Table	of	Contents

# UNITED	STATES	SECURITIES	AND	EXCHANGE	COMMISSION

x ANNUAL	REPORT	PURSUANT	TO	SECTION	13	OF	THE	SECURITIES	EXCHANGE	ACT	OF	1934

# For	the	fiscal	year	ended	December	31,	2006

# Commission	file	number	1-6686

# THE	INTERPUBLIC	GROUP	OF	COMPANIES,	INC.

(Exact	name	of	registrant	as	specified	in	its	charter)

Delaware

(State	or	other	jurisdiction	of incorporation	or	organization)

(I.R.S.	Employer Identification	No.)

1114	Avenue	of	the	Americas,	New	York,	New	York

(Address	of	principal	executive	offices) (Zip	Code)

(Registrant's	telephone	number,	including	area	code)

# Securities	registered	pursuant	to	Section	12(b)	of	the	Act:

# Securities	Registered	Pursuant	to	Section	12(g)	of	the	Act:	None

Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.		Yes	o					No	x

Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	Section	15(d)	of	the	Act.		Yes	o					No	x

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	the	filing	requirements	for	at	least	the	past	90	days.		Yes	x					No	o

Indicate	by	check	mark	if	disclosure	of	delinquent	filers	pursuant	to	Item	405	of	Regulation	S-K	(§229.405	of	this	chapter)	is	not	contained	herein,	and	will	not	be	contained,	to	the	best	of	registrant's	knowledge, in	definitive	proxy	or	information	statements	incorporated	by	reference	in	Part	III	of	this	Form	10-K	or	any	amendment	to	this	Form	10-K.		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"	in	Rule	12b-2	of	the Exchange	Act.

Large	accelerated	filer	x					Accelerated	filer	o					Non-accelerated	filer	o

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

As	of	June	30,	2006,	the	aggregate	market	value	of	the	shares	of	registrant's	common	stock	held	by	non-affiliates	was	$3,678,790,921.	The	number	of	shares	of	the	registrant's	common	stock	outstanding	as	of February	16,	2007	was	468,710,972.

# DOCUMENTS	INCORPORATED	BY	REFERENCE

The	following	sections	of	the	Proxy	Statement	for	the	Annual	Meeting	of	Stockholders	to	be	held	on	May	24,	2007	are	incorporated	by	reference	in	Part	III:	"Election	of	Directors,"	"Corporate	Governance Practices	and	Board	Matters,"	"Section	16(a)	Beneficial	Ownership	Reporting	Compliance,"	"Compensation	of	Executive	Officers,"	"Non-Management	Director	Compensation,"	"Compensation	Discussion	and Analysis,"	"Report	of	the	Compensation	Committee	of	the	Board	of	Directors,"	"Outstanding	Shares,"	"Related	Party	Transactions"	and	"Appointment	of	Independent	Registered	Public	Accountants."

# Part	I.

Item	1A. Risk	Factors

Item	1B. Unresolved	Staff	Comments

Item	2. Properties

Item	3. Legal	Proceedings

Item	4. Submission	of	Matters	to	a	Vote	of	Security	Holders 10

# Part	II.

Item	5. Market	for	Registrant's	Common	Equity	and	Related	Stockholder	Matters 12

Item	6. Selected	Financial	Data

Item	7. Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations

Item	7A. Quantitative	and	Qualitative	Disclosures	About	Market	Risk

Item	8. Financial	Statements	and	Supplementary	Data

Item	9. Changes	in	and	Disagreements	With	Accountants	on	Accounting	and	Financial	Disclosure

Item	9A. Controls	and	Procedures

Item	9B. Other	Information 100

# Part	III.

Item	10. Directors	and	Executive	Officers	of	Interpublic

Item	11. Executive	Compensation

Item	12. Security	Ownership	of	Certain	Beneficial	Owners	and	Management

Item	13. Certain	Relationships	and	Related	Transactions 102 Item	14. Principal	Accountant	Fees	and	Services 102

# Part	IV.

	EX-10.III.A.91:	DESCRIPTION	OF	THE	CHANGE	IN	COMPENSATION	FOR	NON-MANAGEMENT	DIRECTORS.

	EX-12:	SUPPLEMENTAL	CALCULATION	OF	RATIO	OF	EARNINGS	TO	FIXED	CHARGES

# 	EX-21:	SUBSIDIARIES

# 	EX-23:	CONSENT	OF	PRICEWATERHOUSECOOPERS	LLP

# 	EX-24:	POWER	OF	ATTORNEY

# 	EX-31.1:	CERTIFICATION

# STATEMENT	REGARDING	FORWARD-LOOKING	DISCLOSURE

This	annual	report	on	Form	10-K	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	in	this report	under	Item	1A.,	Risk	Factors.	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;

•		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.

Investors	should	carefully	consider	these	factors	and	the	additional	risk	factors	outlined	in	more	detail	in	Item	1A.,	Risk	Factors,	in	this	report.

# AVAILABLE	INFORMATION

Our	annual	reports	on	Form	10-K,	quarterly	reports	on	Form	10-Q,	current	reports	on	Form	8-K,	and	any	amendments	to	these	reports,	will	be	made	available,	free	of	charge,	at	our	website	at http://www.interpublic.com,	as	soon	as	reasonably	practicable	after	we	electronically	file	such	reports	with,	or	furnish	them	to,	the	SEC.	Any	document	that	we	file	with	the	SEC	may	also	be	read	and copied	at	the	SEC's	Public	Reference	Room	located	at	100	F	Street,	N.E.,	Washington,	DC	20549.	Please	call	the	SEC	at	1-800-SEC-0330	for	further	information	on	the	public	reference	room.	Our filings	are	also	available	to	the	public	from	the	SEC's	website	at	http://www.sec.gov,	and	at	the	offices	of	the	New	York	Stock	Exchange	("NYSE").	For	further	information	on	obtaining	copies	of	our public	filings	at	the	NYSE,	please	call	(212)	656-5060.

Our	Corporate	Governance	Guidelines,	Code	of	Conduct	and	each	of	the	charters	for	the	Audit	Committee,	Compensation	Committee	and	the	Corporate	Governance	Committee	are	available	free of	charge	on	our	website	at	http://www.interpublic.com,	or	by	writing	to	The	Interpublic	Group	of	Companies,	Inc.,	1114	Avenue	of	the	Americas,	New	York,	New	York	10036,	Attention:	Secretary.

# Item	1. 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

The	Interpublic	Group	of	Companies,	Inc.,	together	with	its	subsidiaries	(the	"Company,"	"Interpublic,"	"we,"	"us"	or	"our"),	is	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.	With	hundreds	of	offices	in	over	100	countries and	approximately	42,000	employees,	our	agencies	develop	marketing	programs	that	build	brands,	influence	consumer	behavior	and	sell	products.

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.

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.

# Our	Strategy

We	compete	in	a	fast-changing	industry.	To	keep	pace	with	the	trends	transforming	the	media	landscape,	including	new	technologies,	a	proliferation	of	media	channels	and	changes	in	consumer habits,	we	believe	a	marketing	communications	group	must	have	a	broad	spectrum	of	innovative	agency	brands	to	help	clients	navigate	a	fragmented	market.

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.

In	2006,	we	took	a	number	of	steps	to	lead	our	company	forward	strategically.	These	initiatives	include	merging	two	of	our	companies	to	form	Draftfcb,	a	modern,	integrated	global	agency;	a realignment	of	our	media	assets	with	our	two	largest	global	advertising	networks	to	create	a	closer	working	relationship	between	the	two	disciplines;	a	newly	focused	Lowe	with	hubs	in	eight	key markets;	and	strategic	digital	investments	both	internally	and	externally.

To	manage	the	broadest	range	of	clients,	we	continue	to	maintain	separate	agency	brands	in	competing	disciplines.	Having	distinct	agencies	allows	us	to	create	custom	solutions	best	suited	to specific	clients,	as	well	as	avoid	potential	conflicts	of	interest	among	clients	in	the	same	industry.

# Our	Brands

Within	Interpublic,	we	have	some	of	the	world's	best	known	and	most	innovative	communication	specialists.

Globally,	we	offer	three	distinct	options	for	clients	seeking	large-scale,	integrated	capabilities	across	all	our	disciplines.	These	include	Draftfcb,	Lowe	Worldwide	and	McCann	Worldgroup.

Launched	in	2006,	Draftfcb	is	a	modern	agency	model	for	clients	seeking	creative	and	accountable	marketing	programs.	With	more	than	130	years	of	combined	expertise,	the	newly	formed company	has	its	roots	in	both	consumer	advertising	and	behavioral,	data-driven	direct	marketing.	The	agency	is	the	first	global,	behavior-based,	highly	creative	and	accountable	marketing communications	organization	to	operate	with	a	single	income	statement.

Lowe	Worldwide	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,	including	the	United	Kingdom,	United	States,	India,	Sweden	and	much	of Latin	America.	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.

McCann	Worldgroup,	one	of	the	world's	leading	marketing	communications	companies,	offers	best-in-class	communications	tools	and	resources	to	many	of	the	world's	top	companies	and	most famous	brands.	As	more	and	more	marketers	seek	additional	ways	to	reach	consumers,	McCann	Worldgroup	is	exceptionally	qualified	to	meet	their	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.

Within	our	group,	we	also	have	a	unique	roster	of	strong	full-service	domestic	agency	brands,	including	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.

Interpublic	also	has	two	leading	media	specialists,	Initiative	and	Universal	McCann.	To	develop	creative	ideas	that	resonate	with	consumers,	brand-building	agencies	must	work	closely	with media	agencies.	Initiative	and	Universal	McCann	operate	independently	but	were	aligned	with	Draftfcb	and	McCann	Erickson,	respectively,	in	late	2006.	This	approach	is	intended	to	improve	cross- media	communications	and	our	ability	to	deliver	integrated	marketing	programs.	Our	"aligned	model"	with	respect	to	media	differentiates	us	from	our	principal	competitors.

Interpublic	also	has	exceptional	specialist	firms	across	the	full	range	of	marketing	services.	These	include	FutureBrand	(corporate	branding),	Jack	Morton	(experiential	marketing),	Octagon (sports	marketing),	Regan	Campbell	Ward	(healthcare	communications),	and	WeberShandwick	(public	relations),	all	of	which	report	into	our	Constituency	Management	Group	("CMG").	We	also	have best-in-class	digital	agencies,	led	by	R/GA.	To	further	strengthen	our	emerging-media	offering,	in	late	2006	we	formed	the	Futures	Marketing	Group,	which	houses	existing	high-growth	media	offerings such	as	the	Interpublic	Emerging	Media	Lab	and	fosters	new	media	investments	and	alliances.	Many	more	of	our	marketing	specialists	can	be	found	using	the	"Company	Finder"	tool	on	our	website, www.interpublic.com.

To	help	clients	target	fast-growth	demographic	segments	in	the	U.S.	market,	Interpublic	owns	a	stake	in	several	multicultural	agencies,	including	abecé	(Hispanic),	Accent	Marketing	(Hispanic), The	Axis	Agency	(African	American),	Casanova	Pendrill	(Hispanic),	IW	Group	(Asian-Pacific	American)	and	SiboneyUSA	(Hispanic).

# Our	Financial	Reporting	Segments

For	financial	reporting	purposes,	we	have	two	reportable	segments:	Integrated	Agency	Network	("IAN"),	which	is	comprised	of	Draftfcb,	Lowe,	McCann,	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.	Until	December	31,	2005,	we	had an	additional	segment,	Motorsports	operations	("Motorsports"),	which	was	sold	during	2004	and	had	immaterial	residual	operating	results	in	2005.	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	United	States	("U.S."),	Europe	(excluding	the	United	Kingdom	("U.K.")),	the	U.K.,	Asia	Pacific	and	Latin	America	represented	55.6%,	16.8%,	9.1%, 8.3%	and	4.9%	of	our	total	revenue,	respectively,	in	2006.	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	primarily recognized	three	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

In	the	aggregate,	our	top	ten	clients	based	on	revenue	accounted	for	approximately	25%	of	revenue	in	2006	and	2005.	Based	on	revenue	for	the	year	ended	December	31,	2006,	our	largest	clients were	General	Motors	Corporation,	Johnson	&	Johnson,	Microsoft,	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,	2006,	we	employed	approximately	42,000	persons,	of	whom	approximately	18,000	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.

We	are	subject	to	a	variety	of	possible	risks	that	could	adversely	impact	our	revenues,	results	of	operations	or	financial	condition.	Some	of	these	risks	relate	to	the	industry	in	which	we	operate, while	others	are	more	specific	to	us.	The	following	factors	set	out	potential	risks	we	have	identified	that	could	adversely	affect	us.	See	also	Statement	Regarding	Forward-Looking	Disclosure.

# •		We	have	numerous	material	weaknesses	in	our	internal	control	over	financial	reporting	and	extensive	work	remaining	to	remediate	these	weaknesses.

We	have	identified	numerous	material	weaknesses	in	our	internal	control	over	financial	reporting,	and	our	internal	control	over	financial	reporting	was	not	effective	as	of	December	31,	2006.	For a	detailed	description	of	these	material	weaknesses,	see	Item	8,	Management's	Assessment	of	Internal	Control	Over	Financial	Reporting,	in	this	report.	Each	of	our	material	weaknesses	results	in	more than	a	remote	likelihood	that	a	material	misstatement	will	not	be	prevented	or	detected.	Given	the	extensive	material	weaknesses	identified,	there	is	a	risk	of	errors	not	being	prevented	or	detected,	which could	require	us	to	restate	our	financial	statements	in	the	future.	Any	such	restatements	could	result	in	or	contribute	to	regulatory	actions	or	civil	litigation,	ratings	downgrades,	negative	publicity	or difficulties	in	attracting	or	retaining	key	clients,	employees	and	management	personnel.

We	incurred	significant	professional	fees	and	other	expenses	in	2006	to	prepare	our	consolidated	financial	statements	and	to	comply	with	the	requirements	of	Section	404	of	the	Sarbanes-Oxley Act	of	2002,	in	particular	as	a	result	of	the	extent	of	the	deficiencies	in	our	internal	control	over	financial	reporting	and	the	extensive	additional	work	and	resources	required	to	obtain	reasonable	assurance regarding	the	reliability	of	our	financial	statements.	The	cost	of	this	work	will	continue	to	be	significant	in	2007	and	beyond.

Because	of	our	decentralized	structure	and	our	many	disparate	accounting	systems	of	varying	quality	and	sophistication,	we	have	extensive	work	remaining	to	remediate	our	material	weaknesses in	internal	control	over	financial	reporting.	We	have	developed	a	work	plan	with	the	goal	of	remediating	all	of	the	identified	material	weaknesses	by	the	time	we	file	our	Annual	Report	on	Form	10-K	for the	year	ending	December	31,	2007.	There	can	be	no	assurance,	however,	as	to	when	the	remediation	plan	will	be	fully	implemented	and	all	the	material	weaknesses	remediated.	Until	our	remediation	is completed,	there	will	also	continue	to	be	a	risk	that	we	will	be	unable	to	file	future	periodic	reports	with	the	SEC	in	a	timely	manner	and	that	a	default	could	result	under	the	indentures	governing	our	debt securities,	under	any	of	our	credit	facilities	or	under	any	credit	facilities	of	our	subsidiaries.

# •		Ongoing	SEC	investigations	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	restatement	we	presented	in	our	Annual Report	on	Form	10-K	for	the	year	ended	December	31,	2004	that	we	filed	in	September	2005	(the	"2005	Restatement").	In	particular,	since	we	filed	our	2004	Annual	Report	on	Form	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	on	Form	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,	we	cannot	reasonably	estimate	the	amount,	range	of	amounts	or	timing	of	a	resolution.	Accordingly,	we	have	not	yet established	any	accounting	provision	relating	to	these	matters.	Adverse	developments	in	connection	with	the	investigation,	including	any	expansion	of	the	scope	of	the	investigation,	could	also	negatively impact	us	and	could	divert	the	efforts	and	attention	of	our	management	team	from	our	ordinary	business	operations.

# •		We	operate	in	a	highly	competitive	industry.

The	marketing	communications	business	is	highly	competitive.	Our	agencies	and	media	services	must	compete	with	other	agencies,	and	with	other	providers	of	creative	or	media	services,	in	order to	maintain	existing	client	relationships	and	to	win	new	clients.	The	client's	perception	of	the	quality	of	an	agency's	creative	work,	our	reputation	and	the	agencies'	reputations	are	important	factors	in determining	our	competitive	position.	An	agency's	ability	to	serve	clients,	particularly	large	international	clients,	on	a	broad	geographic	basis	is	also	an	important	competitive	consideration.	On	the	other hand,	because	an	agency's	principal	asset	is	its	people,	freedom	of	entry	into	the	business	is	almost	unlimited	and	a	small	agency	is,	on	occasion,	able	to	take	all	or	some	portion	of	a	client's	account	from a	much	larger	competitor.

Many	companies	put	their	advertising	and	marketing	communications	business	up	for	competitive	review	from	time	to	time.	We	have	won	and	lost	client	accounts	in	the	past	as	a	result	of	such periodic	competitions.	Our	ability	to	attract	new	clients	and	to	retain	existing	clients	may	also,	in	some	cases,	be	limited	by	clients'	policies	or	perceptions	about	conflicts	of	interest.	These	policies	can,	in some	cases,	prevent	one	agency,	or	even	different	agencies	under	our	ownership,	from	performing	similar	services	for	competing	products	or	companies.

# •		We	may	lose	or	fail	to	attract	and	retain	key	employees	and	management	personnel.

Employees,	including	creative,	research,	media,	account	and	practice	group	specialists,	and	their	skills	and	relationships	with	clients,	are	among	our	most	important	assets.	An	important	aspect	of our	competitiveness	is	our	ability	to	attract	and	retain	key	employees	and	management	personnel.	Our	ability	to	do	so	is	influenced	by	a	variety	of	factors,	including	the	compensation	we	award,	and	could be	adversely	affected	by	our	recent	financial	or	market	performance.

# •		As	a	marketing	services	company,	our	revenues	are	highly	susceptible	to	declines	as	a	result	of	unfavorable	economic	conditions.

Economic	downturns	often	more	severely	affect	the	marketing	services	industry	than	other	industries.	In	the	past,	some	clients	have	responded	to	weak	economic	performance	in	any	region where	we	operate	by	reducing	their	marketing	budgets,	which	are	generally	discretionary	in	nature	and	easier	to	reduce	in	the	short-term	than	other	expenses	related	to	operations.	This	pattern	may	recur in	the	future.

# •		Downgrades	of	our	credit	ratings	could	adversely	affect	us.

Our	long-term	debt	is	currently	rated	Ba3	with	negative	outlook	by	Moody's,	B	CreditWatch	negative	by	Standard	and	Poor's,	and	B	with	negative	outlook	by	Fitch.	It	is	possible	that	our	credit ratings	will	be	reduced	further.	Ratings	downgrades	or	comparatively	weak	ratings	can	adversely	affect	us,	because	ratings	are	an	important	factor	influencing	our	ability	to	access	capital.	Our	clients	and vendors	may	also	consider	our	credit	profile	when	negotiating	contract	terms,	and	if	they	were	to	change	the	terms	on	which	they	deal	with	us,	it	could	have	a	significant	adverse	effect	on	our	liquidity.

# •		Our	liquidity	profile	could	be	adversely	affected.

In	previous	years,	we	have	experienced	operating	losses	and	weak	operating	cash	flow.	Until	our	margins	consistently	improve	in	connection	with	our	turnaround,	cash	generation	from	operations could	be	challenged	in	certain	periods.	This	could	have	a	negative	impact	on	our	liquidity	in	future	years	and	could	lead	us	to	seek	new	or	additional	sources	of	liquidity	to	fund	our	working	capital	needs. There	can	be	no	guarantee	that	we	would	be	able	to	access	any	new	sources	of	liquidity	on	commercially	reasonable	terms	or	at	all.	If	we	were	unable	to	do	so,	our	liquidity	position	could	be	adversely affected.

# •		If	some	of	our	clients	experience	financial	distress,	their	weakened	financial	position	could	negatively	affect	our	own	financial	position	and	results.

We	have	a	large	and	diverse	client	base,	and	at	any	given	time,	one	or	more	of	our	clients	may	experience	financial	distress,	file	for	bankruptcy	protection	or	go	out	of	business.	If	any	client	with whom	we	have	a	substantial	amount	of	business	experiences	financial	difficulty,	it	could	delay	or	jeopardize	the	collection	of	accounts	receivable,	may	result	in	significant	reductions	in	services	provided by	us	and	may	have	a	material	adverse	effect	on	our	financial	position,	results	of	operations	and	liquidity.	For	a	description	of	our	client	base,	see	Item	1,	Business	—	Clients.

•		International	business	risks	could	adversely	affect	our	operations.

International	revenues	represent	a	significant	portion	of	our	revenues,	approximately	44%	in	2006.	Our	international	operations	are	exposed	to	risks	that	affect	foreign	operations	of	all	kinds, including	local	legislation,	monetary	devaluation,	exchange	control	restrictions	and	unstable	political	conditions.	These	risks	may	limit	our	ability	to	grow	our	business	and	effectively	manage	our operations	in	those	countries.	In	addition,	because	a	significant	portion	of	our	business	is	denominated	in	currencies	other	than	the	U.S.	dollar,	such	as	the	Euro,	Pound	Sterling,	Canadian	Dollar, Brazilian	Real,	Japanese	Yen	and	South	African	Rand,	fluctuations	in	exchange	rates	between	the	U.S.	dollar	and	such	currencies	may	materially	affect	our	financial	results.

# •		In	2006	and	prior	years,	we	recognized	impairment	charges	and	increased	our	deferred	tax	valuation	allowances,	and	we	may	be	required	to	record	additional	charges	in	the	future related	to	these	matters.

We	evaluate	all	of	our	long-lived	assets	(including	goodwill,	other	intangible	assets	and	fixed	assets),	investments	and	deferred	tax	assets	for	possible	impairment	or	realizability	at	least	annually and	whenever	there	is	an	indication	of	impairment	or	lack	of	realizability.	If	certain	criteria	are	met,	we	are	required	to	record	an	impairment	charge	or	valuation	allowance.	In	the	past,	we	have	recorded substantial	amounts	of	goodwill,	investment	and	other	impairment	charges,	and	have	been	required	to	establish	substantial	valuation	allowances	with	respect	to	deferred	tax	assets	and	loss	carry-forwards.

As	of	December	31,	2006,	we	have	substantial	amounts	of	long-lived	assets,	investments	and	deferred	tax	assets	on	our	Consolidated	Balance	Sheet.	Future	events,	including	our	financial performance	and	strategic	decisions,	could	cause	us	to	conclude	that	further	impairment	indicators	exist	and	that	the	asset	values	associated	with	long-lived	assets,	investments	and	deferred	tax	assets	may have	become	impaired.	Any	resulting	impairment	loss	would	have	an	adverse	impact	on	our	reported	earnings	in	the	period	in	which	the	charge	is	recognized.

# •	We	may	not	be	able	to	meet	our	performance	targets	and	milestones.

From	time	to	time,	we	communicate	to	the	market	certain	targets	and	milestones	for	our	financial	and	operating	performance	including,	but	not	limited	to,	the	areas	of	revenue	growth,	operating expense	reduction	and	operating	margin	growth.	These	targets	and	milestones	are	intended	to	provide	metrics	against	which	to	evaluate	our	performance,	but	they	should	not	be	understood	as	predictions or	guidance	about	our	expected	performance.	Our	ability	to	meet	any	target	or	milestone	is	subject	to	inherent	risks	and	uncertainties,	and	we	caution	investors	against	placing	undue	reliance	on	them.	See "Statement	Regarding	Forward-Looking	Disclosure."

# •	We	are	subject	to	regulations	and	other	governmental	scrutiny	that	could	restrict	our	activities	or	negatively	impact	our	revenues.

Our	industry	is	subject	to	government	regulation	and	other	governmental	action,	both	domestic	and	foreign.	There	has	been	an	increasing	tendency	on	the	part	of	advertisers	and	consumer	groups to	challenge	advertising	through	legislation,	regulation,	the	courts	or	otherwise,	for	example	on	the	grounds	that	the	advertising	is	false	and	deceptive	or	injurious	to	public	welfare.	Through	the	years, there	has	been	a	continuing	expansion	of	specific	rules,	prohibitions,	media	restrictions,	labeling	disclosures	and	warning	requirements	with	respect	to	the	advertising	for	certain	products.	Representatives within	government	bodies,	both	domestic	and	foreign,	continue	to	initiate	proposals	to	ban	the	advertising	of	specific	products	and	to	impose	taxes	on	or	deny	deductions	for	advertising,	which,	if successful,	may	have	an	adverse	effect	on	advertising	expenditures	and	consequently	our	revenues.

# None.

Substantially	all	of	our	office	space	is	leased	from	third	parties.	Several	of	our	leases	will	be	expiring	within	the	next	few	months,	while	the	remainder	will	be	expiring	within	the	next	18	years. Certain	leases	are	subject	to	rent	reviews	or	contain	escalation	clauses,	and	certain	of	our	leases	require	the	payment	of	various	operating	expenses,	which	may	also	be	subject	to	escalation.	Physical properties	include	leasehold	improvements,	furniture,	fixtures	and	equipment	located	in	our	offices.	We	believe	that	facilities	leased	or	owned	by	us	are	adequate	for	the	purposes	for	which	they	are currently	used	and	are	well	maintained.	See	Note	18	to	the	Consolidated	Financial	Statements	for	a	discussion	of	our	lease	commitments.

We	are	or	have	been	involved	in	legal	and	administrative	proceedings	of	various	types.	While	any	litigation	contains	an	element	of	uncertainty,	we	have	no	reason	to	believe	that	the	outcome	of such	proceedings	or	claims	will	have	a	material	adverse	effect	on	our	financial	condition	except	as	described	below.

# 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	our	2005	Restatement.	In	particular,	since we	filed	our	2004	Annual	Report	on	Form	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	on	Form	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,	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.

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

Not	applicable.

# Executive	Officers	of	Interpublic

# 1	 Also	a	Director

There	is	no	family	relationship	among	any	of	the	executive	officers.

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.	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.	Mergenthaler	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.

# Price	Range	of	Common	Stock

Our	common	stock	is	listed	and	traded	on	the	NYSE	under	the	symbol	"IPG."	The	following	table	provides	the	high	and	low	closing	sales	prices	per	share	for	the	periods	shown	below	as reported	on	the	NYSE.	As	of	February	16,	2007,	there	were	25,018	registered	holders	of	our	common	stock.

NYSE	Sale	Price

| Period | High | Low |
| :--- | :--- | :--- |
| 2006: |  |  |
| Fourth\tQuarter | $\t12.35 | $\t\t9.79 |
| Third\tQuarter | $9.98 | $7.86 |
| Second\tQuarter | $10.04 | $8.35 |
| First\tQuarter | $10.56 | $9.51 |
| 2005: |  |  |
| Fourth\tQuarter | $11.75 | $9.14 |
| Third\tQuarter | $12.67 | $11.04 |
| Second\tQuarter | $13.28 | $12.11 |
| First\tQuarter | $13.68 | $11.50 |

# Dividend	Policy

No	dividend	was	paid	on	our	common	stock	during	2003,	2004,	2005	or	2006.	Our	future	dividend	policy	will	be	determined	on	a	quarter-by-quarter	basis	and	will	depend	on	earnings,	financial condition,	capital	requirements	and	other	factors.	Our	future	dividend	policy	may	also	be	influenced	by	the	terms	of	certain	of	our	outstanding	securities.	The	terms	of	our	outstanding	series	of	preferred stock	do	not	permit	us	to	pay	dividends	on	our	common	stock	unless	all	accumulated	and	unpaid	dividends	have	been	or	contemporaneously	are	declared	and	paid	or	provision	for	the	payment	thereof has	been	made.	In	the	event	we	pay	dividends	on	our	common	stock,	holders	of	our	4.50%	Convertible	Senior	Notes	will	be	entitled	to	additional	interest	and	the	conversion	terms	of	our 4.25%	Convertible	Senior	Notes	and	our	Series	B	Convertible	Preferred	Stock,	and	the	exercise	prices	of	our	outstanding	warrants,	will	be	adjusted	(see	Notes	10,	11	and	12	to	the	Consolidated	Financial Statements).

# Transfer	Agent	and	Registrar	for	Common	Stock

The	transfer	agent	and	registrar	for	our	common	stock	is:

# Sales	of	Unregistered	Securities

# Repurchase	of	Equity	Securities

The	following	tables	provide	information	regarding	our	purchases	of	equity	securities	during	the	fourth	quarter	of	2006:

# (i)	Repurchase	of	Common	Equity	Securities

|  | Total	Number<br>of	Shares<br>Purchased | Average<br>Price<br>Paid	per<br>Share	2 | Total	Number	of	Shares<br>Purchased	as	Part	of<br>Publicly	Announced<br>Plans	or	Programs | that	May	Yet	Be<br>Purchased<br>Under	the	Plans<br>or	Programs |
| :--- | :--- | :--- | :--- | :--- |
| October\t1-31 | 13,546 | $10.04 | — | — |
| November\t1-30 | 10,218 | $11.65 | — | — |
| December\t1-31 | 506 | $12.06 | — | — |
| Total\t1 | 24,270 | $10.76 | — | — |

1	 Consists	of	restricted	shares	of	our	common	stock	withheld	under	the	terms	of	grants	under	employee	stock	compensation	plans	to	offset	tax	withholding	obligations	that	occurred	upon	vesting	and	release	of	restricted	shares	during	each month	of	the	fourth	quarter	of	2006	(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	our	common	stock	withheld	each	month.

(ii)	Automatic	Conversion	of	53/8%	Series	A	Mandatory	Convertible	Preferred	Stock

|  | Total	Number<br>of	Preferred	Shares<br>Purchased | Average<br>Price<br>Paid	per<br>Preferred	Share	1 | Total	Number	of<br>Preferred	Shares<br>Purchased	as	Part	of<br>Publicly	Announced<br>Plans	or	Programs | of	Preferred	Shares<br>that	May	Yet	Be<br>Purchased<br>Under	the	Plans<br>or	Programs |
| :--- | :--- | :--- | :--- | :--- |
| October\t1-31 | — | — | — | — |
| November\t1-30 | — | — | — | — |
| December\t1-31 | 7,475,000 | — | — | — |
| Total\t1 | 7,475,000 | — | — | — |

1	 Pursuant	to	the	terms	of	our	Series	A	Preferred	Stock,	all	outstanding	shares	of	the	Series	A	Preferred	Stock	were	automatically	converted	on	December	15,	2006,	into	shares	of	our	common	stock	at	a	conversion	rate	of	3.7037	shares	of common	stock	per	share	of	Series	A	Preferred	Stock.

# THE	INTERPUBLIC	GROUP	OF	COMPANIES,	INC.	AND	SUBSIDIARIES

# SUMMARY	SELECTED	FINANCIAL	DATA

# (Amounts	in	Millions,	Except	Per	Share	Amounts	and	Ratios)

# (Unaudited)

|  | 2006 | 2005 | 2004 | 2003 | 2002 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Revenue | $6,190.8 | $6,274.3 | $6,387.0 | $6,161.7 | $6,059.1 |
| Salaries\tand\trelated\texpenses | 3,944.1 | 3,999.1 | 3,733.0 | 3,501.4 | 3,397.1 |
| Office\tand\tgeneral\texpenses | 2,079.0 | 2,288.1 | 2,250.4 | 2,225.3 | 2,248.3 |
| Restructuring\tand\tother\treorganization-related\tcharges\t(reversals) | 34.5 | (7.3) | 62.2 | 172.9 | 7.9 |
| Long-lived\tasset\timpairment\tand\tother\tcharges | 27.2 | 98.6 | 322.2 | 294.0 | 130.0 |
| Motorsports\tcontract\ttermination\tcosts | — | — | 113.6 | — | — |
| Operating\tincome\t(loss) | 106.0 | (104.2) | (94.4) | (31.9) | 275.8 |
| Total\t(expenses)\tand\tother\tincome | (111.0) | (82.4) | (172.6) | (340.9) | (160.0) |
| Provision\tfor\tincome\ttaxes | 18.7 | 81.9 | 262.2 | 242.7 | 106.4 |
| Loss\tfrom\tcontinuing\toperations | (36.7) | (271.9) | (544.9) | (640.1) | (14.8) |
| Income\tfrom\tdiscontinued\toperations,\tnet\tof\ttax | 5.0 | 9.0 | 6.5 | 101.0 | 31.5 |
| Net\t(loss)\tincome\tapplicable\tto\tcommon\tstockholders | $(79.3) | $(289.2) | $(558.2) | $(539.1) | $16.7 |
| Earnings\t(loss)\tper\tshare\tof\tcommon\tstock: |  |  |  |  |  |
| Basic\tand\tdiluted |  |  |  |  |  |
| Continuing\toperations | $(0.20) | $(0.70) | $(1.36) | $(1.66) | $(0.04) |
| Discontinued\toperations | 0.01 | 0.02 | 0.02 | 0.26 | 0.08 |
| Total | $(0.19) | $(0.68) | $(1.34) | $(1.40) | $0.04 |
| Weighted\taverage\tshares:\nBasic\tand\tdiluted | 428.1 | 424.8 | 415.3 | 385.5 | 376.1 |
| OTHER\tDATA |  |  |  |  |  |
| Cash\tdividends\tper\tshare\tof\tcommon\tstock | $— | $— | $— | $— | $0.38 |
| Cash\tdividends\tper\tshare\tof\tpreferred\tstock | $55.19 | $14.50 | $2.69 | $— | $— |
| As\tof\tDecember\t31, |  |  |  |  |  |
| Cash\tand\tcash\tequivalents\tand\tmarketable\tsecurities | $1,957.1 | $2,191.5 | $1,970.4 | $2,067.0 | $983.9 |
| Total\tassets | \t11,864.1 | \t11,945.2 | \t12,253.7 | \t12,467.9 | \t11,907.8 |
| Long-term\tdebt | 2,248.6 | 2,183.0 | 1,936.0 | 2,198.7 | 1,822.2 |
| Total\tliabilities | 9,923.5 | 9,999.9 | \t10,535.4 | \t10,349.1 | \t10,185.2 |
| Preferred\tstock\t—\tSeries\tA | — | 373.7 | 373.7 | 373.7 | — |
| Preferred\tstock\t—\tSeries\tB | 525.0 | 525.0 | — | — | — |
| Total\tstockholders'\tequity | 1,940.6 | 1,945.3 | 1,718.3 | 2,118.8 | 1,722.6 |
| Ratios\tof\tearnings\tto\tfixed\tcharges\t1 | N/A | N/A | N/A | N/A | 1.3 |

# MANAGEMENT'S	DISCUSSION	AND	ANALYSIS	OF	FINANCIAL	CONDITION

# AND	RESULTS	OF	OPERATIONS

# (Amounts	in	Millions,	Except	Per	Share	Amounts)

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	its	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.

CRITICAL	ACCOUNTING	ESTIMATES	provides	a	discussion	of	our	accounting	policies	that	require	critical	judgment,	assumptions	and	estimates.

RESULTS	OF	OPERATIONS	provides	an	analysis	of	the	consolidated	and	segment	results	of	operations	for	2006	compared	to	2005	and	2005	compared	to	2004.

LIQUIDITY	AND	CAPITAL	RESOURCES	provides	an	overview	of	our	cash	flows,	financing,	contractual	obligations	and	derivatives	and	hedging	activities.

OUT-OF-PERIOD	AMOUNTS	provides	a	summary	of	the	impact	of	out-of-period	amounts	for	2006	and	2005.

INTERNAL	CONTROL	OVER	FINANCIAL	REPORTING	describes	the	status	of	our	compliance	with	Section	404	of	the	Sarbanes-Oxley	Act	of	2002	and	related	rules.	For	more	detail,	see Item	8,	Financial	Statements	and	Supplementary	Data,	and	Item	9A,	Controls	and	Procedures.

OTHER	MATTERS	provides	a	discussion	of	other	significant	items	which	impact	our	financial	statements,	such	as	the	SEC	investigation	as	well	as	the	review	of	our	stock	option	practices.

RECENT	ACCOUNTING	STANDARDS	by	reference	to	Note	19	to	the	Consolidated	Financial	Statements,	provides	a	description	of	accounting	standards	which	we	have	not	yet	been	required to	implement	and	may	be	applicable	to	our	future	operations,	as	well	as	those	significant	accounting	standards	which	were	adopted	during	2006.

# 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	organic	revenue	growth	and	our	operating	income,	and	we	are	working	to	achieve	a	level	of	organic	revenue	growth	comparable	to	industry	peers	and double-digit	operating	margins	by	2008.	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,	and	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.

Revenue	is	directly	dependent	upon	the	advertising,	marketing	and	corporate	communications	requirements	of	our	clients.	For	2006,	our	revenues	were	negatively	affected	primarily	by	the	client losses	and	dispositions	that	occurred	in	2005,	and	we	expect	our	operating	margin	will	continue	to	be	negatively	affected,	as	compared	to	our	peers,	by	high	expenses	for	professional	fees,	although	to	a decreasing	extent.	It	is	typical	in	our	industry	to	lose	or	resign	from	client	accounts	and	assignments	for	many	reasons,	including	conflicts	with	recent	client	wins.	We

# MANAGEMENT'S	DISCUSSION	AND	ANALYSIS	OF

# FINANCIAL	CONDITION	AND	RESULTS	OF	OPERATIONS	—	(Continued)

believe	we	are	continuing	our	turnaround	and	our	results	for	2006	reflect	the	challenges	we	face	improving	revenues	and	operating	margins.	However,	we	have	achieved	some	notable	success	in	new client	wins	as	well	as	fewer	client	losses	in	2006,	which	supports	our	efforts	in	our	turnaround.

Our	reported	results	are	affected	by	fluctuations	in	the	exchange	rates	of	the	foreign	currencies	of	our	international	businesses,	principally	the	Brazilian	Real,	Canadian	Dollar,	Japanese	Yen, Pound	Sterling,	South	African	Rand	and	Euro.	In	2006,	the	U.S.	Dollar	was	weaker	against	most	of	these	currencies	compared	to	2005.	In	2005,	the	U.S.	Dollar	was	weaker	against	most	of	these currencies	compared	to	2004.	As	a	result,	the	net	effect	of	foreign	currency	changes	from	comparable	prior	year	periods	was	to	increase	revenues	and	operating	expenses	in	2006	and	2005.

As	discussed	in	more	detail	in	this	MD&A,	for	2006	compared	to	2005:

•		Organic	revenue	increase	was	1.0%	primarily	due	to	higher	revenue	from	existing	clients.

•		Operating	margin	was	1.7%	in	2006,	compared	to	(1.7%)	in	2005.	Operating	margin	was	negatively	impacted	by	restructuring	and	other	reorganization-related	charges	and	long-lived	asset impairment	and	other	charges	by	1.0%	and	1.5%	in	2006	and	2005,	respectively.	Excluding	the	impact	of	these	items,	operating	margin	improved	to	2.7%	in	2006	from	(0.2%)	in	2005.

•		Operating	expenses	were	$6,084.8	in	2006,	compared	to	$6,378.5	in	2005,	a	decrease	of	4.6%.	Operating	expenses	were	negatively	impacted	by	restructuring	and	other	reorganization-

related	charges	and	long-lived	asset	impairment	and	other	charges	of	$61.7	and	$91.3,	in	2006	and	2005,	respectively.	Excluding	the	impact	of	these	items,	operating	expenses	decreased	by $264.1,	or	4.2%,	in	2006.

•		Total	salaries	and	related	expenses	decreased	1.4%	mainly	due	to	net	divestitures	and	lower	severance	charges,	partly	offset	by	higher	incentive	compensation.	The	organic	increase	was 0.5%.

•		Total	office	and	general	expenses	decreased	9.1%	mainly	due	to	the	effect	of	net	divestitures	and	lower	professional	fees.	The	organic	decrease	was	5.2%.

•		As	of	December	31,	2006,	cash	and	cash	equivalents	and	marketable	securities	decreased	$234.4	primarily	due	to	working	capital	usage,	as	well	as	costs	associated	with	capital	markets activity	and	capital	expenditures,	partially	offset	by	improved	operating	results.

•		We	made	substantial	progress	in	remediating	previous	material	weaknesses.

# CRITICAL	ACCOUNTING	ESTIMATES

Our	Consolidated	Financial	Statements	are	prepared	in	accordance	with	generally	accepted	accounting	principles	in	the	United	States	of	America.	Preparation	of	the	Consolidated	Financial Statements	and	related	disclosures	requires	us	to	make	judgments,	assumptions	and	estimates	that	affect	the	amounts	reported	and	disclosed	in	the	accompanying	notes.	We	believe	that	of	our	significant accounting	policies,	the	following	critical	accounting	estimates	involve	management's	most	difficult,	subjective	or	complex	judgments.	We	consider	these	accounting	estimates	to	be	critical	because changes	in	the	underlying	assumptions	or	estimates	have	the	potential	to	materially	impact	our	financial	statements.	Management	has	discussed	with	our	Audit	Committee	the	development,	selection, application	and	disclosure	of	these	critical	accounting	estimates.	We	regularly	evaluate	our	judgments,	assumptions	and	estimates	based	on	historical	experience	and	various	other	factors	that	we	believe to	be	relevant	under	the	circumstances.	Actual	results	may	differ	from	these	estimates	under	different	assumptions	or	conditions.

# 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	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,	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	primarily	recognized	in	one	of	three	ways:	proportional performance,	straight-line	(or	monthly	basis)	or	completed	contract.	See	Note	1	to	the	Consolidated	Financial	Statements	for	further	information.

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.

Substantially	all	of	our	revenue	is	recorded	as	the	net	amount	of	our	gross	billings	less	pass-through	expenses	charged	to	a	client.	In	most	cases,	the	amount	that	is	billed	to	clients	significantly exceeds	the	amount	of	revenue	that	is	earned	and	reflected	in	our	financial	statements,	because	of	various	pass-through	expenses	such	as	production	and	media	costs.	In	compliance	with	Emerging	Issues Task	Force	("EITF")	Issue	No.	99-19,	Reporting	Revenue	Gross	as	a	Principal	versus	Net	as	an	Agent,	we	assess	whether	our	agency	or	the	third-party	supplier	is	the	primary	obligor.	We	evaluate	the terms	of	our	client	agreements	as	part	of	this	assessment.	In	addition,	we	give	appropriate	consideration	to	other	key	indicators	such	as	latitude	in	establishing	price,	discretion	in	supplier	selection	and credit	risk	to	the	vendor.	Because	we	operate	broadly	as	an	advertising	agency	based	on	our	primary	lines	of	business	and	given	the	industry	practice	to	generally	record	revenue	on	a	net	versus	gross basis,	we	believe	that	there	must	be	strong	evidence	in	place	to	overcome	the	presumption	of	net	revenue	accounting.	Accordingly,	we	generally	record	revenue	net	of	pass-through	charges	as	we	believe the	key	indicators	of	the	business	suggest	we	generally	act	as	an	agent	on	behalf	of	our	clients	in	our	primary	lines	of	business.	In	those	businesses	(primarily	sales	promotion,	event,	sports	and entertainment	marketing	and	corporate	and	brand	identity	services)	where	the	key	indicators	suggest	we	act	as	a	principal,	we	record	the	gross	amount	billed	to	the	client	as	revenue	and	the	related	costs incurred	as	operating	expenses.	Revenue	is	reported	net	of	taxes	assessed	by	governmental	authorities	that	are	directly	imposed	on	our	revenue	producing	transactions.

The	determination	as	to	whether	revenue	in	a	particular	line	of	business	should	be	recognized	net	or	gross	involves	difficult	judgments.	If	we	make	these	judgments	differently,	it	could significantly	affect	our	financial	performance.	If	it	were	determined	that	we	must	recognize	a	significant	portion	of	revenues	on	a	gross	basis	rather	than	a	net	basis,	it	would	positively	impact	revenues, but	have	no	impact	on	our	operating	income	and	an	adverse	impact	on	operating	margin.	Conversely,	if	it	were	determined	that	we	must	recognize	a	significant	portion	of	revenues	on	a	net	basis	rather than	a	gross	basis,	it	would	negatively	impact	revenues,	but	have	no	impact	on	our	operating	income	and	a	positive	impact	on	operation	margin.

We	receive	credits	from	our	vendors	and	media	outlets	for	transactions	entered	into	on	behalf	of	our	clients	that,	based	on	the	terms	of	our	contracts	and	local	law,	are	either	remitted	to	our	clients or	retained	by	us.	If	amounts	are	to	be	passed	through	to	clients	they	are	recorded	as	liabilities	until	settlement	or,	if	retained	by	us,	are	recorded	as	revenue	when	earned.

Negotiations	with	a	client	at	the	close	of	a	current	engagement	could	result	in	either	payments	to	the	client	in	excess	of	the	contractual	liability	or	in	payments	less	than	the	contractual	liability. These	items,	referred	to	as	concessions,	relate	directly	to	the	operations	of	the	period	and	are	recorded	as	operating	expense	or	income.

Concession	income	or	expense	may	also	be	realized	in	connection	with	settling	vendor	discount	or	credit	liabilities	that	were	established	as	part	of	the	2005	Restatement.	In	these	situations,	and given	the	historical	nature	of	these	liabilities,	we	have	recorded	such	items	as	other	income	or	expense	in	order	to	prevent	distortion	of	current	operating	results.	See	also	Notes	1	and	4	to	the	Consolidated Financial	Statements.

# 		Stock-Based	Compensation

On	January	1,	2006,	we	adopted	SFAS	No.	123	(revised	2004),	Share-Based	Payment	("SFAS	No.	123R").	SFAS	No.	123R	requires	compensation	costs	related	to	share-based	transactions, including	employee	stock	options,	to	be	recognized	in	the	financial	statements	based	on	fair	value.	We	implemented	SFAS	No.	123R	using	the	modified	prospective	transition	method.	Under	this transition	method,	the	compensation	expense	recognized	beginning	January	1,	2006	includes	compensation	expense	for	(i)	all	stock-based	payments	granted	prior	to,	but	not	yet	vested	as	of	January	1, 2006,	based	on	the	grant-date	fair	value	estimated	in	accordance	with	the	original	provisions	of	SFAS	No.	123,	and	(ii)	all	stock-based	awards	granted	subsequent	to	December	31,	2005	based	on	the grant-date	fair	value	estimated	in	accordance	with	the	provisions	of	SFAS	No.	123R.	Compensation	cost	is	generally	recognized	ratably	over	the	requisite	service	period,	net	of	estimated	forfeitures.

We	use	the	Black-Scholes	option-pricing	model	to	estimate	the	fair	value	of	options	granted,	which	requires	the	input	of	subjective	assumptions	including	the	option's	expected	term	and	the	price volatility	of	the	underlying	stock.	Changes	in	the	assumptions	can	materially	affect	the	estimate	of	fair	value	and	our	results	of	operations	could	be	materially	impacted.	The	expected	volatility	factor	is based	on	a	blend	of	historical	volatility	of	our	common	stock	and	implied	volatility	of	our	tradable	forward	put	and	call	options	to	purchase	and	sell	shares	of	our	common	stock.	The	expected	term	is based	on	the	average	of	an	assumption	that	outstanding	options	are	exercised	upon	achieving	their	full	vesting	date	and	will	be	exercised	at	the	midpoint	between	the	current	date	(i.e.,	the	date	awards have	been	ratably	vested	through)	and	their	full	contractual	term.	Additionally,	we	calculate	an	estimated	forfeiture	rate	which	impacts	our	recorded	expense.	See	Note	14	to	the	Consolidated	Financial Statements	for	further	information.

# 		Income	Taxes

The	provision	for	income	taxes	includes	federal,	state,	local	and	foreign	taxes.	Deferred	tax	assets	and	liabilities	are	recognized	for	the	estimated	future	tax	consequences	of	temporary	differences between	the	financial	statement	carrying	amounts	and	their	respective	tax	bases.	Deferred	tax	assets	and	liabilities	are	measured	using	enacted	tax	rates	expected	to	apply	to	taxable	income	in	the	year	in which	the	temporary	differences	are	expected	to	be	reversed.	Changes	to	enacted	tax	rates	would	result	in	either	increases	or	decreases	in	the	provision	for	income	taxes	in	the	period	of	changes.	We evaluate	the	realizability	of	our	deferred	tax	assets	and	recognize	a	valuation	allowance	when	it	is	more	likely	than	not	that	all	or	a	portion	of	deferred	tax	assets	will	not	be	realized.

The	realization	of	our	deferred	tax	assets	is	primarily	dependent	on	future	earnings.	Any	reduction	in	estimated	forecasted	results	may	require	that	we	record	additional	valuation	allowances against	our	deferred	tax	assets.	Once	a	valuation	allowance	has	been	established,	it	will	be	maintained	until	there	is	sufficient	positive	evidence	to	conclude	that	it	is	more	likely	than	not	that	the	deferred tax	assets	will	be	realized.	A	pattern	of	sustained	profitability	will	generally	be	considered	as	sufficient	positive	evidence	to	reverse	a	valuation	allowance.	If	the	allowance	is	reversed	in	a	future	period, our	income	tax	provision	will	be	correspondingly	reduced.	Accordingly,	the	increase	and	decrease	of	valuation	allowances	has	had	and	could	have	a	significant	negative	or	positive	impact	on	our	future earnings.	See	Note	9	to	the	Consolidated	Financial	Statements	for	further	information.

# 		Goodwill	and	Other	Intangible	Assets

We	account	for	our	business	combinations	using	the	purchase	accounting	method.	The	total	costs	of	the	acquisitions	are	allocated	to	the	underlying	net	assets,	based	on	their	respective	estimated fair	market	values	and	the	remainder	allocated	to	goodwill	and	other	intangible	assets.	Considering	the	characteristics	of	advertising,	specialized	marketing	and	communication	services	companies,	our acquisitions	usually	do	not	have	significant	amounts	of	tangible	assets	as	the	principal	asset	we	typically	acquire	is	creative	talent.	As	a	result,	a	substantial	portion	of	the	purchase	price	is	allocated	to goodwill.	Determining	the	fair	market	value	of	assets	acquired	and	liabilities	assumed	requires	management's	judgment	and	involves	the	use	of	significant	estimates,	including	future	cash	inflows	and outflows,	discount	rates,	asset	lives	and	market	multiples.

We	review	goodwill	and	other	intangible	assets	with	indefinite	lives	not	subject	to	amortization	during	the	fourth	quarter	or	whenever	events	or	significant	changes	in	circumstances	indicate	that the	carrying	value	may	not	be	recoverable.	We	evaluate	the	recoverability	of	goodwill	at	a	reporting	unit	level.	We	identified	14	reporting	units	for	the	2006	annual	impairment	testing	that	are	either	the entities	at	the	operating	segment	level	or	one	level	below	the	operating	segment	level.	We	review	intangible	assets	with	definite	lives	subject	to	amortization	whenever	events	or	circumstances	indicate that	a	carrying	amount	of	an	asset	may	not	be	recoverable.	Intangible	assets	with	definite	lives	subject	to	amortization	are	amortized	on	a	straight-line	basis	with	estimated	useful	lives	of	up	to	15	years. Events	or	circumstances	that	might	require	impairment	testing	include	the	loss	of	a	significant	client,	the	identification	of	other	impaired	assets	within	a	reporting	unit,	loss	of	key	personnel,	the disposition	of	a	significant	portion	of	a	reporting	unit,	or	a	significant	adverse	change	in	business	climate	or	regulations.

