Investor Presentation
Second Quarter 2009 Results
July 23, 2009
Disclosure
The following materials have been prepared for use in the July 23, 2009 conference call on Omnicom’s results of operations for the period
ended June 30, 2009. The call will be archived on the Internet at http://www.omnicomgroup.com/financialwebcasts.
Forward-Looking Statements
Certain of the statements in this document constitute forward-looking statements within the meaning of the Private Securities Litigation Act
of 1995. In addition, from time to time, we or our representatives have made or may make forward-looking statements, orally or in writing.
These statements relate to future events or future financial performance and involve known and unknown risks and other factors that may
cause our actual or our industry’s results, levels of activity, or achievement to be materially different from those expressed or implied by any
forward-looking statements. These risks and uncertainties include, but are not limited to, our future financial condition and results of
operations, the continuing global economic recession and credit crisis, losses on media purchases on behalf of clients, reductions in client
spending and/or a slowdown in client payments, competitive factors, changes in client communication requirements, the hiring and
retention of personnel, our ability to attract new clients and retain existing clients, changes in government regulations impacting our
advertising and marketing strategies, risks associated with assumptions we make in connection with our critical accounting estimates, legal
proceedings, settlements, investigations and claims, and our international operations, which are subject to the risks of currency fluctuations
and exchange controls. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “would,”
“should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of those terms or
other comparable terminology. These statements are present expectations. Actual events or results may differ materially. We undertake no
obligation to update or revise any forward-looking statement, except as required by law.
Other Information
All dollar amounts are in millions except for Net Income per Common Share. The following financial information contained in this document
has not been audited, although some of it has been derived from Omnicom’s historical financial statements, including its audited financial
statements. In addition, industry, operational and other non-financial data contained in this document have been derived from sources we
believe to be reliable, but we have not independently verified such information, and we do not, nor does any other person, assume
responsibility for the accuracy or completeness of that information.
The inclusion of information in this presentation does not mean that such information is material or that disclosure of such information is
required.
1
July 23, 2009
2009 vs. 2008 P&L Summary
July 23, 2009
2
2009
2008
%
2009
2008
%
Revenue
$ 2,870.7
$ 3,476.9
-17.4%
$ 5,617.3
$ 6,672.3
-15.8%
Operating Income (a)
398.1
516.8
-23.0%
680.5
867.6
-21.6%
% Margin
13.9%
14.9%
12.1%
13.0%
Net Interest Expense
21.9
18.7
43.3
29.7
Income Before Tax
376.2
498.1
-24.5%
637.2
837.9
-24.0%
% Margin
13.1%
14.3%
11.3%
12.6%
Taxes
129.7
167.2
218.4
282.4
% Tax Rate
34.5%
33.6%
34.3%
33.7%
Income from Equity Method Investments
7.3
11.0
13.2
19.1
Net Income (b)
253.8
341.9
432.0
574.6
Less: Net Income Attributed to Noncontrolling Interests (b)
(20.4)
(34.9)
(34.1)
(59.0)
Net Income - Omnicom Group
$ 233.4
$ 307.0
-24.0%
$ 397.9
$ 515.6
-22.8%
Net Income per Common Share - Omnicom Group - Diluted (c)
0.75
$
0.95
$
-21.1%
1.27
$
1.59
$
-20.1%
Second Quarter
Year to Date
(a)
Operating income includes depreciation and amortization expense of $57.7 million and $58.5 million for the three months and $113.7 million and
$115.7 million for the six months ended June 30, 2009 and 2008, respectively.
(b)
On January 1, 2009 we adopted SFAS 160, Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51. In
accordance with the presentation requirements of SFAS 160, we have reclassified the amounts reported previously as minority interest expense in
2008 as net income attributed to noncontrolling interests to be consistent with the 2009 presentation.
(c)
See page 20 for supplemental earnings per share information.
2009 Total Revenue Change
July 23, 2009
3
(a) To calculate the FX impact, we first convert the current period’s local currency revenue using the average exchange rates from the equivalent prior period to arrive at constant currency revenue. The FX impact equals the difference between the current period revenue in U.S. dollars and the current period revenue in constant currency.
(b) Acquisition revenue is the aggregate of the applicable prior period revenue of the acquired businesses. Netted against this number is the revenue of any business included in the prior period reported revenue that was disposed of subsequent to the prior period.
