ipg-20220331false000005164412/312022Q166.668.51,228.61,201.6250.04.200April 15, 20240.10.4500.04.650October 1, 20281.22.9650.04.750March 30, 20303.24.9500.02.400March 1, 20310.74.2500.03.375March 1, 20411.05.5500.05.400October 1, 20482.74.900000516442022-01-012022-03-3100000516442022-04-18xbrli:sharesiso4217:USD00000516442021-01-012021-03-31iso4217:USDxbrli:shares00000516442022-03-3100000516442021-12-3100000516442020-12-3100000516442021-03-310000051644ipg:CommonStockSharesIssuedMember2021-12-310000051644us-gaap:CommonStockMember2021-12-310000051644us-gaap:AdditionalPaidInCapitalMember2021-12-310000051644us-gaap:RetainedEarningsMember2021-12-310000051644us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310000051644us-gaap:TreasuryStockMember2021-12-310000051644us-gaap:ParentMember2021-12-310000051644us-gaap:NoncontrollingInterestMember2021-12-310000051644us-gaap:RetainedEarningsMember2022-01-012022-03-310000051644us-gaap:ParentMember2022-01-012022-03-310000051644us-gaap:NoncontrollingInterestMember2022-01-012022-03-310000051644us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310000051644us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-310000051644us-gaap:TreasuryStockMember2022-01-012022-03-310000051644ipg:CommonStockSharesIssuedMember2022-01-012022-03-310000051644us-gaap:CommonStockMember2022-01-012022-03-310000051644ipg:CommonStockSharesIssuedMember2022-03-310000051644us-gaap:CommonStockMember2022-03-310000051644us-gaap:AdditionalPaidInCapitalMember2022-03-310000051644us-gaap:RetainedEarningsMember2022-03-310000051644us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310000051644us-gaap:TreasuryStockMember2022-03-310000051644us-gaap:ParentMember2022-03-310000051644us-gaap:NoncontrollingInterestMember2022-03-310000051644ipg:CommonStockSharesIssuedMember2020-12-310000051644us-gaap:CommonStockMember2020-12-310000051644us-gaap:AdditionalPaidInCapitalMember2020-12-310000051644us-gaap:RetainedEarningsMember2020-12-310000051644us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310000051644us-gaap:ParentMember2020-12-310000051644us-gaap:NoncontrollingInterestMember2020-12-310000051644us-gaap:RetainedEarningsMember2021-01-012021-03-310000051644us-gaap:ParentMember2021-01-012021-03-310000051644us-gaap:NoncontrollingInterestMember2021-01-012021-03-310000051644us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310000051644ipg:CommonStockSharesIssuedMember2021-01-012021-03-310000051644us-gaap:CommonStockMember2021-01-012021-03-310000051644us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310000051644ipg:CommonStockSharesIssuedMember2021-03-310000051644us-gaap:CommonStockMember2021-03-310000051644us-gaap:AdditionalPaidInCapitalMember2021-03-310000051644us-gaap:RetainedEarningsMember2021-03-310000051644us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310000051644us-gaap:ParentMember2021-03-310000051644us-gaap:NoncontrollingInterestMember2021-03-310000051644country:US2022-01-012022-03-310000051644country:US2021-01-012021-03-310000051644country:GB2022-01-012022-03-310000051644country:GB2021-01-012021-03-310000051644srt:EuropeMember2022-01-012022-03-310000051644srt:EuropeMember2021-01-012021-03-310000051644srt:AsiaPacificMember2022-01-012022-03-310000051644srt:AsiaPacificMember2021-01-012021-03-310000051644srt:LatinAmericaMember2022-01-012022-03-310000051644srt:LatinAmericaMember2021-01-012021-03-310000051644ipg:SegmentGeographicalGroupsOfCountriesGroupFiveMember2022-01-012022-03-310000051644ipg:SegmentGeographicalGroupsOfCountriesGroupFiveMember2021-01-012021-03-310000051644ipg:SegmentInternationalDomain2022-01-012022-03-310000051644ipg:SegmentInternationalDomain2021-01-012021-03-310000051644ipg:MDEMembercountry:US2022-01-012022-03-310000051644ipg:MDEMembercountry:US2021-01-012021-03-310000051644ipg:SegmentInternationalDomainipg:MDEMember2022-01-012022-03-310000051644ipg:SegmentInternationalDomainipg:MDEMember2021-01-012021-03-310000051644ipg:MDEMember2022-01-012022-03-310000051644ipg:MDEMember2021-01-012021-03-310000051644ipg:IACMembercountry:US2022-01-012022-03-310000051644ipg:IACMembercountry:US2021-01-012021-03-310000051644ipg:SegmentInternationalDomainipg:IACMember2022-01-012022-03-310000051644ipg:SegmentInternationalDomainipg:IACMember2021-01-012021-03-310000051644ipg:IACMember2022-01-012022-03-310000051644ipg:IACMember2021-01-012021-03-310000051644ipg:SCEMembercountry:US2022-01-012022-03-310000051644ipg:SCEMembercountry:US2021-01-012021-03-310000051644ipg:SegmentInternationalDomainipg:SCEMember2022-01-012022-03-310000051644ipg:SegmentInternationalDomainipg:SCEMember2021-01-012021-03-310000051644ipg:SCEMember2022-01-012022-03-310000051644ipg:SCEMember2021-01-012021-03-310000051644ipg:UnsecuredDebt4200NotesOriginalPrincipalMember2022-03-31xbrli:pure0000051644ipg:UnsecuredDebt4200NotesRemainingPrincipalMember2022-03-310000051644ipg:UnsecuredDebt4200NotesOriginalPrincipalMember2021-12-310000051644ipg:UnsecuredDebt4650NotesMember2022-03-310000051644ipg:UnsecuredDebt4650NotesMember2021-12-310000051644ipg:UnsecuredDebt4750NotesMember2022-03-310000051644ipg:UnsecuredDebt4750NotesMember2021-12-310000051644ipg:UnsecuredDebt2400NotesMember2022-03-310000051644ipg:UnsecuredDebt2400NotesMember2021-12-310000051644ipg:UnsecuredDebt3375NotesMember2022-03-310000051644ipg:UnsecuredDebt3375NotesMember2021-12-310000051644ipg:UnsecuredDebt5400NotesMember2022-03-310000051644ipg:UnsecuredDebt5400NotesMember2021-12-310000051644us-gaap:NotesPayableOtherPayablesMember2022-03-310000051644us-gaap:NotesPayableOtherPayablesMember2021-12-310000051644ipg:CommittedCreditFacilityMember2022-03-310000051644ipg:UncommittedCreditFacilityMember2022-03-310000051644ipg:UncommittedCreditFacilityMember2022-01-012022-03-310000051644ipg:UnsecuredDebt4200NotesRemainingPrincipalMember2022-01-012022-03-310000051644ipg:UnsecuredDebt4650NotesMember2022-01-012022-03-310000051644ipg:UnsecuredDebt4750NotesMember2022-01-012022-03-310000051644ipg:UnsecuredDebt2400NoteMember2022-03-310000051644ipg:UnsecuredDebt2400NotesMember2022-01-012022-03-310000051644ipg:UnsecuredDebt3375NoteMember2022-03-310000051644ipg:UnsecuredDebt3375NotesMember2022-01-012022-03-310000051644ipg:UnsecuredDebt5400NotesMember2022-01-012022-03-3100000516442022-12-310000051644ipg:UnsecuredDebt4000NoteMember2022-03-310000051644ipg:UnsecuredDebt3750NoteDueIn2023Member2022-03-310000051644ipg:IANMember2020-12-310000051644ipg:DXTRAMember2020-12-310000051644ipg:MDEMember2020-12-310000051644ipg:IACMember2020-12-310000051644ipg:SCEMember2020-12-310000051644ipg:IANMember2021-01-012021-12-310000051644ipg:DXTRAMember2021-01-012021-12-310000051644ipg:MDEMember2021-01-012021-12-310000051644ipg:IACMember2021-01-012021-12-310000051644ipg:SCEMember2021-01-012021-12-3100000516442021-01-012021-12-310000051644ipg:IANMember2021-12-310000051644ipg:DXTRAMember2021-12-310000051644ipg:MDEMember2021-12-310000051644ipg:IACMember2021-12-310000051644ipg:SCEMember2021-12-310000051644ipg:IANMember2022-01-012022-01-010000051644ipg:DXTRAMember2022-01-012022-01-010000051644ipg:MDEMember2022-01-012022-01-010000051644ipg:IACMember2022-01-012022-01-010000051644ipg:SCEMember2022-01-012022-01-0100000516442022-01-012022-01-010000051644ipg:IANMember2022-01-010000051644ipg:DXTRAMember2022-01-010000051644ipg:MDEMember2022-01-010000051644ipg:IACMember2022-01-010000051644ipg:SCEMember2022-01-0100000516442022-01-010000051644ipg:IANMember2022-01-012022-03-310000051644ipg:DXTRAMember2022-01-012022-03-310000051644ipg:IANMember2022-03-310000051644ipg:DXTRAMember2022-03-310000051644ipg:MDEMember2022-03-310000051644ipg:IACMember2022-03-310000051644ipg:SCEMember2022-03-310000051644srt:MinimumMember2022-03-310000051644srt:MaximumMember2022-03-310000051644us-gaap:EmployeeSeveranceMember2021-12-310000051644ipg:NoncashItemsMember2022-01-012022-03-310000051644ipg:CashPaymentsMember2022-01-012022-03-310000051644us-gaap:EmployeeSeveranceMember2022-03-310000051644ipg:LeaseimpairmentcostsMember2021-12-310000051644ipg:LeaseimpairmentcostsMember2022-03-310000051644us-gaap:OtherRestructuringMember2021-12-310000051644us-gaap:OtherRestructuringMember2022-03-310000051644ipg:StockSettledAwardsMember2022-01-012022-03-310000051644ipg:PerformanceBasedAwardsMember2022-01-012022-03-310000051644us-gaap:StockCompensationPlanMember2022-01-012022-03-310000051644us-gaap:DomesticPlanMember2022-01-012022-03-310000051644us-gaap:DomesticPlanMember2021-01-012021-03-310000051644us-gaap:ForeignPlanMember2022-01-012022-03-310000051644us-gaap:ForeignPlanMember2021-01-012021-03-310000051644us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2022-01-012022-03-310000051644us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2021-01-012021-03-310000051644us-gaap:DomesticPlanMember2022-03-310000051644us-gaap:ForeignPlanMember2022-03-310000051644us-gaap:CorporateAndOtherMember2022-01-012022-03-310000051644us-gaap:CorporateAndOtherMember2021-01-012021-03-310000051644us-gaap:CorporateAndOtherMember2022-03-310000051644us-gaap:CorporateAndOtherMember2021-12-310000051644us-gaap:FairValueInputsLevel1Member2022-03-310000051644us-gaap:FairValueInputsLevel2Member2022-03-310000051644us-gaap:FairValueInputsLevel3Member2022-03-310000051644us-gaap:EstimateOfFairValueFairValueDisclosureMember2022-03-310000051644us-gaap:FairValueInputsLevel1Member2021-12-310000051644us-gaap:FairValueInputsLevel2Member2021-12-310000051644us-gaap:FairValueInputsLevel3Member2021-12-310000051644us-gaap:EstimateOfFairValueFairValueDisclosureMember2021-12-31utr:Rate
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
| | | | | | | | |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2022
or
| | | | | | | | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 1-6686
THE INTERPUBLIC GROUP OF COMPANIES, INC.
(Exact name of registrant as specified in its charter)
| | | | | | | | |
Delaware | | 13-1024020 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
909 Third Avenue, New York, New York 10022
(Address of principal executive offices) (Zip Code)
(212)704-1200
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.10 per share | IPG | The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | | | | |
Large Accelerated Filer | | ☒ | | Accelerated Filer | | ☐ |
Non-accelerated Filer | | ☐ | | Smaller Reporting Company | | ☐ |
| | | | Emerging Growth Company | | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý
The number of shares of the registrant’s common stock outstanding as of April 18, 2022 was 393,664,189.
INDEX
| | | | | | | | |
| Page |
|
Item 1. | | |
| | |
| | |
| | |
| | |
| | |
| | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
|
Item 1. | | |
Item 1A. | | |
Item 2. | | |
| | |
Item 6. | | |
| |
| |
INFORMATION REGARDING FORWARD-LOOKING DISCLOSURE
This quarterly report on Form 10-Q contains forward-looking statements. Statements in this report that are not historical facts, including statements about management’s beliefs and expectations, constitute forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue” or comparable terminology are intended to identify forward-looking statements. These statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined under Item 1A, Risk Factors, in our most recent annual report on Form 10-K and our quarterly reports on Form 10-Q. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.
Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Such factors include, but are not limited to, the following:
•the effects of a challenging economy on the demand for our advertising and marketing services, on our clients’ financial condition and on our business or financial condition;
•the impacts of the COVID-19 pandemic, including unanticipated developments like the emergence of new coronavirus variants or any shortfalls in vaccination efforts, and associated mitigation measures such as social distancing efforts and restrictions on businesses, social activities and travel on the economy, our clients and demand for our services, which may precipitate or exacerbate other risks and uncertainties;
•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 challenging 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 interest rates, inflation rates and currency exchange rates;
•developments from changes in the regulatory and legal environment for advertising and marketing services companies around the world, including laws and regulations related to data protection and consumer privacy;
•the impact on our operations of general or directed cybersecurity events; and
•failure to fully realize the anticipated benefits of our 2020 restructuring actions and other cost-savings initiatives.
