<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-7898
GREY ADVERTISING INC.
(Exact name of registrant as specified in its charter)
Delaware 13-0802840
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
777 Third Avenue, New York, New York 10017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-546-2000
NOT APPLICABLE
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No / /
As of October 31, 1998, the total number of shares outstanding of Registrant's
Common Stock, par value $1 per share ("Common Stock"), was 974,108 and of
Registrant's Limited Duration Class B Common Stock, par value $1 per share
("Class B Common Stock"), was 263,800.
<PAGE> 2
GREY ADVERTISING INC.
AND CONSOLIDATED SUBSIDIARY COMPANIES
INDEX
PAGE NO.
Financial Statements:
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 5
Condensed Consolidated Statements of Cash Flows 6
Notes to Condensed Consolidated Financial Statements 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Other Information 14
Signatures 15
Index to Exhibits 16
2
<PAGE> 3
GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
(UNAUDITED) (A)
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 132,839,000 $ 150,553,000
Marketable securities 43,613,000 15,401,000
Accounts receivable 675,356,000 647,524,000
Expenditures billable to clients 57,927,000 54,687,000
Other current assets 54,932,000 56,225,000
-------------- --------------
Total current assets 964,667,000 924,390,000
Investments in and advances to nonconsolidated
affiliated companies 17,541,000 18,386,000
Fixed assets-at cost, less accumulated
depreciation of $128,697,000 in 1998 and
$116,443,000 in 1997 101,284,000 88,006,000
Marketable securities 35,893,000 57,340,000
Intangibles and other assets - including loans
to executive officers of $5,572,000 in 1998 and 1997 129,977,000 111,865,000
-------------- --------------
Total assets $1,249,362,000 $1,199,987,000
============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
(A) The condensed consolidated balance sheet has been derived from the audited
financial statements at that date.
3
<PAGE> 4
GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(CONTINUED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
(UNAUDITED) (A)
--------------- ---------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 713,576,000 $ 709,959,000
Notes payable to banks 54,503,000 22,455,000
Accrued expenses and other 134,414,000 122,269,000
Income taxes payable 13,818,000 19,181,000
--------------- ---------------
Total current liabilities 916,311,000 873,864,000
Other liabilities, including deferred
compensation of $40,248,000 in 1998 and
$36,481,000 in 1997 67,650,000 61,723,000
Long-term debt 78,025,000 78,025,000
Minority interest 11,809,000 13,309,000
Redeemable preferred stock - at redemption
value; par value $1 per share; authorized
500,000 shares; issued and outstanding 30,000
shares in 1998 and 32,000 shares in 1997 10,209,000 10,760,000
Common stockholders' equity:
Common Stock - par value $1 per share;
authorized 10,000,000 shares; issued
1,197,244 in 1998 and 1,124,324 in 1997 1,197,000 1,124,000
Limited Duration Class B Common Stock - par value $1
per share; authorized 2,000,000 shares; issued
290,562 shares in 1998 and 307,460 shares in 1997 291,000 308,000
Paid-in additional capital 38,009,000 44,349,000
Retained earnings 184,652,000 169,214,000
Cumulative translation adjustment (12,430,000) (9,422,000)
Unrealized (loss) gain on marketable securities (2,720,000) 189,000
Loans to officer used to purchase Common
Stock and Limited Duration Class B Common Stock (4,726,000) (4,726,000)
--------------- ---------------
204,273,000 201,036,000
Less - cost of 223,136 shares in 1998 and 222,098
shares in 1997 of Common Stock and 26,762 shares
in 1998 and 1997 of Limited Duration Class B
Common Stock held in treasury 38,915,000 38,730,000
--------------- ---------------
Total common stockholders' equity 165,358,000 162,306,000
--------------- ---------------
Total liabilities and stockholders' equity $ 1,249,362,000 $ 1,199,987,000
=============== ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
(A) The condensed consolidated balance sheet has been derived from the
audited financial statements at that date.
