<PAGE>
- - - - - --------------------------------------------------------------------------------
- - - - - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark
One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Transition period from to
COMMISSION FILE NO. 1-5029
FOOTE, CONE & BELDINGCOMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-1088161
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
101 EAST ERIE STREET, CHICAGO, ILLINOIS 60611-2897
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER: (312) 751-7000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
REGISTERED
Common stock, par value New York Stock Exchange
33 1/3 cents per share
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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 [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements in Part III of this Form 10-K or any amendment to this Form 10-
K. [X]
The aggregate market value of Common Stock, 33 1/3 cents par value, held by
non-affiliates of the Registrant, as of March 22, 1994 was $399,701,705.
There were 11,637,157 shares of Registrant's 33 1/3 cents per share par value
Common Stock outstanding as of March 22, 1994.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to shareholders for the year ended
December 31, 1993 are incorporated by reference into Parts I and II.
Portions of the Registrant's Annual Proxy Statement for the year ended
December 31, 1993 are incorporated by reference into Part III.
- - - - - --------------------------------------------------------------------------------
- - - - - --------------------------------------------------------------------------------
<PAGE>
PART I
ITEM 1. BUSINESS:
GENERAL
Response to this item is incorporated by reference to the Registrant's Annual
Report to shareholders for fiscal year ended December 31, 1993 on page 8.
REVENUES
Response to this item is incorporated by reference to the Registrant's Annual
Report to shareholders for fiscal year ended December 31, 1993 on page 8.
CLIENTS
The Registrant and its subsidiaries (the Company) consider their relations
with their clients to be satisfactory. Due to the nature of the business,
however, any client could at some time in the future reduce its advertising
budget, or transfer to another agency all or part of its advertising presently
placed through the Company. Representation of a client does not necessarily
mean that all advertising for such clients is handled by the Company
exclusively. In many cases, the Company handles the advertising of only a
portion of a client's products or services or only the advertising in
particular geographic areas.
COMPETITION
The advertising agency business is highly competitive, with agencies of all
sizes competing primarily on the basis of quality of service to attract and
retain clients and personnel. Advertisers are able to move from one agency to
another with relative ease, in part because accounts are terminable on short
notice, usually90-180 days. Competition for clients by large agencies is
limited somewhat because many advertisers prefer not to be represented by an
agency which handles competing products or services for other advertisers.
REGULATION
Federal, state and local governments and governmental agencies in recent
years have adopted statutes and regulations affecting the advertising
activities of advertising agencies and their clients. For example, statutes and
regulations have prohibited television advertising for certain products and
have regulated the form and content of certain types of advertising for many
consumer products. The Federal Trade Commission ("FTC") has also required proof
of accuracy of advertising claims with respect to various products and, in its
enforcement policies, is seeking to establish more stringent standards with
respect to advertising practices. The FTC has the authority to investigate and
to institute proceedings against advertisers and their advertising agencies for
deceptive advertising. Proposals have also been made for the adoption of
additional statutes and regulations which would further restrict the
advertising activities of advertising agencies and their clients. The effect on
the advertising business of future application of existing statutes or
regulations, or the extent, nature or effect of future legislation or
regulatory activity with respect to advertising, cannot be predicted.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
Response to this item is incorporated by reference to the Registrant's Annual
Report to shareholders for the fiscal year ended December 31, 1993 on page 21.
2
<PAGE>
ITEM 2. PROPERTIES
Virtually all of the Company's operations are conducted in leased premises.
The Company's physical property consists primarily of leasehold improvements,
furniture, fixtures and equipment. However, the Company does own office
buildings in Puerto Rico and the Dominican Republic, neither of which are
material to the Company's consolidated financial statements.
Further information regarding the Company's leased premises, which it
considers to be adequate for its current operations, is contained in note 12 of
the Registrant's Annual Report to Shareholders (page 23).
ITEM 3. PENDING LEGAL PROCEEDINGS
Response to this item is incorporated by reference to the Registrant's Annual
Report to shareholders for the fiscal year ended December 31, 1993 note 5 on
page 19.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
Response to this item is incorporated by reference to the Registrant's Annual
Report to shareholders for the fiscal year ended December 31, 1993 on page 9.
ITEM 6. SELECTED FINANCIAL DATA
Response to this item is incorporated by reference to the Registrant's Annual
Report to shareholders for the fiscal year ended December 31, 1993 on page 11.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Response to this item is incorporated by reference to the Registrant's Annual
Report to shareholders for the fiscal year ended December 31, 1993 on pages 10
and 11.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The following consolidated financial statements of the Registrant and its
subsidiaries, included in the Registrant's Annual Report to shareholders for
the fiscal year ended December 31, 1993 are incorporated by reference:
Consolidated Balance Sheets--December 31, 1992 and 1993
Consolidated Statements of Income--Years ended December 31, 1991, 1992 and
1993
Consolidated Statements of Stockholders' Equity--Years ended December 31,
1991, 1992 and 1993
Consolidated Statements of Cash Flows--Years ended December 31, 1991, 1992
and 1993
Notes to Consolidated Financial Statements--December 31, 1993
Quarterly Financial Data--Years ended December 31, 1992 and 1993
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
3
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the Directors of the Registrant is incorporated
by reference to the Proxy Statement for the Annual Meeting of Stockholders
filed with the Commission prior to April 1, 1994 pursuant to Regulation 14A.
Information with respect to executive officers of the Registrant who are not
also Directors or nominees to the Board of Directors is included below.
JACK J. BOLAND (37) --Executive Vice President,
North American Finance Director
MARY A. CARRAGHER (34) --Vice President,
General Counsel and Assistant Secretary
MICHAEL S. DUFFEY (39) --Vice President,
Treasurer and Assistant Secretary
--Vice President,
DALE F. PERONA (48) Controller and Secretary
Mr. Duffey and Ms. Carragher joined the Company and became officers during
1992. Previous to that time, Mr. Duffey held various executive positions at
Outboard Marine Corporation, and Ms. Carragher held various positions at Sidley
& Austin.
No officer of the Registrant is related to any other officer. All other
officers have been officers of the Registrant or have held senior executive
positions with the Company for the past five years, except as otherwise
disclosed in Registrant's Proxy Statement.
ITEMS 11. EXECUTIVE COMPENSATION
The Registrant has filed with the Commission, prior to April 1, 1994, a
definitive proxy statement pursuant to Regulation 14A. Information required
under this item with respect to Directors and Officers is incorporated by
reference to said Proxy Statement.
ITEMS 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Persons or "groups" (as that term is used in Section 13(d)(3) of the
Securities and Exchange Act of 1934) known by the Registrant to beneficially
own more than five percent of any class of the Registrant's voting securities,
included in the Proxy Statement for the Annual Meeting of Stockholders, is
incorporated herein by reference.
(b) Security ownership of management included in the Proxy Statement for the
Annual Meeting of Stockholders is incorporated herein by reference.
(c) There are no arrangements known to the Registrant the operation of which
may at a subsequent date result in change in control of the Registrant.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information with respect to certain transactions with directors of the
Registrant, see the Proxy Statement for the Annual Meeting of Stockholders
which is incorporated herein by reference.
4
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Item 14(a)--List of Financial Statements.................................. 6
Auditors' Report on Supplemental Notes.................................. 21
Item 14(a)(1)--Supplemental Notes to Consolidated Financial Statements:
A.Valuation Accounts.................................................... 22
B.Short-Term Borrowings................................................. 23
C. Amounts Receivable From Related Parties and Underwriters, Promoters
and Employees Other Than Related Parties............................. 24
Item 14(a)(2)--Schedules
Are not submitted because they are not required or because the required
information is included in the financial statements or notes thereto.
Item 14(a)(3)--Index of Exhibits
The index of exhibits immediately precedes the exhibits filed with the
Securities and Exchange Commission. That index indicates the page number
in the sequential numbering system where each such exhibit can be found.
Item 14(b)--Reports on Form 8-K........................................... None
</TABLE>
5
<PAGE>
FORM 10-K--ITEM 14(A)
FOOTE, CONE & BELDING COMMUNICATIONS, INC. AND SUBSIDIARIES LIST OF FINANCIAL
STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of Foote, Cone & Belding
Communications, Inc. and Subsidiaries, and the Independent Public Accountant's
Report covering these financial statements, appearing in the Registrant's
Annual Report to shareholders on pages 12 through 26 for the year ended
December 31, 1993, are incorporated by reference in Item 8:
Consolidated Balance Sheets--December 31, 1992 and 1993
Consolidated Statements of Income--Years ended December 31, 1991, 1992 and
1993
Consolidated Statements of Stockholders' Equity--Years ended December 31,
1991, 1992 and 1993
Consolidated Statements of Cash Flows--Years ended December 31, 1991, 1992
and 1993
Notes to Consolidated Financial Statements--December 31, 1993
The following consolidated financial statements (numbered in accordance with
Regulation S-X) of Publicis Communication (a 26% owned unconsolidated affiliate
of the Registrant) and Subsidiaries, and Auditors' Report with respect thereto,
are included in this Report.
Consolidated Income Statements--Years ended December 31, 1992 and 1993,
page 10 of this Report.
Consolidated Balance Sheet--December 31, 1992 and 1993, page 9 of this
Report.
Consolidated Statement of Change in Financial Position--Year ended December
31, 1992 and 1993, pages 11 and 12 of this Report.
Notes to the Consolidated Financial Statements--December 31, 1993, pages 13
through 18 of this Report.
Auditors' Report, page 19 of this Report.
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions, or are inapplicable, or the information called for
therein is included elsewhere in the financial statements or related notes
thereto contained in or incorporated by reference into this Report.
Accordingly, such schedules have been omitted.
Publicis Communication owns 51% of Publicis.FCB BV. Accordingly, the
consolidated financial statements of Publicis Communication and Subsidiaries
include the results of operations and financial position of Publicis.FCB BV.
These financial statements have been prepared and audited based upon
accounting and auditing standards and practices acceptable for external
reporting purposes in France. These practices and standards can vary from U.S.
accounting practices. Following is a reconciliation, prepared by Registrant, of
reported net income to net income which would be reported under U.S. generally
accepted accounting principles (amounts in thousands).
<TABLE>
<CAPTION>
1992 1993
------- -------
<S> <C> <C>
Net income as shown in financial statements (1)........... $26,430 $23,186
Amortization of Goodwill (2).............................. (2,577) (2,703)
------- -------
Net income according to generally accepted accounting
principles in the U.S.................................... $23,853 $20,483
======= =======
</TABLE>
- - - - - --------
Notes:
(1) Net income as reported was computed using the average exchange rates for
the year.
(2) Goodwill is charged directly to retained earnings or income in the year it
arises for French financial reporting purposes. The goodwill amortization
expense adjustment was computed using forty years as the estimated useful
life for each of the related goodwill components.
All calculations have been made by Registrant based upon assumptions deemed
appropriate by Registrant.
6
<PAGE>
PUBLICIS COMMUNICATION
CONSOLIDATED FINANCIAL
STATEMENTS 31/12/1993
7
<PAGE>
PUBLICIS COMMUNICATION
31/12/1993
PAGE 9: Comparative Consolidated Balance Sheet
PAGE 10
: Comparative Consolidated Income Statement
PAGES 11-12
: Consolidated Statement of Change in Financial Statements.
