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EX-32 - EXHIBIT 32 - INTERPUBLIC GROUP OF COMPANIES, INC.ipgq1201810qex32.htm
EX-31.2 - EXHIBIT 31.2 - INTERPUBLIC GROUP OF COMPANIES, INC.ipgq1201810qex312.htm
EX-31.1 - EXHIBIT 31.1 - INTERPUBLIC GROUP OF COMPANIES, INC.ipgq1201810qex311.htm
EX-12.1 - EXHIBIT 12.1 - INTERPUBLIC GROUP OF COMPANIES, INC.ipgq1201810qex121.htm
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 March 31, 2018
or
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-6686
ipglogoa01a03a01a08.jpg
THE INTERPUBLIC GROUP OF COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
13-1024020
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)

909 Third Avenue, New York, New York 10022
(Address of principal executive offices) (Zip Code)
(212) 704-1200
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
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, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
ý
 
Accelerated filer
 
¨
Non-accelerated filer
 
¨
 
Smaller reporting company
 
¨
(Do not check if a smaller reporting company)
 
 
 
Emerging growth company
 
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨    No ý

The number of shares of the registrant’s common stock outstanding as of April 16, 2018 was 385,519,753.



INDEX
 
Page
Item 1.
 
 
Consolidated Statements of Operations for the Three Months Ended March 31, 2018 and 2017
 
Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2018 and 2017
 
Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017
 
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017
 
Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2018 and 2017
 
Item 2.
Item 3.
Item 4.
 
 
 
Item 1.
Item 1A.
Item 2.
Item 6.
INFORMATION REGARDING FORWARD-LOOKING DISCLOSURE
This quarterly report on Form 10-Q contains forward-looking statements. Statements in this report that are not historical facts, including statements about management’s beliefs and expectations, constitute forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue” or comparable terminology are intended to identify forward-looking statements. These statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined under Item 1A, Risk Factors, in our most recent annual report on Form 10-K. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.
Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Such factors include, but are not limited to, the following:
potential effects of a challenging economy, for example, on the demand for our advertising and marketing services, on our clients’ financial condition and on our business or financial condition;
our ability to attract new clients and retain existing clients;
our ability to retain and attract key employees;
risks associated with assumptions we make in connection with our critical accounting estimates, including changes in assumptions associated with any effects of a weakened economy;
potential adverse effects if we are required to recognize impairment charges or other adverse accounting-related developments;
risks associated with the effects of global, national and regional economic and political conditions, including counterparty risks and fluctuations in economic growth rates, interest rates and currency exchange rates; and
developments from changes in the regulatory and legal environment for advertising and marketing and communications services companies around the world.
Investors should carefully consider these factors and the additional risk factors outlined in more detail under Item 1A, Risk Factors, in our most recent annual report on Form 10-K.

1


PART I – FINANCIAL INFORMATION
Item 1.
Financial Statements (Unaudited)
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
 
Three months ended
March 31,
 
2018
 
2017
REVENUE:
 
 
 
Net revenue
$
1,774.0

 
$
1,675.3

Billable expenses
395.1

 
388.5

Total revenue
2,169.1

 
2,063.8

 
 
 
 
OPERATING EXPENSES:
 
 
 
Salaries and related expenses
1,330.3

 
1,251.7

Office and other direct expenses
323.8

 
312.7

Billable expenses
395.1

 
388.5

Cost of services
2,049.2

 
1,952.9

Selling, general and administrative expenses
35.1

 
35.2

Depreciation and amortization
46.0

 
41.0

Total operating expenses
2,130.3

 
2,029.1

 
 
 
 
OPERATING INCOME
38.8

 
34.7

 
 
 
 
EXPENSES AND OTHER INCOME:
 
 
 
Interest expense
(19.9
)
 
(20.9
)
Interest income
4.0

 
5.2

Other (expense) income, net
(24.4
)
 
0.8

Total (expenses) and other income
(40.3
)
 
(14.9
)
 
 
 
 
(Loss) income before income taxes
(1.5
)
 
19.8

Provision for (benefit of) income taxes
12.7

 
(0.3
)
(Loss) income of consolidated companies
(14.2
)
 
20.1

Equity in net (loss) income of unconsolidated affiliates
(1.9
)
 
1.2

NET (LOSS) INCOME
(16.1
)
 
21.3

Net loss attributable to noncontrolling interests
2.0

 
3.4

NET (LOSS) INCOME AVAILABLE TO IPG COMMON STOCKHOLDERS
$
(14.1
)
 
$
24.7

 
 
 
 
(Loss) earnings per share available to IPG common stockholders:
 
 
 
Basic
$
(0.04
)
 
$
0.06

Diluted
$
(0.04
)
 
$
0.06

 
 
 
 
Weighted-average number of common shares outstanding:
 
 
 
Basic
383.4

 
391.7

Diluted
383.4

 
399.3

 
 
 
 
Dividends declared per common share
$
0.21

 
$
0.18

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

2


THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in Millions)
(Unaudited)
 
Three months ended
March 31,
 
2018
 
2017
NET (LOSS) INCOME
$
(16.1
)
 
$
21.3

 
 
 
 
OTHER COMPREHENSIVE INCOME
 
 
 
Foreign currency translation:
 
 
 
Foreign currency translation adjustments
22.4

 
52.9

Reclassification adjustments recognized in net income
12.5

 
(0.4
)
 
34.9

 
52.5

 
 
 
 
Available-for-sale securities:
 
 
 
Changes in fair value of available-for-sale securities
0.0

 
0.1

 
0.0

 
0.1

 
 
 
 
Derivative instruments:
 
 
 
Recognition of previously unrealized losses in net income
0.5

 
0.5

Income tax effect
(0.2
)
 
(0.2
)
 
0.3

 
0.3

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

 
1.7

Settlement and curtailment losses included in net income
0.2

 
0.0

Other
0.1

 
(0.2
)
Income tax effect
(0.1
)
 
(0.1
)
 
