ITEM 1. BUSINESS.
The Registrant ("Grey") and its subsidiaries (collectively with Grey, the "Company") have been engaged in the planning, creation, supervision and placing of advertising since the Company's formation in 1917. Grey was incorporated in New York in 1925 and changed its state of incorporation to Delaware in 1974.
The Company's principal business activity consists of providing a full range of advertising services to its clients. Typically, this involves developing an advertising and/or marketing plan after study of a client's business, the distribution or utilization of the client's products or services and the use of various media (e.g., television, radio, newspapers, magazines, direct mail, outdoor billboards and the Internet) by which desired market performance can best be achieved. The Company then creates advertising, prepares media recommendations and places advertising in the media. The Company's business also involves it in allied areas such as marketing consultation, audio-visual production, co-marketing programs, direct marketing, interactive consulting and production, media research and buying, research, product publicity, public affairs, public relations and sales promotion.
The Company is not engaged in more than one industry segment, and no separate class of similar services contributed 10% or more of the Company's gross income or net income during 1996, 1995 or 1994.
The Company serves a diversified client roster in the apparel, automobile, beverage, chemical, communications, community service, computer, corporate, electrical appliance, entertainment, food product, home furnishing, houseware, office product, packaged goods, publishing, restaurant, retailing, toy, travel and other sectors.
Advertising is a highly competitive business in which agencies of all sizes and other providers of creative or media services strive to attract new clients or additional assignments from existing clients. Competition for new business, however, is restricted from time to time because large agencies (such as the Company) often are precluded from providing advertising services products or services that may be viewed as being competitive with those of an existing client. Generally, since advertising agencies charge clients substantially equivalent rates for their services, competitive efforts principally focus on the skills of the competing agencies.
Published reports indicate that there are over 500 advertising agencies of all sizes in the United States. According to a report published in 1996 (Advertising Age, a trade publication), the Company was the 7th largest United States advertising agency in terms of worldwide gross income.
Approximately 53% of Grey's present domestic advertising clients, representing a majority of the Company's 1996 domestic gross income, have been with the Company since 1991. The agreements between the Company and most of its clients are generally terminable by either the Company or the client on 90 days' notice, as is the custom in the industry. Clients may also modify advertising budgets at any time and for any reason, and because the agency's compensation for many clients is determined on the basis of commission rates, shifts in advertising budgets may result in increased or reduced levels of revenue for the Company.
During 1996, one client (The Procter & Gamble Company), which has been a client of the Company for forty years, represented more than 10% of the Company's consolidated income from commissions and fees. The loss of this client would be expected to have an adverse effect on the results of the Company. No other client represented more than 5% of the Company's total consolidated income from commissions and fees. The loss of any single client in past years has not had a long-term negative impact on the Company's financial condition or its competitive position.
On December 31, 1996, the Company and its nonconsolidated affiliated companies employed approximately 6,300 persons, of whom eight are executive officers of Grey.
As is generally the case in the advertising industry, the Company's business traditionally has been seasonal, with greater revenues generated in the second and fourth quarters of each year. This reflects, in large degree, the media placement patterns of the Company's clients.
Advertising programs created by the Company and its nonconsolidated affiliated companies are placed principally in media distributed within the United States and overseas through its offices in the United States and more than 70 foreign countries. While the Company operates on a worldwide basis, for the purpose of presenting certain financial information in accordance with Securities and Exchange Commission rules, its operations are deemed to be conducted in three geographic areas.
Commissions and fees, and operating profit by each such geographic area for the years ended December 31, 1996, 1995 and 1994, and related identifiable assets at December 31 of each of the years, are summarized in Note N of the Notes to Consolidated Financial Statements, which is incorporated herein by reference.
While the Company has no reason to believe that its foreign operations as a whole are presently jeopardized in any material respect, there are certain risks of operating which do not affect domestic operations but which may affect the Company's foreign operations from time to time. Such risks include the possibility of limitations on repatriation of capital or dividends, political instability, currency devaluation and restrictions on the percentage of permitted foreign ownership.
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 advertising 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 Company's international marketplace, unanticipated expenses, client preferences which can be affected by competition and the ability to project risk factors which may vary.
Executive Officers of the Registrant as of March 1, 1997
(a) All executive officers are elected annually by the Board of Directors of Grey. Each executive officer has been with Grey for a period greater than five years. There exists no family relationship between any of Grey's directors or executive officers and any other director or executive officer or person nominated or chosen to become a director or executive officer.
ITEM 2.
ITEM 2. PROPERTIES.
Substantially all offices of the Company are located in leased premises. The Company's principal office is at 777 Third Avenue, New York, New York, where it occupies approximately 357,000 square feet of space. The main lease covering the bulk of this space expires at the end of 1999. The Company also has significant leases covering other offices in New York, Los Angeles, Amsterdam, Brussels, Copenhagen, Dusseldorf, Hong Kong, London, Madrid, Melbourne, Milan, Paris, Stockholm and Toronto.
The Company considers all space leased by it to be adequate for the operation of its business and does not foresee any significant difficulty in meeting its space requirements.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
In the Company's judgement, it is not involved in any material pending legal proceedings other than ordinary routine litigation incidental to the business of the Company.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Common Stock is traded on The NASDAQ Stock Market's National Market and listed on the NASDAQ Stock Market under the symbol GREY.
As of March 1, 1997, there were 488 holders of record of the Common Stock and 279 holders of record of the Limited Duration Class B Common Stock.