PAGES 13-18
: Notes to the Consolidated Financial Statements
8
<PAGE>
PUBLICIS COMMUNICATION GROUP
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
ASSETS 31.12.1992 31.12.1993
------ ---------- ----------
<S> <C> <C>
Fixed Assets 901 155 897 999
--------- ---------
Start-up costs (gross)................................... 1 490 1 008
Intangible assets (gross)................................ 514 586 507 463
Tangible assets (gross).................................. 550 890 576 455
Depreciation and amortization on tangible and intangible
assets.................................................. (314 805) (364 146)
--------- ---------
Net Tangible and Intangible Assets................... 752 161 720 780
Investments (non conso. cos)............................. 3 985 3 813
Investments (equity subs.)............................... 110 966 126 160
Interco loans............................................ 8 697 24 099
Other financial assets................................... 27 394 26 066
Provision on financial assets............................ (2 048) (2 919)
--------- ---------
Net Financial Assets................................. 148 994 177 219
--------- ---------
Current Assets........................................... 4 258 504 3 624 053
--------- ---------
Work in progress......................................... 148 577 125 338
Advance payments made.................................... 162 676 168 468
Accounts receivable (net)................................ 2 673 899 1 794 928
Interco receivable....................................... 14 172 10 473
Other debtors............................................ 580 386 889 525
Cash..................................................... 678 794 635 321
--------- ---------
Other Current Assets..................................... 50 863 45 372
--------- ---------
Prepaid expenses......................................... 47 819 39 065
Deferred charges......................................... 3 044 6 307
--------- ---------
Exchange Differences..................................... 465 553
--------- ---------
Total Assets......................................... 5 210 987 4 567 977
========= =========
<CAPTION>
LIABILITIES & EQUITY
--------------------
<S> <C> <C>
Total Equity............................................. 1 083 667 878 010
--------- ---------
Equity (bef.net inc.), Group share....................... 599 330 369 647
Equity (bef.net inc.), Non-Group share................... 258 252 292 099
--------- ---------
Total Net Equity Bef.Net Income...................... 857 582 661 746
Net income, Group Share.................................. 138 889 131 659
Net income, Non-Group Share.............................. 87 196 84 605
--------- ---------
Total Net Income..................................... 226 085 216 264
--------- ---------
Provisions For Contingencies............................. 170 163 210 543
--------- ---------
Liabilities.............................................. 3 905 227 3 409 291
--------- ---------
Borrowings (not banks)................................... 141 463 301 569
Bank borrowings.......................................... 523 439 382 226
--------- ---------
Borrowings........................................... 664 902 683 795
Advance payments from clients............................ 285 619 172 547
Accounts payable......................................... 1 984 231 1 283 313
Interco payable.......................................... 74 841 82 955
Other creditors.......................................... 895 634 1 186 681
--------- ---------
Other Liabilities.................................... 3 240 325 2 725 496
--------- ---------
Other Accruals........................................... 51 164 69 472
--------- ---------
Exchange Differences..................................... 766 661
--------- ---------
Total Liabilities & Equity........................... 5 210 987 4 567 977
========= =========
</TABLE>
9
<PAGE>
PUBLICIS COMMUNICATION GROUP
CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
YEAR 1992 YEAR 1993 VAR. %
----------- ---------- ----------- ---------- ------
<S> <C> <C> <C> <C> <C>
Billings................ 17 397 665 15 838 009 -9.0%
Purchases............... (14 606 708) (13 384 466)
----------- -----------
Revenues............ 2 790 957 2 453 543 -12.1%
Salaries and Benefits... (1 403 361) (1 351 001) -3.7%
Office and General
Expenses............... (870 877) (682 202) -21.7%
----------- -----------
Total Expenses...... (2 274 238) (2 033 203) -10.6%
Other Income........ 10 843 10 843 17 502 17 502
Operating Profit.... 527 562 437 842 -17.0%
Depreciation............ (91 748) (88 999)
Provision doubtful
debts.................. (25 242) (20 692)
Other provisions........ (20 527) (21 073)
Interest income
(expense).............. (6 090) 9 991
----------- -----------
Profit Before Tax... 383 955 317 069 -17.4%
Exceptional costs....... (12 718) (23 113)
Profit sharing--
statutory.............. (16 496) (7 488)
Income Tax.............. (163 398) (112 322)
Profit (Equity subs.)... 34 742 42 118
----------- -----------
Net Income.......... 226 085 216 264 -4.3%
---------- ----------
Group Share......... 138 889 131 659 -5.2%
========== ==========
</TABLE>
10
<PAGE>
PUBLICIS COMMUNICATION GROUP
CONSOLIDATED STATEMENT OF CHANGE IN FINANCIAL POSITION
(US GAAP--IN THOUSAND FRF)
<TABLE>
<CAPTION>
'000 FRF 1992 1993
- - - - - -------- ------- -------
<S> <C> <C>
SOURCE OF WORKING CAPITAL
NET INCOME.................................................... 226 085 216 264
Depreciation.................................................. 91 748 88 999
------- -------
Sub-total................................................... 317 833 305 263
Equity earnings of affiliates................................. (34 742) (42 117)
Dividends received from affiliates............................ 10 635 6 968
Loan.......................................................... 0 130 610
Other borrowings.............................................. 0 40 000
Exchange differences & others................................. 27 632 (11 147)
------- -------
Total Source.............................................. 321 358 429 577
------- -------
APPLICATION OF WORKING CAPITAL
Paid out dividends............................................ 62 341 55 113
Purchase of interest in affiliated companies.................. 0 0
Investments................................................... 53 276 343 902
Increase in other fixed assets................................ 107 306 62 452
------- -------
Total Application......................................... 222 923 461 467
------- -------
INCREASE (DECREASE) IN WORKING CAPITAL........................ 98 435 (31 890)
======= =======
</TABLE>
11
<PAGE>
PUBLICIS COMMUNICATION GROUP
CONSOLIDATED STATEMENT OF CHANGE IN FINANCIAL POSITION
(US GAAP--IN THOUSAND FRF)
<TABLE>
<CAPTION>
'000 FRF 1992 1993
- - - - - -------- -------- --------
<S> <C> <C>
INCREASE (DECREASE) IN CURRENT ASSETS
Cash........................................................ 53 394 (43 473)
Accounts receivables (net).................................. 59 039 (878 971)
Expenditure billable to clients............................. (29 338) (23 239)
Other current assets........................................ (71 756) 305 829
-------- --------
Sub-total............................................... 11 339 (639 854)
-------- --------
INCREASE (DECREASE) IN CURRENT LIABILITIES
Provision for contingencies................................. (6 013) 40 380
Accounts payable............................................ (47 884) (700 918)
Bank borrowings............................................. (147 001) (141 213)
Loans and other borrowings.................................. 25 262 (10 504)
Other current liabilities................................... 88 540 204 291
-------- --------
Sub-total............................................... (87 096) (607 964)
-------- --------
INCREASE (DECREASE) IN WORKING CAPITAL...................... 98 435 (31 890)
======== ========
</TABLE>
12
<PAGE>
PUBLICIS COMMUNICATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31/12/1993.
I. CONSOLIDATED PRINCIPLES.
PUBLICIS COMMUNICATION GROUP'S consolidated financial statements as at
December 31, 1993 have been prepared in accordance with the French legislation
and are in conformity with generally accepted international accounting
principles.
The consolidated financial statements include the accounts of the Company's
wholly owned and majority owned domestic and international subsidiaries. The
subsidiary companies with less than 50% ownership are consolidated on an equity
basis.
The company translates the financial statements of its international
subsidiaries into French Francs using official exchange rates as of December
31.
II. SUMMARY OF MAJOR ACCOUNTING POLICIES.
Companies Consolidated:
No material changes are noted in the scope of the consolidation as compared
to last year. The FCA! Group accounts will only be consolidated within Publicis
Communication as at January 1st 1994.
General:
The accounting policies used as at December 31, 1993 are identical to those
used in preparing the consolidated financial statements of the Publicis Group.
Tangible and Intangible Assets:
Tangible assets are valued at cost and the depreciation is calculated
according to the most suitable method in order to take into account the
economical criteria. Listed below are the methods most currently used within
the Publicis Communication Group:
Building : 20 years straightline
Leasehold property and improvements
: 10 years straightline
Furniture and Equipment : 5-10 years straightline
Motor Vehicles : 4 years straightline
Premiums paid to acquire marketable leasehold property and the cost of
acquired goodwill are not amortized except in cases where the estimated market
value is considered to be inferior to the acquisition cost. To comply with the
regulation, goodwill generated through the legal reevaluation of 1976 have been
fully written off against net equity 1993.
Goodwill:
The excess costs over the net book value of subsidiaries, after reallocating
potential capital gains to the assets concerned, by their nature, are
considered to be intangible assets, justified by elements such as: market
shares, trade marks, clients' lists, brands . . .
Usually they are not amortized. However, each year, a careful examination is
made to determine their market value. If their market value is inferior to
their acquisition cost, a provision for depreciation is made.
The excess costs referring to unidentified elements are amortized over a
maximum period of 40 years.
In any case, all goodwill of small value are immediately depreciated at 100%.
13
<PAGE>
PUBLICIS COMMUNICATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As at December 31, 1993, considering the economic background (pooling of
interest) of FCA! Group, the goodwill has been exceptionally written off
against net equity.
Work in Progress:
Work in progress is valued at the lower of cost and net realisable value.
Billings:
Since March 31, 1993, the Sapin law has been changing the accounting
principles applicable to Media Buying activities. In order to be able to show
comparable Billings with last year and to be in line with the principles
applied by our foreign competitors, our consolidated Media Revenues raised in
France have been capitalised using the international multiple of 6,67.
Retirement Indemnities:
French Subsidiaries:
Potential and probable retirement indemnities including social security
charges appear either on the Balance Sheet or are shown in the Contingent
Liabilities. The criteria for choosing the treatment is the age of the
employees concerned.
The yearly movements in the provision for the retirement indemnities shown on
the Balance Sheet are accounted for in the expenses of the year.
Foreign Subsidiaries:
Retirement indemnities are accrued for in accordance with the laws and
regulations specific to each country.
Statutory Profit Sharing:
The Statutory Profit Sharing related to the 1993 fiscal year and payable to
the employees is accounted for on a consistent basis with last year.
Income Tax:
All actual and deferred Income Taxes payable are accounted for. Deferred
Income Tax assets or potential fiscal credits are not recognised with the
exception of a latent fiscal credit of 33 1/3% calculated on the provision for
the French statutory profit sharing.
III. COMMENTS ON THE CONSOLIDATED ACCOUNTS.
Foreign Subsidiaries' Contribution in Group Activities:
Foreign subsidiaries account for 64% of the total billings and 62% of the
total consolidated net income.
Intangible Assets:
In addition to lease rights and softwares, intangible assets include KF
21,379 of acquired goodwill and KF 468,409 related to the excess of cost over
the underlying book value of subsidiaries.
14
<PAGE>
PUBLICIS COMMUNICATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
As of December 31, 1993 accumulated depreciation and amortization on
Intangible Assets is KF 23,916 versus KF 24,666 as of December 31, 1992.
Variation in Stockholders' Equity:
The variation of the stockholders' equity between December 31, 1992 and
December 31, 1993 is as follows: (in thousands of FF)
<TABLE>
<CAPTION>
GROUP MINORITY
TOTAL SHARE SHARE
--------- -------- --------
THOUSANDS OF FF
<S> <C> <C> <C>
Net Equity 31/12/92.............................. 857 582 599 330 258 252
1992 Net Income.................................. 226 085 138 889 87 196
--------- -------- -------
Theoretical Equity 31/12/93 (before 1993 Net
Income)......................................... 1 083 667 738 219 345 448
Movements in 1993 affecting the equity:
Dividends distributed.......................... (49 497) (29 700) (19 797)
Exchange differences........................... (3 888) 1 557 (5 445)
Changes in cos consolidated and Others......... (46 235) (20 314) (25 921)
Goodwill write-off (1)......................... (322 301) (320 115) (2 186)
--------- -------- -------
Total Net equity 31/12/1993 (before 1993 Net
Income)..................................... 661 746 369 647 292 099
========= ======== =======
- - - - - --------
(1) Legal goodwill............................... (22 301) (20 115) (2 186)
FCA!'s goodwill.................................. (300 000) (300 000) 0
</TABLE>
NET EQUITY OF THE GROUP
The Net Equity of the Group is as follows: (in thousands of FF)
<TABLE>
<S> <C>
Share Capital of the mother company............................... 135 000
Reserves of the mother company (1)................................ 36 169
Consolidated reserves............................................. 198 478
-------
Group's Net Equity as of 31/12/1993............................... 369 647
=======
</TABLE>
- - - - - --------
(1) After a deduction of the excess of cost over the underlying book value of
subsidiaries amounting to KF 569 961
CONSOLIDATED CASH FLOW
<TABLE>
<CAPTION>
1992 1993 %
------- ------- ---
(IN THOUSANDS OF
FF)
<S> <C> <C> <C>
Consolidated Net Income............................... 226 085 216 264
Provision for depreciation............................ 91 748 88 999
------- -------
Cash Flow............................................. 317 833 305 263 -4%
======= =======
of which : Group Share................................ 187 115 181 464 -3%
======= =======
</TABLE>
CONTINGENT LIABILITIES
<TABLE>
<CAPTION>
GIVEN
-------------
(IN THOUSANDS
OF FF)
<S> <C>
Discounted bills not yet matured............................ 2 291
Guarantees.................................................. 5 413
Pension rights (retirement indemnities)..................... 3 751
Hirer purchase or other lease agreements.................... 9 372
Others...................................................... 2 224
------
Total................................................... 23 051
======
</TABLE>
15
<PAGE>
PRINCIPALES SOCIETES CONSOLIDEES AU 31 DECEMBRE 1993
A/ SOCIETES CONSOLIDEES PAR INTEGRATION GLOBALE
<TABLE>
<CAPTION>
NOM DES SOCIETES % CONTROLE ACTIVITE PAYS VILLES
- - - - - ---------------- ---------- -------- ---- ------
1--AGENCES DE PUBLICITE
<S> <C> <C> <C> <C>
PUBLICIS COMMUNICATION 100.00 Financiere France Paris
PUBLICIS CONSEIL........ 100.00 Publicite France Paris, Bordeaux, Tours
Optimedia.............. 100.00 Achat d'espaces France Paris
Mundoprint............. 100.00 Publicite France Paris
Sigraph................ 98.00 Publicite France Paris
Interplans Edition..... 100.00 Publicite France Paris
Media-System........... 94.69 Publicite France Paris
Media-Finance....... 72.00 Publicite France Paris
Media-System Est.... 50.00 Publicite France Strasbourg
Media-System U.K.
Ltd................ 100.00 Publicite Grande Bretagne Londres
Jonction............ 80.00 Publicite France Paris
Success/B.M.Z......... 100.00 Publicite France Paris
Loeb et associes...... 55.00 Publicite France Paris
Publicis Hourra....... 80.78 Publicite France Lille
Epure............... 89.94 Publicite France Lille
Publicis Edico........ 80.98 Publicite France Lyon, Clermont-Ferrand
Publicis Mediterranee. 89.89 Publicite France Marseille, Nice
Publicis Soleil....... 50.25 Publicite France Toulouse, Montpellier
Publicis Grand Angle.. 76.94 Publicite France Brest, Nantes, Rennes
Positif............. 99.80 Publicite France Brest
Publicis Grand Est.... 82.43 Publicite France Nancy, Dijon, Strasbourg
Publicis Qualigraphie. 83.00 Publicite France Rouen, Caen
C.L.V................. 100.00 Publicite France Paris
Idees Dialogue
Conseil.............. 90.00 Publicite France Paris
Procis................ 78.88 Publicite France Paris
Publicis Direct....... 65.50 Publicite France Paris
TV Mission............ 76.00 Publicite France Paris
Intelligences......... 100.00 Publicite France Paris
ID3D.................. 69.88 Publicite France Paris
Extension............. 100.00 Publicite France Paris
Publicis Atlantique... 83.40 Publicite France Bordeaux
Publicis Consultants.. 100.00 Publicite France Paris
PUBLICIS NEW-YORK Inc... 100.00 Publicite Etats-Unis New-York
PUBLICIS FBC EUROPE..... 51.00 Financiere Pays-Bas Amsterdam, Paris
Publicis FCB Wien..... 100.00 Publicite Autriche Vienne
Publicis FCB Belgique. 100.00 Publicite Belgique Bruxelles
Publicis FCB Direct
Belgium.............. 100.00 Publicite Belgique Bruxelles
Full Option......... 51.00 Publicite Belgique Bruxelles
Cre-Action........ 51.00 Publicite Belgique Bruxelles
LVH/B.M.Z............. 84.00 Publicite Belgique Bruxelles
Publicis FCB Denmark.. 100.00 Publicite Danemark Copenhague
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
NOM DES SOCIETES % CONTROLE ACTIVITE PAYS VILLES
- - - - - ---------------- ---------- -------- ---- ------
<S> <C> <C> <C> <C>
Torma................. 45.03 Publicite Finlande Helsinki
Studio Torma........ 100.00 Publicite Finlande Helsinki
FCB Paris............. 100.00 Publicite France Paris
Axe Publicite....... 100.00 Publicite France Paris
Empir Media......... 100.00 Achat d'espaces France Paris
Empir............... 100.00 Publicite France Paris
Kenya............... 51.00 Publicite France Paris
Publicis FCB Poland... 78.00 Publicite Pologne Varsovie
Farner Publicis FCB... 90.00 Publicite Suisse Zurich
B.E.P. Publicis FCB... 100.00 Publicite Suisse Lausanne
Publicis FCB
Communication
Germany.............. 100.00 Financiere Allemagne Francfort
BMZ................. 49.00 Financiere Allemagne Dusseldorf
FCB Direct.......... 100.00 Publicite Allemagne Hambourg
FCB Hambourg........ 89.00 Publicite Allemagne Hambourg
Promofrance......... 100.00 Publicite Allemagne Francfort
Publicis Vicom...... 100.00 Publicite Allemagne Francfort
Publicis M.C. & D.
