Frank Mergenthaler - Chief Financial Officer and Executive Vice President Michael Roth - Chairman, Chief Executive Officer and Chairman of Executive Committee Jerome Leshne - Senior Vice President of Investor Relations

Peter Stabler - Credit Suisse Daniel Salmon - BMO Capital Markets U.S. Craig Huber - William Bird - Lazard Capital Markets LLC Alexia Quadrani - JP Morgan Chase & Co Tim Nollen - Macquarie Research Richard Tullo - Albert Fried & Company, LLC James Dix - Wedbush Securities Inc. John Janedis - UBS Investment Bank Matthew Chesler - Deutsche Bank AG

Good morning, and welcome to the Interpublic Group First Quarter 2011 Earnings Conference Call. [Operator Instructions] This conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Mr. Jerry Leshne, Senior Vice President of Investor Relations. Sir, you may begin.

Thank you, and good morning. Thank you for joining us. We have posted our earnings release and our slide presentation on our website, interpublic.com, and 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 a.m. 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-Q and other filings with the SEC. At this point, it is my pleasure to turn things over to Michael Roth.

Thank you, Jerry, and thank you all for joining us this morning. We're pleased to report another quarter of strong revenue growth and operating profit improvement. First quarter revenue was up 10.3%, driven by an organic increase of 9.3%. As has been the case in recent quarters, a very broad cross section of our agencies contributed to this outstanding result. Our organic revenue performance speaks to the competitiveness of our offerings, particularly in the key growth areas that we outlined during our recent Investor Day presentations. That is to say, leading-edge digital capabilities, strong emerging market presence and the capacity to deliver highly integrated and accountable marketing solutions. During the quarter, we saw a growth in all regions of the world, led by double-digit gains in Asia Pac and Lat Am and by high single-digit increases in the U.S. and U.K. We've previously indicated that we had not incorporated expectations of a significant recovery in Continental Europe into our plans for 2011. However, we did have some growth in that region during Q1. Turning to client sectors. We also saw a consistently positive performance. Tech and telecom, financial services, health and personal care, auto and transportation and food and beverage all posted double-digit growth in the quarter. Retail and packaged goods were relatively flat. At the agency level, all of our global networks grew organically with leadership in the quarter by Draftfcb, Mediabrands and Lowe. At CMG, our marketing service specialist grew 7.8% organically, led by Weber Shandwick and Golin, FutureBrand and Jack Morton. Our digital offerings were once again outstanding contributors to growth. We had very strong performance at McCanns MRM unit, R/GA and HUGE, as well as the strong digital capabilities within our media agencies, PR firms and U.S.-integrated independent agencies that you all saw on display at Investor Day. Our agencies continue to make good strides in developing their digital offerings and attracting top digital talent. As we said in our last conference call, our expectations as we entered the year were for some sequential moderation from the very high growth rate in last year's fourth quarter. We were very pleased with Q1 top line momentum, as well as the tone of our business. Our Q1 seasonal operating loss was $45 million compared to a loss of $59 million a year ago, a 24% improvement. It's important to note that this was primarily a result of leverage on base payroll and occupancy expenses. Frank will have details in that in just a moment. Earnings per share was a seasonal loss of $0.10, compared with a loss of $0.15 a year ago. As you are aware, the first quarter is our smallest quarter of the year by revenue, while expenses are more consistent across the year, so we typically have a loss in Q1. While this is expected, it's encouraging to see further improvement in our performance compared to 2010, which was also a year of strong improvement. Before turning it over to Frank, there are a few macro issues that many of you have raised and which I would like to touch on briefly. First, the situation in Japan. Above all, our thoughts continue to be with all those affected by the devastating earthquake and tsunami. We've been spending a lot of time supporting our colleagues in Japan on both a personal and professional level, and will continue to do so. That's what matters most. Of course, we're now being asked what the impact of this tragedy might be on our business going forward. To provide some context, Japan represents 1.5% to 2% of our consolidated revenues. Understandably, we anticipate that we will see revenue decreases in the market for the balance of the year. As to possible supply and inventory disruptions, for example, in the auto and tech sectors, these will be difficult to forecast, but we have not seen any material budget adjustments to-date. And should they occur, we believe they would be more a matter of timing rather than permanent reductions. Another macro issue that is causing concern has to do with the political and social developments in many parts of the Middle East and North Africa. Once again, we are in touch regularly with agency leadership, and our focus is on ensuring that our co-workers in that part of the world are safe and that we are doing everything possible to help them. Of course, the situation does raise questions about the impact the upheaval is having, economically and on consumer activity. To put this into perspective, the region is approximately 3% of our total revenue base. No single country is greater than 1%. While Q1 revenue growth overall was solid in the region, revenue is negatively expected in Egypt in light of these events. But while this is not yet a large region for us, conditions are understandably pressuring revenue for some time. Finally, a topic that's also been of significant interest is the potential of commodity price inflation to impact client budgets, particularly in the food and packaged goods sector. We have not seen marketing budgets rolled back as a result of input [ph] and oil cost inflation. Cost inflation has always been a part of client conversations throughout economic recovery, and will continue to do so. Those are the areas of concerns we are hearing and we are actively focused on managing through them. As you'll see in our results today, the strength of our business and our model is driving results and creating value. We have a well-diversified revenue base in terms of geographic regions and professional offerings. Our agencies are performing across the board, and we believe there is great opportunity for our industry to benefit from an increasingly fragmented media landscape. We also continue to demonstrate expense discipline so as to stay on the path we have defined to significantly increase levels of profitability. At this point let me hand things over to Frank for an in-depth look of our financial performance, and I'll come back with some closing remarks.

