-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, BC0VMTtt/L5fPkQnrkHlF2dYZvQCK+mFlkOIljKOYH1C+rguH0nNlMF4uYZiot3L c8bdRor5V8kv29R5U1SCOQ== 0000891554-94-000065.txt : 19941116 0000891554-94-000065.hdr.sgml : 19941116 ACCESSION NUMBER: 0000891554-94-000065 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OMNICOM GROUP INC CENTRAL INDEX KEY: 0000029989 STANDARD INDUSTRIAL CLASSIFICATION: 7311 IRS NUMBER: 131514814 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10551 FILM NUMBER: 94559995 BUSINESS ADDRESS: STREET 1: 437 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2124153600 MAIL ADDRESS: STREET 1: 437 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: DOYLE DANE BERNBACH GROUP INC DATE OF NAME CHANGE: 19861117 FORMER COMPANY: FORMER CONFORMED NAME: DOYLE DANE BERNBACH INTERNATIONAL INC DATE OF NAME CHANGE: 19850604 FORMER COMPANY: FORMER CONFORMED NAME: DOYLE DANE BERNBACH INC DATE OF NAME CHANGE: 19781226 10-Q 1 QUARTERLY REPORT CONFORMED COPY FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended: September 30, 1994 ------------------ Commission file number: 1-10551 ------- Omnicom Group Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) New York 13-1514814 - -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 437 Madison Avenue, New York, New York 10022 - -------------------------------------------------------------------------------- (Address of principal (Zip Code) executive offices) (212) 415-3600 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No -- -- The number of shares of common stock of the Company issued and outstanding at October 31, 1994 is 36,454,400. OMNICOM GROUP INC. AND SUBSIDIARIES INDEX Page No. -------- PART I. FINANCIAL INFORMATION Item I. Financial Statements: Consolidated Condensed Balance Sheets - September 30, 1994, December 31, 1993 and September 30, 1993 2 Consolidated Condensed Statements of Income - Three Months Ended September 30, 1994 and 1993 Nine Months Ended September 30, 1994 and 1993 3 Consolidated Condensed Statements of Cash Flows - Nine Months Ended September 30, 1994 and 1993 4 Notes to Consolidated Condensed Financial Statements 5-8 Item II. Management's Discussion of Financial Condition and Results of Operations 9-16 PART II. OTHER INFORMATION Item 6 Exhibits 17 -1- PART I. FINANCIAL INFORMATION Item 1. Financial Statements OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in Thousands)
Assets September 30, December 31, September 30, ------ 1994 1993 1993 ------------- ------------ ----------- Current assets: Cash and cash equivalents $ 118,281 $ 174,833 $ 101,186 Investments available-for-sale, at market, which approximates cost 11,354 38,003 10,422 Accounts receivable, less allowance for doubtful accounts of $19,851, $17,298 and $15,464 941,634 901,434 835,345 Billable production orders in process 102,591 59,415 87,366 Prepaid expenses and other current assets 139,743 100,791 121,520 ------------ ------------ ------------ Total current assets 1,313,603 1,274,476 1,155,839 Furniture, equipment and leasehold improvements, less accumulated depreciation and amortization of $220,608, $188,868 and $187,543 171,078 160,543 157,983 Investments in affiliates 124,183 112,232 106,433 Intangibles, less accumulated amortization of $128,762, $93,105 and $82,790 697,128 603,494 535,436 Deferred tax benefits 8,343 18,522 16,578 Deferred charges and other assets 144,565 120,596 109,569 ------------ ------------ ------------ Total assets $ 2,458,900 $ 2,289,863 $ 2,081,838 ============ ============ ============ Liabilities and Shareholders' Equity ------------------------------------ Current liabilities: Accounts payable $ 928,076 $ 1,058,095 $ 833,163 Payable to banks 93,179 48,047 74,999 Convertible Subordinated Debentures (Note 6) -- -- 83,900 Other accrued liabilities 412,914 388,102 302,080 Accrued taxes on income 26,181 29,974 24,425 ------------ ------------ ------------ Total current liabilities 1,460,350 1,524,218 1,318,567 Long term debt 348,240 278,312 322,290 Deferred compensation and other liabilities 76,826 56,933 71,062 Minority interests 35,971 28,214 35,394 Shareholders' equity: Common stock 19,321 17,536 15,907 Additional paid-in capital 356,478 252,408 160,931 Retained earnings 298,766 287,416 266,714 Unamortized restricted stock (28,506) (21,807) (23,951) Cumulative translation adjustment (18,641) (65,257) (52,296) Treasury stock (89,905) (68,110) (32,780) ------------ ------------ ------------ Total shareholders' equity 537,513 402,186 334,525 ------------ ------------ ------------ Total liabilities and shareholders' equity $ 2,458,900 $ 2,289,863 $ 2,081,838 ============ ============ ============
