| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended March 31, 2011
or
| For the quarterly period ended June 30, 2011 |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| Delaware | 13-1024020 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| Large accelerated filer | Accelerated filer | ¨ | ||||||
| Non-accelerated filer | ¨ | Smaller reporting company | ¨ | |||||
| (Do not check if a smaller reporting company) | ||||||||
Item 2. Item 3. Item 4. Item 1. Item 1A. Item 2. 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. REVENUE OPERATING EXPENSES: Salaries and related expenses Office and general expenses Restructuring and other reorganization-related charges, net Total operating expenses OPERATING LOSS EXPENSES AND OTHER INCOME: Interest expense Interest income Other (expense) income, net Total (expenses) and other income Loss before income taxes Benefit of income taxes Loss of consolidated companies Equity in net income (loss) of unconsolidated affiliates NET LOSS Net loss attributable to noncontrolling interests NET LOSS ATTRIBUTABLE TO IPG Dividends on preferred stock NET LOSS AVAILABLE TO IPG COMMON STOCKHOLDERS Loss per share available to IPG common stockholders – basic and diluted Weighted-average number of common shares outstanding – basic and diluted Dividends declared per common share ASSETS: Cash and cash equivalents Marketable securities Accounts receivable, net of allowance of $63.4 and $63.1 Expenditures billable to clients Other current assets Total current assets Furniture, equipment and leasehold improvements, net of accumulated depreciation of $1,181.8 and $1,147.1 Deferred income taxes Goodwill Other non-current assets TOTAL ASSETS LIABILITIES: Accounts payable Accrued liabilities Short-term borrowings Current portion of long-term debt Total current liabilities Long-term debt Deferred compensation Other non-current liabilities TOTAL LIABILITIES Redeemable noncontrolling interests (see Note 4) STOCKHOLDERS’ EQUITY: Preferred stock Common stock Additional paid-in capital Accumulated deficit Accumulated other comprehensive loss, net of tax Less: Treasury stock Total IPG stockholders’ equity Noncontrolling interests TOTAL STOCKHOLDERS’ EQUITY TOTAL LIABILITIES AND EQUITY CASH FLOWS FROM OPERATING ACTIVITIES: Net loss Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization of fixed assets and intangible assets Provision for uncollectible receivables Amortization of restricted stock and other non-cash compensation Net amortization of bond premiums and deferred financing costs Deferred income tax benefit Other Changes in assets and liabilities, net of acquisitions and dispositions, providing (using) cash: Accounts receivable Expenditures billable to clients Other current assets Accounts payable Accrued liabilities Other non-current assets and liabilities Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures Proceeds from sales of businesses and investments, net of cash sold Acquisitions, including deferred payments, net of cash acquired Other investing activities Net cash (used in) provided by investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Repurchase of common stock Common stock dividends Exercise of stock options Preferred stock dividends Net decrease in short-term bank borrowings Distributions to noncontrolling interests Other financing activities Net cash used in financing activities Effect of foreign exchange rate changes on cash and cash equivalents Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period INCOME (LOSS) Balance at December 31, 2010 Net loss Foreign currency translation adjustments, net of tax Changes in market value of securities available-for-sale, net of tax Unrecognized losses, transition obligation and prior service cost, net of tax Total comprehensive loss Reclassifications related to redeemable noncontrolling interests Noncontrolling interest transactions Distributions to noncontrolling interests Change in redemption value of redeemable noncontrolling interests Repurchase of common stock Common stock dividends Preferred stock dividends Stock-based compensation Exercise of stock options Restricted stock, net of forfeitures Other Balance at March 31, 2011 Balance at December 31, 2009 Net loss Foreign currency translation adjustments, net of tax Changes in market value of securities available-for-sale, net of tax Unrecognized losses, transition obligation and prior service cost, net of tax Total comprehensive loss Reclassifications related to redeemable noncontrolling interests Noncontrolling interest transactions Distributions to noncontrolling interests Change in redemption value of redeemable noncontrolling interests Preferred stock dividends Stock-based compensation Restricted stock, net of forfeitures Other Balance at March 31, 2010 7.25% Senior Unsecured Notes due 2011 6.25% Senior Unsecured Notes due 2014 (less unamortized discount of $0.4) 10.00% Senior Unsecured Notes due 2017 (less unamortized discount of $10.3) 4.75% Convertible Senior Notes due 2023 (plus unamortized premium of $4.4) 4.25% Convertible Senior Notes due 2023 (plus unamortized premium of $13.8) Other notes payable and capitalized leases Total long-term debt Less: current portion3 Long-term debt, excluding current portion Consolidated Balance Sheet Caption Interest rate swap agreements Hedged debt Consolidated Statement of Operations Three months ended March 31, 2011 Caption Interest rate swap agreements Hedged debt cost structure was reduced. Net loss available to IPG common stockholders Weighted-average number of common shares outstanding – basic and diluted Loss per share available to IPG common stockholders – basic and diluted Restricted stock, stock options and other equity awards 4.75% Notes 4.25% Notes Preferred stock outstanding Total Media and production expenses Salaries, benefits and related expenses Office and related expenses Acquisition obligations Interest Professional fees Other Total accrued liabilities (Losses) gains on sales of businesses and investments Other income, net Total other (expense) income, net second quarter of 2010, we recognized a loss primarily related to the sale of one of our European businesses. Balance at beginning of period Noncontrolling interest balance related to redeemable noncontrolling interests Changes in redemption value of redeemable noncontrolling interests: Additions Redemptions and reclassifications Redemption value adjustments1 Balance at end of period The effective tax rate was negatively impacted by state and local taxes, losses in certain foreign locations where we receive no tax benefit due to 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. Stock options Stock-settled awards Performance-based awards Total stock-based compensation awards Three months ended March 31, Service cost Interest cost Expected return on plan assets Settlement losses Amortization of: Prior service cost Unrecognized actuarial losses Net periodic cost Revenue: IAN CMG Total Segment operating income (loss): IAN CMG Corporate and other Total Restructuring and other reorganization-related charges, net Interest expense Interest income Other (expense) income, net Loss before income taxes Depreciation and amortization of fixed assets and intangible assets: IAN CMG Corporate and other Total Capital expenditures: IAN CMG Corporate and other Total Total assets: IAN CMG Corporate and other Total Balance Sheet Classification Assets Cash equivalents Short-term marketable securities Long-term investments Total As a percentage of total assets Liabilities Interest rate swap agreements1 Mandatorily redeemable noncontrolling interests2 Balance Sheet Classification Assets Cash equivalents Short-term marketable securities Long-term investments Foreign currency derivatives3 Total As a percentage of total assets Liabilities Mandatorily redeemable noncontrolling interests2 Balance at beginning of period Level 3 additions Level 3 reductions Realized gains included in net loss Foreign currency translation Balance at end of period As discussed in our 2010 Annual Report on Form 10-K, we have guarantees of certain obligations of our subsidiaries relating principally to credit facilities Additionally, our conservative approach to our balance sheet and liquidity provides us with a solid financial foundation and financial flexibility to manage our business. The following tables present a summary of financial performance for the three and six months ended Revenue Salaries and related expenses Office and general expenses Operating margin Expenses as % of revenue: Salaries and related expenses Office and general expenses Net loss available to IPG common stockholders Loss per share available to IPG common stockholders – basic and diluted 2% in revenues and salaries and related expenses and approximately 3% in office and general expenses, which had virtually no impact on our operating margin percentage. periods. Consolidated Domestic International United Kingdom Continental Europe Asia Pacific Latin America Other During the continued weakened economic climate persists. expenses Salaries and related expenses Office and general expenses Restructuring and other reorganization-related charges, net Total operating expenses Operating loss Three months ended March 31, and incentive award expense. The organic increase occurred across all regions, primarily in our domestic market. Salaries and related expenses Base salaries, benefits and tax Incentive expense Severance expense Temporary help All other salaries and related expenses staff cost ratio. Three months ended March 31, factors similar to those noted above for the Office and general expenses Professional fees Occupancy expense (excluding depreciation and amortization) Travel & entertainment, office supplies and telecommunications All other office and general expenses Cash interest on debt obligations Non-cash interest Interest expense Interest income Net interest expense Other (expense) income, net Total (expenses) and other income Millions, Except Per Share Amounts) (Losses) gains on sales of businesses and investments Other income, net Total other (expense) income, net Sales of Businesses and Investments – During the three months ended March 31, 2011, we recognized a loss relating to the sale of a business in the domestic market within our Integrated Agency Networks (“IAN”) segment. INCOME TAXES Loss before income taxes Benefit of income taxes Effective tax rate Our tax rates are affected by many factors, including our worldwide earnings from various countries, changes in legislation and tax characteristics of our income. The effective tax rate was negatively impacted by state and local taxes, losses in certain foreign locations where we receive no tax benefit due to 100% valuation allowances and the net establishment of valuation allowances, primarily in the United Kingdom. Financial Condition and Results of Operations - (continued) Consolidated Domestic International During the second quarter of 2011. Segment operating loss Operating margin INCOME expenses and, to a lesser extent, higher discretionary spending to support business growth. of 2011 when compared to the first half of 2010 due to an increase in revenue of $235.2, partially offset by increases in salaries and related expenses of $178.3 and office and general expenses of $50.3. The increase in salaries and related expenses and office and general expenses was driven by factors similar to those noted above for the second quarter of 2011. Consolidated Domestic International During the Segment operating income Operating margin and incentive award expense. Cash Flow Data Net loss, adjusted to reconcile net loss to net cash used in operating activities1 Net cash used in working capital2 Balance Sheet Data Total debt Payments for acquisitions of 2010 Contributions to pension plans – Our funding policy regarding our pension As of Cash, cash equivalents and marketable securities Committed credit agreement Uncommitted facilities cost structure was reduced. Financial Covenants EBITDA Reconciliation Interest coverage ratio (not less than) Actual interest coverage ratio Depreciation and amortization Leverage ratio (not greater than) Actual leverage ratio EBITDA (not less than) Actual EBITDA Rating Outlook consistently from year to year, and there have been no significant changes in the application of critical accounting estimates since December 31, January 1-31 February 1-28 March 1-31 Total EXHIBIT NO. DESCRIPTIONPage No.PART I. FINANCIAL INFORMATIONItem 1.Page No. Item 1. 2 3 4 5172929303030Item 6. Item 6.303132 Three months ended
