NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)

1.

Basis of Presentation
In the opinion of management, the financial statements included herein contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows at June 30, 2002 and for all periods presented. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in The Interpublic Group of Companies, Inc.'s (the "Company" or "Interpublic") December 31, 2001 Annual Report to Stockholders. As discussed in Note 2, the financial statements for prior years have been restated. The operating results for the first six months of the year are not necessarily indicative of the results for the year or other interim periods.

Certain prior year amounts have been reclassified to conform with current year presentation. Additionally, as discussed in Note 7 below, the consolidated statement of operations is not comparable to the prior year reflecting a change in accounting principle pursuant to Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.

2.

Restatement
During the second quarter of 2002, the Company conducted a review principally surrounding the process of internally allocating certain overhead costs and reimbursable charges to operating units throughout the world. Cost allocations are performed by the Company in order to, among other things, satisfy regulatory authorities and measure client account profitability.

As a result of this review, the Company identified $68.5 million of charges, principally in Europe and exclusive to a single agency network, which were not properly expensed but rather included in accounts receivable. Although the Company does not believe the amounts involved are material to any prior period, the Company has restated its previously issued financial statements as the aggregate amount of this error would be material to the 2002 second quarter operating results. The Company has strengthened certain control processes in order to prevent this situation from recurring. The Company is also conducting an additional review of internal procedures and personnel.

See Note 11 for a description of waivers that have been secured to ensure compliance with credit agreements.

The table below presents a summary of the impact of restating the financial statements for the periods December 31, 1997 through March 31, 2002.

CONSOLIDATED STATEMENT OF OPERATIONS

As
Previously
Reported

As
Restated

Three months ended March 31, 2002

     - Operating income

$  140.1   

$138.8   

     - Net income

$    66.7   

$  65.9   

     - Earnings per share - Basic

$    0.18   

$  0.18   

     - Earnings per share - Diluted

$    0.18   

$  0.17   

Three months ended March 31, 2001

     - Operating income

$  153.1   

$152.0   

     - Net loss

$  (28.8)  

$(29.2)  

     - Loss per share - Basic

$  (0.08)  

$(0.08)  

     - Loss per share - Diluted

$  (0.08)  

$(0.08)  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)

As
Previously
Reported

As
Restated

Three months ended June 30, 2001

     - Operating loss

$  (26.2)   

$  (31.0)  

     - Net loss

$(110.2)   

$(113.1)  

     - Loss per share - Basic

$  (0.30)   

$  (0.31)  

     - Loss per share - Diluted

$  (0.30)   

$  (0.31)  

Three months ended September 30, 2001

     - Operating loss

$(570.6)   

$(571.4)  

     - Net loss

$(477.5)   

$(477.8)  

     - Loss per share - Basic

$  (1.29)   

$  (1.29)  

     - Loss per share - Diluted

$  (1.29)   

$  (1.29)  

Three months ended December 31, 2001

     - Operating income

$  235.6    

$  232.0   

     - Net income

$  111.2    

$  108.9   

     - Earnings per share - Basic

$    0.30    

$    0.29   

     - Earnings per share - Diluted

$    0.30    

$    0.29   

Twelve months ended December 31, 2001

     - Operating loss

$(208.1)   

$(218.4)  

     - Net loss

$(505.3)   

$(511.2)  

     - Loss per share - Basic

$  (1.37)   

$  (1.39)  

     - Loss per share - Diluted

$  (1.37)   

$  (1.39)  

