IPG 06.30.11 10Q
Table of Contents


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended June 30, 2011
or
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-6686
THE INTERPUBLIC GROUP OF COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
13-1024020
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)

1114 Avenue of the Americas, New York, New York 10036
(Address of principal executive offices) (Zip Code)
(212) 704-1200
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ý    No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ý    No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
ý
  
Accelerated filer
 
¨
Non-accelerated filer
 
¨
  
Smaller reporting company
 
¨
(Do not check if a smaller reporting company)
  
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨    No ý
The number of shares of the registrant’s common stock outstanding as of July 15, 2011 was 478,523,337.

Table of Contents

INDEX
 
Page No.
 
 
 
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.

INFORMATION REGARDING FORWARD-LOOKING DISCLOSURE
This quarterly report on Form 10-Q contains forward-looking statements. Statements in this report that are not historical facts, including statements about management’s beliefs and expectations, constitute forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue” or comparable terminology are intended to identify forward-looking statements. These statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined under Item 1A, Risk Factors, in our most recent annual report on Form 10-K. Forward-looking statements speak only as of the date they are made and we undertake no obligation to update publicly any of them in light of new information or future events.
Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Such factors include, but are not limited to, the following:
potential effects of a challenging economy, for example, on the demand for our advertising and marketing services, on our clients’ financial condition and on our business or financial condition;
our ability to attract new clients and retain existing clients;
our ability to retain and attract key employees;
risks associated with assumptions we make in connection with our critical accounting estimates, including changes in assumptions associated with any effects of a weakened economy;
potential adverse effects if we are required to recognize impairment charges or other adverse accounting-related developments;
risks associated with the effects of global, national and regional economic and political conditions, including counterparty risks and fluctuations in economic growth rates, interest rates and currency exchange rates; and
developments from changes in the regulatory and legal environment for advertising and marketing and communications services companies around the world.
Investors should carefully consider these factors and the additional risk factors outlined in more detail under Item 1A, Risk Factors, in our most recent annual report on Form 10-K.

1

Table of Contents

Part I – FINANCIAL INFORMATION
 
Item 1.
Financial Statements (Unaudited)
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
 
Three months ended
June 30,
 
Six months ended
June 30,
 
2011
 
2010
 
2011
 
2010
REVENUE
$
1,740.7

 
$
1,611.7

 
$
3,215.5

 
$
2,948.7

 
 
 
 
 
 
 
 
OPERATING EXPENSES:
 
 
 
 
 
 
 
Salaries and related expenses
1,095.7

 
991.0

 
2,175.8

 
1,970.3

Office and general expenses
470.8

 
442.9

 
910.0

 
859.7

Restructuring and other reorganization-related charges, net
0.2

 
0.6

 
1.0

 
0.9

Total operating expenses
1,566.7

 
1,434.5

 
3,086.8

 
2,830.9

 
 
 
 
 
 
 
 
OPERATING INCOME
174.0

 
177.2

 
128.7

 
117.8

 
 
 
 
 
 
 
 
EXPENSES AND OTHER INCOME:
 
 
 
 
 
 
 
Interest expense
(33.1
)
 
(35.0
)
 
(65.0
)
 
(67.6
)
Interest income
9.7

 
6.1

 
18.0

 
12.6

Other income (expense), net
5.3

 
(2.1
)
 
(0.8
)
 
(1.6
)
Total (expenses) and other income
(18.1
)
 
(31.0
)
 
(47.8
)
 
(56.6
)
 
 
 
 
 
 
 
 
Income before income taxes
155.9

 
146.2

 
80.9

 
61.2

Provision for income taxes
47.6

 
63.3

 
26.1

 
48.0

Income of consolidated companies
108.3

 
82.9

 
54.8

 
13.2

Equity in net income (loss) of unconsolidated affiliates
0.6

 
0.2

 
0.9

 
(0.4
)
NET INCOME
108.9

 
83.1

 
55.7

 
12.8

Net (income) loss attributable to noncontrolling interests
(4.3
)
 
(0.6
)
 
3.7

 
5.1

NET INCOME ATTRIBUTABLE TO IPG
104.6

 
82.5

 
59.4

 
17.9

Dividends on preferred stock
(2.9
)
 
(2.9
)
 
(5.8
)
 
(9.8
)
Benefit from preferred stock repurchased
0.0

 
25.7

 
0.0

 
25.7

NET INCOME AVAILABLE TO IPG COMMON STOCKHOLDERS
$
101.7

 
$
105.3

 
$
53.6

 
$
33.8

 
 
 
 
 
 
 
 
Earnings per share available to IPG common stockholders:
 
 
 
 
 
 
 
Basic
$
0.21

 
$
0.22

 
$
0.11

 
$
0.07

Diluted
$
0.19

 
$
0.15

 
$
0.11

 
$
0.02

 
 
 
 
 
 
 
 
Weighted-average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
473.1

 
473.0

 
474.6

 
472.1

Diluted
546.9

 
544.9

 
515.6

 
531.6

 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.06

 
$
0.00

 
$
0.12

 
$
0.00

 
The accompanying notes are an integral part of these unaudited financial statements.

