UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended ~~March 31,~~June 30, 2007
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission filenumber: 1-6686

THE INTERPUBLIC GROUP OF COMPANIES, INC.

(Exact name of registrant as specified in its charter)


Delaware		13-1024020
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1114 Avenue of the Americas, New York, New York 10036

(Address of principal executive offices) (Zip Code)

(212) 704-1200

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” inRule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer o Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). Yes o No þ

The number of shares of the registrant’s common stock outstanding as of ~~April 30,~~July 31, 2007 was ~~468,887,871.~~471,463,748.

INDEX


			Page No.

PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements (Unaudited)		2
		Consolidated Statements of Operations for the Three and Six Months Ended ~~March 31,~~June 30, 2007 and 2006		2
		~~Condensed Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006~~		3
		Condensed Consolidated ~~Statements~~Balance Sheets as of ~~Cash Flows for the Three Months Ended March 31,~~June 30, 2007 and December 31, 2006		4
		Consolidated Statements of ~~Comprehensive Loss~~Cash Flows for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2007 and 2006		5
		Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2007 and 2006		6
		Notes to Consolidated Financial Statements		67
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		1419
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk		2432
	Item 4.	Controls and Procedures		2432

PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings		2533
	Item 1A.	Risk Factors		2533
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		2533
	Item 4.	Submission of Matters to a Vote of Security Holders		34
	Item 6.	Exhibits		2635
SIGNATURES				2736
INDEX TO EXHIBITS				2837
~~EX-10.III.A: DESCRIPTION OF PERFORMANCE OBJECTIVES TO BE USED TO DETERMINE 2007 MANAGEMENT INCENTIVE COMPENSATION AWARDS~~EX-10.III.A.1: INTERPUBLIC EXECUTIVE SEVERANCE PLAN
EX-12.1: ~~SUPPLEMENTAL~~ COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
EX-12.2: ~~SUPPLEMENTAL~~ COMPUTATION OF RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32: CERTIFICATION

INFORMATION REGARDING FORWARD-LOOKING DISCLOSURE

This quarterly report onForm 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. 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 2006 Annual Report onForm 10-K ~~under Item 1A, Risk Factors.~~and in this report. 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:


	•	risks arising from material weaknesses in our internal control over financial reporting, including material weaknesses in our control environment;

	•	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;

• potential adverse effects if we are required to recognize impairment charges or other adverse accounting-related developments;

• potential adverse developments in connection with the ongoing Securities and Exchange Commission (“SEC”) investigation;

• potential downgrades in the credit ratings of our securities;

Part I — FINANCIAL INFORMATION


Item 1.	*Financial Statements*

THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES

~~CONSOLIDATED STATEMENTS OF OPERATIONS~~Consolidated Statements of Operations

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

Three Months Ended

March 31,
2007 2006

REVENUE
$ 1,359.1 $ 1,327.0

OPERATING EXPENSES:

Salaries and related expenses 988.8 950.7
Office and general expenses 495.1 535.5
Restructuring and other reorganization-related (reversals) charges (0.6 ) 0.4

Total operating expenses 1,483.3 1,486.6

OPERATING LOSS
(124.2 ) (159.6 )

EXPENSES AND OTHER INCOME:

Interest expense (55.0 ) (46.1 )
Interest income 28.5 25.9
Other (expense) income (1.5 ) 0.6

Total (expenses) and other income (28.0 ) (19.6 )

Loss before benefit of income taxes
(152.2 ) (179.2 )
Benefit of income taxes (25.7 ) (8.8 )

Loss of consolidated companies
(126.5 ) (170.4 )
Loss applicable to minority interests, net of tax 0.4 0.2
Equity in net income of unconsolidated affiliates, net of tax 0.2 —

NET LOSS
(125.9 ) (170.2 )
Dividends on preferred stock 6.9 11.9

NET LOSS APPLICABLE TO COMMON STOCKHOLDERS
$ (132.8 ) $ (182.1 )

Loss per share of common stock — basic and diluted $ (0.29 ) $ (0.43 )

Weighted-average number of common shares outstanding — basic and diluted 456.0 426.0

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

~~THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~(Amounts in Millions)~~

~~(Unaudited)~~

March 31,
December 31,

2007 2006

ASSETS:

Cash and cash equivalents $ 1,466.9 $ 1,955.7
Marketable securities 51.5 1.4
Accounts receivable, net of allowance of $79.5 and $81.3 3,459.7 3,934.9
Expenditures billable to clients 1,118.2 1,021.4
Deferred income taxes 70.9 70.9
Prepaid expenses and other current assets 246.4 224.5

Total current assets 6,413.6 7,208.8
Land, buildings and equipment, net of accumulated depreciation of $1,032.6 and $1,017.0 605.6 624.0
Deferred income taxes 522.2 476.5
Investments 127.9 128.1
Goodwill 3,077.1 3,067.8
Other assets 348.2 358.9

TOTAL ASSETS
$ 11,094.6 $ 11,864.1

LIABILITIES:
Accounts payable $ 3,801.0 $ 4,124.1
Accrued liabilities 2,127.9 2,426.7
Short-term debt 464.2 82.9

Total current liabilities 6,393.1 6,633.7
Long-term debt 1,846.1 2,248.6
Deferred compensation and employee benefits 599.9 606.3
Other non-current liabilities 384.9 388.4
Minority interests in consolidated subsidiaries 41.6 46.5

TOTAL LIABILITIES
9,265.6 9,923.5

Commitments and contingencies (Note 9)
TOTAL STOCKHOLDERS’ EQUITY
1,829.0 1,940.6

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$ 11,094.6 $ 11,864.1


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006

REVENUE	$	1,652.7		$	1,532.9		$	3,011.8		$	2,859.9

OPERATING EXPENSES:
Salaries and related expenses		1,009.7			945.1			1,998.5			1,895.8
Office and general expenses		502.6			504.6			997.7			1,040.1
Restructuring and other reorganization-related (reversals) charges		(5.2	)		6.3			(5.8	)		6.7

Total operating expenses		1,507.1			1,456.0			2,990.4			2,942.6

OPERATING INCOME (LOSS)		145.6			76.9			21.4			(82.7	)

EXPENSES AND OTHER INCOME:
Interest expense		(56.9	)		(52.0	)		(111.9	)		(98.1	)
Interest income		28.1			26.4			56.6			52.3
Other income		8.0			24.3			6.5			24.9

Total (expenses) and other income		(20.8	)		(1.3	)		(48.8	)		(20.9	)

Income (loss) before income taxes		124.8			75.6			(27.4	)		(103.6	)
(Benefit of) provision for income taxes		(11.4	)		5.0			(37.1	)		(3.8	)

Income (loss) of consolidated companies		136.2			70.6			9.7			(99.8	)
Income applicable to minority interests, net of tax		(2.4	)		(6.2	)		(2.0	)		(6.0	)
Equity in net income of unconsolidated affiliates, net of tax		3.2			1.3			3.4			1.3

NET INCOME (LOSS)		137.0			65.7			11.1			(104.5	)
Dividends on preferred stock		6.9			11.9			13.8			23.8
Allocation to participating securities		8.6			9.6			—			—

NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS	$	121.5		$	44.2		$	(2.7	)	$	(128.3	)

Earnings (loss) per share of common stock:
Basic	$	0.27		$	0.10		$	(0.01	)	$	(0.30	)
Diluted	$	0.24		$	0.10		$	(0.01	)	$	(0.30	)
Weighted-average number of common shares outstanding:
Basic		457.3			426.6			456.7			426.3
Diluted		541.3			429.9			456.7			426.3

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

THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets
(Amounts in Millions)
(Unaudited)

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Amounts in Millions)~~

~~(Unaudited)~~

Three Months Ended

March 31,
2007 2006

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss $ (125.9 ) $ (170.2 )
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization of fixed assets and intangible assets 43.0 42.9
Provision for bad debt 3.8 4.2
Amortization of restricted stock and other non-cash compensation 19.6 9.3
Amortization of bond discounts and deferred financing costs 7.8 3.2
Deferred income tax benefit (48.5 ) (32.4 )
Gain on sales of investments (0.8 ) (4.5 )
Loss applicable to minority interests, net of tax (0.4 ) (0.2 )
Other 7.3 4.6
Change in assets and liabilities, net of acquisitions and dispositions:

Accounts receivable 489.6 450.2
Expenditures billable to clients (91.9 ) (23.9 )
Prepaid expenses and other current assets (22.4 ) (38.0 )
Accounts payable (347.4 ) (494.3 )
Accrued liabilities (311.2 ) (287.0 )
Other non-current assets and liabilities (5.1 ) 8.0

Net cash used in operating activities (382.5 ) (528.1 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisitions, including deferred payments, net of cash acquired (13.5 ) (1.7 )
Capital expenditures (28.0 ) (18.7 )
Maturities of short-term marketable securities 238.4 77.4
Purchases of short-term marketable securities (288.4 ) (381.7 )
Proceeds from sales of businesses and fixed assets, net of cash sold 3.9 0.9
Proceeds from sales of investments 13.1 6.5
Purchases of investments (9.6 ) (4.7 )

Net cash used in investing activities (84.1 ) (322.0 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Net decrease in short-term bank borrowings (20.0 ) (8.9 )
Payments of long-term debt (1.2 ) (0.2 )
Proceeds from long-term debt 0.6 0.1
Consent fees — (0.7 )
Issuance of common stock, net of issuance costs 1.4 —
Distributions to minority interests, net (4.6 ) (6.3 )
Preferred stock dividends (6.9 ) (11.2 )

Net cash used in financing activities (30.7 ) (27.2 )

Effect of exchange rate changes on cash and cash equivalents 8.5 8.4

Net decrease in cash and cash equivalents (488.8 ) (868.9 )
Cash and cash equivalents at beginning of year 1,955.7 2,075.9

Cash and cash equivalents at end of period $ 1,466.9 $ 1,207.0


	June 30,		December 31,
	2007		2006

ASSETS:
Cash and cash equivalents	$	1,220.5	$	1,955.7
Marketable securities		260.2		1.4
Accounts receivable, net of allowance of $79.7 and $81.3		3,881.2		3,934.9
Expenditures billable to clients		1,103.5		1,021.4
Other current assets		339.6		295.4

Total current assets		6,805.0		7,208.8
Land, buildings and equipment, net of accumulated depreciation of $1,072.0 and $1,017.0		618.8		624.0
Deferred income taxes		534.5		476.5
Goodwill		3,140.6		3,067.8
Other assets		467.2		487.0

TOTAL ASSETS	$	11,566.1	$	11,864.1


LIABILITIES:
Accounts payable	$	4,010.4	$	4,124.1
Accrued liabilities		2,220.8		2,426.7
Short-term debt		490.3		82.9

Total current liabilities		6,721.5		6,633.7
Long-term debt		1,843.0		2,248.6
Deferred compensation and employee benefits		605.6		606.3
Other non-current liabilities		400.2		434.9

TOTAL LIABILITIES		9,570.3		9,923.5

Commitments and contingencies (Note 10)
TOTAL STOCKHOLDERS’ EQUITY		1,995.8		1,940.6

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	11,566.1	$	11,864.1

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

THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in Millions)
(Unaudited)

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS~~

~~(Amounts in Millions)~~

~~(Unaudited)~~

Three Months Ended

March 31,
2007 2006

Net Loss
$ (125.9 ) $ (170.2 )
Foreign currency translation adjustment 13.7 12.8
Adjustments to pension and other postretirement plans, net of tax (0.2 ) —
Unrealized holding (losses) gains on securities, net of tax
Unrealized holding gain — 6.5
Reclassification of gain to net earnings (0.7 ) (0.8 )

Net unrealized holding (losses) gains on securities, net of tax (0.7 ) 5.7

Total Comprehensive Loss
$ (113.1 ) $ (151.7 )