March 31, 2011 2010 $ 1,474.8 $ 1,337.0 1,080.1 979.3 439.2 416.8 0.8 0.3 1,520.1 1,396.4 (45.3 ) (59.4 ) (31.9 ) (32.6 ) 8.3 6.5 (6.1 ) 0.5 (29.7 ) (25.6 ) (75.0 ) (85.0 ) (21.5 ) (15.3 ) (53.5 ) (69.7 ) 0.3 (0.6 ) (53.2 ) (70.3 ) 8.0 5.7 (45.2 ) (64.6 ) (2.9 ) (6.9 ) $ (48.1 ) $ (71.5 ) $ (0.10 ) $ (0.15 ) 476.0 471.3 $ 0.06 $ 0.00 Three months ended
June 30, Six months ended
June 30, 2011 2010 2011 2010 REVENUE $ 1,740.7 $ 1,611.7 $ 3,215.5 $ 2,948.7 OPERATING EXPENSES: Salaries and related expenses 1,095.7 991.0 2,175.8 1,970.3 Office and general expenses 470.8 442.9 910.0 859.7 Restructuring and other reorganization-related charges, net 0.2 0.6 1.0 0.9 Total operating expenses 1,566.7 1,434.5 3,086.8 2,830.9 OPERATING INCOME 174.0 177.2 128.7 117.8 EXPENSES AND OTHER INCOME: Interest expense (33.1 ) (35.0 ) (65.0 ) (67.6 ) Interest income 9.7 6.1 18.0 12.6 Other income (expense), net 5.3 (2.1 ) (0.8 ) (1.6 ) Total (expenses) and other income (18.1 ) (31.0 ) (47.8 ) (56.6 ) Income before income taxes 155.9 146.2 80.9 61.2 Provision for income taxes 47.6 63.3 26.1 48.0 Income of consolidated companies 108.3 82.9 54.8 13.2 Equity in net income (loss) of unconsolidated affiliates 0.6 0.2 0.9 (0.4 ) NET INCOME 108.9 83.1 55.7 12.8 Net (income) loss attributable to noncontrolling interests (4.3 ) (0.6 ) 3.7 5.1 NET INCOME ATTRIBUTABLE TO IPG 104.6 82.5 59.4 17.9 Dividends on preferred stock (2.9 ) (2.9 ) (5.8 ) (9.8 ) Benefit from preferred stock repurchased 0.0 25.7 0.0 25.7 NET INCOME AVAILABLE TO IPG COMMON STOCKHOLDERS $ 101.7 $ 105.3 $ 53.6 $ 33.8 Earnings per share available to IPG common stockholders: Basic $ 0.21 $ 0.22 $ 0.11 $ 0.07 Diluted $ 0.19 $ 0.15 $ 0.11 $ 0.02 Weighted-average number of common shares outstanding: Basic 473.1 473.0 474.6 472.1 Diluted 546.9 544.9 515.6 531.6 Dividends declared per common share $ 0.06 $ 0.00 $ 0.12 $ 0.00 March 31,
2011 December 31,
2010 $ 1,840.2 $ 2,675.7 14.1 13.7 3,995.4 4,317.6 1,357.8 1,217.1 266.6 229.4 7,474.1 8,453.5 445.5 454.3 398.9 334.2 3,407.7 3,368.5 451.0 460.3 $ 12,177.2 $ 13,070.8 $ 4,010.6 $ 4,474.5 2,733.6 3,112.7 116.2 114.8 452.4 38.9 7,312.8 7,740.9 1,165.9 1,583.3 477.0 486.1 402.8 402.4 9,358.5 10,212.7 285.9 291.2 221.5 221.5 47.7 47.5 2,436.0 2,456.8 (108.9 ) (63.7 ) (73.8 ) (119.0 ) 2,522.5 2,543.1 (24.6 ) (14.1 ) 2,497.9 2,529.0 34.9 37.9 2,532.8 2,566.9 $ 12,177.2 $ 13,070.8 June 30,
2011 December 31,
2010ASSETS: Cash and cash equivalents $ 1,809.8 $ 2,675.7 Marketable securities 14.2 13.7 Accounts receivable, net of allowance of $63.4 and $63.1 4,160.9 4,317.6 Expenditures billable to clients 1,348.7 1,217.1 Other current assets 260.1 229.4 Total current assets 7,593.7 8,453.5 450.8 454.3 Deferred income taxes 373.0 334.2 Goodwill 3,427.1 3,368.5 Other non-current assets 457.0 460.3 TOTAL ASSETS $ 12,301.6 $ 13,070.8 LIABILITIES: Accounts payable $ 4,064.7 $ 4,474.5 Accrued liabilities 2,849.4 3,112.7 Short-term borrowings 150.0 114.8 Current portion of long-term debt 448.6 38.9 Total current liabilities 7,512.7 7,740.9 Long-term debt 1,167.8 1,583.3 Deferred compensation 451.4 486.1 Other non-current liabilities 402.1 402.4 TOTAL LIABILITIES 9,534.0 10,212.7 Redeemable noncontrolling interests (see Note 4) 272.1 291.2 STOCKHOLDERS’ EQUITY: Preferred stock 221.5 221.5 Common stock 48.1 47.5 Additional paid-in capital 2,398.0 2,456.8 Accumulated deficit (4.3 ) (63.7 ) Accumulated other comprehensive loss, net of tax (46.6 ) (119.0 ) 2,616.7 2,543.1 Less: Treasury stock (153.1 ) (14.1 ) Total IPG stockholders’ equity 2,463.6 2,529.0 Noncontrolling interests 31.9 37.9 TOTAL STOCKHOLDERS’ EQUITY 2,495.5 2,566.9 TOTAL LIABILITIES AND EQUITY $ 12,301.6 $ 13,070.8 Three months ended
March 31, 2011 2010 $ (53.2 ) $ (70.3 ) 35.6 37.4 3.5 1.1 15.7 13.7 (1.9 ) (1.0 ) (53.0 ) (38.7 ) 10.2 10.9 369.4 271.6 (123.2 ) (39.1 ) (28.6 ) (26.5 ) (429.6 ) (347.8 ) (523.8 ) (340.7 ) (22.8 ) (26.1 ) (801.7 ) (555.5 ) (16.9 ) (9.4 ) 2.4 30.1 (2.1 ) (5.6 ) (0.2 ) (2.1 ) (16.8 ) 13.0 (10.5 ) 0.0 (28.5 ) 0.0 8.4 0.0 (2.9 ) (6.9 ) (5.0 ) (7.8 ) (3.1 ) (4.5 ) (3.8 ) 3.0 (45.4 ) (16.2 ) 28.4 (7.7 ) (835.5 ) (566.4 ) 2,675.7 2,495.2 $ 1,840.2 $ 1,928.8 Six months ended
June 30,2011 2010 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 55.7 $ 12.8 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization of fixed assets and intangible assets 73.3 74.2 Provision for uncollectible receivables 5.7 6.7 Amortization of restricted stock and other non-cash compensation 29.5 26.5 Net amortization of bond premiums and deferred financing costs (4.0 ) (1.8 ) Deferred income tax (benefit) provision (36.1 ) 4.4 Other 13.7 18.3 Changes in assets and liabilities, net of acquisitions and dispositions, providing (using) cash: Accounts receivable 251.0 (144.7 ) Expenditures billable to clients (107.7 ) (161.1 ) Other current assets (30.7 ) (25.3 ) Accounts payable (415.7 ) 139.3 Accrued liabilities (365.6 ) (124.8 ) Other non-current assets and liabilities (70.8 ) (26.7 ) Net cash used in operating activities (601.7 ) (202.2 ) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (53.1 ) (28.3 ) Proceeds from sales of businesses and investments, net of cash sold 7.0 30.9 Acquisitions, including deferred payments, net of cash acquired (38.6 ) (9.0 ) Other investing activities 0.2 (2.9 ) Net cash used in investing activities (84.5 ) (9.3 ) CASH FLOWS FROM FINANCING ACTIVITIES: Repurchase of common stock (139.0 ) 0.0 Common stock dividends (56.8 ) 0.0 Exercise of stock options 11.7 0.0 Repurchase of preferred stock 0.0 (265.9 ) Purchase of long-term debt 0.0 (21.4 ) Net increase in short term bank borrowings 24.7 3.6 Acquisition related payments (47.6 ) 0.0 Distributions to noncontrolling interests (10.7 ) (12.1 ) Preferred stock dividends (5.8 ) (13.8 ) Other financing activities 2.8 (6.3 ) Net cash used in financing activities (220.7 ) (315.9 ) Effect of foreign exchange rate changes on cash and cash equivalents 41.0 (37.9 ) Net decrease in cash and cash equivalents (865.9 ) (565.3 ) Cash and cash equivalents at beginning of period 2,675.7 2,495.2 Cash and cash equivalents at end of period $ 1,809.8 $ 1,929.9 LOSS Preferred
Stock Common Stock Additional Paid-
In Capital Accumulated
Deficit Accumulated Other
Comprehensive
Loss, Net of Tax Treasury
Stock Total IPG
Stockholders’
Equity Noncontrolling
Interests Total
Stockholders’
Equity Shares Amount $ 221.5 489.5 $ 47.5 $ 2,456.8 $ (63.7 ) $ (119.0 ) $ (14.1 ) $ 2,529.0 $ 37.9 $ 2,566.9 (45.2 ) (45.2 ) (8.0 ) (53.2 ) 43.5 43.5 0.2 43.7 0.5 0.5 0.5 1.2 1.2 1.2 $ 0.0 $ (7.8 ) $ (7.8 ) 11.2 11.2 (0.1 ) (0.1 ) (3.2 ) (3.3 ) (3.1 ) (3.1 ) (9.4 ) (9.4 ) (9.4 ) (10.5 ) (10.5 ) (10.5 ) (28.5 ) (28.5 ) (28.5 ) (2.9 ) (2.9 ) (2.9 ) 15.9 15.9 15.9 0.9 0.1 8.4 8.5 8.5 0.4 0.1 (6.3 ) (6.2 ) (6.2 ) 0.1 0.0 2.1 2.1 (0.1 ) 2.0 $ 221.5 490.9 $ 47.7 $ 2,436.0 $ (108.9 ) $ (73.8 ) $ (24.6 ) $ 2,497.9 $ 34.9 $ 2,532.8 Shares Amount Balance at December 31, 2010 $ 221.5 489.5 $ 47.5 $ 2,456.8 $ (63.7 ) $ (119.0 ) $ (14.1 ) $ 2,529.0 $ 37.9 $ 2,566.9 Net income (loss) 59.4 59.4 (3.7 ) 55.7 65.6 65.6 0.4 66.0 0.6 0.6 0.6 Recognition of previously unrealized loss
on securities available-for-sale, net of tax 0.2 0.2 0.2 Unrecognized losses, transition obligation
and prior service cost, net of tax 6.0 6.0 6.0 Total comprehensive income (loss) $ 131.8 $ (3.3 ) $ 128.5 10.2 10.2 Noncontrolling interest transactions (0.3 ) (0.3 ) (3.1 ) (3.4 ) Distributions to noncontrolling interests (10.7 ) (10.7 ) (10.3 ) (10.3 ) (10.3 ) Repurchase of common stock (139.0 ) (139.0 ) (139.0 ) Common stock dividends (56.8 ) (56.8 ) (56.8 ) Preferred stock dividends (5.8 ) (5.8 ) (5.8 ) Stock-based compensation 27.2 27.2 27.2 Exercise of stock options 1.2 0.1 11.7 11.8 11.8 Restricted stock, net of forfeitures 0.6 0.5 (27.2 ) (26.7 ) (26.7 ) Other 0.1 0.0 2.7 2.7 0.9 3.6 Balance at June 30, 2011 $ 221.5 491.4 $ 48.1 $ 2,398.0 $ (4.3 ) $ (46.6 ) $ (153.1 ) $ 2,463.6 $ 31.9 $ 2,495.5 LOSSINCOME (LOSS) – (CONTINUED) Preferred
Stock Common Stock Additional Paid-
In Capital Accumulated
Deficit Accumulated Other
Comprehensive
Loss, Net of Tax Treasury
Stock Total IPG
Stockholders’
Equity Noncontrolling
Interests Total
Stockholders’
Equity Shares Amount $ 525.0 486.5 $ 47.1 $ 2,441.0 $ (324.8 ) $ (176.6 ) $ (14.0 ) $ 2,497.7 $ 38.6 $ 2,536.3 (64.6 ) (64.6 ) (5.7 ) (70.3 ) (15.2 ) (15.2 ) (0.1 ) (15.3 ) 0.1 0.1 0.1 1.0 1.0 1.0 $ (78.7 ) $ (5.8 ) $ (84.5 ) 12.8 12.8 (0.2 ) (0.2 ) (0.1 ) (0.3 ) (4.5 ) (4.5 ) (2.3 ) (2.3 ) (2.3 ) (6.9 ) (6.9 ) (6.9 ) 15.7 15.7 15.7 (0.4 ) 0.1 (3.3 ) (3.2 ) (3.2 ) 0.1 0.0 1.9 (0.1 ) 1.8 (0.4 ) 1.4 $ 525.0 486.2 $ 47.2 $ 2,445.9 $ (389.4 ) $ (190.7 ) $ (14.1 ) $ 2,423.9 $ 40.6 $ 2,464.5 Common Stock Shares Amount Balance at December 31, 2009 $ 525.0 486.5 $ 47.1 $ 2,441.0 $ (324.8 ) $ (176.6 ) $ (14.0 ) $ 2,497.7 $ 38.6 $ 2,536.3 Net income (loss) 17.9 17.9 (5.1 ) 12.8 (67.8 ) (67.8 ) (0.1 ) (67.9 ) 0.1 0.1 0.1 Unrecognized losses, transition obligation
and prior service cost, net of tax 3.5 3.5 3.5 Total comprehensive loss $ (46.3 ) $ (5.2 ) $ (51.5 ) 16.9 16.9 Noncontrolling interest transactions (18.8 ) (18.8 ) (0.1 ) (18.9 ) Distributions to noncontrolling interests (12.1 ) (12.1 ) (4.7 ) (4.7 ) (4.7 ) Repurchase of preferred stock (303.5 ) 35.9 (267.6 ) (267.6 ) Preferred stock dividends (9.8 ) (9.8 ) (9.8 ) Stock-based compensation 28.8 28.8 28.8 Restricted stock, net of forfeitures 2.2 0.3 (11.1 ) (10.8 ) (10.8 ) Other 0.2 0.0 1.3 (0.1 ) 1.2 1.2 Balance at June 30, 2010 $ 221.5 488.9 $ 47.4 $ 2,462.6 $ (306.9 ) $ (240.8 ) $ (14.1 ) $ 2,169.7 $ 38.1 $ 2,207.8 lossincome or net loss,income, decreased revenue and office and general expense by $6.6 and $4.3$6.1 for the quartersthree months ended March 31,June 30, 2010, and by $10.4 for the six months endedJune 30, 2010. A comparable amount is included as a reduction to revenue and office and general expense for the three and six months ended June 30, 2011 and 2010, respectively.. We believe this presentation better aligns the Company’s internal financial and operational management reporting as well as increases consistency in our external reporting across the countries in which we operate. March 31,
