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SEC Filings

10-Q
INTERPUBLIC GROUP OF COMPANIES, INC. filed this Form 10-Q on 04/21/2017
Entire Document
 

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


SEGMENT OPERATING INCOME
 
Three months ended
March 31,
 
 
 
2017
 
2016
 
Change
Segment operating income
$
23.4

 
$
20.4

 
14.7
%
Operating margin
6.8
%
 
6.0
%
 
 
Operating income increased during the first quarter of 2017 when compared to the first quarter of 2016, due to an increase in revenue of $5.9, partially offset by an increase in salaries and related expenses of $0.1 and an increase in office and general expenses of $2.8, primarily due to higher production expenses related to pass-through costs, which are also reflected in revenue.
CORPORATE AND OTHER
Certain corporate and other charges are reported as separate line items within total segment operating income (loss) 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 decreased during the first quarter of 2017 by $1.7 to $37.5 compared to the first quarter of 2016.

LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW OVERVIEW
The following tables summarize key financial data relating to our liquidity, capital resources and uses of capital.
 
Three months ended
March 31,
Cash Flow Data
2017
 
2016
Net income, adjusted to reconcile net income to net cash used in operating activities 1
$
88.1

 
$
82.1

Net cash used in working capital 2
(438.7
)
 
(694.7
)
Changes in other non-current assets and liabilities using cash
(21.2
)
 
(41.0
)
Net cash used in operating activities
$
(371.8
)
 
$
(653.6
)
Net cash used in investing activities
(33.2
)
 
(59.5
)
Net cash provided by (used in) financing activities
64.4

 
(154.3
)
 
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, (gains) 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 used in operating activities during the first quarter of 2017 was $371.8, which was an improvement of $281.8 as compared to the first quarter of 2016. 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. The working capital use in the first quarter of 2017 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

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