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 September 30, 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                    (I.R.S. Employer
incorporation 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  X. No  .
                                       ---   ---

The number of shares  outstanding of the  Registrant's  Common Stock,  $0.01 par
value, as of October 30, 1998 was 65,378,152.


<PAGE>



                  YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES

                                    FORM 10-Q

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                  PAGE NO.
<S>        <C>                                                                                                       <C>
PART I:    FINANCIAL INFORMATION

   Item 1.        Financial Statements
                      Consolidated Balance Sheets as of
                      September 30, 1998 and December 31, 1997                                                         2

                      Consolidated Statements of Operations for the
                      Three Months and Nine Months Ended September 30, 1998 and 1997                                   3

                      Consolidated Statements of Cash Flows for the
                      Nine Months Ended September 30, 1998 and 1997                                                    4

                      Consolidated Statements of Changes in Equity/(Deficit)
                      for the Nine Months Ended September 30, 1998 and for the
                      Year Ended December 31, 1997                                                                     5

                      Notes to Consolidated Financial Statements                                                     6 - 7

   Item 2.        Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                                                                8 - 11

PART II:    OTHER INFORMATION

   Item 6.        Exhibits and Reports on Form 8-K                                                                    12


SIGNATURES                                                                                                            13

EXHIBIT INDEX                                                                                                         14
</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 revenues
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, (v) the Company's liquidity and financing
plans and (vi) risks  associated with the Company's  efforts to comply with Year
2000 requirements.  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 SEC 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 AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                          SEPTEMBER 30, 1998     DECEMBER 31, 1997
                                                                                          ------------------     -----------------
<S>                                                                                          <C>                  <C>          
CURRENT ASSETS
    Cash and cash equivalents                                                                $      71,181        $     160,263
    Accounts receivable, net of allowance for doubtful accounts of $15,509
     and $14,125 at September 30, 1998 and December 31, 1997, respectively                         780,230              790,342
    Costs billable to clients, net                                                                  80,479               50,479
    Other receivables                                                                               38,568               35,218
    Deferred income taxes                                                                           26,434               32,832
    Prepaid expenses and other assets                                                               30,657               17,989
                                                                                             -------------        -------------
          Total Current Assets                                                                   1,027,549            1,087,123
                                                                                             -------------        -------------
NONCURRENT ASSETS
    Property and equipment, net                                                                    123,092              125,014
    Deferred income taxes                                                                          164,754              124,192
    Goodwill, less accumulated amortization of $85,269 and $80,166 at
     September 30, 1998 and December 31, 1997, respectively                                        111,065              116,637
    Equity in net assets of and advances to unconsolidated companies                                30,741               26,393
    Other assets                                                                                    38,012               48,660
                                                                                             -------------        -------------
          Total Noncurrent Assets                                                                  467,664              440,896
                                                                                             -------------        -------------
          Total Assets                                                                       $   1,495,213        $   1,528,019
                                                                                             =============        =============
CURRENT LIABILITIES
    Loans payable                                                                            $      37,822        $      10,765
    Accounts payable                                                                               834,592              811,162
    Installment notes payable                                                                          451                3,231
    Accrued expenses and other liabilities                                                         238,022              273,011
    Accrued payroll and bonuses                                                                     61,601               65,458
    Income taxes payable                                                                             2,948               29,665
                                                                                             -------------        -------------
          Total Current Liabilities                                                              1,175,436            1,193,292
                                                                                             -------------        -------------
NONCURRENT LIABILITIES
    Loans payable                                                                                   70,469              330,552
    Installment notes payable                                                                          400                6,503
    Deferred compensation                                                                           32,542               31,077
    Other liabilities                                                                              109,299              112,851
                                                                                             -------------        -------------
          Total Noncurrent Liabilities                                                             212,710              480,983
                                                                                             -------------        -------------
Commitments and Contingencies
Minority Interest                                                                                    5,757                6,987
                                                                                             -------------        -------------
MANDATORILY REDEEMABLE EQUITY SECURITIES
    Common stock, par value $.01 per share; authorized - 250,000,000 shares;
     issued and outstanding - 0 shares and 50,658,180 shares at September 30, 1998
     and December 31, 1997, respectively                                                                --              508,471
                                                                                             -------------        -------------
STOCKHOLDERS' EQUITY/(DEFICIT)
    Preferred stock:
       Money Market Preferred Stock - Cumulative variable dividend;  liquidating
        value of $115.00 per share; one-tenth of one vote per share; authorized
        50,000 shares; 87 shares issued and outstanding                                                 --                   --
       Cumulative Participating Junior Preferred Stock - $ dividend; liquidating
        value of $1.00 per share; 100 votes per share; authorized 2,500,000
        shares; no shares issued and outstanding
    Common stock, par value $.01 per share; authorized - 250,000,000 shares;
     issued and outstanding - 66,215,842 and 11,086,950  shares at September 30,
     1998 and December 31, 1997, respectively
     (excluding 4,393,848 and 1,115,160 common shares in treasury)                                     706                  111
    Capital surplus                                                                                940,954               23,613
    Accumulated deficit                                                                           (785,552)            (522,866)
    Cumulative translation adjustment                                                              (13,650)             (16,577)
    Pension liability adjustment                                                                      (706)                (706)
    Common stock in treasury, at cost                                                              (40,442)              (8,550)
    Unearned compensation - restricted stock                                                            --             (136,739)
                                                                                             -------------        -------------
          Total Stockholders' Equity/(Deficit)                                                     101,310             (661,714)
                                                                                             -------------        -------------
          Total Liabilities, Mandatorily Redeemable Equity Securities and

