-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Aej0D2WJ/K8mDeUNnS8DzfEfSXRMBFewpE3BeWA0qspx9u5Q1Y/42fxyWpC8sjf4 PsUS8sWw89ryaUKGMQ9MWg== 0000891092-01-500153.txt : 20010515 0000891092-01-500153.hdr.sgml : 20010515 ACCESSION NUMBER: 0000891092-01-500153 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OMNICOM GROUP INC CENTRAL INDEX KEY: 0000029989 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 131514814 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10551 FILM NUMBER: 1632467 BUSINESS ADDRESS: STREET 1: 437 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2124153700 MAIL ADDRESS: STREET 1: 437 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: DOYLE DANE BERNBACH GROUP INC DATE OF NAME CHANGE: 19861117 FORMER COMPANY: FORMER CONFORMED NAME: DOYLE DANE BERNBACH INTERNATIONAL INC DATE OF NAME CHANGE: 19850604 FORMER COMPANY: FORMER CONFORMED NAME: DOYLE DANE BERNBACH INC DATE OF NAME CHANGE: 19781226 10-Q 1 file001.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 10-Q ---------- (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended: March 31, 2001 -------------- 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. ================================================================================ (Exact name of registrant as specified in its charter) New York 13-1514814 - -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization) 437 Madison Avenue, New York, New York 10022 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (212) 415-3600 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable - -------------------------------------------------------------------------------- (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. 185,220,561 (as of April 30, 2001) OMNICOM GROUP INC. AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION Page No. -------- Item 1. Financial Statements Consolidated Condensed Balance Sheets - March 31, 2001 and December 31, 2000 1 Consolidated Condensed Statements of Income - Three Months Ended March 31, 2001 and 2000 2 Consolidated Condensed Statements of Cash Flows - Three Months Ended March 31, 2001 and 2000 3 Notes to Consolidated Condensed Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 12 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14 OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in Thousands)
(Unaudited) March 31, December 31, 2001 2000 ---- ---- Assets ------ Current assets: Cash and cash equivalents .................................................. $ 420,705 $ 516,817 Short-term investments at market, which approximates cost .................. 37,466 59,722 Accounts receivable, less allowance for doubtful accounts of $64,639 and $72,745 .................................................. 3,355,318 3,857,182 Billable production orders in process, at cost ............................. 434,418 403,565 Prepaid expenses and other current assets .................................. 547,169 529,597 ----------- ----------- Total Current Assets ................................................ 4,795,076 5,366,883 Furniture, equipment and leasehold improvements at cost, less accumulated depreciation and amortization of $558,202 and $557,210 ............................................................ 482,321 483,105 Investments in affiliates .................................................. 405,630 432,664 Intangibles, less amortization of $420,134 and $410,396 .................... 2,916,547 2,948,821 Deferred tax benefits ...................................................... 108,061 136,196 Long-term investments, available-for-sale .................................. 33,915 79,554 Deferred charges and other assets .......................................... 485,679 444,276 ----------- ----------- Total Assets ........................................................ $ 9,227,229 $ 9,891,499 =========== =========== Liabilities and Shareholders' Equity ------------------------------------ Current liabilities: Accounts payable ........................................................... $ 3,227,592 $ 4,351,039 Current portions of long-term debt ......................................... 30,697 29,307 Bank loans ................................................................. 143,788 72,813 Advance billings ........................................................... 518,958 630,502 Accrued taxes on income .................................................... 58,482 159,238 Other accrued taxes ........................................................ 165,047 167,898 Other accrued liabilities .................................................. 955,279 1,183,199 Dividends payable .......................................................... 32,246 31,056 ----------- ----------- Total Current Liabilities ............................................. 5,132,089 6,625,052 ----------- ----------- Long-term debt ................................................................. 1,053,927 1,015,419 Convertible debentures ......................................................... 1,079,895 229,968 Deferred compensation and other liabilities .................................... 297,894 296,921 Deferred income taxes on unrealized gains ...................................... 32,701 37,792 Minority interests ............................................................. 119,034 137,870 Shareholders' equity: Common stock ............................................................... 29,115 29,115 Additional paid-in capital ................................................. 1,120,116 1,166,076 Retained earnings .......................................................... 1,322,029 1,258,568 Unamortized restricted stock ............................................... (108,072) (119,796) Accumulated other comprehensive loss ....................................... (310,012) (232,063) Treasury stock ............................................................. (541,487) (553,423) ----------- ----------- Total Shareholders' Equity ............................................ 1,511,689 1,548,477 ----------- ----------- Total Liabilities and Shareholders' Equity ............................ $ 9,227,229 $ 9,891,499 =========== ===========