The following table sets forth certain information about dividends paid, and the bid prices on the NASDAQ Stock Market during the periods indicated with respect to the Common Stock:
* Such over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
(a) In 1994, the Company recorded a charge of $39,944,000 on both a pre-tax and after-tax basis, for a non-cash write-off which related almost exclusively to write-offs of goodwill.
(b) Gives effect (i) to amounts attributable to redeemable preferred stock, (ii) to the assumed exercise of dilutive stock options, (iii) to shares issuable pursuant to the Company's Senior Management Incentive Plan and (iv) for fully diluted net income per common share, the assumed conversion of 8-1/2% Convertible Subordinated Debentures.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Income from commissions and fees ("gross income") increased 11.2% in 1996 and 16.0% in 1995 as compared to the respective prior years. Absent exchange rate fluctuations, gross income increased 11.6% in 1996 and 11.4% in 1995. In 1996, 1995 and 1994, respectively, 44.2%, 44.1% and 46.8% of consolidated gross income was attributable to domestic operations and 55.8%, 55.9% and 53.2%, respectively, to international operations. In 1996, gross income from domestic operations increased 11.4% versus 1995 and was up 9.5% in 1995 versus 1994. Gross income from international operations increased 11.1% (11.8% absent exchange rate fluctuations) in 1996 when compared to 1995 and 21.7% (13.1% absent exchange rate fluctuations) in 1995 when compared to 1994. The increases 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 9.8% in 1996 and 16.8% in 1995 as compared to the respective prior years. Office and general expenses increased 12.9% in 1996 and 13.1% in 1995 versus respective prior years. The increases in expenses are generally in line with the increases in gross income in such years.
In 1994, the Company wrote-off $39,944,000 of goodwill. The non-cash write-off related almost exclusively to international acquisitions made by the Company principally in the 1980's. The write-off was associated with 34 of the almost 100 investments for which the Company had unamortized goodwill. The portion of the write-off relating to
advertising agencies was approximately $31,295,000 and $8,649,000 relates to public relations agencies. A significant amount of this write-off related to operations in the United Kingdom. The material portion of the goodwill write-off related to ten agencies acquired in the United Kingdom as part of a strategy to develop the Company's representation outside of the London market in the general advertising category and in specialized disciplines (such as retail advertising, promotional services and public relations). The unimpaired goodwill balances associated with the United Kingdom operations represented less than 10% of the Company's consolidated unamortized goodwill as of December 31, 1994. There were no write-offs in excess of normal amortization schedules in 1996 or 1995.
Inflation did not have a material effect on revenue or expenses in 1996, 1995 or 1994.
In 1996, other income was affected positively by non-recurring, non-operating pre-tax income of approximately $4,000,000 primarily related to gains on the sale of the Company's equity position in a nonconsolidated subsidiary and the liquidation of a non-marketable investment security.
The effective tax rate was 48.1% in 1996, 49.6% in 1995, and 1,342.9% in 1994 (52.0% not factoring in the goodwill write-off). The decrease in the effective tax rate in 1996 as compared to 1995 is due, in part, to a lower effective foreign tax rate in 1996. The decrease in the effective tax rate in 1995 as compared to 1994 is due, in part, to the reduction of goodwill amortization and write-off (which are not deductible for tax purposes) and other items.
Minority interest increased $390,000 in 1996 and $3,233,000 in 1995 as compared to the respective prior years. The changes in 1996 and in 1995 were primarily due to changes in the level of profits of majority-owned companies.
Equity in earnings of nonconsolidated companies decreased $1,166,000 in 1996 and increased $677,000 in 1995 as compared to the respective prior years. These changes are due primarily to changes in the level of profits attributable to the nonconsolidated companies.
The Company reported net income of $28,602,000 for 1996 as compared to $23,438,000 in 1995. Net income for 1996 was up 22.0% over 1995's results. For 1996, primary earnings per common share was up 25.3% versus 1995. Primary earnings per common share for 1995 was up 24.4% versus 1994, absent the goodwill write-off. Absent the non-recurring, non-operating gains, primary earnings per common share for 1996 increased by approximately 16.0% over 1995.
For purposes of computing primary earnings per Common Share, the Company's net income (loss) was adjusted by (i) dividends paid on the Company's Preferred Stock and (ii) by the change in redemption value of the Company's Preferred Stock.
The Company's results may be affected by currency exchange rate fluctuations given the Company's extensive non-United States operations. Generally, the foreign currency exchange risk is limited to net income because the Company's revenues and expenses, by country, are almost exclusively denominated in the local currency of each respective operation with both revenue and expense items matched. Occasionally, the Company enters into foreign currency contracts for known cash flows related to repatriation of earnings from its international subsidiaries. The term of each such foreign currency
contract entered into in 1996 was for less than three months. At December 31, 1996, there were no foreign currency contract transactions open. In addition, the Company had no derivative contracts outstanding at December 31, 1996, and did not enter into any derivative contracts during 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to be highly liquid by maintaining significant levels of cash, cash equivalents and investments in highly liquid marketable securities, a majority of which are United States government securities. Cash and cash equivalents were $112,485,000 and $134,313,000 at December 31, 1996 and 1995, respectively, and the Company's investment in marketable securities was $96,107,000 and $68,671,000 at December 31, 1996 and 1995, respectively. The continued high level of liquidity reflects the Company's ongoing focus on its cash management process. Working capital decreased by $5,739,000 from $9,582,000 at December 31, 1995 to $3,843,000 at December 31, 1996. The decrease in working capital is largely attributable to the increase in the portion of marketable securities which are classified as non-current assets due to their stated maturity dates.
