<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the quarter ended March 31, 1994 Commission file no. 1-5029
FOOTE, CONE & BELDING COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-1088161
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
101 EAST ERIE STREET, CHICAGO, ILLINOIS 60611
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number: (312) 751-7000
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, and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
There were 11,673,749 shares of the Registrant's 33 1/3 cents per share
par value Common Stock outstanding as of May 12, 1994.
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FOOTE, CONE & BELDING COMMUNICATIONS, INC.
INDEX
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements and Exhibits
Consolidated Statements of Income for the
Three Months Ended March 31, 1993 and 1994 3
Consolidated Balance Sheets as of March 31, 1993,
December 31, 1993, and March 31, 1994 4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1993 and 1994 5
Notes to Consolidated Condensed Financial
Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Operating Results 7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 6. Exhibits and Reports on Form 8-K 8
2
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FOOTE, CONE & BELDING COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended March 31
1993 1994
--------- ---------
<S> <C> <C>
Revenues $79,177 $88,362
------- -------
Costs and Expenses:
Salaries and employee benefits $48,443 $55,155
Office and general expenses 26,105 27,912
Other (income) expense 949 1,225
------- -------
Total Costs and Expenses $75,497 $84,292
------- -------
Income Before Provision for Taxes on
Income $ 3,680 $ 4,070
Provision for Federal, Foreign & State
Income Taxes 1,841 1,872
------- -------
$ 1,839 $ 2,198
Minority Interest Credit (Expense) (47) (73)
Equity in Earnings (Losses) of Affiliated
Companies (288) (253)
------- -------
Net Income $ 1,504 $ 1,872
======= =======
Net Income Per Share $ .14 $ .17
======= =======
Average Number of Common and Common
Equivalent Shares Outstanding 11,140 11,339
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
3
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FOOTE CONE & BELDING COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Mar. 31 Dec. 31 Mar. 31
1993 1993 1994
-------- -------- --------
ASSETS:
- - -------
<S> <C> <C> <C>
Cash and short-term investments $ 23,506 $ 65,247 $ 18,946
Accounts receivable, net 252,964 257,133 294,200
Expenditures billable to clients 30,126 18,970 23,969
Other current assets 13,524 13,339 18,939
-------- -------- --------
Total current assets $320,120 $354,689 $356,054
Property and equipment, net 53,958 46,189 44,686
Goodwill 39,157 50,004 49,319
Investment in affiliated companies 162,011 171,740 171,504
Other noncurrent assets 12,877 15,265 14,454
-------- -------- --------
Total assets $588,123 $637,887 $636,017
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
- - -------------------------------------
Accounts payable and accruals $303,630 $333,301 $313,815
Short-term bank borrowings 6,206 5,070 24,529
Current portion of long-term debt 4,141 888 807
Liability for taxes on income 2,757 1,685 2,674
-------- -------- --------
Total current liabilities $316,734 $340,944 $341,825
-------- -------- --------
Deferred taxes $ 2,751 $ 5,268 $ 5,268
-------- -------- --------
Long-term debt $ 31,232 $ 35,367 $ 35,293
-------- -------- --------
Accrued future compensation exp. $ 26,813 $ 29,714 $ 29,547
-------- -------- --------
Other noncurrent liabilities $ 27,577 $ 26,564 $ 25,141
-------- -------- --------
Common stock $ 3,872 $ 3,884 $ 3,896
Paid-in capital 117,329 118,525 119,393
Retained earnings 69,961 83,729 82,110
Less-Treasury stock (560) (1,021) (1,025)
Less-Deferred compensation (3,305) -- 0
Cumulative translation adjustment (4,281) (5,087) (5,431)
-------- -------- --------
Total stockholders' equity $183,016 $200,030 $198,943
-------- -------- --------
Total liabilities and
stockholders' equity $588,123 $637,887 $636,017
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
4
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FOOTE, CONE & BELDING COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Three months ended Mar. 31
1993 1994
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
- - -------------------------------------
Net income $ 1,504 $ 1,872
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 3,479 3,626
Deferred compensation expense (2,675) (53)
Equity earnings of affiliates, net of dividends
received 1,253 253
Accounts receivable (15,411) (37,067)
Accounts payable and accruals 1,170 (18,497)
Billable expenditures and other current assets (5,932) (10,599)
Other 252 (605)
-------- --------
$(16,360) $(61,070)
-------- --------
Cash Provided By (Used For) Financing Activities:
- - -------------------------------------------------
Short-term investments and marketable securities $ 9,227 $ 36,059
Additions to long-term debt 43 45
Payments of long-term debt (105) (342)
Cash dividends paid (3,453) (3,491)
Common stock issuances 1,176 876
Short-term borrowings 652 19,459
-------- --------
$ 7,540 $ 52,606
-------- --------
Cash Provided By (Used For) Investment Activities:
- - --------------------------------------------------
Purchase of subsidiaries $ (12) $ (381)
Purchase of interest in affiliated companies (523) --
Capital expenditures (2,896) (1,397)
-------- --------
$ (3,431) $ (1,778)
-------- --------
Increase (Decrease) In Cash $(12,251) $(10,242)
Balance at beginning of period 24,897 26,111
-------- --------
Balance at end of period $ 12,646 $ 15,869
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
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FOOTE, CONE & BELDING COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1993 AND 1994
(UNAUDITED)
(1) The condensed financial statements included herein have been prepared by
the Company without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission, and include all adjustments (which
comprise only normal recurring items) which the Company considers
necessary for a fair presentation. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. The
consolidated condensed financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's
latest Annual Report on Form 10-K.