Werbeagentur....... 50.00 Publicite Allemagne Erlangen, Munich
Publicis M.C. & D.
Messeagentur....... 50.00 Publicite Allemagne Erlangen, Munich
More Media.......... 90.00 Achat d'espaces Allemagne Dusseldorf
Optimedia Germany... 100.00 Achat d'espaces Allemagne Dusseldorf
Publicis FCB
Frankfurt.......... 100.00 Publicite Allemagne Francfort
ADF Studio........ 100.00 Publicite Allemagne Francfort
Publicis FCB
Communications
Italia............... 100.00 Financiere Italie Milan
Publicis FCB MAC.... 95.00 Publicite Italie Milan, Rome
BMZ/ITALIA.......... 100.00 Publicite Italie Milan
BMZ Roma.......... 100.00 Publicite Italie Rome
Type Service........ 85.00 Publicite Italie Milan
Optimedia........... 100.00 Achat d'espaces Italie Milan
Highmedia......... 70.00 Achat d'espaces Italie Milan
Solaris............. 79.00 Publicite Italie Milan
Overad................ 100.00 Financiere Pays-Bas Amsterdam
Publicis/FCB Prad... 100.00 Publicite Pays-Bas Amsterdam
Publicis/FCB Prad... 100.00 Publicite Pays-Bas Eindhoven
HVR/B.M.Z........... 100.00 Publicite Pays-Bas La Haye
Overad Property..... 100.00 Financiere Pays-Bas Amsterdam
Kern Habbema & Yap.. 53.00 Publicite Pays-Bas Amsterdam
Mundocom A.A.C...... 100.00 Publicite Pays-Bas Amsterdam, Eindhoven
Publicis FCB Norway... 50.02 Publicite Norvege Oslo
Sponsor Marketing... 65.00 Publicite Norvege Oslo
Strategic Marketing. 91.00 Publicite Norvege Oslo
FCB AS.............. 91.00 Publicite Norvege Oslo
Publicis FCB Direct
Norway............. 91.00 Publicite Norvege Oslo
Basic............... 91.00 Publicite Norvege Oslo
Park Norway......... 91.00 Publicite Norvege Oslo
Rodstern Werner
Film............... 100.00 Publicite Norvege Oslo
Publicis Ciesa........ 90.00 Publicite Portugal Lisbonne
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
NOM DES SOCIETES % CONTROLE ACTIVITE PAYS VILLES
- - - - - ---------------- ---------- -------- ---- ------
<S> <C> <C> <C> <C>
Comunicar............. 90.00 Publicite Portugal Lisbonne
FCB Lisboa............ 83.00 Publicite Portugal Lisbonne
Park Lisboa......... 68.00 Publicite Portugal Lisbonne
Optimedia Portugal.... 93.00 Achat d'espaces Portugal Lisbonne
Arge.................. 100.00 Publicite Espagne Madrid, Barcelone
Publicis FCB Madrid... 100.00 Publicite Espagne Madrid
Optimedia Spain....... 98.00 Achat d'espaces Espagne Madrid
Belconexion........... 100.00 Publicite Espagne Madrid
MMS................... 100.00 Financiere Grande Bretagne Londres
Publicis Ltd........ 100.00 Publicite Grande Bretagne Londres
Optimedia
International...... 100.00 Achat d'espaces Grande Bretagne Londres
FCB. TCB............ 100.00 Publicite Grande Bretagne Londres
FCB Impact.......... 100.00 Publicite Grande Bretagne Londres
Mundocom............ 100.00 Publicite Grande Bretagne Londres
COMPAGNIE FINANCIERE
INTERPLANS............. 99.94 Financiere France Paris
Idemedia.............. 89.93 Achat d'espaces France Paris
Credome............. 99.95 Etudes medias France Paris
B/SOCIETES CONSOLIDEES
PAR MISE EN EQUIVALENCE
FCB Communications.... 20.00 Publicite Etats-Unis Chicago
Media Center.......... 25.00 Publicite Pays-Bas Amsterdam
Gnomi FCB............. 40.00 Publicite Grece Athenes
</TABLE>
18
<PAGE>
CABINET ROBERT MAZARS
We have examined the consolidated balance sheet of PUBLICIS COMMUNICATION and
Subsidiaries as of December 31, 1993 and the related consolidated statements of
income, stockholders' equity and changes in financial position for the year in
the period ended December 31, 1993. These statements present a net equity
(group share) of 369,647,000 FF and a net income (group share) of 131,659,000
FF. Our examination was made in accordance with generally accepted auditing
standards and, accordingly, include such test of the accounting records and
other auditing procedures that we considered necessary in the circumstances.
In our opinion, the financial statements referred to above present fairly the
financial position of PUBLICIS COMMUNICATION and Subsidiaries as of December
31, 1993, and the result of their operations and the changes in their financial
position for the year in the period ended December 31, 1993, in conformity with
generally accepted accounting principles applied on a consistent basis.
Paris, 16th March 1994
Frederic ALLILAIRE Jose MARETTE
19
<PAGE>
(This page left blank intentionally)
20
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTAL NOTES
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Foote, Cone & Belding
Communications, Inc.'s Annual Report to Shareholders incorporated by reference
in this Form 10-K, and have issued our report thereon dated February 15, 1994
(except with respect to the matter discussed in Note 10, as to which the date
is March 16, 1994). Our report on the consolidated financial statements
includes an explanatory paragraph with respect to the change in the method of
accounting for income taxes, effective January 1, 1992, as discussed in Note 1
to the consolidated financial statements, and the change in the method of
accounting for post-retirement benefits other than pensions, effective January
1, 1993, as discussed in Note 4 to the consolidated financial statements. Our
audits were made for the purpose of forming an opinion on those financial
statements taken as a whole. Supplemental Notes A through C are the
responsibility of the Company's management and are presented for purposes of
complying with the Securities and Exchange Commission's rules and are not part
of the basic consolidated financial statements. The Supplemental Notes have
been subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
Arthur Andersen & Co.
Chicago, Illinois,
February 15, 1994.
21
<PAGE>
FORM 10-K -- ITEM 14(A)(1)
NOTE A--VALUATION ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1991, 1992, AND 1993
<TABLE>
<CAPTION>
ADJUSTMENTS
AMOUNT ADDITIONS AND
BALANCE AT CHARGED TO CHARGED TO RECLASSI- BALANCE
BEGINNING SHAREHOLDERS' COSTS AND FICATIONS AT END
CLASSIFICATION OF PERIOD EQUITY EXPENSES (DEDUCTIONS) (1) OF PERIOD
-------------- ---------- ------------- ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS--
CURRENT
Year Ended December 31,
1991................... $2,318,623 $ -- $4,321,098 $ (592,397) $(119,463) $5,927,861
========== =========== ========== =========== ========= ==========
Year Ended December 31,
1992................... $5,927,861 $ -- $ 602,628 $ (767,728) $ (58,670) $5,704,091
========== =========== ========== =========== ========= ==========
Year Ended December 31,
1993................... $5,704,091 $ -- $1,106,509 $(1,118,919) $ 68,589 $5,760,270
========== =========== ========== =========== ========= ==========
RESERVE FOR UNREALIZED LOSS ON SHANDWICK
INVESTMENT--NON-CURRENT
Year Ended December 31,
1991................... $ -- $ 4,813,000 $ -- $ -- $ -- $4,813,000
========== =========== ========== =========== ========= ==========
Year Ended December 31,
1992................... $4,813,000 $(4,813,000) $ -- $ -- $ -- $ --
========== =========== ========== =========== ========= ==========
</TABLE>
- - - - - --------
NOTES:
(1) Account consists of currency translation adjustment and adjustments made as
a result of subsidiaries acquired and sold during the year.
22
<PAGE>
NOTE B--SHORT-TERM BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1991, 1992, AND 1993
<TABLE>
<CAPTION>
MAXIMUM AVERAGE WEIGHTED
WEIGHTED AMOUNT AMOUNT AVERAGE
BALANCE AT AVERAGE OUTSTANDING OUTSTANDING INTEREST RATE
END OF INTEREST DURING THE DURING THE DURING THE
CATEGORY PERIOD RATE PERIOD PERIOD (1) PERIOD (2)
-------- ----------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
SHORT-TERM BANK
BORROWINGS
Year ended December 31,
1991................... $11,700,000 6.3% $70,135,000 $50,144,000 7.1%
Year ended December 31,
1992................... $ 5,554,045 7.3% $53,167,000 $23,098,000 5.2%
Year ended December 31,
1993................... $ 5,070,380 6.1% $21,428,000 $ 9,836,000 4.2%
</TABLE>
- - - - - --------
NOTES:
(1) The average amount outstanding during the period was computed by dividing
the total of month-end outstanding principal balances by 12.
(2) The weighted average interest rate during the period was computed by
dividing the actual interest expense by average short-term debt
outstanding.
23
<PAGE>
NOTE C--AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS AND
EMPLOYEES OTHER THAN RELATED PARTIES
<TABLE>
<CAPTION>
BALANCE BALANCE AT END OF
AT PERIOD
BEGINNING AMOUNTS AMOUNTS --------------------
NAME OF DEBTOR OF PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT NON-CURRENT
- - - - - -------------- --------- --------- --------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1991:
Craig R. Wiggins (1).... $600,000 $ -- $-- $ -- $600,000 $ --
======== ======== ==== ======== ======== ========
YEAR ENDED DECEMBER 31,
1992:
Craig R. Wiggins (1).... $600,000 $ -- $-- $ -- $600,000 $ --
======== ======== ==== ======== ======== ========
YEAR ENDED DECEMBER 31,
1993:
Craig R. Wiggins (1).... $600,000 $ -- $-- $ -- $600,000 $ --
======== ======== ==== ======== ======== ========
</TABLE>
- - - - - --------
(1) Note (represents relocation loan) due on demand.
24
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934 AND TO
THE POWER OF ATTORNEY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS (CONSTITUTING, AMONG
OTHERS, A MAJORITY OF THE MEMBERS OF THE BOARD OF DIRECTORS OF THE REGISTRANT)
ON BEHALF OF THE REGISTRANT.
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<S> <C>
John B. Balousek
President and Chief Operating Officer
Director
Gregory W. Blaine
Executive Vice President
Director
Laurel Cutler
Director
Maurice Levy
Director
Newton N. Minow
Director
William A. Schreyer
Director
Louis E. Scott
Director
Stephen T. Vehslage
Director
Craig R. Wiggins
Director
</TABLE>
/s/ Bruce Mason
By: _________________________________
Bruce Mason
as Attorney-in-Fact
/s/ Terry M. Ashwill
By: _________________________________
Terry M. Ashwill
as Attorney-in-Fact
Date: March 29, 1994
25
<PAGE>
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
Date: March 29, 1994
Foote, Cone & Belding
Communications, Inc.
/s/ Bruce Mason
By: _________________________________
Bruce Mason
Chairman of the Board of
Directors and Chief Executive
Officer (Principal Executive
Officer)
/s/ Terry M. Ashwill
By: _________________________________
Terry M. Ashwill
Executive Vice President, Chief
Financial Officer and Director
26
<PAGE>
FORM 10-K--ITEM 14(a)(3)
INDEX OF EXHIBITS
EXHIBIT NO. DESCRIPTION Page
- - - - - ----------- ----------- ----
3(i) Amended Certificate of Incorporation. 28-35
11 Summary of Calculations of Earnings Per Share. 36
13 Portions of the Company's 1993 Annual Report to
Shareholders Incorporated by Reference to this
Form 10-K. 37-55
21 Parent and Significant Subsidiaries of Registrant. 56
23 Consent of Independent Public Accountants 57
24 Power of Attorney 58
27
<PAGE>
Exhibit 3(i)
RESTATED CERTIFICATE OF INCORPORATION
OF
FOOTE, CONE & BELDING COMMUNICATIONS, INC.
This Restated Certificate of Incorporation was duly adopted by the board
of directors in accordance with the provisions of Section 245 of the General
Corporation Law of the State of Delaware. This Restated Certificate of
Incorporation only restates and integrates and does not further amend the
provisions of the corporation's Certificate of Incorporation as heretofore
amended or supplemented, and there is no discrepancy between those provisions
and the provisions of this Restated Certificate of Incorporation. The original
Certificate of Incorporation was filed with the Secretary of State of Delaware
on December 29, 1942 under the name Foote, Cone & Belding, Inc.
FIRST: The name of the corporation is
FOOTE, CONE & BELDING COMMUNICATIONS, INC.