Domestically, the Company maintains committed bank lines of credit totaling $51,000,000. These lines of credit were partially utilized during both 1996 and 1995 to secure obligations of selected foreign subsidiaries in the amount of $26,000,000 and $15,000,000 at December 31, 1996 and 1995, 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. Amounts outstanding under such facilities at December 31, 1996 and 1995 were $60,004,000 and $56,336,000, respectively.
Historically, funds from operations and short-term bank borrowings have been sufficient to meet the Company's dividend, capital expenditure and working capital needs. The Company expects that such sources will be sufficient to meet its short-term cash requirements in the future. While the Company has not utilized long-term borrowing to fund its operating needs, in 1993, it took advantage of favorable terms offered and borrowed $30,000,000 at a fixed interest rate of 7.68%. The principal is repayable in three equal annual installments, commencing in January 1998. During 1996 and 1995, the Company borrowed $1,709,000 and $13,024,000, respectively, against the cash surrender value of life insurance policies it owns on the life of its Chairman and Chief Executive Officer at rates of 7.30% and 8.75%, respectively. The Company does not anticipate any material increased requirement for capital or other expenditures which will adversely affect its liquidity.
The Company's business generally has been seasonal with greater gross income earned in the second and fourth quarters, particularly the fourth quarter. As a result, cash, accounts receivable, accounts payable and accrued expenses are typically higher on the Company's year-end balance sheet than at the end of any of the preceding three quarters.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this Item is presented in this report beginning on Page.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None. PART III.
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information with respect to the directors of the Company is incorporated herein by reference to the Company's proxy statement ("Proxy Statement") to be sent to its stockholders in connection with its 1997 Annual Meeting, under the caption "Election of Directors". Information with respect to the Company's executive officers is set forth in Part I of this report.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is incorporated herein by reference to the Proxy Statement and will be included under the caption "Management Remuneration and Other Transactions".
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item is incorporated herein by reference to the Proxy Statement and will be included under the captions "Election of Directors" and "Voting Securities".
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is incorporated herein by reference to the Proxy Statement and will be included under the captions "Election of Directors" and "Voting Securities".
PART IV.
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) (1) (2) The information required by this subsection of this Item is presented in the index to Financial Statements on Page.
(3) The information required by this subsection of this Item is provided in the Index of Exhibits at Page E-1 of this report. Such index provides a listing of exhibits filed with this report and those incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) needs of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GREY ADVERTISING INC.
By: /s/ Edward H. Meyer ---------------------------- Edward H. Meyer, Chairman, Chief Executive Officer & President
Dated: March 28, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Registrant and in the capacities and on the date indicated.
/s/ Mark N. Kaplan Dated: March 28, 1997 - ----------------------------- Mark N. Kaplan, Director
/s/ Edward H. Meyer Dated: March 28, 1997 - ----------------------------- Edward H. Meyer, Director; Principal Executive Officer
/s/ O. John C. Shannon Dated: March 28, 1997 - ----------------------------- O. John C. Shannon, Director; President - Grey International
/s/ Richard R. Shinn Dated: March 28, 1997 - ----------------------------- Richard R. Shinn, Director
/s/ Steven G. Felsher Dated: March 28, 1997 - ----------------------------- Steven G. Felsher, Principal Financial Officer
/s/ William P. Garvey Dated: March 28, 1997 - ----------------------------- William P. Garvey, Principal Accounting Officer
Annual Report on Form 10-K
Item 8, Item 14(a)(1) and (2) and Item 14(d)
Financial Statements and Supplementary Data
List of Financial Statements
Year ended December 31, 1996
GREY ADVERTISING INC.
New York, New York
Form 10-K - Item 8, Item 14(a)(1) and (2)
Grey Advertising Inc. and Consolidated Subsidiary Companies
The following consolidated financial statements of Grey Advertising Inc. and consolidated subsidiary companies are included in Item 8:
Report of Independent Auditors.........................................
Consolidated Balance Sheets -- December 31, 1996 and 1995..............
Consolidated Statements of Operations -- Years Ended December 31, 1996, 1995 and 1994.....................................
Consolidated Statements of Common Stockholders' Equity -- Years Ended December 31, 1996, 1995 and 1994.........................
Consolidated Statements of Cash Flows -- Years Ended December 31, 1996, 1995 and 1994.........................
Notes to Consolidated Financial Statements -- December 31, 1996....................................................
All schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted.
Summarized financial information and financial statements for nonconsolidated foreign investee companies accounted for by the equity method have been omitted because such companies, considered individually or in the aggregate, do not constitute a significant subsidiary.
Report of Independent Auditors
Board of Directors Grey Advertising Inc.
We have audited the accompanying consolidated balance sheets of Grey Advertising Inc. and consolidated subsidiary companies as of December 31, 1996 and 1995, and the related consolidated statements of operations, common stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1996. 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 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 provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Grey Advertising Inc. and consolidated subsidiary companies at December 31, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP New York, New York February 7, 1997
Grey Advertising Inc. and Consolidated Subsidiary Companies
Consolidated Balance Sheets
See notes to consolidated financial statements
Grey Advertising Inc. and Consolidated Subsidiary Companies
Consolidated Balance Sheets (continued)
See notes to consolidated financial statements.
