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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 4, 2000
True North Communications Inc.
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(exact name of registrant as specified in its charter)
Delaware 1-5029 36-1088162
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
101 East Erie Street, Chicago, Illinois 60611-2897
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 425-6500
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(Not Applicable)
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Former name or former address, if changed since last report
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Item 5. Other Events
On May 4, 2000, the registrant issued a release in the form attached to
this Report as Exhibit 99.1.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits:
99.1 Press Release dated May 4, 2000.
2
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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 hereunto duly authorized.
TRUE NORTH COMMUNICATIONS INC.
By /s/ Kevin J. Smith
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Kevin J. Smith
Chief Financial Officer
Dated: May 4, 2000
3
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EXHIBIT INDEX
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Exhibit No. Description
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99.1 Press Release dated May 4, 2000
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[TRUE NORTH LETTERHEAD]
Date: May 4, 2000 NEWS
Contact: Kevin Smith: 312/425-6546
Kathryn Woods: 212/727-5582
FOR IMMEDIATE RELEASE
TRUE NORTH REPORTS STRONG FIRST QUARTER EARNINGS GROWTH
. Q1 earnings were up substantially on stronger organic growth and operating
margin.
- Organic growth was 13.5% (9.2% excluding Modem Media) compared with 1.4% a
year ago.
- Operating margin increased to 4.6% from 3.6%, placing TNO on track to meet
its near-term goal.
- Collaboration continues to bolster organic growth, with 32 collaborative
wins in the quarter.
. Net new business wins rose 235% to $268 million in equivalent annualized
billings vs. a year ago.
. Last week, FCB won the Compaq account, one of the ad industry's largest wins
this year.
First Quarter Highlights
(Amounts in thousands, except per share data and percentages)
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First Quarter Ended %
03/31/00 03/31/99 Change
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Commission and fee income $ 359,588 $ 303,446 19%
Operating Income $ 16,645 $ 11,007 51%
Net Income $ 10,160 $ 4,873/1/ 109%
EPS - Diluted $ 0.20 $ 0.10/1/ 100%
Avg. Shs. Outstanding - Diluted 50,447 47,729 6%
Operating Margin 4.6% 3.6%
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(1) 1999 excludes $4,070 pre-tax gain ($2,300 after-tax or $.05 per diluted
share) on the sale of DoubleClick securities
================================================================================
"Our first quarter results place us on track to achieve our goals for 2000. True
North's fundamentals continue to strengthen, with solid progress in both organic
growth and profitability. Moreover, new business wins more than tripled in the
first quarter compared with a year ago to the highest level in two years,
building on the positive trend of recent quarters.
Increasingly, True North companies are in the running for the industry's most
important assignments. Just last week, FCB Worldwide was awarded the global
Compaq account, one of the largest wins in the advertising industry this year.
This win further underscores FCB's recent rise to the global top-tier."
-- David Bell, Chairman and Chief Executive Officer
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-MORE-
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[TRUE NORTH LETTERHEAD]
Date: May 4, 2000 NEWS
Contact: Kevin Smith: 312/425-6546
Kathryn Woods: 212/727-5582
FOR IMMEDIATE RELEASE
TRUE NORTH REPORTS STRONG FIRST QUARTER EARNINGS GROWTH
CHICAGO--True North Communications Inc. (NYSE: TNO) today reported higher
earnings for the first quarter of 2000 on the strength of higher organic growth
and improved operating margin.
For the first quarter ended March 31, 2000, earnings per share grew 100% to
$0.20 per share from $0.10 per share in 1999's first quarter, as net income more
than doubled to $10.2 million compared with $4.9 million a year ago. Earnings
in the first quarter of 1999 exclude the $4.1 million ($2.3 million after-tax or
$0.05 per diluted share) gain on the sale of a portion of True North's holdings
in DoubleClick securities. Including the gain on securities, first quarter 1999
net income was $7.2 million or $0.15 per diluted share. Historically, the first
quarter is a seasonal low point from a revenue and earnings standpoint for True
North.
First quarter 2000 revenue from commission and fee income increased 19% to
$359.6 million, as organic growth rose to 13.5% compared with 1.4% in last
year's first quarter. Excluding Modem Media (Nasdaq: MMPT), which is now
approximately 46% owned by True North, organic growth was 9.2% compared with
1.3% a year ago. Net new business increased to $268 million in equivalent
annualized billings, up from $80 million in the year-ago quarter. Operating
income rose 51% to $16.6 million, as staff costs as a percentage of revenues
decreased to 63.8% from 66.7% a year ago. With higher revenues and a lower staff
costs ratio, operating margin increased to 4.6% from 3.6% in last year's first
quarter.
David Bell, True North's Chairman and Chief Executive Officer, commented, "Our
first quarter results place us on track to achieve our goals for 2000. True
North's fundamentals continue to strengthen, with solid progress in both organic
growth and profitability. In addition, net new business wins more than tripled
in the first quarter compared with a year ago to the highest level in two years,
building on the positive trend of recent quarters."
