0000029989us-gaap:ParentMember2018-12-31



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 20172020

Commission File Number: 1-10551

OMNICOM GROUP INC.
(Exact name of registrant as specified in its charter)
New York13-1514814
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer Identification No.)
New York13-1514814
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
437 Madison280 Park Avenue, New York, NY1002210017
(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:
Title of each classTrading SymbolsName of each exchange on which registered
Common Stock, $.15$0.15 Par ValueOMCNew York Stock Exchange
0.800% Senior Notes due 2027OMC/27New York Stock Exchange
1.400% Senior Notes due 2031OMC/31New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

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 twelve12 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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every interactive data fileInteractive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding twelve12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

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 definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerþ
☑
Accelerated filero
☐
Non-accelerated filero☐
Smaller reporting companyo
☐
Emerging growth companyo☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o ☐Noþ


The aggregate market value of the voting and non-voting common stock held by non-affiliates as of June 30, 20172020 was $19,093,687,000.

$11,583,494,559. As of January 31, 2018,February 11, 2021, there were 230,267,646215,014,390 shares of Omnicom Group Inc. Common Stock outstanding.

Portions of the Omnicom Group Inc. Definitive Proxy Statement for the Annual Meeting of Shareholders scheduled to be held on May 22, 20184, 2021 are incorporated by reference into Part III of this report to the extent described herein.




OMNICOM GROUP INC.
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 20172020
TABLE OF CONTENTS
Page
PART IPage
Item 1.PART I
Business
1
Item 1A.
3
Item 1B.
6
Item 2.
Properties
6
Item 3.
Legal Proceedings
6
Item 4.2.
6
Item 3.
6
6
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
7
Item 6.
7.
8
Item 7.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
87
Item 7A.
2728
Item 8.
29
Item 9.
29
Item 9A.
29
Item 9B.
Other Information
29
PART III
Item 10.9B.
29
PART III
30
30
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
30
30
30
PART IV
Item 14.Principal Accounting Fees and Services15.
PART IV
Item 15. and
Exhibits, Financial Statement Schedules
30
Item 16.Form 10-K Summary
33
3433
34
F-1F-1
F-2F-2
F-4F-4
F-9F-9
Selected Quarterly Financial Data
Schedule II - Valuation and Qualifying Accounts
S-1S-1






i



FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report on Form 10-K constitute forward-looking statements, including statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, from time to time, the Company or its representatives have made, or may make, forward-looking statements, orally or in writing. These statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or financial condition, or otherwise, based on current beliefs of the Company’s management as well as assumptions made by, and information currently available to, the Company’s management. Forward-looking statements may be accompanied by words such as “aim,” “anticipate,” “believe,” “plan,” “could,” “should,” “would,” “estimate,” “expect,” “forecast,” “future,” “guidance,” “intend,” “may,” “will,” “possible,” “potential,” “predict,” “project” or similar words, phrases or expressions. These forward-looking statements are subject to various risks and uncertainties, many of which are outside the Company’s control. Therefore, you should not place undue reliance on such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include: the impact of the COVID-19 pandemic, international, national or local economic conditions that could adversely affect the Company or its clients; losses on media purchases and production costs incurred on behalf of clients; reductions in client spending, a slowdown in client payments and a deterioration in the credit markets; the ability to attract new clients and retain existing clients in the manner anticipated; changes in client advertising, marketing and corporate communications requirements; failure to manage potential conflicts of interest between or among clients; unanticipated changes relating to competitive factors in the advertising, marketing and corporate communications industries; the ability to hire and retain key personnel; currency exchange rate fluctuations; reliance on information technology systems; changes in legislation or governmental regulations affecting the Company or its clients; risks associated with assumptions the Company makes in connection with its critical accounting estimates and legal proceedings; and the Company’s international operations, which are subject to the risks of currency repatriation restrictions, social or political conditions and regulatory environment. The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties that may affect the Company’s business, including those described in Item 1A, “Risk Factors” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report. Except as required under applicable law, the Company does not assume any obligation to update these forward-looking statements.
AVAILABLE INFORMATION
We file annual, quarterly and current reports and any amendments to those reports, proxy statements and other information with the United States Securities and Exchange Commission, or SEC. Documents we file with the SEC are available free of charge on our website at http://investor.omnicomgroup.com, as soon as reasonably practicable after such material is filed with the SEC. The information included on or available through our website is not part of this or any other report we file with the SEC. Any document that we file with the SEC is available on the SEC’s website at www.sec.gov and also may be read and copied at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information regarding the operation of the Public Reference Room.




ii



PART I
Introduction

This report is our 20172020 annual report to shareholders and our 20172020 Annual Report on Form 10-K, or 20172020 10-K.

Omnicom Group Inc. was, a New York corporation formed in 1986, and through its branded networks and agencies provides advertising, marketing and corporate communications services to over 5,000 clients in more than 10070 countries. The terms “Omnicom,” “the Company,” “we,” “our” and “us” each refer to Omnicom Group Inc. and its subsidiaries unless the context indicates otherwise.
Item 1. Business
Our Business

Omnicom is a strategic holding company and a leading global provider ofproviding advertising, marketing and corporate communications services.services to clients through our branded networks and agencies around the world. We operate in a highly competitive industry and compete against other global, national and regional advertising and marketing services companies, as well as technology, social media and professional services companies. The proliferation of media channels, including the rapid development and integration of interactive technologies and mediums,media, has fragmented consumer audiences targeted by our clients. These developments make it more complex for marketers to reach their target audiences in a cost-effective way, causing them to turn to global service providers such as Omnicom for a customized mix of advertising and marketing services designed to make the best use ofoptimize their total marketing expenditure. As discussed below, in 2020 the COVID-19 pandemic negatively impacted our business.

Our brandedOn a global, pan-regional and local basis, our networks and agencies operate in all major global markets and provide a comprehensive range of services in the following fundamental disciplines: advertising, customer relationship management, or CRM, which includes CRM Consumer Experience and CRM Execution & Support, public relations and healthcare. In an effort to monitor the changing needs of our clientsAdvertising includes creative services, as well as strategic media planning and to better capture the expanded scope of our services, in the fourth quarter of 2017, we realigned our service disciplines. As a result, our CRM discipline was grouped into two separate categories:buying and data analytics services. CRM Consumer Experience which includes OmnicomOmnicom’s Precision Marketing Group’s digital / Group and digital/direct marketing agencies, as well as our branding, agencies, shopper marketing agencies and our experiential marketing agencies; and,agencies. CRM Execution & Support which includes field marketing, sales support, merchandising and point of sale, as well as other specialized marketing and custom communications services. Also, we realigned and renamed our former specialty communications discipline so that it now exclusively includes agencies offering healthcare marketing and communications services.

Although the medium used to reach a client’s target audience may differ across each of these disciplines, we develop and deliver the marketing message in a similar way by providing client-specific advertising, marketing andPublic relations services include corporate communications, crisis management, public affairs and media and media relations services. Services across our disciplines include:
advertisinginvestor relations
brandingmarketing research
content marketingmedia planning and buying
corporate social responsibility consultingmerchandising and point of sale
crisis communicationsmobile marketing
custom publishingmulti-cultural marketing
data analyticsnon-profit marketing
database managementorganizational communications
digital / direct marketingpackage design
digital transformationproduct placement
entertainment marketingpromotional marketing
experiential marketingpublic affairs
field marketingpublic relations
financial/corporate business-to-business advertisingretail marketing
graphic arts/digital imagingsales support
healthcare marketing and communicationssearch engine marketing
instore designshopper marketing
interactive marketingsocial media marketing
sports and event marketing


1



Healthcare includes advertising and media services to global healthcare clients. Our business model was built and continues to evolve around our clients. While our networks and agencies operate under different names and frame their ideas in different disciplines, we organize our services around our clients. Our fundamental business principle is that our clients’ specific marketing requirements are the central focus of how we structure our service offerings and allocate our resources. This client-centric business model requires that multiple agencies within Omnicom collaborate in formal and informal virtual client networks utilizing our key client matrix organization structure. This collaboration allows us to cut across our internal organizational structures to execute our clients’ marketing requirements in a consistent and comprehensive manner. We believe that this organizational philosophy,use our abilityclient-centric approach to execute on itgrow our business by expanding our service offerings to existing clients, moving into new markets and our key client matrix organization structure differentiates us from our competition. obtaining new clients. In addition during 2017,to collaborating through our client service models, our agencies and networks collaborate across internally developed technology platforms. Annalect, our proprietary data and analytics platform, serves as the strategic resource for all of our agencies and networks to share when developing client service strategies across our virtual networks. Omni, our people-based precision marketing and insights platform, identifies and defines personalized consumer experiences at scale across creative, media and CRM, as well as other disciplines.
Driven by our clients’ continuous demand for more effective and efficient marketing activities, we continuedstrive to provide an extensive range of advertising, marketing and corporate communications services through various client-centric networks that are organized to meet specific client objectives. Our service offerings include:
advertisinginvestor relations
brandingmarketing research
content marketingmedia planning and buying
corporate social responsibility consultingmerchandising and point of sale
crisis communicationsmobile marketing
custom publishingmulti-cultural marketing
data analyticsnon-profit marketing
database managementorganizational communications
digital/direct marketingpackage design
digital transformationproduct placement
entertainment marketingpromotional marketing
experiential marketingpublic affairs
field marketingpublic relations
financial/corporate business-to-business advertisingretail marketing

1

graphic arts/digital imagingsales support
healthcare marketing and communicationssearch engine marketing
instore designshopper marketing
interactive marketingsocial media marketing
sports and event marketing
Certain business trends had positively impacted our business and industry. These trends include clients increasingly expanding the processfocus of forming practice areas within ourtheir brand strategies from national markets to pan-regional and global network structure to bring together agencies operating in common disciplines to leverage existing resourcesmarkets and to create, in close coordination with our key client matrix organization, additional custom client solutions.
integrating traditional and non-traditional marketing channels, as well as utilizing new communications technologies and emerging digital platforms. As clients increase their demands for marketing effectiveness and efficiency, they have made it a practicecontinue to consolidate their business within one or a small number of service providerproviders in the pursuit of a single engagement covering all consumer touch points. We have structured our business around this trend.these trends. We believe that our key client matrix organization structure approach to collaboration and integration of our services and solutions has providedprovides a competitive advantage to our business in the past and we expect this to continue over the medium and long term. Our key client matrix organization structure facilitates superior client management and allows for greater integration of the services required by the world’s largest brands. Our over-archingoverarching strategy is to continue to use our virtual client networks to grow our business relationships with our largest clients by serving them across our networks, disciplines and geographies.
In 2020, the COVID-19 pandemic negatively impacted our business and results of operations. Efforts to mitigate the impact of the pandemic, including government actions to restrict travel, limit public gatherings, shelter-in-place orders and mandatory closures of businesses, resulted in many of our clients reducing or suspending their spending for our advertising, marketing and corporate communication services. As a result, for the year ended December 31, 2020, revenue decreased 11.9%, compared to 2019, primarily due to the impact of the COVID-19 pandemic. We anticipate that the negative impact from the pandemic on our revenue will continue through the first quarter of 2021 as compared to the prior year period. However, we expect organic revenue growth for the first half of 2021. The impact of the COVID-19 pandemic on our revenue has been, and may continue to be, material, depending on several factors, including the potential for prolonged or additional governmental actions to mitigate the effects of the pandemic. It is possible that the COVID-19 pandemic will accelerate certain trends that began pre-pandemic, particularly those relating to online commerce, brand building and how we deploy our personnel. We expect that some of these trends will benefit our agencies and provide revenue growth opportunities, as well as increasing flexibility with respect to our use of physical locations and our cost structure, but some trends may negatively affect us including potential disruption by new participants and technologies (see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” or MD&A, of this report).
We continually evaluate our portfolio of businesses to identify areas for investment and acquisition opportunities, as well as to identify non-strategic or underperforming businesses for disposition. For information about our acquisitions and dispositions, see MD&A - Acquisitions and Goodwill and Notes 5 and 13, respectively, to the consolidated financial statements. None of our acquisitions or dispositions, individually or in the aggregate, was material to our results of operations or financial position in the three years ended December 31, 2020.
The various components of our business, including revenue by discipline and geographic area, and material factors that affected us in 20172020 are discussed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” or MD&A, of this report. None of our acquisitions or dispositions, individually or in the aggregate, in the three year period ended December 31, 2017 was material to our results of operations or financial position. For information about our acquisitions, see Note 4 to the consolidated financial statements.
Geographic Regions
Our United States operations represent approximately 54% of our revenue. As discussed more fully in the Critical Accounting Policies section of the MD&A, our branded networks and agencies conduct business on a global basis and operate in the following geographic regions: The Americas, which includes North America and Latin America; EMEA, which includes Europe, the Middle East and Africa; and, Asia Pacific, which includes Australia, China, India, Japan, Korea, New Zealand, Singapore and other Asian countries. The networks have regional reporting units that are responsible for the agencies in their region. Agencies within the regional reporting units serve similar clients in similar industries and in many cases the same clients and have similar economic characteristics. Accordingly, financial information by geographic region is provided in the MD&A and Note 7 to the consolidated financial statements.&A.
Our Clients
Our clients operate in virtually every sector of the global economy. In many cases, multiple agencies or networks serve different brand,brands, product groups or both within the same client. For example, in 20172020 our largest client represented 3.0%3.4% of revenue and was served by more than 250110 of our agencies. Our 100 largest clients, many of which represent many of the world's majorlargest global marketers, comprisedrepresented approximately 51%54% of revenue and were each served, on average, by more than 50 of our agencies.
Government Regulations
We are subject to various local, state and federal laws and regulations in the countries in which we conduct business. Compliance with these laws and regulations in the normal course of business did not have a material effect on our business, results of operations or financial position. Additional information regarding the impact of government regulations on our business is included in Item 1A. Risk Factors under the heading Regulatory Risks.
Human Capital Resources
Our Employees
At December 31, 2017, we employed approximately 77,300 people worldwide.employees are our most important assets. We believe a critical component to our success depends on the ability to attract, develop and retain key personnel. The skill sets of our workforce across our agencies and within each discipline are similar. Common to all is the ability to understand a client’s brand or product and theirits selling proposition and to develop a unique message to communicate the value of the brand or product to the client’s target audience, whether through traditional channels or emerging digital platforms. Recognizing the importance of this core competency, we have established tailoredsupport and develop our employees through training and educationdevelopment programs forthat build and strengthen employees’ leadership and professional skills.

2

Human capital management strategies are developed collectively by senior management, including the management teams of the Company’s networks and practice areas, and are overseen by the Company’s Board of Directors. We are committed to efforts that ensure that the workplace is equitable, ethical, fosters an inclusive work environment across our client service professionals around this competency.global workforce and respects human rights. Our human capital management priorities include, among other things, providing competitive wages and benefits, succession planning, promoting diversity and inclusion and adopting codes of conduct and business ethics to be implemented throughout the Company.
At December 31, 2020, we employed approximately 64,100 people worldwide. The United States, our largest employee base, employed about 20,800 people. None of our regular employees in the United States is represented by a labor union. The approximate number of employees in our principal geographic regions were 27,100 in the Americas, 25,800 in Europe, Middle East and Africa, or EMEA, and 11,200 in Asia Pacific. Certain employees in a few countries outside of the United States, primarily in Europe, are represented by work councils. See the MD&A for a discussion of the effect of salary and related costs on our results of operations.


2


Information About Our Executive Officers of the Registrant
At January 31, 2018,February 11, 2021, our executive officers were:
NamePositionAge
Bruce CrawfordJohn D. WrenChairman of the Board88
John D. WrenPresident and Chief Executive Officer6568
Philip J. AngelastroExecutive Vice President and Chief Financial Officer5356
Peter K. ShermanExecutive Vice President54
Michael J. O’BrienSeniorExecutive Vice President, General Counsel and Secretary5659
Dennis E. HewittTreasurer73
Andrew L. CastellanetaSenior Vice President, Chief Accounting Officer5962
Peter L. SwiecickiSenior Vice President, Finance and Controller5962
Rochelle M. TarloweSenior Vice President and Treasurer50
Jonathan B. NelsonCEO, Omnicom Digital5053

Each executive officer has held histheir present position for at least five years, except:except Mr. AngelastroWren was named Chairman of the Board and Chief Executive Officer in May 2018 and previously served as President and Chief Executive Officer from 1997 to May 2018; and Ms. Tarlowe was named Senior Vice President and Chief Financial OfficerTreasurer in September 2014May 2019 and previously served as Senior Vice President Finance and ControllerTreasurer of Avis Budget Group from 20022007 until September 2014; Mr. Sherman was named Executive Vice President in April 2014 and previously served as Chief Executive Officer of JWT North America from June 2013 to April 2014 and previously held various positions with BBDO Worldwide from 1997 until 2013; Mr. Castellaneta was named Senior Vice President, Chief Accounting Officer in January 2015 and previously served as Assistant Controller from 2000 until January 2015; and, Mr. Swiecicki was named Senior Vice President, Finance and Controller in January 2015 and previously served as Director of Business Operations from 2013 until January 2015 and previously held various positions with BBDO Worldwide from 1983 until 2013.2019. Additional information about our directors and executive officers will appear in our definitive proxy statement, which is expected to be filed with the United States Securities and Exchange Commission, or SEC, by April 12, 2018.March 25, 2021.
Available Information
We file annual, quarterly and current reports and any amendments to those reports, proxy statements and other information with the SEC. Documents we file with the SEC are available free of charge on our website at http://investor.omnicomgroup.com, as soon as reasonably practicable after such material is filed with the SEC. The information included on or available through our website is not part of this or any other report we file with the SEC. Any document that we file with the SEC is available on the SEC’s website at www.sec.gov.
Item 1A. Risk Factors
Economic Risks
The COVID-19 pandemic has adversely impacted our business, results of operations and financial position and could adversely impact our business, results of operations and financial position in the future.
In 2020, the COVID-19 pandemic negatively impacted our business, results of operations and financial position. Most of our clients' businesses were negatively affected by the COVID-19 pandemic. As long as the COVID-19 pandemic remains a threat, global economic conditions will continue to be volatile and such uncertainty cuts across all clients, industries and geographies. Demand for our services can be expected to continue to be adversely affected as marketers reduce expenditures in the short term due to the uncertain impact of the pandemic on the global economy. The extent of the impact of the COVID-19 pandemic on our business will depend on numerous factors that we are not able to accurately predict, including the duration and scope of the pandemic, government actions to mitigate the effects of the pandemic, and the intermediate and long-term impact of the pandemic on marketers' spending plans.
Adverse economic conditions, a reduction in client spending, a deterioration in the credit markets or a delay in client payments could have a material effect on our business, results of operations and financial position.
Economic conditions have a direct impact on our business, results of operations and financial position. Adverse global or regional economic conditions, including those caused by the COVID-19 pandemic, pose a risk that clients may reduce, postpone or cancel spending on advertising, marketing and corporate communications projects. Such actions would reduce the demand for our services and could result in a reduction in our revenue, which would adversely affect our business, results of operations and

3

financial position. A contraction in the availability of credit may make it more difficult for us to meet our working capital requirements. In addition, a disruption in the credit markets could adversely affect our clients and could cause them to delay payment for our services or take other actions that would negatively affect our working capital. In such circumstances, we may need to obtain additional financing to fund our day-to-day working capital requirements, which may not be available on favorable terms, or at all. Even if we take action to respond to adverse economic conditions, reductions in revenue and disruptions in the credit markets by aligning our cost structure and more efficiently managing our working capital, such actions may not be effective.
In an economic downturn, the risk of a material loss related to media purchases and production costs incurred on behalf of our clients could significantly increase, and methods for managing or mitigating such risk may be less available or unavailable.
In the normal course of business, our agencies enter into contractual commitments with media providers and production companies on behalf of our clients at levels that can substantially exceed the revenue from our services. These commitments are included in accounts payable when the services are delivered by the media providers or production companies. If permitted by local law and the client agreement, many of our agencies purchase media and production services for our clients as an agent for a disclosed principal. In addition, while operating practices vary by country, media type and media vendor, in the United States and certain foreign markets, many of our agencies’ contracts with media and production providers specify that our agencies are not liable to the media and production providers under the theory of sequential liability until and to the extent we have been paid by our client for the media or production services.
Where purchases of media and production services are made by our agencies as a principal or are not subject to the theory of sequential liability, the risk of a material loss as a result of payment default by our clients could increase significantly and such a loss could have a material adverse effect on our business, results of operations and financial position.


3


In addition, our methods of managing the risk of payment default, including obtaining credit insurance, requiring payment in advance, mitigating the potential loss in the marketplace or negotiating with media providers, may be less available or unavailable during a severe economic downturn.
Business and Operational Risks
Clients periodically review and change their advertising, marketing and corporate communications requirements and relationships. If we are unable to remain competitive or retain key clients, our business, results of operations and financial position may be adversely affected.
We operate in a highly competitive industry. Key competitive considerations for retaining existing clients and winning new clients include our ability to develop solutions that meet client needs in a rapidly changing environment, the quality and effectiveness of our services and our ability to serve clients efficiently, particularly large multinational clients, on a broad geographic basis. While many of our client relationships are long-standing, from time to time clients put their advertising, marketing and corporate communications business up for competitive review. We have won and lost accounts as a result of these reviews. To the extent that we are not able to remain competitive or retain key clients, our revenue may be adversely affected, which could have a material adverse effect on our business, results of operations and financial position.
Acquiring new clients and retaining existing clients depends on our ability to avoid and manage conflicts of interest arising from other client relationships, retaining key personnel and maintaining a highly skilled workforce.
Our ability to acquire new clients and retain existing clients may, in some cases, be limited by clients’ perceptions of, or policies concerning, conflicts of interest arising from other client relationships. If we are unable to maintain multiple agencies to manage multiple client relationships and avoid potential conflicts of interests, our business, results of operations and financial position may be adversely affected.
As a service business, our ability to attract and retain key personnel is an important aspect of our competitiveness. If we are unable to attract and retain key personnel, our ability to provide our services in the manner clients have come to expect may be adversely affected, which could harm our reputation and result in a loss of clients, which could have a material adverse effect on our business, results of operations and financial position.
The loss of several of our largest clients could have a material adverse effect on our business, results of operations and financial position.
OurIn 2020, our 100 largest clients representrepresented approximately 51%54% of our revenue. Clients generally are able to reduce or cancel current or future spending on advertising, marketing and corporate communications projects at any time on short notice for any reason. A significant reduction in spending on our services by our largest clients, or the loss of several of our largest clients, if not replaced by new clients or an increase in business from existing clients, would adversely affect our revenue and could have a material adverse effect on our business, results of operations and financial position.
Acquiring new clients

4

We rely extensively on information technology systems, and retaining existing clients dependscybersecurity incidents could adversely affect us.
We rely on our abilityinformation technology systems and infrastructure to avoidprocess, store and transmit data, summarize results, manage conflicts of interest arising from other client relationships, retaining key personnel and maintaining a highly skilled workforce.
Our ability to acquire new clients and to retain existing clients may, in some cases, be limited by clients’ perceptions of, or policies concerning, conflicts of interest arising from other client relationships. If we are unable to maintain multiple agencies to manage multiple client relationships and avoid potential conflicts of interests, our business resultsand maintain client advertising and marketing information. Increased cybersecurity threats and attacks, which are constantly evolving, pose a risk to our systems and networks. For example, in February 2021, we experienced a cybersecurity incident that resulted in the disruption of operations and financial position may be adversely affected.
Our employees arecertain of our most important assetsinformation technology systems at one of our networks. Based on the information currently known and our abilityinvestigation to attract and retain key personnel is an important aspect of our competitiveness. Ifdate, we are unable to attract and retain key personnel, our ability to provide our services indo not believe the manner clients have come to expect may be adversely affected, which could harm our reputation and result in a loss of clients, which couldincident will have a material adverse effectimpact on our business, resultsoperations or financial results. However, cybersecurity threats and attacks in the future could be material. Security breaches, improper use of operationsour systems and financial position.unauthorized access to our data and information by employees and others may pose a risk that sensitive data may be exposed to unauthorized persons or to the public. We also have access to sensitive or personal data or information that is subject to privacy laws and regulations. Our systems and processes to protect against, detect, prevent, respond to and mitigate cybersecurity incidents and our organizational training for employees to develop an understanding of cybersecurity risks and threats may be unable to prevent material security breaches, theft, modification or loss of data, employee malfeasance and additional known and unknown threats. Such events could adversely affect our business and reputation. We also use third-party service providers, including cloud providers, to store, transmit and process data. These third-party service providers could also be subject to cybersecurity incidents that could adversely affect us.
In addition, in 2020 and continuing into 2021, the overwhelming majority of our workforce temporarily transitioned to working from home during the COVID-19 pandemic. The increase in the number of our employees working from home may increase certain business and procedural control risks, including increased risk of cybersecurity incidents and exposure of sensitive business and client advertising and marketing information as well as personal data or information.
Risks Related to International Operations
Currency exchange rate fluctuations have impacted, and in the future could impact our business, results of operations and financial position.
OurIn 2020, our international operations representrepresented approximately 46%45% of our revenue. We operate in all major international markets including the Euro Zone, the United Kingdom, or the U.K., Australia, Brazil, Canada, China and Japan. Our agencies transact business in more than 50 different currencies. Substantially all of our foreign operations transact business in their local currency, and accordingly their financial statements are translated into U.S. Dollars. As a result, both adverse and beneficial fluctuations in foreign exchange rates would impact our business, results of operations and financial position. In addition, funds transferred to the United States can be adversely or beneficially impacted by changes in foreign currency exchange changes.rates.
We rely extensivelyAs a global business we face certain risks of doing business internationally, and we are exposed to risks from operating in high-growth markets and developing countries, which could have a material adverse effect on information technology systems and cybersecurity incidents could adversely affect us.
We rely on information technology systems and infrastructure to process, store and transmit data, summarize results, manage our business, results of operations and maintain client advertisingfinancial position.
The operational and marketing information. Increased cybersecurity threats and attacks, which are becoming more sophisticated, pose a risk to our systems and networks. Security breaches, improper usefinancial performance of our systemsinternational businesses are affected by global and unauthorized accessregional economic conditions, competition for new business and staff, currency exchange rate fluctuations, political conditions, differing regulatory environments and other risks associated with extensive international operations. In addition, we conduct business in numerous high-growth markets and developing countries that tend to have longer billing collection cycles, currency repatriation restrictions and commercial laws that can be undeveloped, vague, inconsistently enforced, retroactively applied or frequently changed. The risks associated with our datainternational operations could have a material adverse effect on our business, results of operations and information by employees and others may pose a risk that sensitive data may be exposed to unauthorized persons orfinancial position. Additionally, our operations are subject to the public. We also may have access to sensitive or personal data or information that is subject to privacyUnited States Foreign Corrupt Practices Act and other anti-corruption and anti-bribery laws and regulations. We install new systems or upgrade our existing systems to prevent, detect, addressThese laws and mitigate cybersecurity incidentsregulations are complex and we provide employee awareness training of cybersecurity risks.Despite our efforts to protect our systemsstringent, and networks and sensitive and personal data or information, we may be vulnerable to material security breaches, theft, modification or loss of data, employee malfeasance and additional known and unknown threats. Such eventsany violation could adversely affecthave an adverse effect on our business and reputation. In addition, we use third-party service providers, including cloud providers,For financial information by geographic region, see Note 8 to store, transmitthe consolidated financial statements.
We have substantial operations in the U.K. and process data. Cybersecurity incidents at these providers couldthe Euro Zone. On December 31, 2020, the U.K. completed its separation from the European Union, or E.U., (commonly referred to as “Brexit”) and entered into an agreement, or Brexit Agreement, with the E.U. that defines the terms of their relationship, covering, among other things, trade and tariffs, services and travel. The uncertainties related to the impact of the Brexit Agreement have cross-border operational, financial and tax implications, among others, and any economic volatility that may arise in the U.K., the E.U. or elsewhere may adversely affect our business.
Risks Related to Acquisitions
We may be unsuccessful in evaluating material risks involved in completed and future acquisitions.
We regularly evaluate potential acquisitions of businesses that are complementary to our businesses and client needs. As part of the process, we conduct business, legal and reputation.

financial due diligence to identify and evaluate material risks involved in any particular transaction. Despite our efforts, we may be unsuccessful in ascertaining or evaluating all such risks. As a result, the intended advantages of any given acquisition may not be realized. If we fail to identify certain material risks from one or more acquisitions, our business, results of operations and financial position could be adversely affected.


45



Our goodwill is an intangible asset that may become impaired, which could have a material adverse effect on our business, results of operations and financial position.
In accordance with generally accepted accounting principles in the United States, or U.S. GAAP or GAAP, we have recorded a significant amount of goodwill related to our acquisitions; a substantial portion of which represents the intangible specialized know-how of the acquired workforce. As discussed in Note 2 to the consolidated financial statements, we review the carrying value of goodwill for impairment annually at June 30 and whenever events or circumstances indicate the carrying value may not be recoverable. The estimates and assumptions about future results of operations and cash flows made in connection with the impairment testing could differ from future actual results of operations and cash flows. While we have concluded, for each year presented in the financial statements included in this report, that our goodwill is not impaired, future events could cause us to conclude that the intangible asset values associated with a given operation may become impaired. Any resulting non-cash impairment charge could have a material adverse effect on our business, results of operations and financial position.
Regulatory Risks
Government regulation and consumer advocates may limit the scope and content of our services, which could affect our ability to meet our clients’ needs, which could have a material adverse effect on our business, results of operations and financial position.
Government agencies and consumer groups directly or indirectly affect or attempt to affect the scope, content and manner of presentation of advertising, marketing and corporate communications services, through regulation or other governmental action, which could affect our ability to meet our clients’ needs. Such regulation may seek, among other things, to limit the tax deductibility of advertising expenditures by certain industries or for certain products and services. In addition, there has been a tendency on the part of businesses to resort to the judicial system to challenge advertising practices and claims, which could cause our clients affected by such actions to reduce their spending on our services. Any regulatory or judicial action that affects our ability to meet our clients' needs or reduces client spending on our services could have a material adverse effect on our business, results of operations and financial position.

Further, laws and regulations related to user privacy, use of personal information and Internet tracking technologies have been proposed or enacted in the United States and a number of international markets. These laws and regulations could affect the acceptance of new communications technologies and the use of current communications technologies as advertising mediums.media. These actions could affect our business and reduce demand for certain of our services, which could have a material adverse effect on our business, results of operations and financial position.

As a global business we face certain risks of doing business internationally and we are exposed to risks from operating in high-growth markets and developing countries, which could have a material adverse effect on our business, results of operations and financial position.

The operational and financial performance of our international businesses are affected by global and regional economic conditions, competition for new business and talented staff, currency fluctuation, political conditions, regulatory environment and other risks associated with extensive international operations. In addition, we conduct business in numerous high-growth markets and developing countries which tend to have longer billing collection cycles, currency repatriation restrictions and commercial laws that can be undeveloped, vague, inconsistently enforced, retroactively applied or frequently changed. The risks associated with our international operations could have a material adverse effect on our business, results of operations and financial position. Additionally, our operations are subject to the United States Foreign Corrupt Practices Act and other anti-corruption and anti-bribery laws and regulations. These laws and regulations are complex and stringent and any violation could have an adverse effect on our business and reputation. For financial information by geographic region, see Note 7 to the consolidated financial statements.

We may be unsuccessful in evaluating material risks involved in completed and future acquisitions.

We regularly evaluate potential acquisitions of businesses that are complementary to our businesses and client needs. As part of the process, we conduct business, legal and financial due diligence with the goal of identifying and evaluating material risks involved in any particular transaction. Despite our efforts, we may be unsuccessful in ascertaining or evaluating all such risks. As a result, the intended advantages of any given acquisition may not be realized. If we fail to identify certain material risks from one or more acquisitions, our business, results of operations and financial position could be adversely affected.

Our goodwill is an intangible asset that may become impaired, which could have a material adverse effect on our business, results of operations and financial position.

In accordance with generally accepted accounting principles in the United States, or U.S. GAAP or GAAP, we have recorded a significant amount of goodwill related to our acquisitions; a substantial portion of which represents the intangible specialized know-how of the acquired workforce. As discussed in Note 2 to the consolidated financial statements, we review the carrying value of goodwill for impairment annually at the end of the second quarter of the year and whenever events or circumstances indicate the carrying value may not be recoverable. The estimates and assumptions about future results of operations and cash flows made in connection with the impairment testing could differ from future actual results of operations and cash flows. While we have concluded, for each year presented in the financial statements included in this report, that our goodwill is not impaired, future events could cause us to conclude that the intangible asset values associated with a given operation may become impaired. Any resulting non-cash impairment charge could have a material adverse effect on our business, results of operations and financial position.



5


We could be affected by future laws or regulations enacted in response to climate change concerns and other actions.

Generally, ourOur businesses are not directly affected by current cap and trade laws and other regulatory requirements aimed at mitigating the impact of climate change by reducing emissions or otherwise, although our businesses could be in the future. However, we could be indirectly affected by increased prices for goods or services provided to us by companies that are directly affected by these laws and regulations andaimed at mitigating the impact of climate change. Specifically, these companies may seek to pass their increased costs through to their customers. Further, if our clients are impacted by such laws or requirements, either directly or indirectly, their spending for advertising and marketing services may decline, which could adversely impact our business, results of operations and financial position. Additionally, to comply with potential future changes in environmental laws and regulations, we may need to incur additional costs; therefore, at this time, we cannot estimate what impact such regulations may have on our business, results of operations and financial position.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We conduct business and maintain offices throughout the world. The facility requirements of our businesses are similar across geographic regions and disciplines. Substantially all our office space is leased under operating leases with varying expiration dates. Lease obligations of our foreign operations are generally denominated in their local currency. We believe that our facilities are adequate for our current operations and are well maintained. Our principal corporate offices are located at 437 Madison280 Park Avenue, New York, New York; 1055 Washington Boulevard, Stamford, Connecticut and 525 Okeechobee Boulevard, West Palm Beach, Florida. We also maintain executive offices in London, England; Shanghai, China and Singapore.
We lease substantially all our office space under operating leases that expire at various dates. Lease obligations of our foreign operations are generally denominated in their local currency. Office base rent expense was $330.4 million, $334.1 millionNotes 2 and $331.5 million in 2017, 2016 and 2015, respectively, net of rent received from non-cancelable third-party subleases.
Future minimum office base rent under non-cancelable operating leases, net of rent receivable from existing non-cancelable third-party subleases, is (in millions):
 Net Rent
2018$295.6
2019236.8
2020191.5
2021165.6
2022142.4
Thereafter624.0
 $1,655.9
See Note 1416 to the consolidated financial statements forprovide a description of our lease commitments,expense, which comprisecomprises a significant component of our occupancy and other costs.costs, and our lease commitments.
Item 3. Legal Proceedings
In the ordinary course of business, we are involved in various legal proceedings. We do not presently expect that these proceedings will have a material adverse effect on our results of operations or financial position.
On December 14, 2016, two of our subsidiaries received subpoenas from the U.S. Department of Justice Antitrust Division concerning its ongoing investigation of video production and post-production practices in the advertising industry. The Company is fully cooperating with the investigation. While the ultimate effect of the investigation is inherently uncertain, we do not at this time believe that the investigation will have a material adverse effect on our results of operations or financial position. However, the ultimate resolution of these matters could be different from our current assessment and the differences could be material.
Item 4. Mine Safety Disclosures
Not Applicable.



6



PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is listed and traded on the New York Stock Exchange under the symbol “OMC.”OMC. As of January 31, 2018,February 11, 2021, there were 2,0741,930 registered holders of our common stock.

The quarterly high and low sales prices for our common stock and dividends paid per share for 2017 and 2016 were:
  High Low 
Dividends Paid
Per Share
2017      
First Quarter $87.43
 $83.67
 $0.55
Second Quarter 86.71
 79.86
 0.55
Third Quarter 83.64
 71.63
 0.55
Fourth Quarter 78.70
 65.32
 0.60
2016  
  
  
First Quarter $84.23
 $66.48
 $0.50
Second Quarter 85.95
 75.61
 0.55
Third Quarter 87.50
 79.94
 0.55
Fourth Quarter 89.66
 78.67
 0.55

Common stock repurchases during the three months ended December 31, 20172020 were:
Period 
Total Number of
Shares Purchased
 
Average Price Paid
Per Share
 
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
 
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans
or Programs
October 1 - 31, 2017 49,710
 $75.14
 — —
November 1 - 30, 2017 103
 67.15
 — —
December 1 - 31, 2017 574,365
 73.72
 — —
  624,178
 $73.83
 — —

Period
Total Number of
Shares Purchased
Average Price
Paid Per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans
or Programs
October 1 - October 31, 202051,487 $50.22 ——
November 1 - November 30, 2020— — ——
December 1 - December 31, 20205,316 64.34 ——
56,803 $51.54 ——
During the three months ended December 31, 2017,2020, we purchased 560,000 shares of our common stock in the open market for general corporate purposes and withheld 64,17856,803 shares from employees to satisfy estimated statutory income tax obligations related to the vesting of restricted stock awards andawards. We did not purchase any shares of our common stock option exercises.in the open market. The value of the common stock withheld was based on the closing price of our common stock on the applicable vesting or exercise date.

There were no unregistered sales of equity securities during the three months ended December 31, 2017.2020.

For information on securities authorized for issuance under our equity compensation plans, see Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” which relevant information will be included in our definitive proxy statement, which is expected to be filed with the SEC by April 12, 2018.March 25, 2021.


