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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)


Office and General Expenses
 
 
 
Components of Change
 
 
 
Change
 
2016
Foreign
Currency
 
Net
Acquisitions/
(Divestitures)
 
Organic
 
2017
Organic
 
Total
Three months ended June 30,
$
464.1

 
$
(5.6
)
 
$
(7.1
)
 
$
(12.3
)
 
$
439.1

 
(2.7
)%
 
(5.4
)%
Six months ended June 30,
914.3

 
(10.6
)
 
(14.0
)
 
(1.8
)
 
887.9

 
(0.2
)%
 
(2.9
)%
Office and general expenses in the second quarter of 2017 decreased by $25.0 compared to the second quarter of 2016, comprised of an organic decrease of $12.3, the effect of net divestitures of $7.1 and a favorable foreign currency rate impact of $5.6. The organic decrease was attributable to lower production expenses related to pass-through costs, which are also reflected in revenue, as well as decreases in adjustments to contingent acquisition obligations, as compared to the prior year, partially offset by higher occupancy costs. Our office and general expense ratio, defined as office and general expenses as a percentage of total consolidated revenue, decreased in the second quarter of 2017 to 23.3% from 24.2%, when compared to the prior-year period.
Office and general expenses in the first half of 2017 decreased by $26.4 compared to the first half of 2016, comprised of an organic decrease of $1.8, the effect of net divestitures of $14.0 and a favorable foreign currency rate impact of $10.6. The organic decrease was primarily driven by factors similar to those noted above for the second quarter of 2017. Our office and general expense ratio decreased in the first half of 2017 to 24.4% from 25.0%, when compared to the prior-year period.
The following table details our office and general expense ratio.
 
Three months ended
June 30,
 
Six months ended
June 30,
 
2017
 
2016
 
2017
 
2016
Office and general expenses
23.3
%
 
24.2
%
 
24.4
%
 
25.0
%
Professional fees
1.7
%
 
1.5
%
 
1.7
%
 
1.6
%
Occupancy expense (excluding depreciation and amortization)
6.9
%
 
6.6
%
 
7.1
%
 
6.9
%
Travel & entertainment, office supplies and telecommunications
3.1
%
 
3.4
%
 
3.2
%
 
3.4
%
All other office and general expenses 1
11.6
%
 
12.7
%
 
12.4
%
 
13.1
%
 
1
Includes production expenses and, to a lesser extent, depreciation and amortization, bad debt expense, adjustments to contingent acquisition obligations, foreign currency losses (gains), spending to support new business activity, net restructuring and other reorganization-related charges (reversals), long-lived asset impairments and other expenses.

EXPENSES AND OTHER INCOME
 
Three months ended
June 30,
 
Six months ended
June 30,
 
2017
 
2016
 
2017
 
2016
Cash interest on debt obligations
$
(20.5
)
 
$
(21.0
)
 
$
(39.1
)
 
$
(40.3
)
Non-cash interest
(5.2
)
 
(3.5
)
 
(7.5
)
 
(6.8
)
Interest expense
(25.7
)
 
(24.5
)
 
(46.6
)
 
(47.1
)
Interest income
4.7

 
5.6

 
9.9

 
11.4

Net interest expense
(21.0
)
 
(18.9
)
 
(36.7
)
 
(35.7
)
Other (expense) income, net
(15.4
)
 
0.4

 
(14.6
)
 
(18.8
)
Total (expenses) and other income
$
(36.4
)
 
$
(18.5
)
 
$
(51.3
)
 
$
(54.5
)
Net Interest Expense
For the three and six months ended June 30, 2017, net interest expense increased by $2.1 and $1.0 as compared to the respective prior-year periods, primarily due to increased non-cash interest expense from revaluations of mandatorily redeemable noncontrolling interests.

23