The accompanying notes to consolidated condensed financial statements are an integral part of these balance sheets. - 2 - OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Dollars in Thousands, Except Per Share Data)
Three Months Ended September 30, Nine Months Ended September 30, -------------------------------- ------------------------------- 1994 1993 1994 1993 ---- ---- ---- ---- Revenues: Commissions and fees $ 422,274 $ 339,531 $ 1,224,010 $ 1,060,428 Operating expenses: Salaries and related costs 245,219 193,665 695,681 605,337 Office and general expenses 142,018 119,745 390,490 341,029 ----------- ----------- ----------- ----------- Total operating expenses 387,237 313,410 1,086,171 946,366 ----------- ----------- ----------- ----------- Operating profit 35,037 26,121 137,839 114,062 Net interest expense: Interest and dividend income (2,717) (2,614) (8,286) (8,539) Interest paid or accrued 7,899 9,154 26,451 29,008 ----------- ----------- ----------- ----------- Total net interest expense 5,182 6,540 18,165 20,469 ----------- ----------- ----------- ----------- Income before income taxes and change in accounting principle 29,855 19,581 119,674 93,593 Income taxes: Federal 3,459 4,968 18,483 16,734 State and local 2,101 2,087 5,823 5,301 International 6,754 1,173 24,979 17,261 ----------- ----------- ----------- ----------- Total income taxes 12,314 8,228 49,285 39,296 ----------- ----------- ----------- ----------- Income after income taxes and before change in accounting principle 17,541 11,353 70,389 54,297 Equity in affiliates 3,432 1,769 9,384 6,135 Minority interests (2,823) (276) (9,205) (5,868) ----------- ----------- ----------- ----------- Income before change in accounting principle 18,150 12,846 70,568 54,564 Cumulative effect of change in accounting principle (Note 5) -- -- (28,009) -- ----------- ----------- ----------- ----------- Net income $ 18,150 $ 12,846 $ 42,559 $ 54,564 =========== =========== =========== =========== Earnings per share: Income before change in accounting principles: Primary $ 0.52 $ 0.43 $ 2.09 $ 1.83 Fully diluted $ 0.52 $ 0.43 $ 2.05 $ 1.73 Cumulative effect of change in accounting principle: Primary -- -- $ (0.83) -- Fully diluted -- -- $ (0.83) -- Net income: Primary $ 0.52 $ 0.43 $ 1.26 $ 1.83 Fully diluted $ 0.52 $ 0.43 $ 1.26 $ 1.73 Dividends declared per common share $ 0.31 $ 0.31 $ 0.93 $ 0.93
The accompanying notes to consolidated condensed financial statements are an integral part of these statements. - 3 - OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
Nine Months Ended September 30, ------------- 1994 1993 ---- ---- Cash flows from operating activities: Net income $ 42,559 $ 54,564 Adjustments to reconcile net income to net cash provided (used) for operating activities: Depreciation and amortization of tangible assets 28,195 25,114 Amortization of intangible assets 16,302 13,093 Minority interests 8,940 5,868 Earnings of affiliates in excess of dividends received (5,588) (2,312) Increase (decrease) in deferred taxes 932 (185) Provision for losses on accounts receivable 3,733 2,501 Amortization of restricted shares 7,301 4,800 Decrease in accounts receivable 21,827 18,703 Increase in billable production (35,547) (26,059) Increase in other current assets (19,650) (4,602) Decrease in accounts payable (197,967) (139,899) Decrease in other accrued liabilities (12,120) (46,995) Decrease in accrued income taxes (5,073) (6,372) Other 36,848 (8,101) --------- --------- Net cash used in operating activities (109,308) (109,882) --------- --------- Cash flows from investing activities: Capital expenditures (30,590) (25,547) Payments for purchases of equity interests in subsidiaries and affiliates, net of cash acquired (83,079) (21,316) Payments for purchases of marketable securities and other investments (5,095) (3,666) Proceeds from sales of marketable securities and other investments 32,326 16,798 --------- --------- Net cash used by investing activities (86,438) (33,731) --------- --------- Cash flows from financing activities: Net borrowings under lines of credit 57,464 34,852 Share transactions under employee stock plans 6,653 7,207 Issuance of principal of debt obligations 151,876 151,752 Dividends and loans to minority stockholders (8,182) (7,167) Dividends paid (30,266) (26,220) Purchase of treasury shares (49,624) (23,329) --------- --------- Net cash provided by financing activities 127,921 137,095 --------- --------- Effect of exchange rate changes on cash and cash equivalents 11,273 (4,755) --------- --------- Net decrease in cash and cash equivalents (56,552) (11,273) Cash and cash equivalents at beginning of period 174,833 112,459 --------- --------- Cash and cash equivalents at end of period $ 118,281 $ 101,186 ========= ========= Supplemental Disclosures: Income taxes paid $ 44,172 $ 45,927 ========= ========= Interest paid $ 26,192 $ 24,536 ========= =========