Good morning. As a reminder, I will be referring to the slide presentation that accompanies our webcast. On Slide 2, you'll see an overview of the quarter which tracks the points that Michael just made. Q1 revenue growth was strong in both the U.S. and international markets and across the entire agency portfolio. Our operating loss in the seasonally small first quarter improved from a year ago to $45 million from $59 million. We realized approximately 100 basis points of operating leverage on combined base payroll and temporary labor expense. We also reduced occupancy expense by 80 basis points of revenue, driving improved leverage on O&G expense. Going the other way, severance expense was elevated in the quarter compared to a year ago, 160 basis points of revenue this year compared with 80 basis points. We view this as an investment and continue to drive efficiency as well as identify and act upon opportunities to add talent, as well as reduce our expense base. We ended the quarter in a strong liquidity position that include $1.85 billion of cash in marketable securities on the balance sheet. This compares with $1.94 billion a year ago. The comparison includes having used approximately $480 million during the 12 months to pay down both debt and convertible preferred stock, and another $40 million in our new dividend and share repurchase programs. Turning to Slide 3, you see our P&L for the quarter. I'll cover revenue and operating expenses in detail on slides to follow. It's worth mentioning that other income and expense of negative $6 million reflects mainly a noncash loss on the disposition of a small agency in the quarter. Turning to operations on Slide 4 beginning with revenue. Revenue in the quarter is $1.47 billion, an increase of 10.3%. Compared to Q1 2010, exchange rates added 1% and there was almost no impact from net acquisitions and dispositions. Our organic revenue change was an increase of 9.3%, a terrific result. Our strength was broad-based by region, client sector and agency. On the bottom half of this slide, you can see the revenue performance of our operating segments. At our Integrated Agency Networks, organic growth was 9.7%. Growth was driven by both U.S. and international markets and we were pleased to see contributions by all of our global agencies. At our CMG segment, revenue increased 7.8% on an organic basis, reflecting increases in both the U.S. and international markets. We were led by PR, branding and event marketing. Moving on to Slide 5, which provides a look at revenue by region. In the U.S., the organic increase was 8.8% and was driven by broad participation across client sectors and disciplines. Leading client sectors were tech and telecom, health, personal care and financial services. Auto was also a solid contributor. We were led by Draftfcb, Mediabrands and Lowe and Partners. International organic growth was 10.2%. In the U.K., revenue increased 9.2% organically with a number of our agencies showing strong double-digit growth. In Continental Europe, the organic increase was 3.9%. While we continue to see mixed results by country, we are pleased with another quarter of sequential improvement. In Asia Pac, organic growth was 18.1% with India and China leading strong increases throughout the region. Organic growth in Lat Am was again outstanding at 13.6%, reflecting both the strength of the economy and our offerings in Brazil, notably McCann, Draftfcb and Lowe. Our other markets grew 11.6% organically, reflecting strong performance in South Africa, Canada and the Middle East. On Slide 6, we chart the longer view of organic revenue change on a trailing 12-month basis. The most recent data point at 9.7% now includes Q1 '11 and the roll-off of Q1 last year, 4 quarters of strong organic growth. On Slide 7, we took a closer look at operating expenses. Again, Q1 is historically our smallest revenue quarter. Our operating loss was $45 million compared with $59 million a year ago, improvement of $14 million. Salaries and related expenses were 73.2% of revenue both this year and last. Total SRS was $1.08 billion compared with $979 million, an increase of 10.3% or 9.3% organically. Underneath that result, there were a number of moving pieces that reflect improved operating leverage but also increased investment in certain areas of our business. Base pay, benefits and tax was 60.5% of revenue compared with 61.9% a year ago, an improvement of 140 basis points. Headcount growth reflects disciplined investment to find areas of growth in the portfolio, such as Mediabrands, R/GA, HUGE and Public Relations, and regionally in Brazil, India and China. Across all of our agencies, we are adding digital talent. Headcount at quarter-end was 41,800, an increase of 4% from a year ago, and 1% over the first 3 months of the year. Severance expense was 1.6% of revenue compared with 80 basis points of revenue a year ago. Our Q1 headcount actions were focused in the U.S. and Europe and are designed to add new talent, as well as drive improved efficiency going forward. Incentive expense in the quarter was 4.4% of revenue compared with 4% a year ago. The increase was due to a few factors, namely the strong increase in our share price during the first quarter, which has an impact on our equity-based programs; and an extra month of expense this year due to the earlier grant date for the 2011 long-term incentive program. For the full year, we expect incentive expense to remain in the historical range of 3.5% to 4% of revenue. Temporary labor expense was 4.1% compared with 3.6% a year ago. All other salaries and related expense was 2.6% of revenue compared with 2.9% last year. Turning to ops and general expenses on the lower half of the slide. O&G increased 5.4% compared to a revenue increase of 10.3%. O&G expense was $439 million or 29.8% of revenue compared with 31.2% a year ago. The comparison includes 80 basis points of improved leverage and occupancy expense due to both revenue growth and rent expense that remained fairly flat. On Slide 8, we show our adjusted operating margin history at a trailing 12 month basis, which was 8.5% as of the end of Q1. As we have said previously, our objective this year is 9.5% to 10%. On Slide 9, we turn to cash flow for the quarter. Cash used in operations was a seasonal use of $801 million compared with $556 million in Q1 2010. Cash used in working capital is $736 million compared with $483 million a year ago. As a reminder, we typically use cash and working capital Q1 due to the seasonality of our business, while typically generating cash and working capital in Q4. In the fourth quarter of 2010, for example, we generated $639 million from working capital. Investing activities used $17 million. Financing activities used $45 million, including our initial dividend on common stock, $29 million and our first month of share repurchase activity in March, $11 million. The net decrease in cash and marketable securities in the quarter was $835 million, compared with $565 million in Q1 2010. Turning to the current portion of our balance sheet on Slide 10. We ended the quarter with $1.85 billion in cash and short-term marketable securities on the balance sheet compared with $1.95 billion a year ago, a decrease of approximately $90 million. On Slide 11, you see our debt maturity schedule as of March 31. Total debt including our convertible notes is $1.7 billion, a decrease of $200 million from a year ago. The schedule shows $155 million due this year, most of which is short-term debt used locally for working capital purposes that typically remains outstanding. The smaller pieces are August 2011 maturity, of which only $36 million remains. Looking ahead to 2012 and '13. It is also worth noting that the amount shown here are the first optional put and call dates of our convertible notes, rather than the maturity dates, which do not occur until 2023. The parity price per conversion is $12.42 per share. In summary on Slide 12, we are pleased with our revenue performance in the quarter. Our continued progress with costs and profitability means we are managing expenses carefully, even as we invest for growth and efficiency. This will allow us to continue to deliver on the marketing expansion and increase profitability that we believe are achievable going forward. Now I'd like to turn the call back over to Michael.

