IPG 09.30.13 10Q


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended September 30, 2013
or
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-6686
THE INTERPUBLIC GROUP OF COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
13-1024020
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)

1114 Avenue of the Americas, New York, New York 10036
(Address of principal executive offices) (Zip Code)
(212) 704-1200
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ý    No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
Yes ý    No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
ý
  
Accelerated filer
 
¨
Non-accelerated filer
 
¨
  
Smaller reporting company
 
¨
(Do not check if a smaller reporting company)
  
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨    No ý
The number of shares of the registrant’s common stock outstanding as of October 15, 2013 was 416,241,739.


INDEX
 
Page No.
 
 
 
Item 1.
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
Item 1.
Item 1A.
Item 2.
Item 5.
Other Information
Item 6.
INFORMATION REGARDING FORWARD-LOOKING DISCLOSURE
This quarterly report on Form 10-Q contains forward-looking statements. Statements in this report that are not historical facts, including statements about management’s beliefs and expectations, constitute forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue” or comparable terminology are intended to identify forward-looking statements. These statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined under Item 1A, Risk Factors, in our most recent annual report on Form 10-K. Forward-looking statements speak only as of the date they are made and we undertake no obligation to update publicly any of them in light of new information or future events.
Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Such factors include, but are not limited to, the following:
•
potential effects of a challenging economy, for example, on the demand for our advertising and marketing services, on our clients’ financial condition and on our business or financial condition;
•
our ability to attract new clients and retain existing clients;
•
our ability to retain and attract key employees;
•
risks associated with assumptions we make in connection with our critical accounting estimates, including changes in assumptions associated with any effects of a weakened economy;
•
potential adverse effects if we are required to recognize impairment charges or other adverse accounting-related developments;
•
risks associated with the effects of global, national and regional economic and political conditions, including counterparty risks and fluctuations in economic growth rates, interest rates and currency exchange rates; and

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•
developments from changes in the regulatory and legal environment for advertising and marketing and communications services companies around the world.Investors should carefully consider these factors and the additional risk factors outlined in more detail under Item 1A, Risk Factors, in our most recent annual report on Form 10-K.
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.

2
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Part I – FINANCIAL INFORMATION
 
Item 1.
Financial Statements (Unaudited)
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
2013
 
2012
 
2013
 
2012
REVENUE
$
1,700.4

 
$
1,670.4

 
$
4,999.6

 
$
4,892.9

 
 
 
 
 
 
 
 
OPERATING EXPENSES:
 
 
 
 
 
 
 
Salaries and related expenses
1,093.6

 
1,064.3

 
3,345.9

 
3,258.1

Office and general expenses
465.3

 
474.7

 
1,379.8

 
1,366.4

Total operating expenses
1,558.9

 
1,539.0

 
4,725.7

 
4,624.5

 
 
 
 
 
 
 
 
OPERATING INCOME
141.5

 
131.4

 
273.9

 
268.4

 
 
 
 
 
 
 
 
EXPENSES AND OTHER INCOME:
 
 
 
 
 
 
 
Interest expense
(23.7
)
 
(31.6
)
 
(98.0
)
 
(96.9
)
Interest income
5.8

 
6.7

 
18.0

 
21.4

Other (expense) income, net
(46.6
)
 
1.7

 
(40.0
)
 
5.1

Total (expenses) and other income
(64.5
)
 
(23.2
)
 
(120.0
)
 
(70.4
)
 
 
 
 
 
 
 
 
Income before income taxes
77.0

 
108.2

 
153.9

 
198.0

Provision for income taxes
28.4

 
41.9

 
78.0

 
72.8

Income of consolidated companies
48.6

 
66.3

 
75.9

 
125.2

Equity in net income of unconsolidated affiliates
0.6

 
1.4

 
0.9

 
2.3

NET INCOME
49.2

 
67.7

 
76.8

 
127.5

Net (income) loss attributable to noncontrolling interests
(0.9
)
 
3.9

 
(2.0
)
 
3.0

NET INCOME ATTRIBUTABLE TO IPG
48.3

 
71.6

 
74.8

 
130.5

Dividends on preferred stock
(2.9
)
 
(2.9
)
 
(8.7
)
 
(8.7
)
NET INCOME AVAILABLE TO IPG COMMON STOCKHOLDERS
$
45.4

 
$
68.7

 
$
66.1

 
$
121.8

 
 
 
 
 
 
 
 
Earnings per share available to IPG common stockholders:
 
 
 
 
 
 
 
Basic
$
0.11

 
$
0.16

 
$
0.16

 
$
0.28

Diluted
$
0.11

 
$
0.15

 
$
0.16

 
$
0.27

 
 
 
 
 
 
 
 
Weighted-average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
419.7
 
431.3
 
419.7
 
435.5
Diluted
426.1
 
456.1
 
424.8
 
469.7
 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.075

 
$
0.060

 
$
0.225

 
$
0.180

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

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THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Amounts in Millions)
(Unaudited)
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
2013
 
2012
 
2013
 
2012
NET INCOME
$
49.2

 
$
67.7

 
$
76.8

 
$
127.5

 
 
 
 
 
 
 
 
OTHER COMPREHENSIVE INCOME (LOSS)
 
 
 
 
 
 
 
Foreign currency translation adjustments
24.0

 
37.3

 
(89.3
)
 
16.1

 
 
 
 
 
 
 
 
Available-for-sale securities:
 
 
 
 
 
 
 
Changes in market value of available-for-sale securities
(0.1
)
 
(40.8
)
 
0.7

 
94.7

Less: recognition of previously unrealized (gains) losses included in net income
0.0

 
0.0

 
(1.4
)
 
0.6

Income tax effect
0.0

 
15.8

 
0.2

 
(34.8
)
 
(0.1
)
 