Investors should carefully consider these factors and the additional risk factors outlined in more detail under Item 1A, Risk Factors, in our most recent annual report on Form 10-K and our quarterly reports on Form 10-Q.
PART I – FINANCIAL INFORMATION
| | | | | |
Item 1. | Financial Statements (Unaudited) |
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
| | | | | | | | | | | | | | | |
| Three months ended March 31, | | |
| 2022 | | 2021 | | | | |
REVENUE: | | | | | | | |
Net revenue | $ | 2,227.2 | | | $ | 2,027.7 | | | | | |
Billable expenses | 341.3 | | | 229.3 | | | | | |
Total revenue | 2,568.5 | | | 2,257.0 | | | | | |
| | | | | | | |
OPERATING EXPENSES: | | | | | | | |
Salaries and related expenses | 1,564.4 | | | 1,393.1 | | | | | |
Office and other direct expenses | 323.4 | | | 292.9 | | | | | |
Billable expenses | 341.3 | | | 229.3 | | | | | |
Cost of services | 2,229.1 | | | 1,915.3 | | | | | |
Selling, general and administrative expenses | 19.3 | | | 28.2 | | | | | |
Depreciation and amortization | 67.8 | | | 69.2 | | | | | |
Restructuring charges | 6.6 | | | 1.3 | | | | | |
Total operating expenses | 2,322.8 | | | 2,014.0 | | | | | |
| | | | | | | |
OPERATING INCOME | 245.7 | | | 243.0 | | | | | |
| | | | | | | |
EXPENSES AND OTHER INCOME: | | | | | | | |
Interest expense | (39.4) | | | (49.6) | | | | | |
Interest income | 9.8 | | | 6.9 | | | | | |
Other expense, net | (6.2) | | | (83.9) | | | | | |
Total (expenses) and other income | (35.8) | | | (126.6) | | | | | |
| | | | | | | |
INCOME BEFORE INCOME TAXES | 209.9 | | | 116.4 | | | | | |
Provision for income taxes | 49.1 | | | 23.8 | | | | | |
INCOME OF CONSOLIDATED COMPANIES | 160.8 | | | 92.6 | | | | | |
Equity in net income (loss) of unconsolidated affiliates | 0.1 | | | (0.2) | | | | | |
NET INCOME | 160.9 | | | 92.4 | | | | | |
Net income attributable to non-controlling interests | (1.5) | | | (0.7) | | | | | |
NET INCOME AVAILABLE TO IPG COMMON STOCKHOLDERS | $ | 159.4 | | | $ | 91.7 | | | | | |
| | | | | | | |
Earnings per share available to IPG common stockholders: | | | | | | | |
Basic | $ | 0.40 | | | $ | 0.23 | | | | | |
Diluted | $ | 0.40 | | | $ | 0.23 | | | | | |
| | | | | | | |
Weighted-average number of common shares outstanding: | | | | | | | |
Basic | 394.5 | | 391.5 | | | | |
Diluted | 398.4 | | 396.0 | | | | |
The accompanying notes are an integral part of these unaudited financial statements.
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in Millions)
(Unaudited)
| | | | | | | | | | | | | | | |
| Three months ended March 31, | | |
| 2022 | | 2021 | | | | |
NET INCOME | $ | 160.9 | | | $ | 92.4 | | | | | |
| | | | | | | |
OTHER COMPREHENSIVE INCOME (LOSS) | | | | | | | |
Foreign currency translation: | | | | | | | |
Foreign currency translation adjustments | (3.6) | | | (41.0) | | | | | |
Reclassification adjustments recognized in net income | 0.0 | | | 0.7 | | | | | |
| (3.6) | | | (40.3) | | | | | |
Derivative instruments: | | | | | | | |
Changes in fair value of derivative instruments | 5.9 | | | 21.3 | | | | | |
Recognition of previously unrealized net (gain) loss in net income | (0.3) | | | 5.2 | | | | | |
Income tax effect | (1.4) | | | (4.2) | | | | | |
| 4.2 | | | 22.3 | | | | | |
Defined benefit pension and other postretirement plans: | | | | | | | |
Net actuarial losses for the period | (0.6) | | | 0.0 | | | | | |
Amortization of unrecognized losses, transition obligation and prior service cost included in net income | 1.7 | | | 2.3 | | | | | |
| | | | | | | |
Other | (0.1) | | | (0.1) | | | | | |
Income tax effect | 0.6 | | | (0.4) | | | | | |
| 1.6 | | | 1.8 | | | | | |
Other comprehensive income (loss), net of tax | 2.2 | | | (16.2) | | | | | |
TOTAL COMPREHENSIVE INCOME | 163.1 | | | 76.2 | | | | | |
Less: comprehensive income attributable to non-controlling interests | 1.8 | | | 0.6 | | | | | |
COMPREHENSIVE INCOME ATTRIBUTABLE TO IPG | $ | 161.3 | | | $ | 75.6 | | | | | |
The accompanying notes are an integral part of these unaudited financial statements.
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Millions)
(Unaudited)
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
ASSETS: | | | |
Cash and cash equivalents | $ | 2,402.3 | | | $ | 3,270.0 | |
Accounts receivable, net of allowance of $66.6 and $68.5, respectively | 4,179.9 | | | 5,177.7 | |
Accounts receivable, billable to clients | 2,155.3 | | | 2,347.2 | |
Assets held for sale | 30.4 | | | 8.2 | |
Other current assets | 502.1 | | | 428.7 | |
Total current assets | 9,270.0 | | | 11,231.8 | |
Property and equipment, net of accumulated depreciation and amortization of $1,228.6 and $1,201.6, respectively | 654.9 | | | 675.8 | |
Deferred income taxes | 308.8 | | | 301.4 | |
Goodwill | 4,899.3 | | | 4,908.7 | |
Other intangible assets | 825.3 | | | 847.5 | |
Operating lease right-of-use assets | 1,506.5 | | | 1,544.4 | |
Other non-current assets | 416.1 | | | 399.6 | |
TOTAL ASSETS | $ | 17,880.9 | | | $ | 19,909.2 | |
| | | |
LIABILITIES: | | | |
Accounts payable | $ | 7,245.3 | | | $ | 8,960.0 | |
Accrued liabilities | 590.9 | | | 918.1 | |
Contract liabilities | 760.0 | | | 688.5 | |
Short-term borrowings | 59.1 | | | 47.5 | |
Current portion of long-term debt | 0.6 | | | 0.7 | |
Current portion of operating leases | 270.3 | | | 265.8 | |
Liabilities held for sale | 28.0 | | | 9.4 | |
Total current liabilities | 8,954.2 | | | 10,890.0 | |
Long-term debt | 2,908.1 | | | 2,908.6 | |
Non-current operating leases | 1,528.9 | | | 1,576.0 | |
Deferred compensation | 288.0 | | | 329.1 | |
Other non-current liabilities | 645.0 | | | 600.7 | |
TOTAL LIABILITIES | 14,324.2 | | | 16,304.4 | |
| | | |
Redeemable non-controlling interests (see Note 5) | 7.9 | | | 15.6 | |
| | | |
STOCKHOLDERS’ EQUITY: | | | |
Common stock | 39.7 | | | 39.3 | |
Additional paid-in capital | 1,206.0 | | | 1,226.6 | |
Retained earnings | 3,196.7 | | | 3,154.3 | |
Accumulated other comprehensive loss, net of tax | (892.3) | | | (894.2) | |
| | | |
| | | |
| 3,550.1 | | | 3,526.0 | |
Less: Treasury stock | (63.1) | | | — | |
Total IPG stockholders’ equity | 3,487.0 | | | 3,526.0 | |
Non-controlling interests | 61.8 | | | 63.2 | |
TOTAL STOCKHOLDERS’ EQUITY | 3,548.8 | | | 3,589.2 | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 17,880.9 | | | $ | 19,909.2 | |
The accompanying notes are an integral part of these unaudited financial statements.
