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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ending September 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________to________________
Commission file number 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, New York, New York 10020
(Address of principal executive offices) (Zip Code)
(212) 399-8000 -
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of
the issuer's classes of common stock, as of the
latest practicable date. Common Stock outstanding at
October 31,1998: 138,984,743 shares.
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
I N D E X
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheet
September 30, 1998 (unaudited) and
December 31, 1997 3-4
Consolidated Statement of Income
Three months ended September 30, 1998
and 1997 (unaudited) 5
Consolidated Statement of Income
Nine months ended September 30, 1998
and 1997 (unaudited) 6
Consolidated Statement of Comprehensive Income
Nine months ended September 30, 1998
and 1997 (unaudited) 7
Consolidated Statement of Cash Flows
Nine months ended September 30, 1998
and 1997 (unaudited) 8
Notes to Consolidated Financial Statements
(unaudited) 9 - 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11 - 14
PART II. OTHER INFORMATION
Item 2. Changes in Securities
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
INDEX TO EXHIBITS
2
PART I - FINANCIAL INFORMATIONTHE INTERPUBLIC GROUP OF COMPANIES, INC. AND
ITS SUBSIDIARIESCONSOLIDATED BALANCE SHEET(Dollars in Thousands)ASSETS
(unaudited)
SEPTEMBER 30, DECEMBER 31,
1998 1997
Current Assets:
Cash and cash equivalents (includes
certificates of deposit: 1998-$104,194;
1997-$256,934) $ 621,698 $ 735,440
Marketable securities, at cost which
approximates market 46,440 31,944
Receivables (less allowance for doubtful
accounts: 1998-$52,161; 1997-$39,896) 3,152,671 3,050,917
Expenditures billable to clients 314,666 240,000
Prepaid expenses and other current assets 156,530 105,504
Total current assets 4,292,005 4,163,805
Other Assets:
Investment in unconsolidated affiliates 51,183 46,665
Deferred taxes on income 65,242 59,424
Other investments and miscellaneous assets 229,513 219,839
Total other assets 345,938 325,928
Fixed Assets, at cost:
Land and buildings 88,202 83,621
Furniture and equipment 573,648 503,823
661,850 587,444
Less accumulated depreciation 378,570 330,593
283,280 256,851
Unamortized leasehold improvements 111,123 103,494
Total fixed assets 394,403 360,345
Intangible Assets (less accumulated
amortization: 1998-$268,878;
1997-$227,401) 1,172,387 1,027,527
Total assets $6,204,733 $5,877,605
3
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIESCONSOLIDATED
BALANCE SHEET(Dollars in Thousands Except Per Share Data)LIABILITIES AND
STOCKHOLDERS' EQUITY
(unaudited)
SEPTEMBER 30, DECEMBER 31,
1998 1997
Current Liabilities:
Payable to banks $ 227,104 $ 162,807
Accounts payable 3,193,273 3,156,049
Accrued expenses 465,432 448,054
Accrued income taxes 176,968 151,138
Total current liabilities 4,062,777 3,918,048
Noncurrent Liabilities:
Long-term debt 262,211 253,910
Convertible subordinated debentures 201,847 201,768
Deferred compensation and reserve
for termination allowances 280,811 263,463
Accrued postretirement benefits 48,049 47,404
Other noncurrent liabilities 64,266 70,791
Minority interests in consolidated
subsidiaries 52,274 31,917
Total noncurrent liabilities 909,458 869,253
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:
1998 - 145,365,365
1997 - 143,567,843 14,537 14,357
Additional paid-in capital 665,282 552,282
Retained earnings 1,134,785 995,702
Adjustment for minimum pension
liability (13,207) (13,207)
Net unrealized gain on equity
securities 10,017 12,405
Cumulative translation adjustment (136,483) (154,093)
1,674,931 1,407,446
Less: Treasury stock, at cost: 1998 - 9,055,137 shares
1997 - 8,063,983 shares 371,169 253,088
Unearned ESOP compensation - 7,420
Unamortized expense of restricted stock grants 71,264
56,634 Total stockholders' equity 1,232,498 1,090,304 Total
liabilities and stockholders'
equity $6,204,733 $5,877,605
The accompanying notes are an integral part of these consolidated financial
statements.
Restated to reflect the aggregate effect of acquisitions accounted for
as poolings of interests. See Note (c).
4
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (unaudited)
THREE MONTHS ENDED SEPTEMBER 30
(Dollars in Thousands Except Per Share Data)
1998 1997
Revenue $ 837,371 $ 710,872
Other income 24,077 22,086
Gross income 861,448 732,958
Costs and expenses:
Operating expenses 759,869 660,465
Interest 14,210 14,343
Total costs and expenses 774,079 674,808
Income before provision for income taxes 87,369 58,150
Provision for income taxes 38,207 26,124
Income of consolidated companies 49,162 32,026
Income applicable to minority interests (5,488) (3,403)
Equity in net income of unconsolidated
affiliates 1,488 2,460
Net income $ 45,162 $ 31,083
Weighted average shares:
Basic 132,792,504 127,078,261
Diluted 137,567,041 132,181,681
Earnings Per Share:
Basic $ .34 $ .24
Diluted $ .33 $ .24
Dividend per share - Interpublic $ .15 $ .13
The accompanying notes are an integral part of these consolidated financial
statements.
Restated to reflect the aggregate effect of acquisitions accounted for
as poolings of interests. See Note (c).
5
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (unaudited)
NINE MONTHS ENDED SEPTEMBER 30
(Dollars in Thousands Except Per Share Data)
1998 1997
Revenue $ 2,541,729 $ 2,177,268
Other income 67,382 60,345
Gross income 2,609,111 2,237,613
Costs and expenses:
Operating expenses 2,211,957 1,924,630
Interest 37,819 36,347
Total costs and expenses 2,249,776 1,960,977
Income before provision for income taxes 359,335 276,636
Provision for income taxes 150,846 114,142
Income of consolidated companies 208,489 162,494
Income applicable to minority interests (14,688) (14,185)
Equity in net income of unconsolidated
affiliates 3,554 5,425
Net income $ 197,355 $ 153,734
Weighted average shares:
Basic 132,704,118 126,991,427
Diluted 137,783,816 136,285,448
Earnings Per Share:
Basic $ 1.49 $ 1.21
Diluted $ 1.44 $ 1.17
Dividend per share - Interpublic $ .43 .37
The accompanying notes are an integral part of these consolidated financial
statements.
Restated to reflect the aggregate effect of acquisitions accounted for
as poolings of interests. See Note (c).