7


Item 6. Selected Financial Data
The following selected financial data should be read in conjunction with our consolidated financial statements and related notes that begin on page F-1 of this report, as well as the MD&A.
 (In millions, except per share amounts)
For the years ended December 31:2017 2016 2015 2014 2013
Revenue$15,273.6
 $15,416.9
 $15,134.4
 $15,317.8
 $14,584.5
Operating Profit2,059.7
 2,008.9
 1,920.1
 1,944.1
 1,825.3
Net Income - Omnicom Group Inc.1,088.4
 1,148.6
 1,093.9
 1,104.0
 991.1
Net Income Per Common Share - Omnicom Group Inc.: 
  
  
  
  
Basic4.68
 4.80
 4.43
 4.27
 3.73
Diluted4.65
 4.78
 4.41
 4.24
 3.71
Dividends Declared Per Common Share2.25
 2.15
 2.00
 1.90
 1.60
 (In millions)
At December 31:2017 2016 2015 2014 2013
Cash and cash equivalents and short-term investments$3,796.4
 $3,022.8
 $2,619.7
 $2,390.3
 $2,728.7
Total Assets24,931.2
 23,165.4
 22,110.7
 21,428.4
 21,980.4
Long-term debt4,912.9
 4,920.5
 3,564.2
 4,542.1
 3,763.3
Convertible debt—
 —
 —
 —
 252.7
Long-Term Liabilities1,091.2
 892.3
 800.5
 774.3
 685.1
Total Shareholders’ Equity2,615.1
 2,162.0
 2,452.4
 2,850.0
 3,582.4
As discussed in Item 7 below, in 2017 the Tax Cuts and Jobs Act, or Tax Act, reduced Net income - Omnicom Group Inc. by $106.3 million and diluted Net income per share - Omnicom Group Inc. by $0.45. See Note 10 to the consolidated financial statements for additional information.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
EXECUTIVE SUMMARY
Impact of the COVID-19 Pandemic on our Business
In 2020, the COVID-19 pandemic negatively impacted our business and results of operations. Efforts to mitigate the impact of the pandemic, including government actions to restrict travel, limit public gatherings, shelter-in-place orders and mandatory closures of businesses, resulted in many of our clients reducing or suspending their spending for our advertising, marketing and corporate communication services. As a result, for the year ended December 31, 2020, revenue decreased $1,782.6 million, or 11.9%, compared to 2019, primarily due to the impact of the COVID-19 pandemic. We anticipate that the negative impact from the pandemic on our revenue will continue through the first quarter of 2021 as compared to the prior year period. However, we expect organic revenue growth for the first half of 2021. The impact of the COVID-19 pandemic on our revenue has been, and may continue to be, material, depending on several factors, including the potential for prolonged or additional governmental actions to mitigate the effects of the pandemic. It is possible that the COVID-19 pandemic will accelerate certain trends that began pre-pandemic, particularly those relating to online commerce, brand building and how we deploy our personnel. We expect that some of these trends will benefit our agencies and provide revenue growth opportunities, as well as increasing flexibility with respect to our use of physical locations and our cost structure, but some trends may negatively affect us including potential disruption by new participants and technologies.
In response to the impact of the COVID-19 pandemic, in the second quarter of 2020, we took actions to align our cost structure and reduce our workforce and facility requirements and continued the review of businesses for disposal and assets for impairment. As a result, we recorded a pre-tax charge of $277.9 million, which is comprised of incremental severance of $150.0 million, real estate operating lease right-of-use, or ROU, asset and other asset impairment charges of $55.8 million, other exit costs of $47.0 million and dispositions and other charges of $25.1 million (see Note 1 to the consolidated financial statements). These actions reduced headcount by over 6,000 and reduced the related facility requirements, which should result in significant reductions in future operating expenses.
In addition, during 2020, we reduced salary and service costs by $162.6 million related to reimbursements and tax credits under government programs in several countries, including the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, in the United States, the Kurzarbeit program in Germany, and other government reimbursement programs in the U.K., France, Canada and other jurisdictions (see Note 1 to the consolidated financial statements). Further, in the fourth quarter of 2020, we recorded asset impairment charges of $55.8 million associated with underperforming assets, which is included in salary and service costs.
The COVID-19 pandemic negatively impacted most of our clients' businesses. As a result, clients have cut costs, including postponing or reducing marketing communication expenditures. While certain industries such as healthcare and pharmaceuticals, technology and telecommunications, financial services and consumer products have been less affected, as long as the COVID-19

7

pandemic remains a threat, global economic conditions continue to be volatile and such uncertainty cuts across all clients, industries and geographies. Overall, while we have a diversified portfolio of service offerings, clients and geographies, demand for our services can be expected to continue to be adversely affected as marketers reduce expenditures in the short term due to the uncertain impact of the pandemic on the global economy. We expect global economic performance and our performance to vary by geography until the impact of the COVID-19 pandemic on the global economy moderates.
Although we have experienced a decrease in our cash flow from operating activities, we took numerous proactive steps to strengthen our liquidity and financial position that are intended to mitigate the potential impact of the COVID-19 pandemic on our liquidity. In February 2020, we issued $600 million 2.45% Senior Notes due April 30, 2030, or the 2.45% Notes. In March 2020, the net proceeds from the issuance of the 2.45% Notes were used to redeem the remaining $600 million principal amount of our 4.45% Senior Notes due August 15, 2020, or the 2020 Notes. As a result, we have no notes maturing until May 2022. In April 2020, we issued $600 million of 4.20% Senior Notes due June 1, 2030, or the 4.20% Notes, and we entered into a new $400 million 364 day revolving credit facility, or the 364 Day Credit Facility. The 364 Day Credit Facility is in addition to our existing $2.5 billion multi-currency revolving credit facility, or Credit Facility, which we extended to mature in February 2025. In addition, in March 2020, we suspended our share repurchase activity.
Results of Operations for the Year Ended December 31, 2020
We are a strategic holding company providing advertising, marketing and corporate communications services to clients through our branded networks and agencies around the world. On a global, pan-regional and local basis, our networks and agencies provide a comprehensive range of services in the following fundamental disciplines: advertising, CRM,which as described below includes CRM Consumer Experience and CRM Execution & Support, public relations and healthcare. Our business model was built and continues to evolve around our clients. While our networks and agencies operate under different names and frame their ideas in different disciplines, we organize our services around our clients. Our fundamental business principle is that our clients’ specific marketing requirements are the central focus of how we structure our service offerings and allocate our resources. This client-centric business model requires that multiple agencies within Omnicom collaborate in formal and informal virtual client networks utilizing our key client matrix organization structure. This collaboration allows us to cut across our internal organizational structures to execute our clients’ marketing requirements in a consistent and comprehensive manner. We continually seekuse our client-centric approach to grow our business withby expanding our service offerings to existing clients, by maintaining our client-centric approach, as well as expanding our existing business relationshipsmoving into new markets and withobtaining new clients. In addition, we pursue selective acquisitions of complementary companies with strong entrepreneurial management teams that typically currently serve or have the ability tocould serve our existing client base.clients.
As a leading global advertising, marketing and corporate communications company, we operate in all major markets and have a large and diverse client base. In 2017,2020, our largest client represented 3.0%3.4% of revenue and our 100 largest clients, which represent many of the world's major marketers, comprisedrepresented approximately 51%54% of revenue. Our clients operate in virtually every sector of the global economy with no one industry comprisingrepresenting more than 14%16% of our revenue in 2017.2020. Although our revenue is generally balanced between the United States and international markets and we have a large and diverse client base, we are not immune to general economic downturns.
As described in more detail below, in 2017 our revenue decreased $143.3 million, or 0.9%, compared to 2016. Changes in foreign exchange rates negatively impacted revenue in the first six months of 2017. Beginning in the third quarter of 2017, the Euro and a number of other foreign currencies strengthened against the U.S. Dollar. As a result, changes in foreign exchange rates for 2017 had a marginal effect on our revenue. In 2017, changes in foreign exchange rates increased revenue by $42.9 million, or 0.3%. Acquisition revenue, net of disposition revenue, reduced revenue $647.3 million, or 4.2%, primarily reflecting the sale of our specialty print media and organic growth increased revenue $461.1 million, or 3.0%.


8

Global economic conditions have a direct impact on our business and financial performance. Adverse global or regional economic conditions, such as those currently arising from the COVID-19 pandemic, pose a risk that our clients may reduce, postpone or cancel spending on advertising, marketing and corporate communications services, which would reduce the demand for our services. In 2017, our agencies in North America continued their modest growth as activityRevenue is typically lower in the United States varied acrossfirst and third quarters and higher in the second and fourth quarters, reflecting client spending patterns during the year and additional project work that usually occurs in the fourth quarter. As a result of the impact related to the COVID-19 pandemic, we experienced a significant decline in our service disciplines andyear-over-year organic revenue growth slowed in the second, third and fourth quarters of 2020, which will likely continue at least through the first half of 2021. We anticipate that the year relativenegative impact from the pandemic on our revenue will continue through the first quarter of 2021 as compared to the prior year period. However, we expect organic revenue growth for the first half. Ourhalf of 2021.
In 2020, revenue decreased $1,782.6 million, or 11.9%, compared to 2019. Changes in foreign exchange rates reduced revenue $60.9 million, or 0.4%, acquisition revenue, net of disposition revenue, reduced revenue $56.7 million, or 0.4%, reflecting the disposition of certain non-strategic businesses, and organic growth reduced revenue $1,665.0 million, or 11.1%.
Certain global events targeted by major marketers for advertising expenditures, such as the FIFA World Cup and the Olympics, and certain national events, such as the U.S. election process, may affect our revenue period-over-period in certain businesses. Typically, these events do not have a significant impact on our revenue in any period.
Beginning in March 2020 and continuing through the United Kingdom, orfourth quarter of 2020, our business experienced the U.K.,effects from reductions in client spending due to the impact related to the COVID-19 pandemic. The spending reductions impacted all our businesses and markets. The most significantly impacted businesses were our advertising discipline, CRM Consumer Experience discipline, especially in our event marketing businesses, and CRM Execution & Support discipline, primarily in our field marketing and merchandising businesses. In North America, we experienced a decline in organic revenue attributable to the COVID-19 pandemic in all our disciplines, except healthcare. In Europe had solid performance. However, while improvingand the Middle East and Africa, almost all businesses

8

and regions experienced a decline in 2017,organic revenue resulting from the continuing uncertainCOVID-19 pandemic, which was marginally offset by an increase primarily from the strengthening of the British Pound and Euro against the U.S. Dollar. In addition, the economic and political conditions in the European Union, orU.K. and the EU, have been further complicatedE.U. resulting from the implementation of the Brexit Agreement remain uncertain and could negatively impact our businesses in the U.K. and the E.U. In Latin America, the impact of the COVID-19 pandemic compounded by the official notification from the U.K. to the European Council to withdraw from the EU. In Brazil,continuing unstable economic and political conditions in Brazil resulted in negative organic growth in Brazil and throughout the region. In addition, the weakening of foreign currency exchange rates against the U.S. Dollar in all countries further contributed to the continuing volatilityreduction in revenue in the market and our agencies experienced negative growth. Most ofregion. In Asia-Pacific, almost all our businesses in Asia continue their modestthe region experienced negative organic growth consistent with recent periods.as a result of the COVID-19 pandemic, and the weakening of most currencies against the U.S. Dollar had a marginal negative impact on revenue. The economic and fiscal issues, including the impact related to the COVID-19 pandemic, facing the countries we operate in Europe and Latin Americacan be expected to continue to cause economic uncertainty in those regions;and volatility; however, the impact on our business varies by country. We will continue to monitor economic conditions closely, as well as client revenue levels and other factors and, infactors. In response to reductions in our client revenue if necessary,that are expected to continue at least through the first half of 2021, beginning in the second quarter of 2020, we will taketook actions available to us to align our cost structure with changes in client demand and manage our working capital. ThereHowever, there can be no assurance whether, or to what extent, our efforts to mitigate any impact of the current and future adverse economic conditions, reductions in client revenue, changes in client creditworthiness and other developments will be effective.effective or that additional actions will not be necessary.
CertainPrior to the COVID-19 pandemic, certain business trends havegenerally had a positive impact on our business and industry. These trends include clients increasingly expanding the focus of their brand strategies from national markets to pan-regional and global markets and integrating traditional and non-traditional marketing channels, as well as utilizing new communications technologies and emerging digital platforms. As clients increase their demands for marketing effectiveness and efficiency, they have made it a practice to consolidate their business within one service provider in the pursuit of a single engagement covering all consumer touch points. We have structured our business around these trends. We believe thatWhile the current economic environment caused many clients to reduce spending for our services, certain trends such as increased spending on digital marketing platforms, and our key client matrix organization structure approach to collaboration and integration of our services and solutions have providedprovide a competitive advantage to our business in the past and webusiness. We expect this advantage to continue over the medium and long term. In addition, during 2017, we continued the process of forming practice areas within
Driven by our global network structure to bring together agencies operating in common disciplines to leverage existing resourcesclients’ continuous demand for more effective and to create, in close coordination with our key client matrix organization, additional custom client solutions. We expect to complete this process in 2018.
In the near term, barring unforeseen events and excluding the impact of changes in foreign exchange rates, as a result of continued improvement in operating performance by many of our agencies and new businessefficient marketing activities, we expect our 2018 revenuestrive to increase modestlyprovide an extensive range of advertising, marketing and over the long term to be in excess of the weighted average nominal GDP growth in our major markets. We expect to continue to identify acquisition opportunities intended to build upon the core capabilities of our strategic disciplines and business platforms, expand our operations in high-growth and emerging markets and enhance our capabilities to leverage new technologiescorporate communications services through various client-centric networks that are being used by marketers today. In addition, weorganized to meet specific client objectives. These services include, among others, advertising, brand consulting, content marketing, corporate social responsibility consulting, crisis communications, custom publishing, data analytics, database management, digital/direct marketing, digital transformation, entertainment marketing, experiential marketing, field marketing, financial/corporate business-to-business advertising, graphic arts/digital imaging, healthcare marketing and communications, in-store design, interactive marketing, investor relations, marketing research, media planning and buying, merchandising and point of sale, mobile marketing, multi-cultural marketing, non-profit marketing, organizational communications, package design, product placement, promotional marketing, public affairs, public relations, retail marketing, sales support, search engine marketing, shopper marketing, social media marketing and sports and event marketing.
We continually evaluate our portfolio of businesses to identify areas for investment and acquisition opportunities, as well as to identify non-strategic or underperforming businesses for disposition. In the first and second quarters of 2019, we disposed of certain businesses, primarily in our CRM Execution & Support discipline.
Given our size and breadth, we manage our business by monitoring several financial indicators. The key indicators that we focus on are revenue and operating expenses. We analyze revenue growth by reviewing the components and mix of the growth, including growth by principal regional market and marketing discipline, the impact from foreign currency exchange rate changes, growth from acquisitions, net of dispositions, and growth from our largest clients. Operating expenses are comprised of cost of services, selling, general and administrative expenses, or SG&A, expenses and depreciation and amortization.
In 2020, our revenue decreased 11.9% compared to 2019. Changes in foreign exchange rates reduced revenue 0.4%, acquisition revenue, net of disposition revenue, reduced revenue 0.4%, and organic growth decreased revenue 11.1% as all our markets were negatively impacted by the COVID-19 pandemic. The change in revenue in 2017 across our principal regional markets were: North America decreased 5.3%10.6%, Europe increased 5.7%decreased 12.2%, Asia-Pacific decreased 8.8% and Latin America increased 16.8% and Asia Pacific increased 0.9%decreased 31.7%. In North America, modest growth in the United States and Canada was offset by the disposition of our specialty print media business in the second quarter. In Europe, growth in substantially all markets and the strengthening of the Euro against the U.S. Dollar was partially offset by the weakening of the British Pound against the U.S. Dollar. The increase in revenue in Latin America was a result of our acquisition activity in Colombia, growth in Mexico and the strengthening of the Brazilian Real against the U.S. Dollar, which was substantially offset by the continued economic weakness in Brazil and negative performance in that market. In Asia Pacific, growth in most countries in the region, especially Australia, India, Japan and Singapore, was partially offset by disposition activity.
In an effort to monitor the changing needs of our clients and to better capture the expanded scope of our services, in the fourth quarter of 2017, we realigned our service disciplines. As a result, our CRM discipline was grouped into two separate categories: CRM Consumer Experience, which includes Omnicom Precision Marketing Group’s digital / direct marketing agencies, as well as our branding agencies, shopper marketing agencies and our experiential marketing agencies; and, CRM Execution & Support, which includes field marketing, sales support, merchandising and point of sale, as well as other specialized marketing and custom communications services. Also, we realigned and renamed our former specialty communications discipline so that it now exclusively includes agencies offering healthcare marketing and communications services.


9

The change in revenue in 20172020, compared to 2016,2019, in our servicefundamental disciplines was: advertisingAdvertising decreased 0.6%13.1%, CRM Consumer Experience decreased 3.2%15.6%, CRM Execution & Support decreased 1.6%16.7%, public relationsPublic Relations decreased 5.6% and Healthcare increased 0.1% and healthcare increased 3.3%3.4%. The decrease in advertising primarily reflects the sale of our specialty print media business in April 2017.
We measure cost of services in two distinct categories: salary and service costs and occupancy and other costs. As a service business, salary and service costs make up the vast majoritysignificant portion of our operating expenses and substantially all these costs comprise the essential components directly linked to the delivery of our services. Salary and service costs include employee compensation and benefits, freelance labor and directthird-party service costs, which include third-party supplier costs and client-related travel costs. Occupancy and other costs consist of the indirect costs related to the delivery of our services, including office rent and other occupancy costs, equipment rent, technology costs, general office expenses and other expenses.

9

SG&A expenses, which decreased year-over-year, primarily consist of third-party marketing costs, professional fees and compensation and benefits and occupancy and other costs of our corporate and executive offices, which includes group-wide finance and accounting, treasury, legal and governance, human resource oversight and similar costs.
Operating expenses for 2017 decreased 1.4% compared to 2016. SalaryIn 2020, salary and service costs, which tend to fluctuate with changes in revenue, decreased $190.9$1,399.4 million, or 1.7%12.8%, in 2017 compared to 2016.2019. Salary and related service costs in 2020 decreased $644.3 million, or 9.3%, year-over-year, primarily as a result of the severance and furlough actions we took in the second quarter of 2020. Also, during 2020, we reduced salary and service costs by $162.6 million related to reimbursements and tax credits under government programs in several countries (see Note 1 to the consolidated financial statements). Third-party service costs, which include expenses incurred with third-party vendors primarily when we act as a principal when performing services for our clients, decreased $755.1 million, or 18.5%, year-over-year reflecting the decrease in revenue and the impact of actions we took to align our cost structure. Occupancy and other costs, which are less directly linked to changes in revenue than salary and service costs, increased $1.5decreased $83.3 million, or 0.1%6.8%, in 2017 compared to 2016. Operating profit increased $50.8 million year-over-year. As a result, operating margin increased year-over-year to 13.5% from 13.0%. Earnings before interest, taxes and amortization of intangible assets, or EBITA margin, in 2017 was 14.2%,2020 as compared to 13.8% in 2016.
Net interest expense increased $7.7 million year-over-year to $174.8 million in 2017. Interest expense increased$14.82019. Operating profit decreased $523.5 million to $224.5$1,598.8 million. Operating margin decreased to 12.1% from 14.2%, and EBITA margin decreased to 12.8% from 14.8% year-over-year. In 2020, operating profit, operating margin and EBITA margin included a net decrease aggregating $171.1 million in 2017. Interest income increased $7.1 million to $49.7 million in 2017 compared to 2016.
On December 22, 2017, the Tax Act was enacted into law. The Tax Act reduced the U.S. federal statutory income tax rate to 21% from 35% for tax years beginning after December 31, 2017 and made several changes to existing tax law that affect our tax assets and liabilities related to previously reported taxable income. The significant changes require that we record tax expense on the accumulated earnings of our foreign subsidiariesCOVID-19 repositioning costs recorded in the second quarter and adjust our previously reported deferred tax positions to reflectasset impairment charges recorded in the impact of the revised statutory federal rate as of the enactment date. In December 2017, the SEC issued Staff Accounting Bulletin 118, or SAB 118, which provides guidance on accounting for the impact of the Tax Act. SAB 118 provides that provisional amounts should be recognized in our financial statements where accounting for certain effects of the Tax Act are not complete and a reasonable estimate of the effects of the Tax Act can be made. Accordingly, at December 31, 2017, we have estimated the effect of the Tax Act and recorded a net increase to income tax expense of $106.3 million. Our estimate is based on our understanding of the Tax Act and currently available guidance. We expect to revise this estimate in future periods as further information becomes available. See Note 10 to the consolidated financial statements for additional information.
Our effective tax rate for 2017 was 36.9% compared to 32.6% for 2016. The increase is attributable to the estimated impact of the Tax Act of $106.3 millionfourth quarter, partially offset by the recognition of an excessincrease related to reimbursements and tax benefit from share-based compensation of $20.8 million resulting from the adoption of FASB ASU 2016-09 (seecredits under government programs in several countries(see Note 1 to the consolidated financial statements). ASU 2016-09 requires that beginning
In 2020, net interest expense increased $5.5 million year-over-year to $189.5 million. Interest expense on debt decreased $27.6 million to $199.6 million, primarily reflecting a reduction in 2017 excess tax benefits and deficiencies arisinginterest expense from share-based compensation be recognized in results of operationsour refinancing activity at lower interest rates in the period whensecond half of 2019 and the restricted stock awards vest or stock options are exercised. In prior years, excess tax benefits and deficiencies from share-based compensation were recorded in additional paid-in capital. The effectfirst quarter of 2020, partially offset by a loss of $7.7 million on the early redemption of the Tax Act on income tax expense for 2017 is presented below in Results of Operations 2017 Compared to 2016. While we are still evaluating the impactremaining $600 million principal amount of the Tax Act on our 2018 annual2020 Notes in the first quarter of 2020 and the interest expense from the issuance of the 4.20% Notes in April 2020 (see Note 7 to the consolidated financial statements). Interest income in 2020 decreased $28.0 million year-over-year to $32.3 million primarily due to lower rates.
Our effective tax rate we expectfor 2020 increased year-over-year to 27.1% from 26.0%. The non-deductibility in certain jurisdictions of a portion of the Tax Act to reduceCOVID-19 repositioning costs recorded in the second quarter of 2020 had the effect of increasing our effective tax rate between 3.5% and 4.5%, which excludesfor 2020. This increase was substantially offset by a lower effective tax rate on our foreign earnings resulting from a change in legislation. In 2019, income tax expense was reduced by $10.8 million primarily from the impactnet favorable settlements of uncertain tax benefits or deficiencies on share-based compensation. At this point, we can not predictpositions in certain jurisdictions. After considering these items, our effective rate for 2020 would have approximated the 2018 impact from share-based compensation because it is subject to changes in our share price.rate for 2019.
Net income - Omnicom Group Inc. for 2017in 2020 decreased $60.2$393.7 million or 5.2%, to $1,088.4$945.4 million from $1,148.6$1,339.1 million in 2016.2019. The year-over-year decrease is due to the impact of the Tax Act of $106.3 million, which is partially offset by the after tax increase from the factors described above. Diluted net income per share - Omnicom Group Inc. decreased 2.7% to $4.65$4.37 in 2017,2020, compared to $4.78$6.06 in 2016. The impact of2019, due to the Tax Act reduced diluted net income per share - Omnicom Group Inc. $0.45. In addition,factors described above, as well as the impact of the reduction in our weighted average common shares outstanding resulting from repurchases of our common stock through March 2020, net of shares issued for restricted stock awards, stock option exercises and the employee stock purchase plan improved diluted net income per share - Omnicom Group Incduring the year. As discussed above and in 2017 comparedNote 1 to 2016.the consolidated financial statements, our results of operations for 2020 included COVID-19 repositioning costs and asset impairment charges, which were partially offset by an increase attributable to reimbursements and tax credits under government programs in several countries. The effectafter-tax impact of the Tax Actthese items on net income - Omnicom Group Inc. and diluted net income per share - Omnicom Group Inc. is presented below in Results of Operations 2017 Compared to 2016.was $146.8 million.


10


CRITICAL ACCOUNTING POLICIES

The following summary of our critical accounting policies provides a better understanding of our financial statements and the related discussion in this MD&A. We believe that the following policies may involve a higher degree of judgment and complexity in their application than most of our accounting policies and represent the critical accounting policies used in the preparation of our financial statements. Readers are encouraged to consider this summary together with our financial statements and the related notes, including Note 2, for a more complete understanding of the critical accounting policies discussed below.
Estimates

We prepare our financial statements in conformity with U.S. GAAP and are required to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We use a fair value approach in testing goodwill for impairment and when evaluating our equity method and cost method investments to determine if an other-than-temporary impairment has occurred. Actual results could differ from those estimates and assumptions.
Acquisitions and Goodwill

We have made and expect to continue to make selective acquisitions. The evaluation of potential acquisitions is based on various factors, including specialized know-how, reputation, geographic coverage, competitive position and service offerings of the target businesses, as well as our experience and judgment.

Business combinations are accounted for using the acquisition method. The assets acquired, including identified intangible assets, liabilities assumed and any noncontrolling interest in the acquired business are recorded at their acquisition date fair values. In circumstances where control is obtained and less than 100% of a business is acquired, goodwill is recorded as if 100% were acquired. Acquisition-related costs, including advisory, legal, accounting, valuation and other costs are expensed as incurred. Certain acquisitions include an initial payment at closing and provide for future additional contingent purchase price payments (earn-outs), which are recorded as a liability at the acquisition date fair value. Subsequent changes in the fair value of the liability are recorded in results of operations. The results of operations of acquired businesses are included in results of operations from the acquisition date. In 2017, we completed four acquisitions of new subsidiaries.

Our acquisition strategy is focused on acquiring the expertise of an assembled workforce in order to continue to build upon the core capabilities of our various strategic business platforms and agency brands through the expansion of their geographic

10

reach or their service capabilities to better serve our clients. Additional key factors we consider include the competitive position and specialized know-how of the acquisition targets. Accordingly, as is typical in most service businesses, a substantial portion of the assets we acquire are intangible assets primarily consisting of the know-how of the personnel, which is treated as part of goodwill and under U.S. GAAP is not required to be valued separately.separately under U.S. GAAP. For each acquisition, we undertake a detailed review to identify other intangible assets that are required to be valued separately. A significant portion of the identifiable intangible assets acquired is derived from customer relationships, including the related customer contracts, as well as trade names. In valuing these identified intangible assets, we typically use an income approach and consider comparable market participant measurements.

We evaluate goodwill for impairment at least annually at the end of the second quarter of theeach fiscal year and whenever events or circumstances indicate the carrying value may not be recoverable. Under FASB ASC Topic 350, Intangibles - Goodwill and Other, we have the option of either assessing qualitative factors to determine whether it is more-likely-than-not that the carrying value of our reporting units exceeds their respective fair value or proceeding directly to the goodwill impairment test. Although not required, weWe performed the annual impairment test and compared the fair value of each of our reporting units to its respective carrying value, including goodwill. We identified our regional reporting units as components of our operating segments, which are our five global agency networks. The regional reporting units of each agency network are responsible for the agencies in their region. They report to the segment managers and facilitate the administrative and logistical requirements of our key client matrix organization structure for delivering services to clients in their regions. We have concluded that for each of our operating segments, their regional reporting units have similar economic characteristics and should be aggregated for purposes of testing goodwill for impairment at the operating segment level. Our conclusion was based on a detailed analysis of the aggregation criteria set forth in FASB ASC Topic 280, Segment Reporting, and in FASB ASC Topic 350. Consistent with our fundamental business strategy, the agencies within our regional reporting units serve similar clients in similar industries, and in many cases the same clients. In addition, the agencies within our regional reporting units have similar economic characteristics. The main economic components of each agency are employee compensation and related costs and direct service costs and occupancy and other costs, which include rent and occupancy costs, technology costs that are generally limited to


11


personal computers, servers and off-the-shelf software and other overhead expenses. Finally, the expected benefits of our acquisitions are typically shared by multiple agencies in various regions as they work together to integrate the acquired agency into our virtual client network strategy.
Goodwill Impairment Review - Estimates and Assumptions
We use the following valuation methodologies to determine the fair value of our reporting units: (1) the income approach, which utilizes discounted expected future cash flows, (2) comparative market participant multiples for EBITDA (earnings before interest, taxes, depreciation and amortization) and (3) when available, consideration of recent and similar acquisition transactions.
In applying the income approach, we use estimates to derive the discounted expected cash flows (“DCF”) for each reporting unit that serves as the basis of our valuation. These estimates and assumptions include revenue growth and operating margin, EBITDA, tax rates, capital expenditures, weighted average cost of capital and related discount rates and expected long-term cash flow growth rates. All of these estimates and assumptions are affected by conditions specific to our businesses, economic conditions related to the industry we operate in, as well as conditions in the global economy. The assumptions that have the most significant effect on our valuations derived using a DCF methodology are: (1) the expected long-term growth rate of our reporting units' cash flows and (2) the weighted average cost of capital (“WACC”) for each reporting unit.
At June 30, 2020 we adjusted our assumptions to reflect the economic conditions in light of the impact on our business related to the COVID-19 pandemic, including downward adjustment to our revenue and earnings assumptions, reducing our long-term growth rate and increasing the weighted average cost of capital, or WACC, for each reporting unit and limiting our estimate of our equity value to reflect the decline in our share price that occurred during the first half of 2020. In addition, the assumptions reflected the expected cost reductions from our severance and real estate facility repositioning actions (see Notes 1 and 11 to the consolidated financial statements).
The assumptions used for the long-term growth rate and WACC in our evaluations as of June 30, 20172020 and 20162019 were:
20202019
Long-Term Growth Rate3%4%
WACC10.6% - 10.8%10.1% - 10.6%
 June 30,
 2017 2016
Long-Term Growth Rate4% 4%
WACC9.6% - 10.3% 9.7% - 10.3%
Long-term growth rate represents our estimate of the long-term growth rate for our industry and the markets of the global economy we operate in. For the past ten years, the average historical revenue growth rate of our reporting units and the Average Nominal GDP, or NGDP, growth of the countries comprising the major markets that account for substantially all of our revenue was approximately 3.6%4.2% and 3.5%4.3%, respectively. We considered this history when determining the long-term growth rates used in our annual impairment test at June 30, 2017.2020 and lowered it to reflect the potential future effects of the unprecedented COVID-19 pandemic on the global economy, which are not reflected in the 10-year historical analysis. We believe marketing expenditures over the long term have a high correlation to GDP. We also believe basedNGDP. Based on our historical performance, we also believe that our long-term growth rate will exceed Average Nominal GDPNGDP growth in the markets we operate in, which are similar across our reporting units. For our annual test as of June 30, 2017,2020, we used an estimated long-term growth rate of 4%3.0%.

11

When performing the annual impairment test as of June 30, 20172020 and estimating the future cash flows of our reporting units, we considered the current macroeconomic environment, as well as industry and market specific conditions at mid-year 2017.2020. In the first half of 2017, we experienced an increase in2020, our revenue of 3.9%declined 11.7%, which excluded our net disposition activity and the impact from changes in foreign exchange rates. Economic conditions inThe COVID-19 pandemic significantly impacted the Euro Zone are unsettled andglobal economy. Government actions taken to mitigate the continuing fiscal issues faced byimpact of the pandemic negatively impacted many countries in the European Union has caused economic difficulty in certain of our Euro Zone markets. Duringclients' businesses, and in turn, clients have reduced their demand for our services. In addition, the first half of 2017, weakness in most Latin American economies we operate in hasassumptions reflected the potentialexpected cost reductions from our severance and real estate facility repositioning actions (see Notes 1 and 13 to affect our near-term performance in that region. We considered the effect of these conditions in our annual impairment test.consolidated financial statements).
The WACC is comprised of: (1) a risk-free rate of return, (2) a business risk index ascribed to us and to companies in our industry comparable to our reporting units based on a market derived variable that measures the volatility of the share price of equity securities relative to the volatility of the overall equity market, (3) an equity risk premium that is based on the rate of return on equity of publicly traded companies with business characteristics comparable to our reporting units, and (4) a current after-tax market rate of return on debt of companies with business characteristics similar to our reporting units, each weighted by the relative market value percentages of our equity and debt.
Our five reporting units vary in size with respect to revenue and the amount of debt allocated to them. These differences drive variations in fair value among our reporting units. In addition, these differences as well as differences in book value, including goodwill, cause variations in the amount by which fair value exceeds book value among the reporting units. The reporting unit goodwill balances and debt vary by reporting unit primarily because our three legacy agency networks were acquired at the formation of Omnicom and were accounted for as a pooling of interests that did not result in any additional debt or goodwill being recorded. The remaining two agency networks were built through a combination of internal growth and acquisitions that were accounted for using the acquisition method and as a result, they have a relatively higher amount of goodwill and debt.


12


Goodwill Impairment Review - Conclusion
Based on the results of our impairment test, we concluded that our goodwill at June 30, 20172020 was not impaired, because the fair value of each of our reporting units was substantially in excess of its respective net book value. For our reporting units with negative book value, we concluded that the fair value of their total assets was in excess of book value. The minimum decline in fair value that one of our reporting units would need to experience in order to fail the goodwill impairment test was approximately 72%20%. Notwithstanding our belief that the assumptions we used for WACC and long-term growth rate in our impairment testing arewere reasonable, we performed a sensitivity analysis for each of our reporting units. The results of this sensitivity analysis on our impairment test as of June 30, 20172020 revealed that if the WACC increased by 1% and/or the long-term growth rate decreased by 1%, the fair value of each of our reporting units would continue to be substantially in excess of its respective net book value and would pass the impairment test.
We will continue to perform our impairment test at the end of the second quarter of each year at June 30th unless events or circumstances trigger the need for an interim impairment test. There were no events through December 31, 2020 that would change our impairment assessment. The estimates used in our goodwill impairment test do not constitute forecasts or projections of future results of operations, but rather are estimates and assumptions based on historical results and assessments of macroeconomic factors affecting our reporting units as of the valuation date. We believe that our estimates and assumptions are reasonable, but they are subject to change from period to period. Actual results of operations and other factors will likely differ from the estimates used in our discounted cash flow valuation, and it is possible that differences could be significant. A change in the estimates we use could result in a decline in the estimated fair value of one or more of our reporting units from the amounts derived as of our latest valuation and could cause us to fail our goodwill impairment test if the estimated fair value for the reporting unit is less than the carrying value of the net assets of the reporting unit, including its goodwill. A large decline in estimated fair value of a reporting unit could result in a non-cash impairment charge and may have an adverse effect on our results of operations and financial condition.
Subsequent to the annual impairment test at June 30, 2017 and considering our operating performance in the second half of the year, there were no events or circumstances that triggered the need for an interim impairment test. Additional information about acquisitions and goodwill appears in Notes 2, 45 and 56 to the consolidated financial statements.
Revenue Recognition
We recognize revenue in accordance with FASB ASC Topic 605, Revenue Recognition, and applicable SEC Staff Accounting Bulletins. Our principal source of revenue is derived from fees for services on a rate per hour or per project basis. Revenue is realizedrecognized when a customer obtains control of promised goods or services (the performance obligation) in an amount that reflects the service is performedconsideration we expect to receive in accordance withexchange for those goods or services (the transaction price). We measure revenue by estimating the client arrangement and upon the completion of the earnings process. Our primary client arrangements include: fixed fee contracts where revenue is recognizedtransaction price based on the level of effort completed to date, retainer agreements whereconsideration specified in the client arrangement. Revenue is recognized as the performance obligations are satisfied. Our revenue is recognized on a straight-line basis overprimarily derived from the contract period,planning and media commissions where revenue is recognized whenexecution of advertising communications and marketing services in the media is run. Prior to recognizing revenue, persuasive evidence of an arrangement must exist, the sales price must be fixed or determinable, delivery, performance and acceptance must be in accordance with the client arrangement and collection must be reasonably assured. These principles are the foundation of our revenue recognition policy and apply to all client arrangements in each of our servicefollowing fundamental disciplines: advertising, which includes creative advertising services and strategic media planning and buying services, customer relationship management or CRM, which includes CRM Consumer Experience and CRM Execution & Support, public relations and healthcare. Becausehealthcare advertising. Our client contracts are primarily fees for service on a rate per hour or per project basis. Revenue is recorded net of sales, use and value added taxes.

12

Performance Obligations. In substantially all our disciplines, the performance obligation is to provide advisory and consulting services at an agreed-upon level of effort to accomplish the specified engagement. Our client contracts are comprised of diverse arrangements involving fees based on any one or a combination of the following: an agreed fee or rate per hour for the level of effort expended by our employees; commissions based on the client’s spending for media purchased from third parties; qualitative or quantitative incentive provisions specified in the contract; and reimbursement for third-party costs that we are required to include in revenue when we control the vendor services related to these costs and we act as principal. The transaction price of a contract is allocated to each distinct performance obligation based on its relative stand-alone selling price and is recognized as revenue when, or as, the customer receives the benefit of the performance obligation. Clients typically receive and consume the benefit of our services as they are performed. Substantially all our client contracts provide that we are compensated for services performed to date and allow for cancellation by either party on short notice, typically 90 days, without penalty.
Generally, our short-term contracts, which normally take 30 to 90 days to complete, are performed by a single agency and consist of a single performance obligation. As a result, we do not consider the underlying services as separate or distinct performance obligations because our services are highly interrelated, occur in close proximity, and the integration of the various components of a marketing message is essential to overall service. In certain of our long-term client contracts, which have a term of up to one year, the performance obligation is a stand-ready obligation, because we provide a constant level of similar services over the term of the contract. In other long-term contracts, when our services are not a stand-ready obligation, we consider our services distinct performance obligations and allocate the transaction price to each separate performance obligation based on its stand-alone selling price, including contracts for strategic media planning and buying services, which are considered to be multiple performance obligations, and we allocate the transaction price to each distinct service based on the staffing plan and the stand-alone selling price. In substantially all of our creative services contracts, we have distinct performance obligations for our services, including certain creative services contracts where we act as an agent and arrange, at the client’s direction, for third parties to perform studio production efforts.
Revenue Recognition Methods. A substantial portion of our revenue is recognized over time, as the services that we provide across eachare performed, because the client receives and consumes the benefit of our disciplinesperformance throughout the contract period, or we create an asset with no alternative use and are similar and deliveredcontractually entitled to clientspayment for our performance to date in similar ways, allthe event the client terminates the contract for convenience. For these client contracts, other than when we have a stand-ready obligation to perform services, revenue is recognized over time using input measures that correspond to the level of staff effort expended to satisfy the performance obligation on a rate per hour or equivalent basis. For client contracts when we have a stand-ready obligation to perform services on an ongoing basis over the life of the key elementscontract, typically for periods up to one year, where the scope of these arrangements is broad and there are no significant gaps in performing the services, we recognize revenue using a time-based measure resulting in a straight-line revenue recognition. From time to time, there may be changes in the client service requirements during the term of a contract and the changes could be significant. These changes are typically negotiated as new contracts covering the additional requirements and the associated costs, as well as additional fees for the incremental work to be performed.
To a lesser extent, for certain other contracts where our performance obligations are satisfied in phases, we recognize revenue over time using certain output measures based on the measurement of the value transferred to the customer, including milestones achieved. Where the transaction price or a portion of the transaction price is derived from commissions based on a percentage of purchased media from third parties, the performance obligation is not satisfied until the media is run and we have an enforceable contract providing a right to payment. Accordingly, revenue for commissions is recognized at a point in time, typically when the media is run, including when it is not subject to cancellation by the client or media vendor.
Principal vs. Agent. In substantially all our businesses, we incur third-party costs on behalf of clients, including direct costs and incidental, or out-of-pocket costs. Third-party direct costs incurred in connection with the creation and delivery of advertising or marketing communication services include, among others: purchased media, studio production services, specialized talent, including artists and other freelance labor, event marketing supplies, materials and services, promotional items, market research and third-party data and other related expenditures. Out-of-pocket costs include, among others: transportation, hotel, meals and telecommunication charges incurred by us in the course of providing our services. Billings related to out-of-pocket costs are included in revenue recognition applysince we control the goods or services prior to delivery to the client.
However, the inclusion of billings related to third-party direct costs in revenue depends on whether we act as a principal or as an agent in the client arrangements in eacharrangement. In most of our service disciplines.
In the majoritybusinesses, including advertising, which also includes studio production efforts and media planning and buying services, public relations, healthcare advertising and most of our CRM Consumer Experience businesses, we act as an agent and recordarrange, at the client's direction, for third parties to perform certain services. In these cases, we do not control the goods or services prior to the transfer to the client. As a result, revenue is recorded net of these costs, equal to the net amount retained when thefor our fee or commission is earned. Although, incommission.