(c) Organic revenue is calculated by subtracting both the acquisition revenue and the FX impact from total revenue growth.
$
%
%
Prior Period Revenue
$ 3,476.9
$ 6,672.3
Foreign Exchange (FX) Impact (a)
(234.7)
-6.8%
(487.0)
-7.3%
Acquisition Revenue (b)
5.6
0.2%
19.7
0.3%
Organic Revenue (c)
(377.1)
-10.8%
(587.7)
-8.8%
Current Period Revenue
$ 2,870.7
-17.4%
$ 5,617.3
-15.8%
Second Quarter
Year to Date
$
2009 Revenue by Discipline
July 23, 2009
4
(a) “Change” is the year-over-year decrease from the prior period.
-20.1%
263.6
Specialty
-18.5%
271.7
PR
-18.7%
1,054.8
CRM
-15.5%
$ 1,280.6
Advertising
% Change (a)
$ Mix
9.3%
Specialty
36.6%
CRM
9.5%
PR
44.6%
Advertising
Year to Date
-20.1%
520.6
Specialty
-18.0%
531.8
PR
-16.0%
2,059.8
CRM
-14.3%
$ 2,505.1
Advertising
% Change (a)
$ Mix
Second Quarter
Advertising
44.6%
PR
9.5%
CRM
36.7%
Specialty
9.2%
2009 Revenue By Geography
July 23, 2009
5
(a) “Change” is the year-over-year increase or decrease from the prior period.
54.4%
U.S.
15.6%
Other
21.4%
Markets
Euro
8.6%
U.K.
Year to Date
-20.1%
463.7
Other
-27.1%
252.3
United Kingdom
-21.2%
630.2
Euro Currency Markets
-12.9%
$
1,524.5
United States
% Change(a)
$ Mix
(234.7)
FX
6.5
Acquisition
(151.2)
Organic
$
(379.4)
$
1,346.2
International
(0.9)
Acquisition
(225.9)
Organic
$
(226.8)
$
1,524.5
United States
$ Change(a)
$ Mix
53.1%
U.S.
16.1%
Other
22.0%
Markets
Euro
8.8%
U.K.
Second Quarter
$ Mix
$ Change(a)
United States
3,056.7
$
(355.7)
$
Organic
(366.0)
Acquisition
10.3
International
2,560.6
$
(699.3)
$
Organic
(221.7)
Acquisition
9.4
FX
(487.0)
$ Mix
% Change(a)
United States
3,056.7
$
-10.4%
Euro Currency Markets
1,200.5
-20.0%
United Kingdom
482.9
-29.9%
Other
877.2
-18.0%
6
Cash Flow – GAAP Presentation (condensed)
July 23, 2009
2009
2008
Net Income
432.0
$
574.6
$
Share-Based Compensation Expense
35.7
27.8
Depreciation and Amortization
113.7
115.7
Other Non-Cash Items to Reconcile to Net Cash Provided by (Used in) Operating Activities, net
6.0
(10.0)
Other Changes in Operating Capital
(478.0)
(799.6)
Net Cash Provided by (Used in) Operating Activities
109.4
(91.5)
Capital Expenditures
(63.3)
(92.7)
Acquisitions, net
(61.0)
(210.1)
Other Investing Activities, net
2.5
(0.2)
Net Cash Used in Investing Activities
(121.8)
(303.0)
Dividends
(93.5)
(97.3)
Proceeds from Short-term Debt, net
24.5
10.7
Proceeds from Long-term Debt, net
200.7
2.3
Repayment of Convertible Debt
(842.0)
-
Stock Repurchases
(8.6)
(407.8)
Proceeds from Stock Plans
6.1
63.7
Excess Tax Benefit on Share-based Compensation
-
9.6
Other Financing Activities, net
(53.7)
(61.0)
Net Cash Used in Financing Activities
(766.5)
(479.8)
Effect of exchange rate changes on cash and cash equivalents
81.5
(3.1)
Net Decrease in Cash and Cash Equivalents
(697.4)
$
(877.4)
$
6 Months ended June 30,
Current Credit Picture
July 23, 2009
7
2009
2008
EBITDA (a)
$
1,736
$
1,976
Gross Interest Expense (a)
122.0
106.3
EBITDA / Gross Interest Expense
14.2
x
18.6
x
Total Debt / EBITDA
1.4
x
1.6
x
Debt (b):
Bank Loans (Due Less Than 1 Year)
$
42
$
23
CP Issued Under $2.5B Revolver Due 6/23/11
-
-
Borrowings Under $2.5B Revolver Due 6/23/11 (b)
200
-
Convertible Notes Due 2/7/31
6
847
Convertible Notes Due 7/31/32
727
727
Convertible Notes Due 6/15/33
-
-
Convertible Notes Due 7/1/38
467
468
Senior Notes Due 4/15/16
997
996
Other Debt
19
20
Total Debt
$
2,458
$
3,081
Cash and Short Term Investments
412
959
Net Debt
$
2,046
$
2,122
12 Months ended June 30,
(a)
“EBITDA” and “Gross Interest Expense” calculations shown are for the twelve months ending June 30. EBITDA is defined as operating income
before interest, taxes, depreciation and amortization. Although EBITDA is a non-GAAP measure, we believe EBITDA is more meaningful for
purposes of this analysis because the financial covenants in our credit facilities are based on EBITDA (see reconciliation of Operating Income to
EBITDA on page 22).
