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): July 22, 2015
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 July 22, 2015, 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 second quarter and first half of 2015, (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 July 22, 2015 (furnished pursuant to Item 2.02)
Exhibit 99.2: Investor presentation dated July 22, 2015 (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: July 22, 2015 | By: | /s/ Andrew Bonzani |
Name: Andrew Bonzani Title: Senior Vice President, General Counsel and Secretary | ||
FOR IMMEDIATE RELEASE New York, NY (July 22, 2015)
INTERPUBLIC ANNOUNCES STRONG SECOND QUARTER
AND FIRST HALF 2015 RESULTS
• | Strong second quarter organic revenue increase of 6.7% and reported revenue increase of 1.3%. |
• | Second quarter operating margin of 11.5% compared to 10.6% in the prior-year period and operating income growth of 10.2% to $215.8 million. |
• | Second quarter diluted earnings per share of $0.29, a 16.0% increase from $0.25 per diluted share a year ago, excluding the charge of $0.02 for early extinguishment of debt in 2014. |
• | First half organic revenue increase of 6.2%, operating profit increase of 21.5% and diluted earnings per share increase of 45.0% over last year's diluted earnings per share excluding the same charge. |
Summary
Revenue
• | Second quarter 2015 revenue was $1.88 billion, compared to $1.85 billion in the second quarter of 2014, with an organic revenue increase of 6.7% compared to the prior-year period. This was comprised of an organic increase of 7.7% in the U.S. and 5.3% internationally. |
• | First half 2015 revenue was $3.55 billion, compared to $3.49 billion in the first half of 2014, with an organic revenue increase of 6.2% compared to the prior-year period. This was comprised of an organic revenue increase of 7.0% in the U.S. and 5.2% internationally. |
Operating Results
• | Operating income in the second quarter of 2015 was $215.8 million, compared to operating income of $195.8 million in 2014. Operating margin was 11.5% for the second quarter of 2015, compared to 10.6% in 2014. |
• | For the first half of 2015, operating income was $223.6 million, compared to operating income of $184.1 million in 2014. Operating margin was 6.3% for the first half of 2015, compared to 5.3% for the first half of 2014. |
Net Results
• | Second quarter 2015 net income available to IPG common stockholders was $121.2 million, resulting in earnings of $0.30 per basic share and $0.29 per diluted share. This compares to net |
Interpublic Group 1114 Avenue of the Americas New York, NY 10036 212-704-1200 tel 212-704-1201 fax
income available to IPG common stockholders a year ago of $99.4 million, or $0.24 per basic share and $0.23 per diluted share. Excluding the impact of the early extinguishment of the company's 6.25% Senior Unsecured Notes due 2014 (the "6.25% Notes"), basic and diluted earnings per share in the second quarter of 2014 were $0.25.
• | First half 2015 net income available to IPG common stockholders was $119.4 million, resulting in basic and diluted earnings per share of $0.29. This compares to net income available to IPG common stockholders of a year ago of $78.5 million, or $0.19 per basic share and $0.18 per diluted share. Excluding the impact of the early extinguishment of the 6.25% Notes, basic and diluted earnings per share were $0.20. |
“We are pleased to report another quarter of strong organic revenue as well as profit growth. We saw positive contributions to our top-line performance from a broad range of our creative, marketing services and media offerings," said Michael I. Roth, Interpublic's Chairman and CEO. "Our digital capabilities, which we have chosen to embed at every one of our agencies and we've largely developed organically, are consistently among the best in the industry. These digital services continued to be significant drivers of growth for us this past quarter. Regionally, our largest markets were standouts, as the US, AsiaPac and the UK all showed very good growth. We remain focused on cost discipline, as evident in our results, as well as committed to capital return programs that remain a source of significant value creation. At the midway point of the year, we believe that the appropriate organic growth target for 2015 is now 4-5%. Consistent with that, we will look to deliver toward the upper end of our full-year operating margin target of 80-100 basis points improvement over 2014. As always, our focus will be on the caliber of our people, our clients' success, and further enhancing shareholder value.”
Operating Results
Revenue
Revenue of $1.88 billion in the second quarter of 2015 increased 1.3% compared with the same period in 2014. During the quarter, the effect of foreign currency translation was negative 5.7%, the impact of net acquisitions was positive 0.3%, and the resulting organic revenue increase was 6.7%.
Revenue of $3.55 billion in the first half of 2015 increased 1.8% compared with the first half of 2014. During the first half of 2015, the effect of foreign currency translation was negative 5.1%, the impact of net acquisitions was positive 0.7%, and the resulting organic revenue increase was 6.2%.
Operating Expenses
Total operating expenses grew 0.3% compared to revenue growth of 1.3% during the second quarter of 2015.
During the second quarter of 2015, salaries and related expenses were $1.21 billion, an increase of 3.0% compared to the same period in 2014.
