-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SqrOlnhGzCOTry+nXmvzt+RTmKr1BVYSruhTaoLShmP417oaQ5iyPWxfmUndWjLF megatsXDiPGVOS4E4yXfeA== 0000950123-01-505579.txt : 20010815 0000950123-01-505579.hdr.sgml : 20010815 ACCESSION NUMBER: 0000950123-01-505579 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREY GLOBAL GROUP INC CENTRAL INDEX KEY: 0000043952 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 130802840 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-07898 FILM NUMBER: 1710326 BUSINESS ADDRESS: STREET 1: 777 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2125462000 MAIL ADDRESS: STREET 1: 777 THIRD AVE STREET 2: 777 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: GREY ADVERTISING INC /DE/ DATE OF NAME CHANGE: 19920703 10-Q 1 y52479e10-q.txt GREY GLOBAL GROUP, INC. 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended June 30, 2001 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-7898 GREY GLOBAL GROUP INC. ----------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-0802840 - ------------------------------- ----------------------------------------- (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization) 777 Third Avenue, New York, New York 10017 - --------------------------------------- --------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, 212-546-2000 including area code: --------------- NOT APPLICABLE Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------ As of July 31, 2001, the total number of shares outstanding of Registrant's Common Stock, par value $0.01 per share ("Common Stock"), was 1,036,350 and of Registrant's Limited Duration Class B Common Stock, par value $0.01 per share ("Class B Common Stock"), was 220,405. 2 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES INDEX
PAGE NO. Financial Statements: Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Operations 5 Condensed Consolidated Statements of Cash Flows 6 Notes to Condensed Consolidated Financial Statements 8 Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Other Information 13 Signatures 14 Index to Exhibits 15
2 3 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31, 2001 2000 (in thousands, except share and per share data) (UNAUDITED) (A) ------------------------------ ASSETS Current assets: Cash and cash equivalents $ 156,720 $ 309,750 Marketable securities 1,427 3,006 Accounts receivable 881,849 999,152 Expenditures billable to clients 82,301 90,075 Other current assets 116,806 105,689 --------------------------- Total current assets 1,239,103 1,507,672 Investments in and advances to nonconsolidated affiliated companies 16,369 16,198 Fixed assets-at cost, less accumulated depreciation of $180,958 in 2001 and $169,939 in 2000 158,446 147,735 Marketable securities 12,411 13,797 Intangibles-net of accumulated amortization of $61,291 in 2001 and $54,420 in 2000 190,729 192,110 Other assets - including loans to executive officers of $5,247 in 2001 and 2000 121,601 111,808 --------------------------- Total assets $1,738,659 $1,989,320 ===========================
See accompanying notes to condensed consolidated financial statements. (A) The condensed consolidated balance sheet has been derived from the audited financial statements at that date. 3 4 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
JUNE 30, DECEMBER 31, 2001 2000 (in thousands, except share and per share data) (UNAUDITED) (A) ------------------------------ LIABILITIES AND COMMON STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,029,952 $ 1,239,940 Notes payable to banks 61,165 47,016 Accrued expenses and other 193,657 245,751 Income taxes payable 18,261 26,386 ------------------------------ Total current liabilities 1,303,035 1,559,093 Other liabilities, including deferred compensation of $57,082 in 2001 and $54,290 in 2000 104,612 99,597 Long-term debt 128,025 128,025 Minority interest 21,025 20,675 Redeemable Preferred Stock - at redemption value; par value $0.01 per share; authorized 500,000 shares; issued and outstanding 30,000 shares in 2001 and 2000 9,878 9,995 Common stockholders' equity: Common Stock - par value $0.01 per share; authorized 50,000,000 shares; issued 1,244,452 shares in 2001 and 1,238,524 shares in 2000 12 12 Limited Duration Class B Common Stock - par value $0.01 per share; authorized 10,000,000 shares; issued 247,542 shares in 2001 and 251,663 shares in 2000 2 3 Paid-in additional capital 46,830 46,004 Retained earnings 205,540 205,378 Accumulated other comprehensive loss: Cumulative translation adjustment (31,663) (27,388) Unrealized loss on marketable securities (4,108) (7,336) ----------- ----------- Total accumulated other comprehensive loss (35,771) (34,724) ----------- ----------- Loans to officer used to purchase Common Stock and Limited Duration Class B Common Stock (4,726) (4,726) ----------- ----------- 211,887 211,947 Less - cost of 209,202 and 210,749 shares of Common Stock and 26,937 and 26,937 shares of Limited Duration Class B Common Stock held in treasury in 2001 and 2000, respectively 39,803 40,012 ----------- ----------- Total common stockholders' equity 172,084 171,935 ----------- ----------- Total liabilities and common stockholders' equity $ 1,738,659 $ 1,989,320 =========== ===========