2.1

 
1.4

Other comprehensive income, net of tax
37.3

 
54.3

TOTAL COMPREHENSIVE INCOME
21.2

 
75.6

Less: comprehensive loss attributable to noncontrolling interests
(1.7
)
 
(2.9
)
COMPREHENSIVE INCOME ATTRIBUTABLE TO IPG
$
22.9

 
$
78.5


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

3


THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Millions)
(Unaudited)
 
March 31,
2018
 
December 31,
2017
ASSETS:
 
 
 
Cash and cash equivalents
$
597.3

 
$
790.9

Accounts receivable, net of allowance of $43.1 and $42.7, respectively
3,942.5

 
4,585.0

Accounts receivable, billable to clients
1,981.1

 
1,747.4

Assets held for sale
12.0

 
5.7

Other current assets
430.6

 
346.5

Total current assets
6,963.5

 
7,475.5

Property and equipment, net of accumulated depreciation of $1,057.1 and $1,036.2, respectively
634.2

 
650.4

Deferred income taxes
273.1

 
234.0

Goodwill
3,839.7

 
3,820.4

Other non-current assets
529.6

 
524.4

TOTAL ASSETS
$
12,240.1

 
$
12,704.7

 
 
 
 
LIABILITIES:
 
 
 
Accounts payable
$
5,467.1

 
$
6,420.2

Accrued liabilities
528.1

 
674.7

Contract liabilities
507.5

 
484.7

Short-term borrowings
799.4

 
84.9

Current portion of long-term debt
2.1

 
2.0

Liabilities held for sale
18.3

 
8.8

Total current liabilities
7,322.5

 
7,675.3

Long-term debt
1,288.2

 
1,285.6

Deferred compensation
457.1

 
476.6

Other non-current liabilities
785.1

 
768.8

TOTAL LIABILITIES
9,852.9

 
10,206.3

 
 
 
 
Redeemable noncontrolling interests (see Note 6)
246.9

 
252.1

 
 
 
 
STOCKHOLDERS’ EQUITY:
 
 
 
Common stock
39.0

 
38.6

Additional paid-in capital
963.7

 
955.2

Retained earnings
2,010.5

 
2,104.5

Accumulated other comprehensive loss, net of tax
(790.8
)
 
(827.8
)
 
2,222.4

 
2,270.5

Less: Treasury stock
(113.9
)
 
(59.0
)
Total IPG stockholders’ equity
2,108.5

 
2,211.5

Noncontrolling interests
31.8

 
34.8

TOTAL STOCKHOLDERS’ EQUITY
2,140.3

 
2,246.3

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
12,240.1

 
$
12,704.7

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

4


THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Millions)
(Unaudited)
 
Three months ended
March 31,
  
2018
 
2017
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net (loss) income
$
(16.1
)
 
$
21.3

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
Depreciation and amortization
46.0

 
41.0

Provision for uncollectible receivables
2.1

 
5.9

Amortization of restricted stock and other non-cash compensation
30.0

 
29.7

Net amortization of bond discounts and deferred financing costs
1.4

 
1.4

Deferred income tax benefit
(20.8
)
 
(12.0
)
Net losses (gains) on sales of businesses
24.4

 
(0.9
)
Other
6.8

 
6.7

Changes in assets and liabilities, net of acquisitions and divestitures, providing (using) cash:
 
 
 
Accounts receivable
675.2

 
806.6

Accounts receivable, billable to clients
(220.7
)
 
(206.5
)
Other current assets
(88.3
)
 
(68.6
)
Accounts payable
(994.2
)
 
(726.5
)
Accrued liabilities
(164.6
)
 
(264.9
)
Contract liabilities
17.6

 
16.2

Other non-current assets and liabilities
(28.7
)
 
(21.2
)
Net cash used in operating activities
(729.9
)
 
(371.8
)
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Capital expenditures
(22.8
)
 
(24.8
)
Acquisitions, net of cash acquired
(0.2
)
 
(3.3
)
Other investing activities
(0.1
)
 
(5.1
)
Net cash used in investing activities
(23.1
)
 
(33.2
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Net increase in short-term borrowings
718.8

 
224.8

Exercise of stock options
6.9

 
8.2

Common stock dividends
(80.8
)
 
(70.9
)
Repurchases of common stock
(54.9
)
 
(55.0
)
Tax payments for employee shares withheld
(26.3
)
 
(36.7
)
Distributions to noncontrolling interests
(3.9
)
 
(6.0
)
Other financing activities
(1.6
)
 
0.0

Net cash provided by financing activities
558.2

 
64.4

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash
(2.9
)
 
20.0

Net decrease in cash, cash equivalents and restricted cash
(197.7
)
 
(320.6
)
Cash, cash equivalents and restricted cash at beginning of period
797.7

 
1,100.2

Cash, cash equivalents and restricted cash at end of period
$
600.0

 
$
779.6


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

5


THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in Millions)
(Unaudited)
 
 
 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated 
Other
Comprehensive
Loss, Net of Tax
 
Treasury
Stock
 
Total IPG
Stockholders’
Equity
 
Noncontrolling
Interests
 
Total
Stockholders’
Equity
 
Shares
 
Amount
 
Balance at December 31, 2017
386.2

 
$
38.6

 
$
955.2

 
$
2,104.5

 
$
(827.8
)
 
$
(59.0
)
 
$
2,211.5

 
$
34.8

 
$
2,246.3

Net loss
 
 
 
 
 
 
(14.1
)
 
 
 
 
 
(14.1
)
 
(2.0
)
 
(16.1
)
Other comprehensive income
 
 
 
 
 
 
 
 
37.0

 
 
 
37.0

 
0.3

 
37.3

Reclassifications related to redeemable
    noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 


 
2.5

 
2.5

Distributions to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(3.9
)
 
(3.9
)
Change in redemption value of redeemable
    noncontrolling interests
 
 
 
 
 
 
1.5

 
 
 
 
 
1.5

 
 
 
1.5

Repurchases of common stock
 
 
 
 
 
 
 
 
 
 
(54.9
)
 
(54.9
)
 
 
 
(54.9
)
Common stock dividends
 
 
 
 
 
 
(80.8
)
 
