<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 June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-7898
GREY GLOBAL GROUP INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
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
------------------
</TABLE>
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 July 31, 2000, the total number of shares outstanding of Registrant's
Common Stock, par value $0.01 per share ("Common Stock"), was 1,011,919 and of
Registrant's Limited Duration Class B Common Stock, par value $0.01 per share
("Class B Common Stock"), was 229,096.
<PAGE> 2
GREY GLOBAL GROUP INC.
AND CONSOLIDATED SUBSIDIARY COMPANIES
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
Financial Statements:
<S> <C>
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 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 13
Signatures 14
Index to Exhibits 15
</TABLE>
2
<PAGE> 3
GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
(in thousands, except share and per share data) (UNAUDITED) (A)
-----------------------------------------------
------------------------- -------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 140,073 $ 306,556
Marketable securities 4,568 5,581
Accounts receivable 1,043,948 940,612
Expenditures billable to clients 81,191 51,991
Other current assets 114,833 93,207
------------------------- -------------------------
Total current assets 1,384,613 1,397,947
Investments in and advances to nonconsolidated affiliated companies 17,971 17,961
Fixed assets-at cost, less accumulated depreciation of $168,540 in
2000 and $158,370 in 1999 140,777 126,939
Marketable securities 19,357 22,429
Intangibles-net of accumulated amortization of $50,658 in 2000 and
$42,818 in 1999 174,440 157,115
Other assets-including loans to executive officers of $5,247 in 2000
and 1999 101,148 86,863
------------------------- -------------------------
Total assets $ 1,838,306 $ 1,809,254
========================= =========================
</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 GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(CONTINUED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
(in thousands, except share and per share data) (UNAUDITED) (A)
----------------------------------------------- -------------------- -------------------------
<S> <C> <C>
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,211,935 $ 1,161,508
Notes payable to banks 74,602 68,500
Accrued expenses and other 185,184 208,254
Income taxes payable 15,233 16,572
-------------------- -------------------------
Total current liabilities 1,486,954 1,454,834
Other liabilities, including deferred compensation of $48,164 in 2000
and $44,160 in 1999 71,808 75,260
Long-term debt 78,025 78,025
Minority interest 20,063 19,620
Redeemable Preferred Stock-at redemption value; par value $0.01 per share in
2000 and $1 per share in 1999; authorized 500,000 shares;
issued and outstanding 30,000 shares in 2000 and 1999 101 10,150
Common stockholders' equity:
Common Stock- par value $0.01 per share in 2000 and $1 per share in 1999;
authorized 50,000,000 shares in 2000 and 10,000,000 shares in 1999; issued
1,234,488 shares in 2000 and 1,228,534 shares in 1999 12 1,229
Limited Duration Class B Common Stock-par value $0.01 per share in 2000 and
$1 per share in 1999; authorized 10,000,000 shares in 2000 and 2,000,000
shares in 1999; issued 256,133 shares in 2000 and 261,224 shares in 1999 3 261
Paid-in additional capital 52,095 39,763
Retained earnings 199,360 191,042
Accumulated other comprehensive loss:
Cumulative translation adjustment (20,610) (15,462)
Unrealized loss on marketable securities (2,783) (141)
-------------------- -------------------------
Total accumulated other comprehensive loss (23,393) (15,603)
-------------------- -------------------------
Loans to officer used to purchase Common Stock and Limited
Duration Class B Common Stock (4,726) (4,726)
-------------------- -------------------------
223,351 211,966
Less-cost of 220,896 and 218,514 shares of Common Stock and 26,937 and 26,937
shares of Limited Duration Class B Common Stock held
in treasury in 2000 and 1999, respectively 41,996 40,601
-------------------- -------------------------
Total common stockholders' equity 181,355 171,365
-------------------- -------------------------
Total liabilities and common stockholders' equity $ 1,838,306 $ 1,809,254
==================== =========================
</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 GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
(in thousands, except share and per share data) 2000 1999 2000 1999
----------------------------------------------- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commissions and fees $ 306,375 $ 260,953 $ 595,083 $ 488,860
Expenses:
Salaries and employee related expenses 197,273 176,445 384,677 328,080
Office and general expenses 95,079 84,037 184,575 157,252