See accompanying notes to condensed consolidated financial statements. 4 5 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED JUNE 30, JUNE 30, (in thousands, except share and per share data) 2001 2000 2001 2000 -------------------------------------------------------------------- Commissions and fees $ 314,260 $ 306,375 $ 619,111 $ 595,083 Expenses: Salaries and employee related expenses 211,054 197,273 416,173 384,677 Office and general expenses 93,479 95,079 187,512 184,575 -------------------------------------------------------------------- 304,533 292,352 603,685 569,252 -------------------------------------------------------------------- 9,727 14,023 15,426 25,831 Other (loss) income - net (1,417) 1,262 (2,186) 2,413 Income of consolidated companies before taxes on income 8,310 15,285 13,240 28,244 Provision for taxes on income 4,252 7,921 6,726 14,832 -------------------------------------------------------------------- Income of consolidated companies 4,058 7,364 6,514 13,412 Minority interest applicable to consolidated companies (1,572) (2,206) (3,486) (3,564) Equity in (loss) earnings of nonconsolidated affiliated companies (59) 567 (356) 1,031 -------------------------------------------------------------------- Net income $ 2,427 $ 5,725 $ 2,672 $ 10,879 ==================================================================== Weighted average number of common shares outstanding Basic 1,236,136 1,227,542 1,237,029 1,230,587 Diluted 1,371,944 1,342,343 1,372,139 1,342,460 Earnings per common share Basic $ 1.89 $ 4.67 $ 2.16 $ 8.78 Diluted $ 1.73 $ 4.29 $ 2.00 $ 8.10 Dividends per common share $ 1.00 $ 1.00 $ 2.00 $ 2.00 ====================================================================
See accompanying notes to condensed consolidated financial statements. 5 6 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, (in thousands, except share and per share data) 2001 2000 --------------------------- OPERATING ACTIVITIES Net income $ 2,672 $ 10,879 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization of fixed assets 21,964 18,152 Amortization of intangibles 6,643 5,598 Deferred compensation 3,981 6,008 Equity in earnings (loss) of nonconsolidated affiliated companies, net of dividends received of $425 in 2001 and $12 in 2000 781 (1,019) Loss from the sale and write-down of marketable securities 2,486 96 Minority interest applicable to consolidated companies 3,486 3,564 Restricted stock expense 791 564 Deferred income taxes (2,400) (1,200) Changes in operating assets and liabilities (161,950) (138,172) --------------------------- Net cash used in operating activities (121,546) (95,530) INVESTING ACTIVITIES Purchases of fixed assets (35,137) (36,456) Trust fund deposits (2,317) (1,936) (Decrease) increase in investments in and advances to nonconsolidated affiliated companies (952) 1,009 Purchases of marketable securities -- (2,741) Proceeds from the sale of marketable securities 3,677 1,900 Purchases of investment securities (746) (14,296) Increase in intangibles, primarily goodwill (9,760) (22,923) --------------------------- Net cash used in investing activities (45,235) (75,443)
6 7 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, (in thousands, except share and per share data) 2001 2000 ----------------------------- FINANCING ACTIVITIES Net proceeds from short-term borrowings 15,916 11,579 Common shares acquired for treasury (122) (1,621) Cash dividends paid on common shares (2,507) (2,485) Cash dividends paid on redeemable Preferred Stock (120) (120) (Payments for repurchase) net proceeds from issuance of restricted stock (79) 7 Proceeds from exercise of stock options 302 188 -------------------------- Net cash provided by financing activities 13,390 7,548 Effect of exchange rate changes on cash 361 (3,058) -------------------------- Decrease in cash and cash equivalents (153,030) (166,483) Cash and cash equivalents at beginning of period 309,750 306,556 -------------------------- Cash and cash equivalents at end of period $ 156,720 $ 140,073 ==========================