2011 December 31,
2010 Effective
Interest Rate Book
Value Fair
Value2 Book
Value Fair
Value2 7.25 %1 $ 36.3 $ 36.6 $ 36.3 $ 37.0 6.29 %1 352.7 382.4 353.3 378.0 10.38 % 589.7 714.0 589.4 705.0 3.50 % 204.4 252.9 205.0 235.0 0.58 % 413.8 461.6 417.4 444.4 21.4 20.8 1,618.3 1,622.2 452.4 38.9 $ 1,165.9 $ 1,583.3 June 30,
2011 December 31,
2010 7.25% Senior Unsecured Notes due 2011 7.25 % $ 36.3 $ 36.3 $ 36.3 $ 37.0 6.25% Senior Unsecured Notes due 2014 (less unamortized
discount of $0.3)6.29 % 355.0 385.9 353.3 378.0 10.00% Senior Unsecured Notes due 2017 (less unamortized
discount of $10.0)10.38 % 590.0 703.5 589.4 705.0 4.75% Convertible Senior Notes due 2023 (plus unamortized
premium of $3.8)3.50 % 203.8 249.1 205.0 235.0 4.25% Convertible Senior Notes due 2023 (plus unamortized
premium of $10.2)0.58 % 410.2 452.5 417.4 444.4 Other notes payable and capitalized leases 21.1 20.8 Total long-term debt 1,616.4 1,622.2 448.6 38.9 Long-term debt, excluding current portion $ 1,167.8 $ 1,583.3 11 Excludes the effect of related gains/losses on interest rate swaps.22 Fair values are derived from trading quotes by institutions making a market in the securities and estimations of value by those institutions using proprietary models. 33 “4.25%“4.25% Notes”) may require us to repurchase their notes for cash at par and as such, we included these notes in the current portion of long-termlong-tern debt on our March 31,June 30, 2011 unaudited Consolidated Balance Sheet. Any 4.25% Notes not repurchased on March 15, 2012 will be reclassified to long-term debt.“2014“2014 Notes”) to effectively convert $100.0$100.0 notional amount of our $350.0 $350.02014 Notes from fixed rate to floating rate debt. In April 2011, we entered into an additional interest rate swap agreement related to the 2014 Notes to effectively convert an additional $100.0$100.0 notional amount of our 2014 Notes from fixed rate to floating rate debt.We enter into In May 2011, we terminated all of the interest rate swaps related to the risk management purposesa total of $2.7, received in cash, which included accrued and unpaid interest. Upon termination of these swaps, a debt premium equal to manage our exposurethe swaps' fair value of $2.3 was recorded as an adjustment to changes in interest rates. The interest rate swap agreements mature on November 15, 2014, coinciding with the maturitycarrying value of the 2014 Notes. We paydebt and will be amortized as a variablereduction to interest rate based uponexpense over the three-month U.S. LIBOR rate plus a fixed spread and receive a fixedremaining term of the 2014 Notes, resulting in an annual effective interest rate of 6.25%5.8%. The variable interest rate is reset quarterly,we make our interest payments semi-annually on May 15th and November 15th. We receive fixed payments semi-annually on May 15th and November 15th. These interest rate swap agreements qualify for hedge accounting as fair value hedges. We evaluate the appropriateness of hedge accounting at inception and throughout the hedge period.The following table presents the fair valuerestatement of our interest rate swapcredit agreement originally dated as of related debt andextending the associated gains/(losses) recognized in net loss dueCredit Agreement's expiration to changes in fair value of our interest rate swap agreement andMay 31, 2016. Additionally, the underlying debt. March 31, 2011 Fair value Other non-current liabilities $ 0.3 Long-term debt (0.3 ) Gains / (losses)
recognized in net loss Other (expense) income, net $ (0.3 ) Other (expense) income, net 0.3 Credit FacilitiesWe maintain a committed corporate credit facility to increaseamendments modified our financial flexibility. The credit facility is a revolving facility expiring July 18, 2013, under which amounts borrowed by uscovenants, and provided additional flexibility with respect to, or any of our subsidiaries designated undereliminated, certain covenants such as restrictions on acquisitions, capital expenditures and restricted payments. In addition, the credit facility may be repaid and reborrowed, subject to an aggregate lending limit of $650.0 or the equivalent in other currencies. The aggregate available amount of letters of credit outstanding may decrease or increase, subject to a limit on letters of credit of $200.0 or the equivalent in other currencies. Our obligations under the credit facility are unsecured. We have not drawn on any of our corporate credit facilities since 2003, although we use them for letters of credit primarily to support obligations of our subsidiaries.credit facilityCredit Agreement as of March 31,June 30, 2011. The financial covenants in the Credit Agreement require that we maintain, as of the end of each fiscal quarter, certain financial measures for the four quarters then ended. As of June 30, 2011, we had received investment-grade ratings from two of the major credit ratings agencies, and consequently we are not required to satisfy a minimum EBITDA financial covenant and no longer have limitations on restricted payments. The table below sets forth the financial covenants in effect as of June 30, 2011.Q2 2011 Q3 2011 4.50x 5.00x 5.00x 3.25x 3.00x 2.75x 1 The interest coverage ratio is defined as EBITDA, as defined in the Credit Agreement, to net interest expense plus cash dividends on convertible preferred stock for the four quarters then ended. 2 The leverage ratio is defined as debt as of the last day of such fiscal quarter to EBITDA, as defined in the Credit Agreement, for the four quarters then ended. Loss Earnings Per Sharelossearnings per common share available to IPG common stockholders. Three months ended
March 31, 2011 2010 $ (48.1 ) $ (71.5 ) 476.0 471.3 $ (0.10 ) $ (0.15 ) Notes to Consolidated Financial Statements – (continued)(Amounts in Millions, Except Per Share Amounts)(Unaudited)Basic and diluted shares outstanding and loss per share are equal for the three months ended March 31, 2011 and 2010 because our potentially dilutive securities are antidilutive as a result of the net loss available to IPG common stockholders in each period presented. Three months ended
June 30, Six months ended
June 30, 2011 2010 2011 2010 Net income available to IPG common stockholders - basic $ 101.7 $ 105.3 $ 53.6 $ 33.8 Adjustments: Effect of dilutive securities Interest on 4.25% Notes 0.4 0.4 0.7 0.7 Interest on 4.75% Notes 1.0 1.0 0.0 0.0 Preferred stock dividends 2.9 0.0 0.0 0.0 0.0 (25.7 ) 0.0 (21.7 ) Net income available to IPG common stockholders - diluted $ 106.0 $ 81.0 $ 54.3 $ 12.8 Weighted-average number of common shares outstanding - basic 473.1 473.0 474.6 472.1 Add: Effect of dilutive securities Restricted stock, stock options and other equity awards 8.8 9.8 8.5 9.3 4.25% Notes 32.5 32.2 32.5 32.2 4.75% Notes 16.3 16.1 0.0 0.0 Preferred stock outstanding 16.2 0.0 0.0 0.0 Preferred stock repurchased 0.0 13.8 0.0 18.0 Weighted-average number of common shares outstanding - diluted 546.9 544.9 515.6 531.6 Earnings per share available to IPG common stockholders - basic $ 0.21 $ 0.22 $ 0.11 $ 0.07 Earnings per share available to IPG common stockholders - diluted $ 0.19 $ 0.15 $ 0.11 $ 0.02 1 lossearnings per share calculation because the effect of including these potential shares would be antidilutive. Three months ended
March 31, 2011 2010 13.3 10.8 16.1 16.1 32.2 32.2 16.2 38.4 77.8 97.5 Also excluded from the diluted loss per share calculation for the three months ended March 31, 2011 and 2010 were 8.1 and 20.7, respectively, Three months ended
June 30, Six months ended
June 30, 2011 2010 2011 2010 4.75% Notes 0.0 0.0 16.3 16.1 Preferred stock outstanding 0.0 16.2 16.2 16.2 Total 0.0 16.2 32.5 32.3 Securities excluded from the diluted earnings per share calculation
because the exercise price was greater than the average market price: 7.7 19.9 7.7 19.9 1 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. which the exercise price is less than the average market price, these options have the potential to be dilutive, though the application of the treasury stock method would reduce this amount.Millions, Except Per Share Amounts) March 31,
2011 December 31,
2010 $ 2,115.0 $ 2,332.2 326.4 470.0 56.3 62.0 69.6 63.5 24.4 41.5 22.2 24.6 119.7 118.9 $ 2,733.6 $ 3,112.7 June 30,
2011 December 31,
2010Media and production expenses $ 2,249.2 $ 2,332.2 Salaries, benefits and related expenses 365.2 470.0 Office and related expenses 54.3 62.0 Acquisition obligations 8.5 63.5 Interest 40.8 41.5 Professional fees 17.9 24.6 Other 113.5 118.9 Total accrued liabilities $ 2,849.4 $ 3,112.7 March 31,June 30, 2011, and December 31, 2010, we had vendor discounts and credit liabilities of $85.6$77.7 and $82.5,$82.5, respectively, related to the 2004 Restatement.Notes to Consolidated Financial Statements – (continued)(Amounts in Millions, Except Per Share Amounts)(Unaudited)(Expense) Income (Expense), netMarch 31,June 30, 2011 and 2010 include certain items which are not directly associated with our revenue-producing operations. Three months ended
March 31, 2011 2010 $ (6.6 ) $ 0.2 0.5 0.3 $ (6.1 ) $ 0.5 Three months ended
June 30, Six months ended
June 30, 2011 2010 2011 2010 Gains (losses) on sales of businesses and investments $ 0.3 $ (3.3 ) $ (6.2 ) $ (3.1 ) Vendor discounts and credit adjustments 2.8 2.2 2.9 2.0 Other income (expense), net 2.2 (1.0 ) 2.5 (0.5 ) Total other income (expense), net $ 5.3 $ (2.1 ) $ (0.8 ) $ (1.6 ) three months ended March 31, first half of 2011, we recognized a loss relating to the sale of a business in the domestic market within our Integrated Agency Networks (“IAN”) segment. During the $300.0$300.0 of our common stock. We may effect such repurchases through open market purchases, trading plans established in accordance with SEC rules, derivative transactions or other means. The timing and amount of repurchases under the authorization will depend on market conditions and our other funding requirements. The share repurchase program has no expiration date. During the period fromsince the Board’s authorization through March 31, 2011, we repurchased 0.912.0 shares that have settled through June 30, 2011, at an average price of $12.36$11.61 per share and an aggregate cost of $10.5.$139.0, including fees. 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 our other funding requirements. Three months ended
March 31, 2011 2010 $ 291.2 $ 277.8 (11.2 ) (12.8 ) 3.6 2.4 (7.4 ) (16.7 ) 9.7 4.4 $ 285.9 $ 255.1 Six months ended