--------------------------------------------------------------------------------
292,352 260,482 569,252 485,332
--------------------------------------------------------------------------------
14,023 471 25,831 3,528
Other income-net 1,262 348 2,413 1,308
--------------------------------------------------------------------------------
Income of consolidated companies before taxes on
income 15,285 819 28,244 4,836
Provision for taxes on income 7,921 6,000 14,832 9,000
--------------------------------------------------------------------------------
Income (loss) of consolidated companies 7,364 (5,181) 13,412 (4,164)
Minority interest applicable to consolidated
companies (2,206) (1,244) (3,564) (2,431)
Equity in earnings (losses) of nonconsolidated
affiliated companies 567 (204) 1,031 73
--------------------------------------------------------------------------------
Net income (loss) $ 5,725 $ (6,629) $ 10,879 $ (6,522)
================================================================================
Weighted average number
of common shares outstanding
Basic 1,227,542 1,239,718 1,230,587 1,238,705
Diluted 1,342,343 1,239,718 1,342,460 1,238,705
Earnings (loss) per common share
Basic $4.67 ($4.93) $8.78 ($4.73)
Diluted $4.29 ($4.93) $8.10 ($4.73)
Dividends per common share $1.00 $1.00 $2.00 $2.00
================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
(in thousands, except share and per share data) 2000 1999
---------------------------------------------- ----------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 10,879 $ (6,522)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization of fixed assets 18,152 15,893
Amortization of intangibles 5,598 4,960
Deferred compensation 6,008 490
Equity in (earnings) losses of nonconsolidated affiliated companies, net of
dividends received of $12 in 2000 and $162 in 1999 (1,019) 89
Loss (gain) from the sale of marketable securities 96 (8)
Minority interest applicable to consolidated companies 3,564 2,431
Restricted stock expense 564 262
Deferred income taxes (1,200) 586
Changes in operating assets and liabilities (138,172) (14,345)
----------------------------------------------------
Net cash (used in) provided by operating activities (95,530) 3,836
INVESTING ACTIVITIES
Purchases of fixed assets (36,456) (23,494)
Trust fund deposits (1,936) (2,054)
Decrease (increase) in investments in and advances to
nonconsolidated affiliated companies 1,009 (1,635)
Purchases of marketable securities (2,741) (379)
Proceeds from the sale of marketable securities 1,900 44,603
Purchases of investment securities (14,296) -
Increase in intangibles, primarily goodwill (22,923) (15,355)
----------------------------------------------------
Net cash (used in) provided by investing activities (75,443) 1,686
</TABLE>
6
<PAGE> 7
GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
(in thousands, except share and per share data) 2000 1999
----------------------------------------------- -----------------------------------------------------
<S> <C> <C>
FINANCING ACTIVITIES
Net proceeds from short-term borrowings 11,579 9,970
Common shares acquired for treasury (1,621) (98)
Cash dividends paid on common shares (2,485) (2,491)
Cash dividends paid on redeemable Preferred Stock (120) (120)
Issuance restricted stock 7 12
Proceeds from exercise of stock options 188 751
-----------------------------------------------------
Net cash provided by financing activities 7,548 8,024
Effect of exchange rate changes on cash (3,058) (7,457)
-----------------------------------------------------
(Decrease) Increase in cash and cash equivalents (166,483) 6,089
Cash and cash equivalents at beginning of period 306,556 153,816
-----------------------------------------------------
Cash and cash equivalents at end of period $ 140,073 $ 159,905
=====================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE> 8
GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
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, 1999
filed with the Securities and Exchange Commission.
2. The financial statements as of June 30, 2000 and for the three and six
months ended June 30, 2000 and 1999 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 six months ended June 30, 2000
are not necessarily indicative of the results to be expected for the full
year.
4. The provision for taxes on income results in an effective tax rate that is
greater than the Federal statutory rate principally due to state and local
income taxes and an effective foreign tax rate in excess of the Federal
statutory rate and, in 1999, the non-recognition of tax benefits of certain
international net operating losses.
5. As of June 30, 2000 and December 31, 1999, 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. 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. The holder of 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.