(b)
On July 1, 2009 the Company completed the sale of $500 million of Senior Notes due July 15, 2019. The Company plans to use the net proceeds
to pay down its borrowings under the Revolver and for general corporate purposes, which could include capital transactions, purchases of treasury
shares, working capital expenditures, acquisitions or refinancing of other debt.
8
Current Liquidity Picture
July 23, 2009
Total Amount
of Facility
Outstanding
Available
Committed Facilities
Revolver & Commercial Paper (a)
2,500
$
200
$
2,300
$
Other Committed Credit Facilities
42
42
-
Total Committed Facilities
2,542
242
2,300
Uncommitted Facilities
(b)
380
-
-
(b)
Total Credit Facilities
2,922
$
242
$
2,300
$
Cash and Short Term Investments
412
Total Liquidity Available
2,712
$
As of June 30, 2009
(a)
Credit facility expires June 23, 2011.
(b)
Represents uncommitted facilities in the U.S., U.K. and Canada. These amounts are excluded from our available liquidity for purposes of this
presentation.
Omnicom Debt Structure
Supplemental Information
The above chart sets forth Omnicom’s adjusted debt outstanding at June 30, 2009. The adjustment reflects the July 1, 2009 issuance of the 2019 Senior
Notes as if the issuance occurred on June 30, 2009 and assumes that a portion of the net proceeds from the issuance was used to reduce the $200 million
of borrowings outstanding under our $2.5 billion revolving credit facility as of June 30, 2009. The amounts reflected above for the 2016 and 2019 Senior
Notes represent the principal amount of these notes at maturity on April 15, 2016 and July 15, 2019, respectively.
10
July 23, 2009
Omnicom Debt Structure Update
2016 Senior Notes
$1,000
2019 Senior Notes
$500
2031
Convert
$6
2032 Convert
$727
2038 Convert
$467
Other Debt
$19
Short-term
Borrowings
$42
Omnicom Debt Structure Update
July 23, 2009
11
The Bank Facility and Commercial Paper Program together provide liquidity in the event any
convertible notes are put. We then have flexibility to refinance in different debt capital
markets.
Our 2031 Notes are putable annually, with the next put date in February 2010. Our 2032 Notes are putable annually, with the next put date in July 2009.
Our 2038 Notes are putable in June 2010, 2013, 2018, 2023 and annually thereafter.
For purposes of this presentation we have adjusted Omnicom’s debt outstanding at June 30, 2009. The adjustment reflects the July 1, 2009 issuance of
the 2019 Senior Notes as if the issuance occurred on June 30, 2009 and assumes that a portion of the net proceeds from the issuance was used to
reduce the $200 million of borrowings outstanding under our $2.5 billion revolving credit facility as of June 30, 2009. We have included the following
borrowings as of June 30, 2009 as outstanding through June 2011, the date of expiration of our five-year credit facility: short-term borrowings of $42
million, revolver borrowings of zero and other debt of $19 million. We believe that this presentation is more meaningful for purposes of understanding
how we evaluate the maturities of our debt structure.
$0
$200
$400
$600
$800
$1,000
$1,200
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Current Credit Picture Update
July 23, 2009
12
On July 1, 2009 the Company completed the issuance of $500 million of Senior Notes due July 15,
2019. The following table sets forth the Company’s debt position as of June 30, 2009 and as adjusted
assuming a portion of the net proceeds from the issuance of the notes was used to reduce borrowings
outstanding under our $2.5 billion revolving credit facility. It does not reflect the use of the
approximately $290 million of net proceeds remaining, or any other financing activities that occurred
subsequent to June 30, 2009.