SECOND: The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is
The Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted
is as follows:
(a) To carry on the business of a general advertising agency, to deal in
advertising in all its forms, and to do all things that may be convenient,
useful, auxiliary or incidental to the carrying on of a general advertising
agency business; and
(b) To conduct any lawful business, to exercise any lawful purpose or
power, and to engage in any lawful act or activity for which a corporation
may be organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is fifteen million one hundred thousand (15,100,000),
divided into two classes as follows:
(a) One hundred thousand (100,000) shares shall be of the par value of
one dollar ($1.00) per share and shall be designated as Preferred Stock;
and
(b) Fifteen million (15,000,000) shares shall be of the par value of
thirty-three and one-third cents (33-1/3c) per share and shall be designated
as Common Stock.
The Preferred Stock may be issued from time to time in one or more
series, which series may have such voting powers, full or limited, or no voting
powers, and such designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, as shall be stated and expressed in the resolution or
resolutions providing for the issue of such stock adopted by the board of
directors pursuant to the authority which is hereby expressly vested in the
board of directors.
28
<PAGE>
The authority of the board of directors with respect to each series shall
include, but not be limited to, determination of the following:
(a) The distinctive designation of such series and the number of
shares which shall constitute such series, which number may be increased
(except where otherwise provided by the board of directors) or decreased
(but not below the number of shares thereof then outstanding) from time
to time by like action of the board of directors;
(b) The rate of dividends, if any, payable on the shares of such series,
the conditions upon which and the dates when such dividends shall be
payable, whether such dividends shall be cumulative (and, if so, from
which date or dates), and whether payable in preference to dividends payable
on any other class or classes or any other series of stock;
(c) Whether or not the shares of such series shall have voting powers
and, if voting powers are granted, the extent of such voting powers;
(d) Whether or not the shares of such series shall be redeemable and,
if so, the terms and conditions of such redemption, including the date or
dates upon or after which they shall be redeemable, and the amount per
share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
(e) Whether or not the shares of such series shall be entitled to the
benefit of a retirement fund or sinking fund and, if so, the terms and
conditions of such fund;
(f) Whether or not the shares of such series shall be convertible into
or exchangeable for shares of any other class or classes of stock of the
corporation or of any series thereof and, if made convertible or
exchangeable, the conversion price or prices or the rate or rates of
exchange and the adjustments thereof, if any, at which such conversion or
exchange may be made, and any other terms and conditions of such conversion
or exchange;
(g) The rights of the holders of the shares of such series upon the
voluntary or involuntary liquidation, dissolution or winding up, or merger,
consolidation or distribution or sale of assets of the corporation;
(h) The conditions and restrictions, if any, on the payment of dividends
or on the making of other distributions on, or the purchase, redemption
or other acquisition by the corporation of the Common Stock or of any
other class or series of stock of the corporation ranking junior to the
shares of such series as to dividends or upon liquidation;
(i) The conditions and restrictions, if any, on the creation of
indebtedness of the corporation or any subsidiary, or on the authorization
or issue of any additional stock of the corporation ranking on a parity
with or prior to the shares of such series as to dividends or upon
liquidation; and
(j) Any other preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof.
Shares of stock of any class of the corporation may be issued by the
corporation from time to time for such consideration, not less than the par
value thereof, as may be fixed from time to
29
<PAGE>
time by the board of directors, and any and all shares so issued, the full
consideration for which shall have been paid or delivered, shall be deemed fully
paid and non-assessable stock and not liable to any further call or assessment
thereon.
No holder of stock of any class of the corporation, whether now or
hereafter authorized, shall have any preemptive or preferential right to
subscribe to any shares of stock of the corporation of any class, now or
hereafter authorized, or to any obligations convertible into stock of the
corporation, issued or sold, or any right to subscribe to any thereof other than
such, if any, as the board of directors of the corporation from time to time may
fix pursuant to the authority hereby conferred by this Restated Certificate of
Incorporation, and the board of directors may issue stock of the corporation, or
obligations convertible into stock, without offering such issue of stock or such
obligations, either in whole or in part, to the stockholders of the corporation.
Subject to the provisions of any applicable law or of the by-laws of the
corporation, as from time to time amended, with respect to the fixing of a
record date for determination of stockholders entitled to vote, and except as
otherwise provided by law or by this Restated Certificate of Incorporation or by
the resolution or resolutions providing for the issue of any series of Preferred
Stock, each holder of shares of Common Stock shall be entitled at any and all
meetings of the stockholders of the corporation to one vote for each share of
such stock standing in his name on the books of the corporation.
Subject to any limitations contained in the resolution or resolutions
providing for the issue of any series of Preferred Stock, the holders of the
Common Stock shall be entitled to receive, when and as declared by the board of
directors, out of the assets of the corporation which are by law available
therefor, dividends payable in cash, in property or in shares of Common Stock.
No dividends other than dividends payable only in shares of Common Stock shall
be paid on the Common Stock if cash dividends in full to which all outstanding
shares of Preferred Stock of all series shall then be entitled for the then
current dividend period and (where such dividends are cumulative) for all past
dividend periods shall not have been paid or declared and set apart in full.
Except as otherwise provided by the resolution or resolutions providing for
the issue of any series of Preferred Stock, the number of authorized shares of
any class or classes of stock may be increased or decreased by the affirmative
vote of the holders of a majority of the stock of the corporation entitled to
vote.
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the corporation, the holders of the Common Stock shall be
entitled, after payment or provisions for payment of the debts and other
liabilities of the corporation and the amounts to which the holders of the
Preferred Stock shall be entitled, to share ratably in the remaining net assets
of the corporation. Neither a consolidation or merger of the corporation with or
into any other corporation, nor a merger of any other corporation into the
corporation, nor a reorganization of the corporation, nor the purchase or
redemption of all or part of the outstanding shares of stock of any class or
classes of the corporation, nor a sale or transfer of the property and business
of the corporation as or substantially as an entirety, shall be considered a
liquidation, dissolution or winding up of the corporation for purposes of the
preceding sentence.
FIFTH: The number of directors of the corporation shall be fixed from time
to time by or in the manner provided in the by-laws, and may be increased or
decreased as therein provided, but the number thereof may not be less than
three.
30
<PAGE>
In furtherance and not in limitation of the powers conferred by statute,
the board of directors is expressly authorized:
(a) To make, alter or repeal the by-laws of the corporation;
(b) To authorize and cause to be executed mortgages and liens upon the real
and personal property of the corporation;
(c) To issue bonds, debentures and other obligations, either
non-convertible or convertible into the corporation's stock, upon such terms,
in such manner and under such conditions in conformity with law as may be
fixed by the board of directors prior to the issuance of such bonds,
debentures and other obligations;
(d) To set apart out of any of the funds of the corporation available for
dividends a reserve or reserves for any proper purpose and to abolish any
such reserve;
(e) To remove at any time any officer elected or appointed by the board of
directors whenever in its judgment the best interests of the corporation
would be served thereby;
(f) By resolution passed by a majority of the whole board, to designate one
or more committees, each committee to consist of two or more of the directors
of the corporation. The board may designate one or more directors as
alternate members of any committee who may replace any absent or disqualified
member at any meeting of the committee. Any such committee, to the extent
provided in the resolution or in the by-laws of the corporation, shall have
and may exercise the powers of the board of directors in the management of
the business and affairs of the corporation, and may authorize the seal of
the corporation to be affixed to all papers which may require it; provided,
however, the by-laws may provide that in the absence or disqualification of
any member of such committee or committees, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the board
of directors to act at the meeting in the place of any such absent or
disqualified member; and
(g) To exercise all such powers and do all such acts and things as may be
exercised or done by the corporation, subject to the provisions of the laws
of the State of Delaware, of this Restated Certificate of Incorporation and
of the by-laws of the corporation.
SIXTH: The corporation shall indemnify each present or former director,
officer, employee or agent of the corporation and each person who is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, and the heirs, executors and administrators of the foregoing
persons, in the manner and to the extent provided in the by-laws of the
corporation as the same may be amended from time to time.
SEVENTH: No contract or transaction between the corporation and one or more
of its directors or officers, or between the corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
board or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose, if:
31
<PAGE>
(a) The material facts as to his interest and as to the contract or
transaction are disclosed or are known to the board of directors or the
committee, and the board or committee in good faith authorizes the
contract or transaction by a vote sufficient for such purpose without
counting the vote of the interested director or directors; or
(b) The material facts as to his interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to
vote thereon, and the contract or transaction is specifically approved
in good faith by vote of the stockholders; or
(c) The contract or transaction is fair to the corporation as of the
time it is authorized, approved or ratified by the board of directors,
a committee thereof, or the stockholders.
Interested directors may be counted in determining the presence of a
quorum at a meeting of the board of directors or of a committee which
authorizes the contract or transaction.
EIGHTH: No person who was at any time a director of the corporation
shall be personally liable to the corporation or its stockholders for monetary
damages for any breach of fiduciary duty by such person as a director, except
for liability (i) for breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which the director derived an improper personal benefit.
If the Delaware General Corporation Law is amended after approval by the
stockholders of this Article Eighth to authorize corporate action further
eliminating or limiting the personal liability of directors, then the
liability of a director of the corporation shall be eliminated or limited to
the fullest extent permitted by the Delaware General Corporation Law, as so
amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the corporation shall not adversely affect any right or protection of a
director of the corporation existing at the time of such repeal or modification.
NINTH: (1) Any action required or permitted to be taken by the
stockholders of the corporation may be effected solely at a duly called annual
or special meeting of stockholders of the corporation and may not be effected
by any consent in writing by such stockholders.
(2) Meetings of stockholders of the corporation may be called only by
the board of directors pursuant to a resolution adopted by the affirmative vote
of a majority of the entire board of directors, by the Chairman of the Board,
or by the President. As used in this Restated Certificate of Incorporation,
the term "entire board of directors" means the total authorized number of
directorships of the corporation, whether or not the directorships are filled
at the time.
TENTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
The capital of the corporation will not be reduced under or by reason
of this Restated Certificate of Incorporation.
32
<PAGE>
IN WITNESS WHEREOF, FOOTE, CONE & BELDING COMMUNICATIONS, INC.
has caused its corporate seal to be hereunto affixed and this Restated
Certificate of Incorporation to be signed by its Chairman of the Board
and attested by its Secretary this 21st day of August, 1991.
FOOTE, CONE & BELDING COMMUNICATIONS, INC.
By /s/ Bruce Mason
---------------------------------
Bruce Mason
Chairman of the Board
(Corporate Seal)
ATTEST:
/s/ Charles H. Gunderson
- - - - - ----------------------------
Charles H. Gunderson
Secretary
33
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
************************
Foote, Cone & Belding Communications, Inc., a corporation organized
and existing under and by virtue of the General Corporation Law of the
State of Delaware, DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Foote, Cone &
Belding Communications, Inc. (the "Corporation") held on February 17, 1993
resolutions were duly adopted setting forth a proposed amendment to the
Restated Certificate of Incorporation of the Corporation, filed with the
Delaware Secretary of State on August 27, 1991, declaring said amendment
to be advisable and directing that said amendment be considered at the
annual meeting of the stockholders of the Corporation to be held on
May 19, 1993. The resolution setting forth the proposed amendment is as
follows:
RESOLVED, that the first paragraph of Article Fourth of the
Restated Certificate of Incorporation of the Corporation be amended
to read as set forth below and that such amendment be submitted to
the stockholders of the corporation for approval, all in accordance
with the requirements of the Delaware General Corporation Law:
"Fourth: The total number of shares of stock which
the corporation shall have authority to issue is thirty
million one hundred thousand (30,100,000), divided into
two classes as follows:
(a) One hundred thousand (100,000) shares shall be
of the par value of one dollar ($1.00) per share and
shall be designated as Preferred Stock; and
(b) Thirty million (30,000,000) shares shall be of
the par value of thirty-three and one-third cents
(33-1/3c) per share and shall be designated as Common
Stock."
34
<PAGE>
SECOND: That thereafter the annual meeting of the stockholders of the
Corporation was duly called, and held on May 19, 1993, at which meeting the
necessary number of shares as required by statute were voted in favor of the
amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said Foote, Cone & Belding Communications, Inc. has
caused its corporate seal to be hereto affixed and this certificate to be
executed by Michael S. Duffey, its Vice President and Treasurer and attested by
Gregory W. Blaine, its Secretary, this 19th day of May, 1993.
/s/ Michael S. Duffey
----------------------------
Vice President and Treasurer
ATTEST:
/s/ Gregory W. Blaine
- - - - - ---------------------
Secretary
(CORPORATE SEAL)
35
<PAGE>
EXHIBIT 11
SUMMARY OF CALCULATIONS OF EARNINGS PER SHARE
For the Years Ended December 31, 1991, 1992 and 1993
I. EARNINGS PER SHARE--PRIMARY CALCULATION
<TABLE>
<CAPTION>
1991 1992 1993
------------ ----------- -----------
<S> <C> <C> <C>
A. Net income (loss)
Net income (loss) before accounting
change $(19,148,103) $18,046,892 $25,714,337
Cumulative impact of change in
accounting principle -- 3,681,577 --
------------ ----------- -----------
Net income (loss) $(19,148,103) $21,728,469 $25,714,337
============ =========== ===========
Weighted average common shares
outstanding 11,061,517 11,382,148 11,572,873
Average common share equivalents
outstanding:
Treasury share impact of Publicis
shares (548,600) (577,720) (577,720)
Stock options 37,421 69,612 208,370
Contingent issuances (Note 1) -- -- --
------------ ----------- -----------
B. Weighted average common and common
equivalent shares outstanding 10,550,338 10,874,040 11,203,523
============ =========== ===========
C. Net income (loss) per share
Net income (loss) before accounting
change $ (1.81) $ 1.66 $ 2.30
Cumulative impact of change in
accounting principle -- 0.34 --
------------ ----------- -----------
Net income (loss) $ (1.81) $ 2.00 $ 2.30
============ =========== ===========
</TABLE>
Note 1 - There are no such common shares issuable for the years presented. As a
result, presentation of an earnings per share calculation on a fully diluted
basis is inapplicable.
36
<PAGE>
EXHIBIT 13
ABOUT THE COMPANY
FCB was incorporated in Delaware in 1942, and in 1943 succeeded to an
advertising business established in 1873.
