SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended Commission file number
December 31, 1997 1-6686
THE INTERPUBLIC GROUP OF COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-1024020
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1271 Avenue of the Americas 10020
New York, New York (Zip Code)
(Address of principal executive offices)
(212) 399-8000
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 ___.
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (Section 229.405 of this
chapter) is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. X .
PAGE
The aggregate market value of the registrant's voting stock
(exclusive of shares beneficially owned by persons referred to in
response to Item 12 hereof) was $7,849,666,419 as of March 23,
1998.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest
practicable date.
Common Stock outstanding at March 23, 1998: 131,754,675 shares.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Annual Report to Stockholders for the year
ended December 31, 1997 are incorporated by reference in
Parts I and II.
2. Portions of the Proxy Statement for the 1998 Annual Meeting
of Stockholders are incorporated by reference in Parts I and
III.
PAGE
PART I
Item 1. Business
The Interpublic Group of Companies, Inc. was incorporated in
Delaware in September 1930 under the name of McCann-Erickson
Incorporated as the successor to the advertising agency
businesses founded in 1902 by A.W. Erickson and in 1911 by
Harrison K. McCann. It has operated under the Interpublic name
since January 1961. As used in this Annual Report, the
"Registrant" or "Interpublic" refers to The Interpublic Group of
Companies, Inc. while the "Company" refers to Interpublic and its
subsidiaries.
The advertising agency business is the primary business of
the Company. This business is conducted throughout the world
through three advertising agency systems, McCann-Erickson
WorldGroup, Ammirati Puris Lintas and The Lowe Group.
Interpublic also carries on a media buying business through its
ownership of Western International Media and its affiliates, as
well as a separate direct and promotional marketing business
through its ownership of DraftWorldwide Inc. The Company also
offers advertising agency services through association
arrangements with local agencies in various parts of the world.
Other activities conducted by the Company within the area of
"marketing communications" include public relations, graphic
design, market research, sales promotion, interactive services,
sports and event marketing, consulting and other related
services.
The principal functions of an advertising agency are to plan
and create advertising programs for its clients and to place
advertising in various media such as television, cinema, radio,
magazines, newspapers, direct mail, outdoor and interactive
electronic media. The planning function involves analysis of the
market for the particular product or service, evaluation of
alternative methods of distribution and choice of the appropriate
media to reach the desired market most efficiently. The
advertising agency develops a communications strategy and then
creates an advertising program, within the limits imposed by the
client's advertising budget, and places orders for space or time
with the media that have been selected.
The principal advertising agency subsidiaries of Interpublic
operating within the United States directly or through
subsidiaries and the locations of their respective corporate
headquarters are:
PAGE
Ammirati Puris Lintas Inc......... New York, New York
Campbell-Ewald
Company.......................... Detroit (Warren),
Michigan
Campbell Mithun Esty LLC.......... Minneapolis, Minnesota
Dailey & Associates............... Los Angeles, California
DraftWorldwide, Inc............... Chicago, Illinois
Lowe & Partners Inc............... New York, New York
McCann-Erickson USA, Inc.......... New York, New York
In addition to domestic operations, the Company provides
advertising services for clients whose business is international
in scope as well as for clients whose business is restricted to a
single country or a small number of countries. It has offices in
Canada as well as in one or more cities in each of the following
countries:
EUROPE, AFRICA AND THE MIDDLE EAST
Austria Greece Nigeria Spain
Belgium Hungary Norway Sweden
Bulgaria Israel Pakistan Switzerland
Cameroon Ireland Poland Tunisia
Croatia Italy Portugal Turkey
Czech Republic Ivory Coast Romania United Arab Emirates
Denmark Kenya Russia United Kingdom
Estonia Mauritius Senegal Zambia
Finland Morocco Slovakia Zimbabwe
France Namibia Slovenia
Germany Netherlands South Africa
LATIN AMERICA AND THE CARIBBEAN
Argentina Colombia Guatemala Peru
Barbados Costa Rica Honduras Puerto Rico
Bermuda Dominican Republic Jamaica Trinidad
Brazil Ecuador Mexico Uruguay
Chile El Salvador Panama Venezuela
page>
ASIA AND THE PACIFIC
Australia Japan People's Republic Sri Lanka
Hong Kong Malaysia of China South Korea
India Nepal Philippines Taiwan
Indonesia New Zealand Singapore Thailand
Vietnam
Operations in the foregoing countries are carried on by one
or more operating companies, at least one of which is either
wholly owned by Interpublic or a subsidiary or is a company in
which Interpublic or a subsidiary owns a 51% interest or more,
except in Malawi and Nepal, where Interpublic or a subsidiary
holds a minority interest.
The Company also offers advertising agency services in
Albania, Aruba, the Bahamas, Bahrain, Belize, Bolivia, Cambodia,
Egypt, Gabon, Ghana, Grand Cayman, Guadeloupe, Guam, Guyana,
Haiti, Reunion, Ivory Coast, Jordan, Kuwait, Lebanon, Martinique,
Myanmar, Nicaragua, Nigeria, Oman, Paraguay, Saudi Arabia,
Senegal, Surinam, Uganda, United Arab Emirates (Dubai) and Zaire
through association arrangements with local agencies operating in
those countries.
For information concerning revenues, operating profits and
identifiable assets on a geographical basis for each of the last
three years, reference is made to Note 13: Geographic Areas of
the Notes to the Consolidated Financial Statements in the
Company's Annual Report to Stockholders for the year ended
December 31, 1997, which Note is hereby incorporated by
reference.
Developments in 1997
The Company completed a number of acquisitions within the
United States and abroad in 1997.
See Note 4 to the Consolidated Financial Statements
incorporated by reference in this Report on Form 10-K for a
discussion of acquisitions.
Income from Commissions and Fees
The Company generates income from planning, creating and
placing advertising in various media. Historically, the
commission customary in the industry was 15% of the gross charge
("billings") for advertising space or time; more recently lower
commissions have been negotiated, but often with additional
incentives for better performance. For example, an incentive
component is frequently included in arrangements with clients
based on increases in a client's sales of the products or
services being advertised. Under commission arrangements, media
bill the Company at their gross rates. The Company bills these
amounts to its clients, remits the net charges to the media and
retains the balance as its commission. Some clients, however,
prefer to compensate the Company on a fee basis, under which the
Company bills its client for the net charges billed by the media
plus an agreed-upon fee. These fees usually are calculated to
reflect the Company's salary costs and out-of-pocket expenses
incurred on the client's behalf, plus proportional overhead and a
profit mark-up.
Normally, the Company, like other advertising agencies, is
primarily responsible for paying the media with respect to firm
contracts for advertising time or space. This is a problem only
if the client is unable to pay the Company because of insolvency
or bankruptcy. The Company makes serious efforts to reduce the
risk from a client's insolvency, including (1) carrying out
credit clearances, (2) requiring in some cases payment of media
in advance, or (3) agreeing with the media that the Company will
be solely liable to pay the media only after the client has paid
the Company for the media charges.
The Company also receives commissions from clients for
planning and supervising work done by outside contractors in the
physical preparation of finished print advertisements and the
production of television and radio commercials and other forms of
advertising. This commission is customarily 17.65% of the
outside contractor's net charge, which is the same as 15% of the
outside contractor's total charges including commission. With
the spread of negotiated fees, the terms on which outstanding
contractors' charges are billed are subject to wide variations
and even include in some instances the elimination of commissions
entirely provided that there are adequate negotiated fees.
The Company derives income in many other ways, including the
planning and placement in media of advertising produced by
unrelated advertising agencies; the maintenance of specialized
media placement facilities; the creation and publication of
brochures, billboards, point of sale materials and direct
marketing pieces for clients; the planning and carrying out of
specialized marketing research; managing special events at which
clients' products are featured; and designing and carrying out
interactive programs for special uses.
The five clients of the Company that made the largest
contribution in 1997 to income from commissions and fees
accounted individually for 2.9% to 11.4% of such income and in
the aggregate accounted for over 31% of such income. Twenty
clients of the Company accounted for approximately 44% of such
income. Based on income from commissions and fees, the three
largest clients of the Company are General Motors Corporation,
Unilever and Nestle. General Motors Corporation first became a
client of one of the Company's agencies in 1916 in the United
States. Predecessors of several of the Lintas agencies have
supplied advertising services to Unilever since 1893. The client
relationship with Nestle began in 1940 in Argentina. While the
loss of the entire business of one of the Company's three largest
clients might have a material adverse effect upon the business of
the Company, the Company believes that it is very unlikely that
the entire business of any of these clients would be lost at the
same time, because it represents several different brands or
divisions of each of these clients in a number of geographical
markets - in each case through more than one of the Company's
agency systems.
Representation of a client rarely means that the Company
handles advertising for all brands or product lines of the client
in all geographical locations. Any client may transfer its
business from an advertising agency within the Company to a
competing agency, and a client may reduce its advertising budget
at any time. The Company's advertising agencies in many
instances have written contracts with their clients.
As is customary in the industry, these contracts provide for
termination by either party on relatively short notice, usually
90 days but sometimes shorter or longer. In 1997, however, 38%
of income from commissions and fees was derived from clients that
had been associated with one or more of the Company's agencies or
their predecessors for 20 or more years.
Personnel
As of January 1, 1998, the Company employed approximately
27,100 persons, of whom approximately 10,200 were employed in the
United States. Because of the personal service character of the
marketing communications business, the quality of personnel is of
crucial importance to continuing success. There is keen
competition for qualified employees. Interpublic considers its
employee relations to be satisfactory.
The Company has an active program for training personnel.
The program includes meetings and seminars throughout the world.
It also involves training personnel in its offices in New York
and in its larger offices worldwide.
Competition and Other Factors
The advertising agency and other marketing communications
businesses are highly competitive. The Company's agencies and
media services must compete with other agencies, both large and
small, and also with other providers of creative or media
services which are not themselves advertising agencies, in order
to maintain existing client relationships and to obtain new
clients. Competition in the advertising agency business depends
to a large extent on the client's perception of the quality of an
agency's "creative product". An agency's ability to serve
clients, particularly large international clients, on a broad
geographic basis is also an important competitive consideration.
On the other hand, because an advertising agency's principal
asset is its people, freedom of entry into the business is almost
unlimited and quite small agencies are, on occasion, able to take
all or some portion of a client's account from a much larger
competitor.
Moreover, increasing size brings limitations to an agency's
potential for securing new business, because many clients prefer
not to be represented by an agency that represents a competitor.
Also, clients frequently wish to have different products
represented by different agencies. The fact that the Company
owns three separate worldwide agency systems and interests in
other advertising agencies gives it additional competitive
opportunities.
The advertising business is subject to government
regulation, both domestic and foreign. There has been an
increasing tendency in the United States on the part of
advertisers to resort to the courts, industry and self-regulatory
bodies to challenge comparative advertising on the grounds that
the advertising is false and deceptive. Through the years, there
has been a continuing expansion of specific rules, prohibitions,
media restrictions, labeling disclosures and warning requirements
with respect to the advertising for certain products.
Representatives within state governments and the federal
government as well as foreign governments continue to initiate
proposals to ban the advertising of specific products and to
impose taxes on or deny deductions for advertising which, if
successful, may have an adverse effect on advertising
expenditures.
Some countries are relaxing commercial restrictions as part
of their efforts to attract foreign investment. However, with
respect to other nations, the international operations of the
Company still remain exposed to certain risks which affect
foreign operations of all kinds, such as local legislation,
monetary devaluation, exchange control restrictions and unstable
political conditions. In addition, international advertising
agencies are still subject to ownership restrictions in certain
countries because they are considered an integral factor in the
communications process.
PAGE
Statement Regarding Forward Looking Disclosure
Certain sections of this report, including "Business",
"Competition and Other Factors" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
contain forward looking statements concerning future events and
developments that involve risks and uncertainties, including
those associated with the effect of national and regional
economic conditions, the ability of the Company to attract new
clients and retain existing clients, the financial success of
clients of the Company, other developments of clients of the
Company, and developments from changes in the regulatory and
legal environment for advertising agencies around the world.
Year 2000 Compliance
Many currently installed computer systems and software
products are coded to accept only two-digit entries in the date
code field. Beginning in the year 2000, these date code fields
will need to accept four-digit entries to distinguish 21st
century dates from 20th century dates. As a result, computer
systems and/or software used by the Company will need to be
upgraded to comply with such "Year 2000" requirements. Further
discussion of this issue is contained in the section of this
Report entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
Item 2. Properties
Most of the advertising operations of the Company are
conducted in leased premises, and its physical property consists
primarily of leasehold improvements, furniture, fixtures and
equipment. These facilities are located in various cities in
which the Company does business throughout the world. However,
subsidiaries of the Company own office buildings in Louisville,
Kentucky; Garden City, New York; Blair, Nebraska; Westport,
Connecticut; Warren, Michigan; Frankfurt, Germany; Sao Paulo,
Brazil; Lima, Peru; Mexico City, Mexico; Santiago, Chile ; and
Brussels, Belgium and own office condominiums in Buenos Aires,
Argentina; Bogota, Colombia; Manila, the Philippines; in England,
subsidiaries of the Company own office buildings in London,
Manchester, Birmingham and Stoke-on-Trent.
The Company's ownership of the office building in Frankfurt
is subject to three mortgages which became effective on or about
February 1993. These mortgages terminate at different dates,
with the last to expire in February 2003. Reference is made to
Note 10: Long-Term Debt - of the Notes to the Consolidated
Financial Statements in the Company's Annual Report to
Stockholders for the year ended December 31, 1997, which Note is
hereby incorporated by reference.
Item 3. Legal Proceedings
Neither the Company nor any of its subsidiaries are subject
to any pending material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Executive Officers of the Registrant
There follows the information disclosed in accordance with
Item 401 of Regulation S-K of the Securities and Exchange
Commission (the "Commission") as required by Item 10 of Form 10-K
with respect to executive officers of the Registrant.
Name Age Office
Philip H. Geier, Jr. (1) 63 Chairman of the Board, President
and Chief Executive Officer
Eugene P. Beard (1) 62 Vice Chairman-Finance and
Operations, Chief Financial Officer
Nicholas J. Camera 51 Vice President, Secretary and
General Counsel
John J. Dooner, Jr. (1) 49 Chairman of McCann-Erickson
WorldGroup, Inc.
C. Kent Kroeber 59 Senior Vice President-Human
Resources
Barry R. Linsky 56 Senior Vice President-Planning
and Business Development
Frank B. Lowe (1) 56 Chairman of The Lowe Group
Martin F. Puris (1) 59 Chairman, Chief Executive Officer
and Chief Creative Officer of
Ammirati Puris Lintas Worldwide
Joseph M. Studley 45 Vice President and Controller
Thomas J. Volpe 62 Senior Vice President-Financial
Operations
(1) Also a Director
There is no family relationship among any of the executive
officers.
The employment histories for the past five years of Messrs.
Geier, Beard, Dooner, Puris and Lowe are incorporated by
reference to the Proxy Statement for Interpublic's 1998 Annual
Meeting of Stockholders.
Mr. Camera joined Interpublic on May 17, 1993. He was
elected Vice President, Assistant General Counsel and Assistant
Secretary on June 1, 1994 and Vice President, General Counsel and
Secretary on December 15, 1995.
Mr. Kroeber joined Interpublic in January 1966 as Manager of
Compensation and Training. He was elected Vice President in 1970
and Senior Vice President in May 1980.
Mr. Linsky joined Interpublic in January, 1991 when he was
elected Senior Vice President-Planning and Business Development.
Prior to that time, he was Executive Vice President, Account
Management of Lowe & Partners, Inc. Mr. Linsky was elected to
that position in July, 1980, when the corporation was known as
The Marschalk Company and was a subsidiary of Interpublic.
Mr. Studley was elected as Vice President and Controller of
Interpublic effective as of April 1, 1994, formerly he was Senior
Vice President and Chief Financial Officer of E.C. Television, a
division of Interpublic, since January 1, 1990. He was a Vice
President of Lintas New York, a division of one of Interpublic's
subsidiaries, from August 1, 1987 until December 31, 1989.
Mr. Volpe joined Interpublic on March 3, 1986. He was
appointed Senior Vice President-Financial Operations on March 18,
1986. He served as Treasurer from January 1, 1987 through May
17, 1988 and the Treasurer's office continues to report to him.
He was Vice President and Treasurer of Colgate-Palmolive Company
from February 1981 to February 1986 and Assistant Corporate
Controller prior thereto.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
The response to this Item is incorporated by reference to
the Registrant's Annual Report to Stockholders for the year ended
December 31, 1997. See Note 12: Results by Quarter (Unaudited),
of the Notes to the Consolidated Financial Statements and
information under the heading Transfer Agent and Registrar for
Common Stock.
Item 6. Selected Financial Data
The response to this Item is incorporated by reference to
the Registrant's Annual Report to Stockholders for the year ended
December 31, 1997 under the heading Selected Financial Data for
Five Years.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The response to this Item is incorporated by reference to
the Registrant's Annual Report to Stockholders for the year ended
December 31, 1997 under the heading Management's Discussion and
Analysis of Financial Condition and Results of Operations.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk
The response to this Item is incorporated by reference to
the Registrant's Annual Report to Stockholders for the year ended
December 31, 1997 under the heading Management's Discussion and
Analysis of Financial Condition and Results of Operations.
Item 8. Financial Statements and Supplementary Data
The response to this Item is incorporated in part by
reference to the Registrant's Annual Report to Stockholders for
the year ended December 31, 1997 under the headings Financial
Statements and Notes to the Consolidated Financial Statements.
Reference is also made to the Financial Statement Schedule listed
under Item 14(a) of this Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this Item is incorporated by
reference to the Registrant's Proxy Statement for its 1998 Annual
Meeting of Stockholders (the "Proxy Statement"), to be filed not
later than 120 days after the end of the 1997 calendar year,
except for the description of Interpublic's Executive Officers
which appears in Part I of this Report on Form 10-K under the
heading "Executive Officers of the Registrant".
Item 11. Executive Compensation
The information required by this Item is incorporated by
reference to the Proxy Statement. Such incorporation by
reference shall not be deemed to incorporate specifically by
reference the information referred to in Item 402(a)(8) of
Regulation S-K.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information required by this Item is incorporated by
reference to the Proxy Statement.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated by
reference to the Proxy Statement. Such incorporation by
reference shall not be deemed to incorporate specifically by
reference the information referred to in Item 402(a)(8) of
Regulation S-K.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) Listed below are all financial statements, financial
statement schedules and exhibits filed as part of this Report on
Form 10-K.
1. Financial Statements:
See the Index to Financial Statements on page F-1.
2. Financial Statement Schedules:
See the Index to Financial Statement Schedule on
page F-1.
PAGE
3. Exhibits:
(Numbers used are the numbers assigned in Item 601 of
Regulation S-K and the EDGAR Filer Manual. An additional copy of
this exhibit index immediately precedes the exhibits filed with
this Report on Form 10-K and the exhibits transmitted to the
Commission as part of the electronic filing of the Report.)
Exhibit No. Description
3 (i) The Restated Certificate of Incorporation of the
Registrant, as amended is incorporated by reference to
its Report on Form 10-Q for the quarter ended June 30,
1997. See Commission file number 1-6686.
(ii) The By-Laws of the Registrant, amended as of February
19, 1991, are incorporated by reference to its Report
on Form 10-K for the year ended December 31, 1990. See
Commission file number 1-6686.
4 Instruments Defining the Rights of Security Holders.
(i) Indenture, dated as of September 16, 1997 between
Interpublic and The Bank of New York is incorporated by
reference to the Registrant's Report on Form 10-Q for
the quarter ended September 30, 1997. See Commission
file number 1-6686.
(ii) The Preferred Share Purchase Rights Plan as adopted on
July 18, 1989 is incorporated by reference to
Registrant's Registration Statement on Form 8-A dated
August 1, 1989 (No. 00017904) and, as amended, by
reference to Registrant's Registration Statement on
Form 8 dated October 3, 1989 (No. 00106686).
10 Material Contracts.
(a) Purchase Agreement, dated September 10, 1997, among The
Interpublic Group of Companies, Inc. ("Interpublic"),
Morgan Stanley & Co., Incorporated, Goldman Sachs and
Co. and SBC Warburg Dillon Read Inc. is incorporated by
reference to the Registrant's Report on Form 10-Q for
the quarter ended September 30, 1997. See Commission
file number 1-6686.
(b) Employment, Consultancy and other Compensatory
Arrangements with Management.
Employment and Consultancy Agreements and any
amendments or supplements thereto and other
PAGE
compensatory arrangements filed with the Registrant's
Reports on Form 10-K for the years ended December 31,
1980 through December 31, 1996 inclusive, or filed with
the Registrant's Reports on Form 10-Q for the periods
ended March 31, 1997, June 30, 1997 and September 30,
1997 are incorporated by reference in this Report on
Form 10-K. See Commission file number 1-6686. Listed
below are agreements or amendments to agreements
between the Registrant and its executive officers which
remain in effect on and after the date hereof or were
executed during the year ended December 31, 1997 and
thereafter, unless previously submitted, which are
filed as exhibits to this Report on Form 10-K.
(i) Philip H. Geier, Jr.
Supplemental Agreement dated as of March 1, 1998
to an Employment Agreement dated as of September
1, 1997 between Interpublic and Philip H. Geier,
Jr.
(ii) Frank Lowe
Supplemental Agreement dated as of March 1, 1998
to an Employment Agreement dated as of January, 1,
1996 between Interpublic and Frank Lowe.
(c) Executive Compensation Plans.
(i) Trust Agreement, dated as of June 1, 1990 between
The Interpublic Group of Companies, Inc., Lintas
Campbell-Ewald Company, McCann-Erickson USA, Inc.,
McCann-Erickson Marketing, Inc., Lintas, Inc. and
Chemical Bank, as Trustee, is incorporated by
reference to Registrant's Annual Report on Form
10-K for the year ended December 31, 1990. See
Commission file number 1-6686.
(ii) The Stock Option Plan (1988) and the Achievement
Stock Award Plan of the Registrant are
incorporated by reference to Appendices C and D of
the Prospectus dated May 4, 1989 forming part of
its Registration Statement on Form S-8 (No.
33-28143).
(iii) The Management Incentive Compensation Plan of the
Registrant is incorporated by reference to the
Registrant's Report on Form 10-Q for the quarter
ended June 30, 1995. See Commission file number
1-6686.
(iv) The 1986 Stock Incentive Plan of the Registrant is
incorporated by reference to Registrant's Annual
Report on Form 10-K for the year ended December
31, 1993. See Commission file number 1-6686.
(v) The 1986 United Kingdom Stock Option Plan of the
Registrant is incorporated by reference to
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1992. See Commission file
number 1-6686.
(vi) The Employee Stock Purchase Plan (1985) of the
Registrant, as amended, is incorporated by
reference to Registrant's Annual Report on Form
10-K for the year ended December 31, 1993. See
Commission file number 1-6686.
(vii) The Long-Term Performance Incentive Plan of the
Registrant is incorporated by reference to
Appendix A of the Prospectus dated December 12,
1988 forming part of its Registration Statement on
Form S-8 (No. 33-25555).
(viii) Resolution of the Board of Directors adopted on
February 16, 1993, amending the Long-Term
Performance Incentive Plan is incorporated by
reference to Registrant's Annual Report on Form
10-K for the year ended December 31, 1992. See
Commission file number 1-6686.
(ix) Resolution of the Board of Directors adopted on
May 16, 1989 amending the Long-Term Performance
Incentive Plan is incorporated by reference to
Registrant's Report on Form 10-K for the year
ended December 31, 1989. See Commission file
number 1-6686.
(x) The 1996 Stock Incentive Plan of the Registrant is
incorporated by reference to the Registrant's
Report on Form 10-Q for the quarter ended June 30,
1996. See Commission file number 1-6686.
(xi) The 1997 Performance Incentive Plan of the
Registrant is incorporated by reference to the
Registrant's Report on Form 10-Q for the quarter
ended June 30, 1997. See Commission file number
1-6686.
PAGE
(d) Loan Agreements.
(i) Amendment No. 6, dated as of August 28, 1997 to a
Credit Agreement dated as of September 30, 1992
and effective as of December 30, 1992 between
Interpublic and The Bank of New York.
(ii) Amendment No. 7, dated as of August 26, 1997 to a
Credit Agreement dated as of September 30, 1992
and effective as of December 23, 1992 between
Interpublic and The First National Bank of
Chicago.
