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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
or
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-6686
https://cdn.kscope.io/f4d24e4b785bf3ab7189496f739c3c49-ipglogo2018a04.jpg
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.)
909 Third Avenue, New York, New York 10022
(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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.10 per share
IPG
The New York Stock Exchange
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 every Interactive Data File required to be submitted 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 such files). Yes ý    No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
 
 
Accelerated Filer
 
Non-accelerated Filer
 
 
Smaller Reporting Company
 
 
 
 
 
Emerging Growth Company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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 April 15, 2020 was 389,613,926.



INDEX
 
Page
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 and our quarterly reports on Form 10-Q. 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;
the outbreak of the novel coronavirus (“COVID-19”), including the measures to reduce its spread, and the impact on the economy and demand for our services, which may precipitate or exacerbate other risks and uncertainties;
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;
developments from changes in the regulatory and legal environment for advertising and marketing and communications services companies around the world; and
failure to realize the anticipated benefits on the acquisition of the Acxiom business.
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 and our quarterly reports on Form 10-Q.

1



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
March 31,
 
2020
 
2019
REVENUE:
 
 
 
Net revenue
$
1,972.1

 
$
2,004.8

Billable expenses
387.7

 
356.4

Total revenue
2,359.8

 
2,361.2

 
 
 
 
OPERATING EXPENSES:
 
 
 
Salaries and related expenses
1,422.8

 
1,421.1

Office and other direct expenses
378.2

 
389.2

Billable expenses
387.7

 
356.4

Cost of services
2,188.7

 
2,166.7

Selling, general and administrative expenses
22.4

 
41.4

Depreciation and amortization
72.8

 
71.1

Restructuring charges
0.0

 
31.8

Total operating expenses
2,283.9

 
2,311.0

 
 
 
 
OPERATING INCOME
75.9

 
50.2

 
 
 
 
EXPENSES AND OTHER INCOME:
 
 
 
Interest expense
(44.8
)
 
(49.8
)
Interest income
10.7

 
7.8

Other expense, net
(21.8
)
 
(6.9
)
Total (expenses) and other income
(55.9
)
 
(48.9
)
 
 
 
 
Income before income taxes
20.0

 
1.3

Provision for income taxes
17.2

 
10.5

Income (Loss) of consolidated companies
2.8

 
(9.2
)
Equity in net loss of unconsolidated affiliates
(0.2
)
 
(0.3
)
NET INCOME (LOSS)
2.6

 
(9.5
)
Net loss attributable to noncontrolling interests
2.1

 
1.5

NET INCOME (LOSS) AVAILABLE TO IPG COMMON STOCKHOLDERS
$
4.7

 
$
(8.0
)
 
 
 
 
Earnings (Loss) per share available to IPG common stockholders:
 
 
 
Basic
$
0.01

 
$
(0.02
)
Diluted
$
0.01

 
$
(0.02
)
 
 
 
 
Weighted-average number of common shares outstanding:
 
 
 
Basic
387.7

 
384.5

Diluted
391.7

 
384.5

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

2



THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in Millions)
(Unaudited)
 
Three months ended
March 31,
 
2020
 
2019
NET INCOME (LOSS)
$
2.6

 
$
(9.5
)
 
 
 
 
OTHER COMPREHENSIVE (LOSS) INCOME
 
 
 
Foreign currency translation:
 
 
 
Foreign currency translation adjustments
(147.6
)
 
8.3

Reclassification adjustments recognized in net income (loss)
(3.6
)
 
1.2

 
(151.2
)
 
9.5

 
 
 
 
Derivative instruments:
 
 
 
Changes in fair value of derivative instruments
(0.4
)
 
0.0

Recognition of previously unrealized losses in net income (loss)
0.6

 
0.6

Income tax effect
(0.1
)
 
(0.1
)
 
0.1

 
0.5

 
 
 
 
Defined benefit pension and other postretirement plans:
 
 
 
Amortization of unrecognized losses, transition obligation and prior service cost included in net income (loss)
1.9

 
1.7

Other
(1.3
)
 
(0.3
)
Income tax effect
(0.3
)
 
(0.1
)
 
0.3

 
1.3

Other comprehensive (loss) income, net of tax
(150.8
)
 
11.3

TOTAL COMPREHENSIVE (LOSS) INCOME
(148.2
)
 
1.8

Less: comprehensive loss attributable to noncontrolling interests
(4.2
)
 
(1.6
)
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO IPG
$
(144.0
)
 
$
3.4


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

3



THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Millions)
(Unaudited)
 
March 31,
2020
 
December 31,
2019
ASSETS:
 
 
 