13

In certain markets,businesses we may bear credit risk with respect to these activities, the arrangements with our clients are such that we act as an agentprincipal when contracting for third-party services on their behalf.behalf of our clients. In these cases, costs incurred with third-party suppliers are excluded from our revenue. Inevents business and most of our CRM Execution & Support businesses, including field marketing and certain arrangements,specialty marketing businesses, we act as principal because we control the specified goods or services before they are transferred to the client and we are responsible for providing the specified goods or services, or we are responsible for directing and integrating third-party vendors to fulfill our performance obligation at the agreed upon contractual price. In such arrangements, we also take pricing risk under the terms of the client contract. In certain specialty media buying businesses, we act as principal when we control the buying process for the purchase of the media and contract directly with third-party suppliers andthe media providers and production companies and we are the primary obligor.vendor. In these circumstances,arrangements, we assume the pricing risk under the terms of the client contract. When we act as principal, we include billable amounts related to third-party costs in the transaction price and record revenue is recordedover time at the gross amount billed, sinceincluding out-of-pocket costs, consistent with the manner that we recognize revenue has been earned for the sale of goodsunderlying services contract. However, in media buying contracts where we act as principal, we recognize revenue at a point in time, typically when the media is run, including when it is not subject to cancellation by the client or services.media vendor.
Variable Consideration. Someof our client arrangements include performance incentivevariable consideration provisions, designed to link a portion of our revenue to our performance relative to quantitative and qualitative goals. We recognizewhich include performance incentives, tiered commission structures and vendor rebates in certain markets outside of the United States. Variable consideration is estimated and included in total consideration at contract inception based on either the expected value method or the most likely outcome method. These estimates are based on historical award experience, anticipated performance and other factors known at the time. Performance incentives are typically recognized in revenue over time. Variable consideration for our media businesses in certain international markets includes rebate revenue and is recognized when it is probable that the specific quantitative goals are achieved, ormedia will be run, including when our performance against qualitative goalsit is determinednot subject to cancellation by the client. We mayIn addition, when we receive rebates or credits from certain vendors based onfor transactions entered into on behalf of clients. These rebates or creditsclients, they are remitted to the clients in accordance with contractual requirements or in certain international markets may be retained by us based on the terms of the client contract or local law. Amounts passed on to clients are recorded as a liability and amounts retained by us are recorded as revenue when earned.


13


Effective January 1, 2018, we will adopt FASB ASC Topic 606, Revenue from Contracts with Customers, or ASC 606. As a result, we will change our revenue recognition accounting policy as described below. ASC 606 will be applied using the modified retrospective method, where the cumulative effect of the initial application is recognized as an adjustment to opening retained earnings at January 1, 2018 and is not expected to have a material impact on our financial position. ASC 606 provides a five-step model where revenue is recognizedearned, typically when the customer obtains control of the promised goods or services in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. The adoption of ASC 606 will not have a material impact on how we recognize revenue for fixed fee or retainer based arrangements. Clients typically receive the benefit of our services as we perform. We will continue to recognize revenue over time using inputs or outputs to measure our progress. Revenue for commission based arrangements will continue to be recognized at a point-in-time. ASC 606 also includes additional disclosure requirements.media is run.
For certain of our businesses, the adoption of ASC 606 will result in a change in our accounting policy for certain third-party out-of-pocket costs, which are incurred in connection with our services and are billed to clients. The inclusion of third-party out-of-pocket costs in revenue depends on whether we act as a principal or agent in the client arrangement. Under ASC 606, the principal versus agent assessment is based on whether we control the specified goods or services before they are transferred to the customer. As a result of the adoption of ASC 606, certain third-party costs are no longer included in revenue and cost of services. In 2017, these third-party out-of-pocket costs were approximately $150 million. This change will reduce reported revenue and will have no impact on operating profit.NEW ACCOUNTING STANDARDS
In addition, performance incentives that can increase revenue if we meet certain quantitative or qualitative objectives in delivering our services will be treated as variable consideration. Performance incentives were recognized in revenue when specific quantitative goals were achieved, or when our performance against qualitative goals was acknowledged by the client. Under ASC 606, variable consideration is estimated and included in total consideration at contract inception based on either the expected value method or the most likely method. These estimates are based on historical award experience, anticipated performance and our best judgment at the time. This change will have offsetting effects in each period and the net effect will not be material to our results of operations or financial position.
Income Taxes
On December 22, 2017, the Tax Act was enacted into law. In accordance with the guidance provided in SEC Staff Accounting Bulletin 118, at December 31, 2017, we made a reasonable estimate of the effect of the Tax Act on our results of operations and, as a result, we recorded a net increase to income tax expense of $106.3 million. We expect to revise this estimate in future periods as further information becomes available. See Note 1022 to the consolidated financial statements for additional information.
NEW ACCOUNTING STANDARDS

See Note 20 for information on the adoption of new accounting standards and accounting standards not yet adopted.





14


RESULTS OF OPERATIONS - 20172020 Compared to 20162019 (in millions):
 2017 2016
Revenue$15,273.6
 $15,416.9
Operating Expenses:   
Salary and service costs11,249.7
 11,440.6
Occupancy and other costs1,232.1
 1,230.6
Cost of services12,481.8
 12,671.2
Selling, general and administrative expenses450.0
 443.9
Depreciation and amortization282.1
 292.9
 13,213.9
 13,408.0
Operating Profit2,059.7
 2,008.9
Operating Margin - %13.5% 13.0%
Interest Expense224.5
 209.7
Interest Income49.7
 42.6
Income Before Income Taxes and Income From Equity Method Investments1,884.9
 1,841.8
Income Tax Expense696.2
 600.5
Income From Equity Method Investments3.5
 5.4
Net Income1,192.2
 1,246.7
Net Income Attributed To Noncontrolling Interests103.8
 98.1
Net Income - Omnicom Group Inc.$1,088.4
 $1,148.6
As discussed below, in 2017 the Tax Act reduced Net income - Omnicom Group Inc. by $106.3 million and diluted Net income per share - Omnicom Group Inc. by $0.45. See Note 10 to the consolidated financial statements for additional information.
Year Ended December 31,
20202019
Revenue$13,171.1 $14,953.7 
Operating Expenses:
Salary and service costs9,572.8 10,972.2 
Occupancy and other costs1,138.5 1,221.8 
COVID-19 repositioning costs277.9 — 
Cost of services10,989.2 12,194.0 
Selling, general and administrative expenses360.5 405.9 
Depreciation and amortization222.6 231.5 
11,572.3 12,831.4 
Operating Profit1,598.8 2,122.3 
Operating Margin - %12.1 %14.2 %
Interest Expense221.8 244.3 
Interest Income32.3 60.3 
Income Before Income Taxes and Income (Loss) From Equity Method Investments1,409.3 1,938.3 
Income Tax Expense381.7 504.4 
Income (Loss) From Equity Method Investments(6.8)2.0 
Net Income1,020.8 1,435.9 
Net Income Attributed To Noncontrolling Interests75.4 96.8 
Net Income - Omnicom Group Inc.$945.4 $1,339.1 
Non-GAAP Financial Measures
We use EBITA and EBITA Margin as additional operating performance measures that exclude the non-cash amortization expense of intangible assets, which primarily consists of amortization of intangible assets arising from acquisitions. We define EBITA as earnings before interest, taxes and amortization of intangible assets, and EBITA Margin as EBITA divided by revenue. EBITA and EBITA Margin are non-GAAP financial measures. We believe that EBITA and EBITA Margin are useful measures for investors to evaluate the performance of our business.
Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with U.S. GAAP. Non-GAAP financial measures reported by us may not be comparable to similarly titled amounts reported by other companies.
The following table reconciles the U.S. GAAP financial measure of Net Incomenet income - Omnicom Group Inc. to EBITA and EBITA Margin for the for the periods presented (in millions):
Year Ended December 31,
2017 201620202019
Net Income - Omnicom Group Inc.$1,088.4
 $1,148.6
Net Income - Omnicom Group Inc.$945.4 $1,339.1 
Net Income Attributed To Noncontrolling Interests103.8
 98.1
Net Income Attributed To Noncontrolling Interests75.4 96.8 
Net Income1,192.2
 1,246.7
Net Income1,020.8 1,435.9 
Income From Equity Method Investments3.5
 5.4
Income (Loss) From Equity Method InvestmentsIncome (Loss) From Equity Method Investments(6.8)2.0 
Income Tax Expense696.2
 600.5
Income Tax Expense381.7 504.4 
Income Before Income Taxes and Income From Equity Method Investments1,884.9
 1,841.8
Income Before Income Taxes and Income (Loss) From Equity Method InvestmentsIncome Before Income Taxes and Income (Loss) From Equity Method Investments1,409.3 1,938.3 
Interest Expense224.5
 209.7
Interest Expense221.8 244.3 
Interest Income49.7
 42.6
Interest Income32.3 60.3 
Operating Profit2,059.7
 2,008.9
Operating Profit1,598.8 2,122.3 
Add back: Amortization of intangible assets113.8
 115.2
Add back: Amortization of intangible assets83.1 83.8 
Earnings before interest, taxes and amortization of intangible assets (“EBITA”)$2,173.5
 $2,124.1
Earnings before interest, taxes and amortization of intangible assets (“EBITA”)$1,681.9 $2,206.1 
   
Revenue$15,273.6
 $15,416.9
Revenue$13,171.1 $14,953.7 
EBITA$2,173.5
 $2,124.1
EBITA$1,681.9 $2,206.1 
EBITA Margin - %14.2% 13.8%EBITA Margin - %12.8 %14.8 %


15


Revenue

In 2017, revenueRevenue for 2020 decreased $143.3$1,782.6 million, or 11.9%, compared to $15,273.6 million from $15,416.9 million in 2016.2019. Changes in foreign exchange rates increasedreduced revenue by $42.9 million, or 0.3%. Acquisition0.4%, acquisition revenue, net of disposition revenue, reduced revenue $647.3 million, or 4.2%, reflecting the disposition of certain non-strategic businesses in the past year,0.4% and negative organic growth increaseddecreased revenue $461.1 million, or 3.0%11.1% as all our geographic markets were negatively impacted by the COVID-19 pandemic (see Note 1 to the consolidated financial statements). The reductionchange in revenue across our principal regional markets were: North America decreased $901.7 million, Europe decreased $499.7 million, Asia-Pacific decreased $145.8 million and Latin America decreased $128.0 million. In North America, we experienced a decline in 2017organic revenue attributable to the COVID-19 pandemic in all our disciplines, except healthcare. In Europe and the Middle East and Africa, almost all businesses and regions experienced a decline in organic revenue resulting from our acquisition and disposition activity arose principally from the sale in the second quarter of our specialty print media business,COVID-19 pandemic, which operated in North America.

Changes in foreign exchange rates negatively impacted revenue in the first six months of 2017. Beginning in the third quarter of 2017, the Euro and a number of foreign currencies strengthened against the U.S. Dollar. As a result, changes in foreign exchange rates for 2017 had a marginal effect on our revenue. Thewas marginally offset by an increase in revenue from changes in foreign exchange rates primarily resulted from the strengthening of the British Pound and Euro Brazilian Real, Australian Dollaragainst the U.S. Dollar. In Latin America, the impact of the COVID-19 pandemic compounded by the continuing unstable economic and Russian Rublepolitical conditions in Brazil resulted in negative organic growth in Brazil and throughout the region. In addition, the weakening of foreign currency exchange rates against the U.S. Dollar mostly offset byin all countries further contributed to the reduction in revenue in the region. In Asia-Pacific, almost all our businesses in the region experienced negative organic growth as a result of the COVID-19 pandemic, and the weakening of the British Poundmost currencies against the U.S. Dollar

had a marginal negative impact on revenue.
The components of revenue change in the United States (“Domestic”) and the remainder of the world (“International”) were (in millions):
TotalDomesticInternational
Total Domestic International$%$%$%
$ % $ % $ %
December 31, 2016$15,416.9
   $8,627.8
   $6,789.1
  
December 31, 2019December 31, 2019$14,953.7 $8,033.0 $6,920.7 
Components of revenue change:   
    
    
Components of revenue change:    
Foreign exchange rate impact42.9
 0.3 % —
 — % 42.9
 0.6 %Foreign exchange rate impact(60.9)(0.4)%— — %(60.9)(0.9)%
Acquisition revenue, net of disposition
revenue
(647.3) (4.2)% (474.4) (5.5)% (172.9) (2.5)%Acquisition revenue, net of disposition revenue(56.7)(0.4)%(36.8)(0.5)%(19.9)(0.3)%
Organic growth461.1
 3.0 % 43.5
 0.5 % 417.6
 6.1 %Organic growth(1,665.0)(11.1)%(810.1)(10.1)%(854.9)(12.4)%
December 31, 2017$15,273.6
 (0.9)% $8,196.9
 (5.0)% $7,076.7
 4.2 %
December 31, 2020December 31, 2020$13,171.1 (11.9)%$7,186.1 (10.5)%$5,985.0 (13.5)%
The components and percentages are calculated as follows:
•The foreign exchange impact is calculated by translating the current period’s local currency revenue using the prior period average exchange rates to derive current period constant currency revenue (in this case $15,230.7$13,232.0 million for the Total column). The foreign exchange impact is the difference between the current period revenue in U.S. Dollars and the current period constant currency revenue ($15,273.613,171.1 million less $15,230.7$13,232.0 million for the Total column).
•Acquisition revenue is calculated as if the acquisition occurred twelve months prior to the acquisition date by aggregating the comparable prior period revenue of acquisitions through the acquisition date. As a result, acquisition revenue excludes the positive or negative difference between our current period revenue subsequent to the acquisition date and the comparable prior period revenue and the positive or negative growth after the acquisition is attributed to organic growth. Disposition revenue is calculated as if the disposition occurred twelve months prior to the disposition date by aggregating the comparable prior period revenue of dispositions through the disposition date. The acquisition revenue and disposition revenue amounts are netted in the table.
•Organic growth is calculated by subtracting the foreign exchange rate impact, and the acquisition revenue, net of disposition revenue components from total revenue growth.
•The percentage change is calculated by dividing the individual component amount by the prior period revenue base of that component ($15,416.914,953.7 million for the Total column).

Changes in the value of foreign currencies against the U.S. Dollar affect our results of operations and financial position. For the most part, because the revenue and expense of our foreign operations are both denominated in the same local currency, the economic impact on operating margin is minimized. Assuming exchange rates at February 12, 20182021 remain unchanged, we estimateexpect the impact of changes in foreign exchange rates to increase 2018 revenue between 2.5% and 3.0% in the first half of 2021, and by approximately 2%.

2.5% for the full year.


16


Revenue for 2017 and the percentage change in revenue and organic growth from 2016 in our principal regional markets were (in millions):
Year Ended December 31,
20202019$ Change% Organic Growth
Americas:
North America$7,577.1 $8,478.8 $(901.7)(10.1)%
Latin America275.4 403.4 (128.0)(15.1)%
EMEA:
Europe3,607.7 4,107.4 (499.7)(12.4)%
Middle East and Africa207.2 314.6 (107.4)(32.3)%
Asia-Pacific1,503.7 1,649.5 (145.8)(8.5)%
 $13,171.1 $14,953.7 $(1,782.6)(11.1)%
 2017 2016 $ Change % Change % Organic Growth
Americas:         
North America$8,686.0
 $9,174.0
 $(488.0) (5.3)% 0.6%
Latin America494.8
 423.6
 71.2
 16.8 % 0.6%
EMEA:         
Europe4,127.9
 3,904.2
 223.7
 5.7 % 7.0%
Middle East and Africa314.6
 278.9
 35.7
 12.8 % 12.5%
Asia Pacific1,650.3
 1,636.2
 14.1
 0.9 % 5.8%
 $15,273.6
 $15,416.9
 $(143.3) (0.9)% 3.0%
OurRevenue in Europe, which includes our primary markets in Europe compriseof the U.K. and the Euro Zone. In 2017,Zone, decreased $499.7 million in 2020 compared to 2019. Revenue in the U.K. comprised 9.1%, representing 9.7% of revenue, anddecreased $151.5 million. Revenue in Continental Europe, which comprises the Euro Zone and the other European countries, together comprised 17.9%representing 17.7% of revenue. In 2017, revenue, includingdecreased $348.2 million. The decrease in revenue is due to negative organic growth resulting from the impact of foreign exchange rates, decreased 0.9% in the U.K. and increased 9.4% in the Euro Zone and the other European countries.
In North America, modest growth in the United States and Canada was offset by the disposition of our specialty print media business in the second quarter. In Europe, growth in substantially all markets and the strengthening of the Euro against the U.S. Dollar was partially offset by the weakening of the British Pound against the U.S. Dollar. The increase in revenue in Latin America was a result of our acquisition activity in Colombia, growth in Mexico and the strengthening of the Brazilian Real against the U.S. Dollar, which was substantially offset by the continued economic weakness in Brazil and negative performance in that market. In Asia Pacific, growth in most countries in the region, especially Australia, India, Japan and Singapore, was partially offset by disposition activity.COVID-19 pandemic.
In the normal course of business, our agencies both gain and lose business from clients each year due to a variety of factors. The net changeIn 2020, the reduction in 2017 was an overall gain inspending by existing clients resulting from the COVID-19 pandemic offset the benefit from gains of new business. Under our client-centric approach, we seek to broaden our relationships with all of our clients. OurIn 2020 and 2019, our largest client represented 3.4% and 3.0% of revenue, in 2017 and 2016.respectively. Our ten largest and 100 largest clients represented 20.8% and 54.0% of revenue for 2020, respectively, and 19.6% and 50.5%51.3% of revenue in 2017, respectively, and 18.3% and 52.4% of revenue in 2016,for 2019, respectively.
Driven by our clients’ continuous demand for more effective and efficient marketing activities, we strive to provide an extensive range of advertising, marketing and corporate communications services through various client-centric networks that are organized to meet specific client objectives. These services include advertising, branding, content marketing, corporate social responsibility consulting, crisis communications, custom publishing, data analytics, database management,
digital / direct marketing, digital transformation, entertainment marketing, experiential marketing, field marketing, financial/corporate business-to-business advertising, graphic arts/digital imaging, healthcare marketing and communications, instore design, interactive marketing, investor relations, marketing research, media planning and buying, merchandising and point of sale, mobile marketing, multi-cultural marketing, non-profit marketing, organizational communications, package design, product placement, promotional marketing, public affairs, public relations, retail marketing, sales support, search engine marketing, shopper marketing, social media marketing and sports and event marketing.
In an effort to monitor the changing needs of our clients and to better capturefurther expand the expanded scope of our services into key clients, we monitor revenue across a broad range of disciplines and group them into the fourth quarter of 2017, we realigned our service disciplines. As a result, ourfollowing categories: advertising, CRM, discipline was grouped into two separate categories:which includes CRM Consumer Experience which includes Omnicom Precision Marketing Group’s digital / direct marketing agencies, as well as our branding agencies, shopper marketing agencies and our experiential marketing agencies; and CRM Execution & Support, which includespublic relations and healthcare.
All our business experienced the effects from client spending reductions related to the COVID-19 pandemic. The spending reductions impacted all our disciplines and markets. The most significantly impacted were our advertising discipline, our CRM Consumer Experience discipline, especially in our event marketing businesses, and our CRM Execution & Support discipline, primarily in our field marketing sales support,and merchandising businesses. Our Public Relations discipline was less significantly impacted, and point of sale, as well as other specialized marketing and custom communications services. Also, we realigned and renamed our former specialty communicationsHealthcare discipline so that it now exclusively includes agencies offering healthcare marketing and communications services.





17

performed well. Revenue for 2017 and 2016 and the change in revenue and organic growth from 2016 by discipline were (in millions):
Year Ended December 31,
202020192020 vs. 20192020
$
% of
Revenue
$
% of
Revenue
$ Change% Organic Growth
Advertising$7,369.0 56.0 %$8,483.8 56.7 %$(1,114.8)(12.2)%
CRM Consumer Experience2,175.7 16.5 %2,577.9 17.2 %(402.2)(15.8)%
CRM Execution & Support1,133.5 8.6 %1,361.2 9.1 %(227.7)(15.1)%
Public Relations1,301.8 9.9 %1,378.9 9.3 %(77.1)(4.2)%
Healthcare1,191.1 9.0 %1,151.9 7.7 %39.2 3.3 %
 $13,171.1 $14,953.7 $(1,782.6)(11.1)%

17
 Year Ended December 31,
 2017 2016 2017 vs. 2016
 $ 
% of
Revenue
 $ 
% of
Revenue
 
$
Change
 
%
Change
 % Organic Growth
Advertising$8,142.5
 53.3% $8,194.5
 53.2% $(52.0) (0.6)% 3.9%
CRM Consumer Experience2,664.3
 17.5% 2,751.1
 17.8% (86.8) (3.2)% 0.8%
CRM Execution & Support2,155.6
 14.1% 2,191.4
 14.2% (35.8) (1.6)% 4.0%
Public Relations1,376.6
 9.0% 1,374.8
 8.9% 1.8
 0.1 % 0.3%
Healthcare934.6
 6.1% 905.1
 5.9% 29.5
 3.3 % 2.8%
 $15,273.6
   $15,416.9
   $(143.3) (0.9)% 3.0%


We provide services to clients that operate in various industry sectors. Revenue by sector for 2017 and 2016 was:
Year Ended December 31,
20202019
Food and Beverage14 %14 %
Consumer Products8 %9 %
Pharmaceuticals and Healthcare16 %14 %
Financial Services8 %8 %
Technology9 %7 %
Auto10 %10 %
Travel and Entertainment7 %9 %
Telecommunications6 %6 %
Retail7 %7 %
Services2 %2 %
Oil, Gas and Utilities1 %2 %
Not-for-Profit1 %1 %
Government3 %2 %
Education1 %1 %
Other7 %8 %
100 %100 %
 2017 2016
Food and Beverage13% 13%
Consumer Products10% 10%
Pharmaceuticals and Health Care12% 12%
Financial Services7% 7%
Technology9% 9%
Auto10% 8%
Travel and Entertainment6% 7%
Telecommunications5% 5%
Retail6% 6%
Other22% 23%

Certain industry sectors have been negatively affected by the impact of the COVID-19 pandemic more significantly than others.
Operating Expenses

Operating expenses for 2017 compared to 2016 were (in millions):
Year Ended December 31,
202020192020 vs. 2019
$% of
Revenue		$% of
Revenue		$ Change% Change
Revenue$13,171.1 $14,953.7 $(1,782.6)(11.9)%
Operating Expenses:
Salary and service costs:
Salary and related service costs6,250.9 47.5 %6,895.2 46.1 %(644.3)(9.3)%
Third-party service costs3,321.9 25.2 %4,077.0 27.3 %(755.1)(18.5)%
9,572.8 72.7 %10,972.2 73.4 %(1,399.4)(12.8)%
Occupancy and other costs1,138.5 8.6 %1,221.8 8.2 %(83.3)(6.8)%
COVID-19 repositioning costs277.9 2.1 %— — %277.9 — %
    Cost of services10,989.2 12,194.0 (1,204.8)
Selling, general and administrative expenses360.5 2.7 %405.9 2.7 %(45.4)(11.2)%
Depreciation and amortization222.6 1.7 %231.5 1.5 %(8.9)(3.8)%
11,572.3 87.9 %12,831.4 85.8 %(1,259.1)(9.8)%
Operating Profit$1,598.8 12.1 %$2,122.3 14.2 %$(523.5)(24.7)%
 Year Ended December 31,
 2017 2016 2017 vs. 2016
 $ 
% of
Revenue
 $ 
% of
Revenue
 
$
Change
 
%
Change
Revenue$15,273.6
   $15,416.9
   $(143.3) (0.9)%
Operating Expenses:           
Salary and service costs11,249.7
 73.7% 11,440.6
 74.2% (190.9) (1.7)%
Occupancy and other costs1,232.1
 8.1% 1,230.6
 8.0% 1.5
 0.1 %
Cost of services12,481.8
   12,671.2
   (189.4)  
Selling, general and administrative expenses450.0
 2.9% 443.9
 2.9% 6.1
 1.4 %
Depreciation and amortization282.1
 1.8% 292.9
 1.9% (10.8) (3.7)%
 13,213.9
 86.5% 13,408.0
 87.0% (194.1) (1.4)%
Operating Profit$2,059.7
 13.5% $2,008.9
 13.0% $50.8
 2.5 %

Operating expenses decreased $194.1 million, or 1.4%, in 2017 compared to 2016. SalaryIn 2020, salary and service costs, which tend to fluctuate with changes in revenue, decreased $190.9$1,399.4 million, or 1.7%12.8%, in 2017 compared to 2016.2019. Salary and related service costs in 2020 decreased $644.3 million, or 9.3%, year-over-year, primarily as a result of the severance and furlough actions we took in the second quarter of 2020. Also, during 2020, we reduced salary and service costs by $162.6 million related to reimbursements and tax credits under government programs in several countries (see Note 1 to the consolidated financial statements). Third-party service costs, which include expenses incurred with third-party vendors primarily when we act as a principal when performing services for our clients, decreased $755.1 million, or 18.5%, year-over-year reflecting the decrease in revenue and the impact of actions we took to align our cost structure. Occupancy and other costs, which are less directly linked to changes in revenue than salary and service costs, increased $1.5decreased $83.3 million, or 0.1%6.8%, in 20172020 as compared to 2016. SG&A expenses increased $6.1 million year-over-year primarily related to professional fees.2019. Operating profit increased $50.8decreased $523.5 million year-over-year. As a result, operatingto $1,598.8 million. Operating margin increased year-over-yeardecreased to 13.5%12.1% from 13.0%14.2%, and EBITA margin increased year-over-yeardecreased to 14.2%12.8% from 13.8%.

14.8% year-over-year. In 2020, operating profit, operating margin and EBITA margin included a net decrease aggregating $171.1 million related to the COVID-19 repositioning costs recorded in the


18


second quarter and asset impairment charges, which are included in salary and service costs, recorded in the fourth quarter, partially offset by an increase related to reimbursements and tax credits under government programs in several countries during the year(see Note 1 to the consolidated financial statements).
Net Interest Expense

NetIn 2020, net interest expense increased $7.7$5.5 million year-over-year to $174.8 million in 2017. Interest$189.5 million. Interest expense increased $14.8on debt decreased $27.6 million to $224.5$199.6 million, primarily reflecting a reduction in 2017, primarily due tointerest expense from our refinancing activity at lower interest rates in the second half of 2019 and the first quarter of 2020, partially offset by a reduced benefitloss of $7.7 million on the early redemption of the remaining $600 million principal amount of the 2020 Notes in the first quarter of 2020 and the interest expense from the fixed-to-floating interest rate swaps resulting from higher rates onissuance of the floating rate leg and higher interest expense on commercial paper. Our long-term debt portfolio at December 31, 2017, after taking into consideration our outstanding interest rate swaps, was approximately 75% fixed rate obligations and 25% floating rate obligations and was unchanged from December 31, 2016. A discussion of our interest rate swaps is included4.20% Notes in April 2020 (see Note 67 to the consolidated financial statements. In 2017, intereststatements). Interest income increased $7.1in 2020 decreased $28.0 million compared year-over-year to the prior year, resulting from higher interest earned on the cash held by our international treasury centers.$32.3 million primarily due to lower rates.
Income Taxes
Our effective tax rate for 2017 was 36.9% compared2020 increased year-over-year to 32.6% for 2016.27.1% from 26.0%. The increase is attributable to the estimated impactnon-deductibility in certain jurisdictions of a portion of the Tax Act of $106.3 million partially offset by the recognition of an excess tax benefit from share-based compensation of $20.8 million resulting from the adoption of FASB ASU 2016-09 (see Note 1 to the consolidated financial statements). ASU 2016-09 requires that beginning in 2017 excess tax benefits and deficiencies arising from share-based compensation be recognized in results of operationsCOVID-19 repositioning costs recorded in the period whensecond quarter of 2020 had the restricted stock awards vest or stock options are exercised. In prior years, excess tax benefits and deficiencies from share-based compensation were recorded in additional paid-in capital. The effect of the Tax Act on income tax expense for 2017 is presented below in Results of Operations 2017 Compared to 2016. While we are still evaluating the impact of the Tax Act on our 2018 annual effective tax rate, we expect the Tax Act to reduceincreasing our effective tax rate between 3.5%for 2020. This increase was substantially offset by a lower effective tax rate on our foreign earnings resulting from a change in legislation. In 2019, income tax expense was reduced by $10.8 million primarily from the net favorable settlements of uncertain tax positions in certain jurisdictions. After considering these items, our effective rate for 2020 would have approximated the rate for 2019.
Net Income and 4.5%, which excludes the impact of tax benefits or deficiencies on share-based compensation. At this point, we can not predict the 2018 impact from share-based compensation because it is subject to changes in our share price.

Net Income Per Share - Omnicom Group Inc.
Net income - Omnicom Group Inc. for 2017in 2020 decreased $60.2$393.7 million or 5.2%, to $1,088.4$945.4 million from $1,148.6$1,339.1 million in 2016.2019. The year-over-year decrease is due to the impact of the Tax Act of $106.3 million, which is partially offset by the after tax increase from the factors described above. Diluted net income per share - Omnicom Group Inc. decreased 2.7% to $4.65$4.37 in 2017,2020, compared to $4.78$6.06 in 2016. The impact of2019, due to the Tax Act reduced diluted net income per share - Omnicom Group Inc. $0.45. In addition,factors described above, as well as the impact of the reduction in our weighted average common shares outstanding resulting from repurchases of our common stock through March 2020, net of shares issued for restricted stock awards, stock option exercises and the employee stock purchase plan improved diluted net income per share - Omnicom Group Incduring the year. As discussed above and in 2017 comparedNote 1 to 2016.

Effectthe consolidated financial statements, our results of the Tax Act
operations for 2020 included COVID-19 repositioning costs and asset impairment charges, which were partially offset by an increase attributable to reimbursements and tax credits under government programs in several countries. The following table presents the effectafter-tax affect of the Tax Actthese items on income tax expense, net income - Omnicom Group Inc. and diluted earnings per sharewas $146.8 million.
The impact on net income Omnicom Group Inc. of these actions was (in millions):
COVID-19 Repositioning CostsImpairment Charges -
Underperforming Assets		Reimbursements and Tax Credits Under Government ProgramsTotal
Increase (decrease) to income before income taxes$(277.9)$(55.8)$162.6 $(171.1)
Increase (decrease) in income tax expense(54.8)(8.7)39.2 (24.3)
Increase (decrease) in net income Omnicom Group Inc.$(223.1)$(47.1)$123.4 $(146.8)


19
 2017 As Reported Effect of Tax Act 2017 Excluding Effect of Tax Act
Income before income taxes and income from equity
     method investments
$1,884.9
 $—
 $1,884.9
Income tax expense$696.2
 $106.3
 $589.9
Effective tax rate36.9%   31.3%
Net income - Omnicom Group Inc.$1,088.4
 (106.3) $1,194.7
Diluted net income per share - Omnicom Group Inc.$4.65
 $(0.45) $5.10

ExcludingRESULTS OF OPERATIONS - 2019 Compared to 2018 (in millions):
Year Ended December 31,
20192018
Revenue$14,953.7 $15,290.2 
Operating Expenses:
Salary and service costs10,972.2 11,306.1 
Occupancy and other costs1,221.8 1,309.6 
Net gain on disposition of subsidiaries— (178.4)
Cost of services12,194.0 12,437.3 
Selling, general and administrative expenses405.9 455.4 
Depreciation and amortization231.5 264.0 
12,831.4 13,156.7 
Operating Profit2,122.3 2,133.5 
Operating Margin - %14.2 %14.0 %
Interest Expense244.3 266.4 
Interest Income60.3 57.2 
Income Before Income Taxes and Income From Equity Method Investments1,938.3 1,924.3 
Income Tax Expense504.4 492.7 
Income From Equity Method Investments2.0 8.9 
Net Income1,435.9 1,440.5 
Net Income Attributed To Noncontrolling Interests96.8 114.1 
Net Income - Omnicom Group Inc.$1,339.1 $1,326.4 
Our results for 2018 include the effect of the net gain on disposition of subsidiaries of $178.4 million and repositioning charges of $149.4 million, after the allocation of $6.9 million to noncontrolling interests, and the additional income tax expense of $3.9 million from the finalization of the provisional estimate of the effect of the Tax Cut and Jobs Act from incomeof 2017, or Tax Act, substantially offset by the impact of a lower tax expense,rate on the net income Omnicom Group Inc.gain on disposition of subsidiaries. The following discussion of our results of operations compares 2019 to 2018 as reported and diluted net income per share Omnicom Group Inc. are Non-GAAP measures. We believe thatadjusted for the effects of these measures help investors understand the effecttransactions. See page 24 for a reconciliation of the Tax Act on our reported results.




19


RESULTS OF OPERATIONS - 2016 Compared to 2015 (in millions):
 2016 2015
Revenue$15,416.9
 $15,134.4
Operating Expenses:   
Salary and service costs11,440.6
 11,248.7
Occupancy and other costs1,230.6
 1,242.7
Cost of services12,671.2
 12,491.4
Selling, general and administrative expenses443.9
 431.8
Depreciation and amortization292.9
 291.1
 13,408.0
 13,214.3
Operating Profit2,008.9
 1,920.1
Operating Margin - %13.0% 12.7%
Interest Expense209.7
 181.1
Interest Income42.6
 39.6
Income Before Income Taxes and Income From Equity Method Investments1,841.8
 1,778.6
Income Tax Expense600.5
 583.6
Income From Equity Method Investments5.4
 8.4
Net Income1,246.7
 1,203.4
Net Income Attributed To Noncontrolling Interests98.1
 109.5
Net Income - Omnicom Group Inc.$1,148.6
 $1,093.9

adjusted 2018 amounts.
Non-GAAP Financial Measures
We use EBITA and EBITA Margin as additional operating performance measures that exclude the non-cash amortization expense of intangible assets, which primarily consists of amortization of intangible assets arising from acquisitions. We define EBITA as earnings before interest, taxes and amortization of intangible assets, and EBITA Margin as EBITA divided by revenue. EBITA and EBITA Margin are non-GAAP financial measures. We believe that EBITA and EBITA Margin are useful measures for investors to evaluate the performance of our business.
Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with U.S. GAAP. Non-GAAP financial measures reported by us may not be comparable to similarly titled amounts reported by other companies.
The following table reconciles the U.S. GAAP financial measure of Net Incomenet income - Omnicom Group Inc. to EBITA and EBITA Margin for the for the periods presented (in millions):
Year Ended December 31,
2016 201520192018
Net Income - Omnicom Group Inc.$1,148.6
 $1,093.9
Net Income - Omnicom Group Inc.$1,339.1 $1,326.4 
Net Income Attributed To Noncontrolling Interests98.1
 109.5
Net Income Attributed To Noncontrolling Interests96.8 114.1 
Net Income1,246.7
 1,203.4
Net Income1,435.9 1,440.5 
Income From Equity Method Investments5.4
 8.4
Income From Equity Method Investments2.0 8.9 
Income Tax Expense600.5
 583.6
Income Tax Expense504.4 492.7 
Income Before Income Taxes and Income From Equity Method Investments1,841.8
 1,778.6
Income Before Income Taxes and Income From Equity Method Investments1,938.3 1,924.3 
Interest Expense209.7
 181.1
Interest Expense244.3 266.4 
Interest Income42.6
 39.6
Interest Income60.3 57.2 
Operating Profit2,008.9
 1,920.1
Operating Profit2,122.3 2,133.5 
Add back: Amortization of intangible assets115.2
 109.3
Add back: Amortization of intangible assets83.8 102.5 
Earnings before interest, taxes and amortization of intangible assets (“EBITA”)$2,124.1
 $2,029.4
Earnings before interest, taxes and amortization of intangible assets (“EBITA”)$2,206.1 $2,236.0 
   
Revenue$15,416.9
 $15,134.4
Revenue$14,953.7 $15,290.2 
EBITA$2,124.1
 $2,029.4
EBITA$2,206.1 $2,236.0 
EBITA Margin - %13.8% 13.4%EBITA Margin - %14.8 %14.6 %


20



Revenue

In 2016,2019, revenue increased $282.5decreased $336.5 million, or 2.2%, to $15,416.9$14,953.7 million from $15,134.4$15,290.2 million in 2015.2018. Changes in foreign exchange rates reduced revenue $283.8$315.9 million, acquisition revenue, net of disposition revenue, increasedreduced revenue by $38.2$445.1 million, and organic growth increased revenue $528.1$424.5 million.

The impact of changes in foreign exchange rates reduced revenue 2.1%, or $315.9 million, primarily resulting from the weakening of substantially all foreign currencies, especially the Euro, British Pound, Australian Dollar, Brazilian Real and Canadian Dollar against the U.S. Dollar.
The components of revenue change in the United States (“Domestic”) and the remainder of the world (“International”) were (in millions):
 Total Domestic International
 $ % $ % $ %
December 31, 2015$15,134.4
   $8,526.7
   $6,607.7
  
Components of revenue change:   
    
    
Foreign exchange impact(283.8) (1.9)% —
 — % (283.8) (4.3)%
Acquisition revenue, net of disposition
     revenue
38.2
 0.3 % (56.9) (0.7)% 95.1
 1.4 %
Organic growth528.1
 3.5 % 158.0
 1.9 % 370.1
 5.6 %
December 31, 2016$15,416.9
 1.9 % $8,627.8
 1.2 % $6,789.1
 2.7 %

TotalDomesticInternational
$%$%$%
December 31, 2018$15,290.2 $7,999.8 $7,290.4 
Components of revenue change:      
Foreign exchange rate impact(315.9)(2.1)%— — %(315.9)(4.3)%
Acquisition revenue, net of disposition revenue(445.1)(2.9)%(180.6)(2.3)%(264.5)(3.6)%
Organic growth424.5 2.8 %213.8 2.7 %210.7 2.9 %
December 31, 2019$14,953.7 (2.2)%$8,033.0 0.4 %$6,920.7 (5.1)%
The components and percentages are calculated as follows:
•The foreign exchange impact is calculated by translating the current period’s local currency revenue using the prior period average exchange rates to derive current period constant currency revenue (in this case $15,700.7$15,269.6 million for the Total column). The foreign exchange impact is the difference between the current period revenue in U.S. Dollars and the current period constant currency revenue ($15,416.914,953.7 million less $15,700.7$15,269.6 million for the Total column).
•Acquisition revenue is calculated as if the acquisition occurred twelve months prior to the acquisition date by aggregating the comparable prior period revenue of acquisitions through the acquisition date. As a result, acquisition revenue excludes the positive or negative difference between our current period revenue subsequent to the acquisition date and the comparable prior period revenue and the positive or negative growth after the acquisition is attributed to organic growth. Disposition revenue is calculated as if the disposition occurred twelve months prior to the disposition date by aggregating the comparable prior period revenue of dispositions through the disposition date. The acquisition revenue and disposition revenue amounts are netted in the table.
•Organic growth is calculated by subtracting the foreign exchange rate impact, and the acquisition revenue, net of disposition revenue components from total revenue growth.
•The percentage change is calculated by dividing the individual component amount by the prior period revenue base of that component ($15,134.415,290.2 million for the Total column).

