-----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, WwsQQEuCShnDKk/kv2b3p32tkjCNd7If+NoNDKsQ+nhxn6Q/hfvQYM3PZfmVPape sIkSzfVbg/rz3oKume7P/Q== 0000891092-99-000158.txt : 19990331 0000891092-99-000158.hdr.sgml : 19990331 ACCESSION NUMBER: 0000891092-99-000158 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990330 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-K405 SEC ACT: SEC FILE NUMBER: 001-10551 FILM NUMBER: 99578699 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-K405 1 FORM 10-K405 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 (I.R.S. Employer Identification No.) incorporation or organization) 437 Madison Avenue, New York, NY 10022 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 415-3600 Securities Registered Pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- ------------------- Common Stock, $.50 Par Value New York Stock Exchange Securities Registered Pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] At March 15, 1999, there were 178,128,121 shares of Common Stock, $.50 par value, outstanding; the aggregate market value of the voting stock held by nonaffiliates at March 15, 1999 was approximately $12,191,950,000. DOCUMENTS INCORPORATED BY REFERENCE Certain portions of the Registrant's definitive proxy statement relating to its annual meeting of shareholders scheduled to be held on May 17, 1999 are incorporated by reference into Part III of this Report. ================================================================================ OMNICOM GROUP INC. ---------- Index to Annual Report on Form 10-K Year Ended December 31, 1998 Page ---- PART I Item 1. Business........................................................ 1 Item 2. Properties...................................................... 3 Item 3. Legal Proceedings............................................... 3 Item 4. Submission of Matters to a Vote of Security Holders............. 3 Supplemental Item. Executive Officers of the Registrant................. 4 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters................................... 5 Item 6. Selected Financial Data......................................... 6 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........................... 6 Item 7A. Quantitative and Qualitative Disclosures About Market Risk................................................... 11 Item 8. Financial Statements and Supplementary Data..................... 11 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........................... 11 PART III Item 10. Directors and Executive Officers of the Registrant.............. 11 Item 11. Executive Compensation.......................................... 11 Item 12. Security Ownership of Certain Beneficial Owners and Management................................................ 11 Item 13. Certain Relationships and Related Transactions.................. 11 The information called for by Items 10, 11, 12 and 13, to the extent not included in this document, is incorporated herein by reference to such information to be included under the captions "Election of Directors," "Common Stock Ownership of Management," "Directors' Compensation" and "Executive Compensation," in the Company's definitive proxy statement which is expected to be filed by April 5, 1999. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K .......................................... 12 PART I Item 1. Business Omnicom Group Inc., through its wholly and partially-owned companies (hereinafter collectively referred to as the "Company" or the "Omnicom Group"), provides corporate communications services to clients worldwide on a global, pan-regional, national and local basis. Operations cover the major regions of North America, the United Kingdom, Germany, France, the remainder of Continental Europe, Latin America, the Far East, Australia, the Middle East and Africa. In both 1998 and 1997, approximately 50% of the Omnicom Group's billings came from its non-U.S. operations. The communications services offered by the Company include advertising in various media such as television, radio, newspaper, magazines, outdoor, and the internet, as well as, public relations, specialty advertising, direct response and promotional marketing, strategic media planning and buying, and internet and digital media development. According to the unaudited industry-wide figures published in 1998 by the trade journal Advertising Age, Omnicom Group Inc. was ranked as the largest advertising agency group worldwide. Corporate Communications Services The Omnicom Group companies provide a variety of advertising and marketing communication services to their clients, including: the creation and production of advertising, marketing consultation, strategic media planning and buying, financial and business-to-business advertising, directory advertising, healthcare communications, managed care consultancy, recruitment communications, branding consultancy, digital communications, contract publishing, design and image consultancy, direct/database marketing, field marketing, integrated promotional marketing, public affairs, corporate and financial public relations, reputation management, sports and event marketing, telemarketing, and internet and digital media development. Brands The above services are provided to clients through numerous worldwide, national and regional independent agency brands. These brands include, among others, BBDO Worldwide, DDB Needham Worldwide, TBWA Worldwide, Adelphi Group, Alcone Marketing Group, Bernard Hodes Advertising, Brodeur Worldwide, Case*Dunlap, Clark & Weinstock, Claydon Heeley, Copithorne & Bellows, CPM International, Diversified Healthcare Communications Group, Doremus & Company, Fleishman-Hillard, Gavin Anderson & Company, GMR Marketing, Goodby, Silverstein & Partners, GPC International, Griffin Bacal, GSD&M, Health & Medical Communications Group, Integer Group, Interbrand, Ketchum, Ketchum Directory Advertising, Martin-Williams, Merkley Newman Harty, Moss Dragoti, Optimum Media Direction, Porter Novelli International, Rapp Collins Worldwide, TARGIS Healthcare Communications Worldwide, The Designory, TicToc and TLP, Inc. Additionally, through its wholly-owned subsidiary Communicade, Omnicom has significant minority equity investments in five interactive marketing agencies: AGENCY.COM, Razorfish and Think New Ideas, headquartered in New York and Red Sky Interactive and Organic Online, in San Francisco, California. Markets The Omnicom Group agency brands provide services to their clients on a global, pan-regional, national and local basis. These agencies operate throughout the major cities of the United States and through subsidiaries and affiliates in Argentina, Australia, Austria, Belgium, Brazil, Bulgaria, Canada, Chile, China, Colombia, Costa Rica, Croatia, Cyprus, the Czech Republic, Denmark, Egypt, El Salvador, Estonia, Finland, France, Germany, Greece, Guatemala, Honduras, Hong Kong, Hungary, India, Ireland, Israel, Italy, Japan, Kuwait, Latvia, Lebanon, Lithuania, Malaysia, Mexico, the Netherlands, New Zealand, Nicaragua, Norway, Panama, Peru, the Philippines, Poland, Portugal, Puerto Rico, Romania, Russia, Saudi Arabia, Singapore, the Slovak Republic, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, the United Arab Emirates, the United Kingdom, Uruguay, Venezuela and other countries around the world. For financial information concerning domestic and foreign operations and segment reporting see Note 5 of the Notes to Consolidated Financial Statements. 1 Clients The clients of the Omnicom Group include major industrial, financial and service industry companies as well as smaller, pan-regional, national and local clients. The Omnicom Group's ten largest clients accounted for approximately 19% of 1998 commission and fees. The majority of these have been clients on average for more than twenty-five years. Twelve Omnicom Group agency brands provided services to the Company's largest client, which accounted for approximately 5% of 1998 commissions and fees. Commissions and Fees Commissions charged on media billings are not uniform and are negotiated with the client. In accordance with industry practice, the media source typically bills the agency for the time or space purchased and the Omnicom Group companies bill their clients for this amount plus the commission. In many cases, fees are generated in lieu of commissions. Several different fee arrangements are used depending on the client and individual agency. In general, fee charges relate to the cost of providing services plus a markup. Revenues are dependent upon the marketing requirements of clients and tend to be highest in the second and fourth quarters of the calendar year. Competitive Conditions The Company's business is highly competitive and accounts may shift agencies, usually on 90 days' notice. Clients may also reduce advertising and marketing budgets at any time. An agency's ability to compete for new clients is affected in some instances by the policy, which many advertisers and marketers follow, of not permitting their agencies to represent competitive accounts in the same market. As a result, increasing size may limit an agency's potential for securing certain new clients. In the vast majority of cases, however, Omnicom Group's consistent maintenance of separate, independent agency brands have enabled the Company to represent competing clients. The Omnicom agency brands have sought, and will seek, new business by showing potential clients examples of advertising and marketing campaigns and by explaining the variety of related services offered. The Omnicom Group competes in the United States and internationally with a multitude of full service and special service agencies. In addition to the usual risks of the Company's business, international operations are subject to the risk of currency exchange fluctuations, exchange control restrictions and to actions of governmental authorities. Employees The business success of the Omnicom Group is, and will continue to be, highly dependent upon the skills and creativity of its creative, research, media and account personnel and their relationships with clients. The Company believes its agencies have established reputations for creativity and marketing expertise which attract, retain and stimulate talented personnel. There is substantial competition among advertising agencies for talented personnel and all agencies are vulnerable to adverse consequences from the loss of key individuals. Employees are generally not under employment contracts and are free to move to competitors. The Company believes that its compensation arrangements for its key employees, which in addition to base salaries and performance bonuses may include stock options, restricted stock and retirement plans, are highly competitive with those of other advertising agencies. As of December 31, 1998, the Omnicom Group, excluding unconsolidated companies, employed approximately 35,600 persons, of which approximately 15,300 were employed in the United States and approximately 20,300 were employed in its international offices. Government Regulation The Company's business is subject to government regulation, both within and outside the United States. In the United States, federal, state and local governments and their agencies and various consumer groups have directly or indirectly affected or attempted to affect the scope, content and manner of presentation of advertising. The continued activity by government and by consumer groups regarding advertising may cause further change in domestic advertising practices in the coming years. While the Company is unable to estimate the effect of 2 these developments on its U.S. business, management believes the total volume of advertising in general media in the United States will not be materially reduced due to future legislation or regulation, even though the form, content, and manner of presentation of advertising may be modified. In addition, the Company will continue to ensure that its management and operating personnel are aware of and are responsive to the possible implications of such developments. Item 2. Properties Substantially all of the Company's offices are located in leased premises. The Company actively manages its lease obligations and, where appropriate, consolidates its leased premises. Management has obtained subleases for most of the premises vacated. Where appropriate, management has established reserves for the difference between the cost of the leased premises that were vacated and anticipated sublease income. Domestic The Company's corporate office occupies approximately 50,000 sq. ft. of space at 437 Madison Avenue, New York, New York under a lease expiring in the year 2010. Offices in Atlanta, Boston, Chicago, Coral Gables, Dallas, Detroit, Houston, Irvine, Kansas City, Los Angeles, Minneapolis, New York, Palo Alto, Philadelphia, Pittsburgh, San Francisco, San Jose, Seattle, Stamford, St. Louis and Washington D.C. and at various other locations occupy approximately an aggregate of 5,018,000 sq. ft. of space under leases with varying expiration dates. International The Company's international subsidiaries in Australia, Austria, Belgium, Brazil, Bulgaria, Canada, Chile, China, Croatia, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong, Hungary, India, Ireland, Italy, Japan, Latvia, Malaysia, Mexico, the Netherlands, New Zealand, Norway, the Philippines, Poland, Portugal, Puerto Rico, Romania, Singapore, the Slovak Republic, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand and the United Kingdom occupy premises under leases with various expiration dates. Item 3. Legal Proceedings The Company has no material pending legal proceedings, other than ordinary routine litigation incidental to its business. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the last quarter of 1998. 3 Supplemental Item. Executive Officers of the Registrant The individuals named below are Executive Officers of the Company and, except as indicated below, have held their current positions during the last five years:
Name Position Age ---- -------- --- Bruce Crawford................ Chairman of Omnicom Group 70 John D. Wren.................. Chief Executive Officer & President of Omnicom Group 46 Randall J. Weisenburger....... Executive Vice President and Chief Financial Officer 40 Dennis E. Hewitt.............. Treasurer of Omnicom Group 54 Barry J. Wagner............... Secretary & General Counsel of Omnicom Group 58 Philip J. Angelastro.......... Controller of Omnicom Group 34 Allen Rosenshine.............. Chairman & Chief Executive Officer of BBDO Worldwide 60 James A. Cannon............... Vice Chairman & Chief Financial Officer of BBDO Worldwide 60 Keith L. Reinhard............. Chairman & Chief Executive Officer of DDB Needham Worldwide 64
John D. Wren was appointed Chief Executive Officer of the Company effective January 1, 1997, succeeding Bruce Crawford in the position. Mr. Wren was appointed President of the Company and Chairman of Diversified Agency Services in September 1995. Mr. Wren was appointed Chief Executive Officer of Diversified Agency Services in May 1993. Mr. Wren had served as President of Diversified Agency Services since February 1992, having previously served as its Executive Vice President and General Manager. Randall J. Weisenburger joined the Company in September 1998 and became its Executive Vice President and Chief Financial Officer on January 1, 1999. Mr. Weisenburger was previously with Wasserstein Perella & Co., where he was President and Chief Executive Officer of Wasserstein Perella Management Partners, its merchant banking subsidiary. Dennis E. Hewitt was promoted to Treasurer of the Company in January 1994. Mr. Hewitt joined the Company in May 1988 as Assistant Treasurer. Barry J. Wagner was promoted to Secretary and General Counsel of the Company in May 1995. Mr. Wagner was previously Assistant Secretary of the Company. Philip J. Angelastro was promoted to Controller of the Company effective February 1, 1999. Mr. Angelastro joined the Company in June 1997 as Vice President of Finance with Diversified Agency Services after being a Partner at Coopers & Lybrand LLP. Similar information with respect to the remaining Executive Officers of the Company, who are all directors of the Company, can be found in the Company's definitive proxy statement expected to be filed April 5, 1999. 4 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Price Range of Common Stock and Dividend History The Company's Common Stock is listed on the New York Stock Exchange under the symbol "OMC". The table below shows the range of quarterly high and low sale prices reported on the New York Stock Exchange Composite Tape for the Company's common stock for the periods indicated and the dividends paid per share on the common stock for such periods; the reported last sales price on March 15, 1999 was $69 1/2. Certain sales prices and per share amounts give effect to the two-for-one stock split completed December 1997. Dividends Paid Per Share of High Low Common Stock ----- ---- ------------ 1997 First Quarter.............. 26 7/16 22 5/16 .10 Second Quarter............. 32 1/8 23 15/16 .10 Third Quarter.............. 37 1/8 31 1/32 .125 Fourth Quarter............. 42 3/8 33 .125 1998 First Quarter.............. 47 1/16 37 7/8 .125 Second Quarter............. 49 7/8 45 1/2 .125 Third Quarter.............. 57 1/4 45 .125 Fourth Quarter............. 58 38 9/16 .15 The Company is not aware of any restrictions on its present or future ability to pay dividends. However, in connection with certain borrowing facilities entered into by the Company and its subsidiaries (see Note 7 of the Notes to Consolidated Financial Statements), the Company is subject to certain restrictions on the ratio of debt to cash flow, the ratio of total consolidated indebtedness to total consolidated capitalization and its ability to make investments in and loans to affiliates and unconsolidated subsidiaries. On February 2, 1999 the Board of Directors declared a regular quarterly dividend of $0.15 per share of common stock, payable April 1, 1999 to holders of record on March 12, 1999. Approximate Number of Equity Security Holders Approximate Number of Record Holders Title of Class on March 15, 1999 -------------- --------------------- Common Stock, $.50 par value........................ 3,696 Preferred Stock, $1.00 par value ................... None 5 Item 6. Selected Financial Data The following table sets forth selected financial data of the Company and should be read in conjunction with the consolidated financial statements which begin on page F-1. Certain per share amounts give effect to the two-for-one stock split completed December 1997.
(Dollars in Thousands Except Per Share Amounts) ------------------------------------------------------------------ 1998 1997 1996 1995 1994 ---------- ---------- ---------- ---------- ---------- For the year: Commissions and fees................ $4,092,042 $3,124,813 $2,641,667 $2,257,536 $1,907,795 Income before change in accounting principles......... 285,068 222,415 176,329 139,955 111,495 Net income ......................... 285,068 222,415 176,329 139,955 83,486 Earnings per common share before change in accounting principles: Basic............................ 1.72 1.40 1.17 0.95 0.80 Diluted.......................... 1.68 1.37 1.12 0.93 0.77 Cumulative effect of change in accounting principles: Basic............................ -- -- -- -- (0.20) Diluted.......................... -- -- -- -- (0.20) Earnings per common share after change in accounting principles: Basic............................ 1.72 1.40 1.17 0.95 0.60 Diluted.......................... 1.68 1.37 1.12 0.93 0.59 Dividends declared per common share............................ 0.525 0.45 0.375 0.33 0.31 At year end: Total assets........................ 6,910,060 4,965,743 4,055,943 3,527,677 3,040,211 Long-term obligations: Long-term debt and convertible subordinated debentures........ 715,864 341,665 204,744 290,379 199,487 Deferred compensation and other liabilities.............. 220,668 114,668 124,739 122,623 150,291
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations In 1998, domestic revenues from commissions and fees increased 29.8 percent. The effect of acquisitions, net of divestitures, accounted for a 12.5 percent increase. The remaining 17.3 percent increase was due to the growth of existing businesses, including net new business gains and higher net spending from existing clients. In 1997, domestic revenues from commissions and fees increased 16.8 percent. The effect of acquisitions, net of divestitures, accounted for a 2.7 percent increase. The remaining 14.1 percent increase was due to the growth of existing businesses, including net new business gains and higher net spending from existing clients. In 1996, domestic revenues from commissions and fees increased 23.9 percent. The effect of acquisitions, net of divestitures, accounted for a 7.4 percent increase. The remaining 16.5 percent increase was due to the growth of existing businesses, including net new business gains and higher net spending from existing clients. In 1998, international revenues increased 32.2 percent. The effect of acquisitions, net of divestitures, accounted for a 20.8 percent increase in international revenues. Changes in the foreign exchange value of the U.S. dollar decreased international revenues by 2.9 percent. The remaining 14.3 percent increase was due to the growth of existing businesses, including net new business gains and higher net spending from existing clients. In 1997, international revenues increased 19.9 percent. The effect of acquisitions, net of divestitures, accounted for a 16.2 percent increase in international revenues. Changes in the foreign exchange value of the U.S. dollar decreased international revenues by 10.3 percent. The remaining 14.0 percent increase was due to the growth of existing businesses, including net new business gains and higher net spending from existing clients. 6 In 1996, international revenues increased 10.3 percent. The effect of acquisitions, net of divestitures, accounted for a 3.2 percent increase in international revenues. Changes in the foreign exchange value of the U.S. dollar decreased international revenues by 3.4 percent. The remaining 10.5 percent increase was due to the growth of existing businesses, including net new business gains and higher net spending from existing clients. In 1998, worldwide operating expenses increased 29.8 percent. Acquisitions, net of divestitures during the year, accounted for a 16.5 percent increase in worldwide operating expenses. Changes in the foreign exchange value of the U.S. dollar decreased worldwide operating expenses by 1.3 percent. The remaining 14.6 percent increase was caused by normal salary increases and growth in out-of-pocket expenditures to service the increased revenue base. Net foreign exchange gains did not significantly impact operating expenses for the year. In 1997, worldwide operating expenses increased 17.5 percent. Acquisitions, net of divestitures during the year, accounted for a 7.9 percent increase in worldwide operating expenses. Changes in the foreign exchange value of the U.S. dollar decreased worldwide operating expenses by 4.7 percent. The remaining 14.3 percent increase was caused by normal salary increases and growth in out-of-pocket expenditures to service the increased revenue base. Net foreign exchange gains did not significantly impact operating expenses for the year. In 1996, worldwide operating expenses increased 16.5 percent. Acquisitions, net of divestitures during the year, accounted for a 4.9 percent increase in worldwide operating expenses. Changes in the foreign exchange value of the U.S. dollar decreased worldwide operating expenses by 1.6 percent. The remaining 13.2 percent increase was caused by increases in employee compensation, including relatively higher levels of bonus and incentive compensation and severance payments, and growth in out-of-pocket expenditures to service the increased revenue base. Net foreign exchange gains did not significantly impact operating expenses for the year. Net interest expense in 1998 increased $17.7 million. This increase primarily reflects higher average borrowings during the year, resulting in part from the issuance of the 21/4% Convertible Subordinated Debentures and the 5.20% French franc Notes, partially offset by the effect of higher average amounts of cash and marketable securities invested during the year. Net interest expense in 1997 increased $1.0 million. The effect of higher average borrowings during the year, resulting in part from the issuance of the 41/4% Convertible Subordinated Debentures, was offset by the effect of higher average amounts of cash and marketable securities invested during the year. Net interest expense in 1996 decreased $6.9 million, due primarily to lower average interest rates on borrowings and the conversion of the 4.5%/6.25% Step-Up Convertible Subordinated Debentures in September 1996. In 1998, the effective tax rate increased to 41.5 percent. The increase primarily reflects higher effective tax rates at the Company's international subsidiaries. In 1997, the effective tax rate increased to 41.0 percent. This increase primarily reflects higher effective tax rates at the Company's international subsidiaries. In 1996, the effective tax rate increased to 40.5 percent. This increase reflects an increase in the effective rate of state and local taxes. In 1998, consolidated net income increased 28.2 percent. This increase was the result of revenue growth and margin improvement, partially offset by a decrease in equity income and an increase in minority interest expense. Operating margin, which excludes net interest expense, increased to 13.7 percent in 1998 from 12.9 percent in 1997 as a result of greater growth in commission and fee revenue than the growth in operating expenses. The decrease in equity income was primarily due to the conversion of certain affiliates into subsidiaries and to decreased earnings at certain of the Company's equity affiliates. The increase in minority interest expense was caused by higher earnings from companies in which minority interests exist and additional minority interests resulting from acquisitions. In 1998, the impact of acquisitions, net of divestitures, resulted in a 13.5 percent increase in consolidated net income, while changes in the foreign exchange value of the U.S. dollar decreased consolidated net income by 1.9 percent. In 1997, consolidated net income increased 26.1 percent. This increase was the result of revenue growth, margin improvement, and an increase in equity income, partially offset by an increase in minority interest expense. Operating margin, which excludes net interest expense, increased to 12.9 percent in 1997 from 12.4 percent in 1996 as a result of greater growth in commission and fee revenue than the growth in operating 7 expenses. The increase in equity income was primarily due to greater profits earned by the Company's existing equity affiliates. The increase in minority interest expense was caused by higher earnings from companies in which minority interests exist and additional minority interests resulting from acquisitions. In 1997, the impact of acquisitions, net of divestitures, resulted in a 16.0 percent increase in consolidated net income, while changes in the foreign exchange value of the U.S. dollar decreased consolidated net income by 5.0 percent. In 1996, consolidated net income increased 26.0 percent. This increase was the result of revenue growth and margin improvement. Operating margin, which excludes net interest expense, increased to 12.4 percent in 1996 from 12.0 percent in 1995 as a result of greater growth in commission and fee revenue than the growth in operating expenses. In 1996, the impact of acquisitions, net of divestitures, resulted in a 2.7 percent increase in consolidated net income, while changes in the foreign exchange value of the U.S. dollar decreased consolidated net income by 2.4 percent. At December 31, 1998, accounts receivable less allowance for doubtful accounts, increased by $666.4 million from December 31, 1997. At December 31, 1998, accounts payable and other accrued liabilities increased by $676.8 million and $366.9 million, respectively, from December 31, 1997. These increases were primarily due to an increased volume of activity resulting from business growth and acquisitions during the year and, in the case of accounts payable, differences in the timing of payments to media and other suppliers in 1998 as compared to 1997. The Company is subject to the risk of currency exchange rate fluctuations related to its international operations. This risk is generally limited to the net income of the operations as the revenues and expenses of the operations are generally denominated in the same currency. The Company or its international operations may in some cases enter into hedging transactions to minimize the risk of adverse currency exchange rate fluctuations on the net income of the operation. The Company's major international markets are Australia, Brazil, Canada, France, Germany, the Netherlands, Spain and the United Kingdom. As part of managing the Company's exposures to currency exchange and market interest rates, the Company periodically enters into derivative financial instruments. Derivative financial instruments are subject to market and counterparty risk. Market risk is the potential for loss resulting from changes in market conditions. The Company periodically determines the potential loss from market risk by performing a value-at-risk computation. Value-at-risk uses a statistical model that utilizes historic currency exchange and interest rate data to measure the potential impact on future earnings of the Company's existing portfolio of derivative financial instruments. The value-at-risk analysis performed on the Company's December 31, 1998 portfolio of derivative financial instruments indicated that the risk of loss was immaterial. Counterparty risk arises from the inability of a counterparty to meet its obligations. To minimize counterparty risk, the Company only enters into derivative contracts with major well-known banks that have credit ratings equal to or better than the Company's. The Company's derivative activities are limited in volume and confined to risk management activities related to the Company's worldwide operations. A reporting system is in place which evaluates the impact on the Company's earnings resulting from changes in interest rates, currency exchange rates and other relevant market risks. This system is structured to enable senior management to initiate prompt remedial action, if appropriate. At December 31, 1998 and 1997, the Company had forward foreign exchange contracts outstanding with an aggregate notional principal amount of $865 million and $584 million, respectively, most of which were denominated in the Company's major international market currencies. These contracts predominantly hedge certain of the Company's intercompany receivables and payables which are recorded in a currency different from that in which they will settle. The terms of these contracts are generally three months or less. At December 31, 1998, the Company had Japanese yen 16.3 billion aggregate notional principal amount of cross currency interest rate swaps. The swaps convert a portion of the Company's U.S. dollar floating rate debt into fixed rate Japanese yen debt and effectively hedge the Company's net investment in Japanese yen denominated assets. At December 31, 1998 and 1997, the Company had no other derivative contracts outstanding. 