4
<PAGE> 5
GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Commissions and fees $ 234,105,000 $ 201,791,000 $ 683,090,000 $ 596,747,000
Expenses:
Salaries and employee related expenses 152,106,000 129,578,000 434,111,000 379,872,000
Office and general expenses 71,184,000 60,919,000 207,617,000 179,252,000
------------- ------------- ------------- -------------
223,290,000 190,497,000 641,728,000 559,124,000
------------- ------------- ------------- -------------
10,815,000 11,294,000 41,362,000 37,623,000
Other income - net 2,720,000 843,000 4,851,000 2,589,000
------------- ------------- ------------- -------------
Income of consolidated companies
before taxes on income 13,535,000 12,137,000 46,213,000 40,212,000
Provision for taxes on income (6,689,000) (6,055,000) (23,524,000) (20,565,000)
------------- ------------- ------------- -------------
Income of consolidated companies 6,846,000 6,082,000 22,689,000 19,647,000
Minority interest applicable to
consolidated companies (1,088,000) (436,000) (4,599,000) (2,877,000)
Equity in earnings of
nonconsolidated affiliated companies 272,000 155,000 1,290,000 1,306,000
------------- ------------- ------------- -------------
Net income $ 6,030,000 $ 5,801,000 $ 19,380,000 $ 18,076,000
============= ============= ============= =============
Weighted average number
of common shares outstanding
Basic 1,233,571 1,180,287 1,216,456 1,180,318
Diluted 1,339,736 1,360,169 1,349,600 1,355,545
Earnings per common share
Basic $4.86 $4.75 $15.86 $15.05
Diluted $4.50 $4.15 $14.37 $13.18
Dividends per common share $1.00 $1.00 $3.00 $3.00
============= ============= ============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 19,380,000 $ 18,076,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of fixed assets 20,634,000 18,186,000
Amortization of intangibles 5,678,000 4,036,000
Deferred compensation 9,204,000 10,940,000
Equity in earnings of nonconsolidated
affiliated companies, net of dividends
received of $665,000 in 1998 and $259,000 in 1997 (625,000) (1,047,000)
Gains from the sale of marketable securities (259,000) (130,000)
Minority interest applicable to consolidated companies 4,599,000 2,877,000
Restricted stock expense 22,000 146,000
Deferred income taxes 1,960,000 (5,325,000)
Changes in operating assets and liabilities:
Increase in accounts receivable (32,276,000) (92,919,000)
Increase in expenditures billable to clients (2,954,000) (1,682,000)
Decrease (increase) in other current assets 10,000 (9,385,000)
(Increase) decrease in other assets (1,498,000) 359,000
Increase in accounts payable 8,357,000 83,554,000
Decrease in accrued expenses and other (3,344,000) (7,556,000)
Decrease in income taxes payable (440,000) (4,228,000)
(Decrease) increase in other liabilities (2,729,000) 824,000
------------ ------------
Net cash provided by operating activities 25,719,000 16,726,000
INVESTING ACTIVITIES
Purchases of fixed assets (33,062,000) (23,875,000)
Trust fund deposits (4,065,000) (2,334,000)
Increase in investments in and advances to
nonconsolidated affiliated companies (1,253,000) (1,104,000)
Purchases of marketable securities (29,883,000) (15,844,000)
Proceeds from the sale of marketable securities 20,497,000 41,683,000
Increase in intangibles, primarily goodwill (18,382,000) (14,514,000)
------------ ------------
Net cash used in investing activities (66,148,000) (15,988,000)
</TABLE>
6
<PAGE> 7
GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
1998 1997
------------- -------------
<S> <C> <C>
FINANCING ACTIVITIES
Net proceeds from (repayments of) short-term borrowings 32,302,000 (45,898,000)
Common shares acquired for treasury (163,000) (218,000)
Redemption of preferred stock (651,000)
Cash dividends paid on common shares (3,657,000) (3,553,000)
Cash dividends paid on redeemable preferred stock (184,000) (192,000)
(Repurchase) issuance of restricted stock (18,000) 26,000
Proceeds from exercise of stock options 71,000
------------- -------------
Net cash provided by (used in) financing activities 27,629,000 (49,764,000)
Effect of exchange rate changes on cash (4,914,000) (8,824,000)
------------- -------------
Decrease in cash and cash equivalents (17,714,000) (57,850,000)
Cash and cash equivalents at beginning of period 150,553,000 112,485,000
------------- -------------
Cash and cash equivalents at end of period $ 132,839,000 $ 54,635,000
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE> 8
GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. As permitted by the Securities and Exchange Commission, the
accompanying unaudited Consolidated Financial Statements and Notes
thereto have been condensed and, therefore, do not contain all
disclosures required by generally accepted accounting principles.