See accompanying notes to condensed consolidated financial statements. 7 8 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data) 1. As permitted by the Securities and Exchange Commission, the accompanying unaudited Consolidated Financial Statements and Notes thereto have been condensed and, therefore, do not contain all disclosures required by accounting principles generally accepted in the United States. Reference should be made to the Company's Annual Report on Form 10-K for the year ended December 31, 2000 filed with the Securities and Exchange Commission. 2. The financial statements as of June 30, 2001 and for the three and six months ended June 30, 2001 and 2000 are unaudited. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. 3. The results of operations for the three and six months ended June 30, 2001 are not necessarily indicative of the results to be expected for the full year. 4. The provision for taxes on income results in an effective tax rate that is greater than the Federal statutory rate principally due to state and local income taxes and an overall effective foreign tax rate in excess of the Federal statutory rate. 5. As of June 30, 2001 and December 31, 2000, the Company had outstanding 20,000 shares of Series I Preferred Stock, and 5,000 shares each of its Series II and Series III Preferred Stock. The holder of these shares is the Chairman and Chief Executive Officer of the Company. Each share of Preferred Stock is to be redeemed by the Company at a price equal to the book value per share attributable to one share of Common Stock and one share of Class B Common Stock (subject to certain adjustments) upon redemption, less a fixed discount established upon the issuance of the Preferred Stock. The holder of each class of Preferred Stock is entitled to receive cumulative preferential dividends at the annual rate of $.25 per share, and to participate in dividends on one share of the Common Stock and one share of the Class B Common Stock to the extent such dividends exceed the per share preferential dividend. The redemption date for the Series I, Series II and Series III Preferred Stock is fixed at April 7, 2004. 6. The computation of basic earnings per common share is based on the weighted average number of common shares outstanding and, for diluted earnings per common share, is adjusted for the dilutive effect, if any, of the assumed exercise of dilutive stock options, shares issuable pursuant to the Company's Senior Management Incentive Plan and the assumed conversion of the Company's 8-1/2% Convertible Subordinated Debentures. For the purpose of computing basic earnings per common share, the Company's net income is adjusted by dividends paid on the Company's Preferred Stock and by the change in redemption value of the Company's Preferred Stock during the period. For the purpose of computing diluted earnings per common share, net income is also adjusted by the interest savings, net of tax, on the assumed conversion of the Company's 8-1/2% Convertible Subordinated Debentures. Additionally, in computing diluted earnings per common share, the average quarterly market price is used to determine the 8 9 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (in thousands, except share and per share data) number of shares which would be assumed to be repurchased. The market price for a share of Class B Common Stock, which is not publicly traded, is deemed to be equal to the market price of a share of Common Stock, into which a share of Class B Common Stock may be converted at the option of the holder, as of the date such valuation is made. The following table shows the amounts effecting income used in computing earnings per common share ("EPS") and the weighted average number of shares of dilutive potential common stock:
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------------------------------------------------- 2001 2000 2001 2000 ------------------------------------------------------------------- BASIC EARNINGS PER COMMON SHARE WEIGHTED AVERAGE SHARES 1,236,136 1,227,542 1,237,029 1,230,587 ------------------------------------------------------------------- Net income $ 2,427 $ 5,725 $ 2,672 $ 10,879 Effect of dividend requirements and the change in redemption value of redeemable preferred stock (91) 5 (3) (77) ------------------------------------------------------------------- NET EARNINGS USED IN COMPUTATION $ 2,336 $ 5,730 $ 2,669 $ 10,802 ------------------------------------------------------------------- PER SHARE AMOUNT $ 1.89 $ 4.67 $ 2.16 $ 8.78 =================================================================== DILUTED EARNINGS PER COMMON SHARE Weighted average shares used in the Basic EPS calculation 1,236,136 1,227,542 1,237,029 1,230,587 Net effect of dilutive stock options and stock incentive plans (1) 84,680 63,673 83,982 60,745 Assumed conversion of 8.5% convertible subordinated debentures 51,128 51,128 51,128 51,128 ------------------------------------------------------------------- ADJUSTED WEIGHTED AVERAGE SHARES 1,371,944 1,342,343 1,372,139 1,342,460 ------------------------------------------------------------------- Net earnings used in the Basic EPS calculation $ 2,336 $ 5,730 $ 2,669 $ 10,802 8.5% convertible subordinated debentures interest net of income tax effect 35 35 71 71 ------------------------------------------------------------------- NET EARNINGS USED IN COMPUTATION $ 2,371 $ 5,765 $ 2,740 $ 10,873 ------------------------------------------------------------------- PER SHARE AMOUNT $ 1.73 $ 4.29 $ 2.00 $ 8.10 ===================================================================
(1) Includes 20,034 and 20,122 shares expected to be issued pursuant to the Senior Management Incentive Plan for the three and six months ended June 30, 2001, respectively, and 15,723 and 15,411 shares expected to be issued pursuant to the Senior Management Incentive Plan for the three months and six months ended June 30, 2000, respectively. 7. During the second quarter of 2001 and 2000, total comprehensive loss amounted to $2,567 and total comprehensive income amounted to $639, respectively, and for the six months ended June 30, 2001 and 2000 total comprehensive loss was $1,623 and total comprehensive income was $3,089, respectively. The difference between net income and total comprehensive income is the result of the change in the translated value of the net assets of the Company's international operations due to the change in value of the United States dollar versus other currencies and the change in fair market value of marketable securities. 9 10 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (in thousands, except share and per share data) 8. The Company is not engaged in more than one industry segment. The Company evaluates performance by geographic region based on profit or loss before income taxes. Commissions and fees are attributed to the geographic region that generates the billings. Commissions and fees, operating profit (loss), and income (loss) of consolidated companies before taxes on income for the three and six months ended June 30, 2001 and 2000, and related identifiable assets at June 30, 2001 and December 31, 2000 are summarized below according to geographic region:
FOR THE THREE MONTHS ENDED JUNE 30, -------------------------------------------------------------------- UNITED STATES EUROPE ---------------------------- ---------------------------- 2001 2000 2001 2000 ------------------------------- ----------------------------- Commissions and fees $ 126,535 $ 137,144 $ 142,176 $ 126,765 -------------------------------------------------------------------- Operating profit (loss) (409) 4,203 6,074 5,725 -------------------------------------------------------------------- Income (loss) of consolidated companies before taxes on income (3,248) 5,301 7,525 5,778 -------------------------------------------------------------------- Identifiable assets Investments in and advances to non- consolidated affiliated companies Total assets
FOR THE THREE MONTHS ENDED JUNE 30, -------------------------------------------------------------------- OTHER CONSOLIDATED ------------------------------- ------------------------------ 2001 2000 2001 2000 ------------------------------- ------------------------------ Commissions and fees $ 45,549 $ 42,466 $ 314,260 $ 306,375 ------------------------------- ------------------------------- Operating profit (loss) 4,062 4,095 9,727 14,023 ------------------------------- ------------------------------- Income (loss) of consolidated companies before taxes on income 4,033 4,206 8,310 15,285 ------------------------------- ------------------------------- Identifiable assets Investments in and advances to non- consolidated affiliated companies Total assets
