SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-Q
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(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the Quarterly Period Ended: June 30, 2004

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from _____________ to ____________

Commission File Number: 1-10551

OMNICOM GROUP INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

New York 13-1514814
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)

437 Madison Avenue, New York, New York 10022
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(Address of principal executive offices) (Zip Code)

(212) 415-3600
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(Registrant's telephone number, including area code)

Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports and (2) has been subject to such filing
requirements for the past 90 days. YES _X_ NO __

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12 b-2 of the Exchange Act). YES _X_ NO __

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. 187,253,300 (as of July 30,
2004)

OMNICOM GROUP INC. AND SUBSIDIAIRES
INDEX

PART I. FINANCIAL INFORMATION

Page No.
--------
Item 1. Financial Statements

Consolidated Condensed Balance Sheets -
June 30, 2004 and December 31, 2003.................... 1

Consolidated Condensed Statements of Income - Three Months
and Six Months Ended June 30, 2004 and 2003............ 2

Consolidated Condensed Statements of Cash Flows -
Six Months Ended June 30, 2004 and 2003................ 3

Notes to Consolidated Condensed Financial Statements........ 4

Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations................................... 9

Item 3. Quantitative and Qualitative Disclosures About Market Risk.. 23

Item 4. Controls and Procedures..................................... 24

PART II. OTHER INFORMATION

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases
of Equity Securities....................................... 25

Item 4. Submission of Matters to a Vote of Security Holders......... 25

Item 6. Exhibits and Reports on Form 8-K............................ 26

Signatures.................................................. 27

Certifications of Senior Executive Officers

OMNICOM GROUP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Millions)

(Unaudited)
June 30, December 31,
2004 2003
---- ----

ASSETS
CURRENT ASSETS:
Cash and cash equivalents ......................................... $ 658.2 $ 1,528.7
Short-term investments at market, which approximates cost ......... 20.2 20.2
Accounts receivable, less allowance for doubtful accounts
of $62.5 and $69.7 ............................................. 4,736.5 4,530.0
Billable production orders in process, at cost .................... 602.3 440.4
Prepaid expenses and other current assets ......................... 868.2 766.6
----------- -----------
Total Current Assets ................................. 6,885.4 7,285.9
----------- -----------
FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost,
less accumulated depreciation and amortization of $844.2 and $817.1 607.7 596.8
INVESTMENTS IN AFFILIATES .............................................. 150.9 151.2
GOODWILL ............................................................... 6,052.7 5,886.2
INTANGIBLES, net of accumulated amortization of $144.1 and $127.8 ...... 113.2 121.4
DEFERRED TAX BENEFITS .................................................. 260.6 264.6
OTHER ASSETS ........................................................... 346.8 313.9
----------- -----------
TOTAL ASSETS ......................................... $ 14,417.3 $ 14,620.0
=========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable .................................................. $ 5,327.4 $ 5,513.3
Advance billings .................................................. 837.8 775.2
Current portion of long-term debt ................................. 190.5 12.4
Bank loans ........................................................ 41.4 42.4
Accrued taxes ..................................................... 136.8 221.7
Other liabilities ................................................. 1,106.1 1,197.5
----------- -----------
Total Current Liabilities ............................ 7,640.0 7,762.5
----------- -----------
LONG-TERM DEBT ......................................................... 20.1 197.3
CONVERTIBLE NOTES ...................................................... 2,339.3 2,339.3
DEFERRED COMPENSATION AND OTHER LIABILITIES ............................ 319.9 342.9
LONG TERM DEFERRED TAX LIABILITY ....................................... 269.8 204.1
MINORITY INTERESTS ..................................................... 177.6 187.3

SHAREHOLDERS' EQUITY:
Common stock ...................................................... 29.8 29.8
Additional paid-in capital ........................................ 1,819.3 1,815.7
Retained earnings ................................................. 2,676.6 2,419.0
Unamortized stock compensation .................................... (223.2) (216.4)
Accumulated other
comprehensive income ................................................... 107.6 109.7
Treasury stock .................................................... (759.5) (571.2)
----------- -----------
Total Shareholders' Equity ........................... 3,650.6 3,586.6
----------- -----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ........... $ 14,417.3 $ 14,620.0
=========== ===========

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

OMNICOM GROUP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in Millions)
(Unaudited)

Three Months Six Months
Ended June 30, Ended June 30,
---------------------- ----------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------

REVENUE ........................... $ 2,407.8 $ 2,149.5 $ 4,639.2 $ 4,086.8

OPERATING EXPENSES:
Salary and service costs ..... 1,653.6 1,426.7 3,247.2 2,787.2
Office and general expenses .. 410.5 403.5 818.9 778.0
---------- ---------- ---------- ----------
2,064.1 1,830.2 4,066.1 3,565.2
---------- ---------- ---------- ----------
OPERATING PROFIT .................. 343.7 319.3 573.1 521.6

NET INTEREST EXPENSE:
Interest expense ............. 10.8 16.2 24.5 27.4
Interest income .............. (3.5) (3.3) (6.8) (6.2)
---------- ---------- ---------- ----------
7.3 12.9 17.7 21.2
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES ........ 336.4 306.4 555.4 500.4

INCOME TAXES ...................... 113.1 104.0 186.7 171.1
---------- ---------- ---------- ----------
INCOME AFTER INCOME TAXES ......... 223.3 202.4 368.7 329.3