Cash and cash equivalents
$
1,554.0

 
$
1,192.2

Accounts receivable, net of allowance of $67.0 and $40.2, respectively
3,661.5

 
5,209.2

Accounts receivable, billable to clients
1,914.0

 
1,934.1

Assets held for sale
17.4

 
22.8

Other current assets
449.8

 
412.4

Total current assets
7,596.7

 
8,770.7

Property and equipment, net of accumulated depreciation and amortization of $1,136.1 and $1,116.4, respectively
752.8

 
778.1

Deferred income taxes
270.7

 
252.1

Goodwill
4,826.5

 
4,894.4

Other intangible assets
990.7

 
1,014.3

Operating lease right-of-use assets
1,525.4

 
1,574.4

Other non-current assets
466.1

 
467.9

TOTAL ASSETS
$
16,428.9

 
$
17,751.9

 
 
 
 
LIABILITIES:
 
 
 
Accounts payable
$
5,559.5

 
$
7,205.4

Accrued liabilities
539.5

 
742.8

Contract liabilities
571.5

 
585.6

Short-term borrowings
310.1

 
52.4

Current portion of long-term debt
502.5

 
502.0

Current portion of operating leases
257.4

 
267.2

Liabilities held for sale
55.4

 
65.0

Total current liabilities
7,795.9

 
9,420.4

Long-term debt
3,410.9

 
2,771.9

Non-current operating leases
1,386.7

 
1,429.6

Deferred compensation
372.8

 
425.0

Other non-current liabilities
732.6

 
714.7

TOTAL LIABILITIES
13,698.9

 
14,761.6

 
 
 
 
Redeemable noncontrolling interests (see Note 5)
154.8

 
164.7

 
 
 
 
STOCKHOLDERS’ EQUITY:
 
 
 
Common stock
38.9

 
38.7

Additional paid-in capital
981.2

 
977.3

Retained earnings
2,591.1

 
2,689.9

Accumulated other comprehensive loss, net of tax
(1,078.7
)
 
(930.0
)
Total IPG stockholders’ equity
2,532.5

 
2,775.9

Noncontrolling interests
42.7

 
49.7

TOTAL STOCKHOLDERS’ EQUITY
2,575.2

 
2,825.6

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
16,428.9

 
$
17,751.9

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

4



THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Millions) (Unaudited)
 
Three months ended
March 31,
  
2020
 
2019
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income (loss)
$
2.6

 
$
(9.5
)
Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
Depreciation and amortization
72.8

 
71.1

Provision for uncollectible receivables
22.6

 
3.4

Amortization of restricted stock and other non-cash compensation
23.2

 
28.2

Net amortization of bond discounts and deferred financing costs
2.3

 
2.3

Deferred income tax provision
(11.2
)
 
(31.0
)
Net losses on sales of businesses
23.3

 
8.6

Other
1.2

 
13.1

Changes in assets and liabilities, net of acquisitions and divestitures, providing (using) cash:
 
 
 
Accounts receivable
1,343.5

 
1,088.4

Accounts receivable, billable to clients
(40.7
)
 
(175.2
)
Other current assets
(57.5
)
 
(79.4
)
Accounts payable
(1,466.9
)
 
(961.3
)
Accrued liabilities
(158.8
)
 
(77.5
)
Contract liabilities
8.8

 
39.2

Other non-current assets and liabilities
(42.3
)
 
(13.9
)
Net cash used in operating activities
(277.1
)
 
(93.5
)
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Capital expenditures
(44.6
)
 
(32.8
)
Acquisitions, net of cash acquired
(1.3
)
 
0.0

Other investing activities
(14.9
)
 
2.1

Net cash used in investing activities
(60.8
)
 
(30.7
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Proceeds from long-term debt
646.2

 
0.0

Net increase in short-term borrowings
247.8

 
201.0

Exercise of stock options
0.0

 
0.6

Common stock dividends
(100.0
)
 
(90.6
)
Tax payments for employee shares withheld
(19.1
)
 
(21.2
)
Acquisition-related payments
(18.6
)
 
0.0

Distributions to noncontrolling interests
(5.6
)
 
(2.5
)
Other financing activities
(6.3
)
 
(0.6
)
Net cash provided by financing activities
744.4

 
86.7

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash
(46.7
)
 
(6.4
)
Net increase (decrease) in cash, cash equivalents and restricted cash
359.8

 
(43.9
)
Cash, cash equivalents and restricted cash at beginning of period
1,195.7

 
677.2

Cash, cash equivalents and restricted cash at end of period
$
1,555.5

 
$
633.3

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

5



THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in Millions)
(Unaudited)
 
 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated 
Other
Comprehensive
Loss, Net of Tax
 