(25.0
)
 
(0.5
)
 
60.5

 
 
 
 
 
 
 
 
Derivative instruments:
 
 
 
 
 
 
 
Changes in fair value of derivative instruments
0.0

 
(3.6
)
 
0.0

 
(22.2
)
Less: recognition of previously unrealized losses in net income
0.4

 
0.0

 
1.3

 
0.0

Income tax effect
(0.1
)
 
1.5

 
(0.5
)
 
9.2

 
0.3

 
(2.1
)
 
0.8

 
(13.0
)
 
 
 
 
 
 
 
 
Defined benefit pension and other postretirement plans:
 
 
 
 
 
 
 
Net actuarial gains for the period
0.0

 
0.0

 
0.0

 
1.0

Less: amortization of unrecognized losses, transition obligation and prior service cost included in net income
2.7

 
2.0

 
8.2

 
5.7

Other
(0.2
)
 
(0.3
)
 
(0.9
)
 
(0.4
)
Income tax effect
(0.8
)
 
(0.6
)
 
(2.8
)
 
(2.3
)
 
1.7

 
1.1

 
4.5

 
4.0

 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax
25.9

 
11.3

 
(84.5
)
 
67.6

TOTAL COMPREHENSIVE INCOME (LOSS)
75.1

 
79.0

 
(7.7
)
 
195.1

Less: comprehensive income (loss) attributable to noncontrolling interests
0.7

 
(3.3
)
 
(1.2
)
 
(3.5
)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO IPG
$
74.4

 
$
82.3

 
$
(6.5
)
 
$
198.6


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

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THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Millions)
(Unaudited)
 
September 30,
2013
 
December 31,
2012
ASSETS:
 
 
 
Cash and cash equivalents
$
999.3

 
$
2,574.8

Marketable securities
5.2

 
16.0

Accounts receivable, net of allowance of $65.7 and $59.0, respectively
3,830.2

 
4,496.6

Expenditures billable to clients
1,551.0

 
1,318.8

Other current assets
377.1

 
332.1

Total current assets
6,762.8

 
8,738.3

Furniture, equipment and leasehold improvements, net of accumulated
    depreciation of $1,160.2 and $1,134.9, respectively
490.5

 
504.8

Deferred income taxes
171.3

 
160.5

Goodwill
3,609.3

 
3,580.6

Other non-current assets
498.1

 
509.7

TOTAL ASSETS
$
11,532.0

 
$
13,493.9

 
 
 
 
LIABILITIES:
 
 
 
Accounts payable
$
5,705.6

 
$
6,584.8

Accrued liabilities
553.3

 
728.2

Short-term borrowings
186.3

 
172.1

Current portion of long-term debt
2.2

 
216.6

Total current liabilities
6,447.4

 
7,701.7

Long-term debt
1,481.0

 
2,060.8

Deferred compensation
483.3

 
489.0

Other non-current liabilities
557.2

 
558.6

TOTAL LIABILITIES
8,968.9

 
10,810.1

 
 
 
 
Redeemable noncontrolling interests (see Note 5)
229.6

 
227.2
 
 
 
 
STOCKHOLDERS’ EQUITY:
 
 
 
Preferred stock
221.5

 
221.5

Common stock
51.2

 
48.8

Additional paid-in capital
2,754.1

 
2,465.4

Retained earnings
710.4

 
738.3

Accumulated other comprehensive loss, net of tax
(369.3
)
 
(288.0
)
 
3,367.9

 
3,186.0

Less: Treasury stock
(1,065.3
)
 
(765.4
)
Total IPG stockholders’ equity
2,302.6

 
2,420.6

Noncontrolling interests
30.9

 
36.0

TOTAL STOCKHOLDERS’ EQUITY
2,333.5

 
2,456.6

TOTAL LIABILITIES AND EQUITY
$
11,532.0

 
$
13,493.9

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

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THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Millions)
(Unaudited)
 
Nine months ended
September 30,
  
2013
 
2012
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
76.8

 
$
127.5

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
Depreciation and amortization of fixed assets and intangible assets
117.9

 
108.8

Provision for uncollectible receivables
11.4

 
11.8

Amortization of restricted stock and other non-cash compensation
32.9

 
37.7

Net amortization of bond discounts and deferred financing costs
5.4

 
0.3

Non-cash loss related to early extinguishment of debt
15.2

Loss on early extinguishment of debt
0.0

Deferred income tax provision (benefit)
28.5

 
(31.5
)
Other
(7.4
)
 
10.0

Changes in assets and liabilities, net of acquisitions and dispositions, providing (using) cash:
 
 
 
Accounts receivable
586.9

 
610.2

Expenditures billable to clients
(250.9
)
 
(268.4
)
Other current assets
(38.8
)
 
(17.8
)
Accounts payable
(811.5
)
 
(852.7
)
Accrued liabilities
(152.9
)
 
(172.0
)
Other non-current assets and liabilities
(43.9
)
 
(9.2
)
Net cash used in operating activities
(430.4
)
 
(445.3
)
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Capital expenditures
(91.6
)
 
(99.3
)
Acquisitions, including deferred payments, net of cash acquired
(48.2
)
 
(140.6
)
Net sales (purchases) and maturities of short-term marketable securities
10.8

 
(0.8
)
Proceeds from sales of businesses and investments, net of cash sold
3.3

 
12.1

Other investing activities
(2.4
)
 
(0.7
)
Net cash used in investing activities
(128.1
)
 
(229.3
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Purchase of long-term debt
(601.2
)
 
(401.0
)
Proceeds from issuance of long-term debt
0.0

 
246.8

Repurchase of common stock
(280.8
)
 
(201.4
)
Common stock dividends
(94.1
)
 
(78.1
)
Exercise of stock options
43.6

 
8.5

Acquisition-related payments
(27.5
)
 