Grey Advertising Inc. and Consolidated Subsidiary Companies
Consolidated Statements of Operations
*Antidilutive
See notes to consolidated financial statements.
Grey Advertising Inc. and Consolidated Subsidiary Companies Consolidated Statements of Common Stockholders' Equity Years ended December 31, 1996, 1995 and 1994
Grey Advertising Inc. and Consolidated Subsidiary Companies Consolidated Statements of Common Stockholders' Equity Years ended December 31, 1996, 1995 and 1994 (continued)
See notes to consolidated financial statements.
Grey Advertising Inc. and Consolidated Subsidiary Companies
Consolidated Statements of Cash Flows
Grey Advertising Inc. and Consolidated Subsidiary Companies
Consolidated Statements of Cash Flows (continued)
See notes to consolidated financial statements.
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. Material intercompany balances and transactions have been eliminated in consolidation. Certain amounts for years prior to 1996 have been reclassified to conform with the current year classification.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
COMMISSIONS AND FEES AND ACCOUNTS RECEIVABLE
Income derived from advertising placed with media is generally recognized based upon the publication or broadcast dates. Income resulting from expenditures billable to clients is generally recognized when billed. Payroll costs are expensed as incurred. Accounts receivable include both the income recognized as well as the actual media and production costs which are paid for by the Company and rebilled to clients at the Company's cost.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three months or less from the purchase date to be cash equivalents. The carrying amount of cash equivalents approximates fair value because of the short maturities of those instruments.
INVESTMENTS IN AND ADVANCES TO NONCONSOLIDATED AFFILIATED COMPANIES
The Company generally carries its investments in nonconsolidated affiliated companies on the equity method. Certain investments which are not material in the aggregate are carried on the cost method.
FIXED ASSETS
Depreciation of furniture, fixtures and equipment is provided for over their estimated useful lives ranging from three to ten years and has been computed principally by the straight-line method. Amortization of leaseholds and leasehold improvements is provided for principally over the terms of the related leases, which are not in excess of the lives of the assets.
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSLATION
Primarily all balance sheet accounts of the Company's foreign operations are translated at the exchange rate in effect at each year end and statement of operations accounts are translated at the average exchange rates prevailing during the year. Resulting translation adjustments are made directly to a separate component of stockholders' equity. Foreign currency transaction gains and losses are reported in income. During 1996, 1995 and 1994, foreign currency transaction gains and losses were not material.
INTANGIBLES
The excess of purchase price over underlying net equity of certain consolidated subsidiaries and nonconsolidated affiliated companies at the date of acquisition ("goodwill") is amortized by the straight-line method over periods of up to twenty years. The amounts of goodwill, net of accumulated amortization, associated with consolidated subsidiaries (included in Other Assets) and nonconsolidated investments (included in Investments in and Advances to Nonconsolidated Affiliated Companies) were $46,084,000 and $5,592,000 in 1996 and $41,237,000 and $8,325,000 in 1995, respectively.
Annually, the Company assesses the carrying value of its goodwill and the respective periods of amortization. As part of the evaluation, the Company considers a number of factors including actual operating results, the impact of gains and losses of major local clients, the impact of any loss of key local management staff and any changes in general economic conditions. The Company quantifies the recoverability of goodwill based on each agency's estimated future non-discounted cash flows over the applicable remaining amortization periods. This requires management to make certain specific assumptions with respect to future revenue and expense levels. Where multiple investments had been made in a single company, a weighted average amortization period is used. Charges to reflect permanent impairment are recorded to the extent that the unamortized book value of the goodwill exceeds the future cumulative non-discounted cash flows.
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides appropriate foreign withholding taxes on unremitted earnings of consolidated and nonconsolidated foreign companies.
MARKETABLE SECURITIES
The Company considers all its investments in marketable securities as available-for-sale. Available-for-sale securities are carried at fair value, based on publicly quoted market prices, with unrealized gains and losses reported as a separate component of stockholders' equity.
STOCK-BASED COMPENSATION
As permitted by Financial Accounting Standards Statement No. 123, Accounting for Stock Based Compensation, the Company accounts for stock-based awards in accordance with APB Opinion No.25, Accounting For Stock Issued to Employees. No compensation expense is recorded for options granted at fair market value at the date of grant. The excess of the fair market value of Restricted Stock over the cash consideration received is amortized, as compensation, over the period of restriction. The future obligation to issue stock, pursuant to the Company's Senior Management Incentive Plan, is included in Paid-In Additional Capital and results in periodic charges to compensation.
B. FOREIGN OPERATIONS
The following financial data is applicable to consolidated foreign subsidiaries:
Consolidated retained earnings at December 31, 1996 includes equity in unremitted earnings of nonconsolidated foreign companies of approximately $8,914,000.
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
C. OTHER INCOME - NET
Details of other income - net are:
D. FIXED ASSETS
Components of fixed assets - at cost are:
E. MARKETABLE SECURITIES
The marketable securities, by type of investment, held by the Company at December 31, 1996 and 1995 are as follows:
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
E. MARKETABLE SECURITIES (CONTINUED)
At December 31, 1996, the Company had unrealized losses of $870,000 and at December 31, 1995 unrealized gains of $550,000, principally related to the investments in U. S. Treasury Securities. At December 31, 1996 and 1995, the Company's investments in marketable securities classified as non-current had an average maturity of approximately 6 years.