Total IPG
Stockholders’
Equity
 
Noncontrolling
Interests
 
Total
Stockholders’
Equity
 
Shares
 
Amount
 
Balance at December 31, 2019
387.0

 
$
38.7

 
$
977.3

 
$
2,689.9

 
$
(930.0
)
 
$
2,775.9

 
$
49.7

 
$
2,825.6

Cumulative effect of accounting change
 
 
 
 
 
 
(6.6
)
 
 
 
(6.6
)
 
 
 
(6.6
)
Net income (loss)
 
 
 
 
 
 
4.7

 
 
 
4.7

 
(2.1
)
 
2.6

Other comprehensive loss
 
 
 
 
 
 
 
 
(148.7
)
 
(148.7
)
 
(2.1
)
 
(150.8
)
Reclassifications related to redeemable noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
2.8

 
2.8

Distributions to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
(5.6
)
 
(5.6
)
Change in redemption value of redeemable noncontrolling interests
 
 
 
 
 
 
3.1

 
 
 
3.1

 
 
 
3.1

Common stock dividends ($0.255 per share)
 
 
 
 
 
 
(100.0
)
 
 
 
(100.0
)
 
 
 
(100.0
)
Stock-based compensation
3.4

 
0.3

 
25.1

 
 
 
 
 
25.4

 
 
 
25.4

Exercise of stock options
0.0

 
0.0

 
0.2

 
 
 
 
 
0.2

 
 
 
0.2

Shares withheld for taxes
(0.9
)
 
(0.1
)
 
(21.4
)
 
 
 
 
 
(21.5
)
 
 
 
(21.5
)
Balance at March 31, 2020
389.5

 
$
38.9

 
$
981.2

 
$
2,591.1

 
$
(1,078.7
)
 
$
2,532.5

 
$
42.7

 
$
2,575.2

 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated 
Other
Comprehensive
Loss, Net of Tax
 
Total IPG
Stockholders’
Equity
 
Noncontrolling
Interests
 
Total
Stockholders’
Equity
 
Shares
 
Amount
 
Balance at December 31, 2018
383.6

 
$
38.3

 
$
895.9

 
$
2,400.1

 
$
(941.1
)
 
$
2,393.2

 
$
39.6

 
$
2,432.8

Cumulative effect of accounting change
 
 
 
 
 
 
2.2

 
 
 
2.2

 
 
 
2.2

Net loss
 
 
 
 
 
 
(8.0
)
 
 
 
(8.0
)
 
(1.5
)
 
(9.5
)
Other comprehensive income
 
 
 
 
 
 
 
 
11.4

 
11.4

 
(0.1
)
 
11.3

Reclassifications related to redeemable noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
2.6

 
2.6

Distributions to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
(2.5
)
 
(2.5
)
Change in redemption value of redeemable noncontrolling interests
 
 
 
 


 
0.3

 
 
 
0.3

 
 
 
0.3

Common stock dividends ($0.235 per share)
 
 
 
 
 
 
(90.6
)
 
 
 
(90.6
)
 
 
 
(90.6
)
Stock-based compensation
3.4

 
0.3

 
29.8

 
 
 
 
 
30.1

 
 
 
30.1

Exercise of stock options
0.0

 
0.0

 
0.6

 
 
 
 
 
0.6

 
 
 
0.6

Shares withheld for taxes
(0.8
)
 
0.0

 
(22.0
)
 
 
 
 
 
(22.0
)
 
 
 
(22.0
)
Other
 
 
 
 
(1.0
)
 
(0.9
)
 
 
 
(1.9
)
 
1.2

 
(0.7
)
Balance at March 31, 2019
386.2

 
$
38.6

 
$
903.3

 
$
2,303.1

 
$
(929.7
)
 
$
2,315.3

 
$
39.3

 
$
2,354.6


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

6



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 its subsidiaries (the "Company," "IPG," "we," "us" or "our") in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") 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 Company expects the effects of the COVID-19 pandemic to negatively impact its results of operations, cash flows and financial position. The Company’s Consolidated Financial Statements presented herein reflect the latest estimates and assumptions made by management that affect the reported amounts of assets and liabilities and related disclosures as of the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented. The Company believes it has used reasonable estimates and assumptions to assess the fair values of goodwill, long-lived assets and indefinite-lived intangible assets; assessment of the annual effective tax rate; valuation of deferred income taxes and the allowance for doubtful accounts.
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 Annual Report on Form 10-K for the year ended December 31, 2019 (the "2019 Annual Report").
Cost of services is comprised of the expenses of our revenue-producing reportable segments, Integrated Agency Networks ("IAN") and Constituency Management Group ("CMG"), including salaries and related expenses, office and other direct expenses and billable expenses, and includes an allocation of the centrally managed expenses of our Corporate and other group. Office and other direct expenses include rent expense, professional fees, certain expenses incurred by our staff in servicing our clients and other costs directly attributable to client engagements.
Selling, general and administrative expenses are primarily the unallocated expenses of our Corporate and other group, excluding depreciation and amortization.
Depreciation and amortization of fixed assets and intangible assets of the Company is disclosed as a separate operating expense.
Segment information for the prior period has been recast to conform to the current-period presentation.
In the opinion of management, these unaudited Consolidated Financial Statements include all adjustments, consisting only of normal and recurring adjustments necessary for a fair statement of the information for each period contained therein. Certain reclassifications and immaterial revisions have been made to prior-period financial statements to conform to the current-period presentation.


