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Article by DailyStocks_admin    (11-20-08 03:14 AM)

The Daily Magic Formula Stock for 11/20/2008 is Interpublic Group of Companies Inc. (The). According to the Magic Formula Investing Web Site, the ebit yield is 13% and the EBIT ROIC is 75-100 %.

Dailystocks.com only deals with facts, not biased journalism. What is a better way than to go to the SEC Filings? It's not exciting reading, but it makes you money. We cut and paste the important information from SEC filings for you to get started on your research on a specific company.


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BUSINESS OVERVIEW

Business

The Interpublic Group of Companies, Inc. was incorporated in Delaware in September 1930 under the name of McCann-Erickson Incorporated as the successor to the advertising agency businesses founded in 1902 by A.W. Erickson and in 1911 by Harrison K. McCann. The Company has operated under the Interpublic name since January 1961.

About Us

We are one of the world’s premier advertising and marketing services companies. Our agency brands deliver custom marketing solutions to many of the world’s largest marketers. Our companies cover the spectrum of marketing disciplines and specialties, from consumer advertising and direct marketing to mobile and search engine marketing.

The work we produce for our clients is specific to their unique needs. Our solutions vary from project-based activity involving one agency and its client to long-term, fully-integrated campaigns created by a group of our companies working together on behalf of a client. With offices in over 100 countries, we can operate in a single region or align work globally across all major world markets.

The role of the holding company is to provide resources and support to ensure that our agencies can best meet our clients’ needs. Based in New York City, Interpublic sets company-wide financial objectives and corporate strategy, directs collaborative inter-agency programs, establishes financial management and operational controls, guides personnel policy, conducts investor relations and initiates, manages and approves mergers and acquisitions. In addition, we provide limited centralized functional services that offer our companies operational efficiencies, including accounting and finance, marketing information retrieval and analysis, legal services, real estate expertise, travel services, recruitment aid, employee benefits and executive compensation management.

To keep our company well-positioned, we support our agencies’ initiatives to expand their high-growth capabilities and build their offerings in key developing markets. When appropriate, we also develop relationships with companies that are building leading-edge marketing tools that complement our agencies and the programs they are developing for clients. In addition, we look for opportunities within our company to modernize operations through mergers, strategic alliances and the development of internal programs that encourage intra-company collaboration.

Market Strategy

We have taken several strategic steps in recent years to position our agencies as leaders in the global advertising and communications market. We operate in a media landscape that has vastly changed over the last few years. Media markets continue to fragment and clients face an increasingly complex consumer culture.

To stay ahead of these challenges and to achieve our objectives, we have invested in creative talent in high-growth areas and have realigned a number of our capabilities to meet market demand. At our McCann Worldgroup unit, we have continued to invest in talent and in upgrading the group’s integrated marketing services offering at MRM, Momentum and McCann Healthcare. We combined accountable marketing and consumer advertising agencies to form the unique global offering Draftfcb. And at our marketing services group, Constituency Management Group (“CMG”), we continue to strengthen our public relations and events marketing specialists.

We have also taken a unique approach to our media offering by aligning our largest media assets with global brand agencies. This approach ensures that the ideas we develop for clients work across new media as well as traditional channels. In 2007, this differentiated media strategy gained significant traction in the marketplace.

The digital component of our business continues to evolve and is increasingly vital to all of our agencies. In order to grow with our clients, we have accelerated our investment in talent, professional training and technology throughout the organization. This reflects our strongly held belief that digital marketing is not a silo. Instead, digital capabilities must reside in all of our assets. For example, our public relations companies increasingly use blogs and social networking sites to influence consumer opinion, while our special events companies use digital kiosks and website surveys to gauge audience response. Recruiting and developing digitally conversant talent at all our agencies and in all marketing disciplines is therefore a priority and an area where we must be willing to invest. Strong, multi-channel talent is vital if we are to continue building long-term relationships with our clients.

Where necessary, we have acquired or built specialty digital assets, such as Reprise Media (search engine marketing), The Interpublic Emerging Media Lab, and Ansible (mobile marketing), to meet the changing needs of our clients. R/GA, a stand-alone digital agency, is an industry leader in the development of award-winning interactive campaigns for global clients. All of these specialty assets have unique capabilities and serve as key digital partners to many of our agencies within the group.

Likewise, we continue to look for strategic investments that give us a leadership position in emerging markets. Recent investments in India, where we operate three leading agency networks, and Brazil give our clients a strong foot-hold in these high-growth developing markets. Our partner in Russia is the acknowledged advertising leader in the country. In China, we continue to invest in our existing companies in the market, building on our decades-long commercial history.

We believe that our market strategy and offerings can improve our organic revenue growth and operating income margin, with our ultimate objective to be fully competitive with our industry peer group on both measures. To further improve our operating margin we continue to focus on actively managing staff costs in non-revenue supporting roles; improving financial systems and back-office processing; reducing organizational complexity and rationalizing our portfolio by divesting non-core and underperforming businesses; and improving our real estate utilization.

Our Offering

Interpublic is home to some of the world’s best known and most innovative communications specialists. We have three global brands that provide integrated, large-scale solutions for clients: McCann Worldgroup (“McCann”), Draftfcb, and Lowe Worldwide (“Lowe”), as well as our domestic integrated agencies and media agencies.