June 30, 2011 2010 Balance at beginning of period $ 291.2 $ 277.8 (10.2 ) (16.9 ) Changes in redemption value of redeemable noncontrolling interests: Additions 5.5 21.0 Redemptions and reclassifications (25.4 ) (16.7 ) 11.0 4.2 Balance at end of period $ 272.1 $ 269.4 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 additional paid-in capital, except adjustments as a result of currency translation. March 31,June 30, 2011, our effective tax rate of 28.7%30.5% was negativelypositively impacted by losses in certain foreign locations for which we receive no benefit duefrom the recognition of previously unrecognized tax benefits primarily as a result of the settlement of the 2007-2008 IRS audit cycle.100% valuation allowances and the establishment of a valuation allowance inpositive factor noted above, the United Kingdom. Our effective tax rate for the six months endedJune 30, 2011 of 32.3% was positively impacted due to tax efficiencies from entity consolidation in the Asia Pacific region and the loss relating to the sale of a business in the domestic market.Notes to Consolidated Financial Statements – (continued)(Amounts in Millions, Except Per Share Amounts)(Unaudited)and various state and local, and non-U.S. tax authorities, we currently anticipate that total unrecognized tax benefits will decrease by an amount between $5.0$3.0 and $15.0$13.0 in the next twelve months, a portion of which will affect the effective tax rate, primarily as a result of the settlement of tax examinations and the lapsing of statutes of limitations. This net decrease is related to various items of income and expense, primarily transfer pricing adjustments.2007.2009. 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 2000.2003. Three months ended
June 30, 2011 2010 Net income $ 108.9 $ 83.1 Foreign currency translation adjustment, net of tax 22.3 (52.6 ) Adjustments to pension and other postretirement plans, net of tax 4.8 2.5 Net unrealized holding gains on securities, net of tax 0.3 0.0 Total comprehensive income 136.3 33.0 Comprehensive income attributable to noncontrolling interests 4.5 0.6 Comprehensive income attributable to IPG $ 131.8 $ 32.4 6:7: Incentive Compensation Plansthreesix months ended March 31, 2011. Awards Weighted-average
grant-date fair value
(per award) 0.7 $ 4.73 0.6 $ 12.94 1.4 $ 11.87 2.7 Awards Stock options 0.7 $ 4.73 Stock-settled awards 0.7 $ 12.83 Performance-based awards 1.8 $ 11.43 Total stock-based compensation awards 3.2 threesix months ended March 31,June 30, 2011, the Compensation Committee granted performance cash awards of $70.6 under the 2009 PIP.PIP with a total target value of $71.0. Of this amount, awards with a total target value of $31.6$31.8 will be settled in shares upon vesting, which is three years from the grant date.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. The remainingAdditionally, during the six months endedJune 30, 2011, the Compensation Committee granted cash awards under the Interpublic Restricted Cash Plan with a total target value of $1.9. Cash awards will be amortized over the vesting period, typically three years.Notes to Consolidated Financial Statements – (continued)(Amounts in Millions, Except Per Share Amounts)(Unaudited)7:8: Employee Benefits Domestic Pension Plan Foreign Pension Plans Postretirement Benefit
Plan 2011 2010 2011 2010 2011 2010 $ 0.0 $ 0.0 $ 2.2 $ 3.2 $ 0.1 $ 0.1 1.7 1.8 5.8 5.9 0.7 0.8 (1.8 ) (1.6 ) (4.7 ) (4.4 ) 0.0 0.0 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 1.7 2.3 0.2 0.5 0.0 0.0 $ 1.6 $ 2.5 $ 3.5 $ 5.7 $ 0.8 $ 0.9 Domestic Pension Plan Foreign Pension Plans Three months ended June 30, 2011 2010 2011 2010 2011 2010 Service cost $ 0.0 $ 0.0 $ 2.9 $ 2.4 $ 0.0 $ 0.0 Interest cost 1.7 1.8 5.9 5.7 0.6 0.6 Expected return on plan assets (1.9 ) (1.8 ) (4.8 ) (4.1 ) 0.0 0.0 Settlement losses 0.0 0.0 0.0 0.6 0.0 0.0 Amortization of: Transition obligation 0.0 0.0 0.0 0.0 0.1 0.1 Prior service cost 0.0 0.0 0.1 0.0 0.0 0.0 Unrecognized actuarial losses 1.6 2.1 0.1 0.4 0.0 0.0 Net periodic cost $ 1.4 $ 2.1 $ 4.2 $ 5.0 $ 0.7 $ 0.7 Domestic Pension Plan Foreign Pension Plans Six months ended June 30, 2011 2010 2011 2010 2011 2010 Service cost $ 0.0 $ 0.0 $ 5.1 $ 5.6 $ 0.1 $ 0.1 Interest cost 3.4 3.6 11.7 11.6 1.3 1.4 Expected return on plan assets (3.7 ) (3.4 ) (9.5 ) (8.5 ) 0.0 0.0 Settlement losses 0.0 0.0 0.0 1.0 0.0 0.0 Amortization of: Transition obligation 0.0 0.0 0.0 0.0 0.1 0.1 Prior service cost 0.0 0.0 0.1 0.1 0.0 0.0 Unrecognized actuarial losses 3.3 4.4 0.3 0.9 0.0 0.0 Net periodic cost $ 3.0 $ 4.6 $ 7.7 $ 10.7 $ 1.5 $ 1.6 threesix months ended March 31,June 30, 2011, we contributed $11.7$12.5 of cash to our domestic pension plan and $5.8$12.1 of cash to our foreign pension plans. For the remainder of 2011, we expect to contribute approximately $2.4$1.6 and $19.0$11.8 of cash to our domestic and foreign pension plans, respectively.8:9: Segment Information(loss), excluding the impact ofrestructuringof restructuring and other reorganization-related charges, netandnet and long-lived asset impairment and other charges, if applicable. Other than certain reclassifications, the segment information is presented consistently with the basis described in our 2010 Annual Report on Form 10-K. Three months ended
March 31, 2011 2010 $ 1,235.9 $ 1,109.2 238.9 227.8 $ 1,474.8 $ 1,337.0 $ (21.4 ) $ (33.3 ) 10.7 7.7 (33.8 ) (33.5 ) (44.5 ) (59.1 ) (0.8 ) (0.3 ) (31.9 ) (32.6 ) 8.3 6.5 (6.1 ) 0.5 $ (75.0 ) $ (85.0 ) $ 29.3 $ 28.7 3.1 3.6 3.2 5.1 $ 35.6 $ 37.4 $ 14.0 $ 8.6 1.3 0.3 1.6 0.5 $ 16.9 $ 9.4 March 31,
2011 December 31,
2010 $ 10,271.3 $ 10,481.7 930.3 930.5 975.6 1,658.6 $ 12,177.2 $ 13,070.8 Three months ended
June 30, Six months ended
June 30, 2011 2010 2011 2010 Revenue: IAN $ 1,471.7 $ 1,363.2 $ 2,707.6 $ 2,472.4 CMG 269.0 248.5 507.9 476.3 Total $ 1,740.7 $ 1,611.7 $ 3,215.5 $ 2,948.7 Segment operating income: IAN $ 184.7 $ 190.0 $ 163.3 $ 156.7 CMG 28.0 21.8 38.7 29.5 Corporate and other (38.5 ) (34.0 ) (72.3 ) (67.5 ) Total 174.2 177.8 129.7 118.7 Restructuring and other reorganization-related charges, net (0.2 ) (0.6 ) (1.0 ) (0.9 ) Interest expense (33.1 ) (35.0 ) (65.0 ) (67.6 ) Interest income 9.7 6.1 18.0 12.6 Other income (expense), net 5.3 (2.1 ) (0.8 ) (1.6 ) Income before income taxes $ 155.9 $ 146.2 $ 80.9 $ 61.2 Depreciation and amortization of fixed assets and intangible assets: IAN $ 31.4 $ 28.6 $ 60.7 $ 57.3 CMG 3.3 3.4 6.4 7.0 Corporate and other 3.0 4.8 6.2 9.9 Total $ 37.7 $ 36.8 $ 73.3 $ 74.2 Capital expenditures: IAN $ 22.8 $ 15.7 $ 36.8 $ 24.3 CMG 2.9 1.6 4.2 1.9 Corporate and other 10.5 1.6 12.1 2.1 Total $ 36.2 $ 18.9 $ 53.1 $ 28.3 June 30,
2011 December 31,
2010 Total assets: IAN $ 10,353.1 $ 10,481.7 CMG 942.1 930.5 Corporate and other 1,006.4 1,658.6 Total $ 12,301.6 $ 13,070.8 9:10: Fair Value Measurementsthatwhich requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. We primarily apply the market approach for recurring fair value measurements. 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. threesix months ended March 31, 2011.June 30, 2011. The following tables present information about our assets and liabilities measured at fair value on a recurring basis as of March 31,June 30, 2011, and March 31,June 30, 2010, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. March 31, 2011 Level 1 Level 2 Level 3 Total $ 1,100.2 $ 0.0 $ 0.0 $ 1,100.2 Cash and cash equivalents 14.1 0.0 0.0 14.1 Marketable securities 1.4 13.9 0.0 15.3 Other assets $ 1,115.7 $ 13.9 $ 0.0 $ 1,129.6 9.2 % 0.1 % 0.0 % 9.3 % $ 0.0 $ 0.3 $ 0.0 $ 0.3 Other non-current liabilities 0.0 0.0 57.9 57.9 March 31, 2010 Level 1 Level 2 Level 3 Total $ 1,239.1 $ 0.0 $ 0.0 $ 1,239.1 Cash and cash equivalents 12.7 0.0 0.0 12.7 Marketable securities 1.3 13.8 0.0 15.1 Other assets 0.0 0.0 0.6 0.6 Other assets $ 1,253.1 $ 13.8 $ 0.6 $ 1,267.5 11.0 % 0.1 % 0.0 % 11.1 % $ 0.0 $ 0.0 $ 63.5 $ 63.5 June 30, 2011 Balance Sheet Classification Level 1 Level 2 Level 3 Total Assets Cash equivalents $ 1,183.0 $ 0.0 $ 0.0 $ 1,183.0 Cash and cash equivalents Short-term marketable securities 14.2 0.0 0.0 14.2 Marketable securities Long-term investments 1.4 10.4 0.0 11.8 Other assets Total $ 1,198.6 $ 10.4 $ 0.0 $ 1,209.0 As a percentage of total assets 9.7 % 0.1 % 0.0 % 9.8 % Liabilities $ 0.0 $ 0.0 $ 27.0 $ 27.0 June 30, 2010 Balance Sheet Classification Level 1 Level 2 Level 3 Total Assets Cash equivalents $ 1,264.7 $ 0.0 $ 0.0 $ 1,264.7 Cash and cash equivalents Short-term marketable securities 12.5 0.0 0.0 12.5 Marketable securities Long-term investments 1.2 13.8 0.0 15.0 Other assets 0.0 0.0 0.3 0.3 Other assets Total $ 1,278.4 $ 13.8 $ 0.3 $ 1,292.5 As a percentage of total assets 10.9 % 0.1 % 0.0 % 11.0 % Liabilities $ 0.0 $ 0.0 $ 61.8 $ 61.8 1Our interest rate swap agreements are fair value hedges whose fair value was derived from the present value of future cash flows using valuation models that were based on readily observable market data such as interest rates and yield curves.Notes to Consolidated Financial Statements – (continued)(Amounts in Millions, Except Per Share Amounts)(Unaudited)21 Relates to unconditional obligations to purchase additional noncontrolling equity shares of consolidated subsidiaries. Fair value measurement of the obligation was based upon the amount payable as if the forward contracts were settled. The amount redeemable within the next twelve months is classified in accrued liabilities; any interests redeemable thereafter are classified in other non-current liabilities. 32 Fair value is derived from changes in market value of obligations denominated in foreign currency based on an internal valuation model. Three months ended
March 31, 2011 Three months ended
March 31, 2010 Liabilities Assets Liabilities Mandatorily redeemable
noncontrolling interests Foreign currency
derivatives Mandatorily redeemable
noncontrolling interests $ 52.0 $ 0.6 $ 47.8 7.4 0.0 15.8 (1.5 ) 0.0 0.0 0.1 0.0 0.1 0.1 0.0 0.0 $ 57.9 $ 0.6 $ 63.5 Three months ended
June 30, 2010 Liabilities Assets Liabilities Mandatorily redeemable noncontrolling interests Mandatorily redeemable noncontrolling interests Balance at beginning of period $ 57.9 $ 0.6 $ 63.5 Level 3 additions 2.5 0.0 0.3 Level 3 reductions (33.9 ) 0.0 (2.9 ) Realized losses included in net income (0.5 ) (0.3 ) (0.9 ) Balance at end of period $ 27.0 $ 0.3 $ 61.8 Liabilities Assets Liabilities Mandatorily redeemable noncontrolling interests Mandatorily redeemable noncontrolling interests Balance at beginning of period $ 52.0 $ 0.6 $ 47.8 Level 3 additions 2.5 0.0 16.1 Level 3 reductions (28.0 ) 0.0 (2.9 ) Realized losses included in net income (0.4 ) (0.3 ) (0.8 ) Foreign currency translation 0.1 0.0 0.0 Balance at end of period $ 27.0 $ 0.3 $ 61.8 Level 3 reductions relate to cash payments made for unconditional obligations to purchase additional equity interests in previous acquisitions. Realized gainslosses included in net lossincome for foreign currency derivatives and mandatorily redeemable noncontrolling interests are reported as a component of other income (expense), net and interest expense, respectively, in the unaudited Consolidated Statements of Operations.10:11: Commitments and ContingenciesGuaranteescertain media payables and operating leases of certain subsidiaries. The amount of parent company guarantees on lease obligations was $364.0$366.1 and $376.8$376.8 as of March 31,June 30, 2011 and December 31, 2010, respectively, and the amount of parent company guarantees primarily relating to credit facilities was $332.0$332.7 and $395.0$395.0 as of March 31,June 30, 2011 and December 31, 2010, respectively.11:12: Recent Accounting StandardsGoodwillDecember 2010,June 2011, the Financial Accounting Standards Board (“FASB”("FASB") issued amended guidance for performing goodwill impairment tests,presenting comprehensive income, which waswill be effective for us beginning January 1, 2011.2012. The amended guidance requires reporting units with zeroeliminates the option to present other comprehensive income and its components in the statement of stockholders' equity. We may elect to present the items of