The accompanying notes to consolidated condensed financial statements are an integral part of these statements. OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Dollars in Thousands, Except Per Share Data) (Unaudited) Three Months Ended March 31, ---------------------------- 2001 2000 ---- ---- Revenue .................................... $1,601,134 $1,379,015 Operating expenses: Salaries and related costs ............. 944,865 838,867 Office and general expenses ............ 464,985 376,461 ---------- ---------- 1,409,850 1,215,328 ---------- ---------- Operating profit ........................... 191,284 163,687 Gain on sale of Razorfish shares ........... -- 110,044 Net interest expense ....................... 20,309 11,321 ---------- ---------- Income before income taxes ................. 170,975 262,410 Income taxes ............................... 67,723 108,469 ---------- ---------- Income after income taxes .................. 103,252 153,941 Equity in affiliates ....................... 410 876 Minority interests ......................... (8,382) (11,279) ---------- ---------- Net income ........................... $ 95,280 $ 143,538 ========== ========== Net Income Per Common Share: Net income: Basic .................................. $ 0.52 $ 0.82 Diluted ................................ $ 0.52 $ 0.78 Dividends declared per common share ........ $ 0.175 $ 0.175 The accompanying notes to consolidated condensed financial statements are an integral part of these statements. 2 OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Dollars in Thousands, Except Per Share Data) (Unaudited)
Three Months Ended March 31, ---------------------------- 2001 2000 ---- ---- Cash flows from operating activities: Net income ................................................................... $ 95,280 $ 143,538 Adjustments to reconcile net income to net cash used for operating activities: Loss (Gain) on sale of long-term investments ................................. 3,500 (110,044) Depreciation and amortization of tangible assets ............................. 26,670 25,339 Amortization of intangible assets ............................................ 23,236 19,832 Minority interests ........................................................... 8,382 11,279 Earnings of affiliates less than dividends received .......................... 3,274 794 Decrease in deferred tax benefits ............................................ 16,566 1,759 Tax benefit on employee stock plans .......................................... 6,738 9,655 Provisions for losses on accounts receivable ................................. 1,879 2,341 Amortization of restricted stock ............................................. 10,027 7,465 Decrease in accounts receivable .............................................. 410,080 171,051 Increase in billable production orders in process ............................ (38,135) (102,949) Increase in prepaid expenses and other current assets ........................ (23,187) (113,490) Decrease in accounts payable ................................................. (1,021,226) (882,291) Decrease in other accrued liabilities ........................................ (300,187) (159,401) (Decrease) increase in accrued taxes on income ............................... (99,907) 36,943 (Increase) decrease in advances to affiliates ................................ (17,726) 40,916 (Increase) decrease in deferred charges and other ............................ (19,054) 4,671 ----------- ----------- Net cash used for operating activities .................................... (913,790) (892,592) ----------- ----------- Cash flows from investing activities: Capital expenditures ......................................................... (34,579) (33,089) Payments for purchases of equity interests in subsidiaries and affiliates, net of cash acquired .......................................... (83,469) (129,065) Proceeds from sales of equity interests in subsidiaries and affiliates ....... -- 6,017 Purchases of long-term investments and other assets .......................... -- (132,602) Proceeds from sales of long-term investments and other assets ................ 63,247 145,628 ----------- ----------- Net cash used for investing activities .................................... (54,801) (143,111) ----------- ----------- Cash flows from financing activities: Net increase in short-term borrowings ........................................ 80,120 192,527 Share transactions under employee stock plans ................................ 21,009 7,673 Proceeds from issuance of convertible debentures and long-term debt obligations ................................................ 913,409 934,336 Repayments of principal of long-term debt obligations ........................ (11,954) (146,019) Dividends from and loans (to) affiliates and minority shareholders ........... (29,401) (55,112) Dividends paid ............................................................... (30,628) (30,677) Purchase of treasury shares .................................................. (60,149) (86,270) ----------- ----------- Net cash provided by financing activities ................................. 882,406 816,458 ----------- ----------- Effect of exchange rate changes on cash and cash equivalents ...................... (9,927) (3,720) ----------- ----------- Net decrease in cash and cash equivalents ................................. (96,112) (222,965) Cash and cash equivalents at beginning of period .................................. 516,817 576,427 ----------- ----------- Cash and cash equivalents at end of period ........................................ $ 420,705 $ 353,462 =========== =========== Supplemental Disclosures: Income taxes paid ............................................................ $ 113,592 $ 65,622 =========== =========== Interest paid ................................................................ $ 24,604 $ 18,092 =========== ===========