2

Table of Contents

THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Millions)
(Unaudited)
 
June 30,
2011
 
December 31,
2010
ASSETS:
 
 
 
Cash and cash equivalents
$
1,809.8

 
$
2,675.7

Marketable securities
14.2

 
13.7

Accounts receivable, net of allowance of $63.4 and $63.1
4,160.9

 
4,317.6

Expenditures billable to clients
1,348.7

 
1,217.1

Other current assets
260.1

 
229.4

Total current assets
7,593.7

 
8,453.5

Furniture, equipment and leasehold improvements, net of accumulated
    depreciation of $1,206.6 and $1,147.1
450.8

 
454.3

Deferred income taxes
373.0

 
334.2

Goodwill
3,427.1

 
3,368.5

Other non-current assets
457.0

 
460.3

TOTAL ASSETS
$
12,301.6

 
$
13,070.8

 
 
 
 
LIABILITIES:
 
 
 
Accounts payable
$
4,064.7

 
$
4,474.5

Accrued liabilities
2,849.4

 
3,112.7

Short-term borrowings
150.0

 
114.8

Current portion of long-term debt
448.6

 
38.9

Total current liabilities
7,512.7

 
7,740.9

Long-term debt
1,167.8

 
1,583.3

Deferred compensation
451.4

 
486.1

Other non-current liabilities
402.1

 
402.4

TOTAL LIABILITIES
9,534.0

 
10,212.7

 
 
 
 
Redeemable noncontrolling interests (see Note 4)
272.1

 
291.2

 
 
 
 
STOCKHOLDERS’ EQUITY:
 
 
 
Preferred stock
221.5

 
221.5

Common stock
48.1

 
47.5

Additional paid-in capital
2,398.0

 
2,456.8

Accumulated deficit
(4.3
)
 
(63.7
)
Accumulated other comprehensive loss, net of tax
(46.6
)
 
(119.0
)
 
2,616.7

 
2,543.1

Less: Treasury stock
(153.1
)
 
(14.1
)
Total IPG stockholders’ equity
2,463.6

 
2,529.0

Noncontrolling interests
31.9

 
37.9

TOTAL STOCKHOLDERS’ EQUITY
2,495.5

 
2,566.9

TOTAL LIABILITIES AND EQUITY
$
12,301.6

 
$
13,070.8

 
The accompanying notes are an integral part of these unaudited financial statements.

3

Table of Contents

THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Millions)
(Unaudited)
 
Six months ended
June 30,
  
2011
 
2010
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
55.7

 
$
12.8

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
Depreciation and amortization of fixed assets and intangible assets
73.3

 
74.2

Provision for uncollectible receivables
5.7

 
6.7

Amortization of restricted stock and other non-cash compensation
29.5

 
26.5

Net amortization of bond premiums and deferred financing costs
(4.0
)
 
(1.8
)
Deferred income tax (benefit) provision
(36.1
)
 
4.4

Other
13.7

 
18.3

Changes in assets and liabilities, net of acquisitions and dispositions, providing (using) cash:
 
 
 
Accounts receivable
251.0

 
(144.7
)
Expenditures billable to clients
(107.7
)
 
(161.1
)
Other current assets
(30.7
)
 
(25.3
)
Accounts payable
(415.7
)
 
139.3

Accrued liabilities
(365.6
)
 
(124.8
)
Other non-current assets and liabilities
(70.8
)
 
(26.7
)
Net cash used in operating activities
(601.7
)
 
(202.2
)
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Capital expenditures
(53.1
)
 
(28.3
)
Proceeds from sales of businesses and investments, net of cash sold
7.0

 
30.9

Acquisitions, including deferred payments, net of cash acquired
(38.6
)
 
(9.0
)
Other investing activities
0.2

 
(2.9
)
Net cash used in investing activities
(84.5
)
 
(9.3
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Repurchase of common stock
(139.0
)
 
0.0

Common stock dividends
(56.8
)
 
0.0

Exercise of stock options
11.7

 
0.0

Repurchase of preferred stock
0.0

 
(265.9
)
Purchase of long-term debt
0.0

 
(21.4
)
Net increase in short term bank borrowings
24.7

 
3.6

Acquisition related payments
(47.6
)
 
0.0

Distributions to noncontrolling interests
(10.7
)
 
(12.1
)
Preferred stock dividends
(5.8
)
 
(13.8
)
Other financing activities
2.8

 
(6.3
)
Net cash used in financing activities
(220.7
)
 
(315.9
)
Effect of foreign exchange rate changes on cash and cash equivalents
41.0

 
(37.9
)
Net decrease in cash and cash equivalents
(865.9
)
 
(565.3
)
Cash and cash equivalents at beginning of period
2,675.7

 
2,495.2

Cash and cash equivalents at end of period
$
1,809.8

 
$
1,929.9

The accompanying notes are an integral part of these unaudited financial statements.

4

Table of Contents

THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)
(Amounts in Millions)
(Unaudited)
 
 
Preferred
Stock
 
 
Common Stock
 
Additional
Paid-In
Capital
 
Accumulated
Deficit
 
Accumulated 
Other
Comprehensive
Loss, Net of Tax
 
Treasury
Stock
 
Total IPG
Stockholders’
Equity
 
Noncontrolling
Interests
 
Total
Stockholders’
Equity
 
Shares
 
Amount
 
Balance at December 31, 2010
$
221.5

 
489.5

 
$
47.5

 
$
2,456.8

 
$
(63.7
)
 
$
(119.0
)
 
$
(14.1
)
 
$
2,529.0

 
$
37.9

 
$
2,566.9

Net income (loss)
 
 
 
 
 
 
 
 
59.4

 
 
 
 
 
59.4

 
(3.7
)
 
55.7

Foreign currency translation adjustments,
    net of tax
 
 
 
 
 
 
 
 
 
 
65.6

 
 
 
65.6

 
0.4

 
66.0

Changes in market value of securities
    available-for-sale, net of tax
 
 
 
 
 
 
 
 
 
 
0.6

 
 
 
0.6

 
 
 
0.6

Recognition of previously unrealized loss
on securities available-for-sale, net of tax
 
 
 
 
 
 
 