 
 
 
 
(80.8
)
 
 
 
(80.8
)
Stock-based compensation
4.4

 
0.4

 
30.3

 
 
 
 
 
 
 
30.7

 
 
 
30.7

Exercise of stock options
0.8

 
0.1

 
6.9

 
 
 
 
 
 
 
7.0

 
 
 
7.0

Shares withheld for taxes
(1.1
)
 
(0.1
)
 
(28.0
)
 
 
 
 
 
 
 
(28.1
)
 
 
 
(28.1
)
Other
 
 
 
 
(0.7
)
 
(0.6
)
 
 
 
 
 
(1.3
)
 
0.1

 
(1.2
)
Balance at March 31, 2018
390.3

 
$
39.0

 
$
963.7

 
$
2,010.5

 
$
(790.8
)
 
$
(113.9
)
 
$
2,108.5

 
$
31.8

 
$
2,140.3

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

6


THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY – (CONTINUED)
(Amounts in Millions)
(Unaudited)
 
 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated 
Other
Comprehensive
Loss, Net of Tax
 
Treasury
Stock
 
Total IPG
Stockholders’
Equity
 
Noncontrolling
Interests
 
Total
Stockholders’
Equity
 
Shares
 
Amount
 
Balance at December 31, 2016
394.3

 
$
39.4

 
$
1,199.2

 
$
1,839.9

 
$
(964.4
)
 
$
(63.3
)
 
$
2,050.8

 
$
39.6

 
$
2,090.4

Net income
 
 
 
 
 
 
24.7

 
 
 
 
 
24.7

 
(3.4
)
 
21.3

Other comprehensive income
 
 
 
 
 
 
 
 
53.8

 
 
 
53.8

 
0.5

 
54.3

Reclassifications related to redeemable
    noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.1

 
3.1

Distributions to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(6.4
)
 
(6.4
)
Change in redemption value of redeemable
    noncontrolling interests
 
 
 
 
 
 
(3.3
)
 
 
 
 
 
(3.3
)
 
 
 
(3.3
)
Repurchases of common stock
 
 
 
 
 
 
 
 
 
 
(55.0
)
 
(55.0
)
 
 
 
(55.0
)
Common stock dividends
 
 
 
 
 
 
(70.9
)
 
 
 
 
 
(70.9
)
 
 
 
(70.9
)
Stock-based compensation
5.4

 
0.5

 
29.7

 
 
 
 
 
 
 
30.2

 
 
 
30.2

Exercise of stock options
0.7

 
0.1

 
8.2

 
 
 
 
 
 
 
8.3

 
 
 
8.3

Shares withheld for taxes
(1.6
)
 
(0.2
)
 
(37.5
)
 
 
 
 
 
 
 
(37.7
)
 
 
 
(37.7
)
Other
 
 
 
 
0.1

 
(0.4
)
 
 
 
 
 
(0.3
)
 
 
 
(0.3
)
Balance at March 31, 2017
398.8

 
$
39.8

 
$
1,199.7

 
$
1,790.0

 
$
(910.6
)
 
$
(118.3
)
 
$
2,000.6

 
$
33.4

 
$
2,034.0

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

7


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 2017 Annual Report on Form 10-K.
As of January 1, 2018, the Company has revised the presentation of its Consolidated Statements of Operations, which disaggregates net revenue and billable expenses within total revenue and separately presents cost of services; selling, general and administrative expenses; and depreciation and amortization within operating expenses. The revised presentation does not impact total revenue, operating expenses or operating income.
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, as disclosed further in Note 11, excluding depreciation and amortization.
Depreciation and amortization of the fixed assets and intangible assets of the Company is disclosed as a separate operating expense.
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:  Summary of Significant Accounting Policies
Effective January 1, 2018, IPG adopted Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, ("ASC 606") using the full retrospective transition method. Under this method, the Company will revise its consolidated financial statements for the years ended December 31, 2016 and 2017, and applicable interim periods within the year ended December 31, 2017, as if ASC 606 had been effective for those periods. ASC 606 applies to all contracts with customers, except for contracts that are within the scope of other standards. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only apply the five-step model to contracts when it is probable that IPG will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are distinct performance obligations. We then assess whether IPG acts as an agent or a principal for each identified performance obligation and include revenue within the transaction price for third-party costs when we determine that we act as principal.
Revenue Recognition
We recognize revenue when the control to promised goods or services transfers to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services. Our revenues are primarily derived from the planning and execution of multi-channel advertising and communications and marketing services, including public relations, meeting and event production, sports and entertainment marketing, corporate and brand identity, and strategic marketing consulting around the world. Our revenues are directly dependent upon the advertising, marketing and corporate communications requirements of our existing clients and our ability to win new clients. Depending on the terms of the client contract, revenue is derived from

