FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

(Mark one)
[X]  QUARTERLY  REPORT  PURSUANT  TO  SECTION  13  OR 15(d)  OF  THE  SECURITIES
     EXCHANGE ACT OF 1934.

For the quarterly period ended March 31, 1998

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934.

For the transition period from _________to_________

                        Commission file number 001-14093

                              Young & Rubicam Inc.
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                 Delaware                                  13-1493710
---------------------------------------------- ---------------------------------
(State or other jurisdiction of incorporation) (I.R.S. Employer or organization
                                                       Identification No.)

                  285 Madison Avenue, New York, New York 10017
               --------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (212) 210-3000
               --------------------------------------------------
              (Registrant's telephone number, including area code)

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

The number of shares  outstanding of the  Registrant's  Common Stock,  $0.01 par
value, as of June 24, 1998 was 66,594,730.


<PAGE>

                  YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES

                                    FORM 10-Q

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                 PAGE NO.
PART I:  FINANCIAL INFORMATION
<S>                                                                                               <C>
  Item 1.      Financial Statements
                  Consolidated Balance Sheets as of
                  December 31, 1997 and March 31, 1998                                                  2

                  Consolidated Statements of Operations for the
                  Three Months Ended March 31, 1997 and 1998                                            3

                  Consolidated Statements of Cash Flows for the
                  Three Months Ended March 31, 1997 and 1998                                            4

                  Consolidated Statements of Changes in Deficit
                  for the Year Ended December 31, 1997 and
                  the Three Months Ended March 31, 1998                                                 5

                  Notes to Consolidated Financial
                  Statements                                                                       6 - 8

  Item 2.      Management's Discussion and Analysis of Financial
               Condition and Results of Operations                                                 8 - 9

PART II:  OTHER INFORMATION

  Item 2.      Changes in Securities and Use of Proceeds                                              10
  Item 6.      Exhibits and Reports on Form 8-K                                                       11

SIGNATURES

EXHIBIT INDEX
</TABLE>


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This  document,  information  included in future filings by Young & Rubicam Inc.
("the Company") with the United States  Securities and Exchange  Commission (the
"SEC"), and information contained in written materials,  press releases and oral
statements  issued by or on  behalf  of the  Company  contain,  or may  contain,
statements that constitute  "forward-looking  statements"  within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements include statements
regarding  the  intent,  belief or current  expectations  of the  Company or its
officers  (including  statements  preceded  by,  followed  by  or  that  include
forward-looking   terminology  such  as  "may,"  "will,"  "should,"  "believes,"
"expects,"  "anticipates,"  "estimates,"  "continues" or similar  expressions or
comparable terminology,  including the negative thereof) with respect to various
matters.   These   forward-looking   statements   include   statements   in  the
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" section of this document relating to the Company's  performance.  It
is important to note that the Company's  actual results could differ  materially
from those anticipated in these  forward-looking  statements depending on, among
other important factors, (i) revenues received from clients,  including pursuant
to incentive compensation  arrangements entered into by the Company with certain
clients,  (ii) gains or losses of clients and client  business and projects,  as
well as changes in the marketing and  communications  budgets of clients,  (iii)
the level of  economic  activity in the  principal  markets in which the Company
conducts business and other trends affecting the Company's  financial  condition
or results of  operations,  (iv) the impact of  competition in the marketing and
communications industry and (v) the Company's liquidity and financing plans. All
forward-looking  statements in this document are based on information  available
to the Company on the date hereof. In addition,  the matters set forth under the
caption "Risk Factors" in the Company's Prospectus dated May 11, 1998 filed with
the  Commission  pursuant  to Rule  424(b)  of the  Securities  Act of 1933,  as
amended,  constitute  cautionary  statements  identifying important factors with
respect  to  such  forward-looking  statements,   including  certain  risks  and
uncertainties that could cause actual results to differ materially from those in
such forward-looking statements.