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Millions)
(Unaudited)
| | | | | | | | | | | |
| Three months ended March 31, |
| 2022 | | 2021 |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | |
Net income | $ | 160.9 | | | $ | 92.4 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 67.8 | | | 69.2 | |
Deferred income tax | 19.9 | | | 18.2 | |
Amortization of restricted stock and other non-cash compensation | 12.5 | | | 20.3 | |
Net losses on sales of businesses | 6.4 | | | 12.5 | |
Net amortization of bond discounts and deferred financing costs | 0.7 | | | 2.7 | |
Loss on early extinguishment of debt | — | | | 74.0 | |
Provision for uncollectible receivables | (0.4) | | | (2.2) | |
| | | |
Other | 12.7 | | | 4.6 | |
Changes in assets and liabilities, net of acquisitions and divestitures, provided (using) cash: | | | |
Accounts receivable | 978.0 | | | 1,158.6 | |
Accounts receivable, billable to clients | 184.7 | | | (40.8) | |
Other current assets | (82.1) | | | (68.8) | |
Accounts payable | (1,685.9) | | | (1,347.0) | |
Accrued liabilities | (334.5) | | | (233.6) | |
Contract liabilities | 74.4 | | | 34.7 | |
Other non-current assets and liabilities | (48.7) | | | (44.6) | |
Net cash used in operating activities | (633.6) | | | (249.8) | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | |
Capital expenditures | (30.7) | | | (28.3) | |
| | | |
| | | |
Net proceeds from investments | 2.6 | | | 28.8 | |
Other investing activities | (0.7) | | | (0.3) | |
Net cash (used in) provided by investing activities | (28.8) | | | 0.2 | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | |
Common stock dividends | (118.3) | | | (109.1) | |
Repurchases of common stock | (63.1) | | | — | |
Tax payments for employee shares withheld | (38.3) | | | (22.4) | |
Distributions to non-controlling interests | (3.1) | | | (3.3) | |
Acquisition-related payments | (1.1) | | | (3.4) | |
Proceeds from long-term debt | — | | | 998.1 | |
Early extinguishment of long-term debt | — | | | (1,066.8) | |
Exercise of stock options | — | | | 8.0 | |
Net increase (decrease) in short-term borrowings | 13.9 | | | (2.9) | |
Other financing activities | (0.1) | | | (10.9) | |
Net cash used in financing activities | (210.1) | | | (212.7) | |
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash | 5.0 | | | (30.4) | |
Net decrease in cash, cash equivalents and restricted cash | (867.5) | | | (492.7) | |
Cash, cash equivalents and restricted cash at beginning of period | 3,272.2 | | | 2,511.5 | |
Cash, cash equivalents and restricted cash at end of period | $ | 2,404.7 | | | $ | 2,018.8 | |
The accompanying notes are an integral part of these unaudited financial statements.
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in Millions)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss, Net of Tax | | Treasury Stock | | | | Total IPG Stockholders’ Equity | | Non-controlling Interests | | Total Stockholders’ Equity |
| Shares | | Amount | | |
Balance at December 31, 2021 | 394.3 | | | $ | 39.3 | | | $ | 1,226.6 | | | $ | 3,154.3 | | | $ | (894.2) | | | $ | 0.0 | | | | | $ | 3,526.0 | | | $ | 63.2 | | | $ | 3,589.2 | |
Net income | | | | | | | 159.4 | | | | | | | | | 159.4 | | | 1.5 | | | 160.9 | |
Other comprehensive loss | | | | | | | | | 1.9 | | | | | | | 1.9 | | | 0.3 | | | 2.2 | |
Reclassifications related to redeemable non-controlling interests | | | | | (1.2) | | | | | | | | | | | (1.2) | | | (0.1) | | | (1.3) | |
Distributions to non-controlling interests | | | | | | | | | | | | | | | | | (3.1) | | | (3.1) | |
Change in redemption value of redeemable non-controlling interests | | | | | | | (1.4) | | | | | | | | | (1.4) | | | | | (1.4) | |
Repurchase of common stock | | | | | | | | | | | (63.1) | | | | | (63.1) | | | | | (63.1) | |
Common stock dividends ($0.290 per share) | | | | | | | (115.6) | | | | | | | | | (115.6) | | | | | (115.6) | |
Stock-based compensation | 2.8 | | | 0.5 | | | 17.5 | | | | | | | | | | | 18.0 | | | | | 18.0 | |
Shares withheld for taxes | (1.0) | | | (0.1) | | | (36.9) | | | | | | | | | | | (37.0) | | | | | (37.0) | |
Balance at March 31, 2022 | 396.1 | | | $ | 39.7 | | | $ | 1,206.0 | | | $ | 3,196.7 | | | $ | (892.3) | | | $ | (63.1) | | | | | $ | 3,487.0 | | | $ | 61.8 | | | $ | 3,548.8 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss, Net of Tax | | | | Total IPG Stockholders’ Equity | | Non-controlling Interests | | Total Stockholders’ Equity |
| Shares | | Amount | |
Balance at December 31, 2020 | 390.9 | | | $ | 39.0 | | | $ | 1,099.3 | | | $ | 2,636.9 | | | $ | (880.2) | | | | | $ | 2,895.0 | | | $ | 48.9 | | | $ | 2,943.9 | |
Net income | | | | | | | 91.7 | | | | | | | 91.7 | | | 0.7 | | | 92.4 | |
Other comprehensive loss | | | | | | | | | (16.1) | | | | | (16.1) | | | (0.1) | | | (16.2) | |
Reclassifications related to redeemable non-controlling interests | | | | | | | | | | | | | | | 1.0 | | | 1.0 | |
Distributions to non-controlling interests | | | | | | | | | | | | | | | (3.3) | | | (3.3) | |
Change in redemption value of redeemable non-controlling interests | | | | | | | 1.0 | | | | | | | 1.0 | | | | | 1.0 | |
| | | | | | | | | | | | | | | | | |
Common stock dividends ($0.270 per share) | | | | | | | (106.5) | | | | | | | (106.5) | | | | | (106.5) | |
Stock-based compensation | 2.6 | | | 0.3 | | | 23.4 | | | | | | | | | 23.7 | | | | | 23.7 | |
Exercise of stock options | 0.6 | | | 0.1 | | | 8.2 | | | | | | | | | 8.3 | | | | | 8.3 | |
Shares withheld for taxes | (0.9) | | | (0.1) | | | (23.0) | | | | | | | | | (23.1) | | | | | (23.1) | |
Other | | | | | | | | | | | | | | | 0.4 | | | 0.4 | |
Balance at March 31, 2021 | 393.2 | | | $ | 39.3 | | | $ | 1,107.9 | | | $ | 2,623.1 | | | $ | (896.3) | | | | | $ | 2,874.0 | | | $ | 47.6 | | | $ | 2,921.6 | |
The accompanying notes are an integral part of these unaudited financial statements.