(36.1
)
Net increase in short-term bank borrowings
13.3

 
45.5

Distributions to noncontrolling interests
(10.4
)
 
(12.2
)
Preferred stock dividends
(8.7
)
 
(8.7
)
Excess tax benefit on share-based compensation
9.2

 
0.0

Other financing activities
1.0

 
(3.0
)
Net cash used in financing activities
(955.6
)
 
(439.7
)
Effect of foreign exchange rate changes on cash and cash equivalents
(61.4
)
 
(1.1
)
Net decrease in cash and cash equivalents
(1,575.5
)
 
(1,115.4
)
Cash and cash equivalents at beginning of period
2,574.8

 
2,302.7

Cash and cash equivalents at end of period
$
999.3

 
$
1,187.3

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

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THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in Millions)
(Unaudited)
 
 
Preferred
Stock
 
 
Common Stock
 
Additional
Paid-In
Capital
 
Retained Earnings
 
Accumulated 
Other
Comprehensive
Loss, Net of Tax
 
Treasury
Stock
 
Total IPG
Stockholders’
Equity
 
Noncontrolling
Interests
 
Total
Stockholders’
Equity
 
Shares
 
Amount
 
Balance at December 31, 2012
$
221.5

 
492.0

 
$
48.8

 
$
2,465.4

 
$
738.3

 
$
(288.0
)
 
$
(765.4
)
 
$
2,420.6

 
$
36.0

 
$
2,456.6

Net income
 
 
 
 
 
 
 
 
74.8

 
 
 
 
 
74.8

 
2.0

 
76.8

Other comprehensive loss
 
 
 
 
 
 
 
 
 
 
(81.3
)
 
 
 
(81.3
)
 
(3.2
)
 
(84.5
)
Reclassifications related to redeemable
    noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.9

 
4.9

Distributions to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(10.4
)
 
(10.4
)
Change in redemption value of redeemable
    noncontrolling interests
 
 
 
 
 
 
 
 
0.6

 
 
 
 
 
0.6

 
 
 
0.6

Repurchase of common stock
 
 
 
 
 
 
 
 
 
 
 
 
(280.8
)
 
(280.8
)
 
 
 
(280.8
)
Common stock dividends
 
 
 
 
 
 
 
 
(94.1
)
 
 
 
 
 
(94.1
)
 
 
 
(94.1
)
Preferred stock dividends
 
 
 
 
 
 
 
 
(8.7
)
 
 
 
 
 
(8.7
)
 
 
 
(8.7
)
Conversion of convertible notes to common stock
 
 
16.9

 
1.7

 
198.3

 
 
 
 
 
 
 
200.0

 
 
 
200.0

Capped call transaction
 
 
 
 
 
 
19.1

 
 
 
 
 
(19.1
)
 
0.0

 
 
 
0.0

Stock-based compensation
 
 
2.4

 
0.4

 
37.2

 
 
 
 
 
 
 
37.6

 
 
 
37.6

Exercise of stock options
 
 
4.7

 
0.5

 
43.6

 
 
 
 
 
 
 
44.1

 
 
 
44.1

Shares withheld for taxes
 
 
(1.5
)
 
(0.2
)
 
(19.8
)
 
 
 
 
 
 
 
(20.0
)
 
 
 
(20.0
)
Excess tax benefit from stock-based compensation
 
 
 
 
 
 
8.5

 
 
 
 
 
 
 
8.5

 
 
 
8.5

Other
 
 
 
 
 
 
1.8

 
(0.5
)
 
 
 
 
 
1.3

 
1.6

 
2.9

Balance at September 30, 2013
$
221.5

 
514.5

 
$
51.2

 
$
2,754.1

 
$
710.4

 
$
(369.3
)
 
$
(1,065.3
)
 
$
2,302.6

 
$
30.9

 
$
2,333.5

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

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THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY – (CONTINUED)
(Amounts in Millions)
(Unaudited)
 
 
Preferred
Stock
 
Common Stock
 
Additional
Paid-In
Capital
 
Retained Earnings
 
Accumulated 
Other
Comprehensive
Loss, Net of Tax
 
Treasury
Stock
 
Total IPG
Stockholders’
Equity
 
Noncontrolling
Interests
 
Total
Stockholders’
Equity
 
Shares
 
Amount
 
Balance at December 31, 2011
$
221.5

 
491.4

 
$
48.2

 
$
2,427.5

 
$
405.1

 
$
(225.7
)
 
$
(414.9
)
 
$
2,461.7

 
$
35.6

 
$
2,497.3

Net income
 
 
 
 
 
 
 
 
130.5

 
 
 
 
 
130.5

 
(3.0
)
 
127.5

Other comprehensive income
 
 
 
 
 
 
 
 
 
 
68.1

 
 
 
68.1

 
(0.5
)
 
67.6

Reclassifications related to redeemable
    noncontrolling interests
 
 
 
 
 
 
12.0

 
 
 
 
 
 
 
12.0

 
8.3

 
20.3

Noncontrolling interest transactions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1.3
)
 
(1.3
)
Distributions to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(12.2
)
 
(12.2
)
Change in redemption value of redeemable
    noncontrolling interests
 
 
 
 
 
 
 
 
3.1

 
 
 
 
 
3.1

 
 
 
3.1

Repurchase of common stock
 
 
 
 
 
 
 
 
 
 
 
 
(201.4
)
 
(201.4
)
 
 
 
(201.4
)
Common stock dividends
 
 
 
 
 
 
 
 
(78.1
)
 
 
 
 
 
(78.1
)
 
 
 
(78.1
)
Preferred stock dividends
 
 
 
 
 
 
 
 
(8.7
)
 
 
 
 
 
(8.7
)
 
 
 