The accompanying notes to consolidated condensed financial statements are an integral part of these statements. - 4 - OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1) The consolidated condensed interim financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. 2) These statements reflect all adjustments consisting of normal recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the information contained therein. Certain reclassifications have been made to the September 30, 1993 reported amounts to conform them with the September 30, 1994 and December 31, 1993 presentation. It is suggested that these consolidated condensed financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's latest annual report on Form 10-K. 3) Results of operations for the interim periods are not necessarily indicative of annual results. -5- NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) 4) Primary earnings per share is based upon the weighted average number of common shares and common share equivalents outstanding during each period. Fully diluted earnings per share is based on the above and if dilutive, adjusted for the assumed conversion of the Company's Convertible Subordinated Debentures and the assumed increase in net income for the after tax interest cost of these debentures. At September 30, 1994, the 4.5%/6.25% Step-up Convertible Subordinated Debentures were outstanding. At September 30, 1993, the 6.5% and 7% Convertible Subordinated Debentures and the 4.5%/6.25% Step-up Convertible Subordinated Debentures were outstanding. The number of shares used in the computations of primary and fully diluted earnings per share is as follows:
Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 1994 1993 1994 1993 ---- ---- ---- ---- Primary 35,197,600 30,095,800 33,895,100 29,866,100 Fully diluted 35,239,700 37,679,200 39,034,600 37,031,900
For purposes of computing fully diluted earnings per share on net income for the three months ended September 30, 1994, and net income and the cumulative effect of the change in accounting principle, for the nine months ended September 30, 1994, the Company's Convertible Subordinated Debentures were not reflected in the computations as their inclusion would have been anti-dilutive. -6- NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) 5) Effective January 1, 1994, the Company adopted the provisions of Statement of Financial Accounting Standards No. 112 "Employers' Accounting for Postemployment Benefits" ("SFAS 112"). The cumulative after tax effect of the adoption of this statement decreased net income by $28,009,000. 6) On June 1, 1994, the Company issued a Notice of Redemption for its 6.5% Convertible Subordinated Debentures with a scheduled maturity in 2004. On or before the July 27, 1994 redemption date, debenture holders elected to convert all of their outstanding debentures into common stock of the Company at a conversion price of $28.00 per common share. On August 9, 1993, the Company issued a Notice of Redemption for its 7% Convertible Subordinated Debentures with a scheduled maturity in 2013. On or before the October 8, 1993 redemption date, debenture holders elected to convert all of their outstanding debentures into common stock of the Company at a conversion price of $25.75 per common share. 7) Effective January 1, 1994, the Company adopted the provisions of Statement of Financial Accounting Standard No. 115 "Accounting for Certain Investments in Debt and Equity Securities." -7- NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) At September 30, 1994 the Company's investments consisted principally of time deposits with financial institutions. These investments, with scheduled maturities of less than one year, are valued at estimate fair value, which approximates cost. 