7

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

Note 2 Revenue
Disaggregation of Revenue
We have two reportable segments as of March 31, 2020: IAN and CMG, as further discussed in Note 10. IAN principally generates revenue from providing advertising and media services as well as a comprehensive array of global communications, marketing services and data management. CMG generates revenue from providing events and public relations services as well as sports and entertainment marketing, corporate and brand identity, and strategic marketing consulting.
Our agencies are located in over 100 countries, including every significant world market. Our geographic revenue breakdown is listed below.
 
Three months ended
March 31,
Total revenue:
2020
 
2019
United States
$
1,569.6

 
$
1,535.1

International:
 
 
 
United Kingdom
197.1

 
206.2

Continental Europe
169.8

 
178.8

Asia Pacific
211.4

 
232.4

Latin America
86.8

 
89.3

Other
125.1

 
119.4

Total International
790.2

 
826.1

Total Consolidated
$
2,359.8

 
$
2,361.2

 
 
Three months ended
March 31,
Net revenue:
2020
 
2019
United States
$
1,320.0

 
$
1,314.1

International:
 
 
 
United Kingdom
165.7

 
170.3

Continental Europe
146.0

 
156.8

Asia Pacific
158.8

 
178.0

Latin America
79.3

 
80.3

Other
102.3

 
105.3

Total International
652.1

 
690.7

Total Consolidated
$
1,972.1

 
$
2,004.8

 

IAN
Three months ended
March 31,
Total revenue:
2020
 
2019
United States
$
1,193.3

 
$
1,200.1

International
625.5

 
662.1

Total IAN
$
1,818.8

 
$
1,862.2

 
 
 
 
Net revenue:
 
 
 
United States
$
1,111.9

 
$
1,114.2

International
552.6

 
591.9

Total IAN
$
1,664.5

 
$
1,706.1

 


8

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

CMG
Three months ended
March 31,
Total revenue:
2020
 
2019
United States
$
376.3

 
$
335.0

International
164.7

 
164.0

Total CMG
$
541.0

 
$
499.0

 
 
 
 
Net revenue:
 
 
 
United States
$
208.1

 
$
199.9

International
99.5

 
98.8

Total CMG
$
307.6

 
$
298.7


Contract Balances
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.
 
March 31,
2020
 
December 31,
2019
Accounts receivable, net of allowance of $67.0 and $40.2, respectively
$
3,661.5

 
$
5,209.2

Accounts receivable, billable to clients
1,914.0

 
1,934.1

Contract assets
58.3

 
63.0

Contract liabilities (deferred revenue)
571.5

 
585.6


Contract assets are primarily comprised of contract incentives that are generally satisfied annually under the terms of our contracts and are transferred to accounts receivable when the right to payment becomes unconditional. Contract liabilities relate to advance consideration received from customers under the terms of our contracts primarily related to reimbursements of third-party expenses, whether we act as principal or agent, and to a lesser extent, periodic retainer fees, both of which are generally recognized shortly after billing.
The majority of our contracts are for periods of one year or less with the exception of our data management contracts. For those contracts with a term of more than one year, we had approximately $715.0 of unsatisfied performance obligations as of March 31, 2020, which will be recognized as services are performed over the remaining contractual terms through 2026.


9

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

Note 3:  Debt and Credit Arrangements
Long-Term Debt
A summary of the carrying amounts of our long-term debt is listed below.
 
