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SEC Filings

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)




CORPORATE AND OTHER
Certain corporate and other charges are reported as a separate line item within total segment operating income and include corporate office expenses, as well as shared service center and certain other centrally managed expenses that are not fully allocated to operating divisions. Salaries and related expenses include salaries, long-term incentives, annual bonuses and other miscellaneous benefits for corporate office employees. Office and general expenses primarily include professional fees related to internal control compliance, financial statement audits and legal, information technology and other consulting services that are engaged and managed through the corporate office. Office and general expenses also include rental expense and depreciation of leasehold improvements for properties occupied by corporate office employees. A portion of centrally managed expenses are allocated to operating divisions based on a formula that uses the planned revenues of each of the operating units. Amounts allocated also include specific charges for information technology-related projects, which are allocated based on utilization.
Corporate and other expenses increased during 2016 by $5.4 to $147.2 compared to 2015. Corporate and other expenses decreased during 2015 by $7.7 to $141.8 compared to 2014.

LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW OVERVIEW
The following tables summarize key financial data relating to our liquidity, capital resources and uses of capital.
 
Years ended December 31,
Cash Flow Data
2016
 
2015
 
2014
Net income, adjusted to reconcile net income to net cash
    provided by operating activities 1
$
1,023.2

 
$
848.8

 
$
843.0

Net cash used in working capital 2
(414.3
)
 
(99.4
)
 
(113.2
)
Changes in other non-current assets and liabilities using cash
(95.5
)
 
(60.4
)
 
(33.4
)
Net cash provided by operating activities
$
513.4

 
$
689.0

 
$
696.4

Net cash used in investing activities
(263.9
)
 
(199.7
)
 
(198.9
)
Net cash used in financing activities
(666.4
)
 
(490.9
)
 
(372.7
)
 
1
Reflects net income adjusted primarily for depreciation and amortization of fixed assets and intangible assets, amortization of restricted stock and other non-cash compensation, losses on sales of businesses and deferred income taxes.
2
Reflects changes in accounts receivable, expenditures billable to clients, other current assets, accounts payable and accrued liabilities.
 
Operating Activities
Net cash provided by operating activities during 2016 was $513.4, which was a decrease of $175.6 as compared to 2015, primarily as a result of an increase in working capital usage of $314.9. Due to the seasonality of our business, we typically use cash from working capital in the first half of a year and generate cash from working capital in the second half of a year, with the largest impacts generally in the first and fourth quarters. Our net working capital usage in 2016 was primarily attributable to our media businesses.
Net cash provided by operating activities during 2015 was $689.0, which was a decrease of $7.4 as compared to 2014. Our net working capital usage in 2015 was primarily attributable to our media businesses.
The timing of media buying on behalf of our clients affects our working capital and operating cash flow. In most of our businesses, our agencies enter into commitments to pay production and media costs on behalf of clients. To the extent possible, we pay production and media charges after we have received funds from our clients. The amounts involved substantially exceed our revenues and primarily affect the level of accounts receivable, expenditures billable to clients, accounts payable and accrued liabilities. Our assets include both cash received and accounts receivable from clients for these pass-through arrangements, while our liabilities include amounts owed on behalf of clients to media and production suppliers.
Our accrued liabilities are also affected by the timing of certain other payments. For example, while annual cash incentive awards are accrued throughout the year, they are generally paid during the first quarter of the subsequent year.

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