	Six Months Ended
	June 30,
	2007			2006

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	11.1		$	(104.5	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization of fixed assets and intangible assets		83.9			85.1
Provision for bad debt		5.2			6.0
Amortization of restricted stock and other non-cash compensation		32.7			20.7
Amortization of bond discounts and deferred financing costs		15.6			10.9
Deferred income tax benefit		(65.7	)		(68.8	)
Gain on sales of investments		(1.8	)		(23.4	)
Income applicable to minority interests, net of tax		2.0			6.0
Other		2.3			9.2
Change in assets and liabilities, net of acquisitions and dispositions:
Accounts receivable		147.8			405.4
Expenditures billable to clients		(38.9	)		(129.5	)
Prepaid expenses and other current assets		(16.0	)		(30.5	)
Accounts payable		(214.1	)		(439.9	)
Accrued liabilities		(294.4	)		(303.3	)
Other non-current assets and liabilities		(8.4	)		45.2

Net cash used in operating activities		(338.7	)		(511.4	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, including deferred payments, net of cash acquired		(80.3	)		(10.2	)
Capital expenditures		(66.5	)		(40.5	)
Maturities of short-term marketable securities		317.5			361.8
Purchases of short-term marketable securities		(575.8	)		(690.4	)
Proceeds from sales of businesses and fixed assets, net of cash sold		5.1			4.5
Proceeds from sales of investments		22.8			67.8
Purchases of investments		(15.6	)		(23.7	)
Other investing activities		3.7			—

Net cash used in investing activities		(389.1	)		(330.7	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in short-term bank borrowings		7.1			1.8
Consent fees		—			(40.9	)
Call spread transactions in connection with ELF Financing		—			(29.2	)
Distributions to minority interests		(10.4	)		(15.2	)
Preferred stock dividends		(13.8	)		(23.1	)
Other financing activities		0.6			(2.3	)

Net cash used in financing activities		(16.5	)		(108.9	)

Effect of exchange rate changes on cash and cash equivalents		9.1			10.7

Net decrease in cash and cash equivalents		(735.2	)		(940.3	)
Cash and cash equivalents at beginning of year		1,955.7			2,075.9

Cash and cash equivalents at end of period	$	1,220.5		$	1,135.6

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

~~NOTES TO CONSOLIDATED 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. (together with its subsidiaries, the “Company”, “Interpublic”, “we”, “us” or “our”) pursuant to the rules and regulations of the Securities and Exchange Commission ~~(“SEC”~~(the “SEC” or the “Commission”) and, in the opinion of management, include all adjustments of a normal and recurring nature necessary for a fair statement of the Consolidated Statements of Operations, Condensed Consolidated Balance Sheets, Consolidated Statements of Cash Flows and Consolidated Statements of Comprehensive ~~Loss~~Income (Loss) for each period presented. Certain reclassifications have been made to prior periods to conform to the current period presentation. The consolidated results for interim periods are not necessarily indicative of results for the full year, as historically our consolidated revenue is lower in the first half of the ~~fiscal~~ year than in the second half. These financial results should be read in conjunction with our 2006 Annual Report onForm 10-K.

AsStarting with the first quarter of ~~March 31,~~ 2007 we have included our $400.0 4.50% Convertible Senior Notes due 2023 in short-term debt because holders of this debt may require us to repurchase these Notes on March 15, 2008 for cash at par.


Note 2:	Restructuring and Other Reorganization-Related (Reversals) Charges

The components of restructuring and other reorganization-related (reversals) charges ~~were~~are as follows:


	Three Months Ended					Three Months Ended					Six Months Ended
	March 31,					June 30,					June 30,
	2007			2006		2007			2006		2007			2006

Other reorganization-related reversals	$	(0.2	)	$	—
Restructuring (reversals) charges
Other reorganization-related charges (reversals)						$	—		$	6.3	$	(0.2	)	$	6.3
Restructuring (reversals) charges:
Lease termination and other exit costs		0.1			0.4		(5.1	)		—		(5.0	)		0.4
Severance and termination costs		(0.5	)		—		(0.1	)		—		(0.6	)		—

		(0.4	)		0.4		(5.2	)		—		(5.6	)		0.4

Total	$	(0.6	)	$	0.4	$	(5.2	)	$	6.3	$	(5.8	)	$	6.7

Restructuring (reversals) charges relate to ~~lease termination and other exit costs and severance and termination costs for~~ the 2003 and 2001 restructuring programs. For the ~~first quarter of~~three and six months ended June 30, 2007, net reversals primarily ~~consisted~~consist of reversals due to the utilization of previously vacated property by an agency at Draftfcb and adjustments to estimates primarily relating to our severance and lease termination ~~costs offset by the amortization of the discounted liability related to lease terminations.~~costs. Net restructuring reversals for the three months ended June 30, 2007 was comprised of net reversals of ~~$(0.6)~~$5.1 at Integrated Agency Networks (“IAN”) and $0.1 at Constituency Management Group (“CMG”) ~~partially offset by~~. For the six months ended June 30, 2007, net ~~charges~~restructuring reversals was comprised of ~~$0.2~~$4.9 at ~~Integrated Agency Networks (“IAN”).~~IAN and $0.7 at CMG.

A rollforward of the remaining liability for the 2003 and 2001 restructuring program is as follows:


	2003			2001						2003			2001
	Program			Program			Total			Program			Program			Total

Liability at December 31, 2006	$	12.6		$	19.2		$	31.8		$	12.6		$	19.2		$	31.8
Charges and adjustments		(0.6	)		0.2			(0.4	)
Net reversals and adjustments											(0.8	)		(4.8	)		(5.6	)
Payments and other		(0.5	)		(1.5	)		(2.0	)		(1.6	)		(2.8	)		(4.4	)

Liability at March 31, 2007	$	11.5		$	17.9		$	29.4
Liability at June 30, 2007										$	10.2		$	11.6		$	21.8

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Consolidated Financial Statements — (Continued)

(Amounts in Millions, Except Per Share Amounts)
(Unaudited)

Note 3: Acquisitions

During the six months ended June 30, 2007, we made three acquisitions: a) a full-service advertising agency in Latin America, b) Reprise Media, which is a full-service search engine marketing firm in North America, and c) the remaining interests in a full-service advertising agency in India in which we previously held a 49% interest. Total cash consideration for these acquisitions was $80.2. There is a contingent purchase obligation for the remaining equity interests in Reprise Media, which is based on future financial performance. If the contingent obligation is met and consideration for these interests is determinable and distributable, we will record the fair value of this consideration as additional goodwill.

For companies acquired during the first half of 2007, we made estimates of the fair values of the assets and liabilities for consolidation. The purchase price in excess of the estimated fair value of the tangible net assets acquired was allocated to goodwill and identifiable intangible assets. These acquisitions do not have significant amounts of tangible assets, therefore a substantial portion of the total consideration has been allocated to goodwill and identifiable intangible assets (approximately $65.0). We are in the process of obtaining final third-party valuations for the intangible assets acquired in India, and adjustments could be made to the preliminary values assigned to the assets and liabilities acquired that would primarily be offset by a change in goodwill. All acquisitions during the first half of 2007 are included in the IAN operating segment. Pro forma information, as required by Statement of Financial Accounting Standards (“SFAS”) No. 141,Business Combinations, related to these acquisitions is not presented because the impact of these acquisitions, either individually or in the aggregate, on the Company’s consolidated results of operations is not significant.

During the three months ended June 30, 2007 and 2006, we made payments in the form of our common stock related to acquisitions initiated in prior years of $0.3 and $5.0, respectively. During the six months ended June 30, 2007 and 2006, we made payments in the form of our common stock related to acquisitions initiated in prior years of $0.3 and $5.1, respectively.

Details of cash paid for current and prior years’ acquisitions are as follows:


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2007			2006		2007			2006

Cash paid for current year acquisitions	$	74.3		$	—	$	80.2		$	—
Cash paid for prior year acquisitions:
Cost of investment		4.3			8.5		11.9			10.2
Compensation expense — related payments		1.4			2.6		1.4			2.7
Less: cash acquired		(11.8	)		—		(11.8	)		—

Total cash paid for acquisitions	$	68.2		$	11.1	$	81.7		$	12.9

Notes to Consolidated Financial Statements — (Continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)

Note 3:4: Supplementary Data

Accrued Liabilities


	March 31,		December 31,		June 30,		December 31,
	2007		2006		2007		2006

Media and production expenses	$	1,563.4	$	1,690.7	$	1,667.9	$	1,690.7
Salaries, benefits and related expenses		323.7		460.6		324.5		460.6
Office and related expenses		79.0		99.2		74.9		99.2
Professional fees		37.2		46.1		23.2		46.1
Restructuring and other reorganization-related		15.5		18.0		13.7		18.0
Interest		24.6		30.0		34.7		30.0
Taxes		6.2		7.3		6.1		7.3
Other		78.3		74.8		75.8		74.8

Total	$	2,127.9	$	2,426.7	$	2,220.8	$	2,426.7

~~2005~~2004 Restatement Liabilities

As part of the restatement set forth in the 2004 Annual Report onForm 10-K filed in September 2005 (the ~~“2005~~“2004 Restatement”), we recognized liabilities related to vendor discounts and credits where we had a contractual or legal obligation to rebate such amounts to our clients or vendors. Reductions to these liabilities are primarily achieved through settlements with clients and vendors, but also may occur if the applicable statute of limitations has lapsed. For the ~~three~~six months ended ~~March 31,~~June 30, 2007, we satisfied ~~$13.2~~$16.9 of these liabilities through cash payments of ~~$3.8~~$5.3 and reductions of certain client receivables of ~~$9.4.~~$11.6. Also, as part of the ~~2005~~2004 Restatement, we recognized liabilities related to internal investigations and international compensation arrangements. A summary of these and the vendor discounts and credits liabilities, which are primarily included in accounts payable, is as follows:


	March 31,		December 31,		June 30,		December 31,
	2007		2006		2007		2006

Vendor discounts and credits	$	199.8	$	211.2	$	189.6	$	211.2
Internal investigations (includes asset reserves)		19.5		19.5		16.5		19.5
International compensation arrangements		28.1		32.3		26.3		32.3

Total	$	247.4	$	263.0	$	232.4	$	263.0

Other Income


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2007			2006		2007			2006

(Losses) gains on sales of businesses and investments	$	(7.3	)	$	19.8	$	(8.3	)	$	20.1
Vendor discounts and credit adjustments		9.8			3.8		8.0			3.8
Other income		5.5			0.7		6.8			1.0

Total	$	8.0		$	24.3	$	6.5		$	24.9

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Consolidated Financial Statements — (Continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

Sale of businesses and investments — During the three months ended June 30, 2007, we sold several businesses within Draftfcb and Lowe Worldwide for a loss of approximately $10.0, partially offset by the sale of our remaining ownership interests in two agencies for a gain of $2.8.

During the three months ended June 30, 2006, we sold an investment located in Asia Pacific for a gain of $18.4. In addition, during the six months ended June 30, 2006 we sold our remaining ownership interest in an agency within Lowe Worldwide, for a gain of $2.5.

Vendor discounts and credit adjustments — We are in the process of settling our liabilities related to vendor discounts and credits primarily established as part of the 2004 Restatement. These adjustments reflect the reversal of certain liabilities as a result of settlements with clients and vendors or where the statute of limitations has lapsed.


Note 4:5:	~~Loss~~Earnings (Loss) Per Share

~~Loss~~Earnings (loss) per basic common share equals net ~~loss~~income (loss) applicable to common stockholders divided by the weighted average number of common shares outstanding for the applicable period. Earnings (loss) per diluted common share reflects the assumed conversion of all dilutive securities.

