UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 8-K
_______________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): April 19, 2013
The Interpublic Group of Companies, Inc. | ||
(Exact Name of Registrant as Specified in Charter) | ||
Delaware | 1-6686 | 13-1024020 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
1114 Avenue of the Americas, New York, New York | 10036 | |
(Address of Principal Executive Offices) | (Zip Code) | |
Registrant’s telephone number, including area code: 212-704-1200 | ||
(Former Name or Former Address, if Changed Since Last Report) | ||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On April 19, 2013, The Interpublic Group of Companies, Inc. (i) issued a press release, a copy of which is attached hereto as Exhibit 99.1 and incorporated by reference herein, announcing its results for the first quarter of 2013, (ii) held a conference call to discuss the foregoing results and (iii) posted an investor presentation, a copy of which is attached hereto as Exhibit 99.2 and incorporated by reference herein, on its website in connection with the conference call.
Item 9.01. Financial Statements and Exhibits.
Exhibit 99.1: Press release dated April 19, 2013 (furnished pursuant to Item 2.02)
Exhibit 99.2: Investor presentation dated April 19, 2013 (furnished pursuant to Item 2.02)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
THE INTERPUBLIC GROUP OF COMPANIES, INC. | ||
Date: April 19, 2013 | By: | /s/ Andrew Bonzani |
Name: Andrew Bonzani Title: Senior Vice President, General Counsel and Secretary | ||
INTERPUBLIC ANNOUNCES FIRST QUARTER 2013 RESULTS
• | Organic revenue increase of 2.3% and reported revenue increase of 2.4% |
• | Seasonal first quarter operating loss of $42.4 million, compared to a loss of $39.4 million a year ago, resulting in first quarter loss per share of $0.14 |
• | Year-to-date new business momentum and cost discipline cited as positioning company to achieve 2013 financial targets |
• | Board approved a total of $500 million toward share repurchase program and increased dividend by 25% during the quarter |
Summary
Revenue
• | First quarter 2013 revenue was $1.54 billion, compared to $1.51 billion in the first quarter of 2012, with an organic revenue increase of 2.3% compared to the prior-year period. This was comprised of an organic revenue increase of 4.9% internationally and 0.5% in the U.S. |
Operating Results
• | Seasonal operating loss in the first quarter of 2013 was $42.4 million, compared to an operating loss of $39.4 million in 2012. |
• | Operating margin was (2.7)% for the first quarter of 2013, compared to (2.6)% in 2012. |
Net Results
• | First quarter 2013 net loss available to IPG common stockholders was $59.2 million, resulting in a loss of $0.14 per basic and diluted share. This compares to net loss available to IPG common stockholders a year ago of $45.9 million, resulting in a loss of $0.10 per basic and diluted share. Average shares outstanding decreased 5.3% compared to the same period in 2012. |
“We started the year well and are pleased with solid performance in the quarter. The combination of the results we are sharing today, significant assignments coming on stream in the coming months and our proven ability to closely manage costs positions us to achieve our financial targets for 2013,” said Michael I. Roth. “Key drivers of performance included our strong operations in emerging economies, the quality digital offerings embedded across
the group, our media and marketing services companies, as well as our substantial US operations. The level of complexity and rate of change that we are seeing in the media and consumer landscape continue to represent a significant opportunity for us to assist clients in ensuring that their marketing programs are engaging and effective. Our Board's recent approval of additional share repurchase and an increased dividend underscore the confidence we have in our operating trajectory. We remain focused on delivering the 2013 targets and further enhancing shareholder value.”
Operating Results
Revenue
Revenue of $1.54 billion in the first quarter of 2013 increased 2.4% compared with the same period in 2012. During the quarter, the effect of foreign currency translation was negative 0.8%, the impact of net acquisitions was positive 0.9%, and the resulting organic revenue increase was 2.3%.
Operating Expenses
During the first quarter of 2013, salaries and related expenses were $1.13 billion, an increase of 2.5% compared to the same period in 2012. After adjusting for currency effects and the impact of net acquisitions, salaries and related expenses increased 2.2% organically.
Staff cost ratio, which is total salaries and related expenses as a percentage of total revenue, was 73.4% in the first quarter of 2013 compared to 73.3% in the same period in 2012.
During the first quarter of 2013, office and general expenses were $453.3 million, an increase of 2.7% compared to the same period in 2012. After adjusting for currency effects and the impact of net acquisitions, office and general expenses increased 3.4% organically.
