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(Exact name of registrant as specified in its charter)
iDelaware
i13-1024020
(State
or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
i909 Third Avenue, iNew
York, iNew York i10022
(Address of principal executive offices) (Zip Code)
i(212)i 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
iCommon Stock, par value $0.10 per share
iIPG
iThe
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. iYesý 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). iYesý 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.
iLarge
Accelerated Filer
☒
Accelerated Filer
☐
Non-accelerated Filer
☐
Smaller Reporting Company
i☐
Emerging
Growth Company
i☐
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 i☐ No ý
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.
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: i 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.
i
Our agencies are located
in over 110 countries, including every significant world market. Our geographic revenue breakdown is listed below.
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 $i756.0 of
unsatisfied performance obligations as of June 30, 2019, which will be recognized as services are performed over the remaining contractual terms.
Note 3: i 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 i1
year to i20 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.
i
The
following table presents information on our operating leases for the three and six months ended June 30, 2019.
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
i
Our future payments of our operating leases as of June 30,
2019 are listed in the table below.
Period
Net Rent
2019
$
i174.0
2020
i315.3
2021
i282.0
2022
i250.6
2023
i195.2
Thereafter
i844.3
Total
future lease payments
i2,061.4
Less: imputed interest
(i337.2
)
Present
value of future lease payments
i1,724.2
Less: current portion of operating leases
i261.0
Non-current
operating leases
$
i1,463.2
/
i
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
$
i352.0
$
(i7.7
)
$
i344.3
2020
i324.3
(i5.2
)
i319.1
2021
i282.3
(i2.2
)
i280.1
2022
i242.5
(i1.3
)
i241.2
2023
i184.0
(i0.6
)
i183.4
Thereafter
i714.6
(i0.5
)
i714.1
Total
future lease payments
$
i2,099.7
$
(i17.5
)
$
i2,082.2
/
As
of June 30, 2019, we have additional operating leases that have not yet commenced with future lease payments of approximately $i140.0 that will commence between 2019 and 2020 with lease terms of i5
to i15 years.
3.50% Senior Notes due 2020 (less unamortized discount and issuance costs
of $0.6 and $1.8, respectively)
i3.89%
$
i497.6
$
i506.3
$
i496.6
$
i499.9
3.75%
Senior Notes due 2021 (less unamortized discount and issuance costs of $0.3 and $2.4, respectively)
i3.98%
i497.3
i513.6
i496.8
i503.2
4.00%
Senior Notes due 2022 (less unamortized discount and issuance costs of $0.8 and $0.7, respectively)
i4.13%
i248.5
i258.5
i248.2
i250.3
3.75%
Senior Notes due 2023 (less unamortized discount and issuance costs of $0.6 and $1.5, respectively)
i4.32%
i497.9
i520.7
i497.7
i491.4
4.20%
Senior Notes due 2024 (less unamortized discount and issuance costs of $0.5 and $2.0, respectively)
i4.24%
i497.5
i538.2
i497.3
i492.6
4.65%
Senior Notes due 2028 (less unamortized discount and issuance costs of $1.6 and $4.1, respectively)
i4.78%
i494.3
i545.9
i494.0
i494.1
5.40%
Senior Notes due 2048 (less unamortized discount and issuance costs of $2.7 and $5.5, respectively)
i5.48%
i491.8
i555.6
i491.7
i474.1
Term
Loan due 2021 - LIBOR plus 1.25%
i300.0
i300.0
i400.0
i400.0
Other
notes payable and capitalized leases
i39.2
i39.2
i38.0
i38.0
Total
long-term debt
i3,564.1
i3,660.3
Less:
current portion
i0.3
i0.1
Long-term
debt, excluding current portion
$
i3,563.8
$
i3,660.2
/
1
See
Note 14 for information on the fair value measurement of our long-term debt.
Term Loan Agreement
On October 1, 2018, in order to fund the acquisition of Acxiom (the "Acxiom Acquisition"), we entered into financing arrangements with third-party lenders under a three-year term loan agreement (the "Term Loan Agreement"). On June 13, 2019, we repaid $i100.0
of the outstanding balance, which reduced our borrowings under the agreement to $i300.0. Consistent with our other debt securities, the Term Loan Agreement includes covenants that, among other things, limit our liens and the liens of certain of our consolidated subsidiaries. We were in compliance with all of our covenants in the Term Loan Agreement as of June 30, 2019.
Credit
Agreements
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 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 October 2022, 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 $i1,500.0,
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 $i250.0, 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 on letters of credit of $i50.0, or the equivalent in other currencies. Our obligations under the Credit Agreement are unsecured. As of June 30, 2019, there were ino borrowings
under the Credit Agreement; however, we had $i8.6 of letters of credit under the Credit Agreement, which reduced our total availability to $i1,491.4.
We were in compliance with all of our covenants in the Credit Agreement as of June 30, 2019.
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
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 June 30, 2019, the Company had uncommitted lines of credit in an aggregate amount of $i1,085.5, under
which we had outstanding borrowings of $i57.1 classified as short-term borrowings on our Consolidated Balance Sheet. The average amount outstanding during the second quarter of 2019 was $i98.3,
with a weighted-average interest rate of approximately i4.7%.
Commercial Paper
The Company is authorized to issue unsecured commercial paper up to a maximum aggregate amount outstanding at any time of $i1,500.0.
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 i397 days from the date of issue. As of June 30, 2019, there was $i150.0
of commercial paper outstanding classified as short-term borrowings on our Consolidated Balance Sheet. The average amount outstanding under the program during the second quarter of 2019 was $i482.6, with a weighted-average interest rate of i2.8% and
a weighted-average maturity of i18 days.
Note 5: iAcquisitions
Acxiom
Acquisition
On October 1, 2018 (the "acquisition date"), the Company completed its acquisition of Acxiom. The purchase accounting process has not been completed primarily because the valuation of acquired assets has not been finalized. We expect to complete the purchase accounting as soon as practicable but no later than one year from the acquisition date. We do not believe there will be material adjustments.
Other Acquisitions
During the first half of 2019, we completed ione
acquisition, a content communications agency based in the U.K. This acquisition was included in the IAN operating segment. During the first half of 2019, we recorded $i2.4 of goodwill and intangible assets related to our acquisitions.
During the first half
of 2018, we completed itwo acquisitions, a full-service digital agency based in Brazil and an entertainment marketing and brand licensing agency in the fashion and lifestyle sector based in the U.K. Both of our acquisitions were included in the CMG operating segment. During the first half of 2018, we recorded $i14.2
of goodwill and intangible assets related to our acquisitions.
The results of operations of our acquired companies were included in our consolidated results from the closing date of each acquisition. iDetails of cash paid for current and prior years' acquisitions are listed below.
Represents
cash payments for amounts that have been recognized in operating expenses since the date of acquisition either relating to adjustments to estimates in excess of the initial value of contingent payments recorded or were contingent upon the future employment of the former owners of the acquired companies. Amounts are reflected in the operating section of the unaudited Consolidated Statements of Cash Flows.