Notes to Consolidated Financial Statements — (Continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)

The following sets forth basic and diluted ~~loss~~earnings (loss) per common share applicable to common stock:

Three Months Ended

March 31,
2007 2006

Basic and Diluted

Net loss $ (125.9 ) $ (170.2 )
Less: preferred stock dividends 6.9 11.9

Net loss applicable to common stockholders
$ (132.8 ) $ (182.1 )

Weighted-average number of common shares outstanding — basic and diluted
456.0 426.0
Loss per share — basic and diluted
$ (0.29 ) $ (0.43 )


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2007		2006		2007			2006

Net income (loss)	$	137.0	$	65.7	$	11.1		$	(104.5	)
Preferred stock dividends		6.9		11.9		13.8			23.8
Allocation to participating securities^(a)		8.6		9.6		—			—

Net income (loss) applicable to common stockholders	$	121.5	$	44.2	$	(2.7	)	$	(128.3	)

Weighted-average number of common shares outstanding — basic		457.3		426.6		456.7			426.3

Earnings (loss) per share — basic	$	0.27	$	0.10	$	(0.01	)	$	(0.30	)

Net income (loss) applicable to common stockholders	$	121.5	$	44.2	$	(2.7	)	$	(128.3	)
Effect of dilutive securities:
Interest on 4.25% Convertible Senior Notes		0.3		—		—			—
Series B Preferred Stock Dividends		6.9		—		—			—

Diluted net income (loss) applicable to common stockholders	$	128.7	$	44.2	$	(2.7	)	$	(128.3	)

Weighted-average number of common shares outstanding — basic		457.3		426.6		456.7			426.3
Effect of dilutive securities:
Restricted stock and stock options		7.5		3.3		—			—
4.25% Convertible Senior Notes		32.2		—		—			—
Capped Warrants		5.3		—		—			—
Uncapped Warrants		0.6		—		—			—
Series B Preferred Stock		38.4		—		—			—

Weighted-average number of common shares outstanding — diluted		541.3		429.9		456.7			426.3

Earnings (loss) per share — diluted	$	0.24	$	0.10	$	(0.01	)	$	(0.30	)


^(a)		Pursuant to Emerging Issues Task Force (“EITF”) IssueNo. 03-6,Participating Securities and the Two-Class Method Under FASB Statement No. 128(“EITF03-6”), net income for purposes of calculating basic earnings per share is adjusted based on an earnings allocation formula that attributes earnings to participating securities and common stock according to dividends declared and participation rights in undistributed earnings. For 2007, participating securities consist of the 4.50% Convertible Senior Notes and for 2006 participating securities consist of the 4.50% Convertible Senior Notes and the Series A Mandatory Convertible Preferred Stock. Our participating securities have no impact on our net loss applicable to common stockholders for the six months ended June 30, 2007 and 2006 as there are no earnings distributable to common stockholders after deducting preferred stock dividends.

Basic and diluted shares outstanding and loss per share are equal for the ~~three~~six months ended ~~March 31,~~June 30, 2007 and 2006 because our potentially dilutive securities are antidilutive as a result of the net loss applicable to common stockholders in each period. ~~Our participating securities have no impact on our net loss applicable~~

Notes to ~~common stockholders for the three months ended March 31, 2007 and 2006 as there are no earnings distributable to common stockholders after deducting preferred stock dividends.~~Consolidated Financial Statements — (Continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)

The following table presents the potential shares excluded from diluted ~~loss~~earnings (loss) per share because the effect of including these potential shares would be antidilutive:


	Three Months Ended				Three Months Ended				Six Months Ended
	March 31,				June 30,				June 30,
	2007		2006		2007		2006		2007		2006

Stock Options and Non-vested Restricted Stock Awards		8.6		5.4		—		—		7.3		2.8
Capped Warrants		5.6		—		—		—		5.8		—
Uncapped Warrants		2.7		—		—		—		1.6		—
4.25% Convertible Senior Notes		32.2		—		—		—		32.2		—
4.50% Convertible Senior Notes		32.2		64.4		32.2		64.4		32.2		64.4
Series A Mandatory Convertible Preferred Stock		—		27.7		—		27.7		—		27.7
Series B Cumulative Convertible Perpetual Preferred Stock		38.4		38.4		—		38.4		38.4		38.4

Total		119.7		135.9		32.2		130.5		117.5		133.3

Securities excluded from the loss per share calculation because the exercise price was greater than the average market price:
Securities excluded from the diluted earnings (loss) per share calculation because the exercise price was greater than the average market price:
Stock Options⁽¹⁾		19.3		30.6		20.9		34.4		18.3		34.4
Warrants⁽²⁾						—		12.8		—		6.4


⁽¹⁾		These options ~~represent what is~~are outstanding at the end of the respective ~~period. At the point that~~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.

⁽²⁾		The potential dilutive impact of the warrants is based upon the difference between the market price of one share of our common stock and the stated exercise prices of the warrants.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Amounts in Millions, Except Per Share Amounts)~~

~~(Unaudited)~~

There were an additional ~~8.2~~8.1 and ~~3.0~~10.6 of outstanding stock options to purchase common shares ~~as of March 31,~~for the three and six months ended June 30, 2007, ~~and 2006,~~ respectively, with exercise prices less than the average market price for the respective period. However, these options are not included in the table above presenting the potential shares excluded from diluted ~~loss~~earnings (loss) per share due to the application of the treasury stock method and the rules related to stock-based compensation arrangements.


Note 5:6:	Taxes

For the three and six months ended ~~March 31,~~June 30, 2007, the difference between the effective tax rate and the statutory rate of 35% is primarily due ~~primarily~~ to state and local taxes, losses incurred innon-U.S. jurisdictions that receive no corresponding tax benefit and the ~~write-off~~recognition of ~~deferred~~previously unrecognized tax ~~assets for restricted stock.~~benefits. The improvement in the effective tax rate as compared to the ~~first quarter of~~six months ended June 30, 2006 ~~was~~is primarily attributable to the recognition of previously unrecognized tax benefits and a reduction in the losses incurred innon-U.S. jurisdictions that receive no ~~benefit and a reduction in the amount of U.S. taxation ofnon-U.S. income~~ ~~without offsetting U.S. foreign tax credits.~~benefit.

We adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48,Accounting for Uncertainty in Income Taxes, (“FIN 48”) on January 1, 2007. As a result of the implementation of FIN 48, we recorded a $9.5 increase in the net liability for unrecognized tax positions, which was recorded as an adjustment to retained earnings effective January 1, 2007. The total amount of

Notes to Consolidated Financial Statements — (Continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)

unrecognized tax benefits at January 1, 2007 was ~~$253.8,~~$271.8, including ~~$213.7~~$242.6 of tax benefits that, if recognized, would impact the effective tax rate and ~~$40.1~~$29.2 of tax benefits that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes. The total amount of accrued interest and penalties at January 1, 2007 was $30.2. In accordance with our accounting policy, interest and penalties accrued on unrecognized tax benefits are classified as income taxes in the statement of operations. We have not elected to change this classification with the adoption of FIN 48.

The total unrecognized tax benefits at June 30, 2007 were $185.4, including $145.0 of tax benefits that, if recognized, would impact the effective tax rate. The gross amount of increases in unrecognized tax benefits during the three and six months ended June 30, 2007 was $5.0 and $18.2, respectively, primarily attributable to current-period international tax exposures. The gross amount of decreases in unrecognized tax benefits during the three and six months ended June 30, 2007 was $102.6 and $104.6, respectively, primarily attributable to settlements of prior-year tax examinations.

With respect to all tax years open to examination by U.S. federal and various state, local, andnon-U.S. tax authorities, we currently anticipate that the total unrecognized tax benefits will decrease by an amount between $80.0 and $90.0 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 limitation. This net decrease is related to various items of income and expense, including transfer pricing adjustments, restatement adjustments and thin capitalization adjustments. In 2006, the IRS completed ~~the~~its field audit of the years 1997 through 2002 and has proposed additions to our taxable income. We have appealed a number of these proposed additions and expect to complete our discussions ~~are ongoing.~~with the IRS in the next twelve months.

~~At March 31, 2007, the IRS field audit of our 2003 and 2004 income tax returns remained ongoing.~~ On May 1, 2007, the IRS completed its examination of ~~these years~~our 2003 and 2004 income tax returns and proposed a number of adjustments to our taxable income. We ~~intend to appeal~~have appealed a number of these items. In addition, weduring the second quarter of 2007, there were net reversals of tax reserves, primarily related to previously unrecognized tax benefits related to various items of income and expense, including approximately $80.0 for certain worthless securities deductions associated with investments in consolidated subsidiaries, which was a result of the completion of a tax examination.

We have various tax years under examination by tax authorities in various countries, such as the United Kingdom, and in various states, such as New York, in which we have significant business operations. It is not yet known whether these examinations will, in the aggregate, result in our paying additional taxes. We have established tax reserves that we believe to be 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 adjust our reserves as additional information or events require.

With ~~respect to all tax years open to examination by U.S. Federal, various state, local, andnon-U.S. tax~~ authorities, we currently anticipate that approximately $80.0 of previously unrecognized tax benefits related to various items of income and expense, including certain worthless securities deductions and transfer pricing adjustments, will be recognized in the next twelve months primarily as a result of the completion of tax examinations in the second quarter of 2007 and the lapsing of statutes of limitation.

~~With~~ limited exceptions, we are no longer subject to U.S. income tax audits for years prior to 1997, state and local income tax audits for years prior to 1999, ornon-U.S. income tax audits for years prior to 2000.

913

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Consolidated Financial Statements — (Continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)


Note 6:7:	Employee Benefits

The components of net periodic cost for the domestic pension plans, the principal foreign pension plans and the postretirement benefit plans are as follows:


	Domestic						Foreign						Postretirement				Domestic Pension Plans						Foreign Pension Plans						Postretirement Benefit Plans
	Pension Plans						Pension Plans						Benefit Plans
Three Months Ended March 31,	2007			2006			2007			2006			2007		2006
Three Months Ended June 30,																	2007			2006			2007			2006			2007		2006

Service cost	$	—		$	0.2		$	3.5		$	4.1		$	0.1	$	0.1	$	—		$	0.2		$	4.6		$	4.3		$	0.2	$	0.2
Interest cost		2.1			2.2			6.1			5.4			0.9		1.0		2.0			2.2			5.9			5.5			0.9		1.0
Expected return on plan assets		(2.5	)		(2.2	)		(5.9	)		(4.3	)		—		—		(2.6	)		(2.3	)		(6.1	)		(4.4	)		—		—
Amortization of:
Transition obligation		—			—			—			0.1			—		—		—			—			—			—			—		0.1
Prior service cost		—			—			0.1			—			—		—
Prior service cost (credit)																		—			—			0.2			—			—		(0.1	)
Unrecognized actuarial losses		1.2			1.5			0.8			1.5			0.3		0.3		2.2			1.6			0.8			1.6			0.1		0.2

Net periodic cost	$	0.8		$	1.7		$	4.6		$	6.8		$	1.3	$	1.4	$	1.6		$	1.7		$	5.4		$	7.0		$	1.2	$	1.4


	Domestic Pension Plans						Foreign Pension Plans						Postretirement Benefit Plans
Six Months Ended June 30,	2007			2006			2007			2006			2007		2006

Service cost	$	—		$	0.4		$	8.1		$	8.4		$	0.3	$	0.3
Interest cost		4.1			4.4			12.0			10.9			1.8		2.0
Expected return on plan assets		(5.1	)		(4.5	)		(12.0	)		(8.7	)		—		—
Amortization of:
Transition obligation		—			—			—			0.1			—		0.1
Prior service cost (credit)		—			—			0.3			—			—		(0.1	)
Unrecognized actuarial losses		3.4			3.1			1.6			3.1			0.4		0.5

Net periodic cost	$	2.4		$	3.4		$	10.0		$	13.8		$	2.5	$	2.8

During the three and six months ended ~~March 31,~~June 30, 2007, we made contributions of ~~$5.3~~$11.3 and $16.6, respectively, to our foreign pension plans. For the remainder of 2007, we expect to contribute an additional $12.0 to our foreign pension plans. We do not anticipate making contributions to our domestic ~~pension plans. We expect to contribute an additional $21.2 to our foreign~~ pension plans.


Note 7:8:	~~Employee Stock Purchase Plan~~Stock-Based Compensation

During the six months ended June 30, 2007 we granted the following stock-based compensation awards under our 2006 performance incentive plan:


	Six Months Ended
	June 30, 2007
			Weighted-Average
			Grant-Date Fair
	Awards		Value (per award)

Stock Options		2.5	$	4.90
Stock-Settled Awards		4.6	$	11.82
Cash-Settled Awards		0.8	$	11.70
Performance-Based Awards		2.9	$	11.71

Notes to Consolidated Financial Statements — (Continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)

Stock-settled awards include restricted stock and restricted stock units (“RSUs”) expected to be settled in stock. Cash-settled awards include RSUs expected to be settled in cash. As of December 31, 2006, all of our RSUs granted were expected to be settled in cash. During the six months ended June 30, 2007, we granted RSUs that we expect to settle in stock in addition to RSUs that we expect to settle in cash. We adjust our fair value measurement for RSUs that are expected to be settled in cash quarterly based on our share price and we amortize stock-based compensation expense related to these awards over the vesting period based upon the quarterly-adjusted fair value. RSUs that are expected to be settled in stock and restricted stock are amortized over the vesting period based on the grant date fair value of the awards.