Interpublic Group 1114 Avenue of the Americas New York, NY 10036 212-704-1200 tel 212-704-1201 fax
During the first half of 2015, salaries and related expenses were $2.42 billion, an increase of 2.6% compared to the same period in 2014.
Staff cost ratio, which is total salaries and related expenses as a percentage of total revenue, was 64.2% in the second quarter of 2015 compared to 63.2% in the same period in 2014, and was 68.1% in the first half of 2015 compared to 67.6% in the same period in 2014.
During the second quarter of 2015, office and general expenses were $455.1 million, a decrease of 6.2% compared to the same period in 2014.
During the first half of 2015, office and general expenses were $908.1 million, a decrease of 4.0% compared to the same period in 2014.
Office and general expenses were 24.3% of total revenue in the second quarter of 2015 compared to 26.2% in the same period in 2014, and were 25.6% in the first half of 2015 compared to 27.1% in the same period in 2014.
Non-Operating Results and Tax
Net interest expense of $15.3 million decreased by $0.7 million, or 4.4%, in the second quarter of 2015 compared to the same period in 2014. For the first half of 2015, net interest expense of $29.0 million decreased by $1.0 million, or 3.3%, compared to the same period in 2014.
Other income, net was $0.5 million and $0.8 million in the second quarter and first half of 2015, respectively.
The income tax provision in the second quarter of 2015 was $77.7 million on income before income taxes of $201.0 million, compared to a provision of $65.3 million on income before income taxes of $168.6 million in the same period in 2014. The income tax provision in the first half of 2015 was $76.3 million on income before income taxes of $195.4 million, compared to a provision of $63.6 million on income before income taxes of $144.6 million in the same period in 2014. The effective income tax rate for the second quarter of 2015 was 38.7%, unchanged from the same period in 2014. The effective income tax rate for the first half of 2015 was 39.0%, compared to 44.0% for the same period in 2014.
Balance Sheet
At June 30, 2015, cash, cash equivalents and marketable securities totaled $855.6 million, compared to $1.67 billion at December 31, 2014. Total debt was $1.78 billion at June 30, 2015, compared to $1.73 billion at December 31, 2014.
Interpublic Group 1114 Avenue of the Americas New York, NY 10036 212-704-1200 tel 212-704-1201 fax
Share Repurchase Program and Common Stock Dividend
During the second quarter of 2015, the company repurchased 2.4 million shares of its common stock at an aggregate cost of $50.8 million and an average price of $20.91 per share, including fees. During the first half of 2015, the company repurchased 4.9 million shares of its common stock at an aggregate cost of $102.0 million and an average price of $20.87 per share, including fees. During the second quarter of 2015, the company declared and paid a common stock cash dividend of $0.12 per share, for a total of $49.2 million.
For more information concerning the company's financial results, please refer to the accompanying slide presentation available on our website, investors.interpublic.com.
# # #
About Interpublic
Interpublic is one of the world's leading organizations of advertising agencies and marketing services companies. Major global brands include BPN, Craft, FCB (Foote, Cone & Belding), FutureBrand, Golin, Huge, Initiative, Jack Morton Worldwide, MAGNA GLOBAL, McCann, Momentum, MRM//McCann, Mullen Lowe Group, Octagon, R/GA, UM and Weber Shandwick. Other leading brands include Avrett Free Ginsberg, Campbell Ewald, Carmichael Lynch, Deutsch, Hill Holliday, ID Media 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
Interpublic Group 1114 Avenue of the Americas New York, NY 10036 212-704-1200 tel 212-704-1201 fax
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.