(iii) Amendment No. 6, dated as of October 1, 1997 to a
Credit Agreement dated as of September 30, 1992
and effective as of December 16, 1992 between
Interpublic and The Fuji Bank, Limited.
(iv) Note dated as of December 16, 1992 between
Interpublic and The Fuji Bank, Limited.
(v) Other Loan and Guaranty Agreements filed with the
Registrant's Annual Report on Form 10-K for the
years ended December 31, 1988 and December 31,
1986 are incorporated by reference in this Report
on Form 10-K. Other Credit Agreements, amendments
to various Credit Agreements, Supplemental
Agreements, Termination Agreements, Loan
Agreements, Note Purchase Agreements, Guarantees
and Intercreditor Agreements filed with the
Registrant's Report on Form 10-K for the years
ended December 31, 1989 through December 31, 1996,
inclusive and filed with Registrant's Reports on
Form 10-Q for the periods ended March 31, 1997,
June 30, 1997 and September 30, 1997 are
incorporated by reference into this Report on Form
10-K. See Commission file number 1-6686.
(e) Leases.
Material leases of premises are incorporated by
reference to the Registrant's Annual Report on Form
10-K for the years ended December 31, 1980 and December
31, 1988. See Commission file number 1-6686.
(f) Acquisition Agreement for Purchase of Real Estate.
(i) Acquisition Agreement (in German) between
Treuhandelsgesellschaft Aktiengesellschaft & Co.
Grundbesitz OHG and McCann-Erickson Deutschland
PAGE
GmbH & Co. Management Property KG
("McCann-Erickson Deutschland") and the English
translation of the Acquisition Agreement are
incorporated by reference to Registrant's Annual
Report on Form 10-K for the year ended December
31, 1992. See Commission file number 1-6686.
(g) Mortgage Agreements and Encumbrances.
(i) Summaries In German and English of Mortgage
Agreements between McCann-Erickson Deutschland and
Frankfurter Hypothekenbank Aktiengesellschaft
("Frankfurter Hypothekenbank"), Mortgage
Agreement, dated January 22, 1993, between
McCann-Erickson Deutschland and Frankfurter
Hypothekenbank, Mortgage Agreement, dated January
22, 1993, between McCann-Erickson Deutschland and
Hypothekenbank are incorporated by reference to
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993. See Commission file
number 1-6686. Summaries In German and English of
Mortgage Agreement, between McCann-Erickson
Deutschland and Frankfurter Sparkasse and Mortgage
Agreement, dated January 7, 1993, between
McCann-Erickson Deutschland and Frankfurter
Sparkasse are incorporated by reference to
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1992. See Commission file
number 1-6686.
(ii) Summaries In German and English of Documents
Creating Encumbrances In Favor of Frankfurter
Hypothekenbank and Frankfurter Sparkasse In
Connection With the Aforementioned Mortgage
Agreements, Encumbrance, dated January 15, 1993,
In Favor Of Frankfurter Hypothekenbank, and
Encumbrance, dated January 15, 1993, In Favor of
Frankfurter Sparkasse are incorporated by
reference to Registrant's Annual Report on Form
10-K for the year ended December 31, 1992. See
Commission file number 1-6686.
(iii) Loan Agreement (in English and German), dated
January 29, 1993 between Lintas Deutschland GmbH
and McCann-Erickson Deutschland is incorporated by
reference to Registrant's Annual Report on Form
10-K for the year ended December 31, 1992. See
Commission file number 1-6686.
PAGE
11 Computation of Earnings Per Share.
13 This Exhibit includes: (a) those portions of the Annual
Report to Stockholders for the year ended December 31, 1997
which are included therein under the following headings:
Financial Highlights; Management's Discussion and Analysis
of Financial Condition and Results Of Operations;
Consolidated Balance Sheet; Consolidated Statement of
Income; Consolidated Statement of Cash Flows; Consolidated
Statement of Stockholders' Equity; Notes to Consolidated
Financial Statements (the aforementioned consolidated
financial statements together with the Notes to Consolidated
Financial Statements hereinafter shall be referred to as the
"Consolidated Financial Statements"); Report of Independent
Accountants; Selected Financial Data For Five Years; Report
of Management; and Stockholders' Information; and (b)
Appendix to Exhibit 13.
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
24 Power of Attorney to sign Form 10-K and resolution of Board
of Directors re Power of Attorney.
27 Financial Data Schedules
99 No reports on Form 8-K were filed during the quarter ended
December 31, 1997.
PAGE
SIGNATURES
Pursuant to the requirements of Section 13 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.
THE INTERPUBLIC GROUP OF COMPANIES, INC.
(Registrant)
March 26, 1998 BY: Philip H. Geier, Jr.
Philip H. Geier, Jr.,
Chairman of the Board,
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this Report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.
Name Title Date
Philip H. Geier, Jr. Chairman of the Board, March 26, 1998
Philip H. Geier, Jr. President and Chief Executive
Officer (Principal Executive
Officer) and Director
Eugene P. Beard Vice Chairman March 26, 1998
Eugene P. Beard -Finance and Operations,
Chief Financial Officer,
(Principal Financial
Officer) and Director
Frank J. Borelli Director March 26, 1998
Frank J. Borelli
Reginald K. Brack Director March 26, 1998
Reginald K. Brack
Jill M. Considine Director March 26, 1998
Jill M. Considine
John J. Dooner, Jr. Director March 26, 1998
John J. Dooner, Jr.
Frank B. Lowe Director March 26, 1998
Frank B. Lowe
PAGE
Leif H. Olsen Director March 26, 1998
Leif H. Olsen
Martin F. Puris Director March 26, 1998
Martin F. Puris
Allen Questrom Director March 26, 1998
Allen Questrom
J. Phillip Samper Director March 26, 1998
J. Phillip Samper
Joseph M. Studley Vice President and March 26, 1998
Joseph M. Studley Controller (Principal
Accounting Officer)
By Philip H. Geier, Jr.
Philip H. Geier, Jr.
Attorney-in-fact
PAGE
INDEX TO FINANCIAL STATEMENTS
The Financial Statements appearing under the headings: Financial
Highlights, Management's Discussion and Analysis of Financial
Condition and Results of Operations, Consolidated Financial
Statements, Notes to Consolidated Financial Statements, Report of
Independent Accountants, Selected Financial Data for Five Years
and Report of Management accompanying the Annual Report to
Stockholders for the year ended December 31, 1997, together with
the report thereon of Price Waterhouse LLP dated February 20,
1998 are incorporated by reference in this report on Form 10-K.
With the exception of the aforementioned information and the
information incorporated in Items 5, 6 and 7, no other data
appearing in the Annual Report to Stockholders for the year ended
December 31, 1997 is deemed to be filed as part of this report on
Form 10-K.
The following financial statement schedules should be read in
conjunction with the financial statements in such Annual Report
to Stockholders for the year ended December 31, 1997. Financial
statement schedules not included in this report on Form 10-K have
been omitted because they are not applicable or the required
information is shown in the financial statements or the notes
thereto.
Separate financial statements for the companies which are 50% or
less owned and accounted for by the equity method have been
omitted because, considered in the aggregate as a single
subsidiary, they do not constitute a significant subsidiary.
INDEX TO FINANCIAL STATEMENT SCHEDULE
Page
Report of Independent Accountants on
Financial Statement Schedules F-2
Consent of Independent Accountants F-2
Financial Statement Schedules Required to be filed by
Item 8 of this form:
VIII Valuation and Qualifying Accounts F-3
F-1
PAGE
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
The Interpublic Group of Companies, Inc.
Our audits of the consolidated financial statements referred to in
our report dated February 20, 1998 appearing in the 1997 Annual
Report to Stockholders of The Interpublic Group of Companies, Inc.
(which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also
included an audit of the Financial Statement Schedule listed in
Item 14 (a) of this Form 10-K. In our opinion, this Financial
Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the
related consolidated financial statements.
PRICE WATERHOUSE LLP
New York, New York
February 20, 1998
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statements on Form S-8 of The Interpublic Group of
Companies, Inc. (the "Company"), of our report dated February 20,
1998, appearing in the 1997 Annual Report to Stockholders which is
incorporated in this Annual Report on Form 10-K: Registration
Statements No. 2-79071; No. 2-43811; No. 2-56269; No. 2-61346;
No. 2-64338; No. 2-67560; No. 2-72093; No. 2-88165; No. 2-90878,
No. 2-97440 and No. 33-28143, relating variously to the Stock Option
Plan (1971), the Stock Option Plan (1981), the Stock Option Plan
(1988) and the Achievement Stock Award Plan of the Company;
Registration Statements No. 2-53544; No. 2-91564, No. 2-98324,
No. 33-22008, No. 33-64062 and No. 33-61371, relating variously to
the Employee Stock Purchase Plan (1975), the Employee Stock Purchase
Plan (1985) and the Employee Stock Purchase Plan of the Company
(1995); Registration Statements No. 33-20291 and No. 33-2830
relating to the Management Incentive Compensation Plan of the
Company; Registration Statements No. 33-5352, No. 33-21605,
No. 333-4747 and No. 333-23603 relating to the 1986 Stock Incentive
Plan, the 1986 United Kingdom Stock Option Plan and the 1996 Stock
Incentive Plan, of the Company; Registration Statements No. 33-10087
and No. 33-25555 relating to the Long-Term Performance Incentive
Plan of the Company; Registration Statement No. 333-28029 relating
to The Interpublic Outside Directors' Stock Incentive Plan of the
Company; and Registration Statement No. 33-42675 relating to the
1997 Performance Incentive Plan of the Company. We hereby consent
to the incorporation by reference in the Prospectuses constituting
part of the Registration Statements on Form S-3 (No. 333-22899, No.
333-42243, No. 333-42905, and No. 333-45569) of The Interpublic
Group of Companies, Inc. of our report dated February 20, 1998
appearing in the 1997 Annual Report to Stockholders which is
incorporated in this Annual Report on Form 10-K. We also consent to
the incorporation by reference of our report on the Financial
Statement Schedule, which appears above.
PRICE WATERHOUSE LLP
New York, New York
March 26, 1998
F-2
PAGE
SCHEDULE VIII
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1997, 1996 and 1995
(Dollars in Thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
Additions
Balance Charged Charged
at to to Other Balance
Beginning Costs & Accounts- Deductions- at End
Description of Period Expenses Describe Describe of Period
Allowance for
Doubtful Accounts -
deducted from
Receivables in the
Consolidated
Balance Sheet:
1997 $33,301 $12,134 $3,535 $(2,566) $39,439
848 (5,439)
(2,374)
1996 $21,942 $15,603 $ 920 $ (815) $33,301
771 (4,755)
(365)
1995 $22,656 $ 8,894 $1,324 $(9,619) $21,941
137 (819)
(632)
Allowance for doubtful accounts of acquired and newly consolidated
companies.
Foreign currency translation adjustment.
Principally amounts written off.
Reversal of previously recorded allowances on accounts receivable.
Miscellaneous.
F-3
PAGE
INDEX TO DOCUMENTS
Exhibit No. Description
3 (i) The Restated Certificate of Incorporation of the
Registrant, as amended is incorporated by reference to
its Report on Form 10-Q for the quarter ended June 30,
1997. See Commission file number 1-6686.
(ii) The By-Laws of the Registrant, amended as of February
19, 1991, are incorporated by reference to its Report
on Form 10-K for the year ended December 31, 1990. See
Commission file number 1-6686.
4 Instruments Defining the Rights of Security Holders.
(i) Indenture, dated as of September 16, 1997 between
Interpublic and The Bank of New York is incorporated by
reference to the Registrant's Report on Form 10-Q for
the quarter ended September 30, 1997. See Commission
file number 1-6686.
(ii) The Preferred Share Purchase Rights Plan as adopted on
July 18, 1989 is incorporated by reference to
Registrant's Registration Statement on Form 8-A dated
August 1, 1989 (No. 00017904) and, as amended, by
reference to Registrant's Registration Statement on
Form 8 dated October 3, 1989 (No. 00106686).
10 Material Contracts.
(a) Purchase Agreement, dated September 10, 1997, among The
Interpublic Group of Companies, Inc. ("Interpublic"),
Morgan Stanley & Co., Incorporated, Goldman Sachs and
Co. and SBC Warburg Dillon Read Inc. is incorporated by
reference to the Registrant's Report on Form 10-Q for
the quarter ended September 30, 1997. See Commission
file number 1-6686.
(b) Employment, Consultancy and other Compensatory
Arrangements with Management.
Employment and Consultancy Agreements and any
amendments or supplements thereto and other
compensatory arrangements filed with the Registrant's
Reports on Form 10-K for the years ended December 31,
1980 through December 31, 1996, inclusive, or filed
with the Registrant's Reports on Form 10-Q for the
periods ended March 31, 1997, June 30, 1997 and
September 30, 1997 are incorporated by reference in
this Report on Form 10-K. See Commission file number
1-6686. Listed below are agreements or amendments to
agreements between the Registrant and its executive
officers which remain in effect on and after the date
hereof or were executed during the year ended December
31, 1997 and thereafter, unless previously submitted,
which are filed as exhibits to this Report on Form 10-K.
(i) Philip H. Geier, Jr.
Supplemental Agreement dated as of March 1, 1998
to an Employment Agreement dated as of September
1, 1997 between Interpublic and Philip H. Geier,
Jr.
(ii) Frank Lowe
Supplemental Agreement dated as of March 1, 1998
to an Employment Agreement dated as of January 1,
1996 between Interpublic and Frank Lowe.
(c) Executive Compensation Plans.
(i) Trust Agreement, dated as of June 1, 1990 between
The Interpublic Group of Companies, Inc., Lintas
Campbell-Ewald Company, McCann-Erickson USA, Inc.,
McCann-Erickson Marketing, Inc., Lintas, Inc. and
Chemical Bank, as Trustee, is incorporated by
reference to Registrant's Annual Report on Form
10-K for the year ended December 31, 1990. See
Commission file number 1-6686.
(ii) The Stock Option Plan (1988) and the Achievement
Stock Award Plan of the Registrant are
incorporated by reference to Appendices C and D of
the Prospectus dated May 4, 1989 forming part of
its Registration Statement on Form S-8
(No. 33-28143).
(iii) The Management Incentive Compensation Plan of the
Registrant is incorporated by reference to the
Registrant's Report on Form 10-Q for the quarter
ended June 30, 1995. See Commission file number
1-6686.
(iv) The 1986 Stock Incentive Plan of the Registrant is
incorporated by reference to Registrant's Annual
Report on Form 10-K for the year ended December
31, 1993. See Commission file number 1-6686.
PAGE
(v) The 1986 United Kingdom Stock Option Plan of the
Registrant is incorporated by reference to
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1992. See Commission file
number 1-6686.
(vi) The Employee Stock Purchase Plan (1985) of the
Registrant, as amended, is incorporated by
reference to Registrant's Annual Report on Form
10-K for the year ended December 31, 1993. See
Commission file number 1-6686.
(vii) The Long-Term Performance Incentive Plan of the
Registrant is incorporated by reference to
Appendix A of the Prospectus dated December 12,
1988 forming part of its Registration Statement on
Form S-8 (No. 33-25555).
(viii) Resolution of the Board of Directors adopted on
February 16, 1993, amending the Long-Term
Performance Incentive Plan is incorporated by
reference to Registrant's Annual Report on Form
10-K for the year ended December 31, 1992. See
Commission file number 1-6686.
(ix) Resolution of the Board of Directors adopted on
May 16, 1989 amending the Long-Term Performance
Incentive Plan is incorporated by reference to
Registrant's Report on Form 10-K for the year
ended December 31, 1989. See Commission file
number 1-6686.
(x) The 1996 Stock Incentive Plan of the Registrant is
incorporated by reference to the Registrant's
Report on Form 10-Q for the quarter ended June 30,
1996. See Commission file number 1-6686.
(xi) The 1997 Performance Incentive Plan of the
Registrant is incorporated by reference to the
Registrant's Report on Form 10-Q for the quarter
ended June 30, 1997. See Commission file number
1-6686.
(d) Loan Agreements.
(i) Amendment No. 6, dated as of August 28, 1997 to a
Credit Agreement dated as of September 30, 1992
and effective as of December 30, 1992 between
Interpublic and The Bank of New York.
PAGE
(ii) Amendment No. 7, dated as of August 26, 1997 to a
Credit Agreement dated as of September 30, 1992
and effective as of December 23, 1992 between
Interpublic and The First National Bank of
Chicago.
(iii) Amendment No. 6, dated as of October 1, 1997 to a
Credit Agreement dated as of September 30, 1992
and effective as of December 16, 1992 between
Interpublic and The Fuji Bank, Limited.
(iv) Note dated as of December 16, 1992 between
Interpublic and The Fuji Bank, Limited.
(v) Other Loan and Guaranty Agreements filed with
the Registrant's Annual Report on Form 10-K for
the years ended December 31, 1988 and December 31,
1986 are incorporated by reference in this Report
on Form 10-K. Other Credit Agreements, amendments
to various Credit Agreements, Supplemental
Agreements, Termination Agreements, Loan
Agreements, Note Purchase Agreements, Guarantees
and Intercreditor Agreements filed with the
Registrant's Report on Form 10-K for the years
ended December 31, 1989 through December 31, 1996,
inclusive and filed with Registrant's Reports on
Form 10-Q for the periods ended March 31, 1997,
June 30, 1997 and September 30, 1997 are
incorporated by reference into this Report on Form
10-K. See Commission file number 1-6686.
(e) Leases.
Material leases of premises are incorporated by
reference to the Registrant's Annual Report on Form
10-K for the years ended December 31, 1980 and December
31, 1988. See Commission file number 1-6686.
(f) Acquisition Agreement for Purchase of Real Estate.
Acquisition Agreement (in German) between
Treuhandelsgesellschaft Aktiengesellschaft & Co.
Grundbesitz OHG and McCann-Erickson Deutschland GmbH &
Co. Management Property KG ("McCann-Erickson
Deutschland") and the English translation of the
Acquisition Agreement are incorporated by reference to
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1992. See Commission file number 1-6686.
PAGE
(g) Mortgage Agreements and Encumbrances.
(i) Summaries In German and English of Mortgage
Agreements between McCann-Erickson Deutschland and
Frankfurter Hypothekenbank Aktiengesellschaft
("Frankfurter Hypothekenbank"), Mortgage
Agreement, dated January 22, 1993, between
McCann-Erickson Deutschland and Frankfurter
Hypothekenbank, Mortgage Agreement, dated January
22, 1993, between McCann-Erickson Deutschland and
Hypothekenbank are incorporated by reference to
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993. See Commission file
number 1-6686. Summaries In German and English of
Mortgage Agreement, between McCann-Erickson
Deutschland and Frankfurter Sparkasse and Mortgage
Agreement, dated January 7, 1993, between McCann-Erickson
Deutschland and Frankfurter Sparkasse are
incorporated by reference to Registrant's Annual
Report on Form 10-K for the year ended December
31, 1992. See Commission file number 1-6686.
(ii) Summaries In German and English of Documents
Creating Encumbrances In Favor of Frankfurter
Hypothekenbank and Frankfurter Sparkasse In
Connection With the Aforementioned Mortgage
Agreements, Encumbrance, dated January 15, 1993,
In Favor Of Frankfurter Hypothekenbank, and
Encumbrance, dated January 15, 1993, In Favor of
Frankfurter Sparkasse are incorporated by
reference to Registrant's Annual Report on Form
10-K for the year ended December 31, 1992. See
Commission file number 1-6686.
(iii) Loan Agreement (in English and German), dated
January 29, 1993 between Lintas Deutschland GmbH
and McCann-Erickson Deutschland is incorporated by
reference to Registrant's Annual Report on Form
10-K for the year ended December 31, 1992. See
Commission file number 1-6686.
11 Computation of Earnings Per Share.
13 This Exhibit includes: (a) those portions of the Annual
Report to Stockholders for the year ended December 31, 1997
which are included therein under the following headings:
Financial Highlights; Management's Discussion and Analysis
of Financial Condition and Results Of Operations;
Consolidated Balance Sheet; Consolidated Statement of
Income; Consolidated Statement of Cash Flows; Consolidated
Statement of Stockholders' Equity; Notes to Consolidated
Financial Statements (the aforementioned consolidated
financial Statements together with the Notes to Consolidated
Financial Statements hereinafter shall be referred to as the
"Consolidated Financial Statements"); Report of Independent
Accountants; Selected Financial Data For Five Years; Report
of Management; and Stockholders' Information; and (b)
Appendix to Exhibit 13.
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
24 Power of Attorney to sign Form 10-K and resolution of Board
of Directors re Power of Attorney.
27 Financial Data Schedules
99 No reports on Form 8-K were filed during the quarter ended
December 31, 1997.
SUPPLEMENTAL AGREEMENT
SUPPLEMENTAL AGREEMENT made as of March 1, 1998, by and
between THE INTERPUBLIC GROUP OF COMPANIES, INC., a corporation
of the State of Delaware (hereinafter referred to as the
"Corporation"), and PHILIP H. GEIER, JR. (hereinafter referred to
as "Executive").
W I T N E S S E T H:
WHEREAS, the Corporation and Executive are parties to
an Employment Agreement made as of July 1, 1991, a Supplemental
Agreement made as of October 1, 1991 and a Supplemental Agreement
made as of August 1, 1997 (hereinafter referred to collectively
as the "Employment Agreement"); and
WHEREAS, the Corporation and Executive desire to amend
the Employment Agreement;
NOW, THEREFORE, in consideration of the mutual promises
herein and in the Employment Agreement set forth, the parties
hereto, intending to be legally bound, agree as follows:
l. Paragraph 3.01 of the Employment Agreement is
hereby amended, effective June 1, 1997, so as to
delete "$965,000" and to substitute therefor
"$995,000".
PAGE
2. Except as hereinabove amended, the Employment
Agreement shall continue in full force and effect.
3. This Supplemental Agreement shall be governed by
the laws of the State of New York.
THE INTERPUBLIC GROUP OF
COMPANIES, INC.
By: C. KENT KROEBER
C. KENT KROEBER
PHILIP H. GEIER, JR.
PHILIP H. GEIER, JR.
SUPPLEMENTAL AGREEMENT
SUPPLEMENTAL AGREEMENT made as of March 1, 1998, by and
between THE INTERPUBLIC GROUP OF COMPANIES, INC., a corporation
of the State of Delaware (hereinafter referred to as the
"Corporation") and FRANK B. LOWE (hereinafter referred to as
"Executive").
W I T N E S S E T H
WHEREAS, the Corporation and Executive are parties to
an Employment Agreement made as of January 1, 1996 (hereinafter
referred to as the "Agreement"); and
WHEREAS, the Corporation and Executive desire to amend
the Agreement;
NOW, THEREFORE, in consideration of the mutual promises
herein and in the Agreement set forth, the parties hereto,
intending to be legally bound, agree as follows:
Section 3.01 of the Agreement is hereby amended,
effective March 1, 1998, so as to delete "$750,000" and
to substitute therefor "$850,000."
Except as hereinabove amended, the Agreement shall
continue in full force and effect.
This Supplemental Agreement shall be governed by the
laws of the State of New York.
THE INTERPUBLIC GROUP OF
COMPANIES, INC.
By: C. KENT KROEBER
C. KENT KROEBER
FRANK B. LOWE
FRANK B. LOWE
<>PAGE>
AMENDMENT NO. 6 TO CREDIT AGREEMENT
AMENDMENT NO. 6, dated as of August 28, 1997, to the Credit
Agreement dated as of September 30, 1992 and effective as of
December 30, 1992, as amended on April 30, 1993, October 5, 1993,
August 15, 1994, December 1, 1994, and August 3, 1995 (the
"Agreement"), between The Interpublic Group of Companies, Inc.
(the "Borrower") and THE BANK OF NEW YORK (the "Bank").
SECTION 1. AMENDMENTS. (a) Section 2.1 of the Credit
Agreement is hereby amended by deleting the figure "$15,000,000"
on the fifth line therein and substituting for such figure the
figure "$20,000,000".
(b) Exhibit A to the Credit Agreement and the
corresponding Note delivered to the Bank thereunder are hereby
amended by deleting the figure "$15,000,000" on the top left
corner therein and substituting for such figure the figure
"$20,000,000".
(c) Upon the effectiveness of this Amendment pursuant to
Section 4 hereof the Bank shall be authorized to endorse on the
Note issued to it the following legend: "The Commitment of the
Bank reflected on the top left corner of this Note has been
increased to $20,000,000 pursuant to an Amendment dated as of
August 20, 1997 to the Credit Agreement referred to in this Note"
or a legend of similar effect.
