-----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, LMyUomWmZUMNmaPozbRBIIDw1lP4Jc9da12Srv+NE+Dp0eWtqYLkg/rE1grQbpWO xXrrIk9wm5PJfZcXOnRMnQ== 0000891092-97-000148.txt : 19970514 0000891092-97-000148.hdr.sgml : 19970514 ACCESSION NUMBER: 0000891092-97-000148 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 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: 97601802 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 FORM 10-Q 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: March 31, 1997 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 April 30, 1997 is 81,724,000. OMNICOM GROUP INC. AND SUBSIDIARIES INDEX Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Condensed Balance Sheets - March 31, 1997, December 31, 1996 and March 31, 1996 2 Consolidated Condensed Statements of Income - Three Months Ended March 31, 1997 and 1996 3 Consolidated Condensed Statements of Cash Flows - Three Months Ended March 31, 1997 and 1996 4 Notes to Consolidated Condensed Financial Statements 5-8 Item 2. Management's Discussion of Financial Condition and Results of Operations 9-12 PART II. OTHER INFORMATION Item 6. Exhibits 13 -1- PART I. FINANCIAL INFORMATION Item 1. Financial Statements OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in Thousands)
Assets March 31, December 31, March 31, 1997 1996 1996 ----------- ----------- ----------- Current assets: Cash and cash equivalents $ 227,960 $ 510,267 $ 195,397 Investments available-for-sale, at market, which approximates cost 79,791 12,841 28,503 Accounts receivable, less allowance for doubtful accounts of $24,411, $25,642 and $24,560 1,626,534 1,555,411 1,652,201 Billable production orders in process 178,349 156,667 165,870 Prepaid expenses and other current assets 248,411 189,799 202,818 ----------- ----------- ----------- Total current assets 2,361,045 2,424,985 2,244,789 Furniture, equipment and leasehold improvements, less accumulated depreciation and amortization of $305,709, $301,102 and $284,475 222,159 221,655 212,403 Investments in affiliates 231,045 223,918 216,276 Intangibles, less amortization of $201,182, $198,880 and $167,422 1,048,982 1,000,312 838,464 Deferred tax benefits 78,019 79,828 71,041 Deferred charges and other assets 115,307 105,245 121,453 ----------- ----------- ----------- Total assets $ 4,056,557 $ 4,055,943 $ 3,704,426 =========== =========== =========== Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 1,695,768 $ 2,070,026 $ 1,615,140 Payable to banks 31,394 8,772 172,472 Other accrued liabilities 706,700 717,869 616,056 Accrued taxes on income 64,086 66,409 52,272 ----------- ----------- ----------- Total current liabilities 2,497,948 2,863,076 2,455,940 Long term debt 549,471 204,744 526,176 Deferred compensation and other liabilities 156,481 124,739 109,819 Minority interests 60,231 62,706 60,219 Shareholders' equity: Common stock 43,417 43,144 40,525 Additional paid-in capital 553,402 554,511 397,106 Retained earnings 428,500 419,072 318,253 Unamortized restricted stock (35,210) (39,445) (27,424) Cumulative translation adjustment (22,331) 3,490 (32,856) Treasury stock (175,352) (180,094) (143,332) ----------- ----------- ----------- Total shareholders' equity 792,426 800,678 552,272 ----------- ----------- ----------- Total liabilities and shareholders' equity $ 4,056,557 $ 4,055,943 $ 3,704,426 =========== =========== ===========
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 March 31, ---------------------------- 1997 1996 --------- --------- Revenues: Commissions and fees $ 696,577 $ 591,601 Operating expenses: Salaries and related costs 421,485 358,588 Office and general expenses 201,102 171,909 --------- --------- 622,587 530,497 --------- --------- Operating profit 73,990 61,104 Net interest expense: Interest and dividend income (2,984) (3,313) Interest paid or accrued 7,333 9,402 --------- --------- Net interest expense 4,349 6,089 --------- --------- Income before income taxes 69,641 55,015 Income taxes: Federal 11,449 10,299 State and local 4,691 2,929 International 12,126 9,043 --------- --------- Total income taxes 28,266 22,271 --------- --------- Income after income taxes 41,375 32,744 Equity in affiliates 4,144 3,053 Minority interests (5,451) (4,884) --------- --------- Net income $ 40,068 $ 30,913 ========= ========= Earnings per share: Primary $ 0.50 $ 0.41 Fully diluted $ 0.50 $ 0.41 Dividends declared per common share $ 0.20 $ 0.175 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) Three Months Ended March 31, -------------------- 1997 1996 --------- --------- Cash flows from operating activities: Net income $ 40,068 $ 30,913 Adjustments to reconcile net income to net cash used for operating activities: Depreciation and amortization of tangible assets 13,204 11,701 Amortization of intangible assets 8,882 7,213 Minority interests 5,451 4,884 Earnings of affiliates in excess of dividends received (2,331) (2,186) Decrease in deferred tax benefits 4,747 391 Provision for losses on accounts receivable 515 948 Amortization of restricted shares 3,900 2,766 Increase in accounts receivable (89,815) (100,247) Increase in billable production (25,074) (31,596) Increase in other current assets (61,631) (38,250) Decrease in accounts payable (342,000) (252,763) Decrease in other accrued liabilities (12,216) (40,383) (Decrease)increase in accrued income taxes (2,589) 8,584 Other (16,780) (22,142) --------- --------- Net cash used for operating activities (475,669) (420,167) --------- --------- Cash flows from investing activities: Capital expenditures (17,542) (13,662) Payments for purchases of equity interests in subsidiaries and affiliates, net of cash acquired (69,255) (28,542) Proceeds from sales of equity interests in subsidiaries and affiliates 54 2,136 Payments for purchases of investments available-for-sale and other investments (65,542) (6,262) Proceeds from sales of investments available-for-sale and other investments 999 863 --------- --------- Net cash used for investing activities (151,286) (45,467) --------- --------- Cash flows from financing activities: Net borrowings under lines of credit 16,146 136,163 Share transactions under employee stock plans 8,420 5,631 Proceeds from issuance of principal of debt obligations 350,552 247,646 Dividends and loans to minority stockholders (5,218) (3,696) Dividends paid (15,846) (12,825) Purchase of treasury shares (4,232) (26,499) --------- --------- Net cash provided by financing activities 349,822 346,420 --------- --------- Effect of exchange rate changes on cash and cash equivalents (5,174) 612 --------- --------- Net decrease in cash and cash equivalents (282,307) (118,602) Cash and cash equivalents at beginning of period 510,267 313,999 --------- --------- Cash and cash equivalents at end of period $ 227,960 $ 195,397 ========= ========= Supplemental Disclosures: Income taxes paid $ 29,328 $ 13,350 ========= ========= Interest paid $ 4,428 $ 8,364 ========= ========= 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 March 31, 1996 reported amounts to conform them with the March 31, 1997 and December 31, 1996 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, 1996. 3) Results of operations for 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 convertible debentures and the assumed increase in net income for the after tax interest cost of such debentures. At March 31, 1997, the 4.25% Convertible Subordinated Debentures had been outstanding since January 3, 1997. At March 31, 1996, the 4.5%/6.25% Step-Up Convertible Subordinated Debentures were outstanding. The number of shares used in the computations of primary and fully diluted earnings per share were as follows: Three Months Ended March 31, --------------------------- 1997 1996 ---------- ---------- Primary EPS Computation 80,598,700 75,192,200 Fully Diluted EPS Computation 80,663,800 80,697,400 For purposes of computing fully diluted earnings per share on net income for the three months ended March 31, 1997, the Company's 4.25% Convertible Subordinated Debentures were not reflected in the computation as their inclusion would have been anti-dilutive. -6- OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- In February 1997, the FASB issued SFAS No. 128, "Earnings per Share". Under SFAS No. 128, the presentation of Primary and Fully Diluted Earnings Per Share will be replaced by Basic and Diluted Earnings Per Share. Adoption of SFAS No. 128 is required for periods ending after December 15, 1997, at which time restatement for prior periods will be necessary. Had the provisions of SFAS No. 128 been in effect as of March 31, 1997, the Company would have reported the following earnings per share information: Three Months Ended March 31, ----------------------- 1997 1996 ----- ----- Earnings per share: Basic $0.50 $0.42 Diluted $0.50 $0.41 5) On February 28, 1997, the Company exchanged 544,487 shares of common stock for all of the outstanding shares of Cline Davis & Mann, Inc. and Gavin Anderson & Company (Japan), Inc. These combinations have been accounted for as poolings of interests. The assets, liabilities, shareholders' equity and results of operations of the companies acquired are not, either individually or in the aggregate, material to the Company and, therefore, the Company's prior year financial statements have not been restated. -7- OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 6) On May 31, 1996, the Company exchanged 1,206,853 shares of common stock for all of the outstanding voting shares of Ketchum Communications Holdings, Inc. The combination was accounted for as a pooling of interests. Accordingly, the March 31, 1996 balance sheet, results of operations and cash flows have been restated to reflect the combination as of January 1, 1996. 7) On January 3, 1997, the Company issued $218,500,000 of 4.25% Convertible Subordinated Debentures with a scheduled maturity in 2007. The debentures are convertible into common stock of the Company at a conversion price of $63.00 per share subject to adjustment in certain events. Debenture holders have the right to require the Company to redeem the debentures on January 3, 2003 at a price of 112.418%, or upon the occurrence of a Fundamental Change, as defined in the indenture agreement, at the prevailing redemption price. The Company may redeem the debentures, as a whole or in part, on or after December 29, 2000 initially at 108.324% and at increasing prices thereafter to 112.418% until January 2, 2003 and 100% thereafter. Unless the debentures are redeemed, repaid or converted prior thereto, the debentures will mature on January 3, 2007 at their principal amount. The proceeds of this issuance are being used for general corporate purposes including working capital. -8- Item 2. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- Results of Operations First Quarter 1997 Compared to First Quarter 1996 Consolidated worldwide revenues from commission and fee income increased 17.7% in the first quarter of 1997 compared to the first quarter of 1996. Consolidated domestic revenues increased 18.2% in the first quarter of 1997 to $381.7 million compared to $322.9 million in the first quarter of 1996. Consolidated international revenues increased 17.2% in the first quarter of 1997 to $314.9 million compared to $268.7 million in the first quarter of 1996. Absent the effect of the net acquisitions of subsidiary companies and movements in international currency exchange rates, consolidated worldwide revenues increased 13.4% in the first quarter of 1997 as compared to the same period in 1996. Operating expenses increased 17.4% in the first quarter of 1997 as compared to the first quarter of 1996. Excluding the effect of the net acquisition activity and movements in international currency exchange rates mentioned above, operating expenses increased 12.9% over 1996 levels. This increase reflects normal salary increases and growth in client service expenditures to support the increased revenue base. -9- MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- Net interest expense decreased by $1.7 million in the first quarter of 1997 as compared to the same period in 1996. This decrease primarily reflects lower average interest rates on borrowings. Pretax profit margin was 10.0% in the first quarter of 1997 as compared to 9.3% in the same period in 1996. Operating margin, which excludes interest and dividend income and interest expense, was 10.6% in the first quarter of 1997 as compared to 10.3% in the same period in 1996. The effective income tax rate of 40.6% in the first quarter of 1997 was comparable to the effective income tax rate of 40.5% in the first quarter of 1996. The increase in equity in affiliates is indicative of greater profits earned by companies in which the Company owns less than a 50% equity interest. The increase in minority interest expense is primarily due to greater earnings by companies where minority interests exist. Net income increased 29.6% in the first quarter of 1997 as compared to the same period in 1996. Absent the effect of net acquisitions and movements in international currency exchange rates, net income increased 24.2% in the first quarter of 1997 as compared to the first quarter of 1996. -10- MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- Capital Resources and Liquidity Cash and cash equivalents at March 31, 1997 decreased to $228.0 million from $510.3 million at December 31, 1996. The relationship between payables to the media and suppliers and receivables from clients, at March 31, 1997, 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 March 31, 1997, the Company had $505.1 million in such unsecured committed lines of credit, comprised of a $360.0 million revolving credit agreement expiring June 30, 2001, and $145.1 million in lines of credit, principally outside of the United States. Of the $505.1 million in unsecured committed lines, $363.2 million remained available at March 31, 1997. On January 3, 1997, the Company issued $218,500,000 of 4.25% Convertible Subordinated Debentures with a scheduled maturity in 2007. The debentures are convertible into common stock of the Company at a conversion price of $63.00 per share subject to adjustment in certain events. Debenture holders have the right to require the Company to redeem the debentures on January 3, 2003 at a price of 112.418%, or upon the occurrence of a Fundamental Change, as defined in the indenture agreement, at the prevailing redemption price. The Company may redeem the debentures, as a whole or in part, on or after December 29, 2000 -11- MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- initially at 108.324% and at increasing prices thereafter to 112.418% until January 2, 2003 and 100% thereafter. Unless the debentures are redeemed, repaid or converted prior thereto, the debentures will mature on January 3, 2007 at their principal amount. The proceeds of this issuance are being used for general corporate purposes including working capital. 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- 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 May 12, 1997 /s/ Fred J. Meyer -------------------------- Fred J. Meyer Chief Financial Officer (Principal Financial Officer) Date May 12, 1997 /s/ Jonathan E. Ramsden -------------------------- Jonathan E. Ramsden Controller (Principal Accounting Officer) -13- EX-27 2 FINANCIAL DATA SCHEDULE
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 THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1997 MAR-31-1997 227,960 79,791 1,650,945 24,411 0 2,361,045 527,868 305,709 4,056,557 2,497,948 549,471 0 0 43,417 749,009 4,056,557 0 696,577 0 421,485 201,102 515 7,333 69,641 28,266 40,068 0 0 0 40,068 0.50 0.50
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