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

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help you understand The Interpublic Group of Companies, Inc. and its subsidiaries ("IPG," "we," "us" or "our"). MD&A should be read in conjunction with our unaudited Consolidated Financial Statements and the accompanying notes included in this report and our 2011 Annual Report on Form 10-K, as well as our other reports and filings with the Securities and Exchange Commission ("SEC"). Our Annual Report includes additional information about our significant accounting policies and practices as well as details about our most significant risks and uncertainties associated with our financial and operating results. Our MD&A includes the following sections:
EXECUTIVE SUMMARY provides a discussion about our strategic outlook, factors influencing our business and an overview of our results of operations. RESULTS OF OPERATIONS provides an analysis of the consolidated and segment results of operations for the periods presented.
LIQUIDITY AND CAPITAL RESOURCES provides an overview of our cash flows, funding requirements, financing and sources of funds and debt credit ratings. CRITICAL ACCOUNTING ESTIMATES provides an update to the discussion in our 2011 Annual Report on Form 10-K of our accounting policies that require critical judgment, assumptions and estimates.
RECENT ACCOUNTING STANDARDS, by reference to Note 13 to the unaudited Consolidated Financial Statements, provides a discussion of certain accounting standards that have been adopted during 2012 or that have not yet been required to be implemented and may be applicable to our future operations.

EXECUTIVE SUMMARY
We are one of the world's premier global advertising and marketing services companies. Our companies specialize in consumer advertising, digital marketing, communication planning and media buying, public relations and specialized communications disciplines. Our agencies create customized marketing programs for many of the world's largest companies. Comprehensive global services are critical to effectively serve our multinational and local clients in markets throughout the world, as they seek to build brands, increase sales of their products and services and gain market share.
We operate in a media landscape that is evolving at a rapid pace. Media channels continue to fragment, and clients face an increasingly complex consumer environment. To stay ahead of these challenges and to achieve our objectives, we have made and continue to make significant investments in creative and strategic talent in fast-growth digital marketing channels and high-growth geographic regions and world markets. In addition, we consistently review opportunities within our company to enhance our operations through mergers and strategic alliances, as well as the development of internal programs that encourage intra-company collaboration. As appropriate, we also develop relationships with technology and emerging media companies that are building leading-edge marketing tools that complement our agencies' skill sets and capabilities.
Our long-term financial goals include maintaining competitive organic revenue growth and continuing to improve our operating margins, which we expect will further strengthen our liquidity and increase value to our shareholders. Accordingly, we remain focused on meeting the evolving needs of our clients while concurrently managing our cost structure. We continually seek greater efficiency in the delivery of our services, focusing on more effective resource utilization, including the productivity of our employees, real estate, information technology and shared services, such as finance, human resources and legal. The improvements we have made in our financial reporting and business information systems in recent years, and which continue, allow us more timely and actionable insights from our global operations, while our disciplined approach to managing our balance sheet and liquidity provides us with a solid financial foundation and financial flexibility to manage our business.

   Management's Discussion and Analysis of Financial Condition and Results of
                            Operations - (continued)
                (Amounts in Millions, Except Per Share Amounts)
                                  (Unaudited)


The following tables present a summary of financial performance for the three
and nine months ended September 30, 2012, as compared with the same periods in
2011.
                                                  Three months ended           Nine months ended
                                                  September 30, 2012          September 30, 2012
% Increase/(Decrease)                            Total         Organic        Total        Organic
Revenue                                            (3.2 )%       (0.9 )%        (1.0 )%        0.8 %
Salaries and related expenses                      (2.2 )%       (0.3 )%        (0.2 )%        1.3 %
Office and general expenses                         2.0  %        4.8  %        (0.7 )%        1.0 %

                                                  Three months ended           Nine months ended
                                                    September 30,                September 30,
                                                  2012          2011           2012          2011
Operating margin                                    7.9  %       10.0  %         5.5  %        6.1 %
Expenses as % of revenue:
Salaries and related expenses                      63.7  %       63.0  %        66.6  %       66.0 %
Office and general expenses                        28.4  %       27.0  %        27.9  %       27.8 %

Net income available to IPG common
stockholders                                  $    68.7      $  208.1      $   121.8      $  261.7

Earnings per share available to IPG common
stockholders:
Basic                                         $    0.16      $   0.45      $    0.28      $   0.56
Diluted                                       $    0.15      $   0.40      $    0.27      $   0.50

When we analyze period-to-period changes in our operating performance we determine the portion of the change that is attributable to foreign currency rates and the net effect of acquisitions and divestitures, and the remainder we call organic change, which indicates how our underlying business performed. The performance metrics that we use to analyze our results include the organic change in revenue, salaries and related expenses and office and general expenses, and the components of operating expenses, expressed as a percentage of total consolidated revenue. Additionally, in certain of our discussions we analyze revenue by business sector, where we focus on our top 100 clients, which typically constitute approximately 55% to 60% of our annual consolidated revenues. We also analyze revenue by geographic region.
The change in our operating performance attributable to foreign currency rates is determined by converting the prior-period reported results using the current-period exchange rates and comparing these prior-period adjusted amounts to the prior-period reported results. Although the U.S. Dollar is our reporting currency, a substantial portion of our revenues and expenses are generated in foreign currencies. Therefore, our reported results are affected by fluctuations in the currencies in which we conduct our international businesses. We do not use derivative financial instruments to manage this translation risk. Our exposure is mitigated as the majority of our revenues and expenses in any given market are generally denominated in the same currency. Both positive and negative currency fluctuations against the U.S. Dollar affect our consolidated results of operations, and the magnitude of the foreign currency impact on us related to each geographic region depends on the significance and operating performance of the region. The primary foreign currencies that impacted our results during the first nine months of 2012 include the Brazilian Real, Euro, Indian Rupee and the South African Rand. During the first nine months of 2012, the U.S. Dollar was stronger relative to several foreign currencies in regions where we primarily conduct our business as compared to the prior-year period, which had a negative impact on our consolidated results of operations. For the third quarter of 2012, foreign currency fluctuations resulted in net decreases of approximately 3% in revenues, salaries and related expenses and office and general expenses, which had no net impact on our operating margin percentage. For the first nine months of 2012, foreign currency fluctuations resulted in net decreases of approximately 2% in revenues and salaries and related expenses and approximately 3% in office and general expenses, which had no net impact on our operating margin percentage.
For purposes of analyzing changes in our operating performance attributable to the net effect of acquisitions and divestitures, transactions are treated as if they occurred on the first day of the quarter during which the transaction occurred. In recent years we have acquired companies that we believe will enhance our offering and disposed of businesses that are not consistent with our strategic plan. For the third quarter and first nine months of 2012, the net effect of acquisitions and divestitures was an increase to revenue and operating expenses compared to the prior-year periods.

Management's Discussion and Analysis of Financial Condition and Results of Operations - (continued)