Thank you, Frank. Well, as you can see our performance in Q1 once again demonstrates the strength of our agencies, their people and their professional offerings. We saw vitality across many client sectors. We also continued to show that we're able to manage the business effectively and convert revenue gains into improved results. Competitive organic revenue is the best indicator that we are building a terrific talent base, and that our strategic decisions are paying off. Key developments in this area during the quarter include continued progress at McCann. The team there is off to a good start in 2011, particularly with their successful defense of the U.S. Army account. McCann's strong focus on delivering integrated marketing solutions is getting traction with existing multinational clients and the agency is active in the new business arena. Draftfcb, was also a major contributor to our success in the quarter. The agency once again grew its revenue and delivered strong profitability. Their integrated model, which increasingly features digital and shopper marketing capabilities which are key in today's world of realtime marketing. Mediabrands continued to deliver outstanding performance during the first quarter. We're very pleased with the leadership of all major units within the group. While the loss of our Microsoft engagement in North America was disappointing, we've subsequently seen Mediabrands re-sign major clients such as Sony to a 3-year commitment and win significant new assignments such as Hasbro. Lowe made solid contributions to Q1 results and we're pleased with Lowe's performance and strategic direction. With their strength in key developing markets, especially Brazil and India, and with the progress they're making in developing a global activation capability, as well as partnering with HUGE in international markets. CMG turned in another strong performance across PR, branding and events. We continue to see a lot of new client activity across the marketing service portfolio. There's also a great deal of digital talent being on-boarded at all of our marketing services firms, and we believe this will lead to continue organic growth momentum at Weber Shandwick, GolinHarris, Jack Morton, FutureBrand and Octagon. Among the digital specialty agencies, R/GA, HUGE and McCann's MRM posted outstanding results. Performance at the integrated U.S. independence was also strong, led by terrific brands, such as the Martin Agency, Hill Holliday and Mullen. In closing, we are pleased with strong Q1 performance, and our long-term view of the opportunity for Interpublic remains unchanged. We continue to operate in a global growth industry. What is more, in a world driven by digital convergence and accelerating technology, the role of marketing will grow. As many of you have heard me say, complexity is good for us because clients need expert guidance and higher-value thinking more than ever before. The key drivers of success and value going forward are going to be digital expertise, strength in emerging markets and seamless delivery on increasingly accountable integrated solutions. The strategic decisions we've taken and the investments we made in recent years position us well for this new reality. We've also consistently shown that we have the ability to effectively manage the business and have put ourselves in the path to competitive operating performance from a margin perspective, while also returning capital to our shareholders. We're aware that we have more difficult comparisons ahead as we move through the year, which will make it challenging to sustain the very high growth rates we've reported over the last 12 months. Nonetheless, based on discussions with key clients, it's clear that market has continued to look to us to help them grow. This gives us a greater confidence that we can deliver on our 2011 targets, a 4% to 5% organic revenue growth and 9.5% to 10% operating margin for the full year, and continue to deliver on our commitment to increase shareholder value. With that, I'd like to open it up to questions.