Interpublic Group 1114 Avenue of the Americas New York, NY 10036 212-704-1200 tel 212-704-1201 fax
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED SUMMARY OF EARNINGS SECOND QUARTER REPORT 2015 AND 2014 (Amounts in Millions except Per Share Data) (UNAUDITED) | |||||||||||
Three Months Ended June 30, | |||||||||||
2015 | 2014 | Fav. (Unfav.) % Variance | |||||||||
Revenue: | |||||||||||
United States | $ | 1,112.1 | $ | 1,030.9 | 7.9 | % | |||||
International | 764.0 | 820.5 | (6.9 | )% | |||||||
Total Revenue | 1,876.1 | 1,851.4 | 1.3 | % | |||||||
Operating Expenses: | |||||||||||
Salaries and Related Expenses | 1,205.2 | 1,170.2 | (3.0 | )% | |||||||
Office and General Expenses | 455.1 | 485.4 | 6.2 | % | |||||||
Total Operating Expenses | 1,660.3 | 1,655.6 | (0.3 | )% | |||||||
Operating Income | 215.8 | 195.8 | 10.2 | % | |||||||
Operating Margin % | 11.5 | % | 10.6 | % | |||||||
Expenses and Other Income: | |||||||||||
Interest Expense | (20.3 | ) | (22.6 | ) | |||||||
Interest Income | 5.0 | 6.6 | |||||||||
Other Income (Expense), Net | 0.5 | (11.2 | ) | ||||||||
Total (Expenses) and Other Income | (14.8 | ) | (27.2 | ) | |||||||
Income before Income Taxes | 201.0 | 168.6 | |||||||||
Provision For Income Taxes | 77.7 | 65.3 | |||||||||
Income of Consolidated Companies | 123.3 | 103.3 | |||||||||
Equity in Net Income of Unconsolidated Affiliates | 0.5 | 0.4 | |||||||||
Net Income | 123.8 | 103.7 | |||||||||
Net Income Attributable to Noncontrolling Interests | (2.6 | ) | (4.3 | ) | |||||||
Net Income Available to IPG Common Stockholders | $ | 121.2 | $ | 99.4 | |||||||
Earnings Per Share Available to IPG Common Stockholders: | |||||||||||
Basic | $ | 0.30 | $ | 0.24 | |||||||
Diluted | $ | 0.29 | $ | 0.23 | |||||||
Weighted-Average Number of Common Shares Outstanding: | |||||||||||
Basic | 410.5 | 421.1 | |||||||||
Diluted | 417.6 | 428.1 | |||||||||
Dividends Declared Per Common Share | $ | 0.120 | $ | 0.095 | |||||||
Interpublic Group 1114 Avenue of the Americas New York, NY 10036 212-704-1200 tel 212-704-1201 fax
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED SUMMARY OF EARNINGS SECOND QUARTER REPORT 2015 AND 2014 (Amounts in Millions except Per Share Data) (UNAUDITED) | |||||||||||
Six Months Ended June 30, | |||||||||||
2015 | 2014 | Fav. (Unfav.) % Variance | |||||||||
Revenue: | |||||||||||
United States | $ | 2,115.9 | $ | 1,969.9 | 7.4 | % | |||||
International | 1,436.2 | 1,519.0 | (5.5 | )% | |||||||
Total Revenue | 3,552.1 | 3,488.9 | 1.8 | % | |||||||
Operating Expenses: | |||||||||||
Salaries and Related Expenses | 2,420.4 | 2,358.8 | (2.6 | )% | |||||||
Office and General Expenses | 908.1 | 946.0 | 4.0 | % | |||||||
Total Operating Expenses | 3,328.5 | 3,304.8 | (0.7 | )% | |||||||
Operating Income | 223.6 | 184.1 | 21.5 | % | |||||||
Operating Margin % | 6.3 | % | 5.3 | % | |||||||
Expenses and Other Income: | |||||||||||
Interest Expense | (41.2 | ) | (42.8 | ) | |||||||
Interest Income | 12.2 | 12.8 | |||||||||
Other Income (Expense), Net | 0.8 | (9.5 | ) | ||||||||
Total (Expenses) and Other Income | (28.2 | ) | (39.5 | ) | |||||||
Income before Income Taxes | 195.4 | 144.6 | |||||||||
Provision For Income Taxes | 76.3 | 63.6 | |||||||||
Income of Consolidated Companies | 119.1 | 81.0 | |||||||||
Equity in Net Income of Unconsolidated Affiliates | 0.5 | 0.3 | |||||||||
Net Income | 119.6 | 81.3 | |||||||||
Net Income Attributable to Noncontrolling Interests | (0.2 | ) | (2.8 | ) | |||||||
Net Income Available to IPG Common Stockholders | $ | 119.4 | $ | 78.5 | |||||||
Earnings Per Share Available to IPG Common Stockholders: | |||||||||||
Basic | $ | 0.29 | $ | 0.19 | |||||||
Diluted | $ | 0.29 | $ | 0.18 | |||||||
