The Interpublic Group of Companies - 10-Q quarterly report FY

          Item 1.  

Financial Statements

Consolidated Balance Sheet

  September 30, 2001 (Unaudited) and

  December 31, 2000

Consolidated Income Statement

  Three and Nine Months Ended September 30, 2001

  and 2000 (Unaudited)

Consolidated Statement of Comprehensive Income

  Three and Nine Months Ended September 30, 2001

  and 2000 (Unaudited)

Consolidated Statement of Cash Flows

  Nine Months Ended September 30, 2001

  and 2000 (Unaudited)

Notes to Consolidated Financial Statements (Unaudited)

          Item 2.

Management's Discussion and Analysis of

  Financial Condition and Results of Operations

          Item 3.

Quantitative and Qualitative Disclosures

  about Market Risk

          Item 2(c)

CHANGES IN SECURITIES

          Item 6.

EXHIBITS AND REPORTS ON FORM 8-K.

          SIGNATURES

          INDEX TO EXHIBITS

Cash and cash equivalents (includes certificates of deposit:

           2001 - $81.6; 2000 - $110.9)

$     685.6 

$     844.6 

Receivables (net of allowance for doubtful accounts:

          2001 - $83.2; 2000 - $85.7)  

4,862.1 

5,735.7 

Expenditures billable to clients

448.6 

437.9 

Prepaid expenses and other current assets

                    Total current assets

Land and buildings

179.7 

174.1 

Furniture and equipment

1,118.2 

1,103.7 

Leasehold improvements

1,712.1 

1,705.6 

Less: accumulated depreciation

                    Total fixed assets

Investment in unconsolidated affiliates

162.2 

178.9 

Deferred taxes on income

512.2 

380.3 

Other investments and miscellaneous assets

       510.1 

       525.4 

Intangible assets (net of accumulated amortization:
          2001 - $978.6; 2000 - $861.5)

    3,058.7 

    3,155.0 

                    Total other assets

Payable to banks

$   1,225.0 

$     549.3 

Accounts payable

4,365.8 

5,751.3 

Accrued expenses

1,233.9 

1,111.1 

Accrued income taxes

                    Total current liabilities

Long-term debt

1,356.3 

998.7 

Convertible subordinated notes

544.6 

533.1 

Deferred compensation and other

449.8 

464.3 

Accrued postretirement benefits

56.3 

55.2 

Other non-current liabilities

103.2 

105.7 

Minority interests in consolidated subsidiaries

                    Total noncurrent liabilities

Commitments and contingencies

Preferred Stock, no par value, shares authorized: 20,

      shares issued: none

Common Stock, $.10 par value, shares authorized: 550, shares issued:

     2001 - 385.5;

     2000 - 377.3

38.5 

37.7 

Additional paid-in capital

1,747.1 

1,514.7 

Retained earnings

971.4 

1,667.5 

Accumulated other comprehensive loss, net of tax

2,321.7 

2,808.3 

Less:  Treasury stock, at cost:

     2001 - 7.8 shares;

     2000 - 5.5 shares

(331.9)

(194.8)

Unamortized expense of restricted stock grants

                    Total stockholders' equity

    $1,605.7 

   Salaries and related expenses

892.0 

992.9 

2,863.1 

2,883.5 

   Office and general expenses

567.0 

485.7 

1,512.2 

1,454.2 

   Amortization of intangible assets

42.8 

37.4 

126.9 

101.8 

   Restructuring and other merger related costs

592.8 

      26.7 

       645.6 

      115.5 

   Goodwill impairment and other

                    Total operating expenses

                    Income (loss) from operations

     (570.6)

     191.5 

     (443.6) 

     585.8 

   Investment impairment

(48.2)

- 

(208.3)

- 

   Interest expense

(46.9)

(36.5)

(125.8)

(87.0)

   Interest income

6.8 

11.6 

30.1 

35.3 

   Other income (expense), net

                    Income (loss) before provision for income taxes

(659.6)

172.9 

(736.3)

564.6 

Provision for (benefit of) income taxes

                    Income (loss) of consolidated companies

(474.9)

100.8 

(600.4)

327.9 

Income applicable to minority interests

(2.9)

(10.7)

(20.4)

(25.8)

Equity in net income of unconsolidated affiliates

Earnings (loss) per share:

   Basic

$    (1.29)

$      .25

$      (1.67)

$        .86

   Diluted

$    (1.29)

$      .24

$      (1.67)

$        .83

Dividend per share

$      .095 

$    .095

$         .285 

$     .275

Weighted average shares:

   Basic

369.6 

362.7

368.2 

358.3

   Diluted

369.6 

373.1

368.2 

369.7

    Foreign Currency Translation Adjustments

22.5 

(39.7)

(76.4)

(117.7)