net income and other comprehensive income in a single continuous statement of comprehensive income or negative carrying amountsin two separate, but consecutive, statements. Under either method the statement would need to be assessed to determine if it is more likely thanpresented with equal prominence as the other primary financial statements. We do not that goodwill impairment exists. As part of this assessment, entities should consider all qualitative factors that could impactexpect the carrying value. The adoption of thisthe amended guidance did notto have a significant impact on our unaudited Consolidated Financial Statements.Revenue Recognition – Milestone MethodMarch 2010, the Emerging Issues Task Force (“EITF”) reached a consensus related to guidance when applying the milestone method of revenue recognition. The consensus was issued byMay 2011, the FASB as an update to authoritativeissued amended guidance for revenue recognitionmeasuring fair value and wasrequired disclosure information about such measures, which will be effective for us beginning January 1, 2011.2012, and applied prospectively. The amended guidance provides criteria for identifying those deliverables inrequires an arrangement that meetentity to disclose all transfers between Level 1 and Level 2 of the definition of a milestone. In addition, the amended guidance includes enhancedfair value hierarchy as well as provide quantitative and qualitative disclosures aboutrelated to Level 3 fair value measurements. Additionally, the arrangements whenamended guidance requires an entity recognizes revenue usingto disclose the milestone method. Thefair value hierarchy level which was used to determine the fair value of financial instruments that are not measured at fair value, but for which fair value information must be disclosed. We do not expect the adoption of thisthe amended guidance did notto have a significant impact on our unaudited Consolidated Financial Statements.Fair Value Measurements – Multiple Deliverables1112 to the unaudited Consolidated Financial Statements, provides a discussion of certain accounting standards that have been adopted during 2011 or that have not yet been required to be implemented and may be applicable to our future operations.servingserve our multinational and local clients in markets throughout the world, as they seek to build brands, increase sales of their products and services and gain market share.positioning. Wepositioning in the market place. To support our objectives, we develop and invest in a range of talent, tools and businesses that are highly relevant to the needs of our clients and offer us strong financial returns. These include investments in rapidly growing marketing channels and geographic regions as well as key strategic world markets. We operate in a media landscape that is constantly changing. Accordingly, we remain focused on meeting the evolving needs of our clients in an increasingly complex consumer environment.capital structureliquidity profile and increasing value to our shareholders, which includes our recently initiated common stock dividend and share repurchase program.program initiated earlier this year. We continually seek greater efficiency in the delivery of our services, focusing on more effective resource utilization, including the productivity of our employees, real estate and information technology. ImprovementsThe improvements we have made in our financial reporting and business information systems during recent years providedallow us with more timely and actionable insights from our global operations. Our conservative approach to our balance sheet and liquidity provides us with a solid financial foundation and financial flexibility. We continue to derive benefits from our diversified client base, global footprint and the broad range and strength of our professional offerings.–- (continued)(Unaudited)March 31,June 30, 2011, as compared with the same periodperiods in 2010. Three months ended
March 31, 2011 % Increase Total Organic 10.3 % 9.3 % 10.3 % 9.3 % 5.4 % 4.2 % Three months ended
March 31, 2011 2010 (3.1 )% (4.4 )% 73.2 % 73.2 % 29.8 % 31.2 % $ (48.1 ) $ (71.5 ) $ (0.10 ) $ (0.15 ) Three months ended
June 30, 2011 Six months ended
June 30, 2011% Increase Total Organic Total Organic Revenue 8.0 % 4.7 % 9.0 % 6.8 % Salaries and related expenses 10.6 % 6.9 % 10.4 % 8.1 % Office and general expenses 6.3 % 2.8 % 5.9 % 3.5 % Three months ended
June 30, Six months ended
June 30, 2011 2010 2011 2010 Operating margin 10.0 % 11.0 % 4.0 % 4.0 % Expenses as % of revenue: Salaries and related expenses 62.9 % 61.5 % 67.7 % 66.8 % Office and general expenses 27.0 % 27.5 % 28.3 % 29.2 % Net income available to IPG common stockholders $ 101.7 $ 105.3 $ 53.6 $ 33.8 Earnings per share available to IPG common stockholders: Basic $ 0.21 $ 0.22 $ 0.11 $ 0.07 Diluted $ 0.19 $ 0.15 $ 0.11 $ 0.02 quarterhalf of 2011 include the Australian Dollar, Brazilian Real, Canadian DollarEuro and Euro.Pound Sterling. During the first half of 2011, primarily in the second quarter of 2011, the U.S. Dollar weakened against severalall foreign currencies in regions where we primarily conduct our business as compared to the prior-year period, which had a net negativepositive impact on our consolidated results of operations. This effect was partially offset asFor the U.S. Dollar strengthened against the Euro during the firstsecond quarter of 2011. For the first quarter of 2011, foreign currency fluctuations resulted in net increases of approximately 1%4% in revenues, salaries and related expenses and office and general expenses, which contributed on a net basis to an increase innegatively impacted our operating lossmargin percentage by 20 basis points. For the first half of 2011, foreign currency fluctuations resulted in increases of approximately 1% compared to the prior-year period.quarterhalf of 2011, the net effect of acquisitions and divestitures had a minimal impact on revenue and operating expenses compared to the respective prior-year period.–- (continued) March 31,June 30, 2011 Compared to Three and Six Months Ended March 31,June 30, 2010 Three months
ended
June 30, 2010 Components of Change Three months
ended
June 30, 2011 Change Organic Organic Total Consolidated $ 1,611.7 $ 57.5 $ (4.7 ) $ 76.2 $ 1,740.7 4.7 % 8.0 % Domestic 961.0 0.0 (13.9 ) 40.7 987.8 4.2 % 2.8 % International 650.7 57.5 9.2 35.5 752.9 5.5 % 15.7 % United Kingdom 90.6 8.7 7.1 13.9 120.3 15.3 % 32.8 % Continental Europe 210.4 23.1 (0.3 ) 4.8 238.0 2.3 % 13.1 % Asia Pacific 160.9 13.8 0.0 9.3 184.0 5.8 % 14.4 % Latin America 84.3 6.6 0.8 (1.2 ) 90.5 (1.4 )% 7.4 % Other 104.5 5.3 1.6 8.7 120.1 8.3 % 14.9 % REVENUE Components of Change Change Three months ended
March 31, 2010 Foreign
Currency Net
Acquisitions/
(Divestitures) Organic Three months ended
March 31, 2011 Organic Total $ 1,337.0 $ 13.2 $ (0.3 ) $ 124.9 $ 1,474.8 9.3 % 10.3 % 803.1 0.0 (8.5 ) 70.7 865.3 8.8 % 7.7 % 533.9 13.2 8.2 54.2 609.5 10.2 % 14.2 % 102.3 1.4 5.7 9.4 118.8 9.2 % 16.1 % 179.0 (1.9 ) 0.0 6.9 184.0 3.9 % 2.8 % 112.6 7.4 0.0 20.4 140.4 18.1 % 24.7 % 64.9 3.1 0.3 8.8 77.1 13.6 % 18.8 % 75.1 3.2 2.2 8.7 89.2 11.6 % 18.8 % firstsecond quarter of 2011, our revenue increased by $137.8,$129.0, or 10.3%8.0%, compared to the firstsecond quarter of 2010, primarily consisting of an organic revenue increase of $124.9,$76.2, or 9.3%4.7%, and a favorable foreign currency rate impact of $57.5. Our organic increase was attributable to net client wins and higher spending from existing clients and net client wins in nearly all sectors of our business and throughout all geographic regions. The sectors which contributed the most to the organic revenue increase were technology and telecom, health and personal care, and auto and transportation. These increases were partially offset by decreases in the packaged goods sector. Regionally, the largest organic revenue increase was in our domestic market, primarily related to the factors noted above. All ofIn our international regions hadmarkets, the organic revenue increases, most notablyincrease occurred in nearly all regions, including the United Kingdom, the Asia Pacific region, primarily in India and China. Revenue also increasedChina, and our Other region, primarily in Japan duringSouth Africa. The Continental Europe region contributed to the first quarter of 2011. The extent to which recent natural disasters in Japan will impact our business for the full year remains unclear, but we do not expect to experienceorganic revenue increase, although this region is still being negatively impacted by certain European countries where a material effect on our consolidated results of operations.dependent uponimpacted by our ability to win new clients and the advertising, marketingretention and corporate communications requirementsspending levels of our existing clients. Most of our expenses are recognized ratably throughout the year and are therefore less seasonal than revenue. Our revenue is typically lowest in the first quarter and highest in the fourth quarter. This reflects the seasonal spending of our clients, incentives earned at year-endyear end on various contracts and project work completed that is typically recognized during the fourth quarter. Additionally, revenues can fluctuate due to the timing of completed projects in the events marketing business, as revenue is typically recognized when the project is complete. We generally act as principal for these projects and as such record the gross amount billed to the client as revenue and the related costs incurred as pass-through costs in office and general expenses. Six months
ended
June 30, 2010 Components of Change Six months
ended
June 30, 2011 Change Organic Organic Total Consolidated $ 2,948.7 $ 70.7 $ (5.0 ) $ 201.1 $ 3,215.5 6.8 % 9.0 % Domestic 1,764.1 0.0 (22.4 ) 111.4 1,853.1 6.3 % 5.0 % International 1,184.6 70.7 17.4 89.7 1,362.4 7.6 % 15.0 % United Kingdom 192.9 10.1 12.8 23.3 239.1 12.1 % 24.0 % Continental Europe 389.4 21.2 (0.3 ) 11.7 422.0 3.0 % 8.4 % Asia Pacific 273.5 21.2 0.0 29.7 324.4 10.9 % 18.6 % Latin America 149.2 9.7 1.1 7.6 167.6 5.1 % 12.3 % Other 179.6 8.5 3.8 17.4 209.3 9.7 % 16.5 % OPERATING EXPENSES Three months ended
March 31, 2011 2010 $ 1,080.1 $ 979.3 439.2 416.8 0.8 0.3 $ 1,520.1 $ 1,396.4 $ (45.3 ) $ (59.4 ) –- (continued) Three months ended
June 30, Six months ended
June 30, 2011 2010 2011 2010 Salaries and related expenses $ 1,095.7 $ 991.0 $ 2,175.8 $ 1,970.3 Office and general expenses 470.8 442.9 910.0 859.7 Restructuring and other reorganization-related charges, net 0.2 0.6 1.0 0.9 Total operating expenses $ 1,566.7 $ 1,434.5 $ 3,086.8 $ 2,830.9 Operating income $ 174.0 $ 177.2 $ 128.7 $ 117.8 Components of Change Change 2010 Foreign
Currency Net
Acquisitions/
