8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): February 22, 2005

OMNICOM GROUP INC.
(Exact Name of Registrant as Specified in Charter)

New York
(State or Other Jurisdiction
of Incorporation) 1-10551
(Commission
File Number)   13-1514814 
(IRS Employer
Identification No.)

437 Madison Avenue, New York, NY
(Address of Principal Executive Offices) 10022
(Zip Code)

Registrants’ telephone number, including area code: (212) 415-3600

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

        Check the appropriate box if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):

o Written communications pursuant to Rule 425 under Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under Securities Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14(d)-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13(c) under the Exchange Act

Item 2.02.  Results of Operations and Financial Condition.

        On February 22, 2005, Omnicom Group Inc. (“Omnicom”) issued an earnings release reporting its financial results for the three and twelve months ended December 31, 2004. A copy of this earnings release is attached as Exhibit 99.1 hereto. Following the issuance of this earnings release, Omnicom hosted an earnings call in which its financial results for the three and twelve months ended December 31, 2004 were discussed. The investor presentation materials used for the call are attached as Exhibit 99.2 hereto.

        On February 22, 2004, Omnicom posted the materials attached as Exhibits 99.1 and 99.2 on its web site (www.omnicomgroup.com).

        As discussed on page 1 of Exhibit 99.2, the investor presentation contains forward-looking statements within the meaning of the federal securities laws. These statements are present expectations, and are subject to the limitations listed therein and in Omnicom’s other SEC reports, including that actual events or results may differ materially from those in the forward-looking statements.

        The foregoing information (including the exhibits hereto) is being furnished under “Item 2.02 Results of Operations and Financial Condition” and “Item 7.01 Regulation FD Disclosure.” Such information (including the exhibits hereto) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

        The filing of this Report and the furnishing of this information pursuant to Items 2.02 and 7.01 (including the investor presentation) do not mean that such information is material or that disclosure of such information is required.

Item 7.01.  Regulation FD Disclosure.

        See “Item 2.02 Results of Operations and Financial Condition” above.

Item 9.01.  Financial Statements and Exhibits.

        (c)  Exhibits.

Exhibit Number	Description
99.1	Earnings release dated February 22, 2005.
99.2	Investor presentation materials dated February 22, 2005.

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 hereunto duly authorized.

OMNICOM GROUP INC.
By:	/s/ Philip J. Angelastro
	Name: Philip J. Angelastro
	Title:   Senior Vice President and             Controller

Date: February 22, 2005

2

EXHIBIT INDEX

Exhibit Number	Description
99.1	Earnings release dated February 22, 2005.
99.2	Investor presentation materials dated February 22, 2005.

3

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

Contact: Randall Weisenburger
212-415-3393

Omnicom Reports 2004 Fourth Quarter and Year-End Results

NEW YORK, February 22, 2005 - Omnicom Group Inc. (NYSE-OMC) today announced that net income for the fourth quarter of 2004 increased 12% to $236.5 million from $210.7 million in the fourth quarter of 2003. Diluted earnings per share increased 14% to $1.28 per share in 2004 from $1.12 per share in 2003.

Worldwide revenue increased 11% to $2,789.0 million in the fourth quarter of 2004 from $2,506.0 million in the fourth quarter of 2003. Domestic revenue for the fourth quarter of 2004 increased 9% to $1,441.8 million compared to $1,327.9 million in 2003. International revenue for the fourth quarter of 2004 increased 14% to $1,347.2 million compared to $1,178.1 million in 2003.

Net income for the twelve months ended December 31, 2004 increased 15% to $723.5 million from $631.0 million in 2003. Diluted earnings per share increased 15% to $3.88 per share in 2004 from $3.37 per share in 2003.

Worldwide revenue for the twelve months ended December 31, 2004 increased 13% to $9,747.2 million from $8,621.4 million in 2003. Domestic revenue for the twelve months ended December 31, 2004 increased 11% to $5,223.4 million compared to $4,720.9 million in 2003. International revenue for the twelve months ended December 31, 2004 increased 16% to $4,523.8 million compared to $3,900.5 million in 2003.

In accordance with SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS 148, “Accounting for Stock-Based Compensation - Transition and Disclosure, an amendment for FASB Statement No. 123,” we elected, effective January 1, 2004, to account for stock-based employee compensation using the fair value method. As a result,

 

the fair value of stock-based employee compensation, including unvested employee stock options issued and outstanding, were recorded as an expense utilizing the retroactive restatement method as set forth in SFAS 148. Accordingly, our results for the quarter and year ended December 31, 2003 have been restated as if we used the fair value method to account for stock-based compensation.