SFAS	No.	142,	Goodwill	and	Other	Intangible	Assets,	specifies	a	two-step	process	for	goodwill	impairment	testing	and	measuring	the	magnitude	of	any	impairment.	The	first	step	of	the impairment	test	is	a	comparison	of	the	fair	value	of	a	reporting	unit	to	its	carrying	value,	including	goodwill.	Goodwill	allocated	to	a	reporting	unit	whose	fair	value	is	equal	to	or	greater	than	its	carrying value	is	not	impaired,	and	no	further	testing	is	required.	Should	the	carrying	amount	for	a	reporting	unit	exceed	its	fair	value,	then	the	first	step	of	the	impairment	test	is	failed	and	the	magnitude	of	any goodwill	impairment	is	determined	under	the	second	step.	The	second	step	is	a	comparison	of	the	implied	fair	value	of	a	reporting	unit's	goodwill	to	its	carrying	value.	Goodwill	of	a	reporting	unit	is impaired	when	its	carrying	value	exceeds	its	implied	fair	value.	Impaired	goodwill	is	written	down	to	its	implied	fair	value	with	a	charge	to	expense	in	the	period	the	impairment	is	identified.

The	fair	value	of	a	reporting	unit	is	estimated	using	traditional	valuation	techniques	such	as	the	income	approach,	which	incorporates	the	use	of	the	discounted	cash	flow	method	and	the	market approach,	which	incorporates	the	use	of	earning	and	revenue	multiples.	These	techniques	use	projections	which	require	the	use	of	significant	estimates	and	assumptions	as	to	matters	such	as	future revenue	growth,	profit	margins,	capital	expenditures,	assumed	tax	rates	and	discount	rates.	We	believe	that	the	estimates	and	assumptions	made	are	reasonable	but	they	are	susceptible	to	change	from period	to	period.	For	example,	our	strategic	decisions	or	changes	in	market	valuation	multiples	could	lead	to	impairment	charges.	Actual	results	of	operations,	cash	flows	and	other	factors	used	in	a discounted	cash	flow	valuation	will	likely	differ	from	the	estimates	used	and	it	is	possible	that	differences	and	changes	could	be	material.

Our	annual	impairment	reviews	as	of	October	1st,	2006	resulted	in	an	impairment	charge	of	$27.2	at	one	of	our	domestic	advertising	reporting	units.	See	Note	8	to	the	Consolidated	Financial Statements	for	further	information.	The	excess	of	the	fair	value	over	the	carrying	value	at	the	low	end	of	the	valuation	range	for	each	of	the	non-impaired	reporting	units	ranged	from	$0.2	to	$1,990.2	and $2.4	to	$1,501.9	in	2006	and	2005,	respectively.	For	2006,	this	excess	ranged	from	$2.4	to	$2,400.2	at	the	high	end	of	the	valuation	range.	In	order	to	evaluate	the	sensitivity	of	the	fair	value	calculations on	the	goodwill	impairment	test,	we	applied	a	hypothetical	10%	decrease	to	the	fair	values	of	each	reporting	unit.	For	2006,	this	would	result	in	the	total	carrying	value	being	less	than	the	total	fair	value at	the	low	end	of	the	range	by	$46.8,	which	would	have	triggered	additional	step	two	tests.	For	2005,	this	hypothetical	10%	decrease	would	result	in	the	total	carrying	value	being	less	than	the	total	fair value	at	the	low	end	of	the	range	by	$38.2,	which	would	have	triggered	additional	step	two	tests.

# 		Pension	and	Postretirement	Benefits

We	use	various	actuarial	assumptions	in	determining	our	net	pension	and	postretirement	benefit	costs	and	obligations.	These	assumptions	include	discount	rates	and	expected	returns	on	plan assets	and	are	updated	annually	or	more	frequently	with	the	occurrence	of	significant	events.	Changes	in	the	related	pension	and	postretirement	benefit	costs	may	occur	in	the	future	due	to	changes	in	the assumptions.

The	discount	rate	is	one	of	the	significant	assumptions	that	impacts	our	net	pension	and	postretirement	costs	and	obligations.	The	discount	rates	are	determined	at	the	beginning	of	the	year	based on	prevailing	interest	rates	as	of	the	measurement	date	and	are	adjusted	to	match	the	duration	of	the	underlying	obligation.	For	2007,	we	plan	to	use	weighted	average	discount	rates	of	5.68%,	4.82%	and 5.75%	for	the	domestic	pension	plans,	foreign	plans	and	the	postretirement	plan,	respectively.	Changes	in	the	discount	rates	are	generally	due	to	increases	or	decreases	in	long-term	interest	rates.	A	higher discount	rate	will	decrease	our	pension	cost.	A	25	basis	point	increase	or	decrease	in	the	discount	rate	would	have	decreased	or	increased	the	2006	net	pension	and	postretirement	cost	by	$2.3	and	$0.1, respectively.	In	addition,	a	25	basis	point	increase	or	decrease	in	the	discount	rate	would	have	decreased	or	increased	the	December	31,	2006	benefit	obligation	by	$31.4.

The	expected	rate	of	return	on	pension	plan	assets	is	another	significant	assumption	that	impacts	our	net	pension	cost	and	is	determined	at	the	beginning	of	the	year.	Changes	in	the	rates	are	due to	lower	or	higher	expected	future	returns	based	on	the	mix	of	assets	held	and	studies	performed	by	our	external	investment	advisors.	For	2007,	we	plan	to	use	weighted	average	expected	rates	of	return	of 8.16%	and	7.57%	for	the	domestic	and	foreign	pension	plans,	respectively.	A	lower	expected	rate	of	return	will	increase	our	net	pension	cost.	A	25	basis	point	increase	or	decrease	in	the	expected	return on	plan	assets	would	have	decreased	or	increased	the	2006	net	pension	cost	by	$1.1.	See	Note	13	to	the	Consolidated	Financial	Statements	for	further	information.

# RESULTS	OF	OPERATIONS

# Consolidated	Results	of	Operations 		REVENUE 		2006	Compared	to	2005

|  |  | Components	of	change	during	2006 | Components	of	change	during	2006 | Components	of	change	during	2006 |  | Change | Change | Change | Change |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2005 | Foreign\ncurrency | Net\nacquisitions/\n(divestitures) | Organic | 2006 | Foreign\ncurrency | Net\nacquisitions/\n(divestitures) | Organic | Total |
| Total | $6,274.3 | 20.6 | (165.4) | 61.3 | $6,190.8 | 0.3% | (2.6)% | 1.0% | \t(1.3)% |
| Domestic | \t3,461.1 | — | (38.3) | 18.4 | \t3,441.2 | — | (1.1)% | 0.5% | \t(0.6)% |
| International | \t2,813.2 | 20.6 | (127.1) | 42.9 | \t2,749.6 | 0.7% | (4.5)% | 1.5% | \t(2.3)% |

Revenue	decreased	due	to	net	divestitures	partially	offset	by	organic	revenue	increases	and	changes	in	foreign	currency	exchange	rates.	Net	divestitures	primarily	impacted	the	Integrated	Agency Networks	("IAN")	segment,	largely	from	Draftfcb	and	McCann	during	2005.	There	were	net	organic	revenue	increases	in	both	our	international	and	domestic	locations.	The	international	organic	increase was	driven	by	higher	revenue	from	existing	clients	primarily	in	the	Asia	Pacific	and	Latin	America	regions	partially	offset	by	net	client	losses,	primarily	in	2005,	at	IAN	as	well	as	decreases	in	the	events marketing	businesses	at	the	Constituency	Management	Group	("CMG")	in	the	United	Kingdom	region.	The	domestic	organic	increase	was	primarily	driven	by	growth	in	the	public	relations	and	branding businesses	at	CMG	as	well	as	higher	revenue	from	existing	clients,	partially	offset	by	net	client	losses	and	decreased	client	spending	at	IAN.

|  |  | Components	of	change	during	2005 | Components	of	change	during	2005 | Components	of	change	during	2005 |  | Change | Change | Change | Change |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2004 | Foreign\ncurrency | Net\nacquisitions/\n(divestitures) | Organic | 2005 | Foreign\ncurrency | Net\nacquisitions/\n(divestitures) | Organic | Total |
| Total | $6,387.0 | 40.4 | (107.4) | (45.7) | $6,274.3 | 0.6% | (1.7)% | \t (0.7)% | \t(1.8)% |
| Domestic | \t3,509.2 | — | (28.9) | (19.2) | \t3,461.1 | — | (0.8)% | \t (0.5)% | \t(1.4)% |
| International | \t2,877.8 | 40.4 | (78.5) | (26.5) | \t2,813.2 | 1.4% | (2.7)% | \t (0.9)% | \t(2.2)% |

Revenue	decreased	during	2005	due	to	net	divestitures	and	organic	revenue	decreases,	partially	offset	by	changes	in	foreign	currency	exchange	rates.	The	revenue	decline	from	net	divestitures was	largely	due	to	dispositions	at	McCann	during	2005	primarily	in	the	Europe	and	United	States	regions	and	the	sale	of	the	Motorsports	business	during	2004.	The	organic	revenue	decrease	was	driven by	IAN,	partially	offset	by	an	increase	at	CMG.	The	decrease	at	IAN	was	a	result	of	client	losses	and	a	reduction	in	revenue	from	existing	clients	primarily	in	our	European	offices.	The	increase	at	CMG was	primarily	driven	by	growth	in	public	relations	businesses	internationally	and	the	sports	marketing	businesses	domestically	as	a	result	of	increased	spending	from	existing	clients	and	client	wins.

# OPERATING	EXPENSES

|  | 2006 | $%	of	Revenue | 2005 | $%	of	Revenue | 2004 | $%	of	Revenue |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Salaries\tand\trelated\texpenses | $3,944.1 | 63.7% | $3,999.1 | 63.7% | $3,733.0 | 58.4% |
| Office\tand\tgeneral\texpenses | \t2,079.0 | 33.6% | \t2,288.1 | 36.5% | \t2,250.4 | 35.2% |
| Restructuring\tand\tother\treorganization-related\tcharges\t(reversals) | 34.5 |  | (7.3) |  | 62.2 |  |
| Long-lived\tasset\timpairment\tand\tother\tcharges | 27.2 |  | 98.6 |  | 322.2 |  |
| Motorsports\tcontract\ttermination\tcosts | — |  | — |  | 113.6 |  |
| Total\toperating\texpenses | $6,084.8 |  | $6,378.5 |  | $6,481.4 |  |

# Salaries	and	Related	Expenses

Salaries	and	related	expenses	are	the	largest	component	of	operating	expenses	and	consist	of	payroll	costs,	employee	performance	incentives,	including	short	and	long-term	incentive	awards,	and other	benefits	associated	with	client	service	professional	staff	and	administrative	staff.	Salaries	and	related	expenses	do	not	vary	significantly	with	short-term	changes	in	revenue	levels.	However,	salaries may	fluctuate	due	to	the	timing	of	hiring	freelance	contractors	who	are	utilized	to	support	business	development,	changes	in	the	funding	levels	of	short	and	long-term	incentive	awards	and	changes	in foreign	currency	exchange	rates.	Our	financial	performance	over	the	past	few	years	has	lagged	behind	our	peers,	primarily	due	to	lower	revenue	growth.	As	a	result,	salaries	and	related	expenses	reflect significant	severance	charges,	primarily	incurred	in	previous	years,	and	investments	in	hiring	creative	talent	to	realign	the	business	for	revenue	growth	and	improved	operating	margins.	Also,	salaries	and related	expenses	reflect	the	hiring	of	additional	finance	professionals	and	information	technology	staff	to	upgrade	system	infrastructure	and	to	address	weaknesses	in	our	accounting	and	control environment,	as	well	as	to	develop	shared	services.

|  |  | Components	of	change	during	the	year | Components	of	change	during	the	year | Components	of	change	during	the	year |  | Change | Change | Change | Change |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Prior\tyear\namount | Foreign\ncurrency | Net\nacquisitions/\n(divestitures) | Organic | Reported\namount | Foreign\ncurrency | Net\nacquisitions/\n(divestitures) | Organic | Total |
| 2006 | $3,999.1 | 11.7 | (85.0) | 18.3 | $3,944.1 | 0.3% | (2.1)% | 0.5% | \t(1.4)% |
| 2005 | 3,733.0 | 19.3 | (46.6) | 293.4 | \t3,999.1 | 0.5% | (1.2)% | 7.9% | \t 7.1% |

Salaries	and	related	expenses	decreased	during	2006	due	to	net	divestitures,	primarily	from	the	sale	of	several	businesses	at	IAN	during	2005,	partially	offset	by	changes	in	foreign	currency exchange	rates	and	a	slight	organic	increase.	Total	salaries	and	related	expenses	as	a	percentage	of	revenue	remained	flat	as	a	result	of	the	decline	in	revenue.	Key	factors	behind	the	change	in	salaries and	related	expenses	from	the	prior	year	were	a	significant	reduction	in	severance	expense	of	$63.7,	offset	by	an	increase	in	long-term	incentive	awards	and	bonus	awards	of	$67.2.	Expenses	related	to incentive	awards	increased	in	2006	due	to	long-term	equity	based	awards	granted	in	June	2006	and	the	full	year	impact	of	awards	granted	in	August	2005,	while	expenses	related	to	bonus	awards increased	primarily	due	to	performance.	The	slight	organic	increase	reflected	in	CMG	and	Corporate	was	offset	by	a	decrease	at	IAN	and	was	primarily	the	result	of	higher	salary	costs	to	upgrade	our talent	and	to	support	revenue	initiatives	and	technology-related	projects,	increased	incentive	awards	and	bonus	awards.	This	was	partially	offset	by	a	decrease	in	severance	expense,	primarily	at international	locations	within	IAN,	which	we	incurred	in	2005	due	to	client	losses.

Salaries	and	related	expenses	increased	primarily	due	to	an	organic	increase	and	changes	in	foreign	currency	exchange	rates,	partially	offset	by	net	divestitures,	primarily	at	McCann	during	2005 and	the	sale	of	the	Motorsports	business	during	2004.	The	organic	increase	was	primarily	the	result	of	higher	severance	expense,	largely	recorded	in	the	fourth	quarter	of	2005	for	international	headcount reductions	within	IAN	as	a	result	of	client	losses,	the	hiring	of	additional	creative	talent	to	enable	future	revenue	growth,	additional	staff	to	address	weaknesses	in	our	accounting	and	control	environment, and	to	develop	shared	services	at	certain	locations.

# Office	and	General	Expenses

Office	and	general	expenses	include	rent	expense,	professional	fees,	expenses	attributable	to	the	support	of	client	service	professional	staff,	depreciation	and	amortization	costs,	bad	debt	expense relating	to	accounts	receivable,	the	costs	associated	with	the	development	of	a	shared	services	center	and	implementation	costs	associated	with	upgrading	our	information	technology	infrastructure.	Office and	general	expenses	also	include	costs	directly	attributable	to	client	engagements.	These	costs	include	out-of-pocket	costs	such	as	travel	for	client	service	professional	staff,	production	costs	and	other direct	costs	that	are	rebilled	to	our	clients.

|  |  | Components	of	change	during	the	year | Components	of	change	during	the	year | Components	of	change	during	the	year |  | Change | Change | Change | Change |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Prior\tyear\namount | Foreign\ncurrency | Net\nacquisitions/\n(divestitures) | Organic | Reported\namount | Foreign\ncurrency | Net\nacquisitions/\n(divestitures) | Organic | Total |
| 2006 | $2,288.1 | 6.5 | (95.8) | \t (119.8) | $2,079.0 | 0.3% | (4.2)% | \t (5.2)% | \t(9.1)% |
| 2005 | 2,250.4 | 13.9 | (88.6) | 112.4 | \t2,288.1 | 0.6% | (3.9)% | 5.0% | \t 1.7% |

Office	and	general	expenses	for	2006	declined	as	a	result	of	significant	reductions	in	professional	fees,	which	decreased	by	$93.7,	primarily	for	projects	related	to	our	restatement	activities	and internal	control	compliance	that	occurred	in	2005,	lower	production	expenses,	lower	bad	debt	expenses	and	net	divestitures,	primarily	due	to	the	sale	of	several	businesses	at	IAN	during	2005.	The decline	in	office	and	general	expenses	occurred	in	both	segments	as	well	as	Corporate.	Partially	offsetting	this	decrease	were	higher	rent	expense	and	reduced	foreign	exchange	gains	on	certain	balance sheet	items.	The	above	items	resulted	in	an	organic	decline	which	was	primarily	reflected	at	Corporate	and	IAN.

Office	and	general	expenses	for	2005	increased	as	a	result	of	an	organic	increase	and	changes	in	foreign	currency	exchange	rates,	partially	offset	by	net	divestitures,	primarily	at	McCann	during 2005	and	the	sale	of	the	Motorsports	business	during	2004.	The	organic	increase	was	primarily	the	result	of	higher	professional	fees,

primarily	at	IAN	and	our	Corporate	group,	driven	by	our	ongoing	efforts	in	internal	control	compliance,	the	2005	Restatement	process	and	the	preliminary	development,	application	and	maintenance	of information	technology	systems	and	processes	related	to	our	shared	services	initiatives.

# Restructuring	and	Other	Reorganization-Related	Charges	(Reversals)

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

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Other\treorganization-related\tcharges | $33.0 | $ — | $— |
| Restructuring\tcharges\t(reversals) | 1.5 | \t(7.3) | \t62.2 |
| Total | $34.5 | $(7.3) | $62.2 |

# Other	Reorganization-Related	Charges

Other	reorganization-related	charges	primarily	represent	severance	charges	directly	associated	with	two	significant	strategic	business	decisions:	the	merger	of	Draft	Worldwide	and	Foote,	Cone and	Belding	Worldwide	to	create	a	global	integrated	marketing	organization	called	Draftfcb;	and	our	realignment	of	our	media	business	to	meet	evolving	client	needs.	In	addition,	we	have	recorded	lease termination	charges	in	relation	to	the	exit	of	certain	properties	for	these	strategic	business	decisions.	These	charges	were	separated	from	salaries	and	related	expenses	and	office	and	general	expenses	as they	did	not	result	from	charges	that	occurred	in	the	normal	course	of	business.	We	expect	charges	relating	to	these	business	decisions	to	be	complete	during	the	first	half	of	2007.

# Restructuring	Charges	(Reversals)

We	record	charges	and	(reversals)	primarily	related	to	changes	in	assumptions	in	connection	with	lease	termination	and	other	exit	costs	and	severance	and	termination	costs	for	the	2003	and	2001 restructuring	programs.	The	2003	program	was	initiated	in	response	to	softness	in	demand	for	advertising	and	marketing	services.	The	2001	program	was	initiated	following	the	acquisition	of	True	North Communications	Inc.	and	was	designed	to	integrate	the	acquisition	and	improve	productivity.	A	summary	of	the	net	charges	and	(reversals)	for	the	2003	and	2001	restructuring	program	is	as	follows:

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Lease\ttermination\tand\tother\texit\tcosts | $1.5 | $(5.9) | $47.8 |
| Severance\tand\ttermination\tcosts | \t — | \t(1.4) | \t14.4 |
| Total | $1.5 | $(7.3) | $62.2 |

During	the	years	ended	December	31,	2006	and	2005	net	lease	termination	and	other	exit	costs	were	primarily	related	to	adjustments	to	management's	estimates	to	decrease	the	restructuring reserves	as	a	result	of	changes	in	sublease	rental	income	assumptions	and	utilization	of	previously	vacated	properties	relating	to	the	2003	program	by	certain	of	our	agencies	due	to	improved	economic conditions	in	certain	markets.

During	the	year	ended	December	31,	2004	net	lease	termination	and	other	exit	costs	were	recorded	primarily	for	the	2003	restructuring	program	for	the	vacating	of	43	offices	located	primarily	in the	U.S.	and	Europe.	Charges	were	recorded	at	net	present	value	and	were	net	of	estimated	sublease	rental	income.	These	charges	were	partially	offset	primarily	by	management's	adjustments	to estimates	as	a	result	of	our	negotiation	of	terms	upon	the	exit	of	leased	properties	and	for	other	reasons	similar	to	those	mentioned	above	for	2006	and	2005.	Severance	and	termination	costs	were recorded	for	a	worldwide	workforce	reduction	of	approximately	400	employees.	The	restructuring	program	affected	employee	groups	across	all	levels	and	functions,	including	executive,	regional	and account	management	and	administrative,	creative	and	media	production	personnel.	These	charges	were	partially

offset	by	adjustments	to	management's	estimates	to	reduce	the	prior	restructuring	reserves	primarily	as	a	result	of	decreases	in	the	number	of	terminated	employees,	change	in	amounts	paid	to	terminated employees	and	change	in	estimates	of	related	restricted	stock	payments	and	payroll	taxes.

# Long-Lived	Asset	Impairment	and	Other	Charges

Long-lived	assets	include	land,	buildings,	equipment,	goodwill	and	other	intangible	assets.	Buildings,	equipment	and	other	intangible	assets	with	finite	lives	are	generally	depreciated	or amortized	on	a	straight-line	basis	over	their	respective	estimated	useful	lives.	When	necessary,	we	record	an	impairment	charge	for	the	amount	by	which	the	carrying	value	of	the	asset	exceeds	the	implied fair	value.	See	Note	1	to	the	Consolidated	Financial	Statements	for	fair	value	determination	and	impairment	testing	methodologies.

The	following	table	summarizes	long-lived	asset	impairment	and	other	charges:

|  | 2006 |  | 2005 |  | 2004 | 2004 | 2004 | 2004 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | IAN | IAN | CMG | Total | IAN | CMG | Motorsports | Total |
| Goodwill\timpairment | $27.2 | $97.0 | $ — | $97.0 | $220.2 | $91.7 | $— | $311.9 |
| Other | — | 1.5 | \t 0.1 | 1.6 | 6.9 | 0.4 | 3.0 | 10.3 |
| Total | $27.2 | $98.5 | $ 0.1 | $98.6 | $227.1 | $92.1 | $3.0 | $322.2 |

IAN	—	Our	long-term	projections,	which	were	updated	in	the	fourth	quarter	of	2006,	showed	previously	unanticipated	declines	in	discounted	future	operating	cash	flows	due	primarily	to	recent client	losses	at	one	of	our	domestic	advertising	reporting	units.	These	discounted	future	operating	cash	flow	projections	indicated	that	the	implied	fair	value	of	goodwill	at	this	reporting	unit	was	less	than its	book	value,	resulting	in	a	goodwill	impairment	charge	of	$27.2.

IAN	—	A	triggering	event	occurred	subsequent	to	our	2005	annual	impairment	test	when	a	major	client	was	lost	by	Lowe's	London	agency	and	the	possibility	of	losing	other	clients	was considered	a	higher	risk	due	to	recent	management	defections	and	changes	in	the	competitive	landscape.	This	caused	projected	revenue	growth	to	decline.	As	a	result	of	these	changes,	our	long-term projections	showed	declines	in	discounted	future	operating	cash	flows.	These	revised	cash	flows	indicated	that	the	implied	fair	value	of	Lowe's	goodwill	was	less	than	the	related	book	value	resulting	in	a goodwill	impairment	charge	of	$91.0	at	our	Lowe	reporting	unit.

IAN	—	During	the	third	quarter	of	2005,	we	recorded	a	goodwill	impairment	charge	of	$5.8	at	a	reporting	unit	within	our	sports	and	entertainment	marketing	business.	The	long-term	projections showed	previously	unanticipated	declines	in	discounted	future	operating	cash	flows	and,	as	a	result,	these	discounted	future	operating	cash	flows	indicated	that	the	implied	fair	value	of	goodwill	was	less than	the	related	book	value.

IAN	—	During	the	third	quarter	of	2004,	we	recorded	goodwill	impairment	charges	of	$220.2	at	The	Partnership	reporting	unit,	which	was	comprised	of	Lowe	Worldwide,	Draft	Worldwide, Mullen,	Dailey	&	Associates	and	Berenter	Greenhouse	&	Webster	("BGW").	Our	long-term	projections	showed	previously	unanticipated	declines	in	discounted	future	operating	cash	flows	due	to	recent client	losses,	reduced	client	spending,	and	declining	industry	valuation	metrics.	These	discounted	future	operating	cash	flow	projections	indicated	that	the	implied	fair	value	of	goodwill	was	less	than	the related	book	value.	The	Partnership	was	subsequently	disbanded	in	the	fourth	quarter	of	2004	and	the	remaining	goodwill	was	allocated	to	the	agencies	within	the	Partnership	based	on	the	relative	fair value	of	its	component	agencies	at	the	time	of	disbandment.

CMG	—	As	a	result	of	the	annual	impairment	review,	a	goodwill	impairment	charge	of	$91.7	was	recorded	at	our	CMG	reporting	unit,	which	was	comprised	of	Weber	Shandwick,	GolinHarris, DeVries,	MWW	Group	and	FutureBrand.	The	fair	value	of	CMG	was	adversely	affected	by	declining	industry	market	valuation	metrics,	specifically,	a	decrease	in	the	EBITDA	multiples	used	in	the underlying	valuation	calculations.	The	impact	of	the	lower	EBITDA	multiples	indicated	that	the	implied	fair	value	of	goodwill	was	less	than	the	related	book	value.

# Motorsports	Contract	Termination	Costs

We	recorded	a	pre-tax	charge	of	$113.6	during	2004	terminating	a	series	of	agreements	with	the	British	Racing	Drivers	Club	and	Formula	One	Administration	Limited,	which	released	us	from certain	guarantees	and	lease	obligations	in	the	United	Kingdom.

# EXPENSE	AND	OTHER	INCOME

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Interest\texpense | $(218.7) | $(181.9) | $(172.0) |
| Interest\tincome | \t 113.3 | 80.0 | 50.8 |
| Other\t(expense)\tincome | (5.6) | 19.5 | (51.4) |
| Total | $(111.0) | $(82.4) | $(172.6) |

# Interest	Expense

The	increase	in	interest	expense	during	2006	was	primarily	due	to	increases	in	non-cash	amortization	of	approximately	$27.0.	This	included	the	amortization	of	fees	and	deferred	warrant	costs incurred	as	a	result	of	the	ELF	Financing	transaction,	prior	year	benefit	from	the	amortization	of	gains	on	terminated	swaps	and	the	amortization	of	the	remaining	costs	associated	with	our	previous committed	credit	agreement.	Additionally,	the	increase	was	due	to	one-time	fees	associated	with	the	exchange	of	our	Floating	Rate	Notes	in	2006.	The	2006	year-over-year	comparison	benefited	from	the fact	that	we	did	not	incur	waiver	and	consent	fees	similar	to	those	incurred	in	2005	for	the	amendment	of	the	indentures	governing	our	debt	securities	and	our	credit	facility.

The	increase	in	interest	expense	during	2005	was	primarily	due	to	waiver	and	consent	fees	incurred	for	the	amendment	of	our	existing	debt	agreements	in	2005	and	higher	average	interest	rates	on newly	issued	debt	when	compared	to	extinguished	debt.

# Interest	Income

The	increase	in	interest	income	during	2006	was	primarily	due	to	an	increase	in	interest	rates	and	higher	average	cash	balances	compared	to	the	prior	year.

The	increase	in	interest	income	during	2005	was	primarily	due	to	an	increase	in	average	interest	rates	as	well	an	increase	in	cash	and	cash	equivalents	primarily	resulting	from	our	Series	B Cumulative	Convertible	Perpetual	Preferred	Stock	offering.

# Other	Income	(Expense)

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Loss\ton\tearly\textinguishment\tof\tdebt | $(80.8) | $— | $— |
| Gains\t(losses)\ton\tsales\tof\tbusinesses | 8.1 | 10.1 | \t(18.2) |
| Vendor\tdiscount\tand\tcredit\tadjustments | 28.2 | 2.6 | — |
| Gains\ton\tsales\tof\tavailable-for-sale\tsecurities\tand\tmiscellaneous\tinvestment\tincome | 36.1 | 16.3 | 5.4 |
| Investment\timpairments | (0.3) | \t(12.2) | \t(63.4) |
| Litigation\treversals | — | — | 32.5 |
| Other\tincome\t(expense) | 3.1 | 2.7 | (7.7) |
| Total | $(5.6) | $19.5 | $(51.4) |

Loss	on	early	extinguishment	of	debt	—	In	November	2006,	we	exchanged	$400.0	of	our	4.50%	Convertible	Senior	Notes	due	2023	(the	"4.50%	Notes")	for	$400.0	aggregate	principal	amount	of 4.25%	Convertible	Senior	Notes	due	2023	(the	"4.25%	Notes").	In	accordance	with	Emerging	Issues	Task	Force	("EITF")	Issue	No.	96-19,	Debtor's	Accounting	for	a	Modification	or	Exchange	of	Debt Instruments,	this	exchange	is	treated	as	an	extinguishment	of	the	4.50%	Notes	and	an	issuance	of	4.25%	Notes	for	accounting	purposes	because	the	present	value	of	the	remaining	cash	flows	plus	the	fair value	of	the	embedded	conversion	option	under	the	terms	of	the	original	instrument	differ	substantially	from	the	new	instrument.	As	a	result,	we	recorded	a	non-cash	charge	at	issuance	of	$77.0, reflecting	the	difference	between	the	fair	value	of	the	new	debt	and	the	carrying	value	of	the	old	debt.	The	difference	between	fair	value	and	carrying	value	will	be	amortized	to	interest	expense	through March	15,	2012,	which	is	the	first	date	holders	may	require	us	to	repurchase	the	4.25%	Notes.	This	results	in	a	reduction	of	reported	interest	expense	of	$14.4	per	year	in	future	annual	periods.	We	also recorded	a	non-cash	charge	of	$3.8	for	the	extinguishment	of	unamortized	debt	issuance	costs	related	to	the	exchanged	4.50%	Notes.

Gains	(losses)	on	sales	of	businesses	—	In	connection	with	the	2005	sale	of	a	European	FCB	agency,	we	released	$11.1	into	income	in	the	fourth	quarter	of	2006.	This	primarily	related	to	certain contingent	liabilities	that	we	retained	subsequent	to	the	sale,	which	were	resolved	in	the	fourth	quarter	of	2006.	During	the	fourth	quarter	of	2005,	we	had	net	gains	related	to	the	sale	of	a	McCann	agency of	$18.6,	offset	partially	by	a	loss	of	$13.0	from	the	sale	of	a	European	FCB	agency.	In	2004,	we	had	net	losses	related	to	the	sale	of	19	agencies.	The	losses	related	primarily	to	the	sale	of	a	U.S.-based promotions	agency,	which	resulted	in	a	loss	of	$8.6,	and	a	$6.2	loss	for	the	final	liquidation	of	the	Motorsports	investment.

We	have	evaluated	each	asset	held	for	sale	and	disposed	entity	on	an	individual	and	an	aggregate	basis	to	determine	if	they	should	be	classified	as	a	component	of	discontinued	operations	in	our consolidated	financial	statements.	We	believe	that	the	impact	of	these	dispositions	and	assets	held	for	sale	are	not	material	to	our	consolidated	financial	statements.	These	dispositions	and	assets	held	for sale,	in	the	aggregate,	provided	income	to	continuing	operations	of	$2.5	for	the	year	ended	December	31,	2006.

Vendor	discount	and	credit	adjustments	—	These	adjustments	reflect	the	reversal	of	certain	liabilities,	primarily	established	during	the	2005	Restatement,	where	the	statute	of	limitations	has lapsed	or	where	negotiations	with	clients	have	resulted	in	concessions.	We	may	have	similar	reversals	in	the	future,	although	to	a	lesser	extent	than	in	2006.	We	believe	that	presenting	amounts	realized due	to	lapses	in	the	statute	of	limitations	or	concession	settlements	as	other	income	or	expense	prevents	the	trend	of	operating	results	from	being	distorted.	For	further	information	on	vendor	discounts	and credits	see	Notes	1	and	4	to	the	Consolidated	Financial	Statements.

Gains	on	sales	of	available-for-sale	securities	and	miscellaneous	investment	income	—	In	the	second	quarter	of	2006,	we	had	net	gains	of	$20.9	related	to	the	sale	of	an	investment	located	in Asia	Pacific	and	the	sale	of	our	remaining	ownership	interest	in	an	agency	within	The	Lowe	Group.	In	addition,	during	the	third	quarter	of	2006,	we	sold	our	interest	in	a	German	advertising	agency	and recognized	the	related	remaining	cumulative	translation	adjustment	balance,	which	resulted	in	a	non-cash	benefit	of	$17.0.	In	2005,	we	had	net	gains	of	$8.3	related	to	the

sale	of	our	remaining	equity	ownership	interest	in	an	agency	within	FCB,	and	net	gains	on	sales	of	available-for-sale	securities	of	$7.9,	of	which	$3.8	related	to	appreciation	of	Rabbi	Trust	investments restricted	for	the	purpose	of	paying	our	deferred	compensation	and	deferred	benefit	arrangement	liabilities.

Investment	Impairments	—	We	recorded	charges	of	$12.2	during	2005,	primarily	related	to	a	$7.1	adjustment	of	the	carrying	amount	of	our	remaining	unconsolidated	investment	in	Latin America	to	fair	value	as	a	result	of	our	intent	to	sell	and	$3.7	related	to	a	decline	in	value	of	certain	available-for-sale	investments	that	were	determined	to	be	other	than	temporary.

We	recorded	investment	impairment	charges	of	$63.4	during	2004,	primarily	related	to	a	$50.9	charge	for	an	unconsolidated	investment	in	a	German	advertising	agency	as	a	result	of	a	decrease in	projected	operating	results.	Additionally,	we	recorded	impairment	charges	of	$4.7	related	to	unconsolidated	affiliates	primarily	in	Israel,	Brazil,	Japan	and	India,	and	$7.8	related	to	several	other available-for-sale	investments.

Litigation	Reversals	—	During	2004	the	settlement	of	thirteen	class	actions	under	the	federal	securities	laws	became	final	and	we	agreed	to	pay	$115.0,	comprised	of	$20.0	in	cash	and	$95.0	in shares	of	our	common	stock	valued	at	$14.50	per	share.	We	received	insurance	proceeds	of	$20.0,	which	we	recorded	as	a	reduction	in	litigation	charges.	We	also	recorded	a	reduction	of	$12.5	relating	to a	decrease	in	the	share	price	between	the	tentative	settlement	date	and	the	final	settlement	date.

|  | Years	ended	December	31, | Years	ended	December	31, | Years	ended	December	31, | Change | Change |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2006 | 2005 | 2004 | '06\tvs.\t'05 | '05\tvs.\t'04 |
| Loss\tfrom\tcontinuing\toperations\tbefore\tprovision\tfor\tincome\ttaxes | $ (5.0) | $(186.6) | $(267.0) | (97.3)% | (30.1)% |
| Provision\tfor\tincome\ttaxes\t—\tcontinuing\toperations | $18.7 | $81.9 | $ 262.2 | (77.2)% | (68.8)% |
| (Benefit)\tprovision\tfor\tincome\ttaxes\t—\tdiscontinued\toperations | \t (5.0) | (9.0) | 3.5 | (44.4)% | — |
| Total\tprovision\tfor\tincome\ttaxes | $13.7 | $72.9 | $ 265.7 | (81.2)% | (72.6)% |

The	tax	provision	for	2006	was	primarily	impacted	by	domestic	losses,	foreign	profits	subject	to	tax	at	different	rates	and	losses	in	certain	foreign	locations	where	we	receive	no	tax	benefit	due	to 100%	valuation	allowances.	Other	factors	included	state	and	local	taxes,	the	write-off	of	deferred	tax	assets	from	restricted	stock,	the	release	of	valuation	allowances,	non-deductible	financing	costs	and the	reversal	of	previously	claimed	foreign	tax	credits.

The	tax	provision	for	2005	was	primarily	impacted	by	an	increase	in	valuation	allowances,	a	non-deductible	asset	impairment,	state	and	local	taxes	and	the	resolution	of	various	income	tax	audits and	issues.

# Valuation	Allowance

Under	Statement	of	Financial	Accounting	Standards	("SFAS")	No.	109,	Accounting	for	Income	Taxes,	we	are	required	to	evaluate	the	realizability	of	our	deferred	tax	assets.	SFAS	No.	109 requires	that	a	valuation	allowance	be	recognized	when	it	is	more	likely	than	not	that	all	or	a	portion	of	deferred	tax	assets	will	not	be	realized.	In	circumstances	where	there	is	significant	negative evidence,	establishment	of	valuation	allowance	must	be	considered.	We	believe	that	cumulative	losses	in	the	most	recent	three-year	period	represent	significant	negative	evidence	under	the	provisions	of SFAS	No.	109	and,	as	a	result,	we	recognized	a	valuation	allowance	for	certain	deferred	tax	assets.	The	deferred	tax	assets	for	which	an	allowance	was	recognized	relate	primarily	to	tax	credit carryforwards,	foreign	tax	loss	and	U.S.	capital	loss	carryforwards,	which	may	not	be	realized	in	the	future.

During	2006	and	2005,	valuation	allowances	of	$63.6	and	$69.9,	respectively,	were	recorded	in	continuing	operations	on	existing	deferred	tax	assets,	each	year's	loss	and	temporary	differences.

During	2004,	a	valuation	allowance	of	$236.0	was	established	in	continuing	operations	on	existing	deferred	tax	assets	and	2004	losses	with	no	benefit.	The	total	valuation	allowance	as	of December	31,	2004	was	$488.6.

For	additional	information,	see	Note	9	to	the	Consolidated	Financial	Statements.

# Segment	Results	of	Operations

As	discussed	in	Note	15	to	the	Consolidated	Financial	Statements,	we	have	two	reportable	segments	as	of	December	31,	2006:	IAN	and	CMG.	We	also	report	results	for	the	Corporate	and	other group.	As	of	December	31,	2005,	we	had	an	additional	segment,	Motorsports	operations	("Motorsports"),	which	was	sold	during	2004	and	had	immaterial	residual	operating	results	in	2005.

On	June	1,	2006,	we	announced	we	would	merge	two	units	included	in	our	IAN	segment,	Draft	Worldwide	("Draft")	and	Foote,	Cone	&	Belding	Worldwide	("FCB"),	to	create	a	global integrated	marketing	organization.	The	new	merged	entity,	Draftfcb,	remains	within	the	IAN	segment.

# INTEGRATED	AGENCY	NETWORKS	(''IAN")

# REVENUE

|  |  | Components	of	change	during	2006 | Components	of	change	during	2006 | Components	of	change	during	2006 |  | Change | Change | Change | Change |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2005 | Foreign\ncurrency | Net\nacquisitions/\n(divestitures) | Organic | 2006 | Foreign\ncurrency | Net\nacquisitions/\n(divestitures) | Organic | Total |
| Total | $5,327.8 | 19.7 | (151.9) | 35.0 | $5,230.6 | 0.4% | (2.9)% | 0.7% | \t(1.8)% |
| Domestic | \t2,904.6 | — | (37.8) | (26.8) | \t2,840.0 | — | (1.3)% | \t (0.9)% | \t(2.2)% |
| International | \t2,423.2 | 19.7 | (114.1) | 61.8 | \t2,390.6 | 0.8% | (4.7)% | 2.6% | \t(1.3)% |

The	revenue	decline	in	2006	was	a	result	of	net	divestitures,	primarily	from	the	sale	of	several	businesses	at	Draftfcb	and	McCann	in	2005,	partially	offset	by	an	organic	increase	and	changes	in foreign	currency	exchange	rates.	The	organic	increase	was	driven	primarily	by	McCann	and	Draftfcb,	partially	offset	by	decreases	at	Lowe	and	The	Works,	one	of	our	independent	agencies.	The	organic increase	at	McCann	was	the	result	of	higher	revenue	from	existing	clients	across	domestic	and	international	regions,	primarily	Asia	Pacific	and	Latin	America.	McCann's	increase	was	primarily	driven	by digital,	direct	and	event	marketing	services.	The	increase	at	Draftfcb	was	primarily	the	result	of	increased	spending	from	existing	clients	partially	offset	by	net	client	losses,	primarily	in	2005,	across domestic	and	most	international	regions,	primarily	Europe,	Asia	Pacific	and	Latin	America.	The	decrease	at	Lowe	was	primarily	due	to	reduced	spending	by	existing	clients	and	net	client	losses, primarily	in	domestic	locations	in	2005.	The	revenue	decrease	at	The	Works,	a	dedicated	General	Motors	resource,	was	primarily	due	to	the	loss	of	the	General	Motors	U.S.	media	buying	business	in 2005.

|  |  | Components	of	change	during	2005 | Components	of	change	during	2005 | Components	of	change	during	2005 |  | Change | Change | Change | Change |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2004 | Foreign\ncurrency | Net\nacquisitions/\n(divestitures) | Organic | 2005 | Foreign\ncurrency | Net\nacquisitions/\n(divestitures) | Organic | Total |
| Total | $5,399.2 | 39.5 | (46.0) | (64.9) | $5,327.8 | 0.7% | (0.9)% | \t (1.2)% | \t(1.3)% |
| Domestic | \t2,933.3 | — | (23.1) | (5.6) | \t2,904.6 | — | (0.8)% | \t (0.2)% | \t(1.0)% |
| International | \t2,465.9 | 39.5 | (22.9) | (59.3) | \t2,423.2 | 1.6% | (0.9)% | \t (2.4)% | \t(1.7)% |

The	revenue	decline	in	2005	primarily	resulted	from	organic	revenue	decreases	and	net	divestitures,	partially	offset	by	changes	in	foreign	currency	exchange	rates.	The	organic	revenue	decrease was	primarily	driven	by	declines	at	Deutsch	and	Lowe,	partially	offset	by	increases	at	Draftfcb	and	Mullen.	The	decline	at	Deutsch	was	due	to	client	losses	and	reduced	spending	from	existing	clients domestically,	partially	offset	by	client	wins.	The	decline

at	Lowe	was	primarily	driven	by	client	losses	and	reduced	spending	from	existing	clients	in	their	European	offices,	as	well	as	reduced	spending	domestically.	Draftfcb	experienced	growth	mainly domestically	due	to	client	wins	and	increased	spending	from	existing	clients.	Although	McCann	is	a	significant	part	of	the	business,	they	did	not	contribute	considerably	to	the	organic	change	in	revenue year	over	year.	The	decrease	due	to	net	divestitures	primarily	related	to	the	sale	of	small	businesses	at	McCann	and	Draftfcb.

# SEGMENT	OPERATING	INCOME

|  | Years	ended	December	31, | Years	ended	December	31, | Years	ended	December	31, | Change | Change |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2006 | 2005 | 2004 | '06\tvs.\t'05 | '05\tvs.\t'04 |
| Segment\toperating\tincome | $391.4 | $249.7 | $577.1 | 56.7% | (56.7)% |
| Operating\tmargin | 7.5% | 4.7% | 10.7% |  |  |

Operating	income	increased	during	2006	due	to	a	decrease	in	office	and	general	expenses	of	$139.7,	a	decrease	in	salaries	and	related	expenses	of	$99.2,	partially	offset	by	a	decrease	in	revenue of	$97.2.	The	primary	drivers	for	our	reduced	office	and	general	expenses	related	to	lower	production	expenses	of	$46.4,	reduced	professional	fees	of	$26.3	and	lower	bad	debt	expense	of	$22.2.	The primary	drivers	for	our	reduced	salaries	and	related	expenses	related	to	lower	severance	expense	of	$63.1	and	decreased	salaries	of	$42.0.

The	organic	segment	operating	income	increase	was	driven	primarily	by	increases	at	McCann,	partially	offset	by	net	decreases	at	our	independent	agencies.	The	increase	at	McCann	was	due	to higher	revenue	as	discussed	above	in	the	revenue	section	and	reduced	office	and	general	expenses	and	salaries	and	related	expenses.	Office	and	general	expenses	decreased	due	to	lower	production expenses,	reduced	professional	fees	in	connection	with	accounting	projects,	such	as	those	related	to	our	restatement	activities,	and	lower	bad	debt	expenses.	Salaries	and	related	expenses	decreased primarily	due	to	reduced	severance	expense	for	headcount	reductions	that	occurred	in	international	locations	in	2005	and	reduced	pension	costs,	partially	offset	by	higher	incentive	and	bonus	awards	due to	improved	performance.	The	net	decline	at	our	independent	agencies	was	driven	by	decreased	revenue,	primarily	at	The	Works,	for	the	reasons	mentioned	above	in	the	revenue	section.

A	decrease	in	revenues	of	$71.4,	an	increase	in	salaries	and	related	expenses	of	$202.3	and	an	increase	in	office	and	general	expenses	of	$53.7	were	the	primary	drivers	that	contributed	to	the decrease	in	operating	income	during	2005.	IAN's	organic	operating	income	decrease	was	primarily	driven	by	McCann,	Draftfcb,	Lowe	and	Deutsch.	The	decrease	at	McCann	was	primarily	caused	by increased	severance,	temporary	staffing	costs,	salary	and	related	benefits	and	professional	fees.	Higher	severance	expense	was	the	result	of	international	headcount	reductions.	Temporary	staffing	and salary	and	related	benefits	were	impacted	by	additional	staffing	necessary	to	address	weaknesses	in	our	accounting	and	control	environment.	Professional	fees	increased	as	a	result	of	costs	associated	with the	2005	Restatement	process	and	internal	control	compliance.	The	decrease	at	Draftfcb	was	due	to	higher	salaries	and	freelance	costs	as	additional	staff	were	hired	to	service	new	clients	and	additional business	from	existing	clients	as	well	as	increased	severance	costs	reflecting	headcount	reductions	at	our	international	agencies.	At	Lowe,	the	decrease	was	primarily	due	to	organic	revenue	decreases	as compared	to	the	prior	year.	Deutsch	experienced	organic	revenue	decreases	as	compared	to	the	prior	year,	partially	offset	by	lower	salaries,	related	benefits	and	freelance	costs	due	to	client	losses	and reduced	incentive	compensation	expense	as	a	result	of	a	reduction	in	operating	performance.	Also,	operating	income	of	most	units	was	negatively	impacted	by	higher	professional	fees	to	support	the	2005 Restatement	process	and	internal	control	compliance.

# CONSTITUENCY	MANAGEMENT	GROUP	("CMG")

|  |  | Components	of	change	during	2006 | Components	of	change	during	2006 | Components	of	change	during	2006 |  | Change | Change | Change | Change |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2005 | Foreign\ncurrency | Net\nacquisitions/\n(divestitures) | Organic | 2006 | Foreign\ncurrency | Net\nacquisitions/\n(divestitures) | Organic | Total |
| Total | $944.2 | 0.9 | (11.2) | 26.3 | $960.2 | 0.1% | (1.2)% | 2.8% | \t 1.7% |
| Domestic | \t556.5 | — | (0.5) | 45.2 | \t601.2 | — | (0.1)% | 8.1% | \t 8.0% |
| International | \t387.7 | 0.9 | (10.7) | (18.9) | \t359.0 | 0.2% | (2.8)% | \t (4.9)% | \t(7.4)% |

Revenue	growth	was	a	result	of	organic	revenue	increases	in	the	public	relations	and	branding	businesses	domestically,	which	was	due	to	higher	revenue	from	existing	clients.	Additionally,	there were	organic	revenue	increases	domestically	in	the	sports	marketing	and	events	marketing	businesses	due	to	higher	revenue	from	existing	clients	and	client	wins.	The	domestic	increase	was	partially	offset by	declines	at	some	CMG	agencies	that	lost	clients.	Internationally,	the	decline	related	primarily	to	a	decrease	in	the	events	marketing	and	sports	marketing	businesses	caused	by	client	losses.	The international	decrease	was	partially	offset	by	increases	in	the	public	relations	and	branding	businesses	due	to	higher	revenue	from	existing	clients.

|  |  | Components	of	change	during	2005 | Components	of	change	during	2005 | Components	of	change	during	2005 |  | Change | Change | Change | Change |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2004 | Foreign\ncurrency | Net\nacquisitions/\n(divestitures) | Organic | 2005 | Foreign\ncurrency | Net\nacquisitions/\n(divestitures) | Organic | Total |
| Total | $935.8 | 1.2 | (12.1) | 19.3 | $944.2 | 0.1% | (1.3)% | 2.1% | \t 0.9% |
| Domestic | \t576.0 | — | (5.9) | (13.6) | \t556.5 | — | (1.0)% | \t (2.4)% | \t(3.4)% |
| International | \t359.8 | 1.2 | (6.2) | 32.9 | \t387.7 | 0.3% | (1.7)% | 9.1% | \t 7.8% |

Revenue	growth	was	a	result	of	an	organic	revenue	increase	in	the	public	relations	businesses	internationally	and	the	sports	marketing	businesses	domestically	as	a	result	of	increased	spending from	existing	clients	and	client	wins.	Domestically,	the	increase	in	the	sports	marketing	businesses	was	offset	by	a	decline	in	the	events	marketing	businesses.	Although	revenue	from	the	events	marketing businesses	declined	domestically,	they	had	an	overall	positive	impact	on	our	organic	revenue	increase	due	to	international	client	wins.	Partially	offsetting	this	increase	were	the	dispositions	of	two businesses	in	2005	and	three	businesses	in	2004.

|  | Years	ended	December	31, | Years	ended	December	31, | Years	ended	December	31, | Change | Change |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2006 | 2005 | 2004 | '06\tvs.\t'05 | '05\tvs.\t'04 |
| Segment\toperating\tincome | $51.6 | $53.0 | $83.7 | (2.6)% | (36.7)% |
| Operating\tmargin | 5.4% | 5.6% | 8.9% |  |  |

Operating	income	decreased	slightly,	primarily	as	a	result	of	an	increase	in	salaries	and	related	expenses	of	$32.0,	partially	offset	by	a	decrease	in	office	and	general	expenses	of	$14.6	and	an increase	in	revenue	of	$16.0.	The	primary	driver	for	our	increase	in	salaries	and	related	expenses	was	higher	base	salaries	expense	of	$22.3	and	the	primary	driver	for	our	decrease	in	office	and	general expenses	was	lower	production	expenses	of	$19.8.	The	slight	organic	segment	operating	income	decrease	was	due	to	decreases	in	the	sports	marketing	businesses	and	other	CMG	agencies,	offset	by growth	at	the	public	relations	and	branding	businesses.	The	decline	in	the	sports	marketing

businesses	was	due	to	revenue	decreases	due	to	client	losses	and	increases	in	salaries	and	related	expenses	due	to	higher	bonus	awards	related	to	improved	domestic	performance.	The	decrease	in	other CMG	agencies	was	due	to	decreased	revenue	for	the	reasons	described	in	the	revenue	section.	Growth	at	the	public	relations	businesses	was	driven	by	increased	revenue,	partially	offset	by	higher	salaries and	related	expenses	from	increased	headcount	to	support	the	growth	in	the	business.	The	increase	at	the	branding	businesses	was	driven	primarily	by	higher	revenue	from	existing	clients.