[Operator Instructions] And our first question comes from Alexia Quadrani with JPMorgan. Alexia Quadrani - JP Morgan Chase & Co: Thank you. Can you give us a little bit of color of how McCann performed in the quarter? And secondly, you mentioned that you haven't really seen any impact from rising commodity prices in terms of your concerns going forward or at least in the quarter, yet the packaged goods sector didn't see quite the robust growth than some of your other verticals did. Maybe you can talk a bit about maybe what's driving the relatively softer performance in the packaged goods category for you guys.

Well, let me answer the packaged goods first. As you know, packaged goods -- the comparisons from year-to-year are different because packaged goods, as you know, even during a difficult period continue to perform reasonably well in terms of growth. Also in particular in the packaged goods, we had a timing issue in Latin America concerning revenue recognition, and that contributed to the -- what seems to be a disappointing result. It's a small amount, Alexia, but it did distort that number a bit, and we should see that positive going forward. McCann is really excited and engaged, particularly with respect to the work that they're doing with their multinational clients. Their results for the quarter, as we said, were positive. They're on track in terms of the repositioning of themselves in the marketplace. They've added a lot of new talent. We're excited about what they're doing, and the client's reaction to the new talent has been very solid. So we're looking forward to seeing the continue in improvement at McCann from a revenue point of view, from an expense point of view and more importantly, from a new business opportunity. I think the fact that we retained the army was a good example of how we're positioned, and how even on the competitive environment that they're in, they have the ability to bring in the integrated marketing capabilities with world-class talent. As far as the commodity, I think I answered it on the packaged goods side. We haven't seen it yet. Obviously, the continued focus on our pricing is consistent that we've always seen. It's difficult. We have to show that the work that we're doing provides ROI, which is why we've invested so much in analytics and the capability to show that we're moving the needle. And we're encouraged by what we're seeing going forward. Alexia Quadrani - JP Morgan Chase & Co: And then, Michael, on the comments on Continental Europe where you saw some nice growth and they were probably unexpected. Can you give us a bit of color on maybe your top markets there, Germany, France? How they performed and sort of what was working, what wasn't?

Yes, France -- U.K., France are performing well. Germany, we had a slight reduction, if you will, in the growth. And that had to do with some client reassignments. But as we indicated, it's performing a little better than we thought they were going to do. We're not raising any big flags on the overall recovery. But it's encouraging to see positive results. What's nice in the U.K. is if you recall, previously we saw some positive results in the U.K. particularly from events. This time, we're seeing it across the board in terms of our offerings in the U.K. So it wasn't just one specific transaction that gave rise to the improvement. Alexia Quadrani - JP Morgan Chase & Co: And just last question maybe for Frank, any guidance to how we should we think of severance going forward for the rest of the year?

Yes, Alexia, we usually point out 1% of revenue is a reasonable estimate. Right now, we ran a little ahead of that in the first quarter, but 1% is probably still a good number. But as you've seen in the last couple of years with us, it's -- we'll be very aggressive on the severance fronts. We think those actions are needed for long term sustainability of the business.

And our next question comes from John Janedis from UBS. John Janedis - UBS Investment Bank: Can you -- just going back to the retail and packaged goods categories, were there any account-specific losses in those verticals? And is there any anecdotal evidence that they could maybe be leading indicators of your broader client base in terms of spend?

No, we didn't have any big account losses in either of those verticals. You all know, Wal-Mart is obviously part of our retail sector and they have been doing some repositioning, as you may know, in the marketplace. And that had some effect on that. John Janedis - UBS Investment Bank: Okay. And then just back to the U.K., Michael. There's obviously been a lot of mixed signals on the economy there in consumer confidence but clearly hasn't seen to have had an impact on your business, what are you hearing in the market? And does the outlook you have there changed at all post the March quarter?

Yes, we're still cautious about it. Obviously, we were pleased with the positive results. We've added some new talent particularly, we have new leadership in McCann and the region. We have the Delaney Lund acquisition with Lowe and Draftfcb had some new talent there as well. So we've had a lot of new people and talent and we're seeing some traction there. As I said -- with that said, we're very cautious about it, but it was encouraging to see the positive results in the first quarter. John Janedis - UBS Investment Bank: Okay. And just maybe just one quick one for, Frank. Frank, is there any kind of target for the buyback, at least for the second quarter? I mean, should we look at that 11-or-so million and triple that to give you like a quarterly number or no?

John, we're into the program one month. The way we work it is, we have daily and weekly targets. Those targets are tied to our cash flow projections. Q1 is our weakest cash flow quarter, so you can expect as cash flow generation increases, we'll be more aggressive on our buyback.

I think the key to know about the share buyback is that, we announced that we're authorized to implement a program, we're committed to making that program work and return capital to our shareholders, as we said. And we'll do it in a thoughtful and effective way and that's the way we’ll move forward. The fact that -- as Frank said, we are only in it one month, so that should not be an indication of anything other than we started.

And next is William Bird with Lazard. William Bird - Lazard Capital Markets LLC: Yes, just 2 questions. On organic growth, it looks like you came in nearly 2 points above your peers. I was just wondering if there's anything anomalous or temporary that might be driving growth higher. And then second, I was wondering if you can just talk a little about utilization? How's it trending? Can you relate to the 50 bps rise in temp helps of revenues? Thank you.