8 Year 2000 Issue The Year 2000 issue is the result of computer programs being written using two digits, rather than four, to define the applicable year. Accordingly, any of the computer programs utilized by the Company that have date sensitive software may cause system failures or miscalculations if data entry of "00" is recognized as a date other than 2000. The Company has developed a Year 2000 readiness plan to address Year 2000 issues. This plan has included the establishment of Omnicom 2000, a special purpose entity dedicated to ensuring that Omnicom companies are addressing and resolving Year 2000 compliance issues. Omnicom 2000 comprises an Executive Committee of senior executives from Omnicom and its principal subsidiaries, and a team of dedicated internal managers and consultants. Omnicom 2000 has also retained external managers and consultants to assist in project management and quality control. The Company's plan includes an assessment phase, a testing phase, an implementation phase and a contingency planning phase. Additionally, the Audit Committee of the Board of Directors meets periodically to review progress against the plan. As part of its assessment phase, the Company has compiled a detailed inventory of systems and potential Year 2000 readiness issues at all of its principal locations. Based on this information, the Company has determined that it is required to modify portions of its software so that its computer systems will properly utilize dates beyond December 31, 1999. In addition, the Company is dependent on third-party computer systems and applications, particularly with respect to such tasks as accounting, billing and buying, planning and paying for media. The Company is in the process of modifying or replacing affected systems, and is also evaluating the adequacy of the processes and progress of third-party vendors of systems that may be affected by the Year 2000 issue. The Company believes that it has identified critical third-party vendors, and it recently completed its testing of these critical vendors to determine their Year 2000 readiness. The Company has been working with and will continue to work with these and other vendors and believes they will be Year 2000 compliant. As a result of the above, the assessment phase is nearly complete. Additionally, the Company believes that the implementation phase of its Year 2000 readiness plan will be substantially completed by the middle of 1999. Contingency planning will continue throughout 1999. The Company believes that, through upgrades, modifications, and replacement of its existing hardware, software and non-IT systems, it will achieve Year 2000 readiness. However, if such upgrades, modifications and replacements are not made, or are not made in a timely manner, the Year 2000 issue could have a material impact on the Company's operations. The out-of-pocket costs incurred in 1998 for its Year 2000 program were not material to consolidated results of operations and are expected to be immaterial in 1999. These costs, the majority of which will not be capitalizable, include third party consultants and the replacement and remediation of existing computer software and hardware. Such costs do not include internal management time, the effects of which are also not expected to be material to the Company's results of operations or financial condition. The Company will continue to refine its estimates of the costs of its Year 2000 efforts, through progress reports from each location and through its capital expenditure budget review process. At this stage of the process, the Company believes that it is difficult to specifically identify the cause of the most reasonable worst case Year 2000 scenario. Due to the decentralized nature of the Company's structure and systems, the Company believes that a reasonable worst case scenario could involve the failures of significant third parties (including entities with which the Company has no direct involvement such as telecommunications companies and public utilities) that continue for more than several days and affect a significant number of the Company's operating locations. The Company is considering various contingency planning approaches in the event of such failures and is currently developing a plan for its operations to follow in the event of a Year 2000 failure. The development of the Company's contingency plans will be ongoing and will reflect additional information with regard to third parties' Year 2000 readiness as it is received. The Company's Year 2000 efforts are ongoing and its overall plan, as well as the consideration of contingency plans, will continue to evolve as new information becomes available. While the Company anticipates continuity of its business activities, that continuity will be dependent upon its ability, and the ability of third parties with whom the Company relies on directly, or indirectly, to be Year 2000 compliant. 9 Capital Resources and Liquidity Cash and cash equivalents increased $91.6 million during 1998 to $648.0 million at December 31, 1998. The Company's positive net cash flow provided by operating activities was maintained. After annual cash outlays for dividends paid to shareholders and minority interests and the repurchase of the Company's common stock for employee programs, the balance of the cash flow, together with the proceeds from the issuance of debt obligations, was used to fund acquisitions, make capital expenditures and repay debt obligations. On June 24, 1998, the Company issued French franc 1 billion (approximately $164 million at the June 24, 1998 exchange rate) of 5.20% Notes with a scheduled maturity in 2005. On March 4, 1998, the Company issued 4,000,000 shares of common stock for aggregate proceeds before expenses of $171.4 million. On January 6, 1998, the Company issued $230.0 million of 21/4% Convertible Subordinated Debentures with a scheduled maturity in 2013. The debentures are convertible into common stock of the Company at a conversion price of $49.83 per share subject to adjustment in certain events. Debenture holders have the right to require the Company to redeem the debentures on January 6, 2004 at a price of 118.968%, 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 31, 2001 initially at 112.841% and at increasing prices thereafter to 118.968% until January 6, 2004, and 100% thereafter. Unless the debentures are redeemed, repaid, or converted prior thereto, the debentures will mature on January 6, 2013 at their principal amount. On January 3, 1997, the Company issued $218.5 million of 41/4% Convertible Subordinated Debentures with a scheduled maturity in 2007. The debentures are convertible into common stock of the Company at a conversion price of $31.50 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. On July 12, 1996, the Company issued a Notice of Redemption for the outstanding 4.5%/6.25% Step-Up Convertible Subordinated Debentures issued on September 1, 1993 with a scheduled maturity in 2000. Prior to the September 5, 1996 redemption date, the debenture holders elected to convert all of their outstanding debentures into common stock of the Company at a conversion price of $13.72 per common share. On March 1, 1996, the Company issued Deutsche Mark 100 million Floating Rate Bonds (approximately $68 million at the March 1, 1996 exchange rate) due March 1, 1999. 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 matured on March 1, 1999 and were repaid at par. 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 December 31, 1998, the Company had $701 million in such unsecured committed lines of credit, comprised of a $500 million revolving credit agreement expiring June 30, 2003, and $201 million in lines of credit, principally outside of the United States. Of the $701 million in unsecured committed lines, $35 million were used at December 31, 1998. Management believes the aggregate lines of credit available to the Company are adequate to support its short-term cash requirements including dividends, capital expenditures, acquisitions, debt repayments and maintenance of working capital. The Company anticipates that the year end cash position, together with the future cash flows from operations and funds available under existing credit facilities will be adequate to meet its long-term cash requirements as presently contemplated. 10 Forward Looking Statements This report contains disclosures which are forward-looking statements. Forward-looking statements include all statements that do not relate solely to historical or current facts, and can be identified by the use of words such as "may," "will," "expect," "project," "estimate," "anticipate," "envisage," "plan" or "continue." These forward-looking statements are based upon the Company's current plans or expectations and are subject to a number of uncertainties and risks that could significantly affect current plans and anticipated actions and the Company's future financial condition and results. The uncertainties and risks include, but are not limited to, general economic and business conditions; loss of significant customers; changes in levels of client advertising; the impact of competition; risks relating to acquisition activities; the complexity of integrated computer systems; and the success and expense of the remediation efforts of the Company, its subsidiaries and third parties in achieving Year 2000 compliance. As a consequence, current plans, anticipated actions and future financial condition and results may differ from those expressed in any forward-looking statements made by or on behalf of the Company. Item 7A. Quantitative and Qualitative Disclosure About Market Risk Information with respect to quantitative and qualitative disclosure about market risk is set forth under Item 7 in Part II of this Form 10-K. Item 8. Financial Statements and Supplementary Data The financial statements and supplementary data required by this item appear beginning on page F-1. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant Information with respect to the directors of the Company and compliance with Section 16 rules is incorporated by reference to the Company's definitive proxy statement expected to be filed by April 5, 1999. Information regarding the Company's executive officers is set forth under the Supplemental Item in Part I of this Form 10-K. Item 11. Executive Compensation Incorporated by reference to the Company's definitive proxy statement expected to be filed by April 5, 1999. Item 12. Security Ownership of Certain Beneficial Owners and Management Incorporated by reference to the Company's definitive proxy statement expected to be filed by April 5, 1999. Item 13. Certain Relationships and Related Transactions Incorporated by reference to the Company's definitive proxy statement expected to be filed by April 5, 1999. 11 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K Page ---- (a)1. Financial Statements: Report of Management................................................ F-1 Report of Independent Public Accountants............................ F-2 Consolidated Statements of Income for the three years ended December 31, 1998..................................... F-3 Consolidated Balance Sheets at December 31, 1998 and 1997..................................................... F-4 Consolidated Statements of Shareholders' Equity for the three years ended December 31, 1998....................... F-5 Consolidated Statements of Cash Flows for the three years ended December 31, 1998........................................... F-6 Notes to Consolidated Financial Statements.......................... F-7 Quarterly Results of Operations (Unaudited)......................... F-21 2. Financial Statement Schedules: Schedule II--Valuation and Qualifying Accounts (for the three years ended December 31, 1998).............................. S-1 All other schedules are omitted because they are not applicable. 3. Exhibits: (3)(i) Articles of Incorporation (as amended on December 4, 1997 and as restated for filing purposes), filed as Exhibit 4.1 to Omnicom Group Inc.'s Registration Statement No. 333-46303, are incorporated herein by reference. (ii) By-laws. Incorporated by reference to Omnicom Group Inc.'s Annual Report on Form 10-K for the year ended December 31, 1987. (4) Instruments Defining the Rights of Security Holders, Including Indentures. 4.1 Copy of Subscription Agreement dated December 14, 1994 by and among the Registrant, BBDO Canada Inc. and Morgan Stanley GmbH and the other Managers listed therein, in connection with the issuance of DM 200,000,000 Floating Rate Bonds of 1995 due January 5, 2000 of BBDO Canada Inc., including form of Guaranty by Registrant, filed as Exhibit 4.2 to Omnicom Group Inc.'s Annual Report on Form 10-K for the year ended December 31, 1994, is incorporated herein by reference. 4.2 Paying Agency Agreement dated January 4, 1995 by and among the Registrant, BBDO Canada Inc. and Morgan Stanley GmbH in connection with the issuance of DM 200,000,000 Floating Rate Bonds of 1995 due January 5, 2000 of BBDO Canada Inc. filed as Exhibit 4.3 to Omnicom Group Inc.'s Annual Report on Form 10-K for the year ended December 31, 1994, is incorporated herein by reference. 4.3 Copy of Subscription Agreement dated February 27, 1996 by and among the Registrant, Morgan Stanley Bank AG and Morgan Stanley & Co. International in connection with the issuance of DM 100,000,000 Floating Rate Bonds of 1996 due March 1, 1999 filed as Exhibit 4.4 to Omnicom Group Inc.'s Annual Report on Form 10-K for the year ended December 31, 1995, is incorporated herein by reference. 4.4 Paying Agency Agreement dated March 1, 1996 by and among the Registrant, Morgan Stanley Bank AG and Morgan Stanley & Co. International in connection with the issuance of DM 100,000,000 Floating Rate Bonds of 1996 due March 1, 1999 filed as Exhibit 4.5 to Omnicom Group Inc.'s Annual Report on Form 10-K for the year ended December 31, 1995, is incorporated herein by reference. 12 4.5 Indenture dated January 3, 1997 between the Registrant and The Chase Manhattan Bank, as trustee, in connection with the issuance of 41/4% Convertible Subordinated Debentures due 2007 filed as Exhibit 4.2 to Omnicom Group Inc.'s Form S-3 Registration Statement No. 333-22589, is incorporated herein by reference. 4.6 Form of Debentures (included in Exhibit 4.5 above) filed as Exhibit 4.3 to Omnicom Group Inc.'s Form S-3 Registration Statement No. 333-22589, is incorporated herein by reference. 4.7 Registration Rights Agreement dated January 3, 1997 between the Registrant and Morgan Stanley & Co. Incorporated related to the Registrant's 41/4% Convertible Subordinated Debentures due 2007 filed as Exhibit 4.4 to Omnicom Group Inc.'s Form S-3 Registration Statement No. 333-22589, is incorporated herein by reference. 4.8 Indenture dated January 6, 1998, between the Registrant and The Chase Manhattan Bank, as trustee, in connection with the issuance of 2 1/4% Convertible Subordinated Debentures due 2013 filed as Exhibit 4.1 to Omnicom Group Inc.'s Report on Form 8-K dated January 20, 1998, is incorporated herein by reference. 4.9 Form of Debentures (included in Exhibit 4.8 above) filed as Exhibit 4.2 to Omnicom Group Inc.'s Report on Form 8-K dated January 20, 1998, is incorporated herein by reference. 4.10 Registration Rights Agreement dated January 6, 1998, between the Registrant and Morgan Stanley & Co. Incorporated related to the Registrant's 21/4% Convertible Subordinated Debentures due 2013 filed as Exhibit 4.3 to Omnicom Group Inc.'s Report on Form 8-K dated January 20, 1998 is incorporated herein by reference. 4.11 Fiscal Agency Agreement dated June 24, 1998, in connection with the issuance of FRF 1,000,000,000 5.20 % Notes due 2005 filed as Exhibit 4.1 to Omnicom Group Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, is incorporated herein by reference. 4.12 Subscription Agreement dated June 22, 1998 by and among Omnicom Group Inc., Morgan Stanley S.A. and Others, in connection with the issuance of FRF 1,000,000,000 5.20 % Notes due 2005 filed as Exhibit 4.2 to Omnicom Group Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, is incorporated herein by reference. 4.13 Deed of the Covenant dated June 24, 1998, in connection with the issuance of FRF 1,000,000,000 5.20 % Notes due 2005 filed as Exhibit 4.3 to Omnicom Group Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, is incorporated herein by reference. (10) Material Contracts. Management Contracts, Compensatory Plans, Contracts or Arrangements. 10.1 Copy of Registrant's 1987 Stock Plan, filed as Exhibit 10.26 to Omnicom Group Inc.'s Annual Report on Form 10-K for the year ended December 31, 1987, is incorporated herein by reference. 10.2 Amendments to Registrant's 1987 Stock Plan, filed as Exhibit 10.2 to Omnicom Group Inc.'s Annual Report on Form 10-K for the year ended December 31, 1994, is incorporated herein by reference. 10.3 Copy of Registrant's Profit-Sharing Retirement Plan dated May 16, 1988, as amended, filed as Exhibit 4.1 to Omnicom Group Inc.'s Form S-8 Registration Statement No. 333-74591, is incorporated herein by reference. 10.4 Standard Form of the Registrant's 1988 Executive Salary Continuation Plan Agreement, filed as Exhibit 10.24 to Omnicom Group Inc.'s Annual Report on Form 10-K for the year ended December 31, 1989, is incorporated herein by reference. 10.5 Standard Form of the Registrant's Indemnification Agreement with members of Registrant's Board of Directors, filed as Exhibit 10.25 to Omnicom Group Inc.'s Annual Report on Form 10-K for the year ended December 31, 1989, is incorporated herein by reference. 13 10.6 Copy of DDB Needham Worldwide Joint Savings Plan, effective as of May 1, 1989, filed as Exhibit 10.26 to Omnicom Group Inc.'s Annual Report on Form 10-K for the year ended December 31, 1989, is incorporated herein by reference. 10.7 Copy of Severance Agreement dated July 6, 1993, between Keith Reinhard and The DDB Needham Worldwide Communications Group, Inc. (then known as DDB Needham Worldwide, Inc.), filed as Exhibit 10.11 to Omnicom Group Inc.'s Annual Report on Form 10-K for the year ended December 31, 1993, is incorporated herein by reference. 10.8 Copy of Employment Agreement dated May 26, 1993, between William G. Tragos and TBWA International B.V., filed as Exhibit 10.13 to Omnicom Group Inc.'s Annual Report on Form 10-K for the year ended December 31, 1993, is incorporated herein by reference. 10.9 Copy of Deferred Compensation Agreement dated October 12, 1984, between William G. Tragos and TBWAChiat/Day Inc. (then known as TBWA Advertising Inc.), filed as Exhibit 10.14 to Omnicom Group Inc.'s Annual Report on Form 10-K for the year ended December 31, 1993, is incorporated herein by reference. 10.10 Standard Form of Severance Compensation Agreement incorporated by reference to BBDO International Inc.'s Form S-1 Registration Statement filed with the Securities and Exchange Commission on September 28, 1973, is incorporated herein by reference. 10.11 Omnicom Group Inc. 1998 Incentive Compensation Plan, filed as Exhibit A to Omnicom Group Inc.'s Proxy Statement dated April 6, 1998, is incorporated herein by reference. Other Material Contracts. 10.12 Copy of $500,000,000 Amended and Restated Credit Agreement, dated as of May 10, 1996 amended and restated as of February 20, 1998, between Omnicom Finance Inc., Omnicom Finance Limited, ABN AMRO Bank N.V., Chase Securities Inc. and the financial institutions party thereto, filed as Exhibit 10.16 to Omnicom Group Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. (21) Subsidiaries of the Registrant (23) Consents of Experts and Counsel. 23.1 Consent of Arthur Andersen LLP (24) Powers of Attorney from Bernard Brochand, Robert J. Callander, James A. Cannon, Leonard S. Coleman, Jr., Bruce Crawford, Susan S. Denison, John R. Murphy, John R. Purcell, Keith L. Reinhard, Allen Rosenshine, Gary L. Roubos, Quentin I. Smith, Jr. and Egon P. S. Zehnder. (27) Financial Data Schedule (filed in electronic format only). (b) Reports on Form 8-K: No reports on Form 8-K were filed during the fourth quarter of the year ended December 31, 1998. 14 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Date: March 29, 1999 By: /s/ RANDALL J. WEISENBURGER ------------------------------ Randall J. Weisenburger Executive Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- /s/ BRUCE CRAWFORD* Chairman and Director March 29, 1999 - ---------------------------------- (Bruce Crawford) /s/ JOHN D. WREN Chief Executive Officer March 29, 1999 - ---------------------------------- and President and Director (John D. Wren) /S/ RANDALL J. WEISENBURGER Executive Vice President March 29, 1999 - ---------------------------------- and Chief Financial Officer (Randall J. Weisenburger) /S/ PHILIP J. ANGELASTRO Controller (Principal March 29, 1999 - ---------------------------------- Accounting Officer) (Philip J. Angelastro) /s/ BERNARD BROCHAND* Director March 29, 1999 - ---------------------------------- (Bernard Brochand) /s/ ROBERT J. CALLANDER* Director March 29, 1999 - ---------------------------------- (Robert J. Callander) /s/ JAMES A. CANNON* Director March 29, 1999 - ---------------------------------- (James A. Cannon) /s/ LEONARD S. COLEMAN, JR.* Director March 29, 1999 - ---------------------------------- (Leonard S. Coleman, Jr.) /s/ SUSAN S. DENISON* Director March 29, 1999 - ---------------------------------- (Susan S. Denison) /s/ JOHN R. MURPHY* Director March 29, 1999 - ---------------------------------- (John R. Murphy) /s/ JOHN R. PURCELL * Director March 29, 1999 - ---------------------------------- (John R. Purcell) /s/ KEITH L. REINHARD* Director March 29, 1999 - ---------------------------------- (Keith L. Reinhard) /s/ ALLEN ROSENSHINE* Director March 29, 1999 - ---------------------------------- (Allen Rosenshine) /s/ GARY L. ROUBOS* Director March 29, 1999 - ---------------------------------- (Gary L. Roubos) /s/ QUENTIN I. SMITH, JR.* Director March 29, 1999 - ---------------------------------- (Quentin I. Smith, Jr.) /s/ EGON P.S. ZEHNDER* Director March 29, 1999 - ---------------------------------- (Egon P.S. Zehnder) *By BARRY J. WAGNER - ---------------------------------- Barry J. Wagner Attorney-in-fact 15 REPORT OF MANAGEMENT The management of Omnicom Group Inc. is responsible for the integrity of the financial data reported by the Company and its subsidiaries. Management uses its best judgment to ensure that the financial statements present fairly, in all material respects, the consolidated financial position and results of operations of Omnicom Group Inc. and subsidiaries. These financial statements have been prepared in accordance with generally accepted accounting principles. The system of internal controls of the Company, augmented by a program of internal audits, is designed to provide reasonable assurance that assets are safeguarded and records are maintained to substantiate the preparation of accurate financial information. Underlying this concept of reasonable assurance is the premise that the cost of control should not exceed the benefits derived therefrom. The financial statements have been audited by independent public accountants. Their report expresses an independent informed judgment as to the fairness of management's reported operating results, cash flows and financial position. This judgment is based on the procedures described in the second paragraph of their report. The Audit Committee meets periodically with representatives of financial management, internal audit and the independent public accountants to assure that each is properly discharging their responsibilities. Additionally, the Audit Committee has met periodically to review progress against the Company's Year 2000 readiness plan. In order to ensure complete independence, the Audit Committee communicates directly and separately with the independent public accountants, internal audit and financial management to discuss the results of their audits, the adequacy of internal accounting controls and the quality of financial reporting. JOHN D. WREN RANDALL J. WEISENBURGER - ------------------------------------- ----------------------------- John D. Wren Randall J. Weisenburger Chief Executive Officer and President Executive Vice President and Chief Financial Officer F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Shareholders of Omnicom Group Inc.: We have audited the accompanying consolidated balance sheets of Omnicom Group Inc. (a New York corporation) and subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1998. These consolidated financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Omnicom Group Inc. and subsidiaries as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998 in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule on page S-1 is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP New York, New York February 16, 1999 F-2 OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Years Ended December 31, (Dollars in Thousands Except Per Share Data) ----------------------------------------- 1998 1997 1996 ---- ---- ---- COMMISSIONS AND FEES .............. $ 4,092,042 $ 3,124,813 $ 2,641,667 OPERATING EXPENSES: Salaries and Related Costs ..... 