Non-Operating Results and Tax
Net interest expense of $30.4 million increased by $5.8 million in the first quarter of 2013 compared to the same period in 2012.
Other income, net was $1.8 million for the first quarter of 2013.
The income tax benefit in the first quarter of 2013 was $12.4 million on loss before income taxes of $71.0 million, compared to a benefit of $19.2 million on loss before income taxes of $65.3 million in the same period in 2012. The effective income tax rate for the first quarter of 2013 was 17.5%, compared to 29.4% for the same period in 2012.
Balance Sheet
At March 31, 2013, cash, cash equivalents and marketable securities totaled $1.65 billion, compared to $2.59 billion at December 31, 2012 and $1.59 billion at March 31, 2012. Total debt was $2.23 billion at March 31, 2013, compared to $2.45 billion at December 31, 2012.
During the first quarter of 2013, the company retired all $200 million in aggregate principal amount of its 4.75% Convertible Senior Notes due 2023 (the "4.75% Notes"). Nearly all of the 4.75% Notes were converted into approximately 16.9 million shares of Interpublic's common stock.
Share Repurchase Program and Common Stock Dividend
In March 2013, the company's Board of Directors authorized an increase in its existing share repurchase program from $300.0 million to $500.0 million to be used towards the repurchase of shares resulting from the conversion to common stock of the 4.75% Notes. During the first quarter of 2013, the company repurchased 6.2 million shares of its common stock at an aggregate cost of $75.8 million and an average price of $12.17 per share.
During the first quarter of 2013, the company declared and paid a common stock cash dividend of $0.075 per share, for a total of $31.0 million.
For more information concerning the company's financial results, please refer to the accompanying slide presentation available on our website, www.interpublic.com.
# # #
About Interpublic
Interpublic is one of the world's leading organizations of advertising agencies and marketing services companies. Major global brands include Draftfcb, FutureBrand, GolinHarris International, Huge, Initiative, Jack Morton Worldwide, Lowe and Partners, MAGNAGLOBAL, McCann, Momentum, MRM Worldwide, Octagon, R/GA, UM and Weber Shandwick. Leading domestic brands include Campbell Ewald; Campbell Mithun; Carmichael Lynch; Deutsch, a Lowe and Partners Company; Gotham Inc.; Hill Holliday; ID Media; Mullen and The Martin Agency. For more information, please visit www.interpublic.com.
# # #
Contact Information
Tom Cunningham
(Press)
(212) 704-1326
Jerry Leshne
(Analysts, Investors)
(212) 704-1439
Cautionary Statement
This release contains forward-looking statements. Statements in this release that are not historical facts, including statements about management's beliefs and expectations, constitute 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.
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED SUMMARY OF EARNINGS FIRST QUARTER REPORT 2013 AND 2012 (Amounts in Millions except Per Share Data) (UNAUDITED) | |||||||||||
Three months ended March 31, | |||||||||||
2013 | 2012 | Fav. (Unfav.) % Variance | |||||||||
Revenue: | |||||||||||
United States | $ | 894.4 | $ | 879.7 | 1.7 | % | |||||
International | 648.6 | 627.1 | 3.4 | % | |||||||
Total Revenue | 1,543.0 | 1,506.8 | 2.4 | % | |||||||
Operating Expenses: | |||||||||||
Salaries and Related Expenses | 1,132.1 | 1,104.9 | (2.5 | )% | |||||||
Office and General Expenses | 453.3 | 441.3 | (2.7 | )% | |||||||
Total Operating Expenses | 1,585.4 | 1,546.2 | (2.5 | )% | |||||||
Operating Loss | (42.4 | ) | (39.4 | ) | (7.6 | )% | |||||
Operating Margin % | (2.7 | )% | (2.6 | )% | |||||||
Expenses and Other Income: | |||||||||||
Interest Expense | (36.8 | ) | (32.6 | ) | |||||||
Interest Income | 6.4 | 8.0 | |||||||||
Other Income (Expense), Net | 1.8 | (1.3 | ) | ||||||||
Total (Expenses) and Other Income | (28.6 | ) | (25.9 | ) | |||||||
Loss before Income Taxes | (71.0 | ) | (65.3 | ) | |||||||
Benefit of Income Taxes | (12.4 | ) | (19.2 | ) | |||||||