(Divestitures) Organic 2011 Organic Total $ 979.3 $ 9.3 $ 0.1 $ 91.4 $ 1,080.1 9.3 % 10.3 % 2010 Components of Change 2011 Change Organic Organic Total Three months ended June 30, $ 991.0 $ 37.4 $ (1.5 ) $ 68.8 $ 1,095.7 6.9 % 10.6 % Six months ended June 30, 1,970.3 46.7 (1.4 ) 160.2 2,175.8 8.1 % 10.4 % remained unchangedincreased in the firstsecond quarter of 2011 at 73.2% to 62.9% from 61.5% when compared to the prior-year period. Salaries and related expenses in the firstsecond quarter of 2011 increased by $100.8$104.7 compared to the firstsecond quarter of 2010, primarily consisting of an organic increase of $91.4$68.8 and an adverse foreign currency rate impact of $9.3.$37.4. The organic increase was due to higher base salaries, and benefits of $56.2 and temporary help of $11.1$60.6 incurred to support business growth (organic revenuethat began in 2010. We have increased our workforce over the past several quarters as our businesses have grown. Also contributing to the organic increase of $124.9).was higher incentive award expense and severance expense. The organic increase occurred across all regions, primarily in our domestic market. Also contributingof $12.6.salaries and related expenses as a percentage of total consolidated revenue. Three months ended
March 31, 2011 2010 73.2 % 73.2 % 60.5 % 61.9 % 4.4 % 4.0 % 1.6 % 0.8 % 4.1 % 3.6 % 2.6 % 2.9 % Three months ended
June 30, Six months ended
June 30, 2011 2010 2011 2010 Salaries and related expenses 62.9 % 61.5 % 67.7 % 66.8 % Base salaries, benefits and tax 52.0 % 51.0 % 55.9 % 56.0 % Incentive expense 3.5 % 3.4 % 3.9 % 3.7 % Severance expense 1.3 % 1.1 % 1.4 % 0.9 % Temporary help 3.8 % 3.4 % 3.9 % 3.5 % All other salaries and related expenses 2.3 % 2.6 % 2.6 % 2.7 % 2010 Components of Change 2011 Change Organic Organic Total Three months ended June 30, $ 442.9 $ 17.3 $ (2.0 ) $ 12.6 $ 470.8 2.8 % 6.3 % Six months ended June 30, 859.7 21.7 (1.6 ) 30.2 910.0 3.5 % 5.9 % Components of Change Change 2010 Foreign
Currency Net
Acquisitions/
(Divestitures) Organic 2011 Organic Total $ 416.8 $ 4.4 $ 0.4 $ 17.6 $ 439.2 4.2 % 5.4 % firstsecond quarter of 2011 to 29.8%27.0% from 31.2%27.5% in the firstsecond quarter of 2010.2010. Office and general expenses in the firstsecond quarter of 2011 increased by $22.4$27.9 compared to the firstsecond quarter of 2010, primarily consisting of an organic increase of $17.6 and an adverse foreign currency rate impact of $4.4.$17.3 and an organic increase of $12.6. The organic increase was primarily due to higher production expenses related to pass-through costs for certain projects where we acted as a principal that increased in size or were new during the firstsecond quarter of 2011.2011. Also contributing to the organic increase was higher discretionary spending to support business growthgrowth.partially offsetdriven by lower occupancy costs.expenses as a percentage of total consolidated revenue.expense ratio. All other office and general expenses primarily include production expenses, and, to a lesser extent, depreciation and amortization, bad debt expense, foreign currency gains (losses) and other expenses. Three months ended
March 31, 2011 2010 29.8 % 31.2 % 2.0 % 2.1 % 8.5 % 9.3 % 4.0 % 4.1 % 15.3 % 15.7 % Management’s Discussion and Analysis of Financial Condition and Results of Operations – (continued)(Amounts in Millions, Except Per Share Amounts)(Unaudited) Three months ended
June 30, Six months ended
June 30, 2011 2010 2011 2010 Office and general expenses 27.0 % 27.5 % 28.3 % 29.2 % Professional fees 1.7 % 1.7 % 1.9 % 1.9 % Occupancy expense (excluding depreciation and amortization) 7.4 % 7.5 % 7.9 % 8.3 % Travel & entertainment, office supplies and telecommunications 3.8 % 3.6 % 3.9 % 3.8 % All other office and general expenses 14.1 % 14.7 % 14.6 % 15.2 % Three months ended
March 31, 2011 2010 $ (33.9 ) $ (33.5 ) 2.0 0.9 (31.9 ) (32.6 ) 8.3 6.5 (23.6 ) (26.1 ) (6.1 ) 0.5 $ (29.7 ) $ (25.6 ) Three months ended
June 30, Six months ended
June 30, 2011 2010 2011 2010 Cash interest on debt obligations $ (34.7 ) $ (35.1 ) $ (68.6 ) $ (68.7 ) Non-cash interest 1.6 0.1 3.6 1.1 Interest expense (33.1 ) (35.0 ) (65.0 ) (67.6 ) Interest income 9.7 6.1 18.0 12.6 Net interest expense (23.4 ) (28.9 ) (47.0 ) (55.0 ) Other income (expense), net 5.3 (2.1 ) (0.8 ) (1.6 ) Total (expenses) and other income $ (18.1 ) $ (31.0 ) $ (47.8 ) $ (56.6 ) March 31,June 30, 2011, net interest expense decreased by $2.5$5.5 and $8.0, as compared to the respective prior-year period,periods, primarily due to an increase in interest income. Interest income increased primarily due to an increase in average cash and cash equivalent balances as well as an increase in average interest rates in various countries around the world for the three months ended March 31, 2011 compared to the prior-year period. Non-cash interest expense benefitted from no longer amortizing the discount on our Floating Rate Senior Unsecured Notes due 2010, which maturedperiods.the prior year. Cash interest expense was virtually unchanged as lower interest expense resulting from prior year debt repayments was offset by higher interest expense related to increasing the size of our credit facility in the second quarter of 2010 and a favorable impact from interest rate swaps realized in the first quarter of 2010.(Expense) Income (Expense), netMarch 31,June 30, 2011 and 2010 include certain items which are not directly associated with our revenue-producing operations. Three months ended
March 31, 2011 2010 $ (6.6 ) $ 0.2 0.5 0.3 $ (6.1 ) $ 0.5 Three months ended
March 31, 2011 2010 $ (75.0 ) $ (85.0 ) $ (21.5 ) $ (15.3 ) 28.7 % 18.0 % Three months ended
June 30, Six months ended
June 30, 2011 2010 2011 2010 Gains (losses) on sales of businesses and investments 0.3 (3.3 ) (6.2 ) (3.1 ) Vendor discounts and credit adjustments 2.8 2.2 2.9 2.0 Other income (expense), net 2.2 (1.0 ) 2.5 (0.5 ) Total other income (expense), net $ 5.3 $ (2.1 ) $ (0.8 ) $ (1.6 ) Management’s DiscussionSales of Businesses and AnalysisInvestments – During the first half of Financial Condition2011, we recognized a loss relating to the sale of a business in the domestic market within our Integrated Agency Networks (“IAN”) segment. During the second quarter of 2010, we recognized a loss primarily related to the sale of one of our European businesses.ResultsCredit Adjustments – We are in the process of Operations – (continued)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 settlements with clients or vendors or where the statute of limitations has lapsed. Three months ended
June 30, Six months ended
June 30, 2011 2010 2011 2010 Income before income taxes $ 155.9 $ 146.2 $ 80.9 $ 61.2 Provision for income taxes $ 47.6 $ 63.3 $ 26.1 $ 48.0 Effective tax rate 30.5 % 43.3 % 32.3 % 78.4 % (Amounts in Millions, Except Per Share Amounts)(Unaudited)Specifically, forFor the three months ended March 31,June 30, 2011 our effective tax rate of 30.5% was positively impacted from the recognition of previously unrecognized tax benefits primarily as a result of the settlement of the 2007-2008 IRS audit cycle.28.7% was negatively impacted by losses in certain foreign locations for which we receive no benefit due to 100% valuation allowances and the establishment of a valuation allowance in the United Kingdom. Our effective tax rate32.3% was positively impacted due to tax efficiencies from entity consolidation in the Asia Pacific region and the loss relating to the sale of a business in the domestic market.March 31,June 30, 2010, the difference between the effective tax rate and the statutory rate of 35% was primarily due to state and local taxes and the write-off of deferred tax assets related to restricted stock. For the six months endedJune 30, 2010, the difference between the effective tax rate and the statutory rate of 35% was also due to losses in certain foreign locations wherefor which we receive no tax benefit due to 100% valuation allowances and the establishment of valuation allowances in EuropeEurope.the loss from the devaluationAnalysis of the Venezuelan currency, for which we receive no tax benefit. March 31,June 30, 2011 Compared to Three and Six Months Ended March 31,June 30, 201089 to the unaudited Consolidated Financial Statements, we have two reportable segments as of March 31, 2011:June 30, 2011: IAN and Constituency Management Group (“CMG”). We also report results for the Corporate and other group. Three months
ended
June 30, 2010 Components of Change Three months
ended
June 30, 2011 Change Organic Organic Total Consolidated $ 1,363.2 $ 50.9 $ 3.9 $ 53.7 $ 1,471.7 3.9 % 8.0 % Domestic 777.2 0.0 (4.5 ) 31.2 803.9 4.0 % 3.4 % International 586.0 50.9 8.4 22.5 667.8 3.8 % 14.0 % IANREVENUE Components of Change Change Three months ended
March 31, 2010 Foreign
Currency Net
Acquisitions/
(Divestitures) Organic Three months ended
March 31, 2011 Organic Total $ 1,109.2 $ 11.7 $ 7.9 $ 107.1 $ 1,235.9 9.7 % 11.4 % 637.1 0.0 0.0 64.1 701.2 10.1 % 10.1 % 472.1 11.7 7.9 43.0 534.7 9.1 % 13.3 % firstsecond quarter of 2011, IAN revenue increased by $126.7$108.5 compared to the firstsecond quarter of 2010, primarily consisting of an organic revenue increase of $107.1.$53.7 and a favorable foreign currency rate impact of $50.9. The increase in revenue at our IAN segment represented approximately 86%70% of the total organic revenue increase. The organic revenue increase was attributable to net clients wins and higher spending from existing clients in nearly all geographic regions, predominantly in our domestic market, at most of our advertising and media businesses. The sectors which primarily contributed to the organic revenue increase were health and personal care, auto and transportation and, to a lesser extent, technology and telecom. The international organic increase occurred in nearly all regions, including our Other region, primarily in South Africa, the Asia Pacific region, primarily in India, and the United Kingdom. There was also a slight organic revenue increase in Continental Europe, although this region is still being negatively impacted by certain European countries where a continued weakened economic climate persists. Six months
ended
June 30, 2010 Components of Change Six months
ended
June 30, 2011 Change Organic Organic Total Consolidated $ 2,472.4 $ 62.6 $ 11.8 $ 160.8 $ 2,707.6 6.5 % 9.5 % Domestic 1,414.3 0.0 (4.5 ) 95.3 1,505.1 6.7 % 6.4 % International 1,058.1 62.6 16.3 65.5 1,202.5 6.2 % 13.6 % was attributableoccurred throughout all geographic regions, driven by factors similar to those noted above for the reasons described in the consolidated revenue discussion.LOSS Three months ended
March 31, 2011 2010 Change $ (21.4 ) $ (33.3 ) (35.7 )% (1.7 )% (3.0 )% Three months ended
June 30, Change Six months ended
June 30, Change 2011 2010 2011 2010 Segment operating income $ 184.7 $ 190.0 (2.8 )% $ 163.3 $ 156.7 4.2 % Operating margin 12.6 % 13.9 % 6.0 % 6.3 % loss improvedincome decreased during the firstsecond quarter of 2011 when compared to the firstsecond quarter of 2010 due to an as the increase in revenue of $126.7, partially$108.5 was offset by increases in salaries and related expenses of $91.8$86.5 and office and general expenses of $23.0.$27.3. The increase in salaries and related expenses was primarily due to higher base salaries, benefits and temporary help across most of the agencies within IAN to support business growth.growth over the past several quarters. Also contributing to the increase in salaries and related expenses waswere higher severanceincentive award expense and incentive awardseverance expense compared to the prior-year period. Office and general expenses increased primarily due to higher production expenses.–- (continued)(Unaudited)first half Three months
ended
June 30, 2010 Components of Change Three months
ended