2,416,284 1,835,118 1,555,553 Office and General Expenses .... 1,115,584 886,149 759,541 ----------- ----------- ----------- 3,531,868 2,721,267 2,315,094 ----------- ----------- ----------- OPERATING PROFIT .................. 560,174 403,546 326,573 NET INTEREST EXPENSE: Interest and Dividend Income ... (29,577) (20,811) (12,725) Interest Paid or Accrued ....... 69,602 43,112 34,067 ----------- ----------- ----------- 40,025 22,301 21,342 ----------- ----------- ----------- INCOME BEFORE INCOME TAXES ........ 520,149 381,245 305,231 INCOME TAXES ...................... 215,808 156,484 123,639 ----------- ----------- ----------- INCOME AFTER INCOME TAXES ......... 304,341 224,761 181,592 EQUITY IN AFFILIATES .............. 25,069 30,089 20,510 MINORITY INTERESTS ................ (44,342) (32,435) (25,773) ----------- ----------- ----------- NET INCOME ........................ $ 285,068 $ 222,415 $ 176,329 =========== =========== =========== NET INCOME PER COMMON SHARE: Basic........................... $ 1.72 $ 1.40 $ 1.17 Diluted......................... $ 1.68 $ 1.37 $ 1.12 The accompanying notes to consolidated financial statements are an integral part of these statements. F-3 OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS A S S E T S December 31, (Dollars in Thousands) ------------------------ 1998 1997 ---- ---- CURRENT ASSETS: Cash and cash equivalents ........................ $ 648,016 $ 556,436 Investments available-for-sale, at market, which approximates cost .............. 80,750 87,668 Accounts receivable, less allowance for doubtful accounts of $57,475 and $32,190 (Schedule II) .................... 2,574,897 1,908,532 Billable production orders in process, at cost ... 245,873 183,145 Prepaid expenses and other current assets ........ 431,733 252,617 ---------- ---------- Total Current Assets ............................. 3,981,269 2,988,398 FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost, less accumulated depreciation and amortization of $414,544 and $336,926 ............ 326,550 239,667 INVESTMENTS IN AFFILIATES ............................ 268,507 281,264 INTANGIBLES, less accumulated amortization of $282,516 and $235,257 ............................. 2,031,058 1,234,539 DEFERRED TAX BENEFITS ................................ 106,036 68,086 DEFERRED CHARGES AND OTHER ASSETS .................... 196,640 153,789 ---------- ---------- $6,910,060 $4,965,743 ========== ========== L I A B I L I T I E S A N D S H A R E H O L D E R S' E Q U I T Y CURRENT LIABILITIES: Accounts payable ................................ $3,272,015 $2,595,255 Current portion of long-term debt ............... 65,101 3,358 Bank loans ...................................... 35,316 14,314 Advance billings ................................ 265,334 185,591 Accrued taxes on income ......................... 53,184 80,489 Other accrued taxes ............................. 126,883 93,390 Other accrued liabilities ....................... 953,210 586,342 Dividends payable ............................... 25,310 20,246 ---------- ---------- Total Current Liabilities ....................... 4,796,353 3,578,985 ---------- ---------- LONG-TERM DEBT ...................................... 267,367 123,165 CONVERTIBLE SUBORDINATED DEBENTURES ................. 448,497 218,500 DEFERRED COMPENSATION AND OTHER LIABILITIES ......... 220,668 114,668 MINORITY INTERESTS .................................. 90,707 63,686 COMMITMENTS AND CONTINGENT LIABILITIES (Note 10) SHAREHOLDERS' EQUITY: Preferred stock, $1.00 par value, 7,500,000 shares authorized, none issued ................................. -- -- Common stock, $.50 par value, 300,000,000 shares authorized, 177,291,763 and 173,836,221 shares issued in 1998 and 1997, respectively ...................... 88,646 86,918 Additional paid-in capital ...................... 643,782 533,412 Retained earnings ............................... 750,226 555,038 Unamortized restricted stock .................... (58,060) (46,745) Accumulated other comprehensive income .......... (94,064) (47,947) Treasury stock, at cost, 8,698,365 and 11,721,122 shares in 1998 and 1997, respectively ................................ (244,062) (213,937) ---------- ---------- Total Shareholders' Equity .................. 1,086,468 866,739 ---------- ---------- $6,910,060 $4,965,743 ========== ========== The accompanying notes to consolidated financial statements are an integral part of these statements. F-4 OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Three Years Ended December 31, 1998 (Dollars in Thousands)
Accumulated Common Stock Additional Unamortized Other Total Comprehensive -------------------- Paid-in Retained Restricted Comprehensive Treasury Shareholders' Income Shares Par Value Capital Earnings Stock Income Stock Equity ------------- -------- --------- ---------- -------- ----------- ------------- -------- ------------- Balance December 31, 1995, as previously reported ............. 159,685,952 $79,843 $ 351,062 $ 299,704 $ (30,739) $(26,641) $(121,722) $ 551,507 Pooling of interests adjustment ........... 2,413,706 1,207 5,082 436 6,725 ------------ ------- --------- --------- --------- -------- --------- ---------- Balance January 1, 1996, as restated .... 162,099,658 81,050 356,144 300,140 (30,739) (26,641) (121,722) 558,232 Comprehensive income: Net income ........... 176,329 176,329 176,329 Other comprehensive income - foreign currency translation adjustments ........ 30,131 30,131 30,131 ------- Comprehensive income ... 206,460 ======= Dividends declared ..... (57,397) (57,397) Amortization of restricted shares .... 13,895 13,895 Share transactions under employee stock plans .......... 7,329 (22,601) 26,893 11,621 Shares issued for acquisitions ......... 9,382 17,808 27,190 Conversion of 4.5%/6.25% Step-Up Debentures ... 10,477,356 5,239 138,511 143,750 Repurchases of shares .. (103,073) (103,073) ------------ ------- --------- --------- --------- -------- --------- ---------- Balance December 31, 1996, as previously reported ............. 172,577,014 86,289 511,366 419,072 (39,445) 3,490 (180,094) 800,678 Pooling of interests adjustment ........... 1,088,974 544 (492) (14,735) (14,683) ------------ ------- --------- --------- --------- -------- --------- ---------- Balance January 1, 1997, as restated .......... 173,665,988 86,833 510,874 404,337 (39,445) 3,490 (180,094) 785,995 Comprehensive income: Net income ........... 222,415 222,415 222,415 Other comprehensive income - foreign currency translation adjustments ........ (51,437) (51,437) (51,437) ------- Comprehensive income ... 170,978 ======= Dividends declared ..... (71,714) (71,714) Amortization of restricted shares .... 17,311 17,311 Share transactions under employee stock plans .......... 16,321 (24,611) 35,606 27,316 Shares issued for acquisitions ......... 170,233 85 6,217 313 6,615 Repurchases of shares .. (69,762) (69,762) ------------ ------- --------- --------- --------- -------- --------- ---------- Balance December 31, 1997, as previously reported ............. 173,836,221 86,918 533,412 555,038 (46,745) (47,947) (213,937) 866,739 Pooling of interests adjustment ........... 3,550,366 1,776 (26,285) (2,455) (26,964) ------------ ------- --------- --------- --------- -------- --------- ---------- Balance January 1, 1998, as restated .......... 177,386,587 88,694 507,127 552,583 (46,745) (47,947) (213,937) 839,775 Comprehensive income: Net income ........... 285,068 285,068 285,068 Other comprehensive income - foreign currency translation adjustments ........ (46,117) (46,117) (46,117) ------- Comprehensive income ... 238,951 ======= Dividends declared ..... (87,425) (87,425) Amortization of restricted shares .... 21,489 21,489 Share transactions under employee stock plans .......... 40,759 (32,804) 43,012 50,967 Shares issued for acquisitions ......... 62,673 31 6,173 2,088 8,292 Issuance of new shares . 96,962 74,122 171,084 Repurchases/cancellations of shares .. (157,497) (79) (7,239) (149,347) (156,665) ------------ ------- --------- --------- --------- -------- --------- ---------- Balance December 31, 1998 ................. 177,291,763 $88,646 $ 643,782 $ 750,226 $ (58,060) $(94,064) $(244,062) $1,086,468 =========== ======= ========= ========= ========= ======== ========= ==========
The accompanying notes to consolidated financial statements are an integral part of these statements. F-5 OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, (Dollars in Thousands) ------------------------------------ 1998 1997 1996 --------- --------- ---------- Cash Flows From Operating Activities: Net income .............................. $ 285,068 $ 222,415 $ 176,329 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of tangible assets ............. 75,561 63,837 50,970 Amortization of intangible assets . 57,374 39,036 34,849 Minority interests ................ 44,342 32,435 25,773 Earnings of affiliates in excess of dividends received .......... (12,143) (15,654) (5,068) Decrease (increase) in deferred tax benefits ................... 21,387 15,629 (4,081) Provisions for losses on accounts receivable ............ 14,418 9,981 7,911 Amortization of restricted shares . 21,489 17,311 13,895 (Increase) decrease in accounts receivable ..................... (217,555) (381,811) 31,511 Increase in billable production orders in process .............. (34,318) (27,209) (20,546) Increase in prepaid expenses and other current assets ....... (65,190) (45,893) (21,132) Increase in accounts payable ...... 319,930 569,522 243,885 Increase (decrease) in other accrued liabilities ............ 70,367 123,053 (68,426) (Decrease) increase in accrued taxes on income ................ (39,326) 10,374 20,718 (Increase) decrease in advances to affiliates .................. (13,279) (29,652) 2,151 Decrease (increase) in deferred charges and other assets ....... 15,175 (42,365) 10,869 Other ............................. (71,935) (27,253) (5,583) --------- --------- --------- Net Cash Provided by Operating Activities ............................ 471,365 533,756 494,025 --------- --------- --------- Cash Flows From Investing Activities: Capital expenditures .................. (89,739) (76,172) (48,777) Purchases of equity interests in subsidiaries and affiliates, net of cash acquired .. (564,419) (334,941) (178,861) Sales of equity interests in subsidiaries and affiliates ....... 78,099 6,705 52,861 Purchases of investments available-for-sale and other investments ....................... (77,148) (112,037) (14,840) Sales of investments available- for-sale and other investments .... 101,735 41,798 25,775 --------- --------- --------- Net Cash Used in Investing Activities ... (551,472) (474,647) (163,842) --------- --------- --------- Cash Flows From Financing Activities: Proceeds from issuance of shares ...... 171,084 -- -- Net (repayments) borrowings under lines of credit ............. (7,719) 2,130 (16,114) Proceeds from issuances of debt obligations .................. 404,282 245,961 78,752 Repayment of principal of debt obligations .................. (134,606) (81,389) (20,485) Share transactions under employee stock plans .............. 50,967 27,316 11,621 Dividends and loans to minority stockholders ............. (46,430) (33,179) (24,154) Dividends paid ........................ (82,361) (67,621) (54,311) Purchase of treasury shares ........... (149,347) (69,762) (103,073) --------- --------- --------- Net Cash Provided by (Used in) Financing Activities .................. 205,870 23,456 (127,764) --------- --------- --------- Effect of exchange rate changes on cash and cash equivalents ...... (34,183) (36,396) (6,151) --------- --------- --------- Net Increase in Cash and Cash Equivalents ...................... 91,580 46,169 196,268 Cash and Cash Equivalents at Beginning of Period ................... 556,436 510,267 313,999 --------- --------- --------- Cash and Cash Equivalents at End of Period ......................... $ 648,016 $ 556,436 $ 510,267 ========= ========= ========= Supplemental Disclosures: Income taxes paid .................... $ 200,246 $ 133,797 $ 112,155 ========= ========= ========= Interest paid ........................ $ 55,904 $ 34,920 $ 34,640 ========= ========= ========= The accompanying notes to consolidated financial statements are an integral part of these statements. F-6 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Business and Summary of Significant Accounting Policies Business. Omnicom Group, Inc., through its wholly and partially-owned companies, provides corporate communications services to clients worldwide on a global, pan-regional, national and local basis. Operations cover the major regions of North America, the United Kingdom, Continental Europe, Latin America, the Far East, Australia, the Middle East and Africa. The communications services offered by the Company include the creation and production of advertising, marketing consultation, strategic media planning and buying, financial and business-to-business advertising, directory advertising, healthcare communications, managed care consultancy, recruitment communications, branding consultancy, digital communications, contract publishing, design and image consultancy, direct/database marketing, field marketing, integrated promotional marketing, public affairs, corporate and financial public relations, reputation management, sports and event marketing, telemarketing, and internet and digital media development. Recognition of Commission and Fee Revenue. Substantially all revenues are derived from commissions for placement of advertisements in various media and from fees for manpower and for production of advertisements. Revenue is generally recognized when billed. Billings are generally rendered upon completion of the earnings process, including: upon presentation date for media, when manpower is used, when costs are incurred for radio and television production and when print production is completed. Principles of Consolidation. The accompanying consolidated financial statements include the accounts of Omnicom Group Inc. and its domestic and international subsidiaries (the "Company"). All significant intercompany balances and transactions have been eliminated. Restatements and Reclassifications. All prior year amounts give effect to a two-for-one stock split in the form of a 100% stock dividend completed in December 1997. In addition, certain prior year amounts have been reclassified to conform with the 1998 presentation. Investments Available-For-Sale. Investments available-for-sale consist principally of time deposits with financial institutions. These investments are generally redeemed at face value upon maturity and, as such, gains or losses on disposition are immaterial. There are no material unrealized holding gains or losses as of December 31, 1998. Billable Production. Billable production orders in process consist principally of costs incurred in providing communications services to clients. Such amounts are generally billed to clients when manpower is used, when costs are incurred for radio and television production and when print production is completed. Common Stock. Wholly-owned subsidiaries of the Company have issued securities which are exchangeable into common stock of the Company at the holders' option. Shares of common stock issuable on the exchange of these securities are included in common stock issued at December 31, 1998. Treasury Stock. The Company accounts for treasury share purchases at cost. The reissuance of treasury shares is accounted for at the average cost. Gains or losses on the reissuance of treasury shares are accounted for as additional paid-in capital. Foreign Currency Translation. The Company's financial statements were prepared in accordance with the requirements of Statement of Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation." Under this method, net transaction gains of $8.9 million, $2.1 million and $1.5 million are included in 1998, 1997 and 1996 net income, respectively. Earnings Per Common Share. Basic earnings per share is based upon the weighted average number of common shares outstanding during each year. Diluted earnings per share is based on the above, plus, if dilutive, common share equivalents which include outstanding options and restricted shares, and if dilutive, adjusted for the assumed conversion of the Company's Convertible Subordinated Debentures and the assumed increase in net income for the after tax interest cost of these debentures. In determining for the year ended December 31, 1998, if the Convertible Subordinated Debentures were dilutive, the 21/4% and 41/4% Convertible Subordinated Debentures were assumed to be converted for the full year. For the year ended December 31, 1997, the 41/4% Convertible Subordinated Debentures were assumed to be converted for the full year. For the year ended December 31, 1996, the 4.5%/6.25% Step-Up Convertible Subordinated Debentures were assumed to be F-7 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) converted through September 5, 1996, when they were converted into common stock. For purposes of computing diluted earnings per share for the years ended December 31, 1998, 1997 and 1996, respectively, 3,223,200, 3,128,300 and 2,813,400 shares were assumed to have been outstanding related to common share equivalents and 6,936,500, 6,936,500 and 7,240,700 shares were assumed to have been converted related to the Company's convertible subordinated debentures. Additionally, the assumed increase in net income used in the computations was $9,627,900, $9,631,300 and $5,134,400 for the years ended December 31, 1998, 1997 and 1996, respectively. The number of shares used in the computations were as follows: 1998 1997 1996 ---- ---- ---- Basic EPS computation................ 165,684,600 159,418,700 151,329,300 Diluted EPS computation.............. 175,844,300 169,483,500 161,383,400 For purposes of computing diluted earnings per share for the year ended December 31, 1998, the Company's 2 1/4% Convertible Subordinated Debentures were not reflected in the computation as their inclusion would have been anti-dilutive. Severance Agreements. Arrangements with certain present and former employees provide for continuing payments for periods up to 10 years after cessation of their full-time employment in consideration for agreements by the employees not to compete and to render consulting services in the post employment period. Such payments, which are determined, subject to certain conditions and limitations, by earnings in subsequent periods, are expensed in such periods. Depreciation of Furniture and Equipment and Amortization of Leasehold Improvements. Depreciation charges are computed on a straight-line basis or declining balance method over the estimated useful lives of furniture and equipment, up to 10 years. Leasehold improvements are amortized on a straight-line basis over the lesser of the terms of the related lease or the useful life of these assets. Intangibles. Intangibles represent acquisition costs in excess of the fair value of tangible net assets of purchased subsidiaries. The intangible values associated with the Company's business consist predominantly of two types: the value of the worldwide agency networks and the value of ongoing client relationships. The Company's worldwide agency networks have been operating for an average of over sixty years and intangibles associated with enhancing network value are intended to enhance the long term value of the networks. Client relationships in the corporate communications services industry are typically long term in nature and the Company's largest clients have on average been clients for more than twenty-five years. As such, intangibles are amortized on a straight-line basis principally over a period of forty years. Each year, the intangibles are written down if, and to the extent, they are determined to be impaired. Intangibles are considered to be impaired if the future anticipated undiscounted cash flows arising from the use of the intangibles is less than the net unamortized cost of the intangibles. Deferred Taxes. Deferred tax liabilities and tax benefits relate to the recognition of certain revenues and expenses in different years for financial statement and tax purposes and to differences between the tax and book basis of assets and liabilities recorded in connection with acquisitions. Cash Flows. The Company's cash equivalents are primarily comprised of investments in overnight interest-bearing deposits, commercial paper and money market instruments with original maturity dates of three months or less. The following supplemental schedule summarizes the fair value of non-cash assets acquired, cash paid, common shares issued (valued at the then market value of the shares) and the liabilities assumed in connection with the acquisition of equity interests in subsidiaries and affiliates, for each of the three years ended December 31: (Dollars in thousands) 1998 1997 1996 ---- ---- ---- Fair value of non-cash assets acquired $ 1,566,370 $ 462,928 $ 277,005 Cash paid, net of cash acquired ....... (564,419) (334,941) (178,861) Common shares issued .................. (175,081) (6,615) (27,190) ----------- --------- --------- Liabilities assumed ................... $ 826,870 $ 121,372 $ 70,954 =========== ========= ========= F-8 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) During 1996, the Company issued 10,477,356 shares of common stock upon conversion of $143,750,000 of its 4.5%/6.25% Step-Up Convertible Subordinated Debentures. Concentration of Credit Risk . The Company provides corporate communications services to a wide range of clients who operate in many industry sectors around the world. The Company grants credit to all qualified clients, but does not believe it is exposed to any undue concentration of credit risk to any significant degree. Derivative Financial Instruments. Derivative financial instruments consist principally of forward foreign exchange contracts and interest rate swaps. For derivative financial instruments to qualify for hedge accounting the following criteria must be met: (a) the hedging instrument must be designated as a hedge; (b) the hedged exposure must be specifically identifiable and expose the Company to risk; and (c) it must be highly probable that a change in fair value of the derivative financial instrument and an opposite change in the fair value of the hedged exposure will have a high degree of correlation. The majority of the Company's derivative activity relates to forward foreign exchange contracts. The Company executes these contracts in the same currency as the hedged exposure, whereby 100% correlation is achieved. Gains and losses on derivative financial instruments which are hedges of existing assets or liabilities are included in the carrying amount of those assets or liabilities and are ultimately recognized in income as part of those carrying amounts. Interest received and/or paid arising from swap agreements which qualify as hedges are recognized in income when the interest is receivable or payable. Derivative financial instruments which do not qualify as hedges are revalued to the current market rate and any gains or losses are recorded in income in the current period. Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. Acquisitions In January 1998, the Company completed the acquisitions of Fleishman-Hillard, Inc., GPC International Holdings Inc. and Palmer Jarvis Inc. These acquisitions were accounted for under the pooling-of-interests method of accounting and, accordingly, the results of operations of Fleishman-Hillard Inc., GPC International Holdings Inc. and Palmer Jarvis Inc. have been included in the consolidated financial statements since January 1, 1998. Prior year consolidated financial statements were not restated as the impact on such years was not material. The number of shares issued by the Company in connection with these acquisitions is 3,550,366. In February 1997, the Company completed the acquisitions of Cline Davis & Mann, Inc. and Gavin Anderson & Company (Japan), Inc. Both of these acquisitions were accounted for under the pooling-of-interests method of accounting and, accordingly, the results of operations of Cline Davis & Mann, Inc. and Gavin Anderson & Company (Japan), Inc. have been included in the consolidated financial statements since January 1, 1997. Prior year consolidated financial statements were not restated as the impact on such years was not material. A total of 1,088,974 shares of common stock were issued in connection with these acquisitions. In May 1996, the Company completed the acquisition of Ketchum Communications Holdings, Inc. ("Ketchum"). The acquisition was accounted for under the pooling-of-interests method of accounting and, accordingly, the results of operations of Ketchum have been included in the consolidated financial statements since January 1, 1996. Prior year consolidated financial statements were not restated as the impact on such years was not material. A total of 2,413,706 shares were issued in connection with this acquisition. During 1998, the Company made several other acquisitions whose aggregate cost, in cash or by issuance of the Company's common stock, totaled $872.6 million for net assets, which included intangible assets of $833.5 million. Due to the nature of corporate communications services companies, the companies acquired by Omnicom Group generally have tangible net liabilities or minimal tangible net assets. The majority of the purchase price is paid for ongoing client relationships and to enhance the competitive position of the Company's worldwide agency brands. Included in both figures are payments of $102.3 million made in 1998 related to acquisitions completed in prior years. F-9 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Certain acquisitions completed in 1998 and prior years require payments in future years if certain results are achieved by the companies that were acquired. Formulas for these contingent future payments differ from acquisition to acquisition. Contingent future payments are not expected to be material to the Company's results of operations or financial position. 3. Bank Loans and Lines of Credit Bank loans are primarily comprised of bank overdrafts of international subsidiaries which are treated as loans pursuant to bank agreements. The weighted average interest rate on the borrowings outstanding as of December 31, 1998 and 1997 was 6.8% and 9.9%, respectively. At December 31, 1998 and 1997, the Company had unsecured committed lines of credit aggregating $701.3 million and $509.4 million, respectively. The unused portion of credit lines was $666.0 million and $495.1 million at December 31, 1998 and 1997, respectively. The lines of credit are generally extended at lending rates that the banks grant to their most credit worthy borrowers. Material compensating balances are not required within the terms of these credit agreements. At December 31, 1997, the committed lines of credit included $360 million under a revolving credit agreement expiring June 30, 2001. As of February 20, 1998, the $360 million revolving credit agreement was replaced by a $500 million revolving credit agreement expiring June 30, 2003. Due to the long-term nature of these credit agreements, borrowings under the agreements would be classified as long-term debt. There were no borrowings under these revolving credit agreements at December 31, 1998 and 1997. The revolving credit agreement includes a facility for issuing commercial paper backed by a bank letter of credit. During the years ended December 31, 1998, 1997 and 1996, the Company issued commercial paper with an average original maturity of 11, 16 and 26 days, respectively. The Company had no commercial paper borrowings outstanding as of December 31, 1998, 1997 and 1996. The maximum outstanding during the year was $265 million, $235 million and $230 million, in 1998, 1997 and 1996, respectively. The gross amount of issuance and redemption during the year was $ 4,231 million, $2,017 million and $1,710 million in 1998, 1997 and 1996, respectively. 4. Employee Stock Plans Effective March 24, 1998, the Company adopted the 1998 Incentive Compensation Plan (the "1998 Plan"). The maximum number of shares of common stock of the Company that may be granted in any calendar year, for restricted stock awards and non-qualified stock options to key employees under the 1998 Plan, is 1.5% of the total number of shares of common stock issued and outstanding on the first day of that calendar year. Any remaining reserved shares of common stock may be carried over to subsequent years. The remaining number of such reserved shares was 2,354,173 at December 31, 1998. Awards under the Company's 1987 Stock Plan, as amended, (the "1987 Plan") ceased to be made when the Company adopted the 1998 Plan. Stock Options. As permitted by SFAS No. 123, "Accounting for Stock Based Compensation," the Company intends to continue to apply the accounting provisions of APB Opinion No. 25, "Accounting for Stock Issued to Employees," and to make annual pro forma disclosures of the effect of adopting the fair value method of accounting for employee stock options and similar instruments. During the initial periods of disclosure, the effects on net income may not be representative of the effects in future years due to the transitional provisions included in SFAS No. 123. Pursuant to the 1987 Plan and 1998 Plan ("the Plans"), the price of options awarded may not be less than 100% of the market value of the stock at the date of the grant. Options become exercisable 30% on each of the first two anniversary dates of the grant date with the final 40% becoming exercisable three years from the grant date. F-10 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) A summary of the status of the Company's stock option plan for the three years ended December 31, 1998 is as follows:
Years Ended December 31, ----------------------------------------------------------------------- 1998 1997 1996 ---------------------- ---------------------- ---------------------- Weighted Weighted Weighted Average Average Average Shares Exercise Price Shares Exercise Price Shares Exercise Price ------ -------------- ------ -------------- ------ -------------- Shares under option, beginning of year................ 6,867,800 $ 16.21 6,757,800 $ 13.16 5,924,800 $ 10.19 Options granted..................... 1,700,000 42.62 1,440,000 24.28 1,880,000 19.80 Options exercised................... (1,377,000) 12.52 (1,330,000) 9.45 (1,047,000) 8.26 ---------- ---------- ---------- Shares under option, end of year...................... 7,190,800 23.16 6,867,800 16.21 6,757,800 13.16 ========== ========== ========== Options exercisable at year-end......................... 3,730,800 3,447,800 3,227,800
The weighted average fair value of options granted during 1998, 1997 and 1996 was $11.45, $6.27 and $4.65 per option, respectively. The fair value of each option grant has been estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: 1998 1997 1996 ---- ---- ---- Expected option lives.............. 5 years 5 years 5 years Risk free interest rate............ 4.66% - 5.75% 6.15% 5.64% - 5.99% Expected volatility................ 18.36% - 20.15% 19.7% 18.8% - 19.5% Dividend yield..................... 0.9% - 1.0% 1.5% 1.7% Using compensation cost for the Company's stock option plan, determined based on the estimated fair value at the grant date for options granted in 1998, 1997 and 1996 consistent with the provisions of SFAS No. 123, the effect on the Company's net income and income per share would have been as follows: Dollars in Thousands Except Per Share Data -------------------------------------------- 1998 1997 1996 ---- ---- ---- Net income, as reported........... $285,068 $222,415 $176,329 Net income, pro forma............. 277,254 217,260 172,849 Basic income per share, as reported..................... 1.72 1.40 1.17 Basic income per share, pro forma....................... 1.67 1.36 1.14 Diluted income per share, as reported..................... 1.68 1.37 1.12 Diluted income per share, pro forma....................... 1.63 1.34 1.10 F-11 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table summarizes information about options outstanding and options exercisable at December 31, 1998:
Options Outstanding Options Exercisable ---------------------------------------------------------------------------------- Weighted Average Range of Exercise Options Remaining Weighted Average Options Weighted Average Prices (in dollars) Outstanding Contractual Life Exercise Price Exercisable Exercise Price - ------------------- ----------- ---------------- ---------------- ----------- ---------------- 5.77 80,000 1 year $ 5.77 80,000 $ 5.77 5.81 140,000 2 years 5.81 140,000 5.81 5.88 80,000 3 years 5.88 80,000 5.88 8.77 214,000 4 years 8.77 214,000 8.77 10.02 329,800 5 years 10.02 329,800 10.02 12.11 614,000 6 years 12.11 614,000 12.11 12.94 to 16.20 980,000 7 years 13.20 980,000 13.20 19.72 to 21.19 1,646,000 8 years 19.81 894,000 19.82 24.28 1,407,000 9 years 24.28 399,000 24.28 39.75 to 48.03 1,700,000 10 years 42.62 -- -- --------- --------- 7,190,800 3,730,800 ========= =========
Restricted Shares. A summary of changes in outstanding shares of restricted stock for the three years ended December 31, 1998 is as follows: Years Ended December 31, ---------------------------------------------- 1998 1997 1996 ---- ---- ---- Beginning balance............... 3,137,350 3,315,516 3,294,000 Amount granted................ 783,419 1,105,838 1,136,616 Amount vested................. (1,111,808) (1,123,882) (1,030,224) Amount forfeited.............. (105,349) (160,122) (84,876) -------- -------- -------- Ending balance.................. 2,703,612 3,137,350 3,315,516 ======== ======== ======== All restricted shares granted under the Plans were sold at a price per share equal to their par value. The difference between par value and market value on the date of the sale is charged to shareholders' equity and then amortized to expense over the period of restriction. Under the Plans, the restricted shares become transferable to the employee in 20% annual increments provided the employee remains in the employ of the Company. Restricted shares may not be sold, transferred, pledged or otherwise encumbered until the restrictions lapse. Under most circumstances, the employee must resell the shares to the Company at par value if the employee ceases employment prior to the end of the period of restriction. The charge to operations in connection with these restricted stock awards for the years ended December 31, 1998, 1997 and 1996 amounted to $ 21.5 million, $17.3 million and $13.9 million, respectively. F-12 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. Segment Reporting The Company has adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information". The Company's wholly-owned and partially-owned businesses operate within the corporate communications services operating segment. These businesses provide a variety of communications services to clients through several worldwide, national and regional independent agency brands. The businesses exhibit similar economic characteristics driven from their consistent efforts to create customer driven marketing communications and services that build their clients businesses. A summary of the Company's operations by geographic area as of December 31, 1998, 1997 and 1996, and for the years then ended is presented below:
(Dollars in Thousands) --------------------------------------------------------------------------------- United United Other Other States Kingdom Germany France Europe International Consolidated ---------- --------- --------- --------- -------- ------------- ------------ 1998 Commissions and Fees...... $2,098,220 $463,595 $358,441 $306,734 $466,037 $399,015 $4,092,042 Long-Lived Assets ........ 156,092 53,167 11,916 17,245 35,530 52,600 326,550 1997 Commissions and Fees...... $1,616,768 $330,327 $284,544 $172,395 $374,303 $346,476 $3,124,813 Long-Lived Assets ........ 128,563 40,028 9,125 8,712 26,336 26,903 239,667 1996 Commissions and Fees...... $1,384,424 $277,208 $230,210 $172,278 $327,056 $250,491 $2,641,667 Long-Lived Assets ........ 119,580 39,454 4,712 9,867 26,846 21,196 221,655
6. Investments in Affiliates The Company has in excess of 65 unconsolidated affiliates accounted for under the equity method. The equity method is used when the Company has an ownership of less than 50% and exercises significant influence over the operating and financial policies of the affiliate. The following table summarizes the balance sheets and income statements of the Company's unconsolidated affiliates, primarily in Europe and Australia, as of December 31, 1998, 1997, 1996, and for the years then ended: (Dollars in Thousands) -------------------------------------- 1998 1997 1996 ---- ---- ---- Current assets .................... $414,595 $589,664 $528,814 Non-current assets ................ 101,139 95,728 91,559 Current liabilities ............... 341,020 500,633 422,886 Non-current liabilities ........... 45,987 35,269 28,796 Minority interests ................ 2,327 3,644 2,134 Gross revenues .................... 376,818 538,647 525,404 Costs and expenses ................ 317,933 446,528 431,031 Net income ........................ 34,120 56,226 57,352 The Company's equity in the net income of these affiliates amounted to $25.1 million, $30.1 million and $20.5 million for 1998, 1997 and 1996, respectively. The Company's equity in the net tangible assets of these affiliated companies was approximately $116.6 million, $105.5 million and $97.5 million at December 31, 1998, 1997 and 1996, respectively. Included in the Company's investments in affiliates is the excess of acquisition costs over the fair value of tangible net assets acquired. These excess acquisition costs are being amortized on a straight-line basis principally over a period of forty years. In 1998, the Company disposed of shares held in certain affiliates. The resulting impact of these sales was not material to the 1998 consolidated results of operations or financial position. F-13 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. Long-Term Debt and Convertible Subordinated Debentures Long-term debt and convertible subordinated debentures outstanding as of December 31, 1998 and 1997 consisted of the following: (Dollars in Thousands) 1998 1997 ---- ---- Deutsche Mark Floating Rate Bonds, with a scheduled maturity in 2000, interest at DM three month LIBOR plus 0.65% ................ $ 66,522 $ 61,738 Deutsche Mark Floating Rate Bonds, with a scheduled maturity in 1999, interest at DM three month LIBOR plus 0.375% .................. 59,930 55,620 French Franc 5.20% Notes with a scheduled maturity in 2005 ................................. 178,600 -- Floating Rate Loan Notes, with a scheduled maturity in 2001 .................................. 2,033 -- Sundry notes and loans payable to banks and others at rates from 5.1% to 24%, maturing at various dates through 2018 ............ 25,383 9,165 -------- -------- 332,468 126,523 Less current portion ................................. 65,101 3,358 -------- -------- Total long-term debt ................................ $267,367 $123,165 ======== ======== 41/4% Convertible Subordinated Debentures with a scheduled maturity in 2007 ................. $218,497 $218,500 21/4% Convertible Subordinated Debentures with a scheduled maturity in 2013 ................. 230,000 -- -------- -------- Total convertible subordinated debentures ......... $448,497 $218,500 ======== ======== On June 24, 1998, the Company issued French franc 1 billion of 5.20% Notes. The Notes are unsecured, unsubordinated obligations of the Company. The Notes are subject to redemption in whole at their principal amount at the option of the Company at any time in the event of certain changes affecting taxation in the United States. Unless previously redeemed, or purchased and cancelled, the Notes will be redeemed at their principal amount on June 24, 2005. In March 1998, the Company issued floating rate Loan Notes in connection with the acquisition of the GGT Group plc. The Loan Notes are unsecured obligations and bear interest at a yearly rate offered in the London Inter-Bank Market for six month deposits of sterling. The Loan Notes are redeemable, at the option of the holder, in whole or in part at their nominal amount, together with accrued interest on any interest payment date after December 31, 1998. Under certain conditions, the Company may redeem the Loan Notes, at their nominal amount plus accrued interest on any interest payment date. Unless previously repaid, redeemed or purchased and cancelled, the Loan Notes will be repaid on June 30, 2001 at par. On January 6, 1998, the Company issued $230 million of 21/4% Convertible Subordinated Debentures with a scheduled maturity in 2013. The debentures are convertible into common stock of the Company at a conversion price of $49.83 per share subject to adjustment in certain events. Debenture holders have the right to require the Company to redeem the debentures on January 6, 2004 at a price of 118.968%, 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 31, 2001 initially at 112.841% and at increasing prices thereafter to 118.968% until January 6, 2004, and 100% thereafter. Unless the debentures are redeemed, repaid or converted prior thereto, the debentures will mature on January 6, 2013 at their principal amount. On January 3, 1997, the Company issued $218.5 million of 41/4% Convertible Subordinated Debentures with a scheduled maturity in 2007. The debentures are convertible into common stock of the Company at a conversion price of $31.50 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. F-14 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) On March 1, 1996, the Company issued Deutsche Mark 100 million Floating Rate Bonds. 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 matured on March 1, 1999 and were repaid at par. On January 4, 1995, an indirect wholly-owned subsidiary of the Company issued Deutsche Mark 200 million Floating Rate Bonds. The bonds are unsecured, unsubordinated obligations of the issuer and are unconditionally and irrevocably guaranteed by the Company. The bonds bear interest at a rate equal to Deutsche Mark three month LIBOR plus 0.65% and, subsequent to January 5, 1997 may be redeemed at the option of the issuer on any interest payment date at their principal amount plus any accrued but unpaid interest. On August 18, 1997 and October 1, 1997, Deutsche Mark 69 million and Deutsche Mark 20 million, respectively, of the Deutsche Mark 200 million Floating Rate Bonds were repurchased. Unless redeemed earlier, the remaining bonds will mature on January 5, 2000 and will be repaid at par. On February 20, 1998, the $360 million revolving credit agreement was replaced by a $500 million revolving credit agreement. This $500 million revolving credit agreement is with a consortium of banks expiring June 30, 2003. This credit agreement includes a facility for issuing commercial paper backed by a bank letter of credit. The agreement contains certain financial covenants regarding the ratio of total consolidated indebtedness to total consolidated capitalization, the ratio of debt to cash flow, and a limitation on investments in and loans to affiliates and unconsolidated subsidiaries. At December 31, 1998 the Company was in compliance with these covenants. Aggregate maturities of long-term debt and convertible subordinated debentures in the next five years are as follows: (Dollars in Thousands) 1999............................................. $ 65,101 2000............................................. 69,960 2001............................................. 4,142 2002............................................. 2,072 2003............................................. 2,061 Thereafter....................................... 637,629 8. Income Taxes Income before income taxes and the provision for taxes on income consisted of the amounts shown below: Years Ended December 31, (Dollars in Thousands) ------------------------------------ 1998 1997 1996 ---- ---- ---- Income before income taxes: Domestic ........................... $263,058 $182,608 $ 162,388 International ...................... 257,091 198,637 142,843 -------- -------- --------- Total ........................ $520,149 $381,245 $ 305,231 ======== ======== ========= Provision for taxes on income: Current: Federal ...................... $ 65,180 $ 47,145 $ 49,394 State and local .............. 21,292 17,221 13,612 International ................ 118,785 78,438 58,339 -------- -------- --------- 205,257 142,804 121,345 -------- -------- --------- Deferred: Federal ...................... 8,876 7,712 2,072 State and local .............. 1,853 541 (120) International ................ (178) 5,427 342 -------- -------- --------- 10,551 13,680 2,294 -------- -------- --------- Total ........................ $215,808 $156,484 $ 123,639 ======== ======== ========= F-15 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company's effective income tax rate varied from the statutory federal income tax rate as a result of the following factors: 1998 1997 1996 ---- ---- ---- Statutory federal income tax rate ................... 35.0% 35.0% 35.0% State and local taxes on income, net of federal income tax benefit ....................... 2.9 3.0 2.9 International subsidiaries' tax rate differentials .. 1.8 1.2 (0.1) Non-deductible amortization of goodwill ............. 3.3 3.0 3.4 Other ............................................... (1.5) (1.2) (0.7) ---- ---- ---- Effective rate ...................................... 41.5% 41.0% 40.5% ==== ==== ==== Deferred income taxes are provided for the temporary difference between the financial reporting basis and tax basis of the Company's assets and liabilities. Deferred tax benefits result principally from recording certain expenses in the financial statements which are not currently deductible for tax purposes and from differences between the tax and book basis of assets and liabilities recorded in connection with acquisitions. Deferred tax liabilities result principally from expenses which are currently deductible for tax purposes, but have not yet been expensed in the financial statements. The Company has recorded deferred tax benefits as of December 31, 1998 and 1997 of $200.3 million and $142.1 million, respectively, related principally to tax deductible intangibles, acquisition liabilities and compensation and severance accruals. The Company has recorded deferred tax liabilities as of December 31, 1998 and 1997 of $57.8 million and $49.7 million, respectively, related principally to furniture and equipment depreciation. Deferred tax benefits (liabilities) as of December 31, 1998 and 1997 consisted of the amounts shown below (dollars in millions): 1998 1997 ---- ---- Deductible intangibles ............................ $ 39.1 $41.4 Acquisition liabilities ........................... 29.9 18.9 Lease reserves .................................... 11.3 7.3 Compensation and severance reserves ............... 42.9 29.4 Tax loss carryforwards ............................ 1.6 3.0 Financial instruments ............................. 14.2 (5.2) Amortization and depreciation ..................... (0.7) (1.7) Other, net ........................................ 4.2 (0.7) ------ ----- 142.5 $92.4 ====== ===== Net current deferred tax benefits as of December 31, 1998 and 1997 were $36.4 million and $24.3 million, respectively, and were included in prepaid expenses and other current assets. Net non-current deferred tax benefits as of December 31, 1998 and 1997 were $106.0 million and $68.1 million, respectively. The Company has concluded that it is probable that it will be able to realize these net deferred tax benefits in future periods. A provision has been made for additional income and withholding taxes on the earnings of international subsidiaries and affiliates that will be distributed. 9. Employee Retirement Plans The Company's international and domestic subsidiaries provide retirement benefits for their employees primarily through defined contribution plans. Company contributions to the plans, which are determined by the boards of directors of the subsidiaries, have been in amounts up to 15% (the maximum amount deductible for federal income tax purposes) of total eligible compensation of participating employees. Expenses related to the Company's contributions to these plans amounted to $68.2 million, $54.3 million and $49.8 million in 1998, 1997 and 1996, respectively. F-16 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company's pension plans are primarily international. These plans are not required to report to governmental agencies pursuant to the Employee Retirement Income Security Act of 1974 (ERISA). Substantially all of these plans are funded by fixed premium payments to insurance companies which undertake legal obligations to provide specific benefits to the individuals covered. Pension expense amounted to $5.2 million, $5.3 million and $4.6 million in 1998, 1997 and 1996, respectively. Certain subsidiaries of the Company have executive retirement programs under which benefits will be paid to participants or their beneficiaries over 15 years beginning at age 65 or death. In addition, other subsidiaries have individual deferred compensation arrangements with certain executives which provide for payments over varying terms upon retirement, cessation of employment or death. Some of the Company's domestic subsidiaries provide life insurance and medical benefits for retired employees. Eligibility requirements vary by subsidiary, but generally include attainment of a specified combined age plus years of service factor. The costs related to these benefits were not material to the 1998, 1997 and 1996 consolidated results of operations or financial position. 10. Commitments and Contingent Liabilities At December 31, 1998, the Company was committed under operating leases, principally for office space. Certain leases are subject to rent reviews and require payment of expenses under escalation clauses. Rent expense was $302.4 million in 1998, $235.9 million in 1997 and $201.1 million in 1996 after reduction for rents received from subleases of $14.7 million, $12.8 million and $11.9 million, respectively. Future minimum base rents under terms of noncancellable operating leases, reduced by rents to be received from existing noncancellable subleases, are as follows: (Dollars in Thousands) Gross Rent Sublease Rent Net Rent ---------- ------------- -------- 1999 ......................... $238,486 $13,871 $224,615 2000 ......................... 218,354 9,855 208,499 2001 ......................... 190,058 7,814 182,244 2002 ......................... 168,926 6,022 162,904 2003 ......................... 156,238 4,683 151,555 Thereafter ................... 877,836 18,145 859,691 The present value of the gross future minimum base rents under noncancellable operating leases is $1,240.4 million. Where appropriate, management has established reserves for the difference between the cost of leased premises that were vacated and anticipated sublease income. The Company is involved in various routine legal proceedings incident to the ordinary course of its business. The Company believes that the outcome of all pending legal proceedings and unasserted claims in the aggregate will not have a material adverse effect on its results of operations, consolidated financial position or liquidity. F-17 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11. Fair Value of Financial Instruments The following table presents the carrying amounts and estimated fair values of the Company's financial instruments at December 31, 1998 and 1997. Amounts in parentheses represent liabilities.
1998 1997 ------------------------ ---------------------- (Dollars in Thousands) (Dollars in Thousands) Carrying Fair Carrying Fair Amount Value Amount Value --------- ----------- ---------- --------- Cash, cash equivalents and investments available-for-sale $ 728,766 $ 728,766 $ 644,104 $ 644,104 Long-term investments ........... 10,562 10,562 6,269 6,269 Long-term debt and convertible subordinated debentures ...... (780,965) (1,068,423) (345,023) (439,251) Financial Commitments Cross currency interest rate swaps ..................... -- (27,669) -- -- Forward foreign exchange contracts ................. -- 2,514 -- (3,430) Guarantees ................... -- (6,417) -- (5,604) Letters of credit ............ -- (922) -- (16,464)
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: Cash equivalents and investments available-for-sale: Cash equivalents and investments available-for-sale consist principally of investments in short-term, interest bearing instruments and are carried at fair market value, which approximates cost. Long-term investments: Included in deferred charges and other assets are long-term investments carried at cost, which approximates estimated fair value. Long-term debt: A portion of the Company's long-term debt included floating rate debt, the carrying value of which approximates fair value. The Company's long-term debt also included convertible subordinated debentures and fixed rate senior debt. The fair value of these instruments was determined by reference to quotations available in markets where these issues were traded. The quotations for the subordinated debentures primarily reflected the conversion value of the debentures into the Company's common stock. Financial Commitments: The estimated fair values of derivative positions are based upon quotations received from independent, third party banks and represent the net amount required to terminate the position, taking into consideration market rates and counterparty credit risk. The fair values of guarantees principally related to affiliated companies, and letters of credit were based upon the face value of the underlying instruments. 12. Financial Instruments and Market Risk The Company utilizes derivative financial instruments predominantly to reduce certain market risks to which the Company is exposed. These market risks primarily consist of the impact of changes in currency exchange rates on assets and liabilities of non-U.S. operations and the impact of changes in interest rates on debt. The Company's derivative activities are limited in volume and confined to risk management activities. Senior management at the Company actively participates in the quantification, monitoring and control of all significant risks. A reporting system is in place which evaluates the impact on the Company's earnings resulting from changes in interest rates, currency exchange rates and other relevant market risks. This system is structured to F-18 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) enable senior management to initiate prompt remedial action, if appropriate. Adequate segregation of duties exists with regard to the execution, recording and monitoring of derivative activities. Additionally, senior management reports periodically to the Audit Committee of the Board of Directors concerning derivative activities. Since 1993, the Audit Committee established limitations on derivative activities which are reviewed annually. At December 31, 1998, the Company had Japanese yen 16.3 billion aggregate notional principal amount of cross currency interest rate swaps. The swaps convert a portion of the Company's U.S. dollar floating rate debt into fixed rate Japanese yen debt and effectively hedge the Company's net investment in Japanese yen denominated assets. There were no swap agreements outstanding at December 31, 1997. The Company enters into forward foreign exchange contracts predominantly to hedge intercompany receivables and payables which are recorded in a currency different from that in which they will settle. Gains and losses on these positions are deferred and included in the basis of the transaction upon settlement. The terms of these contracts are generally three months or less. At December 31, 1998 and 1997, the aggregate amount of intercompany receivables and payables subject to this hedge program was $628 million and $532 million, respectively. The table below summarizes by major currency the notional principal amounts of the Company's forward foreign exchange contracts outstanding at December 31, 1998 and 1997. The "buy" amounts represent the U.S. dollar equivalent of commitments to purchase the respective currency, and the "sell" amounts represent the U.S. dollar equivalent of commitments to sell the respective currency.