6
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)
NINE MONTHS ENDED SEPTEMBER 30
(Dollars in Thousands)
1998 1997
Net Income $ 197,355 $ 153,734
Other Comprehensive Income, net of tax:
Foreign Currency Translation Adjustments 17,610 (54,509)
Net Unrealized Gains on Securities (2,388) -
Other Comprehensive Income 15,222 (54,509)
Comprehensive Income $ 212,577 $ 99,225
The accompanying notes are an integral part of these consolidated financial
statements.
Restated to reflect the aggregate effect of acquisitions accounted for
as poolings of interests. See Note (c).
7
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
NINE MONTHS ENDED SEPTEMBER 30
(Dollars in Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES: 1998 1997
Net income $ 197,355 $ 153,734
Adjustments to reconcile net income to cash
provided by/(used in) operating activities:
Depreciation and amortization of fixed assets 64,248 54,726
Amortization of intangible assets 41,477 26,674
Amortization of restricted stock awards 14,634 11,883
Equity in net income of unconsolidated
affiliates (3,554) (5,425)
Income applicable to minority interests 14,688 14,185
Translation losses 854 743
Net gain from sale of investments (7,579) -
Other (2,764) (7,790)
Changes in assets and liabilities, net of acquisitions:
Receivables 4,289 47,105
Expenditures billable to clients (70,490) (90,751)
Prepaid expenses and other assets (29,472) (4,737)
Accounts payable and other liabilities (66,665) (143,338)
Accrued income taxes 3,817 (24,443)
Deferred income taxes (3,436) 2,328
Deferred compensation and reserve for termination
allowances 2,249 930
Net cash provided by operating activities 159,651 35,824
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions (83,857) (79,494)
Capital expenditures (83,281) (72,389)
Proceeds from sale of assets 22,518 590
Net purchases of marketable securities (9,331) (14,933)
Other investments and miscellaneous assets (4,146) (4,169)
Investments in unconsolidated affiliates (7,923) (5,742)
Net cash used in investing activities (166,020) (176,137)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term borrowings 75,002 11,725
Proceeds from long-term debt 6,535 253,212
Payments of long-term debt (22,101) (25,642)
Treasury stock acquired (148,639) (106,163)
Payments from Unearned ESOP 7,420 -
Issuance of common stock 26,795 31,589
Cash dividends - Interpublic (56,557) (44,932)
Cash dividends - pooled - (7,158)
Net cash (used in)/provided by financing
activities (111,545) 112,631
Effect of exchange rates on cash and cash
equivalents 4,172 (25,261)
Decrease in cash and cash equivalents (113,742) (52,943)
Cash and cash equivalents at beginning of year 735,440 507,394
Cash and cash equivalents at end of period $ 621,698 $ 454,451
The accompanying notes are an integral part of these consolidated financial
statements.
Restated to reflect the aggregate effect of acquisitions accounted for
as poolings of interests. See Note (c).
8
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. Consolidated Financial Statements
(a) In the opinion of management, the consolidated balance sheet as of
September 30, 1998, the consolidated statements of income for the
three months and nine months ended September 30, 1998 and 1997, the
statement of comprehensive income for the nine months ended September
30,1998 and 1997, and the consolidated statement of cash flows for
the nine months ended September 30, 1998 and 1997, contain all
adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of
operations and cash flows at September 30, 1998 and for all periods
presented.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these
consolidated financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in The
Interpublic Group of Companies, Inc.'s (the "Company") December 31,
1997 annual report to stockholders and with the supplemental
consolidated financial statements and notes thereto included in the
Company's Current Report on Form 8-K dated July 1, 1998.
(b) Statement of Financial Accounting Standards (SFAS) No. 95 "Statement
of Cash Flows" requires disclosures of specific cash payments and
noncash investing and financing activities. The Company considers all
highly liquid investments with a maturity of three months or less to
be cash equivalents. Income tax cash payments were approximately
$140.1 million and $91.1 million in the first nine months of 1998 and
1997, respectively. Interest payments during the first nine months of
1998 were approximately $27.0 million. Interest payments during the
comparable period of 1997 were approximately $22.1 million.
(c) In April 1998, the Company issued 4,685,334 shares of its common stock
for three acquisitions, which were accounted for as poolings of
interests. These included Hill, Holliday, Connors, Cosmopulos Inc. -
2,062,434 shares, The Jack Morton Company - 2,135,996 shares and
Carmichael Lynch Inc. - 486,904 shares. The Company's 1997
consolidated financial statements, including the related notes, have
been restated to include the results of operations, financial position
and cash flows of the April 1998 pooled entities in addition to all
prior pooled entities.
(d) In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS No. 133). SFAS No. 133
is effective for all fiscal quarters of all fiscal years beginning after
June 15, 1999 (January 1, 2000 for the Company). SFAS No. 133 requires
that all derivative instruments be recorded on the balance sheet at their
fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and, if
it is, the type of hedge transaction. Management of the Company believes
that the adoption of SFAS No. 133 will not have a material impact on the
Company's results of operations or its financial position.
9
(e) Subsequent event
Effective October 1998, the Company acquired International Public
Relations, plc.
10
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Working capital at September 30, 1998 was $229.2 million, a decrease of
$16.5 million from December 31, 1997. The ratio of current assets to
current liabilities remained relatively unchanged from December 31, 1997 at
approximately 1.1 to 1.
Historically, cash flow from operations has been the primary source of
working capital and management believes that it will continue to be in the
future. The principal use of the Company's working capital is to provide
for the operating needs of its advertising agencies, which include payments
for space or time purchased from various media on behalf of its clients.
The Company's practice is to bill and collect from its clients in
sufficient time to pay the amounts due media. Other uses of working capital
include the payment of cash dividends, acquisitions, capital expenditures
and the reduction of long-term debt. In addition, during the first nine
months of 1998, the Company acquired 2,659,065 shares of its own stock for
approximately $148.6 million for the purposes of fulfilling the Company's
obligations under its various compensation plans.
11
RESULTS OF OPERATIONSThree Months Ended September 30, 1998 Compared to
Three Months Ended September 30, 1997Total revenue for the three months
ended September 30, 1998 increased $126.5 million, or 17.8%, to $837.4
million compared to the same period in 1997. Domestic revenue increased
$65.1 million or 18.0% from 1997 levels. Foreign revenue increased $61.4
million or 17.6% during the third quarter of 1998 compared to 1997. The
impact of foreign currency was negligible for the three months ended
September 30, 1998. Other income increased by $2.0 million during the third
quarter of 1998 compared to the same period in 1997.