Operating	income	decreased	due	to	an	increase	of	$23.3	in	salary	and	related	expenses	and	an	increase	in	office	and	general	expenses	of	$15.8,	partially	offset	by	an	increase	in	revenue	of	$8.4. The	organic	operating	income	decrease	was	primarily	driven	by	increases	in	salary	expense	across	all	businesses	due	to	increased	headcount	to	address	weaknesses	in	our	accounting	and	control environment.	The	decrease	was	also	attributable	to	increases	in	salary	expenses	in	the	public	relations	businesses	to	support	revenue	growth.

# CORPORATE	AND	OTHER

Certain	corporate	and	other	charges	are	reported	as	a	separate	line	within	total	segment	operating	income	(loss)	and	include	corporate	office	expenses	and	shared	services	center	expenses,	as	well as	certain	other	centrally	managed	expenses	that	are	not	fully	allocated	to	operating	divisions,	as	shown	in	the	table	below.	The	amounts	allocated	to	operating	divisions	are	calculated	monthly	based	on	a formula	that	uses	the	revenues	of	the	operating	unit.	Amounts	allocated	also	include	specific	charges	for	information	technology-related	projects,	which	are	allocated	based	on	utilization.	See	Note	15	to the	Consolidated	Financial	Statements	for	further	discussion	of	corporate	and	other	charges.	The	following	expenses	are	included	in	corporate	and	other:

|  | Years	ended	December	31, | Years	ended	December	31, | Years	ended	December	31, | Change | Change |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2006 | 2005 | 2004 | '06\tvs.\t'05 | '05\tvs.\t'04 |
| Salaries\tand\trelated\texpenses | $ 214.1 | $ 201.3 | $ 151.2 | 6.4% | 33.1% |
| Professional\tfees | \t 139.7 | \t 199.3 | \t 145.3 | (29.9)% | 37.2% |
| Rent,\tdepreciation\tand\tamortization | 65.4 | 45.3 | 38.4 | 44.4% | 18.0% |
| Corporate\tinsurance | 21.7 | 26.0 | 29.7 | (16.5)% | (12.5)% |
| Other | 25.3 | 15.2 | 16.8 | 66.4% | (9.5)% |
| Expenses\tallocated\tto\toperating\tdivisions | \t(190.9) | \t(170.8) | \t(138.2) | 11.8% | 23.6% |
| Total | $ 275.3 | $ 316.3 | $ 243.2 | (13.0)% | 30.1% |

Corporate	and	other	expenses	decreased	primarily	due	to	reduced	professional	fees	and	higher	amounts	allocated	to	operating	divisions,	partially	offset	by	higher	rent,	depreciation	and amortization	and	increased	salaries	and	related	expenses.	We	incurred	lower	professional	fees	for	accounting	projects,	which	included	those	related	to	our	prior-year	restatement	activities.	Higher	rent, depreciation	and	amortization	were	due	to	software-related	costs	from	our	ongoing	initiatives	to	consolidate	and	upgrade	our	financial	systems,	as	well	as	to	further	develop	our	shared	services.	Salaries and	related	expenses	increased	due	to	higher	headcount,	primarily	related	to	our	technology	initiatives,	and	for	larger	incentive	compensation	and	bonus	awards	related	to	performance.	Amounts	allocated to	operating	divisions	increased	primarily	due	to	the	implementation	of	new	information	technology-related	projects,	the	consolidation	of	information	technology	support	staff,	and	the	allocation	of	audit fees,	which	are	now	being	allocated	back	to	operating	divisions.

Corporate	and	other	expenses	increased	primarily	due	to	higher	salaries	and	related	expenses	and	professional	fees.	Salary	expenses	increased	from	additional	staffing	to	address	weaknesses	in our	accounting	and	control

environment	and	to	develop	shared	services.	Professional	fees	increased	due	to	costs	associated	with	internal	control	compliance,	costs	associated	with	the	2005	Restatement	process,	and	related	audit costs.	Amounts	allocated	to	operating	divisions	increased	primarily	due	to	the	implementation	of	new	information	technology-related	projects	and	the	consolidation	of	information	technology	support staff,	the	costs	of	which	were	not	being	allocated	back	to	operating	divisions	in	2004.

# LIQUIDITY	AND	CAPITAL	RESOURCES

# CASH	FLOW	OVERVIEW

Cash,	cash	equivalents	and	marketable	securities	decreased	by	$234.4	to	$1,957.1	during	2006	primarily	due	to	fees	associated	with	capital	market	activity,	capital	expenditures	and	working capital	usage,	partially	offset	by	improved	operating	results	and	proceeds	from	sales	of	investments.	Of	this	change,	marketable	securities	decreased	by	$114.2.	A	summary	of	our	cash	flow	activities	is	as follows:

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Net\tcash\tprovided\tby\t(used\tin)\toperating\tactivities | $\t\t9.0 | $\t\t(20.2) | $\t\t464.8 |
| Net\tcash\tprovided\tby\t(used\tin)\tinvesting\tactivities | 11.6 | 166.4 | \t (544.6) |
| Net\tcash\t(used\tin)\tprovided\tby\tfinancing\tactivities | \t(129.7) | 410.1 | \t (259.5) |

# Operating	Activities

Cash	provided	by	operating	activities	was	primarily	due	to	improved	operating	results	during	2006,	partially	offset	by	working	capital	usage	of	$250.6.	Working	capital	usages	reflects	changes	in accounts	receivable,	expenditures	billable	to	clients,	prepaid	expenses	and	other	current	assets,	accounts	payable	and	accrued	liabilities.	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	we	use,	on	their	behalf,	to	pay	production	costs	and	media	costs.	The	amounts	involved	substantially	exceed our	revenues,	and	primarily	impact	the	level	of	accounts	receivable,	expenditures	billable	to	clients,	accounts	payable	and	accrued	media	and	production	liabilities	in	any	given	period	for	these	pass- through	arrangements.	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.

During	2006,	a	reduction	in	accounts	payable	of	$370.0	was	partially	offset	by	a	reduction	in	accounts	receivable	of	$235.4.	The	change	in	accounts	payable	includes	a	reduction	of	our	vendor discount	and	credit	liabilities	established	as	part	of	the	2005	Restatement	of	$73.6,	of	which	$53.1	was	satisfied	through	cash	payments.	Cash	used	by	changes	in	accrued	liabilities	of	$21.4	was	primarily the	result	of	higher	accrued	media	liabilities,	offset	by	payments	for	professional	fees	primarily	related	to	our	prior	year	restatement	activities.	Accrued	liabilities	are	also	affected	by	the	timing	of	certain payments.	For	example,	while	employee	incentive	awards	are	accrued	throughout	the	year,	they	are	generally	paid	during	the	first	quarter	of	the	subsequent	year.

The	net	loss	of	$31.7	during	2006	includes	non-cash	items	that	are	not	expected	to	generate	cash	or	require	the	use	of	cash.	Net	non-cash	expense	items	of	$294.4	primarily	include	the	loss	on early	extinguishment	of	debt,	long	lived	asset	impairment	and	other	charges,	add-back	of	depreciation	of	fixed	assets	and	the	amortization	of	intangible	assets,	restricted	stock	awards	and	non-cash compensation,	bond	discounts	and	deferred	financing	costs.

# Investing	Activities

Cash	provided	by	investing	activities	during	2006	primarily	reflects	net	maturities	of	short-term	marketable	securities,	capital	expenditures,	acquisitions	and	divestitures	and	purchases	and	sales of	investments.	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.	The	net	amount	of	these	securities	was	$193.8	lower	as	of	December	31,	2006	compared	to	December	31,	2005.	Cash	provided	by	investing	activities	was also	impacted	by	capital	expenditures	of	$127.8,	primarily	related	to	computer	hardware	and	leasehold	improvements.

# Financing	Activities

Cash	used	in	financing	activities	during	2006	reflects	fees	and	costs	of	$90.1	that	we	incurred	in	connection	with	our	financing	transactions.	This	includes	fees	of	$41.8	and	call	spread	costs	of $29.2	for	our	new	credit	agreement	and	related	transactions	in	the	second	quarter.	We	incurred	fees	of	$19.1	in	the	fourth	quarter	when	we	exchanged	$400.0	of	our	4.50%	Convertible	Senior	Notes	due 2023	for	the	same	aggregate	principal	amount	of	our	4.25%	Convertible	Senior	Notes	due	2023	and	when	we	exchanged	all	of	our	$250.0	Floating	Rate	Notes	due	2008	for	the	same	aggregate	principal amount	of	Floating	Rate	Notes	due	2010.	These	costs	are	being	amortized	in	interest	expense.	In	addition,	$3.5	of	fees,	incurred	as	part	of	the	Floating	Rate	Note	exchange,	were	recorded	in	interest expense	and	will	not	be	amortized.

Cash	used	in	financing	activities	also	included	dividend	payments	of	$47.0	on	our	Series	A	and	Series	B	Preferred	Stock.

# LIQUIDITY	OUTLOOK

We	expect	our	operating	cash	flow,	cash	and	cash	equivalents	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	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	dispositions	and	taxes.

Our	non-cancelable	lease	commitments	primarily	relate	to	office	premises	and	equipment.	These	commitments	are	partially	offset	by	sublease	rental	income	we	receive	under	non-cancelable subleases.

Capital	expenditures	are	primarily	to	upgrade	computer	and	telecommunications	systems	and	to	modernize	offices.

Of	the	liabilities	recognized	as	part	of	the	2005	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.

We	have	no	significant	scheduled	amounts	of	long-term	debt	due	until	March	2008,	when	holders	of	our	$400.0	4.50%	Convertible	Senior	Notes	may	require	us	to	repurchase	the	Notes	for	cash at	par.

We	pay	annual	dividends	on	each	share	of	Series	B	Preferred	Stock	in	the	amount	of	$52.50	per	share,	or	$27.6.	Dividends	on	each	share	of	Series	B	Preferred	Stock	are	payable	quarterly	in	cash or,	if	certain	conditions	are	met,	in	common	stock,	at	our	option.	See	Note	12	to	the	Consolidated	Financial	Statements	for	further	information.

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	make	contributions	to	our	pension	and	postretirement	benefit	plans	throughout	the	year,	as	determined	using	actuarial	methods	and	assumptions.	For	the	years	ended	December	31,	2006	and 2005,	we	made	contributions	of	$42.7	and	$34.1,	respectively,	to	our	domestic	and	foreign	pension	plans.	For	2007,	we	do	not	anticipate	making	additional	contributions	to	our	domestic	pension	plans. We	expect	to	contribute	an	additional	$20.6	to	our	foreign	pension	plans.

Our	capital	requirements	are	affected	by	purchases	and	sales	of	agencies.	From	time	to	time	we	contemplate	acquisitions	that	may	require	payment	in	cash	or	stock.	In	past	years,	deferred payments	related	to	past	acquisitions	were	a	significant	funding	requirement	for	us,	although	these	payments	have	decreased	significantly	in	recent	years	as	we	have	made	fewer	acquisitions.	Under	the contractual	terms	of	certain	of	our	past	acquisitions	we	have	long-term	obligations	to	pay	additional	consideration	or	to	purchase	additional	equity	interests	in	certain	consolidated	or	unconsolidated subsidiaries	if	specified	conditions,	mostly	relating	to	operating	performance,	are	met.	Some	of	the	consideration	under	these	arrangements	is	in	shares	of	our	common	stock,	but	most	is	in	cash.	For	the years	ended	December	31,	2006,	2005	and	2004,	we	made	cash	payments	related	to	past	acquisitions	of	$22.9,	$97.0	and	$161.7,	respectively.	In	relation	to	our	contingent	acquisition	obligations,	$7.8, $5.3	and	$20.1	were	recorded	as	compensation	expense	for	the	years	ended	December	31,	2006,	2005	and	2004,	respectively.

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	bank borrowing	facilities	to	provide	us	with	liquidity	for	working	capital	needs.	Our	outstanding	long-term	debt,	including	convertible	debt,	is	detailed	in	Note	10	to	the	Consolidated	Financial	Statements,	and our	convertible	preferred	stock	is	detailed	in	Note	12	to	the	Consolidated	Financial	Statements.	We	also	have	two	series	of	equity	warrants	outstanding.	We	have	entered	into	call	spread	transactions	in connection	with	one	of	the	series	of	equity	warrants.	See	Note	11	to	the	Consolidated	Financial	Statements.

In	2006,	we	engaged	in	several	transactions	to	improve	our	liquidity	and	debt	maturity	profile:

•		In	June	2006,	we	replaced	our	existing	$500.0	Three-Year	Revolving	Credit	Facility,	which	would	have	expired	in	May	2007,	with	a	new	$750.0	Three-Year	Credit	Agreement	(the	"Credit Agreement")	as	part	of	a	capital	markets	transaction	that	we	refer	to	as	the	"ELF	Financing."

•		In	November	2006,	we	exchanged	$400.0	of	our	4.50%	Convertible	Senior	Notes	due	2023	for	the	same	aggregate	principal	amount	of	our	4.25%	Convertible	Senior	Notes	due	2023.	This transaction	extended	the	first	date	on	which	holders	can	require	us	to	repurchase	this	portion	of	our	debt	for	cash	from	2008	to	2012.	It	also	extended	the	second	date	on	which	holders	can require	us	to	repurchase	this	portion	of	our	debt	for	cash,	stock	or	a	combination	at	our	option	from	2013	to	2015.

•		In	December	2006,	we	exchanged	all	of	our	$250.0	Floating	Rate	Notes	due	2008	for	the	same	aggregate	principal	amount	of	Floating	Rate	Notes	due	2010.	The	new	Floating	Rate	Notes bear	interest	at	a	per	annum	rate	equal	to	three-month	LIBOR	plus	200	basis	points,	125	basis	points	less	than	the	interest	rate	on	the	old	Floating	Rate	Notes.

Also	in	December	2006,	each	share	of	our	Series	A	Preferred	Stock	converted	into	3.7037	shares	of	our	common	stock.	We	issued	a	total	of	27.7	shares	of	common	stock	to	holders	of	the Series	A	Preferred	Stock.	As	a	result	of	this	conversion,	future	preferred	stock	dividend	requirements	will	be	lower.

# ELF	Financing

Under	the	Credit	Agreement,	a	special-purpose	entity	called	ELF	Special	Financing	Ltd.	("ELF")	acts	as	the	lender	and	letter	of	credit	issuer.	ELF	is	obligated	at	our	request	to	make	cash advances	to	us	and	to	issue	letters	of	credit	for	our	account,	in	an	aggregate	amount	not	to	exceed	$750.0	outstanding	at	any	time.	The	aggregate	face	amount	of	letters	of	credit	may	not	exceed	$600.0	at any	time.	The	Credit	Agreement	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	the	$600.0	limit	on	letters	of	credit.	We	have	not	drawn	on	the	Credit	Agreement	or	our	previous	committed	credit	agreements	since	late	2003.	We	are not	subject	to	any	financial	or	other	material	restrictive	covenants	under	the	Credit	Agreement.	For	additional	information,	see	Notes	10	and	11	to	the	Consolidated	Financial	Statements.

# Other	Credit	Facilities

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.	There	were	borrowings	under	the	uncommitted	facilities	made	by	several	of	our	subsidiaries	outside	the	United	States	totaling	$80.3	and $53.7	as	of	December	31,	2006	and	2005,	respectively.	We	have	guaranteed	the	repayment	of	some	of	these	borrowings	by	our	subsidiaries.	If	we	lose	access	to	these	credit	lines,	we	would	have	to provide	funding	directly	to	some	overseas	operations.	The	weighted-average	interest	rate	on	outstanding	balances	under	the	uncommitted	short-term	facilities	as	of	December	31,	2006	and	2005	was approximately	5%	in	each	year.

# 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.	The	aggregate	amount	of	outstanding	letters	of	credit issued	for	our	account	under	the	Credit	Agreement	and	our	previous	committed	credit	agreement	was	$219.9	and	$162.4	as	of	December	31,	2006	and	2005,	respectively.	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	an	agreed-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	December	31,	2006	and	2005	a	gross	amount	of	$1,052.5	and $842.6,	respectively,	in	cash	was	netted	against	an	equal	gross	amount	of	overdrafts	under	pooling	arrangements.

# CREDIT	AGENCY	RATINGS

Our	long-term	debt	credit	ratings	as	of	February	16,	2007	were	Ba3	with	negative	outlook,	B	CreditWatch	negative	and	B	with	negative	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.

# CONTRACTUAL	OBLIGATIONS

The	following	summarizes	our	estimated	contractual	obligations	at	December	31,	2006,	and	their	effect	on	our	liquidity	and	cash	flow	in	future	periods:

|  | 2007 | 2008 | 2009 | 2010 | 2011 | Thereafter | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Long-term\tdebt\t1 | $2.6 | $2.8 | $257.0 | $240.9 | $500.0 | $1,247.9 | $2,251.2 |
| Interest\tpayments | \t122.0 | \t116.1 | \t107.1 | 93.6 | 75.1 | 74.1 | 588.0 |
| Non-cancelable\toperating\tlease\tobligations | \t292.3 | \t265.2 | \t237.4 | \t207.9 | \t181.9 | 861.2 | \t2,045.9 |
| Contingent\tacquisition\tpayments\t2 | 47.2 | 34.2 | 20.8 | 2.5 | 2.0 | 3.1 | 109.8 |

1	 Holders	of	our	$400.0	4.50%	Notes	may	require	us	to	repurchase	their	Notes	for	cash	at	par	in	March	2008.	These	Notes	will	mature	in	2023	if	not	converted	or	repurchased.

2	 We	have	structured	certain	acquisitions	with	additional	contingent	purchase	price	obligations	in	order	to	reduce	the	potential	risk	associated	with	negative	future	performance	of	the	acquired	entity.	All	payments	are	contingent	upon achieving	projected	operating	performance	targets	and	satisfying	other	conditions	specified	in	the	related	agreements	and	are	subject	to	revisions	as	the	earn-out	periods	progress.	See	Note	18	to	the	Consolidated	Financial	Statements	for further	information.

We	have	not	included	obligations	under	our	pension	and	postretirement	benefit	plans	in	the	contractual	obligations	table.	Our	funding	policy	regarding	our	funded	pension	plan	is	to	contribute amounts	necessary	to	satisfy	minimum	pension	funding	requirements	plus	such	additional	amounts	from	time	to	time	as	are	determined	to	be	appropriate	to	improve	the	plans'	funded	status.	The	funded status	of	our	pension	plans	is	dependent	upon	many	factors,	including	returns	on	invested	assets,	level	of	market	interest	rates	and	levels	of	voluntary	contributions	to	the	plans.	Declines	in	long-term interest	rates	have	had	a	negative	impact	on	the	funded	status	of	the	plans.	For	2007,	we	do	not	expect	to	contribute	to	our	domestic	pension	plans,	and	expect	to	contribute	$20.6	to	our	foreign	pension plans.

We	have	not	included	our	deferred	tax	obligations	in	the	contractual	obligations	table	as	the	timing	of	any	future	payments	in	relation	to	these	obligations	is	uncertain.

# DERIVATIVES	AND	HEDGING	ACTIVITIES

We	periodically	enter	into	interest	rate	swap	agreements	and	forward	contracts	to	manage	exposure	to	interest	rate	fluctuations	and	to	mitigate	foreign	exchange	volatility.	In	May	of	2005,	we terminated	all	of	our	long-term	interest	rate	swap	agreements	covering	the	$350.0	6.25%	Senior	Unsecured	Notes	and	$150.0	of	the	$500.0	7.25%	Senior	Unsecured	Notes.	In	connection	with	the	interest rate	swap	termination,	our	net	cash	receipts	were	$1.1,	which	is	recorded	as	an	offset	to	interest	expense	over	the	remaining	life	of	the	related	debt.

We	have	entered	into	foreign	currency	transactions	in	which	various	foreign	currencies	are	bought	or	sold	forward.	These	contracts	were	entered	into	to	meet	currency	requirements	arising	from specific	transactions.	The	changes	in	value	of	these	forward	contracts	have	been	recorded	in	other	income	or	expense.	As	of	December	31,	2006	and	2005,	we	had	contracts	covering	$0.2	and	$6.2, respectively,	of	notional	amount	of	currency	and	the	fair	value	of	the	forward	contracts	was	negligible.

The	terms	of	the	4.50%	Notes	include	two	embedded	derivative	instruments	and	the	terms	of	our	4.25%	Notes	and	our	Series	B	Preferred	Stock	each	include	one	embedded	derivative	instrument. The	fair	value	of	these	derivatives	on	December	31,	2006	was	negligible.

# OUT-OF-PERIOD	AMOUNTS

During	2006,	we	recorded	adjustments	to	certain	vendor	discounts	and	credits,	contractual	liabilities,	foreign	exchange,	tax	and	other	miscellaneous	items	which	related	to	prior	periods.	For	the year	ended	December	31,	2006,	these	adjustments	resulted	in	a	net	favorable	impact	to	revenue	of	$9.1,	a	net	favorable	impact	to	salaries	and	related	expenses	of	$5.1,	a	net	unfavorable	impact	to	office and	general	expenses	of	$6.6	and	a	net	favorable	impact	to	net	loss	of	$6.9.	The	operating	income	impact	of	these	adjustments	primarily	affected	our	IAN	segment.	Because	these	changes	are	not	material to	our	financial	statements	for	the	periods	prior	to	2006,	for	the	quarters	of	2006	or	for	2006	as	a	whole,	we	recorded	these	out-of-period	amounts	in	their	respective	quarters	of	2006.	See	also	Note	21	to the	Consolidated	Financial	Statements	for	additional	information.

# Three	Months	Ended	December	31,	2005

In	the	fourth	quarter	of	2005,	we	recorded	adjustments	to	certain	vendor	discounts	and	credits,	tax,	and	other	miscellaneous	items	which	related	to	prior	periods.	Because	these	adjustments	were not	material	to	our	financial	statements	for	the	periods	prior	to	2005	or	for	2005	as	a	whole,	we	have	recorded	them	in	the	fourth	quarter	of	2005.

The	following	table	details	the	impact	these	out-of-period	amounts	have	on	the	results	for	the	three	months	ended	December	31,	2005	compared	to	the	three	months	ended	December	31,	2004	on a	consolidated	and	segment	basis.

|  |  | For	the	three	months	ended	December	31, | For	the	three	months	ended	December	31, |  | (unfavorable) |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | (as\treported) | (as\treported) | (as\treported) | (as\treported) | out-of-period |
|  | 2005 | 2004 | $\tchange | %\tchange | amounts |
| Consolidated\tresults\tof\toperations |  |  |  |  |  |
| Revenue | $ 1,895.7 | $ 1,965.7 | $(70.0) | (3.6)% | $(17.3) |
| Salaries\tand\trelated\texpenses | \t 1,107.5 | \t 1,021.9 | 85.6 | 8.4% | (3.2) |
| Office\tand\tgeneral\texpenses | 637.1 | 630.3 | 6.8 | 1.1% | (6.1) |
| Segment\tresults\tof\toperations |  |  |  |  |  |
| IAN |  |  |  |  |  |
| Revenue | $ 1,614.8 | $ 1,700.0 | $(85.2) | (5.0)% | $(17.8) |
| Operating\tincome | 221.2 | 359.2 | (138.0) | (38.4)% | (22.1) |
| CMG |  |  |  |  |  |
| Revenue | $280.6 | $261.0 | $19.6 | 7.5% | $0.5 |
| Operating\tincome | 30.7 | 29.7 | 1.0 | 3.4% | (3.5) |

# INTERNAL	CONTROL	OVER	FINANCIAL	REPORTING

We	have	identified	numerous	material	weaknesses	in	our	internal	control	over	financial	reporting,	as	set	forth	in	greater	detail	in	Item	8,	Management's	Assessment	of	Internal	Control	Over Financial	Reporting	and	Item	9A,	Controls	and	Procedures,	in	this	report.	Each	of	our	material	weaknesses	results	in	more	than	a	remote	likelihood	that	a	material	misstatement	of	the	annual	or	interim financial	statements	will	not	be	prevented	or	detected.	As	a	result,	we	have	determined	that	our	internal	control	over	financial	reporting	was	not	effective	as	of	December	31,	2006.

We	are	in	the	process	of	implementing	remedial	measures	to	address	the	material	weaknesses	in	our	internal	control	over	financial	reporting.	We	continue	to	have	extensive	work	remaining	to remediate	our	remaining	material	weaknesses.	The	magnitude	of	the	work	is	attributable	partly	to	our	decentralized	structure	and	the	number	of	disparate	accounting	systems	of	varying	quality	and sophistication.	We	have	developed	a	work	plan	with	the	goal	of	remediating	all	of	the	identified	material	weaknesses	by	the	time	we	file	our	Annual	Report	on	Form	10-K	for	the	year	ending December	31,	2007.	There	can	be	no	assurance,	however,	as	to	when	the	remediation	plan	will	be	fully	implemented	and	all	the	material	weaknesses	remediated.	There	also	can	be	no	assurance	that	new problems	will	not

be	found	in	the	future.	Until	our	remediation	is	completed,	we	will	continue	to	incur	the	expenses	and	management	burdens	associated	with	the	manual	procedures	and	additional	resources	required	to prepare	our	Consolidated	Financial	Statements.

# OTHER	MATTERS

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	set	forth	in	our	2004 Annual	Report	on	Form	10-K	filed	in	September	2005.	In	particular,	since	we	filed	our	2004	Annual	Report	on	Form	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	on	Form	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, 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.

# Review	of	Stock	Option	Practices

During	the	third	quarter	of	2006,	at	our	recommendation,	our	Audit	Committee	retained	independent	counsel	to	review	our	stock	option	practices	related	to	our	current	and	prior	senior	officers for	a	10-year	period	beginning	in	1996.	We	also	performed	a	comprehensive	accounting	review	that	supplemented	the	review	done	by	independent	counsel.	These	reviews	were	completed	during	the fourth	quarter	of	2006.	Based	on	these	reviews,	in	the	third	quarter	of	2006	we	recorded	a	charge	of	$26.4	to	accumulated	deficit,	a	$23.3	credit	to	additional	paid-in	capital	and	a	$3.1	credit	to	other	non- current	liabilities.	See	Note	20	to	the	Consolidated	Financial	Statements	for	further	discussion.

# RECENT	ACCOUNTING	STANDARDS

See	Note	19	to	the	Consolidated	Financial	Statements	for	a	complete	description	of	recent	accounting	pronouncements	that	have	affected	us	or	may	affect	us.

In	the	normal	course	of	business,	we	are	exposed	to	market	risks	related	to	interest	rates	and	foreign	currency	rates.	From	time	to	time,	we	use	derivatives,	pursuant	to	established	guidelines	and policies,	to	manage	some	portion	of	these	risks.	Derivative	instruments	utilized	in	our	hedging	activities	are	viewed	as	risk	management	tools,	involve	little	complexity	and	are	not	used	for	trading	or speculative	purposes.

# Interest	Rates

Our	exposure	to	market	risk	for	changes	in	interest	rates	relates	primarily	to	our	debt	obligations.	As	of	December	31,	2006	and	2005,	85.1%	and	86.0%	of	our	debt	obligations	bore	interest	at fixed	interest	rates.	Accordingly,	assuming	the	fixed-rate	debt	is	not	refinanced,	there	would	be	no	impact	on	interest	expense	or	cash	flow	from	either	a	10%	increase	or	decrease	in	market	rates	of interest.	However,	there	would	be	an	impact	on	the	fair	market	value	of	the	debt,	as	the	fair	market	value	of	debt	is	sensitive	to	changes	in	interest	rates.	For	2006,	the	fair	market	value	of	the	debt obligations	would	decrease	by	$28.8	if	market	rates	were	to	increase	by	10%	and	would	increase	by	$29.5	if	market	rates	were	to	decrease	by	10%.	For	2005,	the	fair	market	value	of	the	debt	obligations would	have	decreased	by	$27.7	if	market	rates	increased	by	10%	and	would	have	increased	by	$28.0	if	market	rates	decreased	by	10%.	For	that	portion	of	the	debt	that	bore	interest	at	variable	rates, based	on	outstanding	amounts	and	rates	at	December	31,	2006,	interest	expense	and	cash	out-flow	would	increase	or	decrease	by	$2.3	if	market	rates	were	to	increase	or	decrease	by	10%,	respectively. For	that	portion	of	the	debt	that	bore	interest	at	variable	rates,	based	on	outstanding	amounts	and	rates	at	December	31,	2005,	interest	expense	and	cash	out-flow	would	have	increased	or	decreased	by $2.1	if	market	rates	increased	or	decreased	by	10%,	respectively.	Interest	rate	swaps	have	been	used	to	manage	the	mix	of	our	fixed	and	floating	rate	debt	obligations.	In	May	2005,	we	terminated	all	our existing	long-term	interest	rate	swap	agreements,	and	currently	have	none	outstanding.

# Foreign	Currencies

We	face	translation	and	transaction	risks	related	to	changes	in	foreign	currency	exchange	rates.	Amounts	invested	in	our	foreign	operations	are	translated	into	U.S.	Dollars	at	the	exchange	rates	in effect	at	the	balance	sheet	date.	The	resulting	translation	adjustments	are	recorded	as	a	component	of	accumulated	other	comprehensive	income	(loss)	in	the	stockholders'	equity	section	of	our Consolidated	Balance	Sheet.	Our	foreign	subsidiaries	generally	collect	revenues	and	pay	expenses	in	currencies	other	than	the	U.S.	Dollar,	mitigating	transaction	risk.	Since	the	functional	currency	of	our foreign	operations	is	generally	the	local	currency,	foreign	currency	translation	of	the	balance	sheet	is	reflected	as	a	component	of	stockholders'	equity	and	does	not	impact	operating	results.	Since	we report	revenues	and	expenses	in	U.S.	Dollars	changes	in	exchange	rates	may	either	positively	or	negatively	affect	our	consolidated	revenues	and	expenses	(as	expressed	in	U.S.	Dollars)	from	foreign operations.	Currency	transaction	gains	or	losses	arising	from	transactions	in	currencies	other	than	the	functional	currency	are	included	in	results	of	operations	and	were	not	significant	in	the	years	ended December	31,	2006	and	2005.	We	have	not	entered	into	a	material	amount	of	foreign	currency	forward	exchange	contracts	or	other	derivative	financial	instruments	to	hedge	the	effects	of	adverse fluctuations	in	foreign	currency	exchange	rates.

# INDEX

| Management's	Assessment	of	Internal	Control	over	Financial	Reporting | 41 |
| :--- | :--- |
| Report\tof\tIndependent\tRegistered\tPublic\tAccounting\tFirm | 46 |
| Consolidated\tStatements\tof\tOperations\tfor\tthe\tyears\tended\tDecember\t31,\t2006,\t2005\tand\t2004 | 49 |
| Consolidated\tBalance\tSheets\tas\tof\tDecember\t31,\t2006\tand\t2005 | 50 |
| Consolidated\tStatements\tof\tCash\tFlows\tfor\tthe\tyears\tended\tDecember\t31,\t2006,\t2005\tand\t2004 | 51 |
| Consolidated\tStatements\tof\tStockholders'\tEquity\tand\tComprehensive\tLoss\tfor\tthe\tyears\tended\tDecember\t31,\t2006,\t2005\tand\t2004 | 52 |
| Notes\tto\tConsolidated\tFinancial\tStatements | 53 |
| 1.\tSummary\tof\tSignificant\tAccounting\tPolicies | 53 |
| 2.\tRestructuring\tand\tOther\tReorganization-Related\tCharges\t(Reversals) | 58 |
| 3.\tAcquisitions\tand\tDispositions | 60 |
| 4.\tSupplementary\tData | 62 |
| 5.\tLoss\tPer\tShare | 65 |
| 6.\tAccumulated\tOther\tComprehensive\tLoss | 66 |
| 7.\tGoodwill\tand\tOther\tIntangible\tAssets | 66 |
| 8.\tLong-Lived\tAsset\tImpairment\tand\tOther\tCharges | 67 |
| 9.\tProvision\tfor\tIncome\tTaxes | 68 |
| 10.\tDebt | 71 |
| 11.\tWarrants | 75 |
| 12.\tConvertible\tPreferred\tStock | 76 |
| 13.\tEmployee\tBenefits | 77 |
| 14.\tStock-Based\tCompensation | 84 |
| 15.\tSegment\tInformation | 88 |
| 16.\tFinancial\tInstruments | 91 |
| 17.\tDerivative\tand\tHedging\tInstruments | 92 |
| 18.\tCommitments\tand\tContingencies | 93 |
| 19.\tRecent\tAccounting\tStandards | 95 |
| 20.\tReview\tof\tStock\tOption\tPractices | 96 |
| 21.\tOut-of-Period\tAdjustments | 98 |
| 22.\tResults\tby\tQuarter\t(Unaudited) | 99 |

# MANAGEMENT'S	ASSESSMENT	OF	INTERNAL	CONTROL	OVER	FINANCIAL	REPORTING

Management	is	responsible	for	establishing	and	maintaining	adequate	internal	control	over	financial	reporting	as	defined	in	Rules	13a-15(f)	and	15d-15(f)	under	the	Securities	Exchange	Act	of 1934,	as	amended.	Internal	control	over	financial	reporting	is	designed	to	provide	reasonable	assurance	regarding	the	reliability	of	financial	reporting	and	the	preparation	of	financial	statements	for external	purposes	in	accordance	with	generally	accepted	accounting	principles	in	the	United	States	of	America	("GAAP").	We	recognize	that	because	of	its	inherent	limitations,	internal	control	over financial	reporting	may	not	prevent	or	detect	misstatements.	Also,	projections	of	any	evaluation	of	effectiveness	to	future	periods	are	subject	to	the	risk	that	controls	may	become	inadequate	because	of changes	in	conditions,	or	that	the	degree	of	compliance	with	the	policies	and	procedures	may	deteriorate.

To	evaluate	the	effectiveness	of	our	internal	control	over	financial	reporting,	management	used	the	criteria	described	in	Internal	Control	—	Integrated	Framework	issued	by	the	Committee	of Sponsoring	Organizations	of	the	Treadway	Commission	("COSO").

A	material	weakness	in	internal	control	over	financial	reporting	is	a	control	deficiency,	or	combination	of	control	deficiencies,	that	results	in	more	than	a	remote	likelihood	that	a	material misstatement	of	the	annual	or	interim	financial	statements	will	not	be	prevented	or	detected.	In	connection	with	management's	assessment	of	our	internal	control	over	financial	reporting,	we	identified	the following	material	weaknesses	in	our	internal	control	over	financial	reporting	as	of	December	31,	2006.

1. The	Company	did	not	maintain	an	effective	control	environment.	Specifically,	the	Company	did	not	maintain	a	sufficient	complement	of	personnel	throughout	its	worldwide	offices	with an	appropriate	level	of	accounting	knowledge,	experience	and	training	in	the	application	of	GAAP	commensurate	with	the	Company's	financial	reporting	requirements.	In	addition,	the Company	did	not	maintain	effective	controls	over	the	monitoring	of	its	existing	internal	control	activities	over	financial	reporting	and,	instead,	placed	heavy	reliance	on	manual procedures	without	sufficient	review.	Further,	controls	were	not	effective	at	ensuring	employees'	acknowledgement	of	the	Company's	Code	of	Conduct.

The	material	weakness	described	above	has	had	a	pervasive	impact	on	the	Company's	control	environment	and	has	contributed	to	the	material	weaknesses	described	below.

2. The	Company	did	not	maintain	effective	controls	over	accuracy,	presentation	and	disclosure	in	recording	revenue.	Specifically,	controls	were	not	designed	and	in	place	to	ensure	that customer	contracts	were	authorized,	that	customer	contracts	were	analyzed	to	select	the	appropriate	method	of	revenue	recognition	and	to	identify	contracts	with	client	or	vendor incentives	and	rebates,	that	amounts	recorded	were	compared	to	amounts	billed	to	clients,	and	that	billable	job	costs	were	compared	to	client	cost	estimates	to	ensure	that	no	amounts	were owed	to	clients.	In	addition,	controls	were	not	designed	and	in	place	to	ensure	that	revenue	transactions	were	analyzed	for	appropriate	presentation	and	disclosure	of	billable	client	pass- through	expenses	or	for	recognition	of	revenue	on	a	gross	or	net	basis.

3. The	Company	did	not	maintain	effective	controls	to	ensure	that	certain	financial	statement	transactions	and	journal	entries,	both	recurring	and	non-recurring,	were	appropriately	initiated, authorized,	processed,	documented,	accurately	recorded,	and	reviewed.	This	was	evident	in	the	following	specific	areas:

i.				accounts	receivable	transactions,	expenditures	and	fees	billable	to	clients;

ii.			fixed	asset	purchases,	disposals	and	depreciable	lives;

iii.		accounts	payable	and	accrued	liabilities;

iv.			employee	and	executive	compensation	and	benefits;

v.				derivative	instruments;

vi.			cash	and	cash	equivalents,	wire	transfers,	and	foreign	currency	transactions;

vii.		equity	investments	in	unconsolidated	entities;	and viii.	debt	and	equity	transactions.

4. The	Company	did	not	maintain	effective	controls	over	(1)	the	accounting	for	income	taxes	to	ensure	amounts	are	accurately	recorded	in	accordance	with	GAAP,	and	(2)	the	reporting	of income	tax	in	the

statutory	accounts	or	income	tax	returns	for	operations	outside	of	the	United	States.	Specifically,	the	Company	did	not	have	controls	designed	and	in	place	to:

i. analyze	the	income	tax	provision	on	the	statement	of	operations,	and	deferred	taxes	on	the	balance	sheet,	to	determine	appropriate	account	balances	for	GAAP	reporting;

ii. reconcile	income	tax	returns	to	the	appropriate	period	income	tax	calculations;

iii. identify	income	tax	exposures	and	contingencies,	including	interest	and	penalties,	in	a	timely	manner;	and

iv. for	non-U.S.	operations	only,	maintain	an	accurate	and	current	legal	entity	listing,	and	adhere	to	policy	and	procedures	regarding	compliance	with	local	laws	and	regulations.

This	deficiency	resulted	in	audit	adjustments	to	the	2006	annual	consolidated	financial	statements,	which	impacted	deferred	income	taxes,	the	provision	for	income	taxes	and	other	comprehensive loss.

5. The	Company	did	not	maintain	effective	controls	relating	to	the	completeness	and	accuracy	of	local	payroll	and	compensation-related	liabilities	in	certain	operations.	Specifically,	the Company	did	not	have	controls	designed	and	in	place	to:

i. identify	instances	where	local	reporting	regulations	and	payroll	tax	withholding	requirements	were	not	met,	or	to	identify	compensation	practices	which	were	either	not supportable	under	local	law	or	were	not	fully	in	accordance	with	the	Company's	policies	and	procedures;	and

ii. ensure	that	the	underlying	records	support	liabilities	related	to	employee	compensation,	including	an	inventory	of	employee	benefit	plans,	the	calculation	of	pension	liabilities	and changes	made	to	benefit	plans	which	impact	the	Company's	compliance	with	certain	employment	and	tax	regulations.

6. The	Company	did	not	maintain	effective	controls	over	the	safeguarding	of	assets.	Controls	were	not	designed	and	in	place	to	segregate	responsibility	and	authority	between	initiating, processing	and	recording	of	transactions.

7. The	Company	did	not	maintain	effective	controls	over	access	and	changes	to	the	Company's	financial	applications	and	data,	and	controls	over	spreadsheets	used	in	the	Company's financial	reporting	process.	Specifically,	controls	were	not	designed	and	in	place	to	ensure	that	access	to	certain	financial	applications,	data	and	spreadsheets	at	certain	locations	was adequately	restricted	to	authorized	personnel,	and	that	changes	to	financial	applications	were	documented	and	tested.	Also,	controls	were	not	designed	and	in	place	to	ensure	that unauthorized	modification	of	the	data	or	formulas	within	spreadsheets	would	be	prevented.

The	control	deficiencies	described	above	could	result	in	misstatements	of	account	balances	or	disclosures	that	would	be	material	to	the	annual	or	interim	consolidated	financial	statements	that would	not	be	prevented	or	detected.	Accordingly,	management	has	concluded	that	each	of	the	control	deficiencies	noted	above	constitutes	a	material	weakness	and	that	our	internal	control	over	financial reporting	was	not	effective	as	of	December	31,	2006.

Management's	assessment	of	the	effectiveness	of	the	Company's	internal	control	over	financial	reporting	as	of	December	31,	2006	has	been	audited	by	PricewaterhouseCoopers	LLP	("PwC"), our	independent	registered	public	accounting	firm.	PwC's	report	is	included	in	this	Item	8.

# REMEDIATION	OF	CERTAIN	MATERIAL	WEAKNESSES	IN

# INTERNAL	CONTROL	OVER	FINANCIAL	REPORTING	DISCLOSED	IN	OUR

During	the	fourth	quarter	of	2006,	there	were	changes	in	internal	control	that	have	materially	affected,	or	are	reasonably	likely	to	materially	affect,	our	internal	control	over	financial	reporting.

Also,	in	relation	to	these	changes	in	internal	controls,	during	the	fourth	quarter	of	2006,	management	completed	its	testing	to	validate	the	effectiveness	of	its	remedial	measures,	and	concluded that	controls	related	to	the	remediation	of	certain	of	the	material	weaknesses	previously	disclosed	in	the	2005	Annual	Report	on	Form	10-K	were	designed,	in	place	and	operating	effectively	for	a sufficient	period	of	time	for	management	to	determine	that

the	material	weaknesses	were	remediated	as	of	December	31,	2006.	Material	weaknesses	in	the	following	areas	were	remediated:

•		the	accounting	for	purchase	business	combinations	and	the	completeness,	accuracy	and	valuation	of	assets	and	liabilities	recorded	for	compensatory	earn-out	and	put	arrangements	and derivatives	embedded	within	acquisition	transactions;

•		the	complete	and	accurate	recording	of	leases	in	accordance	with	GAAP;

•		the	accuracy	and	completeness	of	the	processing	and	monitoring	of	intercompany	transactions;

•		the	reconciliation	of	financial	statement	accounts;

•		the	analysis	of	certain	financial	statement	accounts	to	value	and	record	them	in	a	timely,	accurate	and	complete	manner;

•		the	period-end	financial	reporting	process;

•		the	documentation,	testing	and	evaluation	of	controls	at	independent	service	providers,	including	those	to	which	we	outsource	certain	payroll	processing	services	in	North	America;	and •		the	communication	of	policies	and	procedures.

The	changes	to	our	internal	control	over	financial	reporting	for	each	of	the	remediated	material	weaknesses	were	as	follows:

•		For	purchase	business	combinations,	we	have	(i)	implemented	controls	to	ensure	that	our	acquisition	database,	which	is	used	to	track	all	pending	and	completed	acquisitions,	properly reflects	all	information	relevant	to	an	acquisition,	including	the	review	sign-offs	by	appropriate	personnel,	(ii)	developed	new	procedures	to	ensure	the	term	sheet	and	acquisition	agreements are	circulated	to	and	reviewed	by	the	appropriate	personnel	in	the	Controllers,	Corporate	Development,	Treasury	and	Legal	departments,	and	(iii)	instituted	monthly	meetings	between	the Corporate	Controllers	and	Corporate	Development	departments	to	review	the	status	of	current	and	potential	acquisitions.	For	compensatory	earn-out	and	put	arrangements	or	derivatives embedded	within	acquisition	transactions,	we	implemented	controls	to	require	approval	from	our	operating	management,	as	well	as	members	of	our	Corporate	Controllers,	Corporate Development	and	Tax	departments,	prior	to	the	execution	of	the	related	agreement.

•		For	leases,	we	centralized	the	review,	recording	and	monitoring	of	lease	accounting	and	reporting	at	one	of	our	shared	service	centers.	Also,	we	now	require	that	our	Accounting	Policy group	review	the	accounting	for	significant	new	or	amended	leases,	the	early	termination	of	leases,	and	the	exit	of	facilities	under	lease.

•		For	intercompany	transactions,	we	established	a	standard	set	of	accounts,	implemented	standard	processes	around	intercompany	settlements	and	dispute	resolution,	and	rolled	out	a company-wide	intercompany	matching	tool	designed	to	facilitate	the	identification	and	resolution	of	intercompany	differences.	Controls	have	been	established	to	facilitate	the	timely review,	resolution	and	elimination	of	intercompany	balances	and	activity.

•		For	account	reconciliations,	we	implemented	a	web-based	reconciliation	and	monitoring	tool	for	certain	accounts	based	on	the	risk,	size	and	level	of	activity	in	accounts.	Additionally,	we performed	extensive,	mandatory	training	throughout	the	Company	to	ensure	that	personnel	understood	and	adhered	to	the	revised	policies	and	procedures	related	to	account	reconciliations. •		For	account	analyses,	we	implemented	ongoing	review	procedures	at	the	local,	regional	and	consolidated	reporting	levels	as	part	of	the	monthly	closing	process.	We	also	performed extensive,	mandatory	training	throughout	the	Company	to	ensure	that	personnel	understood	and	adhered	to	the	policies	and	procedures	related	to	account	analyses. •		For	the	period-end	financial	reporting	process,	we	hired	personnel	in	the	Corporate	Controllers	department	possessing	GAAP	and	SEC	reporting	knowledge	and	experience,	and implemented	procedures	and	controls,	including	closing	schedules,	checklists	and	revised	reporting	package	schedules,	to	allow	for	the	timely	and	accurate	presentation	and	review	of financial	statement	accounts	and	disclosures.

•		For	independent	service	providers,	we	performed	an	inventory	of	outsourced	processes	and	controls,	and	developed	a	standard	set	of	user	controls,	assessment	forms,	and	guidelines	for determining	whether	outsourced	work	requires	a	service	auditor's	report	in	accordance	with	Statement	on	Auditing	Standards	No.	70,	Service	Organizations.

•		For	the	communication	of	and	adherence	to	Company	policies	and	procedures,	our	Chief	Risk	Officer	distributed	a	summary	of	new	or	modified	policies	and	procedures	that	have	been posted	to	the	Company's	Policy	and	Procedure	website	each	quarter.	Updated	policies	and	procedures	were	prepared	and

communicated,	and	training	provided,	in	relation	to	all	of	the	above	material	weaknesses	remediated	in	the	fourth	quarter	of	2006.

# ONGOING	REMEDIATION	OF	MATERIAL	WEAKNESSES	IN	INTERNAL	CONTROL	OVER	FINANCIAL	REPORTING	AS	OF	DECEMBER	31,	2006

Management	initiated	a	comprehensive	remediation	program,	aimed	at	remediating	the	material	weaknesses	disclosed	in	our	2005	Annual	Report	on	Form	10-K	by	December	31,	2007.	Cross- functional	teams	were	established	to	focus	on	the	material	weaknesses.	Each	team,	led	by	the	Corporate	Controller,	went	through	a	comprehensive	process	to	identify	and	assess	the	problems	relating	to the	material	weaknesses,	outline	and	assess	potential	solutions,	finalize	recommended	solutions,	and	create	an	implementation	plan	to	improve	financial	controls	and	remediate	the	material	weaknesses. During	2006,	we	combined	multiple	agency	controller	organizations	by	region,	except	in	North	America,	into	a	central	unit.	Each	region	operates	using	a	consistent	methods	and	procedures	manual, which	is	intended	to	provide	uniform	monitoring	control	of	our	agencies	around	the	world.	We	also	developed	tools	and	documentation	to	apply	uniform	monitoring	control	standards	throughout	the organization.	The	regional	teams	also	conduct	site	visits	to	various	agencies	to	review	results	and	perform	monitoring	procedures	to	ensure	that	the	appropriate	processes	are	followed.	As	discussed	in	the previous	section,	these	actions	and	specific	changes	in	internal	control	over	financial	reporting	resulted	in	the	remediation	of	certain	material	weaknesses	during	the	fourth	quarter	of	2006.

We	continue	to	have	extensive	work	remaining	to	remediate	our	remaining	material	weaknesses.	The	magnitude	of	the	work	is	attributable	partly	to	our	decentralized	structure	and	the	number	of disparate	accounting	systems	of	varying	quality	and	sophistication	that	we	utilize	across	the	Company.	We	have	developed	a	work	plan	with	the	goal	of	remediating	all	of	the	identified	material weaknesses	by	the	time	we	file	our	Annual	Report	on	Form	10-K	for	the	year	ending	December	31,	2007.	There	can	be	no	assurance,	however,	as	to	when	the	remediation	plan	will	be	fully	implemented and	all	the	material	weaknesses	remediated.	There	also	can	be	no	assurance	that	new	problems	will	not	be	found	in	the	future.

Common	actions	we	have	taken	and	continue	to	take,	and	which	were	instrumental	in	remediating	certain	material	weaknesses	during	the	fourth	quarter	of	2006,	include:

•		new	or	enhanced	policies,	and	methods	and	procedure	guides;

•		revised	work	processes;

•		enhanced	monitoring	and	communications;

•		new	or	enhanced	templates	and	analytic	tools;

•		training	and	skills	development;

•		clarified	accountabilities	and	structure;	and

•		updated	control	procedures	and	test	plans	to	reflect	new	policies,	processes	and	procedures	and	evidenced	implementation.

In	addition,	the	following	ongoing	remedial	actions	continue	to	be	implemented	across	our	operating	units:

•		Meetings	with	management	of	our	financial	and	operating	units	to	ensure	their	understanding	of	the	procedures	to	be	followed	and	requirements	to	be	met	prior	to	executing	required internal	management	certification	letters	to	accompany	the	financial	statements	they	submit.

•		Continuing	to	formalize	direct	Corporate	oversight	of	all	financial	personnel	company-wide	with	accounting	and	control-related	responsibilities.

•		Continuing	a	focused	effort	to	establish	controls	to	deter	and	detect	fraud	with	significant	oversight	and	input	by	our	Board	of	Directors	and	Audit	Committee,	including,	but	not	limited	to,

ensuring	proper	follow-up	and	resolution	of	whistleblowers'	assertions.	We	have	communicated	to	our	locations	that	an	anonymous	alert	line	is	in	place	and	is	there	to	use	if	employees	do not	feel	comfortable	with	communicating	with	their	local	management.

•		Establishing	standard	global	documentation	and	testing	requirements	of	internal	controls	over	financial	reporting	to	ensure	consistency	in	the	overall	evaluation	of	internal	controls	within our	operating	units	and	to	enable	focused	future	remediation	efforts	related	to	our	control	deficiencies.

•		Implementing	a	new	enterprise-wide	resource-planning	software	system	with	continuing	rollouts	through	early	2007.	This	implementation	will	allow	for	enhanced	reporting	of	our	results internally	across	the	Company,	and	will	also	allow	for	numerous	controls	to	be	automated	within	the	system.