Well, I think the organic increase is an indication, as I said, of our strong offerings and our performance of our agencies. Our comp is a little bit different than some of our competitors, but that doesn't take away from the fact that we had very strong organic performance, and it's a result across the board, as I said, of our sectors, as well as our agencies.

And with respect to utilization, Bill, I'll just comment on overall margin target. The margin targets that we put out were predicated on our budget. When we look at the first quarter, our performance was at or better than budget across the board for the most part. So we still feel pretty confident in our 2011 margin targets. William Bird - Lazard Capital Markets LLC: And just specifically on temp help. I was wondering what drove that increase and if that's something you expect to be sustained?

Well we look at base and temp together, and the 2 combined had fairly dramatic improvement in operating leverage for the quarter. So again, it's an area that we're 4-plus to revenue in the quarter, which is high. It's an area that our operators need to continue to focus on, so we think that [indiscernible] needs to be below 4% but a lot of it is tied to just increased business activity. William Bird - Lazard Capital Markets LLC: And can you just clarify what you're saying on incentives comp? You were clear in indicating it'll come down as a percent of revs, was there some kind of timing issue, something that pulled forward a little bit?

It was -- the first quarter was pretty much in line with what we expected. And there's 2 components of it. One is for efficiency and cost reduction. There's also a component for utilizing and being opportunistic in bringing in new talent. But we still think a 1% of revenue is probably a reasonable number for the year. Couldn't it be a bit higher? It could, but I don't think it's going to be -- I don't think it's going to be higher than that.

Yes, on the incentive side, we did have some timing issues in the first quarter because of our long-term incentive was pushed forward a month. And obviously, our share price appreciation affected that number as well. So on the incentive side, we're using 3.5% to 4% for the full-year basis even though the first quarter was like 4.4% or something like that.

And next is Dan Salmon from BMO Capital Markets. Daniel Salmon - BMO Capital Markets U.S.: I'm just going to move away from the quarter and something that brought up at the Analyst Day and just would like to get your thoughts on going forward, and that's performance-based pricing, which was talked about a great deal by Mediabrands. And I'm interested to hear about how you view that model, differentiating IPG in the market. And also the potential of seeing it at some of the other agencies particularly McCann where obviously, the new management team has a history at Mediabrands.

Yes, and I read your comment in your note and you raised it there. And thank you for that. Look, we still think that's the opportunity. And we spoke a lot about it in Mediabrands, because Mediabrands is that -- their business lends itself to performance-based compensation a lot easier. And frankly, our clients in that arena seem to be embracing it better. All I'm saying is that, we continue to push for it. Obviously, Mediabrands, it’s an important part of how they view their strategic advantage, if you will, going forward, in terms of willing to put the skin in the game and assume performance-based compensation will be better for us as we go forward. But I think long-term, I think performance-based compensation is going to be the way to go for our industry. I think it puts us in a very solid position with respect to our clients. And the key there is going to be making sure that we have the analytics that are satisfactory to both the client as well as us in terms of the measurements. So we haven't seen all of a sudden since Investor Day a rash of performance-based compensation contracts. But it continues to be an important focus on -- in our negotiations with our clients as we move forward, because I think it's a very effective way for us to get to the margins that I think this industry should be operating in. Daniel Salmon - BMO Capital Markets U.S.: And from the sounds of it, that's -- you mentioned that Mediabrands lends itself particularly well there. But do you expect to see that becoming a bigger part of some of the other agencies as well?

Yes, we already have an incentive comp performance in our contracts. And of course at Draftfcb, behavioral-based marketing is in their DNA. So their model lends itself to performance-based compensation as well. So yes, I don't think it's going to be unique to the media offerings. I believe it's going to be throughout and obviously, McCann has spent a fair amount of investment in the analytics as part of their integrated offering, particular with the multinational clients that they're dealing with. So I viewed that as an important component of our margin improvement going forward.

And our next question comes from James Dix with Wedbush. James Dix - Wedbush Securities Inc.: I guess 3 questions. First, you had very strong international growth in the quarter, well above what I was expecting on, and I think what others were expecting on. You touched, Michael, on a couple key geographic trouble spots, I guess, going forward. If you can give any color on the other areas and whether we should be looking for any material changes in the strong growth outlook that you saw in 1Q in some of those other areas, such as in the Asia Pacific or Latin America? And then I guess, secondly, I suppose maybe more for Frank, do you see any differences in incremental margin, either by geography or by discipline, that we should be thinking about just as we think about your progression towards that 9.5% to 10% goal for the year? For example, is international growth, does that help you more towards your potential target or is that more of a red hen [ph]? And then I have just one follow up.