    Net Unrealized Gains (Losses) on Securities

                    Other Comprehensive Income (Loss)

FINANCIAL STATEMENTS

   Net income (loss)

$(616.3)

$307.1 

   Adjustments to reconcile net income (loss) to cash used in operating activities:

      Depreciation and amortization of fixed assets

149.0 

143.5 

      Amortization of intangible assets

126.9 

101.8 

      Amortization of restricted stock awards

37.2 

27.2 

      Benefit of deferred income taxes

(183.9)

(4.5)

      Income applicable to minority interests

20.4 

25.8 

      Restructuring costs, non-cash

104.3 

31.9 

      Investment impairment

208.3 

- 

      Goodwill impairment

275.6 

- 

      Other

(8.6)

(16.0)

   Changes in assets and liabilities, net of acquisitions:

      Receivables

736.1 

(152.9)

      Expenditures billable to clients

(21.5)

(111.2)

      Prepaid expenses and other assets

(45.3)

(58.3)

      Accounts payable, accrued expenses and other

(1,156.2)

(418.2)

      Accrued income taxes

(179.7)

3.9 

      Deferred compensation and other

       Net cash used in operating activities

   Acquisitions, net

(227.8)

(534.5)

   Capital expenditures

(194.7)

(186.7)

   Proceeds from sale of assets

10.4 

14.1 

   Net (purchases of) proceeds from marketable securities

(8.5)

5.9 

   Other investments and miscellaneous assets

(79.2)

(163.1)

   Investments in unconsolidated affiliates

      Net cash used in investing activities

   Increase in short-term borrowings

115.2 

172.7 

   Proceeds from long-term debt

1,200.2 

859.9 

   Payments of long-term debt

(273.4)

(232.3)

   Treasury stock acquired

(113.8)

(192.7)

   Issuance of common stock

69.7 

62.4 

   Cash dividends - Interpublic

(94.6)

(80.4)

   Cash dividends - pooled companies

      Net cash provided by financing activities

   Deconsolidation of subsidiary

   Effect of exchange rates on cash and cash equivalents

   Decrease in cash and cash equivalents

(159.0)

(504.9)

   Cash and cash equivalents at beginning of year

   Cash and cash equivalents at end of period

THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.

The Company's consolidated financial statements, including the related notes, have been restated for the prior periods presented to include the results of operations, financial position and cash flows of True North Communications Inc. ("True North") (see Note (2)).

Certain prior year amounts have been reclassified to conform with current year presentation.

2.

3.

(Dollars in millions)

Severance and
   termination costs

$15.6

$281.9

$297.5

$51.0

$       -

$246.5

Lease termination
   and related costs

-

257.6

257.6

3.0

77.5

177.1

Other exit costs

-

53.3

53.3

2.0

21.1

30.2

Transaction costs

Total

The severance and termination costs relate to approximately 6,800 employees who have been, or will be, terminated. The employee groups affected included all levels and functions across the Company; executive, regional and account management, and administrative, creative and media production personnel. Approximately half of the headcount reductions relate to the US, one third relate to Europe (principally the UK, France and Germany) with the remainder relating to Latin America and Asia Pacific.

Lease termination costs, net of estimated sublease income, relate to the offices that have been or will be vacated as part of the restructuring. Approximately 180 locations are to be vacated with substantially all actions being completed by December 31, 2001; however, the cash portion of the charge will be paid out over a period of up to five years. The offices to be vacated are geographically spread in a similar manner to the severance charges. Lease termination and related costs include write-offs related to the abandonment of leasehold improvements as part of the office vacancies.

Other exit costs relate principally to the impairment loss on sale or closing of certain business units in the US and Europe and direct costs of the restructuring program. In the aggregate, the businesses being sold or closed represent an immaterial portion of the revenue and operations of the Company. The write-off amount was computed based upon the difference between the estimated sales proceeds (if any) and the carrying value of the related assets. These sales or closures are expected to be completed by the end of December 2001.

During the third quarter of 2000, the Company recorded restructuring and other merger related costs of $26.7 million ($16.8 million net of tax). For the nine months ended September 30, 2000, the Company recorded restructuring and other merger related costs of $115.5 million ($72.5 million net of tax). The key components of the charge in 2000 were the costs associated with the restructuring of Lowe Lintas & Partners Worldwide. The remaining costs relate principally to transaction and other merger related costs arising from the merger with NFO.

4.

5.

6.

7.

8.

In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001 which requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements. Other intangible assets will continue to be amortized over their useful lives.

The Company will apply the new rules on accounting for goodwill and other intangible assets beginning in the first quarter of 2002; however, certain provisions of these standards also apply to acquisitions concluded subsequent to June 30, 2001. During 2002, the Company will perform the first of the required impairment tests of goodwill and indefinite lived intangible assets, and has not yet determined what the effect of these tests will be on the earnings and financial position of the Company.