•		Continuing	the	development	of	a	shared	services	organization	to	consolidate	various	financial	transactional	functions	to	attain	efficiencies	and	improve	controls	surrounding	these	activities.

•		Continuing	to	assess	the	accounting	and	finance	personnel	at	our	agencies.	In	some	cases,	we	have	already	either	replaced	personnel	or	hired	additional	resources.

•		Updating	and	continuing	to	enhance	accounting	and	finance-related	policies	and	procedures.

•		Establishing	revised	quarterly	reporting	for	tax	accounts,	updating	and	enhancing	tax-related	policies	and	procedures,	and	increasing	tax	training	at	regional	and	local	levels.	We	also	hired	a team	of	professionals	solely	to	ensure	that	the	tax	reporting	information	is	being	provided	timely	and	accurately.

•		Engaging	outside	professional	tax	advisors	to	review	the	local	income	tax	returns	of	each	subsidiary	outside	of	the	U.S.	prior	to	filing	in	order	to	ensure	they	are	filed	on	a	timely	basis	and are	prepared	in	accordance	with	local	law	and	regulations.

•		Requiring	written	approval	of	a	corporate	committee	consisting	of	senior	representatives	of	the	human	resources,	tax,	legal	and	accounting	functions	for	any	non-traditional	employment arrangement	or	payroll	practice.	In	addition,	all	existing	non-traditional	employment	arrangements	must	be	reviewed	by	senior	agency	financial	executives	and	a	formal	plan	proposed	to eliminate	those	arrangements	which	are	not	supportable	under	local	law	and	practice,	as	well	as	our	policies	and	procedures.

# REPORT	OF	INDEPENDENT	REGISTERED	PUBLIC	ACCOUNTING	FIRM

To	The	Board	of	Directors	and	Stockholders	of	The	Interpublic	Group	of	Companies,	Inc.

We	have	completed	integrated	audits	of	The	Interpublic	Group	of	Companies,	Inc.'s	2006	and	2005	consolidated	financial	statements	and	of	its	internal	control	over	financial	reporting	as	of December	31,	2006	and	an	audit	of	its	2004	consolidated	financial	statements	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Our	opinions,	based on	our	audits,	are	presented	below.

# Consolidated	financial	statements

In	our	opinion,	the	consolidated	balance	sheets	and	the	related	consolidated	statements	of	operations,	of	cash	flows,	of	stockholders	equity	and	comprehensive	loss	present	fairly,	in	all	material respects,	the	financial	position	of	The	Interpublic	Group	of	Companies,	Inc.	and	its	subsidiaries	at	December	31,	2006	and	December	31,	2005,	and	the	results	of	their	operations	and	their	cash	flows	for each	of	the	three	years	in	the	period	ended	December	31,	2006	in	conformity	with	accounting	principles	generally	accepted	in	the	United	States	of	America.	These	consolidated	financial	statements	are	the responsibility	of	the	Company's	management.	Our	responsibility	is	to	express	an	opinion	on	these	consolidated	financial	statements	based	on	our	audits.	We	conducted	our	audits	of	these	statements	in accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards	require	that	we	plan	and	perform	the	audit	to	obtain	reasonable	assurance	about whether	the	financial	statements	are	free	of	material	misstatement.	An	audit	of	financial	statements	includes	examining,	on	a	test	basis,	evidence	supporting	the	amounts	and	disclosures	in	the	financial statements,	assessing	the	accounting	principles	used	and	significant	estimates	made	by	management,	and	evaluating	the	overall	financial	statement	presentation.	We	believe	that	our	audits	provide	a reasonable	basis	for	our	opinion.

As	discussed	in	Note	13	to	the	consolidated	financial	statements,	the	Company	changed	the	manner	in	which	it	accounts	for	defined	benefit	pension	and	other	postretirement	plans	in	2006.

Also,	we	have	audited	management's	assessment,	included	in	Management's	Assessment	of	Internal	Control	Over	Financial	Reporting	appearing	under	Item	8,	that	the	Company	did	not	maintain effective	internal	control	over	financial	reporting	as	of	December	31,	2006,	because	the	Company	did	not	maintain:	(1)	an	effective	control	environment;	(2)	effective	controls	over	accuracy,	presentation and	disclosure	in	recording	revenue;	(3)	effective	controls	to	ensure	that	certain	financial	statement	transactions	and	journal	entries,	both	recurring	and	non-recurring,	were	appropriately	initiated, authorized,	processed,	documented,	accurately	recorded,	and	reviewed;	(4)	effective	controls	over	the	accounting	for	income	taxes	to	ensure	amounts	are	accurately	recorded	in	accordance	with	GAAP, and	the	reporting	of	income	tax	in	the	statutory	accounts	or	income	tax	returns	for	operations	outside	of	the	United	States;	(5)	effective	controls	relating	to	the	completeness	and	accuracy	of	local	payroll and	compensation-related	liabilities	in	certain	operations;	(6)	effective	controls	over	the	safeguarding	of	assets;	and	(7)	effective	controls	over	access	and	changes	to	the	Company's	financial	applications and	data,	and	controls	over	spreadsheets	used	in	the	Company's	financial	reporting	process,	based	on	criteria	established	in	Internal	Control	—	Integrated	Framework	issued	by	the	Committee	of Sponsoring	Organizations	of	the	Treadway	Commission	(COSO).	The	Company's	management	is	responsible	for	maintaining	effective	internal	control	over	financial	reporting	and	for	its	assessment	of the	effectiveness	of	internal	control	over	financial	reporting.	Our	responsibility	is	to	express	opinions	on	management's	assessment	and	on	the	effectiveness	of	the	Company's	internal	control	over financial	reporting	based	on	our	audit.

We	conducted	our	audit	of	internal	control	over	financial	reporting	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards	require that	we	plan	and	perform	the	audit	to	obtain	reasonable	assurance	about	whether	effective	internal	control	over	financial	reporting	was	maintained	in	all	material	respects.	An	audit	of	internal	control	over financial	reporting	includes	obtaining	an	understanding	of	internal	control	over	financial	reporting,	evaluating	management's	assessment,	testing	and	evaluating	the	design	and	operating	effectiveness	of internal	control,	and	performing	such	other	procedures	as	we	consider	necessary	in	the	circumstances.	We	believe	that	our	audit	provides	a	reasonable	basis	for	our	opinions.

A	company's	internal	control	over	financial	reporting	is	a	process	designed	to	provide	reasonable	assurance	regarding	the	reliability	of	financial	reporting	and	the	preparation	of	financial statements	for	external	purposes	in	accordance	with	generally	accepted	accounting	principles.	A	company's	internal	control	over	financial	reporting

includes	those	policies	and	procedures	that	(i)	pertain	to	the	maintenance	of	records	that,	in	reasonable	detail,	accurately	and	fairly	reflect	the	transactions	and	dispositions	of	the	assets	of	the	company; (ii)	provide	reasonable	assurance	that	transactions	are	recorded	as	necessary	to	permit	preparation	of	financial	statements	in	accordance	with	generally	accepted	accounting	principles,	and	that	receipts and	expenditures	of	the	company	are	being	made	only	in	accordance	with	authorizations	of	management	and	directors	of	the	company;	and	(iii)	provide	reasonable	assurance	regarding	prevention	or timely	detection	of	unauthorized	acquisition,	use,	or	disposition	of	the	company's	assets	that	could	have	a	material	effect	on	the	financial	statements.

Because	of	its	inherent	limitations,	internal	control	over	financial	reporting	may	not	prevent	or	detect	misstatements.	Also,	projections	of	any	evaluation	of	effectiveness	to	future	periods	are subject	to	the	risk	that	controls	may	become	inadequate	because	of	changes	in	conditions,	or	that	the	degree	of	compliance	with	the	policies	or	procedures	may	deteriorate.

A	material	weakness	is	a	control	deficiency,	or	combination	of	control	deficiencies,	that	results	in	more	than	a	remote	likelihood	that	a	material	misstatement	of	the	annual	or	interim	financial statements	will	not	be	prevented	or	detected.	The	following	material	weaknesses	have	been	identified	and	included	in	management's	assessment.

vii. equity	investments	in	unconsolidated	entities;	and

viii. debt	and	equity	transactions.

4. The	Company	did	not	maintain	effective	controls	over	(1)	the	accounting	for	income	taxes	to	ensure	amounts	are	accurately	recorded	in	accordance	with	GAAP,	and	(2)	the	reporting	of income	tax	in	the	statutory	accounts	or	income	tax	returns	for	operations	outside	of	the	United	States.	Specifically,	the	Company	did	not	have	controls	designed	and	in	place	to:

The	control	deficiencies	described	above	could	result	in	misstatements	of	account	balances	or	disclosures	that	would	be	material	to	the	annual	or	interim	consolidated	financial	statements	that would	not	be	prevented	or	detected.

These	material	weaknesses	were	considered	in	determining	the	nature,	timing,	and	extent	of	audit	tests	applied	in	our	audit	of	the	2006	consolidated	financial	statements,	and	our	opinion regarding	the	effectiveness	of	the	Company's	internal	control	over	financial	reporting	does	not	affect	our	opinion	on	those	consolidated	financial	statements.

In	our	opinion,	management's	assessment	that	the	Company	did	not	maintain	effective	internal	control	over	financial	reporting	as	of	December	31,	2006,	is	fairly	stated,	in	all	material	respects, based	on	criteria	established	in	Internal	Control	—	Integrated	Framework	issued	by	the	COSO.	Also,	in	our	opinion,	because	of	the	effects	of	the	material	weaknesses	described	above	on	the	achievement of	the	objectives	of	the	control	criteria,	the	Company	has	not	maintained	effective	internal	control	over	financial	reporting	as	of	December	31,	2006,	based	on	criteria	established	in	Internal	Control	— Integrated	Framework	issued	by	the	COSO.

/s/		PricewaterhouseCoopers	LLP

# CONSOLIDATED	STATEMENTS	OF	OPERATIONS

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| REVENUE | $6,190.8 | $6,274.3 | $6,387.0 |
| OPERATING\tEXPENSES: |  |  |  |
| Salaries\tand\trelated\texpenses | \t3,944.1 | \t3,999.1 | \t3,733.0 |
| Office\tand\tgeneral\texpenses | \t2,079.0 | \t2,288.1 | \t2,250.4 |
| Restructuring\tand\tother\treorganization-related\tcharges\t(reversals) | 34.5 | (7.3) | 62.2 |
| Long-lived\tasset\timpairment\tand\tother\tcharges | 27.2 | 98.6 | 322.2 |
| Motorsports\tcontract\ttermination\tcosts | — | — | 113.6 |
| Total\toperating\texpenses | \t6,084.8 | \t6,378.5 | \t6,481.4 |
| OPERATING\tINCOME\t(LOSS) | 106.0 | (104.2) | (94.4) |
| EXPENSES\tAND\tOTHER\tINCOME: |  |  |  |
| Interest\texpense | (218.7) | (181.9) | (172.0) |
| Interest\tincome | 113.3 | 80.0 | 50.8 |
| Other\t(expense)\tincome | (5.6) | 19.5 | (51.4) |
| Total\t(expenses)\tand\tother\tincome | (111.0) | (82.4) | (172.6) |
| Loss\tfrom\tcontinuing\toperations\tbefore\tprovision\tfor\tincome\ttaxes | (5.0) | (186.6) | (267.0) |
| Provision\tfor\tincome\ttaxes | 18.7 | 81.9 | 262.2 |
| Loss\tfrom\tcontinuing\toperations\tof\tconsolidated\tcompanies | (23.7) | (268.5) | (529.2) |
| Income\tapplicable\tto\tminority\tinterests,\tnet\tof\ttax | (20.0) | (16.7) | (21.5) |
| Equity\tin\tnet\tincome\tof\tunconsolidated\taffiliates,\tnet\tof\ttax | 7.0 | 13.3 | 5.8 |
| Loss\tfrom\tcontinuing\toperations | (36.7) | (271.9) | (544.9) |
| Income\tfrom\tdiscontinued\toperations,\tnet\tof\ttax | 5.0 | 9.0 | 6.5 |
| NET\tLOSS | (31.7) | (262.9) | (538.4) |
| Dividends\ton\tpreferred\tstock | 47.6 | 26.3 | 19.8 |
| NET\tLOSS\tAPPLICABLE\tTO\tCOMMON\tSTOCKHOLDERS | $(79.3) | $(289.2) | $(558.2) |
| Loss\tper\tshare\tof\tcommon\tstock\t—\tbasic\tand\tdiluted |  |  |  |
| Continuing\toperations | $(0.20) | $(0.70) | $(1.36) |
| Discontinued\toperations | 0.01 | 0.02 | 0.02 |
| Total | $(0.19) | $(0.68) | $(1.34) |
| Weighted-average\tnumber\tof\tcommon\tshares\toutstanding\t—\tbasic\tand\tdiluted | 428.1 | 424.8 | 415.3 |

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

# CONSOLIDATED	BALANCE	SHEETS

# (Amounts	in	Millions)

December	31,

|  | 2006 | 2005 |
| :--- | :--- | :--- |
| ASSETS: |  |  |
| Cash\tand\tcash\tequivalents | $1,955.7 | $2,075.9 |
| Marketable\tsecurities | 1.4 | 115.6 |
| Accounts\treceivable,\tnet\tof\tallowance\tof\t$81.3\tand\t$105.5 | 3,934.9 | 4,015.7 |
| Expenditures\tbillable\tto\tclients | 1,021.4 | 917.6 |
| Deferred\tincome\ttaxes | 70.9 | 184.3 |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | 224.5 | 188.3 |
| Total\tcurrent\tassets | 7,208.8 | 7,497.4 |
| Land,\tbuildings\tand\tequipment,\tnet | 624.0 | 650.0 |
| Deferred\tincome\ttaxes | 476.5 | 297.3 |
| Investments | 128.1 | 170.6 |
| Goodwill | 3,067.8 | 3,030.9 |
| Other\tassets | 358.9 | 299.0 |
| TOTAL\tASSETS | $11,864.1 | $11,945.2 |
| LIABILITIES: |  |  |
| Accounts\tpayable | $4,124.1 | $4,438.6 |
| Accrued\tliabilities | 2,456.0 | 2,361.1 |
| Short-term\tdebt | 82.9 | 56.8 |
| Total\tcurrent\tliabilities | 6,663.0 | 6,856.5 |
| Long-term\tdebt | 2,248.6 | 2,183.0 |
| Deferred\tcompensation\tand\temployee\tbenefits | 606.3 | 592.1 |
| Other\tnon-current\tliabilities | 359.1 | 319.0 |
| Minority\tinterests\tin\tconsolidated\tsubsidiaries | 46.5 | 49.3 |
| TOTAL\tLIABILITIES | 9,923.5 | 9,999.9 |
| Commitments\tand\tcontingencies\t(Note\t18) |  |  |
| STOCKHOLDERS'\tEQUITY: |  |  |
| Preferred\tstock,\tno\tpar\tvalue,\tshares\tauthorized:\t20.0 |  |  |
| Series\tA\tshares\tissued\tand\toutstanding:\t2005\t—\t7.5 | — | 373.7 |
| Series\tB\tshares\tissued\tand\toutstanding:\t0.5 | 525.0 | 525.0 |
| Common\tstock,\t$0.10\tpar\tvalue,\tshares\tauthorized:\t800.0 |  |  |
| shares\tissued:\t2006\t—\t469.0;\t2005\t—\t430.3 |  |  |
| shares\toutstanding:\t2006\t—\t468.6;\t2005\t—\t429.9 | 45.6 | 43.0 |
| Additional\tpaid-in\tcapital | 2,586.2 | 2,224.1 |
| Accumulated\tdeficit | (899.2) | (841.1) |
| Accumulated\tother\tcomprehensive\tloss,\tnet\tof\ttax | (303.0) | (276.0) |
|  | 1,954.6 | 2,048.7 |
| Less: |  |  |
| Treasury\tstock,\tat\tcost:\t0.4\tshares | (14.0) | (14.0) |
| Unamortized\tdeferred\tcompensation | — | (89.4) |
| TOTAL\tSTOCKHOLDERS'\tEQUITY | 1,940.6 | 1,945.3 |
| TOTAL\tLIABILITIES\tAND\tSTOCKHOLDERS'\tEQUITY | $11,864.1 | $11,945.2 |

# CONSOLIDATED	STATEMENTS	OF	CASH	FLOWS

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| CASH\tFLOWS\tFROM\tOPERATING\tACTIVITIES: |  |  |  |
| Net\tloss | $(31.7) | $(262.9) | $(538.4) |
| Income\tfrom\tdiscontinued\toperations,\tnet\tof\ttax | (5.0) | (9.0) | (6.5) |
| Adjustments\tto\treconcile\tnet\tloss\tto\tcash\tprovided\tby\t(used\tin)\toperating\tactivities: |  |  |  |
| Depreciation\tand\tamortization\tof\tfixed\tassets\tand\tintangible\tassets | 173.6 | 168.8 | 185.1 |
| Provision\tfor\tbad\tdebt | 1.2 | 16.9 | 36.7 |
| Amortization\tof\trestricted\tstock\tand\tother\tnon-cash\tcompensation | 55.1 | 42.3 | 31.4 |
| Amortization\tof\tbond\tdiscounts\tand\tdeferred\tfinancing\tcosts | 31.8 | 9.1 | 22.9 |
| Deferred\tincome\ttax\t(benefit)\tprovision | (57.9) | 44.6 | 128.2 |
| Long-lived\tasset\timpairment\tand\tother\tcharges | 27.2 | 98.6 | 322.2 |
| Investment\timpairments | 0.3 | 12.2 | 63.4 |
| Loss\ton\tearly\textinguishment\tof\tdebt | 80.8 | — | — |
| Gain\ton\tsales\tof\tinvestments | (36.1) | (16.3) | (5.4) |
| Income\tapplicable\tto\tminority\tinterests,\tnet\tof\ttax | 20.0 | 16.7 | 21.5 |
| Other | (1.6) | (7.8) | 9.3 |
| Change\tin\tassets\tand\tliabilities,\tnet\tof\tacquisitions\tand\tdispositions: |  |  |  |
| Accounts\treceivable | 235.4 | 39.6 | (38.4) |
| Expenditures\tbillable\tto\tclients | (87.7) | (54.3) | (34.4) |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | (6.9) | (6.6) | 50.6 |
| Accounts\tpayable | (370.0) | (163.5) | 55.1 |
| Accrued\tliabilities | (21.4) | 11.1 | 147.3 |
| Other\tnon-current\tassets\tand\tliabilities | (3.1) | 40.3 | 14.2 |
| Net\tchange\tin\tassets\tand\tliabilities\trelated\tto\tdiscontinued\toperations | 5.0 | — | — |
| Net\tcash\tprovided\tby\t(used\tin)\toperating\tactivities | 9.0 | (20.2) | 464.8 |
| CASH\tFLOWS\tFROM\tINVESTING\tACTIVITIES: |  |  |  |
| Acquisitions,\tincluding\tdeferred\tpayments,\tnet\tof\tcash\tacquired | (15.1) | (91.7) | (175.4) |
| Capital\texpenditures | (127.8) | (140.7) | (194.0) |
| Maturities\tof\tshort-term\tmarketable\tsecurities | 951.8 | 690.5 | 1,148.4 |
| Purchases\tof\tshort-term\tmarketable\tsecurities | (839.1) | (384.0) | \t(1,372.7) |
| Proceeds\tfrom\tsales\tof\tbusinesses\tand\tfixed\tassets,\tnet\tof\tcash\tsold | (15.6) | 61.8 | 30.4 |
| Proceeds\tfrom\tsales\tof\tinvestments | 93.8 | 70.4 | 43.0 |
| Purchases\tof\tinvestments | (36.4) | (39.9) | (34.3) |
| Proceeds\tfrom\tthe\tsale\tof\tdiscontinued\toperations,\tnet\tof\tcash\tsold | — | — | 10.0 |
| Net\tcash\tprovided\tby\t(used\tin)\tinvesting\tactivities | 11.6 | 166.4 | (544.6) |
| CASH\tFLOWS\tFROM\tFINANCING\tACTIVITIES: |  |  |  |
| Increase\t(decrease)\tin\tshort-term\tbank\tborrowings | 34.3 | (35.9) | 7.0 |
| Payments\tof\tlong-term\tdebt | (5.2) | (257.1) | (843.0) |
| Proceeds\tfrom\tlong-term\tdebt | 1.8 | 252.4 | 602.3 |
| Issuance\tcosts\tand\tconsent\tfees | (50.6) | (17.9) | (8.0) |
| Issuance\tof\tpreferred\tstock,\tnet\tof\tissuance\tcosts | — | 508.0 | — |
| Issuance\tof\tcommon\tstock,\tnet\tof\tissuance\tcosts | 0.9 | 3.2 | 25.6 |
| Early\tparticipation\tpayment\ton\texchange\tof\t$250.0\tFloating\tRate\tNotes | (10.3) | — | — |
| Call\tspread\ttransactions\tin\tconnection\twith\tELF\tFinancing | (29.2) | — | — |
| Distributions\tto\tminority\tinterests,\tnet | (24.4) | (22.6) | (23.6) |
| Preferred\tstock\tdividends | (47.0) | (20.0) | (19.8) |
| Net\tcash\t(used\tin)\tprovided\tby\tfinancing\tactivities | (129.7) | 410.1 | (259.5) |
| Effect\tof\texchange\trates\ton\tcash\tand\tcash\tequivalents | (11.1) | (30.8) | 17.8 |
| Increase\t(decrease)\tin\tcash\tand\tcash\tequivalents | (120.2) | 525.5 | (321.5) |
| Cash\tand\tcash\tequivalents\tat\tbeginning\tof\tyear | \t2,075.9 | \t1,550.4 | 1,871.9 |
| Cash\tand\tcash\tequivalents\tat\tend\tof\tyear | $1,955.7 | $2,075.9 | $1,550.4 |
| SUPPLEMENTAL\tCASH\tFLOW\tINFORMATION |  |  |  |
| Cash\tpaid\tfor\tinterest | $185.7 | $180.2 | $162.8 |
|  | $111.0 | $94.9 | $66.2 |

# CONSOLIDATED	STATEMENTS	OF	STOCKHOLDERS'	EQUITY	AND	COMPREHENSIVE	LOSS

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| COMMON\tSTOCK |  |  |  |
| Balance\tat\tbeginning\tof\tyear | $43.0 | $42.5 | $41.8 |
| Series\tA\tconversion\tto\tcommon\tstock | 2.8 | — | — |
| Reclassification\tupon\tadoption\tof\tSFAS\tNo.\t123R | (1.0) | — | — |
| Other | 0.8 | 0.5 | 0.7 |
| Balance\tat\tend\tof\tyear | 45.6 | 43.0 | 42.5 |
| PREFERRED\tSTOCK |  |  |  |
| Balance\tat\tbeginning\tof\tyear,\tSeries\tA | 373.7 | 373.7 | 373.7 |
| Conversion\tto\tcommon\tstock | (373.7) | — | — |
| Balance\tat\tend\tof\tyear,\tSeries\tA | — | 373.7 | 373.7 |
| Balance\tat\tbeginning\tof\tyear,\tSeries\tB | 525.0 | — | — |
| Issuance\tof\tpreferred\tstock | — | 525.0 | — |
| Balance\tat\tend\tof\tyear,\tSeries\tB | 525.0 | 525.0 | — |
| ADDITIONAL\tPAID\tIN\tCAPITAL |  |  |  |
| Balance\tat\tbeginning\tof\tyear | \t2,224.1 | \t2,208.9 | \t2,076.0 |
| Cumulative\teffect\tof\tthe\tadoption\tof\tSAB\tNo.\t108 | 23.3 | — | — |
| Stock-based\tcompensation | 60.0 | — | — |
| Reclassification\tupon\tadoption\tof\tSFAS\tNo.\t123R | (88.4) | — | — |
| Restricted\tstock\tgrants,\tnet\tof\tforfeitures\tand\tamortization | — | 42.7 | 26.4 |
| Series\tA\tconversion\tto\tcommon\tstock | 370.9 | — | — |
| Issuance\tof\tshares\tfor\tacquisitions | 11.3 | 12.9 | 33.9 |
| Issuance\tof\tpreferred\tstock | — | (17.4) | — |
| Preferred\tstock\tdividends | (47.6) | (26.3) | (19.8) |
| Call\tspread\ttransactions\tin\tconnection\twith\tELF\tFinancing | (29.2) | — | — |
| Issuance\tof\tcommon\tstock\t—\tlitigation\tsettlement | (0.6) | — | 72.6 |
| Warrants\tissued\tto\tinvestors | 63.4 | — | — |
| Other | (1.0) | 3.3 | 19.8 |
| Balance\tat\tend\tof\tyear | \t2,586.2 | \t2,224.1 | \t2,208.9 |
| ACCUMULATED\tDEFICIT |  |  |  |
| Balance\tat\tbeginning\tof\tyear | (841.1) | (578.2) | (39.8) |
| Cumulative\teffect\tof\tthe\tadoption\tof\tSAB\tNo.\t108 | (26.4) | — | — |
| Net\tloss | (31.7) | (262.9) | (538.4) |
| Balance\tat\tend\tof\tyear | (899.2) | (841.1) | (578.2) |
| ACCUMULATED\tOTHER\tCOMPREHENSIVE\tLOSS |  |  |  |
| Balance\tat\tbeginning\tof\tyear | (276.0) | (248.6) | (259.1) |
|  | 39.7 | 1.4 | (47.6) |
|  | (9.0) | 14.6 | 3.4 |
| Foreign\tcurrency\ttranslation\tadjustment | (23.3) | (43.0) | 51.5 |
| Reclassification\tof\tinvestment\tgain\tto\tnet\tearnings | 17.0 | — | — |
| Recognition\tof\tpreviously\tunrealized\t(gain)\tloss\ton\tsecurities\tavailable-for-sale,\tnet\tof\ttax | (8.8) | (0.4) | 3.2 |
| Net\tother\tcomprehensive\tloss\tadjustments | 15.6 | (27.4) | 10.5 |
| Adoption\tof\tSFAS\tNo.\t158 | (42.6) | — | — |
| Balance\tat\tend\tof\tyear | (303.0) | (276.0) | (248.6) |
| TREASURY\tSTOCK |  |  |  |
| Balance\tat\tbeginning\tof\tyear | (14.0) | (14.0) | (11.3) |
| Issuance\tof\tshares\tfor\tacquisitions | — | — | (2.7) |
| Balance\tat\tend\tof\tyear | (14.0) | (14.0) | (14.0) |
| UNAMORTIZED\tDEFERRED\tCOMPENSATION |  |  |  |
| Balance\tat\tbeginning\tof\tyear | (89.4) | (66.0) | (62.5) |
| Reclassification\tupon\tadoption\tof\tSFAS\tNo.\t123R | 89.4 | — | — |
| Restricted\tstock,\tnet\tof\tforfeitures\tand\tamortization | — | (23.4) | (3.5) |
| Balance\tat\tend\tof\tyear | — | (89.4) | (66.0) |
| TOTAL\tSTOCKHOLDERS'\tEQUITY | $1,940.6 | $1,945.3 | $1,718.3 |
| COMPREHENSIVE\tLOSS |  |  |  |
| Net\tloss\tapplicable\tto\tcommon\tstockholders | $(79.3) | $(289.2) | $(558.2) |
| Preferred\tstock\tdividends | 47.6 | 26.3 | 19.8 |
| Net\tother\tcomprehensive\tincome\t(loss)\tadjustments | 15.6 | (27.4) | 10.5 |
| Total\tcomprehensive\tloss | $(16.1) | $(290.3) | $(527.9) |
| NUMBER\tOF\tCOMMON\tSHARES |  |  |  |
| Balance\tat\tbeginning\tof\tyear | 430.3 | 424.9 | 418.4 |
| Restricted\tstock,\tnet\tof\tforfeitures | 4.3 | 4.1 | 2.7 |
| Series\tA\tconversion\tto\tcommon\tstock | 27.7 | — | — |
| Other | 6.7 | 1.3 | 3.8 |
| Balance\tat\tend\tof\tyear | 469.0 | 430.3 | 424.9 |

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS

# Note	1: Summary	of	Significant	Accounting	Policies

# Business	Description

The	Interpublic	Group	of	Companies,	Inc.	and	subsidiaries	(the	"Company",	"Interpublic",	"we",	"us"	or	"our")	is	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.	Our	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.	With	hundreds	of	offices	in	over	100	countries	and approximately	42,000	employees,	our	agencies	develop	marketing	programs	that	build	brands,	influence	consumer	behavior	and	sell	products.

# Restatements

In	our	2005	Annual	Report	on	Form	10-K,	we	restated	our	previously	reported	financial	statements	for	the	quarters	ended	March	31,	2005,	June	30,	2005	and	September	30,	2005.	In	our	2004 Annual	Report	on	Form	10-K,	we	restated	our	previously	reported	financial	statements	for	the	years	ended	December	31,	2003,	2002,	2001	and	2000,	and	for	the	first	three	quarters	of	2004	and	all	four quarters	of	2003	(the	"2005	Restatement").

# Principles	of	Consolidation

The	Consolidated	Financial	Statements	include	the	accounts	of	the	Company	and	its	subsidiaries,	most	of	which	are	wholly	owned.	Investments	in	companies	over	which	we	do	not	have	control, but	the	ability	to	exercise	significant	influence,	are	accounted	for	using	the	equity	method	of	accounting.	Investments	in	companies	over	which	we	have	neither	control	nor	the	ability	to	exercise significant	influence	are	accounted	for	under	the	cost	method.	All	intercompany	accounts	and	transactions	have	been	eliminated	in	consolidation.

In	accordance	with	Financial	Accounting	Standards	Board	("FASB")	Interpretation	No.	46,	Consolidation	of	Variable	Interest	Entities,	an	Interpretation	of	ARB	No.	51,	along	with	certain revisions,	we	have	consolidated	certain	entities	meeting	the	definition	of	variable	interest	entities.	The	inclusion	of	these	entities	does	not	have	a	material	impact	on	our	Consolidated	Financial Statements.

# Reclassifications

Certain	reclassifications	have	been	made	to	the	prior	period	financial	statements	to	conform	to	the	current	year	presentation.

# Use	of	Estimates

The	preparation	of	financial	statements	in	conformity	with	accounting	principles	generally	accepted	in	the	United	States	of	America	("GAAP")	requires	us	to	make	estimates	and	assumptions	that affect	the	reported	amounts	of	assets	and	liabilities,	the	disclosure	of	contingent	assets	and	liabilities	at	the	date	of	the	financial	statements	and	the	reported	amounts	of	revenues	and	expenses	during	the reporting	period.	Actual	results	could	differ	from	those	estimates.

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.

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

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS	—	(Continued)

(iv)	services	have	been	performed.	Depending	on	the	terms	of	a	client	contract,	fees	for	services	performed	can	be	primarily	recognized	in	one	of	three	ways:	proportional	performance,	straight-line	(or monthly	basis)	or	completed	contract.

•		Fees	are	generally	recognized	as	earned	based	on	the	proportional	performance	method	of	revenue	recognition	in	situations	where	our	fee	is	reconcilable	to	the	actual	hours	incurred	to service	the	client	as	detailed	in	a	contractual	staffing	plan	or	where	the	fee	is	earned	on	a	per	hour	basis,	with	the	amount	of	revenue	recognized	in	both	situations	limited	to	the	amount realizable	under	the	client	contract.	We	believe	an	input	based	measure	(the	'hour')	is	appropriate	in	situations	where	the	client	arrangement	essentially	functions	as	a	time	and	out-of-pocket expense	contract	and	the	client	receives	the	benefit	of	the	services	provided	throughout	the	contract	term.

•		Fees	are	recognized	on	a	straight-line	or	monthly	basis	when	service	is	provided	essentially	on	a	pro	rata	basis	and	the	terms	of	the	contract	support	monthly	basis	accounting. •		Certain	fees	(such	as	for	major	marketing	events)	are	deferred	until	contract	completion	as	the	final	act	is	so	significant	in	relation	to	the	service	transaction	taken	as	a	whole.	Fees	are	also recognized	on	a	completed	contract	basis	when	the	terms	of	the	contract	call	for	the	delivery	of	discrete	projects	('milestone'	arrangements),	if	any	of	the	criteria	of	Staff	Accounting Bulletin	("SAB")	No.	104,	Revenue	Recognition,	were	not	satisfied	prior	to	job	completion	or	the	terms	of	the	contract	do	not	otherwise	qualify	for	proportional	performance	or	monthly basis	recognition.

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.	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.

As	we	provide	services	as	part	of	our	core	operations,	we	generally	incur	incidental	expenses,	which,	in	practice,	are	commonly	referred	to	as	"out-of-pocket"	expenses.	These	expenses	often include	expenses	related	to	airfare,	mileage,	hotel	stays,	out	of	town	meals	and	telecommunication	charges.	In	accordance	with	EITF	Issue	No.	01-14,	Income	Statement	Characterization	of Reimbursements	Received	for	'Out-of-Pocket'	Expenses	Incurred,	we	record	the	reimbursements	received	for	incidental	expenses	as	revenue	with	a	corresponding	offset	to	expense.

Concession	income	or	expense	may	also	be	realized	in	connection	with	settling	vendor	discount	or	credit	liabilities	that	were	established	as	part	of	the	2005	Restatement.	In	these	situations,	and given	the	historical	nature	of	these	liabilities,	we	have	recorded	such	items	as	other	income	or	expense	in	order	to	prevent	distortion	of	current	operating	results.

For	certain	of	these	credit	liabilities	where	the	statute	of	limitations	has	lapsed,	we	release	such	liabilities	unless	the	liabilities	are	associated	with	customers	with	whom	we	are	in	the	process	of settling	such	liabilities.	These	amounts	are	reported	in	other	income	(expense).

# Cash	Equivalents

Cash	equivalents	are	highly	liquid	investments,	including	certificates	of	deposit,	government	securities,	commercial	paper	and	time	deposits	with	original	maturities	of	three	months	or	less	at	the time	of	purchase	and	are	stated	at	estimated	fair	value,	which	approximates	cost.	Cash	is	maintained	at	high-credit	quality	financial	institutions.

As	of	December	31,	2006	and	2005,	we	held	restricted	cash	of	$44.0	and	$34.2,	respectively,	included	in	prepaid	expenses	and	other	current	assets.	Restricted	cash	primarily	represents	cash equivalents	that	are	maintained	on	behalf	of	our	clients	and	are	legally	restricted	for	a	specified	business	purpose.

# Short-Term	Marketable	Securities

We	classify	short-term	marketable	debt	and	equity	securities	as	available-for-sale.	Available-for	sale	securities	are	carried	at	fair	value	with	the	corresponding	unrealized	gains	and	losses	reported as	a	separate	component	of	comprehensive	loss.	The	cost	of	securities	sold	is	determined	based	upon	the	average	cost	of	the	securities	sold.

# Allowance	for	Doubtful	Accounts

The	allowance	for	doubtful	accounts	is	estimated	based	on	the	aging	of	accounts	receivable,	reviews	of	client	credit	reports,	industry	trends	and	economic	indicators,	as	well	as	analysis	of	recent payment	history	for	specific	customers.	The	estimate	is	based	largely	on	a	formula-driven	calculation	but	is	supplemented	with	economic	indicators	and	knowledge	of	potential	write-offs	of	specific	client accounts.

# Expenditures	Billable	to	Clients

Expenditures	billable	to	clients	are	primarily	comprised	of	production	and	media	costs	that	have	been	incurred	but	have	not	yet	been	billed	to	clients,	as	well	as	internal	labor	and	overhead amounts	and	other	accrued	receivables	which	have	not	yet	been	billed	to	clients.	Unbilled	amounts	are	presented	in	expenditures	billable	to	clients	regardless	of	whether	they	relate	to	our	fees	or production	and	media	costs.	A	provision	is	made	for	unrecoverable	costs	as	deemed	appropriate.

# Investments

Publicly	traded	investments	in	companies	over	which	we	do	not	exert	a	significant	influence	are	classified	as	available-for-sale	and	reported	at	fair	value	with	net	unrealized	gains	and	losses reported	as	a	component	of	other	comprehensive	loss.	Non-publicly	traded	investments	and	all	other	publicly	traded	investments	are	accounted	for	on	the	equity	basis	or	cost	basis,	including	investments to	fund	certain	deferred	compensation	and	retirement	obligations.	We	regularly	review	our	equity	and	cost	method	investments	to	determine	whether	a	significant	event	or	change	in	circumstances	has occurred	that	may	have	an	adverse	effect	on	the	fair	value	of	each	investment.	In	the	event	a	decline	in	fair	value	of	an	investment	occurs,	we	determine	if	the	decline	has	been	other	than

temporary.	We	consider	our	investments	strategic	and	long-term	in	nature,	so	we	determine	if	the	fair	value	decline	is	recoverable	within	a	reasonable	period.	For	investments	accounted	for	using	the equity	basis	or	cost	basis,	we	evaluate	fair	value	based	on	specific	information	(valuation	methodologies,	estimates	of	appraisals,	financial	statements,	etc.)	in	addition	to	quoted	market	price,	if	available. In	the	absence	of	other	evidence,	cost	is	presumed	to	equal	fair	value	for	our	cost	and	equity	method	investments.	Factors	indicative	of	an	other	than	temporary	decline	include	recurring	operating	losses, credit	defaults	and	subsequent	rounds	of	financing	with	pricing	that	is	below	the	cost	basis	of	the	investment.	This	list	is	not	all-inclusive;	we	consider	all	known	quantitative	and	qualitative	factors	in determining	if	an	other	than	temporary	decline	in	value	of	an	investment	has	occurred.	Our	assessments	of	fair	value	represent	our	best	estimates	at	the	time	of	impairment	review.	See	Note	4	for	further information.

# Land,	Buildings	and	Equipment

Land,	buildings	and	equipment	are	stated	at	cost,	net	of	accumulated	depreciation.	Buildings	and	equipment	are	depreciated	generally	using	the	straight-line	method	over	the	estimated	useful lives	of	the	related	assets,	which	range	from	3	to	7	years	for	furniture,	equipment	and	computer	software	costs,	10	to	35	years	for	buildings	and	the	shorter	of	the	useful	life	or	the	remaining	lease	term	for leasehold	improvements.	The	total	depreciation	expense	for	the	years	ended	December	31,	2006,	2005	and	2004	was	$167.4,	$167.3	and	$178.3,	respectively.

We	perform	an	annual	impairment	review	of	goodwill	as	of	October	1st	of	each	year	or	whenever	events	or	significant	changes	in	circumstances	indicate	that	the	carrying	value	may	not	be recoverable.	We	evaluate	the	recoverability	of	goodwill	at	a	reporting	unit	level.	We	identified	14	reporting	units	for	the	2006	annual	impairment	testing	that	are	either	the	entities	at	the	operating segment	level	or	one	level	below	the	operating	segment	level.	We	review	intangible	assets	with	definite	lives	subject	to	amortization	whenever	events	or	circumstances	indicate	that	a	carrying	amount	of an	asset	may	not	be	recoverable.	Events	or	circumstances	that	might	require	impairment	testing	include	the	loss	of	a	significant	client,	the	identification	of	other	impaired	assets	within	a	reporting	unit, loss	of	key	personnel,	the	disposition	of	a	significant	portion	of	a	reporting	unit,	or	a	significant	adverse	change	in	business	climate	or	regulations.	Statement	of	Financial	Accounting	Standards ("SFAS")	No.	142,	Goodwill	and	Other	Intangible	Assets,	specifies	a	two-step	process	for	goodwill	impairment	testing	and	measuring	the	magnitude	of	any	impairment.	The	fair	value	of	a	reporting	unit is	estimated	using	traditional	valuation	techniques	such	as	the	income	approach,	which	incorporates	the	use	of	the	discounted	cash	flow	method	and	the	market	approach,	which	incorporates	the	use	of earning	and	revenue	multiples.	See	Note	7	for	further	discussion.

The	financial	statements	of	our	foreign	operations,	when	the	local	currency	is	the	functional	currency,	are	translated	into	U.S.	Dollars	at	the	exchange	rates	in	effect	at	each	year	end	for	assets	and liabilities	and	average	exchange	rates	during	each	year	for	the	results	of	operations.	The	related	unrealized	gains	or	losses	from	translation	are	reported	as	a	separate	component	of	comprehensive	loss. Transactions	denominated	in	currencies	other	than	the	functional	currency	are	recorded	based	on	exchange	rates	at	the	time	such	transactions	arise.	Subsequent	changes	in	exchange	rates	result	in transaction	gains	or	losses,	which	are	reflected	within	office	and	general	expenses.

# Credit	Risk

Financial	instruments	that	potentially	subject	us	to	concentrations	of	credit	risk	are	primarily	cash	and	cash	equivalents,	short-term	marketable	securities,	accounts	receivable,	expenditures billable	to	clients,	interest	rate	instruments	and	foreign	exchange	contracts.	We	invest	our	excess	cash	in	investment-grade,	short-term	securities	with	financial	institutions	and	limit	the	amount	of	credit exposure	to	any	one	counterparty.	Concentrations	of	credit	risk	with	accounts	receivable	are	limited	due	to	our	large	number	of	clients	and	their	dispersion	across	different	industries	and	geographical areas.	We	perform	ongoing	credit	evaluations	of	our	clients	and	maintain	an	allowance	for	doubtful	accounts	based	upon	the	expected	collectibility	of	all	accounts	receivable.	We	are	exposed	to	credit loss	in	the	event	of	nonperformance	by	the	counterparties	of	foreign	currency	contracts.	We	limit	our	exposure	to	any	one	financial	institution	and	do	not	anticipate	nonperformance	by	these counterparties.

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.

The	provision	for	income	taxes	includes	federal,	state,	local	and	foreign	taxes.	Income	taxes	are	accounted	for	under	the	liability	method.	Deferred	tax	assets	and	liabilities	are	recognized	for	the estimated	future	tax	consequences	of	temporary	differences	between	the	financial	statement	carrying	amounts	and	their	respective	tax	bases.	Deferred	tax	assets	and	liabilities	are	measured	using	enacted tax	rates	expected	to	apply	to	taxable	income	in	the	year	in	which	the	temporary	differences	are	expected	to	be	reversed.	We	evaluate	the	realizability	of	our	deferred	tax	assets	and	establish	a	valuation allowance	when	it	is	more	likely	than	not	that	all	or	a	portion	of	deferred	tax	assets	will	not	be	realized.	See	Note	9	for	further	explanation.

# Earnings	(Loss)	Per	Share

In	periods	when	we	generate	income,	we	calculate	basic	Earnings	Per	Share	("EPS")	using	the	two-class	method,	pursuant	to	EITF	Issue	No.	03-6,	Participating	Securities	and	the	Two- Class	Method	under	SFAS	Statement	No.	128	("EITF	03-6").	The	two-class	method	is	required	as	our	4.50%	Convertible	Senior	Notes	and	Series	A	Mandatory	Convertible	Preferred	Stock	("Series	A Preferred	Stock")	qualify	as	participating	securities,	each	having	the	right	to	receive	dividends	or	dividend	equivalents	should	dividends	be	declared	on	common	stock.	Under	this	method,	earnings	for the	period	(after	deduction	for	contractual	preferred	stock	dividends)	are	allocated	on	a	pro-rata	basis	to	the	common	shareholders	and	to	the	holders	of	participating	securities	based	on	their	right	to receive	dividends.	The	weighted-average	number	of	shares	outstanding	is	increased	to	reflect	the	number	of	common	shares	into	which	the	participating	securities	could	convert.	In	periods	when	we generate	a	loss,	basic	loss	per	share	is	computed	by	dividing	the	loss	attributable	to	common	shareholders	by	the	weighted-average	number	of	common	shares	and	contingently	issuable	shares	outstanding for	the	period.	We	do	not	use	the	two-class	method	in	periods	when	we	generate	a	loss	as	the	4.50%	Convertible	Notes	and	Series	A	Preferred	Stock	do	not	participate	in	losses.

Diluted	earnings	(loss)	per	share	reflects	the	potential	dilution	that	would	occur	if	certain	potentially	dilutive	securities	or	debt	obligations	were	exercised	or	converted	into	common	stock.	The potential	issuance	of	common	stock	is	assumed	to	occur	at	the	beginning	of	the	year	(or	at	the	time	of	issuance	of	the	potentially	dilutive	instrument,	if	later),	and	the	incremental	shares	are	included	using the	treasury	stock	or	"if-converted"	methods.	The	proceeds	utilized	in	applying	the	treasury	stock	method	consist	of	the	amount,	if	any,	to	be	paid	upon	exercise	and,	as	it	relates	to	stock-based compensation,	the	amount	of	compensation	cost	attributed	to	future	service	not	yet	recognized	and	any	tax	benefits	credited	to	additional	paid-in-capital	related	to	the	exercise.	These	proceeds	are	then assumed	to	be	used	by	us	to	purchase	common	stock	at	the	average	market	price	during	the	period.	The	incremental	shares	(difference	between	the	shares	assumed	to	be	issued	and	the	shares	assumed	to be	purchased),	to	the	extent	they	would	have	been	dilutive,	are	included	in	the	denominator	of	the	diluted	EPS	calculation.

We	have	pension	and	postretirement	benefit	plans	covering	certain	domestic	and	international	employees.	We	use	various	actuarial	methods	and	assumptions	in	determining	our	pension	and postretirement	benefit	costs	and	obligations,	including	the	discount	rate	used	to	determine	the	present	value	of	future	benefits,	expected	long-term	rate	of	return	on	plan	assets	and	healthcare	cost	trend rates.	On	December	31,	2006	we	adopted	SFAS	No.	158,	Employers'	Accounting	for	Defined	Benefit	Pension	and	Other	Postretirement	Plans	("SFAS	No.	158").	SFAS	No.	158	requires,	among	other things,	balance	sheet	recognition	of	the	overfunded	or	underfunded	status	of	pension	and	postretirement	benefit	plans.	See	Note	13	for	further	discussion.

On	January	1,	2006,	we	adopted	SFAS	No.	123	(revised	2004),	Share-Based	Payment	("SFAS	No.	123R").	SFAS	No.	123R	requires	compensation	costs	related	to	share-based	transactions, including	employee	stock	options,	to	be	recognized	in	the	financial	statements	based	on	fair	value.	We	implemented	SFAS	No.	123R	using	the	modified	prospective	transition	method.	Under	this transition	method,	the	compensation	expense	recognized	beginning	January	1,	2006	includes	compensation	expense	for	(i)	all	stock-based	payments	granted	prior	to,	but	not	yet	vested	as	of	January	1, 2006,	based	on	the	grant-date	fair	value	estimated	in	accordance	with	the	original	provisions	of	SFAS	No.	123,	and	(ii)	all	stock-based	payments	granted	subsequent	to	December	31,	2005	based	on

the	grant-date	fair	value	estimated	in	accordance	with	the	provisions	of	SFAS	No.	123R.	Stock-based	compensation	expense	is	generally	recognized	ratably	over	the	requisite	service	period,	net	of estimated	forfeitures.

Prior	to	January	1,	2006,	we	accounted	for	stock-based	compensation	plans	in	accordance	with	the	provisions	of	Accounting	Principles	Board	Opinion	No.	25,	Accounting	for	Stock	Issued	to Employees	("APB	No.	25"),	as	permitted	by	SFAS	No.	123,	and	accordingly	did	not	recognize	compensation	expense	for	the	issuance	of	stock	options	with	an	exercise	price	equal	or	greater	than	the market	price	at	the	date	of	grant.	However,	see	Note	20	for	detail	of	our	review	of	our	stock	option	practices.	In	addition,	our	previous	Employee	Stock	Purchase	Plan	('ESPP')	was	not	considered compensatory	under	APB	No.	25	and,	therefore,	no	expense	was	required	to	be	recognized.	Compensation	expense	was	previously	recognized	for	restricted	stock,	restricted	stock	units,	performance- based	stock	and	share	appreciation	performance-based	units.	The	effect	of	forfeitures	on	restricted	stock,	restricted	stock	units	and	performance-based	stock	was	recognized	when	such	forfeitures occurred.	See	Note	14	for	further	discussion.

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

The	components	of	restructuring	and	other	reorganization-related	charges	(reversals)	consist	of	the	following:

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Other\treorganization-related\tcharges | $33.0 | $ — | $— |
| Restructuring\tcharges\t(reversals) | 1.5 | \t(7.3) | \t62.2 |
| Total | $34.5 | $(7.3) | $62.2 |

Other	reorganization-related	charges	primarily	represent	severance	charges	directly	associated	with	two	significant	strategic	business	decisions:	the	merger	of	Draft	Worldwide	and	Foote,	Cone and	Belding	Worldwide	to	create	a	global	integrated	marketing	organization	called	Draftfcb;	and	our	realignment	of	our	media	business	to	meet	evolving	client	needs.	In	addition,	we	have	recorded	lease termination	charges	in	relation	to	the	exit	of	certain	properties	for	these	strategic	business	decisions.	These	charges	were	separated	from	salaries	and	related	expenses	and	office	and	general	expenses	as they	did	not	result	from	charges	that	occurred	in	the	normal	course	of	business.

We	record	charges	and	(reversals)	primarily	related	to	changes	in	assumptions	in	connection	with	lease	termination	and	other	exit	costs	and	severance	and	termination	costs	for	the	2003	and	2001 restructuring	programs.	Included	in	net	charges	and	(reversals)	for	the	years	ended	December	31,	2006,	2005	and	2004	are	adjustments	resulting	from	changes	in	management's	estimates.	Severance amounts	incurred	outside	the	parameters	of	our	restructuring	programs	are	recorded	in	the	financial	statements	when	they	become	both	probable	and	estimable.	With	the	exception	of	medical	and	dental benefits	paid	to	employees	who	are	on	long-term	disability,	we	do	not	establish	liabilities	associated	with	ongoing	post-employment	benefits	that	may	vest	or	accumulate	as	the	employee	provides	service as	we	cannot	reasonably	predict	what	our	future	experience	will	be.	See	Note	13	for	further	discussion.

The	2003	program	was	initiated	in	response	to	softness	in	demand	for	advertising	and	marketing	services.	The	2001	program	was	initiated	following	the	acquisition	of	True	North Communications	Inc.	and	was	designed	to	integrate	the	acquisition	and	improve	productivity.	Since	their	inception,	total	net	charges	for	the	2003	and	2001	programs	were	$221.9	and	$644.8, respectively.	Substantially	all	activities	under	the	2003	and	2001	programs	have	been	completed.	In	addition	to	amounts	recorded	as	restructuring	charges,	we	recorded	charges	of	$11.1	during	2004 related	to	the	accelerated	amortization	of	leasehold	improvements	on	properties	included	in	the	2003	program.	These	charges	were	included	in	office	and	general	expenses.