8


diverse arrangements involving fees for services performed, commissions, performance incentive provisions and combinations of the three.
Net revenue, primarily consisting of fees, commissions and performance incentives, represents the amount of our gross billings excluding pass-through expenses charged to a client. Revenues for the creation, planning and placement of advertising are determined primarily on a negotiated fee basis and, to a lesser extent, on a commission basis. Fees are usually calculated to reflect hourly rates plus proportional overhead and a mark-up. Contractual arrangements with clients may also include performance incentive provisions designed to link a portion of our revenue to our performance relative to mutually agreed-upon qualitative or quantitative metrics, or both. Commissions are earned based on services provided and are usually derived from a percentage or fee over the total cost to complete the assignment. Commissions can also be derived when clients pay us the gross rate billed by media and we pay for media at a lower net rate; the difference is the commission that we earn, which we either retain in full or share with the client depending on the nature of the applicable services agreement. We also generate revenue in negotiated fees from our public relations, sales promotion, event marketing, sports and entertainment marketing, and corporate and brand identity services.
Billable expenses include pass-through expenses related to event and advertising production costs for performance obligations where we have determined that we are acting as principal that are rebilled to our clients, as well as out-of-pocket costs. Out-of-pocket costs often include expenses related to airfare, mileage, hotel stays, out-of-town meals and telecommunication charges for client service staff. We record these billable expenses within total revenue with a corresponding offset to operating expenses.
Most of our client contracts are individually negotiated and, accordingly, the terms of client engagements and the basis on which we earn fees and commissions vary significantly. As is customary in the industry, our contracts generally provide for termination by either party on relatively short notice, usually 30 to 90 days. Our payment terms vary by client, and the time between invoicing date and due date is typically not significant. We generally have right to payment for all services provided through the end of the contract or termination date.
Our client contracts may include provisions for incentive compensation and vendor rebates and credits. Our largest clients are multinational entities and, as such, we often provide services to these clients out of multiple offices and across many of our agencies. In arranging for such services, it is possible that we will enter into global, regional and local agreements. Agreements of this nature are reviewed by legal counsel to determine the governing terms to be followed by the offices and agencies involved.
When we receive credits from our vendors and media outlets for transactions entered into on behalf of our clients, they are generally remitted back to our clients; however, they may be retained by us based on specific terms of our contracts and local laws. If amounts are to be passed through to clients, they are recorded as liabilities until settlement or, if retained by us, are recorded as revenue when earned.
For media contracts that can be canceled by the customer at any time without compensation, the contract does not exist until media airs, at which point revenue is recognized.
Timing of Recognition
We have determined that we generally satisfy our performance obligations over time, except for certain commission-based contracts, which are recognized at a point in time, typically the date of broadcast or publication. Fees are generally recognized based on proportional performance utilizing periodically updated estimates to complete.
Performance Obligations
Our client contracts may include various goods and services that are capable of being distinct, are distinct within the context of the contract and are therefore accounted for as separate performance obligations. We allocate revenue to each performance obligation in the contract at inception based on its relative standalone selling price.
Principal vs. Agent
For each identified performance obligation in the contract with the customer, we assess whether our agency or the third-party supplier is the principal or agent. We control the specified services before transferring those services to the customer and act as the principal if we are primarily responsible for the integration of products and services into the deliverable to our customer, have inventory risk, or discretion in establishing pricing. For performance obligations in which we act as principal, we record the gross amount billed to the customer within total revenue and the related incremental direct costs incurred as billable expenses. We have determined that we primarily act as principal for creative, media planning, in-house production, event, public relations and branding services, where we control the specified services before transferring those services to the customer because we are primarily responsible for the integration of products and services into the deliverable to our customer. We generally do not have inventory risk or discretion in establishing pricing in our contracts with customers.
If the third-party supplier, rather than IPG, is primarily responsible for the integration of products and services into the deliverable to our customer, then we generally act as the agent and solely arrange for the third-party supplier to provide services

9


to the customer. For performance obligations for which we act as the agent (primarily production and media buying), we record our revenue as the net amount of our gross billings less pass-through expenses charged to a customer.
Variable Consideration
Revenue for our services is measured based on the consideration specified in a contract with a customer. Contractual arrangements with clients may also include performance incentive provisions designed to link a portion of our revenue to our performance relative to either qualitative or quantitative metrics, or both.
Incentive compensation is estimated using the most likely amount and is included in revenue up to the amount that is not expected to result in a reversal of a significant amount of cumulative revenue recognized. We recognize revenue related to performance incentives as we satisfy the performance obligation to which performance incentives are related.
Practical Expedients
As part of our adoption of ASC 606, we apply the practical expedient and do not disclose information about remaining performance obligations that have original expected durations of one year or less. Amounts related to those performance obligations with expected durations of greater than one year are immaterial.
We apply the practical expedient and do not capitalize costs to obtain a contract as these amounts would generally be recognized over less than one year and are not material.
Additionally, we report revenue net of taxes assessed by governmental authorities that are directly imposed on our revenue-producing transactions.

Note 3:  Revenue
Adoption of ASC 606
Effective with the adoption of ASC 606 on January 1, 2018 using the full retrospective transition method, the Company will revise its consolidated financial statements for the years ended December 31, 2016 and 2017, and applicable interim periods within the year ended December 31, 2017, as if ASC 606 had been effective for those periods. ASC 606, which accelerates the recognition of revenue primarily as a result of estimating variable consideration, mostly impacts the timing of revenue recognition between quarters, but also can affect, to a lesser extent, the amount of annual revenue recognized. Although ASC 606 results in an increase in the number of performance obligations within certain of our contractual arrangements, the amount or timing of revenue recognized is not materially impacted. ASC 606 also results in an increase in third-party costs being included in revenue and costs, primarily in connection with our events businesses, which has no impact on operating income, net income or cash flows. The increases to retained earnings as of December 31, 2017 and 2016 as a result of adopting ASC 606 were not material. The following tables summarize the effects of adopting ASC 606.


10


CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
 
Three months ended March 31, 2017
 
As Revised 1
 
ASC 606 Adjustments
 
As Adjusted
REVENUE:
 
 
 
 
 
Net revenue
$
1,670.3

 
$
5.0

 
$
1,675.3

Billable expenses
83.6

 
304.9

 
388.5

Total revenue
1,753.9

 
309.9

 
2,063.8

 
 
 
 
 
 
OPERATING EXPENSES:
 
 
 
 
 
Salaries and related expenses
1,251.7

 

 
1,251.7

Office and other direct expenses
312.7

 

 
312.7

Billable expenses
83.6

 
304.9

 
388.5

Cost of services
1,648.0

 
304.9

 
1,952.9

Selling, general and administrative expenses
35.2

 

 
35.2

Depreciation and amortization
41.0

 

 
41.0

Total operating expenses
1,724.2

 
304.9

 
2,029.1

 
 
 
 
 
 
OPERATING INCOME
29.7

 
5.0

 
34.7

 
 
 
 
 
 
EXPENSES AND OTHER INCOME:
 
 
 
 
 
Interest expense
(20.9
)
 

 
(20.9
)
Interest income
5.2

 

 
5.2

Other income, net
0.8

 

 
0.8

Total (expenses) and other income
(14.9
)
 

 
(14.9
)
 
 
 
 
 