Omnicom Group Inc. (NYSE-OMC) (www.omnicomgroup.com), is a leading global advertising, marketing and corporate communications company. Omnicom’s branded networks and numerous specialty firms provide advertising, strategic media planning and buying, direct and promotional marketing, public relations and other specialty communications services to over 5,000 clients in more than 100 countries.

For a live webcast and/or a replay of our 2004 Fourth Quarter and Year-End earnings conference call, go to www.omnicomgroup.com/InvestorRelations.

 

Omnicom Group Inc.

(Unaudited)
(in Millions of Dollars, Except Per Share Data)

Three Months Ended December 31	2004		2003 (a)
Revenue	$ 2,789.0		$ 2,506.0
Operating expenses	2,394.1		2,152.9
Operating income	394.9		353.1
Net interest expense	10.0		10.0
Income before income taxes	384.9		343.1
Income taxes	129.4		113.2
Income after income taxes	255.5		229.9
Equity in affiliates	6.6		6.8
Minority interests	(25.6	)	(26.0	)
Net income	$    236.5		$    210.7
Earnings per share
Basic	$      1.28		$      1.12
Diluted	$      1.28		$      1.12
Weighted average shares (in millions)
Basic	184.1		187.8
Diluted (b)	185.2		188.9
Dividend declared per share	$    0.225		$    0.200

(a) In accordance with the adoption of SFAS No. 123, as amended by SFAS 148, on January 1, 2004 we restated our quarterly financial information for the quarter ended December 31, 2003 as if we had used the fair value method to account for employee stock compensation beginning January 1, 2003.

(b) Diluted earnings per share for 2004 and 2003 was calculated using an assumed increase in net income of $325.0 thousand and $279.0 thousand, respectively, related to the after-tax compensation expense from dividends on restricted shares.

 

Omnicom Group Inc.

(Unaudited)
(in Millions of Dollars, Except Per Share Data)

Twelve Months Ended December 31	2004		2003 (a)
Revenue	$ 9,747.2		$ 8,621.4
Operating expenses	8,531.8		7,529.5
Operating income	1,215.4		1,091.9
Net interest expense	36.6		42.8
Income before income taxes	1,178.8		1,049.1
Income taxes	396.3		353.0
Income after income taxes	782.5		696.1
Equity in affiliates	17.1		15.1
Minority interests	(76.1	)	(80.2	)
Net income	$    723.5		$    631.0
Earnings per share
Basic	$      3.90		$      3.37
Diluted	$      3.88		$      3.37
Weighted average shares (in millions)
Basic	185.7		187.3
Diluted (b)	186.6		187.6
Dividend declared per share	$    0.900		$    0.800

(a) In accordance with the adoption of SFAS No. 123, as amended by SFAS 148, on January 1, 2004 we restated our financial information for the year ended December 31, 2003 as if we had used the fair value method to account for employee stock compensation beginning January 1, 2003.

(b) Diluted earnings per share for 2004 and 2003 was calculated using an assumed increase in net income of $1,265.0 thousand and $1,114.0 thousand, respectively, related to the after-tax compensation expense from dividends on restricted shares.

EX-99.2

Exhibit 99.2

OmnicomGroup

FULL YEAR 2004 RESULTS
Investor Presentation

February 22, 2005

The following materials have been prepared for use in the February 22, 2005 conference call on Omnicom’s results of operations for the year December 31, 2004. The call will be archived on the Internet at http://www.omnicomgroup.com/financialwebcasts.

Forward-Looking Statements

Certain of the statements in this document constitute forward-looking statements. These statements relate to future events or future financial performance and involve known and unknown risks and other factors that may cause our actual or our industry’s results, levels of activity or achievement to be materially different from those expressed or implied by any forward-looking statements. These risks and uncertainties include, but are not limited to, our future financial condition and results of operations, changes in general economic conditions, competitive factors, changes in client communication requirements, the hiring and retention of human resources and our international operations, which are subject to the risks of currency fluctuations and exchange controls. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of those terms or other comparable terminology. These statements are present expectations. Actual events or results may differ materially.

Other Information

All dollar amounts are in millions except for EPS. The following financial information contained in this document has not been audited, although some of it has been derived from Omnicom’s historical financial statements, including its audited financial statements. In addition, industry, operational and other non-financial data contained in this document has been derived from sources we believe to be reliable, but we have not independently verified such information, and we do not, nor does any other person, assume responsibility for the accuracy or completeness of that information.

The inclusion of information in this presentation does not mean that such information is material or that disclosure of such information is required.