See Note 14 to the consolidated financial statements in our 2006 Annual Report onForm 10-K for additional information regarding general terms and methods of valuation for stock options, restricted stock awards, performance-based awards, and restricted stock units.

The Interpublic Group of Companies Employee Stock Purchase Plan (2006) (the “2006 Plan”) became active ~~beginning~~ April 1, 2007. Under the 2006 Plan, eligible employees may purchase our common stock through payroll deductions not exceeding 10% of their ~~compensation.~~base compensation or 900 (actual amount) shares each offering period. The price an employee pays for a share of common stock under the 2006 Plan is 90% of the lesser of the average market price of a share on the first business day of the offering period or the average market price of a share on the last business day of the offering period of three months. An aggregate of 15.0 shares are reserved for issuance under the 2006 ~~Plan. We filed a registration statement~~Plan, of which 0.1 shares were issued for the three months ended June 30, 2007. Total compensation expense associated with the ~~SEC to register~~issued shares was $0.2 for the ~~shares that may be purchased under the 2006 Plan.~~three months ended June 30, 2007.

1015

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Consolidated Financial Statements — (Continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)


Note 8:9:	Segment Information

We have two reportable segments: IAN, which is comprised of Draftfcb, Lowe, McCann, our media services and our leading stand-alone agencies, and CMG, which is comprised of the bulk of our specialist marketing service offerings. We also report results for the Corporate and other group. Segment information is presented consistently with the basis described in our 2006 Annual Report onForm 10-K. Summarized financial information concerning our reportable segments is shown in the following table:


	Three Months Ended						Three Months Ended						Six Months Ended
	March 31,						June 30,						June 30,
	2007			2006			2007			2006			2007			2006

Revenue:
IAN	$	1,131.2		$	1,108.8		$	1,379.4		$	1,295.1		$	2,510.6		$	2,403.9
CMG		227.9			218.2			273.3			237.8			501.2			456.0

Total	$	1,359.1		$	1,327.0		$	1,652.7		$	1,532.9		$	3,011.8		$	2,859.9

Segment operating income (loss):
IAN	$	(64.8	)	$	(72.9	)	$	168.3		$	119.5		$	103.5		$	46.8
CMG		(1.4	)		4.2			18.6			12.4			17.2			16.6
Corporate and other		(58.6	)		(90.5	)		(46.5	)		(48.7	)		(105.1	)		(139.4	)

Total		(124.8	)		(159.2	)		140.4			83.2			15.6			(76.0	)

Restructuring and other reorganization-related reversals (charges)		0.6			(0.4	)		5.2			(6.3	)		5.8			(6.7	)
Interest expense		(55.0	)		(46.1	)		(56.9	)		(52.0	)		(111.9	)		(98.1	)
Interest income		28.5			25.9			28.1			26.4			56.6			52.3
Other (expense) income		(1.5	)		0.6
Other income								8.0			24.3			6.5			24.9

Loss before benefit of income taxes	$	(152.2	)	$	(179.2	)
Income (loss) before income taxes							$	124.8		$	75.6		$	(27.4	)	$	(103.6	)

Depreciation and amortization of fixed assets and intangible assets:
Depreciation and amortization of fixed assets and tangible assets:
IAN	$	31.2		$	31.1		$	29.9		$	30.6		$	61.1		$	61.7
CMG		4.7			5.0			4.5			4.7			9.2			9.7
Corporate and other		7.1			6.8			6.5			6.9			13.6			13.7

Total	$	43.0		$	42.9		$	40.9		$	42.2		$	83.9		$	85.1

Capital expenditures:
IAN	$	19.7		$	13.5		$	33.9		$	15.7		$	53.6		$	29.1
CMG		2.0			1.7			1.8			2.3			3.8			4.1
Corporate and other		6.3			3.5			2.8			3.8			9.1			7.3

Total	$	28.0		$	18.7		$	38.5		$	21.8		$	66.5		$	40.5


	June 30,		December 31,
Total assets:	2007		2006
IAN	$	9,499.8	$	9,359.5
CMG		949.8		908.3
Corporate and other		1,116.5		1,596.3

Total	$	11,566.1	$	11,864.1

March 31,
December 31,

Total assets: 2007 2006

IAN $ 9,043.3 $ 9,359.5
CMG 928.7 908.3
Corporate and other 1,122.6 1,596.3

Total $ 11,094.6 $ 11,864.1

1116

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Consolidated Financial Statements — (Continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

The following expenses are included in Corporate and other:


	Three Months Ended						Three Months Ended						Six Months Ended
	March 31,						June 30,						June 30,
	2007			2006			2007			2006			2007			2006

Salaries and related expenses	$	58.0		$	50.3		$	56.8		$	43.9		$	114.8		$	94.2
Professional fees		25.4			60.8			11.6			22.7			37.0			83.4
Rent, depreciation and amortization		17.3			15.3			17.0			16.8			34.3			32.1
Corporate insurance		6.0			4.9			4.7			5.2			10.7			10.1
Other		7.7			6.0			11.9			6.1			19.6			12.4
Expenses allocated to operating divisions		(55.8	)		(46.8	)		(55.5	)		(46.0	)		(111.3	)		(92.8	)

Total	$	58.6		$	90.5		$	46.5		$	48.7		$	105.1		$	139.4


Note 9:10:	Commitments and Contingencies

SEC Investigation

The SEC opened a formal investigation in response to the restatement we first announced in August 2002, and the investigation expanded to encompass the ~~2005 Restatement. In particular, since we filed our~~ 2004 ~~Annual Report onForm 10-K,~~ ~~we have received subpoenas from the SEC relating to matters addressed in our 2005~~ Restatement. We have also responded to inquiries from the SEC staff concerning the restatement of the first three quarters of 2005 that we made in our 2005 Annual Report onForm 10-K. We continue to cooperate with the investigation. We expect that the investigation will result in monetary liability, but ~~because the investigation is ongoing, in particular with respect to the 2005 Restatement,~~as settlement discussions have not yet commenced, we cannot reasonably estimate the amount, range of amounts or timing of a resolution. Accordingly, we have not yet established any provision relating to these matters.

The SEC staff has informed us that it intends to seek approval from the Commission to enter into settlement discussions with us and, failing a settlement, to commence an action charging the Company with various violations of the federal securities laws. In that connection, and as previously disclosed by the Company in a current report onForm 8-K filed June 14, 2007, the staff has sent the Company a “Wells notice,” which invites us to make a responsive submission before the staff makes a final determination concerning its recommendation to the Commission. We expect to discuss settlement with the staff once the Commission authorizes the staff to engage in such discussions. We cannot at this time predict what the Commission will authorize or the outcome of any settlement negotiations.

Other Legal Matters

We are or have been involved in other legal and administrative proceedings of various types. While any litigation contains an element of uncertainty, we do not believe that the outcome of such proceedings or claims will have a material adverse effect on our financial condition.

Guarantees

As discussed in our 2006 Annual Report onForm 10-K, we have contingent obligations under guarantees of certain obligations of our subsidiaries relating principally to credit facilities, guarantees of certain media payables and operating leases of certain subsidiaries. As of ~~March 31,~~June 30, 2007 there have been no material changes to these guarantees.


Note ~~10:~~11:	Recent Accounting Standards

In June 2007, the EITF ratified EITF IssueNo. 06-11,Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards(“EITF 06-11”). UnderEITF 06-11 a realized tax benefit from dividends or

Notes to Consolidated Financial Statements — (Continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)

dividend equivalents that are charged to retained earnings and paid to employees for equity classified non-vested equity shares, non-vested equity share units, and outstanding share options should be recognized as an increase to additionalpaid-in-capital.EITF 06-11 is effective, prospectively, for fiscal years beginning after December 15, 2007. We do not expect the adoption ofEITF 06-11 to have a material impact on our Consolidated Financial Statements.

In February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities(“SFAS No. 159”), which permits an entity to measure certain financial assets and financial liabilities at fair value. Under SFAS No. 159, entities that elect the fair value option will report unrealized gains and losses in earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the potential impact of SFAS No. 159 on our Consolidated Financial Statements.

In January 2007 we adopted FIN 48. See Note 56 for further information.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Amounts in Millions, Except Per Share Amounts)~~

~~(Unaudited)~~

In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value in U.S. GAAP, and expands disclosures about fair value measurements. Under the standard, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. The standard clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability. In support of this principle, the standard establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data, for example, the reporting entity’s own data. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the potential impact of SFAS No. 157 on our Consolidated Financial Statements.

The adoption of the following accounting pronouncements during 2007 did not have a material impact on our Consolidated Financial Statements:


	•	SFAS No. 155,Accounting for Certain Hybrid Financial Instruments

	•	EITF IssueNo. 05-1,Accounting for the Conversion of an Instrument That Becomes Convertible Upon the Issuer’s Exercise of a Call Option

	•	EITF IssueNo. 06-3,How Taxes Collected from Customers and Remitted to Governmental Authorities Should be Presented in the Income Statement (That is, Gross versus Net Presentation)

	•	EITF IssueNo. 06-5,Accounting for Purchases of Life Insurance — Determining the Amount That Could Be Realized in Accordance with FASB TechnicalBulletin No. 85-4, Accounting for Purchases of Life Insurance

	•	EITF IssueNo. 06-6,Debtor’s Accounting for a Modification (or Exchange) of Convertible Debt Instruments

1318

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~Management’s Discussion and Analysis of Financial Condition
~~AND RESULTS OF OPERATIONS~~and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)


Item 2.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand The Interpublic Group of Companies, Inc. and subsidiaries (the “Company”, “Interpublic”, “we”, “us” or “our”). MD&A should be read in conjunction with our financial statements and the accompanying notes. Our MD&A includes the following sections:

EXECUTIVE SUMMARY provides an overview of our results of operations and liquidity.

RESULTS OF OPERATIONS provides an analysis of the consolidated and segment results of operations for the periods presented.

LIQUIDITY AND CAPITAL RESOURCES provides an overview of our cash flows and financing activities.

INTERNAL CONTROL OVER FINANCIAL REPORTING, by reference to our 2006 Annual Report onForm 10-K, provides a description of the status of our compliance with Section 404 of the Sarbanes-Oxley Act of 2002.

CRITICAL ACCOUNTING ESTIMATES provides an ~~updated~~update to the discussion of our accounting policies that require critical judgment, assumptions and estimates ~~that were incorporated~~ in our 2006 Annual Report onForm 10-K.

RECENT ACCOUNTING STANDARDS, by reference to Note 1011 to the unaudited Consolidated Financial Statements, provides a discussion of accounting standards that we have not yet been required to implement, but which may affect us in the future, as well as those accounting standards that have been adopted during 2007.

EXECUTIVE SUMMARY

We are one of the world’s largest advertising and marketing services companies, comprised of communication agencies around the world that deliver custom marketing solutions on behalf of our clients. These agencies cover the spectrum of marketing disciplines and specialties, from traditional services such as consumer advertising and direct marketing, to emerging services such as mobile and search engine marketing. To meet the challenge of an increasingly complex consumer culture, we create customized marketing solutions for each of our clients. These solutions vary from project-based work between one agency and its client to long-term, fully-integrated campaigns involving several of our companies working on behalf of a client. Furthermore, our agencies cover all major markets geographically and can operate in a single region or align work globally across many markets.

Our strategy is focused on improving our organic revenue growth and operating ~~income, and we~~income. We are working to achieve a level of organic revenue growth comparable to industry peers and double-digit operating margins by 2008. We analyzeperiod-to-period changes in our operating performance by determining the portion of the change that is attributable to foreign currency rates and the change attributable to the net effect of acquisitions and divestitures, ~~and~~with the remainder is considered the organic change. For purposes of analyzing this change, acquisitions and divestitures are treated as if they occurred on the first day of the quarter during which the transaction occurred.