In 2016, changesChanges in foreign exchange rates continued to negatively impact revenue but at a more moderate rate as compared to 2015. The impactthe value of foreign exchange rates in 2016 reduced revenue by 1.9%, or $283.8 million. While a number of currencies weakened against the U.S. Dollar including the Australian Dollar, Brazilian Real, Canadian Dollaraffect our results of operations and Russian Ruble,financial position. For the most significantpart, because the revenue and expense of our foreign operations are both denominated in the same local currency, the economic impact resulted from the weakening of the British Pound.

on operating margin is minimized.
Revenue and organic growth for 2016 and the change in revenue from 2015 in our principal regional markets were (in millions):
Year Ended December 31,
20192018$ Change% Organic Growth
Americas:
North America$8,478.8 $8,442.5 $36.3 2.8 %
Latin America403.4 457.5 (54.1)(0.2)%
EMEA:
Europe4,107.4 4,375.4 (268.0)3.1 %
Middle East and Africa314.6 304.4 10.2 6.5 %
Asia-Pacific1,649.5 1,710.4 (60.9)2.2 %
 $14,953.7 $15,290.2 $(336.5)2.8 %
 2016 2015 $ Change % Change % Organic Growth
Americas:         
North America$9,174.0
 $9,029.2
 $144.8
 1.6 % 2.4 %
Latin America423.6
 329.8
 93.8
 28.4 % (0.8)%
EMEA:         
Europe3,904.2
 3,942.9
 (38.7) (1.0)% 4.3 %
Middle East and Africa278.9
 260.6
 18.3
 7.0 % 11.7 %
Asia Pacific1,636.2
 1,571.9
 64.3
 4.1 % 6.9 %
 $15,416.9
 $15,134.4
 $282.5
 1.9 % 3.5 %


21



OurRevenue in Europe, which includes our primary markets in Europe compriseof the U.K. and the Euro Zone. In 2016,Zone, decreased $268.0 million in 2019 as compared to the prior year. Revenue in the U.K. comprised 9.1%, representing 9.6% of total revenue, anddecreased $23.7 million, primarily due to the weakening of the British Pound against the U.S. Dollar. Revenue in Continental Europe, which comprises the Euro Zone and the other European countries, together comprised 16.2%representing 17.9% of revenue. In 2016,total revenue, decreased 6.8% in the U.K. and increased 2.6% in the Euro Zone$244.3 million, primarily due to disposition activity and the other European countries.unfavorable impact from changes in foreign exchange rates.


21

In North America, moderateimproved organic growth in the United States and strong growth in Canada was partiallysubstantially offset by a decrease in revenue resulting from disposition activity in the United States and the weakening of the Canadian Dollar against the U.S. Dollar. In Europe,Organic revenue growth in the U.K., Spain, RussiaUnited States was led by our advertising and Italymedia, CRM Consumer Experience and healthcare businesses, and was partially offset by a decrease in organic revenue growth primarily in our CRM Execution & Support businesses. In Europe, modest organic growth in the region, especially in the U.K. and Spain, was offset by the weakening of substantially all currencies in the British Poundregion against the U.S. Dollar, disposition activity and Russian Rublenegative performance in France. In Latin America, the weakening of currencies in the region against the U.S. Dollar and negative performance in the Netherlands. The increase in revenue in Latin America was a result of our acquisitionand disposition activity in Brazil whichoffset modest organic growth in Chile and Mexico. In Asia-Pacific, organic growth in most countries in the region, especially Japan, New Zealand and India, was partially offset by the weakening of most currencies in the region against the U.S. Dollar, especially the Brazilian Real. The continuing uncertaintydisposition activity and negative performance in the economic and political climate in Brazil resulted inChina, which faced a difficult comparison due to strong organic revenue declines that partially offset the growth from our acquisition and also overshadowed strong growth in Mexico. In Asia Pacific, growth in the major economies in the region was also partially offset by the weakening of most currencies in the region against the U.S. Dollar.

2018.
In the normal course of business, our agencies both gain and lose business from clients each year due to a variety of factors. The net change in 20162019 was an overall gain in new business. Under our client-centric approach, we seek to broaden our relationships with all of our clients. OurIn 2019 and 2018, our largest client represented 3.0% and 2.7% of revenue in 2016 and 2015, respectively.revenue. Our ten largest and 100 largest clients represented 18.3%19.6% and 52.4%51.3% of revenue in 2016,2019, respectively, and 17.9%19.1% and 52.3%50.7% of revenue in 2015,2018, respectively.

Revenue for 2016 and 2015 and the change in revenue and organic growth from 2015 by discipline were (in millions):
Year Ended December 31,Year Ended December 31,
2016 2015 2016 vs. 2015201920182019 vs. 20182019
$ 
% of
Revenue
 $ 
% of
Revenue
 
$
Change
 
%
Change
 % Organic Growth$% of
Revenue		$% of
Revenue		$ Change% Organic Growth
Advertising$8,194.7
 53.2% $7,824.5
 51.7% $370.2
 4.7 % 5.9 %Advertising$8,451.7 56.5 %$8,281.0 54.2 %$170.7 4.5 %
CRM Consumer Experience2,750.9
 17.8% 2,772.5
 18.3% (21.6) (0.8)% 1.8 %CRM Consumer Experience2,610.0 17.5 %2,629.6 17.1 %(19.6)1.6 %
CRM Execution & Support2,191.4
 14.2% 2,359.7
 15.6% (168.3) (7.1)% (3.4)%CRM Execution & Support1,361.2 9.1 %1,891.6 12.4 %(530.4)(3.2)%
Public Relations1,374.8
 8.9% 1,329.1
 8.8% 45.7
 3.4 % 2.8 %Public Relations1,378.9 9.2 %1,435.1 9.4 %(56.2)(2.0)%
Healthcare905.1
 5.9% 848.6
 5.6% 56.5
 6.7 % 7.6 %Healthcare1,151.9 7.7 %1,052.9 6.9 %99.0 9.5 %
$15,416.9
   $15,134.4
   $282.5
 1.9 % 3.5 % $14,953.7 $15,290.2 $(336.5)2.8 %
We provide services to clients that operate in various industry sectors. Revenue by sector for 2016 and 2015 was:
Year Ended December 31,
 2016 201520192018
Food and Beverage 13% 13%Food and Beverage14 %14 %
Consumer Products 10% 10%Consumer Products9 %9 %
Pharmaceuticals and Health Care 12% 11%Pharmaceuticals and Health Care14 %14 %
Financial Services 7% 7%Financial Services8 %8 %
Technology 9% 10%Technology7 %8 %
Auto 8% 8%Auto10 %10 %
Travel and Entertainment 7% 6%Travel and Entertainment9 %8 %
Telecommunications 5% 5%Telecommunications6 %5 %
Retail 6% 6%Retail7 %8 %
ServicesServices2 %2 %
Oil, Gas and UtilitiesOil, Gas and Utilities2 %2 %
Not-for-ProfitNot-for-Profit1 %2 %
GovernmentGovernment2 %2 %
EducationEducation1 %— %
Other 23% 24%Other8 %8 %
100 %100 %


22



Operating Expenses

Operating expenses for 20162019 compared to 20152018 were (in millions):
Year Ended December 31,Year Ended December 31,
2016 2015 2016 vs. 2015201920182019 vs. 2018
$ 
% of
Revenue
 $ 
% of
Revenue
 
$
Change
 
%
Change
$% of
Revenue		$% of
Revenue		$ Change% Change
Revenue$15,416.9
   $15,134.4
   $282.5
 1.9 %Revenue$14,953.7  $15,290.2  $(336.5)(2.2)%
Operating Expenses:           
Operating Expenses:    
Salary and service costs:Salary and service costs:
Salary and service costs11,440.6
 74.2% 11,248.7
 74.3% 191.9
 1.7 %Salary and service costs6,895.2 46.1 %7,127.1 46.6 %(231.9)(3.3)%
Third-party service costsThird-party service costs4,077.0 27.3 %4,179.0 27.3 %(102.0)(2.4)%
10,972.2 73.4 %11,306.1 73.9 %(333.9)(3.0)%
Occupancy and other costs1,230.6
 8.0% 1,242.7
 8.2% (12.1) (1.0)%Occupancy and other costs1,221.8 8.2 %1,309.6 8.6 %(87.8)(6.7)%
Net gain on disposition of subsidiariesNet gain on disposition of subsidiaries— — %(178.4)(1.2)%178.4 
Cost of services12,671.2
   12,491.4
      Cost of services12,194.0 12,437.3 (243.3)
Selling, general and administrative expenses443.9
 2.9% 431.8
 2.9% 12.1
 2.8 %Selling, general and administrative expenses405.9 2.7 %455.4 3.0 %(49.5)(10.9)%
Depreciation and amortization292.9
 1.9% 291.1
 1.9% 1.8
 0.6 %Depreciation and amortization231.5 1.5 %264.0 1.7 %(32.5)(12.3)%
13,408.0
 87.0% 13,214.3
 87.3% 193.7
 1.5 %12,831.4 85.8 %13,156.7 86.0 %(325.3)(2.5)%
Operating Profit$2,008.9
 13.0% $1,920.1
 12.7% $88.8
 4.6 %Operating Profit$2,122.3 14.2 %$2,133.5 14.0 %$(11.2)(0.5)%
Operating expenses increased 1.5% in 2016 compared to 2015.2019 decreased $325.3 million, or 2.5%, year-over-year, primarily as a result of our disposition activity in 2019 and 2018, and the weakening of substantially all foreign currencies against the U.S. Dollar. Operating expenses for 2018 also included a net reduction of $29.0 million, comprised of a $178.4 million reduction for the impact of the net gain on disposition of subsidiaries, partially offset by an increase in operating expenses of $149.4 million for repositioning charges, which included $73.7 million in salary and service costs for incremental severance and $73.5 million in occupancy and other costs for office lease termination and consolidation. Salary and service costs, which tend to fluctuate with changes in revenue, increased $191.9decreased $333.9 million, or 1.7%3.0%, in 20162019 compared to 2015.2018 due to our disposition activity in 2019 and 2018, as well as the incremental severance charge of $73.7 million recorded in 2018 that did not affect 2019. Occupancy and other costs, which are less directly linked to changes in revenue than salary and service costs, decreased $12.1$87.8 million, or 1.0%6.7%, in 20162019 compared to 2015, principally resulting2018 due to our disposition activity in 2019 and 2018, and the office lease termination and consolidation charge of $73.5 million recorded in 2018 that did not affect 2019. Operating margin increased 0.2% to 14.2% year-over-year and EBITA margin increased 0.2% year-over-year to 14.8%. The net decrease in operating expenses of $29.0 million in 2018 related to the net gain on disposition of subsidiaries partially offset by the charges for the repositioning actions, increased both operating margin and EBITA margin for 2018 by 0.2%. Adjusting for the net decrease of $29.0 million in 2018 in operating expenses, Non-GAAP operating margin for 2019 increased to 14.2% from 13.8% in 2018 and adjusted EBITA margin for 2019 increased to 14.8% from 14.4% in 2018. The year-over-year increase primarily reflects a change in the mix of our business during the current period, including the positive effects following the disposition of underperforming businesses in the current and prior year and our repositioning activity in the third quarter of 2018, as well as our ongoing efforts to leverage scalemanage our cost structure and enhance efficiency. SG&A expenses increased $12.1 million year-over-year primarily related to professional fees incurred in connection withincrease the efficiency of the operations of our acquisition activities. As a result, operating margin in 2016 increased to 13.0% from 12.7% in 2015 and EBITA margin increased year-over-year to 13.8% from 13.4%.

agencies.
Net Interest Expense

NetIn 2019, net interest expense increased $25.6decreased $25.2 millionyear-over-year to$167.1 million in 2016. Interest $184.0 million. In 2019, interest expense increased $28.6on debt decreased $14.7 million to $209.7$227.2 million, primarily reflecting a reduction in 2016, primarily resultinginterest expense from refinancing activity in the reduced benefitthird quarter of 2019 at lower interest rates, including the maturity and retirement of the 2019 Notes and the settlement of the outstanding fixed-to-floating interest rate swapswaps, partially offset by a loss on the 2022 Notes. In January 2016, we settled the interest rate swap on the 2022 Notes and we were able to lock interest savings over the remaining termpartial redemption of the 20222020 Notes by reducing the effective rate to 2.7% from 3.5%. Concurrent withand the issuance of $1.4 billion principal amount of 3.60%the Euro Notes due 2026 in April 2016, we entered into a $500 million fixed-to-floating interest rate swap on the notes. Our long-term debt portfolio at December 31, 2016, after taking into consideration our outstanding interest rate swaps, was approximately 75% fixed rate obligations and 25% floating rate obligations as compared to 61% fixed rate and 39% floating rate at December 31, 2015 and, as a result, in 2016 there was less floating rate benefit from the interest rate swaps. A discussion of our interest rate swaps is included in(see Note 67 to the consolidated financial statements.statements). Interest income in 2019 increased $3.0$3.1 million in 2016 compared year-over-year to the prior year, as a result of$60.3 million due to higher cash balances inat our international treasury centers available for investment.centers.
Income Taxes

Our effective tax rate for 2016 was 32.6% compared2019 increased slightly year-over-year to 32.8%26.0% from 25.6% in 2018. The effective tax rate for 2015.2019 includes a reduction of $10.8 million primarily from the net favorable settlement of uncertain tax positions in the second quarter of 2019. The effective tax rate for 2018 reflects a net increase of $3.9 million related to an increase in income tax expense for an adjustment to the provisional amounts related to the Tax Act, substantially offset by the impact of a lower tax rate on the net gain on disposition of subsidiaries.
Net Income and Net Income Per Share - Omnicom Group Inc.

Net income - Omnicom Group Inc. increased $54.7 million, or 5.0%, to $1,148.6 million in 2016 from $1,093.9 million in 2015. The year-over-year increase is2019 increased, due to the factors described above.above, $12.7 million, or 1.0%, to $1,339.1 million from $1,326.4 million in 2018. The net gain on disposition of subsidiaries and repositioning charges, after the allocated share of $6.9 million to noncontrolling interests, and the additional income tax expense from the finalization of the provisional

23

estimate of the effect of the Tax Act, increased net income - Omnicom Group Inc. in 2018 by $18.2 million. Diluted net income per share - Omnicom Group Inc. increased 8.4%3.9% to $4.78$6.06 in 2016,2019, compared to $4.41$5.83 in 20152018, due to the factors described above, as well as the impact of the reduction in our weighted average common shares outstanding resulting from repurchases of our common stock, net of shares issued for restricted stock awards, and stock option exercises and shares issued under ourthe employee stock purchase plan. The net gain on disposition of subsidiaries and repositioning charges net of the additional income tax expense from the finalization of the provisional estimate of the effect of the Tax Act, increased diluted net income per share - Omnicom Group Inc. in 2018 by $0.08, and Non-GAAP diluted net income per share - Omnicom Group Inc. increased 5.4% in 2019 compared to 2018 adjusted for these items.

Reconciliation of Non-GAAP Financial Measures
Non-GAAP operating profit, adjusted EBITA, Non-GAAP net income – Omnicom Group Inc., and Non-GAAP diluted net income per share – Omnicom Group Inc. are Non-GAAP financial measures which adjusts the 2018 financial measures for the impact of the net gain on disposition of subsidiaries of $178.4 million and repositioning charges of $149.4 million, a net increase of $3.9 million in income tax expense, and an allocation of $6.9 million to noncontrolling interests for these items. Accordingly, when comparing operating profit, EBITA, net income - Omnicom Group Inc. and diluted net income per share - Omnicom Group Inc. for 2019 to 2018, we also present the 2018 reported amounts and EBITA on page 14 adjusted for the effects of these transactions. We believe these Non-GAAP measures aid investors by providing additional insight into our operational performance and help clarify trends affecting our business. For comparability of reporting, management considers Non-GAAP measures in conjunction with GAAP financial results in evaluating business performance. These Non-GAAP financial measures presented should not be considered a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.
The following table reconciles our financial results presented above to the Non-GAAP Financial Measures (in millions, except per share amounts):
Year Ended December 31,
20192018
Non-GAAP operating profit and adjusted EBITA:
Net Income - Omnicom Group Inc.$1,339.1 $1,326.4 
Net Income Attributed To Noncontrolling Interests96.8 114.1 
Net Income1,435.9 1,440.5 
Income From Equity Method Investments2.0 8.9 
Income Tax Expense504.4 492.7 
Income Before Income Taxes and Income From Equity Method Investments1,938.3 1,924.3 
Interest Expense244.3 266.4 
Interest Income60.3 57.2 
Operating profit2,122.3 2,133.5 
Net gain on disposition of subsidiaries— (178.4)
Repositioning charges— 149.4 
Non-GAAP operating profit2,122.3 2,104.5 
Add back: Amortization of intangible assets83.8 102.5 
Adjusted EBITA$2,206.1 $2,207.0 
Non-GAAP net income - Omnicom Group Inc. and Non-GAAP diluted net income per share
Omnicom Group Inc.:
Net income - Omnicom Group Inc.$1,339.1 $1,326.4 
Net pre-tax gain on disposition of subsidiaries and repositioning actions— (29.0)
Net income tax benefit of gain on disposition of subsidiaries and repositioning actions— (25.0)
Allocation to noncontrolling interests— 6.9 
Net increase in tax expense related to the Tax Act— 28.9 
Non-GAAP net income - Omnicom Group Inc.$1,339.1 $1,308.2 
Diluted Net Income Per Share - Omnicom Group Inc.$6.06 $5.83 
Net gain on disposition of subsidiaries, repositioning actions and impact of Tax Act— (0.08)
Non-GAAP diluted net income per share - Omnicom Group Inc.$6.06 $5.75 
Weighted average shares220.9 227.6 



2324



LIQUIDITY AND CAPITAL RESOURCES
Although we experienced a decrease in our cash flow from operations, we took numerous proactive steps to strengthen our liquidity and financial position that are intended to mitigate the impact of the COVID-19 pandemic on our liquidity. In February 2020, we issued $600 million of the 2.45% Notes. In March 2020, the net proceeds from the issuance of the 2.45% Notes were used to redeem the remaining $600 million principal amount of the 2020 Notes. As a result, we have no notes maturing until May 2022. In April 2020, we issued $600 million of the 4.20% Notes, and we entered into the $400 million 364 Day Credit facility maturing on April 2, 2021. The 364 Day Credit Facility is in addition to our existing $2.5 billion Credit Facility. Additionally, in March 2020, we suspended our share repurchase activity.
Cash Sources and Requirements

Our primary liquidity sources are our operating cash flow and cash and cash equivalents and short-term investments.equivalents. Additional liquidity sources include our credit facilities and commercial paper program, and access to the capital markets. At December 31, 2017, we have a $2.5 billion revolving credit facility, or Credit Facility expiringmaturing on July 31,February 14, 2025, the $400 million 364 Day Credit Facility maturing on April 2, 2021, the uncommitted domestic and international credit lines aggregating $1.2$1.1 billion, and the ability to issue up to $2 billion of commercial paper.paper and access the capital markets. Our liquidity funds our non-discretionary cash requirements and our discretionary spending.

Borrowings under our credit facilities may use LIBOR as the benchmark interest rate. The LIBOR benchmark rate is expected to be phased out by the end of June 2023. We do not expect that the discontinuation of the LIBOR rate will have a material impact on our liquidity or results of operations.
Working capital is our principal non-discretionary funding requirement. In addition, we have contractual obligations related
to our senior notes,long-term debt (principal and interest payments), recurring business operations, primarily related to lease obligations, and
contingent purchase price obligations (earn-outs) from prior acquisitions. Our principal discretionary cash spending includes dividend
payments to common shareholders, capital expenditures, strategic acquisitions and repurchases of our common stock. As a result, we typically haveOur typical working capital cycle results in a short-term borrowing requirement that normally peakingpeaks during the second quarter of the year due to the timing of payments for incentive compensation, income taxes and contingent purchase price obligations.

Based on past performance and current expectations, we believe that our operating cash flow will be sufficient to meet our non-discretionary cash requirements, and our discretionary spending for the next twelve months.

Cash and cash equivalents increased $793.8$1,294.8 million from December 31, 2016.2019. The components of the increase, were:including the net increase from our refinancing activities, were (in millions):

Sources  
Cash flow from operations  $2,023.9
Less: Increase in operating capital  (348.5)
Principal cash sources  1,675.4
Uses
Capital expenditures$(156.0)  
Dividends paid to common shareholders(515.2)  
Dividends paid to noncontrolling interest shareholders(101.7)  
Acquisition payments, including payment of contingent purchase price obligations and acquisition of additional noncontrolling interests, net of cash acquired(84.8)  
Repurchases of common stock, net of proceeds from stock plans(557.7)  
Principal cash uses  (1,415.4)
Principal cash sources in excess of principal cash uses  260.0
Foreign exchange rate changes  227.9
Financing activities and other  (42.6)
Increase in operating capital  348.5
Increase in cash and cash equivalents  $793.8

Sources  
Cash flow from operations$1,724.6 
Less: Increase in operating capital(30.9)
Principal cash sources1,693.7 
Uses
Capital expenditures$(75.4)
Dividends paid to common shareholders(562.7)
Dividends paid to noncontrolling interest shareholders(95.5)
Acquisition payments, including payment of contingent purchase price obligations and acquisition of additional noncontrolling interests, net of proceeds from sale of investments(117.4)
Repurchases of common stock, net of proceeds from stock plans(217.9)
Principal cash uses(1,068.9)
Principal cash sources in excess of principal cash uses624.8 
Effect of foreign exchange rate changes on cash and cash equivalents114.7 
Other net financing and investing activities524.4 
Increase in operating capital30.9 
Increase in cash and cash equivalents$1,294.8 
Principal cash sources and principal cash uses amounts are Non-GAAP liquidity measures. These amounts exclude changes in working capital and other investing and financing activities, including commercial paper issuances and redemptions used to fund working capital changes. This presentation reflects the metrics used by us to assess our sources and uses of cash and was derived from our consolidated statement of cash flows. We believe that this presentation is meaningful to understand the primary sources and uses of our cash flow and the effect on our cash and cash equivalents. Non-GAAP liquidity measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with U.S. GAAP. Non-GAAP liquidity measures as reported by us may not be comparable to similarly titled amounts reported by other companies. Additional information regarding our cash flows can be found in our consolidated financial statements.



25
24



At December 31, 2020, we have the following contractual obligations:
•Principal payments on long-term debt of $5.8 billion, of which $1.25 billion is due in 2022 and $750 million in due in 2024 (see Note 7 to the consolidated financial statements). Depending on the conditions in the credit markets we may refinance this debt, or we may use cash from operations, including temporally accessing our Credit Facility, to repay this debt.
•Interest payments on long-term debt due within the next five years aggregate $684.1 million, of which $176.4 million is payable in 2021.
•The liability for minimum lease payments for operating leases and finance leases due within the next five years aggregate $1.2 billion, of which $363.5 million is due in 2021 (see Note 16 to the consolidated financial statements).
•At December 31, 2020, the obligation for our defined benefit pension plans was $309.3 million and the liability for our postemployment arrangements was $164.6 million. In 2020, we contributed $9.1 million to our defined benefit plans and paid $8.7 million for our postemployment arrangements. We do not expect these payments to increase significantly in 2021 (see Note 12 to the consolidated financial statements).
•The liability of contingent purchase price payments (earn-outs) at December 31, 2020, was $71.9 million, of which $32.1 million is payable in 2021 (see Note 5 to the consolidated financial statements).
•The liability for the transition tax on accumulated foreign earnings due in the next five years is $105.6 million, of which $11.6 million is payable in 2021 (see Note 11 to the consolidated financial statements).
Based on past performance and current expectations, we believe that our operating cash flow will be sufficient to meet our non-discretionary cash requirements for the next twelve months.
Cash Management

Our regional treasury centers in North America, Europe and Asia manage our cash and liquidity. Each day, operations with excess funds invest thesethose funds with their regional treasury center. Likewise, operations that require funds borrow from their regional treasury center. TheTreasury centers with excess cash invest on a short-term basis with third parties, generally with maturities ranging from overnight to less than 90 days. Certain treasury centers aggregatehave notional pooling arrangements that are used to manage their cash and set-off foreign exchange imbalances. The arrangements require each treasury center to have its own notional pool account and to maintain a notional positive account balance. Additionally, under the net position which is either invested with or borrowed from third parties.terms of the arrangement, set-off of foreign exchange positions are limited to the long and short positions within their own account. To the extent that our treasury centers require liquidity, they have the ability to issue up to a total of $2 billion of U.S. Dollar-denominated commercial paper or borrow under the Credit Facility, 364 Day Credit Facility, or the uncommitted credit lines. This process enables us to manage our debt more efficiently and utilize our cash more effectively, as well as manage our risk to foreign exchange rate imbalances. In countries where we either do not conduct treasury operations or it is not feasible for one of our treasury centers to fund net borrowing requirements on an intercompany basis, we arrange for local currency uncommitted credit lines.

We have a policy governing counterparty credit risk with financial institutions that hold our cash and cash equivalents and we have deposit limits for each institution. In countries where we conduct treasury operations, generally the counterparties are either branches or subsidiaries of institutions that are party to the Credit Facility. These institutions generally have credit ratings equal to or better than our credit ratings. In countries where we do not conduct treasury operations, all cash and cash equivalents are held by counterparties that meet specific minimum credit standards.

At December 31, 2017,2020, our foreign subsidiaries held approximately $937 million$2.3 billion of our total cash and cash equivalents of $3.8$5.6 billion. The majorityMost of the cash is available to us, net of any foreign withholding taxes payable upon repatriation to the United States. See Note 10 to the consolidated financial statements for additional information.

OurAt December 31, 2020, our net debt position, which we define as total debt, including short-term debt, less cash and cash equivalents and short-term investments at December 31, 2017 decreased $798.2$624.4 million as compared to December 31, 2016.2019. The decrease in net debt is due to an increase in cash and cash equivalents and short-term investments of $773.6 million primarily arisingresulted from an increase in operating capital of $348.5 million, an increase in principal cash sources inthe excess of principal cash sources over principal cash uses of $260.0 million and the favorable impact of foreign exchange rate changes on cash and cash equivalents of $227.9$624.8 million.

The components of net debt at December 31, 2017 and 2016 were (in millions):
December 31,
20202019
Short-term debt$3.9 $10.1 
Long-term debt, including current portion5,807.3 5,134.3 
Total debt5,811.2 5,144.4 
Cash and cash equivalents and short-term investments5,600.5 4,309.3 
Net debt$210.7 $835.1 

26
 2017 2016
Short-term debt$11.8
 $28.7
Long-term debt, including current portion4,912.9
 4,920.6
Total debt4,924.7
 4,949.3
Cash and cash equivalents and short-term investments3,796.4
 3,022.8
Net debt$1,128.3
 $1,926.5


Net debt is a Non-GAAP liquidity measure. This presentation, together with the comparable U.S. GAAP liquidity measures, reflects one of the key metrics used by us to assess our cash management. Non-GAAP liquidity measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with U.S. GAAP. Non-GAAP liquidity measures as reported by us may not be comparable to similarly titled amounts reported by other companies.

Debt Instruments and Related Covenants
At December 31, 2017,On February 19, 2020, we issued $600 million of the total2.45% Notes. The net proceeds from the issuance, after deducting the underwriting discount and offering expenses, were $592.6 million and were used to redeem the remaining $600 million principal amount of ourthe 2020 Notes on March 23, 2020. In connection with the redemption, we recorded a loss on extinguishment of $7.7 million in interest expense. Following the redemption, there were no 2020 Notes outstanding.
On April 1, 2020, in response to the potential effects on market liquidity arising from the COVID-19 pandemic, we issued $600 million of the 4.20% Notes. The net proceeds from the issuance, after deducting the underwriting discount and offering expenses, were $592.5 million and were used for general corporate purposes, which included working capital expenditures, fixed rate senior notes was $4.9 billionasset expenditures and repayment of commercial paper and short-term debt.
The 2.45% Notes and the total notional amount4.20% Notes are senior unsecured obligations of the outstanding fixed-to-floating interest rate swaps was $1.25 billion. The interest rate swaps have the economic effectOmnicom that rank equal in right of converting our long-term debt portfolio to approximately 75% fixed rate obligationspayment with all existing and 25% floating rate obligations. A discussion of our interest rate swaps is included in Note 6 to the consolidated financial statements.future unsecured senior indebtedness.
Omnicom and its wholly owned finance subsidiary, Omnicom Capital Inc., or OCI, are co-obligors under all the senior notes. The seniornotes due 2022, 2024 and 2026. These notes are a joint and several liability of usOmnicom and OCI, and weOmnicom unconditionally guaranteeguarantees OCI’s obligations with respect to the senior notes. OCI provides funding for our operations by incurring debt and lending the proceeds to our operating subsidiaries. OCI’s assets primarily consist of cash and cash equivalents and intercompany loans made to our operating subsidiaries, and the related interest receivable. There are no restrictions on the ability of OCI or usOmnicom to obtain funds from our subsidiaries through dividends, loans or advances. Our seniorSuch notes are senior unsecured obligations that rank equal in right of payment with all existing and future unsecured senior indebtedness.

Omnicom and OCI have, jointly and severally, fully and unconditionally guaranteed OFHP’s obligations with respect to the Euro denominated notes due 2027 and 2031. OFHP’s assets consist of its investments in several wholly owned finance companies that function as treasury centers that provide funding for various operating companies in Europe, Brazil, Australia and other countries in the Asia-Pacific region. The finance companies’ assets consist of cash and cash equivalents and intercompany loans that they make or have made to the operating companies in their respective regions and the related interest receivable. There are no restrictions on the ability of Omnicom, OCI or OFHP to obtain funds from their subsidiaries through dividends, loans or advances. The Euro denominated notes and the related guarantees are senior unsecured obligations that rank equal in right of payment with all existing and future unsecured senior indebtedness of OFHP and each of Omnicom and OCI, respectively.

25


The Credit Facility containsand the 364 Day Credit Facility each contain a financial covenantscovenant that requirerequires us to maintain a Leverage Ratio of consolidated indebtedness to consolidated EBITDA (earnings before interest, taxes, depreciation, amortization and non-cash charges) of no more than 3 times for the most recently ended 12-month period (EBITDA is defined as earnings before interest, taxes, depreciation and amortization) and an Interest Coverage Ratio of consolidated EBITDA to interest expense of at least 53.5 times for the most recently ended 12-month period. On October 26, 2020, we amended the Credit Facility and the 364 Day Credit Facility to provide additional flexibility with respect to the Leverage Ratio covenant. The amendments increase the maximum Leverage Ratio to 4.0 times through December 31, 2021 for the Credit Agreement and to 4.0 times through the maturity for the 364 Day Credit Facility. At December 31, 2017,2020, we were in compliance with these covenants as our Leverage Ratio was 2.1 times and our Interest Coverage Ratio was 10.43.0 times. The Credit Facility doesand the 364 Day Credit Facility do not limit our ability to declare or pay dividends or repurchase our common stock.
At December 31, 2017,2020, our long-term and short-term debt was rated BBB+ and A2 by S&P and Baa1 and P2 by Moody's. Our access to the commercial paper market and the cost of these borrowings are affected by market conditions and our credit ratingsratings. Our long-term debt, Credit Facility and market conditions. Our senior notes andthe 364 Day Credit Facility do not contain provisions that require acceleration of cash payments in the event of a downgrade in our credit ratings are downgraded.ratings.
Credit Markets and Availability of Credit
In light of the uncertainty of future economic conditions, we will continue to take actions available to us to respond to changing economic conditions, and we will continue to actively manage our discretionary expenditures. We have not repurchased any of our common stock since March 13, 2020, and we do not plan to resume our repurchases until we believe economic conditions have begun to stabilize. We will continue to monitor and manage the level of credit made available to our clients. We believe that these actions, in addition to the availability of our Credit Facility and 364 Day Credit Facility, are sufficient to fund our near-term working capital needs and our discretionary spending. For additional information about our credit facilities, see Note 7 to the consolidated financial statements.

27

We have typically fundfunded our day-to-day liquidity by issuing commercial paper. In the third and fourth quarters of 2020, we reduced our commercial paper issuances as compared to the prior year period primarily as a result of the issuance of the 4.20% Notes in April 2020. In 2019, we issued short-term debt in a private placement to reduce our commercial paper issuances. This short-term debt was redeemed in the third quarter of 2019. Additional liquidity sources include our Credit Facility, 364 Day Credit Facility or the uncommitted credit lines. At December 31, 2017,2020, there were no outstanding commercial paper issuances or borrowings under the Credit Facility, the 364 Day Credit Facility or the uncommitted credit lines.
Commercial paper activity for the three years ended December 31, 2017 was (dollars in millions):
Year Ended December 31,
2017 2016 2015202020192018
Average amount outstanding during the year$902.3
 $861.3
 $964.8
Average amount outstanding during the year$50.1 $272.3 $411.7 
Maximum amount outstanding during the year$1,769.8
 $1,608.9
 $1,720.7
Maximum amount outstanding during the year$401.2 $825.0 $1,218.7 
Average days outstanding13.0
 11.2
 13.2
Average days outstanding4.6 4.0 5.7 
Weighted average interest rate1.29% 0.70% 0.46%Weighted average interest rate1.52 %2.40 %2.19 %
We expect to continue fundingissuing commercial paper to fund our day-to-day liquidity by issuing commercial paper.liquidity. However, disruptions in the credit markets may lead to periods of illiquidity in the commercial paper market and higher credit spreads. To mitigate any future disruption in the credit markets and to fund our liquidity, we may borrow under the Credit Facility, 364 Day Credit Facility or the uncommitted credit lines or access the capital markets if favorable conditions exist. We will continue to monitor closely our liquidity and conditions in the credit markets. We cannot predict with any certainty the impact on us of any future disruptions in the credit markets. In such circumstances, we may need to obtain additional financing to fund our day-to-day working capital requirements. Such additional financing may not be available on favorable terms, or at all.
Contractual Obligations and Other Commercial Commitments

In the normal course of business we enter into numerous contractual and commercial undertakings. The following tables should be read in conjunction with our consolidated financial statements.

Contractual obligations at December 31, 2017 were (in millions):
   Obligation Due
 
Total
Obligation
 2018 2019 - 2020 2021 - 2022 After 2022
Long-term debt:         
Principal$4,900.0
 $—
 $1,500.0
 $1,250.0
 $2,150.0
Interest966.2
 198.8
 335.4
 216.0
 216.0
Lease obligations1,805.1
 347.3
 498.1
 332.6
 627.1
Contingent purchase price obligations215.6
 92.6
 47.2
 75.8
 —
Transition tax liability on accumulated foreign earnings102.9
 8.2
 16.5
 16.5
 61.7
Deferred tax liability - convertible debt41.4
 41.4
 —
 —
 —
Defined benefit pension plans benefit obligation277.0
 9.7
 23.1
 32.9
 211.3
Postemployment arrangements benefit obligation127.7
 9.3
 14.0
 12.6
 91.8
Uncertain tax positions173.7
 24.3
 44.7
 65.7
 39.0
 $8,609.6
 $731.6
 $2,479.0
 $2,002.1
 $3,396.9



26


Certain acquisitions include an initial payment at closing and provide for future additional contingent purchase price payments (earn-outs) that are recorded as a liability at the acquisition date fair value. Subsequent changes in the fair value of the liability are recorded in results of operations.

The Tax Act includes a transition tax on accumulated foreign earnings. After taking into consideration available foreign tax credits and other items, we recorded a net cash liability of $102.9 million. We will elect to pay the liability over an eight-year period. See Note 10 to the consolidated financial statements for additional information.

The unfunded benefit obligation for our defined benefit pension plans and liability for our postemployment arrangements was $324.4 million at December 31, 2017. In 2017, we contributed $8.3 million to our defined benefit pension plans and paid $8.8 million in benefits for our postemployment arrangements. We do not expect these payments to increase significantly in 2018.

The liability for uncertain tax positions is subject to uncertainty as to when or if the liability will be paid. We have assigned the liability to the periods presented based on our judgment as to when these liabilities will be resolved by the appropriate taxing authorities.

Commercial commitments at December 31, 2017 were (in millions):
   Commitment Expires
 Total
Commitment		 2018 2019 - 2020 2021 - 2022 After 2022
Standby letters of credit$5.3
 $2.2
 $—
 $2.0
 $1.1
Guarantees130.3
 62.7
 60.5
 2.9
 4.2
 $135.6
 $64.9
 $60.5
 $4.9
 $5.3

At December 31, 2017, there were no significant off-balance sheet arrangements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We manage our exposure to foreign exchange and interest rate risk through various strategies, including the use of derivative financial instruments. We use forward foreign exchange contracts as economic hedges to manage the cash flow volatility arising from foreign exchange rate fluctuations. We may use interest rate swaps to manage our interest expense and structure our long-term debt portfolio to achieve a mix of fixed rate and floating rate debt. We do not use derivatives for trading or speculative purposes. Using derivatives exposes us to the risk that counterparties to the derivative contracts will fail to meet their contractual obligations. We manage that risk through careful selection and ongoing evaluation of the counterparty financial institutions based on specific minimum credit standards and other factors.

We evaluate the effects of changes in foreign currency exchange rates, interest rates and other relevant market risks on our derivatives. We periodically determine the potential loss from market risk on our derivatives by performing a value-at-risk, or VaR, analysis. VaR is a statistical model that uses historical currency exchange and interest rate data to measure the potential impact on future earnings of our derivative financial instruments assuming normal market conditions. The VaR model is not intended to represent actual losses but is used as a risk estimation and management tool. Based on the results of the model, we estimate with 95% confidence a maximum one-day change in the net fair value of our derivative financial instruments at December 31, 20172020 was not significant.
Foreign Currency Exchange Risk
OurIn 2020, our international operations representrepresented approximately 46%45% of our revenue. Changes in the value of foreign currencies against the U.S. Dollar affect our results of operations and financial position. For the most part, because the revenue and expenseexpenses of our foreign operations are both denominated in the same local currency, the economic impact on operating margin is minimized. The effects of foreign currency exchange transactions on our results of operations are discussed in Note 2 to the consolidated financial statements.