9.

Net income (loss) as reported

$(477.5)

$  90.8

Earnings (loss) per share:

     Basic

$  (1.29)

$    .25

     Diluted

$  (1.29)

$ .24

Net income before non-recurring items

$   54.5 

$107.7

Earnings per share:

     Basic

$     .15 

$    .30

     Diluted

$     .15 

$    .29

Net income (loss) as reported

$(616.3)

$307.1

Earnings (loss) per share:

     Basic

$  (1.67)

$    .86

     Diluted

$  (1.67)

$    .83

Net income before non-recurring items

$ 248.2 

$379.7

Earnings per share:

     Basic

$     .67 

$  1.06

     Diluted

$     .66 

$  1.03

i.

(Dollars in millions)

Severance and
   termination costs

$15.6

$281.9

$297.5

$51.0

$       -

$246.5

Lease termination
   and related costs

-

257.6

257.6

3.0

77.5

177.1

Other exit costs

-

53.3

53.3

2.0

21.1

30.2

Transaction costs

Total

The severance and termination costs relate to approximately 6,800 employees who have been, or will be, terminated. The employee groups affected included all levels and functions across the Company; executive, regional and account management, and administrative, creative and media production personnel. Approximately half of the headcount reductions relate to the US, one third relate to Europe (principally the UK, France and Germany) with the remainder relating to Latin America and Asia Pacific.

Lease termination costs, net of estimated sublease income, relate to the offices that have been or will be vacated as part of the restructuring. Approximately 180 locations are to be vacated with substantially all actions being completed by December 31, 2001; however, the cash portion of the charge will be paid out over a period of up to five years. The offices to be vacated are geographically spread in a similar manner to the severance charges. Lease termination and related costs include write-offs related to the abandonment of leasehold improvements as part of the office vacancies.

Other exit costs relate principally to the impairment loss on sale or closing of certain business units in the US and Europe and direct costs of the restructuring program. In the aggregate, the businesses being sold or closed represent an immaterial portion of the revenue and operations of the Company. The write-off amount was computed based upon the difference between the estimated sales proceeds (if any) and the carrying value of the related assets. These sales or closures are expected to be completed by the end of December 2001.

The total restructuring charges of $645.6 million exceeded the original estimate, made in July 2001, of $500 million, due to the deterioration in revenue which caused the need for greater headcount reductions and office closings.

During the third quarter of 2000, the Company recorded restructuring and other merger related costs of $26.7 million ($16.8 million net of tax). For the nine months ended September 30, 2000, the Company recorded restructuring and other merger related costs of $115.5 million ($72.5 million net of tax). The key components of the charge in 2000 were the costs associated with the restructuring of Lowe Lintas & Partners Worldwide. The remaining costs relate principally to transaction and other merger related costs arising from the merger with NFO.

ii.

iii.

iv.

4 (a)

Indenture, dated as of October 20, 2000 between The Interpublic Group of Companies, Inc. ("Interpublic") and The Bank of New York (the "Base Indenture"). Pursuant to Sections 601(b)(4)(iii) and (v) of Regulation S-K, the Base Indenture is not being filed by the Registrant in this Report. The Registrant hereby agrees to furnish a copy of the Base Indenture to the Securities and Exchange Commission upon request.

4 (b)

First Supplemental Indenture, dated as of August 22, 2001 to the Base Indenture between Interpublic and the Bank of New York. Pursuant to Sections 601(b) (4) (iii) and (v) of Regulation S-K, the First Supplemental Indenture is not being filed by the Registrant in this Report. The Registrant hereby agrees to furnish a copy of this First Supplemental Indenture to the Securities and Exchange Commission upon request.

4 (c)

Registration Rights Agreement, dated August 17, 2001 among Interpublic, J.P. Morgan Securities Inc., Morgan Stanley & Co. Incorporated and Salomon Smith Barney, Inc.

10(a)

Instrument of Restricted Stock, dated August 23, 2001 between Registrant and David Bell.

10(b)

Instrument of Restricted Stock, dated August 23, 2001 between Registrant and J. Brendan Ryan.

10(c)

Option Certificate, dated August 23, 2001 between Registrant and David Bell.

10(d)

Option Certificate dated August 23, 2001 between Registrant and J. Brendan Ryan.

10(e)

Amendment No. 1, dated as of September 27, 2001, To The 364-Day Credit Agreement, dated June 26, 2001, among Interpublic, the banks, financial institutions and other institutional lenders parties thereto (the "Lenders") and Citibank, N.A. as administrative agent for the Lenders.