(8.7
)
Stock-based compensation
 
 
1.8

 
0.7

 
25.8

 
 
 
 
 
 
 
26.5

 
 
 
26.5

Exercise of stock options
 
 
0.9

 
0.1

 
8.5

 
 
 
 
 
 
 
8.6

 
 
 
8.6

Shares withheld for taxes
 
 
(2.1
)
 
(0.2
)
 
(23.3
)
 
 
 
 
 
 
 
(23.5
)
 
 
 
(23.5
)
Other
 
 
 
 
 
 
(2.0
)
 
(1.0
)
 
 
 
 
 
(3.0
)
 
3.8

 
0.8

Balance at September 30, 2012
$
221.5

 
492.0

 
$
48.8

 
$
2,448.5

 
$
450.9

 
$
(157.6
)
 
$
(616.3
)
 
$
2,395.8

 
$
30.7

 
$
2,426.5

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

8
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Notes to Consolidated Financial Statements
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
Note 1:  Basis of Presentation
The unaudited Consolidated Financial Statements have been prepared by The Interpublic Group of Companies, Inc. and its subsidiaries (the “Company,” “IPG,” “we,” “us” or “our”) in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting interim financial information on Form 10-Q. Accordingly, they do not include certain information and disclosures required for complete financial statements. The preparation of financial statements in conformity with U.S. GAAP requires us to make judgments, assumptions and estimates that affect the amounts reported and disclosed. Actual results could differ from these estimates and assumptions. The consolidated results for interim periods are not necessarily indicative of results for the full year and should be read in conjunction with our 2012 Annual Report on Form 10-K.
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 have been made to prior-period financial statements to conform to the current-period presentation.

Note 2:  Debt and Credit Arrangements
Long-Term Debt
A summary of the carrying amounts and fair values of our long-term debt is listed below.
 
Effective
Interest Rate
 
September 30,
2013
 
December 31,
2012
Book
Value
 
Fair
Value 1
 
Book
Value
 
Fair
Value 1
6.25% Senior Unsecured Notes due 2014 (less unamortized
discount of $0.1)
6.29%
 
$
351.6

 
$
369.4

 
$
352.8

 
$
372.6

2.25% Senior Notes due 2017 (less unamortized
discount of $0.6)
2.30%
 
299.4

 
296.7

 
299.3

 
297.8

4.00% Senior Notes due 2022 (less unamortized
discount of $2.7)
4.13%
 
247.3

 
242.0

 
247.1

 
258.7

3.75% Senior Notes due 2023 (less unamortized
discount of $1.4)
4.32%
 
498.6

 
469.3

 
498.5

 
499.7

10.00% Senior Unsecured Notes due 2017
 
 
0.0

 
0.0

 
591.9

 
660.8

4.75% Convertible Senior Notes due 2023
 
 
0.0

 
0.0

 
200.5

 
202.8

Other notes payable and capitalized leases
 
 
86.3

 
85.8

 
87.3

 
90.8

Total long-term debt
 
 
1,483.2

 
 
 
2,277.4

 
 
Less: current portion 2
 
 
2.2

 
 
 
216.6

 
 
Long-term debt, excluding current portion
 
 
$
1,481.0

 
 
 
$
2,060.8

 
 
 
1 
See Note 11 for information on the fair value measurement of our long-term debt.
2 
We included our 4.75% Convertible Senior Notes due 2023 (the “4.75% Notes”) in the current portion of long-term debt on our December 31, 2012 Consolidated Balance Sheet because holders of the 4.75% Notes had an option to require us to repurchase their Notes for cash, stock or a combination, at our election, at par on March 15, 2013. The 4.75% Notes were retired in the first quarter of 2013.

Debt Transactions
10.00% Senior Unsecured Notes due 2017
In July 2013, we redeemed all $600.0 in aggregate principal amount of the 10.00% Senior Unsecured Notes due 2017 (the "10.00% Notes"). Total cash paid to redeem the 10.00% Notes was $630.0. In connection with the redemption of the 10.00% Notes, we recognized a loss on early extinguishment of debt of $45.2, which included a redemption premium of $30.0, the write-off of the remaining unamortized discount of $7.3 and unamortized debt issuance costs of $7.9. The loss on early extinguishment of debt was recorded in other (expense) income, net within our unaudited Consolidated Statement of Operations.






9
Table of Contents
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)


4.75% Convertible Senior Notes due 2023
In March 2013, we retired all $200.0 in aggregate principal amount of our 4.75% Notes. Of the amount retired, $199.997 in aggregate principal amount of the 4.75% Notes was converted, at the election of the holders, into Interpublic common stock at a conversion rate of 84.3402 shares (actual number) per $1,000 (actual number) principal amount, or approximately 16.9 shares.

Capped Call
In November 2010, we purchased capped call options to hedge the risk of price appreciation on the shares of our common stock into which our 4.75% Notes were convertible. In March 2013, we exercised our capped call options and elected net share settlement. We received a total of 1.5 settlement shares from the option counterparties as a result of exercising these options.

Interest Rate Swaps
We enter into interest rate swaps to manage our exposure to changes in interest rates. In March and April 2012, we entered into forward-starting interest rate swap agreements with an aggregate notional amount of $300.0 to effectively lock in the benchmark rate for a forecasted issuance of debt to occur prior to December 31, 2013. These swaps qualified for hedge accounting as cash flow hedges, and, as such, the effective portion of the losses on the swaps was recorded in other comprehensive income and the ineffective portion of the losses on the swaps was recorded in other (expense) income, net. In November 2012, we terminated these swaps when we issued our 3.75% Senior Notes due 2022 (the "3.75% Notes"). The deferred losses on the swaps, recorded in accumulated other comprehensive loss, are amortized as an increase to interest expense over the term of the 3.75% Notes.
During the first nine months of 2013, we reclassified $1.3 from accumulated other comprehensive loss into interest expense. Over the next twelve months, we expect to reclassify $1.8 from accumulated other comprehensive loss into interest expense in our unaudited Consolidated Statements of Operations.