EQUITY IN AFFILIATES .............. 4.9 1.9 7.3 4.4

MINORITY INTERESTS ................ (22.1) (24.3) (34.3) (38.1)
---------- ---------- ---------- ----------
NET INCOME ................ $ 206.1 $ 180.0 $ 341.7 $ 295.6
========== ========== ========== ==========
NET INCOME PER COMMON SHARE:

Basic ..................... $1.10 $0.96 $1.82 $1.58
Diluted ................... $1.10 $0.96 $1.81 $1.58

DIVIDENDS DECLARED PER COMMON SHARE $0.225 $0.20 $0.45 $0.40

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

OMNICOM GROUP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)

Six Months Ended June 30,
---------------------------
2004 2003
---- ----

Cash flows from operating activities:
Net income .................................................................... $ 341.7 $ 295.6
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation of tangible assets............................................ 66.2 60.2
Amortization of intangible assets.......................................... 20.4 16.2
Minority interests......................................................... 34.3 38.0
Earnings of affiliates (in excess of) less than dividends received......... (1.9) 1.9
Net gain on investment activity............................................ (13.1) --
Tax benefit on employee stock plans........................................ 8.4 5.6
Amortization of stock compensation......................................... 61.6 67.1
Provisions for losses on accounts receivable............................... 4.6 2.3
Changes in assets and liabilities providing (requiring)
cash net of acquisitions:
Increase in accounts receivable............................................ (248.3) (58.7)
Increase in billable production orders in process.......................... (164.2) (138.1)
Increase in prepaid expenses and other current assets...................... (109.1) (61.0)
Net change in other assets and liabilities................................. (168.5) (166.5)
Increase in advanced billings.............................................. 64.9 16.3
Net (decrease) increase in accrued and deferred taxes...................... (2.8) 1.9
Decrease in accounts payable............................................... (158.1) (444.1)
-------- -------
Net cash used for operating activities.................................. (263.9) (363.3)
-------- -------
Cash flows from investing activities:
Capital expenditures....................................................... (78.1) (60.1)
Payments for purchases of equity interests in subsidiaries and
affiliates, net of cash acquired........................................ (158.7) (173.4)
Purchases of short-term investments........................................ (8.3) (2.4)
Proceeds from sale of short-term investments............................... 10.0 12.3
------- -------
Net cash used in investing activities................................... (235.1) (223.6)
------- -------
Cash flows from financing activities:
(Decrease) increase in short-term borrowings............................... (0.1) 10.4
Proceeds from issuance of debt............................................. 2.8 586.5
Repayments of principal of long-term debt obligations...................... (12.7) (41.5)
Dividends paid............................................................. (79.7) (74.7)
Purchase of treasury shares................................................ (286.8) --
Other, net................................................................. (17.1) (29.3)
------- -------
Net cash (used) provided by financing activities........................ (393.6) 451.4
------- -------
Effect of exchange rate changes on cash and cash equivalents.................... 22.1 (8.5)
------- -------
Net decrease in cash and cash equivalents............................... (870.5) (144.0)
Cash and cash equivalents at beginning of period................................ 1,528.7 667.0
------- -------
Cash and cash equivalents at end of period...................................... $ 658.2 $ 523.0
======= ========
Supplemental disclosures:
Income taxes paid.......................................................... $ 114.8 $ 130.2
Interest paid.............................................................. $ 26.5 $ 43.5

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

OMNICOM GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1. We have prepared the consolidated condensed interim financial statements
included herein without audit pursuant to Securities and Exchange
Commission rules. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles ("GAAP") have been condensed or omitted
pursuant to these rules.

2. The accompanying financial statements reflect all adjustments, consisting
of normally recurring accruals, which in the opinion of management are
necessary for a fair presentation, in all material respects, of the
information contained therein. Certain reclassifications have been made to
the June 30, 2003 and December 31, 2003 reported amounts to conform them
to the June 30, 2004 presentation. These statements should be read in
conjunction with the consolidated financial statements and related notes
included in our annual report on Form 10-K for the year ended December 31,
2003.

3. Results of operations for interim periods are not necessarily indicative
of annual results.

4. In accordance with SFAS No. 123, "Accounting for Stock Based
Compensation", as amended by SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of FASB Statement
No. 123", we elected, effective January 1, 2004, to account for
stock-based employee compensation using the fair value method. As a
result, the fair value of stock-based employee compensation, including
unvested employee stock options issued and outstanding, were recorded as
an expense in the current period utilizing the retroactive restatement
method as set forth in SFAS 148. Accordingly, our results for the quarter
and the six months ended June 30, 2003 have been restated as if we had
used the fair value method to account for stock-based employee
compensation. Pre-tax stock-based employee compensation costs for the
three months ended June 30, 2004 and 2003 were $30.0 million and $32.4
million, respectively, and for the six months ended June 30, 2004 and 2003
were $61.6 million and $67.1 million, respectively. Also, in connection
with the restatement, our December 31, 2003 balance sheet presented
reflects an increase in the deferred tax benefit of $120.5 million, an
increase in additional paid-in capital of $434.7 million, an increase in
unamortized stock compensation of $92.6 million and a decrease in retained
earnings of $221.6 million.

The table below presents a reconciliation of net income and earnings
per share, as reported, to the restated results for the quarter and the
six months ended June 30, 2003.