Effective
Interest Rate
 
March 31,
2020
 
December 31,
2019
 
3.50% Senior Notes due 2020 (less unamortized discount and issuance costs of $0.3 and $0.7, respectively)
3.89%
 
$
499.0

 
$
498.5

3.75% Senior Notes due 2021 (less unamortized discount and issuance costs of $0.2 and $1.6, respectively)
3.98%
 
498.2

 
497.9

4.00% Senior Notes due 2022 (less unamortized discount and issuance costs of $0.6 and $0.5, respectively)
4.13%
 
248.9

 
248.7

3.75% Senior Notes due 2023 (less unamortized discount and issuance costs of $0.4 and $1.2, respectively)
4.32%
 
498.4

 
498.2

4.20% Senior Notes due 2024 (less unamortized discount and issuance costs of $0.4 and $1.7, respectively)
4.24%
 
497.9

 
497.8

4.65% Senior Notes due 2028 (less unamortized discount and issuance costs of $1.5 and $3.8, respectively)
4.78%
 
494.7

 
494.6

4.75% Senior Notes due 2030 (less unamortized discount and issuance costs of $3.8 and $6.2, respectively)
4.92%
 
640.0

 

5.40% Senior Notes due 2048 (less unamortized discount and issuance costs of $2.8 and $5.3, respectively)
5.48%
 
491.9

 
491.9

Other notes payable and capitalized leases
 
 
44.4

 
46.3

Total long-term debt
 
 
3,913.4

 
3,273.9

Less: current portion
 
 
502.5

 
502.0

Long-term debt, excluding current portion
 
 
$
3,410.9

 
$
2,771.9



As of March 31, 2020 and December 31, 2019, the estimated fair value of the Company's long-term debt was $3,989.8 and $3,565.5, respectively. Refer to Note 11 for details.

Debt Transactions
4.75% Senior Notes Due 2030
On March 30, 2020, we issued a total of $650.0 in aggregate principal amount of 4.75% senior unsecured notes (the "4.75% Senior Notes") due March 30, 2030. Upon issuance, the 4.75% Senior Notes were reflected in our unaudited Consolidated Balance Sheets at $640.0, net of discount of $3.8 and net of capitalized debt issuance costs, including commissions and offering expenses of $6.2, both of which will be amortized in interest expense through the maturity date using the effective method. Interest is payable semi-annually in arrears on March 30th and September 30th of each year, commencing on September 30, 2020.
Consistent with our other outstanding debt securities, the newly issued 4.75% Senior Notes include covenants that, among other things, limit our liens and the liens of certain of our consolidated subsidiaries, but do not require us to maintain any financial ratios or specified levels of net worth or liquidity. We may redeem the 4.75% Senior Notes at any time in whole, or from time to time in part in accordance with the provisions of the indenture, including the supplemental indenture, under which the 4.75% Senior Notes were issued. Additionally, upon the occurrence of a change of control repurchase event with respect to the 4.75% Senior Notes, each holder of the 4.75% Senior Notes has the right to require the Company to purchase that holder’s 4.75% Senior Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, unless the Company has exercised its option to redeem all the 4.75% Senior Notes.
Credit Arrangements
Credit Agreement
We maintain a committed corporate credit facility, originally dated as of July 18, 2008, which has been amended and restated from time to time (the "Credit Agreement"). We use our Credit Agreement to increase our financial flexibility, to provide letters

10

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

of credit primarily to support obligations of our subsidiaries and to support our commercial paper program. The Credit Agreement is a revolving facility, expiring in November 2024, under which amounts borrowed by us or any of our subsidiaries designated under the Credit Agreement may be repaid and reborrowed, subject to an aggregate lending limit of $1,500.0, or the equivalent in other currencies. The Company has the ability to increase the commitments under the Credit Agreement from time to time by an additional amount of up to $250.0, provided the Company receives commitments for such increases and satisfies certain other conditions. The aggregate available amount of letters of credit outstanding may decrease or increase, subject to a sublimit of $50.0, or the equivalent in other currencies. Our obligations under the Credit Agreement are unsecured. As of March 31, 2020, there were no borrowings under the Credit Agreement; however, we had $8.3 of letters of credit under the Credit Agreement, which reduced our total availability to $1,491.7. We were in compliance with all of our covenants in the Credit Agreement as of March 31, 2020.
364-Day Credit Facility
On March 27, 2020, we entered into an agreement for a 364-day revolving credit facility (the "364-Day Credit Facility") that matures on March 26, 2021. The 364-Day Credit Facility is a revolving facility, under which amounts borrowed by us may be repaid and reborrowed, subject to an aggregate lending limit of $500.0. The cost structure of the 364-Day Credit Agreement is based on the Company’s current credit ratings. The applicable margin for Base Rate Advances (as defined in the 364-Day Credit Facility) is 0.250%, the applicable margin for Eurodollar Rate Advances (as defined in the 364-Day Credit Facility) is 1.250%, and the facility fee payable on a lender’s revolving commitment is 0.250%. In addition, the 364-Day Credit Facility includes covenants that, among other things, (i) limit our liens and the liens of our consolidated subsidiaries, and (ii) limit subsidiary debt. The 364-Day Credit Facility also contains a financial covenant that requires us to maintain, on a consolidated basis as of the end of each fiscal quarter, a leverage ratio for the four quarters then ended. The leverage ratio and other covenants set forth in the 364-Day Credit Facility are identical to the covenants contained in the Company’s existing Credit Agreement, which remains in full effect. As of March 31, 2020, there were no borrowings under the 364-Day Credit Facility, and we were in compliance with all of our covenants in the 364-Day Credit Facility.
We also have uncommitted lines of credit with various banks that permit borrowings at variable interest rates and that are primarily used to fund working capital needs. We have guaranteed the repayment of some of these borrowings made by certain subsidiaries. If we lose access to these credit lines, we would have to provide funding directly to some of our operations. As of March 31, 2020, the Company had uncommitted lines of credit in an aggregate amount of $932.2, under which we had outstanding borrowings of $102.6 classified as short-term borrowings on our Consolidated Balance Sheet. The average amount outstanding during the first quarter of 2020 was $133.3, with a weighted-average interest rate of approximately 3.5%.
Commercial Paper
The Company is authorized to issue unsecured commercial paper up to a maximum aggregate amount outstanding at any time of $1,500.0. Borrowings under the program are supported by the Credit Agreement described above. Proceeds of the commercial paper are used for working capital and general corporate purposes, including the repayment of maturing indebtedness and other short-term liquidity needs. The maturities of the commercial paper vary but may not exceed 397 days from the date of issue. As of March 31, 2020, there was $207.5 of commercial paper outstanding classified as short-term borrowings on our Consolidated Balance Sheet. The average amount outstanding under the program during the first quarter of 2020 was $59.9, with a weighted-average interest rate of 2.8% and a weighted-average maturity of 12 days.