Revenues and net income for the first three months of the year should not
be considered reliable indicators of revenues or net income for the entire
year.
(2) The number of shares outstanding reflects the potential dilution of shares
expected to be earned through profit performance contracts and outstanding
stock options. Per share income amounts are not materially different on a
fully diluted basis.
6
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FOOTE, CONE & BELDING COMMUNICATIONS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net income for the first quarter totaled $1,872,000 or $.17 per share, up 24.5%
over 1993 first quarter net income of $1,504,000 or $.14 per share.
Revenues increased 11.6% to $88,362,000 in 1994 from $79,177,000 in 1993. North
American revenues increased 5.9% to $73,719,000 in 1994 while international
revenues increased 52.6% to $14,643,000. Excluding the impacts of acquisitions
and the 1993 divestiture of Krupp/Taylor USA, North American and international
revenues increased 7.2% and 7.4%, respectively.
Salaries, employee benefits, and office and general expenses increased 11.4% to
$83,067,000 in 1994. The Company's ongoing cost containment program is the
primary reason that the rate of increase in these categories of expenses is less
than the growth rate for revenues. The increase in other expense is primarily
due to higher currency losses recognized in 1994 on the positive operating
results of FCB operations in Brazil. During the first quarter of 1994, the
Company adopted the provisions of Statement of Accounting Standards No. 112
(SFAS No. 112), "Employers' Accounting for Postemployment Benefits". The impact
of the adoption of SFAS No. 112 was immaterial to the Company's results of
operations and financial condition because it offers limited related benefits.
The effective tax rate for 1994 is 46% compared to 50% in 1993. The decrease
results primarily from a shift in the mix of worldwide earnings to countries
having lower effective tax rates.
Equity income, which consists primarily of FCB's share of European operations
was a loss of $253,000 in 1994 compared to a loss of $288,000 in 1993.
Historically, the results of operations in Europe tend to be very cyclical, with
the first quarter of the year being the weakest.
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
As more fully explained below, the decline in "Cash and short-term investments"
and increases in "Accounts receivable, net", "Expenditures billable to clients",
and "Short-term bank borrowings" from the beginning of the year reflect the
cyclical nature of the advertising business and are inter-related.
The increase in "Expenditures billable to clients" is due to the production of
client commercials which will be shown during the summer months. The costs
related to these commercials are billed to clients during the second quarter
when the commercials are completed. Commercial production activity in the last
month of the year is typically low.
7
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The increase in "Accounts receivable, net" is due, in part, to a slowing of
collections which also is typical of the middle portion of the calendar year,
and because media billings for the month of March 1994 were higher than those of
December 1993.
The decrease in "Cash and short-term investments" and the increase in "Short-
term bank borrowings" reflect the higher level of commercial production
activity, as well as the slowing of accounts receivable collections during the
middle parts of the year.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - NONE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None
8
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
FOOTE, CONE & BELDING COMMUNICATIONS, INC.
(Registrant)
/s/ John J. Rezich
------------------------------------------
(Signature)
John J. Rezich
Director, Financial Accounting and
Reporting and Chief Accounting Officer
Date: May 12, 1994
9