Reference should be made to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997 filed with the Securities and
Exchange Commission.
2. The financial statements as of September 30, 1998 and for the three and
nine months ended September 30, 1998 and 1997 are unaudited. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included.
3. The results of operations for the three and nine months ended September
30, 1998 are not necessarily indicative of the results to be expected
for the full year.
4. The provision for taxes on income is greater than the Federal statutory
rate principally due to state and local income taxes, and effective
foreign tax rates in excess of the Federal statutory rate.
5. As of September 30, 1998 and December 31, 1997, the Company had
outstanding 20,000 shares of Series I Preferred Stock, and 5,000 shares
each of its Series II and Series III Preferred Stock. The holder of
these shares is the Chairman and Chief Executive Officer of the
Company. On December 31, 1997, there were outstanding 2000 shares of
Series 1 Preferred Stock which were held by a former employee; these
shares were redeemed during the quarter ended March 31, 1998. Each
share of Preferred Stock is to be redeemed by the Company at a price
equal to the book value per share attributable to one share of Common
Stock and one share of Class B Common Stock (subject to certain
adjustments) upon redemption, less a fixed discount established upon
the issuance of the Preferred Stock. Each class of Preferred Stock is
entitled to receive cumulative preferential dividends at the annual
rate of $.25 per share, and to participate in dividends on one share of
the Common Stock and one share of the Class B Common Stock to the
extent such dividends exceed the per share preferential dividend.
The redemption date for the Series I, Series II and Series III
Preferred Stock is fixed at April 7, 2004. The terms of the Series I,
Series II and Series III Preferred Stock also give the holder, his
estate or his legal representative, as the case may be, the option to
require the Company to redeem the Preferred Stock for a period of 12
months following his (i) death, (ii) permanent disability or permanent
mental disability, (iii) termination of full-time employment for good
reason or (iv) termination of full-time employment by the Company
without cause. In connection with his acquisition of the Preferred
Stock, the holder issued to the Company full recourse promissory notes
(which are included in Other Assets in the accompanying condensed
consolidated balance sheets).
