-----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, CNQGwCiXtw+8L79wOLh0O9B6KQhfjuR+CRkRWxHJfnCzOhDCJomqD2WADH3Tplzg fRTD3QdL9aCKc/2fSvMaoA== 0000891092-96-000199.txt : 19961113 0000891092-96-000199.hdr.sgml : 19961113 ACCESSION NUMBER: 0000891092-96-000199 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 SROS: NYSE 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: 1934 Act SEC FILE NUMBER: 001-10551 FILM NUMBER: 96659628 BUSINESS ADDRESS: STREET 1: 437 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2124153600 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 FORM 10-Q QUARTERLY REPORT CONFORMED COPY FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended: September 30, 1996 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 incorporation or organization) Identification No.) 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) 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 ___ The number of shares of common stock of the Company issued and outstanding at October 31, 1996 is 80,693,000. OMNICOM GROUP INC. AND SUBSIDIARIES INDEX Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Condensed Balance Sheets - September 30, 1996, December 31, 1995 and September 30, 1995 2 Consolidated Condensed Statements of Income - Three Months Ended September 30, 1996 and 1995 Nine Months Ended September 30, 1996 and 1995 3 Consolidated Condensed Statements of Cash Flows - Nine Months Ended September 30, 1996 and 1995 4 Notes to Consolidated Condensed Financial Statements 5-7 Item 2. Management's Discussion of Financial Condition and Results of Operations 8-13 PART II. OTHER INFORMATION Item 6. Exhibits 14 -1- PART I. FINANCIAL INFORMATION Item 1. Financial Statements OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in Thousands)
Assets September 30, December 31, September 30, 1996 1995 1995 ----------- ------------ ------------- Current assets: Cash and cash equivalents $ 191,027 $ 313,999 $ 233,254 Investments available-for-sale, at market, which approximates cost 15,742 21,474 20,838 Accounts receivable, less allowance for doubtful accounts of $21,453, $23,352 and $23,082 1,448,804 1,503,212 1,367,225 Billable production orders in process 186,565 106,115 157,470 Prepaid expenses and other current assets 221,592 161,235 163,790 ----------- ----------- ----------- Total current assets 2,063,730 2,106,035 1,942,577 Furniture, equipment and leasehold improvements, less accumulated depreciation and amortization of $300,069, $259,664 and $259,208 212,623 200,473 198,694 Investments in affiliates 196,142 200,216 187,630 Intangibles, less amortization of $187,632, $157,863 and $155,514 913,243 832,698 815,303 Deferred tax benefits 65,550 70,242 78,663 Deferred charges and other assets 106,759 118,013 126,617 ----------- ----------- ----------- Total assets $ 3,558,047 $ 3,527,677 $ 3,349,484 =========== =========== =========== Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 1,488,205 $ 1,734,500 $ 1,334,623 Payable to banks 61,143 21,031 81,900 Other accrued liabilities 636,469 705,157 639,429 Accrued taxes on income 42,950 41,756 51,902 ----------- ----------- ----------- Total current liabilities 2,228,767 2,502,444 2,107,854 Long term debt 428,139 290,379 513,100 Deferred compensation and other liabilities 109,152 122,623 134,423 Minority interests 57,385 60,724 48,852 Shareholders' equity: Common stock 43,144 39,921 39,922 Additional paid-in capital 554,420 390,984 391,110 Retained earnings 374,646 299,704 264,924 Unamortized restricted stock (43,551) (30,739) (32,985) Cumulative translation adjustment (26,519) (26,641) (18,731) Treasury stock (167,536) (121,722) (98,985) ----------- ----------- ----------- Total shareholders' equity 734,604 551,507 545,255 ----------- ----------- ----------- Total liabilities and shareholders' equity $ 3,558,047 $ 3,527,677 $ 3,349,484 =========== =========== ===========
The accompanying notes to consolidated condensed financial statements are an integral part of these balance sheets. -2- OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Dollars in Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended September 30, September 30, ---------------------- -------------------------- 1996 1995 1996 1995 --------- --------- ----------- ----------- Revenues: Commissions and fees $ 631,772 $ 537,666 $ 1,889,838 $ 1,607,015 Operating expenses Salaries and related costs 385,995 321,863 1,115,803 930,957 Office and general expenses 186,173 169,959 552,118 492,936 --------- --------- ----------- ----------- Total operating expenses 572,168 491,822 1,667,921 1,423,893 --------- --------- ----------- ----------- Operating profit 59,604 45,844 221,917 183,122 Net interest expense: Interest and dividend income (3,043) (2,953) (10,104) (10,343) Interest paid or accrued 7,487 10,130 26,745 33,526 --------- --------- ----------- ----------- Net interest expense 4,444 7,177 16,641 23,183 --------- --------- ----------- ----------- Income before income taxes 55,160 38,667 205,276 159,939 Income taxes: Federal 9,255 7,539 35,192 23,014 State and local 3,722 2,870 10,707 8,654 International 9,259 5,058 37,034 33,183 --------- --------- ----------- ----------- Total income taxes 22,236 15,467 82,933 64,851 --------- --------- ----------- ----------- Income after income taxes 32,924 23,200 122,343 95,088 Equity in affiliates 3,509 3,736 10,585 12,090 Minority interests (4,200) (3,258) (16,829) (14,784) --------- --------- ----------- ----------- Net income $ 32,233 $ 23,678 $ 116,099 $ 92,394 ========= ========= =========== =========== Earnings per share: Net income: Primary $ 0.42 $ 0.32 $ 1.53 $ 1.24 Fully diluted $ 0.42 $ 0.32 $ 1.50 $ 1.23 Dividends declared per common share $ 0.20 $ 0.175 $ 0.55 $ 0.485
