Document
false--12-31Q2201900000516441034900000110340000042500000436000005000000005000000002500000005000000005000000005000000000.03500.03750.03750.04000.04200.04650.05402020-10-012021-10-012023-02-152022-03-152024-04-152028-10-012048-10-0160000030000060000080000050000016000002700000180000024000001500000700000200000041000005500000
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 June 30, 2019
or
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-6686
ipglogo2018a03.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 July 15, 2019 was 387,223,208.



INDEX
 
Page
Item 1.
 
 
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2019 and 2018
 
Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2019 and 2018
 
Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018
 
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018
 
Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2019 and 2018
 
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;
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

Table of Contents

PART I – FINANCIAL INFORMATION
Item 1.
Financial Statements (Unaudited)
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
 
Three months ended June 30,
 
Six months ended
June 30,
 
2019
 
2018
 
2019
 
2018
REVENUE:
 
 
 
 
 
 
 
Net revenue
$
2,125.9

 
$
1,948.2

 
$
4,130.7

 
$
3,722.2

Billable expenses
394.3

 
443.6

 
750.7

 
838.7

Total revenue
2,520.2

 
2,391.8

 
4,881.4

 
4,560.9

 
 
 
 
 
 
 
 
OPERATING EXPENSES:
 
 
 
 
 
 
 
Salaries and related expenses
1,381.2

 
1,292.9

 
2,802.3

 
2,623.2

Office and other direct expenses
387.3

 
333.3

 
776.5

 
657.1

Billable expenses
394.3

 
443.6

 
750.7

 
838.7

Cost of services
2,162.8

 
2,069.8

 
4,329.5

 
4,119.0

Selling, general and administrative expenses
18.1

 
28.8

 
59.5

 
63.9

Depreciation and amortization
73.0

 
44.0

 
144.1

 
90.0

Restructuring charges
2.1

 
0.0

 
33.9

 
0.0

Total operating expenses
2,256.0

 
2,142.6

 
4,567.0

 
4,272.9

 
 
 
 
 
 
 
 
OPERATING INCOME
264.2

 
249.2

 
314.4

 
288.0

 
 
 
 
 
 
 
 
EXPENSES AND OTHER INCOME:
 
 
 
 
 
 
 
Interest expense
(51.6
)
 
(26.1
)
 
(101.4
)
 
(46.0
)
Interest income
7.7

 
4.7

 
15.5

 
8.7

Other expense, net
(3.8
)
 
(16.3
)
 
(10.7
)
 
(40.7
)
Total (expenses) and other income
(47.7
)
 
(37.7
)
 
(96.6
)
 
(78.0
)
 
 
 
 
 
 
 
 
Income before income taxes
216.5

 
211.5

 
217.8

 
210.0

Provision for income taxes
43.6

 
63.6

 
54.1

 
76.3

Income of consolidated companies
172.9

 
147.9

 
163.7

 
133.7

Equity in net loss of unconsolidated affiliates
(0.1
)
 
(0.1
)
 
(0.4
)
 
(2.0
)
NET INCOME
172.8

 
147.8

 
163.3

 
131.7

Net income attributable to noncontrolling interests
(3.3
)
 
(2.0
)
 
(1.8
)
 
0.0

NET INCOME AVAILABLE TO IPG COMMON STOCKHOLDERS
$
169.5

 
$
145.8

 
$
161.5

 
$
131.7

 
 
 
 
 
 
 
 
Earnings per share available to IPG common stockholders:
 
 
 
 
 
 
 
Basic
$
0.44

 
$
0.38

 
$
0.42

 
$
0.34

Diluted
$
0.43

 
$
0.37

 
$
0.41

 
$
0.34

 
 
 
 
 
 
 
 
Weighted-average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
386.2

 
383.6

 
385.4

 
383.5

Diluted
391.2

 
389.5

 
390.1

 
388.9

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

2

Table of Contents

THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in Millions)
(Unaudited)
 
Three months ended
June 30,
 
Six months ended
June 30,
 
2019
 
2018
 
2019
 
2018
NET INCOME
$
172.8

 
$
147.8

 
$
163.3

 
$
131.7

 
 
 
 
 
 
 
 
OTHER COMPREHENSIVE INCOME (LOSS)
 
 
 
 
 
 
 
Foreign currency translation:
 
 
 
 
 
 
 
