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10-K
INTERPUBLIC GROUP OF COMPANIES, INC. filed this Form 10-K on 02/22/2016
Entire Document
 

Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)
(Amounts in Millions, Except Per Share Amounts)



Segment Results of Operations
As discussed in Note 13 to the Consolidated Financial Statements, we have two reportable segments as of December 31, 2015: IAN and CMG. We also report results for the "Corporate and other" group.

IAN
REVENUE
 
Year ended December 31, 2014
 
Components of Change
 
Year ended December 31, 2015
 
Change
 
Foreign
Currency
 
Net
Acquisitions/
(Divestitures)
 
Organic
 
Organic
 
Total
Consolidated
$
6,076.3

 
$
(353.6
)
 
$
12.6

 
$
409.6

 
$
6,144.9

 
6.7
%
 
1.1
 %
Domestic
3,254.8

 
0.0

 
1.6

 
264.4

 
3,520.8

 
8.1
%
 
8.2
 %
International
2,821.5

 
(353.6
)
 
11.0

 
145.2

 
2,624.1

 
5.1
%
 
(7.0
)%
During 2015, IAN revenue increased by $68.6 compared to 2014, comprised of an organic revenue increase of $409.6 and the effect of net acquisitions of $12.6, largely offset by an adverse foreign currency rate impact of $353.6. The organic revenue increase was primarily attributable to a combination of net client wins and higher spending in most client sectors, most notably in the technology and telecom and healthcare sectors. The organic revenue increase in our domestic market was driven by growth across all disciplines, most notably at our advertising businesses. The international organic revenue increase was driven by growth across all disciplines, notably at our advertising businesses and digital specialist agencies in the Asia Pacific region and the United Kingdom.
 
Year ended December 31, 2013
 
Components of Change
 
Year ended December 31, 2014
 
Change
 
Foreign
Currency
 
Net
Acquisitions/
(Divestitures)
 
Organic
 
Organic
 
Total
Consolidated
$
5,772.8

 
$
(76.7
)
 
$
61.0

 
$
319.2

 
$
6,076.3

 
5.5
%
 
5.3
%
Domestic
3,071.2

 
0.0

 
10.2

 
173.4

 
3,254.8

 
5.6
%
 
6.0
%
International
2,701.6

 
(76.7
)
 
50.8

 
145.8

 
2,821.5

 
5.4
%
 
4.4
%
During 2014, IAN revenue increased by $303.5 compared to 2013, comprised of an organic revenue increase of $319.2 and the effect of net acquisitions of $61.0, partially offset by an adverse foreign currency rate impact of $76.7. The organic revenue increase was primarily attributable to net client wins and net higher spending from existing clients, most notably in the healthcare and auto and transportation sectors, partially offset by a modest decline in the technology and telecom and consumer goods sectors. The organic revenue increase in our domestic market was driven by growth across all our disciplines. The international organic revenue increase was driven by our advertising and media businesses, primarily in the Asia Pacific region, led by Australia and China, in the Latin America region, primarily in Brazil, and in Other regions, primarily in the Middle East.

SEGMENT OPERATING INCOME
 
Years ended December 31,
 
Change
 
2015
 
2014
 
2013
 
2015 vs 2014

2014 vs 2013
Segment operating income1
$
846.6

 
$
774.7

 
$
660.0

 
9.3
%
 
17.4
%
Operating margin1
13.8
%
 
12.7
%
 
11.4
%
 
 
 
 
 

1
Segment operating income and operating margin exclude restructuring and other reorganization-related reversals of approximately $0.8 for the year ended December 31, 2015, and charges of $0.7 and $55.4 for the years ended December 31, 2014 and 2013, respectively. See "Restructuring and Other Reorganization-Related (Reversals) Charges, net" in Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 8 to the Consolidated Financial Statements for further information.
Operating income increased during 2015 when compared to 2014 due to an increase in revenue of $68.6 and a decrease in office and general expenses of $13.2, partially offset by increases in salaries and related expenses of $9.9. The decrease in office and general expenses was attributable to lower occupancy costs, including an incentive from a lease buyout, and lower adjustments to contingent acquisition obligations as compared to the prior year. Partially offsetting the decrease in office and general expenses was a net increase in reserves for certain contingencies. The increase in salaries and related expenses was primarily driven by increases in our workforce at businesses and in regions where we had revenue growth from existing clients and net new business wins. Also contributing to the increase in salaries and related expenses was higher incentive awards expense.

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