2
Of the total cash paid for acquisitions, $i0.6
and $i8.5 for the six months ended June 30, 2019 and 2018, respectively, are classified under the investing section of the unaudited Consolidated Statements of Cash Flows, as acquisitions, net of cash acquired. These amounts relate to initial payments for new transactions. Of the total cash paid for acquisitions,
$i13.0 and $i16.0 for the six months ended June
30, 2019 and 2018, respectively, are classified under the financing section of the unaudited Consolidated Statements of Cash Flows as acquisition-related payments. These amounts relate to deferred payments and increases in our ownership interest for prior acquisitions.
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
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 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.
i
The following table presents changes in our redeemable noncontrolling interests.
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
i
Other Expense, Net
i
Results
of operations for the three and six months ended June 30, 2019 and 2018 include certain items that are not directly associated with our revenue-producing operations.
Net
losses on sales of businesses – During the three and six months ended June 30, 2019, the amounts recognized were related to sales of businesses and the classification of certain assets and liabilities, consisting primarily of accounts receivable and cash, as held for sale within our IAN reportable segment. During the three and six months ended June 30, 2018, 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. The businesses held for sale primarily represent unprofitable, non-strategic agencies which are expected to be sold within the next twelve months.
Other –
During the three and six months ended June 30, 2019, the amounts recognized were primarily related to a sale of an equity investment.
/
i
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 June 30, 2019, $i338.4,
excluding fees, remains available for repurchase under the share repurchase programs authorized in previous years, which have no expiration date.
Note 8: iIncome Taxes
For the three and six months ended June 30, 2019,
our income tax provision was positively impacted by the settlement of state income tax audits, partially offset 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 did not receive a tax benefit.
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 $i10.0 and $i20.0
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 9: i Restructuring
Charges
i
In the first quarter of 2019, the Company implemented a cost initiative (the "2019 Plan") to better align our cost structure with our revenue primarily related to specific client losses occurring in 2018, the components of which are listed below.
Net
restructuring charges was comprised of $i27.6 at IAN and $i5.6
at CMG for the first half of 2019. All restructuring actions were identified and initiated by the end of first quarter of 2019, with all actions substantially completed by the end of the second quarter of 2019. The amounts for the three months ended June 30, 2019 are adjustments to the actions taken in the first quarter, and we don't expect any further restructuring activities.
During the first half of 2019, severance and termination costs related to a planned reduction in workforces of i627
employees.The employee groups affected include executive, regional and account management as well as administrative, creative and media production personnel. Cash payments of $i14.5 were made during the first half of 2019, with the remaining liability of $i7.5
expected to be paid by the end of the third quarter of 2019.
Lease impairment costs relate to the office spaces that were vacated as part of the 2019 Plan, which includes impairment on the right-of-use asset of operating leases, furniture, and leasehold improvements. Given the remaining lease terms involved, the lease obligation will be paid out over a period of several years, net of sublease income.
Note 10: iIncentive
Compensation Plans
We issue stock-based compensation and cash awards to our employees under a plan established by the Compensation and Leadership Talent Committee of the Board of Directors (the "Compensation Committee") and approved by our shareholders. iWe issued the following stock-based awards under the 2014 and 2019 Performance Incentive Plans (the "2014 and 2019 PIPs") during the six months endedJune 30,
2019.
Awards
Weighted-average
grant-date fair value
(per award)
Restricted stock (shares or units)
i2.4
$
i22.84
Performance-based
stock (shares)
i2.1
$
i20.16
Total
stock-based compensation awards
i4.5
During
the six months endedJune 30, 2019, the Compensation Committee granted performance cash awards under the 2014 and 2019 PIPs and restricted cash awards under the 2009 Restricted Cash Plan with a total annual target value of $i40.6 and $i19.6,
respectively. Cash awards are expensed over the vesting period, which is typically ithree years.
Note 11: ii 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
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
Note 12: iEmployee
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.
i
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.
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 six months endedJune 30, 2019, we contributed $i1.1
and $i8.7 of cash to our domestic and foreign pension plans, respectively. For the remainder of 2019, we expect to contribute approximately $i1.0
and $i8.0 of cash to our domestic and foreign pension plans, respectively.
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
Note 13: iSegment Information
As of June 30, 2019, we have two reportable segments:
IAN and CMG. IAN is comprised of McCann Worldgroup, Foote, Cone & Belding ("FCB"), MullenLowe Group, IPG Mediabrands, Acxiom, our digital specialist agencies and our domestic integrated agencies. CMG is comprised of a number of our specialist marketing services offerings. We also report results for the “Corporate and other” group. Beginning in the first quarter of 2019, Acxiom's results are presented in IAN although 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. iSummarized
financial information concerning our reportable segments is shown in the following table.
Less:
consolidated amortization of acquired intangibles
i21.3
i5.2
i42.9
i10.5
Operating
income
i264.2
i249.2
i314.4
i288.0
Total
(expenses) and other income
(i47.7
)
(i37.7
)
(i96.6
)
(i78.0
)
Income
before income taxes
$
i216.5
$
i211.5
$
i217.8
$
i210.0
Note
14: iFair Value Measurements
Authoritative guidance for fair value measurements establishes a fair value hierarchy which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:
Level
1
Unadjusted quoted prices in active markets for identical assets or liabilities. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable
market data for substantially the full term of the assets or liabilities.
Level 3
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Financial Instruments that are Measured at Fair Value on a Recurring Basis
We primarily apply the market approach to determine the fair value of financial instruments that are measured at fair value on a recurring basis. There were no
changes to our valuation techniques used to determine the fair value of financial instruments during the six months endedJune 30, 2019. iThe following tables present information about our financial instruments measured at fair value on a recurring basis as of June 30, 2019
and December 31, 2018, and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value.
Accrued
liabilities and Other non-current liabilities
1
Contingent acquisition obligations includes deferred acquisition payments and unconditional obligations to purchase additional noncontrolling equity shares of consolidated subsidiaries. Fair value measurement of the obligations is based upon actual and projected operating performance targets as specified in the related agreements. The decrease
in this balance of $i37.8 from December 31, 2018 to June 30, 2019 is primarily due to payments and a reclassification from an arrangement during the second quarter of
2019. The amounts payable within the next twelve months are classified in accrued liabilities; any amounts payable thereafter are classified in other non-current liabilities.
Financial Instruments that are not Measured at Fair Value on a Recurring Basis
i
The following table presents information about our financial instruments that are not measured at fair value on a recurring basis as of June 30, 2019 and December 31,
2018, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.
Our
long-term debt is comprised of senior notes, a term loan and other notes payable. The fair value of our senior notes, which are traded over-the-counter, is based on quoted prices in markets that are not active. Therefore, these senior notes are classified as Level 2 within the fair value hierarchy. Our term loan is a fixed price commitment that cannot be traded on the open market, and therefore is classified as Level 2 within the fair value hierarchy. Our other notes payable are not actively traded, and their fair value is not solely derived from readily observable inputs. The fair value of our other notes payable is determined based on a discounted cash flow model and other proprietary valuation methods, and therefore is classified as Level 3 within the fair value hierarchy. See Note 4 for further information on our long-term debt.