F. CREDIT ARRANGEMENTS AND LONG-TERM DEBT
The Company maintains committed lines of credit of $51,000,000 with various banks and may draw against the lines on unsecured demand notes at rates below the applicable bank's prime interest rate. These lines of credit, which are renewable annually, were partially utilized during both 1996 and 1995 to secure obligations of selected foreign subsidiaries in the amount of $26,000,000 and $15,000,000 at the end of each respective year. The weighted average interest rate related to the debt associated with the committed lines of credit was 7.11% and 6.95% at December 31, 1996 and 1995, respectively. The Company had $60,004,000 and $56,336,000 outstanding under other uncommitted lines of credit at December 31, 1996 and 1995, respectively. The weighted average interest rate for the borrowings under the uncommitted lines of credit was 6.94% and 7.91% at December 31, 1996 and 1995, respectively. The carrying amount of the debt outstanding under both the committed and uncommitted lines of credit approximates fair value because of the short maturities of the underlying notes. Occasionally, the Company enters into foreign currency contracts for known cash flows related to the repatriation of earnings from its international subsidiaries. The term of each foreign currency contract entered into in 1996 was for less than three months. At December 31, 1996, there were no foreign currency contract transactions open. In addition, the Company had no derivative contracts outstanding at December 31, 1996, and did not enter into any derivative contracts during 1996.
Long-term debt at December 31, 1996 and 1995 is as follows:
The term loans consist of $30,000,000 borrowed from the Prudential Insurance Company at a fixed interest rate of 7.68% with principal repayable in equal installments of $10,000,000 in January 1998, 1999 and 2000. The terms of the loan agreement require, inter alia, that the Company maintain specified levels of net worth, meet certain cash flow requirements and limit its incurrence of additional indebtedness to certain specified
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
F. CREDIT ARRANGEMENTS AND LONG-TERM DEBT (CONTINUED)
amounts. At December 31, 1996, the Company was in compliance with all of these covenants. The fair value of the Prudential debt is estimated to be $30,275,000 and $30,900,000 at December 31, 1996 and 1995, respectively. This estimate was determined using a discounted cash flow analysis using current interest rates for debt having similar terms and remaining maturities.
The remaining portion of long-term debt consists of 8-1/2% Convertible Subordinated Debentures, due December 31, 2003, which are currently convertible into 8.48 shares of Common Stock and an equal number of shares of Limited Duration Class B Common Stock, subject to certain adjustments, for each $1,000 principal amount of such debentures. The debentures were issued in exchange for cash and a $3,000,000, 9% promissory note, payable December 31, 2004, from the Chairman and Chief Executive Officer of the Company, that is included in Other Assets at December 31, 1996 and 1995. During each of the years 1996, 1995 and 1994, the Company paid to the officer interest of $257,000 pursuant to the terms of the debentures and the officer paid to the Company interest of $270,000 pursuant to the terms of the 9% promissory note.
The scheduled repayment of long-term debt is as follows:
During 1996 and 1995, the Company borrowed against the cash surrender value of the life insurance policies that it owns on the life of its Chairman and Chief Executive Officer. The amounts borrowed at December 31, 1996 and 1995 are $14,733,000 and $13,024,000, respectively, with interest rates of 7.30% and 8.75%, respectively, and are carried as a reduction of the related cash surrender value that is included in Other Assets. Of the amounts borrowed in 1996 and 1995, the Company received $464,000 and $11,779,000 in cash, respectively, and $1,245,000 was used in each year to pay premiums on the underlying life insurance policies.
For the years 1996, 1995 and 1994, the Company made interest payments of $10,065,000, $8,934,000 and $7,839,000, respectively.
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
G. REDEEMABLE PREFERRED STOCK
As of December 31, 1996 and 1995, the Company had outstanding 20,000 shares of Series I Preferred Stock, 5,000 shares each of Series II and Series III Preferred Stock and 2,000 shares of Series 1 Preferred Stock. The holder of the Series I, Series II and Series III Preferred Stock is the Chairmen and Chief Executive Officer of the Company, and the Series 1 Preferred Stock is held by a former employee. The terms of each class of Preferred Stock, including the basic economic terms relating thereto, are essentially the same, except with respect to the redemption date of each series. The redemption date for the Series I, Series II and Series III Preferred Stock is fixed at April 7, 2004, unless redeemed earlier under circumstances described below. The terms of the Series I, Series II and Series III Preferred Stock also give the holder, his estate or legal representative, as the case may be, the option to require the Company to redeem his 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. The Company is obligated to redeem the Series 1 Preferred Stock following the attainment of age 65 by the holder thereof.
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 Limited Duration Class B Common Stock (Class B Common Stock) (subject to certain adjustments) upon redemption, less a fixed discount established upon the issuance of the Preferred Stock. The holders of each class of Preferred Stock are 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. In connection with his ownership of the Series I, Series II and Series III Preferred Stock, the holder issued to the Company full recourse promissory notes totaling $763,000 (included in Other Assets at December 31, 1996 and 1995) with a maturity date of April 2004. The interest paid by the senior executive to the Company in 1996, 1995 and 1994 pursuant to the terms of these notes was approximately $70,000 in each year.
In accordance with the terms of the respective Certificates of Designation and Terms of each Series of Preferred Stock ("Certificates"), the Board of Directors determined the change in redemption value would not reflect the 1994 write-off of goodwill described in Note M, but rather reflect amortization as if the Company had continued to write-off goodwill in accordance with historical amortization schedules.