OMNICOM GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

(Dollars in Millions, Except Per Share Amounts)
-----------------------------------------------
Earnings Per Common Share
-------------------------
Net Income Basic Diluted
---------- ----- -------

As reported, quarter ended June 30, 2003.............. $ 190.7 $ 1.02 $ 1.02

Less fair value of stock options issued,
net of taxes.......................................... 10.7 0.06 0.06
------- ------ ------

Restated, quarter ended June 30, 2003................. $ 180.0 $ 0.96 $ 0.96
======= ====== ======

As reported, six months ended June 30, 2003........... $ 319.3 $ 1.71 $ 1.71

Less fair value of stock options issued,
net of taxes.......................................... 23.7 0.13 0.13
------- ------ ------

Restated, six months ended June 30, 2003.............. $ 295.6 $ 1.58 $ 1.58
======= ====== ======

5. Basic earnings per share is based upon the weighted average number of
common shares outstanding during the period. Diluted earnings per share is
based on the above, plus, if dilutive, common share equivalents which
include outstanding options and restricted shares. No adjustments were
made for any series of our zero-coupon convertible notes because the
conversion criteria have not been met. For purposes of computing diluted
earnings per share, 1,314,000 and 1,443,000 common share equivalents were
assumed to be outstanding for the three months and six months ended June
30, 2004, respectively.

The assumed increase in net income related to the after tax
compensation expense related to dividends on restricted shares was $224.0
thousand and $302.0 thousand for the three months ended June 30, 2004 and
2003, respectively, and $424.0 thousand and $604.0 thousand for the six
months ended June 30, 2004 and 2003, respectively.

The number of shares used in our EPS computations were:

Three Months Six Months
Ended June 30, Ended June 30,
---------------------------- ----------------------------
2004 2003 2004 2003
---- ---- ---- ----

Basic EPS Computation 186,846,000 187,172,000 187,349,000 186,864,000
Diluted EPS Computation 188,160,000 187,172,000 188,792,000 186,864,000

OMNICOM GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

6. Total comprehensive income and its components were:

(Dollars in Millions)
---------------------------------------------
Three Months Six Months
Ended June 30, Ended June 30,
------------------- ------------------
2004 2003 2004 2003
---- ---- ---- ----

Net income for the period...................... $ 206.1 $ 180.0 $ 341.7 $ 295.6

Foreign currency translation adjustment, net
of income taxes of $15.0 and $(61.1) and $1.1
and $(70.4) for the three months and six months
ended June 30, 2004 and 2003, respectively..... (27.9) 113.4 (2.1) 130.8
------- -------- ------- -------

Comprehensive income for the period............ $ 178.2 $ 293.4 $ 339.6 $ 426.4
======= ======== ======= =======

7. All of our wholly and partially owned businesses operate within the
advertising, marketing and corporate communications services industry.
These agencies are organized into strategic platforms, client centric
networks, geographic regions and operating groups. Our businesses provide
communications services to similar type clients on a global, pan-regional
and national basis. The businesses have similar cost structures, and are
subject to the same general economic and competitive risks. Given these
similarities, we have aggregated their results into one reporting segment.
A summary of our revenue and long-lived assets by geographic area as of
June 30, 2004 and 2003 is presented below:

(in millions of dollars)
United Euro United Other
States Denominated Kingdom International Consolidated
------ ----------- ------- ------------- ------------

Revenue
3 Months Ended June 30,
2004 $ 1,312.2 $ 503.8 $ 261.4 $ 330.4 $ 2,407.8
2003 1,182.3 446.9 232.1 288.2 2,149.5

Revenue
6 Months Ended June 30,
2004 $ 2,533.4 $ 959.6 $ 512.4 $ 633.8 $ 4,639.2
2003 2,281.8 834.2 443.7 527.1 4,086.8

Long-lived Assets
At June 30,
2004 $ 330.0 $ 100.2 $ 92.1 $ 85.4 $ 607.7
2003 315.6 82.7 86.4 84.4 569.1

8. Bank loans at June 30, 2004 of $41.4 million are primarily comprised of
bank overdrafts of our international subsidiaries which are treated as
unsecured loans pursuant to our bank agreements. In January 2004, in
connection with the purchase of an office building, we assumed a mortgage
of $17.1 million which is included in our long-term debt.

On May 24, 2004, we amended and extended our existing revolving
credit facilities with a consortium of banks, resulting in a five-year
$1,500.0 million revolving credit facility which matures May 24, 2009, and
a $500.0 million 364-day revolving credit facility with a maturity date of
May 23, 2005. These facilities amended our previous three-year $835.0
million and $1,200.0 million, 364-day revolving credit

OMNICOM GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

facilities. We are also an active participant in the commercial paper
market with a $1,500.0 million program. Each of our bank credit facilities
provides credit support for commercial paper issued under this program. As
of June 30, 2004, no commercial paper was outstanding and we had no other
borrowings outstanding under these credit facilities. The 364-day facility
includes a provision which allows us to convert all amounts outstanding at
expiration of the facility into a one-year term loan. The consortium
consists of 27 banks, each committing a pro rata amount to the five-year
and 364-day facilities. Citibank N.A. acts as administrative agent, ABN
Amro acts as syndication agent and JPMorgan Chase Bank and HSBC Bank USA
act as co-documentation agents for the facilities. Other significant
lending institutions include Societe Generale, Bank of America, Wachovia
and Sumitomo Mitsui. These facilities provide us with the ability to
classify our borrowings that could come due within one year as long-term
debt, as it is our intention to keep the borrowings outstanding on a
long-term basis.