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 September 30, 1994. -8- OMNICOM GROUP INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Third Quarter 1994 Compared to Third Quarter 1993: Consolidated worldwide revenues from commission and fee income increased 24.4% from $339,531,000 in the third quarter of 1993 to $422,274,000 in the third quarter of 1994. Consolidated domestic commission and fee income increased 11.3% from $188,415,000 in 1993 to $209,720,000 in 1994. Consolidated international commission and fee income increased 40.7% from $151,116,000 in 1993 to $212,554,000 in 1994. Absent the effect of the net acquisitions of subsidiary companies and movements in international currency exchange rates, worldwide revenues would have increased 13.7% in the third quarter of 1994 as compared to the same period in 1993. Operating expenses increased 23.6% in the third quarter of 1994 as compared to the third quarter of 1993. Excluding the effect of the net acquisition activity and movements in international currency exchange rates, operating expenses would have increased 11.1% over 1993 levels. This increase reflects normal salary increases and growth in client service expenditures to support the increased revenue base. Operating expenses as a percentage of commissions and fees were 91.7% in the third quarter of 1994 as compared to 92.3% in 1993. -9- MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Net interest expense decreased by $1,358,000 in the third quarter of 1994 as compared to the same period in 1993. This decrease reflects lower average interest rates on borrowings, primarily due to the conversion of the Company's 7% Convertible Subordinated Debentures in October 1993 and the conversion of the Company's 6.5% Convertible Subordinated Debentures in July 1994. Pretax profit margin was 7.1% in the third quarter of 1994 as compared to 5.8% in 1993. Operating margin, which excludes interest and dividend income and interest expense, was 8.3% in the third quarter of 1994 as compared to 7.7% in 1993. The effective income tax rate was 41.2% in the third quarter of 1994 as compared to 42.0% for the third quarter of 1993. The decrease reflects a lower international effective tax rate primarily caused by fewer international operating losses with no associated tax benefit. The increase in equity in affiliates is indicative of greater profits earned by companies in which the Company owns less than a 50% equity interest. The increase in minority interests primarily reflects greater earnings by companies in which minority interests exist. -10- MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Net income increased 41.3% to $18,150,000 in the third quarter of 1994 as compared to $12,846,000 in the same period in 1993. Absent the effect of net acquisitions of subsidiary companies and movements in international currency exchange rates, net income would have increased 53.4% in the third quarter of 1994 as compared to the third quarter of 1993. -11- MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Nine Months 1994 Compared to Nine Months 1993: Consolidated worldwide commission and fee income increased 15.4% from $1,060,428,000 in the first nine months of 1993 to $1,224,010,000 in the first nine months of 1994. Consolidated domestic commission and fee income increased 10.7% from $556,293,000 in the first nine months of 1993 to $615,758,000 in the same period of 1994. Consolidated international commission and fee income increased 20.7% from $504,135,000 in the first nine months of 1993 to $608,252,000 in the same period in 1994. Absent the effects of movements in international currency exchange rates and net acquisitions of subsidiary companies made subsequent to the third quarter of 1993, consolidated worldwide commission and fee income would have increased 9.5% in the first nine months of 1994 versus the same period in 1993. Operating expenses increased by 14.8% in the first nine months of 1994 as compared to the same period in 1993. Excluding the effect of net acquisition activity and movements in international currency exchange rates, operating expenses would have increased 8.0% over 1993 levels. This increase occurred for reasons discussed in the third quarter narrative. -12- MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Net interest expense decreased 11.3% to $18,165,000 in the first nine months of 1994 as compared to net interest expense of $20,469,000 in the first nine months of 1993. This decrease reflects lower average interest rates on borrowings, primarily due to the conversion of the Company's 7% Convertible Subordinated Debentures in October 1993 and the conversion of the Company's 6.5% Convertible Subordinated Debentures in July 1994. Pretax profit margin was 9.8% for the first nine months of 1994 as compared to 8.8% in 1993. Operating profit margin, which excludes interest and dividend income and interest expense, was 11.3% in the first nine months of 1994 as compared to 10.8% in the same period of 1993. The effective income tax rate was 41.2% in the first nine months of 1994 as compared to 42.0% in the first nine months of 1993. The decrease reflects a lower international effective tax rate primarily