SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended: June 30, 2000
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: 1-10551
OMNICOM GROUP INC.
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(Exact name of registrant as specified in its charter)
New York 13-1514814
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(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
437 Madison Avenue, New York, New York 10022
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(Address of principal executive offices) (Zip Code)
(212) 415-3600
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
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. 177,639,021 (as of
July 31,2000)
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C>
Page No.
--------
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
June 30, 2000 and December 31, 1999 1
Consolidated Condensed Statements of Income -
Three Months and Six Months Ended June 30, 2000
and 1999 2
Consolidated Condensed Statements of Cash Flows -
Six Months Ended June 30, 2000 and 1999 3
Notes to Consolidated Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
Item 4. Submission of Matters to a Vote of Security Holders 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
2000 1999
---- ----
Assets
------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................... $437,808 $576,427
Short-term investments at market, which approximates cost................... 50,201 24,522
Accounts receivable, less allowance for doubtful accounts
of $49,415 and $53,720................................................... 3,366,496 3,358,304
Billable production orders in process, at cost.............................. 442,750 299,209
Prepaid expenses and other current assets................................... 616,234 453,862
--------- ---------
Total Current Assets................................................. 4,913,489 4,712,324
Furniture, equipment and leasehold improvements at cost, less
accumulated depreciation and amortization of $541,495
and $522,294............................................................. 454,303 444,722
Investments in affiliates................................................... 384,572 369,311
Intangibles, less amortization of $371,604 and $352,081..................... 2,674,593 2,428,385
Deferred tax benefits....................................................... 153,818 120,346
Long-term investments, at market............................................ 384,624 802,644
Deferred charges and other assets........................................... 413,593 139,905
--------- ---------
Total Assets......................................................... 9,378,992 $9,017,637
========= ==========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Accounts payable............................................................ $3,571,872 $4,112,777
Advance billings............................................................ 468,882 417,044
Bank loans.................................................................. 438,772 130,369
Accrued taxes and other liabilities......................................... 1,293,321 1,317,732
Dividends payable........................................................... 31,151 31,141
--------- ---------
Total Current Liabilities.............................................. 5,803,998 6,009,063
========= =========
Long-term debt.................................................................. 1,186,378 263,149
Convertible subordinated debentures............................................. 448,392 448,483
Deferred compensation and other liabilities..................................... 300,393 300,746
Deferred income taxes on unrealized gains....................................... 135,373 320,176
Minority interests.............................................................. 120,769 123,122
Shareholders' equity:
Common stock................................................................ 93,543 93,543
Additional paid-in capital.................................................. 850,351 808,154
Retained earnings........................................................... 1,091,811 882,051
Unamortized restricted stock................................................ (138,789) (85,919)
Accumulated other comprehensive income...................................... (29,348) 285,234
Treasury stock.............................................................. (483,879) (430,165)
--------- ---------
Total Shareholders' Equity............................................. 1,383,689 1,552,898
--------- ---------
Total Liabilities and Shareholders' Equity............................. $9,378,992 $9,017,637
========== ==========
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
1
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Commissions and fees............................. $1,520,245 $1,270,369 $2,899,260 $2,417,246
Operating expenses:
Salaries and related costs................... 858,013 722,703 1,696,880 1,411,004
Office and general expenses.................. 408,515 337,170 784,976 661,176
---------- ---------- ---------- ----------
1,266,528 1,059,873 2,481,856 2,072,180
---------- ---------- ---------- ----------
Operating profit................................. 253,717 210,496 417,404 345,066
Realized gain on sale of Razorfish shares........ -- -- 110,044 --
Net interest expense:
Interest and dividend income................. (8,751) (9,251) (16,025) (16,476)
Interest paid or accrued..................... 24,844 21,048 43,439 39,520
---------- ---------- ---------- ----------
16,093 11,797 27,414 23,044
---------- ---------- ---------- ----------