11

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

Note 4: Earnings Per Share
The following sets forth basic and diluted earnings (loss) per common share available to IPG common stockholders.
 
Three months ended
March 31,
 
2020
 
2019
Net income (loss) available to IPG common stockholders
$
4.7

 
$
(8.0
)
 
 
 
 
Weighted-average number of common shares outstanding - basic
387.7

 
384.5

       Dilutive effect of stock options and restricted shares
4.0

 
N/A

Weighted-average number of common shares outstanding - diluted
391.7

 
384.5

 
 
 
 
Earnings (loss) per share available to IPG common stockholders:
 
 
 
       Basic
$
0.01

 
$
(0.02
)
       Diluted
$
0.01

 
$
(0.02
)



12

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

Note 5:  Supplementary Data
Accrued Liabilities
The following table presents the components of accrued liabilities.
 
March 31,
2020
 
December 31,
2019
Salaries, benefits and related expenses
$
315.4

 
$
494.1

Interest
58.2

 
38.8

Acquisition obligations
32.2

 
45.7

Office and related expenses
21.0

 
26.9

Other
112.7

 
137.3

Total accrued liabilities
$
539.5

 
$
742.8



Other Expense, Net
Results of operations for the three months ended March 31, 2020 and 2019 include certain items that are not directly associated with our revenue-producing operations.
 
Three months ended
March 31,
 
2020
 
2019
Net losses on sales of businesses
$
(23.3
)
 
$
(8.6
)
Other
1.5

 
1.7

Total other expense, net
$
(21.8
)
 
$
(6.9
)

Net losses on sales of businesses – During the three months ended March 31, 2020, the amounts recognized were related to sales of businesses and the classification of certain assets and liabilities, consisting primarily of cash, as held for sale within our IAN reportable segment. During the three months ended March 31, 2019, the amounts recognized were related to sales of businesses and the classification of certain assets and liabilities, consisting primarily of accounts receivable, as held for sale within our IAN reportable segment. The businesses held for sale primarily represent unprofitable, non-strategic agencies which are expected to be sold within the next twelve months.

Share Repurchase Program
On July 2, 2018, in connection with the announcement of the Acxiom acquisition, we announced that share repurchases will be suspended for a period of time in order to reduce the increased debt levels incurred in conjunction with the acquisition. As of March 31, 2020, $338.4, excluding fees, remains available for repurchase under the share repurchase programs authorized in previous years, which have no expiration date.

Redeemable Noncontrolling Interests
Many of our acquisitions include provisions under which the noncontrolling equity owners may require us to purchase additional interests in a subsidiary at their discretion. Redeemable noncontrolling interests are adjusted quarterly, if necessary, to their estimated redemption value, but not less than their initial fair value. Any adjustments to the redemption value impact retained earnings or additional paid in capital, except for foreign currency translation adjustments.

13

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

The following table presents changes in our redeemable noncontrolling interests.
 
