UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 8-K
_______________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): April 23, 2018
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.) |
909 Third Avenue, New York, New York | 10022 | |
(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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
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. o
Item 7.01. Regulation FD Disclosure.
Beginning January 1, 2018, The Interpublic Group of Companies, Inc. and subsidiaries (the “Company”) has adopted Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, ("ASC 606") using the full retrospective method. This adoption method requires the Company to restate each prior reporting period presented consistent with ASC 606 in future filings. The Company has also revised the presentation of its Consolidated Statements of Operations. The Company is furnishing this Form 8-K under Regulation FD to present selected unaudited data from the Company’s previously reported financial information for the year ended December 31, 2017 on a basis consistent with the standard and presented in the Company's new format. Beginning with the quarter ending March 31, 2018, the Company’s financial information will reflect the adoption of ASC 606 and the new presentation, with prior periods adjusted accordingly. The information presented in this Form 8-K is being furnished, not filed, under Item 7.01 of Form 8-K.
Revenue from Contracts with Customers
In May 2014, the Financial Accounting Standards Board ("FASB") issued a new standard related to revenue recognition which requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Adoption of ASC 606 did not have a material impact on the Company’s reported operating income or net income. The most significant impact of ASC 606 relates to an increase in third party costs included in both revenue and costs, primarily in connection with our events businesses, which has no impact on operating income, net income or cash flows. ASC 606 also accelerates the recognition of revenue, primarily as a result of estimating variable consideration, impacting the timing of revenue recognition between quarters, but also, to a lesser extent, the amount of annual revenue recognized. Adoption of ASC 606 did not have a material impact on other line items within the Consolidated Statements of Operations, Consolidated Balance Sheets or Consolidated Statements of Cash Flows.
Consolidated Statements of Operations
The Company has revised the new presentation of its Consolidated Statements of Operations, which disaggregates net revenue and billable expenses within total revenue and separately presents cost of services; selling, general and administrative expenses; and depreciation and amortization within operating expenses. The revised presentation does not impact total revenue, operating expenses or operating income.
Item 9.01. Financial Statements and Exhibits.
Exhibit 99.1: Supplemental Investor Information- New Revenue Accounting Standard ASC 606 and Income Statement Format
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
THE INTERPUBLIC GROUP OF COMPANIES, INC. | |
Date: April 23, 2018 | By: /s/ Andrew Bonzani |
Name: Andrew Bonzani Title: Senior Vice President, General Counsel and Secretary | |
New Revenue Accounting Standard ASC 606
and Income Statement Format
April 23, 2018
I. New Revenue Accounting Standard
ASC 606
No Change to Our Model for Value Creation
• Management priorities and incentives
continue to focus on organic growth and
margin expansion
• No change to client relationships and
services
• No change to cash flow
• No material change to annual operating
profit, pre-tax income, and EPS
• No change to 2018 operating income
target, consistent with the range targeted
earlier this year
Impact on Income Statement &
Performance Metrics
• Increased pass-through revenue and
expense, dollar-for-dollar, which does not
change operating profit. Increases occur in
our marketing and integrated agency
services, but not in media services.