• McCann offers best-in-class communications tools and resources to many of the world’s top companies and most famous brands. We believe McCann is exceptionally qualified to meet client demands, in all regions of the world and in all marketing disciplines, through its operating units: McCann Erickson Advertising, with operations in over 100 countries; MRM Worldwide for relationship marketing and digital expertise; Momentum Worldwide for experiential marketing; and McCann Healthcare Worldwide for healthcare communications.

• Launched in 2006, Draftfcb is a modern agency model for clients seeking creative and accountable marketing programs. With more than 130 years of expertise, the company has its roots in both consumer advertising and behavioral, data-driven direct marketing. We believe the agency is the first global, behavior-based, creative and accountable marketing communications organization operating as a financially and structurally integrated business unit.

• Lowe is a premier creative agency that operates in the world’s largest advertising markets. Lowe is focused on delivering and sustaining high-value ideas for some of the world’s largest clients. The quality of the agency’s product is evident in its global creative rankings and its standing in major markets. By partnering with Interpublic’s marketing services companies, Lowe generates and executes ideas that are frequently recognized for effectiveness, amplified by smart communication channel planning.

• Our domestic independent agencies include some of the larger full-service agency brands, Campbell-Ewald, Campbell Mithun, Deutsch, Hill Holliday, The Martin Agency and Mullen. The integrated marketing programs created by this group have helped build some of the most powerful brands in the U.S., across all sectors and industries.

• We have exceptional marketing specialists across a range of channels. These include FutureBrand (corporate branding), Jack Morton (experiential marketing), Octagon (sports marketing), public relations specialists like WeberShandwick and Golin Harris, and best-in-class digital agencies, led by R/GA. Our healthcare communications specialists reside within our three global brands, McCann, Draftfcb and Lowe.

• We also have two global media agencies, Initiative and Universal McCann, which provide specialized services in media planning and buying, market intelligence and return-on-marketing investment analysis for clients. Initiative and Universal McCann operate independently but work alongside Draftfcb and McCann Erickson, respectively. Aligning the efforts of our major media and our integrated communications networks improves cross-media communications and our ability to deliver integrated marketing programs.

Interpublic lists approximately 90 companies on our website’s “Company Finder” tool, with descriptions and office locations for each. To learn more about our broad range of capabilities, visit www.interpublic.com. Information on our website is not part of this report.

Financial Reporting Segments

We have two reportable segments: Integrated Agency Network (“IAN”), which is comprised of McCann, Draftfcb and Lowe, our media agencies 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. See Note 15 to the Consolidated Financial Statements for further discussion.

Principal Markets

Our agencies are located in over 100 countries, including every significant world market. We provide services for clients whose businesses are broadly international in scope, as well as for clients whose businesses are limited to a single country or a small number of countries. The U.S., Europe (excluding the U.K.), the U.K., Asia Pacific and Latin America represented 55.7%, 16.5%, 9.0%, 8.9% and 4.8% of our total revenue, respectively, in 2007. For further discussion concerning revenues and long-lived assets on a geographical basis for each of the last three years, see Note 15 to the Consolidated Financial Statements.

Sources of Revenue

Our revenues are primarily derived from the planning and execution of advertising programs in various media and the planning and execution of other marketing and communications programs. Most of our client contracts are individually negotiated and accordingly, the terms of client engagements and the basis on which we earn commissions and fees vary significantly. Our client contracts are complex arrangements that may include provisions for incentive compensation and govern vendor rebates and credits. Our largest clients are multinational entities and, as such, we often provide services to these clients out of multiple offices and across various agencies. In arranging for such services to be provided, we may enter into global, regional and local agreements.

Revenues for creation, planning and placement of advertising are determined primarily on a negotiated fee basis and, to a lesser extent, on a commission basis. Fees are usually calculated to reflect hourly rates plus proportional overhead and a mark-up. Many clients include an incentive compensation component in their total compensation package. This provides added revenue based on achieving mutually agreed-upon qualitative and/or quantitative metrics within specified time periods. Commissions are earned based on services provided, and are usually derived from a percentage or fee over the total cost to complete the assignment. Commissions can also be derived when clients pay us the gross rate billed by media and we pay for media at a lower net rate; the difference is the commission that we earn, which is either retained in total or shared with the client depending on the nature of the services agreement.

We pay the media charges with respect to contracts for advertising time or space that we place on behalf of our clients. To reduce our risk from a client’s non-payment, we typically pay media charges only after we have received funds from our clients. Generally, we act as the client’s agent rather than the primary obligor. In some instances we agree with the media provider that we will only be liable to pay the media after the client has paid us for the media charges.

We also generate revenue in negotiated fees from our public relations, sales promotion, event marketing, sports and entertainment marketing and corporate and brand identity services.

Our revenue is directly dependent upon the advertising, marketing and corporate communications requirements of our clients and tends to be higher in the second half of the calendar year as a result of the holiday season and lower in the first half as a result of the post-holiday slow-down in client activity.

