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10-K
INTERPUBLIC GROUP OF COMPANIES, INC. filed this Form 10-K on 02/21/2017
Entire Document
 

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



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.

CMG
REVENUE
 
Year ended December 31, 2015
 
Components of Change
 
Year ended December 31, 2016
 
Change
 
Foreign
Currency
 
Net
Acquisitions/
(Divestitures)
 
Organic
 
Organic
 
Total
Consolidated
$
1,468.9

 
$
(30.9
)
 
$
37.0

 
$
52.7

 
$
1,527.7

 
3.6
%
 
4.0
%
Domestic
954.7

 
0.0

 
21.9

 
19.5

 
996.1

 
2.0
%
 
4.3
%
International
514.2

 
(30.9
)
 
15.1

 
33.2

 
531.6

 
6.5
%
 
3.4
%
During 2016, CMG revenue increased by $58.8 compared to 2015, comprised of an organic revenue increase of $52.7 and the effect of net acquisitions of $37.0, largely offset by an adverse foreign currency rate impact of $30.9. The organic revenue increase in our international markets was driven by our public relations businesses, primarily in the Asia Pacific region, as well as our events businesses, where we had an increase in the United Kingdom offset by a decrease in the Asia Pacific region. The domestic organic revenue increase was primarily attributable to an increase in our public relations businesses, primarily in the technology and telecom and healthcare sectors, offset by a decline in our events marketing business.
 
Year ended December 31, 2014
 
Components of Change
 
Year ended December 31, 2015
 
Change
 
Foreign
Currency
 
Net
Acquisitions/
(Divestitures)
 
Organic
 
Organic
 
Total
Consolidated
$
1,460.8

 
$
(54.9
)
 
$
11.1

 
$
51.9

 
$
1,468.9

 
3.6
%
 
0.6
 %
Domestic
929.2

 
0.0

 
6.2

 
19.3

 
954.7

 
2.1
%
 
2.7
 %
International
531.6

 
(54.9
)
 
4.9

 
32.6

 
514.2

 
6.1
%
 
(3.3
)%
During 2015, CMG revenue increased by $8.1 compared to 2014, comprised of an organic revenue increase of $51.9 and the effect of net acquisitions of $11.1, largely offset by an adverse foreign currency rate impact of $54.9. In our international markets, the organic revenue increase was driven by our public relations and events marketing businesses, predominantly in the Asia Pacific region. The domestic organic revenue increase was primarily attributable to growth at our public relations business, partially offset by a decline at our events marketing business.

SEGMENT OPERATING INCOME
 
Years ended December 31,
 
Change
 
2016
 
2015
 
2014
 
2016 vs 2015
 
2015 vs 2014
Segment operating income
$
189.9

 
$
166.3

 
$
163.9

 
14.2
%
 
1.5
%
Operating margin
12.4
%
 
11.3
%
 
11.2
%
 
 
 
 
Operating income increased during 2016 when compared to 2015 due to an increase in revenue of $58.8 and a decrease in office and general expenses of $3.7, partially offset by an increase in salaries and related expenses of $38.9. The increase in salaries and related expenses was attributable to an increase in base salaries, benefits and tax primarily due to increases in our workforce to support business growth over the last twelve months. The decrease in office and general expenses was primarily due to lower production expenses related to pass-through costs, which are also reflected in revenue, for certain projects in which we acted as principal that decreased in size or did not recur during the current year.
Operating income increased during 2015 when compared to 2014 due to an increase in revenue of $8.1 and a decrease in office and general expenses of $22.0, partially offset by an increase in salaries and related expenses of $27.7. The decrease in office and general expenses was primarily due to lower production expenses related to pass-through costs, which are also reflected in revenue, for certain projects in which we acted as principal that decreased in size or did not recur during the current year. The increase in salaries and related expenses was due to increases in our workforce, most notably at our public relations business, to support business growth and increases due to acquisitions.

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