caused by fewer foreign operating losses with no associated tax benefit. The increase in equity in affiliates is indicative of greater profits earned by companies in which the Company owns less than a 50% equity interest. The increase in minority interests primarily reflects greater earnings by companies in which minority interests exist. -13- MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Effective January 1, 1994, the Company adopted the provisions of Statement of Financial Accounting Standards 112 "Employers' Accounting for Postemployment Benefits" ("SFAS 112"). The cumulative after tax effect of the adoption of this Statement decreased net income by $28,009,000. Net income before the cumulative effect of the adoption of SFAS 112, increased 29.3% to $70,568,000 in the first nine months of 1994 from $54,564,000 in the same period in 1993. Absent the effect of net acquisition activity and movements in international currency exchange rates, net income would have increased 36.5% in the first nine months of 1994 as compared to the same period of 1993. Capital Resources and Liquidity Cash and cash equivalents at September 30, 1994 decreased to $118,281,000 from $174,833,000 at December 31, 1993. This decrease reflects the paydown of year-end accrued liabilities, the seasonal build-up of production inventory which will be billed later in the year, and a payout of funds to the media and other suppliers exceeding collections from clients. -14- MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) These events are normal industry patterns and occurred in the first nine months of 1993 as well. The relationship, at September 30, 1994, between payables to the media and suppliers and receivables from clients compares favorably to customary industry practices. On June 1, 1994, the Company issued a Notice of Redemption for its 6.5% Convertible Subordinated Debentures with a scheduled maturity in 2004. On or before the July 27, 1994 redemption date, debenture holders elected to convert all of their outstanding debentures into common stock of the Company at a conversion price of $28.00 per common share. This resulted in the issuance of 3,571,233 shares of common stock. The Company maintains relationships with a number of banks worldwide, which have extended unsecured committed lines of credit in amounts sufficient to meet the Company's cash needs. At September 30, 1994, the Company had $397,648,000 in committed lines of credit, comprised of $250,000,000 under a credit agreement expiring June 30, 1997 and $147,648,000 in unsecured committed lines of credit, principally outside of the United States. Of the $397,648,000 in committed lines, $128,868,000 remained available at September 30, 1994. -15- MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Management believes the aggregate lines of credit available to the Company are adequate to support its short term cash requirements for dividends, capital expenditures and maintenance of working capital. The Company anticipates that future cash flows from operations plus funds available under existing line of credit facilities will be adequate to support the long term cash requirements as presently contemplated. At the present time, the Company is evaluating the economics of refinancing certain existing debt under more favorable conditions. -16- PART II. OTHER INFORMATION Item 6. Exhibits Exhibit Number Description of Exhibit -------------- ---------------------- 27 Appendix A to Item 601(c) of Regulation S-K Commercial and Industrial Companies - Article 5 of Regulation S-X SIGNATURES - ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Omnicom Group Inc. (Registrant) Date November 11, 1994 /s/ Fred J. Meyer --------------------- ----------------- Fred J. Meyer Chief Financial Officer and Director (Principal Financial Officer) Date November 11, 1994 /s/ Dale A. Adams --------------------- ----------------- Dale A. Adams Controller (Principal Accounting Officer) -17- EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the consolidated condensed financial statements of Omnicom Group Inc. and subsidaiaries for the nine months ended September 30, 1994 and is qualified in its entirety by reference to such financial statements. Note 1: Earnings per share are based on net income before the cumulative effect of the change in accounting principal. 1,000 9-MOS DEC-31-1994 SEP-30-1994 118,281 11,354 961,485 19,851 0 1,313,603 391,686 220,608 2,458,900 1,460,350 348,240 19,321 0 0 518,192 2,458,900 0 1,224,010 0 695,681 390,490 3,733 26,451 119,674 49,285 70,568 0 0 (28,009) 42,559 2.09 2.05
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