 
 
 
0.2

 
 
 
0.2

 
 
 
0.2

Unrecognized losses, transition obligation
and prior service cost, net of tax
 
 
 
 
 
 
 
 
 
 
6.0

 
 
 
6.0

 
 
 
6.0

Total comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
131.8

 
$
(3.3
)
 
$
128.5

Reclassifications related to redeemable
    noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.2

 
10.2

Noncontrolling interest transactions
 
 
 
 
 
 
(0.3
)
 
 
 
 
 
 
 
(0.3
)
 
(3.1
)
 
(3.4
)
Distributions to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(10.7
)
 
(10.7
)
Change in redemption value of redeemable
    noncontrolling interests
 
 
 
 
 
 
(10.3
)
 
 
 
 
 
 
 
(10.3
)
 
 
 
(10.3
)
Repurchase of common stock
 
 
 
 
 
 
 
 
 
 
 
 
(139.0
)
 
(139.0
)
 
 
 
(139.0
)
Common stock dividends
 
 
 
 
 
 
(56.8
)
 
 
 
 
 
 
 
(56.8
)
 
 
 
(56.8
)
Preferred stock dividends
 
 
 
 
 
 
(5.8
)
 
 
 
 
 
 
 
(5.8
)
 
 
 
(5.8
)
Stock-based compensation
 
 
 
 
 
 
27.2

 
 
 
 
 
 
 
27.2

 
 
 
27.2

Exercise of stock options
 
 
1.2

 
0.1

 
11.7

 
 
 
 
 
 
 
11.8

 
 
 
11.8

Restricted stock, net of forfeitures
 
 
0.6

 
0.5

 
(27.2
)
 
 
 
 
 
 
 
(26.7
)
 
 
 
(26.7
)
Other
 
 
0.1

 
0.0

 
2.7

 
 
 
 
 


 
2.7

 
0.9

 
3.6

Balance at June 30, 2011
$
221.5

 
491.4

 
$
48.1

 
$
2,398.0

 
$
(4.3
)
 
$
(46.6
)
 
$
(153.1
)
 
$
2,463.6

 
$
31.9

 
$
2,495.5

 
The accompanying notes are an integral part of these unaudited financial statements.

5

Table of Contents

THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS) – (CONTINUED)
(Amounts in Millions)
(Unaudited)
 
 
Preferred
Stock
 
Common Stock
 
Additional
Paid-In
Capital
 
Accumulated
Deficit
 
Accumulated 
Other
Comprehensive
Loss, Net of Tax
 
Treasury
Stock
 
Total IPG
Stockholders’
Equity
 
Noncontrolling
Interests
 
Total
Stockholders’
Equity
 
Shares
 
Amount
 
Balance at December 31, 2009
$
525.0

 
486.5

 
$
47.1

 
$
2,441.0

 
$
(324.8
)
 
$
(176.6
)
 
$
(14.0
)
 
$
2,497.7

 
$
38.6

 
$
2,536.3

Net income (loss)
 
 
 
 
 
 
 
 
17.9

 
 
 
 
 
17.9

 
(5.1
)
 
12.8

Foreign currency translation adjustments,
    net of tax
 
 
 
 
 
 
 
 
 
 
(67.8
)
 
 
 
(67.8
)
 
(0.1
)
 
(67.9
)
Changes in market value of securities
    available-for-sale, net of tax
 
 
 
 
 
 
 
 
 
 
0.1

 
 
 
0.1

 
 
 
0.1

Unrecognized losses, transition obligation
and prior service cost, net of tax
 
 
 
 
 
 
 
 
 
 
3.5

 
 
 
3.5

 
 
 
3.5

Total comprehensive loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
(46.3
)
 
$
(5.2
)
 
$
(51.5
)
Reclassifications related to redeemable
    noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
16.9

 
16.9

Noncontrolling interest transactions
 
 
 
 
 
 
(18.8
)
 
 
 
 
 
 
 
(18.8
)
 
(0.1
)
 
(18.9
)
Distributions to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(12.1
)
 
(12.1
)
Change in redemption value of redeemable
    noncontrolling interests
 
 
 
 
 
 
(4.7
)
 
 
 
 
 
 
 
(4.7
)
 
 
 
(4.7
)
Repurchase of preferred stock
(303.5
)
 
 
 
 
 
35.9

 
 
 
 
 
 
 
(267.6
)
 
 
 
(267.6
)
Preferred stock dividends
 
 
 
 
 
 
(9.8
)
 
 
 
 
 
 
 
(9.8
)
 
 
 
(9.8
)
Stock-based compensation
 
 
 
 
 
 
28.8

 
 
 
 
 
 
 
28.8

 
 
 
28.8

Restricted stock, net of forfeitures
 
 
2.2

 
0.3

 
(11.1
)
 
 
 
 
 
 
 
(10.8
)
 
 
 
(10.8
)
Other
 
 
0.2

 
0.0

 
1.3

 
 
 
 
 
(0.1
)
 
1.2

 
 
 
1.2

Balance at June 30, 2010
$
221.5

 
488.9

 
$
47.4

 
$
2,462.6

 
$
(306.9
)
 
$
(240.8
)
 
$
(14.1
)
 
$
2,169.7

 
$
38.1

 
$
2,207.8

 
The accompanying notes are an integral part of these unaudited financial statements.