Depending on the terms of the client contract, fees for services performed can be recognized in three principal ways: proportional performance, straight-line (or monthly basis) or completed contract. Fee revenue recognized on a completed contract basis also contributes to the higher seasonal revenues experienced in the fourth quarter because the majority of our contracts end at December 31. As is customary in the industry, our contracts generally provide for termination by either party on relatively short notice, usually 90 days. See Note 1 to the Consolidated Financial Statements for further discussion of our revenue recognition accounting policies.

Clients

One of the benefits of the holding company structure is that our agencies can work with a variety of clients from competing sectors. In the aggregate, our top ten clients based on revenue accounted for approximately 26% of revenue in 2007 and 2006. Based on revenue for the year ended December 31, 2007, our largest clients were General Motors Corporation, Microsoft, Johnson & Johnson, Unilever and Verizon. While the loss of the entire business of any one of our largest clients might have a material adverse effect upon our business, we believe that it is unlikely that the entire business of any of these clients would be lost at the same time. This is because we represent several different brands or divisions of each of these clients in a number of geographic markets, as well as provide services across multiple advertising and marketing disciplines, in each case through more than one of our agency systems. Representation of a client rarely means that we handle advertising for all brands or product lines of the client in all geographical locations. Any client may transfer its business from one of our agencies to a competing agency, and a client may reduce its marketing budget at any time.

Personnel

As of December 31, 2007, we employed approximately 43,000 persons, of whom approximately 19,000 were employed in the U.S. Because of the service character of the advertising and marketing communications business, the quality of personnel is of crucial importance to our continuing success. There is keen competition for qualified employees.


CEO BACKGROUND

Mr. Roth became our Chairman of the Board and Chief Executive Officer, effective January 19, 2005. Prior to that time, Mr. Roth served as our Chairman of the Board from July 13, 2004 to January 2005. Mr. Roth served as Chairman and Chief Executive Officer of The MONY Group Inc. from February 1994 to June 2004. Mr. Roth has been a member of the Board of Directors of Interpublic since February 2002. He is also a director of Pitney Bowes Inc. and Gaylord Entertainment Company.

Mr. Camera was hired in May 1993. He was elected Vice President, Assistant General Counsel and Assistant Secretary in June 1994, Vice President, General Counsel and Secretary in December 1995, and Senior Vice President, General Counsel and Secretary in February 2000.

Mr. Carroll was named Senior Vice President, Controller and Chief Accounting Officer in April 2006. Prior to joining us, Mr. Carroll served as Senior Vice President and Controller of McCann Worldgroup from November 2005 to March 2006. Mr. Carroll served as Chief Accounting Officer and Controller at Eyetech Pharmaceuticals from June 2004 to October 2005. Prior to that time, Mr. Carroll served as Chief Accounting Officer and Controller at MIM Corporation from January 2003 to June 2004 and served as a Financial Vice President at Lucent Technologies, Inc. from July 2001 to January 2003.

Mr. Dooner became Chairman and Chief Executive Officer of the McCann Worldgroup, effective February 27, 2003. Prior to that time, Mr. Dooner served as Chairman of the Board, President and Chief Executive Officer of Interpublic, from December 2000 to February 2003, and as President and Chief Operating Officer of Interpublic from April 2000 to December 14, 2000.

Mr. Dowling was hired in January 2000 as Vice President and General Auditor. He was elected Senior Vice President, Financial Administration of Interpublic in February 2001, and Senior Vice President, Chief Risk Officer in November 2002. Prior to joining us, Mr. Dowling served as Vice President and General Auditor for Avon Products, Inc. from April 1992 to December 1999.

Mr. Krakowsky was hired in January 2002 as Senior Vice President, Director of Corporate Communications. He was elected Executive Vice President, Strategy and Corporate Relations in December 2005. Prior to joining us, he served as Senior Vice President, Communications Director for Young & Rubicam from August 1996 to December 2000. During 2001, Mr. Krakowsky was complying with the terms of a non-competition agreement entered into with Young & Rubicam.

Mr. Mergenthale r was hired in August 2005 as Executive Vice President and Chief Financial Officer. Prior to joining us, he served as Executive Vice President and Chief Financial Officer for Columbia House Company from July 2002 to July 2005. Mr. Mergenthaler served as Senior Vice President and Deputy Chief Financial Officer for Vivendi Universal from December 2001 to March 2002. Prior to that time Mr. Mergenthaler was an executive at Seagram Company Ltd. from November 1996 to December 2001.

Mr. Sompolski was hired in July 2004 as Executive Vice President, Chief Human Resources Officer. Prior to joining us, he served as Senior Vice President of Human Resources and Administration for Altria Group from November 1996 to January 2003.


MANAGEMENT DISCUSSION FROM LATEST 10K


EXECUTIVE SUMMARY

We are one of the world’s premier advertising and marketing services companies. Our agency brands deliver custom marketing solutions to many of the world’s largest marketers. Our companies cover the spectrum of marketing disciplines and specialties, from consumer advertising and direct marketing to mobile and search engine marketing. Major global brands include Draftfcb, FutureBrand, GolinHarris International, Initiative, Jack Morton Worldwide, Lowe Worldwide (“Lowe”), MAGNA Global, McCann Erickson, Momentum, MRM, Octagon, Universal McCann and Weber Shandwick. Leading domestic brands include Campbell-Ewald, Carmichael Lynch, Deutsch, Hill Holliday, Mullen and The Martin Agency.

