ITEM 1. BUSINESS:
General--Response to this item is incorporated by reference to the Financial Report portion of the Registrant's Annual Report to shareholders for fiscal year ended December 31, 1997 (the "1997 Annual Report") on pages 1 and 2.
Revenues--Response to this item is incorporated by reference to page 2 of the 1997 Annual Report.
Clients--The Registrant and its subsidiaries (the "Company") consider their relations with their clients to be satisfactory. Due to the nature of the business, however, any client could at some time in the future reduce its advertising budget, or transfer to another agency all or part of its advertising presently placed through the Company. Representation of a client does not necessarily mean that all advertising for that client is handled by the Company exclusively. In many cases, the Company handles the advertising of only a portion of a client's products or services or only the advertising in particular geographic areas.
Competition--The advertising agency business is highly competitive, with agencies of all sizes competing primarily on the basis of quality of service to attract and retain clients and personnel. Advertisers are able to move from one agency to another with relative ease, in part because accounts are terminable on short notice, usually 90-180 days. Competition for clients by large agencies is limited somewhat because many advertisers prefer not to be represented by an agency which handles competing products or services for other advertisers.
Regulation--Federal, state and local governments and governmental agencies in recent years have adopted statutes and regulations affecting the advertising activities of advertising agencies and their clients. For example, statutes and regulations have prohibited television advertising for certain products and have regulated the form and content of certain types of advertising for many consumer products. The Federal Trade Commission ("FTC") and various State Attorneys General have also required proof of accuracy of advertising claims with respect to various products and, in its enforcement policies, are seeking to establish more stringent standards with respect to advertising practices. The FTC and State Attorneys General have the authority to investigate and to institute proceedings against advertisers and their advertising agencies for deceptive advertising. Proposals have also been made for the adoption of additional statutes and regulations which would further restrict the advertising activities of advertising agencies and their clients. The effect on the advertising business of future application of existing statutes or regulations, or the extent, nature or effect of future legislation or regulatory activity with respect to advertising, cannot be predicted.
Financial Information about Foreign and Domestic Operations--Response to this item is incorporated by reference to pages 2 and 21 of the 1997 Annual Report.
ITEM 2.
ITEM 2. PROPERTIES
Virtually all of the Company's operations are conducted in leased premises. The Company's physical property consists primarily of leasehold improvements, furniture, fixtures and equipment. However, the Company does own office buildings in Puerto Rico and the Dominican Republic, neither of which is material to the Company's consolidated financial statements.
Further information regarding the Company's leased premises, which it considers to be adequate for its current operations, is incorporated by reference to note 12 of Registrant's consolidated financial statements on page 24 of the 1997 Annual Report.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
Response to this item is incorporated by reference to note 7 of Registrant's consolidated financial statements on page 19 of the 1997 Annual Report.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 30, 1997 Registrant held a Special Meeting of Stockholders to consider and vote upon the following matters:
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Response to this item is incorporated by reference to page 2 of the 1997 Annual Report.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Response to this item is incorporated by reference to page 3 of the 1997 Annual Report.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Response to this item is incorporated by reference to pages 3 through 8 of the 1997 Annual Report.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Response to this item is incorporated by reference to page 7 of the 1997 Annual Report.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Response to this item is incorporated by reference to pages 3 and 9 through 28 of the 1997 Annual Report.
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 Registrant contained under the heading "Proposal 1--Election of Directors" in the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held on May 13, 1998 (the "Proxy Statement") is incorporated herein by reference. Information with respect to executive officers of the Registrant who are not also Directors or nominees to the Board of Directors is included below.
Theodore J. Theophilos (44)--Executive Vice President, General Counsel Donald L. Seeley (54)--Executive Vice President, Chief Financial Officer Dale F. Perona (52)--Senior Vice President, Corporate Development/Secretary Kenneth J. Ashley (55)--Vice President, Treasurer John J. Rezich (42)--Vice President, Controller Laura J. Caffrey (48)--Chief Financial Officer--FCB Worldwide L.L.C. Valentine J. Zammit (50)--Executive Vice President of Operations--True North Diversified Companies
Mr. Theophilos joined the Company and became an executive officer during 1996. Previous to that time, Mr. Theophilos was Senior Vice President and General Counsel of A.C. Nielsen Company from 1995 to 1996, and a partner of Sidley & Austin (a law firm) from 1986 to 1995.
Mr. Seeley joined the Company and became an executive officer during 1997. Previous to that time, Mr. Seeley was Chief Executive Officer of The Alexander Consulting Group from 1993 to 1997.
Mr. Ashley joined the Company and became an officer during 1997. Previous to that time, Mr. Ashley was Chief Investment Officer and Treasurer of Thorndale Farm L.L.C., a private investment company, from 1996 to 1998 and Treasurer of CCH Incorporated from 1993 to 1996.
Ms. Caffrey joined the Company in April 1992 as Chief Financial Officer of FCB New York. In April 1996 Ms. Caffrey became Chief Financial Officer of FCB Worldwide L.L.C.