10(f)

Amendment No. 2, dated as of September 27, 2001, To The Five Year Credit Agreement, dated June 27, 2000, as amended among Interpublic, the banks, financial institutions and other institutional lenders parties thereto (the "Lenders") and Citibank, N.A., as administrative agent for the Lenders.

11

Statement re:  Computation of Per Share Earnings.

The following Reports on Form 8-K were filed during the quarter ended September 30, 2001. Unless otherwise specifically stated, the financial statements filed are those of the Registrant and its Consolidated Subsidiaries:

1)

Report, dated July 26, 2001. Item 5 Other Events and Exhibit 99 Press Release.

2)

Report, dated August 10, 2001. Item 5 Other Events. Item 7 Financial Statements and Exhibits. Exhibit 99. Supplemental Consolidated Balance Sheet at December 31, 2000 and 1999; Supplemental Consolidated Statement of Income for the Years Ended December 31, 2000, 1999 and 1998; Supplemental Consolidated Statement of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998; Supplemental Consolidated Statement of Stockholders' Equity and Comprehensive Income for the Years Ended December 31, 2000, 1999 and 1998; Selected Financial Data for Five Years; Results by Quarter (Unaudited); Supplemental Consolidated Financial Statement Schedule; and Schedule II: Valuation and Qualifying Accounts.

3)

Report, dated August 23, 2001, amending Report on Form 8-K, dated June 22, 2001. Item 7 Financial Statements and Exhibits. Consolidated Balance Sheet of True North Communications Inc. ("True North") at December 31, 2000 and 1999; Consolidated Statements of Income, Consolidated Statements of Cash Flow and Consolidated Statements of Stockholders' Equity of True North for the years ended December 31, 2000, 1999 and 1998.

4)

Report, dated September 18, 2001. Item 5 Other Events. Item 7 Financial Statements and Exhibits. Exhibit 99. Consolidated Balance Sheet at December 31, 2000 and 1999; Consolidated Statement of Income for the Years Ended December 31, 2000, 1999 and 1998; Consolidated Statement of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998; Consolidated Statement of Stockholders' Equity and Comprehensive Income for the Years Ended December 31, 2000, 1999 and 1998; Selected Financial Data for Five Years; Results by Quarter (Unaudited); Consolidated Financial Statement Schedule; and Schedule II: Valuation and Qualifying Accounts.

THE INTERPUBLIC GROUP OF COMPANIES, INC.

(Registrant)       

Date:  November 14, 2001

BY /S/ JOHN J. DOONER, JR.                  

            JOHN J. DOONER, JR.

            Chairman of the Board, President

            and Chief Executive Officer

Date:  November 14, 2001

BY /S/ SEAN F. ORR                                  

            SEAN F. ORR

            Executive Vice President 

            and Chief Financial Officer

4 (a)

Indenture, dated as of October 20, 2000 between The Interpublic Group of Companies, Inc. ("Interpublic") and The Bank of New York (the "Base Indenture"). Pursuant to Sections 601(b)(4)(iii) and (v) of Regulation S-K, the Base Indenture is not being filed by the Registrant in this Report. The Registrant hereby agrees to furnish a copy of the Base Indenture to the Securities and Exchange Commission upon request.

4 (b)

First Supplemental Indenture, dated as of August 22, 2001 to the Base Indenture between Interpublic and the Bank of New York. Pursuant to Sections 601(b) (4) (iii) and (v) of Regulation S-K, the First Supplemental Indenture is not being filed by the Registrant in this Report. The Registrant hereby agrees to furnish a copy of this First Supplemental Indenture to the Securities and Exchange Commission upon request.

4 (c)

Registration Rights Agreement, dated August 17, 2001 among Interpublic, J.P. Morgan Securities Inc., Morgan Stanley & Co. Incorporated and Salomon Smith Barney, Inc.

10(a)

Instrument of Restricted Stock, dated August 23, 2001 between Registrant and David Bell.

10(b)

Instrument of Restricted Stock, dated August 23, 2001 between Registrant and J. Brendan Ryan.

10(c)

Option Certificate, dated August 23, 2001 between Registrant and David Bell.

10(d)

Option Certificate dated August 23, 2001 between Registrant and J. Brendan Ryan.

10(e)

Amendment No. 1, dated as of September 27, 2001, To The 364-Day Credit Agreement, dated June 26, 2001, among Interpublic, the banks, financial institutions and other institutional lenders parties thereto (the "Lenders") and Citibank, N.A. as administrative agent for the Lenders.

10(f)

Amendment No. 2, dated as of September 27, 2001, To The Five Year Credit Agreement, dated June 27, 2000, as amended among Interpublic, the banks, financial institutions and other institutional lenders parties thereto (the "Lenders") and Citibank, N.A., as administrative agent for the Lenders.

11

Statement re: Computation of Per Share Earnings.