Credit Agreement
We maintain a committed corporate credit facility to increase our financial flexibility (the "Credit Agreement"). The Credit Agreement is a revolving facility expiring in May 2016, 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 $1,000.0 or the equivalent in other currencies. The aggregate available amount of letters of credit outstanding may decrease or increase, subject to a sublimit on letters of credit of $200.0 or the equivalent in other currencies. Our obligations under the Credit Agreement are unsecured.
We were in compliance with all of our covenants in the Credit Agreement as of September 30, 2013.

Note 3:  Convertible Preferred Stock
The conversion rate of our 5 1/4% Series B Cumulative Convertible Perpetual Preferred Stock (the "Series B Preferred Stock")is subject to adjustment upon the occurrence of certain events, including the payment of cash dividends on our common stock. During the third quarter of 2013, the conversion rate per share for our Series B Preferred Stock was adjusted from 77.1251 to 77.8966 as a result of the cumulative effect of the cash dividends declared and paid on our common stock during the second and third quarters of 2013, resulting in a corresponding adjustment of the conversion price from $12.97 to $12.84. See Note 14 for further information regarding subsequent events.


















10
Table of Contents
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)


Note 4:  Earnings Per Share
The following sets forth basic and diluted earnings per common share available to IPG common stockholders.
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
2013
 
2012
 
2013
 
2012
Net income available to IPG common stockholders - basic
$
45.4

 
$
68.7

 
$
66.1

 
$
121.8

Adjustments: Effect of dilutive securities
 
 
 
 
 
 
 
     Interest on 4.75% Notes 1
0.0

 
1.0

 
0.0

 
3.1

     Interest on 4.25% Notes 1
0.0

 
0.0

 
0.0

 
0.3

Net income available to IPG common stockholders - diluted
$
45.4

 
$
69.7

 
$
66.1

 
$
125.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average number of common shares outstanding - basic
419.7

 
431.3

 
419.7

 
435.5

Add: Effect of dilutive securities
 
 
 
 
 
 
 
     Restricted stock, stock options and other equity awards
6.4

 
8.1

 
5.1

 
7.1

     4.75% Notes 1
0.0

 
16.7

 
0.0

 
16.7

     4.25% Notes 1
0.0

 
0.0

 
0.0

 
10.4

Weighted-average number of common shares outstanding - diluted
426.1

 
456.1

 
424.8

 
469.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share available to IPG common stockholders - basic
$
0.11

 
$
0.16

 
$
0.16

 
$
0.28

Earnings per share available to IPG common stockholders - diluted
$
0.11

 
$
0.15

 
$
0.16

 
$
0.27

 
1 
We retired all of our outstanding 4.75% Notes and 4.25% Convertible Senior Notes due 2023 (the “4.25% Notes”) in March 2013 and March 2012, respectively. See Note 2 for further information on our 4.75% Notes. For purposes of calculating diluted earnings per share, the potentially dilutive shares are pro-rated based on the period they were outstanding.

The following table presents the potential shares excluded from the diluted earnings per share calculation because the effect of including these potential shares would be antidilutive.
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
2013
 
2012
 
2013
 
2012
4.75% Notes 1
0.0

 
0.0

 
4.4

 
0.0

Preferred stock outstanding
17.3

 
16.9

 
17.3

 
16.9

Total
17.3

 
16.9

 
21.7

 
16.9

 
 
 
 
 
 
 
 
Securities excluded from the diluted earnings per share calculation
because the exercise price was greater than the average market price:
 
 
 
 
 
 
 
Stock options 2
0.0

 
7.1

 
0.2

 
7.1

 
1 
We retired all of our outstanding 4.75% Notes in March 2013. See Note 2 for further information on our 4.75% Notes. For purposes of calculating diluted earnings per share, the potentially dilutive shares are pro-rated based on the period they were outstanding.
2 
These options are outstanding at the end of the respective periods. In any period in which the exercise price is less than the average market price, these options have the potential to be dilutive, and application of the treasury stock method would reduce this amount.

Note 5:  Acquisitions
We continue to evaluate strategic opportunities to expand our industry expertise, strengthen our position in high-growth and key strategic geographical markets and industry sectors, advance technological capabilities and improve operational efficiency through both acquisitions and increased ownership interests in current investments. Our acquisitions typically provide for an initial payment at the time of closing and additional contingent purchase price payments based on the future performance of the acquired entity. In addition, we have entered into agreements that may require us to purchase additional equity interests in certain consolidated and unconsolidated subsidiaries. The amounts at which we record these transactions in our financial statements are based on estimates of the future financial performance of the acquired entity, the timing of the exercise of these rights, changes in foreign currency exchange rates and other factors.

11
Table of Contents
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)


During the first nine months of 2013, we completed eight acquisitions, including a full-service digital agency in India, a public relations consultancy in India and a mobile marketing agency in Australia. Of our eight acquisitions, seven were included in the Integrated Agency Networks (“IAN”) operating segment and one was included in the Constituency Management Group ("CMG") operating segment. During the first nine months of 2013, we recorded approximately $67.0 of goodwill and intangible assets related to these acquisitions.
During the first nine months of 2012, we completed eleven acquisitions, including a healthcare market research and consulting agency and a search marketing agency in the United Kingdom and, in the United States, a digital healthcare-marketing specialist and a designer of in-store shopping experiences. Of our eleven acquisitions, seven were included in the IAN operating segment and four were included in the CMG operating segment. During the first nine months of 2012, we recorded approximately $205.0 of goodwill and intangible assets related to these acquisitions.
The results of operations of our acquired companies were included in our consolidated results from the closing date of each acquisition. Details of cash paid for current and prior years' acquisitions are listed below.
 
