FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended: March 31, 1999 -------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to ___________. Commission File Number: 1-10551 ------- Omnicom Group Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) New York 13-1514814 - -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 437 Madison Avenue, New York, New York 10022 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (212) 415-3600 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 178,881,900 (as of April 30, 1999)
OMNICOM GROUP INC. AND SUBSIDIARIES INDEX Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements. Consolidated Condensed Balance Sheets - March 31, 1999, December 31, 1998 and March 31, 1998 2 Consolidated Condensed Statements of Income - Three Months Ended March 31, 1999 and 1998 3 Consolidated Condensed Statements of Cash Flows - Three Months Ended March 31, 1999 and 1998 4 Notes to Consolidated Condensed Financial Statements 5-10 Item 2. Management's Discussion of Financial Condition And Results of Operations. 11-17 Item 3. Quantitative and Qualitative Disclosures About Market Risk. 18 PART II. OTHER INFORMATION Item 6. Exhibits and Reports of Form 8-K. 21 1
PART I. FINANCIAL INFORMATION Item 1. Financial Statements OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in Thousands) <TABLE> <CAPTION> Assets ------ March 31, December 31, March 31, 1999 1998 1998 ------------- ------------- -------------- <S> <C> <C> <C> Current assets: Cash and cash equivalents $ 310,673 $ 648,781 $ 283,221 Investments available-for-sale, at market, which approximates cost 47,674 68,610 74,657 Accounts receivable, less allowance for doubtful accounts of $54,187, $58,240 and $41,400 2,758,269 2,688,649 2,308,817 Billable production orders in process, at cost 282,386 255,294 282,349 Prepaid expenses and other current assets 478,391 448,496 364,063 ------------- ------------- -------------- Total Current Assets 3,877,393 4,109,830 3,313,107 Furniture, equipment and leasehold improvements at cost, less accumulated depreciation and amortization of $459,584 $444,670 and $385,684 374,024 375,649 331,727 Investments in affiliates 312,440 262,392 226,233 Intangibles, less amortization of $304,340, $284,663 and $243,913 2,049,154 2,071,724 1,796,995 Deferred tax benefits 94,610 104,875 82,828 Deferred charges and other assets 202,615 199,056 146,283 ------------- ------------- -------------- $ 6,910,236 $ 7,123,526 $ 5,897,173 ============= ============= ============== Liabilities and Shareholders' Equity ------------------------------------ Current liabilities: Accounts payable $ 2,824,329 $ 3,366,086 $ 2,403,590 Payable to banks and current portion of long-term debt 253,569 139,894 338,427 Other accrued liabilities 1,328,865 1,474,811 1,187,459 Accrued taxes on income 65,791 59,797 69,382 ------------- ------------- -------------- Total Current Liabilities 4,472,554 5,040,588 3,998,858 Long term debt 662,293 268,913 203,479 Convertible subordinated debentures 448,497 448,497 448,500 Deferred compensation and other liabilities 237,272 229,239 220,505 Minority interests 75,853 90,778 68,120 Shareholders' equity: Common stock 93,525 93,328 92,355 Additional paid-in capital 733,597 720,343 647,191 Retained earnings 667,939 628,743 468,458 Unamortized restricted stock (52,727) (58,060) (42,706) Accumulated other comprehensive income (119,154) (94,781) (48,984) Treasury stock (309,413) (244,062) (158,603) ------------- ------------- -------------- Total Shareholders' Equity 1,013,767 1,045,511 957,711 ------------- ------------- -------------- Total Liabilities and Shareholders' Equity $ 6,910,236 $ 7,123,526 $ 5,897,173 ============= ============= ============== </TABLE> The accompanying notes to consolidated condensed financial statements are an integral part of these statements. 2
OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Dollars in Thousands, Except Per Share Data) Three Months Ended March 31, --------------------------------- 1999 1998 ------------- ------------ Commissions and fees $ 1,146,877 $ 905,799 Operating expenses: Salaries and related costs 688,301 552,164 Office and general expenses 324,006 251,988 ------------- ------------ 1,012,307 804,152 ------------- ------------ Operating profit 134,570 101,647 Net interest expense: Interest and dividend income (7,225) (6,927) Interest paid or accrued 18,472 14,214 ------------- ------------ 11,247 7,287 ------------- ------------ Income before income taxes 123,323 94,360 Income taxes: Federal 20,079 15,330 State and local 7,476 6,355 International 22,960 17,696 ------------- ------------ Total income taxes 50,515 39,381 ------------- ------------ Income after income taxes 72,808 54,979 Equity in affiliates 929 4,086 Minority interests (8,175) (7,741) ------------- ------------ Net income $ 65,562 $ 51,324 ============= ============ Net Income Per Common Share: - ---------------------------- Net income: Basic $ 0.37 $ 0.30 Diluted $ 0.37 $ 0.29 Dividends declared per common share $ 0.15 $ 0.125 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) <TABLE> <CAPTION> Three