Foreign currency translation adjustments
4.2

 
(116.4
)
 
12.5

 
(94.0
)
Reclassification adjustments recognized in net income
4.6

 
0.9

 
5.8

 
13.4

 
8.8

 
(115.5
)
 
18.3

 
(80.6
)
 
 
 
 
 
 
 
 
Derivative instruments:
 
 
 
 
 
 
 
Recognition of previously unrealized losses in net income
0.6

 
0.6

 
1.2

 
1.1

Income tax effect
(0.1
)
 
(0.1
)
 
(0.2
)
 
(0.3
)
 
0.5

 
0.5

 
1.0

 
0.8

 
 
 
 
 
 
 
 
Defined benefit pension and other postretirement plans:
 
 
 
 
 
 
 
Net actuarial gains (losses) for the period
0.7

 
(1.4
)
 
0.7

 
(1.4
)
Amortization of unrecognized losses, transition obligation and prior service cost included in net income
1.6

 
2.0

 
3.3

 
3.9

Settlement and curtailment losses included in net income
0.0

 
0.0

 
0.0

 
0.2

Other
0.6

 
(0.5
)
 
0.3

 
(0.4
)
Income tax effect
(0.1
)
 
0.2

 
(0.2
)
 
0.1

 
2.8

 
0.3

 
4.1

 
2.4

Other comprehensive income (loss), net of tax
12.1

 
(114.7
)
 
23.4

 
(77.4
)
TOTAL COMPREHENSIVE INCOME
184.9

 
33.1

 
186.7

 
54.3

Less: comprehensive income (loss) attributable to noncontrolling interests
3.6

 
(0.1
)
 
2.0

 
(1.8
)
COMPREHENSIVE INCOME ATTRIBUTABLE TO IPG
$
181.3

 
$
33.2

 
$
184.7

 
$
56.1


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

3

Table of Contents

THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Millions)
(Unaudited)
 
June 30,
2019
 
December 31,
2018
ASSETS:
 
 
 
Cash and cash equivalents
$
614.0

 
$
673.4

Accounts receivable, net of allowance of $43.6 and $42.5, respectively
4,389.5

 
5,126.6

Accounts receivable, billable to clients
1,977.6

 
1,900.6

Assets held for sale
26.4

 
5.7

Other current assets
467.9

 
476.6

Total current assets
7,475.4

 
8,182.9

Property and equipment, net of accumulated depreciation of $1,103.4 and $1,034.9, respectively
767.1

 
790.9

Deferred income taxes
297.8

 
247.0

Goodwill
4,884.1

 
4,875.9

Other intangible assets
1,052.0

 
1,094.7

Operating lease right-of-use assets
1,596.5

 
0.0

Other non-current assets
454.0

 
428.9

TOTAL ASSETS
$
16,526.9

 
$
15,620.3

 
 
 
 
LIABILITIES:
 
 
 
Accounts payable
$
6,022.3

 
$
6,698.1

Accrued liabilities
626.4

 
806.9

Contract liabilities
585.2

 
533.9

Short-term borrowings
207.1

 
73.7

Current portion of long-term debt
0.3

 
0.1

Current portion of operating leases
261.0

 
0.0

Liabilities held for sale
29.0

 
11.2

Total current liabilities
7,731.3

 
8,123.9

Long-term debt
3,563.8

 
3,660.2

Non-current operating leases
1,463.2

 
0.0

Deferred compensation
401.6

 
422.7

Other non-current liabilities
720.3

 
812.8

TOTAL LIABILITIES
13,880.2

 
13,019.6

 
 
 
 
Redeemable noncontrolling interests (see Note 5)
188.3

 
167.9

 
 
 
 
STOCKHOLDERS’ EQUITY:
 
 
 
Common stock
38.6

 
38.3

Additional paid-in capital
921.4

 
895.9

Retained earnings
2,381.8

 
2,400.1

Accumulated other comprehensive loss, net of tax
(917.9
)
 
(941.1
)
Total IPG stockholders’ equity
2,423.9

 
2,393.2

Noncontrolling interests
34.5

 
39.6

TOTAL STOCKHOLDERS’ EQUITY
2,458.4

 
2,432.8

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
16,526.9

 
$
15,620.3

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

4

Table of Contents

THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Millions) (Unaudited)
 
