Jerry Leshne - Senior Vice President of Investor Relations Michael Roth – Chairman & Chief Executive Officer Frank Mergenthaler – Executive Vice President & Chief Financial Officer

Alexia Quadrani - JP Morgan Craig Huber – Barclays Capital John Janedis - Wachovia Matt Chesler - Deutsche Bank Michael Nathanson - Sanford Bernstein Meggan Friedman – William Blair & Company Sara Gubins – Bank of America-Merrill Lynch Peter Stabler - Credit Suisse Dan Salmon - BMO Tom Singlehurst – Citigroup

We have posted our earnings release and our slide presentation on our website, interpublic.com, and we will refer to both in the course of this call. This morning we are joined by Michael Roth and Frank Mergenthaler.

We will begin with prepared remarks to be followed by Q&A. We plan to conclude before market open at 9:30 am Eastern.

During this call we will refer to forward looking statements about our company which are subject to uncertainties in the cautionary statement included in our earnings release and the slide presentation, and further detailed in our 10-K and other filings with the SEC. At this point it is my pleasure to turn things over to Michael Roth.

I’ll begin with the highlights of our performance and a few key observations regarding our current situation and then Frank will take us through the results in detail and after his remarks I’ll return to add some color on our view of 2009 before we move on to Q&A. IPG has just concluded a very strong year.

We met the ambitious financial objectives set for the business despite an economic environment that deteriorated markedly in the last four to six weeks of the year. Our organic growth performance was at the top of the industry which shows that our professional offerings are both contemporary and competitive.

We delivered on our target of significantly improving operating margin while still taking necessary cost actions in the fourth quarter that will put us in a better position to deal with the continued economic uncertainty of 2009. Its worth noting that important contributions to achieving the 2008 results came from a very broad cross section of our agencies.

Every one of our major global networks from advertising to media to marketing services posted organic revenue growth. Performance in international markets was solid across the board.

Our integrated US independent agencies did well overall. Those companies and areas of the business that were most challenged a few years ago which as you know we’ve been taking strategic actions to address, showed significant improvement in growth and profitability.

If you look at the results we are achieving in award competitions, agency of the year recognition, and other industry honors you’ll see that the reputation and standing of IPG agencies is very much on the upswing. Progress in margin performance continued throughout 2008.

The trailing 12 month operating margin trend which you will see in Frank’s presentation now shows improvement for 10 consecutive quarters. We continue to drive improvement in all of our key cost ratios.

In the fourth quarter despite an organic revenue decrease due to the broader economic conditions we were still able to increase operating margin by close to 400 basis points. This result demonstrates that we increasingly have the financial tools and talent to proactively manage our business.

This will be an important focus of our efforts going forward as we navigate the difficult economic environment that we are likely to be facing for the balance of this year. Fourth quarter operating earnings rose from $272 million in 2007 to $331 million this past year, an increase of nearly 22%.

For the full year, operating income jumped from $344 million in 2007 to $590 million in ’08, an increase of 71% and a long way from the losses the business posted just a few years ago. Earnings per share of $0.52 for 2008 were double the previous year’s results.

These are very significant achievements and I’d like to take this opportunity to thank all of our people at so many of our agencies around the world whose talent and commitment to professional excellence contributed to this strong performance. This type of progress is what we foresaw when we set out to transform IPG.

Going forward, we will continue to focus on the fundamentals, delivering customized and integrated solutions to clients in an increasingly complex and digital media and marketplace landscape where necessary, continuing to invest in talent across our portfolio. This is particularly important in higher growth capabilities such as digital and marketing services as well as in emerging geographies such as the BRICK’s and the Middle East and North Africa, where we’ve taken significant steps during the past 24 to 36 months to bolster our offerings.

We will also continue to deploy our improved cost disciplines and ensure that we are managing to our margins. We will stay true to our conservative approach to the balance sheet and liquidity which has been critical to our success.

Our balance sheet is strong. In light of our cash on hand, untapped standby revolving credit and cash flow from operations, we head into 2009 with ample liquidity including sufficient cash to redeem the $250 million maturities that will come due late this year as well as in 2010.

Cash from operations increased significantly to $865 million last year from just short of $300 million in 2007. Working capital management has been a particular area of focus and as a result we’ve seen great improvement.

We’ve dramatically strengthened the company’s capital structure and financial flexibility. While the economic environment is uncertain we believe that we are well positioned for these volatile times.

As indicated earlier, in my closing remarks I’ll have more to add on what we see in the marketplace and our perspective of 2009. For now let me turn things over to Frank for the full details of our results.