FOR THE SIX MONTHS ENDED JUNE 30, ---------------------------------------------------------------------- UNITED STATES EUROPE ------------------------------ ----------------------------- 2001 2000 2001 2000 ------------------------------ ----------------------------- Commissions and fees $ 255,808 $ 265,454 $ 282,130 $ 252,736 ------------------------------ --------------------------------- Operating profit (loss) (551) 9,881 15,466 13,566 ------------------------------ --------------------------------- Income (loss) of consolidated companies before taxes on income (2,987) 13,183 15,764 12,662 ------------------------------ --------------------------------- Identifiable assets 554,514 791,655 897,540 880,675 ------------------------------ --------------------------------- Investments in and advances to non- consolidated affiliated companies Total assets
GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (in thousands, except share and per share data)
FOR THE SIX MONTHS ENDED JUNE 30, ------------------------------------------------------------------- OTHER CONSOLIDATED ----------------------------- ------------------------------ 2001 2000 2001 2000 ------------------------------ ----------------------------- Commissions and fees $ 81,173 $ 76,893 $ 619,111 $ 595,083 ------------------------------- ----------------------------- Operating profit (loss) 511 2,384 15,426 25,831 ------------------------------- ----------------------------- Income (loss) of consolidated companies before taxes on income 463 2,399 13,240 28,244 ------------------------------- ----------------------------- Identifiable assets 270,236 300,792 1,722,290 1,973,122 ------------------------------- ---------------------------- Investments in and advances to non- consolidated affiliated companies 16,369 16,198 ----------------------------- Total assets $ 1,738,659 $ 1,989,320 ==============================
9. In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141 ("FAS 141"), Business Combinations, and Statement of Financial Accounting Standards No. 142 ("FAS 142"), Goodwill and Other Intangible Assets. FAS 141 and FAS 142 are effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized, but will be subject to annual impairment tests in accordance with the Statements. Other intangible assets will continue to be amortized over their useful lives. The Company will adopt the new statement in the first quarter of 2002 and has not yet determined what the effect of these tests will be on the earnings and financial position of the Company. 10 11 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (in thousands, except share and per share data) RESULTS OF OPERATIONS Income from commissions and fees ("gross income") increased 2.6% during the second quarter of 2001 and 4% during the six months ended June 30, 2001 when compared to the same period in 2000. Absent exchange rate fluctuations, gross income increased 9.3% in the three and six months ended June 30, 2001 when compared to the same period in 2000. In the second quarters of 2001 and 2000, respectively, 40.3% and 44.8% of consolidated gross income was attributable to domestic operations and 59.7% and 55.2% to international operations. In the second quarter of 2001 and the first six months of 2001, respectively, gross income from domestic operations decreased 7.7% and 3.6% versus the respective prior periods; while gross income from international operations increased 10.9% (23.1% absent exchange rate fluctuations) for the second quarter and 10.2% (19.7% absent exchange rate fluctuations) for the first six months when compared to the same respective periods in 2000. The decline in gross income domestically is primarily due to the general economic slowdown in the United States which has affected client spending with especially pronounced weakness in operations servicing technology-related and telecom sector clients. Salaries and employee related expenses increased 7.0% in the second quarter of 2001 and 8.2% for the first six months of 2001. Office and general expenses decreased 1.7% in the second quarter and increased 1.6% for the six months ended June 30, 2001. The increase in salary and employee related expense includes a significant increase in severance costs incurred to reduce expenses in the current environment. Office and general expenses reflect a continued focus on controlling expenses. Inflation did not have a material effect on revenue or expenses during 2001 or 2000. Minority interest applicable to consolidated companies increased by $634 in the second quarter of 2001 and increased by $78 for the first six months of 2001. Equity in earnings of nonconsolidated affiliated companies decreased by $626 in the second quarter