Weighted-Average Number of Common Shares Outstanding: | |||||||||||
Basic | 410.8 | 421.9 | |||||||||
Diluted | 417.6 | 428.5 | |||||||||
Dividends Declared Per Common Share | $ | 0.24 | $ | 0.19 | |||||||
Interpublic Group 1114 Avenue of the Americas New York, NY 10036 212-704-1200 tel 212-704-1201 fax
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES RECONCILIATION OF LOSS ON EARLY EXTINGUISHMENT OF DEBT (Amounts in Millions except Per Share Data) (UNAUDITED) | |||||||||||
Three Months Ended June 30, 2014 | |||||||||||
As Reported | Loss on Early Extinguishment of Debt | Ex-Loss on Early Extinguishment of Debt | |||||||||
Income Before Income Taxes | $ | 168.6 | $ | (10.4 | ) | $ | 179.0 | ||||
Provision for Income Taxes | (65.3 | ) | 3.8 | (69.1 | ) | ||||||
Effective Tax Rate | 38.7 | % | 38.6 | % | |||||||
Equity in Net Income of Unconsolidated Affiliates | 0.4 | 0.4 | |||||||||
Net Income Attributable to Noncontrolling Interests | (4.3 | ) | (4.3 | ) | |||||||
Net Income Available to IPG Common Stockholders | $ | 99.4 | $ | (6.6 | ) | $ | 106.0 | ||||
Weighted-Average Number of Common Shares Outstanding - Basic | 421.1 | 421.1 | |||||||||
Add: Effect of Dilutive Securities | |||||||||||
Restricted Stock, Stock Options and Other Equity Awards | 7.0 | 7.0 | |||||||||
Weighted-Average Number of Common Shares Outstanding - Diluted | 428.1 | 428.1 | |||||||||
Earnings Per Share Available to IPG Common Stockholders - Basic | $ | 0.24 | $ | (0.01 | ) | $ | 0.25 | ||||
Earnings Per Share Available to IPG Common Stockholders - Diluted | $ | 0.23 | $ | (0.02 | ) | $ | 0.25 | ||||
Interpublic Group 1114 Avenue of the Americas New York, NY 10036 212-704-1200 tel 212-704-1201 fax
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES RECONCILIATION OF LOSS ON EARLY EXTINGUISHMENT OF DEBT (Amounts in Millions except Per Share Data) (UNAUDITED) | |||||||||||
Six Months Ended June 30, 2014 | |||||||||||
As Reported | Loss on Early Extinguishment of Debt | Ex-Loss on Early Extinguishment of Debt | |||||||||
Income Before Income Taxes | $ | 144.6 | $ | (10.4 | ) | $ | 155.0 | ||||
Provision for Income Taxes | (63.6 | ) | 3.8 | (67.4 | ) | ||||||
Effective Tax Rate | 44.0 | % | 43.5 | % | |||||||
Equity in Net Income of Unconsolidated Affiliates | 0.3 | 0.3 | |||||||||
Net Income Attributable to Noncontrolling Interests | (2.8 | ) | (2.8 | ) | |||||||
Net Income Available to IPG Common Stockholders | $ | 78.5 | $ | (6.6 | ) | $ | 85.1 | ||||
Weighted-Average Number of Common Shares Outstanding - Basic | 421.9 | 421.9 | |||||||||
Add: Effect of Dilutive Securities | |||||||||||
Restricted Stock, Stock Options and Other Equity Awards | 6.6 | 6.6 | |||||||||
Weighted-Average Number of Common Shares Outstanding - Diluted | 428.5 | 428.5 | |||||||||
Earnings Per Share Available to IPG Common Stockholders - Basic | $ | 0.19 | $ | (0.01 | ) | $ | 0.20 | ||||
Earnings Per Share Available to IPG Common Stockholders - Diluted | $ | 0.18 | $ | (0.02 | ) | $ | 0.20 | ||||
Interpublic Group 1114 Avenue of the Americas New York, NY 10036 212-704-1200 tel 212-704-1201 fax
SECOND QUARTER 2015 EARNINGS CONFERENCE CALL July 22, 2015
• Organic revenue growth was 6.7% Net acquisitions added 0.3% Currency exchange rate changes were negative 5.7% Total revenue increase was 1.3% • Operating margin was 11.5%, an improvement of 90 basis points • Operating income was $216 million, an increase of 10% • Diluted EPS was $0.29, a 16% increase excluding early debt redemption charge from last year’s Q2 • First half organic growth was 6.2% and margin expanded 100 bps Overview – Second Quarter 2015 Page 2 See reconciliation of organic revenue change on pages on 17 and 18 and diluted EPS on page 20.