• Additional disclosure of our net revenue
and billable expenses
• Key metrics will track organic growth of net
revenue and operating margin on net
revenue, due to billable expense volatility
• Earlier recognition of some revenue and
profit, as the work is performed, mainly for
a portion of client performance bonuses
Adoption of ASC 606 Effective January 1, 2018
Based on Preliminary and Unaudited 2017 Restatement
3
$7,882
$7,508 $7,473
$374
$1,200 $1,574
FY 2017 Revenue Restatement Bridge
$7,882
($35)
$9,047
As Reported As Reported,
Showing Net
Revenue &
Billable
Expenses
ASC 606
Incremental
Billable
Expenses
ASC 606
Impact of
Re-phasing Client
Bonuses
As Adjusted
for ASC 606,
Net Revenue
& Billable
Expenses
NetNet
4Based on Preliminary and Unaudited 2017 Restatement
millions
5
FY 2017 Operating Income Adjusted for ASC 606
Preliminary and Unaudited 2017 Restatement
mil l ions , except per share amounts
As Reported
As Reported,
Showing Net
Revenue &
Billable Expenses
ASC 606
Adjustments
As Adjusted for
ASC 606
REVENUE:
Net Revenue 7,508.7$ (35.2)$ 7,473.5$
Billable Expenses (Revenue) 373.7 1,200.4 1,574.1
Total Revenue 7,882.4$ 7,882.4 1,165.2 9,047.6
OPERATING EXPENSES:
Salary and Related Expenses 5,068.1 5,068.1 5,068.1
Office and General Expenses 1,840.7 1,467.0 1,467.0
Billable Expenses 373.7 1,200.4 1,574.1
Total operating expenses 6,908.8 6,908.8 8,109.2
OPERATING INCOME 973.6 973.6 (35.2) 938.4
Operating Margin, Gross Revenue 12.4%
Operating Margin, Net Revenue 13.0% 12.6%
IPG WW - Twelve Months Ended December 31, 2017
FY 2017 Non-Operating Adjusted for ASC 606
mil l ions , except per share amounts
As Reported
As Reported,
Showing Net
Revenue &
Billable Expenses
ASC 606
Adjustments
As Adjusted for
ASC 606
EXPENSES AND OTHER INCOME:
Interest Expense (90.8) (90.8) (90.8)
Interest Income 19.4 19.4 19.4
Other Expense, net (26.2) (26.2) (26.2)
Total (expenses) and other income (97.6) (97.6) (97.6)
Income before income taxes 876.0 876.0 (35.2) 840.8
Provision for Income Taxes 281.9 281.9 (10.6) 271.3
Income of consolidated companies 594.1 594.1 (24.6) 569.5
Equity in Net Income of Unconsolidated Affiliates 0.9 0.9 0.9
Net Income 595.0 595.0 (24.6) 570.4
Net Income Attributable to Noncontrolling Interests (16.0) (16.0) (16.0)
Net Income Attributable to IPG Common Stockholders 579.0 579.0 (24.6) 554.4
EPS Available to IPG Common Stockholders:
Basic 1.49$ 1.49$ 0.07$ 1.42$
Diluted 1.46$ 1.46$ 0.06$ 1.40$
Weighted-Average Number of Common Shares Outstanding:
Basic 389.6 389.6 389.6
Diluted 397.3 397.3 397.3
Adjustments per Diluted Share, Non-Operating:
Net Losses on Sales of Businesses (0.04)$ (0.04)$ (0.04)$
Net Impact of U.S. Tax Reform 0.09$ 0.09$ 0.09$
Diluted EPS Available to IPG Common Stockholders
After Non-Operating Adjustments: 1.41$ 1.41$ 1.35$
IPG WW - Twelve Months Ended December 31, 2017
prel iminary and unaudited restatement
Increased Revenues & Billable Expenses
No impact on operating profit as a result of recording increased billable expenses
• 20,000-person software user convention for technology client
• Billable expenses that cover local event production such as venue, catering, talent and security
• Client is obligor on local contracts
The new standard emphasizes “control” of the service. For example, delivery of an event at scale:
7
Old New
Client Service Fee (Net Revenue) 2,000,000$ 2,000,000$
Client Reimbursement for Local Expenses (Billable Expenses) 8,000,000