ADVERTISING
FCB, through its wholly owned and partially owned companies, operates an
advertising agency which analyzes the advertising needs of clients, plans and
creates advertising for their products and services, and places such
advertising for dissemination through various media such as television, radio,
newspapers and magazines. In accordance with standard agency practice, the
physical preparation of finished newspaper, magazine and television and radio
advertising is performed by outside contractors under supervision by the
Company. The Company also offers its clients such additional services as design
and production of merchandising and sales promotion programs, public relations,
and collateral services such as market and product research, package design,
and trademark and trade name development.
FCB operates fully staffed offices in the United States, Canada, Latin
America, Asia and the Pacific. Together with its partner, Publicis
Communication, the Publicis-FCB Communication group operates fully staffed
offices in Europe. These international offices handle U.S.-based and foreign-
based multinational advertising and national advertising assignments.
FCB also provides specialized communications services to its clients. These
services include direct marketing; sales promotion and design; and health care
and yellow pages advertising.
REVENUES
The principal sources of FCB's advertising revenues are commissions and
related fees earned on advertising placed with the various media. The Company
generally purchases time and space from advertising media on behalf of its
clients. The media bill FCB for the time and space, and FCB in turn bills its
clients and pays the media less the agency commission, traditionally 15%.
FCB receives production commissions from its clients for services, materials
and talent furnished by independent contractors in the preparation and
production of advertising. These commissions are customarily 17.65% of the
independent contractor's charge (which is the equivalent of 15% of the gross
billing for such charge). In addition, FCB receives from certain clients fees
for various other services performed in connection with advertising, research
and marketing studies and public relations activities. FCB performs services for
national and international advertisers of consumer and industrial goods and
services. During 1993 the ten largest clients accounted for approximately 45% of
consolidated revenues (commissions and fees), and no single client accounted for
as much as 10% of consolidated revenues.
<TABLE>
<CAPTION>
- - - - - ----------------------------------------------------------------------------------------------------------------------
1989 1990 1991 1992 1993
- - - - - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Media commissions
Television and radio $132,607 41% $126,962 38% $125,247 37% $125,100 35% $155,025 41%
Newspaper and magazine 50,805 15 47,993 14 37,150 11 37,496 11 33,129 9
Outdoor and other 3,266 1 3,046 1 7,624 2 3,323 1 3,146 1
- - - - - ----------------------------------------------------------------------------------------------------------------------
Total media commissions $186,678 57% $178,001 53% $170,021 50% $165,919 47% $191,300 51%
Production commissions 51,950 16 44,849 13 47,664 14 59,947 17 37,039 10
Fees 87,447 27 115,288 34 124,302 36 127,474 36 144,327 39
- - - - - ----------------------------------------------------------------------------------------------------------------------
$326,075 100% $338,138 100% $341,987 100% $353,340 100% $372,666 100%
======================================================================================================================
Table above sets forth the amounts, in thousands of dollars and percentages, of FCB's revenue derived from media
commissions, production commissions and fees during the last five years.
</TABLE>
37
<PAGE>
UNAUDITED QUARTERLY FINANCIAL DATA
Quarterly results and per share data are as follows (amounts in thousands
except per share data):
<TABLE>
<CAPTION>
- - - - - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1992 March 31 June 30 Sept. 30 Dec. 31
- - - - - -------------------------------------------------------------------------------------------------------
Revenues $78,711 $86,550 $89,213 $ 98,866
- - - - - -------------------------------------------------------------------------------------------------------
Income before provision for income taxes $ 3,405 $ 5,343 $ 6,172 $ 1,730
Provision for federal, foreign and state income taxes 1,682 2,642 3,086 3,481
- - - - - -------------------------------------------------------------------------------------------------------
$ 1,723 $ 2,701 $ 3,086 $ (1,751)
Minority interest expense (25) (47) (110) (172)
Equity in net earnings of affiliated companies (461) 4,970 (301) 8,434
- - - - - -------------------------------------------------------------------------------------------------------
Net income before accounting change $ 1,237 $ 7,624 $ 2,675 $ 6,511
Cumulative effect of change in accounting principle 3,681 -- -- --
- - - - - -------------------------------------------------------------------------------------------------------
Net income $ 4,918 $ 7,624 $ 2,675 $ 6,511
=======================================================================================================
Per Share:
Net income before accounting change $ .12 $ .71 $ .25 $ .59
Cumulative effect of change in accounting principle .34 -- -- --
- - - - - -------------------------------------------------------------------------------------------------------
Net income $ .46 $ .71 $ .25 $ .59
=======================================================================================================
1993 March 31 June 30 Sept. 30 Dec. 31
- - - - - -------------------------------------------------------------------------------------------------------
Revenues $79,177 $93,739 $96,340 $103,410
- - - - - -------------------------------------------------------------------------------------------------------
Income before provision for income taxes $ 3,680 $ 6,324 $ 1,119 $ 12,042
Provision for federal, foreign and state income taxes 1,841 2,748 (2,658) 4,687
- - - - - -------------------------------------------------------------------------------------------------------
$ 1,839 $ 3,576 $ 3,777 $ 7,355
Minority interest expense (47) (120) 104 (365)
Equity in net earnings of affiliated companies (288) 5,443 (572) 5,012
- - - - - -------------------------------------------------------------------------------------------------------
Net income $ 1,504 $ 8,899 $ 3,309 $ 12,002
=======================================================================================================
Net income per share $ .14 $ .80 $ .30 $ 1.06
=======================================================================================================
</TABLE>
Results for the fourth quarter of 1992 include unusual transactions which are
described in Note 16 of the consolidated financial statements.
MARKET PRICE OF
STOCK AND DIVIDEND RECORD
FCB Common Stock is listed on the New York Stock Exchange. The approximate
number of shareholders as of December 31, 1993 was 6,151. The following table
shows the high and low sales price of the Common Stock and dividends paid each
quarter since January 1, 1992.
<TABLE>
<CAPTION>
Price Range
High Low Dividends Declared
- - - - - -----------------------------------------------------
<S> <C> <C> <C>
1992
- - - - - -----------------------------------------------------
1st Quarter $28-1/2 $23-3/4 $.30
2nd Quarter 27-1/2 24-7/8 .30
3rd Quarter 29-3/4 27 .30
4th Quarter 31-3/8 27-1/4 .30
- - - - - -----------------------------------------------------
1993
- - - - - -----------------------------------------------------
1st Quarter $36 $29-7/8 $.30
2nd Quarter 36 29-1/2 .30
3rd Quarter 38-3/8 33-7/8 .30
4th Quarter 48 36-5/8 .30
- - - - - ----------------------------------------------------
</TABLE>
PERSONNEL
Our principal asset is our people. Our success depends in large part on our
ability to attract and retain personnel who are competent in the various aspects
of our business. As of December 31, 1993, FCB employed 3,709 persons in its
majority-owned offices: 2,279 were employed in the domestic offices and 1,430
were employed in the international offices. Of the 3,709 total employees, 1,046
were engaged in the creation and production of advertising, 1,261 in account
management, 675 in media and research activities, and 727 in administrative and
clerical functions.
We believe that it is important for the success of FCB that our people
own a significant portion of FCB's outstanding Common Stock. Our employees owned
approximately 20% of the outstanding Common Stock of the Company at December 31,
1993, either directly or through various employee benefit plans.
38
<PAGE>
DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Foote, Cone & Belding Communications, Inc. and Subsidiaries
RESULTS OF OPERATIONS--1993 COMPARED TO 1992
Net income for the year ended December 31, 1993 was $25,714,000 or $2.30 per
share, compared to $21,728,000 or $2.00 per share in 1992.
Revenues from FCB consolidated operations increased 5.5% from
$353,340,000 in 1992 to $372,666,000 in 1993.
Pretax income increased from $16,650,000 in 1992 to $23,165,000 in 1993.
As more fully explained in Footnote 16, Krupp/Taylor was sold in 1993. The
operating losses of Krupp/Taylor through the date of sale and the loss on
disposition of this unit reduced pretax income. This reduction was more than
offset by improved results for remaining operations, the impact of 1993
acquisitions and reduced interest expense. Pretax income for 1993 also benefited
by approximately $2,990,000 as a result of gains recorded on certain life
insurance policies and adjustments to deferred compensation reserves related to
the death of a former officer of the Company.
The effective tax rate for 1993 was impacted by 1993 unusual
transactions and is more fully explained in Footnote 6 of the consolidated
financial statements.
Equity income, which consists primarily of FCB's share of European
operations, decreased from $12,642,000 in 1992 to $9,595,000 in 1993. European
revenues were adversely impacted by the prolonged European business recession,
currency, and changes in French laws governing advertising agencies and media
companies. In addition, 1993 European operating results were depressed by
severance charges recorded in the French and Italian operations in response to
recessionary conditions.
RESULTS OF OPERATIONS--1992 COMPARED TO 1991
Net income for the year ended December 31, 1992 was $21,728,000 or $2.00 per
share, compared to a loss of ($19,148,000) or ($1.81) per share in 1991. Results
for 1991 included restructuring charges which reduced reported net income by
$35,981,000. Results for 1992 include a one-time credit of $3,681,000 related to
the adoption of Statement of Accounting Standards (SFAS) No. 109, "Accounting
for Income Taxes," as well as a charge of $3,648,000 related to the revaluation
of certain noncurrent assets and liabilities. The impact of the accounting
change and unusual transactions is more fully explained in Footnotes 1 and 16,
respectively, of the consolidated financial statements.
Revenues from FCB consolidated operations increased 3.3% from
$341,987,000 in 1991 to $353,340,000 in 1992.
FCB's ongoing efforts to tighten its expense structure are reflected in
the fact that salaries and benefits increased only 2.6% between years compared
to the 3.3% increase in consolidated revenues, while office and general expense
spending declined .8%. The provision for doubtful accounts was unusually high in
1991 due to the bankruptcy of Orion, a former client of the Company.
The effective tax rate for 1992 was impacted by 1992 unusual
transactions, and is more fully explained in Footnote 6 of the consolidated
financial statements.
Equity income, which consists primarily of FCB's share of European
operations, increased from $9,201,000 in 1991 to $12,642,000 in 1992 as a result
of improved operations in Germany and the U.K.
39
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased $8,435,000 from $5,310,000 at December 31, 1992 to
$13,745,000 at December 31, 1993. The primary reasons for this increase were
continued improvement in the profitability of the Company and tight controls
over capital spending.
Over the past three years the Company has emphasized the timely
collection of accounts receivable. This increased attention has resulted in a
substantial improvement in the aging of accounts receivable. As a result, over
60 day past due receivables have declined from 14.7% of total accounts
receivable at December 31, 1991 to 5.4% at December 31, 1993.
In 1991, the Company instituted controls over spending on property
and equipment to limit such spending to cash-producing projects. As a result,
for the past three years spending on property and equipment has been less than
the related charges for depreciation.
A key financial priority has been the reduction of debt and improved
access to long-term debt funding. During 1993, the Company obtained a Revolving
Credit Agreement totaling $50 million (see Footnote 11). Over the past three
years the Company has reduced average total debt (long-term debt and short-term
bank borrowings) from $92,924,000 in 1991 to $45,790,000 in 1993. As a result,
the Company's debt-to-equity ratio has improved from 31.8% at December 31, 1991
to 20.7% at December 31, 1993.
The Company has paid cash dividends at an annual rate of $1.20 per
common share over the past six years. Determination of the payment of dividends
is made by the Company's Board of Directors on a quarterly basis. The Company
anticipates that its cash flow from operations will be adequate to continue
payment of dividends at similar levels in 1994.
During the past three years, acquisitions have become an increasingly
important component of the Company's investing activities. The Company
continues to contemplate strategic acquisitions to enhance its worldwide
network. Such acquisitions may be financed through a combination of cash from
existing operations, the issuance of stock and long-term borrowings.