Although the U.S. Dollar is our functional currency for reporting purposes, a substantial portion of our revenues is generated in foreign currencies. Therefore, our reported results are affected by fluctuations in the currencies our international businesses are conducted in, principally the Euro and Pound Sterling. InDuring the ~~first quarter of~~three and six months ended June 30, 2007, the U.S. Dollar was weaker against both of these currencies as ~~compared to the first quarter~~

1419

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~Management’s Discussion and Analysis of Financial Condition
~~AND RESULTS OF OPERATIONS~~and Results of Operations — (Continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)

ofcompared to the respective periods in 2006. As a result, the net effect of foreign currency changes from the comparable ~~prior year period~~prior-year periods was an increase in revenues and operating expenses in ~~the first quarter of~~ 2007.

As discussed in more detail in this MD~~&A, for the first quarter of 2007 compared to 2006:~~&A:


	•	Total revenue increased ~~2.4%.~~7.8% and 5.3% for the three and six months ended June 30, 2007, respectively.

	•	Organic revenue increase was ~~1.6% primarily~~6.6% and 4.3% for the three and six months ended June 30, 2007, respectively, due to higher revenue from existing ~~clients.~~clients and net client wins.

	•	Operating margin was ~~(9.1%) in~~8.8% and 0.7% for the three and six months ended June 30, 2007, compared to ~~(12.0%~~5.0% and (2.9%) infor the three and six months ended June 30, 2006. Salaries and related expenses as a percentage of revenue was 61.1% and 66.4% for the three and six months ended June 30, 2007, compared with 61.7% and 66.3% for the three and six months ended June 30, 2006. Office and general expenses as a percentage of revenue was 30.4% and 33.1% for the three and six months ended June 30, 2007, compared with 32.9% and 36.4% for the three and six months ended June 30, 2006.

	•	Operating expenses ~~decreased slightly~~increased by $51.1 and $47.8 for the three and six months ended June 30, 2007, primarily due to ~~$1,483.3 in 2007, compared to $1,486.6 in 2006.~~higher salaries and related expenses.

	•	Total salaries and related expenses increased ~~4.0%.~~6.8% and 5.4% for the three and six months ended June 30, 2007. The organic increase was ~~2.8%.~~5.5% and 4.2% for the three and six months ended June 30, 2007.

	•	Total office and general expenses decreased ~~7.5% primarily due to lower professional fees.~~0.4% and 4.1% for the three and six months ended June 30, 2007. The organic decrease was ~~7.9%.~~0.7% and 4.4% for the three and six months ended June 30, 2007.

	•	During the second quarter of 2007, there were net reversals of tax reserves, primarily related to previously unrecognized tax benefits related to various items of income and expense, including approximately $80.0 for certain worthless securities deductions, which was a result of the completion of a tax examination.

RESULTS OF OPERATIONS

Consolidated Results of Operations — Three and Six Months Ended ~~March 31,~~June 30, 2007 compared to Three and Six Months Ended ~~March 31,~~June 30, 2006

REVENUE

Three Months
Components of Change Three Months

Ended
Net
Ended

March 31,
Foreign
Acquisitions/
March 31,
Change
2006 Currency (Divestitures) Organic 2007 Organic Total

Total
$ 1,327.0 31.6 (20.3 ) 20.8 $ 1,359.1 1.6 % 2.4 %
Domestic
775.4 — (1.7 ) 32.3 806.0 4.2 % 3.9 %
International
551.6 31.6 (18.6 ) (11.5 ) 553.1 (2.1 )% 0.3 %

The components of the change in consolidated revenue for the second quarter of 2007 were as follows:


			Components of Change
	Three Months					Net						Three Months
	Ended		Foreign			Acquisitions/						Ended		Change
	June 30, 2006		Currency			(Divestitures)			Organic			June 30, 2007		Organic			Total

Consolidated	$	1,532.9		40.6			(22.7	)		101.9		$	1,652.7		6.6	%		7.8	%
Domestic		867.4		—			(3.4	)		92.8			956.8		10.7	%		10.3	%
International		665.5		40.6			(19.3	)		9.1			695.9		1.4	%		4.6	%
United Kingdom		138.5		12.6			(9.2	)		1.0			142.9		0.7	%		3.2	%
Continental Europe		258.3		20.5			(5.5	)		(10.1	)		263.2		(3.9	)%		1.9	%
Latin America		70.8		3.6			(1.7	)		0.9			73.6		1.3	%		4.0	%
Asia Pacific		120.5		4.4			(2.0	)		16.4			139.3		13.6	%		15.6	%
Other		77.4		(0.5	)		(0.9	)		0.9			76.9		1.2	%		(0.6	)%

~~Revenue~~

Management’s Discussion and Analysis of Financial Condition
and Results of Operations — (Continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)

During the second quarter of 2007, revenue increased $119.8, or $101.9 on an organic basis, due to domestic organic revenue growth and changes in foreign currency exchange rates ~~and organic revenue increases~~ at both the Integrated Agency Networks (“IAN”) and Constituency Management Group (“CMG”) segments. ~~The domestic~~Domestic organic ~~increase~~growth was primarily driven by ~~increased client spending and net client wins~~expanding business with existing clients, winning new business in ~~the traditional~~ advertising, ~~sector,~~ public relations and sports marketing ~~disciplines.~~disciplines, and the completion of several projects within the events marketing business. The international organic increase was driven by higher revenue from existing clients, primarily in the Asia Pacific region at IAN and CMG, partially offset by decreased spending from existing clients in Continental Europe.

The components of the change in consolidated revenue for the first half of 2007 were as follows:


			Components of Change
	Six Months					Net						Six Months
	Ended		Foreign			Acquisitions/						Ended		Change
	June 30, 2006		Currency			(Divestitures)			Organic			June 30, 2007		Organic			Total

Consolidated	$	2,859.9		72.3			(43.4	)		123.0		$	3,011.8		4.3	%		5.3	%
Domestic		1,642.9		—			(5.3	)		125.2			1,762.8		7.6	%		7.3	%
International		1,217.0		72.3			(38.1	)		(2.2	)		1,249.0		(0.2	)%		2.6	%
United Kingdom		264.3		27.3			(20.4	)		6.2			277.4		2.3	%		5.0	%
Continental Europe		465.0		37.6			(11.1	)		(21.8	)		469.7		(4.7	)%		1.0	%
Latin America		126.3		4.6			(1.8	)		0.5			129.6		0.4	%		2.6	%
Asia Pacific		220.3		6.6			(3.5	)		11.6			235.0		5.3	%		6.7	%
Other		141.1		(3.8	)		(1.3	)		1.3			137.3		0.9	%		(2.7	)%

During the first half of 2007, revenue increased $151.9, or $123.0 on an organic basis, due to domestic organic revenue growth and changes in foreign currency exchange rates at both IAN and CMG, partially offset by net divestitures, primarily at IAN. Domestic organic growth was driven by factors similar to those noted above for the second quarter of 2007. The international organic decrease was driven by lower revenue from existing clients, primarily in the ~~Latin America~~Continental Europe region at IAN and CMG, partially offset by increases primarily related to higher revenue from existing clients in the Asia Pacific region ~~in the events marketing businesses~~ at CMG as well as changes in the timing of client spending relative to a year ago. Europe slightly declined as a result of weakness in traditional advertising and marketing services, partially offset by higher client spending in the events marketing businesses.IAN.

Refer to the segment discussion later in this MD&A for more detailed information on changes in revenue by segment.

1521

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~Management’s Discussion and Analysis of Financial Condition
~~AND RESULTS OF OPERATIONS~~and Results of Operations — (Continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)

OPERATING EXPENSES


	Three Months Ended March 31,											Three Months Ended June 30,											Six Months Ended June 30,
	2007						2006					2007						2006					2007						2006
				% of					% of						% of					% of						% of					% of
	$			Revenue			$		Revenue			$			Revenue			$		Revenue			$			Revenue			$		Revenue

Salaries and related expenses	$	988.8			72.8	%	$	950.7		71.6	%	$	1,009.7			61.1	%	$	945.1		61.7	%	$	1,998.5			66.4	%	$	1,895.8		66.3	%
Office and general expenses		495.1			36.4	%		535.5		40.4	%		502.6			30.4	%		504.6		32.9	%		997.7			33.1	%		1,040.1		36.4	%
Restructuring and other reorganization-related (reversals) charges		(0.6	)					0.4					(5.2	)					6.3					(5.8	)					6.7

Total operating expenses	$	1,483.3					$	1,486.6				$	1,507.1					$	1,456.0				$	2,990.4					$	2,942.6

Salaries and Related Expenses

Components of Change
Net

Foreign
Acquisitions/
Change
2006 Currency (Divestitures) Organic 2007 Organic Total

Three months ended March 31,
$ 950.7 24.4 (12.8 ) 26.5 $ 988.8 2.8 % 4.0 %


			Components of Change
					Net
			Foreign		Acquisitions/							Change
	2006		Currency		(Divestitures)			Organic		2007		Organic			Total

Three months ended June 30,	$	945.1		25.3		(13.1	)		52.4	$	1,009.7		5.5	%		6.8	%
Six months ended June 30,		1,895.8		49.7		(25.8	)		78.8		1,998.5		4.2	%		5.4	%

~~Salaries~~During the second quarter of 2007, salaries and related expenses increased ~~$38.1 during the first quarter of 2007~~$64.6, or $52.4 on an organic basis, primarily due to ~~higher~~an increase in base salaries, benefits and temporary help of $44.8 and an increase in cash bonus accruals and long-term incentive stock compensation expense of $8.5. Changes in foreign currency rates impact our base salaries and benefits ~~stock compensation expense and accruals for bonus awards. Salaries and related expenses were also affected by~~since a large portion of our workforce is located outside of the United States. Excluding the effect of foreign currency ~~exchange rate variances~~ and net ~~divestitures. Salaries~~divestitures, base salaries, benefits and ~~benefits~~temporary help grew on an organic basis by ~~$27.6~~approximately $34.0 primarily to support growth in certain of our ~~businesses. Long-term~~businesses and because of normal annual merit increases. Cash bonus accruals and long-term incentive stock compensation expense and bonus accruals increased a combined $17.4. Long-term incentive stock expense increased due to the effect of equity-based awards granted in June 2006 and a one-time performance equity-based award granted in 2006 to a limited number of operating and corporate executives. Cash bonus awards increased primarily due to ~~higher accruals~~improved operating performance in ~~the first quarter of~~ 2007 compared to ~~the first quarter of~~ 2006. Changes can occur in both ~~short~~short-term and long-term compensation awards based on projected results and could impact trends between various periods in the future.

During the first half of 2007, salaries and related expenses increased $102.7, or $78.8 on an organic basis, mostly for the same reasons as noted above for the second quarter. Base salaries, benefits and temporary help increased by $72.4 and cash bonus accruals and long-term incentive stock compensation expense increased by $25.8. Excluding the effect of foreign currency and net divestitures, base salaries, benefits and temporary help grew on an organic basis by approximately $52.0. Long-term stock compensation incentive expense also increased due to the effect of equity-based awards granted in June 2006 and an accrual related to a one-time performance-based equity award granted in 2006 to certain executives that primarily affected the first quarter of 2007. This award is tied to our financial performance for the2006-2008 period and the performance targets required for this award are significantly higher than for other grants under our current performance incentive plan.

Management’s Discussion and Analysis of Financial Condition
and Results of Operations — (Continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)

Office and General Expenses

Components of Change
Net

Foreign
Acquisitions/
Change
2006 Currency (Divestitures) Organic 2007 Organic Total

Three months ended March 31,
$ 535.5 13.2 (11.4 ) (42.2 ) $ 495.1 (7.9 )% (7.5 )%


			Components of Change
					Net
			Foreign		Acquisitions/								Change
	2006		Currency		(Divestitures)			Organic			2007		Organic			Total

Three months ended June 30,	$	504.6		14.1		(12.8	)		(3.3	)	$	502.6		(0.7	)%		(0.4	)%
Six months ended June 30,		1,040.1		27.3		(24.4	)		(45.3	)		997.7		(4.4	)%		(4.1	)%

Office and general expenses for the second quarter of 2007 decreased slightly primarily due to net divestitures and continued reductions in professional fees, partially offset by an increase in production expenses and the net effect of foreign currency changes. The decrease in professional fees was mainly attributable to reduced costs associated with projects related to financial and compliance matters, including internal control compliance, legal consultation and certain accounting projects, primarily at Corporate. The increase in production expenses primarily related to the pass-through costs involved in the completion of several projects at CMG.