2015 2014 Revenue 1,876.1$ 1,851.4$ Salaries and Related Expenses 1,205.2 1,170.2 Office and General Expenses 455.1 485.4 Operating Income 215.8 195.8 Interest Expense (20.3) (22.6) Interest Income 5.0 6.6 Other Income (Expense), net 0.5 (11.2) Income Before Income Taxes 201.0 168.6 Provision for Income Taxes 77.7 65.3 Equity in Net Income of Unconsolidated Affiliates 0.5 0.4 Net Income 123.8 103.7 Net Income Attributable to Noncontrolling Interests (2.6) (4.3) 121.2$ 99.4$ Earnings per Share Available to IPG Common Stockholders: Basic 0.30$ 0.24$ Diluted 0.29$ 0.23$ Weighted-Average Number of Common Shares Outstanding: Basic 410.5 421.1 Diluted 417.6 428.1 Dividends Declared per Common Share 0.120$ 0.095$ Three Months Ended June 30, Net Income Available to IPG Common Stockholders Operating Performance (Amounts in Millions, except per share amounts) Page 3
Revenue ($ in Millions) Page 4 See reconciliation of segment organic revenue change on pages 17 and 18. Integrated Agency Networks (“IAN”): McCann Worldgroup, FCB (Foote, Cone & Belding), Mullen Lowe Group, IPG Mediabrands, our digital specialist agencies and our domestic integrated agencies Constituency Management Group (“CMG”): Weber Shandwick, Golin, Jack Morton, FutureBrand, Octagon and our other marketing service specialists $ % Change $ % Change June 30, 2014 1,851.4$ 3,488.9$ Total change 24.7 1.3% 63.2 1.8% Foreign currency (105.9) (5.7%) (177.8) (5.1%) Net acquisitions/(divestitures) 7.2 0.3% 24.5 0.7% Organic 123.4 6.7% 216.5 6.2% June 30, 2015 1,876.1$ 3,552.1$ Three Months Ended Six Months Ended 2015 2014 Total Organic 2015 2014 Total Organic IAN 1,526.7$ 1,496.0$ 2.1% 7.7% 2,876.6$ 2,811.7$ 2.3% 7.2% CMG 349.4$ 355.4$ (1.7%) 2.3 675.5$ 677.2$ (0.3%) 2.0 Change Six Months Ended Change Three Months Ended June 30, June 30,
Geographic Revenue Change Page 5 “All Other Markets” includes Canada, Africa and the Middle East. See reconciliation of organic revenue change on pages 17 and 18. Total Organic Total Organic United States 7.9% 7.7% 7.4% 7.0% Internatio al (6.9%) 5.3% (5.5%) 5.2% United Kingdom (1.4%) 7.9% (1.5%) 7.1% Continental Europe (13.0%) 3.6% (10.5%) 3.6% Asia Pacific 3.4% 11.8% 1.6% 9.1% Latin America (22.2%) (1.6%) (18.8%) (1.2%) All Other Markets (8.2%) (0.7%) (3.3%) 3.9% Worldwide 1.3% 6.7% 1.8% 6.2% Three Months Ended June 30, 2015 Six Months Ended June 30, 2015
(0.9%) 0.9% 3.8% 3.7% (10.8%) 7.0% 6.1% 0.7% 2.8% 5.5% (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 Q4-13 Q4-14 5.8% Organic Revenue Growth Page 6 See reconciliation on page 19. Trailing Twelve Months Q2-15
Expenses ($ in Millions) Page 7 See reconciliation of organic measures on pages 17 and 18. Salaries & Related 2015 2014 $ Total Organic Three Months Ended June 30, 1,205.2$ 1,170.2$ 35.0$ 3.0% 8.5% % of Revenue 64.2% 63.2% Three months severance 16.9$ 16.1$ 0.8$ 5.0% % of Revenue 0.9% 0.9% Six Months Ended June 30, 2,420.4$ 2,358.8$ 61.6$ 2.6% 7.1% % of Revenue 68.1% 67.6% Six months severance 34.2$ 36.5$ (2.3)$ (6.3%) % of Revenue 1.0% 1.0% Office & General 2015 2014 $ Total Organic Three Months Ended June 30, 455.1$ 485.4$ (30.3)$ (6.2%) (1.1%) % of Revenue 24.3% 26.2% Three months occupancy expense (ex-D&A) 110.3$ 125.7$ (15.4)$ (12.3%) % of Revenue 5.9% 6.8% Six Months Ended June 30, 908.1$ 946.0$ (37.9)$ (4.0%) 0.5% % of Revenue 25.6% 27.1% Six months occupancy expense (ex-D&A) 232.0$ 252.9$ (20.9)$ (8.3%) % of Revenue 6.5% 7.2% Change Change
(1.7%) 1.7% 5.3% 8.5% 5.7% 8.4% 9.8% 9.8% 8.4% 10.5% 10.9% 9.3% (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 Q4-13 Q4-14 Operating Margin Page 8 Trailing Twelve Months Q2-15 For the twelve months ended December 31, 2013, reported operating income of $598.3 includes our Q4 2013 restructuring charge of $60.6. Excluding this charge, adjusted operating income was $658.9, and adjusted operating margin is represented in green. ($ in Millions)
June 30, December 31, June 30, 2015 2014 2014 CURRENT ASSETS: Cash and cash equivalents 848.9$ 1,660.6$ 895.1$ Marketable securities 6.7 6.6 6.3 Accounts receivable, net 3,976.7 4,376.6 4,272.3 Expenditures billable to clients 1,452.4 1,424.2 1,798.6 Other current assets 352.7 342.2 429.3 Total current assets 6,637.4$ 7,810.2$ 7,401.6$ CURRENT LIABILITIES: Accounts payable 5,669.8$ 6,558.0$ 6,414.8$ Accrued liabilities 603.8 796.0 594.8 Short-term borrowings 158.0 107.2 126.2 Current portion of long-term debt 2.0 2.1 2.4 Total current liabilities 6,433.6$ 7,463.3$ 7,138.2$ Balance Sheet – Current Portion ($ in Millions) Page 9
2015 2014 NET INCOME 124$ 103$ OPERATING ACTIVITIES Depreciation & amortization 57 52 Deferred taxes 32 30 Other non-cash items 5 15 Change in working capital, net 41 (24) Other non-current assets & liabilities 1 (7) Net cash provided by Operating Activities 260 169 INVESTING ACTIVITIES Capital expenditures (30) (32) Acquisitions & deferred payments, net - (29) Business, investment & fixed asset purchases/sales, net - 9 Net cash used in Investing Activities (30) (52) FINANCING ACTIVITIES Repurchase of common stock (51) (52) Common stock dividends (50) (40) Acquisition-related payments (26) (6) Distributions to noncontrolling interests (7) (6) Purchase of long-term debt (1) (350) Proceeds from issuance of long-term debt - 499 Exercise of stock options 2 5 Net increase (decrease) in short-term bank borrowings 21 (46) Other financing activities 3 (2) Net cash (used in) provided by Financing Activities (109) 2 Currency Effect (7) 6 Increase in Cash & S/T Marketable Securities 114$ 125$ Three Months Ended June 30, Cash Flow ($ in Millions) Page 10
$2,349 $2,120 $1,947 $1,737 $1,769 $1,652 $1,663 $1,733 $1,783 $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 12/31/2013 12/31/2014 6/30/2015 $2,450 Total Debt (1) ($ in Millions) Page 11 (2) (1) Includes current portion of long-term debt, short-term borrowings and long-term debt. (2) Includes our November 2012 debt issuances of $800 aggregate principal amount of Senior Notes, which pre-funded our plan to redeem a similar amount of debt in 2013.