Three months ended
March 31,
 
2020
 
2019
Balance at beginning of period
$
164.7

 
$
167.9

Change in related noncontrolling interests balance
(2.9
)
 
(2.8
)
Changes in redemption value of redeemable noncontrolling interests:
 
 
 
Additions
0.0

 
0.0

Redemptions
(2.5
)
 
(3.1
)
Redemption value adjustments
(4.5
)
 
(0.2
)
Balance at end of period
$
154.8

 
$
161.8



Note 6:  Income Taxes
For the three months ended March 31, 2020, our income tax provision was negatively impacted by losses in certain foreign jurisdictions where we receive no tax benefit due to 100% valuation allowances, and net losses on sales of businesses and the classification of certain assets as held for sale, for which we received minimal tax benefit.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted and signed into law. The CARES Act includes several provisions for corporations including increasing the amount of deductible interest, allowing companies to carryback certain Net Operating Losses (“NOLs”) and increasing the amount of NOLs that corporations can use to offset income. The CARES Act did not materially affect our first-quarter income tax provision, deferred tax assets and liabilities, and related taxes payable. We are currently assessing the future implications of these provisions within the CARES Act on our Consolidated Financial Statements, but do not expect the impact to be material.
We have various tax years under examination by tax authorities in various countries, and in various states, 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 $10.0 and $20.0 in the next twelve months, a portion of which will affect our effective income tax rate, primarily as a result of the settlement of tax examinations and the lapsing of statutes of limitations.
We are effectively settled with respect to U.S. federal income tax audits through 2012, with the exception of 2009. With limited exceptions, we are no longer subject to state and local income tax audits for years prior to 2013 or non-U.S. income tax audits for years prior to 2009.

Note 7:  Incentive Compensation Plans
We issue stock-based compensation and cash awards to our employees under various plans established by the Compensation and Leadership Talent Committee of the Board of Directors (the "Compensation Committee") and approved by our stockholders. We issued the following stock-based awards under the 2019 Performance Incentive Plan (the "2019 PIP") during the three months ended March 31, 2020.
 
Awards
 
Weighted-average
grant-date fair value
(per award)
Restricted stock (shares or units)
2.1

 
$
20.97

Performance-based stock (shares)
2.3

 
$
18.71

Total stock-based compensation awards
4.4

 



During the three months ended March 31, 2020, the Compensation Committee granted performance cash awards under the 2019 PIP and restricted cash awards under the 2009 Restricted Cash Plan with a total annual target value of $43.1 and $34.5, respectively. Cash awards are expensed over the vesting period, which is typically three years for performance cash awards and two years or three years for restricted cash awards.

14

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


Note 8 Accumulated Other Comprehensive Loss, Net of Tax
The following tables present the changes in accumulated other comprehensive loss, net of tax, by component.
 
Foreign Currency
Translation Adjustments
 
Derivative
Instruments
 
Defined Benefit Pension and Other Postretirement Plans
 
Total
Balance as of December 31, 2019
$
(697.7
)
 
$
(3.5
)
 
$
(228.8
)
 
$
(930.0
)
Other comprehensive loss before reclassifications
(145.5
)
 
(0.4
)
 
(1.2
)
 
(147.1
)
Amount reclassified from accumulated other comprehensive loss, net of tax
(3.6
)
 
0.5

 
1.5

 
(1.6
)
Balance as of March 31, 2020
$
(846.8
)
 
$
(3.4
)
 
$
(228.5
)
 
$
(1,078.7
)

 
Foreign Currency
Translation Adjustments
 
Derivative
Instruments
 
Defined Benefit Pension and Other Postretirement Plans
 
Total
Balance as of December 31, 2018
$
(716.4
)
 
$
(5.3
)
 
$
(219.4
)
 
$
(941.1
)
Other comprehensive income before reclassifications
8.4

 
0.0

 
0.0

 
8.4

Amount reclassified from accumulated other comprehensive loss, net of tax
1.2

 
0.5

 
1.3

 
3.0

Balance as of March 31, 2019
$
(706.8
)
 
$
(4.8
)
 
$
(218.1
)
 
$
(929.7
)

Amounts reclassified from accumulated other comprehensive loss, net of tax, for the three months ended March 31, 2020 and 2019 are as follows:
 
Three months ended
March 31,
 
Affected Line Item in the Consolidated Statements of Operations
 
2020
 
2019
 
Foreign currency translation adjustments
$
(3.6
)
 
$
1.2

 
Other expense, net
Losses on derivative instruments
0.6

 
0.6

 
Interest expense
Amortization of defined benefit pension and postretirement plan items
1.9

 
1.7

 
Other expense, net
Tax effect
(0.5
)
 
(0.5
)
 