Mr. Zammit held the position of Chief Financial Officer of Bozell, Jacobs, Kenyon & Eckhardt, Inc. from February 1980 until the date of its merger with the Company. At that date, Mr. Zammit became Executive Vice President of True North Diversified Companies.
There are no family relationships between any of Registrant's executive officers. Except as disclosed above or otherwise disclosed in the Proxy Statement, all executive officers have been executive officers of the Registrant or have held senior executive positions with the Registrant for the past five years.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Except for information referred to in Item 402(a)(8) of Regulation S-K, the information contained under the headings "Executive Compensation" and "Compensation of Directors" in the Proxy Statement is incorporated herein by reference.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained under the heading "Security Ownership of Directors, Executive Officers & 5% Holders" in the Proxy Statement is incorporated herein by reference.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the heading "Executive Compensation--Certain Relationships and Related Transactions" in the Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Item 14(a)(1)--List of Financial Statements: The following consolidated financial statements of the Registrant and the Independent Public Accountant's Report covering these financial statements, appearing in the 1997 Annual Report on pages 9 through 28, are incorporated herein by reference in Item 8:
Consolidated Balance Sheets--December 31, 1996 and 1997 Consolidated Statements of Income--Years ended December 31, 1995, 1996 and Consolidated Statements of Stockholders' Equity--Years ended December 31, 1995, 1996 and 1997 Consolidated Statements of Cash Flows--Years ended December 31, 1995, 1996 and 1997 Notes to Consolidated Financial Statements--December 31, 1997 Reports of Independent Public Accountants
The audited financial statements of Publicis Communication, a 50% or less owned foreign affiliate of the Registrant, were not available at the time this Form 10-K was filed. Registrant will file these financial statements by amendment to this Form 10-K by no later than June 30, 1998.
Item 14(a)(2)--Schedules: Are not submitted because they are not required or because the required information is included in the financial statements or notes thereto.
Item 14(a)(3)--Index of Exhibits: The index of exhibits immediately precedes the exhibits filed with the Securities and Exchange Commission.
Item 14(b)--Reports on Form 8-K: Registrant filed Current Reports on Form 8- K dated November 17, 1997, November 17, 1997, December 1, 1997, December 3, 1997, December 10, 1997, December 15, 1997, December 23, 1997, December 29, 1997 and December 30, 1997 reporting matters under Item 5, Other Events.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Date: March 30, 1998
True North Communications Inc.
/s/ Bruce Mason By: _________________________________ Bruce Mason Chief Executive Officer (Principal Executive Officer)
/s/ Donald Seeley By: _________________________________ Donald Seeley Executive Vice President, Chief Financial Officer
/s/ John J. Rezich By: _________________________________ John J. Rezich Vice President, Controller (Chief Accounting Officer)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1934 AND TO THE POWER OF ATTORNEY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS (CONSTITUTING A MAJORITY OF THE MEMBERS OF THE BOARD OF DIRECTORS OF THE REGISTRANT) ON BEHALF OF THE REGISTRANT.
SIGNATURE AND TITLE SIGNATURE AND TITLE
David A. Bell* Richard P. Mayer* _____________________________________ _____________________________________ David A. Bell Richard P. Mayer
Richard S. Braddock* Michael E. Murphy* _____________________________________ _____________________________________ Richard S. Braddock Michael E. Murphy
Donald M. Elliman, Jr.* Charles D. Peebler, Jr.* _____________________________________ _____________________________________ Donald M. Elliman, Jr. Charles D. Peebler, Jr.
W. Grant Gregory* J. Brendan Ryan* _____________________________________ _____________________________________ W. Grant Gregory J. Brendan Ryan
Leo-Arthur Kelmenson* Stephen S. Vehslage* _____________________________________ _____________________________________ Leo-Arthur Kelmenson Stephen S. Vehslage
/s/ Bruce Mason _____________________________________ Bruce Mason
/s/ Theodore J. Theophilos *By: ________________________________ Theodore J. Theophilos as Attorney-in-Fact
Date: March 30, 1998
INDEX OF EXHIBITS
EXHIBIT NO. DESCRIPTION - ------- ----------- 4.1 Registrant's Restated Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3(i) to Registrant's Form 10-K for the year ended December 31, 1994).
4.2 Certificate of Ownership and Merger changing Registrant's name to True North Communications Inc. (incorporated by reference to Exhibit (3)(i) to Registrant's Current Report on Form 8-K filed December 9, 1994).
4.3 Certificate of Correction to Correct a Certain Error in the Restated Certificate of Incorporation, filed December 3, 1996 (incorporated by reference to Exhibit 10.2 to Registrant's Current Report on Form 8-K dated June 10, 1997).
4.4 Registrant's By-laws, as restated on March 4, 1998 (incorporated by reference to Exhibit 4.4 to Registrant's Post-Effective Amendment No. 1 on Form S-8 dated March 17, 1998 to Registrant's Registration Statement on Form S-4, filed November 26, 1997).