Six months ended
June 30,
  
2019
 
2018
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
163.3

 
$
131.7

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
Depreciation and amortization
144.1

 
90.0

Provision for uncollectible receivables
6.7

 
6.1

Amortization of restricted stock and other non-cash compensation
44.1

 
46.0

Net amortization of bond discounts and deferred financing costs
4.6

 
2.7

Deferred income tax provision
(3.0
)
 
(31.0
)
Net losses on sales of businesses
11.8

 
44.2

Other
2.1

 
1.9

Changes in assets and liabilities, net of acquisitions and divestitures, providing (using) cash:
 
 
 
Accounts receivable
743.3

 
238.0

Accounts receivable, billable to clients
(75.4
)
 
(233.7
)
Other current assets
(62.1
)
 
(124.6
)
Accounts payable
(676.9
)
 
(579.3
)
Accrued liabilities
(92.2
)
 
(175.9
)
Contract liabilities
50.2

 
38.0

Operating lease right-of-use assets
168.0

 
0.0

Operating lease liabilities
(164.0
)
 
0.0

Other non-current assets and liabilities
(65.6
)
 
(11.8
)
Net cash provided by (used in) operating activities
199.0

 
(557.7
)
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Capital expenditures
(80.1
)
 
(61.5
)
Acquisitions, net of cash acquired
(0.6
)
 
(8.5
)
Other investing activities
2.8

 
12.4

Net cash used in investing activities
(77.9
)
 
(57.6
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Net increase in short-term borrowings
132.3

 
669.3

Exercise of stock options
0.6

 
7.0

Repurchases of common stock
0.0

 
(114.5
)
Common stock dividends
(181.4
)
 
(161.2
)
Repayment of long-term debt
(100.1
)
 
(4.7
)
Tax payments for employee shares withheld
(22.0
)
 
(28.0
)
Acquisition-related payments
(13.0
)
 
(16.0
)
Distributions to noncontrolling interests
(8.1
)
 
(10.6
)
Other financing activities
0.0

 
(0.3
)
Net cash (used in) provided by financing activities
(191.7
)
 
341.0

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash
10.3

 
(27.5
)
Net decrease in cash, cash equivalents and restricted cash
(60.3
)
 
(301.8
)
Cash, cash equivalents and restricted cash at beginning of period
677.2

 
797.7

Cash, cash equivalents and restricted cash at end of period
$
616.9

 
$
495.9

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

5

Table of Contents

THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(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 March 31, 2019
386.2

 
$
38.6

 
$
903.3

 
$
2,303.1

 
$
(929.7
)
 
$
2,315.3

 
$
39.3

 
$
2,354.6

Net income
 
 
 
 
 
 
169.5

 
 
 
169.5

 
3.3

 
172.8

Other comprehensive income
 
 
 
 
 
 
 
 
11.8

 
11.8

 
0.3

 
12.1

Reclassifications related to redeemable noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
(3.0
)
 
(3.0
)
Distributions to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
(5.6
)
 
(5.6
)
Change in redemption value of redeemable noncontrolling interests
 
 
 
 
 
 
1.1

 
 
 
1.1

 
 
 
1.1

Common stock dividends ($0.235 per share)
 
 
 
 
 
 
(90.8
)
 
 
 
(90.8
)
 
 
 
(90.8
)
Stock-based compensation
0.2

 
0.1

 
18.3

 
 
 
 
 
18.4

 
 
 
18.4

Exercise of stock options
0.1

 
0.0

 
0.0

 
 
 
 
 
0.0

 
 
 
0.0

Shares withheld for taxes
(0.1
)
 
(0.1
)
 
(0.2
)
 
 
 
 
 
(0.3
)
 
 
 
(0.3
)
Other
 
 
 
 
0.0

 
(1.1
)
 
 
 
(1.1
)
 
0.2

 
(0.9
)
Balance at June 30, 2019
386.4

 
$
38.6

 
$
921.4

 
$
2,381.8

 
$
(917.9
)
 
$
2,423.9

 
$
34.5

 
$
2,458.4

 
 
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 income
 
 
 
 
 
 
161.5

 
 
 
161.5

 
1.8

 
163.3

Other comprehensive income
 
 
 
 
 
 
 
 
23.2

 
23.2

 
0.2

 
23.4

Reclassifications related to redeemable noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
(0.4
)
 