The accompanying notes to consolidated condensed financial statements are an integral part of these statements. -3- OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
Nine Months Ended September 30, ---------------------- 1996 1995 --------- --------- Cash flows from operating activities: Net income $ 116,099 $ 92,394 Adjustments to reconcile net income to net cash used for operating activities: Depreciation and amortization of tangible assets 36,736 33,802 Amortization of intangible assets 22,837 20,914 Minority interests 16,829 14,784 Earnings of affiliates in excess of dividends received (418) (3,423) Decrease(increase)in deferred tax benefits 5,172 (11,900) Provision for losses on accounts receivable 2,287 4,568 Amortization of restricted shares 10,100 7,895 Decrease(increase)in accounts receivable 94,964 (128,818) Increase in billable production (52,736) (73,508) Increase in other current assets (58,975) (5,184) Decrease in accounts payable (290,891) (213,280) (Decrease)increase in other accrued liabilities (90,360) 48,191 Decrease in accrued income taxes (1,438) (3,894) Other (110) 197 --------- --------- Net cash used for operating activities (189,904) (217,262) --------- --------- Cash flows from investing activities: Capital expenditures (37,855) (37,102) Payments for purchases of equity interests in subsidiaries and affiliates, net of cash acquired (117,761) (87,217) Proceeds from sales of equity interests in subsidiaries and affiliates 49,934 12,259 Payments for purchases of investments available-for-sale and other investments (13,318) (10,695) Proceeds from sales of investments available-for-sale and other investments 20,345 18,655 --------- --------- Net cash used for investing activities (98,655) (104,100) --------- --------- Cash flows from financing activities: Net borrowings under lines of credit 38,539 66,707 Share transactions under employee stock plans 12,482 5,676 Proceeds from issuance of principal of debt obligations 252,502 291,415 Dividends and loans to minority stockholders (18,297) (14,434) Dividends paid (38,532) (33,044) Purchase of treasury shares (85,812) (8,780) --------- --------- Net cash provided by financing activities 160,882 307,540 --------- --------- Effect of exchange rate changes on cash and cash equivalents 4,705 5,279 --------- --------- Net decrease in cash and cash equivalents (122,972) (8,543) Cash and cash equivalents at beginning of period 313,999 241,797 --------- --------- Cash and cash equivalents at end of period $ 191,027 $ 233,254 ========= ========= Supplemental Disclosures: Income taxes paid $ 89,412 $ 66,087 ========= ========= Interest paid $ 28,834 $ 30,300 ========= =========
The accompanying notes to consolidated condensed financial statements are an integral part of these statements. -4- 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, although the Company believes that the disclosures are adequate to make the information presented not misleading. 2) These statements reflect all adjustments, consisting of normal recurring accruals which, in the opinion of management, are necessary for a fair presentation of the information contained therein. Certain reclassifications have been made to the September 30, 1995 reported amounts to conform them with the September 30, 1996 and December 31, 1995 presentation. It is suggested that these consolidated condensed financial statements 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, 1995. 3) Results of operations for the interim periods are not necessarily indicative of annual results. -5- OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS(CONTINUED) - -------------------------------------------------------------------------------- 4) Primary earnings per share is based upon the weighted average number of common shares and common share equivalents outstanding during each period. Fully diluted earnings per share is based on the above, and if dilutive, adjusted for the assumed conversion of the Company's Convertible Subordinated Debentures and the assumed increase in net income for the after tax interest cost of these debentures. The number of shares used in the computations of primary and fully diluted earnings per share were as follows: Three Months Nine Months Ended September 30, Ended September 30, ------------------------ ------------------------ 1996 1995 1996 1995 ---- ---- ---- ---- Primary 76,629,100 74,580,200 76,120,500 74,359,200 Fully diluted 80,702,800 74,711,400 80,997,000 79,749,000 Share amounts for 1995 have been adjusted to reflect a two-for-one stock split in the form of a 100% stock dividend effective December 15, 1995. 