The work we produce for our clients is specific to their unique needs. Our solutions vary from project-based activity involving one agency and its client to long-term, fully-integrated campaigns created by a group of our companies working together on behalf of a client. With offices in over 100 countries, we can operate in a single region or align work globally across all major world markets. Our revenue is directly dependent upon the advertising, marketing and corporate communications requirements of our clients and tends to be higher in the second half of the calendar year as a result of the holiday season and lower in the first half as a result of the post-holiday slow-down in client activity.

Our strategy is focused on improving our organic revenue growth and operating income. We are working to achieve significant improvements in our organic revenue growth and operating margins, with our ultimate objective to be fully competitive with our industry peer group on both measures.

We analyze period-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, with the remainder 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.

We have strategically realigned a number of our capabilities to promote revenue growth. For example, we have combined accountable marketing and consumer advertising to form the global offering Draftfcb and implemented a differentiated approach to media by aligning our largest media assets with our global brand agencies. We continue to develop our capacity in strategically critical areas, notably digital, marketing services and media, that we expect will drive future revenue growth. The digital component of our business continues to evolve and is increasingly vital to all of our agencies. In order to grow with our clients, we have accelerated our investment in talent, professional development and technology throughout the organization.

To further improve our operating margin we continue to focus on the following areas:


• Actively managing staff costs in non-revenue supporting roles;

• Improving financial systems and back-office processing;

• Reducing organizational complexity and divesting non-core and underperforming businesses; and

• Improving our real estate utilization.

Although the U.S. Dollar is our reporting currency, a substantial portion of our revenues is generated in foreign currencies. Therefore, our reported results are affected by fluctuations in the currencies in which we conduct our international businesses. The weakening of the U.S. Dollar against the currencies of many countries in which we operate contributed to higher revenues and operating expenses. In particular, during 2007 and 2006, the U.S. Dollar was weaker against the Euro, Pound Sterling, Brazilian Real and Canadian Dollar compared to 2006 and 2005, respectively. The 2007 impact was also due to the strength of the Australian Dollar compared to 2006. The average value of the Euro and Pound Sterling, currencies in which the majority of our international operations are conducted, each strengthened approximately 9% against the U.S. Dollar during 2007. Foreign currency variations resulted in increases of approximately 3% in revenues, salaries and related expenses and office and general expenses in 2007 compared to 2006.

As discussed in more detail in this MD&A, for 2007 compared to 2006:


• Total revenue increased by 5.9%.

• Organic revenue increase was 3.8%, primarily due to higher revenue from existing clients.

• Operating margin was 5.3% in 2007, compared to 1.7% in 2006. Salaries and related expenses as a percentage of revenue was 63.2% in 2007 compared to 63.7% in 2006. Office and general expenses as a percentage of revenue was 31.2% in 2007, compared to 33.6% in 2006.

• Operating expenses increased $125.1.

• Total salaries and related expenses increased 4.9%, primarily to support the growth of our business. The organic increase was 2.7%.

• Total office and general expenses decreased 1.6% mainly due to improvements in our financial systems, back-office processes and internal controls, which resulted in lower professional fees. The organic decrease was 2.7%.

• Restructuring and other reorganization-related charges reduced operating income by $25.9 in 2007 and $34.5 in 2006. The majority of charges in 2007 related to a restructuring plan at Lowe and the reorganization of our media businesses.

• As of December 31, 2007, cash and cash equivalents and marketable securities increased $80.3 primarily due to improved operating results and proceeds from the sale of businesses and investments, partially offset by working capital usage, acquisitions, including deferred payments, and capital expenditures.

• We have successfully completed our 18-month plan to remediate the remainder of our previous material weaknesses as of December 31, 2007. See Item 9A, Controls and Procedures, for further discussion.

implemented a differentiated approach to media by aligning our largest media assets with our global brand agencies. We continue to develop our capacity in strategically critical areas, notably digital, marketing services and media, that we expect will drive future revenue growth. The digital component of our business continues to evolve and is increasingly vital to all of our agencies. In order to grow with our clients, we have accelerated our investment in talent, professional development and technology throughout the organization.

To further improve our operating margin we continue to focus on the following areas:


• Actively managing staff costs in non-revenue supporting roles;

• Improving financial systems and back-office processing;

• Reducing organizational complexity and divesting non-core and underperforming businesses; and

• Improving our real estate utilization.

Although the U.S. Dollar is our reporting currency, a substantial portion of our revenues is generated in foreign currencies. Therefore, our reported results are affected by fluctuations in the currencies in which we conduct our international businesses. The weakening of the U.S. Dollar against the currencies of many countries in which we operate contributed to higher revenues and operating expenses. In particular, during 2007 and 2006, the U.S. Dollar was weaker against the Euro, Pound Sterling, Brazilian Real and Canadian Dollar compared to 2006 and 2005, respectively. The 2007 impact was also due to the strength of the Australian Dollar compared to 2006. The average value of the Euro and Pound Sterling, currencies in which the majority of our international operations are conducted, each strengthened approximately 9% against the U.S. Dollar during 2007. Foreign currency variations resulted in increases of approximately 3% in revenues, salaries and related expenses and office and general expenses in 2007 compared to 2006.