Operating expenses increased $99.4 million or 15.1% during the three months
ended September 30, 1998 compared to the same period in 1997. Interest
expense decreased 0.9% as compared to the same period in 1997. Included in
operating expenses were net losses from exchange and translation of foreign
currencies of $.4 million and $3.1 million in 1998 and 1997, respectively.
Pretax income increased $29.2 million or 50.2% during the three months
ended September 30, 1998 compared to the same period in 1997.
The increase in total revenue, operating expenses, and pretax income is
primarily due to the effect of new business gains and acquisitions.
The effective tax rate for the three months ended September 30, 1998 was
43.7%, as compared to 44.9% in 1997.
The difference between the effective and statutory rates is primarily due
to foreign losses with no tax benefit, losses from translation of foreign
currencies which provided no tax benefit, state and local taxes, foreign
withholding taxes on dividends and nondeductible goodwill expense.
Nine Months Ended September 30, 1998 Compared to Nine Months Ended
September 30, 1997
Total revenue for the nine months ended September 30, 1998 increased $364.5
million, or 16.7%, to $2,541.7 million compared to the same period in 1997.
Domestic revenue increased $215.7 million or 19.9% from 1997 levels.
Foreign revenue increased $148.8 million or 13.6% during the first nine
months of 1998 compared to 1997. Worldwide revenue would have increased an
additional 3.1% in 1998 except for the strengthening of the U.S. dollar
against major currencies. Other income increased $7.0 million in the first
nine months of 1998 compared to the same period in 1997.
Operating expenses increased $287.3 million or 14.9% during the nine months
ended September 30, 1998 compared to the same period in 1997. Interest
expense increased 4.0% during the nine months ended September 30, 1998 as
compared to the same nine month period in 1997. Included in operating
expenses were net losses from exchange and translation of foreign
currencies of $2.6 million and $4.5 million in 1998 and 1997, respectively.
Pretax income increased $82.7 million or 29.9% during the nine months ended
September 30, 1998 compared to the same period in 1997.
The increase in total revenue, operating expenses, and pretax income is
primarily due to the effect of new business gains and acquisitions offset
by the impact of foreign currency.
The effective tax rate for the nine months ended September 30, 1998 was
42.0%, as compared to 41.3% in 1997.
12
Year 2000 Issue
The Year 2000 Issue refers to the problem caused by computer programs that
have been written to reflect two digit years, with the century being
assumed as "19". This practice was widely accepted by the applications
development community in the 1960's through the early 1980's, with many of
these programs remaining in use today. As a result, programs that are date
sensitive may recognize the year "00" as 1900, rather than the year 2000.
This may cause programs to fail or cause them to incorrectly report and
accumulate data.
IPG and each of its operating subsidiaries are in the process of
implementing a Year 2000 readiness program with the goal of having all
mission critical systems functioning properly prior to January 1, 2000.
Many of our subsidiaries in our larger markets are dependent upon third
party systems providers, while our subsidiaries in the secondary markets
rely primarily on off-the-shelf applications or home-grown applications.
Considerable progress has been made with our third party systems providers
in larger markets. Although the secondary markets present a greater
challenge, they typically involve smaller offices that are less dependent
upon automated solutions.
In 1997 IPG established a Y2K Project Management Office and shortly
thereafter created a Y2K Task Force, comprised of representatives from the
operating companies. Through the Y2K Task Force, IPG in conjunction with
outside consultants, is working to address the impact of the Year 2000
Issue on IPG. IPG is inventorying and assessing date sensitive computer
software applications, with initial indications being that approximately
35% of systems will require remediation. In addition, IPG has reviewed a
large majority of our hardware containing embedded chips, including
personal computers, file servers, mid-range and mainframe computers,
telephone switches and routers. We have also reviewed the majority of our
security systems, life safety systems, HVAC systems and elevators in our
facilities. As part of this effort, IPG has identified those systems and
applications that are deemed "mission critical", which we are handling on a
priority basis. Utilizing this approach has allowed us to make
considerable progress in our larger offices that in aggregate contribute to
most of our revenue. We have developed a detailed project and remediation
plan that includes system testing schedules and contingency planning that
are designed to achieve our goal of having all "mission critical" elements
remedied and compliance tested by December 31, 1998. We are currently well
into the remediation and testing stage. The Company's Board of Directors,
through the Audit Committee, has been monitoring progress of this project.
Project progress reports are given to the Audit Committee at each regularly
scheduled Audit Committee meeting.
IPG estimates that the modification and testing of our hardware and
software will cost approximately $10 million, of which 50% has been spent
to date in order to meet the Y2K compliance deadline. In addition, IPG has
accelerated the implementation of a number of business process
reengineering projects over the past few years that have provided both Year
2000 readiness and increased functionality of certain systems. IPG
estimates that the hardware and software costs incurred in connection with
these projects is approximately $50 million, which is being capitalized.
Included in the abovementioned Y2K costs are internal costs incurred for
the Y2K project which are primarily related payroll costs for the
information systems groups. A substantial portion of these estimated costs
relate to systems and applications that were anticipated and budgeted.
13
IPG is also in the process of developing contingency plans for affected
areas of our operation. The Y2K Project Management Office has drafted a
Contingency Plan Guideline. This guideline requires the development of
contingency plans for applications, vendors, facilities, business partners
and clients. The contingency plans will cover those "mission critical"
elements that are not Year 2000 compliant by December 31,1998. In
addition, the contingency plans will include procedures for workforce
mobilization, crisis management, disaster recovery and damage control,
which are targeted for completion by March of 1999.
The Company is assessing the Year 2000 readiness of material third parties
by asking all vendors, business partners and facility managers to provide
letters of compliance. In addition, IPG is working with the American
Association of Advertising Agencies and other trade associations to form
Year 2000 working groups that are addressing the issues on an industry
level.
IPG efforts to address the Year 2000 Issue are designed to avoid any
material adverse effect on our operations or financial condition.
Notwithstanding these efforts, however, there is no assurance that IPG will
not encounter difficulties due to the Year 2000 Issue. The "most
reasonably likely worst case scenario" would be a significant limitation on
our ability to continue to provide business services. IPG also recognizes
that it is dependent upon infrastructure services and third parties,
including suppliers, broadcasters and business partners, whose failure may
also significantly impact our ability to provide business services.