June 30, 2011 Change Organic Organic Total Consolidated $ 248.5 $ 6.6 $ (8.6 ) $ 22.5 $ 269.0 9.1 % 8.2 % Domestic 183.8 0.0 (9.4 ) 9.5 183.9 5.2 % 0.1 % International 64.7 6.6 0.8 13.0 85.1 20.1 % 31.5 % REVENUE Components of Change Change Three months ended
March 31, 2010 Foreign
Currency Net
Acquisitions/
(Divestitures) Organic Three months ended
March 31, 2011 Organic Total $ 227.8 $ 1.5 $ (8.2 ) $ 17.8 $ 238.9 7.8 % 4.9 % 166.0 0.0 (8.5 ) 6.6 164.1 4.0 % (1.1 )% 61.8 1.5 0.3 11.2 74.8 18.1 % 21.0 % firstsecond quarter of 2011, CMG revenue increased by $11.1$20.5 compared to the firstsecond quarter of 2010 primarily due to, consisting of an organic revenue increase of $17.8,$22.5 and a favorable foreign currency rate impact of $6.6, partially offset by the effect of net divestitures of $8.2.$8.6. The organic revenue increase was primarily due to increasesnet client wins and occurred in client spending in mostall disciplines, primarily in our public relations, and events marketing and branding businesses. The international organic increase was throughout nearly all regions, most notably in the United Kingdom and the Asia Pacific region, primarily in Australia and China, and in the United Kingdom.China. Revenues in the events marketing business can fluctuate due to timing of completed projects where we act as principal, as revenue is typically recognized when the project is complete. The reduction in revenue due to net divestitures primarily relaterelates to the sale of a business in our domestic market in the fourth quarter of 2010. Six months
ended
June 30, 2010 Components of Change Six months
ended
June 30, 2011 Change Organic Organic Total Consolidated $ 476.3 $ 8.1 $ (16.8 ) $ 40.3 $ 507.9 8.5 % 6.6 % Domestic 349.8 0.0 (17.9 ) 16.1 348.0 4.6 % (0.5 )% International 126.5 8.1 1.1 24.2 159.9 19.1 % 26.4 % Three months ended
March 31, 2011 2010 Change $ 10.7 $ 7.7 39.0 % 4.5 % 3.4 % Three months ended
June 30, Change Six months ended
June 30, Change 2011 2010 2011 2010 Segment operating income $ 28.0 $ 21.8 28.4 % $ 38.7 $ 29.5 31.2 % Operating margin 10.4 % 8.8 % 7.6 % 6.2 % firstsecond quarter of 2011 when compared to the firstsecond quarter of 2010 due to an increase in revenue of $11.1,$20.5, partially offset by increases in salaries and related expenses of $6.2$11.1 and office and general expenses of $1.9.$3.2. Salaries and related expenses increased across allmost disciplines primarily due to higher base salaries, benefits and temporary help primarily to support business growth. Office and general expenses increased primarily due to higher production expenses.lossincome and include corporate office expenses and shared service center expenses, as well as certain other centrally managed expenses that are not fully allocated to operating divisions. Salaries and related expenses include salaries, long-term incentives, annual bonuses and other miscellaneous benefits for corporate office employees. Office and general expenses primarily include professional fees related to internal control compliance, financial statement audits and legal, information technology and other consulting services, which are engaged and managed through the corporate office. In addition, office and general expenses also include rental expense and depreciation of leasehold improvements for properties occupied by corporate office employees. A portion of these expenses are allocated to operating divisions based on a formula that uses the planned revenues of each of the operating units. Amounts allocated also include specific charges for information technology-related projects, which are allocated based on utilization.of $33.8increased during the firstsecond quarter of 2011 were essentially flat by $4.5 to $38.5 compared to the prior-year period assecond quarter of 2010, and increased by $4.8 to $72.3 during the first half of 2011 compared to the first half of 2010, primarily due to higher base salaries, benefits and temporary help and, to a lesser extent, higher severance expense was offset by lower occupancy costs.–- (continued) Three months ended
March 31, 2011 2010 $ (43.1 ) $ (46.9 ) (735.8 ) (482.5 ) Changes in other non-current assets and liabilities using cash (22.8 ) (26.1 ) Net cash used in operating activities $ (801.7 ) $ (555.5 ) Net cash (used in) provided by investing activities (16.8 ) 13.0 Net cash used in financing activities (45.4 ) (16.2 ) Six months ended
June 30,Cash Flow Data 2011 2010 $ 137.8 $ 141.1 (668.7 ) (316.6 ) Changes in other non-current assets and liabilities using cash (70.8 ) (26.7 ) Net cash used in operating activities $ (601.7 ) $ (202.2 ) Net cash used in investing activities (84.5 ) (9.3 ) Net cash used in financing activities (220.7 ) (315.9 ) 1 Reflects net lossincome adjusted primarily for depreciation and amortization of fixed assets and intangible assets, amortization of restricted stock and other non-cash compensation and deferred income taxes.2 Reflects changes in accounts receivable, expenditures billable to clients, other current assets, accounts payable and accrued liabilities. March 31,
2011 December 31,
2010 March 31,
2010 Cash, cash equivalents and marketable securities $ 1,854.3 $ 2,689.4 $ 1,941.5 Short-term borrowings $ 116.2 $ 114.8 $ 86.3 Current portion of long-term debt 452.4 38.9 215.5 Long-term debt 1,165.9 1,583.3 1,634.5 $ 1,734.5 $ 1,737.0 $ 1,936.3 Balance Sheet Data June 30,
2011 December 31,
2010 June 30,
2010Cash, cash equivalents and marketable securities $ 1,824.0 $ 2,689.4 $ 1,942.4 Short-term borrowings $ 150.0 $ 114.8 $ 91.6 Current portion of long-term debt 448.6 38.9 194.3 Long-term debt 1,167.8 1,583.3 1,628.0 Total debt $ 1,766.4 $ 1,737.0 $ 1,913.9 three monthshalf of 2011 was $801.7,$601.7, which is an increase of $246.2$399.5 as compared to the first three monthshalf of 2010, primarily as a result of an increase in working capital usage of $253.3.$352.1. Due to the seasonality of our business, we typically generate cash from working capital in the second half of a year and use cash from working capital in the first half of a year, with the largest impacts in the first and fourth quarters. The net working capital usage in the first three monthshalf of 2011 was primarily impacted by our media businesses.three monthshalf of 2011 primarily reflects capital expenditures of $16.9.and payments for acquisitions. Capital expenditures of $53.1 relate primarily to computer software and hardware and leasehold improvements.–- (continued)Financing ActivitiesNet cash used in financing activities during the first three months of 2011 primarily relate to dividend payments of $28.5 on our common stock.$28.4$41.0 during the first three monthshalf of 2011.2011. This increase primarily reflects the strengthening of the Euro, as well as several other foreign currencies, against the U.S. Dollar as of March 31,June 30, 2011, as compared to December 31, 2010. We expect to pay approximately $89.8 for the remainder of 2011 related to prior year acquisitions, of which $87.3 is expected to be paid in the second quarter of 2011. We may also be required to pay approximately $36.2 related to put options held by minority shareholders that are exercisable during 2011. We will continue to evaluate strategic opportunities to grow and to increase our ownership interests in current investments, particularly in our digital and marketing services offerings, and to expand our presence in high-growth and key strategic world markets. In addition to potential cash expenditures for new acquisitions, we expect to pay approximately $12.0 for the remainder of 2011 related to prior acquisitions. We may also be required to pay approximately $33.0 related to put options held by minority shareholders that are exercisable during 2011.On February 24,In the first quarter of 2011 we initiated regular quarterly cash dividends on our common stock. Most recently, on May 26, 2011 our Board of Directors (“Board”) declared a dividend of $0.06$0.06 per share on our common shares, payable on March 25,June 24, 2011 to holders of record at the close of business on March 11,June 10, 2011 and we intend to continue quarterly common stock dividend payments. As of March 11,. On June 10, 2011, we had 475.4471.0 shares outstanding (excluding restricted shares), which corresponded to an aggregate dividend payment of $28.5.$28.3. Assuming a quarterly dividend of $0.06$0.06 per share and no significant change in the number of outstanding shares, we expect to pay approximately $85.0 for$113.0 over the remainder of 2011.next twelve months. We also pay regular quarterly dividends of $2.9, or $11.6 annually, on our Series B Preferred Stock.March 31,June 30, 2011, we had $36.3 aggregate principal amount of the 2011 Notes outstanding, and we expect to use available cash to retire these outstanding notes. On March 15, 2012 holders, of our $400.0 4.25% Convertible Senior Notes due 2023 may require us to repurchase their notes for cash at par. The remainder of our debt is primarily long-term, with maturities scheduled through 2023.Management’s Discussion and Analysis of Financial Condition and Results of Operations – (continued)(Amounts in Millions, Except Per Share Amounts)(Unaudited)planplans is to contribute amountsmake contributions necessary to satisfy minimum pension funding requirements, plus such additional amountscontributions as we consider appropriate to improve the plans’ funded status. During the threesix months ended March 31,June 30, 2011, we contributed $11.7$12.5 of cash to our domestic pension plan and $5.8$12.1 of cash to our foreign pension plans. For the remainder of 2011, we expect to contribute approximately $2.4$1.6 and $19.0$11.8 of cash to our domestic and foreign pension plans, respectively.$300.0$300.0 of our common stock. We may effect such repurchases through open market purchases, trading plans established in accordance with SEC rules, derivative transactions or other means. The share repurchase program has no expiration date. During the period from the Board’s authorization through March 31, 2011, we repurchased 0.9 shares at an average price of $12.36 per share and an aggregate cost of $10.5. We expect to continue to repurchase our common stock during 2011,in future periods, although the timing and amount of the repurchases will depend on market conditions and our other funding requirements. March 31, 2011 Total
Facility Amount
Outstanding Letters
of Credit1 Total