SECTION 2. REPRESENTATIONS AND WARRANTIES. The Borrower
hereby represents and warrants to the Bank that: (a) the
representations and warranties set forth in Section 5 of the
Credit Agreement are true and correct on and as of the date
hereof as if made on and as of said date; (b) no Event of
Default specified in Section 7 of the Credit Agreement and no
event, which with the giving of notice or lapse of time or both,
would become such an Event of Default has occurred and is
continuing; (c) the execution, delivery and performance by the
Borrower of this Amendment are within the Borrower's corporate
powers, have been duly authorized by all necessary corporate
action, and do not contravene (i) the Borrower's charter of
bylaws, or (ii) law or any contractual restriction binding on or
affecting the Borrower; (d) no order, consent, authorization or
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body, or any other person,
firm, corporation or other legal entity, is required for the due
execution, delivery and performance of this Amendment by the
Borrower; and (e) this Amendment is the legal, valid and
binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms.
PAGE
SECTION 3. MISCELLANEOUS. (a) Unless otherwise
specifically defined herein, each term used herein which is a
defined term shall have the meaning as defined in the Credit
Agreement; (b) each reference to "hereof", "hereunder", "herein"
and "hereby" and each other similar reference, and each reference
to "this Agreement" and each other similar reference contained in
the Credit Agreement shall from and after the date hereof refer
to the Credit Agreement as amended hereby; and (c) except as
specifically amended above, the Credit Agreement shall remain in
full force and effect and is hereby ratified and confirmed.
SECTION 4. COUNTERPARTS; EFFECTIVENESS. This Amendment
may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Amendment shall
become effective as of the date hereof when the Bank shall have
received duly executed counterparts hereof signed by the parties
hereto. This Amendment shall be governed by and construed in
accordance with the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first above written.
THE INTERPUBLIC GROUP OF
COMPANIES, INC.
ALAN M. FORSTER
ALAN M. FORSTER
VICE PRESIDENT & TREASURER
THE BANK OF NEW YORK
By: GEORGIA M. PAN-KITA
GEORGIA M. PAN-KITA
ASSISTANT VICE PRESIDENT
AMENDMENT NO. 7 TO CREDIT AGREEMENT
AMENDMENT NO. 7, dated as of August 26, 1997, to the Credit
Agreement dated as of September 30, 1992 and effective as of
December 23, 1992, as amended on April 30, 1993, October 5, 1993,
August 15, 1994, December 1, 1994, and August 3, 1995 (the
"Agreement"), between The Interpublic Group of Companies, Inc.
(the "Borrower") and THE FIRST NATIONAL BANK OF CHICAGO (the
"Bank").
SECTION 1. AMENDMENTS. (a) Section 2.1 of the Credit
Agreement is hereby amended by deleting the figure "$15,000,000"
on the fifth line therein and substituting for such figure the
figure "$20,000,000".
(b) Exhibit A to the Credit Agreement and the
corresponding Note delivered to the Bank thereunder are hereby
amended by deleting the figure "$15,000,000" on the top left
corner therein and substituting for such figure the figure
"$20,000,000".
(c) Upon the effectiveness of this Amendment pursuant to
Section 4 hereof the Bank shall be authorized to endorse on the
Note issued to it the following legend: "The Commitment of the
Bank reflected on the top left corner of this Note has been
increased to $20,000,000 pursuant to an Amendment dated as of
August 20, 1997 to the Credit Agreement referred to in this Note"
or a legend of similar effect.
SECTION 2. REPRESENTATIONS AND WARRANTIES. The Borrower
hereby represents and warrants to the Bank that: (a) the
representations and warranties set forth in Section 5 of the
Credit Agreement are true and correct on and as of the date
hereof as if made on and as of said date; (b) no Event of
Default specified in Section 7 of the Credit Agreement and no
event, which with the giving of notice or lapse of time or both,
would become such an Event of Default has occurred and is
continuing; (c) the execution, delivery and performance by the
Borrower of this Amendment are within the Borrower's corporate
powers, have been duly authorized by all necessary corporate
action, and do not contravene (i) the Borrower's charter or
bylaws, or (ii) law or any contractual restriction binding on or
affecting the Borrower; (d) no order, consent, authorization or
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body, or any other person,
firm, corporation or other legal entity, is required for the due
execution, delivery and performance of this Amendment by the
Borrower; and (e) this Amendment is the legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in
accordance with its terms.
PAGE
SECTION 3. MISCELLANEOUS. (a) Unless otherwise
specifically defined herein, each term used herein which is a
defined term shall have the meaning as defined in the Credit
Agreement; (b) each reference to "hereof", "hereunder", "herein"
and "hereby" and each other similar reference, and each reference
to "this Agreement" and each other similar reference contained in
the Credit Agreement shall from and after the date hereof refer
to the Credit Agreement as amended hereby; and (c) except as
specifically amended above, the Credit Agreement shall remain in
full force and effect and is hereby ratified and confirmed.
SECTION 4. COUNTERPARTS; EFFECTIVENESS. This Amendment
may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Amendment shall
become effective as of the date hereof when the Bank shall have
received duly executed counterparts hereof signed by the parties
hereto. This Amendment shall be governed by and construed in
accordance with the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first above written.
THE INTERPUBLIC GROUP OF
COMPANIES, INC.
By: ALAN M. FORSTER
ALAN M. FORSTER
VICE PRESIDENT &
TREASURER
THE FIRST NATIONAL BANK OF
CHICAGO
By: JUAN J. DUARTE
JUAN J. DUARTE
ASSISTANT VICE PRESIDENT
AMENDMENT NO. 6 TO CREDIT AGREEMENT
AMENDMENT NO. 6, dated as of October 1, 1997, to the Credit
Agreement dated as of September 30, 1992 and effective as of
December 16, 1992, as amended on April 30, 1993, October 5, 1993,
August 15, 1994, December 1, 1994, and August 3, 1995 (the
"Agreement"), between The Interpublic Group of Companies, Inc.
(the "Borrower") and THE FUJI BANK, LIMITED (the "Bank").
SECTION 1. AMENDMENTS. (a) Section 2.1 of the Credit
Agreement is hereby amended by deleting the figure "$15,000,000"
on the fifth line therein and substituting for such figure the
figure "$20,000,000".
(b) Exhibit A to the Credit Agreement and the
corresponding Note delivered to the Bank thereunder are hereby
amended by deleting the figure "15,000,000" on the top left
corner therein and substituting for such figure the figure
"$20,000,000".
(c) Upon the effectiveness of this Amendment pursuant to
Section 4 hereof the Bank shall be authorized to endorse on the
Note issued to it the following legend: "The Commitment of the
Bank reflected on the top left corner of this Note has been
increased to $20,000,000 pursuant to an Amendment dated as of
October 1, 1997 to the Credit Agreement referred to in this Note"
or a legend of similar effect.
SECTION 2. REPRESENTATIONS AND WARRANTIES. The Borrower
hereby represents and warrants to the Bank that: (a) the
representations and warranties set forth in Section 5 of the
Credit Agreement are true and correct on and as of the date
hereof as if made on and as of said date; (b) no Event of
Default specified in Section 7 of the Credit Agreement and no
event, which with the giving of notice or lapse of time or both,
would become such an Event of Default has occurred and is
continuing; (c) the execution, delivery and performance by the
Borrower of this Amendment are within the Borrower's corporate
powers, have been duly authorized by all necessary corporate
action, and do not contravene (i) the Borrower's charter of
bylaws, or (ii) law or any contractual restriction binding on or
affecting the Borrower; (d) no order, consent, authorization or
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body, or any other person,
firm, corporation or other legal entity, is required for the due
execution, delivery and performance of this Amendment by the
Borrower; and (e) this Amendment is the legal, valid and
binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms.
PAGE
SECTION 3. MISCELLANEOUS. (a) Unless otherwise
specifically defined herein, each term used herein which is a
defined term shall have the meaning as defined in the Credit
Agreement; (b) each reference to "hereof", "hereunder", "herein"
and "hereby" and each other similar reference, and each reference
to "this Agreement" and each other similar reference contained in
the Credit Agreement shall from and after the date hereof refer
to the Credit Agreement as amended hereby; and (c) except as
specifically amended above, the Credit Agreement shall remain in
full force and effect and is hereby ratified and confirmed.
SECTION 4. COUNTERPARTS; EFFECTIVENESS. This Amendment
may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Amendment shall
become effective as of the date hereof when the Bank shall have
received duly executed counterparts hereof signed by the parties
hereto. This Amendment shall be governed by and construed in
accordance with the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first above written.
THE INTERPUBLIC GROUP OF
COMPANIES, INC.
By: ALAN M. FORSTER
ALAN M. FORSTER
VICE PRESIDENT &
TREASURER
THE FUJI BANK, LIMITED, NEW
YORK BRANCH
By: RAYMOND VENTURA
RAYMOND VENTURA
VICE PRESIDENT &
MANAGER
NOTE
*U.S. $15,000,000 December 16, 1992
New York, New York
FOR VALUE RECEIVED, THE INTERPUBLIC GROUP OF COMPANIES,
INC., a Delaware corporation (the "Borrower"), hereby promises to
pay to the order of the THE FUJI BANK, LIMITED (the "Bank"), for
the account of its Applicable Lending Office, the unpaid
principal amount of each Loan made by the Bank to the Borrower
pursuant to the Credit Agreement referred to below on the last
day of the Interest Period relating to such Loan. THE Borrower
promises to pay interest on the unpaid principal amount of each
such Loan on the dates and at the rate or rates provided for in
the Credit Agreement.
All such payments of principal and interest shall be made in
lawful money of the United States of America in Federal or other
immediately available funds at the office of the Bank located at
Two World Trade Center, New York, New York 10048.
All Loans made by the Bank, the respective maturities
thereof and all repayments of the principal thereof shall be
recorded by the Bank and prior to any transfer hereof, endorsed
by the Bank on the schedule attached hereto, or on a continuation
of such schedule attached to and made a part hereof; provided
that the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
This note is the Note referred to in the Credit Agreement
dated as of December 11, 1992, between the Borrower and the Bank
(as the same may be amended from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used
herein with the same meanings. Referee is made to the credit
agreement for provisions for the prepayment hereof and the
acceleration of the maturity hereof.
THE INTERPUBLIC GROUP OF
COMPANIES, INC.
By: ALAN M. FORSTER
ALAN M. FORSTER
VICE PRESIDENT &
TREASURER
* The commitment of the Bank reflected on the top left corner
of this Note has been increased to $20,000,000 pursuant to
an Amendment dated as of October 1, 1997 to the Credit
Agreement referred to in this Note.
EXHIBIT 11
Page 1 of
2
THE INTERPUBLIC GROUP OF COMPANIES, INC.
COMPUTATION OF EARNINGS PER SHARE
(Dollars in Thousands Except Per Share Data)
Year Ended December 31
1997 1996 1995 1994
1993
BASIC:
Net Income before effect of
accounting changes $239,146 $205,205 $129,812 $115,247
$125,279
Effect of accounting changes - - - (21,780)
(512)
________ ________ ________ ________
________Net income, as adjusted $239,146 $205,205 $129,812 $
93,467 $124,767
Weighted average number of common shares outstanding 120,984,168 116,843,475
113,634,945 110,044,626 108,911,045Basic earnings per share data:Income before
effect of accounting change $1.98 $1.76 $1.14
$1.05 $1.15
Effect of accounting changes - - - (.20)
- -
________ _______ _______ _______
_______Net Income $1.98 $1.76 $1.14
$0.85 $1.15
EXHIBIT 11
Page 2 of 2
THE INTERPUBLIC GROUP OF COMPANIES, INC.
COMPUTATION OF EARNINGS PER SHARE
(Dollars in Thousands Except Per Share Data)
Year Ended December 31
1997 1996 1995 1994
1993
DILUTED:
Net Income before effect of
accounting changes $ 239,146 $ 205,205 $ 129,812 $115,247
$ 125,279
Effect of accounting changes - - -
(21,780) (512)
After tax interest savings
on assumed conversion of
subordinated debentures 5,929 6,410 - -
- -
Add: Dividends paid net of
related income tax applicable
to the Restricted Stock Plan 447 384 461 366
330
Net income, as adjusted $ 245,522 $ 211,999 $ 130,273 $ 93,833
$ 125,097
Weighted average number of
common shares outstanding 120,984,168 116,843,475 113,634,945 110,044,626
108,911,045
Assumed conversion of
subordinated debentures 4,010,291 4,466,502 - -
- -
Weighted average number of
incremental shares in
connection with assumed
exercise of stock options 2,910,648 2,219,373 1,921,923 1,523,756
1,646,618
Weighted average number of
incremental shares in
connection with the
Restricted Stock Plan 1,638,646 1,605,564 2,080,067 1,871,346
2,397,039
Total 129,543,753 125,134,914 117,636,935 113,439,728
112,954,702
Diluted Earnings Per Share Data:
Income before effect of
accounting change 1.90 1.69 1.11 1.02
1.11
Effect of accounting change - - -
(.19) -
Net Income 1.90 1.69 1.11 .83
1.11
Restated to reflect the three-for-two stock split effected July 1997.
The computation of diluted EPS for 1997 excludes the assumed conversion of
the 1.80% Convertible Subordinated Notes due 2004 because they were
antidilutive. Similarly, the computation of diluted EPS for 1995, 1994 and 1993
excludes the assumed conversion of the 3 3/4% Convertible Subordinated
Debentures due 2002 as they were antidilutive.
THE INTERPUBLIC GROUP OF COMPANIES, INC.
The Interpublic Group of Companies, Inc. is one of the largest
organizations of advertising agencies and marketing communications
companies in the world. It includes the parent company, The Interpublic
Group of Companies, Inc., McCann-Erickson WorldGroup, Ammirati Puris
Lintas, The Lowe Group, Western International Media, DraftWorldwide, The
Allied Communications Group, Octagon, and other related companies.
Interpublic employs more than 27,000 people and maintains offices in over
120 countries.
TABLE OF CONTENTS
_________________
Financial Highlights
Chairman's Report to Stockholders
Vice Chairman's Report Of Management
Financial Statements
Report of Independent Accountants
Selected Financial Data For Five Years
Board of Directors
Executive Officers and Stockholders' Information
FINANCIAL HIGHLIGHTS
(Dollars in thousands except per share data)
______________________________________________________________________
December 31
Percent
1997 1996 Increase
______________________________________________________________________
Operating Data
Gross income $ 3,125,846 $ 2,537,516 23.2%
Net Income $ 239,146 $ 205,205 16.5%
Per Share Data:
Basic EPS $ 1.98 $ 1.76 12.5%
Diluted EPS 1.90 1.69 12.4
Cash dividends .50 .44 13.6
Share price at December 31 $ 49 13/16 $ 31 5/8 57.5
Weighted-average shares:
Basic 120,984,168 116,843,475 3.5
Diluted 129,543,753 125,134,914 3.5%
Financial Position
Working capital $ 274,014 $ 154,430 77.4%
Total assets 5,702,521 4,765,130 19.7
Book value per share $ 8.46 $ 7.15 18.3%
Return on average stockholders'
equity 25.8% 25.8% -
Gross Income
1997 $3,125,846
1996 $2,537,516
1995 $2,179,739
Basic Earnings Per Share:
1997 $ 1.98
1996 $ 1.76/1.69
1995 $ 1.47/1.14
Cash Dividends Per Share
1997 $ .50
1996 $ .44
1995 $ .40
Return On Average Stockholders' Equity
1997 25.8%
1996 25.8%/25.0%
1995 23.5%/18.4%
________________________________________________________________________
Restated to reflect a three-for-two stock split effected July 1997.
Includes an after-tax gain of approximately $8.1 million or $.07 per
share (basic) resulting from the sale of a portion of the Company's
shares in CKS Group, Inc.
Includes an after-tax charge of $38.2 million or $.33 per share
(basic) for the write-down of goodwill and related assets.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Liquidity and Capital Resources
The Company's financial position continued to be strong during 1997.
Working capital increased $119.6 million over 1996 to $274.0 million. This
increase in working capital was a result of growing operations and the
payment of short-term borrowings with some of the proceeds from the 1.80%
Convertible Subordinated Notes due 2004 issued during the latter part of
1997. Working capital increased $6.7 million and $67.6 million in 1996 and
1995, respectively. The increase in working capital in 1995 related to the
refinancing of short-term debt with long-term debt.
The current ratio was approximately 1.1 to 1 for the past three years,
which is another indication of the Company's strong liquidity. The Company
utilized its strong financial position to obtain short-term and long-term
financing on competitive terms.
The Company and its subsidiaries maintained credit facilities in the United
States and in countries where it conducts business to manage its future
liquidity requirements.
Summary of
___________
Short-term credit facilities at December 31,
____________________________________________
(Dollars in millions)
Domestic International
Available Utilized Available Utilized
1997 $288.0 $ 1.4 $210.8 $86.1
1996 $199.6 $15.2 $215.2 $86.6
1995 $199.6 $36.2 $229.1 $73.5
Approximately 47%, 53% and 56% of the Company's assets at December 31,
1997, 1996 and 1995, respectively, were outside the United States. The
Company actively hedges to minimize the impact of foreign exchange
exposure. However, the notional value and fair value of all outstanding
forwards and options contracts at the end of the year were not significant.
The Company is not aware of any significant occurrences that could
negatively impact its liquidity. However, should such a trend develop, the
Company believes that there are sufficient funds available under its
existing lines of credit and from internal cash-generating capabilities to
meet future needs.
The principal use of the Company's working capital is to provide for the
operating needs of its subsidiaries, which includes payments for space or
time purchased from various media on behalf of clients. The Company's
practice is to bill and collect from its clients in sufficient time to pay
the amounts due media on a timely basis. Other uses of working capital
include the repurchase of the Company's common stock, payment of cash
dividends, capital expenditures and acquisitions.
During 1997, the Company purchased approximately 3.5 million shares of its
common stock for an average price of $41.57 per share. During 1996 and
1995, the Company acquired approximately 2.9 million shares each year for
$86.9 million and $69.7 million, respectively. Repurchases are principally
used to meet the Company's obligations under various compensation plans.
The Company paid $61.2 million ($.50 per share) in dividends to
stockholders in 1997, an 18% increase over 1996 dividends of $51.8 million
($.44 per share). During 1995, the Company paid $46.1 million in dividends
or $.40 per share.
The Company's capital expenditures in 1997 were $96.9 million. The primary
purpose of expenditures was to modernize the offices and upgrade the
computer and communications systems to better serve clients. During 1996,
the Company spent $79.1 million for capital improvements, an increase of
14% from 1995. The increase in capital expenditures year over year resulted
from the continuing growth of operations.
During 1997, the Company paid approximately $300 million in cash and stock
to acquire a number of marketing communications companies to complement its
existing agency systems and to optimally position itself in the ever-
broadening communications marketplace.
In the fourth quarter of 1997, the Company called for redemption its 3 3/4%
Convertible Subordinated Debentures due 2002. Substantially all of the
outstanding debentures were converted into approximately 4.3 million shares
of the Company's common stock.
Return on average stockholders' equity was 25.8% in 1997 and 1996 and 18.4%
in 1995. The return on average stockholders' equity in 1995, excluding the
effect of the write-down of goodwill and other related assets was 23.5%.
RESULTS OF OPERATIONS
Worldwide income from commissions and fees increased 23.3% in 1997, 16.1%
in 1996 and 9.3% in 1995. The continued growth in revenue was mainly due to
the expansion of the business through strategic acquisitions coupled with
new business gains.
International revenue, which represented 53.5% of worldwide revenue in
1997, increased $174.4 million or 12.2% over 1996. This was after an
unfavorable currency impact of 8.5%. During 1996 and 1995, revenue from
international operations increased $89.7 million and $136.4 million,
respectively. During 1997, commissions and fees from domestic operations
increased 39.2% primarily due to acquisitions and the effect of new
business gains. Commissions and fees from domestic operations increased
32.7% in 1996 and 5.8% in 1995.
Other income increased 20.2% in 1997, 24.6% in 1996 and 26.6% in 1995. The
increases were primarily due to the proceeds from the sale of investments,
primarily All American Communications, Inc. in 1997, CKS Group, Inc. and
Spotlink in 1996 and Fremantle International, Inc. in 1995.
Total operating expenses worldwide increased 23.2% in 1997, 15.7% in 1996,
and 8.7% in 1995. Cost increases for both domestic and international are in
line with revenue increases. Operating expenses outside the United States
increased 10.6% in 1997, 6.6% in 1996 and 12.2% in 1995. Domestic operating
expenses increased 42.2% in 1997, 32.8% in 1996 and 2.6% in 1995. The 1997
increase in domestic operating expenses resulted from a greater proportion
of the Company's earnings being generated domestically.
Significant portions of the Company's expenses relate to employee
compensation and various employee incentive and benefit programs which are
based primarily upon operating results. In 1997, as part of its continuing
cost containment efforts, the Company announced that it was curtailing its
domestic pension plan effective April 1, 1998 and recorded pre-tax charges
of approximately $16.7 million. The Company will realize a pre-tax savings
of approximately $9 million per year. The Company continues to sponsor a
domestic defined contribution plan.
Interest expense increased 21.3% in 1997 after increasing 7.2% and 15.5% in
1996 and 1995, respectively. The increase in 1997 was primarily
attributable to the issuance of the 1.80% Convertible Subordinated Notes
due 2004 and additional financing of acquisitions.
Equity in net income of unconsolidated affiliates decreased in 1997, after
increasing in 1996 and 1995. The decrease in equity income in 1997
primarily resulted from the consolidation of a company previously accounted
for on the equity basis. The 1996 and 1995 increases were primarily due to
the Company's investment in Campbell Mithun Esty.
Income applicable to minority interests increased in 1997, 1996 and 1995
primarily due to the strong performance of companies which were not wholly
owned as well as the consolidation of a company with a significant minority
interest in 1997, which was previously accounted for on the equity basis.
In 1995, the Company wrote down goodwill and other related assets of $38.2
million or $.33 per share (basic). The reason for the write-down was that
the carrying value of the assets exceeded management's estimate of the fair
value of these operations which was based primarily on discounted projected
cash flows.
The Company's effective income tax rate was 41.9% in 1997, 42.0% in 1996
and 48.3% in 1995. The higher rate in 1995 was primarily attributable to
the impact of the write-down of goodwill and other related assets of $38.2
million.
The Company's management continuously evaluates and manages its exposure to
exchange, economic, and political risks. The 1997 exchange crisis in Asia
had a minimal impact on the Company partly due to the agency systems'
contingency plans that included active hedging, repatriation of cash, cost-
cutting, and capital improvement freezes.
The Company is engaged in a global effort to assess the required
modification or replacement of its internal software to become Year 2000
compliant. Additionally, the Company is working with its major software
providers to ensure that they are Year 2000 compliant. Management believes
that the required software changes will be completed without causing
operational issues. The costs of addressing the Year 2000 issues are not
expected to have a material adverse impact on the Company's financial
condition or results of operations.