Cautionary Statement
Statements by IPG in this Form 10-Q and in other contexts concerning its
Year 2000 compliance efforts that are not historical fact are forward-
looking statements as defined in the Private Securities Litigation Reform
Act of 1995. These forward-looking statements are subject to certain risks
and uncertainties that could cause actual results to differ materially from
those anticipated in the forward-looking statements, including, but not
limited to, the following: (i) uncertainties relating to the ability of IPG
to identify and address Year 2000 issues successfully and in a timely
manner and at costs that are reasonably in line with IPG's estimates; and
(ii) the ability of IPG's vendors, suppliers, other service providers and
customers to identify and address successfully their own Year 2000 issues
in a timely manner.
14
PART II - OTHER INFORMATION
Item 2. CHANGES IN SECURITIES
(1) On July 20, 1998, the Registrant acquired a company
in consideration for which it issued a total of 152,760
shares of its common stock par value $.10 per share
("Interpublic Stock"), to the acquired company's former
shareholder. The shares of Interpublic Stock had a market
value of $9,200,000 on the date of issuance.
The shares of Interpublic Stock were issued by the
Registrant without registration in reliance on Rule 506 of
Regulation D under the Securities Act of 1933, as amended (the
"Securities Act"), based on the accredited investor status or
sophistication of the former shareholder of the acquired company.
(2) On September 17, 1998, the Registrant acquired
80% of a company in consideration for which it issued a
total of 16,452 shares of Interpublic Stock, to the acquired
company's former shareholders. The shares of Interpublic
Stock had a market value of $800,000 on the date of issuance.
The shares of Interpublic Stock were issued by the
Registrant without registration in reliance on Rule 506 of
Regulation D under the Securities Act, based on the
accredited investor status or sophistication of the
acquired company's former stockholders.
Item 5. OTHER INFORMATION
The deadline is March 4, 1999 for notification of the
Registrant by stockholders of proposals under Rule 14a-4
of the Securities and Exchange Commission.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
Exhibit 10 Executive Severance Agreement, dated January 1,
1998, between The Interpublic Group of Companies,
Inc. ("Interpublic") and Frank B. Lowe.
Exhibit 11 Computation of Earnings Per Share.
Exhibit 27 Financial Data Schedule.
15
(b) Reports on Form 8-K
(1) The following reports on Form 8-K were filed without
financial statements during the quarter ended
September 30, 1998:
(a) Item 9 - Sale of Equity Securities Pursuant
to Regulation S, dated June 24, 1998.
(b) Item 9 - Sale of Equity Securities Pursuant
to Regulation S, dated July 23, 1998.
(c) Item 9 - Sale of Equity Securities Pursuant
to Regulation S, dated August 5, 1998.
(d) Item 9 - Sale of Equity Securities Pursuant
to Regulation S, dated August 24, 1998.
(2) The following reports on Form 8-K were filed with financial
statements during the quarter ended September 30, 1998:
(a) Item 5 - Other Events and
Item 7 - Financial Statements and Exhibits, dated July 1,
1998. Supplemental Financial Statements of the Registrant
At and For the Period Ended December 31, 1997 and
Supplemental Financial Statements At and For the Period
Ended March 31, 1998.
(b) Item 5 - Other Events and Item 7 - Financial Statements
and Exhibits, dated July 17, 1998. Interim Results For
the Six Months Ended April 30, 1998 of a company
subsequently acquired by Registrant.
(c) Item 5 - Other Events and Item 7 - Financial Statements
and Exhibits, dated July 27, 1998. Financial Statements
of the Registrant At and For the Period Ended
June 30, 1998.
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE INTERPUBLIC GROUP OF COMPANIES, INC.
(Registrant)
Date: November 13, 1998 BY /S/ PHILIP H. GEIER, JR.
PHILIP H. GEIER, JR.
Chairman of the Board
President and Chief Executive
Officer
Date: November 13,1998 BY /S/ EUGENE P. BEARD
EUGENE P. BEARD
Vice Chairman -
Finance and Operations
17
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
Exhibit 10 Executive Severance Agreement, dated January 1,
1998, between Interpublic and Frank B. Lowe.
Exhibit 11 Computation of Earnings Per Share.
Exhibit 27 Financial Data Schedule
18
EXHIBIT 10
EXECUTIVE SEVERANCE AGREEMENT
This AGREEMENT ("Agreement") dated January 1, 1998, by
and between The Interpublic Group of Companies, Inc.
("Interpublic"), a Delaware corporation (Interpublic and its
subsidiaries being referred to herein collectively as the
"Company"), and Frank B. Lowe (the "Executive").
W I T N E S S E T H
WHEREAS, the Company recognizes the valuable services
that the Executive has rendered thereto and desires to be assured
that the Executive will continue to attend to the business and
affairs of the Company without regard to any potential or actual
change of control of Interpublic;
WHEREAS, the Executive is willing to continue to serve
the Company but desires assurance that he will not be materially
disadvantaged by a change of control of Interpublic; and
WHEREAS, the Company is willing to accord such
assurance provided that, should the Executive's employment be
terminated consequent to a change of control, he will not for a
period thereafter engage in certain activities that could be
detrimental to the Company;
NOW, THEREFORE, in consideration of the Executive's
continued service to the Company and the mutual agreements herein
contained, Interpublic and the Executive hereby agree as follows:
ARTICLE I
RIGHT TO PAYMENTS
Section 1.1. TRIGGERING EVENTS. If Interpublic
undergoes a Change of Control, the Company shall make payments to
the Executive as provided in article II of this Agreement. If,
within two years following a Change of Control, either (a) the
Company terminates the Executive other than by means of a
termination for Cause or for death or (b) the Executive resigns
for a Good Reason (either of which events shall constitute a
"Qualifying Termination"), the Company shall make payments to the
Executive as provided in article III hereof.
Section 1.2. CHANGE OF CONTROL. A Change of Control
of Interpublic shall be deemed to have occurred if (a) any person
(within the meaning of Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 (the "1934 Act")), other than Interpublic or
any of its majority-controlled subsidiaries, becomes the
beneficial owner (within the meaning of Rule 13d-3 under the 1934
Act) of 30 percent or more of the combined voting power of
Interpublic's then outstanding voting securities; (b) a tender
offer or exchange offer (other than an offer by Interpublic or a
majority-controlled subsidiary), pursuant to which 30 percent or
more of the combined voting power of Interpublic's then
outstanding voting securities was purchased, expires; (c) the
stockholders of Interpublic approve an agreement to merge or
consolidate with another corporation (other than a majority-
controlled subsidiary of Interpublic) unless Interpublic's
shareholders immediately before the merger or consolidation are
to own more than 70 percent of the combined voting power of the
resulting entity's voting securities; (d) Interpublic's
stockholders approve an agreement (including, without limitation,
a plan of liquidation) to sell or otherwise dispose of all or
substantially all of the business or assets of Interpublic; or
(e) during any period of two consecutive years, individuals who,
at the beginning of such period, constituted the Board of
Directors of Interpublic cease for any reason to constitute at
least a majority thereof, unless the election or the nomination
for election by Interpublic's stockholders of each new director
was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of the
period. However, no Change of Control shall be deemed to have
occurred by reason of any transaction in which the Executive, or
a group of persons or entities with which the Executive acts in
concert, acquires, directly or indirectly, more than 30 percent
of the common stock or the business or assets of Interpublic.