 

OmnicomGroup 1

2004 vs. 2003 P&L Summary

	Fourth Quarter (a)			Full Year (a)
	2004	2003	% change	2004	2003	% change
Revenue	$ 2,789.0	$  2,506.0	11.3%	$ 9,747.2	$ 8,621.4	13.1%
Operating Income	394.9	353.1	11.8%	1,215.4	1,091.9	11.3%
% Margin	14.2%	14.1%		12.5%	12.7%
Net Interest Expense	10.0	10.0		36.6	42.8
Profit Before Tax	384.9	343.1	12.2%	1,178.8	1,049.1	12.4%
% Margin	13.8%	13.7%		12.1%	12.2%
Taxes	129.4	113.2		396.3	353.0
% Tax Rate	33.6%	33.0%		33.6%	33.6%
Profit After Tax	255.5	229.9	11.1%	782.5	696.1	12.4%
Equity in Affiliates	6.6	6.8		17.1	15.1
Minority Interest	(25.6)	(26.0)		(76.1)	(80.2)
Net Income	$  236.5	$  210.7	12.2%	$  723.5	$  631.0	14.7%

(a) In connection with our adoption on January 1, 2004 of SFAS 123 — “Accounting for Stock-Based Compensation” as amended by SFAS 148, “Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment for FASB Statement No. 123,” utilizing the retroactive restatement method, stock-based compensation costs have been expensed in the current period and the results for the quarter ended December 31, 2003 and Full Year 2003 have been restated as if we had used the fair value method to account for employee stock- based compensation beginning January 1, 2003.

 

OmnicomGroup 2

2004 vs. 2003 Earnings Per Share

	Fourth Quarter (a)		Full Year (a)
	2004	2003	2004	2003
Earnings per Share:
Basic	$  1.28	$  1.12	$  3.90	$  3.37
Diluted	1.28	1.12	3.88	3.37
Weighted Average Shares (millions):
Basic	184.1	187.8	185.7	187.3
Diluted	185.2	188.9	186.6	187.6
Dividend Declared Per Share	$0.225	$0.200	$0.900	$0.800

(a) In connection with our adoption on January 1, 2004 of SFAS 123 — “Accounting for Stock-Based Compensation” as amended by SFAS 148, “Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment for FASB Statement No. 123,” utilizing the retroactive restatement method, stock-based compensation costs have been expensed in the current period and the results for the quarter ended December 30, 2003 and Full Year 2003 have been restated as if we had used the fair value method to account for employee stock-based compensation beginning January 1, 2003.

 

OmnicomGroup 3

2004 Total Revenue Growth

	Fourth Quarter		Full Year
	$	%	$	%
Prior Period Revenue	$2,506.0		$8,621.4
Foreign Exchange (FX) Impact(a)	103.5	4.1%	390.6	4.5%
Acquisition Revenue(b)	19.2	0.8%	163.9	1.9%
Organic Revenue(c)	160.3	6.4%	571.3	6.7%
Current Period Revenue	$2,789.0	11.3%	$9,747.2	13.1%

(a) To calculate the FX impact, we first convert the current period’s local currency revenue using the average exchange rates from the equivalent prior period to arrive at constant currency revenue. The FX impact equals the difference between the current period revenue in U.S. dollars and the current period revenue in constant currency.

(b) Acquisition revenue is the aggregate of the applicable prior period revenue of the acquired businesses. Netted against this number is the revenue of any business included in the prior period reported revenue that was disposed of subsequent to the prior period.

(c) Organic revenue is calculated by subtracting both the acquisition revenue and the FX impact from total revenue growth.

 

OmnicomGroup 4

2004 Revenue By Discipline

	$ Mix	% Growth(a)
Advertising	1,202.6	9.3	%
CRM	981.0	10.5	%
PR	280.3	15.7	%
Specialty	325.1	17.8	%

	$ Mix	% Growth(a)
Advertising	4,207.5	11.4	%
CRM	3,366.1	14.0	%
PR	1,040.5	12.0	%
Specialty	1,133.1	17.6	%

(a) “Growth” is the year-over-year growth from the prior period. Certain reclassifications have been made to the December 31, 2003 presentation to conform the numbers to the December 31, 2004 balances presented.