<PAGE>

PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS

                  YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>

                                                                                                            MARCH 31, 1998          
                                                                                      DECEMBER 31,----------------------------------
                                                                                          1997          ACTUAL         PRO FORMA(1)
                                                                                         ----           ------         -------------
<S>                                                                                    <C>                 <C>             <C>     
CURRENT ASSETS
   Cash and cash equivalents                                                           $160,263            $50,965         $50,965 
   Accounts receivable, net of allowance for doubtful accounts of $14,125
    and $16,070 at December 31, 1997 and March 31, 1998, respectively                   790,342            807,930         807,930 
   Costs billable to clients                                                             50,479             72,540          72,540 
   Other receivables                                                                     35,218             39,855          39,855 
   Deferred income taxes                                                                 32,832             29,034          29,034 
   Prepaid expenses and other assets                                                     17,989             17,993          17,993 
                                                                                     ----------         ----------      ---------- 
          Total Current Assets                                                        1,087,123          1,018,317       1,018,317 
                                                                                     ----------         ----------      ---------- 
NONCURRENT ASSETS
   Property and equipment, net                                                          125,014            121,389         121,389 
   Deferred income taxes                                                                124,192            124,213         124,213 
   Goodwill, less accumulated amortization of $80,166 and $81,780 at
    December 31, 1997 and March 31, 1998, respectively                                  116,637            112,593         112,593 
   Equity in net assets of and advances to unconsolidated companies                      26,393             26,471          26,471 
   Other assets                                                                          48,660             48,572          48,572 
                                                                                     ----------         ----------      ---------- 
          Total Noncurrent Assets                                                       440,896            433,238         433,238 
                                                                                     ----------         ----------      ---------- 
          Total Assets                                                               $1,528,019         $1,451,555      $1,451,555 
                                                                                     ==========         ==========      ========== 
CURRENT LIABILITIES
   Loans payable                                                                        $10,765            $33,122         $33,122 
   Accounts payable                                                                     811,162            805,744         805,744 
   Installment notes payable                                                              3,231              1,131           1,131 
   Accrued expenses and other liabilities                                               273,011            265,807         265,807 
   Accrued payroll and bonuses                                                           65,458             47,619          47,619 
   Income taxes payable                                                                  29,665             24,396          24,396 
                                                                                     ----------         ----------      ---------- 
          Total Current Liabilities                                                   1,193,292          1,177,819       1,177,819 
                                                                                     ----------         ----------      ---------- 
NONCURRENT LIABILITIES
   Loans payable                                                                        330,552            263,462         263,462 
   Installment notes payable                                                              6,503              6,503           6,503 
   Deferred compensation                                                                 31,077             32,455          32,455 
   Other liabilities                                                                    112,851            107,348         107,348 
                                                                                     ----------         ----------      ---------- 
          Total Noncurrent Liabilities                                                  480,983            409,768         409,768 
                                                                                     ----------         ----------      ---------- 
Commitments and Contingencies
Minority Interest                                                                         6,987              5,460           5,460 
                                                                                     ----------         ----------      ---------- 
MANDATORILY REDEEMABLE EQUITY SECURITIES
   Common  stock,  par value $.01 per share;  authorized -  250,000,000  shares;
    issued and outstanding - 50,658,180 shares,  50,968,935 shares, and 0 shares
    at December 31, 1997, March 31, 1998 (actual) and March 31, 1998
    (pro forma), respectively                                                           508,471            795,774               -
                                                                                     ----------         ----------      ---------- 
STOCKHOLDERS' DEFICIT
    Money Market  Preferred Stock - Cumulative  variable  dividend;  liquidating
    value of $115.00 per share; one-tenth of one vote per share; 50,000
    shares authorized; 87 shares issued and outstanding                                       -                  -               -
   Common stock, par value $.01 per share; authorized - 250,000,000
    shares;  issued and outstanding - 11,086,950  shares,  11,086,950 shares and
    62,055,885 shares at December 31, 1997, March 31, 1998 (actual)
    and March 31, 1998 (pro forma), respectively                                            111                111             620 
   Capital surplus                                                                       23,613                  -         795,265 
   Accumulated deficit                                                                 (522,866)          (660,034)       (660,034)
   Cumulative translation adjustment                                                    (16,577)           (18,631)        (18,631)
   Pension liability adjustment                                                            (706)              (706)           (706)
   Common stock in treasury, at cost; 1,115,160  shares                                  (8,550)            (8,550)         (8,550)
   Unearned compensation - Restricted Stock                                            (136,739)          (249,456)       (249,456)
                                                                                     ----------         ----------      ---------- 
          Total Stockholders' Deficit                                                  (661,714)          (937,266)       (141,492)
                                                                                     ----------         ----------      ---------- 
          Total Liabilities, Mandatorily Redeemable Equity Securities and
           Stockholders' Deficit                                                     $1,528,019         $1,451,555      $1,451,555 
                                                                                     ==========         ==========      ========== 

----------
1. See note 2.