Actual
Adjusted (b)
Debt:
Bank Loans (Due Less Than 1 Year)
$
42
$
42
CP Issued Under $2.5B Revolver Due 6/23/11
-
-
Borrowings Under $2.5B Revolver Due 6/23/11 (a)
200
-
Convertible Notes Due 2/7/31
6
6
Convertible Notes Due 7/31/32
727
727
Convertible Notes Due 6/15/33
-
-
Convertible Notes Due 7/1/38
467
467
Senior Notes Due 4/15/16
997
997
Senior Notes Due 7/15/19 (a)
-
497
Other Debt
19
19
Total Debt
$
2,458
$
2,755
As of June 30, 2009
(a)
On July 1, 2009 the Company completed the issuance of $500 million of Senior Notes due July 15, 2019. The Company plans to use the net
proceeds to pay down its borrowings under the $2.5 billion Revolver and for general corporate purposes, which could include capital transactions,
purchases of treasury shares, working capital expenditures, acquisitions or refinancing of other debt.
(b)
As adjusted reflects the issuance of the July 15, 2019 notes as if these issuances occurred on June 30, 2009 and assumes $200 million of the net
proceeds was used to reduce the borrowings outstanding under the $2.5 billion Revolver as of June 30, 2009. It does not reflect the use of the
approximately $290 million of net proceeds remaining.
Senior Notes Due 2019
July 23, 2009
13
Principal Amount
$500 Million
Co - Issuers
Omnicom Group, Omnicom Finance, Omnicom Capital
Date
July 1, 2009
Maturity
July 15, 2019
Security
Unsecured, pari passu with Bank Facility
Coupon
6.25%
Spread Over Comparable Treasury at Issue
2.75%
Ratings
Moody’s: Baa1
S&P: A-
Fitch: A-
Senior Notes Due 2016
July 23, 2009
14
Principal Amount
$1 Billion
Co - Issuers
Omnicom Group, Omnicom Finance, Omnicom Capital
Date
March 29, 2006
Maturity
April 15, 2016
Security
Unsecured, pari passu with Bank Facility
Coupon
5.90%
Spread Over Comparable Treasury at Issue
1.30%
Rating
Moody’s: Baa1
S&P: A-
Fitch: A-
2032 Convertible Notes
July 23, 2009
15
Principal Amount
$727 Million
Co - Issuers
Omnicom Group, Omnicom Finance, Omnicom Capital
Date
March 6, 2002
Maturity
July 31, 2032 with annual puts each July
Security
Unsecured, pari passu with Bank Facility
Coupon
0.00%
Conversion Price
$55
Rating
Moody’s: Baa1
S&P: A-
Fitch: A-
2038 Convertible Notes
July 23, 2009
16
Principal Amount
$467 Million
Co - Issuers
Omnicom Group, Omnicom Finance, Omnicom Capital
Date
June 10, 2003
Maturity
June 15, 2038 with puts in June of 2010, 2013, 2018, 2023
and annually thereafter until maturity
Security
Unsecured, pari passu with Bank Facility
Coupon
0.00%
Conversion Price
$51.50
Rating
Moody’s: Baa1
S&P: A-
Fitch: A-
Current Bank Credit Facility
July 23, 2009
17
Amount
$2.5 Billion
Type
Unsecured Revolving Credit
Maturity
5 Years – June 2011
Facility Fee
13BP per annum
Drawn Rate
Libor +17BP
Covenants
-Maximum Debt to EBITDA 3:1
-Minimum Interest Coverage 5:1
Current Omnicom Credit Ratings
July 23, 2009
18
Moody’s
S&P
Fitch
Long Term Ratings
Baa1
A-
A-
Short Term Ratings
P2
A2
F2
Outlook
Stable
Negative
Stable
Note: Reflects credit ratings as of July 15, 2009, subsequent to the issuance by the Company on July 1, 2009 of the Senior Notes due 2019, noted on
pages 12 and 13.