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
G. REDEEMABLE PREFERRED STOCK (CONTINUED)
Following the distribution of Class B Common Stock, the holders of the Preferred Stock became entitled to eleven votes per share on all matters submitted to the vote of stockholders. The holder of the Series I Preferred Stock is entitled, as well, to vote as a single class to elect or remove one-quarter of the Board of Directors, to approve the merger or consolidation of the Company or the sale by it of all or substantially all of its assets, and to approve the authorization or issuance of any other class of Preferred Stock having equivalent voting rights.
In the event of the liquidation of the Company, holders of Preferred Stock are entitled to a preferential liquidation distribution of $1.00 per share in addition to all accrued and unpaid preferential dividends.
The total carrying value of the Preferred Stock (applicable to those shares outstanding at each respective year end) increased by $1,112,000, $1,470,000 and $926,000 in 1996, 1995 and 1994, respectively. The change in carrying value represents the change in aggregate redemption value during those periods. This change is referred to as "Additional Capital Applicable to Redeemable Preferred Stock" in the respective Certificates.
H. COMMON STOCK
The Company has authorized and outstanding two classes of common stock, Common Stock and Class B Common Stock, each having a $1 par value per share. The Class B Common Stock has the same dividend and liquidation rights as the Common Stock, and a holder of each share of Class B Common Stock is entitled to ten votes on all matters submitted to stockholders. The shares of Class B Common Stock are restricted as to transferability and upon transfer, except to specified limited classes of transferees, will convert into shares of Common Stock which have one vote per share. The Class B Common Stock will automatically convert to Common Stock on April 3, 2006.
I. RESTRICTED STOCK AND STOCK OPTION PLANS
The Company's 1994 Stock Incentive Plan ("Stock Incentive Plan") is the Company's active restricted stock and stock option plan. The Stock Incentive Plan replaced the Restricted Stock Plan, the Executive Growth Plan, the Incentive Stock Option Plan and the Nonqualified Stock Option Plan (collectively, the "Prior Plans"), and any shares available for granting of awards under the Prior Plans are no longer available for such awards. Options granted pursuant to the Prior Plans remain outstanding and in full force, and shares reserved thereunder remain so for such purposes.
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
I. RESTRICTED STOCK AND STOCK OPTION PLANS (CONTINUED)
STOCK INCENTIVE PLAN
Under the Stock Incentive Plan, awards in the form of incentive or nonqualified stock options or restricted stock are available to be granted through June 2003 to officers and other key employees. A maximum of 250,000 shares of Common Stock are available for grant under the Stock Incentive Plan and no employee can be granted stock options in excess of 75,000 shares or more than 75,000 shares of restricted stock. Stock options cannot be granted at a price less than 100% of the fair market value of the shares on the date of grant. A committee of the Board of Directors ("Committee") determines the terms and conditions under which the awards may be granted, vest or are exercisable. Options must be exercised within ten years of the date of grant. Shares of restricted stock may be sold to participants at a purchase price determined by the Committee (which may be less than fair market value per share). Under the Prior Plans, nonqualified and incentive stock options were granted to employees eligible to receive options at prices not less than 100% of the fair market value of the shares on the date of grant. Options must be exercised within ten years of grant and for only specified limited periods beyond termination of employment. There were 1,916 shares reserved for issuance under the Prior Plans at December 31, 1996.
NONQUALIFIED OPTIONS
Transactions involving nonqualified options under the Stock Incentive and Prior Plans were:
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
I. RESTRICTED STOCK AND STOCK OPTION PLANS (CONTINUED)
There were 33,400, 23,283 and 27,973 options exercisable at December 31, 1996, 1995 and 1994, respectively. The weighted average fair value the of the options granted during 1996 and 1995 was $77 and $51, respectively.
The remaining weighted average contractual life of options outstanding as of December 31, 1996 and the weighted average exercise price for options exercisable at December 31, 1996 are as follows:
INCENTIVE STOCK OPTIONS
Transactions involving outstanding incentive stock options under the plans were:
As of December 31, 1996, there were no incentive stock options which were exercisable. As of December 31, 1995 and 1994, options to acquire 714 and 2,856 shares of Common Stock were exercisable. All incentive stock options outstanding as of December 31, 1996 have a remaining contractual life of approximately one year.
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
I. RESTRICTED STOCK AND STOCK OPTIONS PLANS (CONTINUED)
RESTRICTED STOCK
In 1994, the Company issued 1,750 shares of Restricted Stock at prices between $77.50 and $81.50 per share with restrictions as to transferability expiring after five years. No shares of Restricted Stock were issued in 1995. In 1996, 250 shares of Restricted Stock were issued at a price of $97.75 per share with restrictions as to transferability expiring after five years. During 1995, the restrictions lapsed on 5,000 shares of Common Stock. No restrictions lapsed in either 1996 or 1994.
Compensation to employees under the Stock Incentive and Prior Plans of $98,000 in 1996, $106,000 in 1995 and $238,000 in 1994, representing the unamortized excess of the market value of restricted stock over any cash consideration received, is carried as a reduction of Paid-In Additional Capital and is charged to income ($33,000 in 1996, $132,000 in 1995 and $116,000 in 1994) over the related required period of service of the respective employees.