Section 1.3. TERMINATION FOR CAUSE. Interpublic shall
have Cause to terminate the Executive for purposes of Section 1.1
of this Agreement only if, following the Change of Control, the
Executive (a) engages in conduct that constitutes a felony under
the laws of the United States or a state or country in which he
works or resides and that results or was intended to result,
directly or indirectly, in the personal enrichment of the
Executive at the Company's expense; (b) refuses (except by reason
of incapacity due to illness or injury) to make a good faith
effort to substantially perform his duties with the Company on a
full-time basis and continues such refusal for 15 days following
receipt of notice from the Company that his effort is deficient;
or (c) deliberately and materially breaches any agreement between
himself and the Company and fails to remedy that breach within 30
days following notification thereof by the Company. If the
Company has Cause to terminate the Executive, it may in fact
terminate him for Cause for purposes of section 1.1 hereof if (a)
it notifies the Executive of such Cause, (b) it gives him
reasonable opportunity to appear before a majority of
Interpublic's Board of Directors to respond to the notice of
Cause and (c) a majority of the Board of Directors subsequently
votes to terminate him.
Section 1.4. RESIGNATION FOR GOOD REASON. The
Executive shall have a Good Reason for resigning only if (a) the
Company fails to elect the Executive to, or removes him from, any
office of the Company, including without limitation membership on
any Board of Directors, that the Executive held immediately prior
to the Change of Control; (b) the Company reduces the Executive's
rate of regular cash and fully vested deferred base compensation
("Regular Compensation") from that which he earned immediately
prior to the Change of Control or fails to increase it within 12
months following the Change of Control by (in addition to any
increase pursuant to section 2.2 hereof) at least the average of
the rates of increase in his Regular Compensation during the four
consecutive 12-month periods immediately prior to the Change of
Control (or, if fewer, the number of 12-month periods immediately
prior to the Change of Control during which the Executive was
continuously employed by the Company); (c) the Company fails to
provide the Executive with fringe benefits and/or bonus plans,
such as stock option, stock purchase, restricted stock, life
insurance, health, accident, disability, incentive, bonus,
pension and profit sharing plans ("Benefit or Bonus Plans"),
that, in the aggregate, (except insofar as the Executive has
waived his rights thereunder pursuant to article II hereof) are
as valuable to him as those that he enjoyed immediately prior to
the Change of Control; (d) the Company fails to provide the
Executive with an annual number of paid vacation days at least
equal to that to which he was entitled immediately prior to the
Change of Control; (e) the Company breaches any agreement between
it and the Executive (including this Agreement); (f) without
limitation of the foregoing clause (e), the Company fails to
obtain the express assumption of this Agreement by any successor
of the Company as provided in section 6.3 hereof; (g) the Company
attempts to terminate the Executive for Cause without complying
with the provisions of section 1.3 hereof; (h) the Company
requires the Executive, without his express written consent, to
be based in an office outside of the office in which Executive is
based on the date hereof or to travel substantially more
extensively than he did prior to the Change of Control; or (i)
the Executive determines in good faith that the Company has,
without his consent, effected a significant change in his status
within, or the nature or scope of his duties or responsibilities
with, the Company that obtained immediately prior to the Change
of Control (including but not limited to, subjecting the
Executive's activities and exercise of authority to greater
immediate supervision than existed prior to the Change of
Control); provided, however, that no event designated in clauses
(a) through (i) of this sentence shall constitute a Good Reason
unless the Executive notifies Interpublic that the Company has
committed an action or inaction specified in clauses (a) through
(i) (a "Covered Action") and the Company does not cure such
Covered Action within 30 days after such notice, at which time
such Good Reason shall be deemed to have arisen. Notwithstanding
the immediately preceding sentence, no action by the Company
shall give rise to a Good Reason if it results from the
Executive's termination for Cause or death or from the
Executive's resignation for other than a Good Reason, and no
action by the Company specified in clauses (a) through (i) of the
preceding sentence shall give rise to a Good Reason if it results
from the Executive's Disability. If the Executive has a Good
Reason to resign, he may in fact resign for a Good Reason for
purposes of section 1.1 of this Agreement by, within 30 days
after the Good Reason arises, giving Interpublic a minimum of 30
and a maximum of 90 days advance notice of the date of his
resignation.
Section 1.5. DISABILITY. For all purposes of this
Agreement, the term "Disability" shall have the same meaning as
that term has in the Interpublic Long-Term Disability Plan.
ARTICLE II
PAYMENTS UPON A CHANGE OF CONTROL
Section 2.1. ELECTIONS BY THE EXECUTIVE. If the
Executive so elects prior to a Change of Control, the Company
shall pay him, within 30 days following the Change of Control,
cash amounts in respect of certain Benefit or Bonus Plans or
deferred compensation arrangements designated in sections 2.2
through 2.4 hereof ("Plan Amounts"). The Executive may make an
election with respect to the Benefit or Bonus Plans or deferred
compensation arrangements covered under any one or more of
sections 2.2 through 2.4, but an election with respect to any
such section shall apply to all Plan Amounts that are specified
therein. Each election shall be made by notice to Interpublic on
a form satisfactory to Interpublic and, once made, may be revoked
by such notice on such form at any time prior to a Change of
Control. If the Executive elects to receive payments under a
section of this article II, he shall, upon receipt of such
payments, execute a waiver, on a form satisfactory to
Interpublic, of such rights as are indicated in that section. If
the Executive does not make an election under this article with
respect to a Benefit or Bonus Plan or deferred compensation
arrangement, his rights to receive payments in respect thereof
shall be governed by the Plan or arrangement itself.