Bell also said, "Increasingly, True North companies are in the running for the
industry's most important assignments. Just last week, FCB Worldwide was awarded
the global Compaq account, one of the largest wins in the advertising industry
this year. This win further underscores FCB's recent rise to the global top-
tier."
-MORE-
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2/ TRUE NORTH REPORTS STRONG FIRST QUARTER EARNINGS GROWTH
Kevin Smith, True North's Chief Financial Officer, added, "We are pleased with
our first quarter progress, particularly in organic growth and new business
wins. The synergies we are gaining from the realignment are producing the
savings we expected, and are having a positive impact on our compensation ratio
and operating margin. Our first quarter office and general expenses increased
more than we would like due in large part to expansion-related spending by Modem
Media. Looking ahead, we will intensify our focus on improvement in this area."
First quarter EBITDA (earnings before interest, taxes, depreciation and
amortization) was $33.3 million, up 19.3% from $27.9 million in the year-ago
quarter. Depreciation and amortization totaled $17.0 million in this year's
first quarter, compared with $12.7 million in last year's first quarter.
Key Growth Initiatives -- Organic Growth
Organic growth increased in the first quarter through a focus on expanding key
client relationships, collaboration and new business. Highlights included:
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Expanded Client Relationships
. Kraft awarded its Boca Burger brand to FCB Chicago, Oven Classics to FCB
Canada
. Bristol-Myers Squibb awarded BSMG New York a new corporate assignment
. Tyco expanded its corporate advertising at Bozell Kamstra
. Gatorade selected FCB Australia to handle advertising
. IBM expanded its relationship with R/GA Interactive with several new
assignments
. Datek Online assigned Bozell New York its direct marketing business
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Collaboration Wins
Collaboration gained further momentum in the first quarter. True North added 32
new wins in the quarter from collaboration, with annualized revenue of
approximately $11 million. The wins included the following:
. Don Coleman Advertising collaborated with Temerlin McClain to be named the
first African-American Agency of Record for American Airlines
. Marketing Drive Worldwide collaborated with FCB to win Chrysler business
. BSMG Chicago collaborated with FCB Chicago to win an SC Johnson assignment
. New America Strategies Group agency SiboneyUSA worked with FCB Chicago to win
Quaker Foods business
. R/GA Interactive worked with Avrett Free & Ginsberg, part of Bozell Group, to
win two key assignments from Ralston Purina
. TN Media won media buying for Hoover, collaborating with FCB Worldwide
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-MORE-
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3/ TRUE NORTH REPORTS STRONG FIRST QUARTER EARNINGS GROWTH
Key Growth Initiatives -- New Business
Net new business more than tripled to $268 million in equivalent annualized
billings during the first quarter from $80 million in the year-ago period.
Bell noted, "The wins in the first quarter continued to build. We are especially
pleased that FCB also recently won Compaq on the heels of Boeing early in the
second quarter. Both are major global assignments won against tough competition
- - powerful validation of our strategy of combining Bozell with FCB
internationally."
First quarter wins included:
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Major New Clients
. Monsanto awarded a major new account to FCB New York
. Trip.com assigned its advertising to FCB Chicago
. Microsoft assigned BSMG Washington as one of its public affairs agencies
. Council for Biotechnology awarded BSMG with a multi-year global integrated
campaign
. Sony named R/GA Interactive for a major new web design project
. Gillette chose Marketing Drive Worldwide for sales promotion
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================================================================================
Global Progress
. Amazon.com selected FCB Japan to handle advertising
. Disney Channel awarded FCB Latin America a major pan-regional advertising
assignment
. John Deere expanded its relationship with FCB by naming FCB Canada
. Jordan Investment Board chose FCB Horizon
. Beiersdorf named FCB Brazil its agency for Nivea Visage
. Monsanto also awarded BSMG Worldwide a global assignment
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Key Growth Initiatives - Q1 Acquisitions
In the first quarter, True North announced acquisitions related to two of its
priorities -- to enhance FCB Europe and expand its BSMG Worldwide public
relations brand globally.
FCB Europe
- -- Portugal: In January, FCB acquired Edson Athayde Communicacao, one of
Portugal's most creatively renowned agencies, which it combined with FCB Lisbon
to form Edson/FCB Publicidade, a leading agency in Portugal.
- -- Finland: In March, FCB acquired Finnish agency Kauppamainos Oy, one of the
oldest in Finland, to create Kauppamainos FCB. The new agency is among the top
ten in Finland.
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4/ TRUE NORTH REPORTS STRONG FIRST QUARTER EARNINGS GROWTH
BSMG Worldwide
- -- Germany: In February, BSMG acquired a leading Munich-based public relations
and investor relations company, Management Profile Consulting GmbH (MPC). Under
the agreement, MPC merged its operations with BSMG Worldwide's existing German
operation to form BSMG Worldwide, Germany. The new agency became one of the top
five public relations agencies in Germany.
