-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, PLHeJZHoBiyaXsidEI5w+soLQSvyVjaQyxGMWFJKDv9EPPtZUloeBjf0mk4vkT69 a7dz5WDoNKtaGX9nNvOlHg== 0000950123-94-000903.txt : 19940518 0000950123-94-000903.hdr.sgml : 19940518 ACCESSION NUMBER: 0000950123-94-000903 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREY ADVERTISING INC /DE/ CENTRAL INDEX KEY: 0000043952 STANDARD INDUSTRIAL CLASSIFICATION: 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: 94527733 BUSINESS ADDRESS: STREET 1: 777 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2125462000 MAIL ADDRESS: STREET 2: 777 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10017 10-Q 1 GREY ADVERTISING FORM 10-Q 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 March 31, 1994 / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-7898 GREY ADVERTISING INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 13-0802840 - - ------------------------------ --------------------------------------- (State or other jurisdiction of (I.R.S. 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 April 30, 1994, the total number of shares outstanding of Registrant's Common Stock, par value $1 per share ( Common Stock ), was 904,256 and of Registrant's Limited Duration Class B Common Stock, par value $1 per share ( Class B Common Stock ), was 335,882. 2 GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES INDEX Financial Statements: Page No. --------- Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Income 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 10 Other Information 12 Signatures 13 Index to Exhibits 14 2 3 Grey Advertising Inc. and Consolidated Subsidiary Companies Condensed Consolidated Balance Sheets
MARCH 31, 1994 DECEMBER 31, 1993 (UNAUDITED) (A) -------------- ----------------- ASSETS Current assets: Cash and cash equivalents $95,625,000 $181,267,000 Accounts receivable 359,394,000 363,105,000 Expenditures billable to clients 27,994,000 22,581,000 Other current assets 71,762,000 69,116,000 ----------- ----------- Total current assets 554,775,000 636,069,000 Investments in and advances to nonconsolidated affiliated companies 15,381,000 16,104,000 Fixed assets-at cost, less accumulated depreciation of $74,999,000 and $74,671,000 56,351,000 57,724,000 Marketable securities 23,234,000 22,425,000 Intangibles and other assets-including loans to officers of $5,547,000 in 1994 and $4,947,000 in 1993 86,309,000 88,311,000 ------------ ------------ Total assets $736,050,000 $820,633,000 ============ ============
4 Grey Advertising Inc. and Consolidated Subsidiary Companies Condensed Consolidated Balance Sheets (continued)
MARCH 31, 1994 DECEMBER 31, 1993 LIABILITIES AND STOCKHOLDERS' EQUITY (UNAUDITED) (A) ---------------- ----------------- Current liabilities: Accounts payable $389,330,000 $469,227,000 Notes payable to banks 43,564,000 45,851,000 Accrued expenses and other 83,033,000 88,099,000 Income taxes payable 10,729,000 7,891,000 ------------ ------------ Total current liabilities 526,656,000 611,068,000 Other liabilities including deferred compensation of $16,051,000 and $15,342,000 29,850,000 31,820,000 Long-term debt 33,025,000 33,025,000 Minority interest 8,780,000 9,053,000 Redeemable preferred stock-at redemption value; par value $1 per share; authorized 500,000 shares; issued and outstanding 32,000 shares in 1994 and 1993 6,683,000 6,590,000 Common stockholders' equity: Common Stock-par value $1 per share; authorized 10,000,000 shares; issued 1,066,589 in 1994 and 1,062,046 in 1993 1,067,000 1,062,000 Limited Duration Class B Common Stock-par value $1 per share; authorized 2,000,000 shares; issued 365,195 shares in 1994 and 369,738 shares in 1993 365,000 370,000 Paid-in additional capital 27,794,000 27,329,000 Retained earnings 133,892,000 131,835,000 Cumulative translation adjustment (3,447,000) (3,573,000) Unrealized loss on marketable securities (855,000) (147,000) Loans to officer used to purchase Common Stock and Limited Duration Class B Common Stock (4,726,000) (4,726,000) ------------ ------------ 154,090,000 152,150,000 Less-cost of 163,966 and 164,372 shares of Common Stock and 26,851 and 26,851 shares of Limited Duration Class B Common Stock held in treasury at March 31, 1994 and December 31, 1993, respectively 23,034,000 23,073,000 ------------ ------------ Total common stockholders' equity 131,056,000 129,077,000 ------------ ------------ Total liabilities and stockholders' equity $736,050,000 $820,633,000 ============ ============
