EX-99.2 4 e40447ex99_2.htm INVESTOR PRESENTATION MATERIALS

Exhibit 99.2


       Investor Presentation

 

 

 

     Third Quarter 2010 Results

     October 19, 2010




Disclosure

The following materials have been prepared for use in the October 19, 2010 conference call on Omnicom’s results of operations for the period ended September 30, 2010. 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 within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, from time to time, we or our representatives have made or may make forward -looking statements, orally or in writing. 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, global economic conditions and renewed turmoil in the credit markets, losses on media purchases on behalf of clients, reductions in client spending and/or a slowdown in client payments, competitive factors, changes in client communication requirements, the hiring and retention of personnel, our ability to attract new clients and retain existing clients, changes in government regulations impacting our advertising and marketing strategies, risks associated with assumptions we make in connection with our critical accounting estimates, and our international operations, which are subject to the risks of currency fluctuations and foreign 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 our present expectations. Actual events or results may differ. We undertake no obligation to update or revise any forward -looking statement, except as required by law.

Other Information

All dollar amounts are in millions except for per share amounts. 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 have 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. Certain amounts in prior periods have been reclassified to conform to our current presentation.

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

      October 19, 2010 1


2010 vs. 2009 P&L Summary

  Third Quarter (b)
      Year to Date (b)
  2010
    2009
    %D
2010
    2009
    %D
Revenue $ 2,994.6     $ 2,837.6     5.5 % $ 8,955.7     $ 8,454.9     5.9 %


   
       
   
       
EBITA (a)   332.1       309.5     7.3 %   1,071.3       1,016.5     5.4 %
% Margin   11.1 %     10.9 %         12.0 %     12.0 %      


   
       
   
       
Amortization of Intangibles   18.0       14.7           50.7       41.2        


   
       
   
       
Operating Income (a)   314.1       294.8     6.5 %   1,020.6       975.3     4.6 %
% Margin   10.5 %     10.4 %         11.4 %     11.5 %      


   
       
   
       
Net Interest Expense   29.8       28.9           77.7       72.1        


   
       
   
       
Income Before Taxes   284.3       265.9     6.9 %   942.9       903.2     4.4 %
% Margin   9.5 %     9.4 %         10.5 %     10.7 %      


   
       
   
       
Taxes   96.9       90.5           320.8       308.9        
% Tax Rate   34.1 %     34.0 %         34.0 %     34.2 %      


   
       
   
       
Income from Equity Method Investments   8.2       7.3           23.1       20.5        


   
       
   
       
Net Income   195.6       182.7           645.2       614.8        


   
       
   
       
Less: Noncontrolling Interests   (21.0 )     (17.1 )         (64.0 )     (51.3 )      


   
       
   
       
Net Income - Omnicom Group   174.6       165.6     5.4 %   581.2       563.5     3.1 %


   
       
   
       
Less: Net Income Allocated to Participating Securities   (1.7 )     (1.8 )         (5.6 )     (6.6 )      


   
       
   
       
Net Income Available for Common Shares $ 172.9     $ 163.8         $ 575.6     $ 556.9        
 
   
       
   
       
Net Income per Common Share - Omnicom Group -Diluted $ 0.57     $ 0.53     7.5 % $ 1.88     $ 1.80     4.4 %

(a)     

EBITA and Operating income includes depreciation expense of $44.5 million and $45.4 million for the three months and $134.9 million and $132.6 million for the nine months ended September 30, 2010 and 2009, respectively.

(b)     

See page 20 for additional earnings per share information and page 22 for reconciliation of non-GAAP measures.


      October 19, 2010 2


2010 Total Revenue Change

  Third Quarter
       Year to Date
  $
   %D
$
   %D
Prior Period Revenue $ 2,837.6         $ 8,454.9      

 
 
 
 
Foreign Exchange (FX) Impact (a)   (52.9 )   -1.9%      59.1   0.7%   

 
 
 
 
Acquisition Revenue (b)   19.6     0.7%     18.1   0.2%  

 
 
 
 
Organic Revenue (c)   190.3     6.7%     423.6   5.0%  

 
 
 
 
Current Period Revenue $ 2,994.6     5.5%   $ 8,955.7   5.9%  
 
   
 
 
 

(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.