Notes to Consolidated Financial Statements
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
Note 1: Basis of Presentation
The unaudited Consolidated Financial Statements have been prepared by The Interpublic Group of Companies, Inc. and its subsidiaries (the “Company,” “IPG,” “we,” “us” or “our”) in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting interim financial information on Form 10-Q. Accordingly, they do not include certain information and disclosures required for complete financial statements. The effects of the coronavirus ("COVID-19") pandemic have impacted and will likely continue to impact our results of operations, cash flows and financial position. The Company’s Consolidated Financial Statements presented herein reflect the latest estimates and assumptions made by management that affect the reported amounts of assets and liabilities and related disclosures as of the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented. The Company believes it has used reasonable estimates and assumptions to assess the fair values of goodwill, long-lived assets and indefinite-lived intangible assets; assessment of the annual effective tax rate; valuation of deferred income taxes and allowance for expected credit losses on future uncollectible accounts receivable.
Actual results could differ from these estimates and assumptions. The consolidated results for interim periods are not necessarily indicative of results for the full year and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report”).
Effective January 1, 2022, the Company completed a managerial and operational review, which resulted in organizational realignments to our financial reporting segment structure. As a result, the Company determined we conduct our business across three reportable segments described in Note 11. The three reportable segments are: Media, Data & Engagement Solutions ("MD&E"), Integrated Advertising & Creativity Led Solutions ("IA&C"), and Specialized Communications & Experiential Solutions ("SC&E"). In conjunction with the new reporting structure, the Company has recast certain prior period amounts, wherever applicable, to reflect our revised organizational alignment. This change does not impact the unaudited consolidated statements of operations and comprehensive income, consolidated balance sheets, consolidated statement of cash flows and consolidated statements of stockholders' equity for any of the previously reported periods.
Cost of services is comprised of the expenses of our revenue-producing reportable segments, MD&E, IA&C, and SC&E, including salaries and related expenses, office and other direct expenses and billable expenses, and includes an allocation of the centrally managed expenses from our "Corporate and Other" group. Office and other direct expenses include rent expense, professional fees, certain expenses incurred by our staff in servicing our clients and other costs directly attributable to client engagements.
Selling, general and administrative expenses are primarily the unallocated expenses from Corporate and Other, excluding depreciation and amortization.
Depreciation and amortization of fixed assets and intangible assets of the Company is disclosed as a separate operating expense.
Restructuring charges in 2022 consist of adjustments to the Company's restructuring actions taken during 2020 to lower our operating expenses structurally and permanently relative to revenue and to accelerate the transformation of our business, as discussed further in Note 7. Restructuring charges mainly include severance and termination costs and lease impairment costs.
In the opinion of management, these unaudited Consolidated Financial Statements include all adjustments, consisting only of normal and recurring adjustments necessary for a fair statement of the information for each period contained therein. Certain reclassifications have been made to prior-period financial statements to conform to the current-period presentation.
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
Note 2: Revenue
Disaggregation of Revenue
We have three reportable segments as of March 31, 2022: MD&E, IA&C and SC&E, as further discussed in Note 11. MD&E principally generates revenue from providing global media and communications services, digital services and products, advertising and marketing technology, e‐commerce services, data management and analytics, strategic consulting, and digital brand experience. IA&C principally generates revenue from providing advertising, corporate and brand identity services, and strategic consulting. SC&E generates revenue from providing best-in-class global public relations and communications services, events, sports and entertainment marketing, and strategic consulting.
Our agencies are located in over 100 countries, including every significant world market. Our geographic revenue breakdown is listed below.
| | | | | | | | | | | | | | | |
| Three months ended March 31, | | |
Total revenue: | 2022 | | 2021 | | | | |
United States | $ | 1,650.4 | | | $ | 1,425.8 | | | | | |
International: | | | | | | | |
United Kingdom | 232.1 | | | 203.5 | | | | | |
Continental Europe | 204.7 | | | 195.6 | | | | | |
Asia Pacific | 215.3 | | | 210.9 | | | | | |
Latin America | 94.4 | | | 83.6 | | | | | |
Other | 171.6 | | | 137.6 | | | | | |
Total International | 918.1 | | | 831.2 | | | | | |
Total Consolidated | $ | 2,568.5 | | | $ | 2,257.0 | | | | | |
| | | | | | | | | | | | | | | |
| Three months ended March 31, | | |
Net revenue: | 2022 | | 2021 | | | | |
United States | $ | 1,470.1 | | | $ | 1,309.8 | | | | | |
International: | | | | | | | |
United Kingdom | 182.4 | | | 184.0 | | | | | |
Continental Europe | 179.3 | | | 175.8 | | | | | |
Asia Pacific | 174.6 | | | 169.1 | | | | | |
Latin America | 87.7 | | | 75.4 | | | | | |
Other | 133.1 | | | 113.6 | | | | | |
Total International | 757.1 | | | 717.9 | | | | | |
Total Consolidated | $ | 2,227.2 | | | $ | 2,027.7 | | | | | |
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
| | | | | | | | | | | | | | | |
MD&E | Three months ended March 31, | | |
Total revenue: | 2022 | | 2021 | | | | |
United States | $ | 599.2 | | | $ | 534.6 | | | | | |
International | 356.6 | | | 336.9 | | | | | |
Total MD&E | $ | 955.8 | | | $ | 871.5 | | | | | |
| | | | | | | |
Net revenue: | | | | | | | |
United States | $ | 587.8 | | | $ | 527.7 | | | | | |
International | 344.3 | | | 322.1 | | | | | |
Total MD&E | $ | 932.1 | | | $ | 849.8 | | | | | |
| | | | | | | | | | | | | | | |
IA&C | Three months ended March 31, | | |
Total revenue: | 2022 | | 2021 | | | | |
United States | $ | 673.9 | | | $ | 599.9 | | | | | |
International | 380.3 | | | 354.0 | | | | | |
Total IA&C | $ | 1,054.2 | | | $ | 953.9 | | | | | |
| | | | | | | |
Net revenue: | | | | | | | |
United States | $ | 646.4 | | | $ | 574.4 | | | | | |
International | 312.4 | | | 301.3 | | | | | |
Total IA&C | $ | 958.8 | | | $ | 875.7 | | | | | |
| | | | | | | | | | | | | | | |
SC&E | Three months ended March 31, | | |
Total revenue: | 2022 | | 2021 | | | | |
United States | $ | 377.3 | | | $ | 291.3 | | | | | |
International | 181.2 | | | 140.3 | | | | | |
Total SC&E | $ | 558.5 | | | $ | 431.6 | | | | | |
| | | | | | | |
Net revenue: | | | | | | | |
United States | $ | 235.9 | | | $ | 207.7 | | | | | |
International | 100.4 | | | 94.5 | | | | | |
Total SC&E | $ | 336.3 | | | $ | 302.2 | | | | | |
Contract Balances
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Accounts receivable, net of allowance of $66.6 and $68.5, respectively | $ | 4,179.9 | | | $ | 5,177.7 | |
Accounts receivable, billable to clients | 2,155.3 | | | 2,347.2 | |
Contract assets | 54.4 | | | 62.3 | |
Contract liabilities (deferred revenue) | 760.0 | | | 688.5 | |
Contract assets are primarily comprised of contract incentives that are generally satisfied annually under the terms of our contracts and are transferred to accounts receivable when the right to payment becomes unconditional. Contract liabilities relate
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
to advance consideration received from customers under the terms of our contracts primarily related to reimbursements of third-party expenses, whether we act as principal or agent, and to a lesser extent, periodic retainer fees, both of which are generally recognized shortly after billing.