            Stockholders' Equity/(Deficit)                                                   $   1,495,213        $   1,528,019
                                                                                             =============        =============
</TABLE>


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

                                        2


<PAGE>


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

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                                   SEPTEMBER 30,                     SEPTEMBER 30,
                                                           ------------------------------    -------------------------------
                                                               1998             1997               1998              1997
                                                               ----             ----               ----              ----
<S>                                                       <C>               <C>               <C>               <C>         
Revenues                                                  $    375,419      $    333,387      $  1,095,720      $    977,067

Compensation expense, including employee benefits              227,184           206,676           659,449           600,767
General and administrative expenses                            106,057           131,013           324,783           331,353
Other operating charges                                             --                --           234,449                --
                                                          ------------      ------------      ------------      ------------
Operating expenses                                             333,241           337,689         1,218,681           932,120
                                                          ------------      ------------      ------------      ------------

Income (loss) from operations                                   42,178            (4,302)         (122,961)           44,947
Interest expense, net                                           (2,843)          (10,950)          (13,015)          (28,580)
Other income                                                        --                --             2,200                --
                                                          ------------      ------------      ------------      ------------
Income (loss) before income taxes                               39,335           (15,252)         (133,776)           16,367
Income tax expense (benefit)                                    15,914            (7,796)          (22,291)            7,855
                                                          ------------      ------------      ------------      ------------
                                                                23,421            (7,456)         (111,485)            8,512
Equity in net income of unconsolidated companies                 1,567             1,621             3,194             4,091
Minority interest in net (income) loss of
  consolidated subsidiaries                                       (682)              135              (604)             (698)
                                                          ------------      ------------      ------------      ------------

Income (loss) before extraordinary charge                       24,306            (5,700)         (108,895)           11,905

Extraordinary charge for early retirement of debt,
  net of tax benefit of $2,834                                      --                --            (4,433)               --
                                                          ------------      ------------      ------------      ------------

Net income (loss)                                         $     24,306      ($     5,700)     ($   113,328)     $     11,905
                                                          ============      ============      ============      ============