As discussed in more detail in this MD&A, for 2007 compared to 2006:


• Total revenue increased by 5.9%.

• Organic revenue increase was 3.8%, primarily due to higher revenue from existing clients.

• Operating margin was 5.3% in 2007, compared to 1.7% in 2006. Salaries and related expenses as a percentage of revenue was 63.2% in 2007 compared to 63.7% in 2006. Office and general expenses as a percentage of revenue was 31.2% in 2007, compared to 33.6% in 2006.

• Operating expenses increased $125.1.

• Total salaries and related expenses increased 4.9%, primarily to support the growth of our business. The organic increase was 2.7%.

• Total office and general expenses decreased 1.6% mainly due to improvements in our financial systems, back-office processes and internal controls, which resulted in lower professional fees. The organic decrease was 2.7%.

• Restructuring and other reorganization-related charges reduced operating income by $25.9 in 2007 and $34.5 in 2006. The majority of charges in 2007 related to a restructuring plan at Lowe and the reorganization of our media businesses.

• As of December 31, 2007, cash and cash equivalents and marketable securities increased $80.3 primarily due to improved operating results and proceeds from the sale of businesses and investments, partially offset by working capital usage, acquisitions, including deferred payments, and capital expenditures.

• We have successfully completed our 18-month plan to remediate the remainder of our previous material weaknesses as of December 31, 2007. See Item 9A, Controls and Procedures, for further discussion.

Revenue Recognition

Our revenues are primarily derived from the planning and execution of advertising programs in various media and the planning and execution of other marketing and communications programs. Most of our client contracts are individually negotiated and accordingly, the terms of client engagements and the bases on which we earn commissions and fees vary significantly. Our client contracts are complex arrangements that may include provisions for incentive compensation and govern vendor rebates and credits. Our largest clients are multinational entities and, as such, we often provide services to these clients out of multiple offices and across various agencies. In arranging for such services to be provided, it is possible for a global, regional and local agreement to be initiated. Multiple agreements of this nature are reviewed by legal counsel to determine the governing terms to be followed by the offices and agencies involved. Critical judgments and estimates are involved in determining both the amount and timing of revenue recognition under these arrangements.

Revenue for our services is recognized when all of the following criteria are satisfied: (i) persuasive evidence of an arrangement exists; (ii) the price is fixed or determinable; (iii) collectibility is reasonably assured; and (iv) services have been performed. Depending on the terms of a client contract, fees for services performed can be recognized in three principal ways: proportional performance, straight-line (or monthly basis) or completed contract. See Note 1 to the Consolidated Financial Statements for further discussion.

Depending on the terms of the client contract, revenue is derived from diverse arrangements involving fees for services performed, commissions, performance incentive provisions and combinations of the three. Commissions are generally earned on the date of the broadcast or publication. Contractual arrangements with clients may also include performance incentive provisions designed to link a portion of the revenue to our performance relative to both qualitative and quantitative goals. Performance incentives are recognized as revenue for quantitative targets when the target has been achieved and for qualitative targets when confirmation of the incentive is received from the client. The classification of client arrangements to determine the appropriate revenue recognition involves judgments. If the judgments change there can be a material impact on our financial statements, and particularly on the allocation of revenues between periods. Incremental direct costs incurred related to contracts where revenue is accounted for on a completed contract basis are generally expensed as incurred. There are certain exceptions made for significant contracts or for certain agencies where the majority of the contracts are project-based and systems are in place to properly capture appropriate direct costs.

RESULTS OF OPERATIONS

Consolidated Results of Operations

REVENUE

2007 Compared to 2006

Our revenue increased by $363.4, which consisted of a favorable foreign currency rate impact of $197.5, net divestitures of $70.7 and organic revenue growth of $236.6. The change in revenues was negatively affected by net divestitures of non-strategic businesses, primarily at Draftfcb and Lowe, and a sports marketing business at the Constituency Management Group (“CMG”). This was partially offset by businesses acquired during 2007, primarily in the U.S. and India. The organic revenue growth was primarily driven by domestic markets through expanding business with existing clients, winning new clients in advertising and public relations and completing several projects within the events marketing business. The international organic revenue increase was primarily driven by increases in spending by existing clients in the Asia Pacific region, partially offset by net client losses in Continental Europe, primarily in France at the Integrated Agency Network (“IAN”).


MANAGEMENT DISCUSSION FOR LATEST QUARTER


EXECUTIVE SUMMARY

We are one of the world’s premier advertising and marketing services companies. We generate sales, earnings and cash flows from our agency brands delivering custom marketing solutions to many of the world’s largest marketers. Our companies cover the spectrum of marketing disciplines and specialties, from consumer advertising and direct marketing to mobile and search engine marketing. Major global brands include Draftfcb, FutureBrand, GolinHarris International, Initiative, Jack Morton Worldwide, Lowe Worldwide (“Lowe”), MAGNA Global, McCann Erickson, Momentum, MRM, Octagon, Universal McCann and Weber Shandwick. Leading domestic brands include Campbell-Ewald, Carmichael Lynch, Deutsch, Hill Holliday, Mullen and The Martin Agency.