Loss of Consolidated Companies | (58.6 | ) | (46.1 | ) | |||||||
Equity in Net Income of Unconsolidated Affiliates | 0.1 | 0.4 | |||||||||
Net Loss | (58.5 | ) | (45.7 | ) | |||||||
Net Loss Attributable to Noncontrolling Interests | 2.2 | 2.7 | |||||||||
Net Loss Attributable to IPG | (56.3 | ) | (43.0 | ) | |||||||
Dividends on Preferred Stock | (2.9 | ) | (2.9 | ) | |||||||
Net Loss Available to IPG Common Stockholders | $ | (59.2 | ) | $ | (45.9 | ) | |||||
Loss Per Share Available to IPG Common Stockholders - Basic and Diluted | $ | (0.14 | ) | $ | (0.10 | ) | |||||
Weighted-Average Number of Common Shares Outstanding - Basic and Diluted | 414.2 | 437.6 | |||||||||
Dividends Declared Per Common Share | $ | 0.075 | $ | 0.060 | |||||||
FIRST QUARTER 2013 EARNINGS CONFERENCE CALL April 19, 2013
Overview – First Quarter 2013 Page 2 See reconciliation of organic revenue change on page 15. • Revenue increased 2.4% from Q1-12, 2.3% on an organic basis International organic growth was 4.9% U.S. organic growth was 0.5% • Seasonal Q1 operating loss of $42 million, compared with a loss of $39 million a year ago • EPS was a loss of $0.14, compared with a loss of $0.10 a year ago • Average shares outstanding decreased 5.3% from Q1-12 • Cash & S/T Marketable Securities of $1.65 billion at quarter-end
Operating Performance (Amounts in Millions, except per share amounts) Page 3 2013 2012 Revenue 1,543.0$ 1,506.8$ Salaries and Related Expenses 1,132.1 1,104.9 Office and General Expenses 453.3 441.3 Operating Loss (42.4) (39.4) Interest Expense (36.8) (32.6) Interest Income 6.4 8.0 Other Income (Expense), net 1.8 (1.3) Loss Before Income Taxes (71.0) (65.3) Benefit of Income Taxes (12.4) (19.2) Equity in Net Income of Unconsolidated Affiliates 0.1 0.4 Net Loss (58.5) (45.7) Net Loss Attributable to Noncontrolling Interests 2.2 2.7 Net Loss Attributable to IPG (56.3) (43.0) Dividends on Preferred Stock (2.9) (2.9) (59.2)$ (45.9)$ Loss per Share Available to IPG Common Stockholders - Basic and Diluted (0.14)$ (0.10)$ Weighted-Average Number of Common Shares Outstanding - Basic and Diluted 414.2 437.6 Dividends Declared per Common Share 0.075$ 0.060$ Three Months Ended March 31, Net Loss Available to IPG Common Stockholders
Revenue ($ in Millions) Page 4 See reconciliation of segment organic revenue change on page 15. Integrated Agency Networks (“IAN”): McCann Worldgroup, Draftfcb, Lowe & Partners, IPG Mediabrands and our domestic integrated agencies Constituency Management Group (“CMG”): Weber Shandwick, GolinHarris, Jack Morton, FutureBrand, Octagon and our other marketing service specialists $ % Change March 31, 2012 1,506.8$ Total change 36.2 2.4% Foreign currency (12.2) (0.8%) Net acquisitions/(divestitures) 13.3 0.9% Organic 35.1 2.3% March 31, 2013 1,543.0$ Three Months Ended 2013 2012 Total Organic IAN 1,241.1$ 1,243.9$ (0.2%) (0.1%) CMG 301.9$ 262.9$ 14.8% 14.0% Change Three Months Ended March 31,
Geographic Revenue Change Page 5 “All Other Markets” includes Canada, Africa and the Middle East. See reconciliation of organic revenue change on page 15. Total Organic United States 1.7% 0.5% International 3.4% 4.9% United Kingdom 10.5% 10.1% Continental Europe (4.7%) (5.8%) Asia Pacific 2.9% 4.3% Latin America 8.8% 16.1% All Other Markets 4.9% 9.1% Worldwide 2.4% 2.3% Three Months Ended March 31, 2013
(0.9%) 0.9% 3.8% 3.7% (10.8%) 7.0% 6.1% 0.7% (12.0%) (10.0%) (8.0%) (6.0%) (4.0%) (2.0%) 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Q4-05 Q4-06 Q4-07 Q4-08 Q4-09 Q4-10 Q4-11 Q4-12 Organic Revenue Growth Page 6 See reconciliation on page 16. Trailing Twelve Months Q1-13 0.6%
Salaries & Related 2013 2012 $ Total Organic Three Months Ended March 31, 1,132.1$ 1,104.9$ 27.2$ 2.5% 2.2% % of Revenue 73.4% 73.3% Three months severance 26.1$ 21.4$ 4.7$ 22.0% % of Revenue 1.7% 1.4% Office & General 2013 2012 $ Total Organic Three Months Ended March 31, 453.3$ 441.3$ 12.0$ 2.7% 3.4% % of Revenue 29.4% 29.3% Three months occupancy expense (ex-D&A) 122.6$ 121.9$ 0.7$ 0.6% % of Revenue 7.9% 8.1% Change Change Expenses ($ in Millions) Page 7 See reconciliation of organic measures on page 15.