Nine months ended
September 30,
 
2013
 
2012
Cost of investment: current-year acquisitions
$
51.9

 
$
154.3

Cost of investment: prior-year acquisitions
28.5

 
37.0

Less: net cash acquired
(4.7
)
 
(14.6
)
Total cost of investment
75.7

 
176.7

 
 
 
 
Operating expense 1
1.6

 
3.2

Total cash paid for acquisitions 2
$
77.3

 
$
179.9

 
1 
Represents cash payments made that were either in excess of the contractual value or contingent upon the future employment of the former owners of acquired companies.
2 
Of the total cash paid, $27.5 and $36.1 for the nine months ended September 30, 2013, and 2012, respectively, are classified under the financing section of the unaudited Consolidated Statements of Cash Flows within acquisition-related payments. These amounts relate to increases in our ownership interests in our consolidated subsidiaries, as well as deferred payments for acquisitions that closed on or after January 1, 2009. Of the total cash paid, $48.2 and $140.6 for the nine months ended September 30, 2013, and 2012, respectively, are classified under the investing section of the unaudited Consolidated Statements of Cash Flows within acquisitions, including deferred payments, net of cash acquired. These amounts relate to initial payments for new transactions and deferred payments for acquisitions that closed prior to January 1, 2009.

Many of our acquisitions also include provisions under which the noncontrolling equity owners may require us to purchase additional interests in a subsidiary at their discretion. The following table presents changes in our redeemable noncontrolling interests.
 
Nine months ended
September 30,
 
2013
 
2012
Balance at beginning of period
$
227.2

 
$
243.4

Change in related noncontrolling interests balance
(4.9
)
 
(8.3
)
Changes in redemption value of redeemable noncontrolling interests:
 
 
 
Additions
12.5

 
3.0

Redemptions and other
(2.1
)
 
(14.2
)
Redemption value adjustments 1
(3.1
)
 
(3.6
)
Balance at end of period
$
229.6

 
$
220.3

 
1 
Redeemable noncontrolling interests are reported at their estimated redemption value in each reporting period, but not less than their initial fair value. Any adjustment to the redemption value impacts retained earnings or additional paid-in capital, except adjustments as a result of currency translation.






12
Table of Contents
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)


Note 6:  Supplementary Data
Accrued Liabilities
The following table presents the components of accrued liabilities.
 
September 30,
2013
 
December 31,
2012
Salaries, benefits and related expenses
$
370.9

 
$
478.2

Office and related expenses
52.9

 
51.6

Acquisition obligations
9.2

 
29.5

Interest
15.9

 
42.4

Professional fees
17.6

 
21.7

Other
86.8

 
104.8

Total accrued liabilities
$
553.3

 
$
728.2


Other (Expense) Income, Net
Results of operations for the three and nine months ended September 30, 2013 and 2012 include certain items that are not directly associated with our revenue-producing operations.
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
2013
 
2012
 
2013
 
2012
Loss on early extinguishment of debt
$
(45.2
)
 
$
0.0

 
$
(45.2
)
 
$
0.0

(Losses) gains on sales of businesses and investments
(0.8
)
 
(3.4
)
 
1.9

 
(5.2
)
Vendor discounts and credit adjustments
0.1

 
5.0

 
0.6

 
9.9

Other (expense) income, net
(0.7
)
 
0.1

 
2.7

 
0.4

Total other (expense) income, net
$
(46.6
)
 
$
1.7

 
$
(40.0
)
 
$
5.1

Loss on Early Extinguishment of Debt – During the third quarter of 2013, we recorded a charge of $45.2 related to the redemption of our 10.00% Notes. See Note 2 to the unaudited Consolidated Financial Statements for further information.
Sales of Businesses and Investments – During the first nine months of 2013, we recognized gains from the sale of marketable securities in the Asia Pacific region within our IAN segment and the sale of investments in our Rabbi Trusts, which was partially offset by a loss recognized in the third quarter of 2013 from the sale of a business in the United Kingdom within our IAN segment. During the first nine months of 2012, we recognized losses from the sale of businesses within our IAN segment, as well as an adjustment relating to a reserve for a change in estimate in connection with a business disposed of in a prior year.
Vendor Discounts and Credit Adjustments – We are in the process of settling our liabilities related to vendor discounts and credits established as part of the 2004 Restatement. These adjustments reflect the reversal of certain of these liabilities as a result of differences resulting from settlements with clients or vendors or where the statute of limitations has lapsed.
Other (Expense) Income, net – During the first nine months of 2013, other (expense) income, net primarily included a non-cash gain on re-measurement to fair value of an equity interest in an affiliate, located in the Asia Pacific region within our CMG segment, upon acquiring a controlling interest.














13
Table of Contents
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)


Accumulated Other Comprehensive Loss, Net of Tax
The following table presents the changes in accumulated other comprehensive loss, net of tax by component.
 