Section 2.2. ESBA. The Plan Amount in respect of all
Executive Special Benefit Agreements ("ESBA's") between the
Executive and Interpublic shall consist of an amount equal to the
present discounted values, using the Discount Rate designated in
section 5.8 hereof as of the date of the Change of Control, of
all payments that the Executive would have been entitled to
receive under the ESBA's if he had terminated employment with the
Company on the day immediately prior to the Change of Control.
Upon receipt of the Plan Amount in respect of the ESBA's, the
Executive shall waive any rights that he may have to payments
under the ESBA's. If the Executive makes an election pursuant
to, and executes the waiver required under, this section 2.2, his
Regular Compensation shall be increased as of the date of the
Change of Control at an annual rate equal to the sum of the
annual rates of deferred compensation in lieu of which benefits
are provided the Executive under any ESBA the Accrual Term for
which (as defined in the ESBA) includes the date of the Change of
Control.
Section 2.3. MICP. The Plan Amount in respect of the
Company's Management Incentive Compensation Plans ("MICP") and/or
the 1997 Performance Incentive Plan ("1997 PIP") shall consist of
an amount equal to the sum of all amounts awarded to the
Executive under, but deferred pursuant to, the MICP and/or the
1997 PIP as of the date of the Change of Control and all amounts
equivalent to interest creditable thereon up to the date that the
Plan Amount is paid. Upon receipt of that Plan Amount, the
Executive shall waive his rights to receive any amounts under the
MICP and/or the 1997 PIP that were deferred prior to the Change
of Control and any interest equivalents thereon.
Section 2.4. DEFERRED COMPENSATION. The Plan Amount
in respect of deferred compensation (other than amounts referred
to in other sections of this article II) shall be an amount equal
to all compensation from the Company that the Executive has
earned and agreed to defer (other than through the Interpublic
Savings Plan pursuant to Section 401(k) of the Internal Revenue
Code (the "Code")) but has not received as of the date of the
Change of Control, together with all amounts equivalent to
interest creditable thereon through the date that the Plan Amount
is paid. Upon receipt of this Plan Amount, the Executive shall
waive his rights to receive any deferred compensation that he
earned prior to the date of the Change of Control and any
interest equivalents thereon.
Section 2.5. STOCK INCENTIVE PLANS. The effect of a
Change of Control on the rights of the Executive with respect to
options and restricted shares awarded to him under the
Interpublic 1986 Stock Incentive Plan, the 1996 Stock Incentive
Plan and the 1997 Performance Incentive Plan, shall be governed
by those Plans and not by this Agreement.
ARTICLE III
PAYMENTS UPON QUALIFYING TERMINATION
Section 3.1. BASIC SEVERANCE PAYMENT. In the event
that the Executive is subjected to a Qualifying Termination
within two years after a Change of Control, the Company shall pay
the Executive within 30 days after the effective date of his
Qualifying Termination (his "Termination Date") a cash amount
equal to his Base Amount times the number designated in Section
5.9 of this Agreement (the "Designated Number"). The Executive's
Base Amount shall equal the average of the Executive's Includable
Compensation for the two whole calendar years immediately
preceding the date of the Change of Control (or, if the Executive
was employed by the Company for only one of those years, his
Includable Compensation for that year). The Executive's
Includable Compensation for a calendar year shall consist of (a)
the compensation reported by the Company on the Form W-2 that it
filed with the Internal Revenue Service for that year in respect
of the Executive or which would have been reported on such form
but for the fact that Executive's services were performed outside
of the United States, plus (b) any compensation payable to the
Executive during that year the receipt of which was deferred at
the Executive's election or by employment agreement to a
subsequent year, minus (c) any amounts included on the Form W-2
(or which would have been included if Executive had been employed
in the United States) that represented either (i) amounts in
respect of a stock option or restricted stock plan of the Company
or (ii) payments during the year of amounts payable in prior
years but deferred at the Executive's election or by employment
agreement to a subsequent year. The compensation referred to in
clause (b) of the immediately preceding sentence shall include,
without limitation, amounts initially payable to the Executive
under the MICP or a Long-Term Performance Incentive Plan or the
1997 PIP in that year but deferred to a subsequent year, the
amount of deferred compensation for the year in lieu of which
benefits are provided the Executive under an ESBA and amounts of
Regular Compensation earned by the Executive during the year but
deferred to a subsequent year (including amounts deferred under
Interpublic Savings Plan pursuant to Section 401(k) of the Code);
clause (c) of such sentence shall include, without limitation,
all amounts equivalent to interest paid in respect of deferred
amounts and all amounts of Regular Compensation paid during the
year but earned in a prior year and deferred.
Section 3.2. MICP SUPPLEMENT. The Company shall also
pay the Executive within 30 days after his Termination Date a
cash amount equal to (a) in the event that the Executive received
an award under the MICP (or the Incentive Award program
applicable outside the United States) or the 1997 PIP ("Incentive
Award") in respect of the year immediately prior to the year that
includes the Termination Date (the latter year constituting the
"Termination Year"), the amount of that award multiplied by the
fraction of the Termination Year preceding the Termination Date
or (b) in the event that the Executive did not receive an MICP
award (or an Incentive Award) in respect of the year immediately
prior to the Termination Year, the amount of the MICP award (or
Incentive Award) that Executive received in respect of the second
year immediately prior to the Termination Year multiplied by one
plus the fraction of the Termination Year preceding the
Termination Date.
ARTICLE IV
TAX MATTERS
Section 4.1. WITHHOLDING. The Company may withhold
from any amounts payable to the Executive hereunder all federal,
state, city or other taxes that the Company may reasonably
determine are required to be withheld pursuant to any applicable
law or regulation, but, if the Executive has made the election
provided in section 4.2 hereof, the Company shall not withhold
amounts in respect of the excise tax imposed by Section 4999 of
the Code or its successor.
Section 4.2. DISCLAIMER. If the Executive so agrees
prior to a Change of Control by notice to the Company in form
satisfactory to the Company, the amounts payable to the Executive
under this Agreement but not yet paid thereto shall be reduced to
the largest amounts in the aggregate that the Executive could
receive, in conjunction with any other payments received or to be
received by him from any source, without any part of such amounts
being subject to the excise tax imposed by Section 4999 of the
Code or its successor. The amount of such reductions and their
allocation among amounts otherwise payable to the Executive shall
be determined either by the Company or by the Executive in
consultation with counsel chosen (and compensated) by him,
whichever is designated by the Executive in the aforesaid notice
to the Company (the "Determining Party"). If, subsequent to the
payment to the Executive of amounts reduced pursuant to this
section 4.2, the Determining Party should reasonably determine,
or the Internal Revenue Service should assert against the party
other than the Determining Party, that the amount of such
reductions was insufficient to avoid the excise tax under Section
4999 (or the denial of a deduction under Section 280G of the Code
or its successor), the amount by which such reductions were
insufficient shall, upon notice to the other party, be deemed a
loan from the Company to the Executive that the Executive shall
repay to the Company within one year of such reasonable
determination or assertion, together with interest thereon at the
applicable federal rate provided in section 7872 of the Code or
its successor. However, such amount shall not be deemed a loan
if and to the extent that repayment thereof would not eliminate
the Executive's liability for any Section 4999 excise tax.