We are in the third year of our turnaround plan. During the first two years of this plan we strengthened our leadership teams throughout the Company, strategically realigned certain key operating units, enhanced our liquidity and financial flexibility, remediated all of our material weaknesses within our internal control structure and significantly improved financial performance. In the third year of this plan, we continue to execute on our objective of improving our organic revenue growth and operating margins, with our ultimate objective to be competitive with our industry peer group on both measures. Key components of this strategy are our continued focus on talent and tools, cost control, utilization of resources and regular refinement of our professional offerings so that they can meet their clients’ needs and our commercial objectives.

For the remainder of 2008 and beyond, we expect to continue to make investments in talent and to expand in high-growth advertising and marketing disciplines, especially digital, and in high-growth markets around the world. Technology has accelerated the pace of change of consumer media habits, including the variety and capabilities of media in use. In this evolving environment, we are constantly taking advantage of opportunities to improve service to our clients. We are integrating advertising and marketing campaigns across multiple media platforms, increasing the accountability of client marketing programs and building digital expertise across all disciplines.

As part of our long-term business strategy and to strengthen our competitive position in the marketplace, we continue to evaluate strategic opportunities to grow through acquisition and investment. We select companies with quality management teams and outstanding capabilities that will enhance our service offerings to our existing clients, increase our presence in high-growth markets and/or enhance our ability to attract new clients. We are interested in companies that will complement the service of our existing agencies or allow us to provide new services to our clients.

The continuing uncertainty in the worldwide financial system has negatively impacted general business conditions. It is possible that a weakening economy could adversely affect our clients’ need for advertising and marketing services, or even their solvency, but we cannot predict whether or to what extent this will occur. We are not dependent on short-term funding, and the limited availability of credit in the market has not affected our credit facilities, including our ELF facility, or our liquidity or materially impacted our funding costs. As of September 30, 2008, approximately 85% of our debt obligations bore interest at fixed rates. We have diversified counterparties and clients, but we continue to monitor our counterparty and client risks closely. While the effects of the economic conditions in the future are not predictable, we believe our global presence, the breadth and diversity of our service offerings and our enhanced expense management capabilities position us well in a slower economic climate.

We analyze period-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, with the remainder considered to be 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.

On July 9, 2008 we announced the creation of a management entity called Mediabrands to oversee our media assets that are included in our Integrated Agency Networks (“IAN”) segment. The new entity provides oversight to ensure operational efficiency and increased collaboration across our media units. Our global media networks, Initiative and Universal McCann, continue to operate as independent entities, each aligned where appropriate with its respective full-service marketing network partner. The previous existing entities that comprise Mediabrands remain in the IAN segment. The financial results for these units are analyzed together in MD&A for the three and nine months ended September 30, 2008 and 2007.

Although the U.S. Dollar is our reporting currency, a substantial portion of our revenues is generated in foreign currencies. Therefore, our reported results are affected by fluctuations in the currencies in which we conduct our international businesses. We do not use derivative financial instruments to manage this translation risk. As a result, both positive and negative currency fluctuations against the U.S. Dollar will continue to affect our results of operations. Foreign currency variations resulted in increases of approximately 2% and 3% in revenues, salaries and related expenses and office and general expenses for the three and nine months ended September 30, 2008, respectively, compared to the respective prior-year periods. In recent months the U.S. Dollar has started to strengthen against several foreign currencies, and if this trend continues, it will have a negative impact on our consolidated results of operations.


CONF CALL

Jerome Leshne

Good morning and thank you for joining us. We have posted our earnings release and our slide presentation on our website, interpublic.com, and we will refer to both during the course of this call.

This morning we are joined by Michael Roth and Frank Mergenthaler. We will begin with prepared remarks to be followed by Q&A and we plan to conclude before market open at 9:30 am Eastern.

During this call we will refer to forward-looking statements about our company which are subject to the uncertainties in the cautionary statement included in our earnings release and in the slide presentation, and further detailed in our 10-Q and other filings with the SEC.

At this point it is my pleasure to turn things over to Michael Roth.

Michael Roth

Thank you, Jerry and thank you all for joining us this morning as we review our results for the third quarter and first nine months of 2008. I'll begin by covering the highlights of our performance and Frank will take us through the results in detail. After his remarks I'll return with closing comments before we move onto the Q&A.

We are very pleased with the results that we are sharing with you today. Our performance for both the quarter and the year-to-date are the strongest that IPG has delivered in many years. Organic revenue growth of 7.6% in the quarter and 6.4 % for the nine months put us at the top ranks of our industry. We had contributions to growth across the marketing disciplines and the strong results we are sharing with you were achieved against a difficult comp in the third quarter a year ago.

Turning to operating margin, we saw good progress from 3.3% in the third quarter of 2007 to 6.7% for the same period this year. We are seeing improvements in all our key cost ratios and operating margins before restructuring for the past 12 months at just north of 8%, continuing what is now a two-year trend of improving profitability quarter by quarter. All of our major units are showing improvements in their financial performance thus far this year.