Total Revenue 2,000,000$ 10,000,000$
Salaries & Related Expenses 1,700,000$ 1,700,000$
Billable Expenses 8,000,000
Total Expenses 1,700,000$ 9,700,000$
Operating Income 300,000$ 300,000$
Net Revenue Operating Margin 15.0% 15.0%
IPG
Earlier Recognition of Client Bonuses
No material change to FY operating profit as a result of earlier recognition of revenue and profit
• In media, deliver a defined multi-platform campaign for $20 million less than market-rates while
exceeding client’s KPIs on sales and brand awareness over the full year
• Performance bonus of $4 million upon achievement
8
The new standard requires that client bonuses, likely to be achieved, are recognized as services are being
performed, instead of only when the actual performance criteria have been achieved. The criteria often measure
performance over a full year. For example:
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Old Standard
Revenue - - - $4.0 - - - $4.0
Operating Income - - - $4.0 - - - $4.0
New Standard
Revenue $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0
Operating Income $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0
2017 2018
Summary –New Revenue Standard
• The accounting changes but the business does not. No change to our model for
value creation, no change to cash flow, no material change to annual operating
profit, pre-tax income, or EPS
• Higher reported levels of pass-through revenues and billable expenses, due to
broader definition of revenue, which entail no change to operating income
• To enhance transparency and consistency, our income statement will show net
revenue, and key performance metrics will be primarily focused on net revenue
• New standard requires earlier recognition of some revenue/profit compared to the
old standard
• No change to our 2018 operating income target
9
2017 unaudited restatement by quarter, segment and region
is in the appendix to this presentation
Preliminary and Unaudited 2017 Restatement
II. Income Statement Format
New Income Statement Format
11
• We have adopted the functional form Income Statement presentation,
classifying expenses to Cost of Services and Selling, General &
Administrative expenses
• Unrelated to revenue recognition, this is strictly a change to classifications,
with no impact on results of operations
• In the scope of $8.1 billion of 2017 (restated) operating expense:
o Less than 2% is allocated to SG&A
o D&A was approximately 2%, which we have elected to show separately
o Over 96% categorized among Salaries & Related, Office and Other
Direct Expenses, and now Billable Expenses
• Functional form is already in use in our peer group
Preliminary and Unaudited 2017 Restatement
12
New Income Statement Format - 2017
Preliminary and Unaudited 2017 Restatement
FY 2017
with 606
Adjustments
Income
Statement
Format
Adjustments
FY 2017
Restated
New Format
FY 2017
As Reported
Revenue:
Net Revenue 7,473.5$ 7,473.5$
Billable expenses 1,574.1 1,574.1
Total revenue 9,047.6$ 9,047.6$ 7,882.4$
Operating Expenses:
Salaries and related expenses 5,068.1 (77.4) 4,990.7 5,068.1
Office and other direct expenses 1,467.0 (198.2) 1,268.8 1,840.7
Billable expenses 1,574.1 1,574.1
Cost of services 7,833.6
Selling, general and administrative expenses 118.5 118.5
Depreciation and amortization 157.1 157.1
Total operating expenses 8,109.2$ 8,109.2$ 6,908.8$
Operating Income 938.4$ 938.4$ 973.6$
13