Foreign Currency Translation Adjustments
 
Available-for-Sale Securities
 
Derivative Instruments
 
Defined Benefit Pension and Other Postretirement Plans
 
Total
Balance as of December 31, 2012
$
(130.1
)
 
$
0.8

 
$
(12.7
)
 
$
(146.0
)
 
$
(288.0
)
Other comprehensive (loss) income before reclassifications
(86.1
)
 
0.7

 
0.0

 
(0.9
)
 
(86.3
)
Amount reclassified from accumulated other comprehensive loss, net of tax
0.0

 
(1.2
)
 
0.8

 
5.4

 
5.0

Total change for the period
(86.1
)
 
(0.5
)
 
0.8

 
4.5

 
(81.3
)
Balance as of September 30, 2013
$
(216.2
)
 
$
0.3

 
$
(11.9
)
 
$
(141.5
)
 
$
(369.3
)

Amounts reclassified from accumulated other comprehensive loss, net of tax for the three and nine months ended September 30, 2013 are as follows:
 
Three months ended
September 30, 2013
 
Nine months ended
September 30, 2013
 
Affected Line Item in the Consolidated Statement of Operations
Foreign currency translation adjustments
$
0.0

 
$
0.0

 
 
Gains on available-for-sale securities
0.0

 
(1.4
)
 
Other (expense) income, net
Losses on derivative instruments
0.4

 
1.3

 
Interest expense
Amortization of defined benefit pension and postretirement plans items 1
2.7

 
8.2

 
 
Tax effect
(0.9
)
 
(3.1
)
 
Provision for income taxes
Total amount reclassified from accumulated other comprehensive loss, net of tax
$
2.2

 
$
5.0

 
 
 
1 
These accumulated other comprehensive loss components are included in the computation of net periodic cost. See Note 9 for further information.

Share Repurchase Program
In February 2013, our Board of Directors (the "Board") authorized a new share repurchase program to repurchase from time to time up to $300.0, excluding fees, of our common stock (the "2013 share repurchase program"). In March 2013, the Board authorized an increase in the amount available under our 2013 share repurchase program up to $500.0, excluding fees, of our common stock to be used towards the repurchase of shares resulting from the conversion to common stock of the 4.75% Notes. In February 2012, the Board authorized a share repurchase program to repurchase from time to time up to $300.0, excluding fees, of our common stock (the "2012 share repurchase program"). In November 2012, the Board authorized an increase in the amount available under our 2012 share repurchase program up to $400.0, excluding fees, of our common stock, as a result of the sale of our remaining holdings in Facebook. We may effect such repurchases through open market purchases, trading plans established in accordance with SEC rules, derivative transactions or other means.
The following table presents our share repurchase activity under our share repurchase programs.
 
Nine months ended
September 30,
 
2013
 
2012
Number of shares repurchased
19.9

 
18.6

Aggregate cost, including fees
$
280.8

 
$
201.4

Average price per share, including fees
$
14.12

 
$
10.85

As of September 30, 2013, $319.4 remains available for repurchase under the 2013 share repurchase program. The 2013 share repurchase program has no expiration date. We fully utilized the 2012 share repurchase program as of the second quarter of 2013.


14
Table of Contents
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)


Note 7:  Income Taxes
For the three months ended September 30, 2013, our effective income tax rate of 36.9% was negatively impacted primarily by losses in certain foreign jurisdictions where we receive no tax benefit due to 100% valuation allowances and the net establishment of valuation allowances, primarily in the Continental Europe region. Our effective income tax rate was positively impacted by the recognition of previously unrecognized tax benefits as a result of the settlement of the 2002-2006 NYS audit cycles. For the nine months ended September 30, 2013, our effective income tax rate of 50.7% was negatively impacted primarily by losses in certain foreign jurisdictions where we receive no tax benefit due to 100% valuation allowances.
We have various tax years under examination by tax authorities in various countries, and in various states, such as New York, in which we have significant business operations. It is not yet known whether these examinations will, in the aggregate, result in our paying additional taxes. We believe our tax reserves are adequate in relation to the potential for additional assessments in each of the jurisdictions in which we are subject to taxation. We regularly assess the likelihood of additional tax assessments in those jurisdictions and, if necessary, adjust our reserves as additional information or events require.
With respect to all tax years open to examination by U.S. federal, various state and local, and non-U.S. tax authorities, we currently anticipate that total unrecognized tax benefits will decrease by an amount between $10.0 and $20.0 in the next twelve months, a portion of which will affect our effective income tax rate, primarily as a result of the settlement of tax examinations and the lapsing of statutes of limitations.
We are effectively settled with respect to U.S. income tax audits for years prior to 2009. With limited exceptions, we are no longer subject to state and local income tax audits for years prior to 1999, or non-U.S. income tax audits for years prior to 2005.

Note 8:  Incentive 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.
We issued the following stock-based awards under the 2009 Performance Incentive Plan (the “2009 PIP”) during the nine months ended September 30, 2013.
 
Awards
 
Weighted-average
grant-date fair value
(per award)
Stock options
0.7

 
$
4.14

Stock-settled awards
1.0

 
$
13.17

Performance-based awards
1.5

 
$
11.97

Total stock-based compensation awards
3.2

 
 
During the nine months ended September 30, 2013, the Compensation Committee granted performance cash awards under the 2009 PIP with a total target value of $86.0. Of this amount, awards with a total target value of $35.6 will be settled in shares upon vesting. The number of shares to be settled on the vesting date will be calculated as the cash value adjusted for performance divided by our stock price on the vesting date. Additionally, during the nine months ended September 30, 2013, the Compensation Committee granted cash awards under the Interpublic Restricted Cash Plan with a total target value of $4.2. Cash awards are amortized over the vesting period, typically three years.

Note 9:  Employee Benefits
We have a defined benefit pension plan (the “Domestic Pension Plan”) that covers certain U.S. employees. 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.





15
Table of Contents
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)


The components of net periodic cost for the Domestic Pension Plan, the significant foreign pension plans and the domestic postretirement benefit plan are listed below.
 