Non-financial Assets and Liabilities that are
Measured at Fair Value on a Nonrecurring Basis
Certain non-financial assets and liabilities are measured at fair value on a nonrecurring basis, primarily goodwill, intangible assets, and property and equipment. Accordingly, these assets are not measured and adjusted to fair value on an ongoing basis but are subject to periodic evaluations for potential impairment.
Note 15: iCommitments
and Contingencies
Legal Matters
We are involved in various legal proceedings, and subject to investigations, inspections, audits, inquiries and similar actions by governmental authorities, arising in the normal course of business. The types of allegations that arise in connection with such legal proceedings may vary in nature, but can include claims related to contract, employment, tax and intellectual property matters. We evaluate all cases each reporting period and record liabilities for losses from legal proceedings when we determine that it is probable that the outcome in a legal proceeding will be unfavorable and the amount, or potential range, of loss can be reasonably estimated. In certain cases, we cannot reasonably estimate the potential loss because, for example, the litigation
is in its early stages. While any outcome related to litigation or such governmental proceedings in which we are involved cannot be predicted
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
with certainty, management believes that the outcome of these matters, individually and in the aggregate, will not have a material adverse effect on our financial condition, results of operations or cash flows.
Guarantees
As
discussed in our 2018 Annual Report on Form 10-K, we have guaranteed certain obligations of our subsidiaries relating principally to operating leases, uncommitted lines of credit and cash pooling arrangements. As of June 30, 2019 and December 31, 2018, the amount of parent company guarantees on lease obligations was $i766.3
and $i824.5, respectively, the amount of parent company guarantees relating to uncommitted lines of credit was $i296.7
and $i349.1, respectively, and the amount of parent company guarantees related to daylight overdrafts, primarily utilized to manage intra-day overdrafts due to timing of transactions under cash pooling arrangements without resulting in incremental borrowings, was $i205.2
and $i207.8, respectively.
Note 16: iRecent
Accounting Standards
Accounting pronouncements not listed below were assessed and determined to be not applicable or are expected to have minimal impact on our Consolidated Financial Statements.
Leases
In February 2016, the Financial Accounting Standards Board ("FASB") issued amended guidance on lease accounting. We adopted the standard using the modified retrospective approach with an effective date of January 1, 2019. Prior-year financial statements were not recast under the new standard. The adoption resulted in the presentation of a right-of-use asset and lease liability on our Consolidated Balance Sheet and corresponding impacts on our Consolidated Statement of Cash Flows, but did not have a significant impact on our Consolidated Statements of Operations. See Note 3
for further discussion on our adoption of the new leases standard.
Financial Instrument Credit Losses
In June 2016, the FASB issued amended guidance on the accounting for credit losses on certain types of financial instruments, including trade receivables. The new model uses a forward-looking expected loss method, as opposed to the incurred loss method in current U.S. GAAP, which will generally result in earlier recognition of allowances for losses. This amended guidance is effective beginning January 1, 2020, with early adoption permitted as early as January 1, 2019. We are currently assessing the impact the adoption of the amended guidance will have on our Consolidated Financial Statements.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
Item 2.
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help you understand The Interpublic Group of Companies, Inc. and its subsidiaries (the "Company,""IPG,""we,""us" or "our"). MD&A should be read in conjunction with our unaudited Consolidated Financial Statements and the accompanying notes included in this report and our 2018 Annual Report on Form 10-K, as well as our other reports and filings with the Securities and Exchange Commission (the "SEC"). Our Annual Report includes additional information about our significant accounting policies and practices as well as details about the
most significant risks and uncertainties associated with our financial and operating results. Our MD&A includes the following sections:
EXECUTIVE SUMMARY provides a discussion about our strategic outlook, factors influencing our business and an overview of our results of operations.
RESULTS OF OPERATIONS provides an analysis of the consolidated and segment results of operations for the periods presented.
LIQUIDITY AND CAPITAL RESOURCES provides an overview of our cash flows, funding requirements, financing and sources of funds, and debt credit ratings.
CRITICAL ACCOUNTING ESTIMATES provides an update to the discussion in our 2018 Annual Report on Form 10-K of our accounting policies that require critical judgment, assumptions and estimates.
RECENT
ACCOUNTING STANDARDS, by reference to Note 16 to the unaudited Consolidated Financial Statements, provides a discussion of certain accounting standards that have been recently adopted or that have not yet been required to be implemented and may be applicable to our future operations.
NON-GAAP FINANCIAL MEASURE, provides a reconciliation of non-GAAP financial measure with the most directly comparable generally accepted accounting principles in the United States ("U.S. GAAP") financial measures and sets forth the reasons we believe that presentation of the non-GAAP financial measure contained therein provides useful information to investors regarding our results of operations and financial condition.
EXECUTIVE
SUMMARY
We are one of the world’s premier global advertising and marketing services companies. Our companies specialize in consumer advertising, digital marketing, media planning and buying, public relations and specialized communications disciplines. Our agencies create customized marketing programs for clients that range in scale from large global marketers to regional and local clients. Comprehensive global services are critical to effectively serve our multinational and local clients in markets throughout the world as they seek to build brands, increase sales of their products and services, and gain market share.
We operate in a media landscape that continues to evolve at a rapid pace. Media channels continue to fragment, and clients face an increasingly complex consumer environment. To stay ahead of these challenges and to achieve our objectives, we have made and continue to
make investments in creative and strategic talent in areas including fast-growth digital marketing channels, high-growth geographic regions and strategic world markets. We consistently review opportunities within our Company to enhance our operations through acquisitions and strategic alliances and internal programs that encourage intra-company collaboration. As appropriate, we also develop relationships with technology and emerging media companies that are building leading-edge marketing tools that complement our agencies' skill sets and capabilities.
Our financial goals include competitive organic net revenue growth and expansion of EBITA margin, as defined and discussed within the Non-GAAP Financial Measure section of this MD&A, which we expect will further strengthen our balance sheet and
total liquidity and increase value to our shareholders. Accordingly, we remain focused on meeting the evolving needs of our clients while concurrently managing our cost structure. We continually seek greater efficiency in the delivery of our services, focusing on more effective resource utilization, including the productivity of our employees, real estate, information technology and shared services, such as finance, human resources and legal. The improvements we have made and continue to make in our financial reporting and business information systems in recent years allow us more timely and actionable insights from our global operations. Our disciplined approach to our balance sheet and liquidity provides us with a solid financial foundation and financial flexibility to manage and grow our business. We believe that our strategy and execution position us to meet our financial goals and to deliver long-term shareholder value.
When
we analyze period-to-period changes in our operating performance, we determine the portion of the change that is attributable to changes in foreign currency rates and the net effect of acquisitions and divestitures, and the remainder we call organic change, which indicates how our underlying business performed. We exclude the impact of billable expenses in analyzing our operating performance as the fluctuations from period to period are not indicative of the performance of our underlying
Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)
(Amounts
in Millions, Except Per Share Amounts)
(Unaudited)
businesses and have no impact on our EBITA, as defined and discussed within the Non-GAAP Financial Measure section of this MD&A, or net income.