(Dollars in thousands) Notional Principal Amount ------------------------- 1998 1997 -------------------------------- --------------------------------- Currency Company Buys Company Sells Company Buys Company Sells -------- ------------- ------------- ------------- ------------- U.S. Dollar...................... $215,157 $ 45,010 $ 160,704 $ 47,588 German Mark...................... 175,542 254,962 98,820 154,143 Japanese Yen..................... 20,365 20,272 0 0 French Franc..................... 15,535 32,284 26,693 9,216 Canadian Dollar.................. 13,077 3,574 0 70 Dutch Guilder.................... 3,386 9,633 5,884 12,238 Danish Krone..................... 1,851 3,958 0 3,461 Hong Kong Dollar................. 1,485 5,978 0 12,140 Singapore Dollar................. 1,031 4,669 1,192 2,012 Norwegian Krone.................. 0 8,120 0 2,045 Greek Drachma.................... 0 6,183 0 6,548 Other............................ 13,527 9,709 32,280 9,105 -------- -------- -------- -------- Total............................ $460,956 $404,352 $325,573 $258,566 ======== ======== ======== ========
The derivative financial instruments existing during the years ended December 31, 1998 and 1997 were entered into for the purpose of hedging certain specific currency and interest rate risks. As a result of these financial instruments, the Company reduced financial risk in exchange for foregoing any gain (reward) which might have occurred if the markets moved favorably. In using derivative financial instruments, management exchanged the risks of the financial markets for counterparty risk. To minimize counterparty risk the Company only enters into derivative contracts with major well-known banks that have credit ratings equal to or better than the Company's. F-19 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. Adoption of New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" which the Company is required to adopt effective January 1, 2000. SFAS No. 133 cannot be applied retroactively. SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. Once implemented, SFAS No. 133 must be applied to (a) derivative instruments and (b) certain derivative instruments embedded in hybrid contracts that were issued, acquired, or substantively modified after December 31, 1997. The Company intends to adopt SFAS No. 133 for its fiscal year ending December 31, 2000. The impact of SFAS No. 133 on the Company's financial statements will depend on a variety of factors, including future interpretative guidance from the FASB, the future level forecasted and actual foreign currency transactions, the extent of the Company's hedging activities, the types of hedging instruments used and the effectiveness of such instruments. However, the Company does not believe the effect of adopting SFAS No. 133 will be material to its financial position. 14. Subsequent Event On February 10, 1999, the Company completed the acquisition of Abbott Mead Vickers plc ("AMV"). AMV provides corporate communications services to clients principally in the United Kingdom. The Company issued approximately 9.6 million new shares of common stock in exchange for the 92.3% of AMV ordinary shares not already owned by the Company, at a fixed exchange ratio of .1347 common shares of the Company per AMV ordinary share. The transaction will be accounted for under the pooling-of-interests method of accounting. F-20 OMNICOM GROUP INC. AND SUBSIDIARIES QUARTERLY RESULTS OF OPERATIONS (Unaudited) The following table sets forth a summary of the unaudited quarterly results of operations for the two years ended December 31, 1998 and 1997, in thousands of dollars except for per share amounts. The information set forth in the following table gives effect to the two-for-one stock split completed in December 1997. First Second Third Fourth ----- ------ ----- ------ Commissions & Fees 1998 ................. $ 860,976 $ 1,051,510 $ 981,577 $ 1,197,979 1997 ................. 696,577 786,341 746,839 895,056 Income Before Income Taxes 1998 ................. 91,657 164,231 99,514 164,747 1997 ................. 69,641 117,913 73,060 120,631 Income Taxes 1998 ................. 38,003 69,760 42,206 65,839 1997 ................. 28,266 48,045 29,879 50,294 Income After Income Taxes 1998 ................. 53,654 94,471 57,308 98,908 1997 ................. 41,375 69,868 43,181 70,337 Equity in Affiliates 1998 ................. 4,980 5,278 5,948 8,863 1997 ................. 4,144 7,282 4,601 14,062 Minority Interests 1998 ................. (7,731) (13,757) (9,464) (13,390) 1997 ................. (5,451) (10,751) (6,291) (9,942) Net Income 1998 ................. 50,903 85,992 53,792 94,381 1997 ................. 40,068 66,399 41,491 74,457 Basic Earnings Per Share 1998 ................. 0.31 0.51 0.32 0.57 1997 ................. 0.25 0.41 0.26 0.47 Diluted Earnings Per Share 1998 ................. 0.31 0.50 0.32 0.55 1997 ................. 0.25 0.40 0.26 0.45 F-21 Schedule II OMNICOM GROUP INC. AND SUBSIDIARIES SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS For the Three Years Ended December 31, 1998
Column A Column B Column C Column D Column E - ----------------------------------------------------------------------------------------------------- Additions Deductions ------------ ---------------------------- Balance at Charged Removal of Balance Beginning to Costs Uncollectible Translation at End of Description of Period and Expenses Receivables(1) Adjustments Period - ----------------------------------------------------------------------------------------------------- (Dollars in Thousands) Valuation accounts deducted from assets to which they apply-allowance for doubtful accounts: December 31, 1998.......... $32,190 $14,418 $(9,739) $(1,128) $57,475 December 31, 1997.......... 25,642 9,981 1,856 1,577 32,190 December 31, 1996 ......... 23,352 7,911 5,211 410 25,642
- ---------- (1) Net of acquisition date balances in allowance for doubtful accounts of companies acquired of $13,076, $2,013 and $985 in 1998, 1997, and 1996, respectively. S-1 EX-21 2 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant ------- ------------- ------ ---------- Omnicom Group Inc................................ New York -- -- Cline Davis & Mann, Inc.......................... New York Registrant 100% Omnicom International Inc........................ Delaware Registrant 100% Omnicom Management Inc........................... Delaware Registrant 100% Omnicom Finance Inc.............................. Delaware Registrant 100% Omnicom International Holdings Inc............... Delaware Registrant 100% Communicade Inc.................................. Delaware Registrant 100% C-D Acquisitions Inc............................. Delaware Registrant 100% Strategic Alliance Services Inc.................. Delaware Registrant 100% Goodby, Silverstein & Partners Holdings Inc...... California Registrant 100% Goodby, Silverstein & Partners Inc............... California Goodby, Silverstein & Partners Holdings Inc. 100% I&S Corporation.................................. Japan Registrant 40% Manning Gottlieb Media Ltd....................... United Kingdom Omnicom UK Ltd. 53% Simons Palmer Clemmow Johnson (Holdings) Ltd. 35% The Allmond Partnership Limited United Kingdom Manning Gottlieb Media Limited 66% Omnicom Finance Ltd.............................. United Kingdom Diversified Agency Services Ltd. 100% BBDO Worldwide Inc............................... New York Registrant 100% BBDO Atlanta, Inc................................ Georgia BBDO Worldwide Inc. 100% BBDO Chicago, Inc................................ Delaware BBDO Worldwide Inc. 100% BBDO Detroit, Inc................................ Delaware BBDO Worldwide Inc. 100% BBDO International Inc........................... Delaware Omnicom International Inc. 100% Baker Lovick, L.L.C.............................. Delaware BBDO Canada Inc. 99% Omnicom Finance Ltd. 1% Ross Roy Communications, Inc..................... Michigan Registrant 100% RATTO/BBDO S.A................................... Argentina BBDO Worldwide Inc. 40% Clemenger BBDO Ltd............................... Australia BBDO Worldwide Inc. 47% Diversified Marketing Services Pty. Ltd.......... Australia Clemenger BBDO Ltd. 47% Clemenger Direct Pty. Ltd. (Sydney).............. Australia Diversified Marketing Services Pty. Ltd. 47% Multinet Systems................................. Australia Diversified Marketing Services Pty. Ltd. 33% Porter Novelli Australia (Melbourne) Pty. Ltd.... Australia Diversified Marketing Services Pty. Ltd. 26% Porter Novelli Australia Pty. Ltd................ Australia Diversified Marketing Services Pty. Ltd. 26% Curtis Jones & Brown (Sydney).................... Australia Diversified Marketing Services Pty. Ltd. 26% Port Productions Pty. Ltd. (Melbourne)........... Australia Diversified Marketing Services Pty. Ltd. 35% Total Advt & Communications...................... Australia Diversified Marketing Services Pty. Ltd. 26% Emory Vincent design............................. Australia Diversified Marketing Services Pty. Ltd. 28% Corporate Communications (Tasmania) Pty. Ltd..... Australia Diversified Marketing Services Pty. Ltd. 16% Turnbull Porter Novelli (Melbourne).............. Australia Diversified Marketing Services Pty. Ltd. 47% Turnbull Porter Novelli (Sydney)................. Australia Diversified Marketing Services Pty. Ltd. 47% Turnbull Porter Novelli (Perth).................. Australia Diversified Marketing Services Pty. Ltd. 9% Turnbull Porter Novelli (Adelaide)............... Australia Diversified Marketing Services Pty. Ltd. 14% Postel Australia Pty. Ltd........................ Australia Diversified Marketing Services Pty. Ltd. 35% Hardie Grant Magazines Pty. Ltd.................. Australia Diversified Marketing Services Pty. Ltd. 12% Zivo Pty. Ltd.................................... Australia Diversified Marketing Services Pty. Ltd. 12% CorPol Alliances Pty. Ltd........................ Australia Diversified Marketing Services Pty. Ltd. 28% MM Communications Pty. Ltd....................... Australia Diversified Marketing Services Pty. Ltd. 33% Clemenger Sydney Pty. Ltd........................ Australia Clemenger BBDO Ltd. 47% Clemenger Melbourne Pty. Ltd..................... Australia Clemenger BBDO Ltd. 47% Clemenger Adelaide Pty. Ltd...................... Australia Clemenger BBDO Ltd. 47% Clemenger Tasmania Pty. Ltd...................... Australia Clemenger BBDO Ltd. 47% Clemenger/Concept Pty. Ltd....................... Australia Clemenger BBDO Ltd. 47% Adconnect........................................ Australia Clemenger BBDO Ltd. 5% TEAM/BBDO Werbeagentur Ges. m.b.H................ Austria BBDO Worldwide Inc. 100%
S-2
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant ------- ------------- ------ ---------- TEAM/BBDO Werbeagentur Ges. m.b.H & Co. Kg....... Austria TEAM/BBDO Werbeagentur Ges.m.b.H 84% Palla, Koblinger & Partner GmbH.................. Austria TEAM/BBDO Werbeagentur Ges.m.b.H 20% Optimum Media Direction.......................... Austria TEAM/BBDO Werbeagentur Ges. m.b.H & Co. Kg 42% Heye & Partner Werbeagentur GmbH 50% BBDO Belgium S.A................................. Belgium BBDO Worldwide Inc. 94% Sponsoring & Event Marketing S.A................. Belgium BBDO Belgium S.A. 70% Omnimedia S.A.................................... Belgium BBDO Belgium S.A. 47% DDB Needham Worldwide S.A. 46% Morael & Partners S.A............................ Belgium BBDO Belgium S.A. 66% VVL/BBDO S.A..................................... Belgium BBDO Belgium S.A. 75% Moors Bloomsbury................................. Belgium BBDO Belgium S.A. 75% N'Lil S.A........................................ Belgium BBDO Belgium S.A. 48% Optimum Media Direction.......................... Belgium BBDO Belgium S.A. 47% DDB Needham Worldwide S.A. 46% Optimum Media Team S.A........................... Belgium BBDO Belgium S.A. 42% DDB Needham Worldwide S.A. 46% The Media Partnership S.A........................ Belgium BBDO Belgium S.A. 23% DDB Needham Worldwide S.A. 23% Topolino S.A..................................... Belgium BBDO Belgium S.A. 48% BBDO/Business Communications S.A................. Belgium BBDO Belgium S.A. 75% DMC.............................................. Belgium BBDO Belgium S.A. 47% No Media Comunicacao Ltda........................ Brazil ALMAP/BBDO Comunicacoes Ltda. 70% ALMAP/BBDO Comunicacoes Ltda..................... Brazil BBDO Publicidade, Ltda. 70% BBDO Publicidade, Ltda........................... Brazil BBDO Worldwide Inc. 100% BBDO Canada Inc.................................. Canada BBDO Worldwide Inc. 100% McKim Communications Ltd......................... Canada BBDO Canada Inc. 49% Generator Corp................................... Canada BBDO Canada Inc. 70% Prophet DataProbe Inc............................ Canada BBDO Canada Inc. 90% Lanyon Phillips Communications Inc............... Canada BBDO Canada Inc. 17% Omnicom Canada Inc. 60% Bazooka Information Design Inc................... Canada Lanyon Phillips Communications Inc. 77% Blue Suede Studio Inc............................ Canada Lanyon Phillips Communications Inc. 77% PNMD, Inc........................................ Canada Omnicom Canada Inc. 49% Ross Roy Group of Canada, Ltd.................... Canada Ross Roy Communications, Inc. 100% Ross Roy Communications Canada Ltd............... Canada Ross Roy Group of Canada, Ltd. 100% BBDO Chile, S.A.................................. Chile BBDO Worldwide Inc. 60% IMAX S.A......................................... Chile BBDO Chile, S.A. 31% Publicista y Clientes S.A........................ Chile BBDO Chile, S.A. 30% 180 degrees...................................... Chile BBDO Chile, S.A. 15% Media Direction.................................. Chile BBDO Chile, S.A. 60% BBDO Investigacion............................... Chile BBDO Chile, S.A. 60% Axis............................................. Chile BBDO Chile, S.A. 30% BBDO Publicidad ................................. Chile BBDO Chile, S.A. 60% Multinet ....................................... Chile BBDO Chile, S.A. 18% BBDO/CNUAC Advertising Co. Ltd................... China BBDO Asia Pacific Ltd. 51% Garnier/BBDO S.A................................. Costa Rica BBDO Worldwide Inc. 20% BBDO Zagreb...................................... Croatia BBDO Worldwide Inc. 60% Impact/BBDO International Ltd.................... Cyprus BBDO Worldwide Inc. 44% Impact/BBDO Group Partnership.................... Cyprus Impact/BBDO International Ltd. 44% Impact/ BBDO Advertising & Marketing Ltd. 1% Impact/ BBDO Advertising & Marketing Ltd......... Cyprus Impact/BBDO International Ltd. 44% Mark/BBDO a.s.................................... Czech Republic BBDO Worldwide Europe GmbH 80% Media Direction a.s.............................. Czech Republic BBDO Worldwide Europe GmbH 80% BBDO Danmark A/S................................. Denmark BBDO Worldwide Inc. 75% BBDO A/S......................................... Denmark BBDO Danmark A/S 75%
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Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant ------- ------------- ------ ---------- BBDO Business Communications A/S................. Denmark BBDO Danmark A/S 30% Sepia A/S........................................ Denmark BBDO Danmark A/S 19% Sleeping Beauty A/S.............................. Denmark BBDO Business Communications A/S 7% BBDO A/S 19% Sepia A/S 5% Networkers A/S................................... Denmark Sleeping Beauty A/S 22% Administration ApS............................... Denmark BBDO Business Communications A/S 4% BBDO A/S 9% Sepia A/S 2% DDB Needham Denmark A/S 9% Rapp & Collins/DDB Denmark A/S 6% TBWA Reklamebureau A/S 11% Optima Media Direction .......................... Denmark BBDO Danmark A/S 53% DDB Needham Denmark A/S 20% The Media Partnership............................ Denmark Optima Media Direction 23% Impact Advertising Ltd........................... Egypt Impact/BBDO International Ltd. 44% Apex Publicidad, S.A............................. El Salvador Garnier/BBDO 15% BBDO Helsinki OY................................. Finland BBDO Worldwide Europe GmbH 86% BBDO Paris S.A................................... France BBDO Worldwide Europe GmbH 90% The Media Partnership ........................... France BBDO Paris S.A. 15% West End S.A..................................... France BBDO Paris S.A. 48% BBDO Marketing Services S.A...................... France BBDO Paris S.A. 46% Realisation S.A.................................. France BBDO Paris S.A. 90% Deslegan S.A..................................... France BBDO Paris S.A. 89% Reflexions S.A................................... France BBDO Paris S.A. 90% BLL Looping...................................... France BBDO Paris S.A. 45% CLM/BBDO S.A..................................... France BBDO Paris S.A. 90% Around Midnight S.A.............................. France BBDO Paris S.A. 90% BBDO Corporate................................... France BBDO Paris S.A. 85% Creapress S.A.................................... France BBDO Paris S.A. 72% Client First S.A................................. France Deslegan S.A. 35% Expertises S.A................................... France Deslegan S.A. 86% Realites & Communications S.A.................... France Deslegan S.A. 61% Saguez & Partners................................ France Deslegan S.A. 36% Epsilon S.A...................................... France West End S.A. 48% Appi S.A......................................... France Epsilon S.A. 48% Blue Moon........................................ France BBDO Marketing Services S.A. 23% Proximity S.A.................................... France BBDO Marketing Services S.A. 30% Anaconda......................................... France Proximity S.A. 30% ATM.............................................. France Proximity S.A. 30% BBDO Worldwide Europe GmbH....................... Germany BBDO Worldwide Inc. 100% BBDO GmbH ....................................... Germany BBDO Worldwide Europe GmbH 89% BBDO Interactive GmbH............................ Germany BBDO GmbH 71% KNSK/BBDO Werbeagentur Gmbh...................... Germany BBDO GmbH 89% NOVUM Marketing- und Vertriebsberatung GmbH...... Germany BBDO GmbH 36% The Media Partnership GmbH....................... Germany BBDO GmbH 22% Communication Management GmbH Dusseldorf 25% Stein Holding GmbH............................... Germany BBDO GmbH 62% Boebel, Adam Werbeagentur GmbH................... Germany BBDO GmbH 84% Art & Production Advertising Services GmbH....... Germany BBDO GmbH 89% Sponsor Partners GmbH............................ Germany BBDO GmbH 53% Media Direction GmbH............................. Germany BBDO GmbH 39% HM1 Ges. f. Direktmarketing und Werbelogistik GmbH............................. Germany BBDO GmbH 58% BBDO Dusseldorf GmbH............................. Germany BBDO GmbH 89% MSBK, Team Dialog-Marketing GmbH................. Germany BBDO GmbH 40%
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Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant ------- ------------- ------ ---------- MSBK International AG 31% BBDO Dusseldorf GmbH Werbeagentur................ Germany BBDO GmbH 89% SELL BY TEL Call- & Communication Center GmbH.... Germany BBDO GmbH 69% BBDO Media Team GmbH............................. Germany BBDO GmbH 89% M.I.D Marketinformationsdienst GmbH.............. Germany BBDO GmbH 44% K & K Kohtes & Klewes Kommunikation GmbH......... Germany BBDO GmbH 44% Economia Holding GmbH (Hamburg).................. Germany BBDO GmbH 44% Kofner & Partner Werbeagentur GmbH............... Germany BBDO GmbH 36% Leonhardt & Kern Werbung GmbH.................... Germany BBDO GmbH 68% Luders/BBDO Werbeagentur GmbH.................... Germany BBDO GmbH 44% BBDO Dusseldorf GmbH Advertising................. Germany BBDO GmbH 89% G.F.M.O. GmbH.................................... Germany BBDO GmbH 82% Brand Link GmbH.................................. Germany BBDO GmbH 76% Redwood Brand Publishing GmbH.................... Germany BBDO GmbH 32% Redwood International Publishing Ltd. 36% Peter Schmidt, Claus Koch Holding GmbH........... Germany BBDO GmbH 28% Art & Production pre-press center GmbH........... Germany Art & Production Advertising Services GmbH 89% G.P.O. GmbH...................................... Germany G.F.M.O. GmbH 82% G.F.M.S. GmbH.................................... Germany G.F.M.O. GmbH 82% promediapart/G.F.M.O............................. Germany G.F.M.O. GmbH 74% Leonhardt & Kern Alpha GmbH Werbeagentur......... Germany Leonhardt & Kern Werbung GmbH 68% Leonhardt & Kern Beta GmbH Werbeagentur.......... Germany Leonhardt & Kern Werbung GmbH 52% Leonhardt & Kern Gamma GmbH Werbeagentur......... Germany Leonhardt & Kern Werbung GmbH 62% Design und Grafikstudio "An der Alster" GmbH..... Germany Economia Holding GmbH (Hamburg) 44% Manfred Baumann GmbH Hamburg..................... Germany Economia Holding GmbH (Hamburg) 44% Economia Ges. f. Marketing and Werb. GmbH & Co KG Germany Economia Holding GmbH (Hamburg) 44% Brodersen, Stampe und Partner Werbeagentur GmbH.. Germany Economia Holding GmbH (Hamburg) 44% DIALOGISTIK Service-Center Direktmarketing GmbH.. Germany HM1 Ges. f. Direktmarketing und Werbelogistik GmbH 58% MD Factory Marketing Datanmanagement GmbH........ Germany HM1 Ges. f. Direktmarketing und Werbelogistik GmbH 29% DCS GmbH......................................... Germany HM1 Ges. f. Direktmarketing und Werbelogistik GmbH 58% HM1 Heuser, Mayer & Partner Direktmarketing GmbH. Germany HM1 Ges. f. Direktmarketing und Werbelogistik GmbH 58% K & K Kohtes & Klewes PR GmbH.................... Germany K & K Kohtes & Klewes Kommunikation GmbH 44% K & K Kohtes & Klewes Kommunikation Dresden GmbH. Germany K & K Kohtes & Klewes Kommunikation GmbH 31% K & K Kohtes & Klewes Kommunikation Frankfurt GmbH ............................... Germany K & K Kohtes & Klewes Kommunikation GmbH 33% Viamedia Medienagentur fur Radio & TV GmbH....... Germany K & K Kohtes & Klewes Kommunikation GmbH 33% PURE Information Public Relations GmbH........... Germany K & K Kohtes & Klewes Kommunikation GmbH 27% K & K Kohtes, Klewes & Partner GmbH.............. Germany K & K Kohtes & Klewes Kommunikation GmbH 27% K&K Kohtes & Klewes Kommunikation Hamburg GmbH... Germany K & K Kohtes & Klewes Kommunikation GmbH 36% Kohtes & Klewes comm. medical GmbH............... Germany K & K Kohtes & Klewes Kommunikation GmbH 38% Brodeur Kohtes & Klewes Kommunikation GmbH....... Germany K & K Kohtes & Klewes Kommunikation GmbH 42% Michael Vagedes Ges. fur Eventkomm. mbH.......... Germany K & K Kohtes & Klewes Kommunikation GmbH 18% K & K Kohtes & Klewes Komm. Berlin GmbH.......... Germany K & K Kohtes & Klewes Kommunikation GmbH 44% Deekeling & Fiebig Agent. fur Komm. GmbH......... Germany K & K Kohtes & Klewes Kommunikation GmbH 33% Promotion Dynamics GmbH.......................... Germany Stein Holding GmbH 62% Stein Promotions GmbH............................ Germany Stein Holding GmbH 62% Stein Promotions Hamburg GmbH.................... Germany Stein Holding GmbH 53% MSBK Consulting GmbH............................. Germany MSBK/Team Dialog-Marketing GmbH 22% P.S. Produktions-Service GmbH.................... Germany MSBK International AG 46% SMP Werbeservice GmbH............................ Germany MSBK International AG 36% Knauer/Rump/Partner Werbeagentur GmbH............ Germany MSBK International AG 49% SELL/DIALOG Werbeagentur GmbH.................... Germany Knauer/Rump/Partner Werbeagentur GmbH 39% Claus Koch Corp. Comm............................ Germany Peter Schmidt, Claus Koch Holding GmbH 28% Peter Schmidt Stud. GmbH......................... Germany Peter Schmidt, Claus Koch Holding GmbH 28% Final Artwork GmbH............................... Germany Peter Schmidt, Claus Koch Holding GmbH 28% BBDO Advertising S.A............................. Greece BBDO Worldwide Europe GmbH 80% BBDO Worldwide Inc. 10%