 
Income before income taxes
14.8

 
5.0

 
19.8

Benefit of income taxes
(2.1
)
 
1.8

 
(0.3
)
Income of consolidated companies
16.9

 
3.2

 
20.1

Equity in net income of unconsolidated affiliates
1.2

 

 
1.2

NET INCOME
18.1

 
3.2

 
21.3

Net loss attributable to noncontrolling interests
3.4

 

 
3.4

NET INCOME AVAILABLE TO IPG COMMON STOCKHOLDERS
$
21.5

 
$
3.2

 
$
24.7

 
 
 
 
 
 
Earnings per share available to IPG common stockholders:
 
 
 
 
 
Basic
$
0.05

 
$
0.01

 
$
0.06

Diluted
$
0.05

 
$
0.01

 
$
0.06

 
 
 
 
 
 
Weighted-average number of common shares outstanding:
 
 
 
 
 
Basic
391.7

 

 
391.7

Diluted
399.3

 

 
399.3

 
 
 
 
 
 
Dividends declared per common share
$
0.18

 
 
 
$
0.18

 
1
These amounts have been revised for the new presentation as described in Note 1.


11


CONSOLIDATED BALANCE SHEET
(Unaudited)
 
December 31, 2017
 
As Reported
 
ASC 606 Adjustments
 
As Adjusted
ASSETS:
 
 
 
 
 
Cash and cash equivalents
$
790.9

 
$

 
$
790.9

Accounts receivable, net of allowance of $42.7
4,585.0

 

 
4,585.0

Expenditures billable to clients
1,747.4

 
(1,747.4
)
 

Accounts receivable, billable to clients

 
1,747.4

 
1,747.4

Assets held for sale
5.7

 

 
5.7

Other current assets
335.1

 
11.4

 
346.5

Total current assets
7,464.1

 
11.4

 
7,475.5

Property and equipment, net of accumulated depreciation of $1,036.2
650.4

 

 
650.4

Deferred income taxes
236.0

 
(2.0
)
 
234.0

Goodwill
3,820.4

 

 
3,820.4

Other non-current assets
524.3

 
0.1

 
524.4

TOTAL ASSETS
$
12,695.2

 
$
9.5

 
$
12,704.7

 
 
 
 
 
 
LIABILITIES:
 
 
 
 
 
Accounts payable
$
6,907.8

 
$
(487.6
)
 
$
6,420.2

Accrued liabilities
674.7

 

 
674.7

Contract liabilities

 
484.7

 
484.7

Short-term borrowings
84.9

 

 
84.9

Current portion of long-term debt
2.0

 

 
2.0

Liabilities held for sale
8.8

 

 
8.8

Total current liabilities
7,678.2

 
(2.9
)
 
7,675.3

Long-term debt
1,285.6

 

 
1,285.6

Deferred compensation
476.6

 

 
476.6

Other non-current liabilities
766.9

 
1.9

 
768.8

TOTAL LIABILITIES
10,207.3

 
(1.0
)
 
10,206.3

 
 
 
 
 
 
Redeemable noncontrolling interests
252.1

 

 
252.1

 
 
 
 
 
 
STOCKHOLDERS’ EQUITY:
 
 
 
 
 
Common stock
38.6

 

 
38.6

Additional paid-in capital
955.2

 

 
955.2

Retained earnings
2,093.6

 
10.9

 
2,104.5

Accumulated other comprehensive loss, net of tax
(827.4
)
 
(0.4
)
 
(827.8
)
 
2,260.0

 
10.5

 
2,270.5

Less: Treasury stock
(59.0
)
 

 
(59.0
)
Total IPG stockholders’ equity
2,201.0

 
10.5

 
2,211.5

Noncontrolling interests
34.8

 

 
34.8

TOTAL STOCKHOLDERS’ EQUITY
2,235.8

 
10.5

 
2,246.3

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
12,695.2

 
$
9.5

 
$
12,704.7



12


CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
 
Three months ended March 31, 2017
  
As Reported
 
ASC 606 Adjustments
 
As Adjusted
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
Net income
$
18.1

 
3.2

 
$
21.3

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
 
 
Depreciation and amortization
41.0

 

 
41.0

Provision for uncollectible receivables
5.9

 

 
5.9

Amortization of restricted stock and other non-cash compensation
29.7

 

 
29.7

Net amortization of bond discounts and deferred financing costs
1.4

 

 
1.4

Deferred income tax benefit
(13.8
)
 
1.8

 
(12.0
)
Net gains on sales of businesses
(0.9
)
 

 
(0.9
)
Other
6.7

 

 
6.7

Changes in assets and liabilities, net of acquisitions and divestitures, providing (using) cash:
 
 
 
 
 
Accounts receivable
806.6

 

 
806.6

Expenditures billable to clients
(206.3
)
 
206.3

 

Accounts receivable, billable to clients

 
(206.5
)
 
(206.5
)
Other current assets
(71.6
)
 
3.0

 
(68.6
)
Accounts payable
(702.5
)
 
(24.0
)
 
(726.5
)
Accrued liabilities
(264.9
)
 

 
(264.9
)
Contract liabilities

 
16.2

 
16.2

Other non-current assets and liabilities
(21.2
)
 

 
(21.2
)
Net cash used in operating activities
(371.8
)
 

 
(371.8
)
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
Net cash used in investing activities
(33.2
)
 

 
(33.2
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
Net cash provided by financing activities
64.4

 

 
64.4

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash
20.0

 

 
20.0

Net decrease in cash, cash equivalents and restricted cash
(320.6
)
 

 
(320.6
)
Cash, cash equivalents and restricted cash at beginning of period
1,100.2

 

 
1,100.2

Cash, cash equivalents and restricted cash at end of period
$
779.6

 