6

Table of Contents

Notes to Consolidated Financial Statements
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
Note 1:  Basis of Presentation
The unaudited Consolidated Financial Statements have been prepared by The Interpublic Group of Companies, Inc. and subsidiaries (the “Company,” “IPG,” “we,” “us” or “our”) in accordance with accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting interim financial information on Form 10-Q. Accordingly, they do not include certain information and disclosures required for complete financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make judgments, assumptions and estimates that affect the amounts reported and disclosed. Actual results could differ from these estimates and assumptions. The consolidated results for interim periods are not necessarily indicative of results for the full year and should be read in conjunction with our 2010 Annual Report on Form 10-K.
In the opinion of management, these unaudited Consolidated Financial Statements include all adjustments of a normal and recurring nature necessary for a fair statement of the information for each period contained therein. Certain reclassifications have been made to prior period financial statements to conform to the current period presentation.
During the first quarter of 2011, we changed the classification of taxes assessed by governmental authorities that are directly imposed on our revenue-producing transactions from a gross to a net basis in a country. This change, which was applied retrospectively and does not change previously reported operating income or net income, decreased revenue and office and general expense by $6.1 for the three months ended June 30, 2010, and by $10.4 for the six months ended June 30, 2010. A comparable amount is included as a reduction to revenue and office and general expense for the three and six months ended June 30, 2011. We believe this presentation better aligns the Company’s internal financial and operational management reporting as well as increases consistency in our external reporting across the countries in which we operate.

Note 2:  Debt and Credit Arrangements
Long-Term Debt
A summary of the carrying amounts and fair values of our long-term debt is listed below.
 
Effective
Interest Rate
 
June 30,
2011
 
December 31,
2010
Book
Value
 
Fair
Value 2
 
Book
Value
 
Fair
Value 2
7.25% Senior Unsecured Notes due 2011
7.25
%
1 
$
36.3

 
$
36.3

 
$
36.3

 
$
37.0

6.25% Senior Unsecured Notes due 2014 (less unamortized
discount of $0.3)
6.29
%
1 
355.0

 
385.9

 
353.3

 
378.0

10.00% Senior Unsecured Notes due 2017 (less unamortized
discount of $10.0)
10.38
%
 
590.0

 
703.5

 
589.4

 
705.0

4.75% Convertible Senior Notes due 2023 (plus unamortized
premium of $3.8)
3.50
%
 
203.8

 
249.1

 
205.0

 
235.0

4.25% Convertible Senior Notes due 2023 (plus unamortized
premium of $10.2)
0.58
%
 
410.2

 
452.5

 
417.4

 
444.4

Other notes payable and capitalized leases
 
 
21.1

 
 
 
20.8

 
 
Total long-term debt
 
 
1,616.4

 
 
 
1,622.2

 
 
Less: current portion 3
 
 
448.6

 
 
 
38.9

 
 
Long-term debt, excluding current portion
 
 
$
1,167.8

 
 
 
$
1,583.3

 
 
 
1
Excludes the effect of related interest rate swaps.
2
Fair values are derived from trading quotes by institutions making a market in the securities and estimations of value by those institutions using proprietary models.
3
On March 15, 2012, holders of our 4.25% Convertible Senior Notes due 2023 (the “4.25% Notes”) may require us to repurchase their notes for cash at par and as such, we included these notes in the current portion of long-tern debt on our June 30, 2011 unaudited Consolidated Balance Sheet. Any 4.25% Notes not repurchased on March 15, 2012 will be reclassified to long-term debt.





7

Table of Contents
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)



Interest Rate Swaps
In March 2011, we entered into an interest rate swap agreement related to our 6.25% Senior Unsecured Notes due 2014 (the “2014 Notes”) to effectively convert $100.0 notional amount of our $350.0 2014 Notes from fixed rate to floating rate debt. In April 2011, we entered into an additional interest rate swap agreement related to the 2014 Notes to effectively convert an additional $100.0 notional amount of our 2014 Notes from fixed to floating rate debt. In May 2011, we terminated all of the interest rate swaps related to the 2014 Notes, which were settled for a total of $2.7, received in cash, which included accrued and unpaid interest. Upon termination of these swaps, a debt premium equal to the swaps' fair value of $2.3 was recorded as an adjustment to the carrying value of the debt and will be amortized as a reduction to interest expense over the remaining term of the 2014 Notes, resulting in an annual effective interest rate of 5.8%.

Credit Facilities
On May 31, 2011, we entered into an amendment and restatement of our credit agreement originally dated as of July 18, 2008 (the “Credit Agreement”), increasing the commitments of the lenders to $1,000.0 from $650.0, and extending the Credit Agreement's expiration to May 31, 2016. Additionally, the amendments modified our financial covenants, and provided additional flexibility with respect to, or eliminated, certain covenants such as restrictions on acquisitions, capital expenditures and restricted payments.  In addition, the cost structure was reduced.
We were in compliance with all of our covenants in the Credit Agreement as of June 30, 2011. The financial covenants in the Credit Agreement require that we maintain, as of the end of each fiscal quarter, certain financial measures for the four quarters then ended. As of June 30, 2011, we had received investment-grade ratings from two of the major credit ratings agencies, and consequently we are not required to satisfy a minimum EBITDA financial covenant and no longer have limitations on restricted payments. The table below sets forth the financial covenants in effect as of June 30, 2011.
 
Q2 2011
 
Q3 2011
 
Q4 2011
& Thereafter
Interest coverage ratio (not less than): 1
4.50x
 
5.00x
 
5.00x
Leverage ratio (not greater than): 2
3.25x
 
3.00x
 
2.75x
 
1
The interest coverage ratio is defined as EBITDA, as defined in the Credit Agreement, to net interest expense plus cash dividends on convertible preferred stock for the four quarters then ended.
2
The leverage ratio is defined as debt as of the last day of such fiscal quarter to EBITDA, as defined in the Credit Agreement, for the four quarters then ended.