Twelve months ended December 31, 2000

     - Operating income

$ 849.1    

$ 837.8   

     - Net income

$ 420.3    

$ 413.5   

     - Earnings per share - Basic

$   1.17    

$   1.15   

     - Earnings per share - Diluted

$   1.14    

$   1.12   

Twelve months ended December 31, 1999

     - Operating income

$ 649.4    

$ 639.8   

     - Net income

$ 359.4    

$ 353.8   

     - Earnings per share - Basic

$   1.02    

$   1.01   

     - Earnings per share - Diluted

$   0.99    

$   0.97   

Twelve months ended December 31, 1998

     - Operating income

$ 672.4    

$ 664.3   

     - Net income

$ 374.2    

$ 369.4   

     - Earnings per share - Basic

$   1.08    

$   1.06   

     - Earnings per share - Diluted

$   1.04    

$   1.03   

Twelve months ended December 31, 1997

     - Operating income

$ 342.6    

$ 335.6   

     - Net income

$ 168.7    

$ 164.7   

     - Earnings per share - Basic

$   0.51    

$   0.49   

     - Earnings per share - Diluted

$   0.49    

$   0.48   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)

CONSOLIDATED BALANCE SHEET

March 31, 2002

As
Previously
Reported

As
Restated

CURRENT ASSETS:

  Cash and cash equivalents

$     575.1   

$      575.1 

  Accounts receivable

4,576.0   

4,507.5 

  Other current assets

       784.1   

       784.1 

TOTAL CURRENT ASSETS

$  5,935.2   

$  5,866.7 

TOTAL ASSETS

$11,043.1   

$10,974.6 

LIABILITES AND STOCKHOLDERS' EQUITY:

CURRENT LIABILITIES:

  Accounts payable and accrued expenses

$  5,389.7   

$  5,389.7 

  Loans payable

525.4   

525.4 

  Accrued income taxes

60.9   

32.5 

  Dividends payable

         36.2   

         36.2 

    TOTAL CURRENT LIABILITIES

$  6,012.2   

$  5,983.8 

NON-CURRENT LIABILITIES

$  2,990.3   

$  2,990.3 

STOCKHOLDERS' EQUITY

$  2,040.6   

$  2,000.5 

TOTAL LIABILITIES AND
   STOCKHOLDERS' EQUITY

$11,043.1   

$10,974.6 

December 31, 2001

As
Previously
Reported

As
Restated

CURRENT ASSETS:

  Cash and cash equivalents

$     935.2   

$      935.2 

  Accounts receivable

4,780.5   

4,713.3 

  Other current assets

       751.5   

       751.5 

TOTAL CURRENT ASSETS

$  6,467.2   

$  6,400.0 

TOTAL ASSETS

$11,514.7   

$11,447.5 

LIABILITES AND STOCKHOLDERS' EQUITY:

CURRENT LIABILITIES:

  Accounts payable and accrued expenses

$  5,841.7   

$  5,841.7 

  Loans payable

453.1   

453.1 

  Accrued income taxes

103.1   

75.2 

  Dividends payable

         36.0   

         36.0 

    TOTAL CURRENT LIABILITIES

$  6,433.9   

$  6,406.0 

NON-CURRENT LIABILITIES

$  3,101.5   

$  3,101.5 

STOCKHOLDERS' EQUITY:

$  1,979.3   

$  1,940.0 

TOTAL LIABILITIES AND
   STOCKHOLDERS' EQUITY

$11,514.7   

$11,447.5 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)

3.

Earnings (Loss)Per Share

The following sets forth the computation of earnings per share for the three and six month periods ended June 30, 2002 and 2001:

Three Months Ended June 30,

    2002    

2001
Restated

Basic

Net income (loss)

$ 117.0    

$(113.1)   

Weighted average number of common shares outstanding

  375.7    

    368.9    

Earnings (loss) per share

$  0.31    

$  (0.31)   

Diluted (a)

Net income (loss)

$117.0    

$(113.1)   

Addback income on assumed conversion of subordinated notes

      2.0    

           --    

Net income (loss) - diluted

$119.0    

$(113.1)   

Weighted average number of common shares outstanding

375.7    

368.9    

Weighted average number of incremental shares
   in connection with assumed conversion
   of subordinated notes

6.7    

--    

Weighted average number of incremental shares

   in connection with restricted stock

   and assumed exercise of stock options

     6.7    

           --    

Weighted average number of common shares outstanding - diluted

  389.1    

    368.9    

Earnings (loss) per share - diluted

$  0.31    

$  (0.31)   

(a)

The computation of diluted EPS for 2002 excludes the assumed conversion of the 1.87% Convertible Subordinated Notes because they were anti-dilutive. The computation of diluted EPS for 2001 excludes the assumed conversion of the 1.80% and 1.87% Convertible Subordinated Notes, the conversion of restricted stock and assumed exercise of stock options because they were antidilutive.