Key Growth Initiatives - Developing Digital Brands
"True North's digital assets continue to grow stronger through the creation of
new brands, acquisitions and accelerating organic growth," said Bell. Combined
revenue for its digital brands, excluding Modem Media, is presently an estimated
$65 million on an annualized basis.
The brands include: R/GA Interactive, an interactive design company and an
emerging broadband player; SixtyFootSpider, a data-driven interactive
communications brand launched late last year; Stein Rogan + Partners, a digital
branding agency acquired in the fourth quarter of last year; Bozell Silicon
Valley and BSMG CyberPR. True North is committed to developing those brands
through such initiatives as its recent acquisition for SixtyFootSpider:
- -- SixtyFootSpider: Earlier this week, True North's new interactive agency,
SixtyFootSpider, launched in Q4, announced a transaction that builds its
geographic presence and digital capabilities. SixtyFootSpider said it acquired
the Communications Solutions Division (CSD) of Minneapolis-based Juntunen Media
Group. The newly acquired interactive agency expands SixtyFootSpider's
geographic presence, strengthens its services in such business-to-business
solutions as high-end multimedia and web-based training, and adds a capability
in broadband. CSD serves such select blue chip clients as Hallmark, Target and
3M.
True North also said that it retains its 46% stake in Modem Media (NASDAQ:
MMPT), following the postponement, due to market conditions, of Modem's proposed
follow-on public stock offering. As announced last week, True North converted
its approximately 11.1 million Class B shares in Modem Media to Class A shares,
and will account for Modem under the equity method, effective for the second
quarter of 2000.
About True North
True North Communications (NYSE: TNO) is a top global advertising and
communications holding company. It has three major advertising agencies: FCB
Worldwide, a top-tier global agency and the largest agency brand in the U.S.;
and two strongly positioned agencies in the U.S., Bozell Group and Temerlin
McClain. True North Diversified Companies group is comprised of leading
communications services brands, including: BSMG Worldwide, public relations;
Marketing Drive Worldwide, global marketing services; R/GA Interactive; Tierney
& Partners, advertising and PR; TN Media; and New America Strategies Group, the
largest multicultural marketer; among others. True North, based in Chicago, has
annual revenues exceeding $1.4 billion and annual billings of more than $14
billion.
-MORE-
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CAUTIONARY STATEMENT
Certain statements contained in this press release may constitute "forward-
looking statements" within the meaning of Section 21E(i)(1) of the Securities
Exchange Act of 1934. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause True North's actual
results to be materially different from any future results expressed or implied
by these statements. Such factors include the following: general economic and
business conditions, changes in demand for True North's services, changes in
competition, the ability of True North to integrate acquisitions or complete
future acquisitions, interest rate fluctuations, dependence upon and
availability of qualified personnel and changes in government regulation. In
light of these and other uncertainties, the forward-looking statements included
in this document should not be regarded as a representation by True North that
True North's plans and objectives will be achieved.
##
(Financial Table Follows)
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True North Communications Inc.
Consolidated Income Statement
Quarter Ended March 31,
(000's, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Memo - Excluding
Restructuring
And Other Items
--------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $359,588 $303,446 $359,588 $330,446
-------- -------- -------- --------
Operating Expenses:
Salaries and other employee benefits 229,355 202,464 229,355 202,464
Office and general expenses 113,588 89,975 113,588 89,975
Restructuring and other charges - - - -
-------- -------- -------- --------
Total operating expenses 342,943 292,439 342,943 292,439
-------- -------- -------- --------
Operating Income 16,645 11,007 16,645 11,007
Other Income (Expense) (2,465) (2,714) (2,465) 1,356
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Pretax Income 14,180 8,293 14,180 12,363
Provision for Income Taxes 6,097 3,603 6,097 5,373
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8,083 4,690 8,083 6,990
Minority Interest Expense 1,524 (27) 1,524 (27)
Equity Income 553 210 553 210
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Net Income $ 10,160 $ 4,873 $ 10,160 $ 7,173
======== ======== ======== ========
Basic Earnings Per Share $ 0.21 $ 0.11 $ 0.21 $ 0.16
======== ======== ======== ========
Dilutive Earnings Per Share $ 0.20 $ 0.10 $ 0.20 $ 0.15
======== ======== ======== ========
Operating Margin 4.6% 3.6% 4.6% 3.6%
Average Shares Outstanding - Basic 49,095 46,090 49,095 46,090
Average Shares Outstanding - Diluted 50,447 47,729 50,447 47,729
</TABLE>
Note: There were no unusual items in the first quarter of 2000.
First quarter 1999 results include gains on the sales of securities of
$4,070 (pre-tax) or $.05 per diluted share.