The change in our operating performance attributable to changes in foreign currency rates is determined by converting the prior-period reported results using the current-period exchange rates and comparing these prior-period adjusted amounts to the prior-period reported results. Although the U.S. Dollar is our reporting currency, a substantial portion of our revenues and expenses are generated in foreign currencies. Therefore, our reported results are affected by fluctuations in the currencies in which we conduct our international
businesses. Our exposure is mitigated as the majority of our revenues and expenses in any given market are generally denominated in the same currency. Both positive and negative currency fluctuations against the U.S. Dollar affect our consolidated results of operations, and the magnitude of the foreign currency impact to our operations related to each geographic region depends on the significance and operating performance of the region. The foreign currencies that most adversely impacted our results during the first half of 2019 were the British Pound Sterling and Euro.
For purposes of analyzing changes in our operating performance attributable to the net effect of acquisitions and divestitures, transactions are treated as if they occurred on the first day of the quarter during which the transaction occurred. During the past few years,
we have acquired companies that we believe will enhance our offerings, including the acquisition of Acxiom (the "Acxiom Acquisition"), and disposed of businesses that are not consistent with our strategic plan.
The metrics that we use to evaluate our financial performance include organic change in net revenue as well as the change in certain operating expenses, and the components thereof, expressed as a percentage of consolidated net revenue, as well as EBITA. These metrics are also used by management to assess the financial performance of our operating segments, Integrated Agency Networks ("IAN") and Constituency Management Group ("CMG"). In certain of our discussions, we analyze net revenue by geographic region and by business sector, in which we focus on our top 100 clients, which typically constitute approximately 55% to 60% of our annual consolidated net revenues.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
The following table presents a summary of our financial performance for the three and six months ended June 30, 2019 and 2018.
Three
months ended June 30,
Six months ended June 30,
Statement of Operations Data
2019
2018
% Increase/
(Decrease)
2019
2018
%
Increase/
(Decrease)
REVENUE:
Net
revenue
$
2,125.9
$
1,948.2
9.1
%
$
4,130.7
$
3,722.2
11.0
%
Billable
expenses
394.3
443.6
(11.1
)%
750.7
838.7
(10.5
)%
Total
revenue
$
2,520.2
$
2,391.8
5.4
%
$
4,881.4
$
4,560.9
7.0
%
OPERATING
INCOME
$
264.2
$
249.2
6.0
%
$
314.4
$
288.0
9.2
%
EBITA
1
$
285.5
$
254.4
12.2
%
$
357.3
$
298.5
19.7
%
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
Operating
Ratios
Organic change in net revenue
3.0
%
5.6
%
4.6
%
4.7
%
Operating
margin on net revenue
12.4
%
12.8
%
7.6
%
7.7
%
Operating
margin on total revenue
10.5
%
10.4
%
6.4
%
6.3
%
EBITA
margin on net revenue 1
13.4
%
13.1
%
8.6
%
8.0
%
Expenses
as a % of net revenue:
Salaries and related expenses
65.0
%
66.4
%
67.8
%
70.5
%
Office
and other direct expenses
18.2
%
17.1
%
18.8
%
17.7
%
Selling,
general and administrative expenses
0.8
%
1.5
%
1.4
%
1.7
%
Depreciation
and amortization
3.4
%
2.3
%
3.5
%
2.4
%
Restructuring
charges 2
0.1
%
0.0
%
0.8
%
0.0
%
1
EBITA
is a financial measure that is not defined by U.S. GAAP. Refer to the Non-GAAP Financial Measure section of this MD&A for additional information and for a reconciliation to U.S. GAAP measures.
2
Results include restructuring charges of $2.1 and $33.9 for the three and six months ended June 30, 2019, respectively.
Our organic net revenue increase of 3.0% (which excludes results from Acxiom) for the second quarter
of 2019 was driven by growth throughout nearly all geographic regions and most disciplines, attributable to a combination of net client wins and net higher spending from existing clients, most notably in the healthcare and financial services sectors, partially offset by decrease in the auto and transportation sector. During the second quarter of 2019, our EBITA margin grew to 13.4% from 13.1% in the prior-year period as the increase in net revenue outpaced the overall increase in our operating expense, excluding billable expenses and amortization of acquired intangibles.
Our organic net revenue increase of 4.6% (which excludes results from Acxiom) for the
first half of 2019 was driven by growth throughout all geographic regions and most disciplines, attributable to a combination of net client wins and net higher spending from existing clients, most notably in the healthcare and financial services sectors, partially offset by decrease in the auto and transportation sector. During the first half of 2019, our EBITA margin grew to 8.6% from 8.0% in the prior-year period as the
Management’s
Discussion and Analysis of Financial Condition and Results of Operations - (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
increase in net revenue outpaced the overall increase in our operating expense, excluding billable expenses and amortization of acquired intangibles. In the first half of 2019, our EBITA margin includes restructuring charges of 0.8% of net revenue.
RESULTS OF OPERATIONS
Consolidated Results of Operations – Three and Six Months
Ended June 30, 2019 Compared to Three and Six Months Ended June 30, 2018
Net Revenue
Our net revenue is directly impacted by the retention and spending levels of existing clients and by our ability to win new clients. Most of our expenses are recognized ratably throughout the year and are therefore less seasonal than revenue. Our net revenue is typically lowest in the first quarter and highest in the fourth quarter, reflecting the seasonal spending of our clients.
The
organic increase during the second quarter of 2019 in our domestic market was primarily driven by growth at our advertising businesses and digital specialist agencies, partially offset by a decrease at our media businesses. In our international markets, the 6.5% organic increase was driven by growth across nearly all geographic regions, primarily at our media and advertising businesses as well as public relations agencies. Consolidated net acquisitions includes net revenue mostly from Acxiom, which we acquired on October 1, 2018, partially offset by divestitures mostly in our domestic market and Continental Europe regions.
The
3.0% organic increase during the first half of 2019 in our domestic market was primarily driven by growth at our advertising and media businesses. In our international markets, the 7.1% organic increase was driven by growth across all geographic regions and most disciplines, primarily at our media and advertising businesses as well as public relations agencies. Consolidated net acquisitions includes net revenue mostly from Acxiom, which we acquired on October 1, 2018, partially offset by divestitures mostly in our domestic market and Continental Europe region.
Refer to the segment discussion later in this MD&A for information on changes in net revenue by segment.
Net
revenue growth of 9.1% outpaced the increase in salaries and related expenses of 6.8% during the second quarter of 2019 as compared to the prior-year period, primarily driven by leverage in base salaries, benefits and tax and temporary help expenses. The improved ratio was a result of carefully managing our employee base, and to a lesser extent, lower net benefit expenses. Also contributing to the lower percentage was the inclusion of Acxiom, which has a lower ratio of salaries and related expenses as a percentage of its net revenue.
Net revenue growth of 11.0% outpaced the increase in salaries and related expenses of 6.8% during the first
half of 2019 as compared to the prior-year period, primarily driven by factors similar to those noted above for the second quarter of 2019.
Includes
client service costs, non-pass through production expenses, travel and entertainment, professional fees, spending to support new business activity, telecommunications, office supplies, bad debt expense, adjustments to contingent acquisition obligations, foreign currency losses (gains) and other expenses.