9. Included in operating income for the six months ended June 30, 2004 is a
pre-tax net gain of $13.1 million arising from investment activity
described below.

In March 2004, in connection with Seneca Investments LLC's
("Seneca") recapitalization, we agreed to exchange our remaining preferred
stock in Seneca for a $24.0 million senior secured note and 40% of
Seneca's outstanding common stock. The note, which is due in March 2007,
bears interest at a rate of 6.25% per annum. Prior to Seneca's
recapitalization, we were accounting for our investment under the cost
recovery method. We will now account for this investment using the equity
method. The recapitalization transaction was required to be recorded at
fair value and, accordingly, we recorded a net pre-tax gain of $24.0
million. This gain was partially offset by losses of $10.9 million on
other cost-based investments.

10. The following pronouncement was issued by the Financial Accounting
Standards Board ("FASB") in, or with effective dates in, 2004: Statement
of Financial Accounting Standards No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure - An Amendment of FASB No. 123
(SFAS 148), which we adopted January 1, 2004, as discussed in Note 4.

In March 2004, the FASB issued for exposure a Proposed Statement of
Financial Accounting Standards entitled "Share-Based Payment - an
amendment of SFAS No. 123 and 95". The proposal requires that the fair
value of employee stock-based compensation be expensed. Although the
proposal differs from SFAS 123, as amended by SFAS 148, its requirements
will only apply to newly granted stock or options to employees or
previously granted awards that are either modified or settled after
January 1, 2004. We will continue

OMNICOM GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

to monitor the progress of the FASB with regard to the final requirements
of this new standard.

The Emerging Issues Task Force ("EITF") of the FASB released issue
No. 03-6, "Participating Securities and the Two-Class Method under FASB
Statement No. 128, Earnings Per Share." EITF No. 03-6 is required to be
adopted in financial periods beginning after March 31, 2004, and the
adoption of EITF No. 03-6 did not have an impact on our consolidated
results of operation or financial position.

The following FASB Interpretation ("FIN") has an effective date in
2004: FIN 46, Consolidation of Variable Interest Entities - An
Interpretation of ARB No. 51, as amended by FIN 46R.

FIN 46 addresses the consolidation by business enterprises of
variable interest entities, as defined in FIN 46, and is based on the
concept that companies that control another entity through interests,
other than voting interests, should consolidate the controlled entity. The
FASB subsequently issued FIN 46R in December 2003 that modified certain
provisions of FIN 46. FIN 46R must be applied to the first reporting
period after March 15, 2004 and did not have an impact on, or result in
additional disclosure in our financial statements.

11. On July 29, 2004, we offered to pay holders of our Zero Coupon Zero Yield
Notes due 2032, $27.50 per $1,000 principal amount of notes as an
incentive to the holders who do not put their notes to us for repurchase
and who consent to certain amendments to the indenture under which the
notes were issued. None of the notes were put to us for repurchase. Under
the amendments, we would pay cash, not stock as originally provided for in
the indenture, to noteholders for the initial principal amount of notes
surrendered for conversion. The remainder of the conversion value would be
paid in cash or shares, at our election. In addition, the method by which
contingent cash interest is determined will be amended. Only consenting
noteholders will be bound by the amendments to the indenture. If all
noteholders consent, the total payment will be $24.5 million, which we
will amortize ratably over the next 12 months.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Executive Summary

We are a holding company which owns industry-leading advertising,
marketing and corporate communications companies that span more than 30
marketing disciplines, 100 countries, 1,500 subsidiary agencies and 5,000
clients. On a global, pan-regional and local basis, our agencies provide
traditional media advertising services as well as marketing services including
customer relationship management, public relations and specialty communications.

Given our size and breadth, we manage the business by monitoring several
financial and non-financial performance indicators. The key indicators that we
review focus on the areas of revenues and operating expenses.

Revenue growth is analyzed by reviewing the components and mix of the
growth, including growth by major geographic location, by major marketing
discipline, from currency changes and from acquisition.

Our revenue has historically been derived almost evenly from our domestic
and international operations. For the three months ended June 30, 2004, our
overall revenue growth was 12.0%, of which 3.5% was related to changes in
foreign exchange rates and 2.5% was related to acquired entities. The remainder
of our growth, 6.0%, was organic growth. For the first six months of 2004, our
overall revenue growth was 13.5%, of which 5.0% was related to changes in
foreign exchange rates and 2.6% was related to acquired entities. The remainder
of our growth, 5.9%, was organic growth.

For the three months ended June 30, 2004 and for the first six months of
2004, traditional media advertising represented about 44% of the total revenue
and grew by 12.3% and 13.1%, respectively. For the three months ended June 30,
2004 and in the first six months of 2004, marketing services represented about
56% of total revenue and grew by 11.8% and 13.9%, respectively.