FIVE-YEAR CONSOLIDATED SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
- - - - - --------------------------------------------------------------------------------------------------------------
Years Ended December 31
- - - - - --------------------------------------------------------------------------------------------------------------
(in thousands, except per share data) 1989 1990 1991 1992 1993
- - - - - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $326,075 $338,138 $341,987 $353,340 $372,666
- - - - - --------------------------------------------------------------------------------------------------------------
Net income (loss) 19,639 21,624 (19,148) 21,728 25,714
- - - - - --------------------------------------------------------------------------------------------------------------
Net income (loss) per share 1.94 2.10 (1.81) 2.00 2.30
- - - - - --------------------------------------------------------------------------------------------------------------
Dividends per share 1.20 1.20 1.20 1.20 1.20
- - - - - --------------------------------------------------------------------------------------------------------------
Working capital 3,988 (11,427) 866 5,310 13,745
- - - - - --------------------------------------------------------------------------------------------------------------
Total assets 658,335 647,865 591,442 589,359 637,887
- - - - - --------------------------------------------------------------------------------------------------------------
Long-term debt (includes current portion) 45,396 45,472 40,088 35,652 36,255
- - - - - --------------------------------------------------------------------------------------------------------------
Total liabilities 479,869 456,642 428,401 406,032 437,857
- - - - - --------------------------------------------------------------------------------------------------------------
Stockholders' equity 178,466 191,223 163,041 183,327 200,030
- - - - - --------------------------------------------------------------------------------------------------------------
Book value per share 16.68 17.52 14.51 15.90 17.24
- - - - - --------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE>
CONSOLIDATED BALANCE SHEETS
Foote, Cone & Belding Communications, Inc. and Subsidiaries
<TABLE>
<CAPTION>
- - - - - -------------------------------------------------------------------------------------------------
December 31
ASSETS 1992 1993
- - - - - -------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 24,896,992 $ 26,111,241
Short-term investments and marketable securities (Note 8) 20,086,544 39,136,387
Accounts receivable, less allowance for doubtful accounts
of $5,704,091 in 1992 and $5,760,270 in 1993 237,553,350 257,133,409
Other current assets (Note 9) 37,717,804 32,307,991
- - - - - -------------------------------------------------------------------------------------------------
$320,254,690 $354,689,028
=================================================================================================
- - - - - -------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT:
Land and buildings $ 701,953 $ 451,962
Leasehold improvements 48,220,084 46,756,019
Furniture and equipment 73,233,624 75,104,009
- - - - - -------------------------------------------------------------------------------------------------
$122,155,661 $122,311,990
Less--Accumulated depreciation and amortization (67,864,487) (76,123,268)
- - - - - -------------------------------------------------------------------------------------------------
$ 54,291,174 $ 46,188,722
=================================================================================================
- - - - - -------------------------------------------------------------------------------------------------
OTHER ASSETS:
Goodwill, net of accumulated amortization of
$21,242,967 in 1992 and $21,163,031 in 1993 $ 39,446,502 $ 50,004,489
Investment in affiliated companies (Notes 2 and 10) 162,565,664 171,740,159
Other assets 12,801,240 15,264,813
- - - - - -------------------------------------------------------------------------------------------------
$214,813,406 $237,009,461
- - - - - -------------------------------------------------------------------------------------------------
$589,359,270 $637,887,211
=================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
41
<PAGE>
<TABLE>
<CAPTION>
- - - - - ------------------------------------------------------------------------------------------
December 31
LIABILITIES AND STOCKHOLDERS' EQUITY 1992 1993
- - - - - ------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable (Note 13) $259,629,510 $276,321,341
Short-term bank borrowings (Note 14) 5,554,045 5,070,380
Liability for federal and foreign taxes on income 3,042,727 1,684,894
Current portion of long-term debt (Note 11) 4,365,906 887,828
Accrued expenses 42,352,392 56,979,538
- - - - - ------------------------------------------------------------------------------------------
$314,944,580 $340,943,981
==========================================================================================
- - - - - ------------------------------------------------------------------------------------------
NONCURRENT LIABILITIES:
Long-term debt (Note 11) $ 31,286,231 $ 35,367,260
Liability for deferred compensation (Note 4) 29,440,382 29,714,193
Other noncurrent liabilities 27,610,432 26,564,198
Deferred income taxes 2,750,826 5,267,528
- - - - - ------------------------------------------------------------------------------------------
$ 91,087,871 $ 96,913,179
==========================================================================================
- - - - - ------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (NOTE 15):
Preferred Stock, $1.00 par value, authorized 100,000
shares, none issued $ -- $ --
Common Stock, 33-1/3c par value, authorized 30,000,000
shares, issued 11,574,438 in 1992 and 11,652,761
in 1993 3,858,141 3,884,249
Paid-in capital 116,167,372 118,525,344
Retained earnings 71,909,871 83,729,310
Less--Treasury Common Stock, at cost: 45,847 shares in
1992; 50,013 in 1993 (559,740) (1,021,213)
Less--Deferred compensation (Note 11) (3,525,000) --
Cumulative translation adjustment (4,523,825) (5,087,639)
- - - - - ------------------------------------------------------------------------------------------
$183,326,819 $200,030,051
- - - - - ------------------------------------------------------------------------------------------
$589,359,270 $637,887,211
==========================================================================================
</TABLE>
42
<PAGE>
CONSOLIDATED STATEMENTS
OF INCOME
Foote, Cone & Belding Communications, Inc. and Subsidiaries
<TABLE>
<CAPTION>
- - - - - -----------------------------------------------------------------------------------------------------------
Years Ended December 31
1991 1992 1993
- - - - - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES $341,986,829 $353,340,168 $372,666,200
- - - - - -----------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Salaries and employee benefits $198,497,424 $203,695,970 $221,036,589
Office and general expense 104,227,728 103,396,849 109,322,010
Provision for doubtful accounts 4,321,098 602,628 1,106,509
Direct marketing cost of goods sold 14,331,000 19,468,000 8,199,000
Unusual transactions (Note 16) 41,593,356 3,647,525 6,345,000
Other (income) expense 4,725,885 5,879,377 3,491,833
- - - - - -----------------------------------------------------------------------------------------------------------
Total costs and expenses $367,696,491 $336,690,349 $349,500,941
- - - - - -----------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES $(25,709,662) $ 16,649,819 $ 23,165,259
PROVISION FOR FEDERAL, FOREIGN AND STATE INCOME TAXES
(NOTE 6) 2,409,203 10,890,882 6,617,969
- - - - - -----------------------------------------------------------------------------------------------------------
$(28,118,865) $ 5,758,937 $ 16,547,290
MINORITY INTEREST EXPENSE (230,127) (354,218) (427,575)
EQUITY IN NET EARNINGS OF AFFILIATED COMPANIES (NOTE 10) 9,200,889 12,642,173 9,594,622
- - - - - -----------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) BEFORE ACCOUNTING CHANGE $(19,148,103) $18,046,892 $25,714,337
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
(NOTE 1) -- 3,681,577 --
- - - - - -----------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $(19,148,103) $21,728,469 $25,714,337
===========================================================================================================
PER SHARE:
NET INCOME (LOSS) BEFORE ACCOUNTING CHANGE $ (1.81) $ 1.66 $ 2.30
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
(NOTE 1) -- 0.34 --
- - - - - -----------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (1.81) $ 2.00 $ 2.30
===========================================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 10,550,338 10,874,040 11,203,523
- - - - - -----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
43
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Foote, Cone & Belding Communications, Inc. and Subsidiaries
<TABLE>
<CAPTION>
- - - - - ------------------------------------------------------------------------------------------------------------------------------
Treasury Cumulative
Common Paid-in Retained Common Deferred Translation
Stock Capital Earnings Stock Compensation Adjustment
- - - - - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1990 $3,668,612 $101,093,113 $96,331,951 $(1,328,205) $(5,287,500) $(3,254,999)
Net Income (Loss) -- -- (19,148,103) -- -- --
Cash Dividends -- -- (13,313,601) -- -- --
Common Stock issued for acquisitions -- 217,234 -- 316,580 -- --
Common Stock issued for stock options 18,273 892,058 -- -- -- --
Common Stock purchased by
Stock Purchase Plan 74,041 5,827,660 -- 427,177 -- --
Treasury Stock purchased -- -- -- (57,998) -- --
Translation adjustment -- -- -- -- -- 462,557
Other -- 34,287 -- -- 881,250 --
- - - - - ------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1991 $3,760,926 $108,064,352 $63,870,247 $ (642,446) $(4,406,250) $(2,792,442)
Net Income -- -- 21,728,469 -- -- --
Cash Dividends -- -- (13,688,845) -- -- --
Common Stock issued for stock options 11,747 825,187 -- -- -- --
Common Stock purchased by
Stock Purchase Plan 85,179 7,179,795 -- -- -- --
Other Common Stock issuances 289 98,038 -- 82,706 -- --
Translation adjustment -- -- -- -- -- (1,731,383)
Other -- -- -- -- 881,250 --
- - - - - ------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1992 $3,858,141 $116,167,372 $71,909,871 $ (559,740) $(3,525,000) $(4,523,825)
Net Income -- -- 25,714,337 -- -- --
Cash Dividends -- -- (13,894,898) -- -- --
Common Stock issued for stock options 18,730 1,375,350 -- 255,829 -- --
Common Stock purchased by
Stock Purchase Plan 7,378 722,937 -- -- -- --
Treasury Stock purchased -- -- -- (818,579) -- --
Other Common Stock issuances -- 259,685 -- 101,277 -- --
Translation adjustment -- -- -- -- -- (563,814)
Other -- -- -- -- 3,525,000 --
- - - - - ------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1993 $3,884,249 $118,525,344 $83,729,310 $(1,021,213) $ -- $(5,087,639)
==============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
44
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Foote, Cone & Belding Communications, Inc. and Subsidiaries
<TABLE>
<CAPTION>
- - - - - ----------------------------------------------------------------------------------------------------------------
Years Ended December 31
1991 1992 1993
- - - - - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) before accounting change $(19,148,103) $ 18,046,892 $ 25,714,337
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Provision for doubtful accounts 4,321,098 602,628 1,106,509
Depreciation and amortization 14,779,558 13,691,903 14,928,186
Unrealized loss on Shandwick investment -- 7,022,000 --
Write-off of Krupp/Taylor Goodwill 15,937,104 -- --
Deferred compensation expense 4,699,484 417,506 359,200
Deferred income taxes (6,058,921) (1,480,662) (1,377,011)
Equity earnings of affiliates (9,200,889) (12,642,173) (9,594,622)
Decrease (increase) in accounts receivable 28,114,740 (8,074,790) (20,686,568)
Increase (decrease) in accounts payable (23,719,032) (10,222,933) 16,691,831
Decrease (increase) in other current assets 337,903 (4,659,144) 5,409,813
Increase (decrease) in accrued expenses (25,405,050) 5,747,003 17,163,026
Dividends received from affiliated companies 2,198,463 370,768 1,182,232
Increase (decrease) in other noncurrent liabilities 25,272,927 (1,036,970) (157,471)
Other 3,577,992 1,535,144 1,040,250
- - - - - ----------------------------------------------------------------------------------------------------------------
$ 15,707,274 $ 9,317,172 $ 51,779,712
================================================================================================================
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Decrease (increase) in short-term investments
and marketable securities $ 5,347,407 $ 15,925,680 $(19,049,843)
Increase (decrease) in short-term bank borrowings 2,087,107 (6,145,955) (483,665)
Additions to long-term debt 361,465 103,522 5,216,595
Repayments of long-term debt (3,471,480) (2,096,727) (1,123,296)
Common Stock purchased by Stock Purchase Plan 6,328,878 7,264,974 730,315
Stock option exercises 910,331 836,934 1,649,909
Cash dividends paid (13,313,601) (13,688,845) (13,894,898)
Common Stock purchased for treasury (57,998) -- (818,579)
- - - - - ----------------------------------------------------------------------------------------------------------------
$ (1,807,891) $ 2,199,583 $(27,773,462)
================================================================================================================
CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES:
Purchase of interest in affiliated companies $ (2,979,976) $ (2,064,243) $ (901,533)
Capital expenditures (9,798,907) (8,157,682) (9,034,217)
Purchase of subsidiaries (1,382,057) (3,620,121) (12,856,251)
- - - - - ----------------------------------------------------------------------------------------------------------------
$(14,160,940) $(13,842,046) $(22,792,001)
================================================================================================================
Increase (decrease) in cash $ (261,557) $ (2,325,291) $ 1,214,249
Balance at beginning of year 27,483,840 27,222,283 24,896,992
- - - - - ----------------------------------------------------------------------------------------------------------------
Balance at end of year $ 27,222,283 $ 24,896,992 $ 26,111,241
================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
45
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Foote, Cone & Belding Communications, Inc. and Subsidiaries
1. SUMMARY OF MAJOR ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company's
wholly owned domestic and international subsidiaries and majority-owned
international subsidiaries.
The Company uses the equity method of accounting to record its investments
in 20% to 49% owned affiliated companies.
INCOME RECOGNITION
Revenue on media, production and fee billing is recognized at the time such
services are rendered to clients in the normal course of business. All salary
and other internal costs are charged to expense at the time they are incurred.
DIRECT MARKETING COST OF GOODS SOLD
Direct marketing cost of goods sold represents the materials, labor and
factory overhead costs involved in the manufacturing process of Krupp/Taylor.
PROPERTY AND DEPRECIATION
Depreciation of property and equipment is provided using the straight line
or sum-of-the-years digits method over the estimated useful lives of the
respective assets. Leasehold improvements are amortized over the life of each
lease or the estimated useful lives, whichever is less.
FEDERAL TAXES ON INCOME
Effective January 1, 1992 the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
Prior to the implementation of SFAS No. 109, the Company accounted for income
taxes under the provisions of SFAS No. 96. The essential difference between
SFAS No. 96 and SFAS No. 109 is the basis upon which a benefit may be
recognized for certain future tax deductions. SFAS No. 109 defines different
criteria for tax benefit treatment which are based upon existing facts,
circumstances and management judgment in contrast to the more mechanical
approach which is embodied in SFAS No. 96.
The cumulative impact of the adoption of SFAS No. 109 at the
beginning of 1992 is shown separately on the 1992 consolidated statement of
income as a credit of $3,681,000. The impact of this adoption on the 1992
provision for federal, foreign and state income taxes was immaterial.
At December 31, 1993, unremitted earnings of subsidiaries and
affiliated companies outside the United States were approximately $64,013,000.
Provision is not made for possible income taxes payable upon distribution of
these earnings since the Company reinvests such earnings in expanding foreign
operations.
GOODWILL
The excess of the cost over the fair market value of net assets of purchased
businesses is recorded as goodwill and is amortized on a straight line basis
over periods from ten to forty years. Amortization of goodwill, including
goodwill of affiliated companies, amounted to $5,051,000 in 1991, $4,571,000 in
1992, and $4,869,000 in 1993.
INCOME PER SHARE
Income per share is computed using the weighted average number of Common
Shares outstanding during the year. The computation also reflects the potential
issuance of shares under the Company's stock option agreements. Per share
amounts are not materially different on a fully diluted basis.
46
<PAGE>
2. EUROPEAN OPERATIONS
In January 1989, the Company and Publicis Communication (Publicis), the
wholly owned advertising subsidiary of Publicis S.A. (a publicly held French
company), formed an alliance to conduct their respective advertising
operations. In connection with this alliance, the Company exchanged 2,110,000
of its Common Shares for 350,000 shares (representing a 26% interest therein)
of Publicis.
In addition to the cross exchange of shares in the respective parent
companies, the alliance partners formed a joint operation to conduct their
European advertising operations.
The Company contributed virtually all of its European operations and
approximately $27,000,000 in cash to a newly formed company, Publicis FCB B.V.
(PBV). Publicis contributed substantially all of its European operations
outside of France and a 20% interest in its French agency, Publicis Conseil.
The Company and Publicis own 49% and 51%, respectively, of PBV.
All of the European operations, including those which form PBV as
well as the balance of Publicis Conseil (ownership in Publicis Communication),
operate as a combined European network under the management direction of
Publicis-FCB Communication.
The Company records its share of income in the joint venture and in
Publicis on the equity method.
3. STOCK OPTIONS
The Company has established various stock option plans which provide for the
issuance to employees of options to purchase Common Shares at prices equal to
100% of the fair market value at the date of grant.
The option and vesting periods for these grants are specified at the
date of grant, but in no case exceed ten years. Transactions under these plans
are summarized in the table below.