As Michael mentioned, our ’08 results were consistent with our financial objectives coming into the year. We achieved fully competitive revenue growth and we significantly expanded our operating margins to 8.5%.

Our organic revenue growth was 3.8% for the year which is the high end of our industry. On operating margins we have had significant and consistent progress over the past three years and in every quarter this year.

While margins are not yet where they need to be we are confident that the process improvements we have made to our business model will continually yield operating progress going forward. In Q4’s dramatically changed business environment our organic revenue change was a decrease of 2.2%.

However, Q4 operating margin increased 370 basis points from a year ago. This was despite the expense of difficult but necessary severance actions required by the current economic reality.

As we move forward into ’09 the outlook is cautious. We must therefore continue to manage our cost base aggressively.

Two thousand eight results also include strongly improved cash flow, the result of higher profitability our focus on working capital management and utilization of or tax operating loss carry forwards. I’d like to reiterate Michael’s point that we ended the year with ample financial resources to manage through a more challenged environment.

For the year, diluted EPS was $0.52 compared to $0.26 a year ago and increased 26% in the fourth quarter to $0.39 versus $0.31. Turning to slide three, you can see our complete P&L for the fourth quarter.

I’ll cover revenue and operating expenses in detail in the slides the follow. Our effective tax rate in Q4 was 22% which includes the reversal of $39 million of net tax valuation reserves which is a direct result of our improved profitability in certain markets outside the US and our judgment that profitability in those markets will be sustained going forward.

On slide four, we provide additional detail on revenue. Reported revenue in the quarter is $1.9 billion a decrease of 4.1%.

Compared to Q4 ’07 exchange rates had a negative impact of 4.2% while net business acquisitions added 2.4%. Our organic revenue change was a decrease of $44 million or 2.2%.

As we indicated in our October conference call we’d anticipated that the project work, typically a key driver of fourth quarter growth was at risk for cancellation and deferral in this environment. In fact, pressure on our events business was the most significant change in the quarter accounting for approximately half of our consolidated year over year decrease.

It is also no surprise that the auto sector ad spending decreased in the quarter. More generally, while Q4 spending varied by sector and client the deteriorating macro economic environment clearly impacted our clients around the globe.

On the bottom half of this slide you can see the revenue performance of both operating segments. At our Integrated Agency Networks, reported revenue decreased 2.5% in Q4.

The organic change was -1.5% consisting of a decrease of 2% in the US and a decrease of 1% internationally. We had global organic growth at Mediabrands and growth by Lowe.

We had a decrease as McCann World Group primarily driven by lower project based revenue. For the full year, IAN’s organic revenue growth was 3.4%.

At our CMG segment Q4 revenue decreased 12.8% while the organic decrease was 6.3%. Here again the decrease in the US and International were in the same range with the US down 6% and international down 7%.

Our PR businesses demonstrated good resiliency with organic growth in the high single digit range but the fall off in Q4 event businesses and decreases in our sports marketing business show up disproportionately in the segment. For the full year, segment organic revenue growth was 6.2%.

Slide five provides a breakdown of Q4 and a full year revenue growth by region. As you can see, revenue in most regions of the world showed the effects of the economic conditions in the quarter.

In the US the organic decrease was 2.7% due to the factors I have mentioned. The events business and the auto sector as well as reduced spending by existing clients.

We had strong growth at Mediabrands and our PR businesses Weber Shandwick and GolinHarris as well as growth in the US by Draftfcb. Internationally reported growth decreased 6.3% which includes a significant effect from currency.

The organic decrease was 1.7%. In the UK where the currency effect on reported revenue is dramatic, revenue decreased 3.5% organically.

We had growth by Lowe and the World Group but that was offset by decrease in our Media business and Draftfcb. In continental Europe the organic decrease was 4% due to generally lower spending from existing clients in the region which offset a solid performance in France and Spain.

We had growth from Mediabrands and Lowe but decreases at our other major global networks. In the Asia/Pacific region organic revenue decreased slightly.

We had growth in China and India but at lower rates then earlier in the year. That was offset by continued decrease in other markets notably Australia.

In Latin America organic revenue growth was 12% led by increase in Draftfcb, Lowe and Mediabrands due to both higher spending from existing clients and net new business. Our other markets increased 18.8% as reported due to our acquisition of MCN in Middle East in Q3 of this year but decreased 5.2% organically.

For the full year, as you can see on the right side of this slide, we had organic growth in every region around the world. On slide six we present a longer view of organic revenue growth that tracks our trailing 12 month performance.

It shows our increases through ’07 and ’08 until Q4. That 3.8% for 2008 is clearly competitive within our peer group.

On slide seven we move on to a closer look at operating expenses. Q4 consolidated operating margin grew 370 basis points from a year ago.