Available $ 1,854.3 $ 650.0 $ 0.0 $ 15.7 $ 634.3 $ 464.7 $ 116.2 $ 0.1 $ 348.4 June 30, 2011 Cash, cash equivalents and marketable securities $ 1,824.0 Committed credit agreement $ 1,000.0 $ 0.0 $ 15.7 $ 984.3 Uncommitted credit arrangements $ 472.4 $ 150.0 $ 0.1 $ 322.3 11 We are required from time to time to post letters of credit, primarily to support obligations of our subsidiaries. These letters of credit have historically not been drawn upon. TheOn May 31, 2011, we entered into an amendment and restatement of our credit facility is a revolving facility expiring agreement originally dated as of July 18, 2013, under which amounts borrowed by us2008 (the “Credit Agreement”), increasing the commitments of the lenders to $1,000.0 from $650.0, and extending the Credit Agreement's expiration to May 31, 2016. Additionally, the amendments modified our financial covenants, and provided additional flexibility with respect to, or any of our subsidiaries designated undereliminated, certain covenants such as restrictions on acquisitions, capital expenditures and restricted payments. In addition, the credit facility may be repaid and reborrowed, subject to an aggregate lending limit of $650.0 or the equivalent in other currencies. The aggregate available amount of letters of credit outstanding may decrease or increase, subject to a limit on letters of credit of $200.0 or the equivalent in other currencies. Our obligations under the credit facility are unsecured. We have not drawn on any of our corporate credit facilities since 2003, although we use them for letters of credit primarily to support obligations of our subsidiaries.credit facilityCredit Agreement as of March 31, 2011.June 30, 2011. The financial covenants in the Credit Agreement require that we maintain, as of the end of each fiscal quarter, certain financial measures for the four quarters then ended. As of June 30, 2011, we had received investment-grade ratings from two of the major credit ratings agencies, and consequently we are not required to satisfy a minimum EBITDA financial covenant and no longer have limitations on restricted payments. The table below sets forth the financial covenants applicablein effect as of March 31, 2011. Four Quarters Ended
March 31, 2011 Four Quarters Ended
March 31, 2011 4.25x Operating income $ 562.9 6.58x Add: 198.5 3.25x Other non-cash amounts (0.5 ) 2.28x EBITDA $ 760.9 $ 550.0 $ 760.9 Management’s Discussion and Analysis of Financial Condition and Results of Operations – (continued)June 30, 2011(Amounts in Millions, Except Per Share Amounts).(Unaudited) Four Quarters Ended Four Quarters Ended Financial Covenants June 30, 2011 EBITDA Reconciliation June 30, 2011 Interest coverage ratio (not less than) 4.50x Operating income $ 559.6 Actual interest coverage ratio 6.86x Add: Depreciation and amortization 200.4 Leverage ratio (not greater than) 3.25x Other non-cash amounts (1.2 ) Actual leverage ratio 2.33x EBITDA $ 758.8 TheAs of June 30, 2011, the weighted-average interest rate on outstanding balances under the uncommitted credit facilities as of March 31, 2011 was approximately 5.0%.March 31,June 30, 2011 the amount netted was $1,011.7.$1,103.8.AprilJuly 15, 2011 are listed below. Fitch Ratings Baa3 Ba2BBBB+ BBB Stable PositivePositiveStable Stable MarchJune 2011 when StandardMoody's upgraded our rating from Ba2 to Baa3, which is an investment grade rating, and Poor’s placed our credit rating on positive credit watch. Previously, in November 2010, Standard and Poor’s changed our outlook from stablepositive to positive.stable. Additionally, in May 2011 Standard and Poor’s upgraded our credit rating from BB to BB+, and changed our outlook from positive to stable. Previously, in October 2010, Fitch Ratings upgraded our rating from BB+ to BBB, which is an investment grade rating, and changed our outlook from positive to stable. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning credit rating agency. The rating of each credit rating agency should be evaluated independently of any other rating. Credit ratings could have an impact on liquidity, either adverse or favorable, including, among other things, because they could affect funding costs in the capital markets or otherwise. For example, our credit facility fees and borrowing rates are based on a credit ratings grid., in our Annual Report, we believe that certain of these policies are critical because they are important to the presentation of our financial condition and results of operations, and they require management’s most difficult, subjective or complex judgments, often as a result of the need to estimate the effect of matters that are inherently uncertain. These critical estimates relate to revenue recognition, income taxes, goodwill and other intangible assets, and pension and postretirement benefits. We base our estimates on historical experience and various other factors that we believe to be relevant under the circumstances. Estimation methodologies are appliedManagement’s Discussion and Analysis of Financial Condition and Results of Operations – (continued)(Amounts in Millions, Except Per Share Amounts)(Unaudited)2010.2010. Actual results may differ from these estimates under different assumptions or conditions.1112 to the unaudited Consolidated Financial Statements for further information ofon certain accounting standards that have been adopted during 2011 or that have not yet been required to be implemented and may be applicable to our future operations.quarterhalf of 2011, we entered into anand exited interest rate swap agreement. We entered into an additional interest rate swap agreement in April 2011. Weagreements, which we use interest rate swap agreements to manage our exposure to changes in interest rates. We do not expect these swap agreements to materially alter our exposure to market risk. See Note 2 to the unaudited Consolidated Financial Statements for further information on our interest rate swap agreements. For a further discussion of our exposure to market risk, refer to Item 7A,Quantitative and Qualitative Disclosures About Market Risk, in our 2010 Annual Report on Form 10-K.March 31,June 30, 2011, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.March 31,June 30, 2011, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.1011 to the unaudited Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.firstsecond quarter of 2011, there have been no material changes in the risk factors we have previously disclosed in Item 1A,Risk Factors, in our 2010 Annual Report on Form 10-K.(c) JanuaryApril 1, 2011 to March 31, 2011.June 30, 2011. Total Number of
Shares (or Units)
Purchased1 Average Price Paid per
Share (or Unit)2 Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs3 Maximum Number (or
Approximate Dollar Value)
of Shares (or Units) that May
Yet Be Purchased Under the
Plans or Programs 39,821 $ 10.74 0 $ 0 0 0.00 0 0 1,238,797 12.39 851,300 $ 289,473,831 1,278,618 $ 12.34 851,300 April 1 – 30 741,440 $ 12.15 737,510 $ 280,510,823 May 1 – 31 8,667,360 $ 11.54 6,973,049 $ 200,694,590 June 1 – 30 3,405,580 $ 11.58 3,404,300 $ 161,281,679 12,814,380 $ 11.58 11,114,859 11 Includes restricted shares of our common stock, par value $0.10 per share, withheld under the terms of grants under employee stock-based compensation plans to offset tax withholding obligations that occurred upon vesting and release of restricted shares (the “Withheld Shares”). We repurchased 39,8213,930 Withheld Shares in JanuaryApril 2011, and 387,4971,694,311 Withheld Shares in MarchMay 2011 and 1,280 Withheld Shares in June 2011, for a total of 427,3181,699,521 Withheld Shares during the three-month period.2The average price per share of the Withheld Shares in January was calculated by dividing the aggregate value of the tax withholding obligations for that month by the aggregate number of shares of common stock withheld in such month. 2 The average price per share for each of the month of Marchmonths in the fiscal quarter and for the three-month period was calculated by dividing the sum for the applicable period of the aggregate value of the Withheld Sharestax withholding obligations and the aggregate amount we paid for shares acquired under our program to repurchase our common stock, repurchase programdescribed in Note 4 to the unaudited Consolidated Financial Statements, by the sum of the number of Withheld Shares and the number of shares acquired in our stock repurchase program.33 On February 25, 2011 we announced that on February 24, 2011 our Board of Directors approved a program to repurchase from time to time up to $300 million of our common stock. There is no expiration date associated with the program. credit facility contains certain covenants that, among other things, and subject to certain exceptions, restrict us from making cash acquisitions, making capital expenditures, repurchasing our common stock and declaring or paying cash dividends on our common stock, in excess of an aggregate basket of $600.0 million in any fiscal year, of which we may carry forward unused amounts of up to $200.0 million to the next fiscal year, provided that (a) if we have a leverage ratio of greater than 2.75 to 1 at the end of any fiscal year, we may not carry forward unused amounts, and cash common stock dividends and net share repurchases not otherwise permitted will be restricted to $400.0 million for the next fiscal year, and (b) if we have a leverage ratio of 2.75 to 1 or less at the end of any fiscal year, in the next fiscal year the aggregate basket will be $800.0 million and cash common stock dividends and net share repurchases not otherwise permitted may not exceed $600.0 million. In addition, the aggregate basket in any fiscal year, but not the amount for cash common stock and net share repurchases, may be increased, subject to certain limitations, by up to $100.0 million of net cash proceeds from dispositions made during such fiscal year.In addition, the terms of our outstanding series of preferred stock do not permit us to pay dividends on our common stock unless all accumulated and unpaid dividends on our preferred stock have been or contemporaneously are declared and paid or provision for the payment thereof has been made.THE INTERPUBLIC GROUP OF COMPANIES, INC. By By AprilJuly 28, 2011By By AprilJuly 28, 2011 10(iii)(A)3(i)(1) Retirement Agreement, effectiveCertificate of Elimination of 5 3/8% Series A Mandatory Convertible Preferred Stock, dated as of March 24,May 26, 2011, betweenis incorporated by reference to Exhibit 3(i)(1) to the Current Report on Form 8-K of The Interpublic Group of Companies, Inc. (“Interpublic”), filed with the Securities and Timothy SompolskiExchange Commission (the “SEC”) on May 27, 2011.3(i)(2) Certificate of Decrease of 5 1/4% Series B Cumulative Convertible Perpetual Preferred Stock, dated as of May 26, 2011, is incorporated by reference to Exhibit 3(i)(2) to Interpublic's Current Report on Form 8-K, filed with the SEC on May 27, 2011. 3(i)(3) Restated Certificate of Incorporation of Interpublic, dated as of May 26, 2011, is incorporated by reference to Exhibit 3(i)(3) to Interpublic's Current Report on Form 8-K, filed with the SEC on May 27, 2011. 3(ii) By-Laws of Interpublic, as amended through May 26, 2011, are incorporated by reference to Exhibit 3(ii) to Interpublic's Current Report on Form 8-K, filed with the SEC on May 27, 2011. 10(i)(A) Credit Agreement, dated as of July 18, 2008, as amended and restated as of April 23, 2010, and as further amended and restated as of May 31, 2011, among Interpublic, the lenders named therein and Citibank, N.A., as administrative agent, is incorporated by reference to Exhibit 10.1 to Interpublic’sInterpublic's Current Report on Form 8-K, filed with the Securities and Exchange CommissionSEC on March 25,June 1, 2011.12.1 Computation of Ratios of Earnings to Fixed Charges. 31.1 Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended. 31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended. 32 Certification of the Chief Executive Officer and the Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350 and Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended. 101 Interactive Data File, for the period ended March 31,June 30, 2011.32