27


While ourWe operate in all major international markets includeincluding the Euro Zone, the United Kingdom,U.K., Australia, Brazil, Canada, China and Japan, ourJapan. Our agencies transact business in more than 50 different currencies. As an integral part of our global treasury operations, we centralize our cash and use notional multicurrency pools to manage the foreign currency exchange risk that arises from imbalances between subsidiaries and their respective treasury centers from which they borrow or invest funds. However, in certain circumstances, subsidiaries borrowing or investing with a treasury center operating in a different currency creates foreign exchange exposure. To manage that risk, we had outstanding forward foreign exchange contracts with an aggregate notional amount of $92.8 million and $99.0 million at December 31, 2017 and 2016, respectively. Additionally,centers. In addition, there are circumstances where revenue and expense transactions are not denominated in the same currency. In these instances, amounts are either promptly settled or hedged with forward foreign exchange contracts. To manage thatthis risk, at December 31, 2020 and 2019, we had outstanding forward foreign exchange contracts with an aggregate notional amount of $136.3$169.6 million and $94.0$284.2 million, atrespectively. At December 31, 20172020 and 2016, respectively. The2019, the net fair value of the forward foreign contracts at December 31, 2017 and 2016 was a current asset of $0.9 million and a current liability of $1.1 million, respectively.not material (see Note 20 to the consolidated financial statements).
Foreign currency derivatives are designated as economic hedges; therefore, any gain or loss in fair value incurred on those instruments is generally offset by decreases or increases in the fair value of the underlying exposures.exposure. By using these financial instruments, we reducedreduce financial risk of adverse foreign exchange changes by foregoing any gain which might have occurredoccur if the markets movedmove favorably. The terms of our forward foreign exchange contracts are generally less than 90 days.

28

Interest Rate Risk
We may use interest rate swaps to manage our interest cost and structure our long-term debt portfolio to achieve a mix of fixed rate and floating rate debt. Based on market conditions, we may terminate the swaps to reduce our exposure to rising interest rates or to monetize any gain and lock in a reduction in interest expense over the term of the underlying debt. At December 31, 2017, the total notional amount of the outstanding fixed-to-floating interest rate swaps was $1.25 billion. The interest rate swaps have the economic effect of converting2020, our long-term debt portfolio to approximately 75% fixed rate obligations and 25% floating rate obligations. A discussionconsists entirely of our interest rate swaps is included in Note 6 to the consolidated financial statements.fixed-rate debt.
Credit Risk
We provide advertising, marketing and corporate communications services to several thousand clients that operate in nearly every sector of the global economy and we grant credit to qualified clients in the normal course of business. Due to the diversified nature of our client base, we do not believe that we are exposed to a concentration of credit risk as our largest client represented 3.0%3.4% of revenue in 2017.2020. However, during periods of economic downturn, the credit profiles of our clients could change.
In the normal course of business, our agencies enter into contractual commitments with media providers and production companies on behalf of our clients at levels that can substantially exceed the revenue from our services. These commitments are included in accounts payable when the services are delivered by the media providers or production companies. If permitted by local law and the client agreement, many of our agencies purchase media and production services for our clients as an agent for a disclosed principal. In addition, while operating practices vary by country, media type and media vendor, in the United States and certain foreign markets, many of our agencies’ contracts with media and production providers specify that our agencies are not liable to the media and production providers under the theory of sequential liability until and to the extent we have been paid by our client for the media or production services.

Where purchases of media and production services are made by our agencies as a principal or are not subject to the theory of sequential liability, the risk of a material loss as a result of payment default by our clients could increase significantly and such a loss could have a material adverse effect on our business, results of operations and financial position.

In addition, our methods of managing the risk of payment default, including obtaining credit insurance, requiring payment in advance, mitigating the potential loss in the marketplace or negotiating with media providers, may be less available or unavailable during a severe economic downturn.


28


Item 8. Financial Statements and Supplementary Data
See Item 15, “Exhibits, Financial Statement Schedules.”
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports we file with the SEC is recorded, processed, summarized and reported within applicable time periods. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is accumulated and communicated to management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, as appropriate to allow timely decisions regarding required disclosure. Management, including our CEO and CFO, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2017.2020. Based on that evaluation, our CEO and CFO concluded that, as of December 31, 2017,2020, our disclosure controls and procedures are effective to ensure that decisions can be made timely with respect to required disclosures, as well as ensuring that the recording, processing, summarization and reporting of information required to be included in our Annual Report on Form 10-K for the year ended December 31, 20172020 are appropriate.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Management, with the participation of our CEO, CFO and our agencies, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our CEO and CFO concluded that our internal control over financial reporting was effective as of December 31, 2017.2020. There have not been any changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

KPMG LLP, an independent registered public accounting firm that audited our consolidated financial statements included in this Annual Report on Form 10-K, has issued an attestation report on Omnicom’s internal control over financial reporting as of December 31, 2017,2020, dated February 15, 2018,18, 2021, which is included on page F-2 of this 20172020 10-K.
Item 9B. Other Information
None.



29



PART III
Item 10. Directors, Executive Officers and Corporate Governance

The information regarding Executive Officers of the Registrant is included in Part I, Item 1, “Business.” Additional information called for by this Item, to the extent not included in this document, is incorporated herein by reference to the information to be included under the captions “Item 1 - Election of Directors,” “Stock Ownership Information - Section 16(a) Beneficial Ownership Reporting Compliance”Information” and “Additional Information - Shareholder Proposals and Director Nominations For The 2019for the 2022 Annual Meeting” in our definitive proxy statement, or Proxy Statement, which is expected to be filed with the SEC within 120 days of the fiscal year ended December 31, 2017.2020.
Item 11. Executive Compensation

The information called for by this Item is incorporated herein by reference to the information to be included under the captions “Executive Compensation,” “Item 1 - Election of Directors - Directors' Compensation Forfor Fiscal 2017”Year 2020” and “Item 1 - Election of Directors - Board Policies and Processes - Compensation Committee Interlocks and Insider Participation” in our Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information called for by this Item is incorporated herein by reference to the information to be included under the captions “Stock Ownership Information - BeneficialSecurity Ownership of Certain Beneficial Owners and Management” and “Stock Ownership Information - Equity Compensation Plans” in our Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence

The information called for by this Item is incorporated herein by reference to the information to be included under the captions “Additional Information“Item 1 - Election of Directors - Board Policies and Processes - Transactions with Related Persons” and “Item 1 - Election of Directors - Omnicom Board of Directors”Directors - Director Independence” in our Proxy Statement.
Item 14. Principal AccountingAccountant Fees and Services

The information called for by this Item is incorporated herein by reference to the information to be included under the caption “Item 3 - Ratification of the Appointment of Independent Auditors - Fees Paid to Independent Auditors” in our Proxy Statement.
PART IV
Item 15. Exhibits,Exhibit and Financial Statement Schedules

(a)(1)Financial Statements:Page
F-1F-1
F-2F-2
Consolidated Balance Sheets at December 31, 20172020 and 20162019
F-4F-4
Consolidated Statements of Income for the Three Years Ended December 31, 20172020
F-5F-5
Consolidated Statements of Comprehensive Income for the Three Years Ended December 31, 20172020
F-6F-6
Consolidated Statements of Equity for the Three Years Ended December 31, 20172020
F-7F-7
Consolidated Statements of Cash Flows for the Three Years Ended December 31, 20172020
F-8F-8
F-9F-9
(a)(2)Selected Quarterly Financial Data (Unaudited)
F-33
(a)(2)Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts for the Three Years Ended December 31, 20172020
S-1S-1
All other schedules are omitted because they are not applicable.


30




30

4.1
4.2
4.3
Second Supplemental Indenture to the 2009 Base Indenture, dated as of August 5, 2010, among Omnicom Group Inc., Omnicom Capital Inc., Omnicom Finance Inc. and Deutsche Bank Trust Company Americas, as trustee, in connection with our issuance of $1 billion 4.45% Senior Notes due 2020 (Exhibit 4.1 to our Current Report on Form 8-K (File No. 1-10551) dated August 5, 2010 (“August 5, 2010 8-K”) and incorporated herein by reference).
4.4
Third Supplemental Indenture to the 2009 Base Indenture, dated as of April 23, 2012, among Omnicom Group Inc., Omnicom Capital Inc., Omnicom Finance Inc. and Deutsche Bank Trust Company Americas, as trustee, in connection with our issuance of $750 million 3.625% Senior Notes due 2022 (Exhibit 4.1 to our Current Report on Form 8-K (File No. 1-10551) dated April 23, 2012 and incorporated herein by reference).
4.54.3
4.64.4
4.74.5
4.8
Form of 4.45% Notes due 2020 (Exhibit 4.2 to the August 5, 2010 8-K and incorporated herein by reference).
4.9
Form of 3.625% Notes due 2022 (Exhibit 4.2 to the August 9, 2012 8-K and incorporated herein by reference).
4.104.6
4.114.7
4.124.8
4.134.9
4.144.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18



31



10.14.19
4.20
10.1
Second Amended and Restated Five Year Credit Agreement, dated as of July 31, 2014,February 14, 2020, by and among Omnicom Capital Inc., a Connecticut corporation, Omnicom Finance plc,Limited, a private limited company organized under the laws of England and Wales, Omnicom Group Inc., a New York corporation, any other subsidiary of Omnicom Group Inc. designated for borrowing privileges, the banks, financial institutions and other institutional lenders and initial issuing banks listed on the signature pages thereof, Citigroup Global Markets Inc.Citibank, N.A., J.P. Morgan Securities LLC, HSBC Securities (USA) Inc.JPMorgan Chase Bank, N.A., and Wells Fargo Securities, LLC, as lead arrangers and book managers, JPMorgan Chase Bank, N.A., HSBC Securities (USA) Inc. and Wells Fargo Bank, National Association, as syndication agents, Bank of America, N.A., BNP Paribas, Barclays Bank PLC, Deutsche Bank Securities Inc. and U.S.HSBC Bank USA, National Association, as documentation agents, and Citibank, N.A., as administrative agent for the lenders (Exhibit 10.1 to our Current Report on Form 8-K (File No. 1-10551) filed on August 1, 2014February 19, 2020 and incorporated herein by reference).
10.2
10.3
Amendment No. 1 to the Credit Agreement, dated October 26, 2020, to the Second Amended and Restated Five Year Credit Agreement, dated as of February 14, 2020, by and among Omnicom Capital Inc., Omnicom Finance Limited, Omnicom Group Inc., any other subsidiary of Omnicom Group Inc. designated for borrowing privileges, the banks, financial institutions and other institutional lenders party thereto, Citibank, N.A., JPMorgan Chase Bank, N.A., and Wells Fargo Securities, LLC, as lead arrangers and book managers, JPMorgan Chase Bank, N.A. and Wells Fargo Bank, National Association, as syndication agents, Bank of America, N.A., BNP Paribas, Barclays Bank PLC, Deutsche Bank Securities Inc. and HSBC Bank USA, National Association, as documentation agents, and Citibank, N.A., as administrative agent for the lenders (Exhibit 10.1 to our Quarterly Report on Form 10-Q (File No. 1-10551) for the quarter ended September 30, 2020 ("September 30, 2020 10-Q") and incorporated herein by reference).
10.310.4
10.5
10.6
10.7
10.4Standard form of the Director Indemnification Agreement (Exhibit 10.25 to our Annual Report on Form 10-K (File No. 1-10551) for the year ended December 31, 1989 and incorporated herein by reference).
10.510.8
10.610.9
10.710.10
10.810.11
10.910.12

32

10.1010.13
10.1110.14
10.1210.15
10.1310.16
10.1410.17
10.1510.18
10.1610.19
10.1710.20
10.1810.21
10.1910.22


32


12
Computation of Ratio of Earnings to Fixed Charges.
10.23
2110.24
21
23
31.1
31.2
32
101.INSInline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data Files.File (formatted as inline XBRL and contained in Exhibit 101)
Item 16. Form 10-K Summary

None.



33



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.
February 15, 201818, 2021BY:
/s/ PHILIP J. ANGELASTRO
Philip J. Angelastro

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.
SignatureTitleDate
SignatureTitleDate
/s/ BRUCE CRAWFORDJOHN D. WREN
Chairman and DirectorFebruary 15, 2018
Bruce Crawford
/s/ JOHN D. WREN
Chief Executive Officer and President and Director (Principal Executive Officer)February 15, 201818, 2021
John D. Wren
/s/ PHILIP J. ANGELASTRO
Executive Vice President and Chief Financial Officer (Principal Financial Officer)February 15, 201818, 2021
Philip J. Angelastro
/s/ ANDREW L. CASTELLANETA
Senior Vice President, Chief Accounting Officer (Principal
(Principal Accounting Officer)		February 15, 201818, 2021
Andrew L. Castellaneta
/s/ ALAN R. BATKINMARY C. CHOKSI
DirectorFebruary 15, 201818, 2021
Alan R. BatkinMary C. Choksi
/s/ MARY C.s/ LEONARD S. CHOKSIOLEMAN, JR.
DirectorFebruary 15, 201818, 2021
Mary C. Choksi
/s/ ROBERT CHARLES CLARK
DirectorFebruary 15, 2018
Robert Charles Clark
/s/ LEONARD S. COLEMAN, JR.
DirectorFebruary 15, 2018
Leonard S. Coleman, Jr.
/s/ SUSAN S. DENISON
DirectorFebruary 15, 201818, 2021
Susan S. Denison
/s/ RONNIES.HAWKINS
DirectorFebruary 18, 2021
Ronnie S. Hawkins
/s/ DEBORAH J. KISSIRE
DirectorFebruary 15, 201818, 2021
Deborah J. Kissire
/s/ GRACIA C. C. MARTORE
DirectorFebruary 15, 201818, 2021
Gracia C. Martore
/s/ LINDAJOHN R. MURPHYOHNSON RICE
DirectorFebruary 15, 201818, 2021
John R. MurphyLinda Johnson Rice
/s/ JOHN R. PURCELLVALERIEM. WILLIAMS
DirectorFebruary 15, 201818, 2021
John R. Purcell
/s/ LINDA JOHNSON RICE
DirectorFebruary 15, 2018
Linda Johnson Rice
/s/ VALERIEM. WILLIAMS
DirectorFebruary 15, 2018
Valerie M. Williams




34


MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for the preparation of the consolidated financial statements and related information of Omnicom Group Inc. (“Omnicom”)., or Omnicom. Management uses its best judgment to ensure that the consolidated financial statements present fairly, in all material respects, Omnicom’s consolidated financial position and results of operations in conformity with generally accepted accounting principles in the United States.

The financial statements have been audited by an independent registered public accounting firm in accordance with the standards of the Public Company Accounting Oversight Board. Their report expresses the independent accountant’s judgment as to the fairness of management’s reported financial position, results of operations and cash flows. This judgment is based on the procedures described in the fourthfifth and fifthsixth paragraphs of their report.

Omnicom management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Securities Exchange Act Rule 13a-15(f). Management, with the participation of our Chief Executive Officer, or CEO, Chief Financial Officer, or CFO, and our agencies, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our CEO and CFO concluded that our internal control over financial reporting was effective as of December 31, 2017.2020. There have not been any changes in our internal control over financial reporting during our fourth fiscal quarter that have materially affected or are reasonably likely to affect our internal control over financial reporting.

KPMG LLP, an independent registered public accounting firm that audited our consolidated financial statements included in this Annual Report on Form 10-K, has issued an attestation report on Omnicom’s internal control over financial reporting as of December 31, 2017,2020, dated February 15, 2018.

18, 2021.
The Board of Directors of Omnicom has an Audit Committee comprised of sixfour independent directors. The Audit Committee meets periodically with financial management, Internal Audit and the independent auditors to review accounting, control, audit and financial reporting matters.
















































F-1



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



TheTo the Shareholders and Board of Directors of
Omnicom Group Inc.:
Opinions on the Consolidated Financial Statements and Internal Control overOver Financial Reporting
We have audited the accompanying consolidated balance sheets of Omnicom Group Inc. and subsidiaries (the “Company”)Company) as of December 31, 20172020 and 2016,2019, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2017, 2020, and the related notes and financial statement schedule II (collectively, the “consolidatedconsolidated financial statements”)statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2017,2020, based on criteria established in Internal Control - Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Omnicom Group Inc. and subsidiariesthe Company as of December 31, 20172020 and 2016,2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2017,2020, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2020, based on criteria established in Internal Control -Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Change in Accounting Principle
As discussed in Note 16 to the consolidated financial statements, the Company has changed its method of accounting for leases effective January 1, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’sManagement Report on Internal Control overOver Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the auditaudits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control overOver Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


F-2
F-2



Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of the sufficiency of audit evidence over revenue recognition
As discussed in Note 3 to the consolidated financial statements, the Company provides an extensive range of advertising, marketing and corporate communication services through its branded networks and agencies, which operate in all major markets throughout the Americas, EMEA and Asia Pacific regions. Consolidated revenues across all disciplines and global economic markets was $13,171.1 million for the year-ended December 31, 2020.
We identified the evaluation of the sufficiency of audit evidence over revenue recognition as a critical audit matter. Revenue is recognized from contracts with customers that are based on statements of work which are typically separately negotiated with the client at a local agency level and local agencies execute tens of thousands of contracts per year. Evaluating the sufficiency of audit evidence obtained required a high degree of auditor judgment because of the volume of contracts entered into across the branded networks and agencies for which revenue was recorded. This included selecting the locations where testing would be performed and the supervision and review of procedures performed at those locations.
The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine the scope of agencies at which we performed audit procedures and the nature and extent of the procedures performed at each location. At each agency where procedures over revenue were performed, we (1) evaluated the design and tested the operating effectiveness of certain internal controls over revenue recognition, including controls to check that local agencies recorded revenue in accordance with the Company’s accounting policies and billings were recorded and presented in accordance with client agreements, (2) examined a selection of contracts and assessed that the Company’s accounting policies were applied consistently and accurately, and (3) assessed the recording of revenue by selecting certain transactions and comparing the amounts recognized for consistency with the underlying documentation including contracts with customers. We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed over revenue recognition.
/s/ KPMG LLP
We have served as the Company’s auditor since 2002.
New York, New York
February 15, 2018

18, 2021

F-3


OMNICOM GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
December 31,
20202019
ASSETS
Current Assets:  
Cash and cash equivalents$5,600.5 $4,305.7 
Short-term investments, at cost0 3.6 
Accounts receivable, net of allowance for doubtful accounts of $30.4 and $21.57,813.4 7,829.0 
Work in process1,101.2 1,257.6 
Other current assets1,075.0 1,188.8 
Total Current Assets15,590.1 14,584.7 
Property and Equipment at cost, less accumulated depreciation of $1,156.7 and $1,142.8585.2 663.4 
Operating Lease Right-Of-Use Assets1,223.4 1,398.3 
Equity Method Investments85.3 106.8 
Goodwill9,609.7 9,440.5 
Intangible Assets, net of accumulated amortization of $817.2 and $759.2298.5 338.2 
Other Assets255.0 251.5 
TOTAL ASSETS$27,647.2 $26,783.4 
LIABILITIES AND EQUITY
Current Liabilities:  
Accounts payable$11,513.0 $11,768.4 
Customer advances1,361.3 1,215.3 
Current portion of debt0 602.4 
Short-term debt3.9 10.1 
Taxes payable244.5 252.8 
Other current liabilities2,402.4 2,131.9 
Total Current Liabilities15,525.1 15,980.9 
Long-Term Liabilities970.7 1,006.8 
Long-Term Liability - Operating Leases1,114.0 1,274.7 
Long-Term Debt5,807.3 4,531.9 
Deferred Tax Liabilities443.5 408.1 
Commitments and Contingent Liabilities (Note 18)00
Temporary Equity - Redeemable Noncontrolling Interests209.7 207.3 
Equity:  
Shareholders’ Equity:  
Preferred stock, $1.00 par value, 7.5 million shares authorized, NaN issued0 0 
Common stock, $0.15 par value, 1.0 billion shares authorized, 297.2 million shares
issued, 215.0 million and 217.1 million shares outstanding
44.6 44.6 
Additional paid-in capital747.8 760.9 
Retained earnings8,190.6 7,806.3 
Accumulated other comprehensive income (loss)(1,213.8)(1,197.6)
Treasury stock, at cost, 82.2 million and 80.1 million shares(4,684.8)(4,560.3)
Total Shareholders’ Equity3,084.4 2,853.9 
Noncontrolling interests492.5 519.8 
Total Equity3,576.9 3,373.7 
TOTAL LIABILITIES AND EQUITY$27,647.2 $26,783.4 
 December 31,
 2017 2016
ASSETS   
Current Assets:   
Cash and cash equivalents$3,796.0
 $3,002.2
Short-term investments, at cost0.4
 20.6
Accounts receivable, net of allowance for doubtful accounts of $32.1 and $24.98,083.8
 7,510.8
Work in process1,110.6
 1,125.4
Other current assets1,125.2
 1,063.0
Total Current Assets14,116.0
 12,722.0
Property and Equipment at cost, less accumulated depreciation of $1,279.2 and $1,233.4690.9
 674.8
Equity Method Investments120.3
 120.4
Goodwill9,337.5
 8,976.1
Intangible Assets, net of accumulated amortization of $879.9 and $777.6368.4
 427.4
Other Assets298.1
 244.7
TOTAL ASSETS$24,931.2
 $23,165.4
LIABILITIES AND EQUITY   
Current Liabilities:   
Accounts payable$11,574.6
 $10,476.7
Customer advances1,266.7
 1,186.6
Current portion of debt—
 0.1
Short-term debt11.8
 28.7
Taxes payable330.0
 349.6
Other current liabilities1,925.8
 1,969.2
Total Current Liabilities15,108.9
 14,010.9
Long-Term Debt4,912.9
 4,920.5
Long-Term Liabilities1,091.2
 892.3
Deferred Tax Liabilities483.6
 480.5
Commitments and Contingent Liabilities (Note 16)
 

Temporary Equity - Redeemable Noncontrolling Interests182.4
 201.6
Equity:   
Shareholders’ Equity:   
Preferred stock, $1.00 par value, 7.5 million shares authorized, none issued—
 —
Common stock, $0.15 par value, 1.0 billion shares authorized, 297.2 million shares issued, 230.1 million and 234.7 million shares outstanding44.6
 44.6
Additional paid-in capital828.3
 798.3
Retained earnings6,210.6
 5,677.2
Accumulated other comprehensive income (loss)(963.0) (1,356.0)
Treasury stock, at cost, 67.1 million and 62.5 million shares(3,505.4) (3,002.1)
Total Shareholders’ Equity2,615.1
 2,162.0
Noncontrolling interests537.1
 497.6
Total Equity3,152.2
 2,659.6
TOTAL LIABILITIES AND EQUITY$24,931.2
 $23,165.4





The accompanying notes to the consolidated financial statements are an integral part of these statements.


F-4



OMNICOM GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)



Year Ended December 31,
202020192018
Revenue$13,171.1 $14,953.7 $15,290.2 
Operating Expenses:
   Salary and service costs9,572.8 10,972.2 11,306.1 
   Occupancy and other costs1,138.5 1,221.8 1,309.6 
   COVID-19 repositioning costs277.9 0 0 
   Net gain on disposition of subsidiaries0 0 (178.4)
Cost of services10,989.2 12,194.0 12,437.3 
   Selling, general and administrative expenses360.5 405.9 455.4 
   Depreciation and amortization222.6 231.5 264.0 
11,572.3 12,831.4 13,156.7 
Operating Profit1,598.8 2,122.3 2,133.5 
Interest Expense221.8 244.3 266.4 
Interest Income32.3 60.3 57.2 
Income Before Income Taxes and Income (Loss) From Equity Method Investments1,409.3 1,938.3 1,924.3 
Income Tax Expense381.7 504.4 492.7 
Income (Loss) From Equity Method Investments(6.8)2.0 8.9 
Net Income1,020.8 1,435.9 1,440.5 
Net Income Attributed To Noncontrolling Interests75.4 96.8 114.1 
Net Income - Omnicom Group Inc.$945.4 $1,339.1 $1,326.4 
Net Income Per Share - Omnicom Group Inc.:   
Basic$4.38 $6.09 $5.85 
Diluted$4.37 $6.06 $5.83 

 Years Ended December 31,
 2017 2016 2015
Revenue$15,273.6
 $15,416.9
 $15,134.4
Operating Expenses:     
   Salary and service costs11,249.7
 11,440.6
 11,248.7
   Occupancy and other costs1,232.1
 1,230.6
 1,242.7
Cost of services12,481.8
 12,671.2
 12,491.4
   Selling, general and administrative expenses450.0
 443.9
 431.8
   Depreciation and amortization282.1
 292.9
 291.1
 13,213.9
 13,408.0
 13,214.3
Operating Profit2,059.7
 2,008.9
 1,920.1
Interest Expense224.5
 209.7
 181.1
Interest Income49.7
 42.6
 39.6
Income Before Income Taxes and Income From Equity Method Investments1,884.9
 1,841.8
 1,778.6
Income Tax Expense696.2
 600.5
 583.6
Income From Equity Method Investments3.5
 5.4
 8.4
Net Income1,192.2
 1,246.7
 1,203.4
Net Income Attributed To Noncontrolling Interests103.8
 98.1
 109.5
Net Income - Omnicom Group Inc.$1,088.4
 $1,148.6
 $1,093.9
      
Net Income Per Share - Omnicom Group Inc.:     
Basic$4.68
 $4.80
 $4.43
Diluted$4.65
 $4.78
 $4.41
      
Dividends Declared Per Common Share$2.25
 $2.15
 $2.00




































The accompanying notes to the consolidated financial statements are an integral part of these statements.


F-5



OMNICOM GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)



Year Ended December 31,
202020192018
Net Income$1,020.8 $1,435.9 $1,440.5 
Other Comprehensive Income (Loss):
Cash flow hedge:
Amortization of loss included in interest expense5.5 5.5 5.6 
Income tax effect(1.6)(1.6)(1.6)
3.9 3.9 4.0 
Defined benefit pension plans and postemployment arrangements:
Unrecognized actuarial gains (losses) and prior service cost for the period(29.5)(45.5)10.4 
Amortization of prior service cost and actuarial losses13.9 8.7 16.6 
Income tax effect4.5 10.7 (7.9)
(11.1)(26.1)19.1 
Available-for-sale securities:
Reclassification0 0 0.3 
Foreign currency translation adjustment(5.0)74.9 (319.1)
Other Comprehensive Income (Loss)(12.2)52.7 (295.7)
Comprehensive Income1,008.6 1,488.6 1,144.8 
Comprehensive Income Attributed To Noncontrolling Interests79.5 96.3 83.9 
Comprehensive Income - Omnicom Group Inc.$929.1 $1,392.3 $1,060.9 

 Years Ended December 31,
 2017 2016 2015
Net Income$1,192.2
 $1,246.7
 $1,203.4
Other Comprehensive Income (Loss):     
Cash flow hedge:     
Loss for the period—
 (48.9) (5.6)
Amortization of loss included in interest expense5.3
 4.0
 —
Income tax effect(2.1) 18.7
 2.3
 3.2
 (26.2) (3.3)
Defined benefit pension plans and postemployment arrangements:     
Unrecognized actuarial losses and prior service cost for the period(12.2) (18.3) (7.8)
Amortization of prior service cost and actuarial losses included in periodic benefit expense16.1
 14.0
 14.8
Income tax effect(1.7) 1.6
 (2.8)
 2.2
 (2.7) 4.2
Available-for-sale securities:     
Unrealized gain for the period0.8
 0.2
 0.4
Income tax effect(0.3) (0.1) (0.1)
 0.5
 0.1
 0.3
      
Foreign currency translation adjustment412.7
 (319.4) (427.2)
Other Comprehensive Income (Loss)418.6
 (348.2) (426.0)
Comprehensive Income1,610.8
 898.5
 777.4
Comprehensive Income Attributed To Noncontrolling Interests129.4
 90.5
 80.7
Comprehensive Income - Omnicom Group Inc.$1,481.4
 $808.0
 $696.7








































The accompanying notes to the consolidated financial statements are an integral part of these statements.


F-6


OMNICOM GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
Three Years Ended December 31, 2017
(In millions, except per share amounts)
Year Ended December 31,
 202020192018
Common Stock, shares297.2 297.2 297.2 
Common Stock, par value$44.6 $44.6 $44.6 
Additional Paid-in Capital:
Beginning balance760.9 728.8 828.3 
Acquisition of noncontrolling interests5.7 (22.3)(39.7)
Change in temporary equity3.3 38.2 (71.1)
Share-based compensation71.0 72.5 70.5 
Stock issued, share-based compensation(93.1)(56.3)(59.2)
Ending balance747.8 760.9 728.8 
Retained Earnings:
Beginning balance7,806.3 7,016.1 6,210.6 
Cumulative effect of accounting changes0 22.3 23.6 
Net income945.4 1,339.1 1,326.4 
Common stock dividends declared(561.1)(571.2)(544.5)
Ending balance8,190.6 7,806.3 7,016.1 
Accumulated Other Comprehensive Income (Loss):
Beginning balance(1,197.6)(1,228.5)(963.0)
Cumulative effect of accounting changes0 (22.3)0 
Other comprehensive income (loss)(16.2)53.2 (265.5)
Ending balance(1,213.8)(1,197.6)(1,228.5)
Treasury Stock:
Beginning balance(4,560.3)(4,013.9)(3,505.4)
Stock issued, share-based compensation97.5 63.8 72.8 
Common stock repurchased(222.0)(610.2)(581.3)
Ending balance(4,684.8)(4,560.3)(4,013.9)
Shareholders’ Equity3,084.4 2,853.9 2,547.1 
Noncontrolling Interests:
Beginning balance519.8 559.8 537.1 
Cumulative effect of accounting changes0 0 0.4 
Net income75.4 96.8 114.1 
Other comprehensive income (loss)4.1 (0.5)(30.2)
Dividends to noncontrolling interests(95.5)(97.3)(134.9)
Acquisition of noncontrolling interests(42.0)(54.4)(42.3)
Increase in noncontrolling interests from business combinations30.7 15.4 115.6 
Ending balance492.5 519.8 559.8 
Total Equity$3,576.9 $3,373.7 $3,106.9 
Dividends Declared Per Common Share$2.60 $2.60 $2.40 
 Omnicom Group Inc.    
 Common Stock 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Treasury
Stock
 

Shareholders’
Equity
 
Noncontrolling
 Interests
 
Total
Equity
 Shares Par Value     
Balance as of December 31, 2014397.2
 $59.6
 $818.6
 $9,576.9
 $(618.2) $(6,986.9) $2,850.0
 $471.3
 $3,321.3
Net income      1,093.9
     1,093.9
 109.5
 1,203.4
Other comprehensive income (loss)        (397.2)   (397.2) (28.8) (426.0)
Dividends to noncontrolling interests              (129.4) (129.4)
Acquisition of noncontrolling interests    (38.8)       (38.8) (24.2) (63.0)
Increase in noncontrolling interests from business combinations    
         38.6
 38.6
Change in temporary equity
   11.9
  
     11.9
  
 11.9
Common stock dividends declared ($2.00 per share)      (492.6)     (492.6)   (492.6)
Share-based compensation    99.4
       99.4
   99.4
Stock issued, share-based compensation    (31.2)     84.5
 53.3
   53.3
Common stock repurchased          (727.5) (727.5)   (727.5)
Balance as of December 31, 2015397.2
 59.6
 859.9
 10,178.2
 (1,015.4) (7,629.9) 2,452.4
 437.0
 2,889.4
Net income      1,148.6
     1,148.6
 98.1
 1,246.7
Other comprehensive income (loss)        (340.6)   (340.6) (7.6) (348.2)
Dividends to noncontrolling interests              (87.2) (87.2)
Acquisition of noncontrolling interests    (87.7)       (87.7) (16.0) (103.7)
Increase in noncontrolling interests from business combinations              73.3
 73.3
Change in temporary equity    (33.0)       (33.0)   (33.0)
Common stock dividends declared ($2.15 per share)      (513.9)     (513.9)   (513.9)
Share-based compensation    93.4
       93.4
   93.4
Stock issued, share-based compensation    (34.3)     79.3
 45.0
   45.0
Common stock repurchased          (602.2) (602.2)   (602.2)
Treasury stock retired(100.0) (15.0)   (5,135.7)   5,150.7
 —
   —
Balance as of December 31, 2016297.2
 44.6
 798.3
 5,677.2
 (1,356.0) (3,002.1) 2,162.0
 497.6
 2,659.6
Cumulative effect of accounting changes    4.5
 (31.6)     (27.1) —
 (27.1)
Net income      1,088.4
     1,088.4
 103.8
 1,192.2
Other comprehensive income (loss)        393.0
   393.0
 25.6
 418.6
Dividends to noncontrolling interests              (101.7) (101.7)
Acquisition of noncontrolling interests    (25.7)       (25.7) (8.2) (33.9)
Increase in noncontrolling interests from business combinations              20.0
 20.0
Change in temporary equity    27.1
       27.1
   27.1
Common stock dividends declared ($2.25 per share)      (523.4)     (523.4) 

 (523.4)
Share-based compensation    80.2
       80.2
 

 80.2
Stock issued, share-based compensation    (56.1)     65.1
 9.0
 

 9.0
Common stock repurchased          (568.4) (568.4) 

 (568.4)
Balance as of December 31, 2017297.2
 $44.6
 $828.3
 $6,210.6
 $(963.0) $(3,505.4) $2,615.1
 $537.1
 $3,152.2








The accompanying notes to the consolidated financial statements are an integral part of these statements.


F-7


OMNICOM GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)



Year Ended December 31,
202020192018
Cash Flows from Operating Activities:   
Net income$1,020.8 $1,435.9 $1,440.5 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization of right-of-use assets139.5 147.7 161.5 
Amortization of intangible assets83.1 83.8 102.5 
Amortization of net deferred gain on interest rate swaps(8.1)(14.8)(12.9)
Share-based compensation70.8 72.5 70.5 
COVID-19 repositioning costs277.9 0 0 
Net gain from disposition of subsidiaries0 0 (178.4)
Impact of Tax Act0 0 28.9 
Other, net109.7 5.8 29.2 
Increase in operating capital30.9 125.1 80.5 
Net Cash Provided By Operating Activities1,724.6 1,856.0 1,722.3 
Cash Flows from Investing Activities:   
Capital expenditures(75.4)(102.2)(195.7)
Acquisition of businesses and interests in affiliates, net of cash acquired(67.1)(10.0)(350.4)
Proceeds from disposition of subsidiaries3.2 79.4 308.4 
Proceeds from sale of investments and other3.2 1.9 15.9 
Net Cash Used In Investing Activities(136.1)(30.9)(221.8)
Cash Flows from Financing Activities:   
Proceeds from borrowings1,186.6 1,112.4 0 
Repayment of debt(600.0)(900.0)0 
Change in short-term debt(5.6)2.0 0 
Dividends paid to common shareholders(562.7)(564.3)(548.5)
Repurchases of common stock(222.0)(610.2)(581.3)
Proceeds from stock plans4.1 6.5 13.0 
Acquisition of additional noncontrolling interests(22.3)(51.4)(43.6)
Dividends paid to noncontrolling interest shareholders(95.5)(97.3)(134.9)
Payment of contingent purchase price obligations(31.2)(64.6)(99.0)
Other, net(59.8)(55.1)(46.8)
Net Cash Used In Financing Activities(408.4)(1,222.0)(1,441.1)
Effect of foreign exchange rate changes on cash and cash equivalents114.7 50.2 (203.0)
Net Increase (Decrease) in Cash and Cash Equivalents1,294.8 653.3 (143.6)
Cash and Cash Equivalents at the Beginning of Year4,305.7 3,652.4 3,796.0 
Cash and Cash Equivalents at the End of Year$5,600.5 $4,305.7 $3,652.4 

 Years Ended December 31,
 2017 2016 2015
      
Net income$1,192.2
 $1,246.7
 $1,203.4
Adjustments to reconcile net income to net cash provided by operating activities:     
Depreciation168.3
 177.7
 181.8
Amortization of intangible assets113.8
 115.2
 109.3
Amortization of deferred gain on interest rate swaps(12.9) (15.4) (9.2)
Share-based compensation80.2
 93.4
 99.4
Impact of Tax Act106.3
 —
 —
Other, net27.5
 32.0
 55.3
Increase in operating capital348.5
 302.8
 559.5
Net Cash Provided By Operating Activities2,023.9
 1,952.4
 2,199.5
Cash Flows from Investing Activities:     
Capital expenditures(156.0) (165.5) (202.7)
Acquisition of businesses and interests in affiliates, net of cash acquired(26.3) (308.8) (60.3)
Sale (purchase) of investments, net66.9
 (7.3) (0.5)
Net Cash Used In Investing Activities(115.4) (481.6) (263.5)
Cash Flows from Financing Activities:     
Change in short-term debt(18.1) (1.2) (1.1)
Proceeds from borrowings—
��1,389.6
 —
Repayment of debt—
 (1,000.0) —
Dividends paid to common shareholders(515.2) (505.4) (496.7)
Repurchases of common stock(568.4) (602.2) (727.5)
Proceeds from stock plans10.7
 26.8
 20.1
Acquisition of additional noncontrolling interests(17.0) (72.7) (33.5)
Dividends paid to noncontrolling interest shareholders(101.7) (87.2) (129.4)
Payment of contingent purchase price obligations(108.4) (110.5) (55.3)
Other, net(24.5) (35.5) (32.9)
Net Cash Used In Financing Activities(1,342.6) (998.3) (1,456.3)
Effect of foreign exchange rate changes on cash and cash equivalents227.9
 (75.5) (262.6)
Net Increase in Cash and Cash Equivalents793.8
 397.0
 217.1
Cash and Cash Equivalents at the Beginning of Year3,002.2
 2,605.2
 2,388.1
Cash and Cash Equivalents at the End of Year$3,796.0
 $3,002.2
 $2,605.2















The accompanying notes to the consolidated financial statements are an integral part of these statements.


F-8
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1. Presentation of Financial Statements
The terms “Omnicom,” “the Company,” “we,” “our” and “us” each refer to Omnicom Group Inc. and its subsidiaries, unless the context indicates otherwise. The accompanying consolidated financial statements were prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP or GAAP. All intercompany balances and transactions have been eliminated.