• Very solid performance against FY-15 financial objectives • Traction from key strategic drivers Quality of our agency offerings Strength in high-growth disciplines and largest regions Effective expense management • Continue focus on margin improvement • Financial strength/share repurchase continues to be a source of value creation Summary Page 12
Appendix
2015 2014 Revenue 3,552.1$ 3,488.9$ Salaries and Related Expenses 2,420.4 2,358.8 Office and General Expenses 908.1 946.0 Operating Income 223.6 184.1 Interest Expense (41.2) (42.8) Interest Income 12.2 12.8 Other Income (Expense), net 0.8 (9.5) Income Before Income Taxes 195.4 144.6 Provision for Income Taxes 76.3 63.6 Equity in Net Income of Unconsolidated Affiliates 0.5 0.3 Net Income 119.6 81.3 Net Income Attributable to Noncontrolling Interests (0.2) (2.8) 119.4$ 78.5$ Earnings per Share Available to IPG Common Stockholders: Basic 0.29$ 0.19$ Diluted 0.29$ 0.18$ Weighted-Average Number of Common Shares Outstanding: Basic 410.8 421.9 Diluted 417.6 428.5 Dividends Declared per Common Share 0.24$ 0.19$ Net Income Available to IPG Common Stockholders Six Months Ended June 30, Operating Performance (Amounts in Millions, except per share amounts) Page 14
2015 2014 NET INCOME 120$ 81$ OPERATING ACTIVITIES Depreciation & amortization 114 109 Deferred taxes - 7 Other non-cash items 18 22 Change in working capital, net (760) (747) Other non-current assets & liabilities (29) (29) Net cash used in Operating Activities (537) (557) INVESTING ACTIVITIES Capital expenditures (50) (59) Acquisitions & deferred payments, net - (51) Business, investment & fixed asset purchases/sales, net - 11 Net cash used in Investing Activities (50) (99) FINANCING ACTIVITIES Repurchase of common stock (102) (97) Common stock dividends (99) (80) Acquisition-related payments (28) (9) Distributions to noncontrolling interests (8) (12) Purchase of long-term debt (1) (350) Proceeds from issuance of long-term debt - 499 Excess tax benefit from share-based payment arrangements 9 4 Exercise of stock options 11 11 Net increase (decrease) in short-term bank borrowings 55 (53) Other financing activities 3 (2) Net cash used in Financing Activities (160) (89) Currency Effect (65) 4 Decrease in Cash & S/T Marketable Securities (812)$ (741)$ Six Months Ended June 30, Cash Flow ($ in Millions) Page 15
Q1 Q2 Q3 Q4 YTD 2015 Depreciation and amortization of fixed assets and intangible assets 38.7$ 39.5$ 78.2$ Amortization of restricted stock and other non-cash compensation 16.8 16.4 33.2 Net amortization of bond discounts and deferred financing costs 1.4 1.4 2.8 Q1 Q2 Q3 Q4 FY 2014 Depreciation and amortization of fixed assets and intangible assets 40.5$ 40.2$ 41.0$ 41.3$ 163.0$ Amortization of restricted stock and other non-cash compensation 15.1 11.1 11.7 16.4 54.3 Net amortization of bond discounts and deferred financing costs 1.0 1.3 1.4 1.4 5.1 2015 2014 Depreciation and Amortization ($ in Millions) Page 16