(0.4
)
Distributions to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
(8.1
)
 
(8.1
)
Change in redemption value of redeemable noncontrolling interests
 
 
 
 
 
 
1.4

 
 
 
1.4

 
 
 
1.4

Common stock dividends ($0.235 per share)
 
 
 
 
 
 
(181.4
)
 
 
 
(181.4
)
 
 
 
(181.4
)
Stock-based compensation
3.6

 
0.4

 
48.1

 
 
 
 
 
48.5

 
 
 
48.5

Exercise of stock options
0.1

 
0.0

 
0.6

 
 
 
 
 
0.6

 
 
 
0.6

Shares withheld for taxes
(0.9
)
 
(0.1
)
 
(22.2
)
 
 
 
 
 
(22.3
)
 
 
 
(22.3
)
Other
 
 
 
 
(1.0
)
 
(2.0
)
 
 
 
(3.0
)
 
1.4

 
(1.6
)
Balance at June 30, 2019
386.4

 
$
38.6

 
$
921.4

 
$
2,381.8

 
$
(917.9
)
 
$
2,423.9

 
$
34.5

 
$
2,458.4


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



6

Table of Contents

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
 
Treasury
Stock
 
Total IPG
Stockholders’
Equity
 
Noncontrolling
Interests
 
Total
Stockholders’
Equity
 
Shares
 
Amount
 
Balance at March 31, 2018
390.3

 
$
39.0

 
$
963.7

 
$
2,010.5

 
$
(790.8
)
 
$
(113.9
)
 
$
2,108.5

 
$
31.8

 
$
2,140.3

Net income
 
 
 
 
 
 
145.8

 
 
 
 
 
145.8

 
2.0

 
147.8

Other comprehensive loss
 
 
 
 
 
 
 
 
(112.6
)
 
 
 
(112.6
)
 
(2.1
)
 
(114.7
)
Reclassifications related to redeemable
    noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.8

 
3.8

Distributions to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(6.7
)
 
(6.7
)
Change in redemption value of redeemable
    noncontrolling interests
 
 
 
 
41.8

 
1.4

 
 
 
 
 
43.2

 
 
 
43.2

Repurchases of common stock
 
 
 
 
 
 
 
 
 
 
(59.6
)
 
(59.6
)
 
 
 
(59.6
)
Common stock dividends ($0.210 per share)
 
 
 
 
 
 
(80.4
)
 
 
 
 
 
(80.4
)
 
 
 
(80.4
)
Stock-based compensation
0.2

 
0.1

 
17.7

 
 
 
 
 
 
 
17.8

 
 
 
17.8

Exercise of stock options
0.1

 
(0.1
)
 
0.1

 
 
 
 
 
 
 
0.0

 
 
 
0.0

Shares withheld for taxes
(0.1
)
 
0.0

 
(0.5
)
 
 
 
 
 
 
 
(0.5
)
 
 
 
(0.5
)
Other
 
 
 
 
0.1

 
(0.6
)
 
 
 
 
 
(0.5
)
 
1.1

 
0.6

Balance at June 30, 2018
390.5

 
$
39.0

 
$
1,022.9

 
$
2,076.7

 
$
(903.4
)
 
$
(173.5
)
 
$
2,061.7

 
$
29.9

 
$
2,091.6

 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated 
Other
Comprehensive
Loss, Net of Tax
 
Treasury
Stock
 
Total IPG
Stockholders’
Equity
 
Noncontrolling
Interests
 
Total
Stockholders’
Equity
 
Shares
 
Amount
 
Balance at December 31, 2017
386.2

 
$
38.6

 
$
955.2

 
$
2,104.5

 
$
(827.8
)
 
$
(59.0
)
 
$
2,211.5

 
$
34.8

 
$
2,246.3

Net income
 
 
 
 
 
 
131.7

 
 
 
 
 
131.7

 
0.0

 
131.7

Other comprehensive loss
 
 
 
 
 
 
 
 
(75.6
)
 
 
 
(75.6
)
 
(1.8
)
 
(77.4
)
Reclassifications related to redeemable
    noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6.3

 
6.3

Distributions to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(10.6
)
 
(10.6
)
Change in redemption value of redeemable
    noncontrolling interests
 
 
 
 
41.8

 
2.9

 
 
 
 
 
44.7

 
 