of 2001 and decreased by $1,387 for the first six months of 2001. The fluctuations are primarily due to changes in the level of profits of majority-owned companies and nonconsolidated affiliated companies. The effective tax rate is 51.2% for the second quarter of 2001 and 50.8% for the first six months of 2001. Any fluctuation in the rate is primarily attributable to the change in the mix of pre-tax income from operations in countries with differing effective tax rates. Net income was $2,427 in the second quarter of 2001 and $2,672 for the first six months of 2001 as compared to net income of $5,725 and $10,879 in the respective prior periods. Basic and diluted earnings per common share for the second quarter of 2001 was $1.89 and $1.73, respectively, and for the first six months of 2001 were $2.16 and $2.00, respectively. Basic and diluted earnings per common share for the second quarter of 2000 was $4.67 and $4.29, respectively, and for the first six months of 2000 was $8.78 and $8.10, respectively. 11 12 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (in thousands, except share and per share data) LIQUIDITY AND CAPITAL RESOURCES Working capital decreased to a deficit of $63,932 at June 30, 2001 versus a deficit of $51,421 at December 31, 2000. Cash and cash equivalents decreased by $153,030 from $309,750 at December 31, 2000 to $156,720 at June 30, 2001. The decrease in cash and cash equivalents is attributable to the timing of collections of accounts receivable and billing of expenses to clients versus payments to trade vendors. The Company has committed lines of credit totaling $74,000 which together with other sources of funding, it believes adequate. These lines of credit were partially utilized during the three months and six months ended June 30, 2001 and 2000 to secure obligations of selected foreign subsidiaries. There was $17,900 and $19,000 outstanding under these credit lines as of June 30, 2001 and December 31, 2000, respectively. Other lines of credit are available to the Company in foreign countries in connection with short-term borrowings and bank overdrafts used in the normal course of business. There was $43,265 and $28,016 outstanding at June 30, 2001 and December 31, 2000, respectively. FORWARD LOOKING STATEMENTS In connection with the provisions of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"), the Company may include Forward Looking Statements (as defined in the Reform Act) in oral or written public statements issued by or on behalf of the Company. These Forward Looking Statements may include, among other things, plans, objectives, projections, anticipated future economic performance or assumptions and the like that are subject to risks and uncertainties. As such, actual results or outcomes may differ materially from those discussed in the Forward Looking Statements. Important factors which may cause actual results to differ, include but are not limited to the following: the unanticipated loss of a material client or key personnel, delays or reductions in client budgets, shifts in industry rates of compensation, government compliance costs or litigation, unanticipated natural disasters, changes in the general economic conditions that affect interest rates and/or consumer spending both in the U.S. and the international markets in which the Company operates, unanticipated expenses, client preferences which can be affected by competition and the ability to project risk factors which may vary. 12 13 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Reference is made to the Index annexed hereto and made a part hereof. (b) Reports on Form 8-K: The Company did not file any reports on Form 8K during the quarter ended June 30, 2001. 13 14 GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GREY GLOBAL GROUP INC. (REGISTRANT) Dated: August 14, 2001 By:/s/ Steven G. Felsher ----------------------------- Steven G. Felsher, Vice Chairman General Manager (Duly Authorized Officer) Dated: August 14, 2001 By:/s/ Lester M. Feintuck ----------------------------- Lester M. Feintuck, Senior Vice President Chief Financial Officer U.S. Controller (Chief Accounting Officer) 14 15 INDEX TO EXHIBITS
Page Number in Sequential Number Assigned to Exhibit Table of Item 601 Exhibits Numbering System Where Exhibit (i.e. 601 of Regulation S-K) Description of Exhibits May be Found -------------------------- -------------------------- ------------------------------ 10.01 Amendment Eleven to Meyer Employment Agreement dated as of May 24, 2001, between Grey and Edward H. Meyer.