ARTICLE V
COLLATERAL MATTERS
Section 5.l. NATURE OF PAYMENTS. All payments to the
Executive under this Agreement shall be considered either
payments in consideration of his continued service to the
Company, severance payments in consideration of his past services
thereto or payments in consideration of the covenant contained in
section 5.l0 hereof. No payment hereunder shall be regarded as a
penalty to the Company.
Section 5.2. LEGAL EXPENSES. The Company shall pay
all legal fees and expenses that the Executive may incur as a
result of the Company's contesting the validity, the
enforceability or the Executive's interpretation of, or
determinations under, this Agreement. Without limitation of the
foregoing, Interpublic shall, prior to the earlier of (a) 30 days
after notice from the Executive to Interpublic so requesting or
(b) the occurrence of a Change of Control, provide the Executive
with an irrevocable letter of credit in the amount of $100,000
from a bank satisfactory to the Executive against which the
Executive may draw to pay legal fees and expenses in connection
with any attempt to enforce any of his rights under this
Agreement. Said letter of credit shall not expire before 10
years following the date of this Agreement.
Section 5.3. MITIGATION. The Executive shall not be
required to mitigate the amount of any payment provided for in
this Agreement either by seeking other employment or otherwise.
The amount of any payment provided for herein shall not be
reduced by any remuneration that the Executive may earn from
employment with another employer or otherwise following his
Termination Date.
Section 5.4. SETOFF FOR DEBTS. The Company may reduce
the amount of any payment due the Executive under article III of
this Agreement by the amount of any debt owed by the Executive to
the Company that is embodied in a written instrument, that is due
to be repaid as of the due date of the payment under this
Agreement and that the Company has not already recovered by
setoff or otherwise.
Section 5.5. COORDINATION WITH EMPLOYMENT CONTRACT.
Payments to the Executive under article III of this Agreement
shall be in lieu of any payments for breach of any employment
contract between the Executive and the Company to which the
Executive may be entitled by reason of a Qualifying Termination,
and, before making the payments to the Executive provided under
article III hereof, the Company may require the Executive to
execute a waiver of any rights that he may have to recover
payments in respect of a breach of such contract as a result of a
Qualifying Termination. If the Executive has a Good Reason to
resign and does so by providing the notice specified in the last
sentence of section l.4 of this Agreement, he shall be deemed to
have satisfied any notice requirement for resignation, and any
service requirement following such notice, under any employment
contract between the Executive and the Company.
Section 5.6. BENEFIT OF BONUS PLANS. Except as
otherwise provided in this Agreement or required by law, the
Company shall not be compelled to include the Executive in any of
its Benefit or Bonus Plans following the Executive's Termination
Date, and the Company may require the Executive, as a condition
to receiving the payments provided under article III hereof, to
execute a waiver of any such rights. However, said waiver shall
not affect any rights that the Executive may have in respect of
his participation in any Benefit or Bonus Plan prior to his
Termination Date.
Section 5.7. FUNDING. Except as provided in section
5.2 of this Agreement, the Company shall not be required to set
aside any amounts that may be necessary to satisfy its
obligations hereunder. The Company's potential obligations to
make payments to the Executive under this Agreement are solely
contractual ones, and the Executive shall have no rights in
respect of such payments except as a general and unsecured
creditor of the Company.
Section 5.8. DISCOUNT RATE. For purposes of this
Agreement, the term "Discount Rate" shall mean the applicable
Federal short-term rate determined under Section 1274(d) of the
Code or its successor. If such rate is no longer determined, the
Discount Rate shall be the yield on 2-year Treasury notes for the
most recent period reported in the most recent issue of the
Federal Reserve Bulletin or its successor, or, if such rate is no
longer reported therein, such measure of the yield on 2-year
Treasury notes as the Company may reasonably determine.
Section 5.9. DESIGNATED NUMBER. For purposes of this
Agreement, the Designated Number shall be three (3.0).
Section 5.10. COVENANT OF EXECUTIVE. In the event
that the Executive undergoes a Qualifying Termination that
entitles him to any payment under article III of this Agreement,
he shall not, for 18 months following his Termination Date,
either (a) solicit any employee of Interpublic or a majority-
controlled subsidiary thereof to leave such employ and enter into
the employ of the Executive or any person or entity with which
the Executive is associated or (b) solicit or handle on his own
behalf or on behalf of any person or entity with which he is
associated the advertising, public relations, sales promotion or
market research business of any advertiser that is a client of
Interpublic or a majority-controlled subsidiary thereof as of the
Termination Date. Without limitation of any other remedies that
the Company may pursue, the Company may enforce its rights under
this section 5.l0 by means of injunction. This section shall not
limit any other right or remedy that the Company may have under
applicable law or any other agreement between the Company and the
Executive.
ARTICLE VI
GENERAL PROVISIONS
Section 6.l. TERM OF AGREEMENT. This Agreement shall
terminate upon the earliest of (a) the expiration of five years
from the date of this Agreement if no Change of Control has
occurred during that period; (b) the termination of the
Executive's employment with the Company for any reason prior to a
Change of Control; (c) the Company's termination of the
Executive's employment for Cause or death, the Executive's
compulsory retirement within the provisions of 29 U.S.C. 631(c)
(or, if Executive is not a citizen or resident of the United
States, compulsory retirement under any applicable procedure of
the Company in effect immediately prior to the change of control)
or the Executive's resignation for other than Good Reason,
following a Change of Control and the Company's and the
Executive's fulfillment of all of their obligations under this
Agreement; and (d) the expiration following a Change of Control
of the Designated Number plus three years and the fulfillment by
the Company and the Executive of all of their obligations
hereunder.
Section 6.2. GOVERNING LAW. Except as otherwise
expressly provided herein, this Agreement and the rights and
obligations hereunder shall be construed and enforced in
accordance with the laws of the State of New York.