      October 19, 2010 3


2010 Revenue by Discipline



  $ Mix
   % Change(a)
   % Organic
Change(b)

Advertising $ 1,331.9   6.1 %   6.5 %

 
 
CRM   1,108.4   4.7 %   7.3 %

 
 
PR   279.9   5.1 %   5.4 %

 
 
Specialty   274.4   6.3 %   6.8 %
 
 

  $ Mix
   % Change(a)
   % Organic
Change(b)

Advertising $ 4,008.7   5.3 %   3.1 %

 
 
CRM   3,261.7   6.6 %   6.4 %

 
 
PR   846.7   6.1 %   4.6 %

 
 
Specialty   838.6   6.3 %   9.3 %

(a)     

“Change” is the year-over-year increase from the prior period.

(b)     

“Organic Change” reflects the year-over-year increase in revenue from the prior period, excluding the FX Impact and Acquisition Revenue, as defined on page 3.


      October 19, 2010 4


2010 Revenue By Geography


     $ Mix
   $ Change(a)
United States   $ 1,617.1   $ 125.9  

 
 
Organic           125.9  

 
 
Acquisition           -  

 
 
International   $ 1,377.5   $ 31.1  

 
 
Organic           64.4  

 
 
Acquisition           19.6  

 
 
FX           (52.9 )

     $ Mix
  %Change(a)
   %Organic
Change (b)

United States   $ 1,617.1    8.4 %   8.4 %

 
 
 
Euro Currency
Markets
    551.5   -8.5 %   1.2 %

 
 
 
United Kingdom     270.9   3.0 %   8.9 %

 
 
 
Other     555.1   15.5 %   7.1 %
 
 

     $ Mix
   $ Change(a)
United States   $ 4,846.7   $ 298.7  

 
 
Organic           328.2  

 
 
Acquisition           (29.5 )

 
 
International   $ 4,109.0   $ 202.1  

 
 
Organic           95.4  

 
 
Acquisition           47.6  

 
 
FX           59.1  

     $ Mix
   %Change(a)
   %Organic
Change (b)

United States   $ 4,846.7   6.6 %   7.2 %

 
 
 
Euro Currency
Markets
    1,714.5   -4.9 %   -1.6 %

 
 
 
United Kingdom     780.2   4.6 %   5.2 %

 
 
 
Other     1,614.3   18.9 %   6.3 %

(a)     

“Change” is the year-over-year increase or decrease from the prior period.

(b)     

“Organic Change” reflects the year-over-year increase or decrease in revenue from the prior period, excluding the FX Impact and Acquisition Revenue, as defined on page 3.


      October 19, 2010 5


Cash Flow – GAAP Presentation (condensed)

     Nine Months Ended September 30,
    2010
   2009
Net Income (a)   $ 645.2     $ 614.8  

 
 
  Share-Based Compensation Expense     51.9       56.7  

 
 
  Gain on Remeasurement of Affiliate (a)     (14.0 )     -  

 
 
  Depreciation and Amortization     185.6       173.8  

 
 
  Other Non-Cash Items to Reconcile to Net Cash Provided by Operating Activities, net     (25.9 )     4.9  

 
 
  Other Changes in Operating Capital     (799.3 )     (397.1 )

 
 
Net Cash Provided by Operating Activities     43.5       453.1  

 
 
  Capital Expenditures     (98.1 )     (93.4 )

 
 
  Acquisitions     (115.4 )     (112.6 )

 
 
  Proceeds from Sale of Investments, net     4.3       28.5  

 
 
Net Cash Used in Investing Activities     (209.2 )     (177.5 )

 
 
  Dividends     (169.2 )     (140.3 )

 
 
  Proceeds from Short-term Debt, net     33.1       157.9  

 
 
  Proceeds from Long-term Debt, net     990.4       497.8  

 
 
  Repayment of Convertible Debt     (66.5 )     (1,316.7 )

 
 
  Stock Repurchases     (567.0 )     (13.3 )

 
 
  Proceeds from Stock Plans     105.2       10.1  

 
 
  Excess Tax Benefit on Stock-based Compensation     16.4       -  

 
 
  Payments to Noncontrolling Interests     (26.5 )     (12.3 )

 
 
  Other Financing Activities, net     (58.6 )     (53.9 )

 
 
Net Cash Provided by (Used in) Financing Activities     257.3       (870.7 )

 
 
Effect of exchange rate changes on cash and cash equivalents     10.7       95.2  

 
 
Net Increase (Decrease) in Cash and Cash Equivalents   $ 102.3     $ (499.9 )

 
 

(a)     

In the third quarter of 2010, we recorded a non-cash pre-tax remeasurement gain of $14.0 million. Further, we recorded a pre-tax charge of $13.1 million related to the disposal of four underperforming businesses in Europe.