 

5

 

OmnicomGroup 5

2004 Revenue By Geography

	$ Mix	$ Growth
United States	$1,441.8	$113.9
Organic		95.2
Acquisition		18.7
International	$1,347.2	$169.1
Organic		65.1
Acquisition		0.5
FX		103.5
	$ Mix	% Growth
United States	$1,441.8	8.6	%
Euro Denominated	627.4	15.3	%
United Kingdom	307.6	12.0	%
Other	412.2	14.8	%

	$ Mix	$ Growth
United States	$5,223.4	$502.5
Organic		370.6
Acquisition		131.9
International	$4,523.8	$623.3
Organic		200.7
Acquisition		32.0
FX		390.6
	$ Mix	% Growth
United States	$5,223.4	10.6	%
Euro Denominated	2,058.2	15.0	%
United Kingdom	1,085.0	15.2	%
Other	1,380.6	18.1	%

 

OmnicomGroup 6

Cash Flow - GAAP Presentation (condensed)

	Full Year
	2004		2003		2002
Net Income	$  723.5		$  631.0		$  570.5
Stock-Based Compensation Expense	143.4		148.8		187.8
Depreciation and Amortization	172.1		160.9		150.3
Cash-Tax Differences	108.7		23.2		(35.1	)
Other non-cash items to reconcile to net income	79.1		93.9		93.5
Other changes in Working Capital	60.8		(3.6	)	33.6
Net Cash Provided by Operations	1,287.6		1,054.2		1,000.6
Capital Expenditures	(159.7	)	(141.1	)	(117.2	)
Acquisitions and Long-term Investments	(340.5	)	(410.0	)	(586.3	)
Other Short-term Investing activities, net	(258.7	)	(262.9	)	20.4
Net Cash Used by Investing Activities	(758.9	)	(814.0	)	(683.1	)
Dividends	(163.1	)	(149.3	)	(148.4	)
Stock Repurchases	(446.5	)	(25.9	)	(371.7	)
Other Financing Activities	(40.4	)	529.8		400.3
Net Cash (Used in) Provided by Financing Activities	(650.0	)	354.6		(119.8	)
Effect of exchange rate changes on cash and cash equivalents	43.4		(18.3	)	(2.9	)
Net (Decrease) Increase in Cash and Cash Equivalents	(77.9	)	576.5		194.8

 

OmnicomGroup 7

After-Tax Free Cash Flow ^(a)

	Full Year
	2004	2003		2002
Net Income	$  723.5	$ 631.0		$ 570.5
Stock-Based Compensation Expense	143.4	148.8		187.8
Depreciation and Amortization	172.1	160.9		150.3
Cash-Tax Differences	108.7	23.2		(35.1	)
After-Tax Free Cash Flow	1,147.7	963.9		873.5
Primary Cash Uses:
Capital Expenditures	159.7	141.1		117.2
Dividends	163.1	149.3		148.4
Acquisitions and Long-term Investments	340.5	410.0		586.3
Stock Repurchases, (net of proceeds)(b)	371.7	(27.2	)	320.9

(a)

The After-Tax Free Cash Flow numbers presented above are a non-GAAP measure. They exclude changes in working capital and certain other investing and financing activities. This presentation reflects the metrics used by management to assess our generation of cash. We believe that this presentation is more meaningful for understanding our after-tax free cash flow and our primary uses of that cash flow. This presentation was derived from our GAAP condensed statement of cash flow on the previous page of this presentation.

(b)

Stock repurchases of $446.5 million in 2004, $25.9 million in 2003 and $371.7 million in 2002 are net of proceeds from stock option exercises and stock sold in our employee stock purchase plan of $74.8 million, $53.1 million and $50.8 million for the years ended 2004, 2003 and 2002, respectively.

 

OmnicomGroup 8

Current Credit Picture

	Full Year
	2004		2003
Operating Income (EBIT) (a)	$ 1,215		$ 1,092
Net Interest Expense (a)	$   36.6		$   42.8
EBIT / Net Interest	33.2	x	25.5	x
Net Debt / EBIT	0.7	0	0.9	6
Debt:
Bank Loans (Due Less Than 1 Year)	$      18		$      42
5.20% Euro Notes Due 6/24/05 (b)	207		192
Convertible Notes Due 2/7/31	847		847
Convertible Notes Due 7/31/32	892		892
Convertible Notes Due 6/15/33	600		600
Loan Notes and Sundry (various through 2010)	22		18
Total Debt	$ 2,586		$ 2,591
Cash and Short Term Investments	1,740		1,547
Net Debt	$    846		$ 1,044

(a) “Operating Income (EBIT)” and “Net Interest Expense” calculations shown are for the years ended as specified. Although our bank agreements reference EBITDA, we have used EBIT for this presentation because EBITDA is a non-GAAP measure. 2003 figures are restated to reflect the adoption of SFAS 123 — “Accounting for Stock-Based Compensation.”

(b) The change in the outstanding balance results from changes in the Euro to US dollar currency exchange rate. The Euro balance outstanding as of December 31, 2004 and 2003 was €152.4.