A	summary	of	the	net	charges	and	(reversals),	classified	by	our	Integrated	Agency	Network	("IAN")	and	Constituency	Management	Group	("CMG")	segments	and	our	Corporate	group,	is	as

follows:

|  | Lease	Termination |  | Severance	and |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | and\tOther\tExit\tCosts | and\tOther\tExit\tCosts | Termination\tCosts | Termination\tCosts |  |
| Years\tended\tDecember\t31, | 2003\nProgram | 2001\nProgram | 2003\nProgram | 2001\nProgram | Total |
| 2006 |  |  |  |  |  |
| IAN | $(1.0) | $1.0 | $— | $— | $— |
| CMG | (1.3) | 2.8 | — | — | 1.5 |
| Total | $(2.3) | $3.8 | $— | $— | $1.5 |
| 2005 |  |  |  |  |  |
| IAN | $(6.3) | $(0.3) | $(0.4) | $— | $ (7.0) |
| CMG | 1.1 | 0.2 | (0.7) | — | 0.6 |
| Corporate | (0.2) | (0.4) | (0.3) | — | \t (0.9) |
| Total | $(5.4) | $(0.5) | $(1.4) | $— | $ (7.3) |
| 2004 |  |  |  |  |  |
| IAN | $40.3 | $(7.3) | $14.1 | $(4.3) | $42.8 |
| CMG | 8.1 | 4.0 | 5.1 | (0.7) | \t16.5 |
| Corporate | 3.7 | (1.0) | 0.3 | (0.1) | 2.9 |
| Total | $52.1 | $(4.3) | $19.5 | $(5.1) | $62.2 |

During	the	years	ended	December	31,	2006	and	2005	net	lease	termination	and	other	exit	costs	were	primarily	related	to	adjustments	to	management's	estimates	to	decrease	the	restructuring reserves	as	a	result	of	changes	in	sublease	rental	income	assumptions	and	utilization	of	previously	vacated	properties	by	certain	of	our	agencies	due	to	improved	economic	conditions	in	certain	markets.

During	the	year	ended	December	31,	2004	net	lease	termination	and	other	exit	costs	were	recorded	for	the	vacating	of	43	offices	located	primarily	in	the	U.S.	and	Europe.	Charges	were	recorded at	net	present	value	and	were	net	of	estimated	sublease	rental	income.	These	charges	were	partially	offset	primarily	by	management's	adjustments	to	estimates	as	a	result	of	our	negotiation	of	terms	upon the	exit	of	leased	properties	and	for	reasons	similar	to	those	mentioned	above	for	2006	and	2005.	Severance	and	termination	costs	were	recorded	for	a	worldwide	workforce	reduction	of	approximately 400	employees.	The	restructuring	program	affected	employee	groups	across	all	levels	and	functions,	including	executive,	regional	and	account	management	and	administrative,	creative	and	media production	personnel.	These	charges	were	partially	offset	by	adjustments	to	management's	estimates	to	reduce	the	prior	restructuring	reserves	primarily	as	a	result	of	decreases	in	the	number	of terminated	employees,	change	in	amounts	paid	to	terminated	employees	and	change	in	estimates	of	related	restricted	stock	payments	and	payroll	taxes.

A	summary	of	the	remaining	liability	for	the	2003	and	2001	restructuring	programs	is	as	follows:

|  | December	31,<br>2004 | Charges<br>and<br>Adjustments | Payments<br>and<br>Other	1 | December	31,<br>2005 | Charges<br>and<br>Adjustments | Payments<br>and<br>Other	1 | December	31,<br>2006 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| 2003\tProgram |  |  |  |  |  |  |  |
| Lease\ttermination\tand\tother\texit\tcosts | $51.0 | $(5.4) | $(22.0) | $23.6 | $(2.3) | $(10.3) | $11.0 |
| Severance\tand\ttermination\tcosts | 7.2 | (1.4) | (3.4) | 2.4 | — | (0.8) | 1.6 |
| Total | $58.2 | $(6.8) | $(25.4) | $26.0 | $(2.3) | $(11.1) | $12.6 |
| 2001\tProgram |  |  |  |  |  |  |  |
| Lease\ttermination\tand\tother\texit\tcosts | $37.2 | $(0.5) | $(14.2) | $22.5 | $3.8 | $(7.6) | $18.7 |
| Severance\tand\ttermination\tcosts | 1.6 | — | (1.1) | 0.5 | — | — | 0.5 |
| Total | $38.8 | $(0.5) | $(15.3) | $23.0 | $3.8 | $(7.6) | $19.2 |
| Total\tRestructuring | $97.0 | $(7.3) | $(40.7) | $49.0 | $1.5 | $(18.7) | $31.8 |

1 Includes	amounts	representing	adjustments	to	the	liability	for	changes	in	foreign	currency	exchange	rates.

# Note	3: Acquisitions	and	Dispositions

# Acquisitions

The	majority	of	our	acquisitions	include	an	initial	payment	at	the	time	of	closing	and	provide	for	additional	contingent	purchase	price	payments	over	a	specified	time.	The	initial	purchase	price	of an	acquisition	is	allocated	to	identifiable	assets	acquired	and	liabilities	assumed	based	on	estimated	fair	values	with	any	excess	being	recorded	as	goodwill	and	other	intangible	assets.	These	contingent payments,	which	are	also	known	as	"earn-outs"	and	"put	options,"	are	calculated	based	on	estimates	of	the	future	financial	performance	of	the	acquired	entity,	the	timing	of	the	exercise	of	these	rights, changes	in	foreign	currency	exchange	rates	and	other	factors.	Earn-outs	and	put	options	are	recorded	within	the	financial	statements	as	an	increase	to	goodwill	and	other	intangible	assets	once	the	terms and	conditions	of	the	contingent	acquisition	obligations	have	been	met	and	the	consideration	is	determinable	and	distributable,	or	expensed	as	compensation	in	our	Consolidated	Statements	of	Operations based	on	the	acquisition	agreement	and	the	terms	and	conditions	of	employment	for	the	former	owners	of	the	acquired	businesses.

Cash	paid	and	stock	issued	for	acquisitions	are	comprised	of:	(i)	contingent	payments	as	described	above;	(ii)	further	investments	in	companies	in	which	we	already	have	an	ownership	interest; and	(iii)	other	payments	related	to	loan	notes	and	guaranteed	deferred	payments	that	have	been	previously	recognized	on	the	balance	sheet.

We	did	not	complete	any	acquisitions	during	2006	and	2005.	We	completed	two	acquisitions	during	2004,	which	were	not	significant	on	an	individual	basis.	The	results	of	operations	of	these acquired	companies	were	included	in	our	consolidated	results	from	the	date	of	close	of	the	transaction.	Cash	paid	and	stock	issued	in	2006	were	primarily	recorded	as	an	increase	to	goodwill	and	other intangible	assets	and	related	primarily	to	acquisitions	that	were	completed	prior	to	December	31,	2000.	We	made	stock	payments	related	to	acquisitions	initiated	in	prior	years	of	$11.3,	$12.9	and	$23.8 during	2006,	2005	and	2004,	respectively.

Details	of	cash	paid	for	acquisitions	are	as	follows:

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Cash\tpaid\tfor\tcurrent\tyear\tacquisitions | $— | $— | $14.6 |
| Cash\tpaid\tfor\tprior\tacquisitions: |  |  |  |
| Cost\tof\tinvestment | \t15.1 | \t91.7 | \t141.6 |
| Compensation\texpense-related\tpayments | 7.8 | 5.3 | 20.1 |
| Less:\tcash\tacquired | — | — | (0.9) |
| Net\tcash\tpaid\tfor\tacquisitions | $22.9 | $97.0 | $175.4 |

# Dispositions

Motorsports	—	On	January	12,	2004,	we	completed	the	sale	of	a	business	comprising	the	four	Motorsports	circuits,	including	Brands	Hatch,	Oulton	Park,	Cadwell	Park	and	Snetterton	(the	"four owned	circuits"),	owned	by	our	Brands	Hatch	subsidiaries,	to	MotorSport	Vision	Limited.	The	consideration	for	the	sale	was	approximately	$26.0.

On	April	19,	2004,	we	reached	an	agreement	with	the	Formula	One	Administration	Limited	("FOA")	to	terminate	and	release	our	respective	guarantee	and	promoter	obligations	relating	to	the British	Grand	Prix	held	at	the	Silverstone	racetrack	in	the	United	Kingdom	("U.K.").	Under	this	agreement,	we	were	released	from	our	obligations	following	the	British	Grand	Prix	in	July	2004.	In exchange	for	the	early	termination	of	the	obligations	and	liabilities,	we	paid	a	total	of	$93.0	to	the	FOA	in	two	installments	of	$46.5	each	on	April	19,	2004	and	May	24,	2004.	A	pre-tax	charge	of	$80.0 was	recorded	in	Motorsports	contract	termination	costs	related	to	this	transaction	during	the	second	quarter	of	2004.

On	July	1,	2004,	the	British	Racing	Drivers	Club	("BRDC")	agreed	to	vary	the	terms	of	the	lease	agreement	relating	to	the	Silverstone	race	track	and	we	entered	into	a	series	of	agreements regarding	the	potential	termination	of	our	remaining	Motorsports	obligations	in	the	U.K.	These	agreements	gave	us	the	right	to	terminate	our	lease	obligations	at	the	Silverstone	race	track	and	related agreements,	which	we	exercised	on	November	1,	2004.	In	connection	with	these	agreements,	we	paid	the	BRDC	approximately	$49.0	in	three	installments	during	2004.	As	a	result	of	these	agreements, we	recorded	a	pre-tax	charge	in	the	third	quarter	of	2004	of	$33.6	in	Motorsports	contract	termination	costs.	The	payments	also	include	$5.5	in	office	and	general	expenses	reflecting	the	amount	of	lease expense	associated	with	our	continued	use	of	the	leased	property	through	the	third	and	fourth	quarters	of	2004.	We	have	exited	this	business	and	do	not	anticipate	any	additional	material	charges.	Total Motorsports	charges	consist	of	long-lived	asset	impairment	and	other	charges	of	$3.0	and	contract	termination	costs	of	$113.6	for	the	year	ended	December	31,	2004.

NFO	—	In	July	2004,	we	received	$10.0	from	Taylor	Nelson	Sofres	plc	("TNS")	as	a	final	payment	with	respect	to	the	sale	of	NFO,	which	resulted	in	a	$6.5	gain,	net	of	tax.	We	established reserves	for	certain	income	tax	contingencies	with	respect	to	the	determination	of	our	tax	basis	in	NFO	for	income	tax	purposes	at	the	time	of	the	disposition	of	NFO.	During	the	fourth	quarter	of	2005, $9.0	of	these	reserves	were	reversed,	as	the	related	income	tax	contingencies	were	no	longer	considered	probable	based	on	our	preliminary	review	of	our	tax	basis.	The	results	of	NFO	are	classified	as discontinued	operations	in	accordance	with	SFAS	No.	144,	Accounting	for	the	Impairment	or	Disposal	of	Long	Lived	Assets,	and,	accordingly,	the	results	of	operations	and	cash	flows	have	been	removed from	our	results	of	continuing	operations	and	cash	flows	for	prior	periods.

In	connection	with	the	disposition	of	our	NFO	World	Group	Inc.	("NFO")	operations	in	the	fourth	quarter	of	2003,	we	established	a	reserve	for	certain	income	tax	contingencies	with	respect	to the	determination	of	our	tax	basis	in	NFO	for	income	tax	purposes.	During	the	third	quarter	of	2006	we	received	a	final	study	of	the	tax	basis	of	our	investment,	and	we	determined	that	the	remaining reserve	of	$5.0	should	be	reversed	as	the	related	contingency	is	no	longer	considered	probable.	The	amount	was	reversed	through	income	from	discontinued	operations	for	the	year	ended	December	31, 2006.

# Note	4: Supplementary	Data

# Valuation	and	Qualifying	Accounts	—	Allowance	for	uncollectible	accounts	receivable

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Balance\tat\tbeginning\tof\tperiod | $105.5 | $136.1 | $134.1 |
| Charged\tto\tcosts\tand\texpenses | 1.2 | 16.9 | 36.7 |
| Charged\tto\tother\taccounts | 0.2 | (2.7) | 6.0 |
| Deductions: |  |  |  |
| Dispositions | (5.3) | (3.3) | (3.0) |
| Uncollectible\taccounts\twritten\toff | \t (25.4) | \t (32.9) | \t (45.6) |
| Foreign\tcurrency\ttranslation\tadjustment | 5.1 | (8.6) | 7.9 |
| Balance\tat\tend\tof\tperiod | $81.3 | $105.5 | $136.1 |

|  | 2006 | 2005 |
| :--- | :--- | :--- |
| Land\tand\tbuildings | $104.1 | $97.0 |
| Furniture\tand\tequipment | 952.0 | 954.3 |
| Leasehold\timprovements | 584.9 | 549.6 |
|  | 1,641.0 | \t1,600.9 |
| Less:\taccumulated\tdepreciation | \t(1,017.0) | (950.9) |
| Total | $624.0 | $650.0 |

# Accrued	Liabilities

|  | 2006 | 2005 |
| :--- | :--- | :--- |
| Media\tand\tproduction\texpenses | $1,690.7 | $1,517.6 |
| Salaries,\tbenefits\tand\trelated\texpenses | 460.6 | 447.2 |
| Office\tand\trelated\texpenses | 99.2 | 93.6 |
| Professional\tfees | 46.1 | 70.4 |
| Restructuring\tand\tother\treorganization-related | 47.3 | 49.0 |
| Interest | 30.0 | 35.2 |
| Taxes | 7.3 | 46.7 |
| Other | 74.8 | 101.4 |
| Total | $2,456.0 | $2,361.1 |

# 2005	Restatement	Liabilities

As	part	of	the	2005	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	a	statute	of	limitations	in	a	jurisdiction	has	lapsed.	For	the	year	ended December	31,	2006,	we	satisfied	$59.1	of	these	liabilities	through	cash	payments	of	$53.1	and	reductions	of	certain	client	receivables	of	$6.0.	The	remaining	decline	was	primarily	through	the	release	of liabilities	due	to	the	lapse	of	the	respective	statutes	of	limitations.

Also	as	part	of	the	2005	Restatement,	we	recognized	liabilities	related	to	internal	investigations	and	international	compensation	arrangements.	A	summary	of	these	and	the	vendor	discounts	and credits	liabilities	is	as	follows:

|  | 2006 | 2005 |
| :--- | :--- | :--- |
| Vendor\tdiscounts\tand\tcredits | $211.2 | $284.8 |
| Internal\tinvestigations\t(includes\tasset\treserves) | 19.5 | 24.7 |
| International\tcompensation\tarrangements | 32.3 | 36.2 |
| Total | $263.0 | $345.7 |

Loss	on	early	extinguishment	of	debt	—	In	November	2006,	we	retired	$400.0	of	our	4.50%	Convertible	Senior	Notes	due	2023	in	connection	with	the	issuance	of	$400.0	aggregate	principal amount	of	4.25%	Convertible	Senior	Notes	due	2023	and	as	a	result	we	recorded	non-cash	charges	of	$80.8.	See	Note	10	for	further	discussion.

Vendor	discount	and	credit	adjustments	—	These	adjustments	reflect	the	reversal	of	certain	liabilities,	primarily	established	during	the	2005	Restatement,	where	the	statute	of	limitations	has lapsed	or	where	negotiations	with	clients	have	resulted	in	concessions.	We	believe	that	presenting	amounts	realized	due	to	lapses	in	the	statute	of	limitations	or	concession	settlements	as	other	income	or expense	prevents	the	trend	of	operating	results	from	being	distorted.

Gains	on	sales	of	available-for-sale	securities	and	miscellaneous	investment	income	—	In	the	second	quarter	of	2006,	we	had	net	gains	of	$20.9	related	to	the	sale	of	an	investment	located	in Asia	Pacific	and	the	sale	of	our	remaining	ownership	interest	in	an	agency	within	The	Lowe	Group.	In	addition,	during	the	third	quarter	of	2006,	we	sold	our	interest	in	a	German	advertising	agency	and recognized	the	related	remaining	cumulative	translation	adjustment	balance,	which	resulted	in	a	non-cash	benefit	of	$17.0.	In	2005,	we	had	net	gains	of	$8.3	related	to	the	sale	of	our	remaining	equity ownership	interest	in	an	agency	within	FCB,	and	net	gains	on	sales	of	available-for-sale	securities	of	$7.9,	of	which	$3.8	related	to	appreciation	of	Rabbi	Trust	investments	restricted	for	the	purpose	of paying	our	deferred	compensation	and	deferred	benefit	arrangement	liabilities.

Investment	Impairments	—	We	recorded	investment	impairment	charges	of	$12.2	during	2005,	primarily	related	to	a	$7.1	adjustment	of	the	carrying	amount	of	our	remaining	unconsolidated investment	in	Latin	America	to

fair	value	as	a	result	of	our	intent	to	sell	and	$3.7	related	to	a	decline	in	value	of	certain	available-for-sale	investments	that	were	determined	to	be	other	than	temporary.

# Equity	Investments	in	Unconsolidated	Affiliates

Summarized	financial	information	for	our	equity-basis	investments	in	unconsolidated	affiliates,	in	the	aggregate,	is	as	follows:

|  | December	31,<br>2006 |
| :--- | :--- |
| Consolidated\tBalance\tSheet: |  |
| Total\tcurrent\tassets | $141.6 |
| Total\tnon-current\tassets | 30.5 |
| Total\tcurrent\tliabilities | 84.3 |
| Total\tnon-current\tliabilities | 3.5 |

|  | Year	ended<br>December	31,<br>2006 |
| :--- | :--- |
| Consolidated\tStatement\tof\tOperations: |  |
| Revenue | $186.2 |
| Operating\tincome | 22.8 |
| Net\tincome | 16.5 |

# Note	5: Loss	Per	Share

Earnings	(loss)	per	basic	common	share	equals	net	loss	applicable	to	common	stockholders	divided	by	the	weighted	average	number	of	common	shares	outstanding	for	the	period.	Diluted earnings	(loss)	per	share	equals	net	loss	applicable	to	common	stockholders	adjusted	to	exclude	preferred	stock	dividends,	allocation	to	participating	securities	and	interest	expense	related	to	potentially dilutive	securities	divided	by	the	weighted	average	number	of	common	shares	outstanding,	plus	any	additional	common	shares	that	would	have	been	outstanding	if	potentially	dilutive	shares	had	been issued.	The	following	sets	forth	basic	and	diluted	earnings	(loss)	per	common	share	applicable	to	common	stock:

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Basic\tand\tDiluted |  |  |  |
| Loss\tfrom\tcontinuing\toperations | $ (36.7) | $(271.9) | $(544.9) |
| Less:\tpreferred\tstock\tdividends | 47.6 | 26.3 | 19.8 |
|  | \t (84.3) | \t(298.2) | \t(564.7) |
| Income\tfrom\tdiscontinued\toperations,\tnet\tof\ttax | 5.0 | 9.0 | 6.5 |
| Net\tloss\tapplicable\tto\tcommon\tstockholders | $ (79.3) | $(289.2) | $(558.2) |
| Weighted-average\tnumber\tof\tcommon\tshares\toutstanding\t—\tbasic\tand\tdiluted | \t428.1 | \t 424.8 | \t 415.3 |
| Loss\tper\tshare\tfrom\tcontinuing\toperations | $ (0.20) | $(0.70) | $(1.36) |
| Earnings\tper\tshare\tfrom\tdiscontinued\toperations | 0.01 | 0.02 | 0.02 |
| Loss\tper\tshare\t—\tbasic\tand\tdiluted | $ (0.19) | $(0.68) | $(1.34) |

Basic	and	diluted	shares	outstanding	and	loss	per	share	are	equal	for	all	periods	presented	because	our	potentially	dilutive	securities	are	antidilutive	as	a	result	of	the	net	loss	applicable	to	common stockholders.	Our	participating	securities	have	no	impact	on	our	net	loss	applicable	to	common	stockholders	for	all	full	year	periods	since	these	securities	do	not	participate	in	our	net	loss.

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

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Stock\tOptions\tand\tNon-vested\tRestricted\tStock\tAwards | 5.5 | 4.8 | 4.0 |
| Contingently\tIssuable\tShares | — | — | 1.2 |
| 1.80%\tConvertible\tNotes | — | — | 0.4 |
| 1.87%\tConvertible\tNotes | — | — | 6.1 |
| 4.50%\tConvertible\tNotes | 60.3 | 64.4 | 64.4 |
| 4.25%\tConvertible\tNotes | 4.1 | — | — |
| Series\tA\tMandatory\tConvertible\tPreferred\tStock\t1 | 26.5 | 27.7 | 26.3 |
| Series\tB\tCumulative\tConvertible\tPerpetual\tPreferred\tStock | 38.4 | 7.3 | — |
| Total | \t134.8 | \t104.2 | \t102.4 |
| Securities\texcluded\tfrom\tdiluted\tearnings\t(loss)\tper\tshare\tcalculation\tbecause\tthe\texercise\tprice\twas\tgreater\tthan\tthe\taverage\tmarket\tprice: |  |  |  |
| Stock\tOptions\t2 | 26.3 | 32.4 | 35.4 |
| Warrants\t3 | 37.4 | — | — |

1	 The	Series	A	Mandatory	Convertible	Preferred	Stock	was	no	longer	outstanding	on	December	31,	2006	due	to	the	conversion	to	common	stock	on	December	15,	2006.

2	 These	options	represent	what	is	outstanding	at	the	end	of	the	respective	year.	At	the	point	that	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.

3	 The	potential	dilutive	impact	of	the	warrants	would	be	based	upon	the	difference	between	the	market	price	of	one	share	of	our	common	stock	and	the	stated	exercise	prices	of	the	warrants.	See	Note	11	for	further	discussion.

There	were	an	additional	6.2,	3.3	and	3.0	outstanding	options	to	purchase	common	shares	as	of	December	31,	2006,	2005	and	2004,	respectively,	with	exercise	prices	less	than	the	average	market price	for	the	respective	year.	However,	these	options	are	not	included	in	the	table	above	presenting	the	potential	shares	excluded	from	diluted	earnings	(loss)	per	share	due	to	the	application	of	the treasury	stock	method	and	the	rules	related	to	stock-based	compensation	arrangements.

# Note	6: Accumulated	Other	Comprehensive	Loss

The	components	of	accumulated	other	comprehensive	loss	are	as	follows:

|  | Years	ended	December	31,<br>2006 | 2005 |
| :--- | :--- | :--- |
| Foreign\tcurrency\ttranslation\tadjustment | $(195.1) | $(188.8) |
| Unrealized\tholding\tgains\ton\tsecurities,\tnet | 6.4 | 24.2 |
| Adjustment\tfor\tminimum\tpension\tliability,\tnet\t1 | — | \t(111.4) |
| Unrecognized\tlosses,\ttransition\tobligation\tand\tprior\tservice\tcost,\tnet\t2 | \t(114.3) | — |
| Accumulated\tother\tcomprehensive\tloss,\tnet\tof\ttax | $(303.0) | $(276.0) |

1	 The	minimum	pension	liability	was	eliminated	upon	the	adoption	of	SFAS	No.	158.

2 In	connection	with	the	adoption	of	SFAS	No.	158	on	December	31,	2006,	previously	unrecognized	prior	service	costs	and	credits	and	unrecognized	actuarial	gains	and	losses	were	recognized	as	an	adjustment	to	accumulated	other comprehensive	income	(loss),	net	of	tax.	Such	amounts	will	be	adjusted	as	they	are	subsequently	recognized	as	components	of	net	periodic	benefit	cost	or	income	according	to	current	recognition	and	amortization	provisions.	See	Note	13 for	further	discussion.

# Note	7: Goodwill	and	Other	Intangible	Assets

# Goodwill

Goodwill	is	the	excess	purchase	price	remaining	from	an	acquisition	after	an	allocation	of	purchase	price	has	been	made	to	identifiable	assets	acquired	and	liabilities	assumed	based	on	estimated fair	values.	In	order	to	determine	the	fair	value	of	net	assets	for	new	agency	acquisitions,	valuations	are	performed	based	on	several	factors,	including	the	type	of	service	offered,	competitive	market position,	brand	reputation	and	geographic	coverage.	Considering	the	characteristics	of	advertising,	specialized	marketing	and	communication	services	companies,	our	acquisitions	usually	do	not	have significant	amounts	of	tangible	assets	as	the	principal	asset	we	typically	acquire	is	creative	talent.	As	a	result,	a	substantial	portion	of	the	purchase	price	is	allocated	to	goodwill.	Subsequent	changes	to goodwill	include	both	current	year	and	deferred	payments	related	to	acquisitions.	We	perform	an	annual	impairment	review	of	goodwill	as	of	October	1st	or	whenever	events	or	significant	changes	in circumstances	indicate	that	the	carrying	value	may	not	be	recoverable.

The	changes	in	the	carrying	value	of	goodwill	by	segment	for	the	years	ended	December	31,	2006	and	2005	are	as	follows:

|  | IAN | CMG | Total |
| :--- | :--- | :--- | :--- |
| Balance\tas\tof\tDecember\t31,\t2004 | $2,753.5 | $388.1 | $3,141.6 |
| Goodwill\tallocated\tto\tbusiness\tdispositions | (24.2) | (1.7) | (25.9) |
| Goodwill\tfrom\tprior\tacquisitions | 45.4 | 37.8 | 83.2 |
| Impairment\tcharges\t(see\tNote\t8) | (97.0) | — | (97.0) |
| Other\t(primarily\tcurrency\ttranslation) | (65.0) | (6.0) | (71.0) |
| Balance\tas\tof\tDecember\t31,\t2005 | $2,612.7 | $418.2 | $3,030.9 |
| Goodwill\tallocated\tto\tbusiness\tdispositions | (9.1) | (2.7) | (11.8) |
| Goodwill\tfrom\tprior\tacquisitions | 11.1 | 13.2 | 24.3 |
| Impairment\tcharges\t(see\tNote\t8) | (27.2) | — | (27.2) |
| Other\t(primarily\tcurrency\ttranslation) | 45.0 | 6.6 | 51.6 |
| Balance\tas\tof\tDecember\t31,\t2006 | $2,632.5 | $435.3 | $3,067.8 |

# Other	Intangible	Assets

Included	in	other	intangible	assets	are	assets	with	indefinite	lives	not	subject	to	amortization	and	assets	with	definite	lives	subject	to	amortization.	Other	intangible	assets	include	non-compete agreements,	license	costs,	trade	names	and	customer	lists.	Intangible	assets	with	definitive	lives	subject	to	amortization	are	amortized	on	a	straight-line	basis	with	estimated	useful	lives	of	up	to	15	years. The	total	amortization	expense	for	the	years	ended	December	31,	2006,	2005	and	2004	was	$6.2,	$1.5	and	$6.8,	respectively.	The	following	table	provides	a	summary	of	other	intangible	assets,	which	are included	in	Other	Assets:

|  | 2006 | 2005 |
| :--- | :--- | :--- |
| Other\tintangible\tassets | $63.4 | $64.4 |
| Less:\taccumulated\tamortization | \t(34.4) | \t(29.4) |
| Other\tintangible\tassets,\tnet | $29.0 | $35.0 |

# Note	8: Long-Lived	Asset	Impairment	and	Other	Charges

Long-lived	assets	include	land,	buildings,	equipment,	goodwill	and	other	intangible	assets.	Buildings,	equipment	and	other	intangible	assets	with	finite	lives	are	depreciated	or	amortized	on	a straight-line	basis	over	their	respective	estimated	useful	lives.	When	necessary,	we	record	an	impairment	charge	for	the	amount	that	the	carrying	value	of	the	asset	exceeds	the	implied	fair	value.

The	following	table	summarizes	the	long-lived	asset	impairment	and	other	charges:

|  | 2006 |  | 2005 |  | 2004 | 2004 | 2004 | 2004 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | IAN | IAN | CMG | Total | IAN | CMG | Motor-\nsports | Total |
| Goodwill\timpairment | $27.2 | $97.0 | $ — | $97.0 | $220.2 | $91.7 | $— | $311.9 |
| Other | — | 1.5 | \t 0.1 | 1.6 | 6.9 | 0.4 | 3.0 | 10.3 |
| Total | $27.2 | $98.5 | $ 0.1 | $98.6 | $227.1 | $92.1 | $3.0 | $322.2 |

IAN	—	Our	long-term	projections,	which	were	updated	in	the	fourth	quarter	of	2006,	showed	previously	unanticipated	declines	in	discounted	future	operating	cash	flows	due	primarily	to	recent client	losses	at	one	of	our	domestic	advertising	reporting	units.	These	discounted	future	operating	cash	flow	projections	indicated	that	the

implied	fair	value	of	the	goodwill	at	this	reporting	unit	was	less	than	its	book	value	resulting	in	a	goodwill	impairment	charge	of	$27.2.

IAN	—	During	the	third	quarter	of	2004,	we	recorded	goodwill	impairment	charges	of	$220.2	at	The	Partnership	reporting	unit,	which	was	comprised	of	Lowe	Worldwide,	Draft	Worldwide, Mullen,	Dailey	&	Associates	and	Berenter	Greenhouse	&	Webster	("BGW").	Our	long-term	projections	showed	previously	unanticipated	declines	in	discounted	future	operating	cash	flows	due	to	recent client	losses,	reduced	client	spending	and	declining	industry	valuation	metrics.	These	discounted	future	operating	cash	flow	projections	indicated	that	the	implied	fair	value	of	goodwill	was	less	than	the related	book	value.	The	Partnership	was	subsequently	disbanded	in	the	fourth	quarter	of	2004	and	the	remaining	goodwill	was	allocated	to	the	agencies	within	the	Partnership	based	on	the	relative	fair value	of	the	agencies	at	the	time	of	disbandment.

# Note	9: Provision	for	Income	Taxes

The	components	of	income	(loss)	from	continuing	operations	before	provision	for	(benefit	of)	income	taxes,	equity	earnings,	and	minority	interest	expense	are	as	follows:

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Domestic | $(103.5) | $54.4 | $(72.4) |
| Foreign | 98.5 | \t(241.0) | \t(194.6) |
| Total | $(5.0) | $(186.6) | $(267.0) |

The	provision	for	(benefit	of)	income	taxes	on	continuing	operations	consists	of:

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Federal\tincome\ttaxes\t(including\tforeign\twithholding\ttaxes): |  |  |  |
| Current | $(0.7) | $20.8 | $37.2 |
| Deferred | \t(14.8) | \t16.0 | 18.2 |
|  | \t(15.5) | \t36.8 | 55.4 |
| State\tand\tlocal\tincome\ttaxes: |  |  |  |
| Current | 14.8 | \t12.2 | 12.8 |
| Deferred | \t(24.8) | 4.6 | \t (22.6) |
|  | \t(10.0) | \t16.8 | (9.8) |
| Foreign\tincome\ttaxes: |  |  |  |
| Current | 62.5 | 4.3 | 84.0 |
| Deferred | \t(18.3) | \t24.0 | \t132.6 |
|  | 44.2 | \t28.3 | \t216.6 |
| Total | $18.7 | $81.9 | $262.2 |

# Effective	Tax	Rate	Reconciliation	on	Continuing	Operations

A	reconciliation	of	the	effective	income	tax	rate	on	continuing	operations	before	equity	earnings	and	minority	interest	expense	as	reflected	in	the	Consolidated	Statements	of	Operations	to	the U.S.	federal	statutory	income	tax	rate	is	as	follows:

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| U.S.\tfederal\tstatutory\tincome\ttax\trate | 35.0% | 35.0% | 35.0% |
| Federal\tincome\ttax\tbenefit\tat\tstatutory\trate | $(1.8) | $(65.3) | $ (93.5) |
| State\tand\tlocal\tincome\ttaxes,\tnet\tof\tfederal\tincome\ttax\tbenefit | (6.5) | 3.6 | 13.7 |
| Impact\tof\tforeign\toperations,\tincluding\twithholding\ttaxes | (5.3) | 44.4 | 77.6 |
| Change\tin\tvaluation\tallowance | 63.6 | 69.9 | \t236.0 |
| Goodwill\tand\tother\tlong-lived\tasset\timpairment\tcharges | 3.8 | 19.8 | 26.3 |
| Liquidation\tof\tMotorsports | — | — | \t (19.7) |
| Capitalized\texpenses | — | 10.0 | — |
| Restricted\tstock | 5.3 | — | — |
| Capital\tgains\t(losses) | (34.8) | 2.2 | 1.2 |
| Other | (5.6) | (2.7) | 20.6 |
| Provision\tfor\tincome\ttaxes | $18.7 | $81.9 | $262.2 |
| Effective\ttax\trate\ton\toperations | \t(374.0)% | \t(43.9)% | \t (98.2)% |

Our	effective	tax	rate	was	negatively	impacted	by	foreign	profits	subject	to	tax	at	different	rates	and	losses	in	certain	foreign	locations	where	we	receive	no	tax	benefit	due	to	100%	valuation allowances.	The	difference	between	the	effective	tax	rate	and	the	statutory	federal	rate	of	35%	is	also	due	to	state	and	local	taxes,	the	write-off	of	deferred	tax	assets	from	restricted	stock,	the	release	of valuation	allowances,	non-deductible	financing	costs	and	the	reversal	of	previously	claimed	foreign	tax	credits.

The	components	of	deferred	tax	assets	consist	of	the	following	items:

|  | 2006 | 2005 |
| :--- | :--- | :--- |
| Postretirement/post-employment\tbenefits | $32.4 | $36.4 |
| Deferred\tcompensation | 187.2 | \t 162.7 |
| Pension\tcosts | 37.6 | 36.1 |
| Basis\tdifferences\tin\tfixed\tassets | 66.2 | 59.8 |
| Rent | 19.8 | 19.8 |
| Interest | (3.4) | (13.7) |
| Accruals\tand\treserves | 63.7 | \t 239.3 |
| Allowance\tfor\tdoubtful\taccounts | 16.3 | 23.0 |
| Basis\tdifferences\tin\tintangible\tassets | (93.1) | (35.4) |
| Investments\tin\tequity\tsecurities | 3.2 | (6.8) |
| Tax\tloss/tax\tcredit\tcarry\tforwards | 646.9 | \t 447.3 |
| Restructuring\tand\tother\tmerger-related\tcosts | 11.9 | 16.9 |
| Other | 62.7 | (2.8) |
| Total\tdeferred\ttax\tassets,\tnet | \t1,051.4 | \t 982.6 |
| Valuation\tallowance | (504.0) | \t(501.0) |
| Net\tdeferred\ttax\tassets | $547.4 | $ 481.6 |

# Valuation	and	Qualifying	Accounts	—	Valuation	Allowance

As	required	by	SFAS	No.	109,	Accounting	for	Income	Tax	("SFAS	No.	109"),	we	evaluate	on	a	quarterly	basis	the	realizability	of	our	deferred	tax	assets.	SFAS	No.	109	requires	a	valuation allowance	to	be	established	when	it	is	more	likely	than	not	that	all	or	a	portion	of	deferred	tax	assets	will	not	be	realized.	In	circumstances	where	there	is	sufficient	negative	evidence,	establishment	of	a valuation	allowance	must	be	considered.	We	believe	that	cumulative	losses	in	the	most	recent	three-year	period	represent	sufficient	negative	evidence	under	the	provisions	of	SFAS	No.	109,	and	as	a result,	we	determined	that	certain	of	our	deferred	tax	assets	required	the	establishment	of	a	valuation	allowance.	The	deferred	tax	assets	for	which	an	allowance	was	recognized	relate	primarily	to	tax credit	carryforwards,	foreign	tax	loss	and	U.S.	capital	loss	carryforwards.

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Balance\tat\tbeginning\tof\tperiod | $501.0 | $488.6 | $252.6 |
| Charged\tto\tcosts\tand\texpenses | 63.6 | 69.9 | \t236.0 |
| Charged\tto\tgross\ttax\tassets\tand\tother\taccounts | \t (60.6) | \t (57.5) | — |
| Balance\tat\tend\tof\tperiod | $504.0 | $501.0 | $488.6 |

The	valuation	allowance	is	$504.0	and	$501.0	at	December	31,	2006	and	2005,	respectively.	The	change	during	2006	in	the	deferred	tax	valuation	allowance	relates	to	uncertainties	regarding future	utilization	of	tax	loss	carryforwards,	offset	primarily	by	reversals	of	$45.0	of	valuation	allowances	in	two	European	countries	where	we	believe	that	it	is	now	more	likely	than	not	that	those	tax	loss carryforwards	will	be	utilized.	In	addition,	we	believe	that	it	is	more	likely	than	not	that	approximately	$29.0	of	U.S.	capital	loss	carryforwards	and	$17.0	of	foreign	tax	credits	will	not	be	utilized.	We also	wrote	off	previously	reserved	for	deferred	tax	assets	that	were	deemed	to	be	permanently	unrealizable	due	to	the	expiration	of	tax	loss	carryforwards	and	sales	of	certain	businesses.

At	December	31,	2006,	there	are	$68.6	of	tax	credit	carryforwards	with	expiration	periods	beginning	in	2009	and	ending	in	2013.	There	are	also	$1,521.8	of	loss	carryforwards,	of	which	$571.9 are	U.S.	capital	and	tax	loss	carryforwards	that	expire	in	the	years	2007	through	2024.	The	remaining	$949.9	are	non-U.S.	tax	loss	carryforwards	of	which	$718.6	have	unlimited	carry	forward	periods and	$231.3	have	expiration	periods	from	2007	through	2022

As	of	December	31,	2006	and	December	31,	2005,	we	had	approximately	$991.8	and	$825.9	of	undistributed	earnings	attributable	to	foreign	subsidiaries,	respectively.	It	is	our	intention	to reinvest	undistributed	earnings	of	our

foreign	subsidiaries	and	thereby	postpone	their	remittance.	We	have	not	provided	deferred	U.S.	income	taxes	or	foreign	withholding	taxes	on	temporary	differences	resulting	from	earnings	for	certain foreign	subsidiaries	which	are	permanently	reinvested	outside	the	United	States.	It	is	not	practicable	to	determine	the	amount	of	unrecognized	deferred	tax	liability	associated	with	these	temporary differences.

In	2006	we	finalized	the	1994-1996	IRS	audit	cycle.	We	agreed	to	an	IRS	adjustment	to	move	a	tax	deduction	into	later	years.	The	deferral	of	this	deduction	has	not	impacted	our	tax	provision	in 2006.

In	addition,	in	2006	the	IRS	completed	their	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. Further,	during	the	second	quarter	of	2006,	the	IRS	commenced	the	audit	of	the	2003	and	2004	income	tax	returns.

In	2006,	we	presented	the	IRS	with	an	adjustment	to	our	taxable	loss	for	2004	to	claim	a	deduction	for	a	worthlessness	loss	of	an	acquired	business	which	we	originally	claimed	on	our	2002	tax return	but	which	the	IRS	disallowed.	We	had	previously	received	a	refund	of	approximately	$45.0	from	the	carryback	of	the	2002	loss	to	a	previous	year.	In	2006,	we	paid	$52.7,	including	interest,	as	a result	of	the	disallowance	of	this	loss	deduction	for	2002.	This	loss	claim	is	currently	being	reviewed	by	the	IRS	in	conjunction	with	their	audit	of	the	2003-2004	income	tax	return.

Also	in	2006,	a	decision	was	reached	to	carryback	our	loss	generated	in	2005	to	2003.	The	taxable	income	in	2003	would	be	reduced,	with	the	corollary	effect	of	previously	claimed	foreign	tax credits	being	displaced.	The	displaced	foreign	tax	credits	will	become	part	of	our	foreign	tax	credit	carryforward,	on	which	a	full	valuation	allowance	has	been	recorded.	Accordingly,	we	have	recorded	a charge	to	tax	expense	in	2006	for	this	item.

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.	See	Note	19	for	further	information.

# Long-Term	Debt

A	summary	of	the	carrying	amounts	and	fair	values	of	our	long-term	debt	is	as	follows:

|  | Effective | 2006 | 2006 | 2005 | 2005 |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Interest\nRate\t1 | Book\nValue | Fair\nValue | Book\nValue | Fair\nValue |
| Floating\tRate\tSenior\tUnsecured\tNotes\tdue\t2008 | — | $— | $— | $250.0 | $250.6 |
|  | 5.43% | 249.8 | \t245.0 | 249.7 | \t225.0 |
|  | 8.65% | 239.9 | \t253.8 | — | — |
| 7.25%\tSenior\tUnsecured\tNotes\tdue\t2011 | 7.25% | 499.3 | \t500.0 | 499.2 | \t465.0 |
|  | 6.29% | 350.2 | \t322.0 | 350.3 | \t297.5 |
| 4.50%\tConvertible\tSenior\tNotes\tdue\t2023 | 4.50% | 400.0 | \t467.2 | 800.0 | \t834.0 |
|  | 0.58% | 475.2 | \t487.2 | — | — |
|  |  | 36.8 |  | 36.9 |  |
| Total\tlong-term\tdebt |  | \t2,251.2 |  | \t2,186.1 |  |
| Less:\tcurrent\tportion |  | 2.6 |  | 3.1 |  |
| Long-term\tdebt,\texcluding\tcurrent\tportion |  | $2,248.6 |  | $2,183.0 |  |

1	 Excludes	the	effect	of	related	gains/losses	on	interest	rate	swaps,	as	applicable.

Annual	maturities	as	of	December	31,	2006	are	scheduled	as	follows:

1 In	addition,	holders	of	our	$400.0	4.50%	Notes	may	require	us	to	repurchase	their	4.50%	Notes	for	cash	at	par	in	March	2008.	These	Notes	will	mature	in	2023	if	not	converted	or	repurchased.

# Redemption	of	Long-Term	Debt

In	August	2005,	we	redeemed	the	remainder	of	our	7.875%	Senior	Unsecured	Notes	with	an	aggregate	principal	amount	of	$250.0	at	maturity	for	a	total	cost	of	$258.6,	which	included	the principal	amount	of	the	Notes,	accrued	interest	to	the	redemption	date,	and	a	prepayment	penalty	of	$1.4.	To	redeem	these	Notes	we	used	the	proceeds	from	the	sale	and	issuance	in	July	2005	of	$250.0 Floating	Rate	Senior	Unsecured	Notes	due	2008.

# Floating	Rate	Senior	Unsecured	Notes

In	December	2006,	we	exchanged	all	of	our	$250.0	Floating	Rate	Notes	due	2008	for	$250.0	aggregate	principal	amount	Floating	Rate	Notes	due	2010.	The	new	Floating	Rate	Notes	mature	on November	15,	2010	and	bear	interest	at	a	per	annum	rate	equal	to	three-month	LIBOR	plus	200	basis	points,	125	basis	points	less	than	the	interest	rate	on	the	old	Floating	Rate	Notes.	In	connection	with the	exchange,	we	made	an	early	participation	payment	of	$41.25	(actual	amount)	in	cash	per	$1,000	(actual	amount)	principal	amount	of	old	Floating	Rate	Notes	for	a	total	payment	of	$10.3.

In	accordance	with	EITF	Issue	No.	96-19,	Debtor's	Accounting	for	a	Modification	or	Exchange	of	Debt	Instruments	("EITF	96-19"),	this	transaction	is	treated	as	an	exchange	of	debt	for accounting	purposes	because	the	present	value	of	the	remaining	cash	flows	under	the	terms	of	the	original	instrument	are	not	substantially	different	from	those	of	the	new	instrument.	The	new	Floating Rate	Notes	are	reflected	on	our	Consolidated	Balance	Sheet	net	of	the	$10.3	early	participation	payment,	which	is	amortized	over	the	life	of	the	new	Floating	Rate	Notes	as	a	discount,	using	an	effective interest	method,	and	recorded	in	interest	expense.	Direct	fees	associated	with	the	exchange	of	$3.5	were	reflected	in	interest	expense.

In	November	2006,	we	exchanged	$400.0	of	our	4.50%	Convertible	Senior	Notes	due	2023	(the	"4.50%	Notes")	for	$400.0	aggregate	principal	amount	of	4.25%	Convertible	Senior	Notes	due 2023	(the	"4.25%	Notes").	As	required	by	EITF	96-19,	this	exchange	is	treated	as	an	extinguishment	of	the	4.50%	Notes	and	an	issuance	of	4.25%	Notes	for	accounting	purposes	because	the	present value	of	the	remaining	cash	flows	plus	the	fair	value	of	the	embedded	conversion	option	under	the	terms	of	the	original	instrument	are	substantially	different	from	those	of	the	new	instrument.	As	a	result, the	4.25%	Notes	are	reflected	on	our	Consolidated	Balance	Sheet	at	their	fair	value	at	issuance,	or	$477.0.	We	recorded	a	non-cash	charge	in	the	fourth	quarter	of	2006	of	$77.0	reflecting	the	difference between	the	fair	value	of	the	new	debt	and	the	carrying	value	of	the	old	debt.	The	difference	between	fair	value	and	carrying	value	will	be	amortized	through	March	15,	2012,	which	is	the	first	date holders	may	require	us	to	repurchase	the	4.25%	Notes,	resulting	in	a	reduction	of	reported	interest	expense	in	future	periods.	We	also	recorded	a	non-cash	charge	of	$3.8	for	the	extinguishment	of unamortized	debt	issuance	costs	related	to	the	exchanged	4.50%	Notes.

Our	4.25%	Notes	are	convertible	into	our	common	stock	at	a	conversion	price	of	$12.42	per	share,	subject	to	adjustment	in	specified	circumstances	including	any	payment	of	cash	dividends	on our	common	stock.	The	conversion	rate	of	the	new	notes	is	also	subject	to	adjustment	for	certain	events	arising	from	stock	splits	and	combinations,	stock	dividends,	certain	cash	dividends	and	certain other	actions	by	us	that	modify	our	capital

structure.	The	4.25%	Notes	are	convertible	at	any	time	if	the	average	price	of	our	common	stock	for	20	trading	days	immediately	preceding	the	conversion	date	is	greater	than	or	equal	to	a	specified percentage	of	the	conversion	price,	beginning	at	118.5%	in	2006	and	declining	0.5%	each	year	until	it	reaches	110%	at	maturity.	They	are	also	convertible,	regardless	of	the	price	of	our	common	stock, if:	(i)	we	call	the	4.25%	Notes	for	redemption;	(ii)	we	make	specified	distributions	to	shareholders;	(iii)	we	become	a	party	to	a	consolidation,	merger	or	binding	share	exchange	pursuant	to	which	our common	stock	would	be	converted	into	cash	or	property	(other	than	securities);	or	(iv)	the	credit	ratings	assigned	to	the	4.25%	Notes	by	any	two	of	Moody's	Investors	Service,	Standard	&	Poor's	and Fitch	Ratings	are	lower	than	Ba2,	BB	and	BB,	respectively,	or	the	4.25%	Notes	are	no	longer	rated	by	at	least	two	of	these	ratings	services.	Because	of	our	current	credit	ratings,	the	4.25%	Notes	are currently	convertible.	The	4.25%	Notes	are	also	convertible,	whether	or	not	the	above	conditions	are	met,	from	February	15	to	March	15,	2023.

Holders	of	the	4.25%	Notes	may	require	us	to	repurchase	the	4.25%	Notes	on	March	15,	2012	for	cash	and	on	March	15,	2015	and	March	15,	2018,	for	cash	or	our	common	stock	or	a combination	of	cash	and	common	stock,	at	our	election.	Additionally,	investors	may	require	us	to	repurchase	the	4.25%	Notes	in	the	event	of	certain	change	of	control	events	that	occur	prior	to	March	15, 2012,	for	cash	or	our	common	stock	or	a	combination	of	cash	and	common	stock,	at	our	election.	At	our	option,	we	may	redeem	the	4.25%	Notes	on	or	after	March	15,	2012	for	cash.	The	redemption price	in	each	of	these	instances	will	be	100%	of	the	principal	amount	of	the	Notes	being	redeemed,	plus	accrued	and	unpaid	interest,	if	any.	The	4.25%	Notes	also	provide	for	an	additional	"make-whole" adjustment	to	the	conversion	rate	in	the	event	of	a	change	of	control	meeting	specified	conditions.

In	accordance	with	EITF	03-6,	the	4.25%	Notes	are	not	considered	securities	with	participation	rights	in	earnings	available	to	common	stockholders	as	there	are	no	features	attached	to	this security	that	allow	holders	to	participate	in	our	undistributed	earnings.

Our	4.50%	Notes	are	convertible	into	our	common	stock	at	a	conversion	price	of	$12.42	per	share,	subject	to	adjustment	in	specified	circumstances.	They	are	convertible	at	any	time	if	the average	price	of	our	common	stock	for	20	trading	days	immediately	preceding	the	conversion	date	is	greater	than	or	equal	to	a	specified	percentage,	beginning	at	120%	in	2003	and	declining	0.5%	each year	until	it	reaches	110%	at	maturity,	of	the	conversion	price.	They	are	also	convertible,	regardless	of	the	price	of	our	common	stock,	if:	(i)	we	call	the	4.50%	Notes	for	redemption;	(ii)	we	make specified	distributions	to	shareholders;	(iii)	we	become	a	party	to	a	consolidation,	merger	or	binding	share	exchange	pursuant	to	which	our	common	stock	would	be	converted	into	cash	or	property	(other than	securities)	or	(iv)	the	credit	ratings	assigned	to	the	4.50%	Notes	by	any	two	of	Moody's	Investors	Service,	Standard	&	Poor's	and	Fitch	Ratings	are	lower	than	Ba2,	BB	and	BB,	respectively,	or	the 4.50%	Notes	are	no	longer	rated	by	at	least	two	of	these	ratings	services.	Because	of	our	current	credit	ratings,	the	4.50%	Notes	are	currently	convertible.

Holders	of	the	4.50%	Notes	may	require	us	to	repurchase	the	4.50%	Notes	on	March	15,	2008	for	cash	and	on	March	15,	2013	and	March	15,	2018,	for	cash	or	common	stock	or	a	combination	of both,	at	our	election.	Additionally,	investors	may	require	us	to	repurchase	the	4.50%	Notes	in	the	event	of	certain	change	of	control	events	that	occur	prior	to	March	15,	2008	for	cash	or	common	stock	or a	combination	of	both,	at	our	election.	If	at	any	time	on	or	after	March	13,	2003	we	pay	cash	dividends	on	our	common	stock,	we	will	pay	contingent	interest	in	an	amount	equal	to	100%	of	the	per	share cash	dividend	paid	on	the	common	stock	multiplied	by	the	number	of	shares	of	common	stock	issuable	upon	conversion	of	the	4.50%	Notes.	At	our	option,	we	may	redeem	the	4.50%	Notes	on	or	after September	15,	2009	for	cash.	The	redemption	price	in	each	of	these	instances	will	be	100%	of	the	principal	amount	of	the	Notes	being	redeemed,	plus	accrued	and	unpaid	interest,	if	any.	The 4.50%	Notes	also	provide	for	an	additional	"make-whole"	adjustment	to	the	conversion	rate	in	the	event	of	a	change	of	control	meeting	specified	conditions.

In	accordance	with	EITF	03-6,	the	4.50%	Notes	are	considered	securities	with	participation	rights	in	earnings	available	to	common	stockholders	due	to	the	feature	of	these	securities	that	allows investors	to	participate	in	cash	dividends	paid	on	our	common	stock.	For	periods	in	which	we	experience	net	income,	the	impact	of	these	securities'	participation	rights	is	included	in	the	calculation	of earnings	per	share.	For	periods	in	which	we	experience	a	net	loss,	the	4.50%	Notes	have	no	impact	on	the	calculation	of	earnings	per	share	due	to	the	fact	that	the	holders	of	these	securities	do	not participate	in	our	losses.