The accompanying notes are an integral part of these financial statements.
</TABLE>
                                        2
<PAGE>

                  YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                         THREE MONTHS ENDED
                                                                              MARCH 31,
                                                               -----------------------------------
                                                                         1997              1998
                                                                         ----              ----

<S>                                                                    <C>               <C>     
Revenues                                                               $298,206          $348,173

Compensation expense, including employee benefits                       188,600           213,598
General and administrative expenses                                      95,513           109,242
                                                                         ------           -------
Operating expenses                                                      284,113           322,840
                                                                        -------           -------

Income  from operations                                                  14,093            25,333
Interest income                                                           1,943             2,630
Interest expense                                                        (10,246)           (8,205)
Other income (expense)                                                       -                827
                                                                             --               ---
Income before income taxes                                                5,790            20,585
Income tax provision                                                      2,843             8,852
                                                                          -----             -----
                                                                          2,947            11,733
Equity in net income of unconsolidated companies                          1,040               115
Minority interest in net loss of consolidated subsidiaries                  102               342
                                                                            ---               ---

Net income                                                               $4,089           $12,190
                                                                         ======           =======


Earnings per share:
  Basic                                                                   $0.09             $0.24
                                                                          =====             =====
  Diluted                                                                 $0.07             $0.19
                                                                          =====             =====

Weighted average shares used to compute:
  Basic                                                              47,382,330        50,762,144
                                                                     ==========        ==========
  Diluted                                                            60,225,321        64,453,134
                                                                     ==========        ==========
</TABLE>



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


                                       3
<PAGE>

                  YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                           THREE MONTHS ENDED
                                                                                                MARCH 31,
                                                                                  --------------------------------
                                                                                       1997            1998
                                                                                       ----            ----
<S>                                                                                    <C>            <C>    
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                             $4,089         $12,190
Adjustments to reconcile net income to net cash used by operating activities:
   Depreciation and amortization                                                       13,541          14,180
   Deferred income tax (benefit) expense                                                 (312)          3,777
   Equity in net income of unconsolidated companies                                    (1,040)           (115)
   Dividends from unconsolidated companies                                              1,420             252
   Minority interest in net loss of consolidated subsidiaries                            (102)           (342)
Change  in  assets  and  liabilities,   excluding  effects  from   acquisitions,
dispositions, recapitalization and foreign exchange:
   Accounts receivable, net                                                            73,958         (22,261)
   Costs billable to clients                                                          (10,601)        (22,013)
   Other receivables                                                                   (9,370)         (5,031)
   Prepaid expenses and other assets                                                   (8,381)         (1,163)
   Accounts payable                                                                   (85,353)         (2,178)
   Accrued expenses and other liabilities                                             (47,987)        (75,366)
   Accrued payroll and bonuses                                                        (28,851)        (16,556)
   Income taxes payable                                                                (4,216)         (5,007)
   Deferred compensation                                                                  292           1,478
   Other liabilities                                                                     (737)         (5,236)
   Other                                                                                4,687           1,215
                                                                                       ------           -----
Net cash used by operating activities                                                 (98,963)       (122,176)
                                                                                     --------       ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Additions to property and equipment                                                (13,163)         (7,889)
   Acquisitions, net of cash acquired                                                  (2,212)              -
   Investment in net assets of and advances to unconsolidated companies                (6,334)         (1,030)
   Proceeds from notes receivable                                                         341             339
                                                                                         ----             ---
Net cash used in investing activities                                                 (21,368)         (8,580)
                                                                                     --------         -------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from loans payable, long-term                                             250,104          65,000
   Repayment of loans payable, long-term                                                    -        (131,874)
   Proceeds from loans payable, short-term, net                                        38,794          91,846
   Recapitalization payments                                                         (242,223)              -
   Payments of non-recapitalization deferred compensation                                (336)         (1,190)
   Common stock issued                                                                      -           1,287
   Payment of installment notes                                                             -          (2,100)
   Dividends paid to minority shareholders                                               (218)           (277)
                                                                                        -----           -----
Net cash provided by financing activities                                              46,121          22,692
                                                                                      -------          ------
Effect of exchange rate changes on cash and cash equivalents                           (2,442)         (1,234)
                                                                                      -------         -------
Net decrease in cash and cash equivalents                                             (76,652)       (109,298)
Cash and cash equivalents, beginning of period                                        110,180         160,263
                                                                                      -------         -------
Cash and cash equivalents, end of period                                              $33,528         $50,965
                                                                                      =======         =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Interest paid                                                                       $9,696          $9,157
                                                                                       ======          ======
   Income taxes paid                                                                   $2,697          $9,237
                                                                                       ======          ======
</TABLE>