      October 19, 2010 6


Current Credit Picture

     12 Months Ended September 30,
    2010
   2009
EBITDA (a)   $ 1,675     $ 1,657  

 
 
Gross Interest Expense (a)     129.9       120.7  

 
 
EBITDA / Gross Interest Expense     12.9 x     13.7 x

 
 
Total Debt / EBITDA     1.9 x     1.5 x

 
 
Debt                

 
 
Bank Loans (Due Less Than 1 Year)   $ 63     $ 33  

 
 
CP Issued Under $2.5B Revolver Due 6/23/11     -       144  

 
 
Borrowings Under $2.5B Revolver Due 6/23/11     -       -  

 
 
Convertible Notes Due 2/7/31     -       6  

 
 
Convertible Notes Due 7/31/32 (b)     253       253  

 
 
Convertible Notes Due 7/1/38 (c)     407       467  

 
 
Senior Notes Due 4/15/16     997       997  

 
 
Senior Notes Due 7/15/19     497       497  

 
 
Senior Notes Due 8/15/20     997       -  

 
 
Other Debt     7       16  

 
 
Total Debt   $ 3,221     $ 2,413  

 
 
Cash and Short Term Investments     1,698       613  

 
 
Net Debt   $ 1,523     $ 1,800  
   
 

(a)     

“EBITDA” and “Gross Interest Expense” calculations shown are for the twelve months ending September 30. EBITDA is defined as operating income before interest, taxes, depreciation and amortization. Although EBITDA is a non-GAAP measure, we believe EBITDA is more meaningful for purposes of this analysis because the financial covenants in our credit facilities are based on EBITDA (see reconciliation of Operating Income to EBITDA on page 22).

(b)     

The next put date for our Convertible Notes due 2032 is August 1, 2011.

(c)     

The next put date for our Convertible Notes due 2038 is June 17, 2013.


      October 19, 2010 7


Current Liquidity Picture

      As of September 30, 2010
  Total Amount
of Facility

   Outstanding (c)
   Available
Committed Facilities                  


 
 
  Revolver & Commercial Paper (a) $ 2,500   $ -   $ 2,500  


 
 
  Other Committed Credit Facilities   63     63     -  


 
 
Total Committed Facilities   2,563     63     2,500  


 
 
Uncommitted Facilities (b)   581     -     - (b)


 
 
Total Credit Facilities $ 3,144   $ 63   $ 2,500  


 
 
  Cash and Short Term Investments               1,698  


 
 
  Total Liquidity Available             $ 4,198  
             

(a)     

Credit facility expires June 23, 2011.

(b)     

Represents uncommitted facilities primarily outside the United States. These amounts are excluded from our available liquidity for purposes of this presentation.

(c)     

For the three month period ended September 30, 2010, the average borrowings under our facilities were as follows: commercial paper facilities $419 million and other facilities $58 million. There were no borrowings under the revolver facility during the period. Commercial paper issuances were significantly reduced in the quarter following the issuance in August of our $1 billion Senior Notes due 2020.


      October 19, 2010 8


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Omnicom Debt Structure

     Supplemental Information



Omnicom Debt Structure



The above chart sets forth Omnicom’s debt outstanding at September 30, 2010. The amounts reflected above for the 2016, 2019 and 2020 Senior Notes represent the principal amount of these notes at maturity on April 15, 2016, July 15, 2019 and August 15, 2020, respectively.

      October 19, 2010 10


Omnicom Debt Structure

The Bank Facility and Commercial Paper Program together provide additional liquidity in the event any convertible notes are put. We believe that we will then have flexibility to refinance in different debt capital markets.



Our 2032 Convertible Notes are putable in August 2011 and annually in July thereafter until maturity. Our 2038 Convertible Notes are putable in June 2013, 2018, 2023 and annually thereafter until maturity.