Income before income taxes....................... 237,624 198,699 500,034 322,022
Income taxes..................................... 96,256 80,573 204,724 131,088
---------- ---------- ---------- ----------
Income after income taxes........................ 141,368 118,126 295,310 190,934
Equity in affiliates............................. 2,629 2,849 3,505 3,778
Minority interests............................... (16,610) (13,833) (27,890) (22,008)
---------- ---------- ---------- ----------
Net income................................. $127,387 $107,142 $270,925 $172,704
========== ========== ========== ==========
Net Income Per Common Share:
Net income:
Basic........................................ $0.73 $0.61 $1.55 $0.98
Diluted...................................... $0.70 $0.59 $1.48 $0.95
Dividends declared per common share.............. $0.175 $0.15 $0.35 $0.30
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
2
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income................................................................ $270,925 $172,704
Adjustments to reconcile net income to net cash
used for operating activities:
Gain on sale of Razorfish shares.......................................... (110,044) --
Depreciation and amortization of tangible assets.......................... 50,935 46,445
Amortization of intangible assets......................................... 40,712 32,871
Minority interests........................................................ 27,890 22,008
Earnings of affiliates less than dividends received....................... 10,820 1,538
(Increase)/decrease in deferred tax benefits.............................. (5,834) 14,600
Provision for losses on accounts receivable............................... 5,383 3,817
Amortization of restricted stock.......................................... 18,032 12,654
Increase in accounts receivable........................................... (60,476) (348,650)
Increase in billable production orders in process......................... (148,429) (60,814)
Increase in prepaid expenses and other current assets..................... (141,268) (27,491)
Decrease in accounts payable.............................................. (465,746) (183,353)
Decrease in other accrued liabilities..................................... (30,983) (121,631)
Increase in accrued taxes on income....................................... 39,913 1,002
Increase in deferred charges and other assets............................. (88,375) (40,235)
--------- --------
Net cash used for operating activities................................. (586,545) (474,535)
--------- --------
Cash flows from investing activities:
Capital expenditures...................................................... (69,251) (58,687)
Payments for purchases of equity interests in subsidiaries and affiliates,
net of cash acquired................................................... (475,278) (250,038)
Proceeds from sales of equity interests in subsidiaries and affiliates.... 5,830 1,047
Payments for purchases of long-term investments and other assets.......... (179,053) (39,906)
Proceeds from sales of long-term investments and other assets............ 158,518 71,951
--------- --------
Net cash used for investing activities................................. (559,234) (275,633)
--------- --------
Cash flows from financing activities:
Net increase in short-term borrowings .................................... 442,594 143,016
Share transactions under employee stock plans............................. 45,811 73,670
Proceeds from issuance of long-term debt obligations...................... 950,795 536,567
Repayments of principal of long-term debt obligations..................... (148,042) (74,546)
Dividends and loans to/from affiliates and minority shareholders.......... (94,952) (28,685)
Dividends paid............................................................ (61,154) (51,439)
Purchase of treasury shares............................................... (128,221) (198,581)
--------- --------
Net cash provided by financing activities.............................. 1,006,831 400,002
--------- --------
Effect of exchange rate changes on cash and cash equivalents.................. 329 8,075
--------- --------
Net decrease in cash and cash equivalents.............................. (138,619) (342,091)
Cash and cash equivalents at beginning of period.............................. 576,427 648,781
--------- --------
Cash and cash equivalents at end of period.................................... $437,808 $306,690
========= ========
Supplemental Disclosures:
Income taxes paid.......................................................... $120,161 $93,139
========= ========
Interest paid.............................................................. $61,369 $46,697
========= ========
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
3
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The consolidated condensed interim financial statements included
herein have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
rules and regulations.
2. These statements reflect all adjustments, consisting of normally
recurring accruals, which in the opinion of management, are necessary
for a fair presentation of the information contained therein. Certain
reclassifications have been made to the June 30, 1999 and December 31,
1999 reported amounts to conform them with the June 30, 2000
presentation. These consolidated condensed financial statements should
be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1999.
3. Results of operations for interim periods are not necessarily
indicative of annual results.