<TABLE>
<CAPTION>
- - - - - --------------------------------------------------------------------------------------------------
Shares Option Available
Under Option Price For Grant
- - - - - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OUTSTANDING AT DECEMBER 31, 1990 497,484 $13.88-$32.63 252,595
Granted 22,100 $20.75-$25.75 (22,100)
Exercised (54,820) $14.50-$24.25
Forfeitures (25,502) $15.63-$32.63 25,502
Shares released from restricted stock incentive plan 74,374
Additional shares reserved for grants and awards 610,000
- - - - - --------------------------------------------------------------------------------------------------
OUTSTANDING AT DECEMBER 31, 1991 439,262 $13.88-$31.25 940,371
Granted 348,150 $24.88-$27.88 (348,150)
Exercised (35,240) $13.88-$25.00
Forfeitures (27,490) $18.88-$24.63 27,490
Shares released from restricted stock incentive plan 5,000
- - - - - --------------------------------------------------------------------------------------------------
OUTSTANDING AT DECEMBER 31, 1992 724,682 $18.88-$31.25 624,711
Granted 198,200 $31.00-$38.88 (198,200)
Exercised (68,718) $18.88-$27.63
Forfeitures (24,480) $18.88-$35.50 24,480
- - - - - --------------------------------------------------------------------------------------------------
OUTSTANDING AT DECEMBER 31, 1993 829,684 $18.88-$38.88 450,991
==================================================================================================
</TABLE>
47
<PAGE>
4. RETIREMENT AND OTHER EMPLOYEE BENEFIT PLANS
The Company and participating U.S. subsidiaries have a profit sharing plan,
supplemental pension plan, stock purchase plan and employee stock ownership
plan.
The profit sharing and supplemental pension plans are integrated to
provide, for employees who retire at age 65 with 30 or more years of service,
annual retirement benefits of 45% of the highest five-year average compensation
during their last ten years of full-time employment. Under the integration
formula, the profit sharing plan will provide the principal funding for
employee retirement benefits. If a retiring employee's profit sharing balance
is not sufficient to fund the minimum benefit described above, the pension plan
will provide the necessary supplemental funding to bring the total benefit up
to the level guaranteed by the plans.
The annual Company contribution to the profit sharing plan is based
upon income, as defined in the plan, but may not be in excess of the amount
permitted as deductible expense under the Internal Revenue Code. Under the
Stock Purchase Plan (SPP), which is qualified as an employee stock ownership
plan under the Internal Revenue Code, the Company matches 50% of employee
contributions up to the individual employee limits deductible under the
Internal Revenue Code. The combined profit sharing, pension, employee stock
ownership plan, and SPP provisions were $7,511,000 in 1991, $9,509,000 in 1992
and $10,059,000 in 1993.
The Company has entered into agreements whereby certain employee
directors and other employees are or will be eligible for part-time employment
and/or deferred compensation upon retirement from full-time employment. The
provisions for these agreements, which are charged to income during the years
prior to the time such individuals become eligible to receive such
compensation, were $3,775,000 in 1991, $3,580,000 in 1992 and $4,651,000 in
1993.
The Company provides limited postretirement medical and life
insurance benefits to employees who retire with at least ten years of service
prior to age 65. Prior to January 1, 1993, the Company accounted for such
benefits on the cash basis. In 1993 the Company adopted the provisions of
Statement of Financial Accounting Standards No. 106 (SFAS No. 106), "Employers'
Accounting for Postretirement Benefits Other Than Pensions," on a prospective
basis. Under this method, the Company is amortizing the actuarial present value
of the accumulated postretirement benefit obligation (APBO) at January 1, 1993
over a twenty year period. In addition, the Company provides for current year
service costs, interest costs and actuarially determined plan gains and losses.
The adoption of SFAS No. 106 did not materially impact 1993 earnings. The APBO
for these benefits (calculated using a discount rate of 7%) was approximately
$4,946,000 and $5,619,000 at January 1, 1993 and December 31, 1993,
respectively.
In November 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 112 (SFAS No. 112), "Employers'
Accounting for Postemploy ment Benefits." SFAS No. 112, which must be
implemented by fiscal 1994, establishes accounting standards for employers who
provide benefits to former or inactive employees after employment but before
retirement. The Company has not yet estimated the impact of SFAS No. 112 on net
income; however, it believes that the impact, if any, will be immaterial
because it offers limited related benefits.
5. CONTINGENCIES
The Company is a party to several lawsuits incidental to its business. It is
not possible at the present time to estimate the ultimate liability, if any, of
the Company with respect to such litigation; however, management believes that
any ultimate liability will not be material in relation to the Company's
consolidated financial position.
48
<PAGE>
6. FEDERAL, FOREIGN AND STATE INCOME TAXES
The domestic and foreign components of pretax income are as follows:
<TABLE>
<CAPTION>
- - - - - -------------------------------------------------------------------------------
SFAS No. 96 SFAS No. 109
----------- ------------------
(000's Omitted) 1991 1992 1993
- - - - - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $(30,081) $ 8,062 $14,778
Foreign 4,371 8,588 8,387
- - - - - -------------------------------------------------------------------------------
$(25,710) $16,650 $23,165
===============================================================================
The provision for taxes on income consists of the following:
- - - - - -------------------------------------------------------------------------------
U.S.--Current payable $ 6,446 $ 6,871 $ 2,781
--Deferred (6,059) (1,481) (1,377)
Foreign 1,738 2,534 3,865
State 284 2,967 1,349
- - - - - -------------------------------------------------------------------------------
$ 2,409 $10,891 $ 6,618
===============================================================================
Deferred and prepaid expense results from temporary differences in the
recognition of revenue and expenses for tax and financial reporting purposes.
The sources of these differences and related tax effects are as follows:
- - - - - -------------------------------------------------------------------------------
Safe harbor leases $ (1,143) $ (445) $ (479)
Deferred compensation (970) (223) (157)
Depreciation (719) (1,638) (1,233)
Lease reserves (2,756) 471 581
Allowance for doubtful accounts (1,332) 59 (63)
Other timing differences, net 861 295 (26)
- - - - - -------------------------------------------------------------------------------
$ (6,059) $(1,481) $(1,377)
===============================================================================
</TABLE>
The reconciliation of the U.S. statutory rate to the effective income tax rates
is as follows:
<TABLE>
<CAPTION>
- - - - - --------------------------------------------------------------------------------------------------------------------------
SFAS No. 96 SFAS No. 109
---------------- ------------------------------------
1991 1992 1993
- - - - - --------------------------------------------------------------------------------------------------------------------------
Amount % Amount % AMOUNT %
(000) Rate (000) Rate (000) RATE
- - - - - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
At statutory rate $(8,741) 34.0% $ 5,661 34.0% $8,108 35.0%
State taxes on income, net of federal taxes 188 (0.7) 1,958 11.8 877 3.8
Higher aggregate effective tax rate on foreign operations 252 (1.0) 869 5.2 290 1.3
Tax effect of nondeductible amortization 1,033 (4.0) 858 5.2 980 4.2
Impact of unusual transactions 9,962 (38.7) 1,240 7.4 (3,200) (13.8)
Other (285) 1.0 305 1.8 (437) (1.9)
- - - - - --------------------------------------------------------------------------------------------------------------------------
$ 2,409 (9.4)% $10,891 65.4% $6,618 28.6%
==========================================================================================================================
</TABLE>
49
<PAGE>
7. DISTRIBUTION OF EARNINGS AND ASSETS
Information about the Company's operations in different geographic areas for
1991, 1992 and 1993, in thousands of dollars, is as follows:
<TABLE>
- - - - - ----------------------------------------------------------------------------------------------------
1991 U.S. INTERNATIONAL CORPORATE CONSOLIDATED
- - - - - ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $282,672 $ 59,315 $ -- $341,987
- - - - - ----------------------------------------------------------------------------------------------------
Income (loss) before taxes $(14,734) $ 4,453 $(15,429) $(25,710)
Provision (credit) for taxes 6,841 1,738 (6,170) 2,409
- - - - - ----------------------------------------------------------------------------------------------------
$(21,575) $ 2,715 $ (9,259) $(28,119)
Minority interest expense -- (230) -- (230)
Equity in earnings of affiliated companies -- 9,201 -- 9,201
- - - - - ----------------------------------------------------------------------------------------------------
Net income (loss) $(21,575) $ 11,686 $ (9,259) $(19,148)
====================================================================================================
Identifiable assets at December 31, 1991 $334,820 $100,953 $ 7,769 $443,542
Investment in affiliated companies -- 147,900 -- 147,900
- - - - - ----------------------------------------------------------------------------------------------------
Total assets at December 31, 1991 $334,820 $248,853 $ 7,769 $591,442
====================================================================================================
1992 U.S. INTERNATIONAL CORPORATE CONSOLIDATED
- - - - - ----------------------------------------------------------------------------------------------------
Revenues $287,188 $ 66,152 $ -- $353,340
- - - - - ----------------------------------------------------------------------------------------------------
Income (loss) before taxes $ 23,293 $ 8,755 $(15,398) $ 16,650
Provision (credit) for taxes 13,021 3,105 (5,235) 10,891
- - - - - ----------------------------------------------------------------------------------------------------
$ 10,272 $ 5,650 $(10,163) $ 5,759
Minority interest expense -- (354) -- (354)
Equity in earnings of affiliated companies -- 12,642 -- 12,642
- - - - - ----------------------------------------------------------------------------------------------------
Net income (loss) before accounting change $ 10,272 $ 17,938 $(10,163) $ 18,047
Cumulative effect of change
in accounting principle 2,939 742 -- 3,681
- - - - - ----------------------------------------------------------------------------------------------------
Net income (loss) $ 13,211 $ 18,680 $(10,163) $ 21,728
====================================================================================================
Identifiable assets at December 31, 1992 $312,428 $110,429 $ 3,936 $426,793
Investment in affiliated companies -- 162,566 -- 162,566
- - - - - ----------------------------------------------------------------------------------------------------
Total assets at December 31, 1992 $312,428 $272,995 $ 3,936 $589,359
====================================================================================================
1993 U.S. INTERNATIONAL CORPORATE CONSOLIDATED
- - - - - ----------------------------------------------------------------------------------------------------
Revenues $290,386 $ 82,280 $ -- $372,666
- - - - - ----------------------------------------------------------------------------------------------------
Income (loss) before taxes $ 32,171 $ 8,386 $(17,392) $ 23,165
Provision (credit) for taxes 9,276 3,429 (6,087) 6,618
- - - - - ----------------------------------------------------------------------------------------------------
$ 22,895 $ 4,957 $(11,305) $ 16,547
Minority interest expense -- (428) -- (428)
Equity in earnings of affiliated companies -- 9,595 -- 9,595
- - - - - ----------------------------------------------------------------------------------------------------
Net income (loss) $ 22,895 $ 14,124 $(11,305) $ 25,714
====================================================================================================
Identifiable assets at December 31, 1993 $333,310 $128,713 $ 4,124 $466,147
Investment in affiliated companies -- 171,740 -- 171,740
- - - - - ----------------------------------------------------------------------------------------------------
Total assets at December 31, 1993 $333,310 $300,453 $ 4,124 $637,887
====================================================================================================
</TABLE>
50
<PAGE>
8. SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES
The Company's current investment portfolio consists of short-term investments
(principally time deposits and money-market funds) and marketable securities
which are carried at the lower of cost or market. At December 31, 1992 and 1993,
short-term investments and marketable securities were:
<TABLE>
<CAPTION>
- - - - - ----------------------------------------------------------------------------
(in thousands) 1992 1993
- - - - - ----------------------------------------------------------------------------
<S> <C> <C>
Short-term investments $19,620 $38,760
Limited partnerships 467 376
- - - - - ----------------------------------------------------------------------------
$20,087 $39,136
============================================================================
</TABLE>
At December 31, 1992 and 1993, the cost of short-term investments and
marketable securities approximated their respective market values.
At December 31, 1992 and 1993, other assets include an investment in
Shandwick, plc resulting from the 1989 sale of Golin/Harris. This investment is
carried at the lower of cost or market. To reduce the carrying value of this
investment at December 31, 1991 to market value, a valuation allowance was
established in the amount of $4,813,000 which was charged directly to
shareholders' equity. During 1992, management determined that the decline in
market value of this investment was permanent. Accordingly, a provision of
$7,022,000 was charged against 1992 earnings to establish this market valuation
reserve at December 31, 1992.
9. OTHER CURRENT ASSETS
At December 31, 1992 and 1993, other current assets were as follows:
<TABLE>
<CAPTION>
- - - - - ----------------------------------------------------------------------------
(in thousands) 1992 1993
- - - - - ----------------------------------------------------------------------------
<S> <C> <C>
Expenditures billable to clients $25,590 $18,969
Prepaid expenses 12,128 13,339
- - - - - ----------------------------------------------------------------------------
$37,718 $32,308
============================================================================
</TABLE>
10. INVESTMENT IN AFFILIATED COMPANIES
The Company's investment in affiliated companies consists of equity interests
ranging from 20% to 49% in various international advertising agencies, as
follows:
<TABLE>
<CAPTION>
- - - - - ----------------------------------------------------------------------------
(in thousands) 1992 1993
- - - - - ----------------------------------------------------------------------------
<S> <C> <C>
26% interest in
Publicis Communication (Note 2) $ 63,734 $ 67,221
49% interest in Publicis-FCB
B.V. (Note 2) 86,179 90,871
Other 12,653 13,648
- - - - - ----------------------------------------------------------------------------
$162,566 $171,740
============================================================================
</TABLE>
Summarized financial information for affiliated companies is as follows:
<TABLE>
<CAPTION>
- - - - - ----------------------------------------------------------------------------
(in thousands) 1992 1993
- - - - - ----------------------------------------------------------------------------
<S> <C> <C>
Current assets $840,869 $670,075
Noncurrent assets 165,694 234,745
Current liabilities 790,618 664,741
Long-term debt 82 245
Other noncurrent liabilities 64,251 62,885
Shareholders' equity 151,612 176,949
Revenues 555,721 465,695
Income before provision
for income taxes 70,129 54,953
Net income 28,135 26,466
============================================================================
</TABLE>
The Company's equity in the net tangible assets of these affiliated
companies was $91,328,000 at December 31, 1992 and $108,089,000 at December 31,
1993.