8
<PAGE> 9
GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
6. The computations of basic earnings per common share for the three and
nine months ended September 30, 1998 and 1997 are based on the weighted
average number of common shares outstanding and, for diluted earnings
per common share, are adjusted for the effect, if any, of the assumed
exercise of dilutive stock options, for shares issuable pursuant to the
Company's Senior Management Incentive Plan and for the assumed
conversion of the 8-1/2% Convertible Subordinated Debentures. Also, for
the purpose of computing earnings per common share for the three and
nine months ended September 30, 1998 and September 30, 1997, the
Company's net income was adjusted by dividends paid on the Company's
preferred stock and also by the change in redemption value of the
Company's preferred stock. In computing diluted earnings per common
share, the average quarterly market price was used to determine the
number of shares which would be assumed to be repurchased. The market
price for a share of Class B Common Stock, which is not publicly
traded, is deemed to be equal to the market price of a share of Common
Stock, into which a share of Class B Common Stock may be converted at
the option of the holder, as of the date such valuation is made. The
following table shows the amounts used in computing earnings per common
share ("EPS"), and the effect on income and the weighted average number
of shares of dilutive potential common stock:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
1998 1997 (2) 1998 1997 (2)
<S> <C> <C> <C> <C>
BASIC EARNINGS PER COMMON
- -------------------------
SHARE
-----
WEIGHTED AVERAGE SHARES 1,233,571 1,180,287 1,216,456 1,180,318
------------ ------------ ------------ ------------
Net income $ 6,030,000 $ 5,801,000 $ 19,380,000 $ 18,076,000
Effect of dividend requirements and the
change in redemption value of
redeemable preferred stock (34,000) (192,000) (85,000) (316,000)
------------ ------------ ------------ ------------
NET EARNINGS USED IN COMPUTATION $ 5,996,000 $ 5,609,000 $ 19,295,000 $ 17,760,000
------------ ------------ ------------ ------------
PER SHARE AMOUNT $4.86 $4.75 $15.86 $15.05
============ ============ ============ ============
DILUTED EARNINGS PER COMMON
- ---------------------------
SHARE
-----
Weighted average shares used in the Basic EPS
calculation 1,233,571 1,180,287 1,216,456 1,180,318
Net effect of dilutive stock options and stock
incentive plans (1) 55,125 128,865 82,104 124,210
Assumed conversion of 8.5%
convertible subordinated debentures 51,040 51,017 51,040 51,017
------------ ------------ ------------ ------------
ADJUSTED WEIGHTED AVERAGE SHARES 1,339,736 1,360,169 1,349,600 1,355,545
------------ ------------ ------------ ------------
Net earnings used in the Basic EPS calculation $ 5,996,000 $ 5,609,000 $ 19,295,000 $ 17,760,000
8.5% convertible subordinated debentures
interest, net of income tax effect 34,000 35,000 103,000 104,000
------------ ------------ ------------ ------------
NET EARNINGS USED IN COMPUTATION $ 6,030,000 $ 5,644,000 $ 19,398,000 $ 17,864,000
------------ ------------ ------------ ------------
PER SHARE AMOUNT $4.50 $4.15 $14.37 $13.18
============ ============ ============ ============
</TABLE>
(1) Includes 12,072 and 38,038 for the three and nine months ended
September 30,1998, respectively, and 94,686 shares for both comparable
periods in 1997 related to the Senior Management Incentive Plan.
(2) After restatement for adoption of FAS 128, Earnings Per Share.
9
<PAGE> 10
GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
7. As of January 1, 1998, the Company adopted Financial Accounting
Standards Board Statement No. 130, Reporting Comprehensive Income ("FAS
130"). FAS 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of this
statement had no impact on the Company's net income or common
stockholders' equity. FAS 130 requires the unrealized gains and losses
on the Company's available-for-sale securities and foreign currency
translation adjustments, which prior to adoption were reported
separately in common stockholders' equity, to be included in other
comprehensive income. The prior year Consolidated Statement of Common
Stockholders' Equity will be reclassified to conform to the
requirements of FAS 130.
During the third quarter of 1998 and 1997, total comprehensive income
amounted to $2,135,000 and $5,096,000, respectively, and for the nine
months ended September 30, 1998 and 1997 total comprehensive income was
$13,463,000 and $8,201,000, respectively. The difference between net
income and total comprehensive income in both 1998 and 1997 is
primarily because of a reduction of the value of the net assets and
investments of certain of the company's international operations and
marketable securities, attributable to strengthening of the United
States dollar in selected countries and turbulence in international
financial markets.
8. In June 1997, the Financial Accounting Standards Board issued Statement
No. 131, Disclosure About Segments of an Enterprise and Related
Information ("FAS 131"). FAS 131 establishes standards for the way that
public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises
report selected information about operating segments in interim
financial reports. It also establishes standards for related
disclosures about products and services, geographic areas, and major
customers. FAS 131 is effective for fiscal years beginning after
December 15, 1997. The adoption of this statement is not expected to
have any impact on the Company's consolidated financial statements.