 

OmnicomGroup 9

Current Liquidity Picture

	Total Amount of Facility	As of December 31, 2004
		Outstanding	Available
Committed Facilities
364 Day Revolver due 5/23/05(a)	$   500	$ —	$   500
5 Year Revolver due 5/24/09	1,500	—	1,500
Other Committed Credit Facilities	18	18	—
Total Committed Facilities	2,018	18	2,000
Uncommitted Facilities (b)	384	—	—	(b)
Total Credit Facilities	$2,402	$ 18	2,000
Cash & Short Term Investments			1,740
Total Liquidity Available			$3,740

(a)	The $500 million 364 Day Credit facility includes a one-year term out at maturity at our option.
(b)	Uncommitted facilities in the US, U.K. and Canada. These amounts are excluded for purposes of this analysis.

 

OmnicomGroup 10

Return on Equity^(a)

(a)

“Return on Equity” is constant dollar based Net Income for the given period divided by the shareholders’ equity at the end of the prior period which has also been adjusted to a constant dollar basis.

In connection with our adoption on January 1, 2004 of SFAS 123 — “Accounting for Stock-Based Compensation” as amended by SFAS 148, “Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment for FASB Statement No. 123,” utilizing the retroactive restatement method, stock-based compensation costs have been expensed in the current period and the results for the years ended December 31, 2002 and 2003 have been restated as if we had used the fair value method to account for employee stock-based compensation beginning January 1, 2002.

 

OmnicomGroup 11

Acquisitions Summary

Acquisition Related Expenditures

	Full Year 2004
New Subsidiary Acquisitions (a)	$ 32
Affiliates to Subsidiaries (b)	1
Affiliates (c)	2
Existing Subsidiaries (d)	151
Earn-outs (e)	192
Total Acquisition Expenditures	$378

Note: See appendix for subsidiary acquisition profiles.

(a) Includes acquisitions of a majority interest in new agencies resulting in their consolidation.

(b) Includes acquisitions of additional equity interests in existing affiliate agencies resulting in their majority ownership and consolidation.

(c) Includes acquisitions of less than a majority interest in agencies in which Omnicom did not have a prior equity interest and the acquisition of additional interests in existing affiliated agencies that did not result in majority ownership.

(d) Includes the acquisition of additional equity interests in already consolidated subsidiary agencies.

(e) Includes additional consideration paid for acquisitions completed in prior periods.

 

OmnicomGroup 13

Potential Earn-out Obligations

The following is an estimate of future earn-out related obligations as of December 31, 2004, assuming that the underlying acquired agencies continue to perform at their current levels: ^(a)

2005	2006	2007	2008	Thereafter	Total
$225	$82	$81	$47	$23	$458

(a) The ultimate payments will vary as they are dependent on future events and changes in FX rates.

 

OmnicomGroup 14

Potential Obligations

In conjunction with certain transactions Omnicom has agreed to acquire (at the sellers’ option) additional equity interests. The following is an estimate of these potential future obligations (as of December 31, 2004), assuming these underlying acquired agencies continue to perform at their current levels:^(a)

	Currently Exercisable	Not Currently Exercisable	Total
Subsidiary Agencies	$139	$  99	$238
Affiliated Agencies	24	12	36
Total	$163	$111	$274

(a) The ultimate payments will vary as they are dependent on future events and changes in FX rates.

 

OmnicomGroup 15

Fourth Quarter Acquisition

Cooper & Hayes

Cooper & Hayes is a full-service agency. The acquisition of Cooper & Hayes will enhance DDB’s foothold in the Southeast and its expertise in the cruise, vacation and tourism industries.

The Company is located in Coral Gables, Florida and will be renamed Cooper DDB.

 

OmnicomGroup 16

Fourth Quarter Acquisition

Hornall Anderson Design Works

Hornall Anderson Design Works is an integrated, full service brand design firm. The firm’s competency focuses on strategic based design. Services include: brand strategy, brand design, corporate identity, packaging, literature systems, branded environments and interactive media.

The Company is located in Seattle, Washington.

 

OmnicomGroup 17

Fourth Quarter Acquisition

U5

U5 is a small full service agency which currently services one of our existing client’s in the automotive industry. U5 supports this client in Europe, the Middle East and Asia. Interone Worldwide acquired U5 to strengthen and expand its existing client relationship. Interone and U5 have considerable opportunities for expanding the range of services offered to this shared client within other agencies in the BBDO network group in Germany and the BBDO worldwide network.

The Company is located in Dusseldorf, Germany.

 

OmnicomGroup 18