Other borrowings at September 30, 2010 include short-term borrowings of $63 million and other debt of $7 million, which are due in less than one year. For purposes of this presentation we have included these borrowings as outstanding through June 2011, the date of expiration of our five-year credit facility.

      October 19, 2010 11


Senior Notes Due 2020

Principal Amount $1 Billion

Co - Issuers Omnicom Group, Omnicom Finance, Omnicom Capital

Date August 5, 2010

Maturity August 15, 2020

Security Unsecured, pari passu with Bank Facility

Coupon 4.45%

Spread Over Comparable Treasury at Issue 1.55%

Rating Moody’s: Baa1
S&P: BBB+
Fitch: A-

      October 19, 2010 12


Senior Notes Due 2019

Principal Amount $500 Million

Co - Issuers Omnicom Group, Omnicom Finance, Omnicom Capital

Date July 1, 2009

Maturity July 15, 2019

Security Unsecured, pari passu with Bank Facility

Coupon 6.25%

Spread Over Comparable Treasury at Issue 2.75%

Rating Moody’s: Baa1
S&P: BBB+
Fitch: A-

      October 19, 2010 13


Senior Notes Due 2016

Principal Amount $1 Billion

Co - Issuers Omnicom Group, Omnicom Finance, Omnicom Capital

Date March 29, 2006

Maturity April 15, 2016

Security Unsecured, pari passu with Bank Facility

Coupon 5.90%

Spread Over Comparable Treasury at Issue 1.30%

Rating Moody’s: Baa1
S&P: BBB+
Fitch: A-

In August 2010, we entered into a series of interest rate swap agreements to hedge the risk of changes in fair value of the $1 billion principal amount of our 5.90% Senior Notes due April 15, 2016 (“2016 Notes”). Under the terms of these agreements, we will receive fixed interest rate payments and will make variable interest rate payments on the total principal value of the 2016 Notes. These agreements effectively convert the 2016 Notes from fixed rate debt to floating rate debt from the date we entered into the swaps through the maturity of the 2016 Notes. The swap agreements qualify as a hedge for accounting purposes at inception and at September 30, 2010 and are designated as a fair value hedge on the 2016 Notes. The variable interest rate we pay is based on the one month and three month U.S. LIBOR rate, flat. The fixed rate we receive is 1.766%. The swaps mature on April 15, 2016, the maturity date of the 2016 Notes.

      October 19, 2010 14


2032 Convertible Notes

Principal Amount $253 Million

Co - Issuers Omnicom Group, Omnicom Finance, Omnicom Capital

Date March 6, 2002

Maturity July 31, 2032, with a put in August 2011 and annually in
  July thereafter until maturity

Security Unsecured, pari passu with Bank Facility

Coupon 0.00%

Conversion Price $55

Rating Moody’s: Baa1
S&P: BBB+
Fitch: A-

      October 19, 2010 15


2038 Convertible Notes

Principal Amount $407 Million

Co - Issuers Omnicom Group, Omnicom Finance, Omnicom Capital

Date June 10, 2003

Maturity July 1, 2038 with puts in June of 2013, 2018, 2023 and
annually thereafter until maturity

Security Unsecured, pari passu with Bank Facility

Coupon 0.00%

Conversion Price $51.50

Rating Moody’s: Baa1
S&P: BBB+
Fitch: A-

      October 19, 2010 16


Current Bank Credit Facility

Amount $2.5 Billion

Type Unsecured Revolving Credit

Maturity 5 Years – June 2011

Facility Fee 13BP per annum

Drawn Rate Libor +17BP

Covenants -Maximum Debt to EBITDA 3:1
-Minimum Interest Coverage 5:1

      October 19, 2010 17


Current Omnicom Credit Ratings

  Moody’s S&P Fitch

Long Term Ratings Baa1 BBB+ A-

Short Term Ratings P2 A2 F2

Outlook Stable Stable Stable

Note: Reflects credit ratings as of October 15, 2010.