Supplemental Financial Information
20
2009 vs. 2008 Earnings Per Share (a)
July 23, 2009
2009
2008
2009
2008
Net Income per Common Share - Omnicom Group:
Basic
$ 0.75
$ 0.96
$ 1.28
$ 1.60
Diluted
0.75
0.95
1.27
1.59
Earnings Available for Common Shares:
Net Income - Omnicom Group
$ 233.4
$ 307.0
$ 397.9
$ 515.6
Earnings Allocated to Participating Securities
(2.6)
(3.1)
(4.8)
(5.7)
Earnings Available for Common Shares
$ 230.8
$ 303.9
$ 393.1
$ 509.9
Weighted Average Shares (millions):
Basic
308.1
317.5
307.8
317.9
Diluted
308.6
319.6
308.5
319.8
Dividend Declared per Share
$ 0.150
$ 0.150
$ 0.300
$ 0.300
Second Quarter
Year to Date
(a)
On January 1, 2009, we adopted FSP EITF 03-6-1 entitled “Determining Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities”. Our unvested restricted stock awards pay dividends and therefore qualify as participating securities. In accordance with
EITF 03-6-1, Net income, for the purposes of the basic and diluted EPS calculation is reduced for a presumed hypothetical distribution of earnings to
the holders of the unvested restricted stock. Accordingly, the effect of the allocation required under EITF 03-6-1 reduces Earnings Available to
Common Shareholders. Additionally, the unvested restricted shares were excluded from the calculation of diluted EPS because their inclusion
would have been anti-dilutive. The above information reflects the effect of the adoption on Earnings per Share as if we adopted EITF 03-6-1 at the
beginning of the period and the 2008 amounts have been adjusted.
Acquisition Related Expenditures
July 23, 2009
21
Note: See pages 23-25 for acquisition profiles.
(a) Includes acquisitions of a majority interest in agencies resulting in their consolidation.
(b) Includes acquisitions of additional equity interests in existing affiliate agencies resulting in their majority ownership and consolidation.
(c) Includes acquisitions of less than a majority interest in agencies in which Omnicom did not have a prior equity interest and the acquisition
of additional interests in existing affiliated agencies that did not result in majority ownership.
(d) Includes the acquisition of additional equity interests in already consolidated subsidiary agencies.
(e) Includes additional consideration paid for acquisitions completed in prior periods.
Six Months YTD 2009
New Subsidiary Acquisitions (a)
5
$
Affiliates to Subsidiaries (b)
1
Affiliates (c)
-
Existing Subsidiaries (d)
4
Earn-outs (e)
57
Total Acquisition Expenditures
67
$
Reconciliation of Operating Income to EBITDA
July 23, 2009
22
The covenants contained in our credit facility are based on the EBITDA ratios as presented on pages 7 & 17 of this presentation. The above reconciles our GAAP
Operating Income to EBITDA for the periods presented.
EBITDA is a non-GAAP financial measure within the meaning of applicable SEC rules and regulations Our credit facility defines EBITDA as earnings before deducting
interest expense, income taxes, depreciation and amortization. Our credit facility uses EBITDA to measure our compliance with covenants, such as interest coverage
and leverage. EBITDA is not, and should not, be used as a substitute for Operating Income as determined in accordance with GAAP and is only used to measure our
compliance with our debt covenants. Management does not use EBITDA for any other measurement purpose.
2009
2008
Operating Income
1,502
$
1,750
$
Depreciation
179
178
Amortization
55
48
EBITDA
1,736
$
1,976
$
12 Months ended June 30,
Second Quarter Acquisitions
July 23, 2009
23
Jigsaw International is a qualitative research agency based in Shanghai, China.
The company provides consumer data and qualitative analysis of the Chinese
consumer to its multinational and locally based clients to assist them with their
communications and brand and product development.
Jigsaw International will operate within Hall & Partners’ brand consultancy practice.
Second Quarter Acquisitions
July 23, 2009
24
Total Advertising and Communications is a full service media agency offering an
integrated suite of services to primarily domestic clients in Australia. Its offering
includes media strategy, planning and buying across all media channels.
Located in Sydney, Australia, Total Advertising and Communications will form part
of the PHD global network within Omnicom Media Group and has been rebranded
PHD Australia.
T O T A L
Second Quarter Acquisitions
July 23, 2009
25
DDB South Africa is a full-service advertising agency. Founded in 1992, the agency
has operated as a non-equity associate agency of the DDB Worldwide
Communications Group since 1998. The agency provides services to both
multinational and local South African clients.
DDB South Africa is located in Johannesburg.
L