Earnings (loss) per share:
 Basic:
  Income (loss) before extraordinary charge               $       0.36      ($      0.12)     ($      1.84)     $       0.25
                                                          ============      ============      ============      ============
  Extraordinary charge                                    $         --      $         --      ($      0.08)     $         --
                                                          ============      ============      ============      ============
  Net income (loss)                                       $       0.36      ($      0.12)     ($      1.92)     $       0.25
                                                          ============      ============      ============      ============
 Diluted:
  Income (loss) before extraordinary charge               $       0.29      ($      0.12)     ($      1.84)     $       0.20
                                                          ============      ============      ============      ============
  Extraordinary charge                                    $         --      $         --      ($      0.08)     $         --
                                                          ============      ============      ============      ============
  Net income (loss)                                       $       0.29      ($      0.12)     ($      1.92)     $       0.20
                                                          ============      ============      ============      ============


Weighted average shares used to compute:
  Basic                                                     66,608,726        46,566,357        58,939,274        47,109,739
                                                          ============      ============      ============      ============
  Diluted                                                   82,764,754        46,566,357        58,939,274        60,313,689
                                                          ============      ============      ============      ============

</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>
                                                                                              NINE MONTHS ENDED
                                                                                                SEPTEMBER 30,
                                                                                        -------------------------------
                                                                                             1998             1997
                                                                                             ----             ----
<S>                                                                                       <C>              <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)/income                                                                         ($113,328)       $  11,905
Adjustments to reconcile net (loss)/income to net cash used by operating activities:
    Depreciation and amortization                                                            43,061           41,474
    Other operating charges                                                                 234,449               --
    Extraordinary charge, net                                                                 4,433               --
    Deferred income tax benefit                                                             (34,589)              --
    Equity in net income of unconsolidated companies                                         (3,194)          (4,091)
    Dividends from unconsolidated companies                                                   1,427            2,220
    Minority interest in net income of consolidated subsidiaries                                604              698
Change in assets and liabilities, excluding effects from acquisitions,
 dispositions, recapitalization and foreign exchange:
    Accounts receivable, net                                                                 15,450          135,539
    Costs billable to clients, net                                                          (27,933)         (31,447)
    Other receivables                                                                        (3,247)          (2,167)
    Prepaid expenses and other assets                                                       (12,218)          (7,651)
    Accounts payable                                                                         (7,934)         (50,958)
    Accrued expenses and other liabilities                                                  (49,244)         (30,284)
    Accrued payroll and bonuses                                                              (5,901)         (12,900)
    Income taxes payable                                                                    (23,996)          (8,887)
    Deferred compensation                                                                     3,209            4,295
    Other                                                                                     1,024            6,750
                                                                                          ---------        ---------
Net cash provided by operating activities                                                    22,073           54,496
                                                                                          ---------        ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Additions to property and equipment                                                     (34,784)         (38,930)
    Acquisitions, net of cash acquired                                                         (499)          (5,337)
    Investment in net assets of and advances to unconsolidated companies                     (4,316)          (3,297)
    Proceeds from notes receivable                                                              339              647
                                                                                          ---------        ---------
Net cash used in investing activities                                                       (39,260)         (46,917)
                                                                                          ---------        ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from loans payable, long-term                                                  224,795          236,361
    Repayment of loans payable, long-term                                                  (484,816)         (53,679)
    Proceeds from loans payable, short-term, net                                             65,468           14,855
    Proceeds from issuance of common stock in initial public offering, net                  158,637               --
    Deferred financing costs                                                                   (667)              --
    Recapitalization payments                                                                    --         (247,259)
    Payments of non-recapitalization deferred compensation                                   (3,985)            (508)
    Common stock repurchased                                                                (31,892)          (1,500)
    Common stock issued and other                                                             7,431               99
    Payment of installment notes, net                                                        (8,883)              --
    Dividends paid to minority shareholders                                                  (1,532)          (1,418)
                                                                                          ---------        ---------
Net cash used in financing activities                                                       (75,444)         (53,049)
                                                                                          ---------        ---------
Effect of exchange rate changes on cash and cash equivalents                                  3,549           (7,002)
                                                                                          ---------        ---------
Net decrease in cash and cash equivalents                                                   (89,082)         (52,472)
Cash and cash equivalents, beginning of period                                              160,263          110,180
                                                                                          ---------        ---------
Cash and cash equivalents, end of period                                                  $  71,181        $  57,708
                                                                                          =========        =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Interest paid                                                                         $  24,660        $  28,563
                                                                                          =========        =========
    Income taxes paid                                                                     $  30,760        $  15,624
                                                                                          =========        =========
</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 EQUITY/(DEFICIT)
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                  VOTING                                         COMMON
                                                  COMMON         CAPITAL        ACCUMULATED     STOCK IN        RESTRICTED
                                                  STOCK          SURPLUS          DEFICIT       TREASURY          STOCK
                                                  ------         -------        -----------     --------        ----------
<S>                                             <C>             <C>             <C>             <C>             <C>       
BALANCE AT JANUARY 1, 1997                      $     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 loss                                               --              --        (113,328)             --              --
Issuance of restricted stock                           --          94,039              --              --         136,739
Common stock issued and other                          19           7,412              --              --              --
Common stock repurchased                               --              --              --         (31,892)             --
Issuance of common stock in initial
 public offering, net of expenses                      69         158,568              --              --              --
Accretion of mandatorily redeemable
 equity securities                                     (3)       (137,942)       (149,358)             --              --
Conversion of mandatorily redeemable
 equity securities                                    510         795,264              --              --              --
                                                ---------       ---------       ---------       ---------       ---------

