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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 income decreased during the third quarter of 2017 when compared to the third quarter of 2016, due to an increase in revenue of $17.0, as discussed above, and a decrease in office and general expenses of $5.9, offset by an increase in salaries and related expenses of $23.1. The increase in salaries and related expenses was primarily due to an increase in base salaries, benefits and tax, 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, and lower bad debt expense, partially offset by higher occupancy costs.
Operating income decreased during the first nine months of 2017 when compared to the first nine months of 2016, comprised of an increase in revenue of $12.3, as discussed above, and a decrease in office and general expenses of $18.1, offset by an increase in salaries and related expenses of $52.4. The increase in salaries and related expenses was primarily driven by factors similar to those noted above for the third 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 third quarter of 2017.
CMG
REVENUE
 
 
 
Components of Change
 
 
 
Change
 
Three months ended
September 30, 2016
Foreign
Currency
 
Net
Acquisitions/
(Divestitures)
 
Organic
 
Three months ended
September 30, 2017
Organic
 
Total
Consolidated
$
419.0

 
$
(1.0
)
 
$
(14.8
)
 
$
(20.8
)
 
$
382.4

 
(5.0
)%
 
(8.7
)%
Domestic
272.1

 
0.0

 
(7.6
)
 
(16.5
)
 
248.0

 
(6.1
)%
 
(8.9
)%
International
146.9

 
(1.0
)
 
(7.2
)
 
(4.3
)
 
134.4

 
(2.9
)%
 
(8.5
)%
During the third quarter of 2017, CMG revenue decreased by $36.6 compared to the third quarter of 2016, due to an organic revenue decrease of $20.8, the effect of net divestitures of $14.8 and an adverse foreign currency rate impact of $1.0. The organic revenue decreases in our domestic and international markets were primarily driven by a decrease in pass-through revenue related to certain projects where we acted as principal that decreased in size or did not recur in our events businesses during the third quarter of 2017, the impact of which is also reflected as a comparable reduction in office and general expenses.
 
 
 
Components of Change
 
 
 
Change
 
Nine months ended
September 30, 2016
Foreign
Currency
 
Net
Acquisitions/
(Divestitures)
 
Organic
 
Nine months ended
September 30, 2017
Organic
 
Total
Consolidated
$
1,128.8

 
$
(14.8
)
 
$
(24.7
)
 
$
(13.5
)
 
$
1,075.8

 
(1.2
)%
 
(4.7
)%
Domestic
750.3

 
0.0

 
(16.5
)
 
(13.1
)
 
720.7

 
(1.7
)%
 
(3.9
)%
International
378.5

 
(14.8
)
 
(8.2
)
 
(0.4
)
 
355.1

 
(0.1
)%
 
(6.2
)%
During the first nine months of 2017, CMG revenue decreased by $53.0 compared to the first nine months of 2016, comprised of an organic revenue decrease of $13.5, the effect of net divestitures of $24.7 and an adverse foreign currency rate impact of $14.8. The organic revenue decreases in our domestic and international markets were primarily driven by factors similar to those noted above for the third quarter of 2017, partially offset by growth at our sports marketing businesses in all regions.
SEGMENT OPERATING INCOME
 
Three months ended
September 30,
 
 
 
Nine months ended
September 30,
 
 
 
2017
 
2016
 
Change
 
2017
 
2016
 
Change
Segment operating income
$
50.1

 
$
54.8

 
(8.6
)%
 
$
127.4

 
$
125.2

 
1.8
%
Operating margin
13.1
%
 
13.1
%
 
 
 
11.8
%
 
11.1
%
 
 
Operating income decreased during the third quarter of 2017 when compared to the third quarter of 2016, comprised of a decrease in revenue of $36.6, as discussed above, a decrease in office and general expenses of $21.0 and a decrease in salaries and related expenses of $10.9. The decrease in office and general expenses was primarily due 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. The decrease in salaries and related expenses was primarily due to net divestitures of non-strategic businesses.

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