 
44.7

Repurchases of common stock
 
 
 
 
 
 
 
 
 
 
(114.5
)
 
(114.5
)
 
 
 
(114.5
)
Common stock dividends ($0.210 per share)
 
 
 
 
 
 
(161.2
)
 
 
 
 
 
(161.2
)
 
 
 
(161.2
)
Stock-based compensation
4.6

 
0.5

 
48.0

 
 
 
 
 
 
 
48.5

 
 
 
48.5

Exercise of stock options
0.9

 
0.0

 
7.0

 
 
 
 
 
 
 
7.0

 
 
 
7.0

Shares withheld for taxes
(1.2
)
 
(0.1
)
 
(28.5
)
 
 
 
 
 
 
 
(28.6
)
 
 
 
(28.6
)
Other
 
 
 
 
(0.6
)
 
(1.2
)
 
 
 
 
 
(1.8
)
 
1.2

 
(0.6
)
Balance at June 30, 2018
390.5

 
$
39.0

 
$
1,022.9

 
$
2,076.7

 
$
(903.4
)
 
$
(173.5
)
 
$
2,061.7

 
$
29.9

 
$
2,091.6

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

7

Table of Contents

Notes to Consolidated Financial Statements
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
Note 1:  Basis of Presentation
The unaudited Consolidated Financial Statements have been prepared by The Interpublic Group of Companies, Inc. and 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 preparation of financial statements in conformity with U.S. GAAP requires us to make judgments, assumptions and estimates that affect the amounts reported and disclosed. Actual results could differ from these estimates and assumptions. The consolidated results for interim periods are not necessarily indicative of results for the full year and should be read in conjunction with our 2018 Annual Report on Form 10-K.
Cost of services is comprised of the expenses of our revenue-producing operating 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.
Restructuring charges relate to the Company's implementation of a cost initiative to better align our cost structure with our revenue, as discussed further in Note 9.
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.

Note 2 Revenue
Disaggregation of Revenue
We have two reportable segments as of June 30, 2019: IAN and CMG, as further discussed in Note 13. IAN principally generates revenue from providing advertising and media services as well as a comprehensive array of global communications and marketing services. 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 110 countries, including every significant world market. Our geographic revenue breakdown is listed below.
 
Three months ended
June 30,
 
Six months ended
June 30,
Total revenue:
2019
 
2018
 
2019
 
2018
United States
$
1,595.1

 
$
1,445.7

 
$
3,130.2

 
$
2,796.4

International:
 
 
 
 
 
 
 
United Kingdom
209.8

 
201.6

 
416.0

 
406.0

Continental Europe
209.4

 
205.1

 
388.2

 
386.8

Asia Pacific
258.2

 
304.2

 
490.6

 
535.7

Latin America
101.8

 
92.5

 
191.1

 
172.5

Other
145.9

 
142.7

 
265.3

 
263.5

Total International
925.1

 
946.1

 
1,751.2

 
1,764.5

Total Consolidated
$
2,520.2

 
$
2,391.8

 
$
4,881.4

 
$
4,560.9

 

8

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

 
Three months ended
June 30,
 
Six months ended
June 30,
Net revenue:
2019
 
2018
 
2019
 
2018
United States
$
1,337.7

 
$
1,171.5

 
$
2,651.8

 
$
2,263.8

International:
 
 
 
 
 
 
 
United Kingdom
180.4

 
175.7

 
350.7

 
339.2

Continental Europe
183.3

 
178.7

 
340.1

 
337.4

Asia Pacific
205.1

 
214.2

 
383.1

 
393.0

Latin America
92.1

 
82.0

 
172.4

 
155.9

Other
127.3

 
126.1

 
232.6

 
232.9

Total International
788.2

 
776.7

 
1,478.9

 
1,458.4

Total Consolidated
$
2,125.9

 
$
1,948.2

 
$
4,130.7

 
$
3,722.2

 

IAN
Three months ended
June 30,
 
Six months ended
June 30,
Total revenue:
2019
 
2018
 
2019
 
2018
United States
$
1,215.8

 
$
1,063.2

 
$
2,425.9

 
$
2,086.4

International
752.8

 
749.3

 
1,414.9

 
1,411.6

Total IAN
$
1,968.6

 
$
1,812.5

 
$
3,840.8

 
$
3,498.0

 
 
 
 
 
 
 
 