FINANCIAL STATEMENTS
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31
(Dollars in thousands except per share data)
ASSETS 1997 1996
CURRENT ASSETS:
Cash and cash equivalents (includes
certificates of deposit: 1997-$256,934;
1996-$83,680) $ 715,206 $ 468,526
Marketable securities 30,739 35,408
Receivables (net of allowance for doubtful
accounts: 1997-$39,439; 1996-$33,301) 2,987,688 2,646,259
Expenditures billable to clients 188,402 130,185
Prepaid expenses and other current assets 103,620 73,081
Total current assets 4,025,655 3,353,459
OTHER ASSETS:
Investment in unconsolidated affiliates 46,665 102,711
Deferred taxes on income 48,752 79,371
Other investments and miscellaneous
assets 208,497 173,308
Total other assets 303,914 355,390
FIXED ASSETS, at cost:
Land and buildings 83,621 82,332
Furniture and equipment 476,955 413,029
560,576 495,361
Less: accumulated depreciation 312,089 276,448
248,487 218,913
Unamortized leasehold improvements 100,323 88,045
Total fixed assets 348,810 306,958
INTANGIBLE ASSETS (net of accumulated
amortization: 1997-$225,830;
1996-$186,189) 1,024,142 749,323
TOTAL ASSETS $5,702,521 $4,765,130
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENTS
INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31
(Dollars in thousands except per share data)
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996*
CURRENT LIABILITIES:
Payable to banks $ 157,555 $ 121,655
Accounts payable 3,013,559 2,626,695
Accrued expenses 429,451 317,157
Accrued income taxes 151,076 133,522
Total current liabilities 3,751,641 3,199,029
NONCURRENT LIABILITIES:
Long-term debt 250,947 231,760
Convertible subordinated debentures
and notes 201,768 115,192
Deferred compensation and reserve
for termination allowances 247,747 210,670
Accrued postretirement benefits 47,404 46,726
Other noncurrent liabilities 63,942 66,457
Minority interests in consolidated
subsidiaries 31,917 23,281
Total noncurrent liabilities 843,725 694,086
STOCKHOLDERS' EQUITY:
Preferred Stock, no par value
shares authorized: 20,000,000
shares issued: none
Common Stock, $.10 par value
shares authorized: 225,000,000
shares issued:
1997 - 143,567,843;
1996 - 136,410,542 14,357 13,641
Additional paid-in capital 631,757 465,945
Retained earnings 1,036,306 855,113
Adjustment for minimum pension liability (13,207) (12,979)
Net unrealized gain on equity securities 12,405 -
Cumulative translation adjustment (154,093) (82,978)
1,527,525 1,238,742
Less:
Treasury stock, at cost:
1997 - 12,749,317 shares;
1996 - 14,712,143 shares 363,736 319,377
Unamortized expense of restricted
stock grants 56,634 47,350
Total stockholders' equity 1,107,155 872,015
COMMITMENTS AND CONTINGENCIES (SEE NOTE 15) ___________ __________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,702,521 $4,765,130
* Restated to reflect a three-for-two stock split effected July 1997.
FINANCIAL STATEMENTS
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31
(Dollars in thousands except per share data)
1997 1996* 1995*
Commissions and fees $2,997,202 $2,430,508 $2,093,832
Other income 128,644 107,008 85,907
Gross income 3,125,846 2,537,516 2,179,739
Salaries and related expenses 1,684,841 1,344,238 1,149,964
Office and general expenses 950,285 795,367 699,423
Interest expense 49,445 40,765 38,020
Write-down of goodwill and other
related assets - - 38,177
Total costs and expenses 2,684,571 2,180,370 1,925,584
Income before provision for
income taxes 441,275 357,146 254,155
Provision for income taxes 184,883 150,003 122,743
Income of consolidated
companies 256,392 207,143 131,412
Income applicable to minority
interests (23,754) (14,382) (7,686)
Equity in net income of
unconsolidated affiliates 6,508 12,444 6,086
Net Income $ 239,146 $ 205,205 $ 129,812
Per Share Data:
Basic EPS $1.98 $1.76 $1.14
Diluted EPS $1.90 $1.69 $1.11
* Per share data has been restated to reflect a three-for-two stock split
effected July 1997.
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENTS
(Dollars in thousands) THE INTERPUBLIC GROUP OF COMPANIES, INC. AND
ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996 1995
Net Income $239,146 $205,205
$129,812
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization of fixed assets 74,953 60,457
49,967
Amortization of intangible assets 39,641 28,516
27,628
Amortization of restricted stock awards 16,222 14,451
13,558
Provision for deferred income taxes 12,660 4,072
(18,535)
Noncash pension plan charges 16,700
- - -
Equity in net income of unconsolidated affiliates (6,508)
(12,444) (6,086)
Income applicable to minority interests 23,754 14,382
7,686
Translation losses 1,321 3,484
4,071
Write-down of goodwill and other related assets - -
38,177
Sale of investments (44,598)
(35,043) -
Other (9,515)
(6,513) (9,526)
Change in assets and liabilities, net of acquisitions:
Receivables (309,862)
(243,701) (243,109)
Expenditures billable to clients (25,595)
(12,720) (2,107)
Prepaid expenses and other assets (15,517)
(36,496) (30,008)
Accounts payable and accrued expenses 249,565 263,859
182,580
Accrued income taxes 1,957 22,538
11,633
Deferred compensation and reserve for termination allowances 12,790 (21,021)
8,638
Net cash provided by operating activities 277,114 249,026
164,379
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net (80,078) (51,348)
(64,224)
Capital expenditures (96,903)
(79,081) (69,562)
Proceeds from sales of assets 113,327 39,398
1,722
Net proceeds from(net purchase of) marketable securities 189 1,037
(8,524)
Investment in unconsolidated affiliates (8,371) 17,210
(14,044)
Net cash used in investing activities (71,836)
(72,784) (154,632)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease)in short-term borrowings 21,756 (25,178)
17,565
Proceeds from long-term debt 254,759 75,514
67,858
Payments of long-term debt (22,824) (51,581)
(14,682)
Treasury stock acquired (144,094) (86,949)
(69,720)
Issuance of common stock 36,862 19,588
31,206
Cash dividends (61,242) (51,786)
(46,124)
Net cash provided by (used in) financing activities 85,217 (120,392)
(13,897)
Effect of exchange rates on cash and cash equivalents (43,815) (5,772)
8,889
Increase in cash and cash equivalents 246,680 50,078
4,739
Cash and cash equivalents at beginning of year 468,526 418,448
413,709
Cash and cash equivalents at end of year $715,206 $468,526
$418,448
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENTS
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 1997
(Dollars in thousands)
Net
Unrealized
Unamortized
Additional Minimum Gain
on Cumulative Expense
Common Paid-In Retained Pension
Equity Translation Treasury of Restricted
Stock Capital Earnings Liability
Securities Adjustment Stock
Stock Grants
BALANCES, DECEMBER 31, 1996 $13,641* $465,945 $855,113* $(12,979) $
- - $(82,978) $319,377 $
47,350
Net income 239,146
Cash dividends (61,242)
Foreign currency translation
adjustment
(71,115)
Awards of common stock under Company
plans:
Management incentive compensation 534
Achievement stock awards 253
(175)
Restricted stock 53 27,821
27,873
Employee stock purchases 23 9,684
Exercise of stock options 138 27,905
Purchase of Company's own stock
144,094
Tax benefit relating to
exercise of stock options 12,950
Restricted Stock: Forfeitures
3,664 (2,367)
Amortization
(16,222)
Issuance of shares for acquisitions (31,692) 3,348
(103,224)
Conversion of convertible
debentures 443 118,357
Adjustment for minimum pension
liability (228)
Par value of shares issued
for three-for-two stock split 59 (59)
Change in market value of
securities available-for-sale
12,405
________________________________________________________________________________
____________________________________________
BALANCES, DECEMBER 31, 1997 $14,357 $631,757 $1,036,306 $(13,207) $
12,405 $(154,093) $363,736 $ 56,634
FINANCIAL STATEMENTS
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 1997
(Dollars in
thousands)
Net
Unrealized Unamortized
Additional Minimum Gain
on Cumulative Expense
Common Paid-In Retained Pension
Equity Translation Treasury of Restricted
Stock Capital Earnings Liability
Securities Adjustment Stock Stock Grants
BALANCES, DECEMBER 31, 1995 $8,963 $446,931 $704,946 $( 9,088) $
- - $(93,436) $268,946 $ 39,664
Net income 205,205
Cash dividends (51,786)
Foreign currency translation
adjustment
10,458
Awards of common stock under Company
plans:
Management incentive compensation 172
Achievement stock awards 159
(103)
Restricted stock 50 22,831
23,247
Employee stock purchases 19 7,273
Exercise of stock options 61 12,738
Purchase of Company's own stock
86,949
Tax benefit relating to
exercise of stock options 4,381
Restricted Stock: Forfeitures (1)
1,244 (1,110)
Amortization
(14,451)
Issuance of shares for acquisitions (29,463) 1,295
(37,659)
Conversion of convertible
debentures 2 923
Adjustment for minimum pension
liability ( 3,891)
Par value of shares issued
for three-for-two stock split 4,547 (4,547)
________________________________________________________________________________
_________________________________________
BALANCES, DECEMBER 31, 1996 $13,641* $465,945 $855,113* $(12,979) $
- - $(82,978) $319,377 $ 47,350
* Restated to reflect three-for-two stock split effected July 1997.
FINANCIAL STATEMENTS
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 1997
(Dollars in thousands) Net
Unrealized
Unamortized
Additional Minimum Gain
on Cumulative
Expense
Common Paid-In Retained Pension
Equity Translation Treasury of
Restricted
Stock Capital Earnings Liability
Securities Adjustment Stock Stock Grants
BALANCES, DECEMBER 31, 1994 $8,771 $383,678 $619,627 $(6,422) $
- - $ (97,587) $222,698
$35,942
Net income 129,812
Cash dividends (46,124)
Foreign currency translation
adjustment
4,151
Awards of common stock under Company
plans:
Achievement stock awards 167
(98)
Restricted stock 50 18,256
18,306
Employee stock purchases 15 5,073
Exercise of stock options 127 28,849
Purchase of Company's own stock
75,229
Tax benefit relating to
exercise of stock options 5,809
Restricted Stock: Forfeitures
1,608 (1,026)
Amortization
(13,558)
Issuance of shares for acquisitions 5,099 1,631
(30,491)
Adjustment for minimum pension
liability (2,666)
________________________________________________________________________________
___________________________________________
BALANCES, DECEMBER 31, 1995 $8,963 $446,931 $704,946 $(9,088) $
- - $(93,436) $268,946 $39,664
The accompanying notes are an integral part of these financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations: The Company is a worldwide provider of advertising
agency and related services. The Company conducts business through the
following subsidiaries: McCann-Erickson WorldGroup, Ammirati Puris Lintas,
The Lowe Group, Western International Media, DraftWorldwide, Allied
Communications Group, Octagon and other related companies. Interpublic also
has arrangements through association with local agencies in various parts
of the world. Other "marketing communications" activities conducted by the
Company are market research, sales promotion, product development, direct
marketing, telemarketing and other related services.
Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and its subsidiaries, most of which are wholly
owned. The Company also has certain investments in unconsolidated
affiliates that are carried on the equity basis.
Short-term and Long-term Investments: The Company's investments in
marketable and equity securities are categorized as available-for-sale
securities, as defined by Statement of Financial Accounting Standards No.
115, (SFAS 115),"Accounting for Certain Investments in Debt and Equity
Securities". Unrealized holding gains and losses are reflected as a net
amount in a separate component of stockholders' equity until realized. The
cost of securities sold is based on the average cost of securities when
computing realized gains and losses.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management 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 and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Translation of Foreign Currencies: Balance sheet accounts are translated
principally at rates of exchange prevailing at the end of the year except
for fixed assets and related depreciation in countries with highly
inflationary economies which are translated at rates in effect on dates of
acquisition. Revenue and expense accounts are translated at average rates
of exchange in effect during each year. Translation adjustments are
included as a separate component of stockholders' equity except for
countries with highly inflationary economies, which are included in current
operations.
Commissions, Fees and Costs: Commissions and fees are generally recognized
when media placements appear and production costs are incurred. Salaries
and other agency costs are generally expensed as incurred.
Depreciation and Amortization: Depreciation is computed principally using
the straight-line method over estimated useful lives of the related assets,
ranging generally from 3 to 20 years for furniture and equipment and from
10 to 45 years for various component parts of buildings.
Leasehold improvements and rights are amortized over the terms of related
leases. Company policy provides for the capitalization of all major
expenditures for renewal and improvements and for current charges to income
for repairs and maintenance.
Long-lived Assets: The excess of purchase price over the fair value of net
tangible assets acquired is amortized on a straight-line basis over periods
not exceeding 40 years.
The Company evaluates the recoverability of the carrying value of long-
lived assets whenever events or changes in circumstances indicate that the
net book value of an operation may not be recoverable. If the sum of
projected future undiscounted cash flows of an operation is less than its
carrying value, an impairment loss is recognized. The impairment loss is
measured by the excess of the carrying value over fair value based on
estimated discounted future cash flows or other valuation measures.
Income Taxes: Deferred income taxes reflect the impact of temporary
differences between the amount of assets and liabilities recognized for
financial reporting purposes and such amounts recognized for income tax
purposes.
Earnings per Common and Common Equivalent Share: As further discussed in
Note 3, the Company adopted Statement of Financial Accounting Standards No.
128, (SFAS 128), "Earnings Per Share", in the fourth quarter of 1997. Basic
earnings per share is based on the weighted-average number of common shares
outstanding during each year. Diluted earnings per share also includes
common equivalent shares applicable to grants under the stock incentive and
stock option plans and the assumed conversion of convertible subordinated
debentures and notes, if they are determined to be dilutive.
Treasury Stock: Treasury stock is acquired at market value and is recorded
at cost. Issuances are accounted for on a first in, first out basis.
Concentrations of Credit Risk: The Company's clients are in various
businesses, located primarily in North America, Latin America, Europe and
the Pacific Region. The Company performs ongoing credit evaluations of its
clients. Reserves for credit losses are maintained at levels considered
adequate by management. The Company invests its excess cash in deposits
with major banks and in money market securities. These securities
typically mature within 90 days and bear minimal risk.
NOTE 2: STOCKHOLDERS' EQUITY
On May 19, 1997, the stockholders approved an increase in the number of
authorized common shares from 150,000,000 shares to 225,000,000 shares. The
stockholders also approved a three-for-two stock split, effected in the
form of a 50% stock dividend paid on July 15, 1997 to stockholders of
record as of June 27, 1997. The number of shares reserved for issuance
pursuant to various plans under which stock is issued was increased by 50%.
The three-for-two stock split has been reflected retroactively in the
consolidated financial statements and all per share data, shares, and
market prices of the Company's common stock included in the consolidated
financial statements and notes thereto have been adjusted to give effect to
the stock split.
The Company has a Preferred Share Rights Plan designed to deter coercive
takeover tactics. Pursuant to this plan, common stockholders are entitled
to purchase 1/100 of a share of preferred stock at an exercise price of
$100 if a person or group acquires or commences a tender offer for 15% or
more of Interpublic's common stock. Rights holders (other than the 15%
stockholder) will also be entitled to buy, for the $100 exercise price,
shares of Interpublic's common stock with a market value of $200 in the
event a person or group actually acquires 15% or more of Interpublic's
common stock. Rights may be redeemed at $.01 per right under certain
circumstances.NOTE 3: EARNINGS PER SHARE
In the fourth quarter of 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, (SFAS 128), "Earnings Per Share", which specifies
the method of computation, presentation and disclosure for earnings per
share(EPS). SFAS 128 replaces the presentation of primary EPS with basic EPS and
requires dual presentation of basic and diluted EPS. All prior period EPS data
has been restated to comply with SFAS 128 and to reflect the three-for-two stock
split effected July 1997.
In accordance with SFAS 128, the following is a reconciliation of the components
of the basic and diluted EPS computations for income available to common
stockholders:
FOR THE YEAR
ENDED DECEMBER 31,
(Dollars in thousands)
1997 1996
1995
PER
PER PER
SHARE
SHARE SHARE
INCOME SHARES AMOUNT INCOME SHARES
AMOUNT INCOME SHARES AMOUNT
BASIC EPS
Income available
to common stockholders $239,146 120,984,168 $1.98 $205,205
116,843,475 $1.76 $129,812 113,634,945 $1.14
EFFECT OF DILUTIVE SECURITIES
Options 2,910,648
2,219,373 1,921,923
Restricted stock 447 1,638,646 384
1,605,564 461 2,080,067
3 3/4% Convertible
Subordinated Debentures 5,929 4,010,291 6,410
4,466,502
DILUTED EPS $245,522 129,543,753 $1.90 $211,999
125,134,914 $1.69 $130,273 117,636,935 $1.11
The computation of diluted EPS for 1995 and 1997 excludes the assumed conversion
of the 3 3/4% Convertible Subordinated Debentures and the 1.80% Convertible
Subordinated Notes, respectively, because they were antidilutive.
NOTE 4: ACQUISITIONS AND RELATED COSTS
The Company acquired a number of advertising and communications companies
during the three year period ended December 31, 1997. The aggregate
purchase price, including cash and stock payments, was $301 million, $172
million and $140 million in 1997, 1996 and 1995, respectively. All prior
years' share data has been restated to reflect a three-for-two stock split
effected July 1997.
In 1997, 4,059,255 shares of the Company's common stock were issued for
acquisitions accounted for as poolings of interests. Some of the companies
pooled and the respective shares of the Company's common stock issued were
Complete Medical Group- 708,789 shares, Integrated Communications
Corporation - 585,054 shares, Advantage International- 579,206 shares and
Ludgate- 539,459 shares. Additional companies accounted for as poolings of
interests include Adler Boschetto Peebles, Barnett Fletcher, Davies Baron,
Diefenbach Elkins, D.L. Blair, Rubin Barney & Birger, Inc. and Technology
Solutions Inc.
In 1997, the Company also paid $80 million in cash and issued 1,200,059
shares of its common stock for acquisitions accounted for as purchases and
equity investments. Such acquisitions included Marketing Corporation of
America, Medialog, The Sponsorship Group, Kaleidoscope and Addis Wechsler
(51% interest). The Company also increased its interest in Campbell Mithun
Esty by 25%. The Company also recorded acquisition related deferred
payments of $38 million.
In 1996, the Company issued 3,519,847 shares of its stock for acquisitions
accounted for as poolings of interests. Pooled companies included
DraftDirect- 2,736,914 shares, The Weber Group- 495,996 shares and Torre
Renta Lazur- 286,937 shares.
During 1996, the Company paid $56 million in cash and issued 190,653 shares
of its common stock for acquisitions accounted for as purchases and equity
investments. Such acquisitions included Angotti Thomas Hedge, Jay
Advertising, Media Inc., McAdams Healthcare, GGK (49% interest) and
Goldberg Moser O'Neill (49% interest).
In 1995, the Company acquired Anderson & Lembke and Addison Whitney for
881,763 and 391,134 shares of its common stock, respectively. These
acquisitions were accounted for as poolings of interests. The Company also
issued 1,364,039 shares of its common stock and paid $45 million in cash
for companies accounted for as purchases and equity investments. Such
acquisitions included Newspaper Services of America, Kevin Morley
Marketing, Bosch & Butz (80% interest), Mark Goodson Productions (50%
interest), Campbell Mithun Esty (50% interest) and CKS Group, Inc. (28%
interest).
The Company's financial statements were not restated for poolings of
interests as the Company's consolidated results would not have changed
significantly. Deferred payments of both cash and shares of the Company's
common stock for prior years' acquisitions were $43 million, $16 million,
and $27 million in 1997, 1996 and 1995, respectively.
During 1997, the Company sold its investment in All American
Communications, Inc. for approximately $77 million. During 1996, the
Company sold its 50% investment in Mark Goodson Productions for
approximately $29 million, a portion of its investment in CKS Group, Inc.
for $37.6 million and its investment in Spotlink for $11.7 million in
shares of the purchaser's common stock.
In the fourth quarter of 1995, the Company adopted Statement of Financial
Accounting Standards No. 121, (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of". SFAS 121
established accounting standards for the recognition and the measurement of
impairment of long-lived assets and certain identifiable intangibles
including goodwill. As a result of the adoption of SFAS 121, the Company
recorded a noncash charge of $38.2 million, comprised of a write-down of
$25.8 million for goodwill and $12.4 million for investments and advances.
The write-down related to sixteen separate operating units, primarily
advertising and promotion agencies. All but two of these units are located
in Europe or North America and were acquired between 1978 and 1994. The
reason for the write-down was that the carrying value of the assets
exceeded management's estimate of the fair value of these operations which
was based primarily on discounted projected cash flows. The fair values
estimated by management took into consideration the following: the
profitability and trend in profitability of each of the operations, the
effects of economic recessions in the various markets, changes in client
relationships, trends in clients' spending patterns, the strength of the
U.S. dollar relative to foreign currencies and additional political,
economic and legal factors where applicable. In some instances, strategies
had been implemented to improve operating results which did not prove
successful and in some instances management reached a decision in 1995 to
sell, merge, or discontinue the operations.
NOTE 5: PROVISION FOR INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, (SFAS 109), "Accounting for Income Taxes".
SFAS 109 applies an asset and liability approach that requires the
recognition of deferred tax assets and liabilities with respect to the
expected future tax consequences of events that have been recognized in the
consolidated financial statements and tax returns.
The components of income before provision for income taxes are as follows:
(Dollars in thousands) 1997 1996 1995
Domestic $214,584 $169,919 $107,431
Foreign 226,691 187,227 146,724
Total $441,275 $357,146 $254,155
The provision for income taxes consisted of:
(Dollars in thousands) 1997 1996 1995
Federal income taxes (including foreign
withholding taxes):
Current $ 65,373 $ 56,289 $ 37,149
Deferred 8,234 246 3,751
73,607 56,535 40,900
State and local income taxes:
Current 21,529 19,830 11,741
Deferred 1,944 2,824 625
23,473 22,654 12,366
Foreign income taxes:
Current 85,321 69,812 61,255
Deferred 2,482 1,002 8,222
87,803 70,814 69,477
Total $184,883 $150,003 $122,743
At December 31, 1997 and 1996 the deferred tax assets/(liabilities)
consisted of the following items:
(Dollars in thousands) 1997 1996
Postretirement/postemployment benefits $ 39,318 $ 38,588
Deferred compensation 7,934 9,759
Pension costs 11,873 6,785
Depreciation (9,072) (7,733)
Rent (3,979) 10,364
Interest 2,056 6,051
Accrued reserves 4,361 4,551
Investments in equity securities (8,956) -
Tax loss/tax credit carryforwards 22,172 22,510
Other (4,798) 3,016
Total deferred tax assets 60,909 93,891
Deferred tax valuation allowance 12,157 14,520
Net deferred tax assets $ 48,752 $ 79,371
The valuation allowance of $12,157,000 and $14,520,000 at December 31, 1997
and 1996, respectively, represents a provision for uncertainty as to the
realization of certain deferred tax assets, including U.S. tax credit and
net operating loss carryforwards in certain jurisdictions. The change
during 1997 in the deferred tax valuation allowance primarily relates to
the utilization of the tax credit and net operating loss carryforwards. At
December 31, 1997 there were $7,052,000 of tax credit carryforwards with
expiration periods through 2002 and net operating loss carryforwards with a
tax effect of $15,120,000 with various expiration periods. The Company has
concluded that based upon expected future results, it is more likely than
not that the net deferred tax asset balance will be realized.
A reconciliation of the effective income tax rate as shown in the
consolidated statement of income to the federal statutory rate is as
follows:
1997 1996 1995
Statutory federal income tax rate 35.0% 35.0% 35.0%
State and local income taxes,
net of federal income tax benefit 3.5 2.9 3.2
Impact of foreign operations, including
withholding taxes 1.0 1.1 3.8
Goodwill and intangible assets 2.5 2.5 7.3
Other (0.1) 0.5 (1.0)
Effective tax rate 41.9% 42.0% 48.3%
The total amount of undistributed earnings of foreign subsidiaries for
income tax purposes was approximately $415.4 million at December 31, 1997.
No provision has been made for foreign withholding taxes or United States
income taxes which may become payable if undistributed earnings of foreign
subsidiaries were paid as dividends to the Company, since a major portion
of these earnings has been reinvested in working capital and other business
needs. The additional taxes on that portion of undistributed earnings which
is available for dividends are not practicably determinable.
NOTE 6: INCENTIVE PLANS
The 1997 Performance Incentive Plan, ("1997 PIP Plan"), approved by the
Company's stockholders in May 1997, replaced the Company's Management
Incentive Compensation Plan, Long-Term Performance Incentive Plan, 1996
Stock Incentive Plan and the 1986 Stock Incentive Plan ("Predecessor
Plans"). Awards made under the Predecessor Plans remain subject to their
terms and conditions. The 1997 PIP Plan includes the following types of
awards: (1) stock options, (2) stock appreciation rights, (3) restricted
stock, (4) phantom shares, (5) performance units and (6) management
incentive compensation performance awards.
The maximum number of shares of the Company's common stock which may be
granted in any year under the 1997 PIP Plan, excluding management incentive
compensation performance awards, is equal to a base amount (1.85% of the
total number of shares of the Company's common stock outstanding on the
first day of the year) supplemented by additional shares as defined in the
1997 PIP Plan document. The 1997 PIP Plan also limits the number of shares
available with respect to stock option and stock appreciation rights awards
made each year to any one participant as well as the number of shares
available under certain types of awards.
The following discussion relates to transactions under the 1997 PIP Plan,
the Predecessor Plans as well as other incentive plans. Except as otherwise
noted, awards under the 1997 PIP Plan have terms similar to awards made
under the respective Predecessor Plans. All prior years' EPS and share data
has been restated to reflect a three-for-two stock split effected July
1997.