The accompanying notes are an integral part of these financial statements.
                                       4
<PAGE>

                  YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                  CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                      RETAINED AND
                                                                                     UNDISTRIBUTED
                                                               VOTING                   EARNINGS       COMMON
                                                PREFERRED      COMMON       CAPITAL   (ACCUMULATED     STOCK IN   RESTRICTED
                                                  STOCK         STOCK       SURPLUS     DEFICIT)       TREASURY     STOCK
                                                  -----         -----       -------     --------       --------     -----
<S>                                              <C>          <C>      <C>           <C>                <C>     <C>      
BALANCE AT DECEMBER 31, 1996                      $  -          $111     $106,825      ($498,928)         $ -     ($85,000)
Net loss                                             -             -                     (23,938)           -            -
Common stock issued                                  -             -        1,501              -            -            -
Common stock repurchased                             -             -                           -       (8,550)           -
Unearned compensation -
 Restricted Stock                                    -             -       51,739              -            -      (51,739)
Common stock options
 exercised/repurchased                               -            44        8,711              -            -            -
Accretion of mandatorily redeemable
 equity securities                                   -           (44)    (145,163)             -            -            -
                                                    --           ----    --------             --           --           --

BALANCE AT DECEMBER 31, 1997                      $  -          $111      $23,613      ($522,866)     ($8,550)   ($136,739)
Net income                                           -             -            -         12,190            -            -
Unearned compensation -
 Restricted Stock                                    -             -      112,717              -            -     (112,717)
Common stock options
 exercised/repurchased                               -             3        1,612              -            -            -
Accretion of mandatorily redeemable
 equity securities                                   -            (3)    (137,942)      (149,358)          -            -
                                                    --             --    --------      ---------           --           --

BALANCE AT MARCH 31, 1998                         $  -          $111     $      -      ($660,034)     ($8,550)   ($249,456)
                                                  ====          =====    ========      =========      ========   ========= 
</TABLE>





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


                                       5
<PAGE>


                  YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying  unaudited consolidated financial statements of Young & Rubicam
Inc. (the "Company") have been prepared  pursuant to the rules of the Securities
and Exchange  Commission.  Certain information and footnote disclosures normally
included in financial  statements prepared in accordance with generally accepted
accounting  principles have been condensed or omitted pursuant to such rules and
regulations.   These  consolidated   financial  statements  should  be  read  in
conjunction with the audited consolidated financial statements and notes thereto
included in the  Company's  Registration  Statement  filed on Form S-1 (File No.
333-46929)  (the "Form S-1").  In the opinion of  management,  the  accompanying
financial  statements  reflect all adjustments,  which are of a normal recurring
nature,  necessary  for a fair  presentation  of the  results  for  the  periods
presented.

The  results  for the  first  three  months  of the  year  are  not  necessarily
indicative of the results expected for the full year.

2. Unaudited Pro Forma Balance Sheet

The unaudited  pro forma  balance sheet as of March 31, 1998 has been  presented
after giving effect to the termination of the redeemable  feature and subsequent
reclassification   of  the   mandatorily   redeemable   equity   securities   to
stockholders'  deficit concurrent with the consummation of the Company's initial
public offering of common stock (the "Offering"). (See Note 6.)

3. Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amounts of revenues and expenses for the reporting  period.  Actual
results could differ from those estimates.