See accompanying notes to condensed consolidated financial statements. (A) The consolidated balance sheet has been derived from the audited financial statements at that date. 5 Grey Advertising Inc. and Consolidated Subsidiary Companies Condensed Consolidated Statements of Income (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1994 1993 ------------------------------------ Commissions and fees $132,957,000 $131,527,000 Expenses: Salaries and employee related expenses 84,447,000 85,504,000 Office and general expenses 40,193,000 39,154,000 ------------ ------------ 124,640,000 124,658,000 ------------ ------------ 8,317,000 6,869,000 Other (expense) income-net (883,000) 359,000 ------------ ------------ Income before taxes on income of consolidated companies 7,434,000 7,228,000 Provision for taxes on income (4,086,000) (3,945,000) ------------ ------------ Net income of consolidated companies 3,348,000 3,283,000 Minority interest applicable to consolidated companies (560,000) (615,000) Equity in nonconsolidated affiliated companies 422,000 559,000 ---------- ---------- Net income $3,210,000 $3,227,000 ========== ========== Weighted average number of common shares outstanding Primary 1,286,322 1,259,473 Fully Diluted 1,338,303 1,315,389 Net income per common share Primary $2.38 $2.54 Fully Diluted $2.32 $2.46 Dividends per common share $0.8125 $0.775 ========== =========
See accompanying notes to condensed consolidated financial statements. 5 6 Grey Advertising Inc. and Consolidated Subsidiary Companies Condensed Consolidated Statements of Cash Flows (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1994 1993 ------------------------------------ OPERATING ACTIVITIES Net income $3,210,000 $3,227,000 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization of fixed assets 3,566,000 3,139,000 Amortization of intangibles 1,863,000 1,358,000 Deferred compensation 1,845,000 1,935,000 Equity in earnings of nonconsolidated affiliated companies, net of dividends received of $74,000 and $140,000 (349,000) (418,000) Minority interest applicable to consolidated companies 560,000 615,000 Amortization of restricted stock expense 44,000 115,000 Deferred income taxes (1,111,000) (400,000) Changes in operating assets and liabilities: Decrease in accounts receivable 1,391,000 24,181,000 (Increase) decrease in expenditures billable to clients (5,655,000) 3,666,000 (Increase) decrease in other current assets (4,693,000) 3,017,000 Decrease (increase) in other assets 611,000 (1,226,000) Decrease in accounts payable (73,482,000) (42,305,000) Decrease in accrued expenses and other (4,481,000) (11,004,000) Increase (decrease) in income taxes payable 3,164,000 (397,000) Decrease in other liabilities (2,286,000) (4,707,000) ----------- ----------- Net cash used in operating activities (75,803,000) (19,204,000) INVESTING ACTIVITIES Purchases of fixed assets (2,672,000) (2,783,000) Increase in investments in and advances to nonconsolidated affiliated companies (1,636,000) Purchases of marketable securities (1,517,000) Increase in intangibles, primarily goodwill (680,000) (4,900,000) ---------- ----------- Net cash used in investing activities (4,869,000) (9,319,000)
6 7 Grey Advertising Inc. and Consolidated Subsidiary Companies Condensed Consolidated Statements of Cash Flows (Unaudited) (continued)
FOR THE THREE MONTHS ENDED MARCH 31, 1994 1993 ------------------------------------ FINANCING ACTIVITIES Net (repayments of) proceeds from short-term borrowings $(1,501,000) $8,674,000 Common Shares acquired for treasury (47,000) (498,000) Cash dividends paid on Common Shares (1,008,000) (961,000) Cash dividends paid on Redeemable Preferred Stock (52,000) (53,000) Proceeds from exercise of stock options 70,000 247,000 Proceeds from long-term debt 30,000,000 ----------- ------------ Net cash (used in) provided by financing activities (2,538,000) 37,409,000 Effect of exchange rate changes on cash (2,432,000) 743,000 ----------- ------------ (Decrease) increase in cash and cash equivalents (85,642,000) 9,629,000 Cash and cash equivalents at beginning of period 181,267,000 92,755,000 ----------- ------------ Cash and cash equivalents at end of period $95,625,000 $102,384,000 =========== ============