Stock Options
The 1997 PIP Plan provides for the granting of either incentive stock
options (ISO's) or nonstatutory options to purchase shares at the fair
value of the Company's common stock on the date of grant. The Compensation
Committee of the Board of Directors, ( the "Committee"), is responsible for
determining the vesting terms and the exercise period of each grant within
the limitations set forth in the 1997 PIP Plan document.
Outstanding options are generally granted at the fair market value of the
Company's common stock on the date of grant and are exercisable based on a
schedule determined by the Committee. Generally, options become exercisable
between two and five years after the date of grant and expire ten years
from the date of grant.
Under the 1988 Stock Option Plan, the Company can grant, through 1998,
options to purchase 900,000 shares of the Company's common stock to key
employees who are employed outside the United States. As permitted under
this Plan, certain options were granted at prices less than the market
value of the Company's common stock.
The Company also maintains a stock plan for outside directors. Under this
plan, 300,000 shares of common stock of the Company are reserved for
issuance. Stock options under this plan are awarded at the fair market
value of the Company's common stock on the date the option is granted.
Options generally become exercisable three years after the date of grant
and expire ten years from the date of grant.
Following is a summary of stock option transactions during the three-year
period ended December 31, 1997:
Number of Weighted-
Shares Average
Under Option Exercise Price
________________________________________________________________
Balance, December 31, 1994 9,135,213 $16
Exercisable, December 31, 1994 2,345,247 10
________________________________________________________________
New Awards 3,115,196 22
Exercised (1,903,550) 14
Cancelled (409,707) 20
Balance, December 31, 1995 9,937,152 22
Exercisable, December 31, 1995 4,538,483 11
_________________________________________________________________
New Awards 3,503,580 31
Exercised (907,866) 14
Cancelled (466,923) 22
Balance, December 31, 1996 12,065,943 22
Exercisable, December 31, 1996 3,846,002 14
_________________________________________________________________
New Awards 2,210,980 38
Exercised (1,733,559) 16
Cancelled (521,160) 24
Balance, December 31, 1997 12,022,204 26
Exercisable, December 31, 1997 4,201,219 17
_________________________________________________________________
The following table summarizes information about stock options outstanding
at December 31, 1997:
Weighted-
Average Weighted- Weighted-
Number Remaining Average Number
Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 12/31/97 Life Price at 12/31/97 Price
$4.91 to $14.99 2,255,982 3.50 $14 2,252,156 $14
15.00 to 21.99 3,751,339 6.19 21 1,812,194 20
22.00 to 31.99 3,772,182 8.19 30 136,869 25
32.00 to 49.09 2,242,701 9.34 39 - -
Stock Appreciation Rights
The 1997 PIP Plan permits the Company to grant stock appreciation rights.
A stock appreciation right entitles the holder to receive an amount equal
to the fair market value of a share of common stock of the Company on the
date of exercise over a base price. No such awards have been made to date.
Restricted Stock
Various incentive plans incorporate the issuance of restricted stock
subject to certain restrictions and vesting requirements determined by the
Committee.
Restricted stock awards are subject to certain restrictions and vesting
requirements, generally five to seven years. No monetary consideration is
paid by a recipient for a restricted stock award. The cost of these shares
is amortized over the restriction periods. The Committee is authorized to
direct that discretionary tax assistance payments may be made to recipients
when the restrictions lapse. Such payments are expensed as awarded. At
December 31, 1997, there were a total of 3,589,605 shares of restricted
stock outstanding. During 1997, 1996 and 1995, the Company awarded 699,257
shares, 720,903 shares and 745,842 shares of restricted stock with a
weighted-average grant date fair value of $38.96, $31.14 and $24.55,
respectively.
Restricted shares under the Outside Directors' Plan are subject to certain
restrictions and vesting requirements, generally five years. At December
31, 1997, there were 18,000 shares of restricted stock outstanding. During
1997, the Company awarded 6,000 shares under this Plan with a weighted-
average grant date fair value of $40.
Phantom Shares
The 1997 PIP Plan permits the Company to grant phantom shares. A phantom
share represents the right of the holder to receive an amount determined by
the Committee based on the achievement of performance goals. No such grants
have been made under the 1997 PIP Plan.
Performance Units
The 1997 PIP Plan and its predecessor, the Long-Term Performance Incentive
Plan, permit the Company to grant performance units. Performance units
represent the contractual right of the holder to receive a payment that
becomes vested upon the attainment of performance objectives determined by
the Committee.
Grants consisting of performance units have been awarded to certain key
employees of the Company and its subsidiaries. The ultimate value of these
performance units is contingent upon the annual growth of profit (as
defined) of the Company, its operating components or both, over the 1995-
1998 and 1997-2000 performance periods. The awards are generally paid in
cash. The projected value of these units is accrued by the Company and
charged to expense over the four-year performance period.
The Company expensed $19.9 million in 1997, $13.6 million in 1996 and $9.6
million in 1995 relating to performance units. As of December 31, 1997,
the Company's liability for the 1995-1998 and 1997-2000 performance periods
was $31.7 million, which represents a proportionate part of the total
estimated amounts payable for the two performance periods. The Company's
payout to participants for the 1993-1996 performance period was $20.2
million, of which $7.9 million was paid in December 1996, and the remaining
$12.3 million was paid in the first quarter of 1997.
Management Incentive Compensation Plan
Under the management incentive compensation component of the 1997 PIP Plan
the Committee is authorized to make management incentive compensation
awards to employees of the Company and its subsidiaries and affiliates,
subject to the limitation that no individual may receive in excess of $2
million and certain limitations of common shares issued.
Miscellaneous Incentive Arrangements
Under the Employee Stock Purchase Plan (ESPP), employees may purchase
common stock of the Company through payroll deductions not exceeding 10% of
their compensation. The price an employee pays for a share of stock is 85%
of the market price on the last business day of the month. The Company
issued 281,852 shares, 279,879 shares and 237,821 shares during 1997, 1996
and 1995, respectively, under the ESPP. An additional 8,305,378 shares were
reserved for issuance at December 31, 1997.
Under the Company's Achievement Stock Award Plan, awards may be made up to
an aggregate of 1,872,000 shares of common stock together with cash awards
to cover any applicable withholding taxes. The Company issued 10,130
shares, 8,505 shares and 10,778 shares during 1997, 1996 and 1995,
respectively, under this plan. The weighted-average fair value on the
dates of grant in 1997, 1996 and 1995 was $42.25, $30.86 and $24.73,
respectively.
SFAS 123 Disclosures
The Company adopted Statement of Financial Accounting Standards No. 123,
(SFAS 123), "Accounting for Stock-Based Compensation" in the fourth quarter
of 1996. As permitted by the provisions of SFAS 123, the Company applies
APB Opinion 25, "Accounting for Stock Issued to Employees", and related
interpretations in accounting for its stock-based employee compensation
plans. Accordingly, no compensation cost has been recognized for the
Company's stock options or for purchases under the ESPP. The cost recorded
for restricted stock and achievement stock awards in 1997, 1996 and 1995
was $16,684,652, $14,527,086 and $13,738,872, respectively. If
compensation cost for the Company's stock option plans and its ESPP had
been determined based on the fair value at the grant dates as defined by
SFAS 123, the Company's pro forma net income and earnings per share would
have been as follows:
1997 1996 1995
(Dollars in thousands except per share data)
Net Income As reported $239,146 $205,205 $129,812
Pro forma $229,311 $198,219 $125,636
Earnings per share
Basic As reported $1.98 $1.76 $1.14
Pro forma $1.90 $1.70 $1.11
Diluted As reported $1.90 $1.69 $1.11
Pro forma $1.82 $1.64 $1.07
For purposes of this pro forma information, the fair value of shares issued
under the ESPP was based on the 15% discount received by the employees. The
weighted-average fair value on the date of purchase for stock purchased
under this Plan was $5.36, $4.60 and $3.72 in 1997, 1996 and 1995,
respectively.
For purposes of this pro forma information, the fair value of each option
grant is estimated on the date of grant using the Black-Scholes option-
pricing model with the following weighted-average assumptions used for
grants in 1997, 1996 and 1995, respectively: dividend yield of 1.3%, 1.41%
and 1.72%; expected volatility of 19.17%, 20.71% and 22.08%; risk-free
interest rate of 6.51%, 6.43% and 7.66%; and expected life of six years for
each of the three years.
The weighted-average fair value on the dates of grant for options granted
in 1997, 1996 and 1995 was $11.83, $9.63 and $7.26, respectively. As
required by SFAS 123, this pro forma information is based on stock awards
beginning in 1995 and accordingly is not likely to be representative of the
pro forma effects in future years because options vest over several years
and additional awards generally are made each year.
NOTE 7: RETIREMENT PLANS
Domestic Retirement Plan
The Company and certain of its domestic subsidiaries have a defined benefit
plan ("Domestic Plan") and a defined contribution plan ("Savings Plan")
which covers substantially all regular employees.
The Company announced that it was freezing benefit accruals under the
Domestic Plan effective April 1, 1998. Participants with five or less years
of service will become fully vested in the plan effective April 1, 1998.
Participants with five or more years of service as of March 31, 1998 will
retain their vested balances and participate in a new compensation plan.
Under the new plan, each participant's account will be credited with an
annual allocation, equal to the projected discounted pension benefit
accrual plus interest, while they continue to work for the Company.
Participants will be eligible to receive up to ten years of allocations
coinciding with the number of years of service with the Company after March
31, 1998. As a result of the change in the Domestic Plan, the Company
recorded charges of approximately $16.7 million in the 1997 consolidated
financial statements.
The Company's policy was to fund pension costs as permitted by applicable
tax regulations. Pension costs were determined by the projected unit credit
method based upon career average pay. Funding requirements for the Domestic
Plan were determined using the accrued benefit unit credit method. Under
the "cash balance" formula, the participant's account balance was credited
each year with an amount equal to the percentage of the year's annual
compensation, plus interest credits. Participants in the Domestic Plan on
December 31, 1991 who continued to work for the Company after that date had
their normal retirement benefits under the plan as of that date converted
on an actuarial basis into an opening account balance as of January 1,
1992.
Prior to the 1998 change in the Domestic Plan, the Company was required to
record an intangible asset to the extent of unrecognized prior service cost
and net transition obligation. In 1996 and 1995, the Company recorded an
intangible asset of $10.4 million and $10.5 million, respectively. In
addition, the Company recorded a reduction to stockholders' equity of $13.2
million, $13.0 million and $9.1 million, in 1997, 1996 and 1995,
respectively.
Net pension costs for the Domestic Plan for 1997, 1996 and 1995 included
the following components:
(Dollars in thousands) 1997 1996 1995
Service cost $ 4,179 $ 4,057 $ 3,322
Interest cost 10,567 10,248 10,398
Actual return on plan assets (14,346) (10,983) (20,622)
Amortization of unrecognized
transition obligation 1,887 1,887 1,887
Amortization of unrecognized
prior service cost (1,276) (1,769) (1,769)
Amortization of unrecognized
losses 943 1,005 309
Curtailment charge 9,727 - -
Deferred investment gain 3,335 129 10,874
Net periodic pension cost $15,016 $ 4,574 $ 4,399
The following table sets forth the funded status and amounts recognized for
the Domestic Plan in the Company's consolidated balance sheet at December
31, 1997 and 1996:
(Dollars in thousands) 1997 1996
Actuarial present value of accumulated
benefit obligation (including vested
benefits of $130,707 in 1997 and
$128,649 in 1996) $130,707 $132,110
Actuarial present value of projected benefit
obligation 134,348 139,142
Plan assets at fair value 115,944 112,284
Projected benefit obligation in excess of
plan assets (18,404) (26,858)
Unrecognized net losses 13,207 20,010
Unrecognized prior service cost - 902
Unrecognized net transition obligation - 9,437
Additional minimum liability (13,207) (23,317)
Accrued pension liability $(18,404) $(19,826)
At December 31, 1997, Domestic Plan assets were primarily invested in fixed
income and equity securities. Prior service costs were being amortized over
the estimated average remaining service period of active employees. The
initial net transition obligation was being amortized over 15 years.
A discount rate of 7.25% in 1997, 7.5% in 1996 and 7.25% in 1995 and a
salary increase assumption of 6% in 1997, 1996 and 1995 were used in
determining the actuarial present value of the projected benefit
obligation. The expected return on assets was 10% in 1997, 1996 and 1995.
In addition to the defined benefit plan described above, the Company also
sponsors a Savings Plan that covers substantially all domestic employees of
the Company and participating subsidiaries who have completed one year of
service. The Savings Plan permits participants to make contributions on a
pre-tax and/or after-tax basis. The Savings Plan allows participants to
designate in which fund(s) they want their contributions invested. The
Company matches a portion of participants' contributions based upon the
number of years of service. The Company contributed $6,320,738, $5,389,464
and $4,866,881 to the Savings Plan in 1997, 1996 and 1995, respectively.
Foreign Retirement Plans
The Company has several foreign pension plans in which benefits are based
primarily on years of service and employee compensation. It is the
Company's policy to fund these plans in accordance with local laws and
income tax regulations.
Net pension costs for foreign pension plans for 1997, 1996 and 1995
included the following components:
(Dollars in thousands) 1997 1996 1995
Service cost $ 5,266 $ 4,900 $ 5,276
Interest cost 10,589 10,084 11,054
Net return on plan assets (10,506) (9,077) (8,738)
Net amortization and deferral 1,159 1,251 1,372
Unrecognized net gain (1,745) (2,026) (1,367)
Other - (50) -
Net pension costs $ 4,763 $ 5,082 $ 7,597
The following table sets forth the funded status and amounts recognized for the
foreign pension plans in the Company's consolidated balance sheet at December
31, 1997 and 1996:
(Dollars in thousands) 1997 1996
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
Actuarial present value of
accumulated benefit obligation
(including vested benefits of:
1997 - $95,139 and $60,888;
1996 - $76,092 and $66,113) $ 95,265 $ 64,650 $ 76,293 $ 71,779
Actuarial present value of
projected benefit obligation 105,051 72,119 84,404 79,290
Plan assets at fair value 141,215 4,195 129,488 6,336
Projected benefit obligation
less than (in excess of)
plan assets 36,164 (67,924) 45,084 (72,954)
Unrecognized net (gain)/loss (14,373) 1,490 (27,517) (1,884)
Unrecognized prior service
cost 3,524 - 4,519 -
Unrecognized net (asset)
obligation (1,043) 4,384 (1,492) 5,777
Prepaid (accrued) pension cost at
December 31, 1997 and 1996 $ 24,272 $(62,050) $ 20,594
$(69,061)
Foreign plans utilized discount rates ranging from 3.5% to 14.0% in 1997
and from 5.5% to 12.0% in both 1996 and 1995 and salary increase
assumptions ranging from 2.0% to 10.0% in 1997, 1996 and 1995, to determine
the actuarial present value of the projected benefit obligation. The
expected rates of return on assets of foreign plans ranged from 3.5% to
14.0% in 1997 and 4.0% to 12.0% in both 1996 and 1995.
The Company also has special deferred benefit arrangements with certain key
employees. Vesting is based upon the age of the employee and the terms of
the employee's contract. Life insurance contracts have been purchased in
amounts which may be used to fund these arrangements.
NOTE 8: POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
Postretirement Benefit Plans
The Company and its subsidiaries provide certain postretirement health care
benefits for employees who were in the employ of the Company as of January
1, 1988, and life insurance benefits for employees who were in the employ
of the Company as of December 1, 1961. The plans cover certain employees in
the United States and certain key employees in foreign countries. Effective
January 1, 1993, the Company's plan covering postretirement medical
benefits was amended to place a cap on annual benefits payable to retirees.
Such coverage is self-insured, but is administered by an insurance company.
The Company accrues the expected cost of postretirement benefits other than
pensions over the period in which the active employees become eligible for
such postretirement benefits.
The components of periodic expense for these postretirement benefits for
1997, 1996 and 1995 were as follows:
(Dollars in thousands) 1997 1996
1995
Service cost $ 612 $ 610 $ 583
Interest cost 2,958 2,824 3,047
Amortization of prior service cost (934) (934) (934)
Total periodic expense $2,636 $2,500 $2,696
The following table sets forth the funded status and amounts recognized for
the Company's postretirement benefit plans in the consolidated balance
sheet at December 31, 1997 and 1996:
(Dollars in thousands)
1997 1996
Accumulated postretirement benefit
obligation:
Retirees $ 22,619 $ 21,227
Fully eligible active plan participants 5,484 5,110
Other active plan participants 13,534 12,420
Total accumulated postretirement
benefit obligation 41,637 38,757
Plan assets at fair value - -
Accumulated postretirement benefit
obligation in excess of plan assets (41,637) (38,757)
Unrecognized net loss (2,004) (3,272)
Unrecognized prior service cost (3,763) (4,697)
Accrued postretirement benefit liability $(47,404) $(46,726)
A discount rate of 7.25% in 1997, 7.50% in 1996 and 7.25% in 1995 and a
salary increase assumption of 6.0% in 1997, 1996 and 1995 were used in
determining the accumulated postretirement benefit obligation. A 9.0% and a
10.0% increase in the cost of covered health care benefits was assumed for
1997 and 1996, respectively. This rate is assumed to decrease incrementally
to 5.5% in the year 2002 and remain at that level thereafter. The health
care cost trend rate assumption does not have a significant effect on the
amounts reported. For example, a 1% increase in the health care cost trend
rate would increase the accumulated postretirement benefit obligation at
December 31, 1997 by approximately $1.9 million, and the net periodic cost
for 1997 by approximately $0.2 million.
Postemployment Benefits
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 112, (SFAS 112), "Employers' Accounting for
Postemployment Benefits", and recognized a one-time after-tax charge of
$21.8 million. This Statement requires the Company to accrue the costs of
certain benefits which include severance, worker's compensation and health
care coverage over an employee's service life.
The Company's liability for postemployment benefits totaled $43.3 million
and $32.8 million at December 31, 1997 and 1996, respectively, and is
included in deferred compensation and reserve for termination allowances.
The net periodic expense recognized in 1997, 1996 and 1995 was $28.4
million, $21.1 million and $8.8 million, respectively.
NOTE 9: SHORT-TERM BORROWINGS
The Company and its domestic subsidiaries have lines of credit with various
banks. These credit lines permit borrowings at fluctuating interest rates
determined by the banks. Short-term borrowings by subsidiaries outside the
United States principally consist of drawings against bank overdraft
facilities and lines of credit. These borrowings bear interest at the
prevailing local rates. Where required, the Company has guaranteed the
repayment of the borrowings. Unused lines of credit by the Company and its
subsidiaries at December 31, 1997 and 1996 aggregated $411 million and $313
million, respectively. The weighted-average interest rate on outstanding
balances at December 31, 1997 was approximately 6.61%. Current maturities
of long-term debt are included in the payable to banks balance.
NOTE 10: LONG-TERM DEBT
Long-term debt at December 31 consisted of the following:
1997 1996
(Dollars in thousands)
Convertible Subordinated Notes - 1.80% $201,768 $ -
Convertible Subordinated Debentures - 3 3/4% - 115,192
Term loans- 6.45% to 14.0% 233,333 202,414
Mortgage notes payable and other
long-term loans- 4.0% to 16.0% 38,045 45,513
473,146 363,119
Less: current portion 20,431 16,167
Long-term debt $452,715 $346,952
On September 16, 1997, the Company issued $250 million face amount of
Convertible Subordinated Notes due 2004 ("2004 Notes") with a coupon rate
of 1.80%. The 2004 Notes were issued at an original price of 80% of the
face amount, generating proceeds of approximately $200 million. The notes
are convertible into 3.3 million shares of the Company's common stock at a
conversion rate of 13.386 shares per $1,000 face amount. These shares have
been reserved for the conversion of the notes. The fair value of the 2004
Notes as of December 31, 1997 was approximately $208 million and was
determined by obtaining quotes from brokers.
In the fourth quarter of 1997, the Company called for redemption its 3 3/4%
Convertible Subordinated Debentures due 2002. Substantially all of the
outstanding debentures were converted into approximately 4.3 million shares
of the Company's common stock.
The increase in term loans during 1997 was primarily due to an additional
$50 million private placement with Prudential. Term loans at December 31,
1997 consisted of $146.7 million of private placements with Prudential,
$25.0 million in term loans with First Chicago NBD, $40.0 million in term
loans with SunTrust Bank, $20.0 million in term loans with Wachovia Bank
and a $1.6 million private placement loan with Massachusetts Mutual.
Mortgage notes payable and other long-term loans at December 31, 1997
primarily related to a $31.6 million mortgage which was used to finance
the purchase of a building and land by one of the Company's subsidiaries
during 1993.
Under various loan agreements, the Company must maintain specified levels
of net worth and meet certain cash flow requirements, and is limited in the
level of indebtedness. The Company has complied with the limitations under
the terms of these loan agreements.
Long-term debt maturing over the next five years is as follows: 1998-$20.4
million; 1999-$25.0 million; 2000-$6.0 million; 2001-$14.3 million; 2002-
$45.6 million, and thereafter $361.8 million.
All material long-term debt is carried in the consolidated balance sheet at
amounts which approximate fair values based upon current borrowing rates
available to the Company unless otherwise disclosed.
NOTE 11: SUPPLEMENTAL CASH FLOW INFORMATION
For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid investments with a maturity of three months or
less to be cash equivalents.
Income Tax and Interest Payments
Cash paid for income taxes was approximately $119.7 million, $101.8 million
and $80.8 million in 1997, 1996 and 1995, respectively. Interest payments
were approximately $23.2 million in 1997, $27.1 million in 1996 and $25.0
million in 1995.
Noncash Financing Activity
As more fully described in Note 10, the Company called for redemption all
outstanding issues under the 3 3/4% Convertible Subordinated Debentures due
2002. The debentures were converted into approximately 4.3 million shares
of the Company's common stock.
Acquisitions
As more fully described in Note 4 and in connection with acquisitions, the
Company issued 5,259,314 shares, 3,710,500 shares, and 2,636,936 shares of
the Company's common stock during 1997, 1996 and 1995, respectively.
Details of businesses acquired in transactions accounted for as purchases
were as follows:
1997 1996 1995
(Dollars in thousands)
Fair value of assets acquired $253,093 $182,072 $ 73,142
Liabilities assumed 89,686 106,289 11,170
Net assets acquired 163,407 75,783 61,972
Less: noncash consideration 76,794 7,568 9,637
Less: cash acquired 6,535 16,867 5,481
Net cash paid for acquisitions $ 80,078 $ 51,348 $ 46,854
The amounts shown above exclude acquisition related deferred payments due
in subsequent years, but include cash deferred payments of $30 million, $14
million and $27 million made during 1997, 1996 and 1995, respectively.
NOTE 12: RESULTS BY QUARTER (UNAUDITED)
________________________________________________________________________________
________________________________________
(Dollars in thousands 1st Quarter 2nd Quarter
3rd Quarter 4th Quarter
except per share data) 1997* 1996* 1997 1996*
1997 1996* 1997 1996*
Gross income $597,238 $506,160 $812,313 $675,345
$723,498 $567,718 $992,797 $788,294
Operating expenses 548,013 466,109 634,104 521,568
645,757 509,036 807,252 642,892
Interest expense 10,266 9,525 11,217 9,665 14,014
10,304 13,948 11,271
Income before provision
for taxes 38,959 30,526 166,992 144,112 63,727
48,378 171,597 134,131
Provision for income taxes 16,763 13,126 69,781 61,248 27,284
20,527 71,055 55,102
Net equity interests (161) 432 (7,447) 64
(1,151) (380) (8,487) (2,054)
Net income 22,035 17,832 89,764 82,928
35,292 27,471 92,055 76,975
Per share data:
Basic EPS .19 .15 .75 .72 .29 .23 .74 .65
Diluted EPS .18 .15 .71 .68 .28 .23 .71 .62
Cash dividends per share $.113 $.103 $.130 $.113
$.130 $.113 $.130 $.113
Weighted-average shares:
Basic 118,405,479 115,492,560 119,724,822 115,905,189
121,604,548 118,024,329 124,201,824 117,926,937
Diluted 122,340,229 119,407,773 128,608,097 124,209,539
126,707,968 121,790,364 135,019,603 126,119,965
Stock Price:
High $36 5/8 $31 1/2 $41 3/8 $33 1/8
$51 3/8 $32 3/8 $52 1/2 $33 3/8 Low $32 1/4
$26 5/8 $35 $30 3/8 $41 1/2 $27 7/8 $45 1/4
$29 5/8
________________________________________________________________________________
_________________________________________________
* Restated to reflect a three-for-two stock split effected July 1997.