We prepare our financial statements in conformity with U.S. GAAP and are required to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates and assumptions.
Accounting ChangesRisks and Uncertainties
On January 1, 2017,Impact of the COVID-19 Pandemic on our Business
In 2020, the COVID-19 pandemic negatively impacted our business and results of operations. Efforts to mitigate the impact of the pandemic, including government actions to restrict travel, limit public gatherings, shelter-in-place orders and mandatory closures of businesses, resulted in many of our clients reducing or suspending their spending for our advertising, marketing and corporate communication services. As a result, for the year ended December 31, 2020, revenue decreased $1,782.6 million, or 11.9%, compared to 2019, primarily due to the impact of the COVID-19 pandemic. The impact of the COVID-19 pandemic on our revenue has been, and may continue to be, material, depending on several factors, including the potential for prolonged or additional governmental actions to mitigate the effects of the pandemic in the near-term, and the intermediate and long-term impact on marketers' spending plans.
In response to the impact of the COVID-19 pandemic, in the second quarter of 2020, we adopted FASB ASU 2016-09, Compensation - Stock Compensation: Improvementstook actions to Employee Share-Based Payment Accounting,align our cost structure and reduce our workforce and facility requirements and continued the review of businesses for disposal and assets for impairment. As a result, we recorded a pre-tax charge of $277.9 million, which is comprised of incremental severance of $150.0 million, real estate operating lease right-of-use, or ASU 2016-09, which requires that beginning in 2017 excess tax benefitsROU, asset and deficienciesother asset impairment charges of $55.8 million, other exit costs of $47.0 million and dispositions and other charges of $25.1 million.
In addition, during 2020 we reduced salary and service costs by $162.6 million related to share-based compensation be recordedreimbursements and tax credits under government programs in resultsseveral countries, including the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, in the United States, the Kurzarbeit program in Germany, and other government reimbursement programs in the U.K., France, Canada and other jurisdictions.
The COVID-19 pandemic negatively impacted most of operations upon vesting of restricted stock awardsour clients' businesses. As a result, clients have cut costs, including postponing or exercise of stock options. Excess tax benefitsreducing marketing communication expenditures. While certain industries such as healthcare and deficiencies represent the difference between the actual compensation deduction for tax purposes, which is calculatedpharmaceuticals, technology and telecommunications, financial services and consumer products have been less affected, as long as the difference betweenCOVID-19 pandemic remains a threat, global economic conditions continue to be volatile and such uncertainty cuts across all clients, industries and geographies. Overall, while we have a diversified portfolio of service offerings, clients and geographies, demand for our services can be expected to continue to be adversely affected as marketers reduce expenditures in the grant date priceshort term due to the uncertain impact of the awardpandemic on the global economy. We expect global economic performance and our performance to vary by geography until the impact of the COVID-19 pandemic on the global economy moderates.
Although we have experienced a decrease in our cash flow from operating activities, we took numerous proactive steps to strengthen our liquidity and financial position that are intended to mitigate the potential impact of the COVID-19 pandemic on our liquidity. In February 2020, we issued $600 million 2.45% Senior Notes due April 30, 2030, or the 2.45% Notes. In March 2020, the net proceeds from the issuance of the 2.45% Notes were used to redeem the remaining $600 million principal amount of our 4.45% Senior Notes due August 15, 2020, or the 2020 Notes. As a result, we have no notes maturing until May 2022. In April 2020, we issued $600 million of 4.20% Senior Notes due June 1, 2030, or the 4.20% Notes, and we entered into a new $400 million 364 day revolving credit facility, or the 364 Day Credit Facility. The 364 Day Credit Facility is in addition to our existing $2.5 billion multi-currency revolving credit facility, or Credit Facility, which we extended to mature in February 2025. In addition, in March 2020, we suspended our share repurchase activity.
The impact on the global economy and resulting decline in the price of our common stock onwas determined to be a trigger event in the vesting or exercise date, and compensation expense recognizedfirst quarter of 2020 that required us to perform a review of our long-lived assets for financial reporting purposes. In prior years, excess tax benefits and deficiencies were recorded in additional paid-in capital. In 2017 we recognized an excess tax benefit of $20.8 million.
ASU 2016-09 requires that cash flowsimpairment, primarily related to goodwill, amortizable intangible assets and equity method investments. We updated our review in June 2020, and the excess tax benefits or deficiencies be classifiedresult of the review of intangible assets and goodwill is discussed in operating activities. Accordingly,Note 5. In the second quarter of 2020, we retrospectively adjusteddisposed of one of our equity method investments and recognized a non-cash after-tax charge of $3.9 million. In the statementfourth quarter of cash flows for 2016 and 2015 to conform to the current year presentation, resulting in an increase in net cash provided by operating activities and a corresponding decrease in net cash used in financing activities of $21.2 million and $27.2 million, respectively. Further, ASU 2016-09 permits a policy election to either continue to estimate the number of awards that will be forfeited or to account for forfeitures as they occur. We elected to account for forfeitures as they occur. Accordingly,2020 we recorded a cumulative catch-up adjustment to increase additional paid-in capitalasset impairment charges of $55.8 million associated with underperforming assets, which is included in salary and reduce opening retained earnings by $4.5 million reflecting the estimate of unvested awards at December 31, 2016 that were not expected to vest.
On January 1, 2017, we adopted FASB ASU 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other than Inventory, or ASU 2016-16, which requires that the income tax effects of intra-entity transfers of assets other than inventory are recognized when the transfer occurs. We adopted ASU 2016-16 using the modified retrospective method and recorded a cumulative catch-up adjustment to reduce opening retained earnings by $27.1 million reflecting the elimination of the deferred tax asset related to intercompany asset transfers.
On December 31, 2017, we adopted FASB ASU 2017-12, Derivatives and Hedging, or ASU 2017-12, which amended the hedge accounting and recognition and presentation requirements. The adoption of ASU 2017-12 did not have any impact on our existing hedges, financial position or results of operations.
2. Significant Accounting Policies

Revenue Recognition. We recognize revenue in accordance with FASB Accounting Standards Codification, or FASB ASC, Topic 605, Revenue Recognition, and applicable SEC Staff Accounting Bulletins. Our principal source of revenue is derived from fees for services on a rate per hour or per project basis. Revenue is realized when the service is performed in accordance with the client arrangement and upon the completion of the earnings process. Our primary client arrangements include: fixed fee contracts where revenue is recognized based on the level of effort completed to date, retainer agreements where revenue is recognized on a straight-line basis over the contract period, and media commissions where revenue is recognized when the media is run. Prior to recognizing revenue, persuasive evidence of an arrangement must exist, the sales price must be fixed or determinable, delivery, performance and acceptance must be in accordance with the client arrangement and collection must be reasonably assured. These principles are the foundation of our revenue recognition policy and apply to all client arrangements in each of our service disciplines: advertising, customer relationship management, public relations and healthcare. Because the services that we provide across each of our disciplines are similar and delivered to clients in similar ways, all of the key elements of our revenue recognition policy apply to client arrangements in each of our four disciplines. Revenue is recorded net of sales, use and value added taxes.


costs.

F-9
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The impact of these actions on operating profit and income (loss) from equity method investments was (in millions):
Increase (Decrease)
Operating ProfitIncome (Loss) from Equity Method Investments
COVID-19 repositioning costs$(277.9)
Impairment charges - underperforming assets(55.8)
Impairment charge - equity method investment$(3.9)
Reimbursements and tax credits under government programs162.6 
$(171.1)$(3.9)
Accounting Changes
Adoption of ASU 2016-13
On January 1, 2020, we adopted ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, or ASU 2016-13, which changes the impairment model for most financial assets, including accounts receivable. The new model uses a forward-looking expected loss method. Historically, the credit loss experience on our client billings has not resulted in material bad debt expense. Accordingly, the adoption of ASU 2016-13 did not have a significant impact on our financial position, or on our results of operations.
As a result of the adoption of ASU 2016-13, we changed our accounting policy for allowance for doubtful accounts as follows: We maintain an allowance for doubtful accounts related to potential losses that could arise due to our customers' inability to make required payments. This allowance requires management to apply judgment in deriving the estimated reserve. In connection with the majorityestimate of our allowance, we perform ongoing credit evaluations of our customers’ financial condition, including information related to their credit ratings obtained from independent third-party firms. If, as a result, we become aware that additional reserves may be necessary, we perform additional analysis including, but not limited to, factors such as a customer’s creditworthiness, intent and ability to pay and overall financial position. If the data we use to calculate the allowance for doubtful accounts does not timely reflect the future ability to collect outstanding receivables, including the effects of the COVID-19 pandemic on our clients' credit, additional provisions for doubtful accounts may be needed and our results of operations could be affected. For 2020, we recorded bad debt expense of $23.5 million and increased our allowance for doubtful accounts to $30.4 million.
Adoption of ASU 2018-15
On January 1, 2020, we adopted ASU 2018-15, Intangibles - Goodwill and Other, Internal-Use Software, or ASU 2018-15, which aligns the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. We adopted ASU 2018-15 on a prospective basis for implementation costs for new or existing arrangements incurred on or after the adoption date. The adoption of ASU 2018-15 did not have a significant impact on our results of operations or financial position.
2. Significant Accounting Policies
Revenue Recognition.Revenue is recognized when a customer obtains control of promised goods or services (the performance obligation) in an amount that reflects the consideration we expect to receive in exchange for those goods or services (the transaction price). We measure revenue by estimating the transaction price based on the consideration specified in the client arrangement. Revenue is recognized as the performance obligations are satisfied. Our revenue is primarily derived from the planning and execution of advertising communications and marketing services in the following fundamental disciplines: advertising, which includes creative advertising services and strategic media planning and buying services, customer relationship management or CRM, which includes CRM Consumer Experience and CRM Execution & Support, public relations and healthcare advertising. Our client contracts are primarily fees for service on a rate per hour or per project basis. Revenue is recorded net of sales, use and value added taxes.
Performance Obligations. In substantially all our disciplines, the performance obligation is to provide advisory and consulting services at an agreed-upon level of effort to accomplish the specified engagement. Our client contracts are comprised of diverse arrangements involving fees based on any one or a combination of the following: an agreed fee or rate per hour for the level of effort expended by our employees; commissions based on the client’s spending for media purchased from third parties; qualitative or quantitative incentive provisions specified in the contract; and reimbursement for third-party costs that we are required to include in revenue when we control the vendor services related to these costs and we act as principal. The transaction price of a contract is allocated to each distinct performance obligation based on its relative stand-alone selling price and is recognized as revenue when, or as, the customer receives the benefit of the performance obligation. Clients typically receive and consume the benefit of our services as they are performed. Substantially all our client contracts provide that we are compensated for services performed to date and allow for cancellation by either party on short notice, typically 90 days, without penalty.
F-10
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Generally, our short-term contracts, which normally take 30 to 90 days to complete, are performed by a single agency and consist of a single performance obligation. As a result, we do not consider the underlying services as separate or distinct performance obligations because our services are highly interrelated, occur in close proximity, and the integration of the various components of a marketing message is essential to overall service. In certain of our long-term client contracts, which have a term of up to one year, the performance obligation is a stand-ready obligation, because we provide a constant level of similar services over the term of the contract. In other long-term contracts, when our services are not a stand-ready obligation, we consider our services distinct performance obligations and allocate the transaction price to each separate performance obligation based on its stand-alone selling price, including contracts for strategic media planning and buying services, which are considered to be multiple performance obligations, and we allocate the transaction price to each distinct service based on the staffing plan and the stand-alone selling price. In substantially all of our creative services contracts, we have distinct performance obligations for our services, including certain creative services contracts where we act as an agent and arrange, at the client’s direction, for third parties to perform studio production efforts.
Revenue Recognition Methods. A substantial portion of our revenue is recognized over time, as the services are performed, because the client receives and consumes the benefit of our performance throughout the contract period, or we create an asset with no alternative use and are contractually entitled to payment for our performance to date in the event the client terminates the contract for convenience. For these client contracts, other than when we have a stand-ready obligation to perform services, revenue is recognized over time using input measures that correspond to the level of staff effort expended to satisfy the performance obligation on a rate per hour or equivalent basis. For client contracts when we have a stand-ready obligation to perform services on an ongoing basis over the life of the contract, typically for periods up to one year, where the scope of these arrangements is broad and there are no significant gaps in performing the services, we recognize revenue using a time-based measure resulting in a straight-line revenue recognition. From time to time, there may be changes in the client service requirements during the term of a contract and the changes could be significant. These changes are typically negotiated as new contracts covering the additional requirements and the associated costs, as well as additional fees for the incremental work to be performed.
To a lesser extent, for certain other contracts where our performance obligations are satisfied in phases, we recognize revenue over time using certain output measures based on the measurement of the value transferred to the customer, including milestones achieved. Where the transaction price or a portion of the transaction price is derived from commissions based on a percentage of purchased media from third parties, the performance obligation is not satisfied until the media is run and we have an enforceable contract providing a right to payment. Accordingly, revenue for commissions is recognized at a point in time, typically when the media is run, including when it is not subject to cancellation by the client or media vendor.
Principal vs. Agent. In substantially all our businesses, we incur third-party costs on behalf of clients, including direct costs and incidental, or out-of-pocket costs. Third-party direct costs incurred in connection with the creation and delivery of advertising or marketing communication services include, among others: purchased media, studio production services, specialized talent, including artists and other freelance labor, event marketing supplies, materials and services, promotional items, market research and third-party data and other related expenditures. Out-of-pocket costs include, among others: transportation, hotel, meals and telecommunication charges incurred by us in the course of providing our services. Billings related to out-of-pocket costs are included in revenue since we control the goods or services prior to delivery to the client.
However, the inclusion of billings related to third-party direct costs in revenue depends on whether we act as a principal or as an agent in the client arrangement. In most of our businesses, including advertising, which also includes studio production efforts and media planning and buying services, public relations, healthcare advertising and most of our CRM Consumer Experience businesses, we act as an agent and recordarrange, at the client's direction, for third parties to perform certain services. In these cases, we do not control the goods or services prior to the transfer to the client. As a result, revenue is recorded net of these costs, equal to the net amount retained when thefor our fee or commission is earned. Although, incommission.
In certain markets,businesses we may bear credit risk with respect to these activities, the arrangements with our clients are such that we act as an agentprincipal when contracting for third-party services on their behalf.behalf of our clients. In these cases, costs incurred with third-party suppliers are excluded from our revenue. Inevents business and most of our CRM Execution & Support businesses, including field marketing and certain arrangements,specialty marketing businesses, we act as principal because we control the specified goods or services before they are transferred to the client and we are responsible for providing the specified goods or services, or we are responsible for directing and integrating third-party vendors to fulfill our performance obligation at the agreed upon contractual price. In such arrangements, we also take pricing risk under the terms of the client contract. In certain specialty media buying businesses, we act as principal when we control the buying process for the purchase of the media and contract directly with third-party suppliers andthe media providers and production companies and we are the primary obligor.vendor. In these circumstances,arrangements, we assume the pricing risk under the terms of the client contract. When we act as principal, we include billable amounts related to third-party costs in the transaction price and record revenue is recordedover time at the gross amount billed, sinceincluding out-of-pocket costs, consistent with the manner that we recognize revenue has been earned for the sale of goodsunderlying services contract. However, in media buying contracts where we act as principal, we recognize revenue at a point in time, typically when the media is run, including when it is not subject to cancellation by the client or services.media vendor.

F-11
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Variable Consideration. Someof our client arrangements include performance incentivevariable consideration provisions, designed to link a portion of our revenue to our performance relative to quantitative and qualitative goals. We recognizewhich include performance incentives, tiered commission structures and vendor rebates in certain markets outside of the United States. Variable consideration is estimated and included in total consideration at contract inception based on either the expected value method or the most likely outcome method. These estimates are based on historical award experience, anticipated performance and other factors known at the time. Performance incentives are typically recognized in revenue over time. Variable consideration for our media businesses in certain international markets includes rebate revenue and is recognized when it is probable that the specific quantitative goals are achieved, ormedia will be run, including when our performance against qualitative goalsit is determinednot subject to cancellation by the client. We mayIn addition, when we receive rebates or credits from certain vendors based onfor transactions entered into on behalf of clients. These rebates or creditsclients, they are remitted to the clients in accordance with contractual requirements or in certain international markets may be retained by us based on the terms of the client contract or local law. Amounts passed on to clients are recorded as a liability and amounts retained by us are recorded as revenue when earned.earned, typically when the media is run.

See Note 20 for a discussion of the adoption of ASU 2014-09, Revenue from Contracts with Customers ASC Topic 606.

Operating Expenses.Operating expenses are comprised ofinclude cost of services, selling, general and administrative expenses, or SG&A, expenses and depreciation and amortization. We measure cost of services in two distinct categories: salary and service costs and occupancy and other costs. As a service business, salary and service costs make up the vast majority of our operating expenses and substantially all these costs comprise the essential components directly linked to the delivery of our services. Salary and service costs include employee compensation and benefits, freelance labor and direct service costs, which include third-party supplier costs and client-related travel costs. Occupancy and other costs consist of the indirect costs related to the delivery of our services, including office rent and other occupancy costs, equipment rent, technology costs, general office expenses and other expenses. SG&A expenses primarily consist of third-party marketing costs, professional fees and compensation and benefits and occupancy and other costs of our corporate and executive offices, which includes group-wide finance and accounting, treasury, legal and governance, human resource oversight and similar costs.
Cash and Cash Equivalents. Cash and cash equivalents consist ofinclude cash in banks and highly liquid interest-bearing time deposits with original maturities of three months or less. Due to the short-term nature of these investments, carrying value approximates fair value. We have a policy governing counterparty credit risk for financial institutions that hold our cash and cash equivalents and we have deposit limits for each institution.
Short-Term Investments.Short-term investments consist ofinclude interest-bearing time deposits with maturities of less than twelve months. Short-term investments are carried at cost, which approximates fair value.
Work in Process. Work in process includesrepresents accrued costs incurred on behalf of clients in providing advertising and marketing services,customers, including media and production costs, and fees and other third-party costs that have not yet been billed. Media and production costs are billed during the production process in accordance with the terms of the client contract. Substantially all unbilled fees and fees are normallycosts will be billed within the next 30 days or when the services are performed.days.
Property and Equipment.Property and equipment are carried at cost and are depreciated over the estimated useful lives of the assets using the straight-line method. The estimated useful lives range from seven to ten years for furniture and three to five years for equipment. Leasehold improvements are amortized on a straight-line basis over the shorter of the related lease term or the estimated useful life of the asset. PropertyAssets under capital lease is depreciatedfinance leases are amortized on a straight-line basis over the lease term.
Equity Method Investments. Investments in companies where we exercise significant influence over the operating and financial policies of the investee and own less than 50% of the equity are accounted for using the equity method. Our proportionate share of the net income or loss of equity method investments is included in results of operations and any dividends received reduce the carrying value of the investment. The excess of the cost of our investment over our proportionate share of the fair value of the net assets of the investee at the acquisition date is recognized as goodwill and included in the carrying amount of the investment. Goodwill in the equity method investments is not amortized. Gains and losses from changes in our ownership interests are recorded in results of operations until control is achieved. WhereIn circumstances where a change in our ownership interest results in obtaining control, the existing carrying value of the investment is remeasured to the acquisition date fair value and any gain or loss is recognized in results of operations.


F-10
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cost Method Investments. Investments in companies where we do not exercise significant influence over the operating and financial policies of the investee and own less than 20% of the equity are accounted for using the cost method. Cost method investments are included in other assets and are carried at cost, which approximates or is less than fair value. The carrying value of our cost method investments was $14.4 million and $14.2 million at December 31, 2017 and 2016, respectively.
We periodically review the carrying value of the equity method and cost method investments to determine if there has been an other-than-temporary decline in carrying value. A variety of factors are considered when determining if a decline in carrying value is other-than-temporary, including the financial condition and business prospects of the investee, as well as our investment intent.
Available-for-SaleMarketable Equity Securities. Investments in common stock of publicly traded companies Marketable equity securities are classified as available-for-sale securities. These investments are included in other assets and are carriedmeasured at fair value using quoted market prices. Unrealized gains and losseschanges in fair value are recordedrecognized in accumulated other comprehensive income. The carryingresults of operations.
Non-Marketable Equity Securities.Non-marketable equity securities do not have a readily determinable fair value and are measured at cost, less any impairment, and are adjusted for observable changes in fair value from transactions for identical or similar securities of the available-for-sale securities was $1.4 million and $4.3 million at December 31, 2017 and 2016, respectively.same issuer.
Goodwill and Intangible Assets. Goodwill represents the excess of the acquisition cost over the fair value of the net assets acquired. Goodwill is not amortized but is periodically reviewed for impairment. Intangible assets comprise customer relationships, including the related customer contracts and trade names, and purchased and internally developed software and are
F-12
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
amortized over their estimated useful lives ranging from five to twelve years.years. We consider a number of factors in determining the useful lives and amortization method, including the pattern in which the economic benefits are consumed, as well as trade name recognition and customer attrition. There is no estimated residual value for the intangible assets.
We review the carrying value of goodwill for impairment annually at the end of the second quarter of the yearJune 30 and whenever events or circumstances indicate the carrying value may not be recoverable. The impairment evaluation compares the fair value of each reporting unit, which we identified as our five agency networks, to its carrying value, including goodwill. If the fair value of the reporting unit is equal to or greater than its carrying value, goodwill is not impaired. Goodwill is impaired when the carrying value of the reporting unit exceeds its fair value. Goodwill is written down to its fair value through a non-cash expense recorded in results of operations in the period the impairment is identified.
We identified our regional reporting units as components of our operating segments, which are our five agency networks. The regional reporting units and practice areas of each agency network monitor the performance and are responsible for the agencies in their region. TheyThe regional reporting units report to the segment managers and facilitate the administrative and logistical requirements of our client-centric strategy for delivering services to clients in their regions. We have concluded that, for each of our operating segments, their regional reporting units had similar economic characteristics and should be aggregated for purposes of testing goodwill for impairment at the operating segment level. Our conclusion was based on a detailed analysis of the aggregation criteria set forth in FASB ASC Topic 280, Segment Reporting, and the guidance set forth in FASB ASC Topic 350, Intangibles - Goodwill and Other. Consistent with our fundamental business strategy, the agencies within our regional reporting units serve similar clients in similar industries, and in many cases the same clients. The main economic components of each agency are employee compensation and related costs and direct service costs and occupancy and other costs, which include rent and occupancy costs, technology costs that are generally limited to personal computers, servers and off-the-shelf software and other overhead costs. Finally, the expected benefits of our acquisitions are typically shared by multiple agencies in various regions as they work together to integrate the acquired agency into our client service strategy. We use the following valuation methodologies to determine the fair value of our reporting units: (1) the income approach, which utilizes discounted expected future cash flows, (2) comparative market participant multiples of EBITDA (earnings before interest, taxes, depreciation and amortization) and (3) when available, consideration of recent and similar acquisition transactions.
Based on the results of the annual impairment test, we concluded that at June 30, 20172020 and 2016 our2019 goodwill was not impaired because either the fair value of each reporting unit was substantially in excess of its respective net book value.value, or for reporting units with a negative book value, fair value of assets exceeds total assets. Subsequent to the annual impairment test of goodwill at June 30, 2017,2020, there werehave been no events or circumstances that triggered the need for an interim impairment test.
DebtIssuance Costs. Debt issuance costs are capitalized and amortized in interest expense over the life of the related debt and are presented as a reduction to the carrying amount of debt.
Temporary Equity - Redeemable Noncontrolling Interests. Owners of noncontrolling equity interests in some of our subsidiaries have the right in certain circumstances to require us to purchase all or a portion of their equity interests at fair value as defined in the applicable agreements. The intent of the parties is to approximate fair value at the time of redemption by using a multiple of earnings that is consistent with generally accepted valuation practices used by market participants in our industry. These contingent redemption rights are embedded in the equity security at issuance, are not free-standing instruments, do not represent a de facto financing and are not under our control.


F-11
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Treasury Stock.Repurchases ofour common stock are accounted for at cost and are recorded as treasury stock. Reissued treasury stock, primarily in connection with share-based compensation plans, is accounted for at average cost. Gains or losses on reissued treasury stock arising from the difference between the average cost and the fair value of the award are recorded in additional paid-in capital and do not affect results of operations.
Business Combinations. Combinations.Business combinations are accounted for using the acquisition method and accordingly, the assets acquired, including identified intangible assets, liabilities assumed and any noncontrolling interest in the acquired business are recorded at acquisition date fair value. In circumstances where control is obtained and less than 100% of a business is acquired, goodwill is recorded as if 100% were acquired. Acquisition-related costs, including advisory, legal, accounting, valuation and other costs are expensed as incurred. Certain acquisitions include an initial payment at closing and provide for future additional contingent purchase price payments (earn-outs), which are recorded as a liability at the acquisition date fair value using the discount rate in effect on the acquisition date. Subsequent changes in the fair value of the liability are recorded in results of operations. Amounts earned under the contingent purchase price arrangements may be subject to a maximum and payment is not contingent upon future employment. The results of operations of acquired businesses are included in results of operations from the acquisition date.
Noncontrolling Interests.Noncontrolling interests represent equity interests in certain subsidiaries held by third-parties.third parties. Noncontrolling interests are presented as a component of equity and the proportionate share of net income attributed to the noncontrolling interests is recorded in results of operations. Changes in noncontrolling interests that do not result in a loss of control are accounted for in equity. Gains and losses resulting from a loss of control are recorded in results of operations.
F-13
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Foreign Currency Translation and Transactions. Substantially all of our foreign subsidiaries use their local currency as their functional currency. Assets and liabilities are translated into U.S. Dollars at the exchange rate on the balance sheet date and revenue and expenses are translated at the average exchange rate for the period. Translation adjustments are recorded in accumulated other comprehensive income. Net foreign currency transaction gains and (losses)losses are recorded in results of operations were $(7.8)operations. In 2020 and 2019, we recorded losses of $4.8 million, $12.7 and $11.2 million, respectively, and $4.7 millionin 2017, 2016 and 2015, respectively.2018, we recorded gains of $2.1 million.
Share-Based Compensation. Share-based compensation for restricted stock and stock option awards is measured at the grant date fair value. The fair value of restricted stock awards is determined and fixed using the closing price of our common stock on the grant date and is recorded in additional paid-in capital. The fair value of stock option awards is determined using the Black-Scholes option valuation model. For awards that havewith a service only vesting condition, compensation expense is recognized on a straight-line basis over the requisite service period. For awards with a performance vesting condition, compensation expense is recognized on a graded-vesting basis. Typically, all share-based awards are settled with treasury stock. See Note 910 for additional information regarding our specific award plans.
Salary Continuation Agreements. Arrangements with certain present and former employees provide for continuing payments for periods up to ten years after cessation of full-time employment in consideration for agreement by the employees not to compete with us and to render consulting services during the postemployment period. Such payments, which are subject to certain limitations, including our operating performance during the postemployment period, represent the fair value of the services rendered and are expensed in such periods.
Severance.Severance. The liability for one-time termination benefits, such as severance pay or benefit payouts, is measured and recognized at fair value in the period the liability is incurred. Subsequent changes to the liability are recognized in results of operations in the period of change.
Defined Benefit Pension Plans and Postemployment Arrangements. The funded status of our defined benefit plans is recorded as an asset or liability. Funded status is the difference between the fair value of plan assets and the benefit obligation at December 31, the measurement date, determined on a plan-by-plan basis. The benefit obligation for the defined benefit plans is the projected benefit obligation (“PBO”), which represents the actuarial present value of benefits expected to be paid upon retirement based on estimated future compensation levels. The fair value of plan assets represents the current market value. Overfunded plans where the fair value of plan assets exceeds the benefit obligation are aggregated and recorded as a prepaid pension asset equal to the excess. Underfunded plans where the benefit obligation exceeds the fair value of plan assets are aggregated and recorded as a liability equal to the excess. We record the liability for our postemployment arrangements. The benefit obligation ofliability for our postemployment arrangements is the PBO and these arrangements are not funded. The current portion of the benefit obligation for the defined benefit plans and postemployment arrangements, which represents the actuarial present value of benefits payable in the next twelve months that exceed the fair value of plan assets, is recorded in other current liabilities and the long-term portion is recorded in long-term liabilities.


F-12
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred Compensation. Some of our subsidiaries have individual deferred compensation arrangements with certain executives that provide for payments over varying terms upon retirement, cessation of employment or death. The cost of these arrangements is accrued during the employee’s service period.
Income Taxes. We use the asset and liability method of accounting for income taxes. Under this method, income tax expense is recognized for the amount of taxes payable for the current period and the deferred taxes recognized during the period. Deferred income taxes reflect the temporary difference between assets and liabilities that are recognized for financial reporting purposes and income tax purposes and are recorded as noncurrent. Deferred income taxes are measured using the enacted tax rates that are assumed to be in effect when the differences reverse. Valuation allowances are recorded where it is more likely than not that all or a portion of a deferred tax asset will not be realized. In assessing the need for a valuation allowance, we evaluate factors such as prior earnings history, expected future earnings, carry-back and carry-forward periods and tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset.
Interest and penalties related to tax positions taken in our tax returns are recorded in income tax expense. We record a liability for uncertain tax positions that reflects the treatment of certain tax positions taken in our tax returns, or planned to be taken in a future tax returns, which have not been reflected in income tax expense. Until these positions are sustained by the taxing authorities or the statute of limitations concerning such issues lapses, we do not generally recognize the tax benefits resulting from such positions.
In December 2017, the Tax Cuts and Jobs Act, or Tax Act, was enacted into law. As a result, tax positions related to the accumulated earnings of our foreign subsidiaries are reflected under the provisions of the Tax Act. See Note 10 for additional information.
Net Income Per Share. Basic net income per share is based on the weighted average number of common shares outstanding during the period. Diluted net income per share is based on the weighted average number of common shares outstanding, plus the dilutive effect of common share equivalents, which include outstanding stock options and restricted stock awards.
Net income per shareLeases.At the inception of a contract we assess whether the contract is, computedor contains, a lease. A lease is classified as a finance lease if any one of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease
F-14
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset or the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any one of the criteria. Substantially all our operating leases are leases for office space, and substantially all our finance leases are leases for office furniture and technology equipment.
For all leases a ROU asset and lease liability are recognized at the lease commencement date. The lease liability represents the present value of the lease payments under the lease. The ROU asset is initially measured at cost, which includes the initial lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All ROU assets are reviewed for impairment. The lease liability is initially measured as the present value of the lease payments, discounted using the two-class method, which is an earnings allocation methodinterest rate implicit in the lease or, if that rate cannot be readily determined, our secured incremental borrowing rate for computing net income per share when a company's capital structure includes common stockthe same term as the underlying lease. For real estate and participating securities. Certaincertain equipment operating leases, we use our secured incremental borrowing rate. For finance leases, we use the rate implicit in the lease or our secured incremental borrowing rate if the implicit lease rate cannot be determined.
Lease payments included in the measurement of the unvested restricted stock awards receive non-forfeitable dividends atlease liability comprise: the same rate asfixed noncancelable lease payments, payments for optional renewal periods where it is reasonably certain the common stockrenewal period will be exercised, and thereforepayments for early termination options unless it is reasonably certain the lease will not be terminated early. Lease components, including fixed payments for real estate taxes and insurance for office space leases, are considered participating securities. Underincluded in the two-class method, basic and diluted net income per share is reduced for a presumed hypothetical distribution of earnings to holdersmeasurement of the unvested restricted stock awards receiving non-forfeitable dividends.initial lease liability.
Office space leases may contain variable lease payments, which include payments based on an index or rate. Variable lease payments based on an index or rate are initially measured using the index or rate in effect at lease commencement. Additional payments based on the change in an index or rate, or payments based on a change in our portion of the operating expenses, including real estate taxes and insurance, are recorded as a period expense when incurred. Lease modifications result in remeasurement of the lease liability.
Operating lease expense is recognized on a straight-line basis over the lease term. Lease expense may include variable lease payments incurred in the period that were not included in the initial lease liability. Finance lease expense consists of the amortization of the ROU asset on a straight-line basis over the lease term and interest expense determined on an amortized cost basis. Finance lease payments are allocated between a reduction of the lease liability and interest expense.
Concentration of Credit Risk. We provide advertising, marketing and corporate communications services to several thousand clients that operate in nearly every industry sector of the global economy and we grant credit to qualified clients in the normal course of business. Due to the diversified nature of our client base, we do not believe that we are exposed to a concentration of credit risk as our largest client accounted for 3.0%3.4% of revenue in 2017.2020.
Derivative Financial Instruments. All derivative instruments, including certain derivative instruments embedded in other contracts, are recorded at fair value. Derivatives qualify for hedge accounting if: the hedging instrument is designated as a hedge, the hedged exposure is specifically identifiable and exposes us to risk, and a change in fair value of the derivative financial instrument and an opposite change in the fair value of the hedged exposure have a high degree of correlation. The method of assessing hedge effectiveness and measuring hedge ineffectiveness is formally documented. Hedge effectiveness is assessed, and hedge ineffectiveness is measured at least quarterly throughout the designated hedge period. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged asset, liability or firm commitment through results of operations or recognized in other comprehensive income until the hedged item is recognized in results of operations. The ineffective portion of the change in fair value of a derivative used as hedge is recognized in results of operations. We do not use derivatives for trading or speculative purposes. Using derivatives exposes us to the risk that counterparties to the derivative contracts will fail to meet their contractual obligations. We manage that risk through careful selection and ongoing evaluation of the counterparty financial institutions based on specific minimum credit standards and other factors.


F-13
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value. We apply the fair value measurement guidance in FASB ASC Topic 820, Fair Value Measurements and Disclosures, for our financial assets and liabilities that are required to be measured at fair value and for our nonfinancial assets and liabilities that are not required to be measured at fair value on a recurring basis, which includes goodwill and other identifiable intangible assets. The measurement of fair value requires the use of techniques based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. The inputs create the following fair value hierarchy:
•Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities.
•Level 2 - Unadjusted quoted prices in active markets for similar assets or liabilities; unadjusted quoted prices for identical assets or liabilities in markets that are not active; and model-derived valuations with observable inputs.
•Level 3 - Unobservable inputs for the asset or liability.
We use unadjusted quoted market prices to determine the fair value of our financial assets and liabilities and classify such items in Level 1. We use unadjusted quoted market prices for similar assets and liabilities in active markets and model-derived valuations and classify such items in Level 2.
F-15
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In determining the fair value of financial assets and liabilities, we consider certain market valuation adjustments that market participants would consider in determining fair value, including: counterparty credit risk adjustments applied to financial assets and liabilities, taking into account the actual credit risk of the counterparty when valuing assets measured at fair value and credit risk adjustments applied to reflect our credit risk when valuing liabilities measured at fair value.
Reclassifications. Certain reclassifications have been made to the prior year financial information to conform to the current year presentation.
3. Net Income per Share Revenue

Nature of our services
We provide an extensive range of advertising, marketing and corporate communications services through various client-centric networks that are organized to meet specific client objectives. Our branded networks and agencies operate in all major markets and provide services in the following fundamental disciplines: advertising, customer relationship management, or CRM, which includes CRM Consumer Experience and CRM Execution & Support, public relations and healthcare. Advertising includes creative services, as well as strategic media planning and buying and data analytics services. CRM Consumer Experience includes Omnicom’s Precision Marketing Group and digital/direct agencies, as well as our brand consulting, shopper marketing and experiential marketing agencies. CRM Execution & Support includes field marketing, sales support, merchandising and point of sale, as well as other specialized marketing and custom communications services. Public relations services include corporate communications, crisis management, public affairs and media and media relations services. Healthcare includes advertising and media services to global healthcare clients. At the core of all our services is the ability to create or develop a client’s marketing or corporate communications message into content that can be delivered to a target audience across different communications mediums.
Primarily as a result of the COVID-19 pandemic (see Note 1), our revenue decreased in all our major markets and all disciplines except for healthcare, as compared to the prior year periods.
Revenue by discipline was (in millions):
Year Ended December 31,
202020192018
Advertising$7,369.0 $8,483.8 $8,281.0 
CRM Consumer Experience2,175.7 2,577.9 2,629.6 
CRM Execution & Support1,133.5 1,361.2 1,891.6 
Public Relations1,301.8 1,378.9 1,435.1 
Healthcare1,191.1 1,151.9 1,052.9 
 $13,171.1 $14,953.7 $15,290.2 
Economic factors affecting our revenue
Global economic conditions have a direct impact on our revenue. Adverse economic conditions pose a risk that our clients may reduce, postpone or cancel spending for our services, which would impact our revenue (see Note 1).
Revenue in our principal geographic markets was (in millions):
Year Ended December 31,
202020192018
Americas:
North America$7,577.1 $8,478.8 $8,442.5 
Latin America275.4 403.4 457.5 
EMEA:
Europe3,607.7 4,107.4 4,375.4 
Middle East and Africa207.2 314.6 304.4 
Asia-Pacific1,503.7 1,649.5 1,710.4 
$13,171.1 $14,953.7 $15,290.2 
The computationsAmericas is comprised of basicNorth America, which includes the United States, Canada and diluted net income per share forPuerto Rico, and Latin America, which includes South America and Mexico. EMEA is comprised of Europe, the three years ended December 31, 2017 were (in millions, except per share amounts):Middle East and Africa. Asia-Pacific includes Australia, Greater China, India, Japan, Korea, New Zealand, Singapore and other Asian countries. Revenue in the United States in 2020 and 2019 was $7,186.1 million and $8,033.0 million, respectively.
F-16
 2017 2016 2015
Net Income Available for Common Shares:     
Net income - Omnicom Group Inc.$1,088.4
 $1,148.6
 $1,093.9
Net income allocated to participating securities(1.6) (6.5) (12.4)
 $1,086.8
 $1,142.1
 $1,081.5
Weighted Average Shares:     
Basic232.3
 237.9
 244.2
Dilutive stock options and restricted shares1.6
 1.3
 1.0
Diluted233.9
 239.2
 245.2
      
Anti-dilutive stock options and restricted shares1.0
 —
 0.1
Net Income per Share - Omnicom Group Inc.:     
Basic$4.68
 $4.80
 $4.43
Diluted$4.65
 $4.78
 $4.41


F-14
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Contract assets and liabilities
Work in process includes contract assets, unbilled fees and costs, and media and production costs. Contract liabilities primarily consist of customer advances. Work in process and contract liabilities were (in millions):
December 31,
20202019
Work in process:
   Contract assets and unbilled fees and costs$501.1 $689.2 
   Media and production costs600.1 568.4 
$1,101.2 $1,257.6 
Contract liabilities:
   Customer advances$1,361.3 $1,215.3 
Work in process represents accrued costs incurred on behalf of customers, including media and production costs, and fees and other third-party costs that have not yet been billed. Media and production costs are billed during the production process in accordance with the terms of the client contract. Contract assets primarily include incentive fees, which are not material and will be billed to clients in accordance with the terms of the client contract. Substantially all unbilled fees and costs will be billed within the next 30 days. The contract liability primarily represents advance billings to customers in accordance with the terms of the client contracts, primarily for the reimbursement of third-party costs that are generally incurred in the near term. No impairment losses to the contract assets were recorded in 2020 and 2019.
4. Net Income per Share
The computations of basic and diluted net income per share were (in millions, except per share amounts):
Year Ended December 31,
202020192018
Net income available for common shares:   
Net income - Omnicom Group Inc.$945.4 $1,339.1 $1,326.4 
Weighted average shares:   
Basic215.6 219.8 226.6 
Dilutive stock options and restricted shares0.6 1.1 1.0 
Diluted216.2 220.9 227.6 
Anti-dilutive stock options and restricted shares0.8 0 1.0 
Net income per share - Omnicom Group Inc.:   
Basic$4.38 $6.09 $5.85 
Diluted$4.37 $6.06 $5.83 

5. Business Combinations

In 2017, weAcquisitions completed four acquisitions, whichin 2020 increased goodwill $65.3$82.4 million. Also,In addition, during 2020, we acquired additional equity interests in certain majority owned subsidiaries, in 2017, which are accounted for as equity transactions, and no additional goodwill was recorded. None of thesethe acquisitions in 2020, either individually or in the aggregate, was material to our results of operations or financial position.