See accompanying notes to condensed consolidated financial statements 7 8 GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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 generally accepted accounting principles. Reference should be made to the Company's Annual Report on Form 10-K for the year ended December 31, 1993 filed with the Securities and Exchange Commission. 2. The financial statements as of March 31, 1994 and for the three months ended March 31, 1994 and 1993 are unaudited. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair representation have been included. 3. The results of operations for the three months ended March 31, 1994 are not necessarily indicative of the results to be expected for the full year. 4. The computations of net income per common share for the three months ended March 31, 1994 and March 31, 1993 are based on the weighted average number of common shares outstanding, adjusted for the effect, if any, of the assumed exercise of dilutive stock options and shares payable in Common Stock pursuant to the Company's Senior Management Incentive Plan and, for fully diluted net income per common share, the assumed conversion of the 8-1/2% Convertible Subordinated Debentures issued in December 1983. Also, for the purpose of computing net income per common share for the three months ended March 31, 1994 and March 31, 1993 the Company's net income was reduced by dividends on the Preferred Stock and also adjusted by the change in the redemption value of Preferred Stock. Primary net income per common share is computed as if the stock options were exercised at the beginning of the period and as if the funds obtained thereby were used to purchase Common Stock at the market price during the period. In computing fully diluted net income per common share, the market price at the close of the period or the average market price, whichever was higher, was used to determine the 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. 5. The provision for taxes on income is greater than the Federal statutory rate principally due to state and local income taxes, and effective foreign tax rates that are in excess of the Federal statutory rate. 8 9 6. As at March 31, 1994, the Company had outstanding 22,000 shares of Series 1 Preferred Stock and 5,000 shares each of its Series 2 and Series 3 Preferred Stock which were sold to certain current and former employees, including one senior executive, for a combination of cash and full recourse promissory notes (which are included in Other Assets in the accompanying condensed consolidated balance sheet). 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 pertaining upon redemption (subject to certain adjustments), less a fixed discount established upon the issuance of the Preferred Stock. Holders of Preferred Stock have the option to have their shares redeemed upon termination of their employment prior to age 65. The Company is obligated to redeem such shares following the attainment of age 65 by the holder thereof following termination of employment. The holders of the Preferred Stock are 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. 7. During the first quarter of 1994, the Company adopted FAS 112, Employers' Accounting for Postemployment Benefits. The costs incurred resulting from the adoption of this pronouncment were not material. 9 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Income from commissions and fees increased 1.1% during the first quarter of 1994 when compared to the same period in 1993. Absent exchange rate flucuations, gross income increased 6.3% in 1994 when compared to the same period in 1993. The increase results primarily from expanded activity from existing clients and the continued growth of the Company's general agency and specialized operations. Salaries and employee related expenses decreased 1.2% when compared to the respective prior period. The decrease in salaries and employee related expenses results from careful management of payroll and payroll related expenses and the strength of the U.S. dollar as compared to 1993. Office and general expenses have increased 2.7% in 1994 versus the respective prior period. This change is generally in line with the change in gross income. Inflation did not have a material effect on either revenue or expenses during 1994 or 1993. The effective tax rate remained relatively constant at 55.0% in the first quarter of 1994 versus the respective prior period. Minority interest decreased by $55,000 in the first quarter of 1994 as compared to the respective prior period. The decrease in 1994 is primarily due to changes in the level of profits of majority-owned companies. Equity in earnings of nonconsolidated companies decreased by $137,000 in the first quarter of 1994 as compared to the respective prior period. The decrease is primarily due to changes in the level of profits of nonconsolidated companies. Net income decreased by 0.5% in the first quarter when compared to net income in the same period in 1993. Primary net income per common share decreased by 6.3% from the first quarter of 1993. Fully diluted net income per common share decreased 5.7% from the comparable first quarter of 1993. For purposes of computing primary net income per common share, the Company's net income was reduced by (i) dividends paid on the Company's Preferred Stock and (ii) the change in redemption value of the Preferred Stock. The decrease in the net income per share is primarily attributable to the increased weighted average number of shares outstanding and assorted effects of the Company's stock compensation programs. 