Office and general expenses for the first ~~quarter~~half of 2007 decreased ~~primarily due~~for reasons similar to continued reductions in professional fees, mainly from reduced costs associated with finance related projects, including internal control compliance and certain accounting projects. The decrease primarily occurred at Corporate.those noted above for the second quarter. We expect professional fees to continue to decrease ~~throughout 2007.~~in 2007 compared to 2006.

Restructuring and Other Reorganization-Related (Reversals) Charges

~~The~~For the three and six months ended June 30, 2007, net reversals ~~during~~primarily consist of reversals due to the ~~first quarter~~utilization of ~~2007 primarily consisted of~~previously vacated property by an agency at Draftfcb and adjustments to estimates primarily relating to our severance and lease termination ~~costs,~~costs.

EXPENSES AND OTHER INCOME


	Three Months						Six Months
	Ended						Ended
	June 30,						June 30,
	2007			2006			2007			2006

Interest expense	$	(56.9	)	$	(52.0	)	$	(111.9	)	$	(98.1	)
Interest income		28.1			26.4			56.6			52.3
Other income		8.0			24.3			6.5			24.9

Total	$	(20.8	)	$	(1.3	)	$	(48.8	)	$	(20.9	)

The increase in net interest expense during the second quarter of 2007 is largely due to a rise in interest rates and an increase in short term debt balances at some of our operations outside the U.S. The increase in net interest expense in the first half of 2007 is due to both cash and non-cash items. The cash portion of the increase was largely due to a rise in interest rates and increased short term debt balances at some of our operations outside the U.S., partially offset by ~~the~~increased interest income. The non-cash portion is largely attributable to amortization of issuance costs and deferred warrant costs incurred as a result of the ~~discounted liability related to lease terminations.~~ELF Financing transaction completed in June 2006 partially offset by reductions in interest expense associated with our long-term debt as a result of our debt exchanges that took place in the fourth quarter of 2006.

1623

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~Management’s Discussion and Analysis of Financial Condition
~~AND RESULTS OF OPERATIONS~~and Results of Operations — (Continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)

~~EXPENSE AND OTHER INCOME~~Other Income

Three Months Ended

March 31,
2007 2006

Interest expense $ (55.0 ) $ (46.1 )
Interest income 28.5 25.9
Other (expense) income (1.5 ) 0.6

Total $ (28.0 ) $ (19.6 )


	Three Months					Six Months
	Ended					Ended
	June 30,					June 30,
	2007			2006		2007			2006

(Losses) gains on sales of businesses and investments	$	(7.3	)	$	19.8	$	(8.3	)	$	20.1
Vendor discounts and credit adjustments		9.8			3.8		8.0			3.8
Other income		5.5			0.7		6.8			1.0

Total	$	8.0		$	24.3	$	6.5		$	24.9

~~The increase~~Sale of businesses and investments— During the three months ended June 30, 2007, we sold several businesses within Draftfcb and Lowe for a loss of approximately $10.0, partially offset by the sale of our remaining ownership interests in ~~net interest expense~~two agencies for a gain of $2.8.

During the three months ended June 30, 2006, we sold an investment located in Asia Pacific for a gain of $18.4. In addition, during the ~~first quarter is largely attributable to non-cash items~~six months ended June 30, 2006 we sold our remaining ownership interest in an agency within Lowe Worldwide, for a gain of $2.5.

Vendor discounts and credit adjustments— We are in the process of settling our liabilities related to vendor discounts and credits primarily established as part of the ~~amortization~~2004 Restatement. These adjustments reflect the reversal of ~~issuance costs and deferred warrant costs incurred~~certain liabilities as a result of settlements with clients and vendors or where the ~~ELF Financing transaction completed in the second quarter~~statute of ~~2006.~~limitations has lapsed.

INCOME TAXES

Three Months Ended

March 31,
2007 2006

Loss before benefit of income taxes $ (152.2 ) $ (179.2 )
Benefit of income taxes (25.7 ) (8.8 )


	Three Months					Six Months
	Ended					Ended
	June 30,					June 30,
	2007			2006		2007			2006

Income (loss) before income taxes	$	124.8		$	75.6	$	(27.4	)	$	(103.6	)
(Benefit of) provision for income taxes		(11.4	)		5.0		(37.1	)		(3.8	)

For the three and six months ended ~~March 31,~~June 30, 2007, the difference between the effective tax rate and the statutory rate of 35% is primarily due ~~primarily~~ to state and local taxes, losses incurred innon-U.S. jurisdictions that receive no corresponding tax benefit and the ~~write-off~~recognition of ~~deferred~~previously unrecognized tax ~~assets~~benefits. During the second quarter of 2007, there were net reversals of tax reserves, primarily related to previously unrecognized tax benefits, including approximately $80.0 for ~~restricted stock.~~certain worthless securities deductions associated with investments in consolidated subsidiaries, which was a result of the completion of a tax examination. The improvement in the effective tax rate ~~was~~as compared to the six months ended June 30, 2006 is primarily attributable to the recognition of previously unrecognized tax benefits and a reduction in the losses incurred innon-U.S. jurisdictions that receive no ~~benefit and a reduction in the amount of U.S. taxation ofnon-U.S. income~~ ~~without offsetting U.S. foreign tax credits.~~benefit.

Segment Results of Operations — Three and Six Months Ended ~~March 31,~~June 30, 2007 compared to Three and Six Months Ended ~~March 31,~~June 30, 2006

As discussed in Note 89 to the unaudited Consolidated Financial Statements, we have two reportable segments as of ~~March 31,~~June 30, 2007: IAN and CMG. We also report results for the Corporate and other group.

~~INTEGRATED AGENCY NETWORKS (“IAN”)~~Management’s Discussion and Analysis of Financial Condition
and Results of Operations — (Continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)

IAN

REVENUE


	Three Months		Components of Change								Three Months										Components of Change
	Ended				Net						Ended								Three Months				Net					Three Months
	March 31,		Foreign		Acquisitions/						March 31,		Change						Ended		Foreign		Acquisitions/					Ended		Change
	2006		Currency		(Divestitures)			Organic			2007		Organic			Total			June 30, 2006		Currency		(Divestitures)			Organic		June 30, 2007		Organic			Total

Total	$	1,108.8		25.3		(14.0	)		11.1		$	1,131.2		1.0	%		2.0	%
Consolidated																			$	1,295.1		34.5		(17.1	)		66.9	$	1,379.4		5.2	%		6.5	%
Domestic		635.7		—		(1.7	)		22.7			656.7		3.6	%		3.3	%		715.4		—		(3.4	)		59.5		771.5		8.3	%		7.8	%
International		473.1		25.3		(12.3	)		(11.6	)		474.5		(2.5	)%		0.3	%		579.7		34.5		(13.7	)		7.4		607.9		1.3	%		4.9	%

The revenue increase in the ~~first~~second quarter of 2007 was a result of organic increases and changes in foreign currency exchange rates, ~~and organic increases,~~ partially offset by net divestitures, primarily from the sale of several businesses at Draftfcb in ~~2006.~~the current and prior year. The domestic increase was a result of higher revenue from existing clients and net client wins, primarily at McCann Worldgroup and Draftfcb, and at two of our independent agencies, Hill Holliday and Deutsch. International revenues increased as the second quarter of 2007 benefited from the favorable effect of changes in foreign currency exchange rates and an organic increase due to higher revenue from existing clients at Lowe Worldwide in the Asia Pacific region and at Draftfcb in the Latin America region. This increase was partially offset by net divestitures of businesses, primarily at Draftfcb, and a decrease in spending by existing clients in Europe, primarily at McCann Worldgroup.


			Components of Change
	Six Months				Net						Six Months
	Ended		Foreign		Acquisitions/						Ended		Change
	June 30, 2006		Currency		(Divestitures)			Organic			June 30, 2007		Organic			Total

Consolidated	$	2,403.9		59.9		(31.5	)		78.3		$	2,510.6		3.3	%		4.4	%
Domestic		1,351.1		—		(5.3	)		82.4			1,428.2		6.1	%		5.7	%
International		1,052.8		59.9		(26.2	)		(4.1	)		1,082.4		(0.4	)%		2.8	%

The revenue increase in the first half of 2007 was a result of organic increases and changes in foreign currency exchange rates, partially offset by net divestitures, primarily from the sale of several businesses at Draftfcb in current and prior year. The domestic increase was mostly organic as a result of higher revenue from existing clients and net client wins, primarily at McCann Worldgroup and ~~a performance incentive award earned in the first quarter of 2007 for work on projects started in 2006 at~~Hill Holliday, one of our independent agencies. International revenues ~~were consistent period over period; however,~~increased as the first ~~quarter~~half of 2007 benefited from the favorable effect of changes in foreign currency exchange rates. This was partially offset by a decrease at Draftfcb related to net divestitures of businesses and lower client spending in Europe and at McCann Worldgroup related to lower client spending in Latin America.

SEGMENT OPERATING INCOME


	Three Months									Six Months
	Ended									Ended
	June 30,									June 30,
	2007			2006			Change			2007			2006			Change

Segment operating income	$	168.3		$	119.5			40.8	%	$	103.5		$	46.8			121.2	%

Operating margin		12.2	%		9.2	%					4.1	%		1.9	%

Operating income increased during the second quarter of 2007 due to an increase in revenue of $84.3 and a slight decrease in office and general expenses, partially offset by an increase in salaries and related

1725

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~Management’s Discussion and Analysis of Financial Condition
~~AND RESULTS OF OPERATIONS~~and Results of Operations — (Continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)

changes in foreign currency exchange rates. This was offset by net divestitures of businesses primarily at Draftfcb and an organic revenue decline, primarily at Draftfcb and Lowe, related to lower spending by existing clients mainly in Europe.

~~SEGMENT OPERATING LOSS~~

Three Months Ended

March 31,
2007 2006 Change

Segment operating loss $ (64.8 ) $ (72.9 ) (11.1 )%

Operating margin (5.7 )% (6.6 )%

Operating loss improved during the first quarter of 2007 due to an increase in revenue of $22.4 and a decrease in office and general expenses of $5.5, partially offset by an increase in salaries and related expenses of $19.8.expenses. Higher salaries and related expenses were primarily due to the impact of changes in foreign currency exchange rates, increased base salaries to support growth ~~larger~~and higher cash bonus ~~awards primarily due to higher~~ accruals in the ~~first~~second quarter of 2007 compared to the ~~first~~second quarter of 2006, ~~and an increased amount of long-term incentive awards,~~ partially offset by net divestitures. On

Operating income increased during the first half of 2007 due to an ~~organic basis,~~increase in revenue of $106.7 and a decrease in office and general expenses, partially offset by an increase in salaries and related expenses. Salaries and related expenses increased due to factors similar to those noted above for the ~~revenue increase was greater than the operating expense increase, which contributed to IAN’s operating loss improvement.~~second quarter.

~~CONSTITUENCY MANAGEMENT GROUP (“CMG”)~~CMG

REVENUE


	Three Months		Components of Change							Three Months										Components of Change
	Ended				Net					Ended								Three Months				Net					Three Months
	March 31,		Foreign		Acquisitions/					March 31,		Change						Ended		Foreign		Acquisitions/					Ended		Change
	2006		Currency		(Divestitures)			Organic		2007		Organic			Total			June 30, 2006		Currency		(Divestitures)			Organic		June 30, 2007		Organic			Total

Total	$	218.2		6.3		(6.3	)		9.7	$	227.9		4.4	%		4.4	%
Consolidated																		$	237.8		6.1		(5.6	)		35.0	$	273.3		14.7	%		14.9	%
Domestic		139.7		—		—			9.6		149.3		6.9	%		6.9	%		152.0		—		—			33.3		185.3		21.9	%		21.9	%
International		78.5		6.3		(6.3	)		0.1		78.6		0.1	%		0.1	%		85.8		6.1		(5.6	)		1.7		88.0		2.0	%		2.6	%

Revenue growth in the second quarter of 2007 was primarily a result of higher domestic revenue in the events marketing, public relations and sports marketing businesses. The domestic organic revenue increase was primarily due to the events marketing business completing several long-term projects during the quarter, and expanding business with existing clients in the public relations and sports marketing businesses. ~~The domestic increase was~~Revenues in the events marketing business can fluctuate due to the timing of completing long-term projects, as revenue is typically recognized when the project is complete. Furthermore, 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. International revenues increased slightly primarily due to changes in foreign exchange rates and increased client spending across all disciplines in the Asia Pacific region, partially offset in Europe primarily due to project-based events that did not recur in the second quarter of 2007 and lower client spending. International revenues also declined due to a divestiture of a sports marketing business in 2006.