Three Months Ended June 30, 2014 Foreign Currency Net Acquisitions / (Divestitures) Three Months Ended June 30, 2015 Organic Total Segment Revenue IAN 1,496.0$ (91.9)$ 7.2$ 115.4$ 1,526.7$ 7.7% 2.1% CMG 355.4 (14.0) - 8.0 349.4 2.3% (1.7%) Total 1,851.4$ (105.9)$ 7.2$ 123.4$ 1,876.1$ 6.7% 1.3% Geographic United States 1,030.9$ -$ 1.4$ 79.8$ 1,112.1$ 7.7% 7.9% International 820.5 (105.9) 5.8 43.6 764.0 5.3% (6.9%) United Kingdom 159.0 (14.8) - 12.5 156.7 7.9% (1.4%) Continental Europe 203.8 (39.6) 5.8 7.4 177.4 3.6% (13.0%) Asia Pacific 224.1 (18.8) - 26.4 231.7 11.8% 3.4% Latin America 116.3 (23.9) - (1.9) 90.5 (1.6%) (22.2%) All Other Markets 117.3 (8.8) - (0.8) 107.7 (0.7%) (8.2%) Worldwide 1,851.4$ (105.9)$ 7.2$ 123.4$ 1,876.1$ 6.7% 1.3% Expenses Salaries & Related 1,170.2$ (68.8)$ 4.9$ 98.9$ 1,205.2$ 8.5% 3.0% Office & General 485.4 (26.2) 1.1 (5.2) 455.1 (1.1%) (6.2%) Total 1,655.6$ (95.0)$ 6.0$ 93.7$ 1,660.3$ 5.7% 0.3% Components of Change Change Organic Reconciliation of Organic Measures ($ in Millions) Page 17
Six Months Ended June 30, 2014 Foreign Currency Net Acquisitions / (Divestitures) Organic Six Months Ended June 30, 2015 Organic Total Segment Revenue IAN 2,811.7$ (152.3)$ 14.0$ 203.2$ 2,876.6$ 7.2% 2.3% CMG 677.2 (25.5) 10.5 13.3 675.5 2.0% (0.3%) Total 3,488.9$ (177.8)$ 24.5$ 216.5$ 3,552.1$ 6.2% 1.8% Geographic United States 1,969.9$ -$ 9.0$ 137.0$ 2,115.9$ 7.0% 7.4% International 1,519.0 (177.8) 15.5 79.5 1,436.2 5.2% (5.5%) United Kingdom 326.6 (28.2) - 23.2 321.6 7.1% (1.5%) Continental Europe 371.5 (67.9) 15.7 13.2 332.5 3.6% (10.5%) Asia Pacific 412.7 (30.8) (0.1) 37.7 419.5 9.1% 1.6% Latin America 206.9 (36.3) (0.1) (2.5) 168.0 (1.2%) (18.8%) All Other Markets 201.3 (14.6) - 7.9 194.6 3.9% (3.3%) Worldwide 3,488.9$ (177.8)$ 24.5$ 216.5$ 3,552.1$ 6.2% 1.8% Expenses Salaries & Related 2,358.8$ (122.3)$ 17.2$ 166.7$ 2,420.4$ 7.1% 2.6% Office & General 946.0 (47.1) 4.6 4.6 908.1 0.5% (4.0%) Total 3,304.8$ (169.4)$ 21.8$ 171.3$ 3,328.5$ 5.2% 0.7% Components of Change Change Reconciliation of Organic Measures ($ in Millions) Page 18
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 6/30/13 7,021.6 (111.4) 56.9 65.8 7,032.9 9/30/13 6,965.5 (80.3) 49.5 128.2 7,062.9 12/31/13 6,956.2 (80.4) 50.3 196.2 7,122.3 3/31/14 6,992.4 (89.9) 51.2 263.1 7,216.8 6/30/14 7,032.9 (80.6) 51.6 308.1 7,312.0 9/30/14 7,062.9 (53.5) 74.3 369.0 7,452.7 12/31/14 7,122.3 (75.5) 95.3 395.0 7,537.1 3/31/15 7,216.8 (125.7) 98.4 386.1 7,575.6 6/30/15 7,312.0 (223.5) 85.3 426.5 7,600.3 Components of Change During the Period Reconciliation of Organic Revenue Growth ($ in Millions) Page 19
As Reported Loss on Early Extinguishment of Debt Ex - Loss on Early Extinguishment of Debt As Reported Loss on Early Extinguishment of Debt Ex -Loss on Early Extinguishment of Debt Income Before Income Taxes 168.6$ (10.4)$ 179.0$ 144.6$ (10.4)$ 155.0$ Provision for Income Taxes (65.3) 3.8 (69.1) (63.6) 3.8 (67.4) Effective Tax Rate 38.7% 38.6% 44.0% 43.5% Equity in Net Income of Unconsolidated Affiliates 0.4 0.4 0.3 0.3 Net Income Attributable to Noncontrolling Interests (4.3) (4.3) (2.8) (2.8) 99.4$ (6.6)$ 106.0$ 78.5$ (6.6)$ 85.1$ Weighted-Average Number of Common Shares Outstanding - Basic 421.1 421.1 421.9 421.9 Add: Effect of Dilutive Securities Restricted Stock, Stock Options and Other Equity Aw ards 7.0 7.0 6.6 6.6 Weighted-Average Number of Common Shares Outstanding - Diluted 428.1 428.1 428.5 428.5 Earnings Per Share Available to IPG Common Stockholders - Basic 0.24$ (0.01)$ 0.25$ 0.19$ (0.01)$ 0.20$ Earnings Per Share Available to IPG Common Stockholders - Diluted 0.23$ (0.02)$ 0.25$ 0.18$ (0.02)$ 0.20$ Six Months Ended June 30, 2014 Net Income Available to IPG Common Stockholders - Basic and Diluted Three Months Ended June 30, 2014 ($ in Millions) Page 20 Reconciliation of Loss on Early Extinguishment of Debt (1) (2) (1) In May 2014, we redeemed $350 in aggregate principal amount of our 6.25% Notes. (2) Loss on early extinguishment of debt of $10.4, primarily due to a redemption premium. (2)