We measure operating expenses in two distinct cost categories: salary and
service costs, and office and general expenses. Because we are a service
business, we monitor these costs on a percentage of revenue basis. On an annual
basis, salary and service costs tend to fluctuate in conjunction with changes in
revenues, whereas office and general expenses, which are not directly related to
servicing clients, normally tend to decrease as a percentage as revenues
increase because a significant portion of these expenses are relatively fixed in
nature. During the second quarter of 2004, salary and service costs increased
from 66.4% of revenue to 68.7% of revenue. Office and general expenses decreased
from 18.8% of revenue to 17.0% of revenue. During the first six months of 2004,
salary and service costs increased from 68.2% of revenue to 70.0% of revenue.
Office and general expenses decreased from 19.0% of revenue to 17.7% of revenue.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)

Our net income for the second quarter of 2004 increased by 14.5% to $206.1
million from $180.0 million in the second quarter of 2003, and our diluted EPS
increased by 14.6% to $1.10 from $0.96. Our net income for the first six months
of 2004 increased by 15.6% to $341.7 million from $295.6 million in the first
six months of 2003, and our diluted EPS increased by 14.6% to $1.81 from $1.58.

In accordance with SFAS No. 123, "Accounting for Stock Based
Compensation", as amended by SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of FASB Statement No.
123", we elected to account for stock-based employee compensation using the fair
value method effective January 1, 2004. As a result, the fair value of
stock-based employee compensation, including unvested employee stock options
issued and outstanding, were recorded as an expense in the current period
utilizing the retroactive restatement method as set forth in SFAS 148.
Accordingly, our results for the quarter ended June 30, 2003 and the six months
ended June 30, 2003 have been restated as if we had used the fair value method
to account for stock-based employee compensation. Results of pre-tax stock-based
employee compensation costs for the three months ended June 30, 2004 and 2003
included $30.0 million and $32.4 million, respectively, and for the six months
ended June 30, 2004 and 2003 included $61.6 million and $67.1 million,
respectively. Also, in connection with the restatement, the December 31, 2003
balance sheet presented above reflects an increase in the deferred tax benefit
of $120.5 million, an increase in additional paid-in capital of $434.7 million,
an increase in unamortized stock compensation of $92.6 million and a decrease in
retained earnings of $221.6 million.

The following analysis gives further information about the changes in our
financial performance on a quarterly and six-month year-to-date basis.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)

Results of Operations: Second Quarter 2004 Compared to Second Quarter 2003

Revenue: Our second quarter of 2004 consolidated worldwide revenue
increased 12.0% to $2,407.8 million from $2,149.5 million in the comparable
period last year. The effect of foreign exchange impacts increased worldwide
revenue by $75.3 million. Acquisitions, net of disposals, increased worldwide
revenue by $54.7 million in the second quarter of 2004 and organic growth
increased worldwide revenue by $128.3 million. The components of the second
quarter 2004 revenue growth in the U.S. ("domestic") and the remainder of the
world ("international") are summarized below ($ in millions):

Total Domestic International
-------------------- ------------------- -------------------
$ % $ % $ %
----------- - ---------- - ----------- -

Second Quarter ended June 30, 2003... $ 2,149.5 -- $ 1,182.2 -- $ 967.3 --

Components of Revenue Changes:

Foreign exchange impact.............. 75.3 3.5% -- -- 75.3 7.8%
Acquisitions......................... 54.7 2.5% 45.8 3.9% 8.9 0.9%
Organic.............................. 128.3 6.0% 84.2 7.1% 44.1 4.6%
--------- --- --------- ---- ---------- ----
Second Quarter ended June 30, 2004... $ 2,407.8 12.0% $ 1,312.2 11.0% $ 1,095.6 13.3%
========== ==== ========== ==== ========== ====

The components and percentages are calculated as follows:

o The foreign exchange impact component shown in the table is
calculated by first converting the current period's local currency
revenue using the average exchange rates from the equivalent prior
period to arrive at a constant currency revenue (in this case
$2,332.5 million for the Total column in the table). The foreign
exchange impact equals the difference between the current period
revenue in U.S. dollars and the current period revenue in constant
currency (in this case $2,407.8 million less $2,332.5 million for
the Total column in the table).

o The acquisition component shown in the table is calculated by
aggregating 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.

o The organic component shown in the table is calculated by
subtracting both the foreign exchange and acquisition revenue
components from total revenue growth.

o The percentage change shown in the table of each component is
calculated by dividing the individual component amount by the prior
period revenue base of that component (in this case $2,149.5 million
for the Total column in the table).

The components of revenue and revenue growth in our primary geographic
markets for the second quarter of 2004 compared to the second quarter of 2003
are summarized below ($ in millions):

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)

$ Revenue % Growth
--------- --------
United States....................... $1,312.2 11.0%
Euro Denominated Markets............ 503.8 12.7%
United Kingdom...................... 261.4 12.6%
Other............................... 330.4 13.3%
------- ----
Total............................... $2,407.8 12.0%
======== ====

As indicated, foreign exchange impacts increased our international revenue
by $75.3 million during the quarter ended June 30, 2004. The most significant
impacts resulted from the continued period-over-period strengthening of the Euro
and the British Pound against the U.S. dollar, as our operations in these
markets represented approximately 70.0% of our international revenue.

Several long-term trends continue to positively affect our business,
including our clients increasingly expanding the focus of their brand strategies
from national markets to the global market. Additionally, in an effort to gain
greater efficiency and effectiveness from their marketing dollars, clients are
increasingly requiring greater coordination of their traditional advertising and
marketing activities and concentrating these activities with a smaller number of
service providers.