Provision for income taxes
Total amount reclassified from accumulated other comprehensive loss, net of tax
$
(1.6
)
 
$
3.0

 
 


15

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

Note 9:  Employee Benefits
We have a defined benefit pension plan that covers certain U.S. employees (the “Domestic Pension Plan”). We also have numerous funded and unfunded plans outside the U.S. The Interpublic Limited Pension Plan in the U.K. is a defined benefit plan and is our most material foreign pension plan in terms of the benefit obligation and plan assets. Some of our domestic and foreign subsidiaries provide postretirement health benefits and life insurance to eligible employees and, in certain cases, their dependents. The domestic postretirement benefit plan is our most material postretirement benefit plan in terms of the benefit obligation. Certain immaterial foreign pension and postretirement benefit plans have been excluded from the table below.
The components of net periodic cost for the Domestic Pension Plan, the significant foreign pension plans and the domestic postretirement benefit plan are listed below.
 
Domestic Pension Plan
 
Foreign Pension Plans
 
Domestic Postretirement Benefit Plan
Three months ended March 31,
2020
 
2019
 
2020
 
2019
 
2020
 
2019
Service cost
$
0.0

 
$
0.0

 
$
1.2

 
$
1.2

 
$
0.0

 
$
0.0

Interest cost
1.0

 
1.2

 
2.3

 
3.2

 
0.2

 
0.3

Expected return on plan assets
(1.4
)
 
(1.5
)
 
(4.7
)
 
(4.4
)
 
0.0

 
0.0

Amortization of:
 
 
 
 
 
 
 
 
 
 
 
Unrecognized actuarial losses
0.4

 
0.5

 
1.4

 
1.2

 
0.1

 
0.0

Net periodic cost
$
0.0

 
$
0.2

 
$
0.2

 
$
1.2

 
$
0.3

 
$
0.3


The components of net periodic cost other than the service cost component are included in the line item “Other expense, net” in the Consolidated Statements of Operations.
During the three months ended March 31, 2020, we contributed $0.6 and $4.4 of cash to our domestic and foreign pension plans, respectively. For the remainder of 2020, we expect to contribute approximately $3.0 and $13.0 of cash to our domestic and foreign pension plans, respectively.


16

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

Note 10:  Segment Information
As of March 31, 2020, we have two reportable segments: IAN and CMG. IAN is comprised of McCann Worldgroup, FCB (Foote, Cone & Belding), MullenLowe Group, Media, Data Services and Tech which includes IPG Mediabrands, Acxiom and Kinesso, our digital specialist agencies and our domestic integrated agencies. CMG is comprised of a number of our specialist marketing services offerings including Weber Shandwick, DeVries, Golin, FutureBrand, Jack Morton and Octagon Worldwide. We also report results for the "Corporate and other" group. We continue to evaluate our financial reporting structure, and the profitability measure, employed by our chief operating decision maker for allocating resources to operating divisions and assessing operating division performance, is segment EBITA. Summarized financial information concerning our reportable segments is shown in the following table.
 
Three months ended
March 31,
 
2020
 
2019
Total revenue:
 
 
 
IAN
$
1,818.8

 
$
1,862.2

CMG
541.0

 
499.0

Total
$
2,359.8

 
$
2,361.2

 
 
 
 
Net revenue:
 
 
 
IAN
$
1,664.5

 
$
1,706.1

CMG
307.6

 
298.7

Total
$
1,972.1

 
$
2,004.8

 
 
 
 
Segment EBITA 1:
 
 
 
IAN
$
99.0

 
$
116.0

CMG
22.3

 
0.4

Corporate and other
(24.1
)
 
(44.6
)
Total
$
97.2

 
$
71.8

 
 
 
 
Amortization of acquired intangibles:
 
 
 
IAN
$
20.2

 
$
20.5

CMG
1.1

 
1.1

Corporate and other
0.0

 
0.0

Total
$
21.3

 
$
21.6

 
 
 
 
Depreciation and amortization 2:
 
 
 
IAN
$
44.7

 
$
42.1

CMG
5.1

 
4.8

Corporate and other
1.7

 
2.6

Total
$
51.5

 
$
49.5

 
 
 
 
Capital expenditures:
 
 
 
IAN
$
33.7

 
$
26.5

CMG
1.6

 
1.0

Corporate and other
9.3

 
5.3

Total
$
44.6

 
$
32.8

 
 
1 EBITA is calculated as net income (loss) available to IPG common stockholders before provision for incomes taxes, total (expenses) and other income, equity in net loss of unconsolidated affiliates, net loss attributable to noncontrolling interests and amortization of acquired intangibles..
2 Excludes amortization of acquired intangibles.


17

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