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Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant ------- ------------- ------ ---------- Team/Athens S.A.................................. Greece BBDO Advertising S.A. 64% Arrow II Advertising S.A......................... Greece BBDO Advertising S.A. 32% SPO S.A.......................................... Greece BBDO Advertising S.A. 45% BGM/ the Media Corp S.A......................... Greece BBDO Advertising S.A. 90% Cinemax S.A...................................... Greece BBDO Advertising S.A. 90% BGM/Media Direction Hellas S.A................... Greece BBDO Advertising S.A. 90% BBDO Business Communications S.A................. Greece BBDO Advertising S.A. 90% IKON S.A./Porter Novelli......................... Greece BBDO Advertising S.A. 77% Point Zero S.A................................... Greece BBDO Advertising S.A. 24% Grafis S.A....................................... Greece BBDO Advertising S.A. 90% Lamda Alpha S.A.................................. Greece BBDO Advertising S.A. 23% BBDO/Guatemala S.A............................... Guatemala Garnier/BBDO 30% Zeus/BBDO........................................ Honduras Garnier/BBDO 23% BBDO Asia Pacific Ltd............................ Hong Kong BBDO Worldwide Inc. 100% BBDO Hong Kong Ltd............................... Hong Kong BBDO Asia Pacific Ltd. 100% ADCOM BBDO Direct Limited........................ Hong Kong BBDO Hong Kong Ltd. 100% The Orchard Group Limited........................ Hong Kong BBDO Asia Pacific Ltd. 100% BBDO Budapest.................................... Hungary BBDO Worldwide Europe GmbH 100% The Media Partnership............................ Hungary BBDO Budapest 25% Hungarian Promotional Services................... Hungary BBDO Budapest 55% Media Direction ................................. Hungary BBDO Budapest 100% Optima Media Direction........................... Hungary BBDO Budapest 44% RK Swamy/BBDO Advertising Ltd.................... India BBDO Asia Pacific Ltd. 20% The Candover Company............................. Ireland BBDO Worldwide Inc. 50% AMV (Investments) Ltd. 50% Irish International.............................. Ireland The Candover Company 100% Gitam/BBDO Ltd................................... Israel BBDO Worldwide Inc. 49% Data Pro Ltd..................................... Israel Gitam/BBDO Ltd. 15% Y.SAAR Ltd....................................... Israel Gitam/BBDO Ltd. 15% Video Dada Ltd................................... Israel Gitam/BBDO Ltd. 49% Multi Sdar Ltd................................... Israel Gitam/BBDO Ltd. 49% Motiv Plus S.A................................... Israel Gitam/BBDO Ltd. 49% Gitam International S.A.......................... Israel Motiv Plus S.A. 22% BBDO Italy SpA................................... Italy BBDO Worldwide Inc. 100% Impact & Echo.................................... Kuwait Impact/BBDO Group Partnership 22% Impact/BBDO SAL.................................. Lebanon Impact/BBDO Group Partnership 22% Impact/BBDO SARL................................. Lebanon Impact/BBDO Group Partnership 44% Strategies SAL................................... Lebanon Impact/BBDO SAL 22% BBDO (Malaysia) Sdn Bhd.......................... Malaysia BBDO Asia Pacific Ltd. 100% BBDO Mexico, S.A. de C.V......................... Mexico BBDO Worldwide Inc. 80% OFI Finance B.V.................................. Netherlands Registrant 66% BBDO Canada Inc. 34% BBDO Nederland B.V............................... Netherlands BBDO Worldwide Inc. 50% Keja/Donia B.V................................... Netherlands BBDO Nederland B.V. 50% FHV/BBDO Creative Marketing Agency N.V.......... Netherlands BBDO Nederland B.V. 50% Bennis Porter Novelli............................ Netherlands BBDO Nederland B.V. 50% Signum Informationieprojecten B.V................ Netherlands BBDO Nederland B.V. 50% Bartels/Verdonk Impuls B.V....................... Netherlands BBDO Nederland B.V. 50% BBDO Business Communications B.V................. Netherlands BBDO Nederland B.V. 50% D.M. Het ReklameTeam B.V......................... Netherlands BBDO Nederland B.V. 35% PLP Business Communications...................... Netherlands BBDO BC B.V. 26% Liberty Films B.V................................ Netherlands FHV/BBDO Creative Marketing Agency N.V. 50% Media Direction Netherland B.V................... Netherlands FHV/BBDO Creative Marketing Agency N.V. 31% Adviesbureau Bennis Pauw en Partners BVBA........ Netherlands Bennis Porter Novelli 24%
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Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant ------- ------------- ------ ---------- Diversified Marketing Services Ltd. (N.Z.)....... New Zealand Clemenger BBDO Ltd. 47% Aim Direct....................................... New Zealand Diversified Marketing Services Ltd. (N.Z.) 36% Porter Novelli (Auckland)........................ New Zealand Diversified Marketing Services Ltd. (N.Z.) 23% Porter Novelli (Wellington)...................... New Zealand Diversified Marketing Services Ltd. (N.Z.) 40% Total Media...................................... New Zealand Diversified Marketing Services Ltd. (N.Z.) 19% Colenso Communications Ltd. ..................... New Zealand Clemenger/BBDO Ltd. 47% HKM Advertising Ltd. ............................ New Zealand Clemenger/BBDO Ltd. 47% Agency Management Systems........................ New Zealand Clemenger/BBDO Ltd. 47% Optimum Media Direction.......................... New Zealand Colenso Communications Ltd. 23% HKM Advertising Ltd. 23% BBDO/Nicaragua S.A............................... Nicaragua Garnier/BBDO 25% BBDO Oslo A/S.................................... Norway BBDO Worldwide Europe GmbH 56% Media Direction A/S.............................. Norway BBDO Oslo A/S 56% Schroder Production A/S.......................... Norway BBDO Oslo A/S 56% Sepia A/S........................................ Norway BBDO Oslo A/S 25% BBDO Trade Marketing............................. Norway BBDO Oslo A/S 37% Garnier/BBDO Inc. S.A............................ Panama BBDO Worldwide Inc. 50% BBDO Panama...................................... Panama Garnier/BBDO Inc. S.A. 26% BBDO Peru S.A.................................... Peru BBDO Worldwide Inc. 51% PAC/BBDO Worldwide Inc........................... Philippines BBDO Asia Pacific Ltd. 30% BBDO Warsaw...................................... Poland BBDO Worldwide Inc. 80% Spin Communications.............................. Poland BBDO Warsaw 80% Media Direction.................................. Poland BBDO Warsaw 80% BBDO Portugal Agencia de Publicidade, Lda........ Portugal BBDO Worldwide Europe GmbH 80% Media Direction.................................. Portugal BBDO Portugal Agencia de Publicidade, Lda. 80% Headline Public Relations & Promotions, Inc...... Puerto Rico BBDO Puerto Rico Inc. 85% BBDO Puerto Rico Inc............................. Puerto Rico BBDO Worldwide Inc. 85% Graffiti/BBDO.................................... Romania BBDO Worldwide Inc. 20% Carlos Productions............................... Romania Graffiti/BBDO 13% BBDO Marketing A/O............................... Russia BBDO Worldwide Europe GmbH 100% Arabian Central Establishment.................... Saudi Arabia Impact/BBDO International Ltd. 44% BBDO Singapore Pte Ltd........................... Singapore BBDO Asia Pacific Ltd. 100% Orchard Integrated Pte........................... Singapore The Orchard Group Limited 100% Mark/BBDO Ltd.................................... Slovak Republic Mark/BBDO s.a. 31% BBDO Worldwide Europe GmbH 39% Berry Bush/BBDO (Proprietary) Limited............ South Africa BBDO Worldwide Europe GmbH 20% Tiempo/BBDO Madrid S.A........................... Spain BBDO Espana S.A. 65% The Media Partnership S.A........................ Spain BBDO Espana S.A. 23% Contrapunto S.A.................................. Spain BBDO Espana S.A. 67% Nucleo de Communicacion S.A...................... Spain Contrapunto S.A. 67% Tiempo/BBDO S.A.................................. Spain BBDO Espana S.A. 77% BBDO Espana S.A.................................. Spain BBDO Worldwide Inc. 90% C.P. Communicacion S.A........................... Spain Contrapunto S.A. 62% Media Direction Madrid S.A....................... Spain Tiempo/BBDO Madrid S.A. 65% DEC S.A. .................................. Spain Tiempo/BBDO S.A. 65% Media Direction S.A.............................. Spain Tiempo/BBDO S.A. 77% SELLBYTELL AG.................................... Switzerland SELL BY TEL Call- & Communication Center GmbH 23% MSBK International AG............................ Switzerland BBDO Worldwide Inc. 61% MSBK Zurich AG................................... Switzerland MSBK International AG 24% Ehrenstrahle International A.B................... Sweden BBDO Worldwide Europe GmbH 76% HLR/BBDO Reklambyra A.B.......................... Sweden BBDO Worldwide Europe GmbH 100% Ehrenstrahle & Co. in Stockholm A.B.............. Sweden Ehrenstrahle International A.B. 76% HLR/Broadcast Filmproduction A.B................. Sweden HLR/BBDO Reklambyra A.B. 100% Hard & Co. Reklambyra A.B........................ Sweden HLR/BBDO Reklambyra A.B. 52% Gester & Co. A.B................................. Sweden HLR/BBDO Reklambyra A.B. 20%
S-7
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant ------- ------------- ------ ---------- BBDO Taiwan Advertising Company Ltd.............. Taiwan BBDO Asia Pacific Ltd. 55% Damask/BBDO Limited.............................. Thailand BBDO Asia Pacific Ltd. 100% Alice BBDO....................................... Turkey BBDO Worldwide Europe GmbH 30% MEDIA +.......................................... Turkey Alice BBDO 27% FOCUS 4.......................................... Turkey Alice BBDO 27% BBDO Direct Marketing and PR Services............ Turkey Alice BBDO 30% Impact/BBDO...................................... United Arab Emirates Impact/BBDO International Ltd. 44% BBDO CEE (Ltd)................................... United Kingdom BBDO Worldwide Inc. 100% Media Direction CEE (Ltd)........................ United Kingdom BBDO Worldwide Inc. 100% Media Direct Ltd................................. United Kingdom BBDO Worldwide Inc. 100% Abbott Mead Vickers Plc.......................... United Kingdom Registrant 100% Freud Communications............................. United Kingdom Abbott Mead Vickers Plc. 100% Redwood Publishing Ltd........................... United Kingdom Abbott Mead Vickers Plc. 100% Redwood International Publishing Ltd............. United Kingdom Abbott Mead Vickers Plc. 100% Abbott Mead Vickers BBDO Ltd..................... United Kingdom Abbott Mead Vickers Plc. 100% Drum PHD Ltd..................................... United Kingdom Abbott Mead Vickers Plc. 100% Barraclough Hall Woolston Gray Ltd............... United Kingdom Abbott Mead Vickers Plc. 100% Hammond Communications Ltd....................... United Kingdom Abbott Mead Vickers Plc. 100% Momentum Integrated Communications Ltd........... United Kingdom Abbott Mead Vickers Plc. 100% Clarke Hooper Consulting Ltd..................... United Kingdom Abbott Mead Vickers Plc. 100% Frew, MacMaster Ltd.............................. United Kingdom Abbott Mead Vickers Plc. 100% Craik Jones Watson Mitchell Voelkel Ltd.......... United Kingdom Abbott Mead Vickers Plc. 100% Anthem Advertising Ltd........................... United Kingdom Abbott Mead Vickers Plc. 100% New PHD Ltd...................................... United Kingdom Abbott Mead Vickers Plc. 100% AMV (Investments) Ltd............................ United Kingdom Abbott Mead Vickers Plc. 100% Telecom Express Ltd.............................. United Kingdom Abbott Mead Vickers Plc. 100% Fishburn Hedges Boys Williams Holdings Ltd....... United Kingdom Abbott Mead Vickers Plc. 100% McBain, Noel-Johnson & Co Ltd.................... United Kingdom Abbott Mead Vickers Plc. 100% Leagas Delaney Group Ltd......................... United Kingdom Abbott Mead Vickers Plc. 100% Aurelia Public Relations Ltd..................... United Kingdom Freud Communications 100% Traffic Interactive Ltd.......................... United Kingdom Freud Communications 33% Clarke Hooper Consulting Ltd. 67% Brand Asset Management Licnesing Ltd............. United Kingdom Freud Communications 20% Prager & Partners Ltd............................ United Kingdom Barraclough Hall Woolston Gray Ltd. 75% The O'Connell Partnership Ltd.................... United Kingdom Momentum Integrated Communications Ltd. 100% Games Marketing Group Ltd........................ United Kingdom Clarke Hooper Consulting Ltd. 100% PHD Compass Ltd.................................. United Kingdom New PHD Ltd 50% MSc Communications Ltd........................... United Kingdom New PHD Ltd 50% Outdoor Connection Ltd........................... United Kingdom New PHD Ltd 33% Media Sciene Ltd................................. United Kingdom New PHD Ltd 100% Oval (1028) Ltd.................................. United Kingdom New PHD Ltd 100% Fishburn Hedges Boys Williams Ltd................ United Kingdom Fishburn Hedges Boys Williams Holdings Ltd. 100% Complete Print Solutions Ltd..................... United Kingdom McBain, Noel-Johnson & Co Ltd. 100% Electronic Studio TM Ltd......................... United Kingdom McBain, Noel-Johnson & Co Ltd. 100% The Leagas Delaney Partnership Ltd............... United Kingdom Leagas Delaney Group Ltd. 100% Leagas Delany International Ltd.................. United Kingdom Leagas Delaney Group Ltd. 100% Media Direction Ltd.............................. United Kingdom Leagas Delaney Group Ltd. 100% BBDO Europe Ltd.................................. United Kingdom Prism International Ltd. 100% BBDO/Venezuela C.A............................... Venezuela BBDO Worldwide Inc. 50% DDB Needham Chicago, Inc......................... Delaware The DDB Needham Worldwide Communications Group, Inc. 100% DDB Needham International Inc.................... Delaware Omnicom International Inc. 100% Latin Advertising Venture LLC.................... Delaware DDB Needham Worldwide Partners, Inc. 100% DDB Needham Worldwide Partners, Inc.............. New York The DDB Needham Worldwide Communications Group, Inc. 100% The DDB Needham Worldwide Communications Group, Inc. .................................. New York Registrant 100% Griffin Bacal Inc................................ New York DDB Needham Chicago, Inc. 100%
S-8
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant ------- ------------- ------ ---------- DDB Needham Dallas, Inc.......................... Texas The DDB Needham Worldwide Communications Group, Inc. 100% Tracy-Locke, Inc................................. Texas DDB Needham Dallas, Inc. 100% PGC Advertising, Inc............................. Texas Registrant 100% Elgin DDB Inc.................................... Washington The DDB Needham Worldwide Communications Group, Inc. 100% The Focus Agency Inc............................. Washington Registrant 100% Rainuzzo DDB S.A................................. Argentina DM9 Holding 40% DDB Needham Worldwide Pty. Ltd. (Australia) ..... Australia DDB Needham Worldwide Partners, Inc. 100% DDB Needham Brisbane Pty. Ltd.................... Australia DDB Needham Worldwide Pty. Ltd. (Australia) 100% Diversified Communications Group Pty. Ltd........ Australia DDB Needham Worldwide Pty. Ltd. (Australia) 100% DDB Needham Sydney Pty. Ltd...................... Australia DDB Needham Worldwide Pty. Ltd. (Australia) 100% Production 32 Pty. Ltd........................... Australia DDB Needham Worldwide Pty. Ltd. (Australia) 100% DDB Needham Melbourne Pty. Ltd................... Australia DDB Needham Worldwide Pty. Ltd. (Australia) 100% DDB Needham Finance Pty. Ltd..................... Australia DDB Needham Worldwide Pty. Ltd. (Australia) 100% Carr Clark Rapp Collins Pty. Ltd................. Australia Diversified Communications Group Pty. Ltd. 100% Salesforce Australia Pty. Ltd.................... Australia Diversified Communications Group Pty. Ltd. 100% Heye & Partner Werbeagentur GmbH ................ Austria Heye & Partner GmbH 45% DDB Needham Heye & Partner GmbH.................. Austria DDB Holding Europe SCA 100% DDB Needham Worldwide S.A. ...................... Belgium DDB Holding Europe SCA 92% Marketing Power Rapp & Collins S.A............... Belgium DDB Needham Worldwide S.A. 60% Production 32 S.A................................ Belgium DDB Needham Worldwide S.A. 92% DM9 DDB Publicidad............................... Brazil DM9 Holding 76% Ghirrotti & Co................................... Brazil The DDB Needham Worldwide Communications Group, Inc. 20% Olympic DDB Needham Bulgaria..................... Bulgaria Olympic DDB Needham S.A. 63% Omnicom Canada Inc............................... Canada Registrant 100% Griffin Bacal Volny.............................. Canada Griffin Bacal Canada 100% Griffin Bacal Canada............................. Canada Griffin Bacal Inc. 100% Palmer Jarvis Inc................................ Canada Registrant 100% Area 51 Interactive Inc.......................... Canada Palmer Jarvis Inc. 100% Kaizen Media Services Inc........................ Canada Palmer Jarvis Retail Advertising Ltd. 100% Focus Strategies & Communications Ltd............ Canada Palmer Jarvis Retail Advertising Ltd. 100% The Malahat Group Inc............................ Canada Palmer Jarvis Retail Advertising Ltd. 50% First Event Sports and Sponsorship Inc........... Canada Palmer Jarvis Retail Advertising Ltd. 100% Palmer Jarvis & Associates Advertising (Manitoba) Ltd. .............................. Canada Palmer Jarvis Retail Advertising Ltd. 50% Palmer Jarvis & Associates (Canada) Advertising Corp. 50% Palmer Jarvis Advertising Saskatchewan Ltd....... Canada Palmer Jarvis Retail Advertising Ltd. 50% Palmer Jarvis Retail Advertising Ltd............. Canada Palmer Jarvis & Associates (Canada) Advertising Corp. 100% Palmer Jarvis & Associates (Canada) Advertising Corp. ............................ Canada Seabreeze Investments (1983) Ltd. 100% Seabreeze Investment (1983) Ltd.................. Canada Palmer Jarvis Inc. 100% DM9 Holding ..................................... Cayman Islands DDB Needham Worldwide Partners, Inc. 100% Zegers DDB S.A................................... Chile DM9 Holding 40% Beijing DDB Needham Advertising Co. Ltd.......... China DDB Needham Worldwide Ltd. 51% Guangzhou DDB Advertising Ltd.................... China DDB Needham (China) Investment Ltd. 100% DDB Needham Worldwide Colombia Ltda.............. Colombia DDB Needham Worldwide Partners, Inc. 30% Adcom DDB Needham S.A............................ Costa Rica Adcom/DDB Needham Centroamerica, S.A. 36% Futura DDB Croatia............................... Croatia DDB Needham S.C.E. 36% OMD Croatia...................................... Croatia Futura DDB Croatia 18% BBDO Zagreb 30% DDB Needham Prague............................... Czech Republic DDB Holding Europe SCA 97% Rapp & Collins DDBN A/S.......................... Denmark DDB Needham Denmark A/S 49% E-SCAPE Interactive A/S.......................... Denmark DDB Needham Denmark A/S 39% Rapp & Collins DDBN A/S 5% Agitator Reklamebureau........................... Denmark DDB Needham Denmark A/S 39% DDB Needham Denmark A/S.......................... Denmark DDB Holding Europe SCA 70% RCM/DDB.......................................... El Salvador Adcom/DDB Needham Centroamerica, S.A. 13% Brand Sellers DDB Needham A.S.................... Estonia DDB Worldwide Helsinki Oy 65%
S-9
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant ------- ------------- ------ ---------- Datum Optimum Media Tallinn...................... Estonia Datum Optimum Media Direction Oy 70% Brand Sellers DDB Needham Oy..................... Finland DDB Worldwide Helsinki Oy 77% DDB Worldwide Helsinki Oy........................ Finland DDB Holding Europe SCA 77% Datum Optimum Media Direction Oy................. Finland DDB Worldwide Helsinki Oy 41% DDB Needham Worldwide Partners, Inc. 29% Sarajarvi & Hellen Oy............................ Finland DDB Worldwide Helsinki Oy 41% Diritto Rapp & Collins Oy........................ Finland DDB Worldwide Helsinki Oy 62% Tagaro! DDB & Co SA.............................. France DDB & Co. Hintzy Heymann S.A. 38% DDB Interactive.................................. France DDB Communication France S.A. 79% DDB Lille SNC.................................... France DDB Communication France S.A. 79% DDB The Way S.A.................................. France DDB Communication France S.A. 63% DDB Atlantique S.A............................... France DDB Communication France S.A. 79% La Marque Media SNC.............................. France Optimum Media Direction S.A. 89% Optimum Media SNC................................ France Optimum Media Direction S.A. 89% Optimum Media Direction S.A...................... France DDB Communication France S.A. 40% BBDO Paris S.A. 45% Media Direction SNC.............................. France Optimum Media Direction S.A. 89% Productions 32 SNC............................... France DDB Communication France S.A. 52% SDMS S.A. 17% DDB & Co. Hintzy Heyman S.A...................... France DDB Communication France S.A. 49% DDB Europe S.A. ................................ France DDB Communication France S.A. 79% Directing/Rapp & Collins SNC..................... France DDB Communication France S.A. 55% DDB Red SNC...................................... France DDB Communication France S.A. 79% Marketic Conseil S.A............................. France DDB Communication France S.A. 42% Piment SNC....................................... France DDB Communication France S.A. 49% SFV-Perre Contact S.A............................ France SDMS S.A. 30% DDB Communication France S.A. 32% DDB Communication France S.A..................... France DDB Holding Europe SCA 79% DDB Holding Europe SCA........................... France The DDB Needham Worldwide Communications Group, Inc. 100% Louis XIV S.A.................................... France DDB Communication France S.A. 40% OP & A S.A....................................... France DDB Communication France S.A. 40% Noveau Monde..................................... France DDB Communication France S.A. 54% SDMS S.A......................................... France DDB Communication France S.A. 65% Printer SNC...................................... France DDB Communication France S.A. 40% SDMS S.A. 25% Interimage Rhone Alpes SNC....................... France SDMS S.A. 25% DDB Communication France S.A. 40% Interimage....................................... France SDMS S.A. 17% DDB Communication France S.A. 35% Groupe 32 SNC.................................... France DDB Communication France S.A. 44% SDMS S.A. 29% Rapp & Collins SNC............................... France Directing/Rapp & Collins SNC 28% Piment SNC 25% De La Marque A L'Achat........................... France Piment SNC 25% Fideliting....................................... France Directing/Rapp & Collins SNC 28% DDB CIE SNC...................................... France DDB Communication France S.A. 78% DDB SCA.......................................... France DDB Communication France S.A. 79% Hoffmann, Reiser, Schalt Frankfurt............... Germany Communication Management GmbH Dusseldorf 49% Optimum Sponsoring Dusseldorf.................... Germany Optimum Media Dusseldorf 90% Optimum Media Dusseldorf......................... Germany Communication Management GmbH Dusseldorf 90% Production 32 Dusseldorf......................... Germany Communication Management GmbH Dusseldorf 100% Jahns Rapp Collins .............................. Germany Communication Management GmbH Dusseldorf 51% Heye & Partner GmbH 18% Selby & Co. Hamburg.............................. Germany Communication Management GmbH Dusseldorf 30% Screen GmbH...................................... Germany Communication Management GmbH Dusseldorf 100%
S-10