Driven by our clients' continuous demand for more effective and efficient
branding 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, brand consultancy, crisis communications, custom
publishing, database management, digital and interactive marketing, direct
marketing, directory advertising, entertainment marketing, environmental design,
experiential marketing, field marketing, financial/corporate
business-to-business advertising, graphic arts, healthcare communications,
instore design, investor relations, marketing research, media planning and
buying, multi-cultural marketing, non-profit marketing, organizational
communications, package design, product placement, promotional marketing, public
affairs, public relations, real estate advertising and marketing, recruitment
communications, reputation consulting, retail marketing and sports and event
marketing. In an effort to monitor the changing needs of our clients and to
further expand the scope of our services to key clients, we monitor revenue
across a broad range of disciplines and group them into the following four
categories: traditional media advertising, customer relationship management
(referred to as CRM), public relations and specialty communications, as
summarized below.

(Dollars in Millions)
-----------------------------------------------------------------------
2nd Quarter % of 2nd Quarter % of $ %
2004 Revenue 2003 Revenue Growth Growth
--------- ------- -------- ------- ------ ------

Traditional media advertising $1,059.9 44.0% $ 943.7 43.9% $ 116.2 12.3%
CRM 808.7 33.6% 733.3 34.1% 75.4 10.3%
Public relations 263.1 10.9% 238.2 11.1% 24.9 10.5%
Specialty communications 276.1 11.5% 234.3 10.9% 41.8 17.8%
-------- -------- --------
$2,407.8 $2,149.5 $ 258.3 12.0%
======== ======== ========

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)

Certain reclassifications have been made to the second quarter 2003
amounts in the table above to conform the numbers to the second quarter 2004
amounts presented.

Operating Expenses: Our second quarter 2004 worldwide operating expenses
increased $233.9 million, or 12.8%, to $2,064.1 million from $1,830.2 million in
the second quarter of 2003, as shown below.

(Dollars in Millions)
--------------------------------------------------------------------------------------
Three Months Ended June 30,
--------------------------------------------------------------------------------------
2004 2003 2004 vs 2003
-------------------------------- ----------------------------- -----------------
% % of % % of
of Total Op. of Total Op. $ %
Revenue Revenue Costs Revenue Revenue Costs Growth Growth
---------- ------- ----- ------- ------- ----- ------- ------

Revenue ........................... $ 2,407.8 $2,149.5 $ 258.3 12.0%

Operating expenses:
Salary and service costs....... 1,653.6 68.7% 80.1% 1,426.7 66.4% 78.0% 226.9 15.9%
Office and general expenses.... 410.5 17.0% 19.9% 403.5 18.8% 22.0% 7.0 1.7%
--------- ---- ---- -------- ----- ---- ------- ----
Total Operating Costs.............. 2,064.1 85.7% 1,830.2 85.1% 233.9 12.8%

Operating profit................... $ 343.7 14.3% $ 319.3 14.9% $ 24.4 7.6%
========= ======== =======

Salary and service costs, which are comprised of direct service costs and
salary related costs, increased by $226.9 million, or 15.9%, and represented
80.1% of total operating expenses in the second quarter of 2004 versus 78.0% in
the second quarter of 2003. These expenses also increased as a percentage of
revenue to 68.7% in the second quarter of 2004 from 66.4% in the second quarter
of 2003 primarily as a result of increased incentive compensation costs as well
as increases in direct service costs, including increases in costs relating to
new business initiatives and recruitment costs, and changes in the mix of our
revenues. This was partially offset by our continued efforts to increase the
variability of our cost structure on a location-by-location basis.

Office and general expenses, which are comprised of office and equipment
rent, depreciation and amortization of other intangibles, professional fees and
other overhead expenses, increased by $7.0 million, or 1.7%, in the second
quarter of 2004 compared to the same period in 2003. Office and general expenses
decreased as a percentage of our total operating costs in the second quarter of
2004 to 19.9% versus 22.0% in the prior period. Additionally, as a percentage of
revenue, office and general expenses decreased in the second quarter of 2004 to
17.0% from 18.8% in the second quarter of 2003, as these expenses are relatively
fixed in nature and do not necessarily change relative to our revenue growth or
changes in our salary and services costs.

Net Interest Expense: Our net interest expense in the second quarter of
2004 was $7.3 million, down from $12.9 million in the same period in 2003. The
decrease of $5.4 million in our gross interest expense was attributed to ratably
amortizing the $25.4 million interest payment made in February 2003 related to
our convertible notes due 2031 over the 12-month period ended in February 2004.
No such payment was made in February 2004. In addition, year-over-year interest
cost savings resulted from the issuance of $600.0 million convertible notes in
June 2003 at a zero percent interest rate. This was partially offset by
additional amortization expense related to the $6.7 million interest payment
made in August 2003 related to our convertible notes

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)

due 2032. Furthermore, interest expense relative to the (euro)152.4 million
5.20% Euro note increased due to the foreign currency change of the Euro
relative to the U.S. dollar in the second quarter of 2004.

On July 29, 2004, we offered to pay holders of our Zero Coupon Zero Yield
Convertible Notes due 2032 $27.50 per $1,000 principal amount of notes as an
incentive to the holders which have not exercised their put right on August 2,
2004, and who, prior to the close of business on August 9, 2004, delivered a
consent to amend the indenture under which the notes were issued. We expect to
make a $24.5 million interest payment on August 10, 2004, or as soon as
practicably possible, and it will be amortized ratably over the next 12 months
and, accordingly, we expect interest expense to increase in the second half of
2004 compared to the first half of 2004.