The majority of our contracts are for periods of one year or less with the exception of our data management contracts. For those contracts with a term of more than one year, we had approximately $556.2 of unsatisfied performance obligations as of March 31, 2022, which will be recognized as services are performed over the remaining contractual terms through 2027.
Note 3: Debt and Credit Arrangements
Long-Term Debt
A summary of the carrying amounts of our long-term debt is listed below.
| | | | | | | | | | | | | | | | | |
| Effective Interest Rate | | March 31, 2022 | | December 31, 2021 |
|
4.200% Senior Notes due 2024 (less unamortized discount and issuance costs of $0.1 and $0.4, respectively) | 4.240% | | $ | 249.5 | | | $ | 249.4 | |
4.650% Senior Notes due 2028 (less unamortized discount and issuance costs of $1.2 and $2.9, respectively) | 4.780% | | 495.9 | | | 495.8 | |
4.750% Senior Notes due 2030 (less unamortized discount and issuance costs of $3.2 and $4.9, respectively) | 4.920% | | 641.9 | | | 641.7 | |
2.400% Senior Notes due 2031 (less unamortized discount and issuance costs of $0.7 and $4.2, respectively) | 2.512% | | 495.1 | | | 495.0 | |
3.375% Senior Notes due 2041 (less unamortized discount and issuance costs of $1.0 and $5.5, respectively) | 3.448% | | 493.5 | | | 493.4 | |
5.400% Senior Notes due 2048 (less unamortized discount and issuance costs of $2.7 and $4.9, respectively) | 5.480% | | 492.4 | | | 492.3 | |
Other notes payable and capitalized leases | | | 40.4 | | | 41.7 | |
Total long-term debt | | | 2,908.7 | | | 2,909.3 | |
Less: current portion | | | 0.6 | | | 0.7 | |
Long-term debt, excluding current portion | | | $ | 2,908.1 | | | $ | 2,908.6 | |
As of March 31, 2022 and December 31, 2021, the estimated fair value of the Company's long-term debt was $3,009.1 and $3,337.4, respectively. Refer to Note 12 for details.
Credit Agreement
We maintain a committed corporate credit facility, originally dated as of July 18, 2008, which has been amended and restated from time to time (the "Credit Agreement"). We use our Credit Agreement to increase our financial flexibility, to provide letters of credit primarily to support obligations of our subsidiaries and to support our commercial paper program. On November 1, 2021, we amended and restated the Credit Agreement. As amended, among other things, the maturity date of the Credit Agreement was extended to November 1, 2026 and the cost structure of the Credit Agreement was changed. The Credit Agreement continues to include a required leverage ratio of not more than 3.50 to 1.00, among other customary covenants, including limitations on our liens and the liens of our consolidated subsidiaries and limitations on the incurrence of subsidiary debt. At the election of the Company, the leverage ratio may be changed to not more than 4.00 to 1.00 for four consecutive quarters, beginning with the fiscal quarter in which there is an occurrence of one or more acquisitions with an aggregate purchase price of at least $200.0.
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
The Credit Agreement is a revolving facility, under which amounts borrowed by us or any of our subsidiaries designated under the Credit Agreement may be repaid and reborrowed, subject to an aggregate lending limit of $1,500.0, or the equivalent in other currencies. The Company has the ability to increase the commitments under the Credit Agreement from time to time by an additional amount of up to $250.0, provided the Company receives commitments for such increases and satisfies certain other conditions. The aggregate available amount of letters of credit outstanding may decrease or increase, subject to a sublimit of $50.0, or the equivalent in other currencies. Our obligations under the Credit Agreement are unsecured. The Credit Agreement includes covenants that, among other things, (i) limit our liens and the liens of our consolidated subsidiaries, and (ii) limit subsidiary debt. The Credit Agreement also contains a financial covenant that requires us to maintain a certain leverage ratio on a consolidated basis as of the end of each fiscal quarter. As of March 31, 2022, there were no borrowings under the Credit Agreement; however, we had $10.6 of letters of credit under the Credit Agreement, which reduced our total availability to $1,489.4. We were in compliance with all of our covenants in the Credit Agreement as of March 31, 2022.
Uncommitted Lines of Credit
We also have uncommitted lines of credit with various banks that permit borrowings at variable interest rates and that are primarily used to fund working capital needs. We have guaranteed the repayment of some of these borrowings made by certain subsidiaries. If we lose access to these credit lines, we would have to provide funding directly to some of our operations. As of March 31, 2022, the Company had uncommitted lines of credit in an aggregate amount of $861.4, under which we had outstanding borrowings of $59.1 classified as short-term borrowings on our Consolidated Balance Sheet. The average amount outstanding during the first quarter of 2022 was $51.4 with a weighted-average interest rate of approximately 4.7%.