4. Basic earnings per share is based upon the weighted average
number of common shares outstanding during the period. Diluted
earnings per share is based on the above, plus, if dilutive, common
share equivalents which include outstanding options and restricted
shares, and if dilutive, adjusted for the assumed conversion of the
Company's 2.25% and 4.25% Convertible Subordinated Debentures (the
"Debentures") and the assumed increase in net income for the after tax
interest cost of the Debentures. In determining if the Debentures were
dilutive at June 30, 2000 and 1999, the Debentures were assumed to be
converted for the entire periods. For purposes of computing diluted
earnings per share for the three months ended June 30, 2000 and 1999,
respectively, 178,106,000 and 179,100,000 common share equivalents
were assumed to have been outstanding. Additionally, 11,549,000 and
11,552,000 shares, respectively, were assumed to have been converted
related to the Debentures and the assumed increase in net income used
in the computation was $4,487,000 and $4,488,000, respectively. For
purposes of computing diluted earnings per share for the six months
ended June 30, 2000 and 1999, respectively, 178,054,000 and
178,784,000 common share equivalents were assumed to have been
outstanding. Additionally, 11,550,000 and 11,552,000 share,
respectively, were assumed to have been converted related to the
Debentures and the assumed increase in net income used in the
computation was $8,993,000 and $8,987,000, respectively. The number of
shares used in the computations of basic and diluted earnings per
share were as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic EPS 175,050,000 175,806,000 174,861,000 175,558,000
Diluted EPS 189,655,000 190,652,000 189,604,000 190,336,000
</TABLE>
4
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
5. Total comprehensive income and its components were as follows:
<TABLE>
<CAPTION>
($ in 000's)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income for the period $127,387 $107,142 $270,925 $172,704
Unrealized loss on Long-Term
Investments (a) (169,732) -- (182,642) --
Reclassification to realized gain on sale
of Razorfish shares, net of income -- -- (63,826) --
taxes of $46,218
Foreign currency translation adjustment (b) (41,353) (9,117) (68,114) (33,490)
-------- ------- -------- --------
Comprehensive income (loss) for
the period $(83,698) $98,025 $(43,657) $139,214
-------- ------- -------- --------
</TABLE>
(a) net of income tax benefit of $117,948 and $126,858 for the three and
six month periods ended June 30, 2000, respectively.
(b) net of income tax benefit of $28,737 and $6,335 for the three month
periods ended June 30, 2000 and 1999, respectively, and $47,333 and
$23,272 for the six month periods ended June 30, 2000 and 1999,
respectively.
During the six month period ended June 30, 2000, the Company sold
a portion of its ownership interest in Razorfish Inc. and realized a
pre-tax gain of approximately $110 million. Included in net income for
the period is $63,826,000 related to this transaction and
comprehensive income for the period has been adjusted to reflect the
reclassification of the gain from unrealized to realized.
During the first quarter of the year 2000, certain interactive
marketing agencies, in which the Company holds an ownership interest,
filed initial public offerings of their equity securities.
Accordingly, the Company adjusted the carrying value of these holdings
to reflect market value and recorded an unrealized pre-tax gain of
$284 million in comprehensive income for the three-month period ended
March 31, 2000. During the second quarter of the year 2000 the market
value of the Company's investments in interactive marketing agencies
declined and the unrealized loss in value is included in Unrealized
loss on Long Term Investments in arriving at comprehensive loss for
the three and six month periods ended June 30, 2000. The market value
of these investments is substantially greater than their historical
cost at June 30, 2000.
5
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
6. In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133") which the
Company is required to adopt effective January 1, 2001. SFAS No. 133 cannot
be applied retroactively. SFAS No. 133 establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133 requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria
are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate,
and assess the effectiveness of transactions that receive hedge accounting.
The Company intends to adopt SFAS No. 133 for its fiscal year ending
December 31, 2001. The impact of SFAS No. 133 on the Company's financial
statements will depend on a variety of factors, including future
interpretative guidance from the FASB, the future level of forecasted and
actual foreign currency transactions, the extent of the Company's hedging
activities, the types of hedging instruments used and the effectiveness of
such instruments. However, the Company does not believe the effect of
adopting SFAS No. 133 will be material to its financial position.