# Consent	Solicitation

In	March	2005,	we	completed	a	consent	solicitation	to	amend	the	indentures	governing	five	series	of	our	outstanding	public	debt	to	provide,	among	other	things,	that	our	failure	to	file	with	the trustee	our	SEC	reports,	including	our	2004	Annual	Report	on	Form	10-K	and	Quarterly	Reports	for	the	first	and	second	quarters	of	2005	on	Form	10-Q,	would	not	constitute	a	default	under	the indentures	until	October	1,	2005.

# Credit	Arrangements

We	have	a	committed	credit	agreement	and	uncommitted	credit	facilities	with	various	banks	that	permit	borrowings	at	variable	interest	rates.	As	of	December	31,	2006	and	2005,	there	were	no borrowings	under	our	committed	credit	facilities.	However,	there	were	borrowings	under	the	uncommitted	facilities	made	by	several	of	our	subsidiaries	outside	the	United	States.	We	have	guaranteed	the repayment	of	some	of	these	borrowings	by	our	subsidiaries.	The	weighted-average	interest	rate	on	outstanding	balances	under	the	uncommitted	short-term	facilities	as	of	December	31,	2006	and	2005 was	approximately	5%	in	each	year.	A	summary	of	our	credit	facilities	is	as	follows:

|  | 2006 | 2006 | 2006 | 2006 | 2005 | 2005 | 2005 | 2005 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Total\nFacility | Amount\nOutstanding | Letters\nof\tCredit | Total\nAvailable | Total\nFacility | Amount\nOutstanding | Letters\nof\tCredit | Total\nAvailable |
| Committed |  |  |  |  |  |  |  |  |
| Credit\tAgreement | $750.0 | — | $219.9 | $530.1 | $— | $— | $— | $— |
| Three-Year\tRevolving\tCredit\tFacility | — | — | — | — | \t500.0 | — | 162.4 | 337.6 |
| Other\tFacilities | — | — | — | — | 0.7 | — | — | 0.7 |
|  | $750.0 | $— | $219.9 | $530.1 | $500.7 | $— | $162.4 | $338.3 |
| Uncommitted\nNon-U.S. | $518.9 | $80.3 | $1.1 | $437.5 | $516.2 | $53.7 | $— | $462.5 |

Our	primary	credit	agreement	is	a	$750.0	Three-Year	Credit	Agreement,	dated	as	of	June	13,	2006	(the	"Credit	Agreement").	Under	the	Credit	Agreement,	a	special-purpose	entity	called	ELF Special	Financing	Ltd.	("ELF")	acts	as	the	lender	and	letter	of	credit	issuer.	In	connection	with	entering	into	the	Credit	Agreement,	we	terminated	our	previous	committed	credit	agreement,	the	Amended and	Restated	Three-Year	Credit	Agreement,	dated	as	of	May	10,	2004,	as	amended.	ELF	is	obligated	at	our	request	to	make	cash	advances	to	us	and	to	issue	letters	of	credit	for	our	account,	in	an aggregate	amount	not	to	exceed	$750.0	outstanding	at	any	time.	The	aggregate	face	amount	of	letters	of	credit	may	not	exceed	$600.0	at	any	time.	Our	obligations	under	the	Credit	Agreement	are unsecured.	The	Credit	Agreement	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	the	$600.0	limit	on	letters	of	credit.	We	are	not	subject	to	any	financial	or	other	material	restrictive	covenants	under	the	Credit	Agreement.

We	pay	commitment	fees	on	the	undrawn	amount,	less	the	letters	of	credit,	under	the	Credit	Agreement	and	commissions	on	the	amounts	available	to	be	drawn	under	the	letters	of	credit	at 0.78%	per	annum.	In	addition,	we	pay	a	facility	fee	equal	to	0.15%	per	annum	on	the	undrawn	amount,	including	letters	of	credit,	under	the	facility.	If	we	draw	under	the	facility,	interest	is	payable	on	any outstanding	advances	under	the	Credit	Agreement	at	3-month	LIBOR	plus	0.78%	per	annum.	The	Credit	Agreement	will	expire	on	June	15,	2009.

We	entered	into	the	Credit	Agreement	during	the	second	quarter	of	2006	as	part	of	a	transaction	we	refer	to	as	the	"ELF	Financing."	ELF	is	a	special-purpose	entity	incorporated	in	the	Cayman Islands,	in	which	we	have	no	equity	or	other	interest	and	which	we	do	not	consolidate	for	financial	reporting	purposes.	In	the	ELF	Financing,	institutional	investors	purchased	from	ELF	debt	securities issued	by	ELF	(the	"ELF	Notes")	and	warrants	issued	by	us	(refer	to	Note	11).	ELF	received	$750.0	in	proceeds	from	these	sales,	which	it	used	to	purchase	AAA-rated	liquid	assets.	It	will	hold	the	liquid assets	pending	any	request	for	borrowing	from	us	or	any	drawing	on	any	letters	of	credit	issued	for	our	account	under	the	Credit	Agreement,	which	ELF	will	fund	by	selling	liquid	assets.	We	are	not	the issuer	of	the	ELF	Notes	and	are	not	party	to	the	indenture	governing	the	ELF	Notes.	In	conjunction	with	the	ELF	Financing	we	paid	$41.2	of	issuance	costs,	with	the	offset	recorded	in	other	assets.	The issuance	costs	consist	of

approximately	$25.0	of	underwriting	commissions,	legal	and	accounting	fees,	printing	costs	and	other	fees	or	expenses,	with	the	balance	in	a	fee	to	one	of	the	initial	purchasers	for	its	services	as structuring	agent	for	the	offering.	These	costs	will	be	amortized	through	the	exercise	date	of	the	warrants	on	a	straight-line	basis	as	a	component	of	interest	expense.

Under	certain	circumstances,	including	certain	events	of	default	involving	us	or	occurring	under	the	ELF	Notes,	the	commitment	to	make	advances	and	issue	letters	of	credit	under	the	Credit Agreement	may	be	terminated	by	ELF,	acting	on	instruction	of	the	holders	of	the	ELF	Notes.	We	will	be	entitled,	prior	to	any	such	termination,	to	make	a	borrowing	of	up	to	the	entire	available	amount of	the	commitment	under	the	Credit	Agreement	(regardless	of	whether	our	obligations	under	the	Credit	Agreement	have	been	accelerated).	Upon	termination	of	the	commitment,	the	holders	of	the	ELF Notes	will	automatically	receive	interests	in	the	outstanding	loans	in	exchange	for	their	ELF	Notes.	Thereafter	we	will	not	be	able	to	borrow	or	reborrow	additional	funds	under	the	Credit	Agreement,	but the	advances	will	remain	outstanding	as	term	loans	maturing	on	June	15,	2009	(subject	to	the	rights	of	the	holders	to	accelerate	the	loans	upon	an	event	of	default).

# Cash	Poolings

# Note	11: Warrants

As	part	of	the	ELF	Financing	completed	during	the	second	quarter	of	2006,	we	issued	67.9	warrants,	consisting	of	29.1	capped	warrants	("Capped	Warrants")	and	38.8	uncapped	warrants ("Uncapped	Warrants").	In	accordance	with	EITF	Issue	No.	00-19,	Accounting	for	Derivative	Financial	Instruments	Indexed	to,	and	Potentially	Settled	in,	a	Company's	Own	Stock	("EITF	00-19"),	we recorded	$63.4	of	deferred	warrant	cost	in	other	assets,	with	the	offset	recorded	to	additional	paid-in	capital	within	stockholders'	equity.	This	amount	is	a	non-cash	transaction	and	represents	the	fair	value of	the	warrants	at	the	transaction	close	date	estimated	using	the	Black-Scholes	option-pricing	model,	which	requires	reliance	on	variables	including	the	price	volatility	of	the	underlying	stock.	The deferred	warrant	cost	will	be	amortized	through	the	exercise	date	of	the	warrants	as	issuance	costs	on	a	straight-line	basis	as	a	non-cash	element	of	interest	expense.	As	of	December	31,	2006,	$11.4	has been	recognized	as	interest	expense.

The	stated	exercise	date	of	the	warrants	is	June	15,	2009.	Following	the	exercise	of	the	warrants	each	warrant	will	entitle	the	warrant	holder	to	receive	an	amount	in	cash,	shares	of	our	common stock,	or	a	combination	of	cash	and	shares	of	our	common	stock,	at	our	option.	The	amount	will	be	based,	subject	to	customary	adjustments,	on	the	difference	between	the	market	price	of	one	share	of our	common	stock	(calculated	as	the	average	share	price	over	30	trading	days	following	expiration)	and	the	stated	exercise	price	of	the	warrant.	For	the	Uncapped	Warrants,	the	exercise	price	is $11.91	per	warrant.	For	the	Capped	Warrants,	the	exercise	price	is	$9.89	per	warrant	but	the	amount	deliverable	upon	exercise	is	capped	so	a	holder	will	not	benefit	from	appreciation	of	the	common stock	above	$12.36	per	share.

Concurrently	with	the	issuance	of	the	warrants	described	above,	we	entered	into	call	spread	transactions	with	four	different	counterparties	to	reduce	the	potential	dilution	or	cash	cost	upon exercise	of	the	Uncapped	Warrants.	Each	transaction	gives	us	the	right	to	receive,	upon	expiration	of	the	options	thereunder,	an	amount	in	cash,	shares	of	our	common	stock,	or	a	combination	of	cash	and shares	of	our	common	stock,	at	our	option.	The	amount	will	be	based,	subject	to	customary	adjustments,	on	the	difference	between	the	market	price	of	one	share	of	our	common	stock	(calculated	as	the average	share	price	over	30	trading	days	following	expiration)	and	$11.91	per	share,	the	exercise	price	of	the	Uncapped	Warrants.	The	amount	deliverable	to	us	under	the	call	spread	transactions, however,

is	capped	so	we	will	not	receive	any	amount	relating	to	appreciation	of	our	common	stock	above	$14.38	per	share,	and	we	will	incur	dilution	or	cash	costs	upon	exercise	of	the	Uncapped	Warrants	to	the extent	our	share	price	exceeds	$14.38	per	share	at	that	time.	The	four	transactions	cover	an	aggregate	notional	amount	of	38.8	shares,	equivalent	to	the	full	number	of	the	Uncapped	Warrants,	and	had	an aggregate	purchase	price	of	$29.2.	In	accordance	with	EITF	00-19	the	cost	of	the	four	transactions	has	been	recorded	as	a	reduction	to	additional	paid-in	capital	within	stockholders'	equity.

In	accordance	with	EITF	03-6,	the	warrants	are	not	considered	securities	with	participation	rights	in	earnings	available	to	common	stockholders	due	to	the	contingent	nature	of	the	exercise	feature of	these	securities.

# Note	12: Convertible	Preferred	Stock

# Series	A	Preferred	Stock

On	December	15,	2006,	each	share	of	our	5.375%	Series	A	Mandatory	Convertible	Preferred	Stock	("Series	A	Preferred	Stock")	converted	into	3.7037	shares	of	our	common	stock.	We	had 7.475	shares	of	Series	A	Preferred	Stock	outstanding	which	resulted	in	an	issuance	of	27.7	shares	of	our	common	stock.	We	paid	dividends	of	$20.1,	or	$2.6875	per	share,	on	our	Series	A	Preferred Stock	during	2006	and	2005,	respectively.

# Series	B	Preferred	Stock

On	October	24,	2005,	we	completed	a	private	offering	of	0.525	shares	of	our	5.25%	Series	B	Cumulative	Convertible	Perpetual	Preferred	Stock	("Series	B	Preferred	Stock")	at	an	aggregate offering	price	of	$525.0.	The	net	proceeds	from	the	sale	were	$507.3	after	deducting	discounts	to	the	initial	purchasers	and	the	expenses	of	the	offering.

Each	share	of	our	Series	B	Preferred	Stock	has	a	liquidation	preference	of	$1,000	per	share	and	is	convertible	at	the	option	of	the	holder	at	any	time	into	73.1904	shares	of	our	common	stock, subject	to	adjustment	upon	the	occurrence	of	certain	events,	which	represents	a	conversion	price	of	$13.66,	representing	a	conversion	premium	of	approximately	30%	over	our	closing	stock	price	on October	18,	2005	of	$10.51	per	share.	On	or	after	October	15,	2010,	each	share	of	the	Series	B	Preferred	Stock	may	be	converted	at	our	option	if	the	closing	price	of	our	common	stock	multiplied	by	the conversion	rate	then	in	effect	equals	or	exceeds	130%	of	the	liquidation	preference	of	$1,000	per	share	for	20	trading	days	during	any	consecutive	30	trading	day	period.	Holders	of	the	Series	B	Preferred Stock	will	be	entitled	to	an	adjustment	to	the	conversion	rate	if	they	convert	their	shares	in	connection	with	a	fundamental	change	meeting	certain	specified	conditions.

The	Series	B	Preferred	Stock	is	junior	to	all	of	our	existing	and	future	debt	obligations	and	senior	to	our	common	stock,	with	respect	to	payments	of	dividends	and	rights	upon	liquidation, winding	up	or	dissolution,	to	the	extent	of	the	liquidation	preference	of	$1,000	per	share.	There	are	no	registration	rights	with	respect	to	the	Series	B	Preferred	Stock,	shares	of	our	common	stock	issuable upon	conversion	thereof	or	any	shares	of	our	common	stock	that	may	be	delivered	in	connection	with	a	dividend	payment.

In	accordance	with	EITF	03-6,	the	Series	B	Preferred	Stock	is	not	considered	a	security	with	participation	rights	in	earnings	available	to	common	stockholders	due	to	the	contingent	nature	of	the conversion	feature	of	these	securities.

# Payment	of	Dividends

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	the	Series	B	Preferred	Stock	have	been	or contemporaneously	are	declared	and	paid,	or	provision	for	the	payment	thereof	has	been	made.

We	paid	dividends	of	$26.9,	or	$51.1875	per	share,	on	our	Series	B	Preferred	Stock	during	2006.	The	initial	dividend	on	our	Series	B	Preferred	Stock	was	$6.2,	or	$11.8125	per	share,	and	was declared	on	December	19,	2005	and	paid	in	cash	on	January	17,	2006.	Regular	quarterly	dividends,	if	declared,	are	$6.9,	or	$13.125	per	share.	Dividends	on	each	share	of	Series	B	Preferred	Stock	are payable	quarterly	in	cash	or,	if	certain	conditions	are	met,	in	common	stock,	at	our	option,	on	January	15,	April	15,	July	15	and	October	15	of	each	year.	The	dividend	rate	of	the	Series	B	Preferred	Stock will	be	increased	by	1.0%	if	we	do	not	pay	dividends	on	the	Series	B	Preferred	Stock	for	six

quarterly	periods	(whether	consecutive	or	not).	The	dividend	rate	will	revert	back	to	the	original	rate	once	all	unpaid	dividends	are	paid	in	full.	The	dividend	rate	of	the	Series	B	Preferred	Stock	will	also be	increased	by	1.0%	if	we	do	not	file	our	periodic	reports	with	the	SEC	within	15	days	after	the	required	filing	date	during	the	first	two-year	period	following	the	closing	of	the	offering.

Dividends	on	our	Series	B	Preferred	Stock	are	cumulative	from	the	date	of	issuance	and	are	payable	on	each	payment	date	to	the	extent	that	we	have	assets	that	are	legally	available	to	pay dividends	and	our	Board	of	Directors	or	an	authorized	committee	of	our	Board	declares	a	dividend	payable.	Pursuant	to	the	terms	of	the	Series	B	Preferred	Stock,	if	we	do	not	pay	dividends	on	any	series of	our	preferred	stock	for	six	quarterly	periods	(whether	consecutive	or	not),	then	holders	of	all	series	of	our	preferred	stock	then	outstanding	will	have	the	right	to	elect	two	additional	directors	to	the Board.	These	additional	directors	will	remain	on	the	Board	until	all	accumulated	and	unpaid	dividends	on	our	cumulative	preferred	stock	have	been	paid	in	full,	or	to	the	extent	any	series	of	non- cumulative	preferred	stock	is	outstanding,	until	non-cumulative	dividends	have	been	paid	regularly	for	at	least	one	year.

# Note	13: Employee	Benefits

# Pension	Plans

We	have	a	defined	benefit	pension	plan	("Domestic	Plan")	which	covers	substantially	all	regular	domestic	employees	employed	through	March	31,	1998.	This	plan	features	a	traditional	career pay	benefit	as	well	as	a	cash	balance	benefit,	which	was	added	in	1992.	Post-1992	participants	are	eligible	for	the	cash	balance	benefit	only.	For	pre-1992	participants,	the	benefit	is	the	greater	of	the	cash balance	benefit	or	the	career	pay	benefit	formula.	Participants	are	eligible	to	receive	their	benefit	in	the	form	of	a	lump	sum	payment	or	an	annuity.	Effective	April	1,	1998,	plan	participation	and	benefit accruals	for	the	Domestic	Plan	were	frozen	and	participants	with	less	than	five	years	of	service	became	fully	vested.	As	of	December	31,	2006,	there	were	approximately	4,700	participants	in	the Domestic	Plan.	Participants	with	five	or	more	years	of	participation	in	the	Domestic	Plan	as	of	March	31,	1998	retained	their	vested	balances	in	the	Domestic	Plan	and	also	became	eligible	for	payments under	a	compensation	arrangement,	the	"Supplemental	Compensation	Plan"	(described	below).	Some	of	our	agencies	have	additional	domestic	plans	covering	a	total	of	approximately	300	employees. These	plans	are	also	closed	to	new	participants.

We	also	have	numerous	plans	outside	the	United	States,	some	of	which	are	funded,	while	others	provide	payments	at	the	time	of	retirement	or	termination	under	applicable	labor	laws	or agreements.	The	Interpublic	Pension	Plan	in	the	U.K.	("U.K.	Pension	Plan")	is	the	most	material	foreign	pension	plan	in	terms	of	the	benefit	obligation	and	plan	assets.	This	plan	is	a	defined	benefit	plan offering	plan	participants	a	final	average	pay	benefit.	Effective	November	1,	2002,	the	U.K.	Pension	Plan	was	closed	to	new	entrants,	but	existing	participants	continue	to	earn	benefits	under	the	plan. New	employees	after	November	1,	2002	may	be	eligible	to	join	the	industry	wide	plan	that	operates	on	a	defined	contribution	basis.	As	of	December	31,	2006,	there	were	approximately	1,700 participants	in	the	U.K.	Pension	Plan.

We	included	certain	additional	foreign	pension	plans'	information	in	our	2006	disclosure	that	was	not	included	in	our	2005	disclosure.	We	have	included	the	net	periodic	cost,	as	well	as	the benefit	obligations	and	assets	related	to	these	plans	as	of	and	for	the	years	ended	December	31,	2006	and	2005.	The	benefit	obligations	and	assets	for	these	plans	are	classified	as	"other"	adjustments within	the	Pension	and	Postretirement	Benefit	Obligation	table	below.	These	plans	do	not	have	a	material	impact	on	our	Consolidated	Balance	Sheets	or	Statements	of	Operations	in	2006	or	2005.

# Postretirement	Benefit	Plans

Some	of	our	subsidiaries	provide	postretirement	health	benefits	to	eligible	employees	and	their	dependents	and	postretirement	life	insurance	to	eligible	employees.	For	domestic	employees	to	be eligible	for	postretirement	health	benefits,	an	employee	had	to	be	hired	prior	to	January	1,	1988	(June	22,	2001	for	domestic	employees	of	the	former	True	North	Communications	companies).	To	be eligible	for	life	insurance,	an	employee	had	to	be	hired	prior	to	December	1,	1961	(June	22,	2001	for	domestic	employees	of	the	former	True	North	Communications	companies).	Benefits	are	provided	to retirees	before	and	after	eligibility	for	Medicare,	and	our	cost	is	based	on	each	participant's	retirement	date	and	pre-	and	post-Medicare	eligibility.	As	of	December	31,	2006,	there	were	approximately 3,500	participants	in	these	plans.

Our	postretirement	health	benefits	plans	are	unfunded,	and	we	pay	claims	as	presented	by	the	plans'	administrator.	The	postretirement	life	insurance	plan	is	insured	and	we	pay	premiums	to	the plan	administrator.

In	December	2003,	the	Medicare	Prescription	Drug,	Improvement	and	Modernization	Act	of	2003	(the	"Act")	was	enacted.	The	Act	established	a	prescription	drug	benefit	under	Medicare,	known as	"Medicare	Part	D,"	and	a	federal	subsidy	to	sponsors	of	postretirement	health	benefits	plans	that	provide	a	benefit	that	is	at	least	actuarially	equivalent	to	the	Medicare	Part	D	benefit.	The	prescription drug	benefit	provided	to	certain	participants	in	the	postretirement	medical	plan	is	at	least	actuarially	equivalent	to	the	Medicare	Part	D	benefit,	and,	accordingly,	we	are	entitled	to	a	subsidy.	Our application	for	the	subsidy	for	our	retirees	was	accepted	by	the	Department	of	Health	and	Human	Services,	with	the	exception	of	certain	participants	of	the	True	North	postretirement	benefit	plan,	whose benefits	we	believe	are	not	actuarially	equivalent	to	the	Medicare	Part	D	benefit	and	therefore	not	eligible	for	the	Medicare	Part	D	subsidy.	We	elected	to	prospectively	recognize	the	effect	of	the	Act during	the	third	quarter	of	2004.	The	expected	subsidy	reduced	the	accumulated	postretirement	benefit	obligation	by	$5.0	at	adoption,	and	the	net	periodic	cost	by	$1.0,	$1.0	and	$0.3	for	2006,	2005	and 2004,	respectively,	compared	to	the	amount	calculated	without	considering	the	effects	of	the	subsidy.

# Adoption	of	SFAS	No.	158

On	September	29,	2006,	the	FASB	issued	SFAS	No.	158.	SFAS	No.	158	requires	an	employer	to	recognize	an	asset	or	liability	for	the	overfunded	or	underfunded	status	of	their	pension	and	other postretirement	benefit	plans.	For	a	pension	plan,	the	asset	or	liability	is	the	difference	between	the	fair	value	of	the	plan's	assets	and	the	projected	benefit	obligation.	For	any	other	postretirement	benefit plan,	the	asset	or	liability	is	the	difference	between	the	fair	value	of	the	plan's	assets	and	the	accumulated	postretirement	benefit	obligation.	SFAS	No.	158	requires	employers	to	recognize	all unrecognized	transition	obligations	and	assets,	prior	service	costs	and	credits	and	actuarial	gains	and	losses	in	accumulated	other	comprehensive	income	(loss),	net	of	tax.	Such	amounts	are	adjusted	as they	subsequently	recognize	the	components	of	net	periodic	benefit	cost	or	income	pursuant	to	the	current	recognition	and	amortization	provisions.	The	following	table	summarizes	the	effect	of	required changes	in	the	additional	minimum	liability	(AML)	as	of	December	31,	2006	prior	to	the	adoption	of	SFAS	No.	158	as	well	as	the	impact	of	the	initial	adoption	of	SFAS	No.	158	for	domestic	plans,	the principal	foreign	pension	plans	and	the	postretirement	benefit	plan.

|  | Prior	to<br>SFAS	No.	158<br>Adjustments | Adjustments | December	31,	2006<br>Post	SFAS	No.	158<br>Adjustments |
| :--- | :--- | :--- | :--- |
| Pension\tassets | $6.9 | $(0.7) | $6.2 |
| Other\tassets | 0.7 | (0.7) | — |
| Pension\tliabilities | 187.6 | 37.6 | 225.2 |
| Postretirement\tliabilities | 49.1 | 20.8 | 69.9 |
| Accumulated\tother\tcomprehensive\tloss | (71.7) | (42.6) | (114.3) |

The	amounts	in	accumulated	other	comprehensive	loss	that	are	expected	to	be	recognized	as	components	of	net	periodic	benefit	cost	during	2007	are	as	follows:

|  | Domestic<br>Pension<br>Plans | Foreign<br>Pension<br>Plans | Postretirement<br>Benefit	Plans | Total |
| :--- | :--- | :--- | :--- | :--- |
| Actuarial\tgain | $4.9 | $3.2 | $1.1 | $9.2 |
| Prior\tservice\tcost\t(credit) | — | 0.5 | (0.1) | \t0.4 |
| Transition\tobligation | — | 0.1 | 0.1 | \t0.2 |

# Pension	and	Postretirement	Net	Periodic	Cost

The	following	table	identifies	the	components	of	net	periodic	cost	for	the	domestic	pension	plans,	the	principal	foreign	pension	plans,	and	the	postretirement	benefit	plans.

|  | Domestic	Pension	Plans | Domestic	Pension	Plans | Domestic	Pension	Plans | Foreign	Pension	Plans | Foreign	Pension	Plans | Foreign	Pension	Plans | Benefit	Plans | Benefit	Plans | Benefit	Plans |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Years\tended\tDecember\t31, | 2006 | 2005 | 2004 | 2006 | 2005 | 2004 | 2006 | 2005 | 2004 |
| Service\tcost | $ 0.8 | $0.7 | $0.7 | $17.5 | $17.2 | $17.1 | $ 0.5 | $ 0.7 | $0.4 |
| Interest\tcost | \t 8.9 | 8.6 | 8.7 | 22.8 | 21.7 | 18.1 | \t 3.5 | \t 3.8 | \t3.9 |
| Expected\treturn\ton\tplan\tassets | \t(9.3) | \t(9.4) | \t(9.9) | \t(19.8) | \t(14.9) | \t(11.6) | \t — | \t — | \t — |
| Curtailment\tgains | \t(0.1) | — | — | (2.3) | (2.2) | — | \t — | \t — | \t — |
| Settlement\tlosses | \t — | — | — | 0.5 | 1.4 | — | \t — | \t — | \t — |
| Special\ttermination\tbenefits | \t — | — | — | — | 4.9 | — | \t — | \t — | \t — |
| Amortization\tof: |  |  |  |  |  |  |  |  |  |
| Transition\tobligation | \t — | — | — | 0.2 | 1.4 | — | \t 0.1 | \t 0.1 | \t0.2 |
| Prior\tservice\tcost\t(credit) | \t 0.1 | \t(0.2) | \t(0.1) | 0.2 | 0.1 | — | \t(0.1) | \t(0.1) | \t — |
| Unrecognized\tactuarial\tlosses | \t 7.0 | 6.3 | 4.1 | 6.5 | 6.7 | 4.9 | \t 0.7 | \t 0.9 | \t0.4 |
| Other | \t — | — | — | (0.2) | 0.8 | — | \t — | \t — | \t — |
| Net\tperiodic\tcost | $ 7.4 | $6.0 | $3.5 | $25.4 | $37.1 | $28.5 | $ 4.7 | $ 5.4 | $4.9 |

The	weighted-average	assumptions	used	to	determine	the	net	periodic	cost	are	as	follows:

|  | Domestic	Pension	Plans | Domestic	Pension	Plans | Domestic	Pension	Plans | Foreign	Pension	Plans | Foreign	Pension	Plans | Foreign	Pension	Plans | Benefit	Plans | Benefit	Plans | Benefit	Plans |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Years\tended\tDecember\t31, | 2006 | 2005 | 2004 | 2006 | 2005 | 2004 | 2006 | 2005 | 2004 |
| Discount\trate | \t5.41% | \t5.45% | \t6.15% | \t4.38% | \t4.81% | \t5.20% | \t5.50% | \t5.50% | \t6.25% |
| Rate\tof\tcompensation\tincrease | \tN/A | \tN/A | \tN/A | \t3.29% | \t3.26% | \t3.50% | \tN/A | \tN/A | \tN/A |
| Expected\treturn\ton\tplan\tassets | \t8.17% | \t8.63% | \t8.65% | \t6.52% | \t6.28% | \t6.35% | \tN/A | \tN/A | \tN/A |

# Pension	and	Postretirement	Benefit	Obligation

Significant	foreign	pension	plan	settlements	occurred	during	2006,	primarily	related	to	the	Netherlands	pension	plans'	conversion	to	defined	contribution	plans.	Previously	unrecognized	actuarial gains	were	recognized	as	the	obligations	related	to	those	plans	were	settled.

The	change	in	the	benefit	obligation,	the	change	in	plan	assets,	the	funded	status	and	amounts	recognized	for	the	domestic	pension	plans,	the	principal	foreign	pension	plans,	and	the postretirement	benefit	plans	are	as	follows:

|  | Domestic	Pension	Plans | Domestic	Pension	Plans | Foreign	Pension	Plans | Foreign	Pension	Plans | Postretirement	Benefit<br>Plans | Postretirement	Benefit<br>Plans |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Years\tended\tDecember\t31, | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 |
| Change\tin\tprojected\tbenefit\tobligation |  |  |  |  |  |  |
| Projected\tbenefit\tobligation\tat\tJanuary\t1 | $169.0 | $167.6 | $497.1 | $447.5 | $73.2 | $72.2 |
| Service\tcost | 0.8 | 0.7 | 17.5 | 17.2 | 0.5 | 0.7 |
| Interest\tcost | 9.0 | 8.6 | 22.7 | 21.7 | 3.5 | 3.8 |
| Benefits\tpaid | \t (17.4) | \t (13.4) | \t (24.1) | \t (25.3) | \t (7.5) | \t (6.4) |
| Plan\tparticipant\tcontributions | — | — | 2.2 | 2.9 | 1.5 | 1.4 |
| Plan\tamendments | — | — | 1.4 | — | — | \t (1.2) |
| Actuarial\tlosses\t(gains) | — | 5.5 | \t (25.8) | 49.7 | \t (1.3) | 2.7 |
| Curtailments | (5.8) | — | (3.1) | (2.4) | — | — |
| Settlements | — | — | \t (34.8) | (5.3) | — | — |
| Special\ttermination\tbenefits | — | — | — | 4.9 | — | — |
| Foreign\tcurrency\teffect | — | — | 49.3 | \t (49.3) | — | — |
| Other | 0.8 | — | 6.0 | 35.5 | — | — |
| Projected\tbenefit\tobligation\tat\tDecember\t31 | $156.4 | $169.0 | $508.4 | $497.1 | $69.9 | $73.2 |

|  | Domestic	Pension	Plans | Domestic	Pension	Plans | Foreign	Pension	Plans | Foreign	Pension	Plans | Postretirement	Benefit<br>Plans | Postretirement	Benefit<br>Plans |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Years\tended\tDecember\t31, | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 |
| Change\tin\tfair\tvalue\tof\tplan\tassets |  |  |  |  |  |  |
| Fair\tvalue\tof\tplan\tassets\tat\tJanuary\t1 | $116.3 | $119.2 | $ 275.3 | $ 213.6 | $— | $— |
| Actual\treturn\ton\tplan\tassets | 15.5 | 9.4 | 30.2 | 48.0 | — | — |
| Employer\tcontributions | 17.9 | 1.1 | 24.8 | 33.0 | 6.0 | 5.0 |
| Plan\tparticipant\tcontributions | — | — | 2.2 | 2.9 | 1.5 | 1.4 |
| Benefits\tpaid | \t (17.4) | \t (13.4) | (24.2) | (25.3) | (7.5) | (6.4) |
| Settlements | — | — | (35.6) | (5.3) | — | — |
| Foreign\tcurrency\teffect | — | — | 30.4 | (24.6) | — | — |
| Other | 0.8 | — | 9.6 | 33.0 | — | — |
| Fair\tvalue\tof\tplan\tassets\tat\tDecember\t31 | $133.1 | $116.3 | $ 312.7 | $ 275.3 | $— | $— |
| Reconciliation\tof\tfunded\tstatus\tto\ttotal\tamount\trecognized |  |  |  |  |  |  |
| Funded\tstatus\tof\tthe\tplans | $ (23.3) | $ (52.7) | $(195.7) | $(221.8) | $(69.9) | $(73.2) |
| Unrecognized\tnet\tactuarial\tlosses | — | 77.5 | — | \t 111.9 | — | 22.8 |
| Unrecognized\tprior\tservice\tcost\t(credit) | — | 0.6 | — | 0.2 | — | (1.1) |
| Unrecognized\ttransition\tcost | — | — | — | 1.4 | — | 1.1 |
| Net\tasset\t(liability)\trecognized | $ (23.3) | $25.4 | $(195.7) | $(108.3) | $(69.9) | $(50.4) |
| Amounts\trecognized\tin\tconsolidated\tbalance\tsheet |  |  |  |  |  |  |
| Non-current\tasset | $1.8 | $— | $4.4 | $— | $— | $— |
| Current\tliability | — | — | (7.0) | — | (5.9) | — |
| Non-current\tliability | \t (25.1) | — | \t(193.1) | — | \t(64.0) | — |
| Accrued\tbenefit\tliability | — | \t (47.4) | — | \t(182.0) | — | \t(50.4) |
| Intangible\tasset | — | 0.6 | — | 1.1 | — | — |
| Accumulated\tother\tcomprehensive\tloss | — | 72.2 | — | 72.6 | — | — |
| Net\tasset\t(liability)\trecognized | $ (23.3) | $25.4 | $(195.7) | $(108.3) | $(69.9) | $(50.4) |
| Accumulated\tbenefit\tobligation | $156.4 | $163.7 | $ 462.2 | $ 454.6 |  |  |
| Amounts\trecognized\tin\taccumulated\tother\tcomprehensive\tloss |  |  |  |  |  |  |
| Net\tactuarial\tloss | $59.0 |  | $76.4 |  | $20.8 |  |
| Prior\tservice\tcost\t(credit) | 0.2 |  | 1.5 |  | (0.9) |  |
| Transition\tobligation | — |  | 0.9 |  | 0.9 |  |
| Total\tamount\trecognized | $59.2 |  | $78.8 |  | $20.8 |  |

|  | Domestic	Pension	Plans | Domestic	Pension	Plans | Foreign	Pension	Plans | Foreign	Pension	Plans |
| :--- | :--- | :--- | :--- | :--- |
| Years\tended\tDecember\t31, | 2006 | 2005 | 2006 | 2005 |
| Plans\twith\tunderfunded\tor\tunfunded\taccumulated\tbenefit\tobligation |  |  |  |  |
| Aggregate\tprojected\tbenefit\tobligation | $142.9 | $169.0 | $496.3 | $493.7 |
| Aggregate\taccumulated\tbenefit\tobligation | \t142.9 | \t163.7 | \t455.0 | \t452.5 |
| Aggregate\tfair\tvalue\tof\tplan\tassets | \t117.7 | \t116.3 | \t296.3 | \t271.9 |

Differences	between	the	aggregate	balance	sheet	amounts	listed	above	and	the	totals	reported	in	our	Consolidated	Balance	Sheets	and	our	Consolidated	Statements	of	Stockholders'	Equity	and Comprehensive	Loss	relate	to	the	non-material	foreign	plans.

The	weighted-average	assumptions	used	in	determining	the	actuarial	present	value	of	our	benefit	obligations	are	as	follows:

# Determination	of	Discount	Rates

For	the	domestic	pension	and	postretirement	benefit	plans,	we	determine	our	discount	rate	based	on	the	estimated	rate	at	which	annuity	contracts	could	be	purchased	to	effectively	settle	the respective	benefit	obligations.	In	determining	the	discount	rate,	we	utilize	a	yield	curve	based	on	Moody	Aa-rated	corporate	non-callable	bonds.	Each	plan's	projected	cash	flow	is	matched	to	this	yield curve	and	a	present	value	is	developed,	which	is	then	used	to	develop	a	single	equivalent	discount	rate.	The	average	duration	of	our	domestic	pension	and	postretirement	health	care	obligations	was 10	years	as	of	December	31,	2006.

For	the	foreign	pension	plans,	we	determine	a	discount	rate	by	referencing	market	yields	on	high	quality	corporate	bonds	in	the	local	markets	with	the	appropriate	term	at	December	31,	2006.

# Determination	of	the	Expected	Return	on	Assets

For	the	Domestic	Plan,	we	develop	the	long-term	expected	rate	of	return	assumptions	which	we	use	to	model	and	determine	overall	asset	allocations.	Our	rate	of	return	analyses	factor	in	historical trends,	current	market	conditions,	risk	premiums	associated	with	asset	classes,	and	long-term	inflation	rates.	We	determine	both	a	short-term	(5-7	year)	and	long-term	(30	year)	view	and	then	attempt	to select	a	long-term	rate	of	return	assumption	that	matches	the	duration	of	our	liabilities.	Factors	included	in	the	analysis	of	returns	include	historical	trends	of	asset	class	index	returns	over	various	market cycles	and	economic	conditions.

Approximately	90%	of	the	foreign	plan	assets	are	part	of	the	U.K.	Pension	Plan.	The	U.K.	Pension	Plan's	statement	of	investment	principles	specifies	benchmark	allocations	by	asset	category	for each	investment	manager	employed,	with	specified	ranges	around	the	central	benchmark	allocation.	For	the	U.K.	Pension	Plan,	we	determine	the	expected	rate	of	return	by	utilizing	a	weighted	average approach	based	on	the	current	long-term	expected	rates	of	return	for	each	asset	category.	The	long-term	expected	rate	of	return	for	the	equity	category	is	based	on	the	current	long-term	rates	of	return available	on	government	bonds	and	applying	suitable	risk	premiums	that	consider	historical	market	returns	and	current	market	expectations.

# Asset	Allocation

The	primary	investment	goal	for	our	plans'	assets	is	to	maximize	total	asset	returns	while	ensuring	the	plans'	assets	are	available	to	fund	the	plans'	liabilities	as	they	become	due.	The	plans'	assets in	aggregate	and	at	the	individual	portfolio	level	are	invested	so	that	total	portfolio	risk	exposure	and	risk-adjusted	returns	best	meet	this	objective.

As	of	December	31,	2006	our	domestic	and	foreign	(primarily	the	U.K.)	pension	plans'	target	asset	allocations	for	2007,	as	well	as	the	actual	asset	allocations	at	December	31,	2006	and	2005,	are as	follows:

|  | 2007	Target	Allocation | 2007	Target	Allocation | Domestic | Domestic | Foreign | Foreign |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Asset\tcategory | Domestic | Foreign | 2006 | 2005 | 2006 | 2005 |
| Equity\tsecurities | 50% | 66% | 52% | 49% | 66% | 64% |
| Fixed\tincome\tsecurities | 25% | 22% | 22% | 23% | 22% | 28% |
| Real\testate | 10% | 5% | 7% | 9% | 5% | 3% |
| Other | 15% | 7% | 19% | 19% | 7% | 5% |
| Total | 100% | 100% | \t100% | \t100% | \t100% | \t100% |

The	aggregate	amount	of	our	own	stock	held	as	investment	for	our	domestic	and	foreign	pension	funds	is	considered	negligible	relative	to	the	total	fund	assets.

# Healthcare	Cost	Trend

Assumed	healthcare	cost	trend	rates	have	a	moderate	effect	on	the	amounts	reported	for	the	postretirement	benefit	plans.	We	develop	our	healthcare	cost	trend	rate	assumptions	based	on	data collected	on	recent	trends	and	forecasts.	A	one	percentage	point	change	in	assumed	healthcare	cost	trend	rates	would	have	the	following	effects:

# Cash	Flows

Contributions	—	For	2007,	we	do	not	expect	to	contribute	to	our	domestic	pension	plans,	and	we	expect	to	contribute	$20.6	to	our	foreign	pension	plans.	During	2006,	we	contributed	$17.9	to our	domestic	pension	plans	and	$24.8	to	our	foreign	pension	plans.

Estimated	Future	Payments	—	The	following	estimated	future	payments,	which	reflect	future	service,	as	appropriate,	are	expected	to	be	paid	in	the	years	indicated:

| Years | Domestic<br>Pension	Plans | Foreign<br>Pension	Plans | Postretirement<br>Benefit	Plans |
| :--- | :--- | :--- | :--- |
| 2007 | $13.2 | $20.4 | $6.3 |
| 2008 | 12.9 | 19.9 | 6.1 |
| 2009 | 12.6 | 26.2 | 6.1 |
| 2010 | 11.9 | 21.3 | 6.0 |
| 2011 | 11.7 | 22.5 | 5.9 |
| 2012-2016 | 55.3 | 139.2 | 26.9 |

The	estimated	future	payments	for	our	postretirement	benefit	plans	are	before	any	estimated	federal	subsidies	expected	to	be	received	under	the	Act.	Federal	subsidies	are	estimated	to	range	from $0.4	in	2007,	to	$0.5	in	2011	and	are	estimated	to	be	$2.4	for	the	period	2012-2016.

# Supplemental	Compensation	Plan

As	discussed	above,	participants	with	five	or	more	years	of	participation	in	the	Domestic	Plan	as	of	March	31,	1998	became	eligible	for	payments	under	the	Supplemental	Compensation	Plan. Under	this	plan,	each	participant	is	eligible	for	an	annual	allocation,	which	approximates	the	projected	discontinued	pension	benefit	accrual	(formerly	made	under	the	cash	balance	formula	in	the Domestic	Plan)	plus	interest,	while	they	continue	to	work	for	us.	Payments	began	in	2003	and	are	scheduled	to	end	in	2008.	As	of	December	31,	2006	and	2005,	the	Supplemental	Compensation	Plan liability	recorded	was	$5.4	and	$7.3,	respectively.	Amounts	expensed	for	the	Supplemental	Compensation	Plan	in	2006,	2005	and	2004	were	$0.6,	$1.0	and	$5.4,	respectively.

# Savings	Plans

We	sponsor	a	defined	contribution	plan	("Savings	Plan")	that	covers	substantially	all	domestic	employees.	The	Savings	Plan	permits	participants	to	make	contributions	on	a	pre-tax	and/or	after- tax	basis.	The	Savings	Plan	allows	participants	to	choose	among	various	investment	alternatives.	We	match	a	portion	of	participant	contributions	based	upon	their	years	of	service.	We	contributed	$31.2, $29.9	and	$28.0	to	the	Savings	Plan	in	2006,	2005	and	2004,	respectively.	We	also	expect	to	contribute	$8.9	to	the	Savings	Plan	for	the	performance-based	discretionary	match	for	2006.	In	addition,	we maintain	defined	contribution	plans	in	various	countries	and	contributed	$11.8,	$5.3	and	$3.9	to	these	plans	in	2006,	2005	and	2004,	respectively.

# Deferred	Compensation	and	Benefit	Arrangements

We	have	deferred	compensation	arrangements	which	(i)	permit	certain	of	our	key	officers	and	employees	to	defer	a	portion	of	their	salary	or	incentive	compensation,	or	(ii)	result	in	us contributing	an	amount	to	the	participant's	account.	The	arrangements	typically	provide	that	the	participant	will	receive	the	amounts	deferred	plus	interest	upon	attaining	certain	conditions,	such	as completing	a	certain	number	of	years	of	service	or	upon	retirement	or	termination.	As	of	December	31,	2006	and	2005,	the	deferred	compensation	liability	balance	recorded	was	$143.9	and	$141.3, respectively.	Amounts	expensed	for	deferred	compensation	arrangements	in	2006,	2005	and	2004	were	$10.3,	$10.2	and	$8.8,	respectively.

We	have	deferred	benefit	arrangements	with	certain	key	officers	and	employees	which	provide	participants	with	an	annual	payment,	payable	when	the	participant	attains	a	certain	age	and	after the	participant's	employment	has	terminated.	The	deferred	benefit	liability	recorded	on	as	of	December	31,	2006	and	2005	was	$157.9	and	$151.5,	respectively.	Amounts	expensed	for	deferred	benefit arrangements	in	2006,	2005	and	2004	were	$13.7,	$30.9	and	$17.1,	respectively.

A	significant	assumption	used	to	estimate	certain	deferred	benefit	liabilities	is	a	participant's	retirement	age.	For	one	of	our	more	significant	deferred	benefit	arrangements,	during	the	fourth quarter	of	2005,	based	on	an	analysis	of	recent	trends,	we	determined	most	eligible	participants	were	retiring	and	beginning	to	collect	their	deferred	benefits	at	age	60.	This	compares	to	previous	periods which	used	an	assumed	retirement	of	age	65	within	the	related	deferred	benefit	liability	calculation.	This	change	in	estimate,	recorded	during	the	fourth	quarter	of	2005,	resulted	in	a	$14.8	charge	to salaries	and	related	expenses,	with	a	corresponding	increase	to	the	deferred	benefit	liability.

We	have	purchased	life	insurance	policies	on	participants'	lives	to	assist	in	the	funding	of	the	related	deferred	compensation	and	deferred	benefit	liabilities.	As	of	December	31,	2006	and	2005, the	cash	surrender	value	of	these	policies	was	$117.0	and	$132.8,	respectively.	In	addition	to	the	life	insurance	policies,	certain	investments	are	held	for	the	purpose	of	paying	the	deferred	compensation and	deferred	benefit	liabilities.	These	investments,	along	with	the	life	insurance	policies,	are	held	in	a	separate	trust	and	are	restricted	for	the	purpose	of	paying	the	deferred	compensation	and	the	deferred benefit	arrangement	liabilities.	As	of	December	31,	2006	and	2005,	the	value	of	such	investments	in	the	trust	was	$88.5	and	$86.1,	respectively.	The	short-term	investments,	long-term	investments	and cash	surrender	value	of	the	policies	in	the	trust	are	included	in	cash	and	cash	equivalents,	investments	and	other	assets,	respectively.

# Long-term	Disability	Plan

We	have	a	Long-term	Disability	("LTD")	plan	which	provides	income	replacement	benefits	to	eligible	participants	who	are	unable	to	perform	their	job	duties	during	the	first	24	months	of disability.	Benefits	are	continued	thereafter	if	the	participant	is	unable	to	perform	any	job	related	to	his	or	her	education,	training	or	experience,	provided	the	participants	receive	disability	benefits	from Social	Security.	As	all	income	replacement	benefits	are	fully	insured,	no	related	obligation	is	required	at	December	31,	2006	and	2005.	In	addition	to	income	replacement	benefits,	all	LTD	participants continue	to	receive	medical,	dental	and	life	insurance	benefits	up	to	age	65	(subject	to	minimum	periods	depending	on	the	participants'	age	at	time	of	disability).	We	have	recorded	an	obligation	of	$6.9 and	$9.3	as	of	December	31,	2006	and	2005,	respectively,	related	to	medical,	dental	benefits	and	life	insurance	benefits	for	LTD	participants.

# Note	14: Stock-Based	Compensation

# 2006	Performance	Incentive	Plan

We	issue	stock	and	cash	based	incentive	awards	to	our	employees	under	a	plan	established	by	the	Compensation	Committee	of	the	Board	of	Directors	and	approved	by	our	shareholders.	In	May 2006,	our	shareholders	approved	the	2006	Performance	Incentive	Plan	(the	"2006	PIP").	Under	the	2006	PIP,	up	to	6.0	shares	of	common	stock	may	be	used	for	granting	stock	options	and	stock appreciation	rights	and	up	to	33.0	shares	of	common	stock	may	be	used	for	granting	performance-based	awards	and	other	stock-based	awards.	Subject	to	the	terms	of	the	2006	PIP,	additional	awards	may be	granted	from	shares	available	for	issuance	under	previous	plans	and	in	other	limited	circumstances.	Only	a	certain	number	of	shares	are	available	for	each	type	of	award	under	the	2006	PIP,	and	there are	similar	limits	on	the	number	of	shares	that	may	be	awarded	to	any	one	participant.	The	vesting	period	of	awards	granted	is	generally	commensurate	with	the	requisite	service	period.	We	generally issue	new	shares	to	satisfy	the	exercise	of	stock	options	or	the	distribution	of	other	stock-based	awards.	During	the	second	quarter	of	2006	the	Compensation	Committee	began	to	grant	new	awards	under the	2006	PIP.

# Adoption	of	SFAS	No.	123R

The	following	table	summarizes	the	net	incremental	stock-based	compensation	expense	included	in	salaries	and	related	expenses	as	a	result	of	the	adoption	of	SFAS	No.	123R:

|  | Year	ended<br>December	31,<br>2006 |
| :--- | :--- |
| Loss\tfrom\tcontinuing\toperations\tbefore\tprovision\tfor\tincome\ttaxes | $1.9 |
| Net\tloss | $0.7 |
| Net\tloss\tapplicable\tto\tcommon\tstockholders | $0.7 |

The	impact	on	basic	and	diluted	loss	per	share	was	less	than	one	cent	for	the	year	ended	December	31,	2006.	On	January	1,	2006,	we	recorded	a	benefit	from	the	cumulative	effect	of	the	change in	accounting	principle	due	to	the	initial	adoption	of	SFAS	No.	123R	of	$3.6	($2.3,	net	of	tax)	in	salaries	and	related	expenses.

The	following	table	summarizes	stock-based	compensation	expense	included	in	salaries	and	related	expenses:

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Stock-based\tcompensation\texpense | $72.3 | $46.1 | $34.1 |
| Tax\tbenefit | $24.4 | $15.9 | $11.6 |

In	addition,	stock-based	compensation	expense	of	$4.9	is	included	in	other	reorganization-related	charges	for	the	year	ended	December	31,	2006.	See	Note	2	for	further	explanation.

In	accordance	with	FSP	No.	SFAS	123R-3,	Transition	Election	Related	to	Accounting	for	the	Tax	Effects	of	Share-Based	Payment	Awards,	we	elected	an	alternative	simplified	method	to calculate	the	windfall	tax	pool	(the	"APIC	pool").	Under	this	FSP,	a	company	may	use	a	simplified	method	to	calculate	the	beginning	balance	of	the	APIC	pool	related	to	employee	compensation	and	to determine	the	subsequent	impact	on	the	APIC	pool	of	employee	awards	that	are	fully	vested	and	outstanding	upon	the	adoption	of	SFAS	No.	123R.	As	a	result	of	this	change	in	accounting	principle, SFAS	No.	154,	Accounting	Changes	and	Error	Corrections	—	A	Replacement	of	APB	Opinion	No.	20	and	FASB	Statement	No.	3,	requires	us	to	record	the	impact	of	this	election	retrospectively	to	all prior	periods	affected.	See	Note	22	for	further	information	describing	the	impact.