Commercial Paper
The Company is authorized to issue unsecured commercial paper up to a maximum aggregate amount outstanding at any time of $1,500.0. Borrowings under the program are supported by the Credit Agreement described above. Proceeds of the commercial paper are used for working capital and general corporate purposes, including the repayment of maturing indebtedness and other short-term liquidity needs. The maturities of the commercial paper vary but may not exceed 397 days from the date of issue. During the first quarter of 2022, there was no commercial paper activity and, as of March 31, 2022, there was no commercial paper outstanding.
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
Note 4: Earnings Per Share
The following sets forth basic and diluted earnings per common share available to IPG common stockholders.
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2022 | | 2021 | | | | |
Net income available to IPG common stockholders | $ | 159.4 | | | $ | 91.7 | | | | | |
| | | | | | | |
Weighted-average number of common shares outstanding - basic | 394.5 | | | 391.5 | | | | | |
Dilutive effect of stock options and restricted shares | 3.9 | | | 4.5 | | | | | |
Weighted-average number of common shares outstanding - diluted | 398.4 | | | 396.0 | | | | | |
| | | | | | | |
Earnings per share available to IPG common stockholders: | | | | | | | |
Basic | $ | 0.40 | | | $ | 0.23 | | | | | |
Diluted | $ | 0.40 | | | $ | 0.23 | | | | | |
Note 5: Supplementary Data
Accrued Liabilities
The following table presents the components of accrued liabilities.
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Salaries, benefits and related expenses | $ | 386.1 | | | $ | 685.4 | |
Income taxes payable | 41.6 | | | 42.8 | |
Interest | 39.3 | | | 39.0 | |
Office and related expenses | 28.2 | | | 30.5 | |
Acquisition obligations | 7.4 | | | 15.4 | |
Restructuring charges | 4.5 | | | 8.1 | |
Other | 83.8 | | | 96.9 | |
Total accrued liabilities | $ | 590.9 | | | $ | 918.1 | |
Other Expense, Net
Results of operations for the three months ended March 31, 2022 and 2021 include certain items that are not directly associated with our revenue-producing operations.
| | | | | | | | | | | | | | | |
| Three months ended March 31, | | |
| 2022 | | 2021 | | | | |
Net losses on sales of businesses | $ | (6.4) | | | $ | (12.5) | | | | | |
Loss on early extinguishment of debt | — | | | (74.0) | | | | | |
Other | 0.2 | | | 2.6 | | | | | |
Other expense, net | $ | (6.2) | | | $ | (83.9) | | | | | |
Net losses on sales of businesses – During the three months ended March 31, 2022 and 2021, the amounts recognized were related to sales of businesses and the classification of certain assets and liabilities, consisting primarily of accounts receivable and accounts payable, respectively, as held for sale within our MD&E, IA&C, and SC&E reportable segments. The businesses sold and held for sale primarily represent unprofitable, non-strategic agencies which are expected to be sold within the next twelve months.
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
Loss on early extinguishment of debt – During the three months ended March 31, 2021, we recorded a loss of $74.0 related to the early extinguishment of all $250.0 aggregate principal amount of our 4.000% unsecured senior notes due 2022, all $500.0 aggregate principal amount of our 3.750% unsecured senior notes due 2023, and $250.0 of the $500.0 aggregate principal amount of our 4.200% unsecured senior notes due 2024.
Share Repurchase Program
In February 2022, our Board of Directors (the "Board") reauthorized a program to repurchase, from time to time, up to $400.0 of our common stock.
We may effect such repurchases through open market purchases, trading plans established in accordance with U.S. Securities and Exchange Commission ("SEC") rules, derivative transactions or other means. The timing and amount of repurchases in future periods will depend on market conditions and other funding requirements.
The following table presents our share repurchase activity under our share repurchase programs for the three months ended March 31, 2022 and 2021.
| | | | | | | | | | | |
| Three months ended March 31, |
| 2022 | | 2021 |
Number of shares repurchased | 1.8 | | — | |
Aggregate cost, including fees | $ | 63.1 | | | $ | — | |
Average price per share, including fees | $ | 35.21 | | | $ | — | |
As of March 31, 2022, $337.0, excluding fees, remains available for repurchase under the share repurchase program reauthorized in 2022, which has no expiration date.
Redeemable Non-controlling Interests
Many of our acquisitions include provisions under which the non-controlling equity owners may require us to purchase additional interests in a subsidiary at their discretion. Redeemable non-controlling interests are adjusted quarterly, if necessary, to their estimated redemption value, but not less than their initial fair value. Any adjustments to the redemption value impact retained earnings or additional paid in capital, except for foreign currency translation adjustments.
The following table presents changes in our redeemable non-controlling interests.
| | | | | | | | | | | |
| Three months ended March 31, |
| 2022 | | 2021 |
Balance at beginning of period | $ | 15.6 | | | $ | 93.1 | |
Change in related non-controlling interests balance | (1.0) | | | 0.2 | |
Changes in redemption value of redeemable non-controlling interests: | | | |
| | | |
Additions | 1.1 | | | 0.0 | |
Redemptions | (9.1) | | | (5.7) | |
Redemption value adjustments | 1.3 | | | (2.4) | |
Balance at end of period | $ | 7.9 | | | $ | 85.2 | |
Goodwill
As discussed in Note 11, the Company transitioned to the new segment reporting structure effective January 1, 2022 which resulted in certain changes to our operating segments and reporting units. We have allocated goodwill to our reporting units using a relative fair value approach. In addition, we completed an assessment of any potential goodwill impairment for all reporting units immediately prior and subsequent to the reallocation and determined that no impairment existed.
Goodwill is the excess purchase price remaining from an acquisition after an allocation of purchase price has been made to identifiable assets acquired and liabilities assumed based on estimated fair values.
The following table sets forth details of changes in goodwill by reportable segment of the Company:
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| IAN | | DXTRA | | MD&E | | IA&C | | SC&E | | Total |
Balance at January 1, 2021 | $ | 4,264.5 | | | $ | 681.0 | | | $ | — | | | $ | — | | | $ | — | | | $ | 4,945.5 | |
Dispositions | (0.2) | | | 0.0 | | | — | | | — | | | — | | | (0.2) | |
Foreign Currency and Other | (32.7) | | | (3.9) | | | — | | | — | | | — | | | (36.6) | |
Balance at December 31, 2021 | $ | 4,231.6 | | | $ | 677.1 | | | $ | — | | | $ | — | | | $ | — | | | $ | 4,908.7 | |
Goodwill Reallocation 1 | (4,231.6) | | | (677.1) | | | 2,293.0 | | | 1,920.2 | | | 695.5 | | | — | |
Balance at January 1, 2022 | — | | | — | | | 2,293.0 | | | 1,920.2 | | | 695.5 | | | 4,908.7 | |
Foreign Currency and Other | — | | | — | | | (2.3) | | | (6.1) | | | (1.0) | | | (9.4) | |
Balance at March 31, 2022 | $ | — | | | $ | — | | | $ | 2,290.7 | | | $ | 1,914.1 | | | $ | 694.5 | | | $ | 4,899.3 | |
1 Represents the reallocation of goodwill as a result of the reorganization as described in Note 11.
Note 6: Income Taxes
For the three months ended March 31, 2022, our income tax expense was positively impacted by excess tax benefits on employee share-based payments, the majority of which is typically recognized in the first quarter due to the timing of the vesting of awards, partially offset by net losses on sales of businesses and the classification of certain assets as held for sale for which we received minimal tax benefit.