4. Earnings per Share

The  Company  computes  earnings  per  share in  accordance  with  Statement  of
Financial  Accounting  Standards  ("SFAS") No. 128,  "Earnings Per Share." Basic
earnings per share is calculated by dividing net income by the weighted  average
shares of common  stock  outstanding  during each period.  Diluted  earnings per
share  reflect the  dilutive  effect of stock  options  and other  stock  awards
granted to employees under  stock-based  compensation  plans. In computing basic
and diluted  earnings  per share,  11,086,950  shares of common  stock held in a
restricted stock trust  (the"Restricted  Stock Trust") pursuant to the Company's
Restricted  Stock Plan were excluded from the weighted  average number of common
shares  outstanding  as such  shares  vest upon the  consummation  of an initial
public  offering,  a condition  which was not  satisfied  as of March 31,  1998.
Shares used in computing basic and diluted earnings per share were as follows:

<TABLE>
<CAPTION>
                                                        Three months ended
                                                            March 31,
                                                        1997          1998
                                                        ----          ----
<S>                                                <C>              <C>       
       Basic - weighted average shares             47,382,330       50,762,144

       Effect of dilutive securities               12,842,991       13,690,990
                                                   ----------       ----------

       Diluted - weighted average shares           60,225,321       64,453,134
                                                   ==========       ==========
</TABLE>


                                       6

<PAGE>


5. Comprehensive Income

The Company has adopted SFAS No. 130,  "Reporting  Comprehensive  Income," which
requires  presentation of information on comprehensive income and its components
in the financial statements. For the Company,  comprehensive income includes net
income,  foreign currency translation  adjustments and minimum pension liability
adjustments.  Total comprehensive income and its components for the three months
ended March 31, 1997 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                                       Three months ended
                                                                           March 31,
                                                                      1997             1998
                                                                      ----             ----
                                                                          (in thousands)
<S>                                                               <C>                 <C>     
    Net income                                                    $  4,089            $ 12,190
    Foreign currency translation adjustment, net of tax             (7,998)             (2,054)
    Pension liability adjustment, net of tax                             -                   -
                                                                  --------            --------

    Total comprehensive (loss)/ income                            $ (3,909)           $ 10,136
                                                                  ========            ========
</TABLE>

6. Subsequent Events

COMMON STOCK DIVIDEND: On April 6, 1998, the Board of Directors declared a stock
dividend of 14 shares of common  stock  payable  for each share of common  stock
outstanding  which dividend  became  effective and was paid on May 11, 1998, the
effective date of the Offering.  The Company's  historical  financial statements
have been presented to give retroactive effect to such common stock dividend. In
addition,  the number of shares of common  stock the  Company is  authorized  to
issue was increased  from 10 million to 250 million and the number of authorized
preferred  shares was  increased  from 50,000 to 10 million.  Of the  authorized
preferred  shares,  50,000 shares have been designated as Money Market Preferred
Stock and 2,500,000  shares have been  designated  as  Cumulative  Participating
Junior Preferred Stock.

PUBLIC OFFERING:  On May 15, 1998, the Company closed the Offering. An aggregate
of 19,090,000  shares  (including  2,490,000 shares subject to the underwriters'
overallotment  option) of the Company's  common stock was offered to the public,
of which  6,912,730  shares were sold by the Company and 12,177,270  shares were
sold  by  certain  selling  stockholders.  Net  proceeds  to  the  Company  were
approximately  $160.0  million,   after  deducting  underwriting  discounts  and
commissions  and the  Company's  expenses of the  Offering.  The Company did not
receive  any of the net  proceeds  from the sale of common  stock by the selling
stockholders.  The Company used the net proceeds from the Offering together with
$155 million of  borrowings  under the new credit  facility (see below) to repay
all of the  outstanding  borrowings  under its then existing $700 million senior
secured credit facility.

NEW DEBT  FACILITY:  On May 15, 1998,  the Company  entered into a $400 million,
five-year unsecured multicurrency revolving credit facility (the "New Facility")
which replaced a $700 million senior secured credit  facility.  The New Facility
contains certain financial and operating restrictions and covenant requirements,
including a maximum leverage ratio and a minimum interest coverage  requirement.
The Company is required to pay a facility fee tied to the leverage ratio ranging
from  0.125% to 0.2% per annum.  Under the terms of the New  Facility,  interest
charged on loans ranges from base rate to Eurodollar and Eurocurrency  rate plus
applicable  margins tied to the leverage  ratio  ranging from 0.275% to 0.3%. On
May 15, 1998, the Company used the net proceeds from the Offering  together with
$155  million of  borrowings  under the New  Facility  to repay all  outstanding
borrowings under the senior secured credit facility.  Approximately $7.3 million
of unamortized  deferred financing costs related to the replaced credit facility
will be charged to expense in the Company's consolidated statement of operations
for the three months ended June 30, 1998.