BALANCE AT SEPTEMBER 30, 1998                   $     706       $ 940,954       ($785,552)      ($ 40,442)      $      --
                                                =========       =========       =========       =========       =========
</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  (the  "SEC").   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  Statements.  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 of operations for the interim periods  presented are not necessarily
indicative of the results expected for the full year.

2.   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.

3.   Earnings (loss) per Share

The Company  computes  earnings (loss) per share in accordance with Statement of
Financial  Accounting  Standards  ("SFAS") No. 128,  "Earnings Per Share." Basic
earnings  (loss) per share is  calculated  by dividing net income  (loss) by the
weighted average shares of common stock outstanding during each period.  Diluted
earnings per share reflects the dilutive effect of stock options and other stock
awards granted to employees under stock-based compensation plans. Shares used in
computing basic and diluted earnings (loss) per share were as follows:

<TABLE>
<CAPTION>
                                                         Three months ended                        Nine months ended
                                                           September 30,                             September 30,
                                                           -------------                             -------------
                                                         1998                1997                1998                1997
                                                         ----                ----                ----                ----
        <S>                                           <C>                 <C>                 <C>                 <C>       
        Basic - weighted average shares               66,608,726          46,566,357          58,939,274          47,109,739
        
        Effect of dilutive securities                 16,156,028                  --                  --          13,203,950
                                                      ----------          ----------          ----------          ----------
        
        Diluted - weighted average shares             82,764,754          46,566,357          58,939,274          60,313,689
                                                      ==========          ==========          ==========          ==========
</TABLE>


As of September 30, 1998,  there were  approximately  30.9 million  common stock
options  outstanding  that could  potentially  dilute basic earnings  (loss) per
share in the future that were excluded from the  computation of diluted loss per
share for the nine months ended  September  30, 1998 because the effect would be
antidilutive.

4.   Recently Issued Accounting Standards

In June 1998,  the  Financial  Accounting  Standards  Board issued SFAS No. 133,
"Accounting  for  Derivative  Instruments  and  Hedging  Activities,"  which  is
required  to be adopted in years  beginning  after June 15,  1999.  The  Company
anticipates that the adoption of SFAS No. 133 will not have a significant effect
on the financial condition of the Company.


                                        6

<PAGE>



5.   Comprehensive Income (loss)

The Company has adopted SFAS No. 130,  "Reporting  Comprehensive  Income," which
requires  presentation  of  information on  comprehensive  income (loss) and its
components in the financial  statements.  For the Company,  comprehensive income
(loss) includes net income (loss), foreign currency translation  adjustments and
minimum pension liability adjustments. Total comprehensive income (loss) and its
components for interim periods ended September 30, 1998 and 1997 were as follows
(in thousands):

<TABLE>
<CAPTION>
                                                                      Three months ended          Nine months ended
                                                                         September 30,              September 30,
                                                                         -------------              -------------
                                                                     1998            1997            1998           1997
                                                                     ----            ----            ----           ----

