Annual Report (Form 10-K), fiscal year 1994

ITEM 1. BUSINESS:
GENERAL
Response to this item is incorporated by reference to the Registrant's Annual Report to shareholders for fiscal year ended December 31, 1994 (the "1994 Annual Report") on page 1.
REVENUES
Response to this item is incorporated by reference to pages 1 and 2 of the Registrant's 1994 Annual Report.
CLIENTS
The Registrant and its subsidiaries (the Company) consider their relations with their clients to be satisfactory. Due to the nature of the business, however, any client could at some time in the future reduce its advertising budget, or transfer to another agency all or part of its advertising presently placed through the Company. Representation of a client does not necessarily mean that all advertising for such clients is handled by the Company exclusively. In many cases, the Company handles the advertising of only a portion of a client's products or services or only the advertising in particular geographic areas.
COMPETITION
The advertising agency business is highly competitive, with agencies of all sizes competing primarily on the basis of quality of service to attract and retain clients and personnel. Advertisers are able to move from one agency to another with relative ease, in part because accounts are terminable on short notice, usually 90-180 days. Competition for clients by large agencies is limited somewhat because many advertisers prefer not to be represented by an agency which handles competing products or services for other advertisers.
REGULATION
Federal, state and local governments and governmental agencies in recent years have adopted statutes and regulations affecting the advertising activities of advertising agencies and their clients. For example, statutes and regulations have prohibited television advertising for certain products and have regulated the form and content of certain types of advertising for many consumer products. The Federal Trade Commission ("FTC") has also required proof of accuracy of advertising claims with respect to various products and, in its enforcement policies, is seeking to establish more stringent standards with respect to advertising practices. The FTC has the authority to investigate and to institute proceedings against advertisers and their advertising agencies for deceptive advertising. Proposals have also been made for the adoption of additional statutes and regulations which would further restrict the advertising activities of advertising agencies and their clients. The effect on the advertising business of future application of existing statutes or regulations, or the extent, nature or effect of future legislation or regulatory activity with respect to advertising, cannot be predicted.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
Response to this item is incorporated by reference to pages 2 and 14 of the Registrant's 1994 Annual Report.
ITEM 2.



ITEM 2. PROPERTIES
Virtually all of the Company's operations are conducted in leased premises. The Company's physical property consists primarily of leasehold improvements, furniture, fixtures and equipment. However, the Company does own office buildings in Puerto Rico and the Dominican Republic, neither of which are material to the Company's consolidated financial statements.
Further information regarding the Company's leased premises, which it considers to be adequate for its current operations, is incorporated by reference to note 12 of Registrant's consolidated financial statements on page 15 of the Registrant's 1994 Annual Report.
ITEM 3.

ITEM 3. PENDING LEGAL PROCEEDINGS
Response to this item is incorporated by reference to note 7 of Registrant's consolidated financial statements and the Outlook section of "Discussion and Analysis of Financial Condition and Results of Operations" on pages 13 and 5, respectively of the 1994 Annual Report.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
ITEM 5.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
Response to this item is incorporated by reference to page 2 of the Registrant's 1994 Annual Report.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
Response to this item is incorporated by reference to page 3 of the Registrant's 1994 Annual Report.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Response to this item is incorporated by reference to pages 3, 4 and 5 of the Registrant's 1994 Annual Report.
ITEM 8.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The following consolidated financial statements of the Registrant and its subsidiaries, included in the Registrant's 1994 Annual Report are incorporated herein by reference:
Consolidated Balance Sheets--December 31, 1993 and 1994 Consolidated Income Statements--Years ended December 31, 1992, 1993 and Consolidated Statements of Stockholders' Equity--Years ended December 31, 1992, 1993 and 1994 Consolidated Statements of Cash Flows--Years ended December 31, 1992, 1993 and 1994 Notes to Consolidated Financial Statements--December 31, 1994 Quarterly Financial Data--Years ended December 31, 1993 and 1994
ITEM 9.