The evaluation of potential acquisitions is based on various factors, including specialized know-how, reputation, geographic coverage, competitive position and service offerings, as well as our experience and judgment. Our acquisition strategy is focused on acquiring the expertise of an assembled workforce in order to continue to build upon the core capabilities of our strategic business platforms and agency brands, through the expansion of their geographic area or their service capabilities to better serve our clients. Certain acquisitions include an initial payment at closing and provide for future additional contingent purchase price payments (earn-outs), which are derived using the performance of the acquired entitycompany and are based on predetermined formulas. ContingentAt December 31, 2020 and 2019, contingent purchase price obligations at December 31, 2017 and 2016 were $215.6$71.9 million and $386.1$107.7 million, respectively, of which $92.6$32.1 million and $190.8$29.5 million, respectively, are included in other current liabilities.

For each acquisition, we undertake a detailed review to identify other intangible assets that are required to be valued separately. We use several market participant measurements to determine fair value. This approach includes consideration of similar and recent transactions, as well as utilizing discounted expected cash flow methodologies, and when available and as appropriate, we use comparative market multiples to supplement our analysis. As is typical for most service businesses, a substantial portion of the intangible asset value we acquire is the specialized know-how of the workforce, which is treated as part
F-17
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of goodwill and is not valued separately. A significant portion of the identifiable intangible assets acquired is derived from customer relationships, including the related customer contracts, as well as trade names. One of the primary drivers in executing our acquisition strategy is the existence of, or the ability to, expand our existing client relationships. The expected benefits of our acquisitions are typically shared across multiple agencies and regions.
5.6. Goodwill and Intangible Assets
Goodwill and intangible assets at December 31, 2017 and 2016 were (in millions):
December 31,
 20202019
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
Goodwill$10,141.6 $(531.9)$9,609.7 $9,957.5 $(517.0)$9,440.5 
Intangible assets:      
Purchased and internally developed software$377.6 $(307.0)$70.6 $350.7 $(288.5)$62.2 
Customer related and other738.1 (510.2)227.9 746.7 (470.7)276.0 
 $1,115.7 $(817.2)$298.5 $1,097.4 $(759.2)$338.2 
 2017 2016
 
Gross
Carrying
Value
 
Accumulated
Amortization
 
Net
Carrying
Value
 
Gross
Carrying
Value
 
Accumulated
Amortization
 
Net
Carrying
Value
Goodwill$9,871.8
 $(534.3) $9,337.5
 $9,481.4
 $(505.3) $8,976.1
Intangible assets:           
Purchased and internally developed software$368.2
 $(303.0) $65.2
 $342.6
 $(270.2) $72.4
Customer related and other880.1
 (576.9) 303.2
 862.4
 (507.4) 355.0
 $1,248.3
 $(879.9) $368.4
 $1,205.0
 $(777.6) $427.4


Changes in goodwill for the years ended December 31, 2017 and 2016 were (in millions):
Year Ended December 31,
20202019
January 1$9,440.5 $9,384.3 
Acquisitions50.8 5.5 
Noncontrolling interests in acquired businesses31.6 17.2 
Contingent purchase price obligations of acquired businesses0 24.7 
Dispositions(18.8)(19.1)
Foreign currency translation105.6 27.9 
December 31$9,609.7 $9,440.5 
 2017 2016
January 1$8,976.1
 $8,676.4
Acquisitions19.3
 311.7
Noncontrolling interests in acquired businesses18.9
 74.0
Contingent purchase price obligations of acquired businesses27.1
 152.8
Foreign currency translation and other296.1
 (238.8)
December 31$9,337.5
 $8,976.1
The decline in our stock price at the onset of the COVID-19 pandemic in March 2020 was determined to be a trigger event requiring us to perform an impairment review of our goodwill. We concluded our goodwill was not impaired. At June 30, 2020, we updated our first quarter 2020 assessment and performed our annual goodwill impairment test. Our assumptions reflect the economic conditions in light of the impact of the COVID-19 pandemic on our business, including downward adjustment to our revenue and earnings assumptions, reducing our long-term growth rate to 3.0%, compared to 3.5% in the prior year, increasing the weighted average cost of capital, or WACC, for each reporting unit to between 10.6% and 10.8%, compared to between 10.1% and 10.6% in the prior year, and limiting our estimate of our equity value to reflect the decline in our share price that occurred during the first half of 2020. In addition, the assumptions reflect the expected cost reductions from our severance and real estate repositioning actions (see Notes 1 and 13). Based on the results of the impairment test, we concluded that at June 30, 2020 our goodwill was not impaired because the fair value of each of our reporting units was significantly in excess of its respective carrying value, and for our reporting units with negative book value, we concluded that the fair value of their total assets was in excess of book value. We performed a sensitivity analysis of our assumptions, including a 1 percent change to our WACC or long-term growth assumptions. The results of the sensitivity analysis confirmed our conclusion that goodwill at June 30, 2020 was not impaired. If economic conditions further deteriorate from June 30, 2020, including further declines in GDP estimates, our share price, increased interest rates or other factors, our goodwill could become impaired, and we could incur a non-cash charge against our earnings. The minimum decline in fair value that one of our reporting units would need to experience in order to fail the goodwill impairment test was approximately 20%.

In addition, we evaluated our customer related and other intangible assets for impairment. We compared the carrying value of these assets against the undiscounted cash flows expected to be generated from the assets, and we concluded that at June 30, 2020, our customer related and other intangible assets were not impaired.
There were no events through December 31, 2020 that would change our assumptions and resulting impairment assessments. NaN goodwill impairment losses were recorded in 20172020 or 20162019, and there are no0 accumulated goodwill impairment losses.

F-18

F-15
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.7. Debt

Credit Facilities

At December 31, 2017,On February 14, 2020, we amended our short-term liquidity sources include a $2.5 billion revolving credit facility, or Credit Facility expiringto extend its term to February 14, 2025. To strengthen our liquidity position to mitigate the impact of the COVID-19 pandemic (see Note 1), on July 31, 2021,April 3, 2020, we entered into the $400 million 364 Day Credit Facility, maturing on April 2, 2021. We have uncommitted credit lines aggregating $1.2$1.1 billion and the ability to issue up to $2 billion of commercial paper.

There These facilities provide additional liquidity sources for operating capital and general corporate purposes. At December 31, 2020, there were no0 outstanding commercial paper issuances or borrowings under the Credit Facility, the 364 Day Credit Facility or the uncommitted credit lines at December 31, 2017 and 2016. Available and unused credit lines at December 31, 2017 and 2016 were (in millions):
 2017 2016
Credit Facility$2,500.0
 $2,500.0
Uncommitted credit lines1,181.0
 1,132.0
Available and unused credit lines$3,681.0
 $3,632.0

lines.
The Credit Facility containsand the 364 Day Credit Facility each contain a financial covenantscovenant that requirerequires us to maintain a Leverage Ratio of consolidated indebtedness to consolidated EBITDA (earnings before interest, taxes, depreciation, amortization and non-cash charges) of no more than 3 times for the most recently ended 12-month period (EBITDA is defined as earnings before interest, taxes, depreciation and amortization) and an Interest Coverage Ratio of consolidated EBITDA to interest expense of at least 53.5 times for the most recently ended 12-month period. On October 26, 2020, we amended the Credit Facility and the 364 Day Credit Facility to provide additional flexibility with respect to the Leverage Ratio covenant. The amendments increase the maximum Leverage Ratio to 4.0 times through December 31, 2021 for the Credit Agreement and to 4.0 times through the maturity for the 364 Day Credit Facility. At December 31, 20172020, we were in compliance with these covenants as our Leverage Ratio was 2.1 times and our Interest Coverage Ratio was 10.43.0 times. The Credit Facility doesand the 364 Day Credit Facility do not limit our ability to declare or pay dividends or repurchase our common stock.

Short-Term Debt

Short-term debt atAt December 31, 20172020 and 20162019, short-term debt of $11.8$3.9 million and $28.7$10.1 million, respectively, consists ofrepresented bank overdrafts and short-term borrowings primarily of our international subsidiaries. The weighted average interest rate was 2.6%3.5% and 9.8%2.5%, respectively. Due to the short-term nature of this debt, carrying value approximates fair value.

Long-Term Debt

Long-term debt at December 31, 2017 and 2016 was (in millions):
December 31,
20202019
4.45% Senior Notes due 2020$0 $600.0 
3.625% Senior Notes due 20221,250.0 1,250.0 
3.65% Senior Notes due 2024750.0 750.0 
3.60% Senior Notes due 20261,400.0 1,400.0 
€500 Million 0.80% Senior Notes due 2027611.5 561.4 
2.45% Senior Notes due 2030600.0 0 
4.20% Senior Notes due 2030600.0 0 
€500 Million 1.40% Senior Notes due 2031611.5 561.4 
5,823.0 5,122.8 
Unamortized premium (discount), net(5.1)0.8 
Unamortized debt issuance costs(27.0)(20.0)
Unamortized deferred gain from settlement of interest rate swaps16.4 30.7 
 5,807.3 5,134.3 
Current portion0 (602.4)
Long-term debt$5,807.3 $4,531.9 
 2017 2016
6.25% Senior Notes due 2019$500.0
 $500.0
4.45% Senior Notes due 20201,000.0
 1,000.0
3.625% Senior Notes due 20221,250.0
 1,250.0
3.65% Senior Notes due 2024750.0
 750.0
3.60% Senior Notes due 20261,400.0
 1,400.0
Other debt—
 0.1
 4,900.0
 4,900.1
Unamortized premium (discount), net6.2
 7.6
Unamortized debt issuance costs(20.3) (24.2)
Unamortized deferred gain from settlement of interest rate swaps66.4
 84.7
Fair value adjustment attributed to outstanding interest rate swaps(39.4) (47.6)
 4,912.9
 4,920.6
Current portion—
 (0.1)
Long-term debt$4,912.9
 $4,920.5
On February 19, 2020, we issued $600 million of the 2.45% Notes. The net proceeds from the issuance, after deducting the underwriting discount and offering expenses, were $592.6 million and were used to redeem the remaining $600 million principal amount of the 2020 Notes on March 23, 2020. In connection with the redemption of the 2020 Notes, we recorded a loss on extinguishment of $7.7 million in interest expense. Following the redemption, there were 0 2020 Notes outstanding.

Additionally, to strengthen our liquidity and financial position and to mitigate the potential impact of the COVID-19 pandemic, on April 1, 2020, we issued $600 million of the 4.20% Notes. The net proceeds from the issuance, after deducting the underwriting discount and offering expenses, were $592.5 million and were used for general corporate purposes, which included working capital expenditures, fixed asset expenditures, acquisitions, repayment of commercial paper and short-term debt, refinancing of other debt, or other capital transactions.

The 2.45% Notes and the 4.20% Notes are senior unsecured obligations of Omnicom that rank equal in right of payment with all existing and future unsecured senior indebtedness.

F-19
F-16
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Omnicom and its wholly owned finance subsidiary, Omnicom Capital Inc., or OCI, are co-obligors under all the senior notes. The seniornotes due 2022, 2024 and 2026. These notes are a joint and several liability of usOmnicom and OCI, and weOmnicom unconditionally guaranteeguarantees OCI’s obligations with respect to the senior notes. OCI provides funding for our operations by incurring debt and lending the proceeds to our operating subsidiaries. OCI’s assets primarily consist of cash and cash equivalents and intercompany loans made to our operating subsidiaries, and the related interest receivable. There are no restrictions on the ability of OCI or usOmnicom to obtain funds from our subsidiaries through dividends, loans or advances. Our seniorSuch notes are senior unsecured obligations that rank equal in right of payment with all existing and future unsecured senior indebtedness.

Omnicom and OCI have, jointly and severally, fully and unconditionally guaranteed the obligations of Omnicom Finance Holdings plc, or OFHP, a U.K.-based wholly owned subsidiary of Omnicom, with respect to the Euro denominated notes due 2027 and 2031. OFHP’s assets consist of its investments in several wholly owned finance companies that function as treasury centers, which provide funding for various operating companies in Europe, Brazil, Australia and other countries in the Asia-Pacific region. The finance companies’ assets consist of cash and cash equivalents and intercompany loans that they make or have made to the operating companies in their respective regions and the related interest receivable. There are no restrictions on the ability of Omnicom, OCI or OFHP to obtain funds from their subsidiaries through dividends, loans or advances. The Euro denominated notes and the related guarantees are senior unsecured obligations that rank equal in right of payment with all existing and future unsecured senior indebtedness of OFHP and each of Omnicom and OCI, respectively.
The contractualAt December 31, 2020, the maturities of our long-term debt at December 31, 2017 arewere (in millions):
2018$—
2019500.0
20201,000.0
2021—
20221,250.0
Thereafter2,150.0
 $4,900.0

We use fixed-to-floating interest rate swaps to manage our interest cost and structure our long-term debt portfolio to achieve a mix of fixed rate and floating rate debt. Interest rate swaps hedge the risk of changes in fair value of the underlying senior notes attributable to changes in the benchmark LIBOR interest rate. The interest rate swaps qualify and are designated as fair value hedges on the underlying senior notes and have the economic effect of converting the underlying fixed rate senior notes to floating rate obligations. Gains and losses attributed to changes in the fair value of the swaps substantially offset changes in the fair value of the underlying senior notes attributed to changes in the benchmark interest rate. Accordingly, any hedge ineffectiveness is not material to our results of operations.
In October 2015, we entered into a $750 million interest rate swap on our 3.65% Senior Notes due 2024, or 2024 Notes. We receive fixed interest payments of 3.65% and pay a variable interest equal to three-month LIBOR, plus a spread of 1.72%.

In April 2016, concurrent with the issuance of our 3.60% Senior Notes due 2026, or 2026 Notes, we entered into a $500 million interest rate swap. We receive fixed interest payments of 3.60% and pay a variable interest equal to three-month LIBOR, plus a spread of 1.982%.

At December 31, 2017, we recorded long-term liabilities of $14.7 million and $24.7 million representing the fair value of the swaps on the 2024 Notes and 2026 Notes, respectively and at December 31, 2016, we recorded long-term liabilities of $17.1 million and $30.5 million, respectively. The interest rate swaps have the economic effect of converting our long-term debt portfolio to approximately 75% fixed rate obligations and 25% floating rate obligations.

2021$0 
20221,250.0 
20230 
2024750.0 
20250 
Thereafter3,823.0 
Total principal payments$5,823.0 
Interest Expense

Interest expense for the three years ended December 31, 2017 is composed of (in millions):
Year Ended December 31,
202020192018
Long-term debt$186.4 $194.6 $201.6 
Commercial paper0.9 6.5 9.6 
Interest rate swaps0 6.1 5.2 
Amortization of deferred gain on interest rate swaps(8.1)(14.8)(12.9)
Fees6.5 4.7 5.6 
Pension and other interest36.1 47.2 57.3 
 $221.8 $244.3 $266.4 

 2017 2016 2015
Long-term debt$201.6
 $205.5
 $210.2
Interest rate swaps(7.2) (13.1) (44.1)
Amortization of deferred gain on interest rate swaps(12.9) (15.4) (9.2)
Commercial paper12.5
 6.8
 4.8
Fees5.6
 5.6
 5.7
Other24.9
 20.3
 13.7
 $224.5
 $209.7
 $181.1


F-17
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.8. Segment Reporting

Our five branded agency networks operate in the advertising, marketing and corporate communications services industry, and are organized into agency networks, virtual client networks, regional reporting units and operating groups.groups or practice areas. Our networks, virtual client networks and agencies increasingly share clients and provide clients with integrated services. The main economic components of each agency are employee compensation and related costs and direct service costs and occupancy and other costs which include rent and occupancy costs, technology costs and other overhead expenses. Therefore, given these similarities, we aggregate our operating segments, which are our five agency networks, into one reporting segment.

The agency networks' regional reporting units comprise three principal regions;regions: the Americas, EMEA and Asia Pacific.Asia-Pacific. The regional reporting units monitor the performance and are responsible for the agencies in their region. Agencies within the regional reporting units serve similar clients in similar industries and in many cases the same clients and have similar economic characteristics.

F-20
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Revenue and long-lived assets and goodwill by geographic region at and for the three years ended December 31, 2017 were (in millions):
AmericasEMEAAsia-Pacific
December 31, 2020
Revenue$7,852.5 $3,814.9 $1,503.7 
Long-lived assets and goodwill7,610.9 3,142.3 665.1 
December 31, 2019
Revenue$8,882.2 $4,422.0 $1,649.5 
Long-lived assets and goodwill7,782.0 3,061.3 658.9 
December 31, 2018
Revenue$8,900.0 $4,679.8 $1,710.4 
Long-lived assets and goodwill6,946.1 2,578.9 553.7 

 Americas EMEA Asia Pacific
2017     
Revenue$9,180.8
 $4,442.5
 $1,650.3
Long-lived assets and goodwill6,633.8
 2,840.8
 553.8
2016     
Revenue$9,597.6
 $4,183.1
 $1,636.2
Long-lived assets and goodwill6,662.7
 2,469.1
 519.1
2015     
Revenue$9,359.0
 $4,203.5
 $1,571.9
Long-lived assets and goodwill6,103.4
 2,737.8
 527.9

The Americas comprises North America, which includes the United States, Canada and Puerto Rico, and Latin America, which includes Mexico. EMEA comprises Europe, the Middle East and Africa. Asia Pacific comprises Australia, China, India, Japan, Korea, New Zealand, Singapore and other Asian countries. Revenue in the United States was $8,196.9 million, $8,627.8 million and $8,526.7 million in 2017, 2016 and 2015, respectively. The reduction in revenue in 2017 for North America and the United States primarily reflects the sale of our specialty print media business in the second quarter.
8.9. Equity Method Investments

Income (loss) from our equity method investments in 2020, 2019 and 2018 was $3.5$(6.8) million, $5.4$2.0 million and $8.4$8.9 million, in 2017, 2016 respectively. At December 31, 2020 and 2015, respectively. Our2019, our proportionate share in theirthe net assets at December 31, 2017 and 2016of the equity method investments was $40.7$30.1 million and $38.6$37.0 million, respectively. Our equityEquity method investments are not material to our results of operations or financial position; therefore, summarized financial information is not required to be presented. In the second quarter 2020, we sold an equity method investment and recorded a loss of $3.9 million (see Note 1).
9.10. Share-Based Compensation Plans
Share-based incentive awards are granted to employees under the 2013 Incentive Award Plan, or the 2013 Plan, which is administered by the Compensation Committee of the Board of Directors, or the Compensation Committee. Awards include stock options, restricted stock and other stock awards. The maximum number of shares of common stock that can be granted under the 2013 Plan is 33 million shares plus any shares awarded under the 2013 Plan and any prior plan that have been forfeited or have expired. Stock option awards reduce the number of shares available for grant on a one-for-one basis and all other awards reduce the number of shares available for grant by 3.5 shares for each share awarded. The terms of each award and the exercise date are determined by the Compensation Committee. The 2013 Plan does not permit the holder of an award to elect cash settlement under any circumstances. At December 31, 2017,2020, there were 28,684,23421,419,944 shares available for grant under the 2013 Plan. If all shares available for grant were for awards other than stock options, shares available for grant would be 8,195,495.6,119,984.
Share-based compensation expense in 2020, 2019 and 2018 was $80.2$70.8 million, $93.4$72.5 million and $99.4$70.5 million, in 2017, 2016 and 2015, respectively. At December 31, 2017,2020, unamortized share-based compensation that will be expensed over the next five years is $177.6 million.$168.0 million.


F-18
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We record a deferred tax asset for the share-based compensation expense recognized for financial reporting purposes that has not been deducted on our income tax return. On January 1, 2017, we adopted ASU 2016-09,(see Note 1), which requires that beginning in 2017Any excess tax benefits and deficienciesbenefit or deficiency related to share-based compensation beis recorded as compensation expense in results of operations upon vesting of restricted stock awards or exercise of stock options. Excess tax benefits and deficiencies represent the difference between the actual compensation deduction for tax purposes, which is calculated as the difference between the grant date price of the award, and the price of our common stock on the vesting or exercise date, and compensation expense recognized for financial reporting purposes.date. In 20172020, we recognized an excessa tax deficiency of $3.6 million, and in 2019, we recognized a tax benefit of $20.8$2.8 million.
Stock Options
The exercise price of stock option awards cannot be less than 100% of the market price of our common stock on the grant date. The 2017 option awards vest 100% three years from grant date and have a maximum contractual life of six years. All prior option awards have a maximum contractual life of 10 years.
Stock option activity for the three years ended December 31, 2017 was:
 2017 2016 2015
 Shares 
Weighted
Average
Exercise
Price
 Shares 
Weighted
Average
Exercise
Price
 Shares 
Weighted
Average
Exercise
Price
January 1719,757
 $27.88 1,140,547
 $28.86 1,652,140
 $27.97
Granted1,000,000
 $84.94 —
 
 —
 
Exercised(102,335) $23.40 (420,790) $30.56 (511,593) $25.98
Forfeited(24,000) $84.94 —
 
 —
 
December 311,593,422
 $63.11 719,757
 $27.88 1,140,547
 $28.86
            
Exercisable December 31617,422
 $28.61 695,757
 $26.54 1,074,547
 $26.47
Options outstanding and exercisable at December 31, 2017 were:
Year Ended December 31,
202020192018
SharesWeighted Average Exercise PriceSharesWeighted Average Exercise PriceSharesWeighted Average Exercise Price
January 1866,000 $83.80988,050 $80.371,593,422 $63.11
Exercised0 0(57,300)$23.40(500,122)$24.43
Forfeited(97,250)$84.94(64,750)$84.94(105,250)$84.94
December 31768,750 $83.65866,000 $83.80988,050 $80.37
Exercisable December 31768,750 $83.6560,000 $68.42117,300 $46.43
F-21
    Options Outstanding Options Exercisable
Exercise Price Range Shares 
Weighted Average
Remaining
Contractual Life
 
Weighted Average
Exercise Price
 Shares 
Weighted Average
Exercise Price
$23.00to$24.00 545,422
 1.2 years $23.40 545,422
 $23.40
$66.00to$71.00 72,000
 6.4 years $68.04 72,000
 $68.04
$84.00to$85.00 976,000
 5.2 years $84.94 —
  
    1,593,422
     617,422
  
The 2017 option award grant date fair value of $9.87 was determined using the Black-Scholes option valuation model. The assumptions for the model, without adjusting for the risk of forfeiture and lack of liquidity, were: expected life - 4.5 years, risk free interest rate - 2.0%, expected volatility - 16.3% and dividend yield - 2.6%.

Restricted Stock
Restricted stock activity for the three years ended December 31, 2017 was:
 2017 2016 2015
January 13,802,105
 4,349,105
 5,040,641
Granted966,919
 1,100,396
 1,208,964
Vested(1,757,269) (1,438,386) (1,631,343)
Forfeited(152,382) (209,010) (269,157)
December 312,859,373
 3,802,105
 4,349,105
      
Weighted average grant date fair value of shares granted in the period$74.10 $73.16 $64.49
      
Weighted average grant date fair value at December 31$68.85 $61.72 $55.08


F-19
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At December 31, 2020, options outstanding and exercisable were:
Options OutstandingOptions Exercisable
Exercise Price RangeSharesWeighted Average Remaining Contractual Life
Weighted Average
Exercise Price
Shares
Weighted Average
Exercise Price
$66.00to$71.0060,000 3.4 years$68.4260,000 $68.42
$84.00to$85.00708,750 2.3 years$84.94708,750 $84.94
 768,750   768,750  
Restricted Stock
Restricted stock activity was:
Year Ended December 31,
202020192018
January 12,547,001 2,553,902 2,859,373 
Granted1,511,719 956,135 815,810 
Vested(874,431)(798,468)(944,048)
Forfeited(171,301)(164,568)(177,233)
December 313,012,988 2,547,001 2,553,902 
Weighted average grant date fair value of shares granted in the period$51.26$72.13$67.62
Weighted average grant date fair value at December 31$61.44$70.89$69.77
Generally, restricted shares vest ratably over five years from the grant date provided the employee remains employed by us. Restricted shares may not be sold, transferred, pledged or otherwise encumbered until the forfeiture restrictions lapse. Under most circumstances, the employee forfeits the shares if employment ceases prior to the end of the restriction period.

Performance Restricted Stock Units
The Compensation Committee grants certain employees performance restricted stock units, or PRSU. Each PRSU represents the right to receive one share of common stock on vesting. The ultimate number of PRSUs received by the employee depends on the Company's average return on equity over a three year period compared to the average return on equity of a peer group of principal competitors over the same period. The PRSUs vest three years from the grant date. The PRSUs have a service and performance vesting condition and compensation expense is recognized on a graded-vesting basis. Over the performance period, compensation expense is adjusted upward or downward based on our estimate of the probability of
achieving the performance target for the portion of the awards subject to the performance vesting condition. We have assumed that substantially all the PRSUs will vest.
PRSU activity for the three years ended December 31, 2017 was:
Year Ended December 31,
202020192018
SharesWeighted Average Grant Date Fair ValueSharesWeighted Average Grant Date Fair ValueSharesWeighted Average Grant Date Fair Value
January 1538,134 $77.99 509,844 $80.41 488,887 $82.01 
Granted186,197 61.36 181,782 75.64 182,582 73.72 
Distributed(173,770)84.94 (153,492)83.23 (161,625)77.68 
December 31550,561 $70.17 538,134 $77.99 509,844 $80.41 
 2017 2016 2015
 Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value
January 1462,381
 $77.05
 534,456
 $66.05
 622,859
 $56.16
Granted173,770
 84.94
 153,492
 83.23
 161,625
 77.68
Distributed(147,264) 69.89
 (225,567) 55.20
 (239,387) 48.94
Forfeited—
 —
 —
 —
 (10,641) 48.87
December 31488,887
 $82.01
 462,381
 $77.05
 534,456
 $66.05

Employee Stock Purchase Plan
The employee stock purchase plan, or ESPP, enables employees to purchase our common stock through payroll deductions over each plan quarter at 95% of the market price on the last trading day of the plan quarter. Purchases are limited to 10% of eligible compensation as defined by the Employee Retirement Income Security Act of 1974, or ERISA. OurIn 2020, 2019 and 2018, employees purchased 101,86291,605 shares, 97,93576,040 shares and 111,84991,086 shares, in 2017, 2016 and 2015, respectively. All shares purchased were treasury stock, for which we received $7.6$5.2 million,, $7.8 $5.6 million and $7.8$6.5 million,, respectively. At December 31, 2017,2020, there were 8,766,4378,507,706 shares available under the ESPP.
10. Income Taxes
We file a consolidated U.S. federal income tax return and income tax returns in various state and local jurisdictions. Our subsidiaries file tax returns in various foreign jurisdictions. Our principal foreign jurisdictions include the United Kingdom, France and Germany. The Internal Revenue Service has completed its examination of our federal tax returns through 2012. Tax returns in the United Kingdom, France and Germany have been examined through 2013, 2013 and 2009, respectively.
On December 22, 2017, the Tax Act was enacted into law. The Tax Act reduced the U.S. federal statutory income tax rate to 21% from 35% for tax years beginning after December 31, 2017 and made several changes to existing tax law that affect our tax assets and liabilities related to previously reported taxable income. The significant changes require that we record tax expense on the accumulated earnings of our foreign subsidiaries and adjust our previously reported deferred tax positions to reflect the impact of the revised statutory federal rate as of the enactment date. In December 2017, the SEC issued Staff Accounting Bulletin 118, or SAB 118, which provides guidance on accounting for the impact of the Tax Act. SAB 118 provides that provisional amounts should be recognized in our financial statements where accounting for certain effects of the Tax Act are not complete and a reasonable estimate of the effects of the Tax Act can be made. Accordingly, at December 31, 2017, we have estimated the effect of the Tax Act and recorded a net increase to income tax expense of $106.3 million. Our estimate is based on our understanding of the Tax Act and currently available guidance. However, we are still analyzing the impact of the Tax Act and we expect the estimate to change. Any adjustment to the provisional amounts through December 22, 2018 will be recorded in results of operations in the period when the analysis is complete.


F-22
F-20
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. Income Taxes
We are requiredThe components of income before income taxes were (in millions):
Year Ended December 31,
202020192018
Domestic$711.1 $913.1 $643.7 
International698.2 1,025.2 1,280.6 
 $1,409.3 $1,938.3 $1,924.3 
Income tax expense (benefit) was (in millions):
Year Ended December 31,
202020192018
Current:   
U.S. federal$172.2 $180.2 $273.8 
U.S. state and local39.5 33.9 35.5 
International189.1 306.9 305.2 
 400.8 521.0 614.5 
Deferred:   
U.S. federal(17.4)19.1 (104.2)
U.S. state and local(6.1)(22.5)2.8 
International4.4 (13.2)(20.4)
 (19.1)(16.6)(121.8)
 $381.7 $504.4 $492.7 
The reconciliation from the statutory U.S. federal income tax rate to accountour effective tax rate is:
202020192018
Statutory U.S. federal income tax rate21.0 %21.0 %21.0 %
U.S. state and local income taxes, net of U.S. federal income tax benefit2.2 0.5 1.6 
Effect of Tax Act0 0 1.5 
Impact of foreign operations3.4 4.5 3.8 
Other0.5 0 (2.3)
Effective tax rate27.1 %26.0 %25.6 %
Our effective tax rate for 2020 increased year-over-year to 27.1% from 26.0%. The non-deductibility in certain jurisdictions of a portion of the COVID-19 repositioning costs recorded in the second quarter of 2020 had the effect of U.S. federalincreasing our effective tax rate changesfor 2020. This increase was substantially offset by a lower effective tax rate on our deferredforeign earnings resulting from a change in legislation. The effective tax balances by measuring deferredrate for 2019 includes a reduction of $10.8 million primarily from the net favorable settlement of uncertain tax assets and liabilities at the rate at which they are expected to reversepositions in various jurisdictions in the future, which as a resultsecond quarter of 2019. The international tax rate differentials in 2020 and 2019 are primarily attributed to our earnings in Germany, Australia, France, Japan and Brazil being taxed at higher rates than the U.S. statutory tax rate.
The Tax Cuts and Jobs Act of 2017, or Tax Act, is 21%. The provisional amount foramong other things, implemented a territorial tax system and imposed a one-time transition tax on the remeasurementdeemed repatriation of our deferredaccumulated earnings of foreign subsidiaries. At December 31, 2020 and 2019, the transition tax assetsliability was $112.0 million and liabilities reduced income tax expense by $173.3 million.
$123.6 million, respectively. The territorial tax system will allowallows us to repatriate future earnings of our foreign subsidiaries without incurring additional U.S. tax by providing a 100% dividend exemption. However, while the change toWhile a territorial tax system limits U.S. federal income tax to domestic earnings,source income, foreign source income is subject to tax byin the appropriate foreign jurisdiction at the local rate, which in certain jurisdictions may be higher than the U.S. federal statutory income tax rate of 21%. As a result, the foreign tax rate differential will cause our effective tax rate to be higher than the U.S. federal statutory income tax rate.
The Tax Act imposes a one-time transition tax on our accumulated foreign earnings at December 31, 2017. We recorded a provisional amount of $192.1 million in income tax expensehave elected to account for the transition tax. The portion of the foreign earnings comprising cash and other specified assets is taxed at a 15.5% rate and any remaining amount is taxed at an 8% rate. The provisional amount can change as we obtain additional information related to our foreign subsidiaries. After taking into consideration available foreign tax credits and other items, we recorded a net cash liability of $102.9 million, which we will elect to pay over an eight year period. Although the adoption of a territorial tax system allows for the repatriation of foreign earnings after December 31, 2017 without incurring U.S. income tax, withholding taxes by the foreign jurisdictions will be applied to any dividends remitted to the U.S. As a result, we recorded a charge of $87.5 million related to these withholding taxes.
In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income, or GILTI, provisions of the Tax Act. We have elected to account for any GILTI tax in the period in which it is incurred,incurred. In 2020 and therefore have not2019, we provided any deferred$3.0 million and $14.7 million, respectively, for tax impacts of GILTI in our consolidated financial statements for the year ended December 31, 2017.GILTI.
Income before income taxes for the three years ended December 31, 2017 was (in millions):
 2017 2016 2015
Domestic$832.4
 $805.2
 $803.3
International1,052.5
 1,036.6
 975.3
 $1,884.9
 $1,841.8
 $1,778.6
Income tax expense (benefit) for the three years ended December 31, 2017 was (in millions):
 2017 2016 2015
Current:     
Federal$458.8
 $381.8
 $342.3
State and local36.5
 12.6
 29.9
International280.2
 332.1
 324.5
 775.5
 726.5
 696.7
Deferred:     
Federal(205.5) (88.2) (86.7)
State and local11.1
 12.0
 12.1
International115.1
 (49.8) (38.5)
 (79.3) (126.0) (113.1)
 $696.2
 $600.5
 $583.6
The reconciliation from the statutory U.S. federal income tax rate to our effective tax rate is:
 2017 2016 2015
Statutory U.S. federal income tax rate35.0 % 35.0 % 35.0 %
State and local income taxes, net of federal income tax benefit1.3
 0.9
 1.5
Effect of Tax Act5.6
 —
 —
International tax rate differentials(3.8) (4.0) (3.7)
Other(1.2) 0.7
 —
Effective tax rate36.9 % 32.6 % 32.8 %


F-21
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The international tax rate differentials are primarily attributed to our earnings in the U.K., Canada, the United Arab Emirates, Brazil and Singapore being taxed at different rates than the U.S. statutory tax rate.
Income tax expense in 2017, 20162020, 2019 and 20152018 includes $2.5$3.8 million, $2.3$2.2 million and $1.1$3.6 million,, respectively, of interest, net of tax benefit, and penalties related to tax positions taken on our tax returns. At December 31, 20172020 and 2016,2019, accrued interest and penalties were $16.1$23.5 million and $11.9$20.0 million,, respectively.
F-23
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of deferred tax assets and liabilities at December 31, 2017 and 2016balance sheet classification were (in millions):
December 31,
20202019
Deferred tax assets:  
Compensation$236.5 $210.9 
Tax loss and credit carryforwards67.0 60.6 
Basis differences from acquisitions20.8 22.9 
Basis differences from short-term assets and liabilities34.4 42.2 
Other(5.8)4.6 
Deferred tax assets352.9 341.2 
Valuation allowance(15.9)(7.6)
Net deferred tax assets$337.0 $333.6 
Deferred tax liabilities:  
Goodwill and intangible assets$611.1 $598.0 
Unremitted foreign earnings91.9 69.0 
Basis differences from investments(1.1)9.0 
Financial instruments0.8 0.9 
Deferred tax liabilities$702.7 $676.9 
Long-term deferred tax assets$77.8 $64.8 
Long-term deferred tax liabilities$443.5 $408.1 
 2017 2016
Deferred tax assets:   
Compensation$173.7
 $307.5
Tax loss and credit carryforwards40.3
 88.5
Basis differences from acquisitions18.0
 24.3
Basis differences from short-term assets and liabilities39.5
 36.2
Other17.8
 18.7
Deferred tax assets289.3
 475.2
Valuation allowance(3.3) (3.0)
Net deferred tax assets$286.0
 $472.2
Deferred tax liabilities:   
Goodwill and intangible assets$562.2
 $802.7
Unremitted foreign earnings94.9
 15.9
Financial instruments41.4
 132.3
Basis differences from investments9.8
 1.8
Deferred tax liabilities$708.3
 $952.7
    
Long-term deferred tax assets$61.3
 $—
    
Long-term deferred tax liabilities$483.6
 $480.5
The American Recovery and Reinvestment Act of 2009 provided an election where qualifying cancellation of indebtedness income for debt reacquired in 2009 and 2010 was deferred and included in taxable income from 2014 to 2018. In 2009 and 2010, we redeemed $1.4 billion of our debt resulting in a tax liability of approximately $329 million. Through December 31, 2017, we paid $263 million of the liability. As a result of the Tax Act, the remaining liability was revalued to $41.4 million and will be paid in 2018.
We have concluded that it is more likely than not that we will be able to realize our net deferred tax assets in future periods because results of future operations are expected to generate sufficient taxable income. The valuation allowance of $3.3$15.9 million and $3.0$7.6 million at December 31, 20172020 and 2016,2019, respectively, relates to tax losses and tax credit carryforwards in the U.S. and in international jurisdictions. Tax loss and credit carryforwards for which there is no valuation allowance are available for periods ranging from 20182021 to 2037,2040, which is longer than the forecasted utilization of such carryforwards.
A reconciliation of our unrecognized tax benefits at December 31, 2017 and 2016 is (in millions):
December 31,
20202019
January 1$206.8 $182.8 
Additions:  
Current year tax positions3.9 12.3 
Prior year tax positions2.8 29.4 
Reduction of prior year tax positions(26.1)(13.1)
Settlements(2.5)(5.0)
Foreign currency translation(2.0)0.4 
December 31$182.9 $206.8 
 2017 2016
January 1$116.9
 $113.0
Additions:   
Current year tax positions67.1
 20.0
Prior year tax positions5.5
 6.5
Reduction of prior year tax positions(16.5) (21.9)
Settlements—
 (0.7)
Foreign currency translation0.7
 —
December 31$173.7
 $116.9

The majority of the liability for uncertain tax positions is recorded in long-term liabilities. At December 31, 20172020 and 2016,2019, approximately $142.8$174.0 million and $71.0$179.0 million,, respectively, of the liability for uncertain tax positions would affect our effective tax rate upon resolution of the uncertain tax positions.

We file a consolidated U.S. federal income tax return and income tax returns in various state and local jurisdictions. Our subsidiaries file tax returns in various foreign jurisdictions. Our principal foreign jurisdictions include the United Kingdom, France and Germany. The Internal Revenue Service has completed its examination of our U.S. federal tax returns through 2015. Tax returns in the United Kingdom, France and Germany have been examined through 2017, 2016 and 2009, respectively.