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Income from commissions and fees increased 16.0% during the third quarter of
1998 and 14.5% during the nine months ended September 30, 1998 when compared to
the same periods in 1997. Absent exchange rate fluctuations, gross income
increased 17.3% in the three months ended September 30, 1998 and 17.9% in the
nine months ended September 30, 1998 when compared to the same periods in 1997.
In the third quarters of 1998 and 1997, respectively, 45.4% and 46.2% of
consolidated gross income was attributable to domestic operations and 54.6% and
53.8% to international operations. In the third quarter of 1998 and the first
nine months of 1998, respectively, gross income from domestic operations
increased 14.0% and 12.8% versus the respective prior periods, while gross
income from international operations increased 17.8%, (20.1% absent exchange
rate fluctuations) for the third quarter and 15.9% (22.3% absent exchange rate
fluctuations) for the first nine months of 1998, when compared to the same
periods in 1997. The increase in gross income in both years primarily resulted
from expanded activities from existing clients, and the continued growth of the
Company's general agency and specialized operations.
Salaries and employee related expenses increased 17.4% in the third quarter of
1998 and 14.3% for the first nine months of 1998 when compared to the respective
prior periods. Office and general expenses increased 16.9% and 15.8% for the
three and nine months ended September 30, 1998, respectively, versus the
comparable prior periods. These changes, taken together, are generally in line
with the increase in gross income.
Inflation did not have a material effect on revenue or expenses during 1998 or
1997.
Minority interest applicable to consolidated companies increased by $652,000 in
the third quarter of 1998 and by $1,722,000 for the first nine months of 1998 as
compared to the respective prior periods. The increase is primarily due to
changes in the level of profits of majority-owned companies.
Equity in earnings of nonconsolidated affiliated companies increased by $117,000
in the third quarter of 1998 and decreased by $16,000 for the first nine months
of 1998 as compared to the respective prior periods. The fluctuations are
primarily due to changes in the level of profits of nonconsolidated affiliated
companies.
The effective tax rate remained relatively constant at 49.4% in the third
quarter of 1998 and 50.9% in the first nine months of 1998 versus 49.9% and
51.1% in the same periods in 1997, respectively.
Net income was $6,030,000 in the third quarter of 1998 and $19,380,000 for the
nine months ended September 30, 1998 as compared to $5,801,000 and $18,076,000
in the respective prior periods. Basic and diluted earnings per common share for
the third quarter of 1998 were $4.86 and $4.50, respectively, as compared to
$4.75 and $4.15 in the comparable quarter in 1997. For the nine months ended
September 30, 1998, basic and diluted earnings per common share were $15.86 and
$14.37 versus $15.05 and $13.18 for the same periods in 1997.
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Working capital remained relatively constant at $48,356,000 at September 30,
1998, versus $50,526,000 at December 31, 1997. Cash and cash equivalents
decreased by $17,714,000 from $150,553,000 to $132,839,000. The decrease in cash
and cash equivalents is largely attributable to the timing of collections of
accounts receivable and billing of expenses to clients versus payments to trade
vendors. Domestically, the Company has committed lines of credit totaling
$51,000,000. These lines of credit were partially utilized during the three and
nine months ended September 30, 1998 to secure obligations of selected foreign
subsidiaries. The lines of credit were not in use as of September 30, 1997.
There was $8,000,000 outstanding under these credit lines as of September 30,
1998.
Other lines of credit are available to the Company in foreign countries in
connection with short-term borrowings and bank overdrafts used in the normal
course of business. There was $46,503,000 and $38,248,000 outstanding at
September 30, 1998 and 1997, respectively.