The accompanying notes to consolidated condensed financial statements are an integral part of these statements. 3 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, in all material respects, of the information contained therein. Certain reclassifications have been made to the March 31, 2000 and December 31, 2000 reported amounts to conform them with the March 31, 2001 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, 2000. 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 Convertible Subordinated Debentures (the "Debentures") and the assumed increase in net income for the after tax interest cost of the Debentures. In December 2000, the 4 1/4% Convertible Subordinated Debentures were called for redemption and subsequently converted by holders into shares of common stock. The additional shares are included in shares outstanding at March 31, 2001. In determining if the Debentures were dilutive at March 31, 2001 and 2000, the Debentures were assumed to have been converted for the entire quarter. For purposes of computing diluted earnings per share for the three months ended March 31, 2001 and 2000, respectively, 183,809,000 and 177,484,000 common share equivalents were assumed to have been outstanding. Additionally, 4,614,000 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 $2,088,000 and $4,441,000, respectively. The number of shares used in the computations of basic and diluted earnings per share were as follows: Three Months Ended March 31, --------------------------- 2001 2000 ---- ---- Basic EPS 181,842,000 174,669,000 Diluted EPS 188,423,000 189,036,000 4 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) 5. Total comprehensive income and its components were as follows: Three Months Ended March 31, ($ in 000's) ------------------- 2001 2000 ---- ---- Net income for the period ............................ $ 95,280 $143,538 Unrealized loss on long-term investments, net of income taxes of $6,314 and $8,910 in 2001 and 2000, respectively .......................... (9,471) (12,910) Reclassification to realized gain on sale of Razorfish shares, net of income taxes of $46,218 ..... -- (63,826) Reclassification to realized loss on sale of certain marketable securities, net of income tax benefit of $1,400 ............................................ 2,100 -- Foreign currency translation adjustment, net of income taxes of $47,052 and $18,596 in 2001 and 2000, respectively ....................... (70,578) (26,761) -------- -------- Comprehensive income for the period .................. $ 17,331 $ 40,041 ======== ======== During the three months ended March 31, 2001, the Company sold its minority interests in several public companies that it held as investments. The Company realized a pre-tax loss of $3,500,000 related to this transaction and comprehensive income for the period has been adjusted to reflect the reclassification of this loss from unrealized to realized. During the three months ended March 31, 2001, the market value of the Company's investments in certain public marketing and corporate communication companies declined. Accordingly, the Company adjusted the carrying value of these investments to reflect the market value as of March 31, 2001 and recorded an unrealized pre-tax loss of $15,785,000 in comprehensive income. During the three months ended March 31, 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. 5 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) In May 2001, the Company contributed to a new holding company the equity of an entity that held its investments in several public and private companies which had been classified as long term investments. The investments were primarily companies in the e-services industry. The Company received 8.5% cumulative preferred stock for its contribution. The common stock of the new holding company is owned by a private equity fund. No gain or loss was recognized in the transaction. 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") (as amended by SFAS 138), which the Company adopted effective January 1, 2001. SFAS No. 133 requires 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. Derivatives that are not cash flow hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. The Company recorded a $2.9 million after tax charge ($4.9 million pre-tax) for the cumulative effect of adopting, effective January 1, 2001, SFAS No. 133. The charge resulted from the Company's accounting for a hedge of its Yen net investments. The Company utilized a cross currency contract (the "Contract") to hedge its Yen net investment. Consistent with the Company's policy with respect to derivative instruments and hedging activities and in accordance with SFAS No. 133, when the spot rate is declared as the underlying hedge of a net investment, any ineffectiveness is recorded in operating income or expense. During the first quarter of 2001, the Company terminated the portion of the Contract which gave rise to the ineffectiveness and recorded an additional after tax charge of $300,000 ($500,000 pre-tax). As a result of the termination of part of the Contract, no measurable ineffectiveness will result for the remaining term. The Company also uses forward contracts to hedge its foreign currency intercompany receivables and payables. The term of these forward contracts, on average, is typically 30 days. These contracts are marked to market through earnings and the changes in market value are offset by the changes in the spot value of the foreign currency receivable or payable. This accounting is similar to the accounting applied prior to adopting SFAS 133, as amended. The changes in value are included in operating income or expense and were not material. 7. The Company's wholly and partially owned businesses operate within the marketing and 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 6 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) from their consistent efforts to create customer driven marketing and corporate communications and services that build their clients' businesses. A summary of the Company's operations by geographic area as of March 31, 2001 and 2000, and for the three months then ended is presented below:
(Dollars in Thousands) ------------------------------------------------------------------------------------- United United Other Other States Kingdom Germany France Europe International Consolidated ------ ------- ------- ------ ------ ------------- ------------ 2001 Revenue $896,597 $195,655 $108,972 $97,230 $143,833 $158,848 $1,601,135 Long-Lived Assets 250,990 97,368 10,124 15,483 35,925 72,431 482,321 2000 Revenue $717,378 $188,902 $100,677 $89,037 $130,688 $152,333 $1,379,015 Long-Lived Assets 225,809 102,393 10,259 16,599 34,447 59,066 448,573
8. On April 26, 2001, the Company extended its 364-day revolving credit facility. The facility was renewed under substantially the same terms as had previously been in effect, including a provision which allows the Company to convert all amounts outstanding at expiration on April 25, 2002, into a one-year term loan. The Company also has a $500 million 5-year revolving credit facility, which expires on June 30, 2003. Both facilities allow for the issuance of commercial paper, and on a combined basis, the Company can issue $1.0 billion in commercial paper. Amounts outstanding under the revolving credit facilities at March 31, 2001 include loans of $300.0 million, and $559.0 million of commercial paper, both classified as long-term debt. The Company also had short-term bank loans of $143.8 at March 31, 2001, primarily comprised of bank overdrafts of international subsidiaries, which are treated as unsecured loans pursuant to bank agreements. At March 31, 2001, the Company had committed unsecured credit lines aggregating $1,843.0 million. The unused portion of credit lines was $840.2 at March 31, 2001. 9. In February 2001, the Company completed the issuance of $850 million of aggregate principal amount of Liquid Yield Option Notes (LYONs) due February 7, 2031. The net proceeds from the LYONs offering were $830.2 million. The LYONs are unsecured, unsubordinated zero-coupon securities that may be converted into common shares, subject to specified conditions relating to the price of our common shares. The initial conversion price is $110.01 per share subject to antidilutive adjustments. The Company may be required to redeem the LYONs after February 7, 2002 with cash or common stock or a combination of both, at the Company's election. Additionally, the Company has the option of redeeming the LYONs after February 7, 2006 for cash. 7 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) Furthermore, after February 7, 2006, the Company may be obligated to pay contingent cash interest equal to the amount of dividends it pays to common shareholders during the relevant period, if the Company's stock price reaches specified thresholds. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS Results of Operations First Quarter 2001 Compared to First Quarter 2000 Consolidated worldwide revenue increased 16.1% in the first quarter of 2001 to $1,601.1 million compared to $1,379.0 million in the first quarter of 2000. Consolidated domestic revenue increased 25.0% in the first quarter of 2001 to $896.6 million compared to $717.4 million in the first quarter of 2000. Consolidated international revenue increased 6.5% in the first quarter of 2001 to $704.5 million compared to $661.6 million in the first quarter of 2000. The effect of acquisitions, net of divestitures, increased worldwide revenue by 6.6% and changes in the foreign exchange value of the U.S. dollar decreased worldwide revenue by 4.3%. The remaining 13.8% increase in consolidated worldwide revenue was due to the growth of existing businesses, including net new business wins. Worldwide operating expenses, including net interest expense, increased 16.6% in the first quarter of 2001 compared to the first quarter of 2000. The effect of acquisitions, net of divestitures, increased worldwide operating expenses by 6.9% and changes in the foreign exchange value of the U.S. dollar decreased worldwide operating expenses by 4.3%. The remaining increase of 14.0% reflects normal salary increases and growth in client services expenditures to support the increased revenue base and the cumulative effect of adopting SFAS 133. Net interest expense increased in the first quarter of 2001 to $20.3 million as compared to $11.3 million in the same period in 2000. This increase reflects increased debt levels used primarily to fund acquisitions and share repurchases, offset by reductions in interest expense resulting from the conversion of our 4.25% Convertible Subordinated Debenture at the end of last year and lower overall interest rates. The operating margin, which excludes net interest expense, was 11.9% in the first quarter of 2001 as compared to 11.9% in the same period in 2000. Excluding the gain on sale of Razorfish shares, pretax profit margin was 10.7% in the first quarter of 2001 as compared to 11.0% in the same period in 2000. The effective income tax rate was 39.6% in the first quarter of 2001 as compared to 41.3% in the first quarter of 2000. This decrease is due to continued efforts to reduce our effective tax rate and to the impact of the gain on sale of Razorfish shares last year, which resulted in a higher marginal tax rate for the first quarter of 2000. The decrease in equity in affiliates is the result of the acquisition of additional ownership interests in certain affiliates that resulted in their consolidation in the March 31, 2001 financial statements and lower profits earned by certain companies in which we own less than a 50% equity interest. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS (Continued) The decrease in minority interest expense is primarily due to the acquisition of additional ownership interests and lower earnings by companies where minority interests exist. Excluding the gain on sale of Razorfish shares, net income increased 19.6% to $95.3 million and diluted earnings per share increased 15.6% to $0.52 in the first quarter of 2001. Including this gain, net income decreased 33.6% to $95.3 million in the first quarter of 2001 as compared to $143.5 million in the same period in 2000 and diluted earnings per share decreased 33.3% to $0.52 in the current quarter compared to $0.78 in the prior year period. Capital Resources and Liquidity Cash and cash equivalents at March 31, 2001 decreased to $420.7 million from $516.8 million at December 31, 2000. The relationship between payables to the media and suppliers and receivables from clients, at March 31, 2001, is consistent with industry norms. On April 26, 2001, we renewed our 364-day revolving credit facility. The facility, which supports the issuance of commercial paper, was renewed under substantially the same terms as previously existed, including a provision that allows us to convert all amounts outstanding at expiration on April 25, 2002, into a one-year term loan. Together with our $500 million revolving credit facility, we can issue $1.0 billion in commercial paper. We also maintain relationships with a number of banks worldwide. At March 31, 2001, we had $1,843.0 million in such unsecured committed lines of credit, of which $840.2 million was available. In February 2001, we completed the issuance of $850 million aggregate principal amount of Liquid Yield Option Notes ("LYONs") due February 7, 2031. The net proceeds from the LYONs offering were $830.2 million. The LYONs are unsecured, unsubordinated zero-coupon securities that may be converted into our common shares, subject to specified conditions relating to the price of our common shares. The initial conversion price is $110.01 per share subject to antidilutive adjustment. We may be required to redeem the LYONs after February 7, 2002 with cash or common stock or a combination of both, at our election. Additionally, we have the option of redeeming the LYONs after February 7, 2006 for cash. Furthermore, we may be obligated to pay contingent cash interest after February 7, 2006 equal to the amount of dividends we pay to common shareholders during specified six-month periods, if our stock price reaches specified thresholds. Management believes the aggregate lines of credit available and cash flow from operations provide us with sufficient liquidity and are adequate to support foreseeable operating requirements. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS (Continued) Long-Term Investments We have investments available-for-sale, which are comprised of certain minority interests in public marketing and corporate communication companies that specialize in digital media and other interactive services. The market value of the public companies are subject to a high degree of market volatility. This volatility is reflected in unrealized gains and losses recorded in shareholders' equity as accumulated other comprehensive income. During the quarter ended March 31, 2001, we sold our minority interests in certain public companies that we held as investments. In May 2001, we contributed to a new holding company the equity of an entity that held our investments in several public and private companies which had been classified as long term investments. The investments were primarily companies in the e-services industry. We received 8.5% cumulative preferred stock for its contribution. The common stock of the new holding company is owned by a private equity fund. No gain or loss was recognized in the transaction. Management continually monitors the value of these investments to determine whether an other than temporary impairment has occurred. As of the quarter ended March 31, 2001, the carrying value of these investments approximated their fair value. 11 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk Our 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. Our 2000 Form 10-K provides a more detailed discussion of the market risks affecting our operations. As of March 31, 2001, no material change had occurred in our market risks, as compared to the disclosure in our Form 10-K for the year ending December 31, 2000. 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 within the meaning of the federal securities laws. 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 our current plans or expectations and are subject to a number of uncertainties and risks that could significantly affect current plans and anticipated actions and our future financial condition and results. The uncertainties and risks include, but are not limited to, changes in general economic conditions, competitive factors, client communication requirements, the hiring and retention of human resources and other factors. In addition, our international operations are subject to the risk of currency fluctuations, exchange controls and similar risks discussed in Item 3 above. 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 us or on our behalf. 12 PART II. OTHER INFORMATION Item 6. Exhibit and Reports on Form 8-K (a) Exhibits Exhibit Number Description of Exhibit - -------------- ---------------------- 10.1 364-Day Credit Agreement, dated as of April 30, 1999, amended and restated April 26, 2001, among Omnicom Finance Inc., Omnicom Finance PLC, Omnicom Capital Inc., the financial institutions party thereto, Citibank, N.A., as Administrative Agent, The Bank of Nova Scotia, as Documentation Agent, The Chase Manhattan Bank, Fleet National Bank and San Paolo IMI SPA as Syndication Agents. (b) Reports on Form 8-K No reports on Form 8-K were filed during the first quarter of 2001. 