<S>                                                               <C>             <C>             <C>             <C>      
                  Net income (loss)                               $  24,306       $  (5,700)      $(113,328)      $  11,905
                  Foreign currency translation adjustment,
                    net of tax                                        5,036          (2,394)          2,927         (11,047)

                  Pension liability adjustment, net of tax               --              --              --              --
                                                                  ---------       ---------       ---------       ---------

                  Total comprehensive income (loss)               $  29,342       $  (8,094)      $(110,401)      $     858
                                                                  =========       =========       =========       =========
</TABLE>


6.   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  Registration  Statement filed on Form S-1 for the Company's  initial public
offering of common stock (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  10,000,000 to 250,000,000 and the number
of authorized  preferred shares was increased from 50,000 to 10,000,000.  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.

7.   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 $158.6 million,
after deducting  underwriting discounts and commissions and expenses paid by the
Company in connection with 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  a new  credit  facility  (see  Note  8) to  repay  all of the
outstanding  borrowings  under its then  existing  $700 million  senior  secured
credit facility.

Upon  the  consummation  of the  Offering,  9,231,105  shares  of  common  stock
("Restricted  Stock")  held in a  restricted  stock trust vested and resulted in
non-recurring,  non-cash,  pre-tax  compensation charges of $234.4 million which
have been reflected as "other operating  charges" in the Company's  consolidated
statement of  operations  for the nine months  ended  September  30,  1998.  The
Company redeemed the remaining  1,855,845 shares of Restricted Stock held in the
restricted stock trust upon the consummation of the Offering.

8.   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 its
then existing $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 its then existing $700 million senior secured credit facility.
Approximately  $7.3 million of unamortized  deferred  financing costs related to
the replaced  credit facility were charged to expense and have been reflected as
an extraordinary  charge, net of an applicable tax benefit of approximately $2.8
million,  in the Company's  consolidated  statement of  operations  for the nine
months ended September 30, 1998.


                                        7

<PAGE>





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.

THIRD QUARTER 1998 COMPARED TO THIRD QUARTER 1997

Revenues for the third quarter of 1998 increased by $42.0 million,  or 12.6%, to
$375.4 million compared to the third 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 17.1% to $195.8 million for the
third  quarter of 1998  compared  to the third  quarter  of 1997.  International
revenues  increased  by 8.1% to $179.6  million  for the third  quarter  of 1998
compared to the third quarter of 1997. Excluding the effect of the strengthening
(on average) of the U.S. dollar against foreign  currencies,  total revenues for
the  third  quarter  of 1998  increased  by  14.0%  and  international  revenues
increased by 10.9% compared to the third quarter of 1997.

Compensation  expense increased by $20.5 million, or 9.9%, to $227.2 million for
the third quarter of 1998  compared to the third quarter of 1997.  This increase
was primarily attributable to additional staffing to support business growth and
to salary  increases.  Excluding  the effect of foreign  currency  fluctuations,
compensation expense increased by 11.3% compared to the third quarter of 1997.

General and  administrative  expenses  decreased by $25.0 million,  or 19.0%, to
$106.1  million for the third  quarter of 1998  compared to the third quarter of
1997.  This  decrease  was  primarily  due to the  inclusion  in 1997 of a $25.5
million  write-off of accounts  receivable,  costs billable to clients and other
capitalized costs with respect to the operations of  Burson-Marsteller in Europe
and Asia in the third quarter of 1997.  The  write-offs in Europe were primarily
related to  Burson-Marsteller's  implementation of a new management  information
system in 1997 which  resulted  in  delayed  and  inaccurate  billing of certain
clients and  necessitated  the creation of additional  reserves against accounts
receivable  and  costs  billable  to  clients.   The  write-offs  in  Asia  were
attributable to the Company's evaluation of Burson-Marsteller's recent operating
performance in Asia and the determination that Burson-Marsteller was unlikely to
collect certain accounts receivable and costs billable to clients. Excluding the
effect of foreign  currency  fluctuations and the  Burson-Marsteller  write-off,
general and  administrative  expenses  increased  by 1.9%  compared to the third
quarter of 1997.