Presentation of Expense Metrics
Operating Expenses as % of Net Revenue
• Salaries and related category headings are
unchanged from before
• Office and other direct: “All other” includes
professional fees and T&E, office supplies &
telecom, and other expenses
• D&A is shown separately
• SG&A consists of expenses formerly recorded in
our Salaries and related expenses and, to a lesser
extent, in our O&G expenses
2017 as Restated
Q1 Q2 Q3 Q4 FY
Net revenue 1,675.3 1,834.6 1,832.5 2,131.1 7,473.5
Salaries and related expenses 74.7% 67.0% 66.5% 60.6% 66.8%
Base salaries, benefits and tax 62.3% 57.1% 57.3% 49.3% 56.1%
Incentive expense 4.6% 2.8% 2.1% 3.6% 3.3%
Severance expense 1.3% 1.1% 0.8% 0.8% 1.0%
Temorary help 4.2% 3.9% 3.9% 3.6% 3.9%
All other salaries and related expenses 2.4% 2.0% 2.3% 3.3% 2.5%
Office and other direct expenses 18.7% 17.4% 16.5% 15.7% 17.0%
Occupancy expense 7.4% 6.9% 7.1% 6.0% 6.8%
All other office and other direct expenses 11.3% 10.5% 9.5% 9.7% 10.2%
Selling, general and administrative expenses 2.1% 1.1% 0.7% 2.3% 1.6%
Depreciation and amortization 2.4% 2.3% 2.3% 1.5% 2.1%
Net revenue operating margin 2.1% 12.3% 13.9% 19.9% 12.6%
Appendix
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
Three months ended Year ended
March 31,
2017
June 30,
2017
September 30,
2017
December 31,
2017
December 31,
2017
REVENUE:
Net revenue $ 1,675.3 $ 1,834.6 $ 1,832.5 $ 2,131.1 $ 7,473.5
Billable expenses 388.5 351.2 375.7 458.7 1,574.1
Total revenue 2,063.8 2,185.8 2,208.2 2,589.8 9,047.6
OPERATING EXPENSES:
Salaries and related expenses 1,251.7 1,228.9 1,218.8 1,291.3 4,990.7
Office and other direct expenses 312.7 318.4 302.9 334.8 1,268.8
Billable expenses 388.5 351.2 375.7 458.7 1,574.1
Cost of services 1,952.9 1,898.5 1,897.4 2,084.8 7,833.6
Selling, general and administrative expenses 35.2 20.3 13.6 49.4 118.5
Depreciation and amortization 41.0 41.3 42.2 32.6 157.1
Total operating expenses 2,029.1 1,960.1 1,953.2 2,166.8 8,109.2
OPERATING INCOME 34.7 225.7 255.0 423.0 938.4
Total (expenses) and other income (14.9) (36.4) (26.8) (19.5) (97.6)
Income before income taxes 19.8 189.3 228.2 403.5 840.8
(Benefit of) provision for income taxes (0.3) 81.6 54.9 135.1 271.3
Income of consolidated companies 20.1 107.7 173.3 268.4 569.5
Equity in net income (loss) of
unconsolidated affiliates 1.2 (0.1) (1.0) 0.8 0.9
NET INCOME 21.3 107.6 172.3 269.2 570.4
Net loss (income) attributable to
noncontrolling interests 3.4 0.1 (2.6) (16.9) (16.0)
NET INCOME AVAILABLE TO IPG
COMMON STOCKHOLDERS $ 24.7 $ 107.7 $ 169.7 $ 252.3 $ 554.4
Earnings per share available to IPG common
stockholders:
Basic $ 0.06 $ 0.27 $ 0.44 $ 0.66 $ 1.42
Diluted $ 0.06 $ 0.27 $ 0.43 $ 0.64 $ 1.40
Operating margin as a % of net revenue 2.1% 12.3% 13.9% 19.9% 12.6%
Operating margin as a % of total revenue 1.7% 10.3% 11.5% 16.3% 10.4%
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, 2017
As Reported I/S FormatAdjustments
New I/S
Presentation
ASC 606
Adjustments New GAAP
REVENUE:
Net revenue — $ 1,670.3 $ 1,670.3 $ 5.0 $ 1,675.3
Billable expenses — 83.6 83.6 304.9 388.5
Total revenue $ 1,753.9 1,753.9 309.9 2,063.8
OPERATING EXPENSES:
Salaries and related expenses 1,275.4 (23.7) 1,251.7 1,251.7
Office and other direct expenses 448.8 (136.1) 312.7 312.7
Billable expenses — 83.6 83.6 304.9 388.5
Cost of services — 1,648.0 304.9 1,952.9
Selling, general and administrative expenses — 35.2 35.2 35.2