(1.7%) 1.7% 5.3% 8.5% 5.7% 8.4% 9.8% 9.8% 9.7% (4.0%) (2.0%) 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Q4-05 Q4-06 Q4-07 Q4-08 Q4-09 Q4-10 Q4-11 Q4-12 Operating Margin Page 8 Trailing Twelve Months Q1-13
Balance Sheet – Current Portion ($ in Millions) Page 9 March 31, December 31, March 31, 2013 2012 2012 CURRENT ASSETS: Cash and cash equivalents 1,645.7$ 2,574.8$ 1,573.1$ Marketable securities 5.4 16.0 13.8 Accounts receivable, net 3,885.7 4,496.6 3,732.1 Expenditures billable to clients 1,511.4 1,318.8 1,447.3 Other current assets 400.0 332.1 346.2 Total current assets 7,448.2$ 8,738.3$ 7,112.5$ CURRENT LIABILITIES: Accounts payable 5,650.2$ 6,584.8$ 5,929.1$ Accrued liabilities 596.4 728.2 676.7 Short-term borrowings 159.7 172.1 161.5 Current portion of long-term debt 1.9 216.6 219.8 Total current liabilities 6,408.2$ 7,701.7$ 6,987.1$
2013 2012 NET LOSS (59)$ (46)$ OPERATING ACTIVITIES Depreciation & amortization 55 50 Deferred taxes (50) (52) Other non-cash items 5 18 Change in working capital, net (722) (445) Other non-current assets & liabilities (4) (23) Net cash used in Operating Activities (775) (498) INVESTING ACTIVITIES Acquisitions & deferred payments, net (35) (2) Capital expenditures (18) (22) Business & investment purchases/sales, net 2 3 Net cash used in Investing Activities (51) (21) FINANCING ACTIVITIES Purchase of long-term debt - (400) Proceeds from issuance of long-term debt - 247 Repurchase of common stock (76) (53) Common stock dividends (31) (26) Net (decrease) increase in short-term bank borrowings (11) 4 Preferred stock dividends (3) (3) Exercise of stock options 18 5 Other financing activities (1) (3) Net cash used in Financing Activities (104) (229) Currency Effect (10) 19 Decrease in Cash & S/T Marketable Securities (940)$ (729)$ Three Months Ended March 31, Cash Flow ($ in Millions) Page 10 (1) Excludes the net purchase, sale and maturities of short-term marketable securities. See reconciliation on page 17. (1)
$2,349 $2,120 $1,947 $1,737 $1,769 $1,652 $1,636 $2,233 $1,000 $1,500 $2,000 $2,500 $3,000 12/31/2007 12/31/2008 12/31/2009 12/31/2010 12/31/2011 12/31/2012 3/31/2013 $2,450 Total Debt (1) ($ in Millions) Page 11 (1) Includes current portion of long-term debt, short-term borrowings and long-term debt. (2) Includes our November 2012 debt issuances of $800 aggregate principal amount of Senior Notes, which pre-funded our plan to redeem a similar amount of debt in 2013. (3) In March 2013, we retired $200 aggregate principal amount of our 4.75% Convertible Senior Notes, primarily through conversion into IPG common stock. (2) (2) (3)
Summary Page 12 • Q1 a solid start on our operating objectives for the year • Improving new business results • Continuing our expense discipline while making revenue- associated investments • Driving further value creation through capital returns
Appendix
Depreciation and Amortization ($ in Millions) Page 14 Q1 YTD 2013 Depreciation and amortization of fixed assets and intangible assets 38.2$ 38.2$ Amortization of restricted stock and other non-cash compensation 15.5 15.5 Net amortization of bond discounts and deferred financing costs 1.4 1.4 Q1 Q2 Q3 Q4 FY 2012 Depreciation and amortization of fixed assets and intangible assets 34.6$ 36.8$ 37.4$ 38.9$ 147.7$ Amortization of restricted stock and other non-cash compensation 16.7 12.7 8.3 6.8 44.5 Net amortization of bond (premiums) discounts and deferred financing costs (1.7) 1.0 1.0 1.5 1.8 2013 2012