7. The Company's wholly-owned and partially-owned businesses operate
within the corporate communications services operating segment. These
businesses provide a variety of communications services to clients through
several worldwide, national and regional independent agency brands. The
businesses exhibit similar economic characteristics driven from their
consistent efforts to create customer driven marketing communications and
services that build their clients' businesses. A summary of the Company's
operations by geographic area as of June 30, 2000 and 1999, and for the
three and six months then ended is presented below:
<TABLE>
<CAPTION>
(Dollars in Thousands)
----------------------------------------------------------------------------------
United United Other Other
------ ------ ----- -----
States Kingdom Germany France Europe International Consolidated
------ ------- ------- ------ ------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Commissions and Fees
3 months Ended June 30:
2000 $805,396 $202,623 $106,537 $89,910 $149,730 $166,049 $1,520,245
1999 638,937 162,017 99,373 89,973 139,799 140,270 1,270,369
Commissions and Fees
6 months Ended June 30:
2000 $1,522,740 $391,525 $207,214 $178,947 $280,418 $318,416 $2,899,260
1999 1,226,149 326,768 190,994 173,868 255,994 243,473 2,417,246
Long-Lived Assets
at June 30:
2000 $236,239 $93,749 $10,177 $16,183 $37,676 $60,279 $454,303
1999 166,860 99,337 11,776 16,268 34,426 51,906 380,573
</TABLE>
6
<PAGE>
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
8. On April 27, 2000, the Company extended its $750 million revolving
credit facility (the "Facility"). The Facility was renewed under the same
terms with an additional provision which allows the Company to convert all
amounts outstanding under the Facility to a one-year term loan.
Additionally, on July 31, 2000 the Facility was amended and increased to $1
billion. The Facility, which allows for the issuance of $750 million of
commercial paper, expires on April 26, 2001. In addition to the $1 billion
credit facility the Company has a $500 million 5-year revolving credit
facility available which also allows for the issuance of commercial paper
and expires on June 30, 2003 (together with the Facility, the
"Facilities").
Amounts borrowed or issued under the Facilities at June 30, 2000,
which include commercial paper of $788.1 million, and bank loans of $200
million, were classified as long-term debt. Amounts available under the
Facilities at June 30, 2000 were $261.9 million. The Company has additional
unused, unsecured lines of credit which together with the lines of credit
under the Facilities aggregate $479.9 million available at June 30, 2000.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
---------------------
Second Quarter 2000 Compared to Second Quarter 1999
---------------------------------------------------
Consolidated worldwide revenues from commission and fee income increased
19.7% in the second quarter of 2000 to $1,520.2 million compared to $1,270.4
million in the second quarter of 1999. Consolidated domestic revenues increased
26.1% in the second quarter of 2000 to $805.4 million compared to $638.9 million
in the second quarter of 1999. Consolidated international revenues increased
13.2% in the second quarter of 2000 to $714.8 million compared to $631.5 million
in the second quarter of 1999. The effect of acquisitions, net of divestitures,
increased worldwide revenues by 7.2% and changes in the foreign exchange value
of the U.S. dollar decreased worldwide revenues by 3.5%. The remaining 16%
increase in consolidated worldwide revenues was due to the growth of existing
businesses.
Worldwide operating expenses, including net interest expense, increased
19.7% in the second quarter of 2000 compared to the second quarter of 1999. The
effect of acquisitions, net of divestitures, increased worldwide operating
expenses by 6.7% and changes in the foreign exchange value of the U.S. dollar
decreased worldwide operating expenses by 3.6%. The remaining increase of 16.6%
reflects primarily increased salaries and client services expenditures in
support of an increased revenue base.
Net interest expense increased in the second quarter of 2000 to $16.1
million as compared to $11.8 million in the same period in 1999. This reflected
higher average interest rates during the period and increased borrowings
primarily related to both acquisitions and share repurchases.
Pretax profit margin was 15.6% in the second quarter of 2000, which was
equal to the same period in 1999 and operating margin, which excludes interest
and dividend income and interest expense, was 16.7% in the second quarter of
2000 as compared to 16.6% in the same period in 1999.
The effective income tax rate was 40.5% in the second quarter of 2000 as
compared to 40.6% in the second quarter of 1999. This decrease is due
principally to lower effective tax rates at the Company's international
subsidiaries.
Equity in affiliates decreased to $2.6 million from $2.8 million in the
second quarter of 1999. This decrease is primarily the result of the acquisition
of additional ownership interests in certain affiliates that resulted in their
consolidation in the June 30, 2000 financial statements and lower profits earned
by certain affiliates in which the Company owns less than a 50% equity interest.
Minority interest expense increased to $16.6 million from $13.8 in the
second quarter of 1999. This increase is primarily due to acquisitions and
greater earnings by companies where minority interests exist.
8
<PAGE>
Net income increased 18.9% to $127.4 million and diluted earnings per share
increased 18.6% to $0.70 in the second quarter of 2000 as compared to $107.1
million and $0.59 per share, respectively, in the same period in the prior year.