NOTE 13: GEOGRAPHIC AREAS
Total assets, income from commissions and fees and income before provision
for income taxes are presented below by major geographic area:
(Dollars in thousands) 1997 1996 1995
Total Assets:
United States $3,001,726 $2,236,168 $1,864,095
International
Europe 1,737,361 1,626,966 1,554,283
Asia Pacific 571,153 544,287 515,219
Latin America 257,730 224,683 193,592
Other 134,551 133,026 132,577
Total International 2,700,795 2,528,962 2,395,671
Total Consolidated $5,702,521 $4,765,130 $4,259,766
Income From Commissions and Fees:
United States $1,393,841 $1,001,545 $ 754,576
International
Europe 996,823 882,746 837,006
Asia Pacific 323,626 309,161 281,961
Latin America 204,894 170,024 152,503
Other 78,018 67,032 67,786
Total International 1,603,361 1,428,963 1,339,256
Total Consolidated $2,997,202 $2,430,508 $2,093,832
Income Before Provision for Income Taxes:
Operating income:
United States $ 248,807 $ 197,793 $ 131,194
International
Europe 129,757 96,948 73,424
Asia Pacific 53,485 57,439 48,292
Latin America 48,067 35,578 31,626
Other 10,604 10,153 7,638
Total International 241,913 200,118 160,980
Items not allocated to operations,
principally interest expense:
United States (34,223) (27,874) (23,763)
International (15,222) (12,891) (14,256)
Total Consolidated $ 441,275 $ 357,146 $ 254,155
The largest client of the Company contributed approximately 11% in 1997,
1996 and 1995 to income from commissions and fees. The Company's second
largest client contributed approximately 8% in 1997, 1996 and 1995 to
income from commissions and fees.
Dividends received from foreign subsidiaries were approximately $40.8
million in 1997, $35.2 million in 1996 and $31.8 million in 1995. Net
assets of foreign subsidiaries were approximately $645 million, $677
million and $584 million at December 31, 1997, 1996 and 1995, respectively.
Consolidated net income includes losses from exchange and translation of
foreign currencies of $5.6 million, $4.1 million and $4.7 million in 1997,
1996 and 1995, respectively.
NOTE 14: FINANCIAL INSTRUMENTS
Financial assets which include cash and cash equivalents, marketable
securities and receivables have carrying values which approximate fair
value. Long-term equity securities, included in other investments and
miscellaneous assets in the Consolidated Balance Sheet, are deemed to be
available-for-sale as defined by SFAS 115 and accordingly are reported at
fair value with net unrealized gains and losses reported within
stockholders' equity. At December 31, 1997, long-term equity securities had
a cost basis of $20 million with a market value of $42 million.
Financial liabilities with carrying values approximating fair value include
accounts payable and accrued expenses, as well as payable to banks and long-
term debt. As of December 31, 1997, the 1.80% Convertible Subordinated
Notes due 2004 had a cost basis of $202 million with a market value of $208
million. The fair value was determined by obtaining quotes from
brokers(refer to Note 10 for additional information on long-term debt).
The Company occasionally uses forwards and options to hedge a portion of
its net investment in foreign subsidiaries and certain intercompany
transactions in order to mitigate the impact of changes in foreign exchange
rates on working capital. The notional value and fair value of all
outstanding forwards and options contracts at the end of the year as well
as the net cost of all settled contracts during the year were not
significant.
NOTE 15: COMMITMENTS AND CONTINGENCIES
At December 31, 1997, the Company's subsidiaries operating outside the
United States were contingently liable for discounted notes receivable of
approximately $11.5 million.
The Company and its subsidiaries lease certain facilities and equipment.
Gross rental expense amounted to approximately $192 million for 1997, $180
million for 1996 and $164 million for 1995, which was reduced by sublease
income of $30.5 million in 1997, $29.1 million in 1996 and $19.5 million in
1995.
During 1995, the Company entered into a transaction whereby it acquired the
leasing operations of a third party at a cost of approximately $7 million.
These leasing operations include equipment leased from the equipment owner
(the "Owner"), which was in turn leased to a third party (the "Sublessee").
These leases were accounted for by the Company as operating leases. The
Sublessee prepaid $46.6 million of its obligations under the sublease
agreement. This prepayment is held in an interest-bearing escrow account
and is used to meet the Company's lease obligations to the Owner. At
December 31, 1997, the remaining escrow balance was $5.2 million and is
reflected in prepaid expenses and other current assets. The unearned
sublease income amount was $3.3 million and is reflected in other
noncurrent liabilities. The deferred tax asset attributable to the prepaid
sublease obligation amounted to $4.4 million at December 31, 1997.
Minimum rental commitments for the rental of office premises and equipment
under noncancellable leases, some of which provide for rental adjustments
due to increased property taxes and operating costs for 1998 and
thereafter, are as follows:
(Dollars in thousands) Gross Sublease
Period Amount Income
1998 $152,289 $13,385
1999 137,615 10,071
2000 120,774 7,812
2001 103,912 6,898
2002 91,530 4,105
2003 and thereafter 425,343 4,020
Certain of the Company's acquisition agreements provide for the payment by
the Company of future contingent consideration based upon future revenues
or profits of the companies acquired.
The Company and certain of its subsidiaries are party to various tax
examinations, some of which have resulted in assessments. The Company
intends to vigorously defend any and all assessments and believes that
additional taxes (if any) that may ultimately result from the settlement of
such assessments and open examinations would not have a material adverse
effect on the consolidated financial statements.
REPORT OF INDEPENDENT ACCOUNTANTS
_______________________________________________________________________
1177 Avenue of the Americas
New York, New York 10036
To the Board of Directors and Stockholders of
The Interpublic Group of Companies, Inc. February 20, 1998
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of stockholders' equity and of cash
flows present fairly, in all material respects, the financial position of
The Interpublic Group of Companies, Inc. and its subsidiaries (the
"Company") at December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles. 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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 4 to the consolidated financial statements, during
1995, the Company changed its method of accounting for long-lived assets in
accordance with Statement of Financial Accounting Standards No. 121.
Price Waterhouse LLP
SELECTED FINANCIAL DATA FOR FIVE YEARS
(Dollars in thousands
except per share data) 1997 1996 1995
1994 1993
Operating Data
Gross income $ 3,125,846 $ 2,537,516 $ 2,179,739 $
1,984,255 $ 1,793,856
Operating expenses 2,635,126 2,139,605 1,849,387
1,701,817 1,535,651
Restructuring charges - - -
48,715 -
Write-down of goodwill and other
related assets - - 38,177
- - -
Interest expense 49,445 40,765 38,020
32,924 26,445
Provision for income taxes 184,883 150,003 122,743
86,333 99,819
Income before effect of accounting
changes 239,146 205,205 129,812
115,247 125,279
Effect of accounting changes:
Postemployment benefits - -
- - (21,780) -
Income taxes - - -
- - (512)
Net Income $ 239,146 $ 205,205 $ 129,812 $
93,467 $ 124,767
Per Share Data
Basic
Income before effect of accounting
changes $ 1.98 $ 1.76 $ 1.14 $
1.05 $ 1.15
Effect of accounting
changes - - -
(.20) -
Net Income $ 1.98 $ 1.76 $ 1.14 $
0.85 $ 1.15
Weighted-average shares 120,984,168 116,843,475 113,634,945
110,044,626 108,911,045
Diluted
Income before effect of accounting
changes $ 1.90 $ 1.69 $ 1.11 $
1.02 $ 1.11
Effect of accounting
changes - - -
(.19) -
Net Income $ 1.90 $ 1.69 $ 1.11 $
0.83 $ 1.11
Weighted-average shares 129,543,753 125,134,914 117,636,935
113,439,728 112,954,702
Financial Position
Working capital $ 274,014 $ 154,430 $ 147,701 $
80,134 $ 167,175
Total assets 5,702,521 4,765,130 4,259,766
3,793,418 2,869,817
Long-term debt 452,715 346,952 283,497
241,803 226,085
Book value per share $ 8.46 $ 7.15 $ 6.28 $
5.57 $ 5.02
Other Data
Cash dividends $ 61,242 $ 51,786 $ 46,124 $
40,360 $ 35,901
Cash dividends per share $ .50 $ .44 $ .40 $
.36 $ .33
Number of employees 27,100 21,700 19,700
18,100 17,600
All prior years' per share data and shares have been restated to reflect a
three-for-two stock split effected July 1997.
Reflects the cumulative effect of adopting SFAS 112, "Employers' Accounting
for Postemployment Benefits."
Reflects the cumulative effect of adopting SFAS 109, "Accounting for Income
Taxes."
VICE CHAIRMAN'S REPORT OF MANAGEMENT
The financial statements, including the financial analyses and all other
information in this Annual Report, were prepared by management, who is
responsible for their integrity and objectivity. Management believes the
financial statements, which require the use of certain estimates and
judgments, reflect the Company's financial position and operating results
in conformity with generally accepted accounting principles. All financial
information in this Annual Report is consistent with the financial
statements.
Management maintains a system of internal accounting controls which
provides reasonable assurance that, in all material respects, assets are
maintained and accounted for in accordance with management's authorization
and transactions are recorded accurately in the books and records. To
assure the effectiveness of the internal control system, the organizational
structure provides for defined lines of responsibility and delegation of
authority.
The Finance Committee of the Board of Directors, which is comprised of the
Company's Chairman and Vice Chairman and three outside Directors, is
responsible for defining these lines of responsibility and delegating the
authority to management to conduct the day-to-day financial affairs of the
Company. In carrying out its duties, the Finance Committee primarily
focuses on monitoring financial and operational goals and guidelines;
approving and monitoring specific proposals for acquisitions; working
capital, cash and balance sheet management; and overseeing the hedging of
foreign exchange, interest-rate and other financial risks. The Committee
meets regularly to review presentations and reports on these and other
financial matters to the Board. It also works closely with, but is
separate from, the Audit Committee of the Board of Directors.
The Company has formally stated and communicated policies requiring of
employees high ethical standards in their conduct of its business. As a
further enhancement of the above, the Company's comprehensive internal
audit program is designed for continual evaluation of the adequacy and
effectiveness of its internal controls and measures adherence to
established policies and procedures.
The Audit Committee of the Board of Directors is comprised of four
directors who are not employees of the Company. The Committee reviews
audit plans, internal controls, financial reports and related matters, and
meets regularly with management, internal auditors and independent
accountants. The independent accountants and internal auditors have free
access to the Audit Committee, without management being present, to discuss
the results of their audits or any other matters.
The Company is addressing the Year 2000 Compliance Project with the
mobilization of required resources at the Corporate offices and all
operating units. Project plans have been developed to assess and prioritize
the operational applications, supplier and network compliance and required
remediation. The Audit Committee is overseeing the timely implementation
and completion of this project.
The independent accountants, Price Waterhouse LLP, are recommended by the
Audit Committee of the Board of Directors and selected by the Board of
Directors, and their appointment is ratified by the shareholders. The
independent accountants have examined the financial statements of the
Company and their opinion is presented on page 53.
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 1
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
DOMESTIC:
The Interpublic Group of Companies, Inc. Delaware - -
(Registrant)
Casablanca Productions California 100 Registrant
Conan Entertainment LLC California 50 Western International Syndication Corp.
Dailey & Associates, Inc. California 100 Registrant
Diefenbach-Elkins International, Inc. California 100 Registrant
D.L. Blair/West, Inc. California 100 D.L. Blair, Inc.
Eidolon Corporation California 100 Registrant
International Business Services, Inc. California 100 Infoplan International, Inc.
Main Street Media, LLC California 100 Western International Media Corporation
North Light, Ltd. California 100 Dailey & Associates, Inc.
Tall Wall Media, Inc. California 100 Registrant
The Phillips-Ramsey Co. California 100 Registrant
Van Wagner Tall Wall Media LLC California 51 Tall Wall Media, Inc.
W.D.M.G., Inc. California 100 Western Direct Marketing Group, Inc.
Western Direct Marketing Group, Inc. California 100 Western International Media Corporation
Western International Media Corporation California 100 Registrant
Western International Syndication Corporation California 100 Registrant
Western Motivational Incentives Group California 100 Western International Media Corporation
Western Traffic, Inc. California 100 Registrant
Momentum IMC Company Colorado 100 McCann-Erickson USA, Inc.
Advantage International Holdings, Inc. Delaware 100 Registrant
Advent.A2 Inc. Delaware 100 Advent Event Marketing, Inc.
Advent Event Marketing, Inc. Delaware 100 McCann-Erickson USA, Inc.
Advent.LA Inc. Delaware 100 Advent Event Marketing, Inc.
Ammirati Puris Lintas Canada Ltd. Delaware 100 Ammirati Puris Lintas Inc.
Ammirati Puris Lintas Inc. Delaware 100 Registrant
Ammirati Puris Lintas USA, Inc. Delaware 100 Registrant
Anderson & Lembke, Inc. Delaware 100 Registrant
Angotti, Thomas, Hedge, Inc. Delaware 100 Registrant
Asset Recovery Group, Inc. Delaware 100 Registrant
Business Science Research Corporation, Inc. Delaware 100 Registrant
PAGE
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 2
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
DOMESTIC:
Campbell-Ewald Company Delaware 100 Registrant
Campbell Mithun Esty LLC Delaware 75 Registrant
Communications Services International Inc. Delaware 100 CSI Limited
DraftWorldwide, Inc. Delaware 100 Registrant
Global Event Marketing & Management (GEMM) Inc. Delaware 100 Registrant
Healthcare Capital, Inc. Delaware 100 McCann Healthcare, Inc.
Hypermedia Solutions, LLC Delaware 55 The Coleman Group, LLC
Infoplan International, Inc. Delaware 100 Registrant
Interpublic Game Shows, Inc. Delaware 100 Registrant
Interpublic Television, Inc. Delaware 100 Registrant
Jack Tinker Advertising, Inc. Delaware 100 Registrant
Jay Advertising, Inc. Delaware 100 Registrant
Kaleidoscope Sports and Entertainment LLC Delaware 100 Registrant
LFS, Inc. Delaware 100 Registrant
Lowe Direct Inc. Delaware 100 Lowe & Partners/SMS Inc.
Lowe & Partners/SMS Interactive Inc. Delaware 100 Lowe & Partners/SMS Inc.
LMMS-USA, Inc. Delaware 100 McCann-Erickson USA, Inc.
Market Reach Retail LLC Delaware 50 Skott, Inc.
MarketCorp Promotions, Inc. Delaware 100 DraftWorldwide, Inc.
Marketing Corporation of America Delaware 100 Registrant
McAvey & Grogan, Inc. Delaware 100 Registrant
McCann-Erickson USA, Inc. Delaware 100 Registrant
McCann-Erickson Corporation (S.A.) Delaware 100 Registrant
McCann-Erickson Corporation (International) Delaware 100 Registrant
McCann-Erickson (Paraguay) Co. Delaware 100 Registrant
McCann-Erickson Worldwide, Inc. Delaware 100 Registrant
McCann Healthcare, Inc. Delaware 100 McCann-Erickson USA, Inc.
McCann Worldwide Marketing Communications Co. Delaware 100 Registrant
Media Inc. Delaware 100 Registrant
Media Direct Partners, Inc. Delaware 100 Media, Inc.
Media Partnership Corporation Delaware 100 Registrant
Newspaper Services of America, Inc. Delaware 100 Registrant
PAGE
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 3
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
DOMESTIC:
Octagon Worldwide Inc. Delaware 100 Registrant
Player, LLC Delaware 51 Registrant
Player Development LLC Delaware 100 Player LLC
Player Management LLC Delaware 100 Player LLC
Regan, Campbell & Ward LLC Delaware 60 McCann-Erickson Worldwide USA, Inc.
Skott, Inc. Delaware 100 Newspaper Services of America, Inc.
The Coleman Group, LLC Delaware 51 Interpublic Television, Inc.
The Coleman Group Worldwide LLC Delaware 100 Registrant
The Lowe Group, Inc. Delaware 100 Lowe Worldwide Holdings B.V.
Thunder House Online Marketing Delaware 100 Registrant
Communications, Inc.
Weller & Klein Research, Inc. Delaware 100 Registrant
WPR Acquisition Corp. Delaware 100 McCann-Erickson USA, Inc.
Advantage International, Inc. District of 100 Advantage International Holdings, Inc.
Columbia
Advantage Investments, Inc. District of 100 Advantage International Holdings, Inc.
Columbia
Ben Disposition, Inc. Florida 100 LFS, Inc.
Rubin Barney & Birger, Inc. Florida 100 Registrant
Fitzgerald & Company Georgia 100 Registrant
Quest Futures Group, Inc. Kansas 100 Registrant
Adware Systems, Inc. Kentucky 100 McCann-Erickson USA, Inc.
Neva Group, Inc. Massachusetts 100 Registrant
C-E Communications Company Michigan 100 Registrant
Biogenesis Communications, Inc. New Jersey 100 Registrant
Genquest, Biomedical Education Services, Inc. New Jersey 100 Biogenesis Communications, Inc.
Global Healthcare Associates, Inc. New Jersey 100 Registrant
Horizon Communications, Inc. New Jersey 100 McCann-Erickson USA, Inc.
Integrated Communications Corp. New Jersey 100 Registrant
Internal Oncology Network, Inc. New Jersey 100 Torre Lazur, Inc.
Interpublic, Inc. New Jersey 100 Registrant
Medical Forum, Inc. New Jersey 100 Torre Lazur, Inc.
PAGE
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 4
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
DOMESTIC:
Pace, Inc. New Jersey 100 Registrant
Sound Vision, Inc. New Jersey 100 Torre Lazur, Inc.
Spectral Fusion, Inc. New Jersey 100 Torre Lazur, Inc.
Torre Lazur, Inc. New Jersey 100 Registrant
ABP\DraftWorldwide, Inc. New York 100 Registrant
API Championship Group Inc. New York 70 The Sponsorship Group Limited
D.L. Blair, Inc. New York 100 Registrant
GDL, Inc. New York 100 The Lowe Group, Inc.(100% of Common
Stock) and Goldschmidt Dunst &
Lawson Corp. (100% of Preferred
Stock)
Goldschmidt Dunst & Lawson Corp. New York 100 The Lowe Group, Inc.
Herbert Zeltner, Inc. New York 100 Registrant
LCF&L, Inc. New York The Lowe Group, Inc. (99.9%) and
GDL, Inc. (.1%)
Lowe Group Holdings, Inc. New York 100 Registrant
Lowe McAdams Healthcare Inc. New York 100 Lowe & Partners/SMS Inc.
Lowe & Partners/SMS Inc. New York 100 Lowe International (16%), Lowe Worldwide
Holdings B.V. (4%) and
Registrant (80%)
Ludgate Communications, Inc. New York 100 Ludgate Group Limited
McCann Direct, Inc. New York 100 Registrant
McCann-Erickson Marketing, Inc. New York 100 Registrant
Promotion & Merchandising, Inc. New York 100 D.L. Blair, Inc.
T.C. Promotions I, Inc. New York 100 Registrant
T.C. Promotions II, Inc. New York 100 Registrant
Technology Solutions, Inc. New York 100 Registrant
The Gotham Group, Inc. New York 100 Registrant
Western Trading LLC New York 55 Western International Media Corporation
Addison Whitney, Inc. North Carolina 100 Registrant
Long Haymes Carr, Inc. North Carolina 100 Registrant
F&S Disposition, Inc. Ohio 100 Ammirati Puris Lintas Inc.
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 5
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
DOMESTIC:
Marketing Arts Corporation Virginia 100 The Martin Agency, Inc.
Cabell Eanes, Inc. Virginia 100 The Martin Agency, Inc.
The Martin Agency, Inc. Virginia 100 Lowe & Partners/SMS Inc.
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 6
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
FOREIGN:
Interpublic S.A. de Publicidad Argentina 100 Registrant
IM Naya Argentina 50 Registrant
Adlogic Proprietary Limited Australia 50 Merchant Partners Australia Ltd.
Advantage International Pty. Limited Australia 80 Advantage International Holdings, Inc.
Advantage Holdings Ltd. Australia 100 Advantage International Holdings, Inc.
Advantage Racing Pty. Ltd. Australia 80 Advantage International Holdings, Inc.
Ammirati Puris Lintas Proprietary Limited Australia 100 Registrant
Ammirati Puris Lintas Melbourne Australia 100 Ammirati Puris Lintas Proprietary
Proprietary Limited Limited
CWFS Australia 100 McCann Australia (50%) and
McCann-Erickson Limited(50%)
CSI (Australia) Pty Limited Australia 100 CSI Limited
Harrison Advertising Pty Limited Australia 100 McCann-Erickson Advertising Ltd.
Impulse Art Proprietary Limited Australia 100 Ammirati Puris Lintas Proprietary Ltd.
Interpublic Limited Proprietary Limited Australia 100 Registrant
Lintas: Hakuhodo Pty. Limited Australia 50 Ammirati Puris Lintas Proprietary Ltd.
Marplan Proprietary Limited Australia 100 Registrant
McCann-Erickson Advertising Pty. Limited Australia 100 Registrant
McCann-Erickson Sydney Proprietary Limited Australia 100 McCann-Erickson Advertising Ltd.
Merchant and Partners (Sydney) Pty. Ltd. Australia 100 Merchant and Partners Australia Pty.
Limited
Merchant and Partners Australia Pty. Limited Australia 100 Registrant
Round Australia Limited Australia 100 Advantage International Holdings, Inc.
Universal Advertising Placement Pty. Limited Australia 100 McCann-Erickson Advertising Ltd.
Ammirati Puris Lintas Werbeagentur Austria 100 Registrant
Gesellschaft m.b.H.
Campbell Ewald Werbeagentur Ges.m.b.H. Austria 100 Lowe Worldwide Holdings B.V.
Initiatives Media Werbemittlung Ges.m.b.H. Austria 100 Ammirati Puris Lintas Werbeagentur
Gesellschaft m.b.H.
McCann-Erickson Gesellschaft m.b.H. Austria 100 Registrant
PAGE
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 7
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
FOREIGN:
PCS Werbeagentur Ges.m.b.H. Austria 100 Ammirati Puris Lintas Werbeagentur
Gesellschaft m.b.H.
A.C.E. Advertising Creation Marketing N.V. Belgium 100 Ammirati Puris Lintas Brussels S.A.
Ammirati Puris Lintas Brussels S.A. Belgium 100 Ammirati Puris Lintas Holding B.V.
Direct Creations S.A. Belgium 100 Lowe Troost S.A.
Initiative Media Brussels S.A. Belgium 100 Ammirati Puris Lintas Brussels S.A.
(96%) and Initiative Media (4%)
Initiative Media International S.A. Belgium 100 Lintas Holding B.V.
Lowe Troost S.A. Belgium 100 Lowe Worldwide Holdings B.V.
McCann-Erickson Co. S.A. Belgium 100 Registrant
P.R. International N.V. Belgium 100 Ammirati Puris Lintas Brussels S.A.
Programming Media International-PMI S.A. Belgium 100 Registrant
Universal Media, S.A. Belgium 100 McCann-Erickson Co., S.A. (50%) and
Lowe Troost S.A. (50%)
Triad Assurance Limited Bermuda 100 Registrant
Ammirati Puris Lintas Ltda. Brazil 98.75 Registrant
DM Marketing Direto Ltda Brazil 51 DraftWorldwide, Inc.
DM Marketing Direto Sao Paulo Ltda Brazil 51 DraftWorldwide, Inc.
Interpublic Publicidade e Pesquisas Brazil 100 International Business Services, Inc.
Sociedade Limitada
McCann-Erickson Publicidade Ltda. Brazil 100 Registrant
MPMPPA Profissionais de Promocao Associados Ltda. Brazil 100 MPM Lintas Communicacoes Ltda.
Universal Publicidade Ltda Brazil 100 Interpublic Publicidade
E Pesquisas Sociedade Ltda.
API Prism International Inc. British Virgin 100 API Prism Limited
Islands
CSI Holdings S.A. British Virgin 100 Communication Services International
Islands (Holdings) S.A.
CSI International Holdings S.A. British Virgin 100 CSI Holdings S.A.
Islands
Adware Systems Canada Inc. Canada 100 Adware Systems, Inc.