13 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) ------------------ May 14, 2001 /s/ Randall J. Weisenburger --------------------------------- Randall J. Weisenburger Executive Vice President and Chief Financial Officer (Principal Financial Officer) May 14, 2001 /s/ Philip J. Angelastro --------------------------------- Philip J. Angelastro Controller (Chief Accounting Officer) 14 EX-10.1 2 file002.txt CREDIT AGREEMENT EXHIBIT 10.1 ================================================================================ OMNICOM FINANCE INC., OMNICOM FINANCE PLC, and OMNICOM CAPITAL INC., as Borrowers THIRD AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT Dated as of April 30, 1999, Amended and Restated as of April 27, 2000, and Amended and Restated as of July 31, 2000, and Amended and Restated as of April 26, 2001 SALOMON SMITH BARNEY INC., as Lead Arranger and Book Runner CITIBANK, N.A., as Administrative Agent THE BANK OF NOVA SCOTIA, as Documentation Agent and THE CHASE MANHATTAN BANK, FLEET NATIONAL BANK, and SANPAOLO IMI S.p.A., as Syndication Agents ================================================================================ THIRD AMENDMENT AND RESTATEMENT (this "Third Amendment and Restatement") dated as of April 26, 2001 of the 364-Day Credit Agreement referred to below, among: OMNICOM FINANCE INC., a corporation organized and existing under the laws of Delaware ("OFI"); OMNICOM FINANCE PLC (formerly, Omnicom Finance Limited), a corporation organized and existing under the laws of England and Wales ("OFL"); OMNICOM CAPITAL INC., a corporation organized and existing under the laws of Connecticut ("OCI" and, together with OFI and OFL, each a "Borrower", and collectively, the "Borrowers" ); OMNICOM GROUP INC. (the "Guarantor"); each of the financial institutions listed in Schedule I hereto (each a "Bank", and collectively the "Banks") and CITIBANK, N.A., as administrative agent for the Banks (in such capacity, together with its successors in such capacity, the "Administrative Agent"); SALOMON SMITH BARNEY INC., as lead arranger and book runner; THE BANK OF NOVA SCOTIA, as documentation agent (the "Documentation Agent"); and THE CHASE MANHATTAN BANK, FLEET NATIONAL BANK and SANPAOLO IMI S.p.A., as syndication agents (the "Syndication Agents", and collectively, together with the Administrative Agent and the Documentation Agent, the "Agents"). OFI, OFL, certain of the Banks and the Agents are parties to a 364-Day Credit Agreement, dated as of April 30, 1999 and, together with OCI, are party to a subsequent Amended and Restated 364-Day Credit Agreement, dated as of April 27, 2000 and a Second Amended and Restated Credit Agreement dated as of July 31, 2000 (as in effect immediately prior to the effectiveness of this Third Amendment and Restatement pursuant to Section 4 hereof, the "Existing Credit Agreement"), providing, subject to the terms and conditions thereof, for extensions of credit (by the making of loans) by the Banks to the Borrowers in an aggregate principal amount not exceeding $1,000,000,000 at any one time outstanding. The Borrowers, the Banks signatory hereto and the Agents wish to amend and restate the Existing Credit Agreement to extend the Commitment Termination Date (as defined in the Existing Credit Agreement) for an additional 364 days; and the bank identified under the heading "ADDITIONAL BANK" on the signature pages hereto wishes to become party to the Existing Credit Agreement pursuant to this Third Amendment and Restatement and undertake a Commitment, as of the Existing Commitment Termination Date (as defined in the Existing Credit Agreement), in the amount specified opposite such bank's name on Schedule I to this Third Amendment and Restatement. Accordingly, the parties hereto hereby agree to amend the Existing Credit Agreement in certain respects as set forth herein and to restate the Existing Credit Agreement as so amended (the Existing Credit Agreement as so amended and restated, the "Third Amended and Restated Credit Agreement"): Section 1. Definitions. Except as otherwise defined herein, terms defined in the Existing Credit Agreement are used herein as defined therein. Section 2. Amendments. Subject to the satisfaction of the conditions precedent specified in Section 4 of this Third Amendment and Restatement, but effective on the Effective Date (as defined below), (i) each of the Existing Credit Agreement and the Guaranty is hereby amended as set forth below, and (ii) the Existing Credit Agreement is restated to read in its entirety as set forth in the Existing Credit Agreement, which is hereby incorporated herein by reference, with the amendments set forth below: THIRD AMENDED AND RESTATED CREDIT AGREEMENT -2- A. References in the Existing Credit Agreement to "this Agreement" (and indirect references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed to be references to the Third Amended and Restated Credit Agreement. B. Section 1.01 of the Existing Credit Agreement shall be amended by adding the following new definition for "Third Amended and Restated Credit Agreement" and inserting the same in the appropriate alphabetical location and by amending and restating the following definition for "Commitment" to read in its entirety as follows: "Third Amended and Restated Credit Agreement" shall mean this Agreement as amended and restated by the Amendment and Restatement dated as of April 27, 2000, the Second Amendment and Restatement dated as of July 31, 2000 and the Third Amendment and Restatement dated as of April 26, 2001 among the Borrowers, the Guarantor, the Banks