Six Months Ended June 30,

 2002
 Restated

2001
Restated

Basic

Net income (loss)

$ 182.9    

$(142.4)   

Weighted average number of common shares outstanding

  374.3    

  367.5    

Earnings (loss) per share

$  0.49    

$ (0.39)   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)

Diluted (b)

Net income (loss)

$182.9    

$(142.4)   

Weighted average number of common shares outstanding

374.3    

367.5    

Weighted average number of incremental shares

   in connection with restricted stock

   and assumed exercise of stock options

     6.8    

        --    

Weighted average number of common shares outstanding - diluted

  381.1    

  367.5    

Earnings (loss) per share - diluted

$  0.48    

$ (0.39)   

(b)

The computation of diluted EPS for 2002 and 2001 excludes the assumed conversion of the 1.8% and 1.87% Convertible Subordinated Notes because they were anti-dilutive. The computation of diluted EPS for 2001 excludes the conversion of restricted stock and assumed exercise of stock options because they were antidilutive.

4.

Restructuring And Other Merger Related Costs

Following the completion of the True North acquisition in June 2001, the Company initiated a series of operational initiatives focusing on: a) the integration of the True North operations and the identification of synergies and savings, b) the realignment of certain Interpublic businesses and c) productivity initiatives to achieve higher operating margins. In connection with the operational initiatives, the Company executed a wide-ranging restructuring plan that included severance, lease terminations and other actions. The total amount of the charges incurred in 2001 in connection with the plan was $645.6.

A summary of the remaining liability for restructuring and other merger related costs is as follows:

Balance at
December
   31, 2001   

Cash paid
through
June
  30, 2002  

Liability
at June
  30, 2002  

          TOTAL BY TYPE

          Severance and termination costs

$154.0        

$  94.2       

$  59.8       

          Lease termination and other exit costs

  157.1        

  39.4       

  117.7       

          Total

$311.1        

$133.6       

$177.5       

As of June 30, 2002, the Company expects that 7,500 employees will be terminated in connection with the restructuring plan. Of that total, the majority of severance actions have occurred with the remainder to occur by the end of September. A significant portion of severance liabilities are expected to be paid out over a period of up to one year.

The employee groups affected by the restructuring program include all levels and functions across the Company: executive, regional and account management, administrative, creative and media production personnel. Approximately half of the headcount reductions relate to the U.S., one third relate to Europe (principally the UK, France and Germany), with the remainder relating to Latin America and Asia Pacific.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)

Lease termination costs, net of estimated sublease income, relate to the offices that have been or will be vacated as part of the restructuring. The Company plans to downsize or vacate approximately 180 locations and expects that all leases will have been terminated or the premises vacated or subleased by September 30, 2002. The cash portion of the charge will be paid out over a period of up to five years. The geographical distribution of offices to be vacated is similar to the geographical distribution of 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 U.S. and Europe. In the aggregate, the businesses being sold or closed represent an immaterial portion of the revenue and operating profit 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. The sales and closures had been completed by June 30, 2002.

5.

Goodwill Impairment and Other Charges
In 2001, the Company determined that the goodwill attributable to certain acquisitions was in excess of its estimates of the entities' future cashflows. As a result, an impairment charge of $303.1 ($263.4, net of tax) had been recorded in 2001. Of the total write-off, $221.4 was recorded in the second quarter of 2001, with the remainder recorded in the third quarter of 2001. The largest components of the goodwill impairment and other charges were Capita Technologies, Inc. (approximately $145) and Zentropy Partners (approximately $16), both internet services businesses. The remaining amount primarily related to several other businesses including internet services, healthcare consulting, and certain advertising offices in Europe and Asia Pacific.