The	following	table	illustrates	the	pro	forma	effect	on	net	loss	applicable	to	common	stockholders	and	loss	per	share	if	we	had	applied	the	fair	value	recognition	provisions	of	SFAS	No.	123	and SFAS	No.	148,	Accounting	for	Stock-Based	Compensation	—	Transition	and	Disclosure	—	An	Amendment	of	FASB	No.	123	to	all	stock-based	employee	compensation,	net	of	forfeitures	for	our	stock option	and	ESPP	plans	for	the	year	ended	December	31,	2005	and	2004.

|  | 2005 | 2004 |
| :--- | :--- | :--- |
| As\treported,\tnet\tloss | $(262.9) | $(538.4) |
| Dividends\ton\tpreferred\tstock | 26.3 | 19.8 |
| Net\tloss\tapplicable\tto\tcommon\tstockholders | $(289.2) | $(558.2) |
| Add\tback: |  |  |
| Stock-based\temployee\tcompensation\texpense\tincluded\tin\tnet\tloss\tapplicable\tto\tcommon\tstockholders,\tnet\tof\ttax | 30.2 | 22.5 |
| Less: |  |  |
| Total\tfair\tvalue\tof\tstock-based\temployee\tcompensation\texpense,\tnet\tof\ttax | (62.6) | (51.3) |
| Pro\tforma\tnet\tloss\tapplicable\tto\tcommon\tstockholders | $(321.6) | $(587.0) |
| Loss\tper\tshare\t—\tbasic\tand\tdiluted |  |  |
| As\treported | $(0.68) | $(1.34) |
| Pro\tforma | $(0.76) | $(1.41) |

# Employee	Stock	Purchase	Plans

In	November	2005,	our	stockholders	approved	the	establishment	of	an	Interpublic	Group	of	Companies	Employee	Stock	Purchase	Plan	(2006)	(the	"2006	Plan")	to	replace	the	previously	existing ESPP.	Under	the	2006	Plan,	employees	may	purchase	our	common	stock	through	payroll	deductions	not	exceeding	10%	of	their	compensation.	The	price	an	employee	pays	for	a	share	of	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.	During	the	second	quarter	of	2006,	we	filed	a	registration	statement	with	the	SEC	to	register	the	shares	that	may be	purchased	under	the	2006	Plan.	This	plan	is	not	yet	active.

Under	the	former	ESPP,	employees	could	purchase	our	common	stock	through	payroll	deductions	not	exceeding	10%	of	their	compensation.	The	price	an	employee	paid	for	a	share	of	stock under	the	ESPP	was	85%	of	the	average	market	price	on	the	last	business	day	of	each	month.	The	15%	discount	received	by	employees	on	the	date	that	common	stock	was	purchased	under	our	former ESPP	had	a	weighted-average	fair	value	of	$1.97	and	$2.03	per	share	for	2005	and	2004,	respectively,	and	is	included	in	the	total	fair	value	of	stock-based	employee	compensation	expense	in	the	pro forma	table	above.	In	2005	and	2004,	we	issued	0.1	shares	and	0.7	shares,	respectively,	purchased	by	employees	under	the	ESPP.	Shares	issued	to	employees	under	the	former	ESPP	had	no	impact	on	our Consolidated	Statements	of	Operations.	The	ESPP	expired	effective	June	30,	2005.

# Stock	Options

Stock	options	are	granted	at	the	fair	market	value	of	our	common	stock	on	the	grant	date	and	are	generally	exercisable	between	two	and	five	years	from	the	grant	date	and	expire	ten	years	from the	grant	date.

The	following	tables	are	a	summary	of	stock	option	activity	during	2006:

|  | Options | Weighted-Average<br>Exercise<br>Price | Remaining<br>Contractual	Term<br>(in	years) | Aggregate<br>Intrinsic<br>Value |
| :--- | :--- | :--- | :--- | :--- |
| Stock\toptions\toutstanding\tas\tof\tJanuary\t1,\t2006 | 36.3 | $25.06 |  |  |
| Granted | 3.2 | 8.73 |  |  |
| Exercised | (0.1) | 9.64 |  |  |
| Cancelled/expired | (6.6) | 23.56 |  |  |
| Forfeited | (0.2) | 10.38 |  |  |
| Stock\toptions\toutstanding\tas\tof\tDecember\t31,\t2006 | 32.6 | 23.94 | 5.0 | $19.7 |
| Stock\toptions\tvested\tand\texpected\tto\tvest\tas\tof\tDecember\t31,\t2006 | 31.5 | 24.40 | 4.9 | $18.3 |
| Stock\toptions\texercisable\tat\tDecember\t31,\t2006 | 26.3 | 27.16 | 4.1 | $8.6 |

|  | Options | Weighted-Average<br>Grant	Date<br>Fair	Value<br>(per	option) | Weighted-Average<br>Remaining<br>Contractual	Term<br>(in	years) | Aggregate<br>Intrinsic<br>Value |
| :--- | :--- | :--- | :--- | :--- |
| Non-vested\tas\tof\tJanuary\t1,\t2006 | 3.4 | $5.65 |  |  |
| Granted | 3.2 | 3.91 |  |  |
| Vested | (0.1) | 6.30 |  |  |
| Forfeited | (0.2) | 4.58 |  |  |
| Non-vested\tas\tof\tDecember\t31,\t2006 | 6.3 | 4.80 | 8.9 | $11.1 |

There	were	0.1,	0.2	and	0.7	stock	options	exercised	during	2006,	2005	and	2004,	respectively.	The	total	intrinsic	value	of	stock	options	exercised	during	2006,	2005	and	2004	was	$0.2,	$0.4,	and $2.3,	respectively.	Accordingly,	the	related	excess	tax	benefit	classified	as	a	financing	inflow	for	2006	was	$0.1.	The	cash	received	from	the	stock	options	exercised	in	2006	was	$0.9.	As	of	December	31, 2006	there	was	$18.9	of	total	unrecognized	compensation	expense	related	to	non-vested	stock	options	granted,	which	is	expected	to	be	recognized	over	a	weighted-average	period	of	3.0	years.

We	use	the	Black-Scholes	option-pricing	model	to	estimate	the	fair	value	of	options	granted,	which	requires	the	input	of	subjective	assumptions	including	the	option's	expected	term	and	the	price volatility	of	the	underlying	stock.	Changes	in	the	assumptions	can	materially	affect	the	estimate	of	fair	value	and	our	results	of	operations	could	be	materially	impacted.

The	fair	value	of	each	option	grant	has	been	estimated	with	the	following	weighted-average	assumptions:

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Expected\tvolatility\t1 | \t38.9% | 41.0% | 44.7% |
| Expected\tterm\t(years)\t2 | 5.9 | 5.8 | 6.0 |
| Risk\tfree\tinterest\trate\t3 | 5.1% | 4.0% | 4.0% |
| Expected\tdividend\tyield\t4 | 0.0% | 0.0% | 0.0% |
| Option\tgrant\tprice | $8.73 | $12.39 | $14.19 |
| Option\tgrant-date\tfair\tvalue | $3.91 | $5.62 | $6.90 |

1	 The	expected	volatility	for	the	second	half	of	2005	and	the	twelve	months	ended	December	31,	2006	used	to	estimate	the	fair	value	of	stock	options	awarded	is	based	on	a	blend	of:	(i)	historical	volatility	of	our	common	stock	for	periods equal	to	the	expected	term	of	our	stock	options	and	(ii)	implied	volatility	of	tradable	forward	put	and	call	options	to	purchase	and	sell	shares	of	our	common	stock.	For	the	twelve	months	ended	December	31,	2004	and	the	first	half	of 2005,	the	expected	volatility	factor	was	based	on	historical	volatility	of	our	common	stock	over	the	most	recent	period	commensurate	with	the	estimated	expected	term	of	our	stock	options.

2	 The	estimate	of	our	expected	term	for	the	second	half	of	2005	and	the	twelve	months	ended	December	31,	2006	is	based	on	the	average	of	(i)	an	assumption	that	all	outstanding	options	are	exercised	upon	achieving	their	full	vesting	date and	(ii)	an	assumption	that	all	outstanding	options	will	be	exercised	at	the	midpoint	between	the	current	date,	(i.e.,	the	date	awards	have	ratably	vested	through),	and	their	full	contractual	term.	In	determining	the	estimate,	we	considered several	factors,	including	the	historical	option	exercise	behavior	of	our	employees	and	the	terms	and

vesting	periods	of	the	options.	For	the	twelve	months	ended	December	31,	2004	and	the	first	half	of	2005,	our	estimate	of	expected	term	was	based	on	the	historical	patterns	of	exercises.

3	 The	risk	free	rate	is	determined	using	the	implied	yield	currently	available	for	zero-coupon	U.S.	government	issuers	with	a	remaining	term	equal	to	the	expected	term	of	the	options.

4	 No	dividend	yield	was	assumed	because	we	currently	do	not	pay	cash	dividends	on	our	common	stock	and	have	no	current	plans	to	reinstate	a	dividend.

On	December	20,	2005,	the	Compensation	Committee	approved	the	immediate	acceleration	of	vesting	of	all	of	our	"out-of-the-money"	outstanding	and	unvested	stock	options	previously awarded	to	our	employees	under	equity	compensation	plans,	excluding	unvested	options	(1)	granted	during	the	2005	calendar	year,	(2)	held	by	our	CEO	or	CFO	or	(3)	held	by	non-management	directors. The	number	of	shares,	exercise	prices	and	other	terms	of	the	options	subject	to	the	acceleration	remain	unchanged.	The	accelerated	vesting	of	these	stock	options	reduced	the	non-cash	compensation expense	recorded	in	our	Consolidated	Statements	of	Operations	when	we	adopted	SFAS	No.	123R.

# Restricted	Stock

Restricted	stock	is	granted	to	certain	key	employees	and	is	subject	to	certain	restrictions	and	vesting	requirements	as	determined	by	the	Compensation	Committee.	The	vesting	period	is	generally three	years.	No	monetary	consideration	is	paid	by	a	recipient	for	a	restricted	stock	award,	and	the	fair	value	of	the	shares	on	the	grant	date	is	amortized	over	the	vesting	period.

# Restricted	Stock	Units

Restricted	stock	units	are	granted	to	certain	key	employees	and	generally	vest	over	three	years.	Upon	completion	of	the	vesting	period,	the	grantee	is	entitled,	at	the	Compensation	Committee's discretion,	to	receive	a	payment	in	cash	or	in	shares	of	common	stock	based	on	the	fair	market	value	of	the	corresponding	number	of	shares	of	common	stock.	The	holder	of	restricted	stock	units	has	no ownership	interest	in	the	underlying	shares	of	common	stock	until	the	restricted	stock	units	vest	and	the	shares	of	common	stock	are	issued.	No	monetary	consideration	is	paid	by	a	recipient	for	a restricted	stock	unit	award.	The	fair	value	of	restricted	stock	unit	awards	is	adjusted	at	the	end	of	each	quarter	based	on	our	share	price.	We	amortize	stock-based	compensation	expense	related	to	these awards	over	the	vesting	period	based	upon	the	quarterly-adjusted	fair	value.

During	2006,	2005	and	2004,	we	awarded	2.2,	1.6	and	1.0	restricted	stock	units	with	a	weighted-average	grant-date	fair	value	of	$8.88,	$12.09	and	$13.41	per	award,	respectively.	The	total	fair value	of	cash	in	respect	of	restricted	stock	units	distributed	to	participants	during	2006	and	2005	was	$0.2	and	$0.1,	respectively.	No	restricted	stock	units	vested	during	2004.

# Performance-Based	Stock

Performance-based	stock	awards	have	been	granted	to	certain	key	employees	subject	to	certain	restrictions	and	vesting	requirements	as	determined	by	the	Compensation	Committee. Performance-based	stock	awards	are	a	form	of	stock	award	in	which	the	number	of	shares	ultimately	received	by	the	participant	depends	on	performance	against	specific	performance	targets.	The	awards generally	vest	over	a	three-year	period	related	to	the	employees'	continuing	employment	and	the	achievement	of	certain	performance	objectives.	The	final	number	of	shares	that	could	ultimately	be received	by	a	participant	ranges	from	0%	to	200%	of	the	target	amount	of	shares	originally	granted.	The	holder	of	an	award	of	performance-based	stock	has	no	ownership	interest	in	the	underlying	shares of	common	stock	until	the	award	vests	and	the	shares	of	common	stock	are	issued.	We	amortize	stock-based	compensation	expense	for	the	estimated	number	of	performance-based	stock	awards	that	we expect	to	vest	over	the	vesting	period	generally	using	the	grant-date	fair	value	of	the	shares.	No	monetary	consideration	is	paid	by	a	participant	for	a	performance-based	stock	award.

During	2006	and	2005	we	awarded	9.9	and	2.9	shares	of	performance-based	stock,	at	target,	with	a	weighted-average	grant-date	fair	value	of	$9.68	and	$12.35	per	award,	respectively.	No performance-based	stock	was	granted	during	2004.	The	total	fair	value	of	performance-based	stock	distributed	to	participants	during	2006	was	$0.1.	No	performance-based	stock	awards	were	distributed during	2005.

Certain	stock-based	compensation	awards	expected	to	be	settled	in	cash	have	been	classified	as	liabilities	in	the	Consolidated	Balance	Sheets	as	of	December	31,	2006	and	2005.

A	summary	of	the	activity	of	our	non-vested	restricted	stock,	restricted	stock	units,	and	performance-based	stock	during	2006	is	presented	below	(performance-based	stock	awards	are	shown	at 100%	of	the	shares	originally	granted):

|  | Restricted	Stock | Restricted	Stock | Restricted	Stock	Units | Restricted	Stock	Units | Performance-Based	Stock | Performance-Based	Stock |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Awards | Weighted-Average\nGrant-Date\tFair\nValue\t(per\taward) | Awards | Weighted-Average\nGrant-Date\tFair\nValue\t(per\taward) | Awards | Weighted-Average\nGrant-Date\tFair\nValue\t(per\taward) |
| Non-vested\tas\tof\tJanuary\t1,\t2006 | 9.5 | $15.35 | 2.3 | $12.54 | 2.8 | $12.34 |
| Granted | 5.3 | 8.77 | 2.2 | 8.88 | 9.9 | 9.68 |
| Vested | (1.2) | 22.07 | — | 12.37 | — | 12.15 |
| Forfeited | (1.0) | 12.89 | (0.4) | 12.11 | (0.9) | 11.16 |
| Non-vested\tas\tof\tDecember\t31,\t2006 | \t 12.6 | $12.16 | 4.1 | $10.61 | \t 11.8 | $10.21 |
| Total\tunrecognized\tcompensation\texpense\tremaining | $ 64.2 |  | $ 30.4 |  | $ 45.6 |  |
| Weighted-average\tyears\texpected\tto\tbe\trecognized\tover | 1.6 |  | 1.8 |  | 2.2 |  |

# Share	Appreciation	Performance-Based	Units

In	August	2005,	we	granted	Michael	Roth,	Chairman	of	the	Board	and	Chief	Executive	Officer,	0.3	share	appreciation	performance-based	units	("SAPUs")	based	on	a	weighted-average	grant- date	stock	price	of	$12.17.	At	the	Compensation	Committee's	discretion,	Mr.	Roth	is	entitled	to	receive	a	payment	in	cash	or	shares	of	common	stock	upon	completion	of	a	four-year	vesting	period.

Mr.	Roth	has	no	ownership	interest	in	the	underlying	shares	of	common	stock	until	the	SAPUs	vest	and	the	shares	of	common	stock	are	issued.	The	fair	value	of	the	SAPUs	is	estimated	using	the	Black- Scholes	valuation	model,	using	assumptions	similar	to	those	used	for	stock	options.	For	2006,	we	recorded	stock-based	compensation	expense	for	SAPUs	of	$0.6.	There	was	no	compensation	expense recorded	in	2005	for	SAPUs,	as	the	exercise	price	exceeded	the	market	price.	As	of	December	31,	2006,	there	was	$0.9	of	total	unrecognized	compensation	expense	related	to	non-vested	SAPUs	that	is expected	to	be	recognized	over	a	weighted-average	period	of	2.6	years.	We	amortize	stock-based	compensation	expense	related	to	these	awards	over	the	vesting	period	based	upon	the	quarterly-adjusted fair	value.

# Note	15: Segment	Information

As	of	December	31,	2006,	we	are	organized	into	five	global	operating	divisions	and	a	group	of	leading	stand-alone	agencies	that	are	grouped	into	two	reportable	segments,	IAN	and	CMG.	We also	report	results	for	the	Corporate	group.	As	of	December	31,	2005,	we	had	an	additional	segment,	Motorsports	operations	("Motorsports"),	which	was	sold	during	2004	and	had	immaterial	residual operating	results	in	2005.	Future	changes	to	our	organizational	structure	may	result	in	changes	to	the	reportable	segment	disclosure.

Within	the	IAN	segment,	McCann	Worldgroup,	Draftfcb,	Lowe	Worldwide,	Initiative	and	our	stand-alone	agencies	provide	a	comprehensive	array	of	global	communications	and	marketing services,	each	offering	a	distinctive	range	of	solutions	for	our	clients.	Our	stand-alone	agencies,	including	Campbell-Ewald,	Hill	Holliday,	Deutsch	and	Mullen,	provide	a	full	range	of	advertising, marketing	communications	services	and/or	marketing	services	and	partner	with	our	global	operating	divisions	as	needed.	Each	of	IAN's	operating	divisions	share	similar	economic	characteristics	and	are similar	in	other	areas,	specifically	related	to	the	nature	of	their	respective	services,	the	manner	in	which	the	services	are	provided	and	the	similarity	of	their	respective	customers.

CMG,	which	includes	Weber	Shandwick,	MWW	Group,	FutureBrand,	DeVries,	GolinHarris,	Jack	Morton,	and	Octagon	Worldwide,	provides	clients	with	diversified	services,	including	public relations,	meeting	and	event	production,	sports	and	entertainment	marketing,	corporate	and	brand	identity	and	strategic	marketing	consulting.	CMG	shares	some	similarities	to	other	service	lines	offered by	IAN,	however,	CMG's	businesses,	on	an	aggregate	basis,	have	a	higher	proportion	of	arrangements	for	which	it	acts	as	principal,	a	different	distribution	model	than	IAN	and	different	margins.

During	2004,	we	exited	our	Motorsports	business,	which	owned	and	operated	venue-based	motorsports	businesses.	Other	than	the	recording	of	long-lived	asset	impairment	and	contract termination	costs	during	2004,	the	operating	results	of	Motorsports	during	2005	and	2004	were	not	material,	and	are	therefore	not	discussed	in	detail.

The	profitability	measure	employed	by	our	chief	operating	decision	makers	for	allocating	resources	to	operating	divisions	and	assessing	operating	division	performance	is	operating	income	(loss), excluding	the	impact	of	restructuring	and	other	reorganization-related	charges	(reversals),	long-lived	asset	impairment	charges	and	Motorsports	contract	termination	costs.	With	the	exception	of excluding	these	amounts	from	reportable	segment	operating	income	(loss),	all	segments	follow	the	same	accounting	policies	as	those	described	in	Note	1.

Summarized	financial	information	concerning	our	reportable	segments	is	shown	in	the	following	table:

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Revenue: |  |  |  |
| IAN | $5,230.6 | $5,327.8 | $5,399.2 |
| CMG | 960.2 | 944.2 | 935.8 |
| Motorsports | — | 2.3 | 52.0 |
| Total | $6,190.8 | $6,274.3 | $6,387.0 |
| Segment\toperating\tincome\t(loss): |  |  |  |
| IAN | $391.4 | $249.7 | $577.1 |
| CMG | 51.6 | 53.0 | 83.7 |
| Motorsports | — | 0.7 | (14.0) |
| Corporate\tand\tother | (275.3) | (316.3) | (243.2) |
| Total | 167.7 | (12.9) | 403.6 |
| Restructuring\tand\tother\treorganization-related\tcharges\t(reversals) | (34.5) | 7.3 | (62.2) |
| Long-lived\tasset\timpairment\tand\tother\tcharges | (27.2) | (98.6) | (322.2) |
| Motorsports\tcontract\ttermination\tcosts | — | — | (113.6) |
| Interest\texpense | (218.7) | (181.9) | (172.0) |
| Interest\tincome | 113.3 | 80.0 | 50.8 |
| Other\t(expense)\tincome | (5.6) | 19.5 | (51.4) |
| Loss\tfrom\tcontinuing\toperations\tbefore\tprovision\tfor\tincome\ttaxes | $(5.0) | $(186.6) | $(267.0) |
| Depreciation\tand\tamortization\tof\tfixed\tassets\tand\tintangible\tassets: |  |  |  |
| IAN | $126.1 | $135.3 | $146.5 |
| CMG | 19.2 | 18.3 | 22.1 |
| Corporate\tand\tother | 28.3 | 15.2 | 16.5 |
| Total | $173.6 | $168.8 | $185.1 |
| Capital\texpenditures: |  |  |  |
| IAN | $92.8 | $89.7 | $133.7 |
| CMG | 11.4 | 14.8 | 27.1 |
| Corporate\tand\tother | 23.6 | 36.2 | 33.2 |
| Total | $127.8 | $140.7 | $194.0 |

| Total	assets: | 2006 | 2005 |
| :--- | :--- | :--- |
| IAN | $9,359.5 | $9,217.1 |
| CMG | 908.3 | 965.9 |
| Corporate\tand\tother | 1,596.3 | 1,762.2 |
| Total | $11,864.1 | $11,945.2 |

Corporate	and	other	charges	includes	corporate	office	expenses	and	shared	service	center	expenses,	as	well	as	certain	other	centrally	managed	expenses	which	are	not	fully	allocated	to	operating divisions,	as	shown	in	the	table	below.	Salaries	and	related	expenses	include	salaries,	pension,	bonus	and	medical	and	dental	insurance	expenses	for	corporate	office	employees.	Professional	fees	include costs	related	to	the	internal	control	compliance,	cost	of	2005	Restatement	efforts,	financial	statement	audits,	legal,	information	technology	and	other	consulting	fees,	which	are	engaged	and	managed through	the	corporate	office.	Professional	fees	also	include	the	cost	of	temporary	financial	professionals	associated	with	work	on	our	2005	Restatement	activities.	Rent,	depreciation	and	amortization includes	rental	expense	and	depreciation	of	leasehold	improvements	for	properties	occupied	by	corporate	office	employees.	Corporate	insurance	expense	includes	the	cost	for	fire,	liability	and	automobile premiums.	The	amounts	allocated	to	operating	divisions	are	calculated	monthly	based	on	a	formula	that	uses	the	revenues	of	the	operating

unit.	Amounts	allocated	also	include	specific	charges	for	information	technology-related	projects,	which	are	allocated	based	on	utilization.	The	following	expenses	are	included	in	Corporate	and	Other:

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Salaries\tand\trelated\texpenses | $ 214.1 | $ 201.3 | $ 151.2 |
| Professional\tfees | \t 139.7 | \t 199.3 | \t 145.3 |
| Rent,\tdepreciation\tand\tamortization | 65.4 | 45.3 | 38.4 |
| Corporate\tinsurance | 21.7 | 26.0 | 29.7 |
| Other | 25.3 | 15.2 | 16.8 |
| Expenses\tallocated\tto\toperating\tdivisions | \t(190.9) | \t(170.8) | \t(138.2) |
| Total | $ 275.3 | $ 316.3 | $ 243.2 |

Revenue	and	long-lived	assets	are	presented	below	by	major	geographic	area:

|  | Revenue | Revenue | Revenue | Long-Lived	Assets | Long-Lived	Assets |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Years\tended\tDecember\t31, | Years\tended\tDecember\t31, | Years\tended\tDecember\t31, | December\t31, | December\t31, |
|  | 2006 | 2005 | 2004 | 2006 | 2005 |
| U.S. | $3,441.2 | $3,461.1 | $3,509.2 | $2,818.2 | $2,733.6 |
| International: |  |  |  |  |  |
| U.K. | 565.6 | 619.9 | 657.6 | 306.8 | 306.9 |
| All\tOther\tEurope | \t1,043.0 | \t1,135.5 | \t1,225.9 | 606.0 | 615.2 |
| Asia\tPacific | 512.0 | 473.5 | 477.3 | 122.4 | 119.1 |
| Latin\tAmerica | 303.4 | 259.7 | 242.1 | 109.4 | 144.9 |
| Other | 325.6 | 324.6 | 274.9 | 216.0 | 230.8 |
| Total\tinternational | \t2,749.6 | \t2,813.2 | \t2,877.8 | \t1,360.6 | \t1,416.9 |
| Total\tconsolidated | $6,190.8 | $6,274.3 | $6,387.0 | $4,178.8 | $4,150.5 |

Revenue	is	attributed	to	geographic	areas	based	on	where	the	services	are	performed.	Property	and	equipment	is	allocated	based	upon	physical	location.	Intangible	assets,	other	assets	and investments	are	allocated	based	on	the	location	of	the	related	operations.

# Note	16: Financial	Instruments

The	following	table	presents	the	carrying	amounts	and	fair	values	of	our	financial	instruments	as	of	December	31,	2006	and	2005.	The	carrying	amounts	reflected	in	our	Consolidated	Balance Sheet	for	cash	and	cash	equivalents,	accounts	receivable,	accounts	payable,	accrued	expenses	and	short-term	borrowings	approximated	their	respective	fair	values	as	of	December	31,	2006	and	2005.

|  | 2006 | 2006 | 2005 | 2005 |
| :--- | :--- | :--- | :--- | :--- |
|  | Book\tValue | Fair\tValue | Book\tValue | Fair\tValue |
| Investment\tsecurities: |  |  |  |  |
| Short-term\tmarketable\tsecurities | $1.4 | $1.4 | $115.6 | $115.6 |
| Long-term\tinvestments | 73.0 | 91.2 | 120.7 | 120.7 |
| Equity\tmethod\tinvestments | 55.1 | 55.1 | 49.9 | 49.9 |
| Long-term\tdebt | (2,214.4) | \t (2,275.2) | (2,149.2) | \t (2,072.1) |
| Financial\tcommitments: |  |  |  |  |
| Other\tforward\tcontracts | (13.7) | (13.7) | (11.5) | (11.5) |

# Investment	Securities

Short-term	marketable	securities	consist	primarily	of	available-for-sale	debt	and	equity	securities	that	are	publicly	traded.	Long-term	investments	consisted	primarily	of	public	and	non-public available-for-sale	equity	securities.	These	are	mostly	equity	interests	of	less	than	20%	that	we	have	in	various	agencies	and	are	accounted	for	under	the	cost	method.	Equity	method	investments	consisted primarily	of	investments	in	unconsolidated	affiliated	companies	accounted	for	under	the	equity	method	and	have	been	carried	at	cost,	which	approximates	fair	value.

Dividends	received	from	our	investments	in	unconsolidated	affiliated	companies	were	$4.4,	$5.9	and	$9.3	in	2006,	2005	and	2004,	respectively,	and	reduced	the	carrying	values	of	the	related	investments.

Long-term	debt	includes	variable	and	fixed	rate	debt.	The	fair	value	of	our	long-term	debt	instruments	is	based	on	market	prices	for	debt	instruments	with	similar	terms	and	maturities.

# Financial	Commitments

Financial	commitments	include	other	forward	contracts	relating	primarily	to	an	obligation	to	repurchase	49%	of	the	minority-owned	equity	shares	of	a	consolidated	subsidiary,	valued	pursuant	to SFAS	No.	150,	Accounting	for	Certain	Financial	Instruments	with	Characteristic	of	Both	Liabilities	and	Equity.	Fair	value	measurement	of	the	obligation	was	based	upon	the	amount	payable	as	if	the forward	contract	was	settled	at	December	31,	2006	and	2005.	Changes	in	the	fair	value	of	the	obligation	have	been	recorded	as	interest	expense	or	income	in	the	Consolidated	Statement	of	Operations.

# Note	17: Derivative	and	Hedging	Instruments

We	periodically	enter	into	interest	rate	swap	agreements	and	forward	contracts	to	manage	exposure	to	interest	rate	fluctuations	and	to	mitigate	foreign	exchange	volatility.	Derivative	instruments, including	those	that	are	embedded	in	other	contracts,	are	recorded	at	fair	value	in	the	balance	sheet	as	either	an	asset	or	a	liability.	Changes	in	the	fair	value	of	the	derivatives	are	recorded	each	period	in our	Consolidated	Statement	of	Operations	unless	specific	hedge	accounting	criteria	are	met.	We	do	not	enter	into	derivative	financial	instruments	for	speculative	purposes	and	do	not	have	a	material portfolio	of	derivative	financial	instruments.

# Interest	Rate	Swaps

In	January	2005,	we	executed	an	interest	rate	swap	which	synthetically	converted	$150.0	of	fixed	rate	debt	to	floating	rate	debt.	The	interest	rate	swap	effectively	converted	$150.0	of	the	$500.0 7.25%	Senior	Unsecured	Notes	due	August	2011	to	floating	rate	debt	and	matures	on	the	same	day	the	debt	is	due.	Under	the	terms	of	the	interest	rate	swap	agreement	we	paid	a	floating	interest	rate, based	on	one-month	LIBOR	plus	a	spread	of	297.0	basis	points,	and	received	the	fixed	interest	rate	of	the	underlying	bond	being	hedged.

In	May	2005,	we	terminated	all	of	our	long-term	interest	rate	swap	agreements	covering	the	$350.0	6.25%	Notes	due	November	2014	and	$150.0	of	the	$500.0	7.25%	Notes	due	August	2011.	In connection	with	the	interest	rate	swap	termination,	our	net	cash	receipts	were	$1.1,	which	will	be	recorded	as	an	offset	to	interest	expense	over	the	remaining	life	of	the	related	debt.

We	accounted	for	interest	rate	swaps	related	to	our	existing	long-term	debt	as	fair	value	hedges.	As	a	result,	the	incremental	interest	payments	or	receipts	from	the	swaps	were	recorded	as adjustments	to	interest	expense	in	the	Consolidated	Statement	of	Operations.	The	interest	rate	swaps	settled	on	the	underlying	bond	interest	payment	dates	until	maturity.	There	was	no	assumed	hedge ineffectiveness	as	the	interest	rate	swap	terms	matched	the	terms	of	the	hedged	bond.

# Forward	Contracts

We	have	entered	into	foreign	currency	transactions	in	which	various	foreign	currencies	are	bought	or	sold	forward.	These	contracts	were	entered	into	to	meet	currency	requirements	arising	from specific	transactions.	The

changes	in	value	of	these	forward	contracts	have	been	recorded	as	other	income	or	expense	in	our	Consolidated	Statement	of	Operations.	As	of	December	31,	2006	and	2005,	we	had	contracts	covering $0.2	and	$6.2,	respectively,	of	notional	amount	of	currency	and	the	fair	value	of	the	forward	contracts	was	negligible.

# Other

# Note	18: Commitments	and	Contingencies

# Leases

We	lease	office	premises	and	equipment.	Where	leases	contain	escalation	clauses	or	concessions,	such	as	rent	holidays	and	landlord/tenant	incentives	or	allowances,	the	impact	of	such adjustments	is	recognized	on	a	straight-line	basis	over	the	minimum	lease	period.	Certain	leases	provide	for	renewal	options	and	require	the	payment	of	real	estate	taxes	or	other	occupancy	costs,	which are	also	subject	to	escalation	clauses.	Rent	expense	was	as	follows:

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Gross\trent\texpense | $389.9 | $404.4 | $433.0 |
| Third-party\tsublease\trental\tincome | \t (20.7) | \t (25.4) | \t (24.6) |
| Net\trent\texpense | $369.2 | $379.0 | $408.4 |

Future	minimum	lease	commitments	for	office	premises	and	equipment	under	non-cancelable	leases,	along	with	minimum	sublease	rental	income	to	be	received	under	non-cancelable	subleases, are	as	follows:

| Period | Gross	Rent<br>Expense | Rental<br>Income | Net	Rent<br>Expense |
| :--- | :--- | :--- | :--- |
| 2007 | $330.2 | $(37.9) | $292.3 |
| 2008 | 296.5 | (31.3) | 265.2 |
| 2009 | 265.3 | (27.9) | 237.4 |
| 2010 | 230.0 | (22.1) | 207.9 |
| 2011 | 200.2 | (18.3) | 181.9 |
| 2012\tand\tthereafter | 905.8 | (44.6) | 861.2 |
| Total | $2,228.0 | $ (182.1) | $2,045.9 |

# Guarantees

We	have	contingent	obligations	under	guarantees	of	certain	obligations	of	our	subsidiaries	("parent	company	guarantees")	relating	principally	to	credit	facilities,	guarantees	of	certain	media payables	and	operating	leases	of	certain	subsidiaries.	The	amount	of	such	parent	company	guarantees	was	$327.9	and	$306.8	at	December	31,	2006	and	2005,	respectively.	In	the	event	of	non-payment	by the	applicable	subsidiary	of	the	obligations	covered	by	a	guarantee,	we	would	be	obligated	to	pay	the	amounts	covered	by	that	guarantee.	As	of	December	31,	2006,	there	are	no	material	assets	pledged	as security	for	such	parent	company	guarantees.

# Contingent	Acquisition	Obligations

We	have	structured	certain	acquisitions	with	additional	contingent	purchase	price	obligations	in	order	to	reduce	the	potential	risk	associated	with	negative	future	performance	of	the	acquired entity.	In	addition,	we	have	entered	into	agreements	that	may	require	us	to	purchase	additional	equity	interests	in	certain	consolidated	and	unconsolidated	subsidiaries.	The	amounts	relating	to	these transactions	are	based	on	estimates	of	the	future	financial	performance	of	the	acquired	entity,	the	timing	of	the	exercise	of	these	rights,	changes	in	foreign	currency	exchange	rates	and	other	factors.	We have	not	recorded	a	liability	for	these	items	since	the	definitive	amounts	payable	are	not	determinable	or	distributable.	When	the	contingent	acquisition	obligations	have	been	met	and

consideration	is	determinable	and	distributable,	we	record	the	fair	value	of	this	consideration	as	an	additional	cost	of	the	acquired	entity.	However,	we	recognize	deferred	payments	and	purchases	of additional	interests	after	the	effective	date	of	purchase	that	are	contingent	upon	the	future	employment	of	owners	as	compensation	expense.	Compensation	expense	is	determined	based	on	the	terms	and conditions	of	the	respective	acquisition	agreements	and	employment	terms	of	the	former	owners	of	the	acquired	businesses.	This	future	expense	will	not	be	allocated	to	the	assets	and	liabilities	acquired and	is	amortized	over	the	required	employment	terms	of	the	former	owners.

The	following	table	details	the	estimated	liability	with	respect	to	our	contingent	acquisition	obligations	and	the	estimated	amount	that	would	be	paid	under	the	options,	in	the	event	of	exercise	at the	earliest	exercise	date.	All	payments	are	contingent	upon	achieving	projected	operating	performance	targets	and	satisfying	other	conditions	specified	in	the	related	agreements	and	are	subject	to revisions	as	the	earn-out	periods	progress.	The	following	contingent	acquisition	obligations	include	compensation	expense,	except	as	noted	below.	As	of	December	31,	2006,	our	estimated	future contingent	acquisition	obligations	are	as	follows:

|  | 2007 | 2008 | 2009 | 2010 | 2011 | Thereafter | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Deferred\tacquisition\tpayments |  |  |  |  |  |  |  |
| Cash | $9.1 | $0.9 | $13.5 | $ — | $ — | $— | $23.5 |
| Stock | 0.4 | — | — | \t — | \t — | — | 0.4 |
| Put\toptions\twith\tconsolidated\taffiliates\t1 |  |  |  |  |  |  |  |
| Cash | \t35.1 | \t22.5 | 2.9 | \t0.2 | \t2.0 | 3.1 | 65.8 |
| Stock | — | 0.9 | — | \t — | \t — | — | 0.9 |
| Put\toptions\twith\tunconsolidated\taffiliates\t1 |  |  |  |  |  |  |  |
| Cash | 0.3 | 8.8 | 3.9 | \t0.1 | \t — | — | 13.1 |
| Stock | 0.3 | 0.7 | 0.5 | \t0.1 | \t — | — | 1.6 |
| Call\toptions\twith\tconsolidated\taffiliates\t1 |  |  |  |  |  |  |  |
| Cash | 2.0 | 0.3 | — | \t2.1 | \t — | — | 4.4 |
| Stock | — | 0.1 | — | \t — | \t — | — | 0.1 |
| Subtotal\t—\tCash | \t46.5 | \t32.5 | \t20.3 | \t2.4 | \t2.0 | 3.1 | \t106.8 |
| Subtotal\t—\tStock | 0.7 | 1.7 | 0.5 | \t0.1 | \t — | — | 3.0 |
| Total\tcontingent\tacquisition\tpayments | $47.2 | $34.2 | $20.8 | $2.5 | $2.0 | $3.1 | $109.8 |

As	of	December	31,	2006	our	compensation	expense	associated	with	our	estimated	contingent	acquisition	payments	is	as	follows:

|  | 2007 | 2008 | 2009 | 2010 | 2011 | Thereafter | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Cash | $2.5 | $1.8 | $1.1 | $0.4 | $ — | $— | $5.8 |
| Total\tcontingent\tacquisition\tpayments,\tnet\tof\tcompensation\texpense | $44.7 | $32.4 | $19.7 | $2.1 | $2.0 | $3.1 | $104.0 |

1	 We	have	entered	into	certain	acquisitions	that	contain	both	put	and	call	options	with	similar	terms	and	conditions.	In	such	instances,	we	have	included	the	related	estimated	contingent	acquisition	obligations	with	put	options.

We	maintain	certain	put	options	with	consolidated	affiliates	that	are	exercisable	at	the	discretion	of	the	minority	owners	as	of	December	31,	2006.	These	put	options	are	assumed	to	be	exercised in	the	earliest	possible	period	subsequent	to	December	31,	2006.	Therefore,	the	related	estimated	acquisition	payments	of	$33.8	have	been	included	within	the	total	payments	expected	to	be	made	in	2007 in	the	table	above.	These	payments,	if	not	made	in	2007,	will	continue	to	carry-forward	into	2008	or	beyond	until	they	are	exercised	or	expire.

# Legal	Matters

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	our	2005 Restatement.	In	particular,	since	we	filed	our	2004	Annual	Report	on	Form	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	on	Form	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,	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.

Other	Legal	Matters	—	We	are	involved	in	other	legal	and	administrative	proceedings	of	various	types.	While	any	litigation	contains	an	element	of	uncertainty,	we	have	no	reason	to	believe	that the	outcome	of	such	proceedings	or	claims	will	have	a	material	adverse	effect	on	our	financial	condition,	results	of	operations	or	our	cash	flows.

# Note	19: Recent	Accounting	Standards

In	September	2006,	the	Securities	and	Exchange	Commission	("SEC")	issued	SAB	No.	108,	which	provides	interpretive	guidance	on	how	registrants	should	quantify	financial-statement misstatements.	Currently,	the	two	methods	most	commonly	used	by	preparers	and	auditors	to	quantify	misstatements	are	the	"rollover"	method	(which	focuses	primarily	on	the	income	statement	impact of	misstatements)	and	the	"iron	curtain"	method	(which	focuses	primarily	on	the	balance	sheet	impact	of	misstatements).	In	connection	with	our	review	of	the	Company's	stock	option	practices	we initially	applied	the	provisions	of	SAB	No.	108	as	a	cumulative	effect	adjustment	effective	January	1,	2006.	See	also	Note	20.	Under	SAB	No.	108,	we	are	required	to	consider	both	the	rollover	and	iron curtain	methods	(i.e.,	a	dual	approach)	when	evaluating	the	materiality	of	financial	statement	errors.	Prior	to	the	adoption	of	SAB	No.	108	we	used	the	"iron	curtain"	method	for	quantifying	identified financial	statement	misstatements.

In	September	2006,	the	FASB	issued	SFAS	No.	157,	Fair	Value	Measurements,	which	defines	fair	value,	establishes	a	framework	for	measuring	fair	value	in	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	financial	statements	issued	for	fiscal	years	beginning	after	November	15,	2007,	and	interim	periods	within	those	fiscal	years.	We	are currently	evaluating	the	impact	of	SFAS	No.	157	on	our	Consolidated	Financial	Statements.

In	July	2006,	the	FASB	issued	FASB	Interpretation	("FIN")	No.	48,	Accounting	for	Uncertainty	in	Income	Taxes	—	an	interpretation	of	FASB	Statement	No.	109,	which	clarifies	the	accounting for	uncertainty	in	tax	positions.	FIN	48	prescribes	a	recognition	threshold	and	a	measurement	attribute	for	the	financial	statement	recognition	and	measurement	of	tax	positions	taken	or	expected	to	be taken	in	a	tax	return.	For	those	benefits	to	be	recognized,	a	tax	position	must	be	more-likely-than-not	to	be	sustained	upon	examination	by	taxing	authorities.	The	amount	recognized	is	measured	as	the largest	amount	of	benefit	that	is	greater	than	50	percent	likely	of	being	realized	upon	ultimate	settlement.	FIN	48	is	effective	for	fiscal	years	beginning	after	December	15,	2006,	with	any	cumulative effect	of	the	change	in	accounting	principle	recorded	as	an	adjustment	to	opening	retained	earnings	effective	January	1,	2007.	We	are	currently	assessing	the	potential	impact	on	retained	earnings	upon adoption.	We	do	not	expect	the	increase	to	accumulated	deficit	as	of	January	1,	2007	to	be	material.

In	June	2006,	the	FASB	ratified	the	consensus	reached	in	EITF	Issue	No.	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).	The	scope	of	EITF	Issue	No.	06-3	includes	any	tax	assessed	by	a	governmental	authority	that	is	directly	imposed	on	a	revenue-producing transaction	between	a	seller	and	a	customer.	This	issue	provides	that	a	company	may	adopt	a	policy	of	presenting	taxes	either	gross	within	revenue	or	net.	If	taxes	subject	to	this	issue	are	significant,	a company	is	required	to	disclose	its	accounting	policy	for	presenting	taxes	and	the	amount	of	such	taxes	that	are	recognized	on	a	gross	basis.	EITF	Issue	No.	06-3	is	effective	for	periods	beginning	after December	15,	2006.	Taxes	subject	to	this	issue	are	reported	net	in	our	Consolidated	Statements	of	Operations.	We	do	not	expect	the	adoption	of	EITF	No.	06-3	to	have	a	material	impact	on	our Consolidated	Financial	Statements.

In	February	2006,	SFAS	No.	155,	Accounting	for	Certain	Hybrid	Financial	Instruments,	was	issued,	which	amends	SFAS	No.	133	and	SFAS	No.	140.	SFAS	No.	155	permits	fair	value remeasurement	for	any	hybrid	financial

instruments	that	contain	an	embedded	derivative	that	would	otherwise	require	bifurcation	in	accordance	with	the	provisions	of	SFAS	No.	133,	Accounting	for	Derivative	Instruments	and	Hedging Activities,	with	changes	in	fair	value	recognized	in	the	Statement	of	Operations.	SFAS	No.	155	is	effective	for	fiscal	years	beginning	after	September	15,	2006.	We	do	not	expect	the	adoption	of SFAS	No.	155	to	have	a	material	impact	on	our	Consolidated	Financial	Statements.

The	adoption	of	the	following	accounting	pronouncements	during	2006	did	not	have	a	material	impact	on	our	Consolidated	Financial	Statements:

# •		SFAS	No.	154,	Accounting	Changes	and	Error	Corrections;	and

•		FSP	No.	FAS	115-1	and	FAS	124-1,	The	Meaning	of	Other-Than-Temporary	Impairment	and	Its	Application	to	Certain	Investments.

•		EITF	Issue	No.	05-1,	Accounting	for	the	Conversion	of	an	Instrument	That	Becomes	Convertible	Upon	the	Issuer's	Exercise	of	a	Call	Option

•		EITF	Issue	No.	06-6,	Debtor's	Accounting	for	a	Modification	(or	Exchange)	of	Convertible	Debt	Instruments

•		EITF	Issue	No.	06-7,	Issuers	Accounting	for	a	Previously	Bifurcated	Conversion	Option	in	a	Convertible	Debt	Instrument	When	the	Conversion	Option	No	Longer	Meets	the	Bifurcation Criteria	in	FASB	Statement	No.	133,	"Accounting	for	Derivative	Instruments	and	Hedging	Activities"

•		FSP	No.	FIN	46R-6,	Determining	the	Variability	to	be	Considered	in	Applying	FASB	Interpretation	No.	46R

•		FSP	EITF	No.	00-19-2,	Accounting	for	Registration	Payment	Arrangements

# Note	20: Review	of	Stock	Option	Practices

As	a	result	of	the	significant	number	of	companies	identifying	issues	with	their	stock	option	practices,	during	the	third	quarter	of	2006	we	decided	to	conduct	a	review	of	our	practices	for	stock option	grants.	At	our	recommendation,	on	September	8,	2006,	our	Audit	Committee	retained	independent	counsel	to	review	our	stock	option	practices	related	to	the	Company's	current	and	prior	senior officers	for	a	10-year	period	beginning	in	1996.	We	also	performed	a	comprehensive	accounting	review	that	supplemented	the	review	done	by	independent	counsel.	Preliminary	findings	of	these	reviews were	presented	to	the	Audit	Committee	on	October	26,	2006	and	November	7,	2006.	These	reviews	are	both	complete	and	did	not	result	in	any	changes	to	the	preliminary	findings.

The	reviews	determined,	among	other	things,	the	following:

•		There	was	no	systematic	pattern	of	selecting	an	exercise	price	based	on	the	lowest	stock	price	over	the	period	preceding	the	grant.

•		All	grants	made	after	2002	were	accounted	for	correctly.

•		There	were	certain	deficiencies	in	the	process	of	granting,	documenting	and	accounting	for	stock	options.

•		The	date	used	to	determine	the	exercise	price	for	certain	stock	option	grants	made	between	1996	and	2002	preceded	the	finalization	of	the	approval	process	of	those	grants	for	accounting purposes.	(Discussed	in	more	detail	below.)

•		Certain	stock	options	were	granted	at	prices	inconsistent	with	the	related	stock	option	plans.

The	most	significant	deficiencies	the	reviews	identified	were	as	follows:

•		In	certain	situations	from	1996	through	2002,	in	connection	with	our	broad	based	annual	option	grants,	an	exercise	price	for	such	options	was	set	as	of	a	specified	date	in	the	future.	This date,	however,	preceded	the	final	determination	of	the	number	of	shares	individual	employees	were	to	receive,	which	resulted	in	some	grants	being	issued	in-the-money,	and	some	grants being	issued	out-of-the-money,	as	of	the	measurement	date.

•		For	certain	annual	grants,	as	well	as	numerous	individual	grants	from	1996	through	2002,	the	date	used	for	the	exercise	price	was	a	date	from	an	earlier	period.	In	many	cases,	that	earlier date	was	at	or	about	the	date	of	a	prior	meeting	of	the	compensation	committee	or	a	management	committee	authorized	by	the	compensation	committee.

•		In	addition,	the	review	identified	many	grants	from	1996	through	2005	for	which	not	all	of	the	relevant	documentation	could	be	located	and,	in	some	cases,	no	authorizing	documentation could	be	located.	However,	in	most	of	these	instances,	there	was	no	indication,	using	all	available	relevant	information,	that	the	grants	were	not	appropriately	accounted	for.

Under	applicable	accounting	standards	prior	to	January	1,	2006	(APB	No.	25),	compensation	expense	should	reflect	the	difference,	if	any,	between	an	option's	exercise	price	and	the	market	price of	the	Company's	stock	at	the	measurement	date,	the	point	at	which	the	terms	and	the	recipients	of	the	option	grant	are	determined	with	finality.	In	some	instances,	we	incorrectly	determined	the measurement	date	for	accounting	purposes	to	be	the	date	as	of	which	the	exercise	price	was	set	rather	than	the	date	the	grants	were	finalized.	As	a	result,	compensation	expense	in	the	pretax	amount	of $40.6	should	have	been	recorded	over	the	years	1996	through	2003.

In	accordance	with	SAB	No.	108,	the	materiality	of	these	newly-identified	errors	was	assessed	against	prior	periods	using	the	Company's	pre-SAB	No.	108	policy	("iron-curtain"	method)	for quantifying	materiality.	After	considering	all	of	the	quantitative	and	qualitative	factors	these	errors	were	not	considered	to	be	material	to	prior	periods.	Given	that	the	effect	of	correcting	these	errors during	2006	would	cause	our	2006	financial	statements	to	be	materially	misstated,	the	Company	concluded	that	the	cumulative	effect	adjustment	method	of	initially	applying	the	guidance	in SAB	No.	108	was	appropriate.	The	impact	of	the	cumulative	effect	adjustment	was	a	$26.4	charge	to	accumulated	deficit,	a	$23.3	credit	to	additional	paid-in	capital	and	a	$3.1	credit	to	other	non-current liabilities	to	reflect	certain	taxes	payable	effective	January	1,	2006.	The	following	table	shows	the	impact	on	the	previously	reported	accounts	as	of	December	31,	2005	adjusted	effective	January	1,	2006:

|  | December	31,	2005 | January	1,	2006 |
| :--- | :--- | :--- |
| Other\tnon-current\tliabilities | $319.0 | $322.1 |
| Additional\tpaid-in\tcapital | 2,224.1 | 2,247.4 |
| Accumulated\tdeficit | (841.1) | (867.5) |
| Total\tstockholders'\tequity | 1,945.3 | 1,942.2 |

# Note	21: Out-of-Period	Adjustments

During	2006,	we	recorded	adjustments	to	certain	vendor	discounts	and	credits,	contractual	liabilities,	foreign	exchange,	tax	and	other	miscellaneous	items	which	related	to	prior	periods.	Because these	changes	are	not	material	to	our	financial	statements	for	the	periods	prior	to	2006,	for	the	quarters	of	2006	or	for	2006	as	a	whole,	we	recorded	these	out-of-period	amounts	in	their	respective	quarters of	2006.

|  | Revenue | Operating<br>income | Loss	from<br>continuing<br>operations<br>before<br>provision	for<br>income	taxes | Loss	from<br>continuing<br>operations |
| :--- | :--- | :--- | :--- | :--- |
| As\treported | $6,190.8 | $106.0 | $(5.0) | $(36.7) |
| Favorable/(unfavorable)\tadjustments: |  |  |  |  |
| Vendor\tdiscounts\tand\tcredits | 6.3 | 6.3 | 1.2 | 1.2 |
| Contractual\tliabilities | — | 4.4 | 4.4 | 4.4 |
| Foreign\texchange\tadjustments | — | — | 4.8 | 4.8 |
| Other\tadjustments | 2.8 | (2.9) | (7.4) | (7.4) |
| Total\tpre-tax\tadjustments | 9.1 | 7.8 | 3.0 | 3.0 |
| Tax\tadjustments |  |  |  | 3.9 |
| Total\tnet\tadjustments |  |  |  | $6.9 |
| Loss\tper\tshare\tof\tcommon\tstock\t—\tbasic\tand\tdiluted: |  |  |  |  |
| As\treported |  |  |  | $(0.20) |
| Effect\tof\tadjustments |  |  |  | $0.02 |
| Weighted-average\tshares |  |  |  | 428.1 |

# Description	of	Out-of-Period	Adjustments:

Vendor	Discounts	and	Credits	—	In	connection	with	our	2005	Restatement	certain	liabilities	were	recorded	that	were	determined	at	that	time	to	be	a	contractual	obligation	to	clients.	The	revenue adjustment	primarily	relates	to	obtaining	certain	evidence	in	the	fourth	quarter	of	2006	indicating	that	no	actual	contractual	obligation	existed	in	regard	to	those	clients.	The	loss	from	continuing operations	adjustment	also	includes	a	concession	payment	to	a	certain	client.