As a result of these factors, we saw our third quarter operating income rise from $51 million in 2007 to $116 million this year. For the first nine months, operating income jumped from $73 million in 2007 to $259 million this year. All of this is very positive news and demonstrates that we continue to succeed in delivering significant progress against the financial targets that we set for 2008.

This is a testament to our people and the talent and professional excellence that exists across our many great agencies, as well as to existing strong management and discipline in all our units. This kind of progress is what we foresaw when we set out to transform IPG.

What no one could have seen coming, of course, is the dramatic deterioration of the economic environment in which we are operating and the resulting impact on the financial markets. Through the first nine months of this year, our results did not reflect these developments. However, during the past month or so as the crisis began to impact the global economy, we're seeing it beginning to weigh on marketers plans for both the fourth quarter and 2009. This makes the prospects of a slowdown in client spend more of a risk.

We believe that with our strong performance year-to-date we remain positioned to achieve our financial objectives for 2008. However, the impact of an increasingly unsettled and volatile business environment on our sector does create a risk to meeting our stated goals. I'll have more to add on this in my closing remarks, but for now let me turn things over to Frank.

Frank Mergenthaler

Good morning. As Michael indicated, we are very pleased with the performance in Q3 and the nine months. The quarter’s results demonstrate that we continue to make significant progress on both growth and profitability. I'll remind everyone that the presentation slides which accompany our remarks are available on our website.

Turning to slide 2, consolidated organic revenue growth was 7.6%, led by growth in the U.S. against a strong comparable quarter; and the UK with solid performance across our advertising and marketing disciplines.

Operating income was $116 million, more than twice the same period last year. Operating margin expanded to 6.7% from 3.3%, reflecting improved leverage on sales and related expenses. In general, all controllable expenses were well managed in support of our growth. Our diluted earnings per share was $0.08 compared with a loss of $0.06 a year ago.

Turning to slide 3, you can see our complete P&L for the third quarter. I'll cover revenue and operating expenses in detail on the slides that follow.

On slide 4 we provide additional detail on revenue. Reported revenue in the quarter was $1.74 billion, an increase of 11.5%. Compared to 3Q07, exchange rates had a positive impact of 2.3% while net business acquisitions added 1.6%. Organic revenue growth of 7.6% compares to 5.7% in 3Q07. Growth was attributable to higher revenue from existing clients and from net new business wins.

Our events marketing business was a strong contributor to growth, so it's worth noting that new event business typically comes with relatively high pass through revenues and expenses. This occurs when we book offsetting revenue expenses and the use of third parties. Such revenue and expenses occur in equal amount so apart from our fees, they are profit neutral and typically their growth is immaterial to our consolidated growth rate; but in Q3 their strong increase contributed 1.8%, approximately $30 million to organic revenue growth. The expense offset is in O&G (Office and General Expenses).

On the bottom half of this slide you can see that both operating segments performed well in the quarter. In our integrated agency networks, reported revenue grew 10.6% and the organic increase was 5.6%. Our growth was led by media, digital activation as well as advertising.

At our Constituency Management Group, reported revenue grew 16.8% and the organic increase was 18.3%. Performance was strong in all our major agencies and disciplines, including events marketing, public relations, branding, and sports marketing.

Slide 5 provides a breakdown of Q3 revenue growth by region. In the U.S., organic revenue growth was 7.9% against 6.8% in 3Q07. We had growth across our full range of advertising and marketing disciplines, led by Mediabrands, McCann World Group’s MRN Momentum units, our Hale, Holiday and Deutsche agencies; public relation agencies Weber Shandwick and GolinHarris; and Jack Morton and Events. This brings organic revenue growth for the nine months to 5.4%.

Internationally, reported revenue growth was 15% which includes a significant currency lift. Organic growth was 7.2% in Q3 and 7.8% for the nine months. In the UK, Q3 organic growth was 21.1%, a terrific result that includes the performance of our events business, Jack Morton. It is worth noting that separate of our events business, organic growth was 13% in the UK, attributable to new business and higher existing client revenue at McCann and Lowe.

In continental Europe, organic growth was 6.8% paced by McCann and Lowe with new client wins and increases from existing clients. Among the largest markets we had increases in were Germany, France, and Spain.

In Asia Pac, Q3 organic growth was 1.9%. We had strong gains in India and solid growth in China. Growth in the region has slowed due to challenging economic conditions in Japan, where we have a major presence through McCann Erickson.

In Latin America, organic revenue growth was 3.1% led by McCann due to higher revenue from existing clients. Our other markets category increased 28% as reported primarily due to currency and acquisitions.

On slide 6, we present a longer view of organic revenue growth that tracks our progress on a trailing 12-month basis over the turnaround period. As you can see, organic revenue growth has trended up strongly and was 5% for the most recent 12 months.

On slide 7, we move on to a closer look at operating expenses. Consolidated operating margin grew 340 basis points from a year ago. Salaries and related expense were $1.09 billion in the quarter, 62.8% of revenue compared with 66.3% of revenue a year ago, an improvement of 350 basis points. As you'll see in the appendix to our presentation slides, leverage on base salaries and benefits improved 180 basis points in the quarter and 130 basis points for the nine months. Incentive expense decreased in Q3 from a year ago due to more ratable recognition of our annual plan compared to last year. Temporary labor, which has been an area of focus for us, decreased to 3.1% of revenue from 3.6% a year ago.