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant ------- ------------- ------ ---------- InterScreen Dusseldorf........................... Germany Screen GmbH 51% Interscreen Prag (TCH)........................... Germany InterScreen Dusseldorf 51% DDB Needham Beteiligungsgesellschaft............. Germany Communication Management GmbH Dusseldorf 100% DDB Needham GmbH Dusseldorf...................... Germany Communication Management GmbH Dusseldorf 100% Fritsch Heine Rapp Collins Hamburg............... Germany Communication Management GmbH Dusseldorf 87% Heye & Partner GmbH.............................. Germany DDB Holding Europe SCA 45% Heye Management Service GmbH..................... Germany Heye & Partner GmbH 23% Print Munchen GmbH............................... Germany Heye & Partner GmbH 45% Communication Management GmbH Dusseldorf......... Germany Registrant 100% Optimum Media Direction Germany GmbH............. Germany Heye & Partner GmbH 11% BBDO GmbH 40% Optimum Media Dusseldorf 25% DDBN (Frankfurt)................................. Germany DDB Needham Beteiligungsgesellschaft 100% Rapp Collins Consulting.......................... Germany Fritsch Heine Rapp Collins Hamburg 87% Growth Enterprises Ltd........................... Gibraltar DDB Needham Worldwide Partners 51% Olympic DDB Needham S.A.......................... Greece DDB Needham Worldwide Partners, Inc. 63% Tempo Optimum Media Hellas S.A................... Greece Olympic DDB Needham S.A. 45% TBWA/Producta S.A. 15% Rapp Collins Hellas S.A.......................... Greece Olympic DDB Needham S.A. 43% Hypertech........................................ Greece Olympic DDB Needham S.A. 9% DDB Needham S.C.E................................ Greece Olympic DDB Needham S.A. 63% Publinac/DDB Needham Guatemala [C.A.]............ Guatemala Adcom/DDB Needham Centroamerica, S.A. 11% Adcom/DDB Needham ............................... Honduras Adcom/DDB Needham Centroamerica, S.A. 20% DDB Needham Worldwide Ltd........................ Hong Kong DDB Needham (China) Investment Ltd. 100% DDB Nexus Ltd.................................... Hong Kong DDB Needham Worldwide Ltd. 49% DDB Needham Asia Pacific Ltd..................... Hong Kong DDB Needham Worldwide Partners, Inc. 100% DDB Needham (China) Investment Ltd............... Hong Kong DDB Needham Asia Pacific Ltd. 100% DDB Needham Advertising Co. (Budapest)........... Hungary DDB Needham Heye & Partner GmbH 40% DDB Holding Europe SCA 48% Optimum Media Co................................. Hungary DDB Needham Advertising Co. (Budapest) 77% TMP Co........................................... Hungary DDB Needham Advertising Co. (Budapest) 22% Optimum Media Direction.......................... Hungary DDB Needham Advertising Co. (Budapest) 38% Lexington Bt.................................... Hungary DDB Needham Advertising Co. (Budapest) 44% Madison Bt. 44% Madison Bt....................................... Hungary DDB Needham Advertising Co. (Budapest) 88% MUDRA Communications Ltd......................... India The DDB Needham Worldwide Communications Group, Inc. 10% DDB Communication S.R.L.......................... Italy DDB Holding Europe SCA 90% Optimum Media Direction S.R.L.................... Italy DDB Communication S.R.L. 36% BBDO Italy SpA 40% Verba DDB S.R.L.................................. Italy DDB Communication S.R.L. 90% Verba S.R.L...................................... Italy DDB Communication S.R.L. 90% Grafika S.R.L.................................... Italy DDB Communication S.R.L. 90% Nadler S.R.L..................................... Italy DDB Communication S.R.L. 90% TMP Italy S.R.L.................................. Italy DDB Communication S.R.L. 23% BBDO Italy SpA 25% Rapp Collins S.R.L............................... Italy DDB Communication S.R.L. 72% DDB Needham Japan Inc............................ Japan The DDB Needham Worldwide Communications Group, Inc. 100% DDB Needham DIK Korea............................ Korea DDB Needham Worldwide Partners, Inc. 39% DDB Worldwide Latvia............................. Latvia DDB Worldwide Helsinki Oy 44% Brand Sellers DDB Baltic......................... Latvia DDB Worldwide Latvia 44% Datum Optimum Media Latvia....................... Latvia Datum Optimum Media Direction Oy 22% SIA Rapp Collins................................. Latvia DDB Worldwide Latvia 37% DDB & Co......................................... Latvia DDB Worldwide Latvia 30% Brand Sellers DDB Vilnius........................ Lithuania DDB Worldwide Helsinki Oy 48% Datum Optimum Media Lithuania.................... Lithuania Datum Optimum Media Direction Oy 36%
S-11
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant ------- ------------- ------ ---------- Naga DDB SDN BHD................................. Malaysia DDB Needham Asia Pacific Ltd. 30% Gibert DDB....................................... Mexico Latin Advertising Venture LLC 60% Griffin Bacal Meranda S De R. L. De C.V.......... Mexico Griffin Bacal Inc. 57% Result DDB....................................... Netherlands Registrant 85% Medion B.V....................................... Netherlands Rapp and Collins B.V. 79% Rapp and Collins B.V............................. Netherlands Result DDB 79% Eigen Fabrikaat BV............................... Netherlands Result DDB 49% DDB Needham Holding B.V.......................... Netherlands DDB Holding Europe SCA 100% The Media Partnership............................ Netherlands Result DDB 16% FHV/BBDO Creative Marketing Agency N.V. 10% DDB Needham New Zealand Ltd...................... New Zealand DDB Needham Worldwide Ltd. 60% DDB Needham Worldwide Ltd........................ New Zealand DDB Needham Worldwide Pty. Ltd. (Australia 100% Beyond DDB Ltd................................... New Zealand DDB Needham New Zealand Ltd. 60% Sales Success New Zealand Ltd.................... New Zealand Beyond DDB Ltd. 45% Rapp Collins Worldwide Ltd....................... New Zealand Beyond DDB Ltd. 60% DDB Norway A/S.................................. Norway DDB Holding Europe SCA 100% New Deal DDB A/S................................. Norway DDB Norway A/S 98% DDB Needham Holding B.V. 2% Optimum Media A/S................................ Norway New Deal DDB A/S 90% Big Deal Film A/S................................ Norway New Deal DDB A/S 100% Real Deal DDB A/S................................ Norway New Deal DDB A/S 50% Business Deal DDB A/S............................ Norway New Deal DDB A/S 51% Macaroni A/S..................................... Norway New Deal DDB A/S 50% Pro Deal A/S..................................... Norway New Deal DDBA/S 100% New Insight A/S.................................. Norway New Deal DDBA/S 100% Retail Deal...................................... Norway New Deal DDBA/S 35% Adcom/DDB Needham Centroamerica, S.A............. Panama DDB Needham Worldwide Partners, Inc. 50% Adcom/DDB Needham Panama S.A..................... Panama Adcom/DDB Needham Centroamerica, S.A. 3% AMA DDB Needham Worldwide Inc.................... Philippines DDB Needham Asia Pacific Ltd. 51% Nowa Agencja Sp. ZO.O............................ Poland DDB Needham Worldwide Partners, Inc. 49% Optimum Media Sp. ZO.O........................... Poland Nowa Agencja Sp. ZO.O 34% Polskie Media.................................... Poland Optimum Media Sp. ZO.O. 34% Twin............................................. Poland Nowa Agencja Sp. ZO.O 49% Tempo Media Agencia de Meos, Publicidade S.A..... Portugal Guerriero DDB Publicidade, Ltda. 28% BBDO Portugal Agencia de Publicidad, Lda 32% The Media Partnership Ltda....................... Portugal Guerriero DDB Publicidade, Ltda. 18% BBDO Portugal Agencia de Publicidad, Lda 20% Guerriero DDB Publicidade, Ltda.................. Portugal DDB Holding Europe SCA 70% Olympic DDB Romania SRL.......................... Romania DDB Needham S.C.E. 63% DDB Needham Worldwide GAF Pte. Ltd............... Singapore DDB Needham Asia Pacific Ltd. 83% DDB Needham Worldwide Bratislava................. Slovak Republic DDB Needham Worldwide Partners, Inc. 80% Tandem DDB, S.A.................................. Spain The DDB Needham Worldwide Communications Group, Inc. 7% Registrant 89% Tandem Campmany Guasch DDB, S.A.................. Spain Registrant 2% Tandem DDB, S.A. 94% Optimum Media S.A................................ Spain Tandem Campmany Guasch DDB, S.A. 94% Instrumens/Rapp & Collins S.A.................... Spain Tandem DDB, S.A. 96% Screen SA (Barcelona)............................ Spain Screen GmbH 100% A Toda Copia S.A................................. Spain Tandem DDB, S.A. 96% The Media Partnership S.A........................ Spain Tandem DDB, S.A. 24% Bomberos A.B..................................... Sweden Paradiset DDB A.B. 39% Mercator Trade Marketing A.B..................... Sweden Paradiset DDB A.B. 39% Paradiset DDB A.B................................ Sweden DDB Worldwide Sweden A.B. 76% DDB Worldwide Sweden A.B......................... Sweden DDB Needham Worldwide Partners, Inc. 100% Seiler DDB AG.................................... Switzerland DDB Needham Holding AG 30%
S-12
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant ------- ------------- ------ ---------- DDB Needham Holding AG........................... Switzerland DDB Holding Europe SCA 100% DDB Needham Worldwide Ltd........................ Taiwan DDB Needham Asia Pacific Ltd. 90% Spaulding & Hawi DDB Advertising Co., Ltd........ Thailand The DDB Needham Worldwide Communications Group, Inc. 100% Medina/Turgul DDB................................ Turkey DDB Holding Europe SCA 30% Slogan DDB....................................... Uruguay DDB Needham Worldwide Partners Inc. 40% BMP DDB Ltd...................................... United Kingdom Omnicom UK Ltd. 100% Optimum Media Direction Ltd...................... United Kingdom Omnicom UK Ltd. 100% Outdoor Connection Ltd........................... United Kingdom BMP DDB Ltd. 33% Solutions in Media Ltd........................... United Kingdom Omnicom UK Ltd. 100% Griffin Bacal Limited............................ United Kingdom Prism International Ltd. 100% Target DDB Publicidad C.A........................ Venezuela DDB Needham Worldwide Partners, Inc. 49% Baxter, Gurian & Mazzei, Inc..................... California Health & Medical Communications, Inc. 100% Harrison Wilson & Associates, Inc................ California Registrant 100% Alcone Marketing Group, Inc...................... California Registrant 100% Upstart Communications, Inc...................... California Fleishman-Hillard Inc. 100% Integer Group, L.L.C............................. Colorado C-D Acquisitions Inc. 100% ACCEL Healthcare L.L.C........................... Delaware Registrant 60% Copithorne & Bellows Public Relations Inc........ Delaware Registrant 100% C&B/Interactive Public Relations ................ Delaware Copithorne & Bellows Public Relations, Inc. 100% Team South....................................... Delaware Rapp Collins Worldwide Holdings Inc. 100% Quantum Plus Corp................................ Delaware Rapp Collins Worldwide Holdings Inc. 100% Clark & Weinstock Inc............................ Delaware Registrant 100% Ketchum New York Advertising Holdings, Inc....... Delaware Ketchum Communications Holdings, Inc. 100% Ketchum Inc...................................... Delaware Registrant 100% Susan A. Thomas Inc.............................. Delaware Ketchum Inc. 100% Ketchum International, Inc....................... Delaware Registrant 100% Creative Media L.L.C............................. Delaware DAS Holdings Inc. 99% Goodby, Silverstein & Partners Holding Inc. 1% Doremus & Company................................ Delaware BBDO Worldwide Inc. 100% Doremus Printing Corp............................ Delaware Doremus & Company 100% Porter Novelli Inc............................... Delaware Doremus & Company 100% DAS Holdings Inc................................. Delaware Registrant 100% Interbrand Holdings Inc.......................... Delaware Omnicom UK Limited 100% Rapp Collins Worldwide Inc. (DE)................. Delaware Rapp Collins Worldwide Holdings Inc. 100% Optima Direct Inc................................ Delaware Registrant 100% Merkley Newman Harty, Inc........................ Delaware Registrant 100% NN Agency Inc.................................... Delaware Registrant 100% Focus Agency Limited Partnership................. Delaware NN Agency Inc. 99% C-D Acquisitions Inc. 1% Gavin Anderson & Company Worldwide Inc........... Delaware Registrant 100% Bernard Hodes Advertising Inc.................... Delaware Registrant 100% Kragie Newell Advertising Inc.................... Delaware Integer Group, L.L.C. 100% Lauren Graphics, Inc............................. Delaware Registrant 100% Rapp Collins Worldwide Limited Partnership....... Delaware Rapp Collins Worldwide Holdings Inc. 99% Rapp Collins Worldwide GP Inc. 1% Rapp Collins Worldwide GP Inc.................... Delaware Registrant 100% Rapp Collins Worldwide Holdings Inc.............. Delaware Registrant 100% Interbrand Zintzmeyer & Lux Inc.................. Delaware Interbrand Holdings Inc. 100% Millsport L.L.C.................................. Delaware DAS Holdings Inc. 25% Worldwide Marketing Resources Inc................ Delaware Registrant 100% Ketchum Directory Advertising Inc................ Delaware Registrant 100% Fleishman-Hillard Inc............................ Delaware Registrant 100% TLP East L.L.C................................... Delaware TLP, Inc. 75% Sheppard Associates Inc.......................... Delaware Registrant 100% Tic Toc, The Imagination Company L.L.C........... Delaware Registrant 75%
S-13
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant ------- ------------- ------ ---------- Duffy Wall & Associates, Inc..................... District of Columbia Fleishman-Hillard Inc. 100% Martec C I Group, Inc............................ Florida Diversified Agency Services Holding 51% Crescent Communications Inc...................... Georgia Ketchum Inc. 100% Frank J. Corbett, Inc............................ Illinois Health & Medical Communications, Inc. 100% HRC Illinois Inc................................. Illinois Rapp Collins Worldwide Holdings Inc. 100% The Russ Reid Company, Inc....................... Illinois DAS Holdings Inc. 47% Brodeur & Partners Inc........................... Massachusetts Registrant 100% Meridian Technology Marketing Inc................ Massachusetts Registrant 100% Fleishman-Hillard Missouri Poll, Inc............. Missouri Fleishman-Hillard Inc. 100% Harrison Wilson & Associates, Inc................ New Jersey Registrant 100% Gerstman + Meyers Inc............................ New York Interbrand Corporation 100% RC Communications, Inc........................... New York Registrant 99% Health & Medical Communications, Inc............. New York BBDO Worldwide Inc. 100% Gavin Anderson & Company Inc..................... New York Gavin Anderson & Company Worldwide Inc. 100% Lyons/Lavey/Nickel/Swift, Inc.................... New York Health & Medical Communications, Inc. 100% Interbrand Corporation........................... New York Registrant 100% Health Science Communications Inc................ New York Registrant 100% Kallir, Philips, Ross, Inc....................... New York Registrant 100% Shain Colavito Pensabene Direct, Inc............. New York Registrant 100% Harrison & Star, Inc............................. New York Registrant 100% Rapp & Collins USA Inc........................... New York Registrant 100% Della Femina/Jeary and Partners.................. New York Ketchum New York Advertising Holdings, Inc. 49% Gavin Anderson & Company (Japan), Inc............ New York Registrant 100% Stern Advertising, Inc........................... Ohio Registrant 100% Ketchum Communications, Inc...................... Pennsylvania Ketchum Communications Holdings, Inc. 100% Ketchum Communications Holdings, Inc............. Pennsylvania Registrant 100% GMR Group Inc.................................... Pennsylvania Registrant 60% Case Dunlap...................................... Texas Registrant 100% TLP, Inc......................................... Texas Registrant 100% Gary M. Reynolds and Associates, Inc............. Wisconsin Registrant 100% Avalos & Bourse, S.A............................. Argentina Diversified Agency Services Holding 30% Rapp Collins Argentina........................... Argentina Diversified Agency Services Holding 51% Alcone Marketing Group Asia Pacific.............. Australia Alcone Marketing Group, Inc. 100% Gavin Anderson & Company Pty Ltd................. Australia Gavin Anderson & Company Worldwide Inc. 100% Canberra Liaison................................. Australia Gavin Anderson & Company Pty Ltd. 70% PPD Sales Services GmbH.......................... Austria PPD Sales Services GmbH 100% GPC Market Access Europe S.A..................... Belgium GPC Market Access Group Ltd. 42% GPC Tennoc Limited 58% CPM Belgium S.A.................................. Belgium Promotess Holdings S.A. 100% Fleishman-Hillard Brussels....................... Belgium Fleishman-Hillard Inc. 100% Kallir, Phillips, Ross S.P.R.L................... Belgium The Promotions Partnership Limited 100% Promotess Holdings S.A........................... Belgium Diversified Agency Services Ltd. 100% Data Company Acquisition Inc..................... Brazil DAS Holdings Inc. 80% DM Company S.A. de C.V........................... Brazil Data Company Acquisition Inc. 80% Rapp Collins Brazil.............................. Brazil Registrant 70% Langdon Starr Inc................................ Canada Omnicom Canada Inc. 20% Fleishman-Hillard Canada, Inc.................... Canada Fleishman-Hillard Inc. 100% GPC International Holdings Inc................... Canada Registrant 100% GPC Canada Inc................................... Canada GPC International Holdings Inc. 100% Specialized Communications Inc................... Canada GPC International Holdings Inc. 100% Intercon Consultants Ltd......................... Canada GPC Canada Inc. 100% Ontario Inc...................................... Canada GPC Canada Inc. 100% Storgaard & Associates Inc....................... Canada GPC Canada Inc. 100% Storgaard & Associates Design Group Inc.......... Canada GPC Canada Inc. 100% D.R. Harley Consultants Limited.................. Canada GPC Canada Inc. 100%
S-14
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant ------- ------------- ------ ---------- Factor Research Group Inc........................ Canada D.R. Harley Consultants Limited 100% Neo Communications Inc........................... Canada GPC Canada Inc. 100% Michele Bazin Inc................................ Canada GPC Canada Inc. 100% Canada Inc....................................... Canada GPC Canada Inc. 100% Concordia Communication et. Affaires Publiques Inc ................................ Canada GPC Canada Inc. 50% Canada Inc. 25% Michele Bazin Inc. 25% Diversified Agency Services Holding.............. Cayman Islands Registrant 100% Sales Rapp Collins Chile......................... Chile Registrant 30% Pathways Marketing Consultants (Shanghai) Co. Ltd. China Sinowin Industrial Ltd. 51% Fleishman-Hillard Link, Ltd...................... China Fleishman-Hillard Missouri Poll, Inc. 65% Sinowin Industrial Ltd........................... China Registrant 51% PPD Marketing Services Spol.sr.o................. Czech Republic PPD Sales Services GmbH & Co. KG 51% PPD Marketing Services GmbH & Co. KG 49% Mapi Research Institute SarL..................... France Diversified Agency Services Ltd. 50% Institute Opinion Patient S A.................... France Adelphi Group Limited 50% Pro Valorem...................................... France Gavin Anderson & Company (France) S.A. 100% Ketchum Advertising France....................... France Ketchum International, Inc. 62% KPRW Paris....................................... France Ketchum International, Inc. 79% Fleishman-Hillard France......................... France Fleishman-Hillard Inc. 99% Arsenal S.A...................................... France Omnicom UK Ltd. 60% CPM France S.A................................... France DAS France Ltd. 50% Groupe IPC S.A. 50% Services Groupe IPC.............................. France CPM France S.A. 10% GBW Conseil S.A. 10% Prise Directe SARL 10% Resultats Groupe IPC SARL 10% Groupe IPC S.A. 10% Groupe IPC S.A................................... France DAS France Ltd. 100% Prise Direct SARL................................ France Groupe IPC S.A. 50% DAS France Ltd. 50% GBW Conseil S.A.................................. France Groupe IPC S.A. 74% DAS France Ltd. 26% Resultats Groupe IPC SARL........................ France Groupe IPC S.A. 50% DAS France Ltd. 50% Parmenide Porter Novelli S.A..................... France DAS France Ltd. 70% Analyse Informatique des Donnees S.A............. France DAS France Ltd. 60% Bernard Hodes Advertising S.A.................... France DAS France Ltd. 40% BDDP Corporate S.A. 38% Gavin Anderson & Company Worldwide GmbH.......... Germany BBDO Worldwide Europe GmbH 92% TARGIS Agentur fur Kommunikation GmbH............ Germany Diversified Agency Services Ltd. 85% Fleishman-Hillard Germany GmbH................... Germany Fleishman-Hillard Inc. 70% Ketchum Public Relations GmbH.................... Germany Ketchum International, Inc. 100% Advantage GmbH................................... Germany Doremus & Company 35% Interbrand Zintzmeyer & Lux GmbH................. Germany Interbrand Zintermeyer & Lux A.G. 100% Diversified Agency Services GmbH................. Germany Registrant 98% Diversified Agency Services Ltd. 2% CPM International GmbH........................... Germany Diversified Agency Services GmbH 98% CPM United Kingdom Ltd. 2% PPD Management GmbH.............................. Germany Diversified Agency Services GmbH 100% PPD Sales Services GmbH & Co. KG................. Germany CPM International GmbH 96% PPD Management GmbH 4% PPD Marketing Services GmbH & Co. KG............. Germany CPM International GmbH 96% PPD Management GmbH 4% CCS Handelsservice GmbH.......................... Germany PPD Sales Services GmbH & Co. KG 40%
S-15
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant ------- ------------- ------ ---------- Plus Promotion Verkaufsforderungs mbh............ Germany PPD Marketing Services GmbH & Co. KG 20% Gavin Anderson & Company (H.K.) Ltd.............. Hong Kong Gavin Anderson & Company Worldwide Inc. 100% Doremus Hong Kong Ltd............................ Hong Kong Doremus & Company 100% Ketchum NEWSCAN Public Relations Ltd............. Hong Kong Ketchum International, Inc. 30% Fleishman-Hillard Hong Kong, Ltd................. Hong Kong Fleishman-Hillard Inc. 100% Diversified Agency Services Ltd.................. Hong Kong Registrant 100% Rapp Collins Worldwide (Hong Kong) Ltd........... Hong Kong Diversified Agency Services Ltd. 100% Bernard Hodes Advertising (Hong Kong) Ltd........ Hong Kong Diversified Agency Services Ltd. 100% Bentley Communications Ltd....................... Hong Kong DDB Needham Asia Pacific Ltd. 28% Hong Kong Diversified Agency Services Ltd. 30% BPR Advertising Co., Ltd......................... Hong Kong DDB Needham Asia Pacific Ltd. 28% Diversified Agency Services Ltd. 30% BPR Staff Options Co. Ltd........................ Hong Kong DDB Needham Asia Pacific Ltd. 33% Diversified Agency Services Ltd. 35% BC Staff Options Co. Ltd......................... Hong Kong DDB Needham Asia Pacific Ltd. 33% Diversified Agency Services Ltd. 35% PPD Marketing Services Szolgaltato kft........... Hungary PPD Sales Services GmbH & Co. KG 50% PPD Marketing Services GmbH & Co. KG 50% Counter Products Marketing (Ireland) Ltd......... Ireland CPM United Kingdom Ltd. 90% Fleishman-Hillard Saunders Limited............... Ireland Fleishman-Hillard Inc. 41% Westland Ltd..................................... Ireland Fleishman-Hillard Saunders Limited 41% Interbrand Italia Srl............................ Italy Omnicom UK Ltd. 43% Inventa Srl...................................... Italy Interbrand Italia Srl 26% Omnicom UK Ltd. 17% CPM Italia Srl................................... Italy Interbrand Italia Srl 43% Ketchum Public Relations SRL..................... Italy Ketchum International, Inc. 41% Fleishman-Hillard Italia SpA..................... Italy Fleishman-Hillard Inc. 90% Image Time SrL................................... Italy Omnicom UK Ltd. 30% PRAP Japan Inc................................... Japan Ketchum International, Inc. 15% Fleishman-Hillard Japan K.K...................... Japan Fleishman-Hillard Inc. 90% Kabushiki Kaisha Interbrand Japan................ Japan Interbrand Group Ltd. 74% Diversified Agency Services B.V. 26% Rapp Collins K.K................................. Japan DAS Holdings Inc. 80% Targis K.K....................................... Japan Registrant 67% Interbrand Korea Inc............................. Korea Interbrand Group Ltd. 100% Fleishman-Hillard Mexico, S.A. de C.V............ Mexico Fleishman-Hillard Inc. 100% Ketchum Mexico S.A. de C.B....................... Mexico Ketchum International, Inc. 100% Diversified Agency Services Mexico S.A. de C.V... Mexico Registrant 100% Interbrand Mexico, S.A. de C.V................... Mexico Diversified Agency Services Mexico S.A. de C.V. 100% Rapp Collins Mexico.............................. Mexico Rapp Collins Worldwide Holdings Inc. 100% Martec S.A. DE C.V............................... Mexico Diversified Agency Services Holding 51% CPM Nederland Field Marketing B.V................ Netherlands Omnicom UK Ltd. 100% Diversified Agency Services B.V.................. Netherlands Interbrand Group Ltd. 100% Schoep & van der Toorn B.V....................... Netherlands Diversified Agency Services B.V. 65% PPD Marketing Services Sp.z.o.o.................. Poland PPD Sales Services GmbH & Co. KG 51% PPD Marketing Services GmbH & Co. KG 49% Gavin Anderson & Company (Singapore) Pte. Ltd.... Singapore Gavin Anderson & Company Worldwide Inc. 60% Interbrand Pte. Ltd.............................. Singapore Registrant 100% Fleishman-Hillard Hickson Pte Ltd................ Singapore Fleishman-Hillard Inc. 80% PPD Marketing Services Spol.sr.o................. Slovak Republic PPD Sales Services GmbH & Co. KG 51% PPD Marketing Services GmbH & Co. KG 49% Comunicacion Empresarial SL...................... Spain Diversified Agency Services Ltd. 25% CPM Targis S.A................................... Spain Adding Omnicom S.L. 20% Marketing Aplicado SA 29% SEIS Madrid...................................... Spain Ketchum International, Inc. 30%