 
$
779.6

Retained earnings as of December 31, 2016 and March 31, 2017 increased by $35.6 and $38.8, respectively, as a result of the adoption of ASC 606. Accumulated other comprehensive loss, net of tax, as of December 31, 2016 and March 31, 2017 decreased by $1.9 and $1.2, respectively, as a result of the adoption of the ASC 606.
Disaggregation of Revenue
The following is a description of the principal activities, by reportable segment, from which we generate revenue. For more detailed information about reportable segments, see Note 11.
Integrated Agency Networks
The IAN segment of IPG principally generates revenue from providing advertising and media services as well as a comprehensive array of global communications and marketing services. Within IAN’s advertising business, we typically identify two performance obligations for creative and production services. Depending on the arrangement, we typically act as the principal for our creative services and as the agent for our production services. Within our media business, we also identify two performance obligations for media planning and media buying services. We typically act as the principal for our media planning services and

13


as the agent for media buying services. Generally, our branding arrangements consist of two performance obligations, and we act as the principal for both performance obligations.
Constituency Management Group
The CMG segment generates revenue from providing events and public relations services as well as sports and entertainment marketing, corporate and brand identity, and strategic marketing consulting. In CMG’s events and public relations arrangements, we typically identify one performance obligation, for which we act as the principal in most arrangements. Generally, our branding arrangements consist of two performance obligations, and we act as the principal for both performance obligations.
Principal Geographic Markets
Our agencies are located in over 100 countries, including every significant world market. Our geographic revenue breakdown is listed below.
 
Three months ended
March 31,
Total revenue:
2018
 
2017
United States
$
1,350.7

 
$
1,315.2

International:
 
 
 
United Kingdom
204.4

 
175.0

Continental Europe
181.7

 
158.2

Asia Pacific
231.5

 
220.3

Latin America
80.0

 
75.8

Other
120.8

 
119.3

Total International
818.4

 
748.6

Total Consolidated
$
2,169.1

 
$
2,063.8

 
 
Three months ended
March 31,
Net revenue:
2018
 
2017
United States
$
1,092.3

 
$
1,057.1

International:
 
 
 
United Kingdom
163.5

 
135.2

Continental Europe
158.7

 
140.9

Asia Pacific
178.8

 
173.7

Latin America
73.9

 
69.0

Other
106.8

 
99.4

Total International
681.7

 
618.2

Total Consolidated
$
1,774.0

 
$
1,675.3

 

IAN
Three months ended
March 31,
Total revenue:
2018
 
2017
United States
$
1,023.2

 
$
969.9

International
662.3

 
597.9

Total IAN
$
1,685.5

 
$
1,567.8

 
 
 
 
Net revenue:
 
 
 
United States
$
898.0

 
$
862.0

International
583.3

 
529.1

Total IAN
$
1,481.3

 
$
1,391.1

 


14


CMG
Three months ended
March 31,
Total revenue:
2018
 
2017
United States
$
327.5

 
$
345.3

International
156.1

 
150.7

Total CMG
$
483.6

 
$
496.0

 
 
 
 
Net revenue:
 
 
 
United States
$
194.3

 
$
195.1

International
98.4

 
89.1

Total CMG
$
292.7

 
$
284.2

 
Contract Balances
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.
 
March 31,
2018
 
December 31,
2017
Accounts receivable, net of allowance of $43.1 and $42.7, respectively
$
3,942.5

 
$
4,585.0

Accounts receivable, billable to clients
1,981.1

 
1,747.4

Contract assets
26.6

 
11.5

Contract liabilities (deferred revenue)
507.5

 
484.7

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 rights 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.


15

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


Note 4:  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
 
March 31,
2018
 
December 31,
2017
Book
Value
 
Fair
Value 1
 
Book
Value
 
Fair
Value 1
4.00% Senior Notes due 2022 (less unamortized discount and issuance costs of $1.2 and $1.0, respectively)
4.13%
 
$
247.8

 
$
253.0

 
$
247.6

 
$
259.0

3.75% Senior Notes due 2023 (less unamortized discount and issuance costs of $0.8 and $2.0, respectively)
4.32%
 
497.2

 
499.9

 
497.1

 
513.2

4.20% Senior Notes due 2024 (less unamortized discount and issuance costs of $0.6 and $2.5, respectively)
4.24%
 
496.9

 
509.0

 
496.7

 
524.2

Other notes payable and capitalized leases
 
 
48.4

 
48.4

 
46.2

 
46.2

Total long-term debt
 
 
1,290.3

 
 
 
1,287.6

 
 
Less: current portion
 
 
2.1

 
 
 
2.0

 
 
Long-term debt, excluding current portion
 
 
$
1,288.2

 
 
 
$
1,285.6

 
 
 
1
See Note 12 for information on the fair value measurement of our long-term debt.
Credit Agreements
We maintain a committed corporate credit facility, 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 March 31, 2018, there were no borrowings under the Credit Agreement; however, we had $8.5 of letters of credit under the Credit Agreement, which reduced our total availability to $1,491.5. We were in compliance with all of our covenants in the Credit Agreement as of March 31, 2018.
We also have uncommitted lines of credit with various banks, which permit borrowings at variable interest rates and which are primarily used to fund working capital needs. We have guaranteed the repayment of some of these borrowings made by certain subsidiaries. If we lose access to these credit lines, we would have to provide funding directly to some of our operations. As of March 31, 2018, the Company had uncommitted lines of credit in an aggregate amount of $1,150.8, under which we had outstanding borrowings of $178.5 classified as short-term borrowings on our Consolidated Balance Sheet. The average amount outstanding during the first quarter of 2018 was $111.3, with a weighted-average interest rate of approximately 3.5%.
Commercial Paper
We have a commercial paper program under which the Company is authorized to issue unsecured commercial paper up to a maximum aggregate amount outstanding at any time of $1,500.0. Borrowings under the program are supported by the Credit Agreement described above. Proceeds of the commercial paper are used for working capital and general corporate purposes, including the repayment of maturing indebtedness and other short-term liquidity needs. The maturities of the commercial paper vary but may not exceed 397 days from the date of issue. As of March 31, 2018, there was $620.9 commercial paper outstanding. The average amount outstanding under the program during the first quarter of 2018 was $453.4, with a weighted-average interest rate of 2.1% and a weighted-average maturity of sixteen days.


16

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


Note 5:  Earnings Per Share
The following sets forth basic and diluted (loss) earnings per common share available to IPG common stockholders.
 