Depreciation and amortization — 41.0 41.0 41.0
Total operating expenses 1,724.2 $ — 1,724.2 304.9 2,029.1
OPERATING INCOME 29.7 29.7 5.0 34.7
Total (expenses) and other income (14.9) (14.9) (14.9)
Income before income taxes 14.8 14.8 5.0 19.8
Benefit of income taxes (2.1) (2.1) 1.8 (0.3)
Income of consolidated companies 16.9 16.9 3.2 20.1
Equity in net income of unconsolidated
affiliates 1.2 1.2 1.2
NET INCOME 18.1 18.1 3.2 21.3
Net loss attributable to noncontrolling
interests 3.4 3.4 3.4
NET INCOME AVAILABLE TO IPG
COMMON STOCKHOLDERS $ 21.5 $ 21.5 $ 3.2 $ 24.7
Earnings per share available to IPG common
stockholders:
Basic $ 0.05 $ 0.05 $ 0.01 $ 0.06
Diluted $ 0.05 $ 0.05 $ 0.01 $ 0.06
Operating margin as a % of net revenue 1.8% 2.1%
Operating margin as a % of total revenue 1.7% 1.7% 1.7%
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, 2017
As Reported I/S Format Adjustments
New I/S
Presentation
ASC 606
Adjustments New GAAP
REVENUE:
Net revenue — $ 1,815.4 $ 1,815.4 $ 19.2 $ 1,834.6
Billable expenses — 69.5 69.5 281.7 351.2
Total revenue $ 1,884.9 1,884.9 300.9 2,185.8
OPERATING EXPENSES:
Salaries and related expenses 1,239.3 (10.4) 1,228.9 1,228.9
Office and other direct expenses 439.1 (120.7) 318.4 318.4
Billable expenses — 69.5 69.5 281.7 351.2
Cost of services — 1,616.8 281.7 1,898.5
Selling, general and administrative expenses — 20.3 20.3 20.3
Depreciation and amortization — 41.3 41.3 41.3
Total operating expenses 1,678.4 $ — 1,678.4 281.7 1,960.1
OPERATING INCOME 206.5 206.5 19.2 225.7
Total (expenses) and other income (36.4) (36.4) (36.4)
Income before income taxes 170.1 170.1 19.2 189.3
Provision for income taxes 75.4 75.4 6.2 81.6
Income of consolidated companies 94.7 94.7 13.0 107.7
Equity in net loss of unconsolidated
affiliates (0.1) (0.1) (0.1)
NET INCOME 94.6 94.6 13.0 107.6
Net loss attributable to noncontrolling
interests 0.1 0.1 0.1
NET INCOME AVAILABLE TO IPG
COMMON STOCKHOLDERS $ 94.7 $ 94.7 $ 13.0 $ 107.7
Earnings per share available to IPG common
stockholders:
Basic $ 0.24 $ 0.24 $ 0.03 $ 0.27
Diluted $ 0.24 $ 0.24 $ 0.03 $ 0.27
Operating margin as a % of net revenue 11.4% 12.3%
Operating margin as a % of total revenue 11.0% 11.0% 10.3%
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
Three months ended September 30, 2017
As Reported I/S Format Adjustments
New I/S
Presentation
ASC 606
Adjustments New GAAP
REVENUE:
Net revenue — $ 1,796.6 $ 1,796.6 $ 35.9 $ 1,832.5
Billable expenses — 106.0 106.0 269.7 375.7
Total revenue $ 1,902.6 1,902.6 305.6 2,208.2
OPERATING EXPENSES:
Salaries and related expenses 1,227.6 (8.8) 1,218.8 1,218.8
Office and other direct expenses 455.9 (153.0) 302.9 302.9
Billable expenses — 106.0 106.0 269.7 375.7
Cost of services — 1,627.7 269.7 1,897.4
Selling, general and administrative expenses — 13.6 13.6 13.6
Depreciation and amortization — 42.2 42.2 42.2
Total operating expenses 1,683.5 $ — 1,683.5 269.7 1,953.2
OPERATING INCOME 219.1 219.1 35.9 255.0
Total (expenses) and other income (26.8) (26.8) (26.8)
Income before income taxes 192.3 192.3 35.9 228.2
Provision for income taxes 42.5 42.5 12.4 54.9
Income of consolidated companies 149.8 149.8 23.5 173.3
Equity in net loss of unconsolidated
affiliates (1.0) (1.0) (1.0)
NET INCOME 148.8 148.8 23.5 172.3
Net income attributable to noncontrolling
interests (2.6) (2.6) (2.6)
NET INCOME AVAILABLE TO IPG
COMMON STOCKHOLDERS $ 146.2 $ 146.2 $ 23.5 $ 169.7