			Components of Change
	Six Months				Net					Six Months
	Ended		Foreign		Acquisitions/					Ended		Change
	June 30, 2006		Currency		(Divestitures)			Organic		June 30, 2007		Organic			Total

Consolidated	$	456.0		12.4		(11.9	)		44.7	$	501.2		9.8	%		9.9	%
Domestic		291.8		—		—			42.8		334.6		14.7	%		14.7	%
International		164.2		12.4		(11.9	)		1.9		166.6		1.2	%		1.5	%

Revenue growth in the first half of 2007 was primarily a result of higher domestic revenue ~~from existing clients and net client wins~~ in the events marketing, public relations and sports marketing ~~partially offset~~businesses. The domestic organic revenue increase was driven by ~~declines in~~factors similar to those noted above for the ~~events marketing businesses due to net client losses.~~second quarter. International revenues ~~were consistent period over period~~increased slightly primarily due to changes in foreign exchange rates and increased ~~client spending~~revenue from existing clients in ~~the events marketing businesses~~public relations in Europe, partially offset by project-based events that did not recur in the first ~~quarter~~half of 2007, primarily in ~~the Asia Pacific region~~Europe and Asia. International revenues were also negatively impacted by a ~~decline in the~~divestiture of a sports marketing business in ~~Europe due to net client losses.~~

~~SEGMENT OPERATING (LOSS) INCOME~~

Three Months Ended

March 31,
2007 2006 Change

Segment operating (loss) income $ (1.4 ) $ 4.2 (133.3 )%

Operating margin (0.6 )% 1.9 %

Operating income decreased to a loss primarily as a result of an increase in salaries and related expenses of $10.6 and an increase in office and general expenses of $4.7, partially offset by the increase in revenue of2006.

1826

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~Management’s Discussion and Analysis of Financial Condition
~~AND RESULTS OF OPERATIONS~~and Results of Operations — (Continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)

~~$9.7.~~SEGMENT OPERATING INCOME


	Three Months									Six Months
	Ended									Ended
	June 30,									June 30,
	2007			2006			Change			2007			2006			Change

Segment operating income	$	18.6		$	12.4			50.0	%	$	17.2		$	16.6			3.6	%

Operating margin		6.8	%		5.2	%					3.4	%		3.6	%

Operating income for the second quarter of 2007 increased primarily as a result of an increase in revenues of $35.5, partially offset by increases in office and general expenses and salaries and related expenses. Higher salaries and related expenses primarily related to the hiring of additional staff in the public relations ~~and sports marketing~~ businesses to support their revenue growth. Office and general expenses increased primarily due to ~~higher Corporate charges allocated to the segment~~production expenses related to the ~~implementation~~completion of ~~new information technology-related projects. On~~several projects in the events marketing business.

Operating income for the first half of 2007 increased slightly primarily as a result of an ~~organic basis,~~increase in revenues of $45.2, partially offset by increases in salaries and related expenses and office and general expenses. Salaries and related expenses and office and general expenses increased due to factors similar to those noted above for the ~~operating expense increase was greater than the revenue increase, which contributed to the operating loss at CMG.~~second quarter.

CORPORATE AND OTHER


										Three Months									Six Months
	Three Months Ended									Ended									Ended
	March 31,									June 30,									June 30,
	2007			2006			Change			2007			2006			Change			2007			2006			Change

Salaries and related expenses	$	58.0		$	50.3			15.3	%	$	56.8		$	43.9			29.4	%	$	114.8		$	94.2			21.9	%
Professional fees		25.4			60.8			(58.2	)%		11.6			22.7			(48.9	)%		37.0			83.4			(55.6	)%
Rent, depreciation and amortization		17.3			15.3			13.1	%		17.0			16.8			1.2	%		34.3			32.1			6.9	%
Corporate insurance		6.0			4.9			22.4	%		4.7			5.2			(9.6	)%		10.7			10.1			5.9	%
Other		7.7			6.0			28.3	%		11.9			6.1			95.1	%		19.6			12.4			58.1	%
Expenses allocated to operating divisions		(55.8	)		(46.8	)		19.2	%		(55.5	)		(46.0	)		20.7	%		(111.3	)		(92.8	)		19.9	%

Total	$	58.6		$	90.5			(35.2	)%	$	46.5		$	48.7			(4.5	)%	$	105.1		$	139.4			(24.6	)%

Corporate and other expenses for the second quarter of 2007 decreased compared to prior year primarily due to reduced professional fees and higher amounts allocated to operating divisions, partially offset by increased salaries and related expenses. Lower professional fees were primarily ~~from~~attributable to reduced costs associated with ~~finance~~projects related ~~projects,~~to financial and compliance matters, including internal control compliance, legal consultation and certain accounting ~~projects and legal consultation.~~projects. Amounts allocated to operating divisions increased primarily due to the implementation of new information technology-related projects and the charging of shared service and technology expenses. Salaries and related expenses ~~primarily~~increased due to higher accruals for long-term incentive compensation and cash bonus awards and higher headcount due to the transfer of employees from the agency level to support our technology and regional corporate initiatives.

Corporate and other expenses for the first half of 2007 decreased compared to prior year for the same reasons as noted above for the second quarter. In addition, salaries and related expenses increased due to a one-time ~~performance equity-based~~performance-based equity award granted in 2006 to a limited number of ~~operating~~senior executives.

Management’s Discussion and ~~corporate executives. Additionally, salaries~~ Analysis of Financial Condition
and ~~related expenses increased due to higher headcount at our shared service center, which is used to support our technology initiatives.~~Results of Operations — (Continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOW OVERVIEW

Cash, cash equivalents and marketable securities decreased by ~~$438.7~~$476.4 to ~~$1,518.4~~$1,480.7 during the first ~~quarter~~half of 2007 primarily due to working capital ~~usage.~~usage, which is seasonally typical. Of this change, marketable securities increased by ~~$50.1,~~$258.8, primarily as a result of our net purchases of auction rate securities in the ~~quarter.~~first half of 2007. A summary of our cash flow activities is as follows:


							Six Months
	Three Months Ended March 31,						Ended June 30,
	2007			2006			2007			2006

Net cash used in operating activities	$	(382.5	)	$	(528.1	)	$	(338.7	)	$	(511.4	)
Net cash used in investing activities		(84.1	)		(322.0	)		(389.1	)		(330.7	)
Net cash used in financing activities		(30.7	)		(27.2	)		(16.5	)		(108.9	)

Operating Activities

During the first ~~quarter~~half of 2007, we used working capital of ~~$283.3.~~$415.6. Working capital reflects changes in accounts receivable, expenditures billable to clients, prepaid expenses and other current assets, accounts payable and accrued liabilities. During the ~~three months ended March 31,~~first half of 2007, ~~a reduction~~reductions in accounts

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~
~~AND RESULTS OF OPERATIONS — (Continued)~~
~~(Amounts in Millions, Except Per Share Amounts)~~
~~(Unaudited)~~

payable of ~~$347.4~~$214.1 and ~~in accrued media and production expenses of $127.3, included in~~ accrued liabilities ~~was more than~~of $294.4 were partially offset by a reduction in accounts receivable of ~~$489.6. Accrued~~$147.8. The reduction in accrued liabilities ~~also decreased as a result of payments~~was primarily related to payment of cash incentive awards earned during 2006. ~~Accrued liabilities are affected by the timing of certain payments. For example, while~~While employee incentive awards are accrued throughout the year, they are paid during the first quarter of the subsequent year.

The timing of media buying on behalf of our clients affects our working capital and operating cash flow. In most of our businesses, we collect funds from our clients ~~which~~that we use, on their behalf, to pay production costs and media costs. The amounts involved substantially exceed our revenues, and primarily affect the level of accounts receivable, expenditures billable to clients, accounts payable and accrued media and production liabilities. Our assets include both cash received and accounts receivable from clients for these pass-through arrangements, while our liabilities include amounts owed on behalf of clients to media and production suppliers. Generally, we pay production and media charges after we have received funds from our clients, and our risk from client nonpayment has historically not been significant.

The net ~~loss~~income of ~~$125.9~~$11.1 during the ~~three months ended March 31,~~first half of 2007 includes non-cash items that are not expected to generate cash or require the use of cash. Net non-cash expense items of ~~$31.8~~$74.2 primarily include ~~the add-back of~~ the deferred income tax benefit, depreciation of fixed assets and the amortization of intangible assets, restricted stock awards and non-cash compensation.

Investing Activities

Cash used in investing activities during the ~~three months ended March 31,~~first half of 2007 primarily reflects net purchases of short-term marketable securities, acquisitions and capital ~~expenditures and acquisitions.~~expenditures. Net purchases of marketable securities were from purchases of auction rate securities, which are classified as short-term marketable securities based upon our evaluation of the maturity dates associated with the underlying bonds. The cash flows attributable to short-term marketable securities vary from one period to another because of changes in the maturity profile of our treasury investments. ~~Capital expenditures of $28.0 primarily related to computer hardware and leasehold improvements.~~

Payments for acquisitions ~~related~~relate to ~~the purchase~~purchases of ~~an agency in Latin America~~agencies and deferred payments on prior acquisitions. During the six months ended June 30, 2007, we made three acquisitions: a) a full-service advertising agency in Latin America, b) Reprise Media, which is a full-service search engine marketing firm in North America,

Management’s Discussion and Analysis of Financial Condition
and Results of Operations — (Continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)

and c) the remaining interests in a full-service advertising agency in India in which we previously held a 49% interest. Total cash consideration for these acquisitions was $80.2. Subsequent to June 30, 2007, we acquired the remaining interests in another one of our businesses in India.

Capital expenditures of $66.5 primarily related to leasehold improvements and computer hardware.

Financing Activities

Cash used in financing activities during the ~~three months ended March 31,~~first half of 2007 primarily reflects ~~repayments of short-term borrowings and~~ dividend payments of ~~$6.9~~$13.8 on our Series B Preferred ~~Stock.~~Stock and distributions to minority interests, partially offset by short-term borrowings.

LIQUIDITY OUTLOOK

We expect our cash and cash equivalents and marketable securities to be sufficient to meet our anticipated operating requirements at a minimum for the next twelve months.

We believe that a conservative approach to liquidity is appropriate for our Company, in view of the cash requirements resulting from, among other things, high professional fees, liabilities to our clients for vendor discounts and credits, any potential penalties or fines that may have to be paid in connection with the ongoing SEC investigation, the normal cash variability inherent in our operations and other unanticipated requirements. In addition, until our margins consistently improve in connection with our turnaround, cash generation from operations could be challenged in certain periods.

A reduction in our liquidity in future periods as a result of the above items or other business objectives could lead us to seek new or additional sources of liquidity to fund our working capital needs. From time to time we evaluate market conditions and financing alternatives for opportunities to raise additional financing or

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~
~~AND RESULTS OF OPERATIONS — (Continued)~~
~~(Amounts in Millions, Except Per Share Amounts)~~
~~(Unaudited)~~

otherwise improve our liquidity profile and enhance our financial flexibility. There can be no guarantee that we would be able to access new sources of liquidity on commercially reasonable terms, or at all.

Funding Requirements

Our most significant funding requirements include: our operations, non-cancelable operating lease obligations, capital expenditures, payments related to vendor discounts and credits, debt service, preferred stock dividends, contributions to pension and postretirement plans, acquisitions and taxes.

On March 15, 2008 holders of our $400.0 4.50% Convertible Senior Notes due 2023 may require us to repurchase these Notes for cash at par. The remainder of our debt profile is primarily long-term, with maturities scheduled from 2009 to 2023.