S-16
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant ------- ------------- ------ ---------- Adding Omnicom S.L............................... Spain Diversified Agency Services Ltd. 51% Marketing Aplicado SA............................ Spain Omnicom UK Ltd. 49% Interbrand Zintermeyer & Lux A.G................. Switzerland Omnicom UK Ltd. 100% Adelphi Group Limited............................ United Kingdom Diversified Agency Services Ltd. 100% Adelphi Communications Limited................... United Kingdom Adelphi Group Limited 100% Adelphi Group Products Limited................... United Kingdom Adelphi Group Limited 100% Adelphi International Research Limited........... United Kingdom Adelphi Group Limited 100% Countrywide Communications (London) Ltd.......... United Kingdom Countrywide Porter Novelli Ltd. 100% Countrywide Communications (Scotland) Ltd........ United Kingdom Countrywide Porter Novelli Ltd. 75% Affinity Consulting Ltd.......................... United Kingdom Countrywide Porter Novelli Ltd. 100% CPM Mobile Marketing Ltd......................... United Kingdom CPM United Kingdom Ltd. 100% CPM Field Marketing Ltd.......................... United Kingdom Omnicom UK Ltd. 100% CPM International Group Ltd...................... United Kingdom Prism International 100% Visitation Field Marketing Limited............... United Kingdom CPM International Group Ltd. 100% Field Marketing Solutions Limited................ United Kingdom Diversified Agency Services Ltd. 100% Health Science TARGIS Limited.................... United Kingdom Diversified Agency Services Ltd. 100% Countrywide Porter Novelli Ltd................... United Kingdom Diversified Agency Services Ltd. 100% DAS Financial Services Ltd....................... United Kingdom Diversified Agency Services Ltd. 75% BBDO Canada Inc. 25% Medi Cine International plc...................... United Kingdom Diversified Agency Services Ltd. 100% WWAV Rapp Collins Group Ltd...................... United Kingdom Diversified Agency Services Ltd. 100% Gavin Anderson (UK) Ltd.......................... United Kingdom Diversified Agency Services Ltd. 100% Rapp Collins Europe Ltd.......................... United Kingdom Diversified Agency Services Ltd. 100% GPC Group Limited................................ United Kingdom Diversified Agency Services Ltd. 85% GPC International Holdings Inc. 15% Doremus & Company Ltd............................ United Kingdom Diversified Agency Services Ltd. 100% Prism International Ltd.......................... United Kingdom Option One Limited 100% Claydon Heeley International Ltd................. United Kingdom Diversified Agency Services Ltd. 100% Omnicom UK Ltd................................... United Kingdom Diversified Agency Services Ltd. 100% Copithorne & Bellows Public Relations Ltd........ United Kingdom DAS Property Development Ltd. 100% Government Policy Consultants Ltd................ United Kingdom GPC Group Limited 100% GPC Scotland Limited............................. United Kingdom Government Policy Consultants Limited 100% GPC Market Access Europe S.A..................... United Kingdom GPC Group Limited 36% GPC Tennoc Limited 49% GPC Tennoc Limited............................... United Kingdom GPC Group Limited 85% Interbrand UK Ltd................................ United Kingdom Interbrand Group Ltd. 100% Ketchum Group Limited............................ United Kingdom Omnicom UK Ltd. 100% Ketchum Life Limited............................. United Kingdom Ketchum Group Limited 100% Perception Design Ltd............................ United Kingdom Ketchum Group Limited 51% Omnicom UK Ltd. 49% Ketchum Limited.................................. United Kingdom Ketchum Group Limited 85% Omnicom UK Ltd. 15% Ketchum Sponsorship Limited...................... United Kingdom Ketchum Group Limited 85% Omnicom UK Ltd. 15% Markforce Associates Ltd......................... United Kingdom Interbrand Group Ltd. 100% Interbrand Newell and Sorrell Ltd................ United Kingdom Interbrand Group Ltd. 100% Newell & Sorell Inc.............................. United Kingdom Interbrand Newell and Sorrell Ltd. 100% Jones Mason Barton Antenen Limited............... United Kingdom Diversified Agency Services Ltd. 50% United Kingdom BMP DDB Limited 50% CPM United Kingdom Limited....................... United Kingdom Omnicom UK Ltd. 100% Specialist Publications (UK) Ltd................. United Kingdom Omnicom UK Ltd. 100% Premier Magazines Ltd............................ United Kingdom Omnicom UK Ltd. 100% Paling Walters Targis Ltd........................ United Kingdom Omnicom UK Ltd. 100% Alcone Marketing Group Ltd....................... United Kingdom Omnicom UK Ltd. 100% DAS France Ltd................................... United Kingdom Omnicom UK Ltd. 100%
S-17
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant ------- ------------- ------ ---------- DAS Property Development Ltd..................... United Kingdom Omnicom UK Ltd. 100% Smythe Dorward Lambert Ltd....................... United Kingdom Omnicom UK Ltd. 100% Brodeur A Plus Group Ltd......................... United Kingdom Diversified Agency Services Ltd. 82% Omnicom UK Ltd. 18% Porter Novelli Ltd............................... United Kingdom Omnicom UK Ltd. 100% Bernard Hodes Advertising Limited................ United Kingdom Prism International Ltd. 100% Macmillan Davies Hodes Consultants Ltd........... United Kingdom Prism International Ltd. 100% Diversified Agency Services Ltd.................. United Kingdom DAS International Limited 100% The Computing Group Ltd.......................... United Kingdom WWAV Rapp Collins Group Ltd. 100% Data Warehouse Ltd............................... United Kingdom WWAV Rapp Collins Group Ltd. 75% WWAV Rapp Collins Ltd............................ United Kingdom WWAV Rapp Collins Group Ltd. 100% WWAV Rapp Collins Media Ltd...................... United Kingdom WWAV Rapp Collins Group Ltd. 100% WWAV Rapp Collins North Ltd...................... United Kingdom WWAV Rapp Collins Group Ltd. 100% HLB Ltd.......................................... United Kingdom WWAV Rapp Collins Group Ltd. 100% WWAV Rapp Collins West Limited................... United Kingdom WWAV Rapp Collins Group Ltd. 100% WWAV Rapp Collins Scotland Ltd................... United Kingdom WWAV Rapp Collins Group Ltd. 100% DAS International Limited........................ United Kingdom Registrant 100% Fleishman-Hillard U.K. Ltd....................... United Kingdom DAS International Limited 100% Fleishman-Hillard Europe Ltd..................... United Kingdom Fleishman-Hillard U.K. Ltd. 90% TBWA Worldwide Inc............................... New York Registrant 100% TBWA Chiat/Day Inc............................... Delaware Registrant 100% Ketchum Advertising Inc.......................... Delaware Registrant 100% Advertising US Holdings Inc...................... Delaware Registrant 100% Gold Greenlees Trott US Holdings Inc............. Delaware Advertising US Holdings Inc. 100% GGT USA / South Inc.............................. Delaware Gold Greenlees Trott US Holdings Inc. 100% G&S Associates Inc............................... Texas Gold Greenlees Trott US Holdings Inc. 100% Martin-Williams Inc.............................. Minnesota Gold Greenlees Trott US Holdings Inc. 100% Savaglio TBWA y Associados S.A................... Argentina Registrant 30% TBWA Holdings Australasia Pty Ltd................ Australia Registrant 100% Whybin TBWA & Partners Pty. Ltd.................. Australia TBWA Holdings Australasia Pty Ltd 60% Whybin Lawrence TBWA............................. Australia TBWA Holdings Australasia Pty Ltd 51% TBWA/TELL Werbeagentur G.m.b.H................... Austria Registrant 70% TBWA/GV Group S.A................................ Belgium TBWA International B.V. 75% TBWA S.A. (Brussels)............................. Belgium TBWA/GV Group S.A. 75% GV Company S.A................................... Belgium TBWA/GV Group S.A. 75% Motu Nui S.A..................................... Belgium TBWA/GV Group S.A. 75% Media KnowHow S.A................................ Belgium TBWA/GV Group S.A. 75% 4ReAL S.A........................................ Belgium TBWA/GV Group S.A. 60% Marketing & Entertainment S.A.................... Belgium TBWA/GV Group S.A. 75% Concept+......................................... Belgium TBWA S.A. (Brussels) 59% TBWA Propaganda Limitada......................... Brazil Registrant 70% TBWA Sofia o.o.d................................. Bulgaria Registrant 55% Stringer Veroni Ketchum.......................... Canada Omnicom Canada Inc. 67% Ketchum International, Inc. 33% Frederick & Valenzula TBWA Disenadores Asociados S.A. ................................ Chile Registrant 30% Shanghai TBWA Lee Davis Advertising Ltd.......... China TBWA Lee Davis Advertising Ltd. 34% TBWA Publicidad ................................. Costa Rica Registrant 25% TBWA Zagreb d.o.o................................ Croatia Registrant 90% Grade/TBWA s.r.o................................. Czech Republic Registrant 30% Hager Praha s.r.o................................ Czech Republic Registrant 60% MAX TBWA s.r.o................................... Czech Republic Registrant 51% TBWA Reklamebureau A/S........................... Denmark Registrant 85% Eliasson & Jesting/TBWA Dialog................... Denmark TBWA Reklamebureau A/S 43% Paltemaa Huttunen Santala TBWA Oy................ Finland Registrant 34% BDDP Worldwide S.A............................... France TBWA Worldwide Inc. 100%
S-18
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant ------- ------------- ------ ---------- BDDP France S.A.................................. France BDDP Worldwide S.A. 100% BDDP @ TBWA S.A.................................. France BDDP France S.A. 98% BDDP & Fils S.A.................................. France BDDP France S.A. 74% Question d'Edition S.A........................... France BDDP France S.A. 84% SEO "Achat d'Espace" S.A......................... France BDDP Worldwide S.A. 100% Jump S.A......................................... France BDDP Worldwide S.A. 82% Ananas S.A.R.L................................... France Jump S.A. 65% Agence Gagnol S.A................................ France Jump S.A. 81% Groupe Jump S.A.................................. France Jump S.A. 73% Nouvelle Vague S.A............................... France BDDP Worldwide S.A. 62% Nickel S.A....................................... France BDDP Worldwide S.A. 87% ALS/Tonic S.A.................................... France BDDP Worldwide S.A. 88% BDDP Corporate S.A............................... France BDDP Worldwide S.A. 96% Agence BDDP Corporate S.A........................ France BDDP Corporate S.A. 96% Allo - Carrieres S.A............................. France Agence BDDP Corporate S.A. 96% Compagnie Corporate Gestion Deleguee S.A......... France Agence BDDP Corporate S.A. 96% Auditoire S.A.................................... France BDDP Corporate S.A. 96% Textuel S.A...................................... France BDDP Corporate S.A. 96% Les Editions Textuel S.A......................... France BDDP Corporate S.A. 28% Textuel S.A. 5% BDDP & Tequila Interactive S.A................... France BDDP Corporate S.A. 48% Tequila France S.A. 48% CPM Rhone - Alpes S.A.R.L........................ France BDDP Corporate S.A. 48% ASA S.A.R.L...................................... France BDDP Corporate S.A. 96% Tequila France S.A............................... France BDDP Worldwide S.A. 95% The Brand Company S.A............................ France BDDP Worldwide S.A. 88% The Brand Company Archi S.A.R.L.................. France The Brand Company S.A. 88% Euromix Media S.A.R.L............................ France BDDP Worldwide S.A. 100% TJP & Associates S.A............................. France BDDP Worldwide S.A. 100% The Media Partnership France S.A................. France BDDP Worldwide S.A. 17% The Media Partnership Research S.A............... France The Media Partnership France S.A. 17% TBWA (Deutschland) Holding GmbH.................. Germany TBWA International B.V. 100% TBWA Werbeagentur GmbH........................... Germany TBWA (Deutschland) Holding GmbH 100% TBWA Dusseldorf GmbH............................. Germany TBWA Werbeagentur GmbH 100% BDDP Communications GmbH......................... Germany BDDP Worldwide SA 100% Godenrath Preiswerk/BDDP Werbeagentur GmbH....... Germany BDDP Communications GmbH 85% Wundrich Meissen Creativ Consulting GmbH......... Germany Godenrath Preiswerk/BDDP Werbeagentur GmbH 85% Production Company Stuttgart GmbH................ Germany Godenrath Preiswerk/BDDP Werbeagentur GmbH 85% Planet Communications Germany.................... Germany Ketchum International Inc. 65% TBWA/Producta S.A................................ Greece Registrant 51% TBWA Lee Davis Advertising Ltd................... Hong Kong Registrant 76% TBWA Thompson Ltd................................ Hong Kong Registrant 100% TBWA Budapest Reklam Mugynokseg Kft.............. Hungary Registrant 75% TBWA Anthem Private Limited...................... India Registrant 51% Radeus Advertising Private Limited............... India TBWA Anthem Private Limited 51% Yehoshua TBWA Advertising & Marketing Ltd........ Israel TBWA International B.V. 25% TBWA Italia S.P.A. (Milan)....................... Italy TBWA International B.V. 100% BDDP S.P.A....................................... Italy BDDP Worldwide SA 100% TBWA Nippo....................................... Japan TBWA Worldwide Inc. 77% Nissan Graphic Arts.............................. Japan TBWA Worldwide Inc. 67% Tae Kwang Multi - Ad Ltd......................... Korea TBWA Worldwide Inc. 70% Teran TBWA Publicidad............................ Mexico Registrant 30% TBWA International B.V........................... Netherlands Registrant 100% Data Company B.V................................. Netherlands TBWA International B.V. 100% E-Company B.V.................................... Netherlands TBWA International B.V. 51%
S-19
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant ------- ------------- ------ ---------- Mako/Bovaco B.V.................................. Netherlands TBWA International B.V. 57% Sponsor Company B.V.............................. Netherlands TBWA International B.V. 20% Multicom Direct Marketing & Advertising B.V...... Netherlands TBWA International B.V. 100% TBWA Campaign Company B.V........................ Netherlands TBWA International B.V. 70% Dresme Van Dijk Partners B.V..................... Netherlands TBWA International B.V. 100% Direct Company B.V............................... Netherlands Dresme Van Dijk Partners B.V. 100% HVR/Bruns van der Wijk B.V. ..................... Netherlands TBWA International B.V. 59% Neuerburg PR B.V................................. Netherlands TBWA International B.V. 15% TBWA/ Neth-work B.V. ............................ Netherlands TBWA International B.V. 50% TBWA Reklame & Marketing B.V..................... Netherlands TBWA International B.V. 100% Grant Tandy B.V.................................. Netherlands TBWA International B.V. 100% CO/CIE B.V....................................... Netherlands BDDP Worldwide S.A. 51% BDDP Corporate S.A. 47% BDDP & Partners B.V.............................. Netherlands BDDP Worldwide S.A. 100% ARA/BDDP B.V..................................... Netherlands BDDP & Partners B.V. 100% BDDP Nederland B.V............................... Netherlands BDDP & Partners B.V. 100% ARA/BDDP Groep B.V............................... Netherlands BDDP Nederland B.V. 100% Bovil B.V........................................ Netherlands ARA/BDDP Groep B.V. 70% Navar BDDP B.V................................... Netherlands ARA/BDDP Groep B.V. 100% TBWA Reklamebyra A.S............................. Norway TBWA International B.V. 55% TBWA Dialog A.S.................................. Norway TBWA Reklamebyra A.S. 55% Immo Polska Sp. zo.o............................. Poland Registrant 76% TBWA Polska Sp. zo.o............................. Poland Registrant 76% TBWA Warszawa Sp. zo.o........................... Poland Registrant 73% TBWA-EPG Publicidade, Ltd........................ Portugal Registrant 59% TBWA Bucharest s.r.l............................. Romania Registrant 90% TBWA Singapore Pte Ltd........................... Singapore Registrant 82% Tequila Asia Pacific............................. Singapore Tequila UK Limited 73% TBWA Bratislava spol s.r.o....................... Slovakia Registrant 90% Hunt Lascaris TBWA Holdings (Pty) Limited........ South Africa TBWA International B.V. 20% Registrant 80% Hunt Lascaris TBWA Johannesberg (Pty) Limited.... South Africa Hunt Lascaris TBWA Holdings (Pty) Limited 100% Hunt Lascaris TBWA Cape (Pty) Limited............ South Africa Hunt Lascaris TBWA Holdings (Pty) Limited 85% Hunt Lascaris TBWA (Durban) (Pty) Limited........ South Africa Hunt Lascaris TBWA Holdings (Pty) Limited 80% Paroden Inv Holdings (Pty) Limited............... South Africa TBWA International B.V. 100% Schalit Shipley Nethwork......................... South Africa Registrant 20% TBWA/ Neth-work B.V. 10% Paroden Inv Holdings (Pty) Limited 40% Specialist Communications Services............... South Africa Registrant 51% Ad Active S.A. (Pty) Limited..................... South Africa Specialist Communications Services 26% Rapp Collins S.A. (Pty) Limited.................. South Africa Specialist Communications Services 41% Tool S.A. (Pty) Limited.......................... South Africa Specialist Communications Services 31% South Africa Advertising Investments (Pty) Limited ................................ South Africa Registrant 60% Gavin Reddy Horn (Pty) Limited................... South Africa South Africa Advertising Investments (Pty) Limited 32% Gavin Reddy Horn Cape............................ South Africa Gavin Reddy Horn (Pty) Limited 32% Media Direciton S.A. (Proprietary) Limited....... South Africa Registrant 51% TBWA Espana S.A.................................. Spain TBWA International B.V. 95% TBWA Sweden A.B.................................. Sweden Registrant 100% TBWA Sweden K.B.................................. Sweden TBWA Sweden A.B. 51% TBWA GGK A.G..................................... Switzerland TBWA International B.V. 51% Impuls BDDP A.G.................................. Switzerland BDDP & Partners B.V. 70% TBWA Next & Triplet Advertising Co. Limited...... Thailand Registrant 61% The GGT Group Limited............................ United Kingdom DAS International Limited 100% Tequila International Holdings Limited........... United Kingdom The GGT Group Limited 100% Summertime Communications Limited................ United Kingdom The GGT Group Limited 100%
S-20
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant ------- ------------- ------ ---------- BDDP.GGT Limited................................. United Kingdom Summertime Communications Limited 100% TBWA UK Group Holdings Limited................... United Kingdom BDDP.GGT Limited 100% TISSA Ltd........................................ United Kingdom TBWA UK Group Holdings Limited 100% TBWA GGT Simons Palmer Limited................... United Kingdom TBWA UK Group Holdings Limited 100% Genesis Digital Creation Limited................. United Kingdom TBWA GGT Simons Palmer Limited 100% Simons Palmer Clemmow Johnson (Holdings) Limited. United Kingdom TBWA GGT Simons Palmer Limited 100% Catapult Studios Limited......................... United Kingdom Simons Palmer Clemmow Johnson (Holdings) Limited 100% Parellel Productions Limited..................... United Kingdom Simons Palmer Clemmow Johnson (Holdings) Limited 100% MicMacs Limited.................................. United Kingdom Simons Palmer Clemmow Johnson (Holdings) Limited 100% Maher Bird Associates Limited.................... United Kingdom Simons Palmer Clemmow Johnson (Holdings) Limited 89% B.D.H. Communications Group Limited.............. United Kingdom The GGT Group Limited 100% BDH TBWA Limited................................. United Kingdom B.D.H. Communications Group Limited 100% Compendium Specialist Communications Services Limited ............................. United Kingdom B.D.H. Communications Group Limited 100% Compendium Technology Limited.................... United Kingdom B.D.H. Communications Group Limited 100% Iconactive Limited............................... United Kingdom B.D.H. Communications Group Limited 100% Corporate Business Advisors Limited.............. United Kingdom The GGT Group Limited 100% Mortimer Whittaker O'Sullivan Limited............ United Kingdom Corporate Business Advisors Limited 100% Fallowbush Limited............................... United Kingdom The GGT Group Limited 100% BDDP Holdings UK Limited......................... United Kingdom Fallowbush Limited 100% GGT Advertising Limited.......................... United Kingdom The GGT Group Limited 100% R. M. Communications Limited..................... United Kingdom GGT Advertising Limited 100% GGT Direct Advertising Limited................... United Kingdom The GGT Group Limited 100% Option One Group Limited......................... United Kingdom The GGT Group Limited 100% Option One Limited............................... United Kingdom Option One Group Limited 100% Tequila UK Limited............................... United Kingdom Option One Limited 81% Prism International Limited...................... United Kingdom Option One Limited 100% Tequila Payne Stracey Limited.................... United Kingdom Prism International Limited 100%
S-21 EX-23.1 3 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated February 16, 1999 included in this Form 10-K into the previously filed Registration Statement File No. 333-41717, 333-70091, 333-74591, 333-74727 and 333-74879 on Form S-8 of Omnicom Group Inc. and into the previously filed Registration Statement File Nos. 333-22589, 333-43883, 333-44481, 333-44483, 333-46303 and 333-47047 on Form S-3 of Omnicom Group Inc. ARTHUR ANDERSEN LLP New York, New York March 29, 1999 S-22 EX-24 4 POWER OF ATTORNEY POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned directors of Omnicom Group Inc., a New York corporation ("Omnicom"), constitute and appoint John D. Wren and Barry J. Wagner, and each of them, their true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for them and in their name, place and stead, to sign the Annual Report on Form 10-K of Omnicom for the fiscal year ended December 31, 1998, including any or all amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, including specifically this Power of Attorney, with the Securities and Exchange Commission and the New York Exchange, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes, shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned have subscribed these presents on the 29th day of March, 1999. /s/ Bernard Brochand /s/ John R. Purcell - ------------------------------- ------------------------------ Bernard Brochand John R. Purcell /s/ Robert J. Callander /s/ Keith L. Reinhard - ------------------------------- ------------------------------ Robert J. Callander Keith L. Reinhard /s/ James A. Cannon /s/ Allen Rosenshine - ------------------------------- ------------------------------ James A. Cannon Allen Rosenshine /s/ Leonard S. Coleman, Jr. /s/ Gary L. Roubos - ------------------------------- ------------------------------ Leonard S. Coleman, Jr. Gary L. Roubos /s/ Bruce Crawford /s/ Quentin I. Smith, Jr. - ------------------------------- ------------------------------ Bruce Crawford Quentin I. Smith, Jr. /s/ Susan S. Denison /s/ Egon P.S. Zehnder - ------------------------------- ------------------------------ Susan S. Denison Egon P.S. Zehnder /s/ John R. Murphy - ------------------------------- John R. Murphy EX-27 5 FDS --
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF OMNICOM GROUP INC. AND SUBSIDIARIES AS OF AND FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS DEC-31-1998 DEC-31-1998 648,016 80,750 2,632,372 57,475 0 3,981,269 741,094 414,544 6,910,060 4,796,353 715,864 0 0 88,646 997,822 6,910,060 0 4,092,042 0 2,416,284 1,115,584 14,418 69,602 520,149 215,808 285,068 0 0 0 285,068 1.72 1.68
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