6. The computation of basic earnings per common share is based on the weighted
average number of common shares outstanding and, for diluted earnings per
common share, is adjusted for the dilutive effect, if any, of the assumed
exercise of dilutive stock options, shares issuable pursuant to the
Company's Senior Management Incentive Plan and the assumed conversion of
the Company's 8 1/2% Convertible Subordinated Debentures. For the purpose
of computing basic earnings per common share, the Company's net income is
adjusted by dividends paid on the Company's Preferred Stock and by the
change in redemption value of the Company's Preferred Stock during the
period. For the purpose of computing diluted earnings per common share, net
income is also adjusted by the interest savings, net of tax, on the assumed
conversion of the Company's 8 1/2% Convertible Subordinated Debentures.
Additionally, in computing diluted earnings per common share, the average
quarterly market price is 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
8
<PAGE> 9
GREY GLOBAL GROUP INC. AND CONSOLIDATED SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(in thousands, except share and per share data)
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 effecting income used in
computing earnings per common share ("EPS") and the weighted average number
of shares of dilutive potential common stock:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------------------------------------------------
2000 1999 2000 1999
----------------------------------------------------------------------
BASIC EARNINGS (LOSS) PER
-------------------------
COMMON SHARE
------------
<S> <C> <C> <C> <C>
WEIGHTED AVERAGE SHARES 1,227,542 1,239,718 1,230,587 1,238,705
----------------------- ----------------------------------------------------------------------
Net income (loss) $ 5,725 $ (6,629) $ 10,879 $ (6,522)
Effect of dividend requirements and the change in
redemption value of redeemable preferred stock 5 521 (77) 661
----------------------------------------------------------------------
NET EARNINGS (LOSS) USED IN COMPUTATION $ 5,730 $ (6,108) $ 10,802 $ (5,861)
----------------------------------------------------------------------
PER SHARE AMOUNT $4.67 ($4.93) $8.78 ($4.73)
======================================================================
DILUTED EARNINGS (LOSS) PER
---------------------------
COMMON SHARE
------------
Weighted average shares used in the Basic EPS
calculation 1,227,542 1,239,718 1,230,587 1,238,705
Net effect of dilutive stock options and stock
incentive plans (2) 63,673 - (1) 60,745 - (1)
Assumed conversion of 8.5% convertible
subordinated debentures 51,128 - (1) 51,128 - (1)
----------------------------------------------------------------------
ADJUSTED WEIGHTED AVERAGE SHARES 1,342,343 1,239,718 1,342,460 1,238,705
----------------------------------------------------------------------
Net earnings (loss) used in the Basic EPS
calculation $ 5,730 $ (6,108) $10,802 $ (5,861)
8.5% convertible subordinated debentures
interest net of income tax effect 35 - (1) 71 - (1)
----------------------------------------------------------------------
NET EARNINGS (LOSS) USED IN COMPUTATION $ 5,765 $ (6,108) $ 10,873 $ (5,861)
----------------------------------------------------------------------
PER SHARE AMOUNT $4.29 ($4.93) $8.10 ($4.73)
======================================================================
</TABLE>
(1) For the three and six months ended June 30, 1999, the assumed exercise
of stock options, issuances under stock incentive plans and the
assumed conversion of the 8 1/2% Convertible Subordinated Debentures
each had an anti-dilutive effect. As such, these items have been
excluded from the diluted EPS calculation for the period.
(2) Includes 15,723 and 15,411 shares expected to be issued pursuant to
the Senior Management Incentive Plan for the three and six months
ended June 30, 2000, respectively. Due to their anti-dilutive effect,
shares expected to be issued pursuant to the Senior Management
Incentive Plan for the three and six months ended June 30, 1999 were
not included in the calculation.
7. During the second quarter of 2000 and 1999, total comprehensive income
amounted to $639 and total comprehensive loss amounted to $9,882,
respectively and for the six months ended June 30, 2000 and 1999 total
comprehensive income was $3,089 and total comprehensive loss was $10,937,
respectively. The difference between net income and total comprehensive
income is the result of the change in the translated value of the net
assets of the Company's international operations due to the change in value
of the United States Dollar versus other currencies.
9
<PAGE> 10
8. The Company is not engaged in more than one industry segment. The Company
evaluates performance by geographic region based on profit or loss before
income taxes. Commissions and fees are attributed to the geographic region
that generates the billings.