6.

Investment Impairment
During the first quarter of 2001 the Company recorded a charge of $160.1 related to the impairment of investments primarily in publicly traded internet-related companies, including marchFIRST, Inc. (an internet professional services firm), which had filed for relief under Chapter 11 of the Federal Bankruptcy Code in April 2001. The impairment charge adjusted the carrying value of investments to the estimated market value.

During the second quarter of 2002, the Company recorded investment impairment charges of $16.2, primarily relating to certain investments of Octagon, a sports marketing company.

7.

New Accounting Standards
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statements of Financial Accounting Standards No. 141, Business Combinations ("SFAS 141"), and No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). These statements were effective for fiscal years beginning after December 15, 2001. Under the new standards, the purchase method of accounting is required for all business combinations initiated after June 30, 2001 and goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests. Other intangible assets will continue to be amortized over their estimated useful lives.

During the first quarter of 2002, the Company performed the required impairment tests of goodwill and determined that there was no impairment required to be recognized upon adoption. The Company estimates that, based on its current intangible assets, amortization expense will be approximately $6.0 to $8.0 in each of the next five years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)

In connection with SFAS 142, goodwill amortization ceased effective January 1, 2002. The following analysis shows the impact on the Company's statement of operations had SFAS 142 been effective for all periods presented:

Three Months Ended
June 30,

Six Months Ended
June 30,

    2002  

2001
(Restated)

  2002
(Restated)

2001
(Restated)

Reported net income (loss)

$117.0  

$(113.1)   

$182.9   

$(142.4)  

Add back: goodwill amortization, net of tax

       --  

   35.0    

       --   

   70.3   

Adjusted net income (loss)

$117.0  

$ (78.1)   

$182.9   

$ (72.1)  

Basic earnings (loss) per share:

   Reported earnings (loss)

$0.31  

$(0.31)   

$0.49   

$(0.39)  

   Add back: goodwill amortization, net of tax

       --  

   0.10    

       --   

   0.19   

   Adjusted earnings (loss)

$0.31  

$(0.21)   

$0.49   

$(0.20)  

Diluted earnings (loss) per share:

   Reported earnings (loss)

$0.31  

$(0.31)   

$0.48   

$(0.39)  

   Add back: goodwill amortization, net of tax

       --  

   0.10    

       --   

   0.19   

   Adjusted earnings (loss)

$0.31  

$(0.21)   

$0.48   

$(0.20)  

In June 2001, Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations ("SFAS 143") was issued. SFAS 143 addresses financial accounting and reporting for legal obligations associated with the retirement of tangible long-lived assets and the associated retirement costs that result from the acquisition, construction, or development and normal operation of a long-lived asset. Upon initial recognition of a liability for an asset retirement obligation, SFAS 143 requires an increase in the carrying amount of the related long-lived asset. The asset retirement cost is subsequently allocated to expense using a systematic and rational method over the asset's useful life. SFAS 143 is effective for fiscal years beginning after June 15, 2002. The adoption of this statement is not expected to have an impact on the Company's financial position or results of operations.

In August 2001, Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-lived Assets ("SFAS 144") was issued. SFAS 144 supersedes Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-lived Assets to be Disposed of ("SFAS 121"), and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. SFAS 144 also amends ARB (Accounting Research Bulletins) No. 51, Consolidated Financial Statements, to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary.