Reconciliation of Organic Measures ($ in Millions) Page 15 Three Months Ended March 31, 2012 Foreign Currency Net Acquisitions / (Divestitures) Three Months Ended March 31, 2013 Organic Total Segment Revenue IAN 1,243.9$ (11.3)$ 10.3$ (1.8)$ 1,241.1$ (0.1%) (0.2%) CMG 262.9 (0.9) 3.0 36.9 301.9 14.0% 14.8% Total 1,506.8$ (12.2)$ 13.3$ 35.1$ 1,543.0$ 2.3% 2.4% Geographic United States 879.7$ -$ 10.5$ 4.2$ 894.4$ 0.5% 1.7% International 627.1 (12.2) 2.8 30.9 648.6 4.9% 3.4% United Kingdom 125.2 (0.6) 1.1 12.7 138.4 10.1% 10.5% Continental Europe 167.3 2.4 (0.5) (9.7) 159.5 (5.8%) (4.7%) Asia Pacific 170.9 (4.5) 2.1 7.4 175.9 4.3% 2.9% Latin America 79.3 (5.9) 0.1 12.8 86.3 16.1% 8.8% All Other Markets 84.4 (3.6) - 7.7 88.5 9.1% 4.9% Worldwide 1,506.8$ (12.2)$ 13.3$ 35.1$ 1,543.0$ 2.3% 2.4% Expenses Salaries & Related 1,104.9$ (7.2)$ 9.8$ 24.6$ 1,132.1$ 2.2% 2.5% Office & General 441.3 (5.1) 2.0 15.1 453.3 3.4% 2.7% Total 1,546.2$ (12.3)$ 11.8$ 39.7$ 1,585.4$ 2.6% 2.5% Components of Change Change Organic
Reconciliation of Organic Revenue Growth ($ in Millions) Page 16 Last Twelve Months Ending Beginning of Period Revenue Foreign Currency Net Acquisitions / (Divestitures) Organic End of Period Revenue 12/31/05 6,387.0$ 40.4$ (107.4)$ (56.2)$ 6,263.8$ 3/31/06 6,323.8 (10.9) (132.6) 81.5 6,261.8 6/30/06 6,418.4 (8.8) (157.5) (68.5) 6,183.6 9/30/06 6,335.9 (13.9) (140.4) 15.6 6,197.2 12/31/06 6,263.8 20.7 (165.5) 57.8 6,176.8 3/31/07 6,261.8 78.4 (147.2) 16.0 6,209.0 6/30/07 6,183.6 102.4 (124.7) 166.6 6,327.9 9/30/07 6,197.2 137.3 (110.9) 209.2 6,432.8 12/31/07 6,176.8 197.5 (70.7) 233.1 6,536.7 3/31/08 6,209.0 217.8 (45.9) 280.6 6,661.5 6/30/08 6,327.9 244.8 (12.6) 282.4 6,842.5 9/30/08 6,432.8 237.4 32.8 317.2 7,020.2 12/31/08 6,536.7 71.5 87.6 243.0 6,938.8 3/31/09 6,661.5 (88.3) 114.7 91.9 6,779.8 6/30/09 6,842.5 (286.2) 139.2 (275.3) 6,420.2 9/30/09 7,020.2 (390.1) 115.2 (636.4) 6,108.9 12/31/09 6,938.8 (251.6) 69.1 (748.9) 6,007.4 3/31/10 6,779.8 (88.2) 36.0 (705.4) 6,022.2 6/30/10 6,420.2 59.1 2.0 (316.9) 6,164.4 9/30/10 6,108.9 117.7 9.6 60.1 6,296.3 12/31/10 6,007.4 63.3 17.0 419.6 6,507.3 3/31/11 6,022.2 21.0 18.2 583.7 6,645.1 6/30/11 6,164.4 61.5 12.4 535.8 6,774.1 9/30/11 6,296.3 119.1 (7.7) 539.5 6,947.2 12/31/11 6,507.3 122.2 (8.6) 393.7 7,014.6 3/31/12 6,645.1 92.9 (1.4) 310.0 7,046.6 6/30/12 6,774.1 (14.3) 14.5 247.3 7,021.6 9/30/12 6,947.2 (117.2) 39.7 95.8 6,965.5 12/31/12 7,014.6 (147.6) 41.8 47.4 6,956.2 3/31/13 7,046.6 (143.7) 48.2 41.3 6,992.4 Components of Change During the Period
Reconciliation of Investing Cash Flow ($ in Millions) Page 17 2013 2012 INVESTING ACTIVITIES Cash used in Investing Activities per presentation (51)$ (21)$ Purchase, sale and maturities of short-term marketable securities, net 11 - Cash used in Investing Activities as reported (40)$ (21)$ Three Months Ended March 31,
Metrics Update