Salaries and related expenses were $1.08 billion in the quarter which is a decrease of 2.3% as reported and 70 basis points higher on an organic basis due primarily to increased severance. Salaries and related expense were 56.8% of revenue compared with 55.8% of revenue a year ago.

As you can see, severance expense was $48 million in the quarter an increase of $16 million. Our severance actions in the quarter in response to the slowing pace of business directly affected approximately 3% of our global workforce across multiple business units and regions.

Our Q4 incentive expense accrual decreased compared to a year ago due to lower annual incentive awards for the full year and more even quarterly expense recognition as well as decreased amortization expense of our long term performance based equity awards. For the full year incentive expense decreased $10 million.

Temporary labor expense decreased 2.7% of revenue from 3.2% a year ago notwithstanding lower revenue. This has been an area of increasing discipline for us as the economy slows and should continue to be a flexible part of our expense base going forward.

For the full year, our salaries and related expense decreased as a percentage of revenue to 62.4% from 63.2%. With the exception of severance expense we improved our leverage in each of the major cost categories as you can see in the appendix to our presentation.

Turning to office and general expense, on the lower half of this slide, in Q4 O&G expense was $484 million a decrease of $94 million or 12.2% organically. O&G expenses were 25.5% of revenue compared with 29.2% a year ago.

We improved leverage on every major component of O&G which is also the case for the full year. In Q4 we had a significant decrease in pass through costs from a year ago.

I mentioned previously that we saw our events business decrease in the quarter. As we discussed in our October conference call the event business has a relatively high level of pass through revenue and in costs.

When the revenue decreases the related O&G expense out as well. In addition, we had 50 basis points of incremental leverage on travel expenses and office supplies the result of reinforcing our operating discipline throughout our agencies.

You can see that we continue to work down professional fees as well, especially audit and legal fees. Occupancy expense also decreased as a percentage of revenue from a year ago as they have for the full year as well, benefiting from the real estate actions we took in Q4 ’07.

Our total real estate square footage decreased by approximately 4% in the year which you can see also in the appendix. For the full year, O&G expenses were 28.9% of revenue compared with 31.2% in 2007.

We are pleased with our performance on costs and continue to believe there are further opportunities to improve efficiencies in areas such as operational productivity and real estate utilization. On slide eight we show continuing progress on operating margin on a trailing 12 month basis over the past three years.

This remains one of our primary financial objectives. It’s obviously made easier with revenue growth and conversely will be more challenging for several quarters as we look ahead.

In formulating our ’09 plan we have identified specific actable opportunities on margin. We believe that the process and people that we have put in place have us well positioned to get these cost savings.

On slide nine we turn to cash flow for the year. For the 12 months cash from operations $865 million compared with $298 million in 2007 an improvement of $567 million due to higher net income and significantly improved cash generation and working capital.

Again, for perspective on our turnaround if you look back to 2005 cash from operations was negative and barely positive in ’06. Deferred taxes were a source of $52 million compared to a use of $22 million in 2007.

This is an area of real improvement for us. Our cash taxes paid in 2008 were $104 million.

Cash taxes paid were 22% of pre-tax income compared with 37% in 2007. Improved profitability means we’re able to increasingly monetize our substantial loss carry forwards in the US and in several of our largest non-US markets.

We utilized approximately $400 million of loss carry forwards in ’08 for cash tax savings of approximately $120 million. Our loss carry forward position at year end was $1.4 billion of which approximately half had valuation allowances again them.

Working capital was a source of $194 million compared to use of $171 million in 2007. Working capital management has been and continues to be a major area of focus for us.

Investing activities used a total of $250 million in acquisitions and CapEx. The most significant acquisitions in ’08 were the Middle East Communications Network, the Premier Marketing Services Group in the Middle East/North Africa region were removed from minority and majority position.

Our majority interest in HUGE, a leading digital agency based in New York. Financing activities used $277 million primarily to a repayment of almost all of our 4.5% convertible notes in March which used $191 million.

The net increase in cash and marketable securities for the year was $245 million. Turning to the current portion of our balance sheet on slide 10, you can see that we ended ’08 with $2.3 billion in cash and short term marketable securities.

In the liabilities section short term debt includes our November ’09 maturity of $250 million of our 5.4% senior notes. Our debt maturity schedule at year end is presented on slide 11.

Total debt was $2.1 billion. Our maturities are well spaced going forward with $250 million maturing in November 2009 and the same amount in November 2010.

Michael spoke to these and to our liquidity strength in his opening remarks. In summary, we are pleased with our performance in the quarter and the year, particularly in light of the economic conditions in the later part of ’08.

