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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)


salaries, benefits and tax, primarily attributable to 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. The decrease in office and general expenses was attributable to lower production expenses related to pass-through costs, which are also reflected in revenue, partially offset by higher occupancy costs.
Operating income decreased during the first half of 2017 when compared to the first half of 2016, comprised of a decrease in revenue of $4.7, as discussed above, and an increase in salaries and related expenses of $29.3, partially offset by a decrease in office and general expenses of $12.2. The increase in salaries and related expenses was primarily driven by factors similar to those noted above for the second quarter of 2017, partially offset by lower acquisition-related contractual compensation. The decrease in office and general expenses was primarily driven by factors similar to those noted above for the second quarter of 2017 as well as decreases in adjustments to contingent acquisition obligations, as compared to the prior year.
CMG
REVENUE
 
 
 
Components of Change
 
 
 
Change
 
Three months ended
June 30, 2016
Foreign
Currency
 
Net
Acquisitions/
(Divestitures)
 
Organic
 
Three months ended
June 30, 2017
Organic
 
Total
Consolidated
$
369.4

 
$
(6.5
)
 
$
(7.6
)
 
$
(8.2
)
 
$
347.1

 
(2.2
)%
 
(6.0
)%
Domestic
252.4

 
0.0

 
(6.8
)
 
(13.2
)
 
232.4

 
(5.2
)%
 
(7.9
)%
International
117.0

 
(6.5
)
 
(0.8
)
 
5.0

 
114.7

 
4.3
 %
 
(2.0
)%
During the second quarter of 2017, CMG revenue decreased by $22.3 compared to the second quarter of 2016, due to an organic revenue decrease of $8.2, the effect of net divestitures of $7.6 and an adverse foreign currency rate impact of $6.5. The organic revenue decrease in our domestic market was primarily driven by our events businesses as a result of certain projects where we acted as principal that decreased in size or did not recur during the second quarter of 2017, the impact of which is also reflected as a comparable reduction in office and general expenses, as well as a decline in our public relations businesses. Organic revenue increased in our international markets driven by growth across all disciplines, most notably at our events businesses in the Asia Pacific region, led by Singapore and Hong Kong, and our public relations businesses in Continental Europe.
 
 
 
Components of Change
 
 
 
Change
 
Six months ended
June 30, 2016
Foreign
Currency
 
Net
Acquisitions/
(Divestitures)
 
Organic
 
Six months ended
June 30, 2017
Organic
 
Total
Consolidated
$
709.8

 
$
(13.8
)
 
$
(9.9
)
 
$
7.3

 
$
693.4

 
1.0
%
 
(2.3
)%
Domestic
478.2

 
0.0

 
(8.9
)
 
3.4

 
472.7

 
0.7
%
 
(1.2
)%
International
231.6

 
(13.8
)
 
(1.0
)
 
3.9

 
220.7

 
1.7
%
 
(4.7
)%
During the first half of 2017, CMG revenue decreased by $16.4 compared to the first half of 2016, comprised of an organic revenue increase of $7.3, offset by an adverse foreign currency rate impact of $13.8 and the effect of net divestitures of $9.9. The organic revenue increase in our domestic market was primarily driven by our sports marketing businesses, partially offset by decreases at our brand consultancy businesses. In our international markets, the organic revenue increase was primarily driven by our public relations and sports marketing businesses, most notably in the United Kingdom, partially offset by a decrease within our events businesses in the United Kingdom as a result of certain projects where we no longer act as principal.
SEGMENT OPERATING INCOME
 
Three months ended
June 30,
 
 
 
Six months ended
June 30,
 
 
 
2017
 
2016
 
Change
 
2017
 
2016
 
Change
Segment operating income
$
53.9

 
$
50.0

 
7.8
%
 
$
77.3

 
$
70.4

 
9.8
%
Operating margin
15.5
%
 
13.5
%
 
 
 
11.1
%
 
9.9
%
 
 
Operating income increased during the second quarter of 2017 when compared to the second quarter of 2016, as a result of a decrease in office and general expenses of $16.8 and a decrease in salaries and related expenses of $9.4, partially offset by a decrease in revenue of $22.3, as discussed above. The decrease in office and general expenses was primarily due to decreases in

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