Convertible Senior Notes
The conversion rates of our 4.25% Notes and 4.75% Convertible Senior Notes due 2023 (the "4.75% Notes," and, together with the 4.25% Notes, the "Convertible Notes") are subject to adjustment in specified circumstances, including any payment of cash dividends on our common stock. As of June 30, 2011, the conversion rate for our Convertible Notes has been adjusted from 80.5153 to 81.3289 as a result of the cumulative effect of the cash dividends declared and paid on our common stock during the first half of 2011, resulting in a corresponding adjustment of the conversion price from $12.42 to $12.30. The conversion rate of our 5 1/4% Series B Cumulative Convertible Perpetual Preferred Stock is also subject to adjustment for the payment of cash dividends on our common stock, but has not been adjusted as the applicable threshold for adjustment has not been reached.

Capped Call
In November 2010 we purchased capped call options to hedge the risk of price appreciation on the shares of our common stock into which our 4.75% Notes are convertible.  During the second quarter of 2011, the strike price and cap price related to the capped call options were adjusted due to the payment of cash dividends on our common stock. As of June 30, 2011, the options give us the right to purchase up to 16.3 shares of our common stock at a strike price of $12.30 per share (previously $12.42), except that the economic value of the net proceeds of exercising the options will not exceed the difference between the strike price and the adjusted cap price of $18.08 per share (previously $18.26).  










8

Table of Contents
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)



Note 3:  Earnings Per Share
The following sets forth basic and diluted earnings per common share available to IPG common stockholders.
 
Three months ended
June 30,
 
Six months ended
June 30,
 
2011
 
2010
 
2011
 
2010
Net income available to IPG common stockholders - basic
$
101.7

 
$
105.3

 
$
53.6

 
$
33.8

Adjustments: Effect of dilutive securities
 
 
 
 
 
 
 
     Interest on 4.25% Notes
0.4

 
0.4

 
0.7

 
0.7

     Interest on 4.75% Notes
1.0

 
1.0

 
0.0

 
0.0

Preferred stock dividends
2.9

 
0.0

 
0.0

 
0.0

     Benefit from preferred stock repurchased 1
0.0

 
(25.7
)
 
0.0

 
(21.7
)
Net income available to IPG common stockholders - diluted
$
106.0

 
$
81.0

 
$
54.3

 
$
12.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average number of common shares outstanding - basic
473.1

 
473.0

 
474.6

 
472.1

Add: Effect of dilutive securities
 
 
 
 
 
 
 
     Restricted stock, stock options and other equity awards
8.8

 
9.8

 
8.5

 
9.3

     4.25% Notes
32.5

 
32.2

 
32.5

 
32.2

     4.75% Notes
16.3

 
16.1

 
0.0

 
0.0

Preferred stock outstanding
16.2

 
0.0

 
0.0

 
0.0

     Preferred stock repurchased
0.0

 
13.8

 
0.0

 
18.0

 
 
 
 
 
 
 
 
Weighted-average number of common shares outstanding - diluted
546.9

 
544.9

 
515.6

 
531.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share available to IPG common stockholders - basic
$
0.21

 
$
0.22

 
$
0.11

 
$
0.07

Earnings per share available to IPG common stockholders - diluted
$
0.19

 
$
0.15

 
$
0.11

 
$
0.02

 
1
For the three and six months ended June 30, 2010, the benefit from the preferred stock repurchased is excluded from net income available to IPG common stockholders for purposes of calculating diluted earnings per share since the associated common shares, if converted, were dilutive. In addition, for the six months ended June 30, 2010, the benefit is also net of $4.0 of preferred dividends that were declared during the first quarter of 2010 and associated with the preferred stock repurchased.

The following table presents the potential shares excluded from the diluted earnings per share calculation because the effect of including these potential shares would be antidilutive.
 
Three months ended
June 30,
 
Six months ended
June 30,
 
2011
 
2010
 
2011
 
2010
4.75% Notes
0.0

 
0.0

 
16.3

 
16.1

Preferred stock outstanding
0.0

 
16.2

 
16.2

 
16.2

Total
0.0

 
16.2

 
32.5

 
32.3

 
 
 
 
 
 
 
 
Securities excluded from the diluted earnings per share calculation
because the exercise price was greater than the average market price:
 
 
 
 
 
 
 
Stock options 1
7.7

 
19.9

 
7.7

 
19.9

 
1
These options are outstanding at the end of the respective periods. In any period in which the exercise price is less than the average market price, these options have the potential to be dilutive, and application of the treasury stock method would reduce this amount.





9

Table of Contents
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)



Note 4:  Supplementary Data
Accrued Liabilities
The following table presents the components of accrued liabilities.
 
June 30,
2011
 
December 31,
2010
Media and production expenses
$
2,249.2

 
$
2,332.2

Salaries, benefits and related expenses
365.2

 
470.0

Office and related expenses
54.3

 
62.0

Acquisition obligations
8.5

 
63.5

Interest
40.8

 
41.5

Professional fees
17.9

 
24.6

Other
113.5

 
118.9

Total accrued liabilities
$
2,849.4

 
$
3,112.7

Acquisition obligations – During the second quarter of 2011 we paid acquisition obligations, including payments of $32.9 relating to transactions with consolidated subsidiaries where we have increased our ownership interests, which are classified within acquisition related payments in the financing section of the unaudited Consolidated Statements of Cash Flows. Additionally, we paid deferred payments of $31.8 relating to a prior-year acquisition, which was classified within acquisitions, including deferred payments, net of cash acquired in the investing section of the unaudited Consolidated Statements of Cash Flows.