Income from  operations was $42.2 million for the third quarter of 1998 compared
to a loss from  operations  of $4.3  million for the third  quarter of 1997,  an
increase of $46.5 million, primarily due to the 1997 Burson-Marsteller write-off
described above.  Excluding the 1997  Burson-Marsteller  write-off,  income from
operations  increased by $21.0 million, or 98.8%,  compared to the third quarter
of 1997.

Net  interest  expense  decreased  by $8.1 million to $2.8 million for the third
quarter of 1998  compared to the third  quarter of 1997.  The decline was due to
lower  average  borrowing  levels and lower average  borrowing  rates during the
third quarter of 1998 compared to the third quarter of 1997.

Income tax expense was $15.9  million for the third  quarter of 1998 compared to
an income  tax  benefit  of $7.8  million  for the third  quarter  of 1997.  The
effective income tax rates were 40.4% and a benefit of 51.1%, respectively,  for
the third  quarter of 1998 and 1997.  Such  decrease in the  effective  tax rate
resulted  primarily from lower foreign taxes on the Company's foreign operations
as well as a reduction in the effective rate at which state and local taxes were
provided on domestic income.

Net income for the third  quarter of 1998 was $24.3  million  compared  to a net
loss of $5.7  million for the third  quarter of 1997.  Excluding  the  after-tax
effect of the Burson-Marsteller write-off, net income increased by $16.7 million
compared to the third quarter of 1997.


                                        8

<PAGE>




NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997

Revenues  for the nine  months  ended  September  30, 1998  increased  by $118.7
million,  or 12.1%,  to  $1,095.7  million  compared  to the nine  months  ended
September 30, 1997.  The increase was  primarily due to new business  (including
business  from new clients and higher  revenue from  existing  clients).  United
States  revenues  increased by 19.3% to $568.2 million for the nine months ended
September  30, 1998  compared  to the nine  months  ended  September  30,  1997.
International  revenues  increased by 5.3% to $527.5 million for the nine months
ended  September 30, 1998 compared to the nine months ended  September 30, 1997.
Excluding  the  effect of the  strengthening  (on  average)  of the U.S.  dollar
against foreign  currencies,  total revenues for the nine months ended September
30,  1998  increased  by 15.1% and  international  revenues  increased  by 11.0%
compared to the nine months ended September 30, 1997.

Compensation  expense increased by $58.7 million, or 9.8%, to $659.4 million for
the nine  months  ended  September  30, 1998  compared to the nine months  ended
September  30, 1997.  This  increase was  primarily  attributable  to additional
staffing  to support  business  growth and to salary  increases.  Excluding  the
effect of foreign currency fluctuations, compensation expense increased by 12.7%
compared to the nine months ended September 30, 1997.

General and  administrative  expenses  decreased by $6.6  million,  or 2.0%,  to
$324.8 million for the nine months ended September 30, 1998 compared to the nine
months  ended  September  30,  1997.  This  decrease  was  primarily  due to the
inclusion in 1997 of a $25.5  million  write-off of accounts  receivable,  costs
billable to clients and other  capitalized  costs with respect to the operations
of  Burson-Marsteller  in Europe and Asia offset in 1998 by additional operating
expenses to support new business  growth.  The  Burson-Marsteller  write-offs in
Europe  were  primarily  related  to  its  implementation  of a  new  management
information  system in 1997 which resulted in delayed and inaccurate  billing of
certain clients and  necessitated  the creation of additional  reserves  against
accounts  receivable and costs billable to clients.  The write-offs in Asia were
attributable to the Company's evaluation of Burson-Marsteller's recent operating
performance in Asia and the determination that Burson-Marsteller was unlikely to
collect certain accounts receivable and costs billable to clients. Excluding the
effect of foreign  currency  fluctuations and the  Burson-Marsteller  write-off,
general  and  administrative  expenses  increased  by 9.7%  compared to the nine
months ended September 30, 1997.