Office and other direct expenses increased by 16.2% compared to net revenue growth of 9.1% during the second quarter of 2019 as compared to the prior-year period. The increase in office and other direct expenses was mainly due to the inclusion of Acxiom, which has a higher ratio of office and other direct expenses as a percentage of its net revenue, primarily driven by client service costs. Additionally, overall office and other
direct expenses benefited primarily from leverage in occupancy expense, partially offset by an increase in professional fees.
Office and other direct expenses increased by 18.2% compared to net revenue growth of 11.0% during the first half of 2019 as compared to the prior-year period, primarily driven by factors similar to those noted above for the second quarter of 2019.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") are primarily the unallocated expenses of our Corporate and other group, as detailed further
in the segment discussion later in this MD&A, excluding depreciation and amortization. SG&A as a
Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
percentage of net revenue decreased in the second quarter and first half
of 2019 compared to the prior-year period, primarily attributable to an increase in allocated service fees, mainly as a result of the inclusion of Acxiom, and lower professional fees, partially offset by higher incentive expense.
Depreciation and Amortization
Depreciation and amortization as a percentage of net revenue increased to 3.4% in the second quarter of 2019 from 2.3% and 3.5% in the first half of 2019 from 2.4% in the prior-year period, primarily due to the inclusion
of Acxiom.
Restructuring Charges
In the first quarter of 2019, the Company implemented a cost initiative (the “2019 Plan”) to better align our cost structure with our revenue primarily related to specific client losses occurring in 2018, the components of which are listed below. All restructuring actions were substantially completed by the end of the second quarter of 2019. The amounts for the three months ended June 30, 2019 are adjustments to the actions taken in the first quarter, and we don't expect any further restructuring activities.
The following table presents the 2019 Plan restructuring charges and employee headcount reduction for the first six months ended June 30, 2019.
Restructuring
Charges
Headcount Reduction (Actual Number)
Domestic
$
27.0
507
International
6.9
120
Consolidated
$
33.9
627
The
2019 Plan included cost initiatives due to specific client losses, and as such we considered the potential for goodwill impairment at one of our reporting units. Our review did not indicate an impairment triggering event as of June 30, 2019.
For the three and six months ended June 30, 2019, net interest expense increased by $22.5 and $48.6, respectively, as compared to the prior-year period, primarily attributable to increased cash interest expense from the issuance of long-term debt in 2018 in order to finance the Acxiom Acquisition, partially offset by an increase in interest income, primarily due to higher interest rates in international markets.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
Other Expense, Net
Results of operations for the three and six months ended June 30, 2019 and 2018 include certain items that are not directly associated with our revenue-producing operations.
Net
losses on sales of businesses – During the three and six months ended June 30, 2019, the amounts recognized were related to sales of businesses and the classification of certain assets and liabilities, consisting primarily of accounts receivable and cash, as held for sale within our IAN reportable segment. During the three and six months ended June 30, 2018, 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. The businesses held for sale primarily represent unprofitable, non-strategic agencies which are expected to be sold within the next twelve months.
Other –
During the three and six months ended June 30, 2019, the amounts recognized were primarily related to a sale of an equity investment.
Our
tax rates are affected by many factors, including our worldwide earnings from various countries, changes in legislation and tax characteristics of our income. For the three and six months ended June 30, 2019, our income tax provision was positively impacted by the settlement of state income tax audits, partially offset 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 did not receive a tax benefit.
For the three and six months ended June 30, 2018, our effective income tax rates were negatively impacted by losses in certain foreign jurisdictions where we receive no tax
benefit due to 100% valuation allowances and by losses on sales of businesses, and the classification of certain assets as held for sale, for which we received a minimal tax benefit, partially offset by additional research and development credits based on the conclusion of multi-year studies.
EARNINGS PER SHARE
Basic earnings per share available to IPG common stockholders for the three and six months ended June 30, 2019 were $0.44 and $0.42, respectively, compared to $0.38 and $0.34
for the three and six months ended June 30, 2018, respectively. Diluted earnings per share available to IPG common stockholders for the three and six months ended June 30, 2019 were $0.43 and $0.41, respectively, compared to $0.37 and $0.34 for the three and six months ended June 30, 2018, respectively.
Basic and diluted earnings per share for the three months endedJune 30,
2019 included a negative impact of $0.04 from the amortization of acquired intangibles, a negative impact of $0.02 from net losses on sales of businesses and the classification of certain assets as held for sale and a positive impact of $0.04 from a tax benefit related to the conclusion and settlement of tax examinations of previous years.
Basic and diluted earnings per share for the six months endedJune 30, 2019 included a negative impact of $0.09 from the amortization of acquired intangibles, a negative impact of $0.06 from first-quarter
restructuring charges, a negative impact of $0.04 from net losses on sales of businesses and the classification of certain assets as held for sale and a positive impact of $0.04 from a tax benefit related to the conclusion and settlement of tax examinations of previous years.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
Basic
and diluted earnings per share for the three months endedJune 30, 2018 included a negative impact of $0.01 from the amortization of acquired intangibles and a negative impact of $0.05 from net losses on sales of businesses and the classification of certain assets as held for sale.
Basic and diluted earnings per share for the six months endedJune 30, 2018 included a negative impact of $0.03 from the amortization of acquired intangibles and a negative impact of $0.11
from net losses on sales of businesses and the classification of certain assets as held for sale.
Segment Results of Operations – Three and Six Months Ended June 30, 2019 Compared to Three and Six Months Ended June 30, 2018
As discussed in Note 13 to the unaudited Consolidated Financial Statements, we have two reportable segments as of June 30, 2019: IAN and CMG. We also report results for the "Corporate
and other" group.
The
organic increase was attributable to a combination of net client wins and net higher spending from existing clients, most notably in the healthcare and financial services sectors, partially offset by decrease in the auto and transportation sector. The organic increase in our domestic market was primarily driven by growth at our advertising businesses and digital specialist agencies, partially offset by our media businesses. The international organic increase was driven by growth across nearly all geographic regions, primarily at our media and advertising businesses, most notably in the Latin America and Continental Europe regions. Consolidated net acquisitions includes net revenue mostly from Acxiom, which we acquired on October 1, 2018, partially offset by divestitures mostly from our domestic market and Continental Europe regions.
The
organic increase was attributable to a combination of net client wins and net higher spending from existing clients, most notably in the healthcare and financial services sectors, partially offset by decrease in the auto and transportation sector. The organic increase in our domestic market was primarily driven by growth at our advertising and media businesses. The international organic increase was driven by growth across all of our major networks, primarily at our media and advertising businesses, most notably in the Latin America and Continental Europe regions. Consolidated net acquisitions includes net revenue mostly from Acxiom, which we acquired on October 1, 2018, partially offset by divestitures mostly from our domestic market and Continental Europe regions.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
1
Segment EBITA and EBITA margin on net revenue include $2.0 and $27.6 of
restructuring charges in the second quarter and first half of 2019, respectively. See "Restructuring Charges" in MD&Aand Note 9 to the Consolidated Financial Statements for the further information.