                                       7

<PAGE>



RESTRICTED STOCK: In March 1998, the Company amended the agreement  govering the
Restricted Stock Trust to provide,  upon the  consummation of the Offering,  for
the  redemption  of  1,855,845  of  the   11,086,950   shares  of  common  stock
("Restricted  Stock") held in the  Restricted  Stock  Trust.  The vesting of the
remaining  9,231,105  shares of Restricted  Stock upon the  consummation  of the
Offering resulted in a non-recurring,  non-cash,  pre-tax compensation charge of
approximately $235.0 million which will be reflected in the Company's results of
operations for the three months ended June 30, 1998.

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

The discussion  which follows  should be read in conjunction  with the Company's
consolidated  financial  statements and notes thereto, and the information under
the caption  "Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations," contained in the Company's Prospectus dated May 11, 1998
filed in connection with the Offering.

First Quarter 1998 Compared to First Quarter 1997

Revenues for the first quarter of 1998 increased by %50.0 million,  or 16.8%, to
$348.2 million compared to the first quarter of 1997. The increase was primarily
due to new business (including business from new clients and higher revenue from
existing  clients).  U.S. revenues  increased by 25.4% to $184.5 million for the
first  quarter of 1998  compared  to the first  quarter  of 1997.  International
revenues  increased  by 8.3% to $163.7  million  for the first  quarter  of 1998
compared to 1997.  Excluding the effect of the  strengthening of the U.S. dollar
against  foreign  currencies,  total  revenues  for the  first  quarter  of 1998
increased by 21.2% and international revenues increased by 17.1% compared to the
first quarter of 1997.

Compensation expense increased by $25.0 million, or 13.3%, to $213.6 million for
the first quarter of 1998  compared to the first quarter of 1997.  This increase
was primarily attributable to additional staffing to support business growth and
salary  increases.  Excluding the effect of the strengthening of the U.S. dollar
against foreign currencies,  compensation expense increased by 17.9% compared to
the first quarter of 1997.

General and  administrative  expenses  increased by $13.7 million,  or 14.3%, to
$109.2  million for the first  quarter of 1998  compared to the first quarter of
1997.  This  increase was  primarily  due to  additional  operating  expenses to
support new business  growth.  Excluding the effect of the  strengthening of the
U.S.  dollar against foreign  currencies,  general and  administrative  expenses
increased by 19.7% compared to the first quarter of 1997.

Income from  operations  increased by $11.2 million,  or 79.4%, to $25.3 million
for the first  quarter of 1998  compared to the first quarter of 1997 due to the
factors outlined above.

Interest expense, net of interest income, decreased $2.7 million to $5.6 million
in the first quarter of 1998 compared to the first quarter of 1997.  The decline
was due to lower  average  borrowing  levels and more  favorable  average  rates
during the first quarter of 1998 compared to the first quarter of 1997.


The effective income tax rate was 43.0% and 49.1%,  respectively,  for the first
quarter of 1998 and 1997.  The decrease in the  effective tax rate resulted from
lower foreign taxes on the Company's  foreign  operations as well as a reduction
in the rate at which state and local taxes were assessed on domestic income.

Net income  for the first  quarter of 1998  increased  by $8.1  million to $12.2
million compared to the first quarter of 1997.

LIQUIDITY AND CAPITAL RESOURCES

Historically,   the  Company's  operations  have  been  financed  by  internally
generated funds and third party borrowings. Cash and cash equivalents were $51.0
million at March 31, 1998  compared  with $160.3  million at December  31, 1997.
Cash was used during the first quarter of 1998 to repay  long-term  debt, to 



                                        8
<PAGE>

pay employee incentive compensation earned in 1997 and for capital expenditures.
In addition,  cash was used to pay media and production obligations on behalf of
clients  (which  reflect the timing of payment as well as seasonal  media buying
patterns of advertisers).

The  Company   estimates  that  its  capital   expenditures   in  1998  will  be
approximately  $75.0 million for  information  technology and certain  leasehold
improvements required as a result of lease renewals.

The  Company's  net  deferred  tax assets at March 31, 1998 were $153.2  million
consisting  primarily of net operating loss ("NOL")  carryforwards  and expenses
accrued  for  financial  reporting  purposes  which are not  deductible  for tax
purposes until actually  paid. The Company has  approximately  $140.4 million of
NOL  carryforwards  for U.S. tax purposes which expire in 2012 and approximately
$69.2 million of NOL  carryforwards  for foreign tax purposes with  carryforward
periods ranging from one year to an indefinite time.