5) On May 31, 1996, the Company exchanged 1,206,853 shares of common stock for all of the outstanding shares of Ketchum Communications Holdings, Inc. ("Ketchum"). The combination has been accounted for as a pooling of interests, effective January 1, 1996. The assets, liabilities, shareholders' equity and results of operations of Ketchum are not material to the Company, and therefore the Company's prior year financial statements were not restated. -6- OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS(CONTINUED) - -------------------------------------------------------------------------------- 6) On July 12, 1996, the Company announced the redemption of its outstanding 4.5% / 6.25% Step-up Convertible Subordinated Debentures with a scheduled maturity in 2000. On or before the September 5, 1996 redemption date, debenture holders elected to convert all of their outstanding debentures into common stock of the Company. To complete the redemption, 5,238,678 shares of common stock were issued at a conversion price of $27.44 per share. -7- Item 2. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- Results of Operations Third Quarter 1996 Compared To Third Quarter 1995 Consolidated worldwide revenues from commission and fee income increased 17.5% in the third quarter of 1996 compared to the third quarter of 1995. Consolidated domestic revenues increased 25.4% in the third quarter of 1996 to $341.6 million compared to $272.3 million in the third quarter of 1995. Consolidated international revenues increased 9.3% in the third quarter of 1996 to $290.2 million compared to $265.4 million in the third quarter of 1995. Absent the effect of the net acquisitions of subsidiary companies and movements in international currency exchange rates, consolidated worldwide revenues increased 13.5% in the third quarter of 1996 as compared to the same period in 1995. Operating expenses increased 16.3% in the third quarter of 1996 as compared to the third quarter of 1995. Excluding the effect of the net acquisition activity and movements in international currency exchange rates mentioned above, operating expenses increased 12.1% over 1995 levels. This increase reflects normal salary increases and growth in client service expenditures to support the increased revenue base. -8- MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- Net interest expense decreased by $2.7 million in the third quarter of 1996 as compared to the same period in 1995. This decrease primarily reflects lower average interest rates on borrowings and the conversion of the Step-Up Convertible Subordinated Debentures. Pretax profit margin was 8.7% in the third quarter of 1996 as compared to 7.2% in the same period in 1995. Operating margin, which excludes interest and dividend income and interest expense, was 9.4% in the third quarter of 1996 as compared to 8.5% in the same period in 1995. The effective income tax rate of 40.3% in the third quarter of 1996 was comparable to the effective income tax rate of 40.0% in the third quarter of 1995. The decrease in equity in affiliates is primarily due to the conversion of certain affiliates into partnerships or subsidiaries and the disposal of an affiliate during the prior quarter, partially offset by the effect of increased earnings at the Company's equity affiliates. The increase in minority interest expense is primarily due to greater earnings by companies where minority interests exist and additional minority interests resulting from acquisitions, partially offset by the acquisition of certain interests held by minority shareholders during the period. -9- MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- Net income increased 36.1% in the third quarter of 1996 as compared to the same period in 1995. Absent the effect of net acquisitions and movements in international currency exchange rates, net income increased 31.6% in the third quarter of 1996 as compared to the third quarter of 1995. Nine Months 1996 Compared to Nine Months 1995 Consolidated worldwide commission and fee income increased 17.6% in the first nine months of 1996 compared to the first nine months of 1995. Consolidated domestic commission and fee income increased 25.3% in the first nine months of 1996 to $1,017.8 million compared to $812.1 million in the same period in 1995. Consolidated international commission and fee income increased 9.7% in the first nine months of 1996 to $872.0 million compared to $794.9 million in the same period in 1995. Absent the effect of movements in international currency exchange rates and net acquisitions of subsidiary companies made subsequent to the third quarter