PAGE
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 8
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
FOREIGN:
Ammirati Puris Lintas Canada Ltd. Canada 100 Registrant
API Sponsorship Limited Canada 75 The Sponsorship Group Limited
Diefenbach-Elkins Limited Canada 100 Diefenbach-Elkins
Durnan Communications Canada 100 Ammirati Puris Lintas Canada Ltd.
Lowe Holdings Ltd. Canada 100 Lowe Investments Ltd.
Lowe Investments Limited Canada 100 Lowe Group Holdings Inc.
MacLaren McCann Canada Inc. Canada 100 Registrant
Promaction Corporation Canada 100 McCann-Erickson Advertising of Canada
Promaction 1986 Inc. Canada 100 MacLaren McCann Canada, Inc.
364838 British Colombia Limited Canada 100 API Sponsorship Canada Ltd.
Tribu Lintas Inc. Canada 100 MacLaren McCann Canada, Inc.
Ammirati Puris Lintas Chile S.A. Chile 100 Ammirati Puris Lintas Holding B.V.
Dittborn, Urzueta y Asociados Marketing Chile 60 McCann-Erickson S.A. de Publicidad
Directo S.A.
Initiative Media Servicios de Medios Ltda. Chile 99 Ammirati Puris Lintas Chile S.A.
McCann-Erickson S.A. de Publicidad Chile 100 Registrant
Ammirati Puris Lintas China China 50 Registrant & Shanghai Bang Da
Advertising
McCann-Erickson Guangming Advertising Limited China 51 McCann-Erickson Worldwide
Ammirati Puris Lintas Colombia Colombia 100 Registrant
Epoca S.A. Colombia 60 Registrant
Harrison Publicidad De Colombia S.A. Colombia 100 Registrant
McCann-Erickson Centroamericana Costa Rica 100 Registrant
(Costa Rica) Ltda.
McCann-Erickson Zagreb Croatia 100 McCann-Erickson International GmbH
McCann-Erickson Prague
Ammirati Lintas Praha Spol. s.r.o. Czech Republic 100 Ammirati Puris Lintas Deutschland GmbH
McCann-Erickson Prague, Spol. s.r.o. Czech Republic 100 McCann-Erickson International GmbH
Pool Media International srl Czech Republic 100 McCann-Erickson Prague, Spol. s.r.o.
Femencom Limited Cyprus 100 Third Dimension Limited
Ammirati Puris Lintas Denmark A/S Denmark 100 Ammirati Puris Lintas Holding B.V.
Campbell-Ewald Aps Denmark 100 Registrant
PAGE
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 9
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
FOREIGN:
Initiative Universal Aps Denmark 100 Registrant
Job A/S Denmark 100 Ammirati Puris Lintas Denmark
McCann-Erickson A/S Denmark 100 Registrant
Medialog A/S Denmark 100 Registrant
Progaganda, Reuther, Lund & Priesler Denmark 75 Registrant
Reklamebureau Aps Denmark
Signatur APS Denmark 100 Ammirati Puris Lintas Denmark A/S
McCann-Erickson Dominicana, S.A. Dominican Republic 100 Registrant
McCann-Erickson (Ecuador) Publicidad S.A. Ecuador 96 McCann-Erickson Corporation (Int'l)
McCann-Erickson Centro Americana El Salvador 100 Registrant
(El Salvador) S.A.
Ammirati Puris Lintas Oy Finland 100 Lintas Holding B.V.
Hasan & Partners Oy Finland 100 Registrant
Lintas Service Oy Finland 100 Lintas Oy
Lowe Brindfors Oy Finland 100 Lowe Scandinavia AB
Lowe Brindfors Production Oy Finland 100 Lowe Brindfors Oy
Mainostoinisto Ami Hasan & Company Oy Finland 100 Hasan & Partners, Inc.
Mainostoinisto Womena - McCann Oy Finland 100 Registrant
McCann-Pro Oy Finland 100 Oy Liikemainonta-McCann AB
Oy Liikemainonta-McCann AB Finland 100 Registrant
PMI - Mediaporssi Oy Finland 66 Oy Liikemainonta-McCann AB (33%) and
Lintas Oy (33%)
Womena-Myynninvauhdittajat Oy Finland 100 Oy Liikemainonta-McCann AB
Alice SNC France 50 Lowe Alice S.A.
Ammirati Puris Lintas S.A. France 100 France C.C.P.M.
CDRG France France 74 McCann-Erickson France Holding Co.
Creation Sarl France 97.5 SP3 S.A.
Creative Marketing Service SAS France 100 France C.C.P.M.
D.L. Blair Europe SNC France 100 T.C. Promotions, I, Inc. (50%) and
T.C. Promotions II, Inc. (50%)
DraftWorldwide Sante Sarl France 100 DraftWorldwide Sarl
DraftWorldwide Sarl France 100 DraftWorldwide Limited
PAGE
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 10
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
FOREIGN:
E.C. Television/Paris, S.A. France 100 France C.C.P.M.
Fab + S.A. France 99.4 SP3 S.A.
France C.C.P.M. France 100 Ammirati Puris Lintas Holding B.V.
Infernal Sarl France 100 SP3 S.A.
Initiatives Media Paris S.A. France 100 France C.C.P.M.
Leuthe il-autre Agence France 85 McCann-Erickson (France) Holding Co.
Lowe Alice S.A. France 100 Lowe Worldwide Holdings B.V.
MacLaren Lintas S.A. France 100 France C.C.P.M.
McCann Communications France 75 McCann-Erickson (France) Holding Co.
McCann-Promotion S.A. France 99.8 McCann-Erickson (France) Holding Co.
McCann-Erickson (France) Holding Co. France 100 Registrant
McCann-Erickson (Paris) S.A. France 100 McCann-Erickson (France) Holding Co.
McCann-Erickson Rhone Alpes S.A. France 100 McCann-Erickson (France) Holding Co.
McCann-Erickson Thera France France 74 CDRG Communications
Publi Media Service France 50 Owned in quarters by McCann,
Ammirati Puris Lintas agencies in
France, Publicis and Idemedia
Slad France 60 McCann-Erickson (France) Holding Co.
SP3 S.A. France 100 McCann-Erickson (France) Holding Co.
Strateus France 72 France C.C.P.M.
Universal Media S.A. France 100 McCann-Erickson (France) Holding Co.
Valefi France 55 McCann-Erickson (France) Holding Co.
Virtuelle France 60 Fieldplan Limited
Adplus Werbeagentur GmbH Germany 100 Lowe & Partners GmbH Frankfurt
Ammirati Puris Lintas Deutschland GmbH Germany 100 Registrant
Ammirati Puris Lintas Service GmbH Germany 100 Ammirati Puris Lintas Deutschland GmbH
Ammirati Puris Lintas Hamburg GmbH Germany 100 Ammirati Puris Lintas Deutschland GmbH
Ammirati Puris Lintas S Communications GmbH Germany 100 Ammirati Puris Lintas Deutschland GmbH
Creative Media Services GmbH Germany 100 Ammirati Puris Lintas Deutschland GmbH
DraftWorldwide Holdings GmbH Germany 100 DraftWorldwide Limited
Gottschall & Partners GmbH Germany 100 Lowe & Partners Gmbh Frankfurt
Heinrich Hoffman & Partner GmbH Germany 100 Lowe & Partners GmbH Frankfurt
PAGE
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 11
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
FOREIGN:
IMP Interactive Partner GmbH Germany 100 Ammirati Puris Lintas Deutschland
Initiativ Media GmbH Germany 100 Ammirati Puris Lintas Deutschland GmbH
Interpublic GmbH Germany 100 Registrant
K&S Marketing and Consultant GmbH Germany 100 Adplus GmbH
Kolitho Repro GmbH Germany 100 Peter Reincke Direkt-Marketing GmbH
Krakow McCann Werbeagentur GmbH Germany 100 McCann-Erickson Deutschland GmbH
Lowe & Partners GmbH Dusseldorf Germany 100 Lowe Worldwide Holdings B.V. (75%)
and Registrant (25%)
Lowe & Partners GmbH Frankfurt Germany 100 Lowe & Partners GmbH Dusseldorf
Lowe & Partners GmbH Hamburg Germany 100 Lowe & Partners GmbH Dusseldorf
Mailpool Adressen-Management GmbH Germany 100 DraftWorldwide Holdings GmbH Germany
Max W.A. Kramer GmbH Germany 100 Ammirati Puris Lintas Deutschland GmbH
McCann Direct GmbH Germany 100 McCann-Erickson Deutschland GmbH
McCann-Erickson Dusseldorf Germany 100 McCann-Erickson Deutschland
McCann-Erickson (International) GmbH Germany 100 Registrant
McCann-Erickson Deutschland GmbH Germany 100 McCann-Erickson (International) GmbH
McCann-Erickson Scope GmbH Germany 100 McCann-Erickson Deutschland GmbH
McCann-Erickson Frankfurt GmbH Germany 100 McCann-Erickson Deutschland GmbH
McCann-Erickson Hamburg GmbH Germany 100 McCann-Erickson Deutschland GmbH
McCann-Erickson Nurnberg GmbH Germany 100 McCann-Erickson Deutschland GmbH
McCann-Erickson Service GmbH Germany 100 McCann-Erickson Deutschland GmbH
McCann-Erickson Management Property GmbH Germany 100 McCann-Erickson Deutschland GmbH (80%)
Interpublic GmbH (20%)
Peter Reincke Direkt-Marketing GmbH Germany 76 DraftWorldwide Holdings GmbH Germany
PWS Germany 100 McCann-Erickson Deutschland GmbH
Scherer MRM Holding GmbH Germany 75 McCann-Erickson Deutschland
Scherer Team GmbH Germany 100 Scherer MRM Holding GmbH
Typo-Wenz Artwork GmbH Germany 100 Interpublic GmbH
Universalcommunication Media Intensiv GmbH Germany 100 Interpublic GmbH
Unterstuetzungskasse der H.K. Germany 100 McCann-Erickson (International) GmbH
McCann Company GmbH
Wolff & Partner, Kreatives Direktmarketing GmbH Germany 100 DraftWorldwide Holdings GmbH Germany
PAGE
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 12
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
FOREIGN:
Ammirati Puris Lintas Advertising Company S.A. Greece 100 Interpublic Ltd. (95%), Fieldplan Ltd.
(5%)
Ammirati Puris Lintas Worldwide Greece 100 Interpublic Limited
Advertising (Hellas) L.L.C.
International Media Advertising S.C.A. Greece 100 Fieldplan Ltd.
McCann-Erickson Athens S.A. Greece 100 Registrant
Sprint Advertising S.A. Greece 51 Fieldplan Limited
Initiative Media Advertising S.A. Greece 100 Fieldplan Limited
Universal Media Hellas S.A. Greece 100 McCann-Erickson (International) GmbH
Publicidad McCann-Erickson Centroamericana Guatemala 100 Registrant
(Guatemala), S.A.
McCann-Erickson Centroamericana S. de R.L. Honduras 100 Registrant
(Honduras)
Anderson & Lembke Asia Limited Hong Kong 100 Anderson & Lembke, Inc.
API Prism Limited Hong Kong 70 The Sponsorship Group Limited
Ammirati Puris Lintas Hong Kong Limited Hong Kong 100 Ammirati Puris Lintas Holding B.V.
Communications Services International Asia Hong Kong 100 CSI International Holdings S.A.
Pacific Limited
Dailey International enterprises Ltd. Hong Kong 100 Registrant (50%), Ammirati Puris
Lintas (50%)
Dailey Investments Limited Hong Kong 100 Registrant (50%), Ammirati Puris
Lintas (50%)
DraftWorldwide Limited Hong Kong 100 DraftWorldwide, Inc.
Infoplan (Hong Kong) Limited Hong Kong 100 McCann-Erickson (HK) Limited
Lowe & Partners/Live Limited Hong Kong 74 Lowe Group Holdings Inc.
Ludgate Asia Ltd. Hong Kong 100 Ludgate Group Limited
McCann-Erickson, Guangming Ltd. Hong Kong 100 Registrant
McCann-Erickson (HK) Limited Hong Kong 100 Registrant
Prism Golf Management Limited Hong Kong 50 API Prism Limited
Ammirati Puris Lintas Budapest Reklam Es Hungary 100 Ammirati Puris Lintas Deutschland GmbH
Marketing Kommunikacios Kft (90%) and Ammirati Puris Lintas
Hamburg GmbH (10%)
PAGE
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 13
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
FOREIGN:
Initiative Media Hungary Hungary 100 Lintas Budapest
McCann-Erickson Interpress International Hungary 100 Registrant
Advertising Agency Ltd.
McCann-Erickson (India) Pvt. India 60 McCann-Erickson Worldwide Inc.
McCann-Erickson, Limited Ireland 100 Registrant
Ammirati Puris Lintas Milano S.p.A. Italy 100 Ammirati Puris Lintas Holding B.V.
Centro Media Planning-Buying-Booking S.r.l. Italy 100 Ammirati Puris Lintas Milano S.p.A.
Chorus Media Srl Italy 51 Pirella Gottsche Lowe S.p.A.
DraftWorldwide Italia Srl. Italy 100 DraftWorldwide, Inc.
Exel S.R.L. Italy 99 Ammirati Puris Lintas S.P.A.
Initiative Media S.R.L. Italy 100 Ammirati Puris Lintas S.P.A.
Infoplan Italiana S.P.A. Italy 100 Registrant
McCann-Erickson Italiana S.p.A. Italy 100 Registrant
McCann Marketing Communications S.p.A. Italy 100 McCann-Erickson Italiana S.p.A.
Pirella Gottsche Lowe S.p.A. Italy 95 Lowe Worldwide Holdings B.V.
Pool Media International (P.M.I.) S.r.l. Italy 100 Registrant (95%) and Business Science
Research Corp (5%)
Spring S.R.L. Italy 99 Ammirati Puris Lintas S.P.A.
Universal Media Srl Italy 100 McCann-Erickson Italiana S.p.A. (50%)
Pirella Gottsche Lowe S.p.A. (50%)
Ammirati Puris Lintas S.A. Ivory Coast 67 France C.C.P.M.
Nelson Ivory Coast Ivory Coast 100 McCann-Erickson France
McCann-Erickson (Jamaica) Limited Jamaica 100 Registrant
Ammirati Puris Lintas K.K. Japan 100 Ammirati Puris Lintas Nederland B.V.
Hakuhodo Lintas K.K. Japan 50 Registrant
Infoplan, Inc. Japan 100 McCann-Erickson Inc.
K.K. Momentum Japan 100 McCann-Erickson Inc.
K.K. Standard McIntyre Japan 50 McCann-Erickson Healthcare, Inc.
McCann-Erickson Inc. Japan 100 Registrant
Third Dimension Limited Jersey 100 Registrant
McCann-Erickson (Kenya) Limited Kenya 73 Registrant
Communication Services (International) Luxembourg 100 Registrant
Holdings S.A.
PAGE
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 14
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
FOREIGN:
Ammirati Puris Lintas (Malaysia) Sdn. Bhd. Malaysia 100 Registrant
API Sponsorship SDM.BHD Malaysia 100 API Sponsorship Canada Ltd. (50%) and
The Sponsorship Group Ltd. (50%)
Initiative Media (M) Sdn. Bhd. Malaysia 100 Ammirati Puris Lintas (Malaysia)
Sdn. Bhd.
McCann-Erickson (Malaysia) Sdn. Bhd. Malaysia 100 Registrant
Mutiara-McCann (Malaysia) Sdn. Bhd. Malaysia 83.50 Registrant
Union Two Thousand Sdn. Bhd. Malaysia 60.9 DraftWorldwide, Inc.
Ammirati Puris Lintas B.V. Netherlands 100 IPG Nederland B.V.
Anderson & Lembke Europe B.V. Netherlands 100 Anderson & Lembke, Inc.
CSI International B.V. Netherlands 100 CSI International B.V.
Data Beheer B.V. Netherlands 100 Data Holding B.V.
Data Holding B.V. Netherlands 100 IPG Nederland B.V.
Gold Reclame En Marketing Advisers B.V. Netherlands 100 IPG Nederland B.V.
Initiative Media Programming B.V. Netherlands 100 Ammirati & Puris Lintas B.V.
IPG Nederland B.V. Netherlands 100 Registrant
Lowe Digital B.V. Netherlands 80 Lowe Direct (30%), Lowe Kuipper
& Shoutten (50%)
Lowe Direct B.V. Netherlands 70 Lowe Kuipper & Shoutten
Lowe Europa B.V. Netherlands 100 Lowe Worldwide Holdings B.V.
Lowe International Holdings B.V. Netherlands 100 Registrant
Lowe Kuiper & Schouten B.V. Netherlands 100 Lowe Worldwide Holdings B.V.
Lowe Worldwide Holdings B.V. Netherlands 100 Poundhold Ltd.
McCann-Erickson (Nederland) B.V. Netherlands 100 IPG Nederland B.V.
Octagon Worldwide Holdings B.V. Netherlands 100 Lowe International Holdings B.V.
P. Strating Promotion B.V. Netherlands 100 IPG Nederland B.V.
Programming Media International B.V. Netherlands 100 Registrant
Reclame-Adviesbureau Via B.V. Netherlands 100 IPG Nederland B.V.
Roomijsfabriek "De Hoop" B.V. Netherlands 100 Ammirati Puris Lintas Holding B.V.
Universal Media B.V. Netherlands 100 IPG Nederland B.V.
Western International Media Holdings B.V. Netherlands 100 Lowe Group Holdings, Inc. (52%),
Ammirati Puris Lintas (38%), and
Western Media (10%)
PAGE
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 15
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
FOREIGN:
Zet Zet B.V. Netherlands 100 Data Gold B.V.
CSI International N.V. Netherlands 100 CSI Holdings S.A.
Antilles
Ammirati Puris Lintas (NZ) Limited New Zealand 100 Registrant
McCann-Erickson Limited New Zealand 100 Registrant
Pearson Davis New Zealand 51 Ammirati Puris Lintas New Zealand
Pritchard Wood-Quadrant Limited New Zealand 100 Registrant
Universal Media Limited New Zealand 100 McCann-Erickson Limited
Digit A/S Norway 100 JBR/McCann/A/S
JBR Film A/S Norway 100 JBR Reklamebyra A/S
JBR McCann A/S Norway 100 McCann-Erickson A/S
JBR McCann Signatur A/S Norway 100 McCann-Erickson A/S
JBR Purkveien A/S Norway 100 McCann-Erickson A/S
JBR Riddeersvoldgate A.S. Norway 100 McCann-Erickson A/S
Lowe Norway A/S Norway 100 Lowe Scandinavia AB
McCann-Erickson A/S Norway 100 McCann-Erickson Marketing
H.K. McCann Communications Company, Inc. Philippines 100 McCann-Erickson (Philippines) Inc.
McCann-Erickson (Philippines), Inc. Philippines 58 Registrant (30%), Business Science
Research Corp. (28%)
McCann Group of Companies, Inc. Philippines 100 Registrant
Ammirati Puris Lintas Warsawa Sp. Poland 100 Ammirati Puris Lintas Deutschland GmbH
IM Warsaw Poland 100 Ammirati Puris Lintas Warsaw
ITI McCann-Erickson International Advertising Poland 50 McCann-Erickson International GmbH
McCann Communications - Poland Poland 100 Registrant
McCann-Erickson Prague Spol. s.r.o. Poland 100 McCan-Erickson International GmbH
Ammirati Puris Lintas, Lda. Portugal 100 Interpublic SGPS/Lda.
Iniciativas De Meios-Actividades Publicitarias, Portugal 98 Ammirati Puris Lintas, Ltda.
Limitada
Interpublic SGPS/Lda Portugal 100 Registrant
Lowe Portuguesa Publicidade a Estudios de Portugal 100 Interpublic SGPS/Lda
Mercado, S.A.
McCann-Erickson/Portugal Limitada Portugal 100 Interpublic SGPS/Lda
PAGE
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 16
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
FOREIGN:
MKM Markimage, Marketing E Imagem, S.A. Portugal 100 McCann-Erickson Portugal
Publicidade Ltda.
Universal Media Publicidade, Limitada Portugal 100 McCann-Erickson/Portugal Limitada
Ammirati Puris Lintas Puerto Rico, Inc. Puerto Rico 100 Ammirati Puris Lintas, Inc.
McCann-Erickson, Dublin Limited Republic of 100 Registrant
Ireland
B.V. McCann-Erickson Romania Romania 70 Registrant
McCann-Erickson Moscow Russia 100 McCann-Erickson International GmbH
Ammirati Puris Lintas (Singapore) Pte. Ltd. Singapore 100 Registrant
Lowe & Partners/Monsoon Advertising Pte. Ltd. Singapore 80 Lowe Group Holdings Inc.
McCann-Erickson (Singapore) Singapore 100 Registrant
Union Two Thousand Pte. Ltd. Singapore 60 DraftWorldwide, Inc.
McCann-Erickson Bratislava Slova Republic 100 McCann-Erickson Prague Spol. s.r.o.
Adsearch Proprietary Limited South Africa 100 Registrant
Ammirati Puris Lintas (Proprietary) Limited South Africa 100 Ammirati Puris Lintas Holding B.V. (76%)
Registrant (24%)
API Sponsorship S.A. (Pty) Limited South Africa 95 The Sponsorship Group Limited
API Sportshows Limited South Africa 50 API Sponsorship S.A. (Pty) Ltd.
Campbell-Ewald Proprietary Limited South Africa 100 McCann-Erickson South Africa
Proprietary Limited
McCann Cape Town (Proprietary) Limited South Africa 100 McCann Group
McCann Durban (Proprietary) Limited South Africa 100 McCann Group
McCann-Erickson South Africa (Pty.) South Africa 100 Registrant
Ltd. ("McCann Group")
McCann International (Proprietary) Limited South Africa 100 McCann Group
McCann South Africa Proprietary Limited South Africa 100 McCann-Erickson Johannesburg
(Proprietary) Limited
McCann-Erickson Johannesburg (Proprietary) South Africa 100 McCann-Erickson South Africa
Limited (Proprietary) Limited
McCannix Proprietary Limited South Africa 100 McCann-Erickson Johannesburg
(Proprietary) Limited
PAGE
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 17
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
FOREIGN:
Media Initiative (Proprietary) Limited South Africa 100 Ammirati Puris Lintas (Proprietary)
Limited
PULA API (Pty) Limited South Africa 51 API Sponsorship S.A. (Pty) Ltd.
The Loose Cannon Company Proprietary Limited South Africa 100 McCann-Erickson South Africa
Proprietary Limited
Universal Media (Proprietary) Limited South Africa 100 McCann Group
Lintas Korea, Inc. South Korea 100 Registrant
McCann-Erickson, Inc. South Korea 51 McCann-Erickson Marketing, Inc.
Ammirati Puris Lintas S.A. Spain 100 Ammirati Puris Lintas Holding B.V.
Cachagua S.A. Spain 100 The Interpublic Group of Companies de
Espana S.A.
Clarin, S.A. Spain 100 McCann-Erickson S.A.
Coleman Schmidlin & Partner S.A. Spain 71 Coleman Group Worldwide, LLC
DraftWorldwide S.A. Spain 70 DraftWorldwide Limited
Encuadre S.A. Spain 67 Clarin, S.A.
Events & Programming International Spain 100 The Interpublic Group of Companies de
Consultancy, S.A. (EPIC) Espana S.A.
Iniciativas de Medios, S.A. Spain 100 Ammirati Puris Lintas, S.A.
Lowe & Partners Espana S.A. Spain 98 Lowe Worldwide Holdings B.V. (91%)
Lowe International Holdings B.V. (7%)
McCann-Erickson S.A. Spain 100 The Interpublic Group of Companies de
Espana S.A.
McCann-Erickson Barcelona S.A. Spain 100 The Interpublic Group of Companies de
Espana S.A.
Pool Media International S.A. Spain 100 The Interpublic Group of Companies de
Espana S.A.
The Interpublic Group of Companies de Espana Spain 100 Registrant
Universal Media S.A. Spain 100 McCann-Erickson S.A.
Valmorisco Communications Spain 100 The Interpublic Group of Companies de
Espana S.A.
Ammirati Puris Lintas Shoppen AB Sweden 100 Ammirati Puris Lintas AB
Ammirati Puris Lintas AB Sweden 100 Ammirati Puris Lintas Holding B.V.
PAGE
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 18
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
FOREIGN:
Anderson & Lembke AB Sweden 100 Anderson & Lembke, Inc.
Infoplan AB Sweden 100 McCann-Erickson AB
Interpublic Svenska AB Sweden 100 Lowe International Holdings B.V.