In response to the economic impact of the COVID-19 pandemic, the CARES Act, was signed into law on March 27, 2020. We have determined that the CARES Act did not have a material impact on our income tax expense or effective tax rate for 2020.
F-22
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.12. Pension and Other Postemployment Benefits
Defined Contribution Plans
Our domestic and international subsidiaries provide retirement benefits for their employees primarily through defined contribution profit sharing and savings plans. Contributions to the plans vary by subsidiary and have generally been in amounts up
F-24
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
to the maximum percentage of total eligible compensation of participating employees that is deductible for income tax purposes. Contribution expense in 2020, 2019 and 2018 was $112.9$108.1 million, $108.5$115.2 million and $105.7$118.8 million, in 2017, 2016 and 2015, respectively.
Defined Benefit Pension Plans
Two of our U.S. businesses and several of our non-U.S. businesses sponsor noncontributory defined benefit pension plans. These plans provide benefits to employees based on formulas recognizing length of service and earnings. The U.S. plans cover approximately 900800 participants, are closed to new participants and do not accrue future benefit credits. The non-U.S. plans, which include plans required by local law, cover approximately 6,2005,100 participants and are not subject to ERISA.
We have a Senior Executive Restrictive Covenant and Retention Plan, or Retention Plan, for certain executive officers selected by the Compensation Committee. The Retention Plan is a non-qualified deferred compensation severance plan that was adopted to secure non-competition, non-solicitation, non-disparagement and ongoing consulting services from such executive officers and to strengthen the retention aspect of executive officer compensation. The Retention Plan provides annual payments upon termination following at least seven years of service with Omnicom or its subsidiaries to the participants or to their beneficiaries. A participant’s annual benefit is payable for 15 consecutive calendar years following termination, but in no event prior to age 55. The annual benefit is equal to the lesser of (i) the participant’s final average pay times an applicable percentage, which is based upon the executive’s years of service as an executive officer, not to exceed 35% or (ii) $1.5 million adjusted for cost-of-living, beginning with the second annual payment, not to exceed 2.5% per year. The Retention Plan is not funded and benefits are paid when due.
The components of net periodic benefit expense for the three years ended December 31, 2017 were (in millions):
Year Ended December 31,
202020192018
Service cost$7.5 $7.9 $7.7 
Interest cost7.7 8.2 7.9 
Expected return on plan assets(2.6)(3.5)(2.8)
Amortization of prior service cost0.8 0.8 4.4 
Amortization of actuarial loss6.7 2.5 6.9 
 $20.1 $15.9 $24.1 
 2017 2016 2015
Service cost$10.1
 $7.8
 $5.3
Interest cost7.9
 7.8
 7.6
Expected return on plan assets(3.6) (3.7) (4.0)
Amortization of prior service cost4.6
 4.5
 4.3
Amortization of actuarial losses7.0
 5.3
 5.7
 $26.0
 $21.7
 $18.9
Included in accumulated other comprehensive income at December 31, 20172020 and 20162019 were unrecognized actuarial losses and unrecognized prior service cost of $90.0$96.5 million ($56.0 ($60.2 million net of income taxes) and $98.0$93.9 million ($60.0 ($58.3 million net of income taxes), respectively, that have not yet been recognized in net periodic benefit cost. The unrecognized actuarial gains and losses and unrecognized prior service cost included in accumulated other comprehensive income and expected to be recognized in net periodic benefit cost in 20182021 is $11.4 million.$7.5 million.
The weighted average assumptions used to determine net periodic benefit expense for the three years ended December 31, 2017 were:
 2017 2016 2015
Discount rate3.5% 3.7% 3.5%
Compensation increases2.0% 2.0% 1.9%
Expected return on plan assets5.3% 4.8% 5.7%


F-23
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31,
202020192018
Discount rate2.4 %2.9 %3.6 %
Compensation increases2.5 %2.5 %2.5 %
Expected return on plan assets5.1 %5.5 %5.8 %
The expected long-term rate of return for plan assets for the U.S. plans is based on several factors, including current and expected asset allocations, historical and expected returns on various asset classes and current and future market conditions. A total return investment approach using a mix of equities and fixed income investments maximizes the long-term return. This strategy is intended to minimize plan expense by achieving long-term returns in excess of the growth in plan liabilities over time. The discount rate used to compute net periodic benefit cost is based on yields of available high-quality bonds and reflects the expected cash flow as of the measurement date. The expected returns on plan assets and discount rates for the non-U.S. plans are based on local factors, including each plan’s investment approach, local interest rates and plan participant profiles.
Experience gains and losses and the effects of changes in actuarial assumptions are generally amortized over a period no longer than the expected average future service of active employees.
Our funding policy is to contribute amounts sufficient to meet minimum funding requirements in accordance with the applicable employee benefit and tax laws that the plans are subject to, plus such additional amounts as we may determine to be appropriate. WeIn 2020 and 2019, we contributed $8.3$9.1 million $6.6and $7.1 million, and $4.2 million in 2017, 2016 and 2015, respectively, to ourthe defined benefit pension plans. We do not expect ourthe contributions for 20182021 to differ materially from our 2017the 2020 contributions.
At December 31, 2017 and 2016, the
F-25
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The change in benefit obligation and fair value of plan assets and funded status of ourthe defined benefit pension plans were (in millions):
December 31,
20202019
Benefit Obligation:  
January 1$293.5 $258.4 
Service cost7.5 7.9 
Interest cost7.7 8.2 
Amendments, curtailments and settlements(0.2)1.4 
Actuarial loss17.2 28.8 
Benefits paid(13.5)(9.2)
Foreign currency translation(2.9)(2.0)
December 31$309.3 $293.5 
Fair Value of Plan Assets:  
January 1$64.3 $57.4 
Actual return on plan assets5.0 8.7 
Employer contributions9.1 7.1 
Benefits paid(13.5)(9.2)
Foreign currency translation and other(1.6)0.3 
December 31$63.3 $64.3 
 2017 2016
Benefit Obligation:   
January 1$251.1
 $234.8
Service cost10.1
 7.8
Interest cost7.9
 7.8
Amendments, curtailments and settlements0.3
 —
Actuarial losses6.8
 13.3
Benefits paid(9.1) (9.4)
Foreign currency translation9.9
 (3.2)
December 31$277.0
 $251.1
Fair Value of Plan Assets:   
January 1$68.6
 $68.9
Actual return on plan assets6.3
 4.9
Employer contributions8.3
 6.6
Benefits paid(9.1) (9.4)
Foreign currency translation and other6.2
 (2.4)
December 31$80.3
 $68.6
    
Funded Status December 31$(196.7) $(182.5)
The funded status and balance sheet classification of the defined benefit pension plans were (in millions):
December 31,
20202019
Funded Status$(246.0)$(229.2)
Other assets$2.7 $2.8 
Other current liabilities(5.2)(5.1)
Long-term liabilities(243.5)(226.9)
 $(246.0)$(229.2)
At December 31, 20172020 and 2016,2019, the funded status was classified as follows (in millions):
 2017 2016
Other assets$6.0
 $4.2
Other current liabilities(5.1) (5.1)
Long-term liabilities(197.6) (181.6)
 $(196.7) $(182.5)
The accumulated benefit obligation for our defined benefit pension plans at December 31, 2017 and 2016, was $264.5$243.9 million and $240.8$268.9 million, respectively.
At December 31, 2017 and 2016, plansPlans with benefit obligations in excess of plan assets were (in millions):
 2017 2016
Benefit obligation$253.8
 $241.3
Plan assets51.1
 54.6
 $202.7
 $186.7



F-24
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31,
20202019
Benefit obligation$(294.0)$(280.7)
Plan assets45.4 48.3 
 $(248.6)$(232.4)
The weighted average assumptions used to determine the benefit obligation at December 31, 2017 and 2016, were:
December 31,
2017 201620202019
Discount rate3.1% 3.5%Discount rate1.7 %2.8 %
Compensation increases2.0% 2.0%Compensation increases2.7 %2.7 %
At December 31, 2017,2020, the estimated benefits expected to be paid over the next 10 years are (in millions):
2018$9.7
201910.8
202012.3
202116.1
202216.8
2023 - 202799.6
The fair value of plan assets at December 31, 2017 and 2016 was (in millions):
2021$6.5 
202216.5 
202316.7 
202415.8 
202518.7 
2026 - 2030104.9 
F-26
2017Level 1 Level 2 Level 3 Total
Cash$1.0
     $1.0
Mutual funds41.5
     41.5
Unit trusts28.2
     28.2
Insurance contracts    $8.6
 8.6
Other  $1.0
   1.0
 $70.7
 $1.0
 $8.6
 $80.3
2016       
Cash$1.6
     $1.6
Mutual funds39.0
     39.0
Unit trusts23.5
     23.5
Insurance contracts    $4.3
 4.3
Other  $0.2
   0.2
 $64.1
 $0.2
 $4.3
 $68.6
Mutual funds and unit trusts are publicly traded and are valued using quoted market prices. The mutual funds and unit trusts include investments in equity and fixed income securities. Insurance contracts primarily consist of guaranteed investment contracts. Other investments primarily consist of commingled short-term investment funds.
Changes in the fair value of plan assets measured using Level 3 inputs at December 31, 2017 and 2016 were (in millions):
 2017 2016
January 1$4.3
 $4.2
Actual return on assets0.2
 0.2
Purchases, sales and settlements, net4.1
 (0.1)
December 31$8.6
 $4.3
The weighted average asset allocations at December 31, 2017 and 2016 were:
 2017 2016
 
Target
Allocation
 
Actual
Allocation
 
Actual
Allocation
Cash4% 1% 3%
Mutual funds48% 52% 57%
Unit trusts34% 35% 34%
Insurance contracts11% 11% 6%
Other3% 1% —%
 100% 100% 100%


F-25
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Risk tolerance for these plans is established through consideration of plan liabilities, funded status and evaluation of the overall investment environment. The investment portfolios comprise a mix of equity and fixed-income investments. Equity investments are diversified across geography and market capitalization through investment in large and medium capitalization U.S. and international equities. Fixed income investments include a mix of U.S. and international debt securities. Investment risk is measured and monitored on an ongoing basis through annual liability measurements, and periodic asset/liability studies and investment portfolio reviews.

Postemployment Arrangements
We have executive retirement agreements under which benefits will be paid to participants or to their beneficiaries over periods up to ten years beginning after cessation of full-time employment. Our postemployment arrangements are unfunded and benefits are paid when due.
The components of net periodic benefit expense for the three years ended December 31, 2017 were (in millions):
Year Ended December 31,
202020192018
Service cost$4.6 $4.4 $4.7 
Interest cost3.4 4.3 3.6 
Amortization of prior service cost4.3 4.5 3.5 
Amortization of actuarial loss2.1 0.9 1.8 
 $14.4 $14.1 $13.6 
 2017 2016 2015
Service cost$4.4
 $3.9
 $4.8
Interest cost3.7
 3.5
 4.3
Amortization of prior service cost3.5
 3.1
 3.2
Amortization of actuarial losses1.0
 1.1
 1.6
 $12.6
 $11.6
 $13.9
Included in accumulated other comprehensive income at December 31, 20172020 and 20162019 were unrecognized actuarial losses and unrecognized prior service cost of $54.0$73.8 million ($33.0 ($46.4 million net of income taxes) and $51.0$60.8 million ($30.0 ($37.2 million net of income taxes), respectively, that have not yet been recognized in the net periodic benefit cost. The unrecognized actuarial gains and losses and unrecognized prior service cost included in accumulated other comprehensive income and expected to be recognized in net periodic benefit cost in 20182021 is $5.2 million.$8.0 million.
The weighted average assumptions used to determine net periodic benefit expense for the three years ended December 31, 2017 were:
Year Ended December 31,
2017 2016 2015202020192018
Discount rate3.9% 4.1% 3.8%Discount rate2.5 %2.9 %3.4 %
Compensation increases3.5% 3.5% 3.5%Compensation increases3.5 %3.5 %3.5 %
Experience gains and losses and effects of changes in actuarial assumptions are amortized over a period no longer than the expected average future service of active employees.
At December 31, 20172020 and 2016,2019, the benefit obligation wasand balance sheet classification were (in millions):
December 31,
20202019
January 1$146.0 $126.5 
Service cost4.6 4.4 
Interest cost3.4 4.3 
Amendments3.0 4.5 
Actuarial loss16.3 14.1 
Benefits paid(8.7)(7.8)
December 31$164.6 $146.0 
 2017 2016
January 1$120.3
 $115.9
Service cost4.4
 3.9
Interest cost3.7
 3.5
Amendments—
 5.6
Actuarial (gain) loss8.1
 0.6
Benefits paid(8.8) (9.2)
December 31$127.7
 $120.3

At December 31, 2017 and 2016, the liability was classified as follows (in millions):
 2017 2016
Other current liabilities$9.3
 $8.1
Long-term liabilities118.4
 112.2
 $127.7
 $120.3


F-26
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other current liabilities$9.5 $8.6 
Long-term liabilities155.1 137.4 
 $164.6 $146.0 
The weighted average assumptions used to determine the benefit obligation at December 31, 2017 and 2016 were:
December 31,
2017 201620202019
Discount rate3.4% 3.9%Discount rate1.9 %2.9 %
Compensation increases3.5% 3.5%Compensation increases3.5 %3.5 %
At December 31, 2017,2020, the estimated benefits expected to be paid over the next 10 years are (in millions):
2021$9.5 
202210.5 
202310.0 
20249.9 
202510.2 
2026 - 203050.7 

F-27
2018$9.3
20197.4
20206.6
20216.1
20226.5
2023 - 202733.2
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12.13. COVID-19 Repositioning Costs
In response to the impact of the COVID-19 pandemic, in the second quarter of 2020, we took actions to align our cost structure and reduce our workforce and facility requirements and reviewed businesses for disposal and assets for impairment. As a result of these actions, we recorded a pre-tax charge of $277.9 million, which is comprised of incremental severance of $150.0 million, real estate operating lease ROU asset and other asset impairment charges of $55.8 million, other exit costs of $47.0 million and dispositions and other charges of $25.1 million. Substantially all the liability related to real estate will be paid over the applicable lease term. The ROU asset and other asset impairment charges and the disposition and other charges are non-cash charges.
At December 31, 2020 the liability for the COVID-19 repositioning costs was (in millions):
Opening balance$197.0 
Payments(113.2)
December 31, 2020$83.8 
We expect that the liability for the COVID-19 repositioning costs will be substantially paid by the end of 2021.
Net Gain on Dispositions and Repositioning Actions.
In the third quarter of 2018, we disposed of certain businesses, primarily in our CRM Execution & Support discipline, and recorded a net gain of $178.4 million. Additionally, we took certain repositioning actions in an effort to continue to improve our strategic position and achieve operating efficiencies and recorded charges of $149.4 million, which included $68.4 million for severance, $73.5 million for office lease consolidation and termination and other costs of $7.5 million. At December 31, 2020, substantially all the liability was paid.
14. Supplemental Cash Flow Data

The increasechange in operating capital for the three years ended December 31, 2017 was (in millions):
Year Ended December 31,
202020192018
(Increase) decrease in accounts receivable$141.2 $(156.6)$88.3 
(Increase) decrease in work in process and other current assets293.0 (99.8)(269.3)
Increase (decrease) in accounts payable(428.6)276.3 242.9 
Increase (decrease) in customer advances, taxes payable and other
     current liabilities
65.9 87.2 54.3 
Change in other assets and liabilities, net(40.6)18.0 (35.7)
Increase in operating capital$30.9 $125.1 $80.5 
Income taxes paid$376.5 $361.0 $590.9 
Interest paid$205.5 $246.3 $243.2 
Supplemental non-cash information related to leases was (in millions):
Year Ended December 31,
20202019
Net increase in lease liability:
Operating leases$133.9 $1,816.7 
Finance leases$32.1 $54.1 

 2017 2016 2015
(Increase) decrease in accounts receivable$(341.6) $(376.5) $(1,063.6)
(Increase) decrease in work in process and other current assets5.4
 (89.7) (79.6)
Increase (decrease) in accounts payable763.2
 741.9
 1,443.7
Increase (decrease) in customer advances, taxes payable and other
     current liabilities
4.8
 31.6
 243.9
Change in other assets and liabilities, net(83.3) (4.5) 15.1
 $348.5
 $302.8
 $559.5
      
Income taxes paid$566.0
 $570.4
 $540.1
Interest paid$226.2
 $216.7
 $173.9
13.15. Noncontrolling Interests

Changes in the ownership interests in our less than 100% owned subsidiaries for the three years ended December 31, 2017 were (in millions):
Year Ended December 31,
202020192018
Net income attributed to Omnicom Group Inc.$945.4 $1,339.1 $1,326.4 
Net transfers (to) from noncontrolling interests5.8 (22.3)(39.7)
Change from net income attributed to Omnicom Group Inc. and
       transfers (to) from noncontrolling interests
$951.2 $1,316.8 $1,286.7 

F-28
 2017 2016 2015
Net income attributed to Omnicom Group Inc.$1,088.4
 $1,148.6
 $1,093.9
Transfers (to) from noncontrolling interests:     
Increase in additional paid-in capital from sale of shares in noncontrolling interests1.8
 2.0
 1.7
Decrease in additional paid-in capital from purchase of shares in noncontrolling interests(27.5) (89.7) (40.5)
Net transfers (to) from noncontrolling interests(25.7) (87.7) (38.8)
Change from net income attributed to Omnicom Group Inc. and
       transfers (to) from noncontrolling interests
$1,062.7
 $1,060.9
 $1,055.1


F-27
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.16. Leases
We lease our office space under operating leases and our equipment under operating and capital leases. Office leases may include renewal options. In circumstances whereOn January 1, 2019, we adopted FASB Accounting Standards Codification, or ASC, Topic 842, Leases, or ASC 842. As permitted by ASC 842, we elected the exerciseadoption date of a renewal optionJanuary 1, 2019, which is reasonably assured at the inceptiondate of the lease, the renewal period is included in the determination of the lease term. Office leases may also include scheduled rent increases and concessions, such as rent abatements and landlord incentives and tenant improvement allowances. Scheduled rent increases are recognized on a straight-line basis over the lease term and concessions are recorded as deferred rent and are amortized ininitial application. Prior to January 1, 2019, rent expense on a straight-line basis over thecontinues to be reported under ASC Topic 840, Leases, or ASC 840
The components of lease term. Certain office leases require payment of real estate taxes and other occupancy costs and these costs are not included in rent expense. Leasehold improvements made at inception or during the lease term are amortized over the shorter of the asset life or the lease term, which may include renewal periods where the renewal is reasonably assured.cost under ASC 842 were (in millions):
Year Ended December 31,
20202019
Operating lease cost$303.6 $317.8 
Variable lease cost28.5 38.2 
Short-term lease cost4.3 4.9 
Sublease income(0.9)(5.1)
335.5 355.8 
Finance lease cost:
   Amortization of ROU assets50.2 43.2 
   Interest5.3 5.1 
55.5 48.3 
Total lease cost$391.0 $404.1 
Rent expense under ASC 840 for the three yearsyear ended December 31, 20172018 was (in millions):
2018
Office rent$295.0 
Equipment rent16.6 
Third-party sublease rent(7.2)
Total rent cost$304.4 
 2017 2016 2015
Office base rent$336.7
 $339.7
 $342.5
Third party sublease rent(6.3) (5.6) (11.0)
Net office rent330.4
 334.1
 331.5
Equipment rent20.1
 21.0
 22.6
 $350.5
 $355.1
 $354.1
The aggregate minimum lease payments under non-cancelable operating leases, reduced by third party sublease rent receivable from existing non-cancelable subleases, and capital leases are (in millions):
 Operating Leases Capital Leases
2018$317.8
 $34.5
2019249.7
 30.0
2020198.3
 26.4
2021169.4
 17.1
2022144.2
 6.4
Thereafter627.2
 3.1
Total1,706.6
 117.5
Sublease rent(19.0)  
Net operating lease payments$1,687.6
  
Interest component  (7.0)
Present value of minimum capital lease payments  $110.5

PropertyAmortization expense for assets under capital lease was $36.7 million in 2018.
The balance sheet classification, weighted average remaining lease term and capital lease obligations at December 31, 2017weighted average discount rate related to our operating and 2016finance leases were (in millions):
 2017 2016
Property under capital lease:   
Cost$229.3
 $184.8
Accumulated depreciation(121.0) (110.2)
 $108.3
 $74.6
Capital lease obligations:   
Current$31.6
 $24.2
Long-term78.9
 49.8
 $110.5
 $74.0
Depreciation expense for property under capital lease was $31.1 million, $27.2 million and $26.5 million in 2017, 2016 and 2015, respectively.

December 31,
20202019
Operating leases:
ROU asset$1,223.4 $1,398.3 
Lease liability:
Other current liabilities$270.5 $290.3 
Long-term liability - operating leases1,114.0 1,274.7 
$1,384.5 $1,565.0 
Weighted average remaining lease term (years)7.98.2
Weighted average discount rate3.7 %3.8 %
Finance leases:
Property and equipment, net$120.7 $138.7 
Lease liability:
Other current liabilities$49.5 $46.6 
Long-term liabilities74.6 92.1 
$124.1 $138.7 
Weighted average remaining lease term (years)3.03.4
Weighted average discount rate4.2 %4.3 %

F-29
F-28
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At December 31, 2020, the maturities of the lease liabilities were (in millions):
15.
Operating LeasesFinance Leases
2021$313.8 $49.7 
2022256.6 36.7 
2023193.6 24.2 
2024167.9 11.9 
2025141.9 4.1 
Thereafter536.2 3.7 
Total lease payments1,610.0 130.3 
Less: Imputed interest225.5 6.2 
Present value of lease liability$1,384.5 $124.1 

17. Temporary Equity - Redeemable Noncontrolling Interests
Owners of noncontrolling equity interests in some of our subsidiaries have the right in certain circumstances to require us to purchase all or a portion of their equity interest at fair value as defined in the applicable agreements. Assuming that the subsidiaries perform over the relevant periods at their current profit levels, at December 31, 20172020 the aggregate estimated maximum amount we could be required to pay in future periods is $182.4$209.7 million, of which $130.5$151.0 million is currently exercisable by the holders. If these rights are exercised, there would be an increase in the net income attributable to Omnicom as a result of our increased ownership interest and the reduction of net income attributable to noncontrolling interests. The ultimate amount paid could be significantly different because the redemption amount depends on the future results of operations of the subject businesses, the timing of the exercise of these rights and changes in foreign currency exchange rates.
16.18. Commitments and Contingent Liabilities
In the ordinary course of business, we are involved in various legal proceedings. We do not presently expect that these proceedings will have a material adverse effect on our results of operations or financial position.
On December 14, 2016, two of our subsidiaries received subpoenas from the U.S. Department of Justice Antitrust Division concerning its ongoing investigation of video production and post-production practices in the advertising industry. The Company is fully cooperating with the investigation. While the ultimate effect of the investigation is inherently uncertain, we do not at this time believe that the investigation will have a material adverse effect on our results of operations or financial position. However, the ultimate resolution of these matters could be different from our current assessment and the differences could be material.
17. Equity19. Accumulated Other Comprehensive Income
Changes in accumulated other comprehensive income (loss), net of income taxes for the years ended December 31, 2017 and 2016 were (in millions):
Cash
Flow
Hedge		Defined Benefit Pension Plans and Postemployment ArrangementsForeign Currency TranslationTotal
January 1, 2019$(22.3)$(69.3)$(1,136.9)$(1,228.5)
Other comprehensive income (loss) before reclassifications0 (32.3)75.4 43.1 
Cumulative effect of accounting change(5.6)(16.7)0 (22.3)
Reclassification from accumulated other comprehensive income (loss)3.9 6.2 0 10.1 
December 31, 2019(24.0)(112.1)(1,061.5)(1,197.6)
Other comprehensive income (loss) before reclassifications0 (21.0)(9.0)(30.0)
Reclassification from accumulated other comprehensive income (loss)3.9 9.9 0 13.8 
December 31, 2020$(20.1)$(123.2)$(1,070.5)$(1,213.8)

F-30
 Cash Flow Hedge Available-for-Sale Securities Defined Benefit Pension Plans and Postemployment Arrangements Foreign Currency Translation Total
January 1, 2016$(3.3) $(0.9) $(87.9) $(923.3) $(1,015.4)
Other comprehensive income (loss) before
     reclassifications
(28.5) 0.1
 (11.0) (311.8) (351.2)
Reclassification from accumulated other
     comprehensive income (loss)
2.3
 —
 8.3
 —
 10.6
December 31, 2016(29.5) (0.8) (90.6) (1,235.1) (1,356.0)
Other comprehensive income (loss) before
     reclassifications
—
 0.5
 (7.2) 387.1
 380.4
Reclassification from accumulated other
     comprehensive income (loss)
3.2
 —
 9.4
 —
 12.6
December 31, 2017$(26.3) $(0.3) $(88.4) $(848.0) $(963.0)
In December 2016, we retired 100 million shares of our treasury stock, which reduced the number of common shares issued and treasury shares held. Upon retirement, the excess of the average cost of the treasury stock over the par value of the common stock was charged to retained earnings. Accordingly, the balance sheet at December 31, 2016 reflects a reduction in common stock, retained earnings and treasury stock. The retirement of the treasury stock had no impact on shareholders’ equity or common stock outstanding. The retired treasury shares are included in the authorized but unissued common shares.



F-29
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18.20. Fair Value

Financial assets and liabilities measured at fair value on a recurring basis at December 31, 2017 and 2016 were (in millions):
December 31, 2020Level 1Level 2Level 3Total
Assets:    
Cash and cash equivalents$5,600.5  $5,600.5 
Marketable equity securities1.6 1.6 
Foreign currency derivatives$0.6 0.6 
Liabilities:   
Foreign currency derivatives$0.3 $0.3 
Contingent purchase price obligations$71.9 71.9 
December 31, 2019
Assets:
Cash and cash equivalents$4,305.7  $4,305.7 
Short-term investments3.6  3.6 
Marketable equity securities1.6  1.6 
Foreign currency derivatives$0.6 0.6 
Liabilities: 
Foreign currency derivatives0.4 0.4 
Contingent purchase price obligations$107.7 107.7 
2017Level 1 Level 2 Level 3 Total
Assets:       
Cash and cash equivalents$3,796.0
     $3,796.0
Short-term investments0.4
     0.4
 Available-for-sale securities1.4
     1.4
Foreign currency derivatives  $1.0
   1.0
Liabilities: 
      
Interest rate and foreign currency derivatives  $39.5
   $39.5
Contingent purchase price obligations    $215.6
 215.6
2016       
Assets:       
Cash and cash equivalents$3,002.2
     $3,002.2
Short-term investments20.6
     20.6
Available-for-sale securities4.3
     4.3
Foreign currency derivatives  $0.2
   0.2
Liabilities:       
Interest rate and foreign currency derivatives  $48.9
   $48.9
Contingent purchase price obligations    $386.1
 386.1


Changes in contingent purchase price obligations for the years ended December 31, 2017 and 2016 were (in millions):
December 31,
2017 201620202019
January 1$386.1
 $322.0
January 1$107.7 $146.5 
Acquisitions31.9
 165.3
Acquisitions14.4 51.1 
Revaluation and interest(27.4) 18.0
Revaluation and interest(21.9)(18.0)
Payments(187.0) (103.7)Payments(31.3)(71.4)
Foreign currency translation12.0
 (15.5)Foreign currency translation3.0 (0.5)
December 31$215.6
 $386.1
December 31$71.9 $107.7 
The carrying amount and fair value of our financial assets and liabilities at December 31, 2017 and 2016 were (in millions):
December 31,
2017 2016 20202019
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Assets:       Assets:    
Cash and cash equivalents$3,796.0
 $3,796.0
 $3,002.2
 $3,002.2
Cash and cash equivalents$5,600.5 $5,600.5 $4,305.7 $4,305.7 
Short-term investments0.4
 0.4
 20.6
 20.6
Short-term investments0 0 3.6 3.6 
Available-for-sale securities1.4
 1.4
 4.3
 4.3
Marketable equity securitiesMarketable equity securities1.6 1.6 1.6 1.6 
Non-marketable equity securitiesNon-marketable equity securities8.9 8.9 9.0 9.0 
Foreign currency derivatives1.0
 1.0
 0.2
 0.2
Foreign currency derivatives0.6 0.6 0.6 0.6 
Cost method investments14.4
 14.4
 14.2
 14.2
Liabilities:       Liabilities:    
Short-term debt$11.8
 $11.8
 $28.7
 $28.7
Short-term debt$3.9 $3.9 $10.1 $10.1 
Interest rate and foreign currency derivatives39.5
 39.5
 48.9
 48.9
Foreign currency derivativesForeign currency derivatives0.3 0.3 0.4 0.4 
Contingent purchase price obligations215.6
 215.6
 386.1
 386.1
Contingent purchase price obligations71.9 71.9 107.7 107.7 
Long-term debt, including current portion4,912.9
 5,056.9
 4,920.6
 5,035.1
Long-term debt, including current portion5,807.3 6,380.6 5,134.3 5,316.4 

F-31
F-30
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The estimated fair value of the foreign currency and interest rate derivative instruments is determined using model-derived valuations, taking into consideration foreign currency rates for the foreign currency derivatives and readily observable inputs for LIBOR interest rates and yield curves to derive the present value of the future cash flows for the interest rate derivatives and counterparty credit risk for each. The estimated fair value of the contingent purchase price obligations is calculated in accordance with the terms of each acquisition agreement and is discounted. The fair value of long-term debt is based on quoted market prices.
19.21. Derivative Instruments and Hedging Activities
We manage our exposure to foreign currency exchange rate risk and interest rate risk through various strategies, including the use of derivative financial instruments. We use forward foreign exchange contracts as economic hedges to manage the cash flow volatility arising from foreign currency exchange rate fluctuations. We may use interest rate swaps to manage our interest expense and structure our long-term debt portfolio to achieve a mix of fixed rate and floating rate debt. We do not use derivatives for trading or speculative purposes. Using derivatives exposes us to the risk that counterparties to the derivative contracts will fail to meet their contractual obligations. We manage that risk through careful selection and ongoing evaluation of the counterparty financial institutions based on specific minimum credit standards and other factors.
We evaluate the effects of changes in foreign currency exchange rates, interest rates and other relevant market risks on our derivatives. We periodically determine the potential loss from market risk on our derivatives by performing a value-at-risk analysis, or VaR, analysis.VaR. VaR is a statistical model that uses historical currency exchange and interest rate data to measure the potential impact on future earnings of our derivative financial instruments assuming normal market conditions. The VaR model is not intended to represent actual losses but is used as a risk estimation and management tool. Based on the results of the model, we estimate with 95% confidence a maximum one-day change in the net fair value of our derivative financial instruments at December 31, 20172020 was not significant.
Foreign Currency Exchange Risk
As an integral part of our global treasury operations, we centralize our cash and use notional multicurrency pools to manage the foreign currency exchange risk that arises from imbalances between subsidiaries and their respective treasury centers from which they borrow or invest funds. However, in certain circumstances, subsidiaries borrowing or investing with a treasury center operating in a different currency creates foreign exchange exposure. To manage that risk, we had outstanding forward foreign exchange contracts with an aggregate notional amount of $92.8 million and $99.0 million at December 31, 2017 and 2016, respectively. Additionally,centers. In addition, there are circumstances where revenue and expense transactions are not denominated in the same currency. In these instances, amounts are either promptly settled or hedged with forward foreign exchange contracts. To manage thatthis risk, we had outstanding forward foreign exchange contracts with an aggregate notional amount of $136.3$169.6 million and $94.0$284.2 million at December 31, 20172020 and 2016, respectively. The net fair value of the forward foreign contracts at December 31, 2017 and 2016 was a current asset of $0.9 million and a current liability of $1.1 million,2019, respectively.
Foreign currency derivatives are designated as fair value hedges; therefore, any gain or loss in fair value incurred on those instruments is recorded in results of operations and is generally offset by decreases or increases in the fair value of the underlying exposures.exposure. By using these financial instruments, we reducedreduce financial risk of adverse foreign exchange changes by foregoing any gain which might have occurredoccur if the markets movedmove favorably. The terms of our forward foreign exchange contracts are generally less than 90 days.
Interest Rate Risk
We use interest rate swaps to manage our interest cost and structure our long-term debt portfolio to achieve a mix of fixed rate and floating rate debt. Based on market conditions, we may terminate the swaps to reduce our exposure to rising interest rates or to monetize any gain and lock in a reduction in interest expense over the term of the underlying debt. The total notional amount of the outstanding fixed-to-floating interest rate swaps at December 31, 2017 and 2016, was $1.25 billion. See Note 6 for a discussion of our interest rate swaps.
20.22. New Accounting Standards
Effective January 1, 2018, we will adopt FASB ASC Topic 606, Revenue from Contracts with Customers, or ASC 606. As a result, we will change our revenue recognition accounting policy as described below. ASC 606 will be applied using the modified retrospective method, where the cumulative effect of the initial application is recognized as an adjustment to opening retained earnings at January 1, 2018 and is not expected to have a material impact on our financial position. ASC 606 provides a five-step model where revenue is recognized when the customer obtains control of the promised goods or services in an


F-31
OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

amount that reflects the consideration that we expect to receive in exchange for those goods or services. The adoption of ASC 606 will not have a material impact on how we recognize revenue for fixed fee or retainer based arrangements. Clients typically receive the benefit of our services as we perform. We will continue to recognize revenue over time using inputs or outputs to measure our progress. Revenue for commission based arrangements will continue to be recognized at a point-in-time. ASC 606 also includes additional disclosure requirements.
For certain of our businesses, the adoption of ASC 606 will result in a change in our accounting policy for certain third-party out-of-pocket costs, which are incurred in connection with our services and are billed to clients. The inclusion of third-party out-of-pocket costs in revenue depends on whether we act as a principal or agent in the client arrangement. Under ASC 606, the principal versus agent assessment is based on whether we control the specified goods or services before they are transferred to the customer. As a result of the adoption of ASC 606, certain third-party costs are no longer included in revenue and cost of services. This change will reduce reported revenue and will have no impact on operating profit.
In addition, performance incentives that can increase revenue if we meet certain quantitative or qualitative objectives in delivering our services will be treated as variable consideration. Performance incentives were recognized in revenue when specific quantitative goals were achieved, or when our performance against qualitative goals was acknowledged by the client. Under ASC 606, variable consideration is estimated and included in total consideration at contract inception based on either the expected value method or the most likely method. These estimates are based on historical award experience, anticipated performance and our best judgment at the time. This change will have offsetting effects in each period and the net effect will not be material to our results of operations or financial position.
In February 2016,December 2019, the FASB issued ASU 2016-02, Leases,2019-12, Income Taxes (Topic 740) or ASU 2016-02,2019-12, which, will supersedeamong other things, amends the current guidancerules for leaserecognizing deferred taxes for investments, performing intra-period tax allocations and calculating income taxes in interim periods and reduces complexity in certain areas, including the accounting for transactions that result in a step-up in the tax basis of goodwill and will require lesseesallocating taxes to recognize the right-to-use assets and related lease liabilities on the balance sheet.members of a consolidated group. ASU 2016-022019-12 is effective for annual and interim periods beginning after December 15, 2018 and early adoption is permitted. ASU 2016-02 provides for a modified retrospective application for leases existing at, or entered into after, the earliest comparative period presented in the financial statements. We will adopt ASU 2016-02 on January 1, 2019. While we are not yet in a position to assess the full impact of the application of the new standard, we expect that the impact of recording the lease liabilities and the corresponding right-to-use assets will have a significant impact on our total assets and liabilities with a minimal impact on our equity and no effect on results of operations.
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, or ASU 2016-01, which revises the classification and measurement of investments in equity securities. ASU 2016-01 requires equity investments, except those accounted for under the equity method of accounting, be measured at fair value and changes in fair value will be recognized in net income. ASU 2016-01 is effective on January 1, 2018 using a cumulative-effect adjustment to opening retained earnings.2021. We do not expect that the adoption of ASU 2016-012019-12 will not have a significant impact on our financial position or results of operations.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, or ASU 2016-13, which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019 and early adoption is permitted for annual and interim periods beginning after December 15, 2018. We will adopt ASU 2016-13 on January 1, 2020. However, we are not yet in a position to assess the impact of the new standardmaterial effect on our results of operations orand financial position.
In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits, or ASU 2017-07, which requires that only the service cost component of periodic benefit cost is recorded in salary and service cost. All other components of net periodic benefit cost are presented separately and are excluded from operating profit. ASU 2017-07 is effective on January 1, 2018 using the full retrospective method. The adoption of ASU 2017-07 will have the affect of increasing operating profit but will have no effect on income before income taxes and equity method investments, net income or earnings per share.
21.23. Subsequent Events

We have evaluated events subsequent to the balance sheet date and determined there have not been any events that have occurred that would require adjustment to or disclosure in the consolidated financial statements.


F-32

OMNICOM GROUP INC. AND SUBSIDIARIES
Selected Quarterly Financial Data (Unaudited)
(In millions, except per share amounts)


The unaudited selected quarterly financial data for the years ended December 31, 2017 and 2016 were:
 Quarter
 First Second Third Fourth
Revenue       
2017$3,587.4
 $3,790.1
 $3,719.5
 $4,176.6
20163,499.1
 3,884.9
 3,791.1
 4,241.8
Operating Expenses       
20173,177.5
 3,224.6
 3,255.3
 3,556.5
20163,107.0
 3,323.1
 3,338.0
 3,639.9
Operating Profit       
2017409.9
 565.5
 464.2
 620.1
2016392.1
 561.8
 453.1
 601.9
Net Income - Omnicom Group Inc.       
2017241.8
 328.6
 263.6
 254.4
2016218.4
 326.1
 253.8
 350.3
Net Income Per Share Omnicom Group Inc. - Basic       
20171.03
 1.41
 1.14
 1.10
20160.90
 1.36
 1.06
 1.47
Net Income Per Share Omnicom Group Inc. - Diluted       
20171.02
 1.40
 1.13
 1.09
20160.90
 1.36
 1.06
 1.47



F-33



OMNICOM GROUP INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Three Years Ended December 31, 20172020
(In millions)



DescriptionBalance
Beginning
of Period		Charged
to Costs
and Expenses		Removal of
Uncollectible
Receivables		Translation
Adjustment
Increase (Decrease)		Balance
End of
Period
Valuation accounts deducted from assets:     
Allowance for Doubtful Accounts:     
December 31, 2020$21.5 $23.5 $(15.0)$0.4 $30.4 
December 31, 201926.8 8.5 (13.8)0 21.5 
December 31, 201832.1 11.8 (16.8)(0.3)26.8 

Description
Balance
Beginning
of Period
 
Charged
to Costs
and Expenses
 
Removal of
Uncollectible
Receivables
 
Translation
Adjustment
Increase (Decrease)
 
Balance
End of
Period
Valuation accounts deducted from assets:         
Allowance for Doubtful Accounts:         
December 31, 2017$24.9
 $15.1
 $(8.2) $0.3
 $32.1
December 31, 201622.5
 10.2
 (7.4) (0.4) 24.9
December 31, 201524.9
 4.4
 (5.4) (1.4) 22.5


S-1