Net revenue:
 
 
 
 
 
 
 
United States
$
1,131.7

 
$
963.3

 
$
2,251.0

 
$
1,861.3

International
674.1

 
665.8

 
1,266.0

 
1,249.1

Total IAN
$
1,805.8

 
$
1,629.1

 
$
3,517.0

 
$
3,110.4

 

CMG
Three months ended
June 30,
 
Six months ended
June 30,
Total revenue:
2019
 
2018
 
2019
 
2018
United States
$
379.3

 
$
382.5

 
$
704.3

 
$
710.0

International
172.3

 
196.8

 
336.3

 
352.9

Total CMG
$
551.6

 
$
579.3

 
$
1,040.6

 
$
1,062.9

 
 
 
 
 
 
 
 
Net revenue:
 
 
 
 
 
 
 
United States
$
206.0

 
$
208.2

 
$
400.8

 
$
402.5

International
114.1

 
110.9

 
212.9

 
209.3

Total CMG
$
320.1

 
$
319.1

 
$
613.7

 
$
611.8


Contract Balances
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.
 
June 30,
2019
 
December 31,
2018
Accounts receivable, net of allowance of $43.6 and $42.5, respectively
$
4,389.5

 
$
5,126.6

Accounts receivable, billable to clients
1,977.6

 
1,900.6

Contract assets
51.2

 
67.9

Contract liabilities (deferred revenue)
585.2

 
533.9



9

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

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. For those contracts with a term of more than one year, we had approximately $756.0 of unsatisfied performance obligations as of June 30, 2019, which will be recognized as services are performed over the remaining contractual terms.

Note 3 Leases
Effective January 1, 2019, IPG adopted Accounting Standards Codification Topic 842, Leases ("ASC 842"), using the modified retrospective transition method. As such, we have recognized a right-of-use asset and a corresponding lease liability on our Consolidated Balance Sheet for virtually all of our leases with a term of more than twelve months. Prior-year financial statements were not recast under the new standard and, therefore, those amounts are not presented below. As an accounting policy, we have elected not to apply the recognition requirements to short-term leases, not to separate non-lease components from lease components, and have elected the package of transition provisions available for existing contracts, which allowed us to carry forward our historical assessments of (i) whether contracts are or contain leases, (ii) lease classification and (iii) initial direct costs.
We do not have a material amount of finance leases and the majority of our operating leases, for which we serve as the lessee, consist primarily of real-estate property for our offices around the world. Both the asset and liability are measured at the present value of the future lease payments, with the asset being subject to adjustments such as initial direct costs, prepaid lease payments, and lease incentives. Many of our leases provide for renewal and/or termination options, as well as escalation clauses, which are also factored into our lease payments when appropriate. Our leases have remaining lease terms of 1 year to 20 years. The discount rate used to measure the lease asset and liability is determined at the beginning of the lease term using the rate implicit in the lease, if readily determinable, or using the Company's collateralized credit-adjusted borrowing rate.
The following table presents information on our operating leases for the three and six months ended June 30, 2019.
 
Three months ended
June 30, 2019
 
Six months ended
June 30, 2019
Operating lease cost
$
81.0

 
$
159.4

Short-term lease cost
4.9

 
10.0

Sublease income
(2.7
)
 
(4.8
)
Total lease cost
$
83.2

 
$
164.6

 
 
 
 
 
 
 
Six months ended
June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
 
 
$
164.0

Right-of-use assets obtained in exchange for lease liabilities
 
 
$
309.6

 
 
 
 
 
 
 
As of June 30, 2019
Weighted-average remaining lease term
 
 
Eight years

Weighted-average discount rate
 
 
4.36
%



10

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

Our future payments of our operating leases as of June 30, 2019 are listed in the table below.
Period
Net Rent
2019
$
174.0

2020
315.3

2021
282.0

2022
250.6

2023
195.2

Thereafter
844.3

Total future lease payments
2,061.4

Less: imputed interest
(337.2
)
Present value of future lease payments
1,724.2

Less: current portion of operating leases
261.0

Non-current operating leases

$
1,463.2



Our future payments of our operating leases as of December 31, 2018 are listed in the table below.
Period
Rent
Obligations
 
Sublease Rental
Income
 
Net Rent
2019
$
352.0

 
$
(7.7
)
 
$
344.3

2020
324.3