SFAS 144 retains the fundamental provisions of SFAS 121 for recognizing and measuring impairment losses on long-lived assets held for use and long-lived assets to be disposed of by sale, while resolving significant implementation issues associated with SFAS 121. Among other things, SFAS 144 provides guidance on how long-lived assets used as part of a group should be evaluated for impairment, establishes criteria for when long-lived assets are held for sale, and prescribes the accounting for long-lived assets that will be disposed of other than by sale. SFAS 144 is effective for fiscal years beginning after December 15, 2001. The adoption of this statement did not have an impact on the Company's financial position or results of operations.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)

In November 2001, the Emerging Issues Task Force reached a consensus on Issue No. 01-14, Income Statement Characterization of Reimbursements Received for "Out-of-Pocket" Expenses Incurred ("EITF 01-14"). EITF 01-14 establishes that reimbursements received for certain out-of-pocket expenses should be reported as revenue and operating expenses in the statement of operations. Historically, the Company classified reimbursed out-of-pocket expenses as a reduction of operating expenses. The Company has adopted this guidance effective the first quarter of fiscal year 2002.

In June 2002, Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities ("SFAS 146") was issued. SFAS 146 changes the measurement and timing of recognition for exit costs, including restructuring charges, and is effective for any such activities initiated after December 31, 2002. It has no effect on charges recorded for exit activities begun prior to this date.

8.

Derivative and Hedging Instruments
Interest Rate Swaps
At June 30, 2002, the Company had outstanding interest rate swap agreements covering all of the $500.0, 7.875% notes due October 2005. The fair value of the hedges at June 30, 2002 was an asset of approximately $19.9.

Hedges of Net Investments
The Company has repaid the Euro borrowings that, as of December 31, 2001, had been designated as a hedge of a net investment.

Forward Contracts
As of June 30, 2002, the Company had contracts covering approximately $34.8 of notional amount of currency. As of June 30, 2002, the fair value of the forward contracts was an asset of $3.0.

Other
The Company has two embedded derivative instruments under the terms of the offering of Zero-Coupon Convertible Notes. At June 30, 2002, the fair value of the two derivatives was negligible.

9.

Segment Information
During the second quarter of 2002, the Company reorganized its operations. Prior to the second quarter the Company was organized into four global operating groups: a) McCann-Erickson WorldGroup ("McCann"), b) the FCB Group ("FCB"), c) The Partnership and d) Advanced Marketing Services ("AMS"). In the second quarter, the Company carved out certain operations related to certain sports and event planning activities and combined them to form a fifth global operating group, IPG Sports and Entertainment ("S&E"). Each of McCann, FCB, The Partnership, AMS and S&E operate with the same business objective which is to provide clients with a wide variety of services that contribute to the delivery of a message and to the maintenance or creation of a brand. However, the Partnership and AMS historically have had lower gross margins than the Company average. The five global operating groups share numerous clients, have similar cost structures, provide services in a similar fashion and draw their employ ee base from the same sources. The annual margins of each of the five groups may vary due to global economic conditions, client spending and specific circumstances such as the Company's restructuring activities. However, based on the respective future prospects of the five groups, the Company believes that the long-term average gross margin of each of these five groups will converge over time and, given the similarity of the operations, the five groups have been aggregated.

10.

Acquisitions and Deferred Payments
During the first six months of 2002 the Company has completed 8 acquisitions. The companies acquired included those in the U.S. and Europe and included healthcare, public relations, direct marketing and research companies. In connection with these acquisitions, the Company paid $43.1 in cash and issued shares with a value of $1.1. Additionally, the Company paid $2.0 in cash and $0.8 in stock for additional ownership interests in companies in which a previous investment had been made. In connection with the acquisitions, approximately $4.5 of cash was acquired.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)

During the first six months of 2002 the Company paid $165.9 in cash and $42.5 in stock as deferred payments on acquisitions that had closed in prior years. During the first six months of 2001 the Company paid $78.0 in cash and $29.7 in stock as deferred payments on acquisitions that had closed in prior years.

As of June 30, 2002, the Company's estimated liability for earn-outs is as follows:

2002

2003

2004

2005 and after

Total

Cash

$46.9

$120.4         

$72.1

$66.6

$306.0

Stock

  30.6

    26.5         

  10.1

  19.4

     86.6

   Total

$77.5

$146.9         

$82.2

$86.0

$392.6

The amounts above are estimates based on the current projections as to the amount that will be paid and are subject to revisions as the earn-out periods progress.