Lost Forever AB Sweden 100 Message Plus Media
Lowe Brindfors AB Sweden 100 Lowe Scandinavia AB
Lowe Scandinavia AB Sweden 100 Interpublic Svenska AB
McCann Annonsbyra AB Sweden 100 McCann-Erickson AB
McCann Annonsbyra I Malmoe AB Sweden 100 McCann-Erickson AB
McCann-Erickson AB Sweden 100 Registrant
Message Plus Media Sweden 91 Lowe Scandinavia AB
PMI Initiative Universal Media AB Sweden 100 Ammirati Puris Lintas AB (50%)
McCann-Erickson AB (50%)
Ronnberg & McCann A.B. Sweden 100 McCann-Erickson AB
Swedish Media Exchange SMX AB Sweden 100 Interpublic Svenska AB
Advantage International Inc. Switzerland 100 Advantage International Holdings, Inc.
Coleman Schmidlin Partner AG Switzerland 71 Coleman Group Worldwide LLC
Fisch Meier Direkt AG Switzerland 100 Ammirati Puris Lintas Deutschland GmbH
Fisch Meier Promotion AG Switzerland 100 Fisch Meier Direkt AG
Get Neue Gestaltungstechnik AG Switzerland 100 Bosch & Butz Werbeagenter
Initiative Media Switzerland Switzerland 100 Ammirati Puris Lintas Holding B.V.
Lowe Bosch & Butz Werbeagenter AG Switzerland 80 Lowe International Holdings B.V.
McCann-Erickson S.A. Switzerland 100 Registrant
McCann-Erickson Services S.A. Switzerland 100 Registrant
P.C.M. Marketing AG Switzerland 100 Ammirati Puris Lintas Deutschland GmbH
Pool Media-PMI S.A. Switzerland 100 Registrant
Sinka, Interactive AG Switzerland 100 Fisch Meier Direkt AG
Unimedia S.A. Switzerland 100 Registrant
Ammirati Puris Lintas Taiwan Ltd. Taiwan 100 Registrant
McCann-Erickson Communications Group Co. Ltd. Taiwan 100 Registrant
Lintas (Thailand) Ltd. Thailand 80 Registrant
PAGE
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 19
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
FOREIGN:
McCann-Erickson (Thailand) Ltd. Thailand 100 Registrant
Lintas Gulf Limited U.A.E. 51 Ammirati Puris Lintas Worldwide Limited
McCann-Erickson (Trinidad) Limited Trinidad 100 Registrant
Grafika Lintas Reklamcilik A.S. Turkey 51 Registrant
Initiative Media Istanbul Turkey 70 Registrant
Link Ajams Limited Sirketi Turkey 100 PARS
Lowe Adam Tanitim Hizmetleri AS Turkey Turkey 80 Lowe International Holdings B.V.
McCann-Direct Reklam Tanitama Servisleri A.S. Turkey 100 PARS
PARS McCann-Erickson Reklamcilik A.S.("PARS") Turkey 100 Registrant
Universal Media Planlama Ve Dagitim Turkey 100 PARS
Addison Whitney United Kingdom 100 Interpublic Limited (50%), Business
Science Research (50%)
Addition Communications Limited United Kingdom 100 SP Group Limited
Addition Marketing Group Limited United Kingdom 100 SP Group Limited
Advantage International Limited United Kingdom 100 Interpublic Limited
Adware Systems Limited United Kingdom 100 Orkestra Limited
Ammirati Puris Lintas Limited United Kingdom 100 Interpublic Limited
API Consulting Limited United Kingdom 100 The Sponsorship Group Limited
API Personality Management Limited United Kingdom 100 The Sponsorship Group Limited
API Soccer Limited United Kingdom 100 The Sponsorship Group Limited
API Sponsorship Canada Limited United Kingdom 100 The Sponsorship Group Limited
API Sponsorship Europe Limited United Kingdom 100 The Sponsorship Group Limited
API Sponsorship USA Limited United Kingdom 100 The Sponsorship Group Limited
API Sponsorship Limited United Kingdom 100 The Sponsorship Group Limited
API Sports Media Limited United Kingdom 100 The Sponsorship Group Limited
API Television Limited United Kingdom 100 The Sponsorship Group Limited
Artel Studios Limited United Kingdom 100 Stowe, Bowden, Wilson Limited
Barnett Fletcher Promotions Company Limited United Kingdom 100 Interpublic Limited
Brilliant Pictures Limited United Kingdom 100 Still Price Court Twivy D'Souza
Lintas Group Limited
PAGE
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 20
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
FOREIGN:
Brompton Advertising Ltd. United Kindgom 100 The Brompton Group Ltd.
Brompton Promotions Ltd. United Kingdom 100 The Brompton Group Ltd.
Bureau of Commercial Information Limited United Kingdom 100 Registrant
Bureau of Commercial Research Limited United Kingdom 100 Registrant
Business Geographics United Kingdom 70 International Poster Management Limited
Campbell-Ewald Limited United Kingdom 100 Interpublic Limited (50%), Business
Science Research (50%)
Card Marketing & Technology Limited United Kingdom 100 Interfocus Group Limited
CM Lintas International Ltd. United Kingdom 100 Interpublic Limited
Coachouse Ltd. United Kingdom 100 McCann-Erickson Manchester Limited
Coleman Planet & Partners Limited United Kingdom 71 Registrant
Colourwatch Group Limited United Kingdom 100 Lowe International Limited
Complete Medical Group United Kingdom 100 Interpublic Limited
Croxland Limited United Kingdom 100 Interfocus Group Limited
CSI Limited United Kingdom 100 Third Dimension Limited
Davies/Baron Limited United Kingdom 100 Interpublic Limited
DraftWorldwide Limited United Kingdom 100 Interpublic Limited
Epic (Events & Programming International United Kingdom 100 Interpublic Limited
Consultancy) Limited
Fieldplan Ltd. United Kingdom 100 Interpublic Limited
Gotham Limited United Kingdom 100 Lowe International Limited
Global Corporate Commercial & Broadcast Limited United Kingdom 100 Global Sports Production Ltd.
Global Sports Production Limited United Kingdom 85 The Sponsorship Group Limited
Grand Slam Millennium Television Limited United Kingdom 85 The Sponsorship Group Limited
Grand Slam Sports Limited United Kingdom 100 The Sponsorship Group Limited
Harrison Advertising (International) Limited United Kingdom 100 Interpublic Limited
H.K. McCann Limited United Kingdom 100 McCann Erickson Advertising Limited
Initiative Media Limited United Kingdom 100 Interpublic Limited
Initiative Media London Limited United Kingdom 99.5 Still Price Court Twivy D'Souza
Lintas Group Limited
Interfocus Group Limited United Kingdom 75 Registrant
PAGE
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 21
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
FOREIGN:
Interfocus Network Ltd. United Kingdom 75 Interfocus Group Ltd.
International Poster Management Ltd. United Kingdom 100 Interpublic Limited
Interpublic Limited United Kingdom 100 Registrant
Interpublic Pension Fund Trustee United Kingdom 100 Interpublic Limited
Company Limited
LHSB Management Services Ltd. United Kingdom 100 Lowe International Limited
Lintas International Limited United Kingdom 100 Interpublic Limited
Lintas Worldwide Limited United Kingdom 100 Interpublic Limited (50%), Business
Science Research (50%)
Lintas W.A. Limited United Kingdom 100 Interpublic Limited
Lovell Vass Boddey Limited United Kingdom 100 DraftWorldwide Limited
Lowe Digital Limited United Kingdom 100 Lowe International Limited
Lowe Direct Limited United Kingdom 75 Lowe International Limited
Lowe Howard-Spink Ltd. United Kingdom 100 Lowe International Limited
Lowe & Howard-Spink Media Limited United Kingdom 100 Lighthold Limited
Lowe International Limited United Kingdom 100 Interpublic Limited
Lowe & Partners Financial Limited United Kingdom 100 Lowe International Limited
Ludcom PLC United Kingdom 100 Ludgate Group Limited
Ludgate Bachard Limited United Kingdom 10 Ludgate Group Limited
Ludgate Communications Limited United Kingdom 100 Ludgate Group Limited
Ludgate Design Limited United Kingdom 100 Ludgate Group Limited
Ludgate Group Limited United Kingdom 100 Interpublic Limited
Ludgate Laud Limited United Kingdom 100 Ludgate Group Limited
MLS Soccer Limited United Kingdom 100 The Sponsorship Group Limited
Matter of Fact Communications Limited United Kingdom 100 McCann-Erickson Bristol Limited
McCann Communications Limited United Kingdom 100 Interpublic Limited
McCann Direct Limited United Kingdom 100 Interpublic Limited
McCann-Erickson Advertising Limited United Kingdom 100 Interpublic Limited
McCann-Erickson Belfast Limited United Kingdom 100 McCann-Erickson United Kingdom Limited
McCann-Erickson Bristol Limited United Kingdom 100 McCann-Erickson United Kingdom Limited
McCann-Erickson Central Limited United Kingdom 100 McCann-Erickson United Kingdom Limited
PAGE
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 22
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
FOREIGN:
McCann-Erickson Manchester Limited United Kingdom 100 McCann-Erickson United Kingdom Limited
McCann-Erickson Payne, Golley Ltd. United Kingdom 75.9 McCann-Erickson United Kingdom Limited
McCann-Erickson Scotland Limited United Kingdom 100 McCann-Erickson United Kingdom Limited
McCann-Erickson United Kingdom Limited United Kingdom 100 Interpublic Limited
McCann-Erickson Wales United Kingdom 100 McCann-Erickson Payne Golley
McCann-Erickson Payne Golley Limited United Kingdom 100 McCann-Erickson United Kingdom Limited
McCann-Erickson Scotland Limited United Kingdom 100 McCann-Erickson United Kingdom Limited
McCann Media Limited United Kingdom 100 McCann-Erickson Bristol
McCann Properties Limited United Kingdom 100 McCann-Erickson United Kingdom Limited
Octagon Worldwide Limited United Kingdom 100 Octagon Worldwide Holdings BV
Orbit International (1990) Ltd. United Kingdom 100 Lowe International Limited
Orkestra Ltd. United Kingdom 100 Interpublic Limited
Planet Packaging Consultants, Ltd. United Kingdom 71 The Coleman Group Worldwide LLC
Poundhold Ltd. United Kingdom 100 Lowe International Limited
Pritchard Wood and Partners Limited United Kingdom 100 Interpublic Limited (50%), Business
Science Research (50%)
Royds London Limited United Kingdom 100 McCann-Erickson United Kingdom Limited
Salesdesk Limited United Kingdom 100 Orkestra Ltd.
Smithfield Lease Limited United Kingdom 100 Lowe International Limited
Sports Management Limited United Kingdom 100 The Sponsorship Group Limited
SP Group Limited United Kingdom 100 Interpublic Limited
Still Price Court Twivy D'Souza Lintas Limited United Kingdom 100 SP Group Limited
Stowe, Bowden, Wilson Limited United Kingdom 100 McCann-Erickson United Kingdom Limited
Talbot Television Limited United Kingdom 100 Fremantle International Inc.
Tavistock Advertising Limited United Kingdom 100 Lowe International Limited
Team GB Limited United Kingdom 100 The Sponsorship Group Limited
The Below the Line Agency Limited United Kingdom 100 Interpublic Limited
The Big Events Company Limited United Kingdom 100 CSI Limited
The Brompton Group Ltd. United Kingdom 100 Lowe International Limited
The Championship Group Limited United Kingdom 100 The Sponsorship Group Limited
PAGE
PERCENTAGE EXHIBIT 21
OF VOTING PAGE 23
SECURITES MARCH 20, 1998
JURISDICTION OWNED BY
UNDER WHICH IMMEDIATE
NAME ORGANIZED PARENT (%) IMMEDIATE PARENT
FOREIGN:
The Howland Street Studio Ltd. United Kingdom 100 Interpublic Limited
The Line Limited United Kingdom 100 SP Group Limited
The Lowe Group Nominees Limited United Kingdom 100 Lowe International Limited
The Really Big Promotions Company Limited United Kingdom 100 Interpublic Limited
The Sponsorship Group Limited United Kingdom 60.23 Registrant
Tinker and Partners Limited United Kingdom 100 Interpublic Limited
Tweak Limited United Kingdom 100 SP Group Limited
Universal Advertising Limited United Kingdom 100 Interpublic Limited
Universal Communications Worldwide Limited United Kingdom 100 Interpublic Limited
Virtual Reality Sports Limited United Kingdom 100 The Sponsorship Group Limited
Washington Soccer Limited United Kingdom 100 The Sponsorship Group Limited
Weber Europe Limited United Kingdom 100 Interpublic Limited
Western International Media Ltd. United Kingdom 100 Lowe International Holdings B.V.
Lifox S.A. Uruguay 100 Lowe Group Holdings, Inc.
Lingfield S.A. (safi) Uruguay 100 Interpublic Publicidade a Pesquisas
Sociedad Ltda.
Rockdone Corporation S.A. (safi) Uruguay 100 Universal Publicidade S.A. (safi)
Steffen Corporation Uruguay 100 Ammirati Puris Lintas Brasil
Universal Publicidade S.A. (safi) Uruguay 100 McCann-Erickson Publicidade Ltda.
McCann-Erickson Publicidad De Venezuela, S.A. Venezuela 99.67 Registrant
Lintas (Private) Limited Zimbabwe 80 Fieldplan Ltd.
A number of inactive subsidiaries and other subsidiaries, all of which considered in the aggregate as a single subsidiary would
not constitute a significant subsidiary, are omitted from the above list.
These subsidiaries normally do business under their official corporate names.
International Business Services, Inc. does business in Michigan under the
name "McCann-I.B.S., Inc." and in New York under the name "McCann
International Business Services". Ammirati Puris Lintas, Inc. conducts
business through its Ammirati Puris Lintas New York division.
McCann-Erickson conducts some of its business in the states of Kentucky and
Michigan under the name "McGraphics". McCann-Erickson USA, Inc. does business
in Michigan under the name SAS and does business in Indiana, Michigan,
New York, Pennsylvania and Wisconsin under the name of McCann-Erickson
Universal Group.
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
The Interpublic Group of Companies, Inc.
Our audits of the consolidated financial statements referred to in
our report dated February 20, 1998 appearing in the 1997 Annual
Report to Stockholders of The Interpublic Group of Companies, Inc.
(which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also
included an audit of the Financial Statement Schedule listed in
Item 14 (a) of this Form 10-K. In our opinion, this Financial
Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the
related consolidated financial statements.
PRICE WATERHOUSE LLP
New York, New York
February 20, 1998
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statements on Form S-8 of The Interpublic Group of
Companies, Inc. (the "Company"), of our report dated February 20,
1998, appearing in the 1997 Annual Report to Stockholders which is
incorporated in this Annual Report on Form 10-K: Registration
Statements No. 2-79071; No. 2-43811; No. 2-56269; No. 2-61346;
No. 2-64338; No. 2-67560; No. 2-72093; No. 2-88165; No. 2-90878,
No. 2-97440 and No. 33-28143, relating variously to the Stock Option
Plan (1971), the Stock Option Plan (1981), the Stock Option Plan
(1988) and the Achievement Stock Award Plan of the Company;
Registration Statements No. 2-53544; No. 2-91564, No. 2-98324,
No. 33-22008, No. 33-64062 and No. 33-61371, relating variously to
the Employee Stock Purchase Plan (1975), the Employee Stock Purchase
Plan (1985) and the Employee Stock Purchase Plan of the Company
(1995); Registration Statements No. 33-20291 and No. 33-2830
relating to the Management Incentive Compensation Plan of the
Company; Registration Statements No. 33-5352, No. 33-21605,
No. 333-4747 and No. 333-23603 relating to the 1986 Stock Incentive
Plan, the 1986 United Kingdom Stock Option Plan and the 1996 Stock
Incentive Plan, of the Company; Registration Statements No. 33-10087
and No. 33-25555 relating to the Long-Term Performance Incentive
Plan of the Company; Registration Statement No. 333-28029 relating
to The Interpublic Outside Directors' Stock Incentive Plan of the
Company; and Registration Statement No. 33-42675 relating to The
1997 Performance Incentive Plan of the Company. We hereby consent
PAGE
to the incorporation by reference in the Prospectuses constituting
part of the Registration Statements on Form S-3 (No. 333-22899, No.
333-42243, No. 333-42905, and No. 333-45569) of The Interpublic
Group of Companies, Inc. of our report dated February 20, 1998
appearing in the 1997 Annual Report to Stockholders which is
incorporated in this Annual Report on Form 10-K. We also consent to
the incorporation by reference of our report on the Financial
Statement Schedule, which appears above.
PRICE WATERHOUSE LLP
New York, New York
March 26, 1998
F-2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual
whose signature appears below constitutes and appoints PHILIP H.
GEIER, JR., EUGENE P. BEARD, JOSEPH STUDLEY and NICHOLAS J.
CAMERA, and each of them, as true and lawful attorneys-in-fact
and agents with full power of substitution and resubstitution,
for him, and in his name, place and stead, in any and all
capacities, to sign the Report on Form 10-K for the year ended
December 31, 1997, for The Interpublic Group of Companies, Inc.,
S.E.C. File No. 1-6686, and any and all amendments and
supplements thereto and all other instruments necessary or
desirable in connection therewith, and to file the same, with all
exhibits thereto, and all documents in connection therewith, with
the Securities and Exchange Commission and the New York Stock
Exchange, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and
every act and thing requested and necessary to be done in and
about the premises as fully to all intents and purposes as he
might do or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agents or any of them or their
or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: March 26, 1998
PHILIP H. GEIER, JR. JOHN J. DOONER, JR.
PHILIP H. GEIER, JR. JOHN J. DOONER, JR.
EUGENE P. BEARD FRANK B. LOWE
EUGENE P. BEARD FRANK B. LOWE
FRANK J. BORELLI LEIF H. OLSEN
FRANK J. BORELLI LEIF H. OLSEN
REGINALD K. BRACK MARTIN F. PURIS
REGINALD K. BRACK MARTIN F. PURIS
JILL M. CONSIDINE ALLEN QUESTROM
JILL M. CONSIDINE ALLEN QUESTROM
J. PHILLIP SAMPER
J. PHILLIP SAMPER
PAGE
THE INTERPUBLIC GROUP OF COMPANIES, INC.
CERTIFIED RESOLUTIONS
I, Nicholas J. Camera, Secretary of The Interpublic
Group of Companies, Inc. (the "Corporation"), hereby certify that
the resolutions attached hereto were duly adopted on March 20,
1997 by the Board of Directors of the Corporation and that such
resolutions have not been amended or revoked.
WITNESS my hand and the seal of the Corporation this
26th day of March, 1998.
NICHOLAS J. CAMERA
NICHOLAS J. CAMERA
PAGE
THE INTERPUBLIC GROUP OF COMPANIES, INC.
MEETING OF THE BOARD OF DIRECTORS
RESOLUTIONS RE FROM 10-K
RESOLVED, that the Chairman of the Board and President
and the Vice Chairman-Finance and Operations of the Corporation
be, and each of them hereby is, authorized to execute and deliver
on behalf of the Corporation an annual report on Form 10-K for
the year ended December 31, 1997, in the form presented to this
meeting with such changes therein as either of them with the
advice of the General Counsel shall approve; and further
RESOLVED, that the Chairman of the Board and President
in his capacity as Chief Executive Officer, the Vice
Chairman-Finance and Operations in his capacity as Chief
Financial Officer, and the Vice President and Controller in his
capacity as Chief Accounting Officer of the Corporation be, and
each of them hereby is, authorized to execute such annual report
on Form 10-K; and further
RESOLVED, that the officers of the Corporation be and
each of them hereby is, authorized and directed to file such
annual report on Form 10-K, with all the exhibits thereto and any
other documents that may be necessary or desirable in connection
therewith, after its execution by the foregoing officers and by a
majority of this Board of Directors, with the Securities and
Exchange Commission and the New York Stock Exchange; and further
RESOLVED, that the officers and directors of the
Corporation who may be required to execute such annual report on
Form 10-K be, and each of them hereby is, authorized to execute a
power of attorney in the form submitted to this meeting
appointing Philip H. Geier, Jr., Eugene P. Beard, Joseph Studley
and Nicholas J. Camera, and each of them, severally, his or her
true and lawful attorneys and agents to act in his or her name,
place and stead, to execute said annual report on Form 10-K and
any and all amendments and supplements thereto and all other
instruments necessary or desirable in connection therewith; and
further
RESOLVED, that the signature of any officer of the
Corporation required by law to affix his signature to such annual
report on Form 10-K or to any amendment or supplement thereto and
such additional documents as they may deem necessary or advisable
in connection therewith, may be affixed by said officer
personally or by any attorney-in-fact duly constituted in writing
by said officer to sign his name thereto; and further
RESOLVED, that the officers of the Corporation be, and
each of them hereby is, authorized to execute such amendments or
supplements to such annual report on Form 10-K and such
additional documents as they may deem necessary or advisable in
connection with any such amendment or supplement and to file the
foregoing with the Securities and Exchange Commission and the New
York Stock Exchange; and further
RESOLVED, that the officers of the Corporation be, and
each of them hereby is, authorized to take such actions and to
execute such other documents, agreements or instruments as may be
necessary or desirable in connection with the foregoing.
5
YEAR YEAR
DEC-31-1995 DEC-31-1996
DEC-31-1995 DEC-31-1996
418,448 468,526
38,926 35,408
2,320,248 2,646,259
21,941 33,301
0 0
2,974,398 3,353,459
437,466 495,361
240,274 276,448
4,259,766 4,765,130
2,826,697 3,199,029
113,235 115,192
0 0
0 0
8,963 13,641
749,706 872,015
4,259,766 4,765,130
0 0
2,179,739 2,537,516
0 0
1,925,584 2,180,370
0 0
0 0
38,020 40,765
254,155 357,146
122,743 150,003
129,812 205,205
0 0
0 0
0 0
129,812 205,205
1.14 1.76
1.11 1.69
5
3-MOS 6-MOS 9-MOS
DEC-31-1996 DEC-31-1996 DEC-31-1996
MAR-31-1996 JUN-30-1996 SEP-30-1996
322,874 415,898 424,832
44,760 41,502 42,354
2,078,745 2,467,895 2,211,656
22,593 24,246 27,825
0 0 0
2,667,235 3,159,264 2,917,266
444,774 461,766 474,233
248,685 255,199 266,552
3,982,938 4,510,687 4,276,170
2,559,642 3,000,744 2,783,426
113,923 114,651 114,456
0 0 0
0 0 0
8,998 9,039 9,069
727,695 811,052 810,683
3,982,938 4,510,687 4,276,170
0 0 0
506,160 1,181,504 1,749,222
0 0 0
475,634 1,006,867 1,526,207
0 0 0
0 0 0
9,525 19,190 29,494
30,526 174,637 223,015
13,126 74,374 94,901
17,832 100,759 128,230
0 0 0
0 0 0
0 0 0
17,832 100,759 128,230
.15 .87 1.10
.15 .84 1.07
5
3-MOS 6-MOS 9-MOS
DEC-31-1997 DEC-31-1997 DEC-31-1997
MAR-31-1997 JUN-30-1997 SEP-30-1997
411,614 405,677 451,595
34,074 41,734 39,635
2,638,123 2,910,799 2,684,633
33,082 22,468 39,645
0 0 0
3,313,769 3,658,836 3,489,648
498,469 523,965 544,820
282,068 292,488 310,215
4,711,765 5,204,108 5,081,735
3,196,854 3,603,745 3,255,160
115,929 116,626 315,459
0 0 0
0 0 0
13,723 13,820 13,892
835,406 910,426 911,561
4,711,765 5,204,108 5,081,735
0 0 0
597,238 1,409,551 2,133,049
0 0 0
558,279 1,203,600 1,863,371
0 0 0
0 0 0
10,266 21,483 35,497
38,959 205,951 269,678
16,763 86,543 113,828
22,035 111,799 147,091
0 0 0
0 0 0
0 0 0
22,035 111,799 147,091
.19 .94 1.23
.18 .90 1.18
5
12-MOS
DEC-31-1997
DEC-31-1997
715,206
30,739
2,987,688
39,439
0
4,025,655
560,576
312,089
5,702,521
3,751,641
201,768
0
0
14,357
1,107,155
5,702,521
0
3,125,846
0
2,684,571
0
0
49,445
441,275
184,883
239,146
0
0
0
239,146
1.98
1.90