Moving into ’09 it is apparent that due to the unprecedented economic forces at work the next several quarters will be very challenging. We believe that our operating performance speaks to several strengths of our company including a fully competitive, contemporary and diversified offering, a cost structure with important sources of expense flexibility as well as effective cost discipline and strong financial resources now in place across the organization.

Now let me turn it back over to Michael.

As you can see there’s a great deal to be pleased about when it comes to our performance for Q4 and the whole of 2008. However, in light of what’s going on in the marketplace the questions which are on everybody’s mind is how much to do with we’re seeing in the business today and how we see the balance in 2009.

The impact that the global economic situation is having on our industry was evident in the latter part of the fourth quarter and that trend is carried through into the early part of this year. There’s no doubt that we are operating in a very challenging business environment.

Given the limited visibility we or any of our peers have into the business at this point in time forecasting is extremely challenging. What I can tell you with certainty is that clients are being very measured and cautioned in their approach to all spending.

We’re seeing them go out to the media owners looking to drive the best possible deals and get maximum value for their money. They’re looking agency budgets carefully as well.

Of course, we should benefit from the fact that clients understand that their brands are valuable assets and that it doesn’t make sense to under invest in those assets and risk losing market share in the long term. Having said that, it’s also the case then when you make such broad blanket statements you run the risk of over generalizing a complex situation.

Within client sectors and geographies there’s still a higher degree of variability in terms of how clients are behaving. Some client industries are being affected more then others, as are certain marketing disciplines.

We’re fortunate that our business includes a decree of diversification that should provide some resiliency even in these difficult times. We have a large number of clients across a broad spectrum of industries and world markets.

We’ve done a lot of work over the past couple of years to strengthen our offering in emerging geographies. The largest investment we’ve made during the turnaround has been in talent, particularly in building up embedded digital competency across all of our units.

Our global operators are reporting that certain geographies, especially within Asia and Latin America may see low growth in 2009 then in recent years but are still forecasting growth. Conversely we’re seeing softness in a number of the larger developed European markets which means we’ll all have to manage very conservatively in light of likely revenue decreases.

Our highly diversified client mix should be a plus. Our financial service exposure is limited and to date we’re seeing a number of our major consumer goods clients continue to invest in their brands.

Within our own offering many of the marketing service offerings are holding up. We’ve been pleased by the way PR continued to perform in Q4 and thus far in 2009.

Our Healthcare marketing agencies are very strong and we’ve had good success recently in consolidation pitches orchestrated at the holding company level but involving a number of our healthcare assets. Even in this economy activation activity is required particularly since many clients still need to move product at a time when consumer are feeling very wary which means they need highly direct and targeted appeals.

We also continued to see demand for digital and emerging media capabilities. This is an area I’d like to spend a minute addressing.

As you know, we have some outstanding digital agencies. RGA which is a best in class and MRM which if it were a stand alone would be one of the three or four largest global digital agency networks.

Reprise Media and HUGE which were both acquired in the past couple of years also come to mind. Our overriding philosophy is that digital smarts and know how has to be a the core of everything that we do and therefore digital capabilities have been embedded in all of our agencies; in advertising, media, PR, activation, you name it.

At this point digital activity is growing significantly at all of our agencies and we believe our revenue from digital offerings across the company is competitive with our peers. Having an integrated fully faceted digital offering is vital to so many of the pieces of our business that we handle.

What this means is that while we’re going to continue to be active in looking at potential acquisitions and alliances in narrow areas of technological specialization for the most part we keep building digital within our agency structures and migrating revenue as budgets shift to increased digital activity. That’s a view of what’s going on across our portfolio.

The places where there’s pressure as a result of the economy and what we see as the areas that will help us in relative terms to weather the storm. The other item that is on top of our mind for us is staying very close to the broader economic developments and reacting quickly to protect our margins.

Since it is unclear what competitive organic revenue growth will look like for the balance of 2009 we must be extremely focused on controlling our costs. We have demonstrated last year that we’re driving greater leverage from base pay, temporary labor and incentives as well as all of our O&G categories.

We will have to keep looking at all those measures closely because managing the business very conservatively is going to be key as we move through this period of uncertainty. To sum up, during 2008 we posted the best performance IPG has delivered in many years.

We’ve consolidated the gains of professional offerings, we continue to attract top talent and we’re successfully addressing emerging areas of client need. We’ve made great progress in developing tools and systems required to manage the business more proactively with greater discipline.

Our conservative approach to the balance sheet and liquidity has put the company on sound financial footing and given us increased financial flexibility to weather potential volatility. We believe these factors will be vital as we move through the current economic difficulties and emerge in a strong position to enhance IPG’s long term value.