We have various tax years under examination by tax authorities in various countries, and in various states, in which we have significant business operations. It is not yet known whether these examinations will, in the aggregate, result in our paying additional taxes. We believe our tax reserves are adequate in relation to the potential for additional assessments in each of the jurisdictions in which we are subject to taxation. We regularly assess the likelihood of additional tax assessments in those jurisdictions and, if necessary, adjust our reserves as additional information or events require.
With respect to all tax years open to examination by U.S. federal, various state and local, and non-U.S. tax authorities, we currently anticipate that total unrecognized tax benefits will decrease by an amount between $35.0 and $45.0 in the next twelve months, a portion of which will affect our effective income tax rate, primarily as a result of the settlement of tax examinations and the lapsing of statutes of limitations.
We are effectively settled with respect to U.S. federal income tax audits through 2016. With limited exceptions, we are no longer subject to state and local income tax audits for years prior to 2013 or non-U.S. income tax audits for years prior to 2010.
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
Note 7: Restructuring Charges
Beginning in the second quarter of 2020, the Company took restructuring actions to lower its operating expenses structurally and permanently relative to revenue and to accelerate the transformation of our business (the “2020 Restructuring Plan”). These actions continued through the fourth quarter of 2020, and most were based on our recent experience and learning in the COVID-19 pandemic and a resulting review of our operations to address certain operating expenses such as occupancy expense and salaries and related expenses.
Lease impairment costs, which relate to the office spaces that were vacated as part of the 2020 Restructuring Plan, included impairments of operating lease right-of-use assets and associated leasehold improvements, furniture and asset retirement obligations in addition to losses and gains related to early lease terminations. Lease impairments were calculated based on estimated fair values using market participant assumptions including forecasted net discounted cash flows related to the operating lease right-of-use assets.
All restructuring actions were identified and initiated in 2020, with all actions completed by the end of the fourth quarter of 2020. The amounts for the three months ended March 31, 2022 are adjustments to the actions taken in 2020.
The components of the restructuring charges related to the 2020 Restructuring Plan are listed below.
| | | | | | | | | | | | | | | | | | | |
| Three months ended March 31, | | | | |
| 2022 | | 2021 | | | | | | | | |
Severance and termination costs | $ | 0.3 | | | $ | 1.5 | | | | | | | | | |
Lease impairment costs | 5.3 | | | (0.4) | | | | | | | | | |
Other restructuring costs | 1.0 | | | 0.2 | | | | | | | | | |
Total restructuring charges | $ | 6.6 | | | $ | 1.3 | | | | | | | | | |
Net restructuring charges were comprised of $6.1 at IA&C and $0.4 at SC&E for the three months ended March 31, 2022, which include non-cash lease impairment costs of $5.1 at IA&C and $0.2 at SC&E.
Net restructuring charges were comprised of $0.4 at IA&C and $0.9 at SC&E for the three months ended March 31, 2021.
A summary of the restructuring activities taken in the first three months of 2022 related to the 2020 Restructuring Plan is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2020 Restructuring Plan |
| Liability at December 31, 2021 | | Restructuring Expense | | Non-Cash Items | | Cash Payments | | | | Liability at March 31, 2022 |
Severance and termination costs | $ | 9.4 | | | $ | 0.3 | | | $ | 0.0 | | | $ | 4.8 | | | | | $ | 4.9 | |
Lease impairment costs | 0.0 | | | 5.3 | | | 5.3 | | | 0.0 | | | | | 0.0 | |
Other restructuring costs | 0.0 | | | 1.0 | | | 1.0 | | | 0.0 | | | | | 0.0 | |
Total | $ | 9.4 | | | $ | 6.6 | | | $ | 6.3 | | | $ | 4.8 | | | | | $ | 4.9 | |
Note 8: Incentive Compensation Plans
We issue stock-based compensation and cash awards to our employees under various plans established by the Compensation and Leadership Talent Committee of the Board of Directors (the "Compensation Committee") and approved by our stockholders. We issued the following stock-based awards under the 2019 Performance Incentive Plan (the "2019 PIP") during the three months ended March 31, 2022.
| | | | | | | | | | | |
| Awards | | Weighted-average grant-date fair value (per award) |
Restricted stock (units) | 1.2 | | | $ | 36.67 | |
Performance-based stock (shares) | 1.5 | | | $ | 30.05 | |
| | | |
Total stock-based compensation awards | 2.7 | | | |
During the three months ended March 31, 2022, the Compensation Committee granted performance cash awards under the 2019 PIP and restricted cash awards under the 2020 Restricted Cash Plan with a total annual target value of $45.1 and $11.9,
Notes to Consolidated Financial Statements – (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
respectively. Cash awards are expensed over the vesting period, which is typically three years for performance cash awards and two years or three years for restricted cash awards.
Note 9: Accumulated Other Comprehensive Loss, Net of Tax
The following tables present the changes in accumulated other comprehensive loss, net of tax, by component.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Foreign Currency Translation Adjustments | | | | Derivative Instruments | | Defined Benefit Pension and Other Postretirement Plans | | Total |
Balance as of December 31, 2021 | $ | (723.2) | | | | | $ | 22.9 | | | $ | (193.9) | | | $ | (894.2) | |
Other comprehensive (loss) income before reclassifications | (3.9) | | | | | 4.4 | | | 0.3 | | | 0.8 | |
Amount reclassified from accumulated other comprehensive loss, net of tax | 0.0 | | | | | (0.2) | | | 1.3 | | | 1.1 | |
Balance as of March 31, 2022 | $ | (727.1) | | | | | $ | 27.1 | | | $ | (192.3) | | | $ | (892.3) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Foreign Currency Translation Adjustments | | Derivative Instruments | | Defined Benefit Pension and Other Postretirement Plans | | Total |
Balance as of December 31, 2020 | $ | (637.6) | | | $ | 6.8 | | | $ | (249.4) | | | $ | (880.2) | |
Other comprehensive (loss) income before reclassifications | (40.9) | | | 18.4 | | | 0.0 | | | (22.5) | |
Amount reclassified from accumulated other comprehensive loss, net of tax | 0.7 | | | 3.9 | | | 1.8 | | | 6.4 | |
Balance as of March 31, 2021 | $ | (677.8) | | | $ | 29.1 | | | $ | (247.6) | | | $ | (896.3) | |