Months Ended March 31, ----------------------------- 1999 1998 ----------- ----------- <S> <C> <C> Cash flows from operating activities: Net income $ 65,562 $ 51,324 Adjustments to reconcile net income to net cash used for operating activities: Depreciation and amortization of tangible assets 22,889 18,544 Amortization of intangible assets 16,849 10,915 Minority interests 8,175 7,741 Earnings of affiliates less than (in excess of) dividends received 945 (1,673) Decrease in deferred tax benefits 1,065 1,771 Provision for losses on accounts receivable 2,344 1,754 Amortization of restricted stock 5,273 4,482 (Increase) decrease in accounts receivable (140,594) 5,437 Increase in billable production orders in process (20,605) (74,093) Increase in prepaid expenses and other current assets (39,394) (19,077) Decrease in accounts payable (465,440) (512,684) Decrease in other accrued liabilities (114,084) (90,104) Increase (decrease) in accrued taxes on income 10,211 (33,928) Other 1,719 2,295 ----------- ----------- Net cash used for operating activities (645,085) (627,296) ----------- ----------- Cash flows from investing activities: Capital expenditures (27,163) (25,295) Payments for purchases of equity interests in subsidiaries and affiliates, net of cash acquired (108,409) (239,823) Proceeds from sales of equity interests in subsidiaries and affiliates 634 869 Payments for purchases of investments available-for-sale and other investments (21,278) (15,136) Proceeds from sales of investments available-for-sale and other investments 37,518 27,785 ----------- ----------- Net cash used for investing activities (118,698) (251,600) ----------- ----------- Cash flows from financing activities: Net borrowings under lines of credit 109,117 86,497 Share transactions under employee stock plans 13,484 (659) Proceeds from issuance of shares -- 171,035 Proceeds from issuance of debt obligations 476,778 391,045 Repayments of principal of debt obligations (59,345) (5,497) Dividends and loans to minority shareholders (16,473) (8,426) Dividends paid (25,069) (19,908) Purchase of treasury shares (72,524) (18,437) ----------- ----------- Net cash provided by financing activities 425,968 595,650 ----------- ----------- Effect of exchange rate changes on cash and cash equivalents (293) 1,329 ----------- ----------- Net decrease in cash and cash equivalents (338,108) (281,917) Cash and cash equivalents at beginning of period 648,781 565,138 ----------- ----------- Cash and cash equivalents at end of period $ 310,673 $ 283,221 =========== =========== Supplemental Disclosures: Income taxes paid $ 35,205 $ 75,257 =========== =========== Interest paid $ 19,191 $ 12,897 =========== =========== </TABLE> 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. All prior period amounts included in these financial statements have been restated to reflect the effect of accounting for the acquisition of Abbott Mead Vickers Plc as a pooling-of-interests (see footnote number 8). 2) These statements reflect all adjustments, consisting of normal recurring accruals, which in the opinion of management, are necessary for a fair presentation of the information contained therein. Certain reclassifications have been made to the March 31, 1998 reported amounts to conform them with the March 31, 1999 and December 31, 1998 presentation. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1998. 3) Results of operations for interim periods are not necessarily indicative of annual results. 5
OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 4) Basic earnings per share is based upon the weighted average number of common shares outstanding during the period. 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 2.25% and 4.25% Convertible Subordinated Debentures (the "Debentures") and the assumed increase in net income for the after tax interest cost of the Debentures. In determining if the Debentures were dilutive at March 31, 1999 and 1998, the Debentures were assumed to be converted for the entire quarter. For purposes of computing diluted earnings per share for the three months ended March 31, 1999 and 1998, respectively, 178,357,000 and 174,388,000 common share equivalents were assumed to have been outstanding. Additionally, for the three months ended March 31, 1999 6,936,000 shares were assumed to have been converted related to the Debentures and the assumed increase in net income used in the computation was $2,385,000. The number of shares used in the computations of basic and diluted earnings per share were as follows: Three Months Ended March 31, --------------- 1999 1998 ---- ---- Basic EPS 175,329,000 171,032,000 Diluted EPS 185,293,000 174,388,000 6
OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- For purposes of computing diluted earnings per share for the three months ended March 31, 1999, the Company's 2.25% Convertible Subordinated Debentures were not reflected in the computation, as their inclusion would have been anti-dilutive. For purposes of computing diluted earnings per share for the three months ended March 31, 1998, the Debentures were not reflected in the computation, as their inclusion would have been anti-dilutive. 5) Total comprehensive income and its components were as follows: Three Months Ended March 31, --------------------- (Dollars in Thousands) 1999 1998 -------- --------- Net Income $ 65,562 $ 51,324 Other Comprehensive Income - Foreign Currency Translation Adjustments (24,373) (1,626) -------- -------- Comprehensive Income $ 41,189 $ 49,698 ======== ======== 6) In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133") 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 7
OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 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 of 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. 8
OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 7) 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 March 31, 1999 and 1998, and for the three months then ended is presented below: <TABLE> <CAPTION> (Dollars in Thousands) -------------------------------------------------------------------------------- United United Other Other States Kingdom Germany France Europe International Consolidated ------ ------- ------- ------ ------ ------------- ------------ <S> <C> <C> <C> <C> <C> <C> <C> 1999 Commissions and Fees $587,212 $164,751 $91,621 $83,895 $116,195 $103,203 $1,146,877 Long-Lived Assets 162,619 99,698 11,441 15,648 25,179 59,439 374,024 1998 Commissions and Fees $475,161 $137,824 $70,135 $41,766 $ 92,076 $ 88,837 $ 905,799 Long-Lived Assets 164,961 82,942 10,136 14,569 26,226 32,893 331,727 8) 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 shares of new 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 </TABLE> 9
OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- transaction was accounted for under the pooling-of-interests method of accounting. Accordingly, the Company's financial statements have been restated to include the operating results of AMV for all periods presented. For the three month period ended March 31, 1998, previously reported commissions and fees and net income for the company were $860,976,000 and $50,903,000, respectively. The amounts presented in the restated consolidated condensed financial statements reflect an increase from the previously reported amounts of $44,823,000 to commissions and fees and an increase of $421,000 to net income. These increases reflect the impact of including the operating results of AMV for the three month period ended March 31, 1998, net of adjustments to eliminate inter-company transactions between AMV and the Company and adjustments to conform AMV accounting methods to those used by the Company. 9) On April 30, 1999, the Company entered into a $750 million revolving credit agreement with a consortium of banks expiring on April 28, 2000. This revolving credit agreement includes a facility for issuing commercial paper. 10
Item 2. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- Results of Operations --------------------- First Quarter 1999 Compared to First Quarter 1998 ------------------------------------------------- Consolidated worldwide revenues from commission and fee income increased 26.6% in the first quarter of 1999 to $1,146.9 million compared to $905.8 million in the first quarter of 1998. Consolidated domestic revenues increased 23.6% in the first quarter of 1999 to $587.2 million compared to $475.2 million in the first quarter of 1998. Consolidated international revenues increased 30.0% in the first quarter of 1999 to $559.7 million compared to $430.6 million in the first quarter of 1998. Absent the effect of acquisitions, net of divestitures and changes in the foreign exchange value of the U.S. dollar, consolidated worldwide revenues increased 14.1% in the first quarter of 1999 as compared to the same period in 1998. Worldwide operating expenses increased 25.9% in the first quarter of 1999 as compared to the first quarter of 1998. Absent the effect of acquisitions, net of divestitures and changes in the foreign exchange value of the U.S. dollar, operating expenses increased 13.7% over 1998 levels. This increase reflects normal salary increases and growth in client service expenditures to support the increased revenue base. 11
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- Net interest expense increased by $4.0 million in the first quarter of 1999 as compared to the same period in 1998. This increase primarily reflects higher average borrowings during the period, partially offset by the effect of higher average amounts of cash and marketable securities invested during the period. Pretax profit margin was 10.8% in the first quarter of 1999 as compared to 10.4% in the same period in 1998. Operating margin, which excludes interest and dividend income and interest expense, was 11.7% in the first quarter of 1999 as compared to 11.2% in the same period in 1998. The effective income tax rate was 41.0% in the first quarter of 1999 as compared to 41.7% in the first quarter of 1998. This decrease primarily reflects a reduction in effective tax rates at the Company's international subsidiaries. The decrease in equity in affiliates is the result of the acquisition of additional ownership interests in certain affiliates that resulted in their consolidation in the March 31, 1999 financial statements and lower profits earned by certain companies in which the Company owns less than a 50% equity interest. The increase in minority interest expense is primarily due to new minorities resulting from acquisitions and 12