EBITA margin slightly decreased during the second quarter of 2019 when compared to the second quarter of 2018, as the increase in operating expenses, excluding billable expenses and amortization of acquired intangibles, outpaced the net revenue growth of 10.8%,
which was discussed in detail above. The net revenue growth outpaced the increase in salaries and related expenses as compared to the prior period, primarily due to leverage in base salaries, benefits and tax and temporary help expenses as well as the inclusion of Acxiom, which has a lower ratio of salaries and related expenses as a percentage of its net revenue. The improved ratio was a result of carefully managing our employee base, and to a lesser extent, lower net benefit expenses which included a gain from an employer related contract. The increase in office and other direct expenses outpaced the growth in net revenue as compared to the prior-year period, mainly due to the inclusion of Acxiom, which has a higher ratio of office and other direct expense as a percentage of its net revenue, primarily driven by client service costs. Additionally, overall office and other direct
expenses primarily benefited from leverage in occupancy expense, partially offset by an increase in professional fees.
EBITA margin expanded during the first half of 2019 when compared to the first half of 2018, as the net revenue growth of 13.1%, which was discussed in detail above, outpaced the increase in operating expenses, excluding billable expenses and amortization of acquired intangibles. The net revenue growth outpaced the increase in salaries and related expenses and the increase in office and other direct expenses outpaced the growth in net revenue as compared to the prior-year period, primarily driven by factors similar to those noted above for the second quarter
of 2019.
For the three and six months ended June 30, 2019, segment EBITA includes restructuring charges of $2.0 and $27.6, respectively, to better align our cost structure with our revenue.
Depreciation and amortization as a percentage of net revenue increased to 3.6% in the second quarter of 2019 from 2.2% and 3.6% in the first half of 2019
from 2.4% in the prior-year period, primarily due to the inclusion of Acxiom.
The
organic increase was primarily attributable to net client wins, most notably in the healthcare sector, partially offset by decrease in the auto and transportation sector. The organic decrease in our domestic market was primarily due to declines at our event businesses and public relations agencies, partially offset by growth at our sports marketing business. The international organic increase was driven by growth across all geographic regions and most disciplines, primarily at our public relations agencies and sports marketing business, most notably in the United Kingdom.
The
organic increase was primarily attributable to net client wins, most notably in the healthcare sector, partially offset by decrease in the auto and transportation sector. The slight organic decrease in our domestic market was primarily due to declines at our event businesses, partially offset by growth at our public relations agencies and sports marketing business. The international organic increase was driven by growth across all geographic regions and most disciplines, primarily at our public relations agencies and sports marketing business, most notably in the United Kingdom.
Segment
EBITA and EBITA margin on net revenue include $5.6 of restructuring charges in the first half of 2019. See "Restructuring Charges" in MD&A and Note 9 to the Consolidated Financial Statements for the further information.
EBITA margin slightly increased during the second quarter of 2019 when compared to the second quarter of 2018, as the net revenue growth of 0.3%, which was discussed in detail above, outpaced the increase in operating expenses, excluding billable expenses and amortization
of acquired intangibles, primarily driven by leverage in salaries and related expenses.
EBITA margin decreased during the first half of 2019 when compared to the first half of 2018, as the increase in operating expenses, primarily driven by the restructuring charges of $5.6 in the first quarter of 2019 and higher salaries and related expenses to support business growth, outpaced net revenue growth of 0.3%, which was discussed in detail above. The restructuring charges taken in the first quarter of 2019 was to better align our cost structure with our revenue.
Depreciation and amortization as a percentage of net
revenue relatively remained flat in the second quarter and first half of 2019 as compared to the prior-year period.
CORPORATE AND OTHER
Corporate and other is primarily comprised of selling, general and administrative expenses including corporate office expenses as well as shared service center and certain other centrally managed expenses that are not fully allocated to operating divisions; salaries, long-term incentives, annual bonuses and other miscellaneous benefits for corporate office employees; professional fees related to internal control compliance, financial statement audits and legal, information technology and other consulting services that are engaged and managed through the corporate office; and rental expense for properties occupied
by corporate office employees. A portion of centrally managed expenses is allocated to operating divisions based on a formula that uses the planned revenues of each of the operating units. Amounts allocated also include specific charges for information technology-related projects, which are allocated based on utilization.
Corporate and other expenses decreased by $11.2 to $19.8 during the second quarter of 2019 and $4.2 to $64.4 during the first half of 2019 as compared to the prior-year period, primarily attributable
to an increase in allocated service fees, mainly as a result of the inclusion of Acxiom, and lower professional fees, partially offset by higher incentive expense. During the first half of 2019, corporate and other expense includes $0.7 of restructuring charges. See "Restructuring Charges" in MD&A and Note 9 to the Consolidated Financial Statements for the further information.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW OVERVIEW
The following tables summarize key financial data relating to our liquidity, capital resources and uses of capital.
Six
months ended June 30,
Cash Flow Data
2019
2018
Net income, adjusted to reconcile to net cash used in operating activities 1
$
373.7
$
291.6
Net
cash used in working capital 2
(113.1
)
(837.5
)
Changes in other assets and liabilities using cash
(61.6
)
(11.8
)
Net
cash provided by (used in) operating activities
$
199.0
$
(557.7
)
Net cash used in investing activities
(77.9
)
(57.6
)
Net
cash (used in) provided by financing activities
(191.7
)
341.0
1
Reflects net income adjusted primarily for depreciation and amortization of fixed assets and intangible assets,
amortization of restricted stock and other non-cash compensation, net losses on sales of businesses and deferred income taxes.
2
Reflects changes in accounts receivable, other current assets, accounts payable, accrued liabilities and contract liabilities.
Operating Activities
Due to the seasonality of our business, we typically use cash from working capital in the first nine months of a year, with the largest impact in the first quarter, and generate cash from working capital in the fourth quarter, driven by the seasonally strong media spending by
our clients. Quarterly and annual working capital results are impacted by the fluctuating annual media spending budgets of our clients as well as their changing media spending patterns throughout each year across various countries.
The timing of media buying on behalf of our clients across various countries affects our working capital and operating cash flow and can be volatile. In most of our businesses, our agencies enter into commitments to pay production and media costs on behalf of clients. To the extent possible, we pay production and media charges after we have received funds from our clients. The amounts involved, which substantially exceed our revenues, primarily affect the level of accounts receivable, accounts payable, accrued liabilities and contract liabilities. Our assets include both cash received and accounts receivable
from clients for these pass-through arrangements, while our liabilities include amounts owed on behalf of clients to media and production suppliers. Our accrued liabilities are also affected by the timing of certain other payments. For example, while annual cash incentive awards are accrued throughout the year, they are generally paid during the first quarter of the subsequent year.
Net cash provided by operating activities during the first half of 2019 was $199.0, which was a decrease in use of $756.7 as compared to the first half of 2018, primarily as a result of a decrease in working capital usage of $724.4.
Working capital in the first half of 2019 was an unseasonably low use, which benefited from the timing of sizable cash collections that were received in the first half of 2019 instead of the fourth quarter of 2018, primarily attributable to our media businesses.