Three months ended
March 31,
 
2018
 
2017
Net (loss) income available to IPG common stockholders
$
(14.1
)
 
$
24.7

 
 
 
 
Weighted-average number of common shares outstanding - basic
383.4

 
391.7

       Dilutive effect of stock options and restricted shares
N/A

 
7.6

Weighted-average number of common shares outstanding - diluted
383.4

 
399.3

 
 
 
 
(Loss) earnings per share available to IPG common stockholders:
 
 
 
       Basic
$
(0.04
)
 
$
0.06

       Diluted
$
(0.04
)
 
$
0.06

Shares outstanding and loss per share are equal on a basic and diluted basis for the three months ended March 31, 2018 because our potentially dilutive securities are antidilutive as a result of the net loss available to IPG common stockholders. Potential shares of restricted stock and stock options totaling 5.2 were excluded from the diluted loss per share calculation for the three months ended March 31, 2018.

Note 6:  Supplementary Data
Accrued Liabilities
The following table presents the components of accrued liabilities.
 
March 31,
2018
 
December 31,
2017
Salaries, benefits and related expenses
$
300.1

 
$
441.7

Office and related expenses
51.9

 
53.2

Acquisition obligations
43.4

 
42.0

Interest
14.6

 
16.4

Other
118.1

 
121.4

Total accrued liabilities
$
528.1

 
$
674.7


Other (Expense) Income, Net
Results of operations for the three months ended March 31, 2018 and 2017 include certain items that are not directly associated with our revenue-producing operations.
 
Three months ended
March 31,
 
2018
 
2017
Net (losses) gains on sales of businesses
$
(24.4
)
 
$
0.9

Other
0.0

 
(0.1
)
Total other (expense) income, net
$
(24.4
)
 
$
0.8

Net (losses) gains on sales of businesses – During the three months ended March 31, 2018, the amounts recognized were related to sales of businesses and the classification of certain assets and liabilities, consisting primarily of cash, accounts receivable and accounts payable, as held for sale within our IAN operating segment.

Share Repurchase Program
In February 2018, 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, which was in addition to the remaining amount available to be repurchased from the $300.0 authorization made by the Board in February 2017.

17

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


We may effect such repurchases through open market purchases, trading plans established in accordance with SEC rules, derivative transactions or other means. We expect to continue to repurchase our common stock in future periods, although the timing and amount of the repurchases will depend on market conditions and other funding requirements.
The following table presents our share repurchase activity under our share repurchase programs for the three months ended March 31, 2018 and 2017.
 
Three months ended
March 31,
 
2018
 
2017
Number of shares repurchased
2.4

 
2.3

Aggregate cost, including fees
$
54.9

 
$
55.0

Average price per share, including fees
$
22.59

 
$
23.85

As of March 31, 2018, $400.6, excluding fees, remains available for repurchase under the share repurchase programs. The share repurchase programs have no expiration date.

Redeemable Noncontrolling Interests
Many of our acquisitions include provisions under which the noncontrolling equity owners may require us to purchase additional interests in a subsidiary at their discretion. Redeemable noncontrolling interests are adjusted quarterly to their estimated redemption value, but not less than their initial fair value. Any adjustments to the redemption value impact retained earnings, except for foreign currency translation adjustments.
The following table presents changes in our redeemable noncontrolling interests.
 
Three months ended
March 31,
 
2018
 
2017
Balance at beginning of period
$
252.1

 
$
252.8

Change in related noncontrolling interests balance
(2.8
)
 
(4.5
)
Changes in redemption value of redeemable noncontrolling interests:
 
 
 
Redemptions and other
(1.9
)
 
(12.7
)
Redemption value adjustments
(0.5
)
 
5.6

Balance at end of period
$
246.9

 
$
241.2



18

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


Note 7:  Income Taxes
For the three months ended March 31, 2018, our income tax provision was driven 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 full tax benefit, partially offset by excess tax benefits on employee share-based payments, the majority of which is typically recognized in the first quarter due to the timing of the vesting of awards.
The Tax Cuts and Jobs Act of 2017 imposed a new tax on certain foreign earnings generated in 2018 and forward. These global intangible low-taxed income ("GILTI") tax rules are complex. U.S. GAAP allows us to choose an accounting policy which treats the U.S. tax under GILTI provisions as either a current expense, as incurred, or as a component of the Company’s measurement of deferred taxes. The Company has elected to account for the GILTI tax as a current expense.
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 $30.0 and $40.0 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 2007 or non-U.S. income tax audits for years prior to 2006.

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 2014 Performance Incentive Plan (the "2014 PIP") during the three months ended March 31, 2018.
 
Awards
 
Weighted-average
grant-date fair value
(per award)
Restricted stock (shares or units)
1.7

 
$
23.62

Performance-based stock (shares)
2.8

 
$
21.15

Restricted stock units (settled in cash)
0.1

 
$
23.63

Total stock-based compensation awards
4.6

 


During the three months ended March 31, 2018, the Compensation Committee granted performance cash awards under the 2014 PIP and restricted cash awards under the 2009 Restricted Cash Plan with a total annual target value of $55.1 and $18.7, respectively. Cash awards are expensed over the vesting period, which is typically three years.

Note 9:  Accumulated Other Comprehensive Loss, Net of Tax
The following tables present the changes in accumulated other comprehensive loss, net of tax, by component.
 