Metrics Update Page 19 SALARIES & RELATED Trailing Twelve Months (% of revenue) Base, Benefits & Tax Incentive Expense Severance Expense Temporary Help OFFICE & GENERAL Trailing Twelve Months (% of revenue) Professional Fees Occupancy Expense (ex-D&A) T&E, Office Supplies & Telecom All Other O&G FINANCIAL Available Liquidity $1.0 Billion 5-Year Credit Facility Covenants Category Metric
Salaries & Related Expenses Page 20 62.8% 63.1% 63.2% 60.0% 62.0% 64.0% 66.0% 3/31/2012 12/31/2012 3/31/2013 % of Revenue, Trailing Twelve Months
Salaries & Related Expenses (% of Revenue) Page 21 Three Months Ended March 31 “All Other Salaries & Related,” not shown, was 2.6% and 2.7% for the three months ended March 31, 2013 and 2012, respectively. 2013 2012
Office & General Expenses Page 22 27.3% 27.1% 27.1% 25.0% 26.0% 27.0% 28.0% 29.0% 3/31/2012 12/31/2012 3/31/2013 % of Revenue, Trailing Twelve Months
Office & General Expenses (% of Revenue) Page 23 Three Months Ended March 31 “All Other O&G” includes production expenses, depreciation and amortization, bad debt expense, foreign currency gains (losses), restructuring and other reorganization-related charges (reversals), long-lived asset impairment and other expenses. 2013 2012
$1,587 $1,515 $1,202 $2,591 $1,651 $984 $983 $984 $985 $986 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 3/31/2012 6/30/2012 9/30/2012 12/31/2012 3/31/2013 Cash, Cash Equivalents and Short-Term Marketable Securities Available Committed Credit Facility Available Liquidity ($ in Millions) Page 24 Cash, Cash Equivalents and Short-Term Marketable Securities + Available Committed Credit Facility (1) Includes net proceeds from our November 2012 debt issuances of $800 aggregate principal amount of Senior Notes, which pre-funded our plan to address our capital structure in 2013. (1) (1)
Last Twelve Months Ending March 31, 2013 I. Interest Coverage Ratio (not less than): 5.00x Actual Interest Coverage Ratio: 7.78x II. Leverage Ratio (not greater than): 2.75x Actual Leverage Ratio: 1.88x Interest Coverage Ratio - Interest Expense Reconciliation Last Twelve Months Ending March 31, 2013 Interest Expense: $137.7 - Interest income 27.9 - Other 9.5 + Preferred stock dividends 11.6 Net interest expense as defined: $111.9 EBITDA Reconciliation Last Twelve Months Ending March 31, 2013 Operating Income: $675.3 + Depreciation and amortization 194.5 + Other non-cash charges 0.7 EBITDA as defined: $870.5 Covenants $1.0 Billion 5-Year Credit Facility Covenants ($ in Millions) Page 25 (1 ) In November 2012, we entered into an amendment to our Credit Agreement that modified the definition of debt for our financial covenants. As a result of this amendment, the Senior Notes we issued in November 2012 do not have an impact on our financial covenants until August 15, 2013, unless and to the extent the 4.75% Notes or the 10.00% Notes are retired prior to that date. We retired the 4.75% Notes in the first quarter for 2013. (1)
Cautionary Statement Page 26 This investor presentation contains forward-looking statements. Statements in this investor presentation that are not historical facts, including statements about management’s beliefs and expectations, constitute 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 in our most recent Annual Report on Form 10-K under Item 1A, Risk Factors. 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 in our most recent Annual Report on Form 10-K under Item 1A, Risk Factors.