Metrics Update
Metrics Update Page 22 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
63.6% 64.0% 64.2% 60.0% 62.0% 64.0% 66.0% 6/30/2014 12/31/2014 6/30/2015 % of Revenue, Trailing Twelve Months Salaries & Related Expenses Page 23
0.9% 0.9% 1.0% 1.0% 0.0% 1.0% 2.0% 3.0% Severance Expense Three Months Six Months 3.8% 3.7% 3.8% 3.8% 0.0% 2.0% 4.0% 6.0% Temporary Help Three Months Six Months 3.7% 2.7% 3.8% 3.3% 0.0% 2.0% 4.0% 6.0% Incentive Expense Six MonthsThree Months 53.2% 53.6% 56.6% 56.8% 45.0% 50.0% 55.0% 60.0% Base, Benefits & Tax Three Months Six Months 2015 2014 Salaries & Related Expenses (% of Revenue) Page 24 Three and Six Months Ended June 30 “All Other Salaries & Related,” not shown, was 2.6% and 2.3% for the three months ended June 30, 2015 and 2014, respectively, and 2.9% and 2.7% for the six months ended June 30, 2015 and 2014, respectively.
26.7% 25.6% 24.9% 23.0% 25.0% 27.0% 29.0% 6/30/2014 12/31/2014 6/30/2015 % of Revenue, Trailing Twelve Months Office & General Expenses Page 25 (1) Office & general expenses excludes our Q4 2013 restructuring charge, which was recorded as a separate line item in our income statement. (1)
1.5% 1.6% 1.6% 1.7% 0.0% 1.0% 2.0% 3.0% Professional Fees Three Months Six Months 5.9% 6.8% 6.5% 7.2% 4.0% 6.0% 8.0% 10.0% Occupancy Expense (ex-D&A) Three Months Six Months 13.4% 14.2% 13.9% 14.5% 10.0% 12.0% 14.0% 16.0% All Other O&G Three Months Six Months 3.5% 3.6% 3.6% 3.7% 2.0% 3.0% 4.0% 5.0% T&E, Office Supplies & Telecom Three Months Six Months Office & General Expenses (% of Revenue) Page 26 Three and Six Months Ended June 30 “All Other O&G” includes production expenses, depreciation and amortization, bad debt expense, adjustments for contingent acquisition obligations, foreign currency (gains) losses, restructuring and other reorganization-related charges (reversals), long-lived asset impairments and other expenses. 2015 2014
$901 $902 $1,667 $741 $856 $985 $984 $984 $983 $983 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 6/30/2014 9/30/2014 12/31/2014 3/31/2015 6/30/2015 Cash, Cash Equivalents and Short-Term Marketable Securities Available Committed Credit Facility Available Liquidity ($ in Millions) Page 27 Cash, Cash Equivalents and Short-Term Marketable Securities + Available Committed Credit Facility
Last Twelve Months Ending June 30, 2015 I. Interest Coverage Ratio (not less than): 5.00x Actual Interest Coverage Ratio: 19.30x II. Leverage Ratio (not greater than): 3.25x Actual Leverage Ratio: 1.70x Interest Coverage Ratio - Interest Expense Reconciliation Last Twelve Months Ending June 30, 2015 Interest Expense: $83.3 - Interest income 26.8 - Other 2.1 Net interest expense : $54.4 EBITDA Reconciliation Last Twelve Months Ending June 30, 2015 Operating Income: $827.9 + Depreciation and amortization 221.8 EBITDA : $1,049.7 Covenants $1.0 Billion 5-Year Credit Facility Covenants ($ in Millions) Page 28 (1) Calculated as defined in the Credit Agreement. (1) (1)
Cautionary Statement Page 29 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.