EX-10.01 3 y52479ex10-01.txt AMENDMENT ELEVEN TO MEYER EMPLOYMENT AGREEMENT 1 ELEVENTH AMENDMENT AGREEMENT made as of May 24, 2001 (the "Effective Date"), between GREY GLOBAL GROUP INC., a Delaware corporation with principal offices at 777 Third Avenue, New York, New York 10017 ("Grey"), and Edward H. Meyer, residing at 580 Park Avenue, New York, New York 10021 ("Meyer"). Meyer is employed by Grey as its President, Chairman of the Board and Chief Executive Officer pursuant to an employment agreement originally executed effective February 9, 1984 and amended from time to time thereafter (such employment agreement, as so amended, being hereinafter referred to as the "Current Agreement"). The parties desire to amend the Current Agreement in certain respects. NOW, THEREFORE, in consideration of the foregoing, the parties hereby agree as follows: 1. Capitalized Terms. Capitalized terms used herein, unless otherwise defined herein, have the meaning ascribed to such terms in the Current Agreement. 2. Section 1 of the Current Agreement is hereby amended and restated to read as follows: 1. Employment; Term. For the period beginning on the date hereof and ending on December 31, 2004, Grey shall continue to employ Meyer as the President, Chairman of the Board and Chief Executive Officer ("Chief Executive Officer") of Grey with full responsibility for supervision of all corporate affairs, reporting only to the Board of Directors of Grey ("Board"). 3. Section 4(a) of the Current Agreement is hereby amended so that the phrase "December 2002" is deleted and replaced with the phrase "December 2004". 4. Section 4(b) of the Current Agreement is hereby amended so that the phrase "December 31, 2002" is deleted and replaced by the phrase "December 31, 2004". 5. Section 4(c) of the Current Agreement is hereby amended so that the phrase "upon Meyer's retirement from Grey at December 31, 2002" is deleted and replaced by the phrase "upon Meyer's retirement from Grey on or after December 31, 2004". 6. Section 4(c) of the Current Agreement is hereby amended so that the phrase "January 2003" is deleted and replaced by the phrase "the first week of the month immediately following the month of Meyer's retirement on or after December 31, 2004". 7. Section 13 of the Current Agreement is hereby amended and restated to read as follows: 2 13. Certain Post-Termination Arrangements. In recognition of the high degree of prominence Meyer has achieved in Grey's industry and his close association with Grey in the minds of clients, industry professionals and the public at large, and in further recognition of the benefits accruing to Grey in maintaining such prominence, upon termination of Meyer's full-time employment as Chief Executive Officer pursuant to this Agreement for any reason other than Cause: 13.1 for the remainder of Meyer's life (the "Continuation Period"), Grey shall, at its expense, furnish Meyer with: (a) office facilities on a floor regularly used by top management, such office facilities to be comparable in quality and floor location and no less than one-half the size of those utilized by Meyer immediately prior to such termination and located in the midtown Manhattan area, or at Meyer's option, either in the building then housing Grey or in a building of comparable quality, (b) for the first five years after such termination, two secretaries having skill levels comparable to skill levels of the senior secretaries utilized by Meyer immediately prior to such termination with salary and benefits and office accommodations and facilities comparable to those of the senior secretaries utilized by Meyer during his employment hereunder (each such secretary, a "Secretary"), and for the remainder of the Continuation Period, one Secretary; and (c) such other staff assistance and office support services as shall be reasonably necessary for Meyer to satisfactorily pursue his personal and professional activities including, if applicable, the Consulting Services described in Section 12 hereof; provided, however, that Grey shall furnish such office support services to Meyer only from the building then housing Grey; 13.2 for a period of five years, Grey shall (A) furnish Meyer with a car and a driver comparable to the car and driver furnished him during his employment as Chief Executive Officer of Grey, to be used by Meyer as he sees fit, and (B) pay all the associated expenses of such car and driver on the same basis as it paid such expenses during Meyer's employment as Chief Executive Officer of Grey; 13.3 Grey shall reimburse Meyer for all travel and entertainment expenses not exceeding $100,000 per annum for a period of five years after such termination incurred by him in performing services for Grey (as determined by Meyer in his sole discretion), provided that Meyer provides written documentation for such expenses in a manner which reasonably