Foreign Currency
Translation Adjustments
 
Derivative
Instruments
 
Defined Benefit Pension and Other Postretirement Plans
 
Total
Balance as of December 31, 2017
$
(585.3
)
 
$
(6.8
)
 
$
(235.7
)
 
$
(827.8
)
Other comprehensive income before reclassifications
22.1

 
0.0

 
0.4

 
22.5

Amount reclassified from accumulated other comprehensive loss, net of tax
12.5

 
0.3

 
1.7

 
14.5

Balance as of March 31, 2018
$
(550.7
)
 
$
(6.5
)
 
$
(233.6
)
 
$
(790.8
)

19

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


 
Foreign Currency
Translation Adjustments
 
Available-for-Sale
Securities
 
Derivative
Instruments
 
Defined Benefit Pension and Other Postretirement Plans
 
Total
Balance as of December 31, 2016
$
(718.6
)
 
$
0.6

 
$
(8.4
)
 
$
(238.0
)
 
$
(964.4
)
Other comprehensive income before reclassifications
52.4

 
0.1

 
0.0

 
0.1

 
52.6

Amount reclassified from accumulated other comprehensive loss, net of tax
(0.4
)
 
0.0

 
0.3

 
1.3

 
1.2

Balance as of March 31, 2017
$
(666.6
)
 
$
0.7

 
$
(8.1
)
 
$
(236.6
)
 
$
(910.6
)
Amounts reclassified from accumulated other comprehensive loss, net of tax, for the three months ended March 31, 2018 and 2017 are as follows:
 
Three months ended
March 31,
 
Affected Line Item in the Consolidated Statements of Operations
 
2018
 
2017
 
Foreign currency translation adjustments
$
12.5

 
$
(0.4
)
 
Other (expense) income, net
Losses on derivative instruments
0.5

 
0.5

 
Interest expense
Amortization of defined benefit pension and postretirement plan items
2.1

 
1.7

 
Other (expense) income, net
Tax effect
(0.6
)
 
(0.6
)
 
Provision for (benefit of) income taxes
Total amount reclassified from accumulated other comprehensive loss, net of tax
$
14.5

 
$
1.2

 
 
 
Note 10:  Employee Benefits
We have a defined benefit pension plan that covers certain U.S. employees (the “Domestic Pension Plan”). We also have numerous funded and unfunded plans outside the U.S. The Interpublic Limited Pension Plan in the U.K. is a defined benefit plan and is our most material foreign pension plan in terms of the benefit obligation and plan assets. Some of our domestic and foreign subsidiaries provide postretirement health benefits and life insurance to eligible employees and, in certain cases, their dependents. The domestic postretirement benefit plan is our most material postretirement benefit plan in terms of the benefit obligation. Certain immaterial foreign pension and postretirement benefit plans have been excluded from the table below.
The components of net periodic cost for the Domestic Pension Plan, the significant foreign pension plans and the domestic postretirement benefit plan are listed below.
 
Domestic Pension Plan
 
Foreign Pension Plans
 
Domestic Postretirement Benefit Plan
Three months ended March 31,
2018
 
2017
 
2018
 
2017
 
2018
 
2017
Service cost
$
0.0

 
$
0.0

 
$
1.1

 
$
0.9

 
$
0.0

 
$
0.0

Interest cost
1.1

 
1.3

 
3.4

 
3.3

 
0.3

 
0.3

Expected return on plan assets
(1.8
)
 
(1.6
)
 
(4.9
)
 
(4.3
)
 
0.0

 
0.0

Settlements and curtailments
0.0

 
0.0

 
0.2

 
0.0

 
0.0

 
0.0

Amortization of:
 
 
 
 
 
 
 
 
 
 
 
Unrecognized actuarial losses
0.4

 
0.4

 
1.5

 
1.3

 
0.0

 
0.0

Net periodic cost
$
(0.3
)
 
$
0.1

 
$
1.3

 
$
1.2

 
$
0.3

 
$
0.3

The components of net periodic cost other than the service cost component are included in the line item “Other (expense) income, net” in the Consolidated Statements of Operations.
During the three months ended March 31, 2018, we contributed $0.3 and $5.7 of cash to our domestic and foreign pension plans, respectively. For the remainder of 2018, we expect to contribute approximately $10.0 and $14.0 of cash to our domestic and foreign pension plans, respectively.


20

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


Note 11:  Segment Information
As of March 31, 2018, we have two reportable segments: IAN and CMG. IAN is comprised of McCann Worldgroup, Foote, Cone & Belding ("FCB"), MullenLowe Group, IPG Mediabrands, 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. The profitability measure employed by our chief operating decision maker for allocating resources to operating divisions and assessing operating division performance is segment operating income (loss). Segment information is presented consistently with the basis described in our 2017 Annual Report on Form 10-K.    Summarized financial information concerning our reportable segments is shown in the following table.
 
Three months ended
March 31,
 
2018
 
2017
Total revenue:
 
 
 
IAN
$
1,685.5

 
$
1,567.8

CMG
483.6

 
496.0

Total
$
2,169.1

 
$
2,063.8

 
 
 
 
Net revenue:
 
 
 
IAN
$
1,481.3

 
$
1,391.1

CMG
292.7

 
284.2

Total
$
1,774.0

 
$
1,675.3

 
 
 
 
Segment operating income (loss):
 
 
 
IAN
$
57.0

 
$
50.1

CMG
19.4

 
22.1

Corporate and other
(37.6
)
 
(37.5
)
Total
38.8

 
34.7

 
 
 
 
Interest expense, net
(15.9
)
 
(15.7
)
Other (expense) income, net
(24.4
)
 
0.8

(Loss) income before income taxes
$
(1.5
)
 
$
19.8

 
 
 
 
Depreciation and amortization
 
 
 
IAN
$
37.4

 
$
32.7

CMG
6.1

 
6.0

Corporate and other
2.5

 
2.3

Total
$
46.0

 
$
41.0

 
 
 
 
Capital expenditures:
 
 
 
IAN
$
15.8

 
$
17.2

CMG
1.1

 
2.7

Corporate and other
5.9

 
4.9

Total
$
22.8

 
$
24.8

 
 
 
 
 
March 31,
2018
 
December 31,
2017
Total assets:
 
 
 
IAN
$
10,744.3

 
$
10,978.0

CMG
1,476.5

 
1,427.4

Corporate and other
19.3

 
299.3

Total
$
12,240.1

 
$
12,704.7

 

21

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


Note 12:  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 three months ended March 31, 2018. The following tables present information about our financial instruments measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017, and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value.
 
March 31, 2018
 
Balance Sheet Classification
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Assets
 
 
 
 
 
 
 
 
 
Cash equivalents
$
111.1

 
$
0.0

 
$
0.0