2004 Restatement Liabilities
As part of the restatement we presented in our 2004 Annual Report on Form 10-K (the “2004 Restatement”), we recognized liabilities related to vendor discounts and credits where we had a contractual or legal obligation to rebate such amounts to our clients or vendors. Reductions to these liabilities are achieved through settlements with clients and vendors, but also may occur if the applicable statute of limitations in a jurisdiction has lapsed. As of June 30, 2011, and December 31, 2010, we had vendor discounts and credit liabilities of $77.7 and $82.5, respectively, related to the 2004 Restatement.

Other Income (Expense), net
Results of operations for the three and six months ended June 30, 2011 and 2010 include certain items which are not directly associated with our revenue-producing operations.
 
Three months ended
June 30,
 
Six months ended
June 30,
 
2011
 
2010
 
2011
 
2010
Gains (losses) on sales of businesses and investments
$
0.3

 
$
(3.3
)
 
$
(6.2
)
 
$
(3.1
)
Vendor discounts and credit adjustments
2.8

 
2.2

 
2.9

 
2.0

Other income (expense), net
2.2

 
(1.0
)
 
2.5

 
(0.5
)
Total other income (expense), net
$
5.3

 
$
(2.1
)
 
$
(0.8
)
 
$
(1.6
)
Sales of Businesses and Investments – During the first half of 2011, we recognized a loss relating to the sale of a business in the domestic market within our Integrated Agency Networks (“IAN”) segment. During the second quarter of 2010, we recognized a loss primarily related to the sale of one of our European businesses.
Vendor Discounts and Credit Adjustments – We are in the process of settling our liabilities related to vendor discounts and credits established as part of the 2004 Restatement. These adjustments reflect the reversal of certain of these liabilities as a result of settlements with clients or vendors or where the statute of limitations has lapsed.

Share Repurchase Program
On February 24, 2011 our Board of Directors (the “Board”) authorized a program to repurchase from time to time up to $300.0 of our common stock. We may effect such repurchases through open market purchases, trading plans established in accordance with SEC rules, derivative transactions or other means. The timing and amount of repurchases under the authorization will depend on market conditions and our other funding requirements. The share repurchase program has no expiration date. During the period since the Board’s authorization we repurchased 12.0 shares that have settled through June 30, 2011, at an average price of $11.61 per share and an aggregate cost of $139.0, including fees. We expect to continue to repurchase our common stock in future periods, although the timing and amount of the repurchases will depend on market conditions and our other funding requirements.

10

Table of Contents
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)



Redeemable Noncontrolling Interests
The following table presents changes in our redeemable noncontrolling interests.
 
Six months ended
June 30,
 
2011
 
2010
Balance at beginning of period
$
291.2

 
$
277.8

Change in related noncontrolling interest balance

(10.2
)
 
(16.9
)
Changes in redemption value of redeemable noncontrolling interests:
 
 
 
Additions
5.5

 
21.0

Redemptions and reclassifications
(25.4
)
 
(16.7
)
Redemption value adjustments 1
11.0

 
4.2

Balance at end of period
$
272.1

 
$
269.4

 
1
Redeemable noncontrolling interests are reported at their estimated redemption value in each reporting period, but not less than their initial fair value. Any adjustment to the redemption value impacts additional paid-in capital, except adjustments as a result of currency translation.
Note 5:  Income Taxes
For the three months ended June 30, 2011, our effective tax rate of 30.5% was positively impacted from the recognition of previously unrecognized tax benefits primarily as a result of the settlement of the 2007-2008 IRS audit cycle.
In addition to the positive factor noted above, the effective tax rate for the six months ended June 30, 2011 of 32.3% was positively impacted due to tax efficiencies from entity consolidation in the Asia Pacific region and the loss relating to the sale of a business in the domestic market. The effective tax rate was negatively impacted by state and local taxes, losses in certain foreign locations where we receive no tax benefit due to 100% valuation allowances and the net establishment of valuation allowances, primarily in the United Kingdom.
We have various tax years under examination by tax authorities in various countries, such as the United Kingdom, and in various states, such as New York, in which we have significant business operations. It is not yet known whether these examinations will, in the aggregate, result in our paying additional taxes. We believe our tax reserves are adequate in relation to the potential for additional assessments in each of the jurisdictions in which we are subject to taxation. We regularly assess the likelihood of additional tax assessments in those jurisdictions and, if necessary, adjust our reserves as additional information or events require.
With respect to all tax years open to examination by U.S. federal, various state and local, and non-U.S. tax authorities, we currently anticipate that total unrecognized tax benefits will decrease by an amount between $3.0 and $13.0 in the next twelve months, a portion of which will affect the effective tax rate, primarily as a result of the settlement of tax examinations and the lapsing of statutes of limitations. This net decrease is related to various items of income and expense, primarily transfer pricing adjustments.
We are effectively settled with respect to U.S. income tax audits for years prior to 2009. With limited exceptions, we are no longer subject to state and local income tax audits for years prior to 1999, or non-U.S. income tax audits for years prior to 2003.
Note 6:  Comprehensive Income
 
Three months ended
June 30,
 
2011
 
2010
Net income
$
108.9

 
$
83.1

Foreign currency translation adjustment, net of tax
22.3

 
(52.6
)
Adjustments to pension and other postretirement plans, net of tax
4.8

 
2.5

Net unrealized holding gains on securities, net of tax
0.3

 
0.0

    Total comprehensive income
136.3

 
33.0

Comprehensive income attributable to noncontrolling interests
4.5

 
0.6

Comprehensive income attributable to IPG
$
131.8

 
$
32.4

Comprehensive income (loss) for the six months ended June 30, 2011 and 2010 is displayed in the unaudited Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss).