Domestic Pension Plan
 
Foreign Pension Plans
 
Domestic
Postretirement Benefit Plan
Three months ended September 30,
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Service cost
$
0.0

 
$
0.0

 
$
2.6

 
$
3.0

 
$
0.1

 
$
0.1

Interest cost
1.4

 
1.6

 
5.3

 
5.3

 
0.4

 
0.5

Expected return on plan assets
(1.9
)
 
(2.0
)
 
(4.7
)
 
(4.5
)
 
0.0

 
0.0

Settlement and curtailment losses
0.0

 
0.0

 
0.0

 
0.1

 
0.0

 
0.0

Amortization of:
 
 
 
 
 
 
 
 
 
 
 
Transition obligation
0.0

 
0.0

 
0.0

 
0.0

 
0.0

 
0.0

Prior service cost (credit)
0.0

 
0.0

 
0.1

 
0.1

 
(0.1
)
 
0.0

Unrecognized actuarial losses
2.0

 
1.6

 
0.7

 
0.3

 
0.0

 
0.0

Net periodic cost
$
1.5

 
$
1.2

 
$
4.0

 
$
4.3

 
$
0.4

 
$
0.6

 
Domestic Pension Plan
 
Foreign Pension Plans
 
Domestic
Postretirement Benefit Plan
Nine months ended September 30,
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Service cost
$
0.0

 
$
0.0

 
$
7.7

 
$
8.3

 
$
0.1

 
$
0.2

Interest cost
4.1

 
4.7

 
15.9

 
16.3

 
1.2

 
1.7

Expected return on plan assets
(5.8
)
 
(5.8
)
 
(14.3
)
 
(13.6
)
 
0.0

 
0.0

Settlement and curtailment losses
0.0

 
0.0

 
0.0

 
0.1

 
0.0

 
0.0

Amortization of:
 
 
 
 
 
 
 
 
 
 
 
Transition obligation
0.0

 
0.0

 
0.0

 
0.0

 
0.0

 
0.1

Prior service cost (credit)
0.0

 
0.0

 
0.2

 
0.1

 
(0.1
)
 
(0.1
)
Unrecognized actuarial losses
6.0

 
4.8

 
2.1

 
0.8

 
0.0

 
0.0

Net periodic cost
$
4.3

 
$
3.7

 
$
11.6

 
$
12.0

 
$
1.2

 
$
1.9

During the nine months ended September 30, 2013, we contributed $0.5 and $13.5 of cash to our domestic and foreign pension plans, respectively. For the remainder of 2013, we do not expect to make any additional cash contributions to our domestic pension plan and we expect to contribute approximately $6.0 of cash to our foreign pension plans.

Note 10:  Segment Information
We have two reportable segments, IAN and CMG. IAN is comprised of McCann Worldgroup, Draftfcb, Lowe & Partners, IPG Mediabrands 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. The profitability measure employed by our chief operating decision maker for allocating resources to operating divisions and assessing operating division performance is operating income. The segment information is presented consistently with the basis described in our 2012 Annual Report on Form 10-K.












16
Table of Contents
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)


Summarized financial information concerning our reportable segments is shown in the following table.
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
2013
 
2012
 
2013
 
2012
Revenue:
 
 
 
 
 
 
 
IAN
$
1,370.9

 
$
1,332.5

 
$
4,047.7

 
$
3,999.7

CMG
329.5

 
337.9

 
951.9

 
893.2

Total
$
1,700.4

 
$
1,670.4

 
$
4,999.6

 
$
4,892.9

 
 
 
 
 
 
 
 
Segment operating income:
 
 
 
 
 
 
 
IAN
$
119.9

 
$
116.6

 
$
266.5

 
$
278.6

CMG
39.7

 
34.4

 
88.3

 
73.1

Corporate and other
(18.1
)
 
(19.6
)
 
(80.9
)
 
(83.3
)
Total
141.5

 
131.4

 
273.9

 
268.4

 
 
 
 
 
 
 
 
Interest expense
(23.7
)
 
(31.6
)
 
(98.0
)
 
(96.9
)
Interest income
5.8

 
6.7

 
18.0

 
21.4

Other (expense) income, net
(46.6
)
 
1.7

 
(40.0
)
 
5.1

Income before income taxes
$
77.0

 
$
108.2

 
$
153.9

 
$
198.0

 
 
 
 
 
 
 
 
Depreciation and amortization of fixed assets and intangible assets:
 
 
 
 
 
 
 
IAN
$
32.9

 
$
30.1

 
$
95.4

 
$
88.4

CMG
3.9

 
3.9

 
11.6

 
10.6

Corporate and other
3.7

 
3.4

 
10.9

 
9.8

Total
$
40.5

 
$
37.4

 
$
117.9

 
$
108.8

 
 
 
 
 
 
 
 
Capital expenditures:
 
 
 
 
 
 
 
IAN
$
24.5

 
$
19.9

 
$
48.0

 
$
52.6

CMG
2.4

 
11.9

 
6.5

 
17.5

Corporate and other
17.9

 
9.3

 
37.1

 
29.2

Total
$
44.8

 
$
41.1

 
$
91.6

 
$
99.3

 
 
 
 
 
 
 
 
 
September 30,
2013
 
December 31,
2012
 
 
 
 
Total assets:
 
 
 
 
 
 
 
IAN
$
10,368.3

 
$
11,035.3

 
 
 
 
CMG
1,182.8

 
1,073.1

 
 
 
 
Corporate and other
(19.1
)
 
1,385.5

 
 
 
 
Total
$
11,532.0

 
$
13,493.9

 
 
 
 
 

17
Table of Contents
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)



Note 11:  Fair 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 nine months ended September 30, 2013. The following tables present information about our financial instruments measured at fair value on a recurring basis as of September 30, 2013 and December 31, 2012, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.
 
September 30, 2013
 
Balance Sheet Classification
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Assets
 
 
 
 
 
 
 
 
 
Cash equivalents
$
511.0

 
$
0.0

 
$
0.0

 
$
511.0

 
Cash and cash equivalents
Short-term marketable securities
5.2

 
0.0

 
0.0

 
5.2

 
Marketable securities
Long-term investments
1.5

 
0.0

 
0.0

 
1.5