Six Months 2000 Compared to Six Months 1999
-------------------------------------------
Consolidated worldwide revenues from commission and fee income increase
19.9% in the first six months of 2000 to $2,899.3 million compared to $2,417.2
million in the first six months of 1999. Consolidated domestic revenues
increased 24.2% in the first six months of 2000 to $1,522.7 million compared to
$1.226.1 million in the same period in 1999. Consolidated international revenues
increased 15.6% in the first six months of 2000 to $1,376.6 million compared to
$1,191.1 million in the same period in 1999. The effect of acquisitions, net of
divestitures, increased worldwide revenues by 7.7% and changes in the foreign
exchange value of the U.S. dollar decreased worldwide revenue by 3.6%. The
remaining 15.8% increase in consolidated worldwide revenues was due to the
growth of existing businesses.
Worldwide operating expenses, including net interest expense, increased
19.8% in the first six months of 2000 to $2,509.3 million compared to $2,095.2
million in the first six months of 1999. The effect of acquisitions, net of
divestitures, increased worldwide operating expenses by 7.6% and changes in the
foreign exchange value of the U.S. dollar decreased worldwide operating expenses
by 3.7%. The remaining 15.9% reflects primarily increased salaries and client
services expenditures in support of an increased revenue base.
Net interest expense increased to $27.4 million in the first six months of
2000 compared to $23.0 million in the same period in 1999. This increase
primarily reflects higher interest rates and higher average borrowings during
the period.
Excluding the gain on sale of Razorfish shares, pretax profit margin was
13.5% for the first six months of 2000 as compared to 13.3% in the same period
in 1999. Operating margin, which excludes interest and dividend income and
interest expense, was 14.4% for the first six months of 2000 as compared to
14.3% in the same period in 1999.
The effective income tax rate was 40.9% for the first six months of 2000 as
compared to 40.7% for the same period in 1999. This increase primarily reflects
the impact of the gain on sale of Razorfish shares which resulted in a higher
marginal tax rate.
Equity in affiliates decreased to $3.5 million from $3.8 million in the six
months of 1999. This decrease is primarily the result of the acquisition of
additional ownership interests in certain affiliates that resulted in their
consolidation in the June 30, 2000 financial statements and lower profits earned
by certain affiliates in which the Company owns less than 50% equity interest.
9
<PAGE>
Minority interest expense increased to $27.9 million from $22 million in
the six months of 1999. This increase is primarily due to acquisitions and
greater earnings by companies where minority interests exist.
Including the gain on sale of Razorfish shares, net income increased 56.9%
to $270.9 million in the first six months of 2000 as compared to $172.7 million
in the same period in 1999. Excluding this gain, net income increased 19.9% to
$207.1 million in the first six months of 2000 compared to the same period in
1999 and diluted EPS increased 20.0% to $1.14 in the first six months of 2000
from $0.95 for the same period in 1999.
Capital Resources and Liquidity
-------------------------------
Cash and cash equivalents at June 30, 2000 decreased to $437.8 million from
$576.4 million at December 31, 1999. The relationship between payables to the
media and suppliers and receivables from clients, at June 30, 2000, is
consistent with industry norms.
The Company maintains relationships with a number of banks worldwide, which
have extended unsecured committed lines of credit in amounts sufficient to meet
the Company's cash needs. At June 30, 2000, the Company had $1,873.9 million in
such unsecured committed lines of credit of which $479.9 million was available.
On April 27, 2000 the Company renewed its $750 million revolving credit
facility (the "Facility"). The Facility, which allows for the issuance of $750
million of commercial paper, was renewed under the same terms, with an
additional provision that allows the Company to convert all amounts outstanding
at expiration of the Facility, on April 26, 2001, into a one-year term loan. On
July 31, 2000 the Facility was amended and increased to $1 billion. In addition
to the $1 billion facility the Company has a $500 million 5 year revolving
credit facility available which also allows for the issuance of commercial
paper, and expires on June 30, 2003.
Management believes the aggregate lines of credit available to the Company
and cash flow from operations provide the Company with sufficient liquidity and
are adequate to support foreseeable operating requirements.
10
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Market Risk
-----------
The Company's market risks primarily consist of the impact of changes in
currency exchange rates on assets and liabilities of non-U.S. operations and the
impact of changes in interest rates on debt.