PRO FORMA INFORMATION
Pro forma information regarding net income and earnings per share is required by Financial Accounting Standards Statement No. 123, Accounting for Stock-Based Compensation, and has been determined as if the Company had accounted for its employee stock options under the fair value method of the Statement. The approximate fair value for these options was estimated at the date of grant using a Black-Scholes option valuation model with the following weighted average assumptions for the years 1996 and 1995, respectively; risk-free interest rates of 6.16% and 7.85%; dividend yields of 1.73% and 2.37%; volatility factors of the expected market price of the Company's Common Stock of .17 each year; and a weighted-average expected life for the options of 9.6 years.
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restriction and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
I. RESTRICTED STOCK AND STOCK OPTIONS PLANS (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information follows:
The pro forma information for 1996 and 1995 is not necessarily indicative of future year calculations because options issued prior to 1995 have not been valued for purposes of the pro forma calculation.
J. COMPUTATION OF EARNINGS PER COMMON SHARE
The computation of earnings per common share is based on the weighted average number of common shares outstanding, including adjustments for the effect of the assumed exercise of dilutive stock options and shares issuable pursuant to the Company's Senior Management Incentive Plan (see Note L(1)) (1,295,441 in 1996, 1,295,182 in 1995, 1,285,605 in 1994) and, for fully diluted earnings per common share, the assumed conversion of the 8-1/2% Convertible Subordinated Debentures. Also, for the purpose of computing earnings per common share, the Company's net income (loss) is adjusted by dividends on the Preferred Stock and by the increase or decrease in redemption value of the Preferred Stock. Primary earnings per common share is computed as if stock options were exercised at the beginning of the period and the funds obtained thereby used to purchase common shares at the average market price during the period. In computing fully diluted earnings per common share, the market price at the close of the period or the average market price, whichever is higher, is used to determine the number of shares which are assumed to be repurchased.
The effects of the Preferred Stock dividend requirements and the change in redemption values amounted to $1.05, $1.31, and $0.88 per share in 1996, 1995 and 1994, respectively.
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
K. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. At December 31, 1996 and 1995, the Company had deferred tax assets and deferred tax liabilities as follows:
The components of income of consolidated companies before taxes on income are as follows:
Provisions (benefits) for Federal, foreign, state and local income taxes consisted of the following:
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
K. INCOME TAXES (CONTINUED)
The effective tax rate varied from the statutory Federal income tax rate as follows:
During the years 1996, 1995 and 1994, the Company made net income tax payments of $36,513,000, $21,368,000 and $19,005,000, respectively.
The tax benefit resulting from the difference between compensation expense deducted for tax purposes and compensation expense charged to income for restricted stock and nonqualified stock options is recorded as an increase to Paid-In Additional Capital.
L. RETIREMENT PLANS, DEFERRED COMPENSATION, EXECUTIVE OFFICER LOANS, LEASES AND CONTINGENCIES
1. The Company's Profit Sharing Plan is available to employees of the Company and qualifying subsidiaries meeting certain eligibility requirements. This plan provides for contributions by the Company at the discretion of the Board of Directors, subject to maximum limitations. The Company also maintains a noncontributory Employee Stock Ownership Plan covering eligible employees of the Company and specified, qualifying subsidiaries, under which the Company may make contributions (in stock or cash) to an Employee Stock Ownership Trust (ESOT) in amounts each year as determined at the discretion of the Board of Directors. The Company made only cash contributions to the ESOT in 1996, 1995 and 1994. The Company and the ESOT have certain rights to purchase shares from participants whose employment has terminated. In addition to the two plans noted above, various subsidiaries maintain separate profit sharing and retirement arrangements. Furthermore, the Company also provides additional retirement and deferred compensation benefits to certain officers and employees.
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
L. RETIREMENT PLANS, DEFERRED COMPENSATION, EXECUTIVE OFFICER LOANS, LEASES AND CONTINGENCIES (CONTINUED)
The Company maintains a Senior Management Incentive Plan in which deferred compensation is granted to senior executive or management employees deemed essential to the continued success of the Company. The Plan operates as an ongoing series of individual five year plans. The latest plan in the series commenced in 1993 and will end on December 31, 1997. At that date, participants with 5 years of participation in the current plan will vest in their awards. Those participants who commenced participation after 1993 will vest in their awards five years from the year of their initial participation. The amount recorded as an expense related to this plan amounted to $8,211,000, $6,873,000 and $5,434,000 in 1996, 1995 and 1994, respectively. Approximately $5,634,000, $5,223,000 and $4,215,300 of plan expense incurred in 1996, 1995 and 1994, respectively, will be payable in Common Stock in accordance with the terms of the plan. These awards converted, at the fair value of the Common Stock on the date of grant, into 22,424, 27,705 and 28,647 equivalent shares of Common Stock at December 31, 1996, 1995 and 1994, respectively, including an amount of shares for the dividends that would have been payable assuming awards were outstanding from the date of the grant. The future obligation to issue stock related to these stock awards has been reflected as an increase to Paid-In Additional Capital. At December 31, 1996, there were 95,543 shares which were payable in Common Stock pursuant to this plan.
Expenses related to the foregoing plans and benefits aggregated $36,140,000 in 1996, $29,307,000 in 1995 and $24,211,000 in 1994.