Income Taxes: Our consolidated effective income tax rate was 33.6% in the
second quarter of 2004, which is consistent with our full year rate for 2003,
but is less than the 33.9% rate in the second quarter of 2003. This reduction
from the second quarter of 2003 reflects the realization of our ongoing focus on
tax planning initiatives, including increasing the efficiencies of our
international and state tax structures.

Earnings Per Share (EPS): For the foregoing reasons, our net income in the
second quarter of 2004, increased $26.1 million, or by 14.5% to $206.1 million
from $180.0 million in the second quarter of 2003. Diluted earnings per share
increased 14.6% to $1.10 in the second quarter of 2004, as compared to $0.96 in
the prior year period.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)

Results of Operations: First Six Months 2004 Compared to First Six Months 2003

Revenue: Our first six months of 2004 consolidated worldwide revenue
increased 13.5% to $4,639.2 million from $4,086.8 million in the comparable
period last year. The effect of foreign exchange impacts increased worldwide
revenue by $205.1 million. Acquisitions, net of disposals, increased worldwide
revenue by $106.9 million in the first six months of 2004 and organic growth
increased worldwide revenue by $240.4 million. The components of the first six
months of 2004 revenue growth in the U.S. ("domestic") and the remainder of the
world ("international") are summarized below ($ in millions):

Total Domestic International
-------------------- ------------------- -------------------
$ % $ % $ %
----------- - ---------- - ----------- -

Six Months ended June 30, 2003....... $ 4,086.8 -- $ 2,281.8 -- $ 1,805.0 --

Components of Revenue Changes:

Foreign exchange impact.............. 205.1 5.0% -- -- 205.1 11.4%
Acquisitions......................... 106.9 2.6% 89.4 3.9% 17.5 1.0%
Organic.............................. 240.4 5.9% 162.2 7.1% 78.2 4.3%
--------- --- --------- --- ---------- ---
Six Months ended June 30, 2004....... $ 4,639.2 13.5% $ 2,533.4 11.0% $ 2,105.8 16.7%
========== ==== ========== ==== ========== ====

The components and percentages are calculated as follows:

o The foreign exchange impact component shown in the table is
calculated by first converting the current period's local currency
revenue using the average exchange rates from the equivalent prior
period to arrive at a constant currency revenue (in this case
$4,434.1 million for the Total column in the table). The foreign
exchange impact equals the difference between the current period
revenue in U.S. dollars and the current period revenue in constant
currency (in this case $4,639.2 million less $4,434.1 million for
the Total column in the table).

o The organic component shown in the table is calculated by
subtracting both the foreign exchange and acquisition revenue
components from total revenue growth.

o The percentage change shown in the table of each component is
calculated by dividing the individual component amount by the prior
period revenue base of that component (in this case $4,086.8 million
for the Total column in the table).

The components of revenue and revenue growth in our primary geographic
markets for the first six months of 2004 compared to the first six months of
2003 are summarized below ($ in millions):

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)

$ Revenue % Growth
--------- --------

United States....................... $2,533.4 11.0%
Euro Denominated Markets............ 959.6 15.0%
United Kingdom...................... 512.4 15.5%
Other............................... 633.8 20.2%
------- ----
Total............................... $4,639.2 13.5%
======== ====

As indicated, foreign exchange impacts increased our international revenue
by $205.1 million during the first six months ended June 30, 2004. The most
significant impacts resulted from the continued period-over-period strengthening
of the Euro and the British Pound against the U.S. dollar, as our operations in
these markets represented approximately 70.0% of our international revenue.

In an effort to monitor the changing needs of our clients and to further
expand the scope of our services to key clients, we monitor revenue across a
broad range of disciplines and group them into the following four categories:
traditional media advertising, customer relationship management (referred to as
CRM), public relations and specialty communications, as summarized below.

(Dollars in Millions)
------------------------------------------------------------------------
Six Months % of Six Months % of $ %
2004 Revenue 2003 Revenue Growth Growth
--------- ------- -------- ------- ------ ------

Traditional media advertising $2,037.1 43.9% $1,801.8 44.1% $ 235.3 13.1%
CRM 1,558.8 33.6% 1,363.6 33.4% 195.2 14.3%
Public relations 502.4 10.8% 460.0 11.2% 42.4 9.2%
Specialty communications 540.9 11.7% 461.4 11.3% 79.5 17.2%
-------- -------- ------
$4,639.2 $4,086.8 $ 552.4 13.5%
======== ======== =======

Certain reclassifications have been made to the first six months of 2003
amounts in the table above to conform the numbers to the first six months of
2004 amounts presented.

Operating Expenses: Our first six months of 2004 worldwide operating
expense increased $500.9 million, or 14.0%, to $4,066.1 million from $3,565.2
million in the first six months of 2003, as shown below.