RECENT DEVELOPMENTS

On May 15, 1998,  the Company  closed the  Offering.  An aggregate of 19,090,000
shares (including  2,490,000 shares subject to the  underwriters'  overallotment
option)  of the  Company's  common  stock was  offered to the  public,  of which
6,912,730  shares were sold by the Company  and  12,177,270  shares were sold by
certain  selling  stockholders.  Net proceeds to the Company were  approximately
$160.0 million,  after deducting  underwriting discounts and commissions and the
Company's  expenses of the Offering.  The Company did not receive any of the net
proceeds from the sale of common stock by the selling stockholders.

Also on May 15, 1998,  the Company  replaced its  existing  $700 million  senior
secured credit facility with the New Facility. The Company used the net proceeds
from the  Offering  together  with  $155  million  of  borrowings  under the New
Facility  to repay all of the  outstanding  borrowings  under its then  existing
senior secured credit facility.  Under the New Facility, the Company expects its
borrwing rate to be approximately 1% lower, on average, compared to the replaced
credit facility.

The Company  believes that cash provided by operations and funds available under
the New Facility will be sufficient to meet its anticipated cash requirements.

Effective  upon the  consumation  of the  Offering,  the  Company  recognized  a
non-recurring,  non-cash,  pre-tax  compensation charge of approximately  $235.0
million in connection  with the vesting of shares of Restricted  Stock allocated
to employees.  In addition,  approximately $7.3 million of unamortized  deferred
financing  costs related to the replaced  senior  secured  credit  facility were
charged to expense.  The aggregate after-tax effect of these non-cash charges of
approximately  $175.0 million will be reflected in the results of operations for
the three months ended June 30, 1998. As a result of these charges,  the Company
expects to incur a net loss for the year ending 1998.

The  Company  expects to  exercise  its right to prepay  certain  non-negotiable
subordinated  payment  obligations of up to $15.4 million on June 30, 1998 using
available  cash  or  borrowings  under  the  New  Facility.  The  non-negotiable
subordinated payment obligations were incurred by the Company in connection with
the  termination of employment of certain  former  employee  stockholders.  Such
payment  obligations  are repayable in up to four annual  installments  and bear
interest at a rate equal to the  applicable  U.S.  federal  rate in effect under
Section 1274(d) of the Internal Revenue Code of 1986, as amended.

The  Company  expects  to  commence  the  declaration  and  payment of a regular
quarterly cash dividend in the last quarter of 1998. However,  any determination
to pay dividends will be at the  discretion of the Company's  Board of Directors
and will depend upon, among other factors,  the Company's results of operations,
financial condition and capital requirements.

                                       9
<PAGE>



PART II OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

In March 1998, the Company issued and sold 135,885 shares of common stock to its
employees  for an  aggregate  amount of  $864,196  pursuant  to the  exercise of
options to purchase shares of common stock.

Pursuant  to the Form S-1 which  was  declared  effective  by the SEC on May 11,
1998, and a registration statement on Form S-1 (File No. 333-52395) filed by the
Company  pursuant  to Rule  462(b) of the  Securities  Act of 1933,  as  amended
(together with the Form S-1, the "Form S-1 Registration Statement"), the Company
registered  for sale  pursuant to the  Securities  Act of 1933,  as amended,  an
aggregate of  16,600,000  shares of common stock (the "Firm  Shares"),  of which
6,912,730  shares were offered by the Company and 9,687,270  shares were offered
by certain selling stockholders (the "Selling Stockholders").

Of the  16,600,000  shares of common stock  registered  pursuant to the Form S-1
Registration  Statement,  13,280,000 shares were offered initially in the United
States by the U.S. Underwriters (as defined in the Underwriting  Agreement dated
May 11, 1998 among the Company, the Selling Stockholders,  the U.S. Underwriters
named therein and the  International  Managers named therein (the  "Underwriting
Agreement")),  for whom  Donaldson,  Lufkin & Jenrette  Securities  Corporation,
Bear, Stearns & Co. Inc., Furman Selz LLC, Goldman, Sachs & Co. and Smith Barney
Inc. acted as U.S.  Representatives,  and 3,320,000  shares of common stock were
offered initially  outside the United States by the  International  Managers (as
defined in the  Underwriting  Agreement) for whom  Donaldson,  Lufkin & Jenrette
International,  Bear, Stearns  International  Limited,  Furman Selz LLC, Goldman
Sachs   International   and   Smith   Barney   Inc.   acted   as   International
Representatives.

