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SEC Filings

10-Q
INTERPUBLIC GROUP OF COMPANIES, INC. filed this Form 10-Q on 07/27/2017
Entire Document
 

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


OPERATING EXPENSES
 
Three months ended
June 30,
 
Six months ended
June 30,
 
2017
 
2016
 
2017
 
2016
Salaries and related expenses
$
1,239.3

 
$
1,229.5

 
$
2,514.7

 
$
2,498.3

Office and general expenses
439.1

 
464.1

 
887.9

 
914.3

Total operating expenses
$
1,678.4

 
$
1,693.6

 
$
3,402.6

 
$
3,412.6

Operating income
$
206.5

 
$
224.3

 
$
236.2

 
$
247.3

In the second quarter of 2017, total operating expenses decreased 0.9%, compared to our revenue decrease of 1.7%, from the second quarter of 2016, resulting in an operating margin of 11.0%, compared to 11.7% in the prior-year period. In the first half of 2017, total operating expenses decreased 0.3%, compared to our revenue decrease of 0.6%, from the first half of 2016, resulting in an operating margin of 6.5%, compared to 6.8% in the prior-year period.
Salaries and Related Expenses
 
 
 
Components of Change
 
 
 
Change
 
2016
Foreign
Currency
 
Net
Acquisitions/
(Divestitures)
 
Organic
 
2017
Organic
 
Total
Three months ended June 30,
$
1,229.5

 
$
(15.4
)
 
$
(12.4
)
 
$
37.6

 
$
1,239.3

 
3.1
%
 
0.8
%
Six months ended June 30,
2,498.3

 
(29.2
)
 
(28.4
)
 
74.0

 
2,514.7

 
3.0
%
 
0.7
%
Salaries and related expenses in the second quarter of 2017 increased by $9.8 compared to the second quarter of 2016, comprised of an organic increase of $37.6, partially offset by a favorable foreign currency rate impact of $15.4 and the effect of net divestitures of $12.4. The organic increase was primarily attributable to an increase in base salaries, benefits and tax as a result of increases in our workforce at businesses and in regions where we had revenue growth or new business wins over the last twelve months, partially offset by lower incentive expense. Our staff cost ratio, defined as salaries and related expenses as a percentage of total consolidated revenue, increased in the second quarter of 2017 to 65.7% from 64.1%, when compared to the prior-year period.
Salaries and related expenses in the first half of 2017 increased by $16.4 compared to the first half of 2016, comprised of an organic increase of $74.0, partially offset by a favorable foreign currency rate impact of $29.2 and the effect of net divestitures of $28.4. The organic increase was primarily driven by factors similar to those noted above for the second quarter of 2017, and lower acquisition-related contractual compensation, which is classified within all other salaries and related expenses in the table below. Our staff cost ratio increased in the first half of 2017 to 69.1% from 68.3% when compared to the prior-year period.
The following table details our staff cost ratio.
 
Three months ended
June 30,
 
Six months ended
June 30,
 
2017
 
2016
 
2017
 
2016
Salaries and related expenses
65.7
%
 
64.1
%
 
69.1
%
 
68.3
%
Base salaries, benefits and tax
56.1
%
 
54.1
%
 
58.1
%
 
56.7
%
Incentive expense
2.7
%
 
3.0
%
 
3.7
%
 
3.8
%
Severance expense
1.1
%
 
1.0
%
 
1.2
%
 
1.2
%
Temporary help
3.9
%
 
3.8
%
 
4.0
%
 
3.9
%
All other salaries and related expenses
1.9
%
 
2.2
%
 
2.1
%
 
2.7
%

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