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"Margin expansion and capital returns are powerful drivers of value for Interpublic going forward." Michael I. Roth, IPG Chairman & CEO

13-February-2017
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"Margin expansion and capital returns are powerful drivers of value for Interpublic going forward." Michael I. Roth, IPG Chairman & CEO

The Interpublic recently announced its full year and fourth quarter 2016 results. The full year 2016 revenue was $7.85 billion, compared to $7.61 billion in 2015, with an organic revenue increase of 5.0% compared to the prior-year period. This was comprised of an organic revenue increase of 5.8% internationally and 4.4% in the U.S.

Fourth quarter 2016 revenue was $2.26 billion, compared to $2.20 billion in the fourth quarter of 2015, with an organic revenue increase of 5.3% compared to the prior-year period. This was comprised of an organic revenue increase of 7.8% internationally and 3.3% in the U.S.

Coming to operating results, for the full year 2016, operating income was $938.0 million, compared to $871.9 million in 2015. Operating margin was 12.0% for the full year 2016, compared to 11.5% for the full year 2015. Operating income in the fourth quarter of 2016 was $485.1 million, compared to $456.4 million in 2015. Operating margin was 21.4% for the fourth quarter of 2016, compared to 20.8% for the fourth quarter of 2015.

Full year 2016 net income available to IPG common stockholders was $608.5 million, resulting in earnings of $1.53 per basic and $1.49 per diluted share. This compares to net income available to IPG common stockholders of $454.6 million, or $1.11 per basic and $1.09 per diluted share a year ago.

Full year 2016 results include a non-operating pre-tax loss of $41.4 million on the sales of businesses, in "Other expense, net," which is chiefly non-cash. The income tax provision includes valuation allowance reversals of $12.2 million as a result of the disposition of certain businesses, a benefit of $10.4 million related to the adoption of the Financial Accounting Standards Board Accounting Standards Update (ASU) 2016-09, a benefit of $23.4 million related to the conclusion and settlement of a tax examination of previous years, and a benefit of $44.6 million related to refunds to be claimed on future amended U.S. federal returns for tax years 2014 and 2015 primarily related to foreign tax credits. Excluding these items, net income available to IPG common stockholders would be $556.9 million, resulting in diluted earnings per share of $1.37. This compares to adjusted net income available to IPG common stockholders a year ago of $501.7 million, and adjusted diluted earnings per share of $1.21, excluding the impact of losses on sales of businesses.

Fourth quarter 2016 net income available to IPG common stockholders was $317.6 million, resulting in earnings of $0.81 per basic and $0.78 per diluted share. This compares to net income available to IPG common stockholders of $260.3 million, or $0.65 per basic and $0.63 per diluted share a year ago.

Fourth quarter 2016 results include a non-operating pre-tax loss of $25.3 million on the sales of businesses, in "Other expense, net," which is chiefly non-cash. The income tax provision includes a benefit of $37.4 million related to refunds to be claimed on future amended U.S. federal returns for tax years 2014 and 2015 primarily related to foreign tax credits. Excluding these items, net income available to IPG common stockholders would be $303.6 million, resulting in diluted earnings per share of $0.75. This compares to adjusted net income available to IPG common stockholders a year ago of $272.1 million, and adjusted diluted earnings per share of $0.66, excluding the impact of losses on sales of businesses.

"Across the board, 2016 was a successful year, in which we posted strong financial results, continued to build our digital and integrated offerings, and garnered the highest level of recognition for the creativity and effectiveness of our work in over a decade. We grew organically in every region of the world, with notably strong performance in the U.S., and with broad participation from across our agencies, disciplines and client sectors," said Michael I. Roth, Interpublic's Chairman and CEO. "Digital activity across the portfolio continues to be a significant driver of our results. We are well positioned to keep innovating, and to remain a vital partner in helping our clients navigate the complex marketing media environment. Of course, we also demonstrated our continued ability to focus on and deliver improved profitability. Margin expansion and capital returns are powerful drivers of value for Interpublic going forward."

Commenting on 2017 targets, Roth added, "Given our positive market momentum - having just concluded a three-year period of industry-leading organic revenue growth - we believe a competitive target of 3%-4% on this key metric is appropriate for 2017. We are also targeting an additional 50 basis points of operating margin improvement. We have a strong balance sheet and a commitment to returning capital to our owners, which is underscored by the actions our board announced today to increase the dividend and allocate additional funds for share repurchase. Combined with the breadth and strength of our professional offerings, there remains significant potential for enhancing shareholder value in the years to come."

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