Contractual	Liabilities	—	As	part	of	our	remediation	efforts	for	accounting	for	purchase	business	combinations	we	mandated	a	procedure	whereby	compensatory	earn-out	liabilities	should	be evaluated	quarterly	to	ensure	that	the	amount	being	accrued	is	still	appropriate.	As	a	result,	we	identified	an	instance	where	the	earn-out	liability	was	overstated	and	should	have	been	adjusted	in	prior periods	based	on	the	future	financial	performance	projections	for	that	respective	acquired	entity.

Foreign	Exchange	Adjustments	—	We	recorded	adjustments	related	to	the	cumulative	translation	adjustment	balances	that	remained	on	our	books	and	records	subsequent	to	the	sale	of	certain agencies.	In	accordance	with	SFAS	No.	52,	Foreign	Currency	Translation,	these	amounts	should	have	been	reported	as	part	of	the	gain	or	loss	on	sale	or	liquidation	of	the	respective	agency	during	the period	in	which	that	transaction	occurred.

Other	Adjustments	—	Primarily	relates	to	an	adjustment	to	one	of	our	cost	investments	of	$4.1	which	had	been	inappropriately	marked	to	market.

Tax	Adjustments	—	Includes	the	tax	effect	of	the	adjustments	noted	above	and	the	correction	of	certain	deferred	tax	assets	and	liabilities.

| Note	22:<br>Results	by	Quarter	(Unaudited) |  |  |  |  |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Three\tMonths\tEnded\tMarch\t31, | Three\tMonths\tEnded\tMarch\t31, | Three\tMonths\tEnded\tJune\t30, | Three\tMonths\tEnded\tJune\t30, | Three\tMonths\tEnded\tSeptember\t30, | Three\tMonths\tEnded\tSeptember\t30, | Three\tMonths\tEnded\tDecember\t31,\t3 | Three\tMonths\tEnded\tDecember\t31,\t3 |
|  | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 |
| Revenue | $1,327.0 | $1,328.2 | $1,532.9 | $1,610.7 | $1,453.8 | $1,439.7 | $1,877.1 | $1,895.7 |
| Salaries\tand\trelated\texpenses | 950.7 | 975.1 | 945.12 | 953.7 | 960.7 | 962.8 | \t1,087.6 | \t1,107.5 |
| Office\tand\tgeneral\texpenses | 535.5 | 529.1 | 504.6 | 543.4 | 466.0 | 578.5 | 572.9 | 637.1 |
| Restructuring\tand\tother\treorganization-related\tcharges\t(reversals) | 0.4 | (6.9) | 6.32 | (1.9) | 6.2 | 0.1 | 21.6 | 1.4 |
| Long-lived\tasset\timpairment\tand\tother\tcharges | — | — | — | — | — | 6.5 | 27.2 | 92.1 |
| Operating\tincome\t(loss) | (159.6) | (169.1) | 76.9 | 115.5 | 20.9 | (108.2) | 167.8 | 57.6 |
| Other\tincome\t(expense) | 0.6 | 14.7 | 24.3 | 0.7 | 22.6 | (2.2) | (53.1) | 6.3 |
| Total\t(expenses)\tand\tother\tincome | (19.6) | (17.3) | (1.3) | (25.0) | (9.3) | (27.1) | (80.8) | (13.0) |
| Provision\t(benefit)\tfor\tincome\ttaxes | (8.8) | (40.6) | 5.01 | 79.9 | 10.51 | (34.8) | 12.0 | 77.4 |
| Income\t(loss)\tfrom\tcontinuing\toperations | (170.2) | (146.4) | 65.71 | 9.2 | (1.3)1 | (102.8) | 69.1 | (31.9) |
| Net\tincome\t(loss) | (170.2) | (146.4) | 65.7 | 9.2 | 3.7 | (102.8) | 69.1 | (22.9) |
| Net\tincome\t(loss)\tapplicable\tto\tcommon\tstockholders | $(182.1) | $(151.4) | $43.7 | $3.5 | $(8.2) | $(107.8) | $49.1 | $(34.2) |
| Earnings\t(loss)\tper\tshare\tof\tcommon\tstock: |  |  |  |  |  |  |  |  |
| Basic: |  |  |  |  |  |  |  |  |
| Continuing\toperations | $(0.43) | $(0.36) | $0.10 | $0.01 | $(0.03) | $(0.25) | $0.11 | $(0.10) |
| Discontinued\toperations | — | — | — | — | 0.01 | — | — | 0.02 |
| Total | $(0.43) | $(0.36) | $0.10 | $0.01 | $(0.02) | $(0.25) | $0.11 | $(0.08) |
| Diluted: |  |  |  |  |  |  |  |  |
| Continuing\toperations | $(0.43) | $(0.36) | $0.09 | $0.01 | $(0.03) | $(0.25) | $0.11 | $(0.10) |
| Discontinued\toperations | — | — | — | — | 0.01 | — | — | 0.02 |
| Total | $(0.43) | $(0.36) | $0.09 | $0.01 | $(0.02) | $(0.25) | $0.11 | $(0.08) |

1	 As	discussed	in	Note	14,	as	a	result	of	our	election	to	select	an	alternative	simplified	method	to	calculate	our	windfall	tax	pool	we	have	retrospectively	recorded	the	impact	of	this	election	on	all	affected	prior	periods.	There	was	no	impact for	the	three	months	ended	March	31,	2006.	The	following	table	details	the	impact	of	the	change	for	the	applicable	periods:

2	 As	discussed	in	Note	2,	as	a	result	of	two	strategic	business	decisions	we	separated	certain	costs	from	salaries	and	related	expenses	of	$6.3	and	retrospectively	recorded	the	impact	of	this	change	for	the	three	months	ended	June	30,	2006.

3	 As	discussed	in	Note	21,	we	recorded	adjustments	to	certain	vendor	discounts	and	credits,	contractual	liabilities,	foreign	exchange,	tax	and	other	miscellaneous	items	which	related	to	prior	periods.	For	the	fourth	quarter	of	2006,	these adjustments	resulted	in	a	net	favorable	impact	to	revenue	of	$8.3,	net	favorable	impact	to	salaries	and	related	expenses	of	$4.2,	net	unfavorable	impact	to	office	and	general	expenses	of	$2.8	and	a	net	favorable	impact	to	net	income	of $11.9.	For	the	fourth	quarter	of	2005,	these	adjustments	resulted	in	a	net	unfavorable	impact	to	revenue,	salaries	and	related	expenses	and	office	and	general	expenses	of	$17.3,	$3.2	and	$6.1,	respectively,	and	a	net	favorable	impact	to provision	for	income	taxes	and	net	loss	of	$19.5	and	$2.7,	respectively.

Management's	Assessment	of	Internal	Control	over	Financial	Reporting	and	the	Report	of	Independent	Registered	Public	Accounting	Firm	located	in	Item	8	are	incorporated	by	reference	herein.

# Disclosure	controls	and	procedures

We	have	carried	out	an	evaluation	under	the	supervision	of,	and	with	the	participation	of,	our	management,	including	the	Chief	Executive	Officer	and	Chief	Financial	Officer,	of	the	effectiveness of	the	design	and	operation	of	our	disclosure	controls	and	procedures	as	of	December	31,	2006.	Our	evaluation	has	disclosed	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.	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	as	of	December	31,	2006,	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

As	described	in	"Remediation	of	Certain	Material	Weaknesses	in	Internal	Control	Over	Financial	Reporting	Disclosed	in	our	2005	Annual	Report	on	Form	10-K,"	which	is	located	in	Item	8	and is	incorporated	by	reference	herein,	there	were	changes	in	internal	control	during	the	fourth	quarter	of	2006	that	have	materially	affected,	or	are	reasonably	likely	to	materially	affect,	our	internal	control over	financial	reporting.

# Item	9B. Other	Information

The	information	required	by	this	Item	is	incorporated	by	reference	to	the	"Election	of	Directors"	section,	the	"Corporate	Governance	Practices	and	Board	Matters"	section	and	the	"Section	16(a) Beneficial	Ownership	Reporting	Compliance"	section	of	the	Proxy	Statement,	except	for	the	description	of	the	Company's	Executive	Officers,	which	appears	in	Part	I	of	this	Report	on	Form	10-K	under the	heading	"Executive	Officers	of	Interpublic."

# NYSE	Certification

In	2006,	our	CEO	provided	the	Annual	CEO	Certification	to	the	NYSE,	as	required	under	Section	303A.12(a)	of	the	New	York	Stock	Exchange	Listed	Company	Manual.

The	information	required	by	this	Item	is	incorporated	by	reference	to	the	"Compensation	of	Executive	Officers"	section,	the	"Non-Management	Director	Compensation"	section,	the "Compensation	Discussion	and	Analysis"	section	and	the	"Report	of	the	Compensation	Committee	of	the	Board	of	Directors"	section	of	the	Proxy	Statement.

The	information	required	by	this	Item	is	incorporated	by	reference	to	the	"Outstanding	Shares"	section	of	the	Proxy	Statement,	except	for	information	regarding	the	shares	of	Common	Stock	to	be issued	or	which	may	be	issued	under	our	equity	compensation	plans,	which	is	provided	in	the	following	table:

# Equity	Compensation	Plan	Information

(1) Includes	a	total	of	10,287,077	performance-based	share	awards	made	under	the	2004	and	2006	Performance	Incentive	Plan	representing	the	target	number	of	shares	to	be	issued	to	employees following	the	completion	of	the	2005-2007	performance	period	(the	"2007	LTIP	Share	Awards")	and	the	2006-2008	performance	period	(the	"2008	LTIP	Share	Awards"),	respectively.	The computation	of	the	weighted	average	exercise	price	in	column	(b)	of	this	table	does	not	take	the	2007	LTIP	Share	Awards	or	the	2008	LTIP	Share	Awards	into	account.

(2) Includes	a	total	of	5,007,356	restricted	share	unit	and	performance-based	awards	("Share	Unit	Awards")	which	may	be	settled	in	shares	or	cash.	The	computation	of	the	weighted	average exercise	price	in	column	(b)	of	this	table	does	not	take	the	Share	Unit	Awards	into	account.	Each	Share	Unit	Award	actually	settled	in	cash	will	increase	the	number	of	shares	of	Common	Stock available	for	issuance	shown	in	column	(c).

(4) Consists	of	special	stock	option	grants	awarded	to	certain	True	North	executives	following	our	acquisition	of	True	North	(the	"True	North	Options").	The	True	North	Options	have	an	exercise price	equal	to	the	fair	market	value	of	Interpublic's	common	stock	on	the	date	of	the	grant.	The	terms	and	conditions	of	these	stock	option	awards	are	governed	by	Interpublic's	1997 Performance	Incentive	Plan.	Generally,	the	options	become	exercisable	between	two	and	five	years	after	the	date	of	the	grant	and	expire	ten	years	from	the	grant	date.

# Item	13. Certain	Relationships	and	Related	Transactions

The	information	required	by	this	Item	is	incorporated	by	reference	to	the	"Related	Party	Transactions"	section	of	the	Proxy	Statement.

# Item	14. Principal	Accountant	Fees	and	Services

The	information	required	by	this	Item	is	incorporated	by	reference	to	the	"Appointment	of	Independent	Registered	Public	Accountants"	section	of	the	Proxy	Statement.

# Item	15. Exhibits,	Financial	Statement	Schedules

(a)	Listed	below	are	all	financial	statements,	financial	statement	schedules	and	exhibits	filed	as	part	of	this	Report	on	Form	10-K.

# 1. Financial	Statements:

The	Interpublic	Group	of	Companies,	Inc.	and	Subsidiaries	Report	of	Independent	Registered	Public	Accounting	Firm Consolidated	Statements	of	Operations	for	the	years	ended	December	31,	2006,	2005	and	2004

Consolidated	Balance	Sheets	as	of	December	31,	2006	and	2005

Consolidated	Statements	of	Cash	Flows	for	the	years	ended	December	31,	2006,	2005	and	2004

Consolidated	Statements	of	Stockholders'	Equity	and	Comprehensive	Loss	for	the	years	ended	December	31,	2006,	2005	and	2004

2. Financial	Statement	Schedules:

All	financial	statement	schedules	are	omitted	because	they	are	either	not	applicable	or	the	required	information	is	otherwise	provided.

# 3.	Exhibits:

(Numbers	used	are	the	numbers	assigned	in	Item	601	of	Regulation	S-K	and	the	EDGAR	Filer	Manual.	An	additional	copy	of	this	exhibit	index	immediately	precedes	the	exhibits	filed	with	this	Report on	Form	10-K	and	the	exhibits	transmitted	to	the	SEC	as	part	of	the	electronic	filing	of	this	Report.)

# Exhibit	No. Description

3(i) Restated	Certificate	of	Incorporation	of	the	Registrant,	as	amended	through	October	24,	2005,	is	incorporated	by	reference	to	Exhibit	3(i)	to	the	Registrant's Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	September	30,	2005	filed	with	the	SEC	on	November	9,	2005.

3(ii) By-Laws	of	the	Registrant,	as	amended	and	restated	through	March	23,	2006,	are	incorporated	by	reference	to	Exhibit	3(ii)	to	the	Registrant's	Current	Report	on Form	8-K	filed	with	the	SEC	on	March	29,	2006.

4(iii)(A) Certificate	of	Designations	of	5.25%	Series	B	Cumulative	Convertible	Perpetual	Preferred	Stock	of	the	Registrant,	as	filed	with	the	Delaware	Secretary	of	State	on October	24,	2005	is	incorporated	by	reference	to	Exhibit	4.1	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	October	24,	2005.

4(iii)(B) Senior	Debt	Indenture,	dated	as	of	October	20,	2000	(the	''2000	Indenture"),	between	the	Registrant	and	The	Bank	of	New	York,	as	trustee,	is	incorporated	by reference	to	Exhibit	99.1	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	October	24,	2000.

4(iii)(C) First	Supplemental	Indenture,	dated	as	of	August	22,	2001,	to	the	2000	Indenture,	with	respect	to	the	7.25%	Senior	Unsecured	Notes	due	2011	is	incorporated	by reference	to	Exhibit	4.2	to	the	Registrant's	Registration	Statement	on	Form	S-4	filed	with	the	SEC	on	December	4,	2001.

4(iii)(D) Second	Supplemental	Indenture,	dated	as	of	December	14,	2001,	to	the	2000	Indenture,	with	respect	to	the	Zero-Coupon	Convertible	Senior	Notes	due	2021	is incorporated	by	reference	to	Exhibit	4.1	to	the	Registrant's	Registration	Statement	on	Form	S-3	filed	with	the	SEC	on	April	5,	2002.

4(iii)(E) Third	Supplemental	Indenture,	dated	as	of	March	13,	2003,	to	the	2000	Indenture,	with	respect	to	the	4.50%	Convertible	Senior	Notes	due	2023	is	incorporated	by reference	to	Exhibit	4.1	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	March	18,	2003.

4(iii)(F) Fifth	Supplemental	Indenture,	dated	as	of	March	28,	2005,	to	the	2000	Indenture,	as	modified	by	the	First	Supplemental	Indenture,	dated	as	of	August	22,	2001, with	respect	to	the	7.25%	Senior	Unsecured	Notes	due	2011	is	incorporated	by	reference	to	Exhibit	4.2	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with the	SEC	on	April	1,	2005.

4(iii)(G) Sixth	Supplemental	Indenture,	dated	as	of	March	30,	2005,	to	the	2000	Indenture,	as	modified	by	the	Third	Supplemental	Indenture,	dated	as	of	March	13,	2003, with	respect	to	the	4.50%	Convertible	Senior	Notes	due	2023	is	incorporated	by	reference	to	Exhibit	4.3	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with the	SEC	on	April	1,	2005.

4(iii)(H) Seventh	Supplemental	Indenture,	dated	as	of	August	11,	2005,	to	the	2000	Indenture,	as	modified	by	the	Third	Supplemental	Indenture,	dated	as	of	March	13,	2003, and	the	Sixth	Supplemental	Indenture,	dated	as	of	March	30,	2005,	with	respect	to	the	4.50%	Convertible	Senior	Notes	due	2023	is	incorporated	by	reference	to Exhibit	4.1	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	August	15,	2005.

4(iii)(I) Senior	Debt	Indenture	dated	as	of	November	12,	2004	(the	''2004	Indenture"),	between	the	Registrant	and	Suntrust	Bank,	as	trustee,	is	incorporated	by	reference	to Exhibit	4.1	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	November	15,	2004.

4(iii)(J) First	Supplemental	Indenture,	dated	as	of	November	18,	2004,	to	the	2004	Indenture,	with	respect	to	the	5.40%	Notes	due	2009	is	incorporated	by	reference	to Exhibit	4.1	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	November	19,	2004.

4(iii)(K) Second	Supplemental	Indenture,	dated	as	of	November	18,	2004,	to	the	2004	Indenture,	with	respect	to	the	6.25%	Notes	due	2014	is	incorporated	by	reference	to Exhibit	4.2	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	November	19,	2004.

4(iii)(L) Third	Supplemental	Indenture,	dated	as	of	March	28,	2005,	to	the	2004	Indenture,	as	modified	by	the	Second	Supplemental	Indenture,	dated	as	of	November	18, 2004,	with	respect	to	the	6.25%	Senior	Unsecured	Notes	due	2014	is	incorporated	by	reference	to	Exhibit	4.4	to	the	Registrant's	Current	Report	on	Form	8-K	filed with	the	SEC	on	April	1,	2005.

4(iii)(M) Fourth	Supplemental	Indenture,	dated	as	of	March	29,	2005,	to	the	2004	Indenture,	as	modified	by	the	First	Supplemental	Indenture,	dated	as	of	November	18, 2004,	with	respect	to	the	5.40%	Senior	Unsecured	Notes	due	2009	is	incorporated	by	reference	to	Exhibit	4.5	to	the	Registrant's	Current	Report	on	Form	8-K	filed with	the	SEC	on	April	1,	2005.

4(iii)(N) Sixth	Supplemental	Indenture,	dated	as	of	December	8,	2006,	to	the	2004	Indenture,	with	respect	to	the	Floating	Rate	Notes	due	2010	is	incorporated	by	reference	to Exhibit	4.1	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	December	8,	2006.

4(iii)(O) Senior	Debt	Indenture,	dated	as	of	November	15,	2006	(the	''2006	Indenture"),	between	the	Registrant	and	The	Bank	of	New	York,	as	trustee,	is	incorporated	by reference	to	Exhibit	4.1	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	November	17,	2006.

4(iii)(P) First	Supplemental	Indenture,	dated	as	of	November	15,	2006,	to	the	2006	Indenture,	with	respect	to	the	4.25%	Convertible	Senior	Notes	Due	2023	is	incorporated by	reference	to	Exhibit	4.2	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	November	17,	2006.

4(iii)(Q) Warrant	Agreement,	dated	as	of	June	13,	2006,	between	the	Registrant	and	LaSalle	Bank	National	Association,	as	Warrant	Agent,	is	incorporated	by	reference	to Exhibit	10.2	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	June	19,	2006.

10(i)(A) Call	Option	Agreement,	dated	as	of	June	6,	2006,	between	the	Registrant	and	UBS	AG,	London	Branch,	is	incorporated	by	reference	to	Exhibit	10.4	to	the Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	June	12,	2006.

10(i)(B) Call	Option	Agreement,	dated	as	of	June	6,	2006,	between	the	Registrant	and	Morgan	Stanley	&	Co.	International	Limited,	is	incorporated	by	reference	to Exhibit	10.3	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	June	12,	2006.

10(i)(C) Call	Option	Agreement,	dated	as	of	June	6,	2006,	between	the	Registrant	and	JP	Morgan	Chase	Bank,	National	Association,	London	Branch,	is	incorporated	by reference	to	Exhibit	10.2	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	June	12,	2006.

10(i)(D) Call	Option	Agreement,	dated	as	of	June	6,	2006,	between	the	Registrant	and	Citibank,	N.A.,	is	incorporated	by	reference	to	Exhibit	10.1	to	the	Registrant's Current	Report	on	Form	8-K	filed	with	the	SEC	on	June	12,	2006.

10(i)(E) L/C	Issuance	Agreement,	dated	as	of	June	13,	2006,	between	the	Registrant,	as	Account	Party,	and	Morgan	Stanley	Capital	Services,	Inc.,	as	L/C	Issuer,	is incorporated	by	reference	to	Exhibit	10.4	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	June	19,	2006.

10(i)(F) Letter	of	Credit	Agreement,	dated	as	of	June	13,	2006,	between	the	Registrant	and	Citibank,	N.A.,	is	incorporated	by	reference	to	Exhibit	10.3	to	the	Registrant's Current	Report	on	Form	8-K	filed	with	the	SEC	on	June	19,	2006.

10(i)(G) 3-Year	Credit	Agreement,	dated	as	of	June	13,	2006,	among	the	Registrant,	as	Borrower,	ELF	Special	Financing	Ltd.,	as	Initial	Lender	and	L/C	Issuer,	and	Morgan Stanley	Capital	Services,	Inc.,	as	Administrative	Agent	and	L/C	Administrator,	is	incorporated	by	reference	to	Exhibit	10.1	to	the	Registrant's	Current	Report	on Form	8-K	filed	with	the	SEC	on	June	19,	2006.

10(i)(H) Registration	Rights	Agreement,	dated	as	of	November	15,	2006,	is	incorporated	by	reference	to	Exhibit	10.1	to	the	Registrant's	Current	Report	on	Form	8-K	filed with	the	SEC	on	November	17,	2006.

10(i)(I) Registration	Rights	Agreement,	dated	as	of	December	8,	2006	is	incorporated	by	reference	to	Exhibit	10.1	to	the	Registrant's	Current	Report	on	Form	8-K	filed with	the	SEC	on	December	8,	2006.

# (i)	Michael	Roth

10(iii)(A)(1) Employment	Agreement,	made	as	of	July	13,	2004,	by	and	between	the	Registrant	and	Michael	I.	Roth,	is	incorporated	by	reference	to	Exhibit	10(iii)(A)(9)	to	the Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	June	30,	2004.	*

10(iii)(A)(2) Executive	Severance	Agreement,	dated	July	13,	2004	and	executed	as	of	July	27,	2004,	by	and	between	the	Registrant	and	Michael	I.	Roth,	is	incorporated	by reference	to	Exhibit	10(iii)(A)(10)	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	June	30,	2004.	*

Supplemental	Employment	Agreement,	dated	as	of	January	19,	2005,	between	the	Registrant	and	Michael	I.	Roth,	is	incorporated	by	reference	to	Exhibit	10.2	to	the Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	January	21,	2005.	*

10(iii)(A)(4) Supplemental	Employment	Agreement,	dated	as	of	February	14,	2005,	between	the	Registrant	and	Michael	I.	Roth,	is	incorporated	by	reference	to	Exhibit	10.2	to the	Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	February	17,	2005.	*

# (ii)	Nicholas	J.	Camera

10(iii)(A)(5) Executive	Special	Benefit	Agreement,	dated	as	of	January	1,	1995,	between	the	Registrant	and	Nicholas	J.	Camera,	is	incorporated	by	reference	to	Exhibit	10(b)(v) (c)	to	the	Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	2002.	*

10(iii)(A)(6) Executive	Severance	Agreement,	dated	as	of	January	1,	1998,	between	the	Registrant	and	Nicholas	J.	Camera,	is	incorporated	by	reference	to	Exhibit	10(b)(vi)(a) to	the	Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	2001.	*

10(iii)(A)(7) Employment	Agreement,	dated	as	of	November	14,	2002,	between	the	Registrant	and	Nicholas	J.	Camera,	is	incorporated	by	reference	to	Exhibit	10(b)(v)(a)	to	the Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	2002.	*

10(iii)(A)(8) Supplemental	Agreement,	made	as	of	January	1,	2003	and	executed	as	of	June	23,	2003	to	an	Executive	Severance	Agreement,	made	as	of	January	1,	1998,	by	and between	the	Registrant	and	Nicholas	J.	Camera,	is	incorporated	by	reference	to	Exhibit	10(iii)(A)(iii)(a)	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the quarter	ended	June	30,	2003.	*

10(iii)(A)(9) Supplemental	Agreement,	made	as	of	June	16,	2003,	to	an	Executive	Severance	Agreement,	made	as	of	January	1,	1998,	by	and	between	the	Registrant	and Nicholas	J.	Camera,	is	incorporated	by	reference	to	Exhibit	10(iii)(A)(iii)(b)	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	June	30, 2003.	*

# (iii)	Christopher	F.	Carroll

10(iii)(A)(10) Employment	Agreement,	made	as	of	April	1,	2006,	by	and	between	the	Registrant	and	Christopher	F.	Carroll,	is	incorporated	by	reference	to	Exhibit	10.1	to	the Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	April	6,	2006.	*

10(iii)(A)(11) Executive	Severance	Agreement,	dated	April	1,	2006,	by	and	between	the	Registrant	and	Christopher	F.	Carroll,	is	incorporated	by	reference	to	Exhibit	10.2	to	the Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	April	6,	2006.	*

# (iv)	Thomas	Dowling

10(iii)(A)(12) Employment	Agreement,	dated	as	of	November	1999,	between	the	Registrant	and	Thomas	Dowling,	is	incorporated	by	reference	to	Exhibit	10(b)(iii)(A)(1)	to	the Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	March	31,	2002.	*

10(iii)(A)(13) Executive	Special	Benefit	Agreement,	dated	as	of	February	1,	2000,	between	the	Registrant	and	Thomas	Dowling,	is	incorporated	by	reference	to	Exhibit	10(b)(viii) (a)	to	the	Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	2001.	*

10(iii)(A)(14) Executive	Special	Benefit	Agreement,	dated	as	of	February	1,	2001,	between	the	Registrant	and	Thomas	Dowling,	is	incorporated	by	reference	to	Exhibit	10(b)(viii) (b)	to	the	Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	2001.	*

10(iii)(A)(15) Supplemental	Agreement,	dated	as	of	October	1,	2002,	to	an	Employment	Agreement,	dated	as	of	November	1999,	between	the	Registrant	and	Thomas	Dowling,	is incorporated	by	reference	to	Exhibit	10(b)(vii)(b)	to	the	Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	2002.	*

10(iii)(A)(16) Supplemental	Agreement,	dated	as	of	November	14,	2002,	to	an	Employment	Agreement,	dated	as	of	November	1999,	between	the	Registrant	and	Thomas Dowling,	is	incorporated	by	reference	to	Exhibit	10(b)(vii)(a)	to	the	Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	2002.	*

10(iii)(A)(17) Executive	Severance	Agreement,	dated	November	14,	2002,	between	the	Registrant	and	Thomas	Dowling,	is	incorporated	by	reference	to	Exhibit	10(iii)(A)(vii)	to the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	March	31,	2003.	*

# (v)	Philippe	Krakowsky

10(iii)(A)(18) Executive	Special	Benefit	Agreement,	dated	as	of	February	1,	2002,	and	signed	as	of	July	1,	2002,	between	the	Registrant	and	Philippe	Krakowsky,	is	incorporated by	reference	to	Exhibit	10(iii)(A)(v)	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	September	30,	2002.	*

10(iii)(A)(19) Special	Deferred	Compensation	Agreement,	dated	as	of	April	1,	2002,	and	signed	as	of	July	1,	2002,	between	the	Registrant	and	Philippe	Krakowsky,	is incorporated	by	reference	to	Exhibit	10(iii)(A)(iv)	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	September	30,	2002.	*

10(iii)(A)(20) Executive	Severance	Agreement,	dated	September	13,	2002,	between	the	Registrant	and	Philippe	Krakowsky,	is	incorporated	by	reference	to	Exhibit	10(iii)(A)(vi) to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	September	30,	2002.	*

10(iii)(A)(21) Executive	Special	Benefit	Agreement,	dated	September	30,	2002,	between	the	Registrant	and	Philippe	Krakowsky,	is	incorporated	by	reference	to	Exhibit	10(iii)(A) (vi)	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	September	30,	2002.	*

10(iii)(A)(22) Supplemental	Agreement,	made	as	of	June	16,	2003,	to	an	Executive	Severance	Agreement,	made	as	of	November	14,	2002,	by	and	between	the	Registrant	and Philippe	Krakowsky,	is	incorporated	by	reference	to	Exhibit	10(iii)(A)(viii)(b)	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	June	30, 2003.	*

10(iii)(A)(23) Employment	Agreement,	made	as	of	January	1,	2006	and	executed	on	March	20,	2006,	by	and	between	the	Registrant	and	Philippe	Krakowsky,	is	incorporated	by reference	to	Exhibit	10.1	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	March	24,	2006.	*

(vi)	Frank	Mergenthaler

10(iii)(A)(24) Employment	Agreement,	made	as	of	July	13,	2005,	between	the	Registrant	and	Frank	Mergenthaler	is	incorporated	by	reference	to	Exhibit	10.1	to	the	Registrant's Current	Report	on	Form	8-K	filed	with	the	SEC	on	July	19,	2005.	*

10(iii)(A)(25) Executive	Severance	Agreement,	made	as	of	July	13,	2005,	between	the	Registrant	and	Frank	Mergenthaler	is	incorporated	by	reference	to	Exhibit	10.1	to	the Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	July	19,	2005.	*

# (vii)	Timothy	A.	Sompolski

10(iii)(A)(26) Employment	Agreement,	made	as	of	July	6,	2004,	by	and	between	the	Registrant	and	Timothy	Sompolski,	is	incorporated	by	reference	to	Exhibit	10(iii)(A)(11)	to the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	March	31,	2004.	*

10(iii)(A)(27) Executive	Severance	Agreement,	made	as	of	July	6,	2004,	by	and	between	the	Registrant	and	Timothy	Sompolski,	is	incorporated	by	reference	to	Exhibit	10(iii)(A) (12)	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	March	31,	2004.	*

10(iii)(A)(28) The	Interpublic	Capital	Accumulation	Plan	Participation	Agreement,	effective	July	6,	2004,	by	and	between	the	Registrant	and	Timothy	Sompolski,	is	incorporated by	reference	to	Exhibit	10(iii)(A)(13)	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	June	30,	2004.	*

(viii)	John	J.	Dooner,	Jr.

10(iii)(A)(29) Executive	Special	Benefit	Agreement,	dated	as	of	July	1,	1986,	between	the	Registrant	and	John	J.	Dooner,	Jr.,	is	incorporated	by	reference	to	Exhibit	10(e)	to	the Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	1995.	*

10(iii)(A)(30) Executive	Severance	Agreement,	dated	as	of	August	10,	1987,	between	the	Registrant	and	John	J.	Dooner,	Jr.,	is	incorporated	by	reference	to	Exhibit	10(h)	to	the Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	1995.	*

10(iii)(A)(31) Supplemental	Agreement,	dated	as	of	May	23,	1990,	to	an	Executive	Special	Benefit	Agreement,	dated	as	of	July	1,	1986,	between	the	Registrant	and	John	J. Dooner,	Jr.,	is	incorporated	by	reference	to	Exhibit	10(l)	to	the	Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	1995.	*

10(iii)(A)(32) Executive	Special	Benefit	Agreement,	dated	as	of,	July	1,	1992,	between	the	Registrant	and	John	J.	Dooner,	Jr.,	is	incorporated	by	reference	to	Exhibit	10(q)	to	the Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	1995.	*

10(iii)(A)(33) Supplemental	Agreement,	dated	as	of	August	10,	1992,	to	an	Executive	Severance	Agreement,	dated	as	of	August	10,	1987,	between	the	Registrant	and	John	J. Dooner,	Jr.,	is	incorporated	by	reference	to	Exhibit	10(p)	to	the	Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	1995.	*

10(iii)(A)(34) Employment	Agreement,	dated	as	of	January	1,	1994,	between	the	Registrant	and	John	J.	Dooner,	Jr.,	is	incorporated	by	reference	to	Exhibit	10(r)	to	the Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	1995.	*

10(iii)(A)(35) Executive	Special	Benefit	Agreement,	dated	as	of	June	1,	1994,	between	the	Registrant	and	John	J.	Dooner,	Jr.,	is	incorporated	by	reference	to	Exhibit	10(s)	to	the Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	1995.	*

10(iii)(A)(36) Executive	Severance	Agreement,	dated	January	1,	1998,	between	the	Registrant	and	John	J.	Dooner,	Jr.,	is	incorporated	by	reference	to	Exhibit	10(b)	to	the Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	March	31,	1998.	*

10(iii)(A)(37) Supplemental	Agreement,	dated	as	of	April	1,	2000,	to	an	Employment	Agreement	between	the	Registrant	and	John	J.	Dooner,	Jr.,	is	incorporated	by	reference	to Exhibit	10(b)	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	March	31,	2000.	*

10(iii)(A)(38) Executive	Special	Benefit	Agreement,	dated	as	of	May	20,	2002,	between	the	Registrant	and	John	J.	Dooner,	Jr.,	signed	as	of	November	11,	2002,	is	incorporated by	reference	to	Exhibit	10(b)(xv)(c)	to	the	Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	2002.	*

10(iii)(A)(39) Supplemental	Agreement,	dated	as	of	November	7,	2002,	to	an	Employment	Agreement	between	the	Registrant	and	John	J.	Dooner,	Jr.,	is	incorporated	by	reference to	Exhibit	10(b)(xv)(a)	to	the	Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	2002.	*

10(iii)(A)(40) Supplemental	Agreement,	dated	as	of	November	7,	2002,	to	an	Executive	Special	Benefit	Agreement	between	the	Registrant	and	John	J.	Dooner,	Jr.,	is incorporated	by	reference	to	Exhibit	10(b)(xv)(b)	to	the	Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	2002.	*

10(iii)(A)(41) Supplemental	Agreement,	made	as	of	January	1,	2003	and	executed	as	of	June	17,	2003,	to	an	Executive	Severance	Agreement,	made	as	of	January	1,	1998,	by	and between	the	Registrant	and	John	J.	Dooner,	Jr.,	is	incorporated	by	reference	to	Exhibit	10(iii)(A)(iv)(b)	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the quarter	ended	June	30,	2003.	*

10(iii)(A)(42) Supplemental	Agreement,	made	as	of	March	31,	2003	and	executed	as	of	April	15,	2003,	to	an	Employment	Agreement,	made	as	of	January	1,	1994,	by	and between	the	Registrant	and	John	J.	Dooner,	Jr.,	is	incorporated	by	reference	to	Exhibit	10(iii)(A)(iv)(a)	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the quarter	ended	June	30,	2003.	*

10(iii)(A)(43) Supplemental	Agreement	dated	as	of	November	12,	2003,	to	an	Employment	Agreement	between	the	Registrant	and	John	J.	Dooner,	Jr.,	is	incorporated	by reference	to	Exhibit	10(b)(viii)(u)	to	the	Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	2003.	*

(ix)	Stephen	Gatfield

10(iii)(A)(44) Employment	Agreement,	made	as	of	February	2,	2004,	by	and	between	the	Registrant	and	Stephen	Gatfield,	is	incorporated	by	reference	to	Exhibit	10(iii)(A)(1)	to the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	March	31,	2004.	*

10(iii)(A)(45) Participation	Agreement	under	The	Interpublic	Senior	Executive	Retirement	Income	Plan,	dated	as	of	January	30,	2004,	between	the	Registrant	and	Stephen Gatfield,	is	incorporated	by	reference	to	Exhibit	10(iii)(A)(2)	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	March	31,	2004.	*

10(iii)(A)(46) Executive	Severance	Agreement,	made	as	of	April	1,	2004,	by	and	between	the	Registrant	and	Stephen	Gatfield,	is	incorporated	by	reference	to	Exhibit	10(iii)(A) (3)	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	March	31,	2004.	*

10(iii)(A)(47) Supplemental	Agreement,	dated	as	of	February	24,	2006,	between	the	Registrant	and	Stephen	Gatfield,	is	incorporated	by	reference	to	Exhibit	10.1	to	the Registrant's	Current	Report	on	Form	8-K/A	filed	with	the	SEC	on	March	3,	2006.	*

10(iii)(A)(48) Letter	Agreement,	dated	March	15,	2006,	by	and	between	the	Registrant	and	Stephen	Gatfield,	is	incorporated	by	reference	to	Exhibit	10(iii)(A)(2)	to	the Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	March	31,	2006.	*

# (x)	Jill	M.	Considine

Deferred	Compensation	Agreement,	dated	as	of	April	1,	2002,	between	the	Registrant	and	Jill	M.	Considine,	is	incorporated	by	reference	to	Exhibit	10(iii)(A)(i)	to the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	June	30,	2002.	*

10(iii)(A)(50) Letter,	dated	November	2,	2006,	from	Jill	M.	Considine	to	the	Registrant,	is	incorporated	by	reference	to	Exhibit	10(iii)(B)	to	the	Registrant's	Quarterly	Report	on Form	10-Q	for	the	quarter	ended	September	30,	2006.	*

# (xi)	Richard	A.	Goldstein

10(iii)(A)(51) Deferred	Compensation	Agreement,	dated	as	of	June	1,	2001,	between	the	Registrant	and	Richard	A.	Goldstein,	is	incorporated	by	reference	to	Exhibit	10(c)	to Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	June	30,	2001.	*

10(iii)(A)(52) Letter,	dated	July	24,	2006,	from	Richard	A.	Goldstein	to	the	Registrant,	is	incorporated	by	reference	to	Exhibit	10(iii)(A)	to	the	Registrant's	Quarterly	Report	on Form	10-Q	for	the	quarter	ended	September	30,	2006.	*

# (xii)	David	A.	Bell

10(iii)(A)(53) Executive	Special	Benefit	Agreement,	made	as	of	April	1,	2003,	by	and	between	the	Registrant	and	David	A.	Bell,	is	incorporated	by	reference	to	Exhibit	10(iii)(A) (i)(a)	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	June	30,	2003.	*

10(iii)(A)(54) Employment	Agreement,	dated	as	of	January	18,	2005,	between	the	Registrant	and	David	A.	Bell,	is	incorporated	by	reference	to	Exhibit	10.1	to	the	Registrant's Current	Report	on	Form	8-K	filed	with	the	SEC	on	January	21,	2005.	*

10(iii)(A)(55) Amendment,	dated	March	16,	2006,	to	an	Employment	Agreement,	made	as	of	January	18,	2005,	by	and	between	the	Registrant	and	David	A.	Bell,	is	incorporated by	reference	to	Exhibit	10.1	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	March	22,	2006.	*

Compensation	Plans	and	Arrangements:

10(iii)(A)(56) Trust	Agreement,	dated	as	of	June	1,	1990,	between	the	Registrant,	Lintas	Campbell-Ewald	Company,	McCann-Erickson	USA,	Inc.,	McCann-Erickson	Marketing, Inc.,	Lintas,	Inc.	and	Chemical	Bank,	as	Trustee,	is	incorporated	by	reference	to	the	Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31, 1990.	*

10(iii)(A)(57) The	Stock	Option	Plan	(1988)	and	the	Achievement	Stock	Award	Plan	of	the	Registrant	are	incorporated	by	reference	to	Appendices	C	and	D	of	the	Prospectus, dated	May	4,	1989,	forming	part	of	its	Registration	Statement	on	Form	S-8	(No.	33-28143).	*

10(iii)(A)(58) The	Management	Incentive	Compensation	Plan	of	the	Registrant	is	incorporated	by	reference	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter ended	June	30,	1995.	*

10(iii)(A)(59) The	1986	Stock	Incentive	Plan	of	the	Registrant	is	incorporated	by	reference	to	Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	1993.	*

10(iii)(A)(60) The	1986	United	Kingdom	Stock	Option	Plan	of	the	Registrant	is	incorporated	by	reference	to	the	Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended December	31,	1992.	*

10(iii)(A)(61) The	Long-Term	Performance	Incentive	Plan	of	the	Registrant	is	incorporated	by	reference	to	Appendix	A	of	the	Prospectus	dated	December	12,	1988	forming	part of	its	Registration	Statement	on	Form	S-8	(No.	33-25555).	*

10(iii)(A)(62) Resolution	of	the	Board	of	Directors	adopted	on	February	16,	1993,	amending	the	Long-Term	Performance	Incentive	Plan	is	incorporated	by	reference	to	the Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	1992.	*

10(iii)(A)(63) Resolution	of	the	Board	of	Directors	adopted	on	May	16,	1989	amending	the	Long-Term	Performance	Incentive	Plan	is	incorporated	by	reference	to	the Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	1989.	*

10(iii)(A)(64) The	1996	Stock	Incentive	Plan	of	the	Registrant	is	incorporated	by	reference	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	June	30, 1996.	*

10(iii)(A)(65) The	1997	Performance	Incentive	Plan	of	the	Registrant	is	incorporated	by	reference	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended June	30,	1997.	*

10(iii)(A)(66) True	North	Communications	Inc.	Stock	Option	Plan	is	incorporated	by	reference	to	Exhibit	4.5	of	Post-Effective	Amendment	No.	1	on	Form	S-8	to	Registration Statement	on	Form	S-4	(Registration	No.	333-59254).	*

10(iii)(A)(67) Bozell,	Jacobs,	Kenyon	&	Eckhardt,	Inc.	Stock	Option	Plan	is	incorporated	by	reference	to	Exhibit	4.5	of	Post-Effective	Amendment	No.	1	on	Form	S-8	to Registration	Statement	on	Form	S-4	(Registration	No.	333-59254).	*

10(iii)(A)(68) True	North	Communications	Inc.	Deferred	Compensation	Plan	is	incorporated	by	reference	to	Exhibit	(c)(xiv)	of	the	Registrant's	Annual	Report	on	Form	10-K	for the	year	ended	December	31,	2002.	*

10(iii)(A)(69) Resolution	of	the	Board	of	Directors	of	True	North	Communications	Inc.	adopted	on	March	1,	2002	amending	the	Deferred	Compensation	Plan	is	incorporated	by reference	to	Exhibit	(c)(xv)	of	the	Registrant's	Annual	Report	on	Form	10-K	for	the	year	ended	December	31,	2002.	*

10(iii)(A)(70) The	2002	Performance	Incentive	Plan	of	the	Registrant	is	incorporated	by	reference	to	Appendix	A	to	the	Registrant's	Proxy	Statement	on	Schedule	14A,	filed April	17,	2002.	*

10(iii)(A)(71) The	Interpublic	Registrant	Senior	Executive	Retirement	Income	Plan	is	incorporated	by	reference	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter ended	September	30,	2003.	*

10(iii)(A)(72) The	Interpublic	Capital	Accumulation	Plan	is	incorporated	by	reference	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	September	30, 2003.	*

10(iii)(A)(73) The	Interpublic	Outside	Directors	Stock	Incentive	Plan	of	the	Registrant,	as	amended	through	August	1,	2003,	is	incorporated	by	reference	to	the	Registrant's Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	September	30,	2003.	*

10(iii)(A)(74) The	Interpublic	2004	Performance	Incentive	Plan	(the	''2004	PIP")	is	incorporated	by	reference	to	Appendix	B	to	the	Registrant's	Proxy	Statement	on	Schedule 14A,	filed	with	the	SEC	on	April	23,	2004.	*

10(iii)(A)(75) The	Interpublic	Non-Management	Directors'	Stock	Incentive	Plan	(the	''Non-Management	Directors'	Plan")	is	incorporated	by	reference	to	Appendix	C	to	the Registrant's	Proxy	Statement	on	Schedule	14A,	filed	with	the	SEC	on	April	23,	2004.	*

10(iii)(A)(76) 2004	PIP	—	Form	of	Option	Certificate	is	incorporated	by	reference	to	Exhibit	10.1	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on October	27,	2004.	*

10(iii)(A)(77) 2004	PIP	—	Form	of	Instrument	of	Restricted	Stock	is	incorporated	by	reference	to	Exhibit	10.2	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC on	October	27,	2004.	*

10(iii)(A)(78) 2004	PIP	—	Form	of	Instrument	of	Restricted	Stock	Units	is	incorporated	by	reference	to	Exhibit	10.3	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the SEC	on	October	27,	2004.	*

10(iii)(A)(79) Non-Management	Directors'	Plan	—	Form	of	Plan	Option	Certificate	is	incorporated	by	reference	to	Exhibit	10.4	of	the	Registrant's	Current	Report	on	Form	8-K filed	with	the	SEC	on	October	27,	2004.	*

10(iii)(A)(80) Non-Management	Directors'	Plan	—	Form	of	Instrument	of	Restricted	Shares	is	incorporated	by	reference	to	Exhibit	10.5	to	the	Registrant's	Current	Report	on Form	8-K	filed	with	the	SEC	on	October	27,	2004.	*

10(iii)(A)(81) Non-Management	Directors'	Plan	—	Form	of	Instrument	of	Restricted	Share	Units	is	incorporated	by	reference	to	Exhibit	10.6	of	the	Registrant's	Current	Report on	Form	8-K	filed	with	the	SEC	on	October	27,	2004.	*

10(iii)(A)(82) The	Interpublic	Senior	Executive	Retirement	Income	Plan	—	Form	of	Participation	Agreement	is	incorporated	by	reference	to	Exhibit	10.7	of	the	Registrant's Current	Report	on	Form	8-K	filed	with	the	SEC	on	October	27,	2004.	*

10(iii)(A)(83) The	Interpublic	Capital	Accumulation	Plan	—	Form	of	Participation	Agreement	is	incorporated	by	reference	to	Exhibit	10.8	of	the	Registrant's	Current	Report	on Form	8-K	filed	with	the	SEC	on	October	27,	2004.	*

10(iii)(A)(84) The	Employee	Stock	Purchase	Plan	(2006)	of	the	Registrant	is	incorporated	by	reference	to	Appendix	B	to	the	Registrant's	Proxy	Statement	on	Schedule	14A,	filed with	the	SEC	on	October	21,	2005.	*

10(iii)(A)(85) The	Interpublic	2006	Performance	Incentive	Plan	(the	"2006	PIP")	is	incorporated	by	reference	to	Appendix	A	to	the	Registrant's	Definitive	Proxy	Statement	on Schedule	14A	filed	with	the	SEC	on	April	27,	2006.	*

10(iii)(A)(86) 2006	PIP	—	Form	of	Instrument	of	Performance	Shares,	is	incorporated	by	reference	to	Exhibit	10.1	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the SEC	on	June	21,	2006.	*

10(iii)(A)(87) 2006	PIP	—	Form	of	Instrument	of	Performance	Units	is	incorporated	by	reference	to	Exhibit	10.2	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the SEC	on	June	21,	2006.	*

10(iii)(A)(88) 2006	PIP	—	Form	of	Instrument	of	Restricted	Stock,	is	incorporated	by	reference	to	Exhibit	10.3	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC on	June	21,	2006.	*

10(iii)(A)(89) 2006	PIP	—	Form	of	Instrument	of	Restricted	Stock	Units,	is	incorporated	by	reference	to	Exhibit	10.4	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with the	SEC	on	June	21,	2006.	*

(32) Certification	of	the	Chief	Executive	Officer	and	the	Chief	Financial	Officer	furnished	pursuant	to	18	U.S.C.	Section	1350	and	Rule	13a-14(b)	under	the	Securities Exchange	Act	of	1934,	as	amended.

*	Management	contracts	and	compensation	plans	and	arrangements.

# SIGNATURES

Pursuant	to	the	requirements	of	Section	13	of	the	Securities	Exchange	Act	of	1934,	the	Registrant	has	duly	caused	this	report	to	be	signed	on	its	behalf	by	the	undersigned,	thereunto	duly authorized.

(Registrant)

Michael	I.	Roth Chairman	of	the	Board and	Chief	Executive	Officer

Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	this	Report	has	been	signed	below	by	the	following	persons	on	behalf	of	the	Registrant	and	in	the	capacities	and	on	the	dates

indicated.

| /s/		Michael	I.	Roth<br>Michael	I.	Roth | Chairman	of	the	Board	and	Chief	Executive	Officer<br>(Principal	Executive	Officer) | February	28,	2007 |
| :--- | :--- | :--- |
| /s/\t\tFrank\tMergenthaler\nFrank\tMergenthaler | Executive\tVice\tPresident,\nChief\tFinancial\tOfficer\n(Principal\tFinancial\tOfficer) | February\t28,\t2007 |
| /s/\t\tChristopher\tF.\tCarroll\nChristopher\tF.\tCarroll | Senior\tVice\tPresident,\tController\tand\nChief\tAccounting\tOfficer\n(Principal\tAccounting\tOfficer) | February\t28,\t2007 |
| /s/\t\tFrank\tJ.\tBorelli\nFrank\tJ.\tBorelli | Director | February\t28,\t2007 |
| /s/\t\tReginald\tK.\tBrack\nReginald\tK.\tBrack | Director | February\t28,\t2007 |
| /s/\t\tJill\tM.\tConsidine\nJill\tM.\tConsidine | Director | February\t28,\t2007 |
| /s/\t\tRichard\tA.\tGoldstein\nRichard\tA.\tGoldstein | Director | February\t28,\t2007 |
| /s/\t\tH.\tJohn\tGreeniaus\nH.\tJohn\tGreeniaus | Director | February\t28,\t2007 |
| /s/\t\tWilliam\tT.\tKerr\nWilliam\tT.\tKerr | Director | February\t28,\t2007 |
| /s/\t\tJ.\tPhillip\tSamper | Director | February\t28,\t2007 |

# EXHIBIT	INDEX

10(iii)(A)(3) Supplemental	Employment	Agreement,	dated	as	of	January	19,	2005,	between	the	Registrant	and	Michael	I.	Roth,	is	incorporated	by	reference	to	Exhibit	10.2	to	the Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	January	21,	2005.	*

Supplemental	Agreement,	made	as	of	January	1,	2003	and	executed	as	of	June	23,	2003	to	an	Executive	Severance	Agreement,	made	as	of	January	1,	1998,	by	and between	the	Registrant	and	Nicholas	J.	Camera,	is	incorporated	by	reference	to	Exhibit	10(iii)(A)(iii)(a)	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the quarter	ended	June	30,	2003.	*

10(iii)(A)(49) Deferred	Compensation	Agreement,	dated	as	of	April	1,	2002,	between	the	Registrant	and	Jill	M.	Considine,	is	incorporated	by	reference	to	Exhibit	10(iii)(A)(i)	to the	Registrant's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	June	30,	2002.	*

Amendment,	dated	March	16,	2006,	to	an	Employment	Agreement,	made	as	of	January	18,	2005,	by	and	between	the	Registrant	and	David	A.	Bell,	is	incorporated by	reference	to	Exhibit	10.1	to	the	Registrant's	Current	Report	on	Form	8-K	filed	with	the	SEC	on	March	22,	2006.	*

10(iii)(A)(90) 2006	PIP	—	Form	of	Instrument	of	Nonstatutory	Stock	Options,	is	incorporated	by	reference	to	Exhibit	10.5	to	the	Registrant's	Current	Report	on	Form	8-K	filed with	the	SEC	on	June	21,	2006.	*



Question: what is the total interest expense incurred by the senior unsecured notes that was redeemed in august 2005?
Calculation:     interest_expense = 258.6 - 250.0
 interest_expense_with_prepayment_penalty = interest_expense - 1.4
 answer = interest_expense_with_prepayment_penalty
Answer: 7.2