Commissions and fees, operating profit, and income of consolidated
companies before taxes on income for the three and six months ended June
30, 2000 and 1999, and related identifiable assets at June 30, 2000 and
December 31, 1999 are summarized below according to geographic region:
<TABLE>
<CAPTION>
For the Three Months Ended
June 30,
------------------------------------------------------------------------------
United States Europe
----------------------------------- -------------------------------------
2000 1999 2000 1999
----------------- ----------------- ----------------- -------------------
<S> <C> <C> <C> <C>
Commissions and fees $ 137,144 $ 106,251 $ 126,765 $ 128,207
----------------- ----------------- ----------------- -------------------
Operating profit (loss) 4,203 1,025 5,725 3,738
----------------- ----------------- ----------------- -------------------
Income (loss) of consolidated companies
before taxes on income 5,301 1,605 5,778 3,998
----------------- ----------------- ----------------- -------------------
Identifiable assets
Investments in and advances to non-
consolidated affiliated companies
Total assets
<CAPTION>
For the Three Months Ended
June 30,
------------------------------------- ----------------------------------------
Other Consolidated
------------------------------------- ----------------------------------------
2000 1999 2000 1999
----------------- ------------------- -------------------- -------------------
<S> <C> <C> <C> <C>
Commissions and fees $ 42,466 $ 26,495 $ 306,375 $ 260,953
----------------- ------------------- -------------------- -------------------
Operating profit (loss) 4,095 (4,292) 14,023 471
----------------- ------------------- -------------------- -------------------
Income (loss) of consolidated companies
before taxes on income 4,206 (4,784) 15,285 819
----------------- ------------------- -------------------- -------------------
Identifiable assets
Investments in and advances to non-
consolidated affiliated companies
Total assets
</TABLE>
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
------------------------------------------------------------------------------
United States Europe
----------------------------------- -------------------------------------
2000 1999 2000 1999
----------------- ----------------- ----------------- -------------------
Commissions and fees $ 265,454 $ 205,368 $ 252,736 $ 234,634
----------------- ----------------- ----------------- -------------------
Operating profit (loss) 9,881 6,546 13,566 5,796
----------------- ----------------- ----------------- -------------------
Income (loss) of consolidated companies
before taxes on income 13,183 8,703 12,662 5,718
----------------- ----------------- ----------------- -------------------
Identifiable assets 736,442 796,657 815,360 752,662
----------------- ----------------- ----------------- -------------------
Investments in and advances to non-
consolidated affiliated companies
Total assets
<CAPTION>
For the Six Months Ended
June 30,
----------------------------------------------------------------------------------
Other Consolidated
----------------------------------- ------------------------------------------
2000 1999 2000 1999
----------------- ----------------- ---------------------- -------------------
<S> <C> <C> <C> <C>
Commissions and fees $ 76,893 $ 48,858 $ 595,083 $ 488,860
----------------- ----------------- ---------------------- -------------------
Operating profit (loss) 2,384 (8,814) 25,831 3,528
----------------- ----------------- ---------------------- -------------------
Income (loss) of consolidated companies
before taxes on income 2,399 (9,585) 28,244 4,836
----------------- ----------------- ---------------------- -------------------
Identifiable assets 268,533 241,974 1,820,335 1,791,293
----------------- -----------------
Investments in and advances to non-
consolidated affiliated companies 17,971 17,961
---------------------- -------------------
Total assets $ 1,838,306 $ 1,809,254
====================== ===================
</TABLE>
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS (CONTINUED)
(in thousands, except share and per share data)
RESULTS OF OPERATIONS
Income from commissions and fees ("gross income") increased 17.4% during the
second quarter of 2000 and 21.7% during the six months ended June 30, 2000 when
compared to the same periods in 1999. Absent exchange rate fluctuations, gross
income increased 22.5% in the three months ended June 30, 2000 and 26.7% in the
six months ended June 30, 2000 when compared to the same periods in 1999. In the
second quarters of 2000 and 1999, respectively, 44.8% and 40.7% of consolidated
gross income was attributable to domestic operations and 55.2% and 59.3% to
international operations. In the second quarter of 2000 and the first six months
of 2000, respectively, gross income from domestic operations increased 29.1% and
29.3% versus the respective prior periods, while gross income from international
operations increased 9.4%, (18.0% absent exchange rate fluctuations) for the
second quarter of 2000 and 16.3% (24.8% absent exchange rate fluctuations) for
the first six months of 2000 when compared to the same periods in 1999. The
increase in gross income primarily resulted from the impact of new business and
the continued growth of the Company's media and marketing communications
operations, and from acquired operations.