Effective upon the  consummation of the Offering,  the Company  recognized other
operating charges of $234.4 million.  These other operating charges consisted of
non-recurring,  non-cash  compensation  charges  resulting  from the  vesting of
shares of Restricted Stock allocated to employees. As a result of these charges,
the Company expects to incur a net loss for the year ending December 31, 1998.

Loss from  operations was $123.0 million for the nine months ended September 30,
1998  compared to income from  operations  of $44.9  million for the nine months
ended  September  30, 1997, a decrease of $167.9  million,  primarily due to the
other operating  charges  described above partially  offset by the effect of the
1997 Burson-Marsteller write-off.  Excluding the other operating charges and the
Burson-Marsteller  write-off, income from operations increased by $41.0 million,
or 58.2%, compared to the nine months ended September 30, 1997.

Net interest  expense  decreased by $15.6  million to $13.0 million for the nine
months ended  September 30, 1998 compared to the nine months ended September 30,
1997.  The decline was due to lower average  borrowing  levels and lower average
borrowing  rates during the nine months ended September 30, 1998 compared to the
nine months ended September 30, 1997.

The  Company  recognized  an income tax  benefit of $22.3  million  for the nine
months ended  September  30, 1998 compared to income tax expense of $7.9 million
for the nine months ended September 30, 1997.  Included in 1998 is an income tax
benefit of $64.6 million  attributable to the other operating  charges of $234.4
million described above and reflects the anticipated federal,  state and foreign
tax effect of such other  operating  charges  after  consideration  of valuation
allowance amounts for certain non-U.S. deductions. The effective income tax rate
was a benefit of 16.7% for the nine months ended  September 30, 1998.  Excluding
the benefit derived from the other operating charges, the effective tax rate was
42.0% for the nine months ended  September  30, 1998, a decrease  from the 48.0%
effective tax rate for the nine months ended  September 30, 1997.  Such decrease
resulted  primarily from lower foreign taxes on the Company's foreign operations
as well as a reduction in the effective rate at which state and local taxes were
provided on domestic income.

The Company incurred an extraordinary  charge of $4.4 million in the nine months
ended September 30, 1998,  which is net of a tax benefit of  approximately  $2.8
million, due to the write-off of unamortized deferred financing costs related to
the replaced credit facility.

Net loss  for the nine  months  ended  September  30,  1998 was  $113.3  million
compared to net income of $11.9 million for the nine months ended  September 30,
1997.  Excluding  the  after-tax  effect of the  other  operating  charges,  the
Burson-Marsteller  write-off and the extraordinary  charge, net income increased
by $35.8 million compared to the nine months ended September 30, 1997.


                                       9

<PAGE>




LIQUIDITY AND CAPITAL RESOURCES

The Company historically has financed its working capital, capital expenditures,
acquisitions  and equity  repurchases  from cash generated  from  operations and
third-party   borrowings.   Quarterly  and  annual   operating  cash  flows  are
significantly  impacted by the seasonal media spending  patterns of advertisers,
including the timing of payments made to media and other  suppliers on behalf of
clients  as well as the  timing of cash  collections  from  clients to fund such
expenditures.  The Company's practice is to bill and collect from its clients in
sufficient time to pay the amounts due the media. Cash and cash equivalents were
$71.2 million at September  30, 1998 compared to $160.3  million at December 31,
1997. Cash was used during the nine months ended September 30, 1998 primarily to
repay long-term debt, including the prepayment of approximately $19.0 million of
certain  non-negotiable  subordinated  payment  obligations  to former  employee
stockholders, and for capital expenditures and common stock repurchases.

On May 15,  1998,  the Company  consummated  the  Offering.  Net proceeds to the
Company  were  $158.6  million,   after  deducting  underwriting  discounts  and
commissions  and expenses paid by the Company in  connection  with the Offering.
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 $700 million senior secured credit facility.

Capital  expenditures were $34.8 million for the nine months ended September 30,
1998.  The  Company  estimates  that its  capital  expenditures  in 1998 will be
approximately  $70  million for  information  technology  and certain  leasehold
improvements.