11

Table of Contents
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)



Note 7:  Incentive Compensation Plans
We issue stock-based compensation and cash awards to our employees under a plan established by the Compensation and Leadership Talent Committee of the Board of Directors (the “Compensation Committee”) and approved by our shareholders.
We issued the following stock-based awards under the 2009 Performance Incentive Plan (the “2009 PIP”) during the six months ended June 30, 2011.
 
Awards
 
Weighted-average
grant-date fair value
(per award)
Stock options
0.7

 
$
4.73

Stock-settled awards
0.7

 
$
12.83

Performance-based awards
1.8

 
$
11.43

Total stock-based compensation awards
3.2

 
 
During the six months ended June 30, 2011, the Compensation Committee granted performance cash awards under the 2009 PIP with a total target value of $71.0. Of this amount, awards with a total target value of $31.8 will be settled in shares upon vesting. The number of shares to be settled on the vesting date will be calculated as the cash value adjusted for performance divided by our stock price on the vesting date. Additionally, during the six months ended June 30, 2011, the Compensation Committee granted cash awards under the Interpublic Restricted Cash Plan with a total target value of $1.9. Cash awards will be amortized over the vesting period, typically three years.

Note 8:  Employee Benefits
We have a domestic pension plan which covers certain U.S. employees. We also have numerous foreign pension plans outside the U.S., some of which are funded, while others provide payments at the time of retirement or termination under applicable labor laws or agreements. Some of our domestic and foreign agencies also provide postretirement benefits to eligible employees and their dependents. Certain immaterial foreign pension and postretirement plans have been excluded from the table below. The components of net periodic cost for the domestic pension plan, the principal foreign pension plans and the postretirement benefit plan are listed below.
 
Domestic Pension Plan
 
Foreign Pension Plans
 
Postretirement Benefit
Plans
Three months ended June 30,
2011
 
2010
 
2011
 
2010
 
2011
 
2010
Service cost
$
0.0

 
$
0.0

 
$
2.9

 
$
2.4

 
$
0.0

 
$
0.0

Interest cost
1.7

 
1.8

 
5.9

 
5.7

 
0.6

 
0.6

Expected return on plan assets
(1.9
)
 
(1.8
)
 
(4.8
)
 
(4.1
)
 
0.0

 
0.0

Settlement losses
0.0

 
0.0

 
0.0

 
0.6

 
0.0

 
0.0

Amortization of:
 
 
 
 
 
 
 
 
 
 
 
Transition obligation
0.0

 
0.0

 
0.0

 
0.0

 
0.1

 
0.1

Prior service cost
0.0

 
0.0

 
0.1

 
0.0

 
0.0

 
0.0

Unrecognized actuarial losses
1.6

 
2.1

 
0.1

 
0.4

 
0.0

 
0.0

Net periodic cost
$
1.4

 
$
2.1

 
$
4.2

 
$
5.0

 
$
0.7

 
$
0.7

 

12

Table of Contents
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)



 
Domestic Pension Plan
 
Foreign Pension Plans
 
Postretirement Benefit
Plans
Six months ended June 30,
2011
 
2010
 
2011
 
2010
 
2011
 
2010
Service cost
$
0.0

 
$
0.0

 
$
5.1

 
$
5.6

 
$
0.1

 
$
0.1

Interest cost
3.4

 
3.6

 
11.7

 
11.6

 
1.3

 
1.4

Expected return on plan assets
(3.7
)
 
(3.4
)
 
(9.5
)
 
(8.5
)
 
0.0

 
0.0

Settlement losses
0.0

 
0.0

 
0.0

 
1.0

 
0.0

 
0.0

Amortization of:
 
 
 
 
 
 
 
 
 
 
 
Transition obligation
0.0

 
0.0

 
0.0

 
0.0

 
0.1

 
0.1

Prior service cost
0.0

 
0.0

 
0.1

 
0.1

 
0.0

 
0.0

Unrecognized actuarial losses
3.3

 
4.4

 
0.3

 
0.9

 
0.0

 
0.0

Net periodic cost
$
3.0

 
$
4.6

 
$
7.7

 
$
10.7

 
$
1.5

 
$
1.6

During the six months ended June 30, 2011, we contributed $12.5 of cash to our domestic pension plan and $12.1 of cash to our foreign pension plans. For the remainder of 2011, we expect to contribute approximately $1.6 and $11.8 of cash to our domestic and foreign pension plans, respectively.

Note 9:  Segment Information
We have two reportable segments: IAN, which is comprised of McCann Worldgroup, Draftfcb, Lowe, Mediabrands and our domestic integrated agencies, and Constituency Management Group (“CMG”), which is comprised of a number of our specialist marketing services offerings. We also report results for the “Corporate and other” group. The profitability measure employed by our chief operating decision maker for allocating resources to operating divisions and assessing operating division performance is operating income, excluding the impact of restructuring and other reorganization-related charges, net and long-lived asset impairment and other charges, if applicable. Other than certain reclassifications, the segment information is presented consistently with the basis described in our 2010 Annual Report on Form 10-K.























13

Table of Contents
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)



Summarized financial information concerning our reportable segments is shown in the following table.
 