Sure, on the -- obviously, we're excited about what's happening in Latin America, China and India. We have very strong offerings across all our multinational clients there, as well as local. So particularly in Brazil, we have a strong offering obviously, the transaction that we did at McCann with W [ph] already is very effective and we're very pleased with the results of that. Draftfcb and Lowe both had very strong offerings as well as Weber Shandwick and our other marketing services. So Latin America performed extremely well. Not quite the 40% growth that we saw last year but obviously, the comp was a lot different. But nonetheless, it was strong double-digit and we expect to see continued growth in Latin America. The same is true for India. We think India is a very important component of our growth plans. And there, too, we have a very strong media offering, as well as our multinational clients and agencies that are present there, Draftfcb, McCann and Lowe. And China, we're seeing strong performance. We view China as an opportunity for us, as I said before, we're a little bit behind our competition in terms of our presence in China, but we've made -- we're making a strong effort to increase our presence in China and our expectation is to continue that increase and follow the strong performance that were seeing over there. On the margin, Frank?

James, there's nothing in the revenue mix in Q1 or our view for the back half of the year that changes our view that 30% conversion on incremental revenue is still a reasonable number. James Dix - Wedbush Securities Inc.: Okay, great. And then just one follow up. You talked a little bit about Mediabrands and their compensation structure. Could you talk just a little bit about the growth you're seeing in media buying and planning, generally? Some of your peers have talked about some pretty strong growth. I presume you're seeing that at Mediabrands, but if you could confirm that. And then, just what is your outlook for that -- that discipline going forward this year, especially as the ad recovery continues?

Well, as we indicated, Mediabrands both -- all the components Mediabrands initiatives, as well as UM had a very strong first quarter. Buying, you have to split buying from planning. Obviously buying is a more difficult market to enhance margins but it's part of the integrated offering in media, and therefore planning is that much more important. We're very pleased, as you know, we've repositioned our offerings in Mediabrands on regions where we could compete so that we can bring all the offerings in Mediabrands to bear with respect to our client offerings. And that's having good traction in the marketplace. We view our media offerings under the umbrella of Mediabrands as a critical component of our growth opportunity in our margin opportunity to actually go forward.

And next is Tim Nollen with Macquarie. Tim Nollen - Macquarie Research: Thanks. I have 3 things, please. First on revenues, we've talked about this issue of comps a few times now already in this call. And your peers have also, similar to you, said that they're quite optimistic on the pace of organic growth for the bulk of the year. But your comp shift into Q2 is very dramatic versus Q1. You were minus 3 in Q1 last year and you were plus 8.5 in Q2. So just to apply the same type of growth rate from Q1 this year into Q2, it would mean you'd be down 1% in Q2 and yet, you're talking a very positive story. I just wonder if there's incremental spending from clients coming through that's going to fill in Q2 or what is it that makes you that optimistic that the numbers will stay high? And this isn't just you, it's your peers all saying the same thing, but it's a starker contrast for you from Q1 into Q2. Second, question is, the working capital figure that you pointed to, and I noticed quite a sharp downturn there in the Q1 number versus Q1 last year. I know Q1 is always seasonally low on that. But I just wonder what was driving the figure this year versus last year? And then lastly, if you could please talk about net new business, even if you won't give a number of what the trend is and what accounts we need to be aware of there in play. Thanks.

Okay. I'll take 2 of them, and I'll give the working capital to Frank. Q1 versus Q2. Look, we don't look at it -- I know you have to model, and you have to expect on a quarterly basis. We look at it as it's on a year basis. And that's why, when we say, we're comfortable with the 4% to 5% organic growth for the year, it takes into consideration the lumpiness, if you will, of how it’s spread on a quarterly basis. So whether it comes through on the second quarter, or the third quarter, we think that number -- we're comfortable with that number, and obviously, starting where we are in the first quarter is encouraging for us going forward. The tone of our business -- another way of answering your question is the tone of our business continues to be very solid. So therefore, going into the second quarter, there's no reason for us to believe that there is any reason for us not to be able to deliver on what we're saying. And how it falls out on a quarterly basis, we'll see. Okay? As far as net new business, the one item -- we've had 3 items, 3 companies in review that everyone was watching. One was Microsoft. We know the results for that, in terms of retaining some of the business in losing the North American site. The Army, McCann retained the Army and the other one is S.C. Johnson, which as you know, we're defending. And we hope to see results probably either the second quarter or early part of third quarter. So in terms of net new business, we should see the impact of the Microsoft loss affecting us in the second half of the year. And as far as the rest goes there are a couple of other pitches out there that we're in the finals on. And we hope could be successful in those. On the working capital, Frank?

With respect to working capital, Tim, the significant use in Q1 is attributable to the significant generation in Q4. They're directly correlated. When you take a look at Q1 cash used as a percentage of Q4 cash generated, it's right in line with what we normally would have expected.

And our next question comes from Peter Stabler from Wells Fargo Security. Peter Stabler - Credit Suisse: Michael, you mentioned at the Investor Day, complexity and confusion being a friend. You brought it up again today. I'm wondering if you could step back and just elaborate a little bit on that? I tend to agree in my conversations with agencies and clients that this is an ongoing trend. Help us understand whether this is a positive trend. Can we enter a period of greater secular growth, even if it's marginally greater than we saw over the last, let's say, decade on a normalized basis? Is increasing complexity and confusion leading to an increase in activity and creation of assets by your agencies? Or is it just more of a market condition that you can't really quantify or address, in terms of growth targets, et cetera? Thanks very much.