Section 6.3. SUCCESSORS TO THE COMPANY. This
Agreement shall inure to the benefit of Interpublic and its
subsidiaries and shall be binding upon and enforceable by
Interpublic and any successor thereto, including, without
limitation, any corporation or corporations acquiring directly or
indirectly all or substantially all of the business or assets of
Interpublic whether by merger, consolidation, sale or otherwise,
but shall not otherwise be assignable by Interpublic. Without
limitation of the foregoing sentence, Interpublic shall require
any successor (whether direct or indirect, by merger,
consolidation, sale or otherwise) to all or substantially all of
the business or assets of Interpublic, by agreement in form
satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in
the same manner and to the same extent as Interpublic would have
been required to perform it if no such succession had taken
place. As used in this agreement, "Interpublic" shall mean
Interpublic as heretofore defined and any successor to all or
substantially all of its business or assets that executes and
delivers the agreement provided for in this section 6.3 or that
becomes bound by this Agreement either pursuant to this Agreement
or by operation of law.
Section 6.4. SUCCESSOR TO THE EXECUTIVE. This
Agreement shall inure to the benefit of and shall be binding upon
and enforceable by the Executive and his personal and legal
representatives, executors, administrators, heirs, distributees,
legatees and, subject to section 6.5 hereof, his designees
("Successors"). If the Executive should die while amounts are or
may be payable to him under this Agreement, references hereunder
to the "Executive" shall, where appropriate, be deemed to refer
to his Successors.
Section 6.5. NONALIENABILITY. No right of or amount
payable to the Executive under this Agreement shall be subject in
any manner to anticipation, alienation, sale, transfer,
assignment, pledge, hypothecation, encumbrance, charge,
execution, attachment, levy or similar process or (except as
provided in section 5.4 hereof) to setoff against any obligation
or to assignment by operation of law. Any attempt, voluntary or
involuntary, to effect any action specified in the immediately
preceding sentence shall be void. However, this section 6.5
shall not prohibit the Executive from designating one or more
persons, on a form satisfactory to the Company, to receive
amounts payable to him under this Agreement in the event that he
should die before receiving them.
Section 6.6. NOTICES. All notices provided for in
this Agreement shall be in writing. Notices to Interpublic shall
be deemed given when personally delivered or sent by certified or
registered mail or overnight delivery service to The Interpublic
Group of Companies, Inc., l27l Avenue of the Americas, New York,
New York l0020, attention: Corporate Secretary. Notices to the
Executive shall be deemed given when personally delivered or sent
by certified or registered mail or overnight delivery service to
the last address for the Executive shown on the records of the
Company. Either Interpublic or the Executive may, by notice to
the other, designate an address other than the foregoing for the
receipt of subsequent notices.
Section 6.7. AMENDMENT. No amendment of this
Agreement shall be effective unless in writing and signed by both
the Company and the Executive.
Section 6.8. WAIVERS. No waiver of any provision of
this Agreement shall be valid unless approved in writing by the
party giving such waiver. No waiver of a breach under any
provision of this Agreement shall be deemed to be a waiver of
such provision or any other provision of this Agreement or any
subsequent breach. No failure on the part of either the Company
or the Executive to exercise, and no delay in exercising, any
right or remedy conferred by law or this Agreement shall operate
as a waiver of such right or remedy, and no exercise or waiver,
in whole or in part, of any right or remedy conferred by law or
herein shall operate as a waiver of any other right or remedy.
Section 6.9. SEVERABILITY. If any provision of this
Agreement shall be held invalid or unenforceable in whole or in
part, such invalidity or unenforceability shall not affect any
other provision of this Agreement or part thereof, each of which
shall remain in full force and effect.
Section 6.l0. CAPTIONS. The captions to the
respective articles and sections of this Agreement are intended
for convenience of reference only and have no substantive
significance.
Section 6.ll. COUNTERPARTS. This Agreement may be
executed in any number of counterparts, each of which shall be
deemed to be an original but all of which together shall
constitute a single instrument.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first above written.
THE INTERPUBLIC GROUP OF COMPANIES, INC.
BY/ S/ C. KENT KROEBER
C. KENT KROEBER
BY/ S/ FRANK B. LOWE
FRANK B. LOWE
Exhibit 11THE
INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIESCOMPUTATION OF
EARNINGS PER SHARE (Dollars in Thousands Except Per Share Data)
Three Months Ended September 30
Basic 1998 1997
Net income $ 45,162 $ 31,083
Weighted average number of common shares
outstanding 132,792,504 127,078,261
Earnings per common share $ .34 $ .24
Three Months Ended September 30
Diluted 1998 1997
Net income $ 45,162 $ 31,083
Add:
Dividends paid net of related income tax
applicable to restricted stock 129 125
Net income, as adjusted $ 45,291 $ 31,208
Weighted average number of common shares
outstanding 132,792,504 127,078,261
Weighted average number of incremental shares
in connection with restricted stock
and assumed exercise of stock options 4,774,537 5,103,420
Total 137,567,041 132,181,681
Earnings per common and common equivalent
share $ .33 $ .24
Note: The computation of diluted EPS for 1998 and 1997 excludes the assumed
conversion of the Convertible Subordinated Debentures and Notes because
they were anti-dilutive.
Restated to reflect the aggregate effect of acquisitions accounted for
as poolings of interests. See Note (c).
Exhibit 11
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Dollars in Thousands Except Per Share Data)
Nine Months Ended September 30
Basic 1998 1997
Net income $ 197,355 $ 153,734
Weighted average number of common shares
outstanding 132,704,118 126,991,427
Earnings per common share $ 1.49 $ 1.21
Nine Months Ended September 30
Diluted 1998 1997
Net income $ 197,355 $ 153,734
Add:
After tax interest savings on assumed
conversion of subordinated debentures
and notes - 5,192
Dividends paid net of related income tax
applicable to restricted stock 405 331
Net income, as adjusted $ 197,760 $ 159,257
Weighted average number of common shares
outstanding 132,704,118 126,991,427
Weighted average number of incremental shares
in connection with restricted stock
and assumed exercise of stock options 5,076,151 4,486,147
Assumed conversion of subordinated
debentures and notes 3,547 4,807,874
Total 137,783,816 136,285,448
Earnings per common and common equivalent
share $ 1.44 $ 1.17
Note: The computation of diluted EPS for 1998 excludes the assumed
conversion of the 1.8% Convertible Subordinated Notes because they were
anti-dilutive.
Restated to reflect the aggregate effect of acquisitions accounted for
as poolings of interests. See Note (c).