Three months ended
June 30,
 
Six months ended
June 30,
 
2011
 
2010
 
2011
 
2010
Revenue:
 
 
 
 
 
 
 
IAN
$
1,471.7

 
$
1,363.2

 
$
2,707.6

 
$
2,472.4

CMG
269.0

 
248.5

 
507.9

 
476.3

Total
$
1,740.7

 
$
1,611.7

 
$
3,215.5

 
$
2,948.7

 
 
 
 
 
 
 
 
Segment operating income:
 
 
 
 
 
 
 
IAN
$
184.7

 
$
190.0

 
$
163.3

 
$
156.7

CMG
28.0

 
21.8

 
38.7

 
29.5

Corporate and other
(38.5
)
 
(34.0
)
 
(72.3
)
 
(67.5
)
Total
174.2

 
177.8

 
129.7

 
118.7

 
 
 
 
 
 
 
 
Restructuring and other reorganization-related charges, net
(0.2
)
 
(0.6
)
 
(1.0
)
 
(0.9
)
Interest expense
(33.1
)
 
(35.0
)
 
(65.0
)
 
(67.6
)
Interest income
9.7

 
6.1

 
18.0

 
12.6

Other income (expense), net
5.3

 
(2.1
)
 
(0.8
)
 
(1.6
)
Income before income taxes
$
155.9

 
$
146.2

 
$
80.9

 
$
61.2

 
 
 
 
 
 
 
 
Depreciation and amortization of fixed assets and intangible assets:
 
 
 
 
 
 
 
IAN
$
31.4

 
$
28.6

 
$
60.7

 
$
57.3

CMG
3.3

 
3.4

 
6.4

 
7.0

Corporate and other
3.0

 
4.8

 
6.2

 
9.9

Total
$
37.7

 
$
36.8

 
$
73.3

 
$
74.2

 
 
 
 
 
 
 
 
Capital expenditures:
 
 
 
 
 
 
 
IAN
$
22.8

 
$
15.7

 
$
36.8

 
$
24.3

CMG
2.9

 
1.6

 
4.2

 
1.9

Corporate and other
10.5

 
1.6

 
12.1

 
2.1

Total
$
36.2

 
$
18.9

 
$
53.1

 
$
28.3

 
 
 
 
 
 
 
 
 
June 30,
2011
 
December 31,
2010
 
 
Total assets:
 
 
 
 
IAN
$
10,353.1

 
$
10,481.7

 
CMG
942.1

 
930.5

 
Corporate and other
1,006.4

 
1,658.6

 
Total
$
12,301.6

 
$
13,070.8

 
 
 
 
 
 
 














14

Table of Contents
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)



Note 10:  Fair Value Measurements
Authoritative guidance for fair value measurements establishes a fair value hierarchy which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. We primarily apply the market approach for recurring fair value measurements. There are three levels of inputs that may be used to measure fair value:
Level 1
  
Unadjusted quoted prices in active markets for identical assets or liabilities. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
 
 
Level 2
  
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
 
Level 3
  
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
There were no changes to our valuation techniques used to measure the fair value of assets and liabilities on a recurring basis during the six months ended June 30, 2011. The following tables present information about our assets and liabilities measured at fair value on a recurring basis as of June 30, 2011, and June 30, 2010, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.
 
June 30, 2011
 
Balance Sheet Classification
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Assets
 
 
 
 
 
 
 
 
 
Cash equivalents
$
1,183.0

 
$
0.0

 
$
0.0

 
$
1,183.0

 
Cash and cash equivalents
Short-term marketable securities
14.2

 
0.0

 
0.0

 
14.2

 
Marketable securities
Long-term investments
1.4

 
10.4

 
0.0

 
11.8

 
Other assets
Total
$
1,198.6

 
$
10.4

 
$
0.0

 
$
1,209.0

 
 
 
 
 
 
 
 
 
 
 
 
As a percentage of total assets
9.7
%
 
0.1
%
 
0.0
%
 
9.8
%
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Mandatorily redeemable noncontrolling interests 1
$
0.0

 
$
0.0

 
$
27.0

 
$
27.0

 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2010
 
Balance Sheet Classification
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Assets
 
 
 
 
 
 
 
 
 
Cash equivalents
$
1,264.7

 
$
0.0

 
$
0.0

 
$
1,264.7

 
Cash and cash equivalents
Short-term marketable securities
12.5

 
0.0

 
0.0

 
12.5

 
Marketable securities
Long-term investments
1.2

 
13.8

 
0.0

 
15.0

 
Other assets
Foreign currency derivatives 2
0.0

 
0.0

 
0.3

 
0.3

 
Other assets
Total
$
1,278.4

 
$
13.8

 
$
0.3

 
$
1,292.5

 
 
 
 
 
 
 
 
 
 
 
 
As a percentage of total assets
10.9
%
 
0.1
%
 
0.0
%
 
11.0
%
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Mandatorily redeemable noncontrolling interests 1
$
0.0

 
$
0.0

 
$
61.8

 
$
61.8

 
 
 
1
Relates to unconditional obligations to purchase additional noncontrolling equity shares of consolidated subsidiaries. Fair value measurement of the obligation was based upon the amount payable as if the forward contracts were settled. The amount redeemable within the next twelve months is classified in accrued liabilities; any interests redeemable thereafter are classified in other non-current liabilities.
2
Fair value is derived from changes in market value of obligations denominated in foreign currency based on an internal valuation model.




15

Table of Contents
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)



The following tables present additional information about assets and liabilities measured at fair value on a recurring basis and for which we utilize Level 3 inputs to determine fair value.
 
Three months ended
June 30, 2011
 
Three months ended
June 30, 2010
 
Liabilities
 
Assets
 
Liabilities
 
Mandatorily redeemable noncontrolling interests
 
Foreign currency
derivatives
 
Mandatorily redeemable noncontrolling interests
Balance at beginning of period
$
57.9

 
$
0.6

 
$
63.5

Level 3 additions
2.5

 
0.0

 
0.3

Level 3 reductions
(33.9
)
 
0.0

 
(2.9
)
Realized losses included in net income
(0.5
)
 
(0.3
)
 
(0.9
)
Balance at end of period
$
27.0

 
$