      October 19, 2010 18


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Supplemental Financial Information



2010 vs. 2009 Earnings Per Share

  Third Quarter
       Year to Date
  2010
    2009
  2010
    2009
Net Income per Common Share - Omnicom Group:                              


   
   
   
 
Basic $ 0.58     $ 0.53     $ 1.90     $ 1.81  


   
   
   
 
Diluted   0.57       0.53       1.88       1.80  


   
   
   
 
                               
Net Income Available for Common Shares:                              


   
   
   
 
Net Income - Omnicom Group $ 174.6     $ 165.6     $ 581.2     $ 563.5  


   
   
   
 
Net Income Allocated to Participating Securities   (1.7 )     (1.8 )     (5.6 )     (6.6 )


   
   
   
 
Net Income Available for Common Shares $ 172.9     $ 163.8     $ 575.6     $ 556.9  
 
   
   
   
 
Weighted Average Shares (millions):                              


   
   
   
 
Basic   299.3       308.6       302.7       308.0  


   
   
   
 
Diluted   303.5       311.6       306.9       309.5  


   
   
   
 
Dividend Declared per Share $ 0.20     $ 0.15     $ 0.60     $ 0.45  

      October 19, 2010 20


Acquisition Related Expenditures

    
Nine Months YTD 2010

New Subsidiary Acquisitions (a)   $ 6

 
Affiliates to Subsidiaries (b)     10

 
Affiliates (c)     2

 
Existing Subsidiaries (d)     26

 
Earn-outs (e)     98

 
Total Acquisition Expenditures (f)   $ 142
   

(a)     

Includes acquisitions of a majority interest in 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 which are recorded to Equity – Noncontrolling Interest.

(e)     

Includes additional consideration paid for acquisitions completed in prior periods.

(f)     

Total Acquisition Expenditures figure is net of cash acquired.


      October 19, 2010 21


Reconciliation of non-GAAP Measures

    3 Months Ended September 30,
  9 Months Ended September 30,
  12 Months Ended September 30,
     2010
   2009
   2010
   2009
   2010
      2009
EBITDA $ 376.6   $ 355.0   $ 1,206.2   $ 1,149.1   $ 1,674.7   $ 1,657.3







Depreciation   44.5   45.4   134.9   132.6   188.8   177.7







EBITA   332.1   309.6   1,071.3   1,016.5   1,485.9   1,479.6







Amortization of Intangibles   18.0   14.8   50.7   41.2   65.8   55.9







Operating Income   314.1   294.8   1,020.6   975.3   1,420.1   1,423.7







Net Interest Expense   29.8   28.9   77.7   72.1   106.2   96.0







Income Before Tax   284.3   265.9   942.9   903.2   1,313.9   1,327.7







Taxes   96.9   90.5   320.8   308.9   445.5   450.9







Income from Equity Method Investments   8.2   7.3   23.1   20.5   33.4   36.5







Net Income   195.6   182.7   645.2   614.8   901.8   913.3







Less: Net Income Attributed to Noncontrolling Interests   (21.0 ) (17.1 ) (64.0 ) (51.3 ) (91.0 ) (78.8 )







Net Income - Omnicom Group $ 174.6   $ 165.6   $ 581.2   $ 563.5   $ 810.8   $ 834.5







The above reconciles EBITDA & EBITA to the GAAP financial measures for the periods presented.

EBITDA and EBITA are non-GAAP financial measures within the meaning of applicable SEC rules and regulations. Our credit facility defines EBITDA as earnings before deducting interest expense, income taxes, depreciation and amortization. Our credit facility uses EBITDA to measure our compliance with covenants, such as interest coverage and leverage ratios as presented on pages 7 & 17 of this presentation. Management uses EBITA as an additional operating performance measure, which excludes acquisition-related amortization expense, because it believes that EBITA is a useful measure to evaluate the performance of our businesses. EBITDA and EBITA are not, and should not, be used as substitutes for Operating Income as determined in accordance with GAAP and are only used to measure our compliance with our debt covenants and as an additional performance measure of our businesses.

      October 19, 2010 22


Third Quarter Acquisition

Omnicom Media Group Middle East and North Africa

Omnicom Media Group Middle East and North Africa is a leading full service media agency offering an integrated suite of services to both international and domestic clients in the United Arab Emirates and North Africa through the OMD and PHD brands. The company has a subsidiary in Saudi Arabia. Its offering includes media strategy, planning and buying across all media channels.

The company has operated as an affiliate of our BBDO and TBWA networks since 2002 and is headquartered in Dubai, United Arab Emirates.

      October 19, 2010 23