With that I’d like to thank you for being with us and open up the floor to questions.

You mentioned that revenues fell off late in the quarter, can you give us some color how much the drop off was in December and how that’s trended into January has it stayed at December levels or has it gotten worse? You mentioned you have some actions to help profitability or further cut costs in ’09.

Given that it’s obviously going to be a very challenging top line environment could you give us a little bit of color on how much flexibility there is in profitability, how much will margins likely decline or how much can you preserve them?

Let me take the second part and then we’ll get into some of the details of the first part. Obviously this is an evolving situation with respect to 2009.

What we’ve shown is that we’ve been quick to react to taking costs out of our business and therefore we expect as the revenue declines persist we will be taking actions in the first quarter, obviously salary is an important part of that. We do expect see it.

In fact, you’ve seen some recent announcements that some of our agencies which showed some cut backs already taking place. We’re ahead of the curve.

Let me address the major question and that is for 2009 where do we think we’re going to end up. Obviously it’s hard to project what revenue will be for 2009 but our expectation is if revenue declines in the range of conservatively 2% to 3% we think we can maintain margins by taking actions early on.

If the revenue deteriorates at a greater rate then that obviously we’ll be hard pressed to maintain our margins but I think we’ve shown an ability to react and show that we’re very aware of margin objectives within IPG.

You’re talking about organic right there?

That’s correct. As far as the fourth quarter we threw out a number of about $75 million in the fourth quarter.

Let’s assume we reached somewhat part of that number in the fourth quarter and we continue to see some of that in the first quarter 2009.

The $75 million related to project related businesses that we call out at risk. As we mentioned in our comments that’s where we saw the steepest fall off.

The balance sheet has always been a bit of a concern. It looked stronger and stronger particularly with the fourth quarter year end numbers.

Could you give us a sense there’s always been an overhang question of how much of your cash is needed to fund ongoing business versus what’s really a completely yours in reserve. Could you give us a sense what the cash balance is at the low point mid month of any month of the year to give us a sense of how much you need for operations?

Let me reiterate, all our cash on our balance sheet is ours. I have to say that on every call and it’s true.

Obviously there are high points and low points and Frank will address the ups and downs of our cash flow. If you’ll recall in my opening remarks I indicated to you that we believe that given the two big maturities we have in 2009 and 2010 we can handle the payment of those maturities out of our cash flow, converting that to we believe we have about $500 million of cash available for use to pay off that liability without accessing the additional capital markets.

We expanded disclosure in our public filing to give month end, high watermark, and low watermark for cash for 2008. The low watermark was about $1.5 billion and that was right after we paid the $250 million notes in March.

High watermark was end of the year. Probably within a month there is approximately $200 million swing on top of that month end.

That data should be able to allow you to do sensitivities off of what the intra quarter volatility is.

About your cash balance you gave us some detail but what was your average cash daily balance for the entire 2008?

We’re not going to give a daily balance. The fact that we’ve given month end cash position, high low for the year and you can see where our quarterly numbers land and the fact that we just commented intra month there may be $200 million of volatility that’s a whole heck of a lot of data that allows you to model the sensitivities on our cash.

There’s an awful lot of concern out there among your debt and equity holdings. You’re saying the low point the entire year any day was $1.5 billion.

What we said was the low at any month then was $1.5 billion and that was right after the payment of the $250 million notes. Intra month you’ve got about $200 million swing based upon the working capital in the business.

The concern about the debt we’ve answered that. We believe, given our current position that any maturities for 2009 and 2010 can be handled from our own cash flow.

You’re saying cash the whole year never went below $1.3 billion.

If my low watermark was $1.5 billion and we’ve got $200 million yes that would be the math.

With your ’09 and ’10 maturities coming up I believe your 2010 November $250 million bonds traded roughly $0.70 on the dollar. With at last $1.3 billion cash why don’t you go out there have a tender offer maybe a 10% premium and take those out preemptively rather then wait 20 months, you’re going to have to pay them off regardless in 20 months.

If I answer that yes the trading will be about 95%. The current trading on that is really of the ’09 is in the 90% range.

I’m talking the 2010 ones.

We know that’s out there. Everyone knows the uncertainty in the overall economic environment requires us to be conservative on the balance sheet.

If as we go through 2009 the economic situation becomes more stable and we continue to be more comfortable with our overall financial position we’ll obviously look at that. The critical question right now is do we have the financial resources to be able to pay that off when due and the answer to that is we believe yes.

For the full year what was your total auto revenue exposure and how does that break down between Detroit and elsewhere.