Earnings per share available to IPG common
stockholders:
Basic $ 0.38 $ 0.38 $ 0.06 $ 0.44
Diluted $ 0.37 $ 0.37 $ 0.06 $ 0.43
Operating margin as a % of net revenue 12.2% 13.9%
Operating margin as a % of total revenue 11.5% 11.5% 11.5%
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
Three months ended December 31, 2017
As Reported I/S Format Adjustments
New I/S
Presentation
ASC 606
Adjustments New GAAP
REVENUE:
Net revenue — $ 2,226.4 $ 2,226.4 $ (95.3) $ 2,131.1
Billable expenses — 114.6 114.6 344.1 458.7
Total revenue $ 2,341.0 2,341.0 248.8 2,589.8
OPERATING EXPENSES:
Salaries and related expenses 1,325.8 (34.5) 1,291.3 1,291.3
Office and other direct expenses 496.9 (162.1) 334.8 334.8
Billable expenses — 114.6 114.6 344.1 458.7
Cost of services — 1,740.7 344.1 2,084.8
Selling, general and administrative expenses — 49.4 49.4 49.4
Depreciation and amortization — 32.6 32.6 32.6
Total operating expenses 1,822.7 $ — 1,822.7 344.1 2,166.8
OPERATING INCOME 518.3 518.3 (95.3) 423.0
Total (expenses) and other income (19.5) (19.5) (19.5)
Income before income taxes 498.8 498.8 (95.3) 403.5
Provision for income taxes 166.1 166.1 (31.0) 135.1
Income of consolidated companies 332.7 332.7 (64.3) 268.4
Equity in net income of unconsolidated
affiliates 0.8 0.8 0.8
NET INCOME 333.5 333.5 (64.3) 269.2
Net income attributable to noncontrolling
interests (16.9) (16.9) (16.9)
NET INCOME AVAILABLE TO IPG
COMMON STOCKHOLDERS $ 316.6 $ 316.6 $ (64.3) $ 252.3
Earnings per share available to IPG common
stockholders:
Basic $ 0.82 $ 0.82 $ (0.16) $ 0.66
Diluted $ 0.81 $ 0.81 $ (0.17) $ 0.64
Operating margin as a % of net revenue 23.3% 19.9%
Operating margin as a % of total revenue 22.1% 22.1% 16.3%
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
Year ended December 31, 2017
As Reported I/S Format Adjustments
New I/S
Presentation
ASC 606
Adjustments New GAAP
REVENUE:
Net revenue — $ 7,508.7 $ 7,508.7 $ (35.2) $ 7,473.5
Billable expenses — 373.7 373.7 1,200.4 1,574.1
Total revenue $ 7,882.4 7,882.4 1,165.2 9,047.6
OPERATING EXPENSES:
Salaries and related expenses 5,068.1 (77.4) 4,990.7 4,990.7
Office and other direct expenses 1,840.7 (571.9) 1,268.8 1,268.8
Billable expenses — 373.7 373.7 1,200.4 1,574.1
Cost of services — 6,633.2 1,200.4 7,833.6
Selling, general and administrative expenses — 118.5 118.5 118.5
Depreciation and amortization — 157.1 157.1 157.1
Total operating expenses 6,908.8 $ — 6,908.8 1,200.4 8,109.2
OPERATING INCOME 973.6 973.6 (35.2) 938.4
Total (expenses) and other income (97.6) (97.6) (97.6)
Income before income taxes 876.0 876.0 (35.2) 840.8
Provision for income taxes 281.9 281.9 (10.6) 271.3
Income of consolidated companies 594.1 594.1 (24.6) 569.5
Equity in net income of unconsolidated
affiliates 0.9 0.9 0.9
NET INCOME 595.0 595.0 (24.6) 570.4
Net income attributable to noncontrolling
interests (16.0) (16.0) (16.0)
NET INCOME AVAILABLE TO IPG
COMMON STOCKHOLDERS $ 579.0 $ 579.0 $ (24.6) $ 554.4
Earnings per share available to IPG common
stockholders:
Basic $ 1.49 $ 1.49 $ (0.07) $ 1.42
Diluted $ 1.46 $ 1.46 $ (0.06) $ 1.40
Operating margin as a % of net revenue 13.0% 12.6%
Operating margin as a % of total revenue 12.4% 12.4% 10.4%
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
SEGMENT REVENUE AND OPERATING INCOME (LOSS)
(Amounts in Millions)
(Unaudited)
Summarized financial information concerning our reportable segments is shown below.