I think it's a fair question, and yes, I've said it a few times. No, I think it adds to growth, in terms of our opportunities. Just look at what's happened with social media, okay? You get an entire new market that opens up. Clients that are hearing a lot about it at cocktail parties. That's all they talk about. The CEOs attend the cocktail party and they all come back and saying, " What are we doing about social media?" And we -- what we have to do is be ahead of the curve, in terms of investing in assets and having people who can answer those questions for our clients as part of the integrated offering that we're providing. So we have whole new areas of expertise. And what's great about in social media, for example, it crosses all of our disciplines. So certainly our integrated offerings, in terms of our networks, have social media capabilities. Our independent agencies have social media capabilities. And our PR agencies are where you would logically think social media plays a very important role is a very important growth opportunity. And in fact, they're delivering on it in terms of their results. So that's just one example. The other part of it is, our clients have to figure out where do they spend their marketing dollars. And that's where our expertise comes into play. We have to be able to look at a total solution for our clients in terms of where they spend their dollars, where do they get the best bang for the buck. And it's incumbent upon us to have the expertise to help them do that, to analyze the effect of that. And basically, ultimately, our compensation on the performance of that will be decided. So I think it is a pretty exciting place for us to be as these new media opportunities and these new areas grow. If we're ahead of the curve or participate in that, every time we were asked to be in front of our client, it's an opportunity for show -- telling them and showing them our expertise and how we can help them move the needle. So it's incumbent upon us to be ready, willing and able to help them and be ahead of the curve and for them to ask. And because it's so confusing, it's impossible for all of our clients to have that kind of expertise internally. So I think it's a huge opportunity for our industry. Peter Stabler - Credit Suisse: I've got a quick one for Frank. Could you tell us year-over-year headcount changes in terms of gross bodies? And then could you remind me the event marketing pass-through costs, where do the -- what line do [indiscernible] up in?

The headcount change, Peter, it's 4% year-over-year, 1% for the quarter. So we had 1% over the last 3 months. And on the pass-through costs go through the O&G bucket. And the year-on-year pass-through cost change is de minimis. Peter Stabler - Credit Suisse: Where in O&G?

Other. Peter Stabler - Credit Suisse: Other. Okay.

And our next question comes from Matt Chesler with Deutsche Bank. Matthew Chesler - Deutsche Bank AG: Good morning. As I look at your historical results, it's now been 4 quarters in which you've grown faster than the rest of your peers. So admittedly though, you're predicting that sustainability of the ad market strength is getting more complex. But what do you think is preventing or holding back the ratings agencies for taking a more constructive view?

We'd like to know the answer to that too, by the way. It's our view that we should be already there. We've always answered this question. We have meetings -- we've had meetings and we have meetings coming up. And obviously, they have -- Accenture already has us as investment grade, the other two have us on now for positive. They're waiting to seek, as you point out, consistency. We already show fourth quarter. I would suspect that they'll look to see how we perform for this year. And I don't think they have to, but they may. And hopefully, after they see a strong performance for the year, we'll see action on their part. But frankly, I agree with you. I think all of us agree with you. We've had 4 good solid results. We've shown our ability to manage our business. Certainly, from a competitive point of view, our organic growth shows we're competitive. We've shown the ability to leverage the revenue and convert. And our balance sheet is as strong as it's ever been. And so I don't see frankly, any reason why they shouldn't. And we'll continue to push them to see it the same way. Matthew Chesler - Deutsche Bank AG: So you're saying it might be premature to expect that 4 quarters is enough or what -- the trajectory is enough right now?

Matt, probably at best case, an upgrade the end of this year, more likely. Yes, there could be an interim move between where we are now and investment grades because there still is one more notch. But we'd expect if we deliver on our current targets that, that early in next year would probably more reasonable time run.

I also suspect the rating -- the rating agencies in the past have had issues on timing things. And with the uncertainty in the global environment right now, they may use that as a reason to hold back as well. So it's not up to us. We can make the case. We certainly strongly believe that we should be there, and I think in time -- at the appropriate time, they'll take the action. But nonetheless, I think the way to look at us as a rating perspective is where we think where we already are there and therefore, our performance, and frankly, our pricing should reflect that.

They were all at the Investor Day. The feedback was very positive. In fact, S&P gave us CreditWatch positive coming out of that meeting. So all things are pointing the right direction. It’s to Michael's point, it's probably just -- it's more a matter of timing and internal process. Matthew Chesler - Deutsche Bank AG: So if we were to assume that it's just a matter of timing -- I've always viewed your cash balance. Your balance sheet is including some -- I don't know if it's insurance cash or cash that you need to hold because you don't have access to the commercial paper markets the way that you would. Let's just presume that you get the ratings upgrade, and you can access the commercial paper balance, what do you think that does to the amount of cash that you think you need to hold on the balance sheet?

Well, obviously, that financial flexibility helps us do a whole bunch of things. And obviously, we're looking at all of that. Again, one question that will follow from that, do we see any huge acquisitions out there that we would leverage up to do? And frankly, we haven't seen any. We're not missing any huge offerings, if you will. We continue to do -- I'll answer one of the questions I'm sure one of you have, in terms of what we see in the acquisition environment. And we put out the $150 million number as a stake in the ground, and we continue to see some transactions. We'll announce a couple of small specialty transactions coming up, as we said we would. But we'll be opportunistic on the acquisitions side in the digital and the emerging markets. The rest is just financial modeling and financial opportunities for us. And the more that you have in flexibility, the more things we can do. Commercial paper, obviously, would be helpful. And that would enable us to free up some excess cash that's on the balance sheet. I think we've shown that we are willing -- I think the announcement of the dividend and the share buyback is a good example of how we view our responsibility to our shareholders is if we have too much cash on our balance sheet is to return it in a thoughtful way. So as our financial flexibility expands, then we will continue to look at how the best way to enhance our shareholder value.