Of the liabilities recognized as part of the ~~2005~~2004 Restatement, we estimate that we will pay approximately $100.0 related to vendor discounts and credits, internal investigations and international compensation arrangements over the next 12 months.

Our Series B Preferred Stock provides for a quarterly dividend of $13.125 per share, or $6.9. We have not paid any dividends on our common stock since December of 2002. The terms of our Series B Preferred Stock do not permit us to pay dividends on our common stock unless all accumulated and unpaid dividends on our Series B Preferred Stock have been, or contemporaneously are, declared and paid, or provision for the payment thereof has been made.

We ~~are currently evaluating~~continue to evaluate strategic opportunities to grow the business and increase our ownership interests in current investments, particularly to develop the digital and marketing services components of our business and to expand our presence in key markets, including Brazil, Russia, India and China.

Management’s Discussion and Analysis of Financial Condition
and Results of Operations — (Continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)

We have various tax years under examination in various countries in which we have significant business operations. We do not know whether these examinations will, in the aggregate, result in our paying additional income taxes, which we believe are adequately reserved for.

FINANCING AND SOURCES OF FUNDS

Substantially all of our operating cash flow is generated by our agencies. Our liquid assets are held primarily at the holding company level, and to a lesser extent at our largest subsidiaries.

In recent years, we have obtained long-term financing in the capital markets by issuing debt securities, convertible debt securities and convertible preferred stock. We have also used borrowing facilities to provide us with liquidity for working capital needs. In connection with the ELF Financing, we ~~also~~ have two series of equity warrants outstanding and have entered into call spread transactions in connection with one of the series of equity warrants.

Credit Facilities

Our principal credit facility is our $750.0 Three-Year Credit Agreement (the “Credit Agreement”), which we can utilize for cash advances and for letters of credit up to $600.0. This is a revolving facility under which amounts borrowed may be repaid and borrowed again, and the aggregate available amount of letters of credit may decrease or increase, subject to the overall limit of $750.0 and athe $600.0 limit on letters of credit. We have not drawn on the Credit Agreement or our previous committed credit agreements since late 2003.

In addition to the Credit Agreement, we have uncommitted credit facilities with various banks that permit borrowings at variable interest rates. We use our uncommitted credit lines for working capital needs at some of our operations outside the United States and the amount outstanding as of ~~March 31,~~June 30, 2007 was ~~$61.8.~~$90.0. If we

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~
~~AND RESULTS OF OPERATIONS — (Continued)~~
~~(Amounts in Millions, Except Per Share Amounts)~~
~~(Unaudited)~~

lose access to these credit lines we would have to provide funding directly to some overseas operations. The weighted-average interest rate on this outstanding balance was approximately 5%6%.

Letters of Credit

We are required from time to time to post letters of credit, primarily to support our commitments, or those of our subsidiaries, to purchase media placements, mostly in locations outside the United States, or to satisfy other obligations. These letters of credit are generally backed by letters of credit issued under the Credit Agreement. As of ~~March 31,~~June 30, 2007, the aggregate amount of outstanding letters of credit issued for our account under the Credit Agreement was $222.9. These letters of credit have historically not been drawn upon.

Cash Pooling

We aggregate our net domestic cash position on a daily basis. Outside the United States, we use cash pooling arrangements with banks to help manage our liquidity requirements. In these pooling arrangements, several Interpublic agencies agree with a single bank that the cash balances of any of the agencies with the bank will be subject to a full right of setoff against amounts the other agencies owe the bank, and the bank provides overdrafts as long as the net balance for all the agencies does not exceed anagreed-upon level. Typically each agency pays interest on outstanding overdrafts and receives interest on cash balances. Our consolidated balance sheets reflect cash net of overdrafts for each pooling arrangement. As of ~~March 31,~~June 30, 2007 a gross amount of approximately ~~$1,053.0~~$1,039.2 in cash was netted against an equal gross amount of overdrafts under pooling arrangements.

Management’s Discussion and Analysis of Financial Condition
and Results of Operations — (Continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)

CREDIT AGENCY RATINGS

Our long-term debt credit ratings as of ~~March 31,~~June 30, 2007 were Ba3 with stable outlook, B with positive outlook and BBB- with ~~negative~~stable outlook, as reported by Moody’s Investors Service, Standard & Poor’s and Fitch Ratings, respectively. A downgrade in our credit ratings could adversely affect our ability to access capital and could result in more stringent covenants and higher interest rates under the terms of any new indebtedness.

INTERNAL CONTROL OVER FINANCIAL REPORTING

Our internal control over financial reporting is described in detail in ~~Item 8,~~ Management’s Assessment of Internal Control Over Financial Reporting located in Item 8, Financial Statements and Supplementary Data, and in Item 9A, Controls and Procedures, in our 2006 Annual Report onForm 10-K.

CRITICAL ACCOUNTING ESTIMATES

Our significant accounting policies are described in Note 1 to the Consolidated Financial Statements for the year ended December 31, 2006 included in our 2006 Annual Report onForm 10-K. As summarized in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our 2006 Annual Report onForm 10-K, 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. We base our estimates on historical experience and on other factors that we consider reasonable under the circumstances. Estimation methodologies are applied consistently from year to year, and there have been no significant changes in the application of critical accounting estimates since December 31, 2006 except as noted below in regards to income taxes. Actual results may differ from these estimates under different assumptions or conditions.

On January 1, 2007 we adopted FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes, (“FIN 48”) which prescribes a recognition threshold and measurement attribute for the financial statement

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~
~~AND RESULTS OF OPERATIONS — (Continued)~~
~~(Amounts in Millions, Except Per Share Amounts)~~
~~(Unaudited)~~

recognition and measurement of a tax position that an entity takes or expects to take in a tax return. Additionally, FIN 48 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The assessment of recognition and measurement requires critical estimates and the use of complex judgments. We evaluate our tax positions using a “more likely than not” recognition threshold and then we apply a measurement assessment to those positions that meet the recognition threshold.

RECENT ACCOUNTING STANDARDS

Please refer to Note 1011 to our unaudited Consolidated Financial Statements for a discussion of recent accounting standards that we have not yet been required to implement, but which may affect us in the future, as well as those accounting standards that have been adopted during 2007.

2331


Item 3.	*Quantitative and Qualitative Disclosures about Market Risk*

There has been no significant change in our exposure to market risk during the ~~three~~six months ended ~~March 31,~~June 30, 2007. For a discussion of our exposure to market risk, refer to ~~Part II,~~ Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our 2006 Annual Report onForm 10-K.


Item 4.	*Controls and Procedures*

Disclosure Controls and Procedures

We have carried out an evaluation under the supervision of, and with the participation of, our management, including ~~the~~our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of ~~March 31,~~June 30, 2007. We continue to have numerous material weaknesses in our internal control over financial reporting as noted in Management’s Assessment of Internal Control over Financial Reporting located in Item 8, Financial Statements and Supplementary Data, in our 2006 Annual Report onForm 10-K. Based on an evaluation of these material weaknesses, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are not effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

Changes in internal control over financial reporting

There has been no change in internal control over financial reporting in the quarter ended ~~March 31,~~June 30, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We are continuing to implement the remedial actions outlined in Ongoing Remediation of Material Weaknesses in Internal Control over Financial Reporting as of December 31, 2006 located in Item 8, Financial Statements and Supplementary Data, in our 2006 Annual Report onForm 10-K.

2432

PART II — OTHER INFORMATION


Item 1.	*Legal Proceedings*

Information about our legal proceedings is set forth in Note 910 to the unaudited consolidated financial statements included in this report.

~~Item 1A.~~ ~~Risk Factors~~


Item 1A.	*Risk Factors*

In the ~~first~~second quarter of 2007, there have been no material changes ~~from~~in the risk factors aswe have previously disclosed. See Item 1A, Risk Factors, in our 2006 Annual Report onForm 10-K. The following risk factor has been updated to reflect recent communications with the SEC, as previously disclosed by the Company in a current report onForm 8-K filed June 14, 2007.


	•	*The ongoing SEC investigation regarding our accounting restatements could adversely affect us.*

The SEC opened a formal investigation in response to the restatement we first announced in August 2002, and the investigation expanded to encompass the 2004 Restatement. We have also responded to inquiries from the SEC staff concerning the restatement of the first three quarters of 2005 that we made in our 2005 Annual Report onForm 10-K. We continue to cooperate with the investigation. We expect that the investigation will result in monetary liability, but as settlement discussions have not yet commenced, we cannot reasonably estimate the amount, range of amounts or timing of a resolution. Accordingly, we have not yet established any provision relating to these matters.

The SEC staff has informed us that it intends to seek approval from the Commission to enter into settlement discussions with us and, failing a settlement, to commence an action charging the Company with various violations of the federal securities laws. In that connection, the staff has sent the Company a “Wells notice,” which invites us to make a responsive submission before the staff makes a final determination concerning its recommendation to the Commission. We expect to discuss settlement with the staff once the Commission authorizes the staff to engage in such discussions. We cannot at this time predict what the Commission will authorize or the outcome of any settlement negotiations.


Item 2.	*Unregistered Sales of Equity Securities and Use of Proceeds*

(a) During the ~~first~~second quarter of 2007, we engaged in one transaction, which is described below, in which we issued shares of our common stock, par value $.10 per share, that were not registered under the Securities Act of 1933, as amended (the “Securities Act”).

1. On ~~January 4,~~June 6, 2007, we issued ~~8,159~~24,639 shares of our common stock as part of a deferred payment of purchase price to ~~three~~five former shareholders of a company ~~48% of the outstanding shares of which~~that one of our subsidiaries had acquired in the ~~first~~third quarter of 2001. The shares were valued at ~~$97,170~~$288,472 as of the date of issuance and were issued without registration in ~~an “offshore transaction” and solely to“non-U.S. persons”~~ in reliance on ~~Regulation S under~~Section 4(2) of the Securities ~~Act.~~Act, based on the sophistication of the former shareholders of the acquired company. The former shareholders had access to all the documents filed by us with the SEC.

Shareholder proposal for special shareholder meetings:


Item 6.	*Exhibits*


Exhibit No.		Description

10(iii)(A)(1)		~~Description of Performance Objectives To Be Used To Determine 2007 Management Incentive Compensation Awards Payable in 2008 to the Named~~Interpublic Executive ~~Officers of The Interpublic Group of Companies, Inc. (“Interpublic”) under Interpublic’s 2006 Performance Incentive~~Severance Plan.
12.1		~~Supplemental~~ Computation of Ratios of Earnings to Fixed Charges.
12.2		~~Supplemental~~ Computation of Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends.
31.1		Certification of the Chief Executive Officer pursuant toRule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
31.2		Certification of the Chief Financial Officer pursuant toRule 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 andRule 13a-14(b) under the Securities Exchange Act of 1934, as amended.

2635


	•	~~potential adverse effects if we are required to recognize impairment charges or other adverse accounting-related developments;~~

	•	~~potential adverse developments in connection with the ongoing Securities and Exchange Commission (“SEC”) investigation;~~

	•	~~potential downgrades in the credit ratings of our securities;~~

	•	risks associated with the effects of global, national and regional economic and political conditions, including 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.


⁽¹⁾		Consists of restricted shares of our common stock 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 during each month of the ~~first~~second quarter of 2007 (the “Withheld Shares”).

⁽²⁾		The average price per month of the Withheld Shares was calculated by dividing the aggregate value of the tax withholding obligations for each month by the aggregate number of shares of common stock withheld each month.


Item 4.	*Submission of Matters to a Vote of Security Holders*


					BROKER
NOMINEE	FOR		AGAINST		NONVOTES

Frank J. Borelli		393,442,059		15,361,469		0
Reginald K. Brack		357,812,663		50,990,865		0
Jill M. Considine		395,902,233		12,901,295		0
Richard A. Goldstein		380,917,319		27,886,209		0
H. John Greeniaus		371,894,043		36,909,485		0
William T. Kerr		376,773,486		32,030,042		0
Michael I. Roth		381,463,257		27,340,271		0
J. Phillip Samper		358,283,391		50,520,137		0
David M. Thomas		402,142,292		6,661,236		0

BROKER