YEAR 2000 READINESS
Some of the Company's older computer programs were written using a two digit
year. As a result, those computer programs may be unable to process
date-sensitive information beyond the year 2000. This situation, which is not
uncommon, is frequently referred to as the Year 2000 Issue and can cause a
temporary disruption of the ordinary course of business. The Company is
completing an assessment of its computer programs and those of its third party
software vendors and is taking what it believes to be the appropriate steps to
modify or replace software as necessary, evaluate the readiness of its vendors,
assess potential problems and quantify contingency plans. The Company has
completed some of the necessary modifications and anticipates having a
significant portion of the modifications to existing software and conversions to
new software completed by December 31, 1998. The Year 2000 Issue is not expected
to pose significant operational problems for its computer systems. The estimated
cost of the project has been determined and is not expected to have a material
adverse effect on the Company. The project is being funded through operating
cash and is being expensed as incurred. The cost and time of completion are
based on management's best estimates which were derived utilizing numerous
assumptions of future events, including the continued availability of certain
resources and other factors. There can, however, be no guarantee that these
estimates will be achieved and actual results could differ materially from those
anticipated. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct all relevant computer codes, the
timely receipt and installation of upgrades from third party software vendors,
compliance of third party vendors and customers with whom the Company interacts
and similar circumstances.
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(CONTINUED)
FORWARD LOOKING STATEMENTS
In connection with the provisions of the Private Securities Litigation Reform
Act of 1995 (the "Reform Act"), the Company may include Forward Looking
Statements (as defined in the Reform Act) in oral or written public statements
issued by or on behalf of the Company. These Forward Looking Statements may
include, among other things, plans, objectives, projections, anticipated future
economic performance or assumptions and the like that are subject to risks and
uncertainties. As such, actual results or outcomes may differ materially from
those discussed in the Forward Looking Statements. Important factors which may
cause actual results to differ, include but are not limited to, the following:
the unanticipated loss of a material client or key personnel, delays or
reductions in client budgets, shifts in industry rates of compensation,
government compliance costs or litigation, unanticipated natural disasters,
changes in the general economic conditions that affect interest rates and/or
consumer spending both in the U.S. and the international markets in which the
Company operates, unanticipated expenses, client preferences which can be
affected by competition, the inability to implement upgrades for certain
computer programs which are not year 2000 compliant and the ability to project
risk factors which may vary.
13
<PAGE> 14
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibits: Reference is made to the Index annexed hereto and made a
part hereof.
(b)Reports on Form 8-K: The Company did not file any reports on Form
8-K during the quarter ended September 30, 1998.
14
<PAGE> 15
GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GREY ADVERTISING INC.
(REGISTRANT)
DATE: November 14, 1998 By:/s/ Steven G. Felsher
-----------------------------
Steven G. Felsher
Executive Vice President -
Finance - Worldwide
Secretary and Treasurer
(Duly Authorized Officer)
DATE: November 14, 1998 By:/s/ Lester M. Feintuck
-----------------------------
Lester M. Feintuck
Senior Vice President -
Chief Financial Officer - US Operations
Controller
(Chief Accounting Officer)
15
<PAGE> 16
INDEX TO EXHIBITS
Page Number in
Number Assigned to Sequential
Exhibit (i.e. 601 Table of Item 601 Exhibits Numbering System
of Regulation S-K) Description of Exhibits Where Exhibit May
be Found
27 Financial Data Schedule 17
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1998 AND THE
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 OF GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY
COMPANIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 132,839
<SECURITIES> 43,613
<RECEIVABLES> 675,356
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 964,667
<PP&E> 229,981
<DEPRECIATION> 128,697
<TOTAL-ASSETS> 1,249,362
<CURRENT-LIABILITIES> 916,311
<BONDS> 78,025
10,209
0
<COMMON> 1,488
<OTHER-SE> 163,870
<TOTAL-LIABILITY-AND-EQUITY> 1,249,362
<SALES> 683,090
<TOTAL-REVENUES> 683,090
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 641,728
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,748
<INCOME-PRETAX> 46,213
<INCOME-TAX> 23,524
<INCOME-CONTINUING> 19,380
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,380
<EPS-PRIMARY> 15.86
<EPS-DILUTED> 14.37
</TABLE>