In accordance with established audit practice in France, the audit reports
for Publicis Communication and Publicis Conseil for the year ended December 31,
1993 (see Note 2) are dated March 16, 1994, the date of the first board of
directors meeting for the respective companies following completion of the
audit.
51
<PAGE>
11. LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt consists of:
- - - - - -----------------------------------------------------------
(in thousands) 1992 1993
- - - - - -----------------------------------------------------------
<S> <C> <C>
10.53% senior notes $25,000 $25,000
12.36% senior notes 6,383 5,775
Guarantee of indebtedness for
Stock Purchase Plan debt 3,525 --
Other notes and obligations 744 5,480
- - - - - -----------------------------------------------------------
$35,652 $36,255
Less portions due within one year (4,366) (888)
- - - - - -----------------------------------------------------------
$31,286 $35,367
===========================================================
</TABLE>
Scheduled maturities of long-term debt are $888,000, $5,607,000, and
$29,760,000 in 1994, 1995 and 1996, respectively.
During 1987, the Company entered into a credit agreement with a bank
which allowed the Company's SPP to borrow $7,050,000 to purchase shares of the
Company's Common Stock. Repayment of the loan was guaranteed by the Company.
Accordingly, the loan had been recorded as long-term debt on the Company's
consolidated balance sheet. A like amount of deferred compensation was recorded
as a reduction of stockholders' equity. During 1993 this loan was repaid.
On March 1, 1993 the Company entered into a Revolving Credit Agreement
totaling $50,000,000 with several banks. This agreement, which expires on
February 29, 1996, provides that the Company may obtain loans bearing interest
at a bid rate (LIBOR or Fixed), a Reference Rate, or the Eurodollar rate plus a
spread, and requires a commitment fee of .125% and a facility fee of .125%. At
December 31, 1993, there were no borrowings under this agreement.
During 1989 the Company borrowed $25,000,000 to finance its capital
contribution to the Publicis Alliance. As of December 31, 1993, this obligation
and other international subsidiary debt totaling $4,775,000, which by their
terms are due within one year, are classified as long-term because these
obligations are supported by the Revolving Credit Agreement, and it is the
Company's intention to maintain these obligations as long-term.
The long-term debt agreements and Revolving Credit Agreement contain
various restrictive covenants and conditions which include, but are not limited
to:
.The Company must maintain a minimum net worth of $165,000,000, a current ratio
of at least .9, a debt to capitalization ratio of no greater than .4, and a
fixed charge coverage ratio of at least 1.5.
.The Company is precluded from issuing additional long-term debt if consolidated
funded debt (as defined) exceeds 350% of consolidated operating cash flow for
the most recent four quarters.
At December 31, 1993, the Company was in compliance with all covenants and
conditions related to these agreements.
During 1993, the Company entered into an interest rate swap contract with
a notional amount of $25,000,000. Under this arrangement, the Company will
receive LIBOR and pay a fixed rate of 6.1% from June 1994 to June 1999.
At December 31, 1993, the Company estimates that the fair value of its
long-term debt is not materially different from its financial statement carrying
value. The fair value was estimated using quoted market prices or discounted
future cash flows.
Total interest expense, including interest on short-term borrowings, was
$9,351,000, $6,718,000, and $6,388,000 in 1991, 1992 and 1993, respectively.
12. LEASE OBLIGATIONS
The Company leases substantially all of its office facilities under operating
leases. Net rental expense on the leases was $31,448,000 in 1991, $30,011,000 in
1992, and $33,958,000 in 1993, after deducting sublease income of $7,837,000,
$7,004,000, and $5,972,000, respectively. Certain major leases are subject to
annual adjustments based on changes in costs and taxes.
Future rental obligations have been determined based on the required
payments for leases existing in 1993. At December 31, 1993, the future rental
obligation under these leases (net of sublease income of approximately
$31,855,000) is as follows:
<TABLE>
<CAPTION>
- - - - - ----------------------------------
Year Amount (000's)
- - - - - ----------------------------------
<S> <C>
1994 $ 35,894
1995 35,611
1996 35,193
1997 36,701
1998 36,220
Thereafter 149,963
- - - - - ----------------------------------
</TABLE>
52
<PAGE>
13. ACCOUNTS PAYABLE
Accounts payable includes the liability for cash overdrafts which represents
checks outstanding in excess of balances maintained at the respective banks.
The liability for cash overdrafts was $18,905,000 and $34,013,000 at December
31, 1992 and 1993, respectively.
14. SHORT-TERM BANK BORROWINGS
Short-term bank borrowings consist principally of amounts borrowed under
domestic and international bank overdraft facilities, lines of credit and
multicurrency credit arrangements. Average aggregate short-term borrowings were
$23,098,000 in 1992 and $9,836,000 in 1993, and the maximum amount outstanding
was $53,167,000 in 1992 and $21,428,000 in 1993.
The Company had available at various banks uncommitted lines of
credit aggregating approximately $76,212,000 at December 31, 1993, of which
$71,142,000 was unused. The lines of credit are subject to annual renewal and
may be withdrawn at the option of the various banks.
15. SHAREHOLDERS' RIGHTS PLAN
Under the Company's Shareholders' Rights Plan, one preferred stock purchase
right exists for each outstanding share of Common Stock. The rights, which
expire in November 1998, are exercisable only if a person or group (excluding
the Company and Publicis Communication) acquires 20% or more of the Company's
Common Stock or announces a tender offer which would result in ownership of 30%
or more of the Company's Common Stock. Each right entitles the holder to
purchase one one-thousandth of a share of Series A Junior Participating
Preferred Stock ("Preferred Stock") of the Company at a purchase price of $85,
subject to adjustment under certain conditions. At December 31, 1993, 30,000
shares of the Company's unissued Preferred Stock were reserved for issuance
upon exercise of these rights.
Subject to certain conditions and limitations, in the event that the
Company is acquired by a person or group, these rights (which have not
otherwise been exercised to acquire the Company's Preferred Stock) entitle the
holder to acquire the common stock of the surviving entity at approximately 50%
of its fair market value.
The Board of Directors has the flexibility to (i) redeem outstanding
rights, (ii) adjust the thresholds at which these rights become exercisable,
and, (iii) exclude other persons or groups from triggering the exercisability
of these rights.
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16. UNUSUAL TRANSACTIONS
During the fourth quarter of 1991, the Company recorded charges to
restructure operations and recognize anticipated losses to sublet excess office
space. These charges, included in unusual transactions, totaled $42,384,000
before tax. Approximately $28,765,000 of these charges related to the Company's
Los Angeles-based direct marketing unit and advertising operations: of this
total, $15,937,000 represented the write-off of goodwill related to the
Krupp/Taylor operations and $12,828,000 represented charges to establish
reserves for lease exposures and to recognize severance costs related to the
restructuring. The remaining charge of $13,619,000 related to reserves
established for premature terminations of sublease agreements principally at
the Company's New York operations and for severance and related expenses
associated with management changes principally in the New York operations. Also
included in unusual transactions was a gain of $791,000 related to the sale of
the Company's financial advertising subsidiary, Albert Frank-Guenther Law. The
after-tax impact of unusual transactions in 1991 was a loss of $35,981,000.
During 1992, the Company established a reserve for the difference
between the market value and cost of its Shandwick investment (see Note 8),
resulting in a pretax charge against income of $7,022,000. The Company also
renegotiated the lease of a foreign subsidiary resulting in a pretax gain of
$3,374,000. The after-tax impact of unusual items in 1992 was a loss of
$3,648,000.
During 1993, the Company sold Krupp/Taylor, its Los Angeles-based
direct mail production facility. Because Krupp/Taylor relocated its production
facility during 1993, plant downtime negatively impacted operating results. As
a consequence, revenue and earnings were significantly reduced. Accordingly,
prior to the date of sale, Krupp/Taylor's 1993 pretax loss and net loss were
$8,393,000 and $4,876,000, respectively. The sale resulted in a pretax loss of
$6,345,000 and the realization of additional tax benefits deriving from the
1991 write-down of the financial statement carrying value of Krupp/Taylor. The
after-tax impact of unusual items in 1993 is a loss of $600,000.
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MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
Foote, Cone & Belding Communications, Inc. and Subsidiaries
The financial statements and related financial information included in this
annual report are the responsibility of management. They have been reported in
conformity with generally accepted accounting principles. In preparing these
financial statements, management has necessarily included some amounts which are
based on its best estimates and judgments. FCB maintains systems of internal
accounting control designed to provide reasonable assurance that its assets are
safeguarded against loss from unauthorized use or disposition, and that
transactions are executed and recorded in accordance with established
procedures. These systems of financial control are reviewed, modified and
improved as changes occur in business conditions and operations.
Arthur Andersen & Co., our independent public accountants, are
engaged to audit and to report on our consolidated financial statements. In
performing their audit in accordance with generally accepted auditing
standards, they evaluate our systems of internal accounting control, review
selected transactions, and carry out other auditing procedures to the extent
they consider necessary in expressing their informed professional opinion on
our financial statements.
The Audit Committee, composed of nonemployee members of the Board of
Directors, meets periodically with management, the independent certified public
accountants, and the internal auditors. This Committee reviews audit plans and
assesses the adequacy of internal controls and financial reporting. Both the
independent certified public accountants and internal auditors have direct
access to the Audit Committee.
BRUCE MASON TERRY M. ASHWILL
Chairman/CEO Chief Financial Officer
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Foote, Cone & Belding
Communications, Inc.
We have audited the accompanying consolidated balance sheets of Foote, Cone
& Belding Communications, Inc. (a Delaware corporation) and Subsidiaries as of
December 31, 1993 and 1992, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1993. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of Publicis Communication S.A. and Publicis Conseil, the investments
in which are reflected in the accompanying financial statements using the
equity method of accounting. The investments in Publicis Communication S.A. and
Publicis Conseil represent approximately 15% and 16% of total assets as of
December 31, 1993 and 1992, respectively. The equity in their net earnings were
$2,267,000, $5,343,000 and $5,053,000 for each of the three years in the period
ended December 31, 1993. The financial statements of Publicis Communication
S.A. and Publicis Conseil were audited by other auditors whose reports have
been furnished to us (see Note 10) and our opinion, insofar as it relates to
the amounts included for Publicis Communication S.A. and Publicis Conseil, is
based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors,
the financial statements referred to above present fairly, in all material
respects, the financial position of Foote, Cone & Belding Communications, Inc.
and Subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the
Company adopted Statement of Financial Accounting Standards No. 109--Accounting
for Income Taxes, effective January 1, 1992. As discussed in Note 4 to the
consolidated financial statements, the Company adopted Statement of Financial
Accounting Standards No. 106--Employer's Accounting for Postretirement Benefits
Other Than Pensions, effective January 1, 1993.
ARTHUR ANDERSEN & CO.
Chicago, Illinois,
February 15, 1994 (except with respect to the matter discussed in Note 10,
as to which the date is March 16, 1994).
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EXHIBIT 21
PARENT AND SIGNIFICANT SUBSIDIARIES OF REGISTRANT
JURISDICTION OF INCORPORATION
-----------------------------
Foote, Cone & Belding Communications, Inc. Delaware
Subsidiaries 100% owned by the Registrant and included in the consolidated
financial statements--
VICOM/FCB, Inc. Delaware
Foote, Cone & Belding of Pennsylvania, Inc. Delaware
Foote, Cone & Belding Advertising, Inc. Delaware
Foote, Cone & Belding, Inc. Delaware
FCB International, Inc. Delaware
Subsidiaries 100% owned by FCB International, Inc. and included in the
consolidated financial statements--
FCB/Ronalds-Reynolds, Ltd. Canada (Ontario)
FCB Australia Pty., Ltd. Australia
Less than 50% owned affiliates accounted for by the equity method--
Publicis Communication France
Publicis . FCB BV The Netherlands
NOTE: Other subsidiaries included in the consolidated financial statements are
excluded from this listing because in the aggregate they do not constitute a
significant subsidiary as defined by the Securities and Exchange Commission.
56
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EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Foote, Cone & Belding Communications, Inc.:
As independent public accountants, we hereby consent to the incorporation of our
reports included in or incorporated by reference to this Form 10-K, into the
Company's previously filed Registration Statements on Form S-8 (File No.'s
33-15126, 33-41128, and 33-48523).
ARTHUR ANDERSEN & CO.
Chicago, Illinois,
March 25, 1994.
57
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EXHIBIT 24
POWER OF ATTORNEY
The undersigned does hereby constitute and appoint Bruce Mason and
Terry M. Ashwill, and each of them, his attorney-in-fact for the purpose of
signing in his name and on his behalf as a director of Foote, Cone & Belding
Communications, Inc. (the "Company"), the Company's Annual Report on Form 10-K
pursuant to the Securities Exchange Act of 1934 and any registration statement
filed during 1993 for the registration under the Securities Act of 1933 of
Common Stock of the Company to be issued or sold in connection with the
Company's Stock Option, Restricted Stock or Stock Purchase Plans, and of signing
any and all amendments to said registration statement and any and all amendments
thereto as each thereof is so signed for filing with the Securities and Exchange
Commission.
Dated: March 4, 1994
/s/ John B. Balousek /s/ William A. Schreyer
- - - - - ------------------------ ------------------------
John B. Balousek William A. Schreyer
/s/ Gregory W. Blaine /s/ Louis E. Scott
- - - - - ------------------------ ------------------------
Gregory W. Blaine Louis E. Scott
/s/ Laurel Cutler /s/ Stephen T. Vehslage
- - - - - ------------------------ ------------------------
Laurel Cutler Stephen T. Vehslage
/s/ Maurice Levy /s/ Craig R. Wiggins
- - - - - ------------------------ ------------------------
Maurice Levy Craig R. Wiggins
/s/ Newton N. Minow
- - - - - ------------------------
Newton N. Minow
58