We won’t give the whole auto but the elephant in the room and the question that people are constantly asking us and we normally don’t like to give out exposures to a particular client. Right now our total exposure to General Motors including our work in process is roughly $150 million.

There’s been a lot of speculation about that. You should know that we build all of that into our stress testing in terms of our plans, our cash flow modeling and the statements that we made to you about our ability to retire our debt.

With the current environment can you give more color to what extent you’re seeing clients ask for better terms? Are you also seeing competitors lowering bids in an effort to gain share here?

The second part, you never see it as a competitive bid as lowering it. A lot of it has to do with scope.

There’s no question that we’re in constant dialogue with our clients with respect to scope and getting better value for their dollar. The real discussion is how can they get better return on investment for their spend.

We’re spending a lot of time modeling and showing the allocation and using our tools to maximize the return on the spend. There’s no question that clients are cautious in terms of how they’re going to spend their dollars.

What we’re seeing is constant dialogue, proving where they spend their money has the biggest return. I also think you’re going to see some reduction in the experimental media.

Clients are much more reluctant now to make investments in areas that haven’t really proven themselves. You’ll see a fall off in that.

As the year comes through in the latter part of the year hopefully we’ll see some recovery and we’ll start seeing the spending pick up in that environment. You can’t specifically say that we’re out there competing on a fee basis with our competitors its more or less how can I spend dollars and get the maximized return on our investment.

There’s obviously been talk about advertisers stretching out payment terms. Do you think that could actually give you an opportunity to take share from smaller independents?

Are you in turn trying to ask for similar terms for you from the networks?

No, we’re not going to go out and start using ourselves as a bank in order to provide better terms so we pick up clients. Some clients are asking for terms.

We frankly have been very reluctant to do that. Yes on one hand we deal with our clients on the other hand we have vendors that we have to deal with as well.

Our treasury department is very much engaged in matching our revenue and our expenses and that’s what they should be doing.

Very impressive declines in the OG&A expense. How far along are we on your progress in bringing down professional fees?

It was down during the quarter not as much as I had modeled. Secondly, you mentioned that perhaps some of what we saw of the decline was a reflection of lower pass through revenues offsetting expenses maybe you could isolate that for us as well.

On the professional fees not too long ago they were running at 5% of revenue. We had said back then that we would hope to get them somewhere down around 2% which is where we are.

We continue make good traction there and we would expect further improvement in ’09. With respect to the pass throughs which if you looked at the appendix in the other O&G category the affect on margin is relatively small just because that’s the whole phenomenon of grossed up accounting.

While it takes the specific O&G metric and makes smaller the impact on the overall margin improvement of 370 basis points in the quarter is relatively deminimus. The other O&G categories we continue to aggressively go after things like real estate, things like insurance, things like travel, every dollar that goes out the door across the globe is getting a greater level of scrutiny and our teams are doing a terrific job in managing those respective cost pockets.

The margin impact was minimal, in terms of the dollar impact in the quarter roughly what was that? Is the pass through situation that we’re going to see for future quarters?

The pass through issue is with the project related businesses and the gross up accounting it’s an issue. It’s something that we called out.

I don’t have the exact number; we’ll follow through with Jerry afterwards. I look at it a holistic view on the margin and to me it’s relatively deminimus because we lost the corresponding revenue.

Going back to that point on page 32, looking at the other O&G at that point it was deminimus in margins but there was a big swing on the O&G basis points tied to revenue. If that didn’t impact margin with other O&G was there anything else within that line the bad debt expense or foreign currency that swung really positive on margin?

Bad debt actually was relatively deminimus. There was a big depreciation year on year change where last year we had some accelerated depreciation due to some real estate moves we made where depreciation this year is more normalized so that shows in the improvement.

There’s a whole bunch of things that go through there, insurance goes through there, FX goes through there and we did have some FX transactional gains in the quarter but not much to really move the needle. It’s made up of a bucket of different costs.

Is the event business similar margins to the overall company, that’s a business that you think would be at risk in ’09.

Because of the gross up issue that the margin on it is relatively small. If you think about it, the real value creation area is the fee you get for putting on the event when you’re forced to gross up your P&L for all the costs and the corresponding spend, the net margin is relatively small.

It’s still a profitable business for us. I don’t want you to think that that means it’s not profitable it’s just a question of the mechanics of the gross up in our calculations of margin.

How should we be thinking about the annualized savings from the severance package taken in the fourth quarter? Can you provide a little more color on how we should be thinking about severance expense in Q1 and the first half relative to Q4?

The $48 million of severance that we took in the fourth quarter we believe has a run rate savings of about $100 million. The mix of that severance is about two thirds US, a third outside the US.

