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SEC Filings

10-Q
INTERPUBLIC GROUP OF COMPANIES, INC. filed this Form 10-Q on 10/26/2017
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
September 30,
 
Nine months ended
September 30,
 
2017
 
2016
 
2017
 
2016
Salaries and related expenses
$
1,227.6

 
$
1,228.0

 
$
3,742.3

 
$
3,726.3

Office and general expenses
455.9

 
486.2

 
1,343.8

 
1,400.5

Total operating expenses
$
1,683.5

 
$
1,714.2

 
$
5,086.1

 
$
5,126.8

Operating income
$
219.1

 
$
208.0

 
$
455.3

 
$
455.3

In the third quarter of 2017, total operating expenses decreased 1.8%, compared to our revenue decrease of 1.0%, from the third quarter of 2016, resulting in operating margin expansion to 11.5% from 10.8%. In the first nine months of 2017, total operating expenses decreased 0.8%, compared to our revenue decrease of 0.7%, from the first nine months of 2016, resulting in an operating margin of 8.2%, which remains flat as compared to 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 September 30,
$
1,228.0

 
$
4.6

 
$
(21.0
)
 
$
16.0

 
$
1,227.6

 
1.3
%
 
0.0
 %
Nine months ended September 30,
3,726.3

 
(24.6
)
 
(49.4
)
 
90.0

 
3,742.3

 
2.4
%
 
0.4
 %
Salaries and related expenses in the third quarter of 2017 decreased by $0.4 compared to the third quarter of 2016, comprised of an organic increase of $16.0 and an adverse foreign currency rate impact of $4.6, offset by the effect of net divestitures of $21.0. The organic increase was primarily attributable to an increase in base salaries, benefits and tax, 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 third quarter of 2017 to 64.5% from 63.9%, when compared to the prior-year period.
Salaries and related expenses in the first nine months of 2017 increased by $16.0 compared to the first nine months of 2016, comprised of an organic increase of $90.0, partially offset by the effect of net divestitures of $49.4 and a favorable foreign currency rate impact of $24.6. The organic increase was primarily driven by factors similar to those noted above for the third quarter of 2017, as well as 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 nine months of 2017 to 67.5% from 66.8% when compared to the prior-year period.
The following table details our staff cost ratio.
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
2017
 
2016
 
2017
 
2016
Salaries and related expenses
64.5
%
 
63.9
%
 
67.5
%
 
66.8
%
Base salaries, benefits and tax
55.7
%
 
53.5
%
 
57.3
%
 
55.6
%
Incentive expense
2.0
%
 
3.7
%
 
3.1
%
 
3.8
%
Severance expense
0.8
%
 
0.7
%
 
1.0
%
 
1.0
%
Temporary help
3.8
%
 
3.9
%
 
3.9
%
 
3.9
%
All other salaries and related expenses
2.2
%
 
2.1
%
 
2.2
%
 
2.5
%

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