4.5* Certificate of Increase of Shares Designated as Series A Junior Participating Preferred Stock, filed on December 3, 1997.
4.6* Certificate of Amendment of Restated Certificate of Incorporation, filed December 30, 1997.
4.7 Rights Agreement dated as of November 16, 1988 between Registrant and Harris Trust and Savings Bank, as Rights Agent (incorporated by reference to Exhibit 1 to the Registrant's Registration Statement on Form 8-A under the Securities Exchange Act of 1934 filed on November 18, 1988).
10.1*# Registrant's Stock Option Plan, amended and restated on December 30, 1997.
10.2# The Bozell, Jacobs, Kenyon & Eckhardt, Inc. Stock Option Plan, established effective March 30, 1992, as amended (incorporated by reference to Exhibit 4.5 to Registrant's Post-Effective Amendment No. 1 on Form S-8 dated March 17, 1998 to Registrant's Registration Statement on Form S-4, filed November 26, 1997).
10.3# Registrant's Outside Directors Stock Option Plan (incorporated by reference to Appendix A to Registrant's Definitive Proxy Statement for its Annual Meeting of Stockholders held on May 30, 1992).
10.4*# Employment Agreement between Bruce Mason and Registrant, dated as of July 30, 1997.
10.5# Employment Agreement between J. Brendan Ryan and Registrant, dated as of December 31, 1996 (incorporated by reference to Exhibit 10.4 to Registrant's Current Report on Form 8-K dated June 10, 1997).
10.6# Employment Agreement between Theodore J. Theophilos and Registrant, effective as of October 15, 1996 (incorporated by reference to Exhibit 10.9 to Registrant's Annual Report on Form 10- K for the year ended December 31, 1996).
10.7# Asset Protection Plan between Bruce Mason and Registrant, dated June 4, 1996 (incorporated by reference to Exhibit 10.10 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996).
10.8# Asset Protection Plan between J. Brendan Ryan and Registrant, dated June 5, 1996 (incorporated by reference to Exhibit 10.11 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996.
10.9# Asset Protection Plan between Theodore J. Theophilos and Registrant, dated October 18, 1996 (incorporated by reference to Exhibit 10.15 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996).
10.10# Employment Agreement between Donald L. Seeley and Registrant, dated June 20, 1997 (incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997).
10.11# Asset Protection Plan between Donald L. Seeley and Registrant, dated July 1, 1997 (incorporated by reference to Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997).
10.12*# Employment Agreement between Charles D. Peebler, Jr. and Registrant, dated as of July 30, 1997.
10.13*# Employment Agreement between Richard S. Braddock and Registrant, dated as of July 30, 1997.
10.14*# Employment Agreement between Valentine J. Zammit and Registrant, dated June 26, 1997, as amended on July 25, 1997.
10.15*# Employment Agreement between Leo-Arthur Kelmenson and Registrant, dated March 30, 1992 as amended as of July 13, 1992, June 30, 1993, February 3, 1995 and July 30, 1997.
10.16*# Employment Agreement between David A. Bell and Registrant, dated September 13, 1985, as amended on February 8, 1988, June 1992, May 1996 and July 30, 1997.
10.17 Agreement dated as of May 19, 1997 among Publicis S.A., a societe anonyme organized and existing under the laws of France, Publicis Communication, a societe anonyme organized and existing under the laws of France and Publicis FCB Europe B.V., a company organized under the laws of the Netherlands, on the one hand, and Registrant, FCB International, Inc., a Delaware
corporation and True North Holdings Netherlands B.V., a company organized under the laws of the Netherlands, on the other hand (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K dated May 19, 1997).
10.18 Pooling Agreement dated as of May 19, 1997 among Publicis S.A., a societe anonyme organized and existing under the laws of France, Publicis Communication, a societe anonyme organized and existing under the laws of France and Registrant (incorporated by reference to Exhibit 10.2 to Registrant's Current Report on Form 8-K dated May 19, 1997).
10.19 Share Repurchase and Share Exchange Agreement dated May 19, 1997 among FCB International, Inc., a Delaware corporation, Registrant, True North Holding B.V., a company organized under the laws of the Netherlands, Publicis Communication, a societe anonyme organized and existing under the laws of France, and Publicis FCB Europe B.V., a company organized under the laws of the Netherlands (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K dated June 10, 1997).
10.20* Registration Rights Agreement between Registrant and The Northwestern Mutual Life Insurance Company, dated as of July 30, 1997.
11.1* Statement re Computation of Per Share Earnings.
13.1* Portions of Registrant's Annual Report to Shareholders incorporated by reference into this Report on Form 10-K.
18.1* Letter re change in accounting principles.
21.1* Subsidiaries of Registrant.
23.1* Consent of Arthur Andersen LLP.
23.2* Consent of KPMG Peat Marwick LLP.
24.1* Power of Attorney.
27.1* Financial Data Schedule.
* Filed herewith.
# Management contract or compensatory plan or arrangement.