It is worth noting that salaries as a percentage of revenue benefit from our incremental pass through revenue in the quarter, and that our leverage improvement in the quarter was still strong, approximately 250 basis points adjusting for that effect.

Office and General expenses on the lower half of this slide were $526 million, 30.2% of revenue compared to 30.1% of revenue a year ago. The organic increase was 9.2%, but the comparison reflects the increases in pass through expenses which are offset in revenue. Excluding that impact, O&G expense increased only 3.3% and leverage improved approximately 50 basis points.

As you can see in the appendix, real estate utilization improved as a percent of revenues which is the result of ongoing operating disciplines and cost actions taken in 2007.

On slide 8, we show continuing progress on operating margin on a trailing 12-month basis, which is one of our primary financial objectives. This excludes past restructuring impairment charges in order to capture the trend in underlying results. Q3 was our ninth consecutive quarter of improvement and as you can see, adjusted operating margin over the last 12 months was 8.1%.

On slide 9, we turn to cash flow for the year-to-date period. For the nine months, cash generated from operations was $146 million compared with the use of $209 million in 2007, an improvement of $365 million.

Working capital used $159 million in the nine months, which is an improvement of $235 million from last year. We would typically expect the use of cash and working capital for the first nine months due to the seasonal nature of our business. Working capital management continues to be an area of strong focus for us.

Investing activities used $196 million in the nine months, including $75 million in Q3 related to four acquisitions that were closed. The most significant of these were the Middle East Communications Network, the premier marketing services group in the Middle East/North Africa region where we moved from a minority to majority position. And Huge, a terrific digital agency based in New York in which we took a majority interest.

The net change in cash and marketable securities in the nine months was a seasonal decrease of $323 million compared with a decrease of $431 million a year ago. This is an improvement of $108 million, notwithstanding our redemption of $191 million of convertible notes in March of this year.

Turning to our balance sheet on slide 10, you can see that we ended Q3 with $1.7 billion in cash and short-term marketable securities. That is an increase of $174 million from a year ago while again having redeemed the converts in March of this year.

Our debt maturity schedule as of quarter end is presented on slide 11. Total debt at quarter end was $2.1 billion. Our maturities are well spaced going forward, with $250 million maturing in November 2009 and the same amount in November 2010.

We were pleased to initiate our new $335 million revolving credit facility with a group of leading banks in the quarter which has a three-year commitment. We continue to have the $750 million facility in place until June 2009 as well. Along with our cash position, and the fact that we do not rely on short-term financing, our liquidity continues to be strong, which is particularly important given the current situation in the credit markets.

In summary, this was the best Q3 and nine months in many years for IPG with improved controls, business processes, systems and talent, we believe we are in a much stronger position to navigate through today's more challenging business environment. We have strong liquidity, our businesses are demonstrating full competitiveness, and we are successfully utilizing enhanced financial tools and insight to improve efficiency and profitability so as to drive improved performance across the board.

Now let me turn it back over to Michael.

Michael Roth

Thank you, Frank. As you can see, our performance for Q3 and the first nine months was strong. Profitability continues to improve. We posted very good organic revenue growth with additional assignments from existing clients, as well as new business wins. The growth was across all marketing disciplines. We continue to see demand for digital, marketing services, integrated solutions and high value, strategic thinking in advertising and media, as well as strong capabilities in the emerging economies.

We have made important moves in recent times to further improve our position in key growth markets and in emerging media capabilities. We will remain focused on these areas for potential acquisitions and alliances.

Topmost on our agenda is keeping the positive momentum we are building and making all of our agencies’ offerings fully competitive. This means creating solutions for clients that put the right people and the right tools at their disposal at the right time to connect with consumers. As such, we will continue to invest appropriately in talent and tools in strategically critical areas for the long-term health of the business

The other item that is top of the mind for us is staying close to the broader economic developments and reacting quickly to protect our margins. As I mentioned in my opening remarks, the difficult global economic situation is leading to increased caution on the part of our clients. To date, we have experienced a limited number of delays and cancellations in some fourth quarter project spending. There is no clear pattern to it, though we are seeing softness in the financial sector and auto continues to be hit.

By region, we're seeing softness in Japan and some softness in project spend in European markets. The question we cannot answer with certainty is whether there is more to come and the degree to which we will see activity curtailed. We will continue our dialogue with our clients and work closely with them to achieve their business needs, and also continue to do something we have pledged to you since the beginning of this year, which is to manage the business very conservatively as we move through this period of uncertainty.

We continue to believe that our model, based on the full range of marketing disciplines and broad geographic presence, will provide some measure of protection. As you know, the momentum of the economic downturn is calling into question every business assumption, no matter what industry you're in. Nonetheless, we continue to believe we are in positions to achieve our financial objectives for 2008, although the degree to which economic conditions further deteriorate is a risk to meeting these goals.

We will be extremely focused on controlling costs and managing margins and at the same time continue to partner with our clients. That is what we are asking of our operating management and of ourselves. It's what's required to consolidate and build on the progress we have been making and to enhance IPG's long-term value.

With that, I want to thank you for being with us and open up the floor to questions.

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