In  addition,  pursuant  to the Form S-1  Registration  Statement,  the  Company
registered  for sale an  aggregate  of  2,490,000  shares of common  stock  (the
"Option Shares") subject to an overallotment option (the "Overallotment Option")
granted by certain  non-management Selling Stockholders to the U.S. Underwriters
to purchase up to an 



                                       10
<PAGE>

additional 2,490,000 shares of common stock solely to cover overallotments which
Overallotment Option was exercised by the U.S.  Underwriters for an aggregate of
2,490,000 shares of common stock.

The  offering of the Firm Shares and Option  Shares has  terminated.  The public
offering  price of the Firm  Shares and the Option  Shares was $25.00 per share.
The closing of the sale of the Firm Shares and the Option Shares occurred on May
15,  1998.  The  aggregate  gross  proceeds  to  the  Company  and  the  Selling
Stockholders  from  the  sale of the  Firm  Shares  and the  Option  Shares  was
$477,250,000.

The Form S-1  Registration  Statement  registered  for  sale by the  Company  an
aggregate  of  6,912,730  Firm Shares at a proposed  maximum  offering  price of
$24.00 per share,  for aggregate gross proceeds (before  deducting  underwriting
discounts and commissions  and Company  expenses) of  $165,905,520.  The Company
sold an  aggregate  of  6,912,730  Firm Shares at the public  offering  price of
$25.00 per share,  for aggregate gross proceeds (before  deducting  underwriting
discounts and commissions and Company  expenses) of  $172,818,250.  The Form S-1
Registration  Statement  registered  for  sale by the  Selling  Stockholders  an
aggregate of 12,177,270  shares of common stock  (consisting  of 9,687,270  Firm
Shares and up to 2,490,000  Option Shares) at a proposed  maximum offering price
of $24.00 per share, for aggregate gross proceeds (before deducting underwriting
discounts and commissions) of  $292,254,480.  The Selling  Stockholders  sold an
aggregate of 12,177,270  shares of common stock  (consisting  of 9,687,270  Firm
Shares and 2,490,000  Option Shares) at the public  offering price of $25.00 per
share, for aggregate gross proceeds (before deducting underwriting discounts and
commissions) of $304,434,250.

To date, hereof, the Company has incurred or expects to incur the following fees
and  expenses  in  connection  with  the  Offering  pursuant  to  the  Form  S-1
Registration   Statement:   (i)   $9,505,004  of   underwriters   discounts  and
commissions,  (ii) $135,158 of SEC registration  fees, (iii) $30,500 of National
Association of Securities  Dealers,  Inc. filing fees, (iv) $336,640 of New York
Stock Exchange  listing fees, (v) $950,000 of estimated legal fees and expenses,
(vi)  $1,075,000 of estimated  accounting  fees and expenses,  (vii) $475,000 of
estimated printing and engraving expenses, (viii) $20,000 of estimated registrar
and transfer agent's fees and (ix) $291,000 of estimated miscellaneous expenses.

The  aggregate  net proceeds to the Company  from the Offering of the  6,912,730
Firm Shares,  after  deducting  underwriting  discounts and  commissions and the
Company's  expenses of the Offering,  are estimated to be  approximately  $160.0
million. The Company used the net proceeds from the Offering, together with $155
million of  borrowings  under the New Facility to repay  outstanding  borrowings
under its existing credit facility.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

   (a) Exhibits:
       See Exhibit Index

   (b) Reports on Form 8-K:
       None.

                                       11
<PAGE>



                                   SIGNATURES

Pursuant  to the  requirements  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.

                                                  Young & Rubicam Inc.
                                                  ------------------------------
                                                                    (Registrant)

Date June 25, 1998                         /s/ Michael J. Dolan
     ----------------                    -----------------------------
                                         Name: Michael J. Dolan
                                         Title: Vice Chairman and
                                            Chief Financial Officer

                                       12
<PAGE>



                                  EXHIBIT INDEX

      NUMBER                                           DESCRIPTION
      ------                                           -----------

      27.1                                             Financial Data Schedule










                                       13