10 11 LIQUIDITY AND CAPITAL RESOURCES Working capital increased by $3,118,000 from $25,001,000 at December 31, 1993 to $28,119,000 at March 31, 1994. Cash and cash equivalents decreased by $85,642,000 from $181,267,000 to $95,625,000. The decrease is largely attributable to the settlement of year-end payable balances which are typically higher at the end of the year. Domestically, the Company has committed lines of credit totalling $40,000,000. These lines of credit were partially utilized during the three months ended March 31, 1994 and 1993 to secure obligations of selected foreign subsidiaries. There was $14,740,000 and $11,250,000 outstanding under these credit lines as of March 31, 1994 and 1993, respectively. Domestically, the Company also maintains uncommitted lines of credit. These facilities, which are available at the discretion of the offering banks, were not utilized during the period. There were no amounts outstanding under these arrangements at March 31, 1994 or March 31, 1993. 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 were $28,824,000 and $33,576,000 outstanding at March 31, 1994 and 1993, respectively. 11 12 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Reference is made to the Index of Exhibits annexed hereto and made a part hereof. (b) Reports on Form 8-K: The Company did not file any reports on Form 8-K during the quarter ended March 31, 1994. 12 13 GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES SIGNATURES Pursuant to the requirements of 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 ADVERTISING INC. --------------------- (Registrant) DATE: May 12, 1994 By:/s/ Steven G. Felsher ----------------------------- Steven G. Felsher Executive Vice President, Secretary and Treasurer (Duly Authorized Officer) DATE: May 12, 1994 By:/s/ William P. Garvey ----------------------------- William P. Garvey Executive Vice President Chief Financial Officer (Chief Accounting Officer)
13 14 INDEX TO EXHIBITS
Number Assigned to Exhibit Page Number in Sequential (i.e., Exhibit Table of Item 601 Numbering System Where of Regulation S-K) Description of Exhibit Exhibit May Be Found - - --------------------------------------------------------------------------------------------------- Table of Item 601 of Exhibit (11) Description of Exhibit Statement re Computation of Net Income per Common Share (unaudited) (15)
14 EX-11 2 COMPUTATION OF NET INCOME PER COMMON SHARE 1 Grey Advertising Inc. and Consolidated Subsidiary Companies Exhibit - Statement Re: Computation of Net Income Per Common Share (unaudited)
For the three months ended March 31, 1994 1993 --------------- ------------ PRIMARY Average shares outstanding(1) 1,268,090 1,247,300 Net effect of dilutive stock options - based on the treasury stock method using average market price 18,232 12,173 -------------- ------------ TOTAL 1,286,322 1,259,473 ============== ============ Net Income $3,210,000 $3,227,000 Less: Effect of dividend requirements and the change in the redemption value of redeemable preferred stock (145,000) (29,000) -------------- ------------ NET EARNINGS USED IN COMPUTATION 3,065,000 3,198,000 ============== ============ Per share amount $2.38 $2.54 ============== ============ FULLY DILUTED Average shares outstanding(1) 1,268,090 1,247,300 Net effect of dilutive stock options - based on the treasury stock method using the period- end market price, if higher than the average market price 19,214 17,089 Assumed conversion of 8.5% convertible subordinated debentures issued December 1983 50,999 51,000 -------------- ------------ TOTAL 1,338,303 1,315,389 ============== ============ Net Income $3,210,000 $3,227,000 Less: Effect of dividend requirements and the change in the redemption value of redeemable preferred stock (145,000) (29,000) Add: 8.5% convertible subordinated debentures interest, net of income tax effect 35,000 35,000 -------------- ------------ NET EARNINGS USED IN COMPUTATION 3,100,000 3,233,000 ============== ============ Per share amount $2.32 $2.46 ============== ============
(1) Includes 27,273 shares and 8,628 shares for 1994 and 1993, respectively, expected to be issued pursuant to the terms of the Senior Management Incentive Plan 15 -----END PRIVACY-ENHANCED MESSAGE-----