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- greater earnings by companies where minority interests exist. Net income increased 27.7% to $65.6 million in the first quarter of 1999 as compared to $51.3 million in the same period in 1998. Absent the effect of acquisitions, net of divestitures and changes in the foreign exchange value of the U.S. dollar, net income increased 13.9% in the first quarter of 1999 as compared to the first quarter of 1998. Capital Resources and Liquidity ------------------------------- Cash and cash equivalents at March 31, 1999 decreased to $310.7 million from $648.8 million at December 31, 1998. The relationship between payables to the media and suppliers and receivables from clients, at March 31, 1999, is consistent with industry norms. The Company maintains relationships with a number of banks worldwide, which have extended unsecured committed lines of credit in amounts sufficient to meet the Company's cash needs. At March 31, 1999, the Company had $803.7 million in such unsecured committed lines of credit, comprised of a $500.0 million revolving credit agreement expiring June 30, 2003, and $303.7 million in lines of credit, principally outside of the United States. Of the $803.7 million in unsecured committed lines, $183.7 million remained available at March 31, 1999. Additionally, on April 13
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- 30, 1999 the Company entered into a $750 million revolving credit agreement expiring on April 28, 2000. Management believes the aggregate lines of credit available to the Company plus cash flows from operations will be adequate to support its anticipated requirements. 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 14
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- 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 compiled a detailed inventory of systems and potential Year 2000 readiness issues at all of its principal locations. Based on this information, the Company 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, buying and 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. The Company has completed the assessment phase and believes that the implementation phase of its Year 2000 readiness plan will be substantially completed by the middle 15
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- 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 the first quarter of 1999 for its Year 2000 program were not material to consolidated results of operations and are expected to be immaterial for the year ended December 31, 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 16
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- 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. 17
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - -------------------------------------------------------------------------------- Market Risk ----------- The Company's 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 1998 Form 10-K provides a more detailed discussion of the market risks affecting its operations. As of March 31, 1999, no material change has occurred in the Company's market risks, as compared to the disclosure in its Form 10-K for the year ending December 31, 1998. 18
Forward-Looking Statements -------------------------- "Management's Discussion of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosures About Market Risk" set forth in this report contain 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 19
differ from those expressed in any forward-looking statements made by or on behalf of the Company. SIGNATURES: - ----------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Omnicom Group Inc. (Registrant) ------------------ Date: May 17, 1999 /s/ Randall J. Weisenburger ------------ ---------------------------- Randall J. Weisenburger Chief Financial Officer (Principal Financial Officer) Date: May 17, 1999 /s/ Philip J. Angelastro ------------ ------------------------- Philip J. Angelastro Controller (Chief Accounting Officer) 20
PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number Description of Exhibit -------------- ---------------------- 10.1 364-Day Credit Agreement, dated as of April 30, 1999, among Omnicom Finance Inc., Omnicom Finance Limited, the financial institutions party thereto, Citibank, N.A., as Administrative Agent, The Bank of Nova Scotia, as Documentation Agent, and Istituto Bancario San Paolo Di Torino Istituto Mobiliare Italiano S.p.A., as Syndication Agent (the "Credit Agreement"). 10.2 List of Contents of Exhibits to the Credit Agreement. 10.3 Guaranty, dated as of April 30, 1999, made by Omnicom Group Inc. 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 first quarter of 1999. 21