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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)



FINANCING AND SOURCES OF FUNDS
Substantially all of our operating cash flow is generated by our agencies. Our cash balances are held in numerous jurisdictions throughout the world, primarily at the holding company level and at our largest subsidiaries. Below is a summary of our sources of liquidity.
 
December 31, 2016
 
Total
Facility
 
Amount
Outstanding
 
Letters
of Credit  1
 
Total
Available
Cash, cash equivalents and marketable securities
 
 
 
 
 
 
$
1,100.6

Committed credit agreement
$
1,000.0

 
$
0.0

 
$
4.9

 
$
995.1

Uncommitted credit arrangements
$
856.6

 
$
85.7

 
$
2.3

 
$
768.6

 
1
We are required from time to time to post letters of credit, primarily to support obligations of our subsidiaries. These letters of credit historically have not been drawn upon.

At December 31, 2016, we held $698.0 of cash, cash equivalents and marketable securities in foreign subsidiaries. We have not provided U.S. federal income taxes on undistributed foreign earnings of our foreign subsidiaries because we consider such earnings to be permanently reinvested outside the United States. If in the future we distribute these amounts to the United States, an additional provision for the U.S. income and foreign withholding taxes, net of foreign tax credits, could be necessary.

Credit Agreements
We maintain a committed corporate credit facility to increase our financial flexibility, which has been amended and restated from time to time (the "Credit Agreement"). The Credit Agreement is a revolving facility, expiring in October 2020, under which amounts borrowed by us or any of our subsidiaries designated under the Credit Agreement may be repaid and reborrowed, subject to an aggregate lending limit of $1,000.0, or the equivalent in other currencies. The Company has the ability to increase the commitments under the Credit Agreement from time to time by an additional amount of up to $250.0, provided the Company receives commitments for such increases and satisfies certain other conditions. The aggregate available amount of letters of credit outstanding may decrease or increase, subject to a sublimit on letters of credit of $200.0 or the equivalent in other currencies. We use our Credit Agreement to provide letters of credit primarily to support obligations of our subsidiaries. Our obligations under the Credit Agreement are unsecured.
Under the Credit Agreement, we can elect to receive advances bearing interest based on either the base rate or the Eurocurrency rate (each as defined in the Credit Agreement) plus an applicable margin that is determined based on our credit ratings. As of December 31, 2016, the applicable margin was 0.10% for base rate advances and 1.10% for Eurocurrency rate advances. Letter of credit fees accrue on the average daily aggregate amount of letters of credit outstanding, at a rate equal to the applicable margin for Eurocurrency rate advances, and fronting fees accrue on the aggregate amount of letters of credit outstanding at an annual rate of 0.25%. We also pay a facility fee at an annual rate that is determined based on our credit ratings, which as of December 31, 2016, was 0.15% on the aggregate lending commitment under the Credit Agreement.
The table below sets forth the financial covenants in effect as of December 31, 2016.
 
Four Quarters Ended
 
 
Four Quarters Ended
Financial Covenants
December 31, 2016
 
EBITDA Reconciliation
December 31, 2016
Interest coverage ratio (not less than) 1
5.00x
 
Operating income
$
938.0

Actual interest coverage ratio
18.53x
 
Add:
 
Leverage ratio (not greater than) 1
3.50x
 
Depreciation and amortization
245.8

Actual leverage ratio
1.43x
 
EBITDA 1
$
1,183.8

 
1
The interest coverage ratio is defined as EBITDA, as defined in the Credit Agreement, to net interest expense. The leverage ratio is defined as debt as of the last day of such fiscal quarter to EBITDA for the four quarters then ended.

As of December 31, 2016, we were in compliance with all of our covenants in the Credit Agreement. If we were unable to comply with our covenants in the future, we would seek an amendment or waiver from our lenders, but there is no assurance that our lenders would grant an amendment or waiver. If we were unable to obtain the necessary amendment or waiver, the credit facility could be terminated and our lenders could accelerate payments of any outstanding principal. In addition, under those circumstances we could be required to deposit funds with one of our lenders in an amount equal to any outstanding letters of credit under the credit facility.

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