Salaries and employee related expenses increased 11.8% in the second quarter of
2000 and 17.3% for the first six months of 2000 when compared to the respective
prior periods. Office and general expenses increased 13.1% and 17.4% for the
three and six months ended June 30, 2000 versus the comparable prior periods.
These increases are slightly less but generally in line with the growth in gross
income.
Inflation did not have a material effect on revenue or expenses during 2000 or
1999.
Minority interest applicable to consolidated companies increased by $962 in the
second quarter of 2000 and increased by $1,133 for the first six months of 2000
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 $771 in
the second quarter of 2000 and increased by $958 for the first six months of
2000 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 is 51.8% for the second quarter of 2000 and 52.5% for
the first six months of 2000. The rates were significantly higher in the
comparable periods in 1999 principally because the Company decided it was not
prudent to recognize the future tax benefits attributable to net operating
losses at certain international subsidiaries.
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS (CONTINUED)
(in thousands, except share and per share data)
Net income was $5,725 in the second quarter of 2000 and $10,879 for the first
six months of 2000 as compared to net losses of $6,629 and $6,522, respectively,
in the comparable prior periods. Basic and diluted earnings per common share for
the second quarter of 2000 were $4.67 and $4.29 respectively, and for the first
six months of 2000 were $8.78 and $8.10 respectively. The increase in net income
is attributable principally to increased gross income at the Company's media and
marketing communications operations, and the reduction of operating losses at
certain international subsidiaries. Basic and diluted loss per common share for
the second quarter of 1999 was $4.93 and for the first six months of 1999 was
$4.73.
LIQUIDITY AND CAPITAL RESOURCES
Working capital decreased by $45,454 to a deficit of $102,341 at June 30, 2000,
versus a deficit of $56,887 at December 31, 1999. Cash and cash equivalents
decreased by $166,483 from $306,556 to $140,073 at June 30, 2000. The decrease
in cash and cash equivalents is attributable to the acquisition of a number of
companies, the continued expansion of the Company's media and marketing
communications operations internationally and 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
$60,000 that it believes adequate. These lines of credit were
partially utilized during the three months ended June 30, 2000 and 1999 to
secure obligations of selected foreign subsidiaries. There was $19,300 and
$20,500 outstanding under these credit lines as of June 30, 2000 and December
31, 1999, respectively.
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 $55,302 and $48,000 outstanding at June 30, 2000
and December 31, 1999, respectively.
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.
12
<PAGE> 13
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: At the Annual Meeting of Stockholders of
Grey Advertising Inc. (the "Company") held on June 29, 2000,
the stockholders of the Company approved amendments to the
Restated Certificate of Incorporation of the Company to: (i)
change the name of the Company to Grey Global Group Inc., (ii)
increase the number of authorized shares of the Company's
Common Stock and Limited Duration Class B Common Stock, (iii)
decrease the par value per share of the Company's authorized
shares and (iv) make certain other related changes. A copy of
the Restated Certificate of Incorporation of the Company that
was filed with the Secretary of State of the State of Delaware
on July 14, 2000. (Incorporated herein by reference to Grey's
report on Form 8-K dated July 13, 2000 and filed July 21,
2000)
13
<PAGE> 14
GREY GLOBAL GROUP 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.
<TABLE>
<S> <C>
GREY ADVERTISING INC.
---------------------
(REGISTRANT)
DATE: August 14, 2000 By:/s/ Steven G. Felsher
-----------------------------
Steven G. Felsher
Executive Vice President -
Finance - Worldwide
Secretary and Treasurer
(Duly Authorized Officer)
DATE: August 14, 2000 By:/s/ Lester M. Feintuck
-----------------------------
Lester M. Feintuck
Senior Vice President -
Chief Financial Officer - US Operations
Controller
(Chief Accounting Officer)
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Number Assigned to Page Number in Sequential
Exhibit (i.e. 601 of Table of Item 601 Exhibits Numbering System Where
Regulation S-K) Description of Exhibits Exhibit May be Found
--------------- ----------------------- --------------------
<S> <C> <C>
27 Financial Data Schedule 16
</TABLE>
15