Investing Activities
Net cash used in investing activities during the first half of 2019 primarily consisted of payments for capital expenditures of $80.1, related mostly to leasehold improvements and computer software and hardware.
Financing
Activities
Net cash used in financing activities during the first half of 2019 was driven by the payment of dividends of $181.4 and the payment of $100.0 of the outstanding balance of our Term Loan due in 2021, partially offset by an increase in short-term borrowings of $132.3, related mostly to an increase of outstanding commercial paper.
Foreign Exchange Rate Changes
The effect of foreign exchange rate changes on cash, cash equivalents and restricted cash included in the unaudited Consolidated Statements of Cash Flows resulted in a net increase of $10.3
during the first half of 2019.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
LIQUIDITY OUTLOOK
We expect our cash flow from operations and existing cash and cash equivalents
to be sufficient to meet our anticipated operating requirements at a minimum for the next twelve months. We also have a committed corporate credit facility as well as uncommitted lines of credit and a commercial paper program available to support our operating needs. We continue to maintain a disciplined approach to managing liquidity, with flexibility over significant uses of cash, including our capital expenditures, cash used for new acquisitions, our common stock repurchase program and our common stock dividends.
From time to time, we evaluate market conditions and financing alternatives for opportunities to raise additional funds or otherwise improve our liquidity profile, enhance our financial flexibility and manage market risk. Our ability to access the capital markets depends on a number of factors, which include those specific to us, such as our credit ratings, and those related to the financial markets, such as the
amount or terms of available credit. There can be no guarantee that we would be able to access new sources of liquidity, or continue to access existing sources of liquidity, on commercially reasonable terms, or at all.
Funding Requirements
Our most significant funding requirements include our operations, non-cancelable operating lease obligations, capital expenditures, acquisitions, common stock dividends, taxes, restructuring, and debt service. Additionally, we may be required to make payments to minority shareholders in certain subsidiaries if they exercise their options to sell us their equity interests.
Notable funding requirements include:
•
Debt
service – As of June 30, 2019, we had outstanding short-term borrowings of $207.1 primarily from our uncommitted lines of credit and commercial paper program used primarily to fund seasonal working capital needs. The remainder of our debt is primarily long-term, with maturities scheduled from 2020 through 2048. On June 13, 2019, we repaid $100.0 of the outstanding balance of our Term Loan due in 2021, which reduced our borrowings under the agreement to $300.0.
•
Acquisitions
– We paid cash of $0.6 for acquisitions completed in the first half of 2019. We also paid $22.1 in deferred payments for prior acquisitions as well as ownership increases in our consolidated subsidiaries. In addition to potential cash expenditures for new acquisitions, we expect to pay approximately $38.0 over the next twelve months related to prior acquisitions. We may also be required to pay approximately $30.0 related to put options held by minority shareholders if exercised over the next twelve months. We will continue to evaluate strategic opportunities to grow and continue to strengthen our market position, particularly in our digital and marketing services offerings, and to expand our presence in high-growth and key strategic world markets.
•
Dividends
– In the first half of 2019, we paid a quarterly cash dividend of $0.235 per share on our common stock, which corresponded to an aggregate dividend payment of $181.4. Assuming we continue to pay a quarterly dividend of $0.235 per share, and there is no significant change in the number of outstanding shares as of June 30, 2019, we would expect to pay approximately $363.0 over 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 June 30, 2019, $338.4, excluding fees, remains available for repurchase under the share repurchase programs authorized in previous years, which have no expiration date.
FINANCING AND SOURCES OF FUNDS
Substantially all of our operating cash flow is generated by our agencies. Our cash balances are held in numerous jurisdictions throughout the world, including at the holding company level. Below is a summary of our sources of liquidity.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
Credit Agreements
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 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 October 2022, 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 on letters of credit of $50.0, or the equivalent in other currencies. Our obligations under the Credit Agreement are unsecured. As of June 30, 2019, there were no borrowings under the Credit Agreement; however, we had $8.6 of letters of credit under the Credit Agreement, which reduced our total availability to $1,491.4.
We were in compliance with all of our covenants in the Credit Agreement as of June 30, 2019. The financial covenants in the Credit Agreement
require that we maintain, as of the end of each fiscal quarter, certain financial measures for the four quarters then ended. The table below sets forth the financial covenants in effect as of June 30, 2019.
The
interest coverage ratio is defined as EBITDA, as defined in the Credit Agreement and the Term Loan Agreement, to net interest expense for the four quarters then ended. The leverage ratio is defined as debt as of the last day of such fiscal quarter to EBITDA for the four quarters then ended. The inclusion of Acxiom results, as required per the Credit Agreement and the Term Loan Agreement, did not impact compliance with our covenants.
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 June 30,
2019, the Company had uncommitted lines of credit in an aggregate amount of $1,085.5, under which we had outstanding borrowings of $57.1 classified as short-term borrowings on our Consolidated Balance Sheet. The average amount outstanding during the second quarter of 2019 was $98.3, with a weighted-average interest rate of approximately 4.7%.
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 June 30, 2019, there was $150.0 of commercial paper outstanding. The average amount outstanding under the program during the second quarter of 2019 was $482.6, with a weighted-average
interest rate of 2.8% and a weighted-average maturity of 18 days.
Cash Pooling
We aggregate our domestic cash position on a daily basis. Outside the United States, we use cash pooling arrangements with banks to help manage our liquidity requirements. In these pooling arrangements, several IPG agencies agree with a single bank that the cash balances of any of the agencies with the bank will be subject to a full right of set-off against amounts other agencies owe the bank, and the bank provides for overdrafts as long as the net balance for all agencies does not exceed an agreed-upon level. Typically, each agency pays interest on outstanding overdrafts and receives interest on cash balances. Our unaudited Consolidated Balance Sheets reflect cash, net of bank overdrafts, under all of our pooling
arrangements, and as of June 30, 2019, the amount netted was $2,059.7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
DEBT CREDIT RATINGS
Our
debt credit ratings as of July 15, 2019, are listed below.
Moody’s Investors Service
S&P Global Ratings
Fitch Ratings
Short-term rating
P-2
A-2
F2
Long-term
rating
Baa2
BBB
BBB+
Outlook
Stable
Negative
Stable
A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning
credit rating agency. The rating of each credit rating agency should be evaluated independently of any other rating. Credit ratings could have an impact on liquidity, either adverse or favorable, because, among other things, they could affect funding costs in the capital markets or otherwise. For example, our Credit Agreement fees and borrowing rates are based on a credit ratings grid, and our access to the commercial paper market is contingent on our maintenance of sufficient short-term debt ratings.
CRITICAL ACCOUNTING ESTIMATES
Our significant accounting policies are described in Note 1 to the Consolidated Financial Statements for the year ended December 31,
2018, included in our 2018 Annual Report on Form 10-K. As summarized in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report, we believe that certain of these policies are critical because they are important to the presentation of our financial condition and results of operations, and they require management’s most difficult, subjective or complex judgments, often as a result of the need to estimate the effect of matters that are inherently uncertain. These critical estimates relate to revenue recognition, income taxes, goodwill and other intangible assets, and pension and postretirement benefits. We base our estimates on historical experience and various other factors that we believe to be relevant under the circumstances. Estimation methodologies are applied consistently from year to
year, and there have been no significant changes in the application of critical accounting estimates since December 31, 2018. Actual results may differ from these estimates under different assumptions or conditions.