In 1995, the Company and its Chairman and Chief Executive Officer entered into an agreement extending the term of his employment agreement with the Company through December 31, 2002. This agreement further provides for the deferral of certain compensation otherwise payable to the Chairman and Chief Executive pursuant to his employment agreement and the payment of such deferred compensation into a trust, commonly referred to as a rabbi trust, established with United States Trust Company of New York. The purpose of the trust arrangement is to ensure the Company's ability to deduct compensation paid to the Chairman and Chief Executive Officer without the application of Section 162(m) of the Internal
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
L. RETIREMENT PLANS, DEFERRED COMPENSATION, EXECUTIVE OFFICER LOANS, LEASES AND CONTINGENCIES (CONTINUED)
Revenue Code ("Section"). The Section, under certain circumstances, denies a tax deduction to an employer for certain compensation expenses in excess of $1,000,000 per year paid by a publicly-held corporation to certain of its executives. Amounts deferred and paid into the trust, as adjusted for the earnings and gains or losses on the trust assets, will be paid to the Chairman and Chief Executive Officer or to his estate, as the case may be, upon the expiration of his employment agreement, or the termination of his employment by reason of death or disability. At December 31, 1996 and 1995, the value of the trust was $5,648,000 and $2,496,000 respectively and is included in Other Assets and the Company's related deferred compensation obligation for the same amount is included in Other Liabilities.
2. Pursuant to an employment agreement, dated December 21, 1990, an executive officer of the Company borrowed $1,000,000 from the Company. One-fifth of the principal amount of the loan was forgiven by the Company each December 31, beginning with December 31, 1991, as the officer continued to be employed by the Company on those dates. In 1994, the executive officer entered into a new employment agreement. Pursuant to that agreement, the executive officer borrowed an additional $600,000 from the Company repayable at December 31, 1998, except that one-third of the principal amount of the loan is forgiven by the Company each December 31, beginning with December 31, 1996, provided that the officer continues to be employed by the Company on those dates. In 1996, 1995 and 1994, the Company has included in each year $200,000 of compensation expense, representing the amount of loan forgiven each year. As of December 31, 1996 and 1995, the remaining loan balance was $400,000 and $600,000, respectively, included in Other Assets.
In addition, a second executive officer has outstanding loans with the Company totaling $875,000 and $375,000 as of December 31, 1996 and 1995, respectively, which are reflected in Other Assets. The first of these loans, granted in 1995, was for $50,000 and is forgivable contingent upon employment by the Company through 1998, while two other loans for $125,000 and $200,000 made in 1995 are repayable with accrued interest in December 1999 and May 1999, respectively. The loan for $125,000 is forgivable on December 31, 1999 provided that the executive officer is employed by the Company on that date. During 1996, the Company made two additional loans to this executive officer for $175,000 and $325,000 which are repayable with accrued interest in December 2003.
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
L. RETIREMENT PLANS, DEFERRED COMPENSATION, EXECUTIVE OFFICER LOANS, LEASES AND CONTINGENCIES (CONTINUED)
In connection with a 1992 exercise of the stock options, the Company received a cash payment of $67,000 and a note from the Chairman and Chief Executive Officer of the Company in the amount of $3,170,000, due in December 2001, at a fixed interest rate of 6.06%. In addition, and in accordance with the terms of the option agreement, the holder of the options issued to the Company a promissory note in the principal amount of $2,340,000 bearing interest at the rate of 6.06%, payable in December 2001, to settle his obligation to provide the Company with funds necessary to pay the required withholding taxes due upon the exercise of the options. A portion of the second note ($1,556,000) equal to the tax benefit received by the Company upon exercise and the full amount of the note for $3,170,000 are reflected in a separate component of stockholders' equity at December 31, 1996 and 1995. The interest paid to the Company by the holder pursuant to the terms of the two notes issued in connection with the option exercise was $334,000 in 1996, 1995 and 1994.
3. Rental expense amounted to approximately $41,104,000 in 1996, $36,445,000 in 1995 and $35,568,000 in 1994 which is net of sub-lease rental income of $66,000 in 1996, $129,000 in 1995 and $1,263,000 in 1994. Approximate minimum rental commitments, excluding escalations, under noncancellable operating leases are as follows:
4. The Company is not involved in any pending legal proceedings not covered by insurance or by adequate indemnification or which, if decided adversely, would have a material effect on the results of operations, liquidity or financial position of the Company.
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
M. GOODWILL WRITE-OFF
In 1994, the Company wrote-off $39,944,000 of goodwill. The non-cash write-off related almost exclusively to international acquisitions made by the Company principally in the 1980's. The write-off was associated with 34 of the almost 100 investments for which the Company had unamortized goodwill. The portion of the write-off relating to advertising agencies was approximately $31,295,000 and $8,649,000 relates to public relations agencies. A significant amount of this write-off related to operations in the United Kingdom. The material portion of the goodwill write-off related to ten agencies acquired in the United Kingdom as part of a strategy to develop the Company's representation outside of the London market in the general advertising category and in specialized disciplines (such as retail advertising, promotional services and public relations). The unimpaired goodwill balances associated with the United Kingdom operations represented less than 10% of the Company's consolidated unamortized goodwill as of December 31, 1994. There were no write-offs in excess of normal amortization schedules in 1996 or 1995.
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
N. INDUSTRY SEGMENT AND RELATED INFORMATION
Commissions and fees and operating profit by geographic area for the years ended December 31, 1996, 1995 and 1994, and related identifiable assets at December 31, 1996, 1995 and 1994 are summarized below (000s omitted):
Commissions and fees from one client amounted to 13.2%, 13.8% and 13.8% of the consolidated total in 1996, 1995 and 1994, respectively.
INDEX TO EXHIBITS
E-1
E-2
E-3
E-4
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E-6
E-7
E-8