Three months ended Year ended
March 31,
2017
June 30,
2017
September 30,
2017
December 31,
2017
December 31,
2017
Total Revenue:
IAN $ 1,567.8 $ 1,711.3 $ 1,702.8 $ 2,027.7 $ 7,009.6
CMG 496.0 474.5 505.4 562.1 2,038.0
Total $ 2,063.8 $ 2,185.8 $ 2,208.2 $ 2,589.8 $ 9,047.6
Net Revenue:
IAN $ 1,391.1 $ 1,534.0 $ 1,531.4 $ 1,810.2 $ 6,266.7
CMG 284.2 300.6 301.1 320.9 1,206.8
Total $ 1,675.3 $ 1,834.6 $ 1,832.5 $ 2,131.1 $ 7,473.5
Segment operating income (loss):
IAN $ 50.1 $ 196.0 $ 216.8 $ 412.2 $ 875.1
CMG 22.1 51.5 53.1 63.2 189.9
Corporate and other (37.5) (21.8) (14.9) (52.4) (126.6)
Total $ 34.7 $ 225.7 $ 255.0 $ 423.0 $ 938.4
IAN operating margin on net revenue 3.6% 12.8% 14.2% 22.8% 14.0%
CMG operating margin on net revenue 7.8% 17.1% 17.6% 19.7% 15.7%
IPG operating margin on net revenue 2.1% 12.3% 13.9% 19.8% 12.6%
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
REVENUE BY REGION
(Amounts in Millions)
(Unaudited)
Summarized financial information concerning our regions is shown below.
Net Revenue: Three months ended Year ended
March 31,
2017
June 30,
2017
September 30,
2017
December 31,
2017
December 31,
2017
Consolidated $ 1,675.3 $ 1,834.6 $ 1,832.5 $ 2,131.1 $ 7,473.5
Domestic 1,057.1 1,127.6 1,109.6 1,164.5 4,458.8
International 618.2 707.0 722.9 966.6 3,014.7
United Kingdom 135.2 141.7 160.0 176.2 613.1
Continental Europe 140.9 154.6 150.7 241.6 687.8
Asia Pacific 173.7 205.3 203.7 284.2 866.9
Latin America 69.0 85.7 86.9 109.2 350.8
Other 99.4 119.7 121.6 155.4 496.1
Three months ended Year ended
IAN March 31,
2017
June 30,
2017
September 30,
2017
December 31,
2017
December 31,
2017
Consolidated $ 1,391.1 $ 1,534.0 $ 1,531.4 $ 1,810.2 $ 6,266.7
Domestic 862.0 926.3 913.2 959.1 3,660.6
International 529.1 607.7 618.2 851.1 2,606.1
Three months ended Year ended
CMG March 31,
2017
June 30,
2017
September 30,
2017
December 31,
2017
December 31,
2017
Consolidated $ 284.2 $ 300.6 $ 301.1 $ 320.9 $ 1,206.8
Domestic 195.1 201.3 196.4 205.4 798.2
International 89.1 99.3 104.7 115.5 408.6
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
RECONCILIATIONS OF ADJUSTED NON-GAAP RESULTS
(Unaudited)
Summarized financial information reconciling our non-GAAP adjustments to our earnings per share available to IPG common
stockholders ("EPS") is presented below. Note that neither the adoption of the new revenue standard nor the reclassification of
revenues and operating expenses on our statements of operations impacted the adjustments presented below.
Three months ended Year ended
March 31,
2017
June 30,
2017
September 30,
2017
December 31,
2017
December 31,
2017
New GAAP diluted EPS $ 0.06 $ 0.27 $ 0.43 $ 0.64 $ 1.40
Diluted EPS impact of:
Net losses on sales of businesses (0.03) (0.02) 0.01 (0.04)
U.S. federal tax credits 0.08 (0.08) —
Net impact of U.S. tax reform 0.09 0.09
New GAAP adjusted diluted EPS $ 0.06 $ 0.30 $ 0.37 $ 0.62 $ 1.35
This Exhibit 99.1 contains forward-looking statements. Statements in this Exhbit 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.
Cautionary Statement