As we look into Q1 there was only so much action you could take in Q4. Our teams are as they continue to formulate their view on revenue and they speak with their clients we can expect to see higher then normal severance expense in the quarter.

I don’t have a number for you now. I don’t think our teams do.

To Michael’s comments everybody’s pretty manically focused right now on managing costs in the environment we’re in and while we’re doing a good job on costs other then salary the big cost base out there is our people. We’re trying to be very sensitive to the fact that that is our key asset.

The cost base and salary line has to align with our projected revenue and that’s a moving target right now.

One of the things you can take away from our performance in 2008 is our ability to focus on the margin and take necessary actions when there’s a reduction on the revenue side. When we set targets now we’re setting targets based on margin and letting our business units manage their business to that.

In order to accomplish those margin objectives there’s no question that severance actions and things like that come into play. In the first quarter you’re going to see some action in that area particularly because the uncertainty of what’s coming in the rest of 2009.

We’ll see some action in the first quarter on that.

In terms of what you’re thinking about the FX impact for Q1 and for 2009 with rates where they are today.

It’s between 4% and 5%. I think that’s the number that I remember correctly for the quarter and for the year.

Maybe it’s a range. I think the first quarter may have been 4% and it may have been 6% or maybe a little higher, maybe 6% to 8%.

You mentioned further opportunities to reduce costs in real estate. Could you discuss the timing of this and the potential magnitude?

We’re constantly looking. The one area that we managed to show continued improvement in and we’ve done a great job is managing our real estate.

There aren’t any huge opportunities on the real estate but whenever we can see consolidation in some of our locations we will do so. The timing of that is toward the beginning of the year because we’re looking to provide savings and therefore the earlier we take any such actions the better.

We’ve been reducing our real estate footprint since ’04. You’ve got to do it on a market by market basis and we’ve done a pretty good job of consolidating various companies in markets.

We’ve done it in Shanghai, we’ve done it in Paris, we’ve done it in Los Angeles but you’re tied somewhat to the lease maturities but I do think the real estate team has been very, very effective there. Our agencies have been very willing to do whatever they can to try and drive costs out of the respective businesses with being flexible in real estate.

Could you talk about acquisition plans if any or is it fair to assume that you might hold off given the current environment?

Obviously we’re very cautious about using our cash and spending our capital in an uncertain environment. Therefore if there are some acquisitions they will tend to be more towards the latter part of the year then the early part of the year.

In the areas that I mentioned in my opening remarks, the digit area, emerging markets those are areas where we will continue to invest in. We have a couple transactions in mind; order of magnitude we’re looking in the range of $100 million is our plan for the year.

We don’t expect to exceed that as we’ve been able to keep our acquisitions within our targets in the prior years. We’ll be cautious in terms of how we go forward but nothing huge, pardon the expression huge because we did a transaction called Huge but nothing of a great magnitude on the horizon.

It seems to be generally accepted that traditional advertising wins in the new business front are only partially based on price in that chemistry track record, strategic insights to a clients business are more important. In this environment should we assume that price of services will play a more prominent role.

New business wins this year are they going to be less profitable then new business wins a year ago?

No, what you’re going to see in new business is they’re going be more tactical and the return on investment is a critical component of any pitch that we’re involved in. The pitches that we’ve seen recently have been integrated offerings.

It’s taken a number of years for us to keep saying that but now it’s a reality. When we go into a new business pitch we’re bringing all the resources we can to the table whether it be media, whether it be activation, whether it be digital, whether it be PR, everything has to be brought to the table at one place to the client to show the overall effect of an integrated offering.

When you put that all together you have to be able to show a return on investment with respect to the spend. That’s where all the play is going to be and that is if we can have the tools and resources that show that for every dollar that’s spent there’s a return on investment that’s what’s going to win the day.

That’s why we’ve invested as we have particularly in the actions we’ve taken in the media side and the formation of the media brands and all the talent that we’ve added with respect to our media offering as well as the digital capabilities and the tools and resources in measurement and analytics that are critical in those environments. There’s no question that when we are in a pitch the bang for the dollar is critical so it’s not so much negotiating the price as it is providing efficiencies and maximization of returns.

You commented on the working capital improvements here and they were really impressive. Could you comment on a view for ’09 particularly given that total media spend would likely decline.

In a growing business this model is cash flow generated from working capital. It becomes much more challenging in flat to declining periods from a revenue base and that’s what we’re expecting to see in ’09.

I don’t expect to see the cash generation we saw this year. With that said not too long ago Interpublic was weak in managing its working capital.

The treasury team working with the operating folks around the world have done a terrific job in tightening the managing of our payable and our receivables up so we would hope that even with a decline we can still hold our own in the working capital area just because we’ve got a full court press on it and we’ve got better visibility into it.