RECENT ACCOUNTING STANDARDS
See Note 16 to the unaudited Consolidated Financial Statements for further information on certain accounting standards that have been recently adopted or that have not yet been required to be implemented and may be applicable to our future operations.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
NON-GAAP FINANCIAL MEASURE
This MD&A includes both financial measures in accordance with U.S. GAAP, as well as a non-GAAP financial measure. The non-GAAP financial measure represents Net Income Available to IPG Common Stockholders before Provision for Income Taxes, Total (Expenses) and Other Income, Equity in Net Loss of Unconsolidated Affiliates, Net Income Attributable to Noncontrolling Interests and Amortization of Acquired Intangibles, which we refer
to as “EBITA”.
EBITA should be viewed as supplemental to, and not as an alternative for Net Income Available to IPG Common Stockholders calculated in accordance with U.S. GAAP ("net income") or operating income calculated in accordance with U.S. GAAP ("operating income"). This section also includes reconciliation of this non-GAAP financial measure to the most directly comparable U.S. GAAP financial measures, as presented below.
EBITA is used by our management as an additional measure of our Company’s performance for purposes of business decision-making, including developing budgets, managing expenditures, and evaluating potential acquisitions or divestitures. Period-to-period comparisons of EBITA help our management identify additional trends in our
Company’s financial results that may not be shown solely by period-to-period comparisons of net income or operating income. In addition, we may use EBITA in the incentive compensation programs applicable to some of our employees in order to evaluate our Company’s performance. Our management recognizes that EBITA has inherent limitations because of the excluded items, particularly those items that are recurring in nature. Management also reviews operating and net income as well as the specific items that are excluded from EBITA, but included in net income or operating income, as well as trends in those items. The amounts of those items are set forth, for the applicable periods, in the reconciliation of EBITA to net income that accompany our disclosure documents containing non-GAAP financial measures, including the reconciliations contained in this MD&A.
We
believe that the presentation of EBITA is useful to investors in their analysis of our results for reasons similar to the reasons why our management finds it useful and because it helps facilitate investor understanding of decisions made by management in light of the performance metrics used in making those decisions. In addition, as more fully described below, we believe that providing EBITA, together with a reconciliation of this non-GAAP financial measure to net income, helps investors make comparisons between our Company and other companies that may have different capital structures, different effective income tax rates and tax attributes, different capitalized asset values and/or different forms of employee compensation. However, EBITA is intended to provide a supplemental way of comparing our Company
with other public companies and is not intended as a substitute for comparisons based on net income or operating income. In making any comparisons to other companies, investors need to be aware that companies may use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measures and the corresponding U.S. GAAP measures provided by each company under the applicable rules of the SEC.
The following is an explanation of the items excluded by us from EBITA but included in net loss:
•
Total (Expense) and Other Income, Provision for Income Taxes, Equity
in Net Loss of Unconsolidated Affiliates and Net Income Attributable to Noncontolling Interests. We exclude these items (i) because these items are not directly attributable to the performance of our business operations and, accordingly, their exclusion assists management and investors in making period-to-period comparisons of operating performance and (ii) to assist management and investors in making comparisons to companies with different capital structures. Investors should note that these items will recur in future periods.
•
Amortization of Acquired Intangibles. Amortization of acquired intangibles is a non-cash expense relating to intangible
assets arising from acquisitions that are expensed on a straight-line basis over the estimated useful life of the related assets. We exclude amortization of acquired intangibles because we believe that (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and (ii) such expenses can vary significantly between periods as a result of new acquisitions and full amortization of previously acquired intangible assets. Accordingly, we believe that this exclusion assists management and investors in making period-to-period comparisons of operating performance. Investors should note that the use of intangible assets contributed to revenue in the periods presented and will contribute to future revenue generation and should also note that such expense may recur in future periods.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
The following table presents the reconciliation of Net Income Available to IPG Common Stockholders to EBITA for the second quarter and first half of 2019 and 2018.
Quantitative
and Qualitative Disclosures about Market Risk
In the normal course of business, we are exposed to market risks related to interest rates, foreign currency rates and certain balance sheet items. There has been no significant change in our exposure to market risk during the second quarter of 2019. Our exposure to market risk for changes in interest rates primarily relates to the fair market value and cash flows of our debt obligations. As of June 30, 2019, and December 31, 2018, approximately 86% of our debt obligations bore fixed interest rates. We have, from time to time, used interest rate swaps for risk management
purposes to manage our exposure to changes in interest rates. For further discussion of our exposure to market risk, refer to Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our 2018 Annual Report on Form 10-K.
Item 4.
Controls and Procedures
Disclosure Controls and Procedures
Our management, with
the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2019, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that
such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Changes in Internal Control Over Financial Reporting
There has been no change in internal control over financial reporting in the quarter ended June 30, 2019, that has materially affected, or
is reasonably likely to materially affect, our internal control over financial reporting.
Information about our legal proceedings is set forth in Note 15 to the unaudited Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Item 1A.
Risk Factors
In the second quarter of 2019, there have been no material changes in the risk factors we have previously disclosed in Item 1A, Risk
Factors, in our 2018 Annual Report on Form 10-K.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
(c)
The following table provides information regarding our purchases of our equity securities during the period from April
1, 2019 to June 30, 2019:
Total Number of Shares (or Units) Purchased 1
Average Price Paid
per Share
(or Unit) 2
Total Number of Shares (or Units) Purchased as Part of
Publicly Announced
Plans or Programs 3
Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs 3
April 1 - 30
2,765
$
23.12
—
$
338,421,933
May
1 - 31
3,153
$
21.27
—
$
338,421,933
June 1 - 30
2,037
$
22.38
—
$
338,421,933
Total
7,955
$
22.20
—
1
The
total number of shares of our common stock, par value $0.10 per share, purchased were withheld under the terms of grants under employee stock-based compensation plans to offset tax withholding obligations that arose upon vesting and release of restricted shares (the "Withheld Shares").
2
The average price per share for each of the months in the fiscal quarter and for the three-month period was calculated by dividing the sum in the applicable period of the aggregate value of the tax withholding obligations by the sum of the number of Withheld Shares.
3
In
February 2017, the Company's Board of Directors (the "Board") authorized a share repurchase program to repurchase from time to time up to $300.0 million, excluding fees, of our common stock (the "2017 Share Repurchase Program"). In February 2018, the Board authorized a share repurchase program to repurchase from time to time up to $300.0 million, excluding fees, of our common stock, which was in addition to any amounts remaining under the 2017 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, and no shares were repurchased pursuant to the share repurchase programs in the periods reflected. There are no expiration
dates associated with the share repurchase programs.
Certification
of the Chief Executive Officer and the Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350 and Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended.
101
Interactive Data File, for the period ended June 30, 2019. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
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 thereunto duly authorized.