On August 4, 1998,  the  Company  announced  that the Board of  Directors  ("the
Board") had approved a plan to repurchase up to 2,000,000 shares of common stock
over the next two years.  Through  September 30, 1998,  the Company  repurchased
712,800 shares of common stock for an aggregate of $21.9 million. On October 13,
1998, the Company announced that the Board had approved a new repurchase program
of up to an additional 6,000,000 of the Company's outstanding common shares over
the next two years.  The shares may be  repurchased  by the Company from time to
time  in  the  open  market  or  in  private  transactions,  possibly  including
transactions with employees.

The Company's net deferred tax assets at September 30, 1998 were $191.2  million
consisting   primarily  of  federal,   state  and  foreign  net  operating  loss
carryforwards.  Consequently,  the Company  expects a reduction in the amount of
cash taxes paid on a worldwide  basis in future years.  The  consummation of the
offering gave rise to a non-recurring,  non-cash, pre-tax compensation charge of
$234.4  million,  which  resulted in  additional  tax benefits to the company of
$64.6 million.

The  Company  expects  to  declare  and pay a regular  quarterly  cash  dividend
beginning in the first half of 1999. However, any determination to pay dividends
will be at the  discretion  of the  Board  and will  depend  upon,  among  other
factors,  the Company's  results of  operations,  financial  condition,  capital
requirements and contractual  restrictions pursuant to the New Facility. The New
Facility  contains  certain  financial and operating  restrictions  and covenant
requirements, and permits the payment of cash dividends except in the event of a
continuing default under the credit agreement.

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

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998,  the  Financial  Accounting  Standards  Board issued SFAS No. 133,
"Accounting  for  Derivative  Instruments  and  Hedging  Activities,"  which  is
required  to be adopted in years  beginning  after June 15,  1999.  The  Company
anticipates that the adoption of SFAS No. 133 will not have a significant effect
on the financial condition of the Company.

YEAR 2000 COMPLIANCE

The Company is working to resolve the  potential  impact of the year 2000 on the
ability of the Company's computer systems to accurately process information with
dates later than  December 31, 1999,  or to process  date-sensitive  information
accurately after the turn of the century (referred to as the "Year 2000" issue).
The Company has completed an  assessment  of its computer  systems and is in the
process of modifying or replacing all affected  systems for compliance  with the
Year 2000 issue. While the Company believes it has made substantial  progress in
resolving any Year 2000 issues, the modifications and testing necessary to fully
validate readiness are still being conducted. The Company is also monitoring the
adequacy of the  processes  and progress of  third-party  vendors of systems and
applications  that may be  affected  by the Year  2000  issue.  The  Company  is
dependent in part on third-party computer systems and applications, particularly
with respect to such critical tasks as accounting,  billing and buying, planning
and paying for media, as well as on its own computer systems.  The Company is in
the process of obtaining  assurances from such vendors that their systems are or
are becoming Year 2000 compliant.

While the Company believes its process is designed to be successful,  because of
the complexity of the Year 2000 issue and the  interdependence  of organizations
using computer systems,  it is possible that the Company's efforts,  or those of
third  parties  with  whom the  Company  interacts,  will not be  satisfactorily
completed in a timely fashion.  Failure to satisfactorily  address the Year 2000
issue could have a material adverse effect on the Company's prospects, business,
financial condition and results of operations.


                                       10

<PAGE>




The costs of the Company's  Year 2000 project have not yet been  determined  but
are not expected to be  material.  However,  there can be no assurance  that the
Company will not experience  cost overruns or delays in connection with its plan
for replacing or modifying  systems,  which could have a material adverse effect
on the  Company's  prospects,  business,  financial  condition  and  results  of
operations.

The Company has not yet determined  the extent of contingency  planning that may
be required.






                                       11

<PAGE>



PART II: OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits: See Exhibit Index

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





                                       12

<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 November 6, 1998                              /s/ Michael J. Dolan
     ----------------                              --------------------

                                                   Name: Michael J. Dolan
                                                   Title: Vice Chairman and
                                                        Chief Financial Officer





                                       13