signatory thereto and the Agents. "Commitment" shall mean, for each Bank, the amount set forth opposite such Bank's name in Schedule I to the Third Amended and Restated Credit Agreement, as the same may be (x) reduced from time to time pursuant to Section 4.02 and/or Section 10, (y) increased pursuant to Section 4.04 and/or (z) adjusted from time to time as a result of assignments to or from such Bank pursuant to Section 12.04(b). C. Section 4.03 of the Existing Credit Agreement is amended by deleting paragraph (a) in its entirety and inserting a new paragraph (a) as follows: "(a) The "Commitment Termination Date" shall be April 25, 2002 or such later date to which the Commitment Termination Date has been extended pursuant to this Section 4.03." D. Section 4.03(b) of the Existing Credit Agreement is amended by deleting the reference to "Consent Date (as hereinafter defined)" at the end of the first sentence and replacing it with "Existing Commitment Termination Date". E. Section 4.03(d) of the Existing Credit Agreement is amended by deleting the reference to "Consent Date" and replacing it with "Existing Commitment Termination Date". F. Section 4.04 of the Existing Credit Agreement is amended and restated in its entirety to read as follows: "4.04 Increase of Commitments. The Guarantor shall have the right, at any time prior to the then Existing Commitment Termination Date, without the consent of the Required Banks, to effect an increase or increases in the Total Commitment to any amount up to $1,000,000,000; provided that (i) each increase shall be in a minimum amount of $1,000,000 and multiples of $1,000,000 in excess thereof; (ii) no Default or Event of Default has occurred and is continuing; THIRD AMENDED AND RESTATED CREDIT AGREEMENT -3- and (iii) one or more of the existing Banks agree, but are not required to agree, to increase their respective Commitments hereunder and/or one or more new banks, satisfactory to the Guarantor and reasonably satisfactory to the Administrative Agent, agree to provide Commitments hereunder. Notice from the Guarantor requesting such increase shall be given to the Banks, with a copy to the Administrative Agent, at least three Business Days before the proposed effective date for such increase. An increase in the Total Commitments pursuant to this Section 4.04 shall not, however, be permitted if the Total Commitment shall have been reduced pursuant to Section 4.02(b) during the preceding four months." G. Schedule I of the Existing Credit Agreement is deleted in its entirety and replaced with the schedule set forth in Schedule I to this Third Amendment and Restatement. H. Section 6(e) of the Guaranty is hereby amended by deleting the first reference to "December 31, 1998" in the first sentence thereof and replacing it with "December 31, 2000" and by deleting the reference to "December 31, 1998 through the date hereof" in the third sentence thereof and replacing it with "December 31, 2000 through April 26, 2001". Section 3. Representations and Warranties. Each Borrower (but only OFI and OCI with respect to Section 7.09) represents and warrants to the Banks as of the Effective Date that the representations and warranties set forth in Section 7 of the Existing Credit Agreement are true and correct as to itself on and as of the Effective Date as though made on and as of the Effective Date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date) and as if each reference in said Section 7 to "this Agreement" included reference to the Third Amended and Restated Credit Agreement. The Guarantor represents and warrants to the Banks as of the Effective Date that the representations and warranties (after giving effect to the amendment in Section 2 H of this Third Amendment and Restatement) set forth in Section 6 of the Guaranty are true and correct as to itself on and as of the Effective Date as though made on and as of the Effective Date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date). Each Borrower and the Guarantor represents and warrants to the Banks as of the Effective Date that no event has occurred and is continuing that constitutes a Default or Event of Default (and the parties agree that breach of any of the representations and warranties in this Section 3 shall constitute an Event of Default under Section 10.02 of the Third Amended and Restated Credit Agreement). Section 4. Conditions to Effectiveness. The amendment and restatement set forth in Section 2 of this Third Amendment and Restatement shall become effective on the date (the "Effective Date") on which the Administrative Agent shall notify the Guarantor that the following conditions precedent have been satisfied (and the Administrative Agent shall promptly notify the Banks of the occurrence of the Effective Date): THIRD AMENDED AND RESTATED CREDIT AGREEMENT -4- (a) Documents. The Administrative Agent shall have received the following documents (with sufficient copies for each Bank), each of which shall be satisfactory to the Administrative Agent in form and substance: (1) Execution by All Parties. Counterparts of this Third Amendment and Restatement, duly executed and delivered by each Borrower, the Guarantor, the Administrative Agent and each Bank (it being understood and agreed that by its execution of this Third Amendment and Restatement, the Guarantor confirms its obligations under the Guaranty with respect to the Third Amended and Restated Credit Agreement). (2) Notes. For Barclays Bank PLC, a Note substantially in the form of Exhibit B to the Existing Credit Agreement, executed and delivered by each of the Borrowers to evidence each such Bank's Loans. (3) Other Documents. Such other documents as the Administrative Agent may reasonably request, all in form and substance satisfactory to the Administrative Agent. (b) Fees and Expenses. The Administrative Agent shall have received evidence satisfactory to it that (i) the Borrowers and the Guarantor shall have paid in full all fees, expenses and interest due and payable to the Administrative Agent and the Banks under the Existing Credit Agreement, including, without limitation, all amounts due and owing to Dresdner Bank AG, (ii) the Guarantor shall have paid all accrued fees and expenses of the Administrative Agent (including the reasonable fees and expenses of counsel to the Administrative Agent) in connection with this Third Amendment and Restatement and (iii) the Guarantor shall have paid to the Administrative Agent for account of the Banks such up-front or other fees in connection with the execution of this Third Amendment and Restatement as the Guarantor and the Administrative Agent shall have agreed upon. Section 5. Miscellaneous. Except as herein provided, the Existing Credit Agreement shall remain unchanged and in full force and effect. This Third Amendment and Restatement may be executed in any number of counterparts, all of which taken together shall constitute one and the same agreement and any of the parties hereto may execute this Third Amendment and Restatement by signing any such counterpart. This Third Amendment and Restatement shall be governed by, and construed in accordance with, the law of the State of New York. THIRD AMENDED AND RESTATED CREDIT AGREEMENT -5- IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Third Amendment and Restatement as of the day and year first above written. BORROWERS: OMNICOM FINANCE INC. By: /s/ Dennis E. Hewitt ------------------------ Name: Dennis E. Hewitt Title: Treasurer OMNICOM FINANCE PLC By: /s/ Dennis E. Hewitt ------------------------ Name: Dennis E. Hewitt Title: Director By: /s/ Barry J. Wagner ------------------------ Name: Barry J. Wagner Title: Director OMNICOM CAPITAL INC. By: /s/ Dennis E. Hewitt ------------------------ Name: Dennis E. Hewitt Title: President GUARANTOR: OMNICOM GROUP INC., as Guarantor By: /s/ Dennis E. Hewitt ------------------------ Name: Dennis E. Hewitt Title: Treasurer THIRD AMENDED AND RESTATED CREDIT AGREEMENT -6- BANKS: CITIBANK, N.A., as Administrative Agent and as Bank By: /s/ Carolyn A. Kee ------------------------ Name: Carolyn A. Kee Title: Vice President THIRD AMENDED AND RESTATED CREDIT AGREEMENT -7- THE BANK OF NOVA SCOTIA as Documentation Agent and as Bank By: /s/ John Campbell ------------------------ Name: John Campbell Title: Unit Head THIRD AMENDED AND RESTATED CREDIT AGREEMENT -8- THE CHASE MANHATTAN BANK as Syndication Agent and as Bank By: /s/ Constance M. Coleman ------------------------ Name: Constance M. Coleman Title: Vice President THIRD AMENDED AND RESTATED CREDIT AGREEMENT -9- FLEET NATIONAL BANK, as Syndication Agent and as Bank By: /s/ Thomas J. Levy ------------------------ Name: Thomas J. Levy Title: Vice President THIRD AMENDED AND RESTATED CREDIT AGREEMENT -10- SANPAOLO IMI S.p.A. as Syndication Agent and as Bank By: /s/ Carlo Persico ------------------------ Name: Carlo Persico Title: G.M. By: /s/ Robert Wurster ------------------------ Name: Robert Wurster Title: FVP THIRD AMENDED AND RESTATED CREDIT AGREEMENT -11- SCOTIABANC, INC. By: /s/ W.J. Brown ------------------------ Name: W.J. Brown Title: Managing Director THIRD AMENDED AND RESTATED CREDIT AGREEMENT -12- SVENSKA HANDELSBANKEN By: /s/ Paul Breakspear ------------------------ Name: Paul Breakspear Title: Account Manager By: /s/ Simon Silvester ------------------------ Name: Simon Silvester Title: Head of London Branch THIRD AMENDED AND RESTATED CREDIT AGREEMENT -13- HSBC BANK USA By: /s/ Diane M. Zieske ------------------------ Name: Diane M. Zieske Title: First Vice President THIRD AMENDED AND RESTATED CREDIT AGREEMENT -14- WACHOVIA BANK, N.A. By: /s/ Elizabeth M. Phelan ------------------------ Name: Elizabeth M. Phelan Title: Vice President THIRD AMENDED AND RESTATED CREDIT AGREEMENT -15- PNC BANK, NATIONAL ASSOCIATION By: /s/ Donald V. Davis ------------------------ Name: Donald V. Davis Title: Vice President THIRD AMENDED AND RESTATED CREDIT AGREEMENT -16- SUMITOMO MITSUI BANKING CORPORATION (formerly known as The Sumitomo Bank, Limited) By: /s/ C. Michael Garrido ------------------------ Name: C. Michael Garrido Title: Senior Vice President THIRD AMENDED AND RESTATED CREDIT AGREEMENT -17- MELLON BANK, N.A. By: /s/ Maria N. Sisto ------------------------ Name: Maria N. Sisto Title: Vice President THIRD AMENDED AND RESTATED CREDIT AGREEMENT -18- FIRSTAR BANK, NA By: /s/ Robert A. Flosbach ------------------------ Name: Robert A. Flosbach Title: Senior Vice President THIRD AMENDED AND RESTATED CREDIT AGREEMENT -19- BANK ONE, NA (MAIN OFFICE CHICAGO) By: /s/ Mahua G. Thakurta ------------------------ Name: Mahua G. Thakurta Title: Commercial Banking Officer THIRD AMENDED AND RESTATED CREDIT AGREEMENT -20- THE BANK OF NEW YORK By: /s/ Roger A. Grossman ------------------------ Name: Roger A. Grossman Title: Vice President THIRD AMENDED AND RESTATED CREDIT AGREEMENT -21- ADDITIONAL BANK: BARCLAYS BANK PLC By: /s/ Marlene Wechselblatt ------------------------ Name: Marlene Wechselblatt Title: Vice President THIRD AMENDED AND RESTATED CREDIT AGREEMENT -22- SCHEDULE I Schedule of Commitments ----------------------- Lenders Commitment - ------- ---------- CITIBANK, N.A. $150,000,000 THE BANK OF NOVA SCOTIA/SCOTIABANC, INC. $100,000,000 THE CHASE MANHATTAN BANK $100,000,000 FLEET NATIONAL BANK $100,000,000 SANPAOLO IMI S.p.A. $70,000,000 SVENSKA HANDELSBANKEN $75,000,000 HSBC BANK USA $65,000,000 WACHOVIA BANK, N.A. $60,000,000 PNC BANK, NATIONAL ASSOCIATION $50,000,000 SUMITOMO MITSUI BANKING CORPORATION $50,000,000 MELLON BANK, N.A. $40,000,000 FIRSTAR BANK, NA $30,000,000 BARCLAYS BANK PLC $20,000,000 BANK ONE, NA (MAIN OFFICE CHICAGO) $15,000,000 THE BANK OF NEW YORK $10,000,000 ============ TOTAL $935,000,000 THIRD AMENDED AND RESTATED CREDIT AGREEMENT -----END PRIVACY-ENHANCED MESSAGE-----