of 1995, consolidated worldwide commission and fee income increased 13.4% in the first nine months of 1996 versus the first nine months of 1995. Operating expenses increased by 17.1% in the first nine months of 1996 as compared to the same period in 1995. Excluding the effect of movements in international currency exchange rates and net acquisition activity, operating expenses increased 12.4% over 1995 levels. -10- MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- Net interest expense decreased by $6.5 million in the first nine months of 1996 as compared to the same period in 1995. This decrease primarily reflects lower average interest rates on borrowings and the conversion of the Step-Up Convertible Subordinated Debentures. Pretax profit margin for the first nine months of 1996 was 10.9% as compared to 10.0% in the same period in 1995. Operating margin, which excludes interest and dividend income and interest expense, was 11.7% in the first nine months of 1996 as compared to 11.4% in the same period in 1995. The effective income tax rate of 40.4% in the first nine months of 1996 was comparable to the effective income tax rate of 40.5% in the first nine months of 1995. The decrease in equity in affiliates is primarily due to the conversion of certain affiliates into partnerships or subsidiaries and the disposal of an affiliate during the period, partially offset by the effect of increased earnings at the Company's affiliates. The increase in minority interest expense is primarily due to greater earnings by companies where minority interests exist and additional minority interests resulting from acquisitions, partially offset by the acquisition of certain interests held by minority shareholders during the period. -11- MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- Net income increased 25.7% in the first nine months of 1996 as compared to the same period in 1995. Absent the effect of net acquisitions and movements in international currency exchange rates, net income increased 22.5% in the first nine months of 1996 as compared to the same period in 1995. Capital Resources and Liquidity Cash and cash equivalents at September 30, 1996 decreased to $191.0 million from $314.0 million at December 31, 1995. The relationship between payables to the media and suppliers and receivables from clients, at September 30, 1996, is consistent with industry norms. The Company maintains relationships with a number of banks worldwide, which have extended unsecured committed lines of credit in amounts sufficient to meet the Company's cash needs. At September 30, 1996, the Company had $516.8 million in such unsecured committed lines of credit, comprised of a $360.0 million revolving credit agreement expiring June 30, 2001, and $156.8 million in lines of credit, principally outside of the United States. Of the $516.8 million in unsecured committed lines, $254.1 million remained available at September 30, 1996. Management believes the aggregate lines of credit available to the Company plus cash flows from operations will be adequate to support its anticipated requirements. -12- MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- On March 1, 1996, the Company issued Deutsche Mark 100 million Floating Rate Bonds(approximately $68 million at the March 1, 1996 exchange rate). The bonds are unsecured, unsubordinated obligations of the Company and bear interest at a per annum rate equal to Deutsche Mark three month LIBOR plus 0.375%. The bonds will mature on March 1, 1999 and will be repaid at par. On July 12, 1996, the Company announced the redemption of its outstanding 4.5% / 6.25% Step-up Convertible Subordinated Debentures with a scheduled maturity in 2000. On or before the September 5, 1996 redemption date, debenture holders elected to convert all of their outstanding debentures into common stock of the Company. To complete the redemption, 5,238,678 shares of common stock were issued at a conversion price of $27.44 per share. -13- PART II. OTHER INFORMATION Item 6. Exhibits Exhibit Number Description of Exhibit -------------- ---------------------- 27 Financial Data Schedule (filed in electronic format only) SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OMNICOM GROUP INC. (Registrant) Date November 12, 1996 /s/ Fred J. Meyer ----------------------- ------------------ Fred J. Meyer Chief Financial Officer (Principal Financial Officer) Date November 12, 1996 /s/ Jonathan E. Ramsden ----------------------- ------------------------ Jonathan E. Ramsden Controller (Principal Accounting Officer) -14- EX-27 2 FDS --
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF OMNICOM GROUP, INC. AND SUBSIDIARIES AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1996 SEP-30-1996 191,027 15,742 1,470,257 21,453 0 2,063,730 512,692 300,069 3,558,047 2,228,767 428,139 0 0 43,144 691,460 3,558,047 0 1,889,838 0 1,115,803 552,118 2,287 26,745 205,276 82,933 116,099 0 0 0 116,099 1.53 1.50
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