To be specific we have in our objectives for our business units working capital is one of the components of incentive compensation. Obviously we have strong controls now which are great.

We have a lot of visibility into our businesses and the businesses know that they have to do this and that’s how they’re getting paid.

Someone asked a question about are we seeing our payment terms start to draw out. We are seeing it in certain clients but we’re also very aware of it and we’re doing the same thing on the payable side to ensure that our credit exposure is held to a minimum.

I remember in the second and third quarter there were some UK events that were helping revenue there. I think you said at the time they were bi-yearly.

Is that correct and should we expect those not to repeat this year?

I’m not sure which ones but normally those types of events are non-recurring, they’re one time items. As the year goes through we’ll see if we have another one.

Right now you have to look at it that way.

There’s a good portion of our events business every year that they’ve got to go out and its not repeating so we’ve got to go out and they’re to be generated but it was pretty significant.

To get back to the margins question it sounds as if there are internal levers that are still to be pulled but as you put it margins aren’t at the level where they need to be yet. From where they are now to where they need to be can you quantify how much of that are internal things related to professional fees, real estate, those type of more corporate type expenses that can be pulled versus operational efficiencies at the agencies.

For us to attain competitive margins there has to be a component of growth in the equation where we’re converting new revenue at an efficient rate. In an environment where there’s no growth getting to “competitive margins” is impossible.

Our view now is how do we defend our margins and a top line declining environment and there there’s some range that our top line go down we think we can defend margins but if it goes down in excess of that it’ll be very difficult to hold our margins. The process improvements we’ve put in place and the tools we put in place and the people we put in place we’ve shown dramatic improvement in our ability to manage our cost base.

Right now the gap between where we are in competitive margins is based on revenue.

It would be a mistake for us to slash and burn from a cost perspective to achieve competitive margins because that would be a short term fix. When this market does turn around we want to make sure we’re in a position to be competitive and hound the talent and resources.

In fact, a lot of our clients have asked the question if you are cutting, how are we assured that we’re going to have the talent and resources necessary to meet our needs. You have to look at this on a long term basis and we can get to our competitive margins that we’re driving towards just by taking costs out.

We’re very much aware. That doesn’t mean that we’re not looking very closely at our margins and making sure that every opportunity is not taken but you have to take a longer term view of this and make sure you’re competitive because the worse thing you can do is slash too many costs out of this business and then be in a competitive disadvantage when it comes time to compete.

Do you have an employee count number for the end of the year? If you have it split between US and International that would be great too.

Its 44,000. Year on year increase is almost 100% attributable to the acquisition of MCN.

You talk about on the one hand a complete lack of visibility but earlier on in the call you mentioned making sure that the operational guys are focused 100% on delivering margin. I’m ingesting how you actually do that.

Should we expect more volatility in margin performance through the year with effectively a balancing through the final quarter as you try and get the costs allocation correct or adjust severance or adjust incentive payments to make up for over or under servicing? On the tax losses, on the basis of potentially have more value to someone else then to you is there any way that you can structure disposals to sell off assets tax losses.

Those losses aren’t worth anything more to other people then us. The issue is profitability of the businesses that generate those losses.

To the extent we can generate profits that’s how we’ll use those losses. I didn’t say we had total lack of visibility I said it’s difficult for visibility.

Obviously we have budgets, we’re working with clients, and we get input from our clients on a daily basis in terms of scope of work. We do have a base business that we have visibility into and we have to manage to.

It increases or decreases in that scope that we have to manage to while we do have some visibility to into our business.

On the variability of cost base the message to our operating folks around the world is you’ve got to stay very close to your clients and your projected revenue and if that revenue is not sufficient to maintain your cost base you’ve got to take appropriate actions. We would expect if the year continues to soften that our severance expense would be higher year on year.

We say manage to our margin we’re trying to make sure our businesses are right sized for the revenue base they have as opposed to manage to a specific margin target in a quarter. We’re pushing very hard to the extent our revenue is not working we’ve got to adjusted the cost base accordingly.

That will cause some volatility quarter to quarter in our margins.

On turnover, have the turnover rates stayed broadly constant?

The turnover rate is constant. Unfortunately we’re faced with severance.

It’s hard to say its constant when we’re involved in a severance environment. The key talent resources that we have has remained constant.

Let me thank everyone for their support. I hope you get a sense that we have come a long way from a business perspective.

We’re keeping our heads down, we’re doing what’s necessary to manage to the margins and grow our business. That will be our primary focus.

Thank you for all your support.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT.

USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. If you have any additional questions about our online transcripts, please contact us at: [email protected].

Thank you!