conforms to Grey's policy as Meyer shall reasonably determine, and provided further that the $100,000 amounts shall be adjusted as of January 1, 1989 and as of each January 1 thereafter ending with the January 1 in the year in which such termination occurs, to reflect increases in the Consumer Price Index published by the Bureau of Labor Statistics For All Urban Customers, New York 16 3 Northeastern New Jersey Index (for these purposes, the base year for such expenses shall be 1988); 13.4 in view of Meyer's lengthy experience and grasp of the needs of charities in the communities of which Grey is a part, Grey charges and invests Meyer, for each of the first five years after such termination, with the responsibility and authority for direction of $100,000 of the annual charitable contributions of Grey, it being understood that such amounts shall be reduced in each year by (A) any monies donated by the trustees of the Good Neighbor Foundation and other similar foundations based in part on Meyer's recommendation and (B) any monies donated by Grey to charitable institutions pursuant to commitments made by Meyer on behalf of Grey prior to such termination; 13.5 for a period of five years, Grey shall provide Meyer access to the executive dining rooms and kitchen facilities of Grey on a basis comparable to the basis on which such facilities were provided to Meyer as Chief Executive Officer of Grey; and 13.6 within 120 days after such termination, Meyer may purchase from Grey, at the then depreciated book value to Grey, up to $100,000 (based on such depreciated book value) of the furnishings, including without limitation the paintings, contained in his office immediately prior to such termination. Notwithstanding the foregoing, Grey may (a) on ten (10) days' written notice to Meyer, suspend its payments for such office facilities, Secretaries and staff assistance and office support services and/or car and driver if Meyer is unable regularly to make use of such office facilities and office support services, Secretaries and staff assistance and/or car and driver, as the case may be, because of a disability which persists for a period of 18 months, or (b) terminate its payments for such office facilities, Secretaries, and staff assistance and office support and car and driver if Meyer should not be in compliance with Section 8 hereof (as modified by Section 11 hereof). Any suspension of payments for facilities and services as described in this paragraph shall apply only to those facilities and services of which Meyer is not able regularly to make use because of a disability, which persists for a period of 18 months. Notwithstanding any suspension described in clause (a) of the first sentence of this paragraph, upon recovery of Meyer from his disability, Grey shall reinstate such payments for the above described facilities and services, provided that the period of time during which Meyer is entitled to such facilities and services has not expired. For the purposes of this paragraph, the term "disability" shall mean Meyer's physical or mental incapacity so as to render him incapable of making use of any one or more of the facilities and services described in this paragraph. To establish a status of disability as provided in the preceding sentence, there must first be issued in writing a determination of disability. A determination of disability may be issued at the initiation of Grey, Meyer or a legal representative of Meyer. A determination of disability shall be issued upon the written certification of a 4 qualified medical doctor agreed to by Grey and Meyer or, in the event of Meyer's incapacity to designate a doctor, Meyer's legal representative. In the absence of agreement between Grey and Meyer (or his legal representative), each party shall nominate a qualified medical doctor and the two doctors shall select a third doctor, who shall make the determination as to the disability. In the event that either Meyer or Grey shall desire to establish whether Meyer is disabled, Meyer (or his legal representative) and Grey shall use their respective best efforts to cooperate so that a prompt determination can be reached and Meyer shall make himself available, as reasonably requested by Grey, for examination by a doctor in accordance with this paragraph. The facilities and services described in this Section 13 shall not accrue to the benefit of Sandra Meyer (in the event of Meyer's death). 8. Status of Current Agreement. This Amendment shall be effective as of the Effective Date, and, except as set forth herein, the Current Agreement shall remain in full force and effect and shall be otherwise unaffected hereby. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals as of the day and year first above written. GREY GLOBAL GROUP INC. By __________________ __________________ Edward H. Meyer -----END PRIVACY-ENHANCED MESSAGE-----