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the Directors of the Registrant contained under the heading "Proposal 1--Election of Directors" in the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held on May 17, 1995 (the "Proxy Statement") is incorporated herein by reference. Information with respect to executive officers of the Registrant who are not also Directors or nominees to the Board of Directors is included below.
MARY A. CARRAGHER (35) --Vice President, General Counsel and Assistant Secretary
DALE F. PERONA (49) --Vice President, Treasurer and Secretary
JOHN J. REZICH (39) --Controller (Chief Accounting Officer)
Ms. Carragher joined the Company and became an officer during 1992. Previous to that time, Ms. Carragher was an attorney at Sidley & Austin.
No officer of the Registrant is related to any other officer. All other officers have been officers of the Registrant or have held senior executive positions with the Company for the past five years, except as otherwise disclosed above or in Registrant's Proxy Statement.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
Except for information referred to in Item 402(a)(8) of Regulation S-K, the information contained under the heading "Executive Compensation" in the Proxy Statement and the information relating to the compensation of directors contained under the heading "Proposal 1--Election of Directors" in the Proxy Statement is incorporated herein by reference.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except for the first two paragraphs thereof, the information contained under the heading "Voting Securities" in the Proxy Statement and the information with respect to ownership of the Registrant's common stock contained under the heading "Proposal 1--Election of Directors" in the Proxy Statement is incorporated herein by reference.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Registrant filed the following reports on Form 8-K during the fourth quarter of 1994 and the first quarter of 1995:
FORM 10-K--ITEM 14(A)
TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of the Registrant and the Independent Public Accountant's Report covering these financial statements, appearing in the Registrant's 1994 Annual Report on pages 6 through 19 are incorporated herein by reference in Item 8:
Consolidated Balance Sheets--December 31, 1993 and 1994
Consolidated Statements of Income--Years ended December 31, 1992, 1993 and
Consolidated Statements of Stockholders' Equity--Years ended December 31, 1992, 1993 and 1994
Consolidated Statements of Cash Flows--Years ended December 31, 1992, 1993 and 1994
Notes to Consolidated Financial Statements--December 31, 1994
The audited financial statements of Publicis Communication, a 50% or less owned foreign affiliate of the Registrant, were not available at the time this Form 10-K was filed. Registrant will file these financial statements by amendment to this Form 10-K.
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions, or are inapplicable, or the information called for therein is included elsewhere in the financial statements or related notes thereto contained in or incorporated by reference into this Report. Accordingly, such schedules have been omitted.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL NOTE
We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in True North Communications Inc.'s Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated March 10, 1995. Our report on the consolidated financial statements includes an explanatory paragraph with respect to the change in method of accounting for certain investments in debt and equity securities, effective January 1, 1994, as discussed in Note 2 to the consolidated financial statements, the change in the method of accounting for postretirement benefits other than pensions, effective January 1, 1993, as discussed in Note 11 to the consolidated financial statements, and the change in method of accounting for income taxes, effective January 1, 1992, as discussed in Note 1 to the consolidated financial statements. Our audits were made for the purpose of forming an opinion on those financial statements taken as a whole. Supplemental Note A is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. The Supplemental Note has been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole.
Arthur Andersen LLP
Chicago, Illinois, March 10, 1995.
FORM 10-K -- ITEM 14(A)(1)
NOTE A--VALUATION ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993, AND 1994 (AMOUNTS IN 000'S)
-------- NOTES: (1) Account consists of currency translation adjustment and adjustments made as a result of subsidiaries acquired and sold during the year. (2) 1994 deductions consist primarily of a write-off of a trade receivable from Orion, which was adequately reserved in 1991.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934 AND TO THE POWER OF ATTORNEY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS (CONSTITUTING, AMONG OTHERS, A MAJORITY OF THE MEMBERS OF THE BOARD OF DIRECTORS OF THE REGISTRANT) ON BEHALF OF THE REGISTRANT.
/s/ Bruce Mason *By: ________________________________ Bruce Mason as Attorney-in-Fact
/s/ Terry M. Ashwill *By: ________________________________ Terry M. Ashwill as Attorney-in-Fact Date: March 30, 1995
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
Date: March 30, 1995
True North Communications Inc.
/s/ Bruce Mason By: _________________________________ Bruce Mason Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer)
/s/ Terry M. Ashwill By: _________________________________ Terry M. Ashwill Executive Vice President, Chief Financial Officer and Director
/s/ John J. Rezich By: _________________________________ John J. Rezich Controller (Chief Accounting Officer)
INDEX OF EXHIBITS -----------------
EXHIBIT NO. DESCRIPTION ----------- -----------
*3(i) Registrant's Restated Certificate of Incorporation, as amended.
3(i) Certificate of Ownership and Merger changing Registrant's name to True North Communications Inc. filed with the Commission as Exhibit (3)(i) to Registrant's Current Report on Form 8-K filed December 9, 1994.
3(ii) Registrant's By-laws, as amended, filed with the Commission as Exhibit 4(d) to Registrant's Registration Statement on Form S-8 under the Securities Act of 1933, Registration No. 33-54279.
4.1 Rights Agreement dated as of November 16, 1988 between the Registrant and Harris Trust and Savings Bank, as Rights Agent, filed with the Commission as Exhibit 1 to the Registrant's Registration Statement on Form 8-A under the Securities Exchange Act of 1934 filed with the Commission on November 18, 1988.
10.1 Registrant's Stock Option Plan, filed with the Commission as Appendix A to Registrant's Definitive Proxy Statement for its Annual Meeting of Stockholders held on May 18, 1994.
10.2 Registrant's Outside Directors Stock Option Plan, filed with the Commission as Appendix A to Registrant's Definitive Proxy Statement for its Annual Meeting of Stockholders held on May 20, 1992.
10.3 Master Alliance Agreement between Publicis Communication and the Registrant and FCB Stockholders Agreement between the same parties, both dated as of January 1, 1989, filed with the Commission as Exhibits to Registrant's Current Report on Form 8-K filed February 6, 1989.
*11 Statement re Computation of Per Share Earnings.
*13 Portions of Registrant's Annual Report to Security Holders incorporated by reference into this Report on Form 10-K.
*21 Subsidiaries.
*23 Consent of Arthur Andersen LLP
*24 Power of Attorney
*27 Financial Data Schedule
NOTE: -----
Except for the documents that are marked with an asterisk, each of the documents listed above has heretofore been filed with the Securities and Exchange Commission (the "Commission") and each such document is incorporated herein by reference. Documents marked with an asterisk are filed herewith.