Your next is Craig Uber with Access 342. Craig Huber -: A housekeeping question, first. On foreign exchange, given that you guys are in about 100 countries around the world. If rates stay where they're at right now for the rest of the year, how would you expect foreign currency impact your numbers for the second quarter and also for the full year?

For the full year, relatively flat. I'm not at position to give you that Q2 number right now, Craig. Craig Huber -: Okay, and then also just, can you elaborate further on one of your comments on Continental Europe in the year? Your organic growth there the last 2 quarters, I guess, is between 2% to 4%. I mean given the various cross-currents, small markets there versus large, proximity to the Middle East, et cetera, slower economies, do you think that's a decent expectation to 4% organic growth in Continental Europe for you guys in the next 3 quarters?

At the beginning of the year, I would have thought that would be on the high side, to be honest with you. I think given the results in the first quarter, probably 2% is a number that would be if we deliver that 2% to 4%, I think that would be a good year. And I'm encouraged to see that, but again, that one is very hard to predict. There are a lot of things that are going on there. We're just encouraged by what we've seen in the first quarter. And ask the question again in the second quarter, I'll have a better answer for you. Craig Huber -: Okay, then also, your auto category, just generally speaking. How did that perform revenue-wise organic growth year-over-year in the quarter? And what are those clients generally telling you about you the outlook for their auto market advertising spend for the rest of the year?

Yes, our auto category -- what's encouraging about our auto category is it continues to be very positive. It's in the -- the growth is in double-digit numbers. And it's a number of auto clients that are contributing. As you know, we had some new clients last year, and that's contributing to our growth. And we continue to see the spend there. So we're encouraged by what we're seeing. We haven't seen any big pullbacks as a result of supply issues with respect to production. And we expect to see that to continue. It's a very competitive environment out there. And they have to spend marketing dollars to sell cars.

And our last question comes from Richard Tullo with Albert Fried. Richard Tullo - Albert Fried & Company, LLC: 10% revenue growth, very solid, absolute, relative basis as you alluded to before. During the quarter, the several new account wins: Hasbro and Sony. Would you say that the performance-based marketing contributed to those wins in some shape or form? And are these performance-based accounts?

I won't comment on how we structure our compensation by client. And I would say, you don't get the compensation unless you get to the finals and you're pretty well there. So I wouldn't say that compensation -- performance-based compensation is the reason for a win, but it certainly helps in narrowing any gap there might be, in terms of expectation on pricing. But unless we have the offering from a professional point of view, no matter what you're pricing is going to be, you're not going to -- you're not going to win the business. So our approach is, put together the best team you can with the best offering you have, get to the finals and then start talking about compensation. And if you need to bridge the gap and if performance-based compensation does that, we're there. Richard Tullo - Albert Fried & Company, LLC: Okay, and in regards to Asia-Pacific, and specifically Japan. How is that market going? Are we having discussions about reduced spends? Or are they holding tight? What is the status at this point in time?

Well as I indicated, frankly, we had a positive quarter in the first quarter in Japan. But unfortunately because of the events, there's no doubt that, that's going to be pulled back for the rest of the year. There are 2 components. There's the local spending and then there's the multinational spending within Japan. And we participate in both. I think the one that will be most adversely affected would be the local spend. And therefore, we're not projecting any growth in Japan. And as far as the multinational spend, we're watching that carefully, but we still see spend in those markets. Richard Tullo - Albert Fried & Company, LLC: And in regards to Facebook. If you were to sell that stake at some point this year, are you more inclined to return the proceeds to shareholders, pay back, buy back debt? Or make acquisitions or a little bit of all?

We don't look at our programs on a discreet basis. We'll look at our overall balance sheet. We'll look at our available cash, and we'll look at the best way to enhance shareholder value. And if it means increasing the dividend or buyback or doing something else, we will do it. But you can be assured that we're looking at the best way to enhance shareholder value because that's what our responsibilities are. Richard Tullo - Albert Fried & Company, LLC: And just as a follow-up with Frank. Is it safe to assume that $30 million to $40 million in a normal cash flow environment would be kind of a run rate on the buyback program?

We announced, Richard, that the buyback program approved by our board was $300 million. And we didn't put a timeline on when we would execute the complete program. As I indicated in my comments earlier, we set daily and weekly targets, predicated on cash flow projections. Q1 is normally our weakest cash flow quarter. As cash flow generation increases, as it seasonally normally does, you can expect to see more aggressive with respect to that program.

Well, thank you, all, for participating. We're encouraged and excited about our results for the first quarter. And as I said, the tone of the business is positive, and we look forward to our next call with you. Thank you very much.

And thank you for your participation in today's call. Please disconnect your lines at this time.