The Company's 1999 Form 10-K provides a more detailed discussion of the
market risks affecting its operations. As of June 30, 2000, no material change
had occurred in the Company's market risks, as compared to the disclosure in its
Form 10-K for the year ending December 31, 1999.
FORWARD-LOOKING STATEMENTS
--------------------------
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Quantitative and Qualitative Disclosures About Market Risk" set
forth in this report contain disclosures which are forward-looking statements.
Forward-looking statements include all statements that do no relate solely to
historical or current facts, and can be identified by the use of words such as
"may," "will," "expect," "project," "estimate," "anticipate," "envisage," "plan"
or "continue." These forward-looking statements are based upon the Company's
current plans or expectations and are subject to a number of uncertainties and
risks that could significantly affect current plans and anticipated actions and
the Company's future financial condition and results. The uncertainties and
risks include, but are not limited to, general economic and business conditions;
loss of significant customers; changes in levels of client advertising; the
impact of competition; risks relating to acquisition activities; and the
complexity of integrated computer systems. As a consequence, current plans,
anticipated actions and future financial condition and results may differ from
those expressed in any forward-looking statements made by or on behalf of the
Company.
11
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of the Shareholders of the Company was held on
May 16, 2000 in New York, New York, at which four matters were submitted to a
vote of the shareholders:
(a) Votes cast for or where authority to vote for was withheld
regarding the election of seven Directors were as follows:
Votes For Authority Withheld
--------- -----------------
Robert J. Callander 146,081,425 798,498
Susan S. Denison 146,081,487 798,436
John R. Murphy 146,079,861 800,062
John R. Purcell 146,076,694 803,229
Richard I. Beattie 146,079,053 800,870
Michael Greenlees 146,031,437 848,486
Linda Johnson Rice 145,607,323 1,272,600
(b) Votes cast for or against and the number of abstentions regarding
the confirmation of the appointment of Arthur Andersen LLP as
independent auditors of the Company to serve for the year ending
December 31, 2000 were as follows:
Votes For Votes Against Abstain
--------- ------------- -------
146,425,872 65,959 388,092
(c) Votes cast for or against and the number of abstentions regarding
approval of the Amendment to the Restated Certificate of
Incorporation of Omnicom Group Inc. were as follows:
Votes For Votes Against Abstain
--------- ------------- -------
89,778,135 56,476,777 625,011
(d) Votes cast for or against and the number of abstentions
regarding approval of the Amended and Restated Omnicom Group
Inc. 1998 Incentive Compensation Plan were as follows:
Votes For Votes Against Abstain
--------- ------------- -------
142,292,627 3,409,480 1,177,816
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<PAGE>
Item 6. Exhibit and Reports on Form 8-K
(a) Exhibits
Exhibit Number Description of Exhibit
-------------- ----------------------
3.1 Certificate of Amendment of the Certificate of Incorporation
of Omnicom Group Inc.
10.1 Omnicom Group Inc. Amended and Restated 1998 Incentive
Compensation Plan, filed as Exhibit B to Omnicom Group
Inc.'s Proxy Statement dated April 11, 2000, is incorporated
herein by reference.
10.2 Amendment No. 1 dated as of July 7, 2000 to $500,000,000
Amended and Restated Credit Agreement dated as of February
20, 1998 between Omnicom Finance, Inc, Omnicom Finance PLC,
Omnicom Capital Inc., Omnicom Group Inc., ABN AMRO Bank
N.V., New York Branch and the financial institutions party
thereto.
10.3 Second Amendment and Restatement dated as of July 31, 2000
of the 364-Day Credit Agreement, dated as of April 30,
1999, amended and restated as of April 27, 2000 among
Omnicom Finance Inc., Omnicom Finance PLC, Omnicom Capital
Inc., the financial institutions party thereto, Citibank,
N.A., The Bank of Nova Scotia and San Paolo IMI SPA, as
Syndication Agent.
27. Financial Data Schedule (filed in electronic format only)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the second quarter of 2000.
13
<PAGE>
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.
Omnicom Group Inc.
(Registrant)
------------------
Date August 14, 2000 /s/ Randall J. Weisenburger
--------------- ---------------------------
Randall J. Weisenburger
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
Date August 14, 2000 /s/ Philip J. Angelastro
--------------- ---------------------------
Philip J. Angelastro
Controller
(Chief Accounting Officer)
14