(Dollars in Millions)
--------------------------------------------------------------------------------------
Six Months Ended June 30,
--------------------------------------------------------------------------------------
2004 2003 2004 vs 2003
-------------------------------- ----------------------------- -----------------
% % of % % of
of Total Op. of Total Op. $ %
Revenue Revenue Costs Revenue Revenue Costs Growth Growth
---------- ------- ----- ------- ------- ----- ------- ------

Revenue ........................... $ 4,639.2 $ 4,086.8 $ 552.4 13.5%

Operating expenses:
Salary and service costs....... 3,247.2 70.0% 79.9% 2,787.2 68.2% 78.2% 460.0 16.5%
Office and general expenses.... 818.9 17.7% 20.1% 778.0 19.0% 21.8% 40.9 5.3%
--------- ---- ---- -------- ---- ---- --------- -----
Total Operating Costs.............. 4,066.1 87.6% 3,565.2 87.2% 500.9 14.0%

Operating profit................... $ 573.1 12.4% $ 521.6 12.8% $ 51.5 9.9%
========= ======== =========

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)

Salary and service costs, which are comprised of direct service costs and
salary related costs, increased by $460.0 million, or 16.5%, and represented
79.9% of total operating expenses in the first six months of 2004 versus 78.2%
in the first six months of 2003. These expenses also increased as a percentage
of revenue to 70.0% in the first six months of 2004 from 68.2% in the first six
months of 2003, primarily, as a result of increased incentive compensation costs
as well as increases in direct service costs, including increases in costs
relating to new business initiatives and recruitment costs, and changes in the
mix of our revenues. This was partially offset by our continued efforts to
increase the variability of our cost structure on a location-by-location basis
and the positive impact in the first quarter of 2004 of previous severance
actions.

Office and general expenses, which are comprised of office and equipment
rent, depreciation and amortization of other intangibles, professional fees and
other overhead expenses, increased by $40.9 million, or 5.3%, in the first six
months of 2004 compared to the same period in 2003. Office and general expenses
decreased as a percentage of our total operating costs in the first six months
of 2004 to 20.1% versus 21.8% in the prior period. Additionally, as a percentage
of revenue, office and general expenses decreased in the first six months of
2004 to 17.7% from 19.0% in the first six months of 2003 as these expenses are
relatively fixed in nature and do not necessarily change relative to our revenue
growth or changes in our salary and service costs.

Included in office and general expense was a net gain of $13.1 million
related to investment activity during the first quarter. In March 2004, in
connection with Seneca's recapitalization, we agreed to exchange our remaining
preferred stock in Seneca for a $24.0 million senior secured note and 40% of
Seneca's outstanding common stock. The note, which is due in March 2007, bears
interest at a rate of 6.25% per annum. The recapitalization transaction was
required to be recorded at fair value and, accordingly, we recorded a pre-tax
net gain of $24.0 million. This gain was offset by losses of $10.9 million on
other cost-based investments.

Excluding the net gain of $13.1 million, office and general expenses were
17.9% of revenue in the first six months of 2004 compared to 19.0% of revenue in
the first six months of 2003 and operating margin decreased to 12.1% of revenue
from 12.8% of revenue. This decrease in operating margin resulted primarily from
$9.9 million of costs incurred in connection with the disposal of two
non-strategic businesses.

Net Interest Expense: Our net interest expense in the first six months of
2004 was $17.7 million, down from $21.2 million in the same period in 2003. Our
gross interest expense also decreased by $2.9 million which is attributed to
ratably amortizing the $25.4 million interest payment made in February 2003
related to our convertible notes due 2031 over the preceding twelve-month period
ended in February 2004. No such payment was made in February 2004. Interest cost
savings also resulted from the issuance of $600.0 million convertible notes in
June 2003 at a zero percent interest rate. This was partially offset by
additional amortization expense related to the $6.7 million interest payment
made in 2003 related to our convertible notes due 2032. In addition, interest
expense relative to the (euro)152.4 million 5.20% Euro note increased due to the
foreign currency change of the Euro relative to the U.S. dollar in the first
half of 2004.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)

Income Taxes: Our consolidated effective income tax rate was 33.6% in the
first six months of 2004, which is consistent with our full year rate for 2003,
but is less than the 34.2% rate in the first six months of 2003. This reduction
from the first half of 2003 reflects the realization of our ongoing focus on tax
planning initiatives, including increasing the efficiencies of our international
and state tax structures.

Earnings Per Share (EPS): For the foregoing reasons, our net income in the
first six months of 2004, increased $46.1 million, or by 15.6% to $341.7 million
from $295.6 million in the first six months of 2003. Diluted earnings per share
increased 14.6% to $1.81 in the first six months of 2004, as compared to $1.58
in the prior year period.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)

Critical Accounting Policies

To assist in better understanding our financial statements and the related
management's discussion and analysis of those results, readers are encouraged to
consider this information together with our discussion of our critical
accounting policies under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in our Annual Report on Form 10-K
for the year ended December 31, 2003 (the "2003 Form 10-K"), as well as our
consolidated financial statements and the related notes included in our 2003
Form 10-K, for a more complete understanding of all of our accounting policies.

Proposed Accounting Pronouncements

On June 30, 2004, the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board ("FASB") reached a tentative conclusion with regard
to EITF Issue 04-8, Accounting Issues Related to Certain Features of
Contingently Convertible Debt and the Effect on Diluted Earnings per Share. As
currently drafted, this tentative conclusion is expected to be finalized in the
Fall of 2004 and it would be effective beginning with our December 31, 2004
financials. The tentative conclusion applies to all contingently convertible
debt instruments including our Convertible Notes due 2031, 2032 and 2033.

The tentative conclusion requires companies to account for contingently
convertible debt using the "if converted" method set forth in Statement of
Financial Accounting Standard No. 128 for purposes of calculating diluted EPS.
Therefore, contingently convertible debt would be included in the diluted EPS
calculation as if the debt had been converted into common stock.

The tentative conclusion, which is subject to change before it is
finalized, requires retroactive application and as a result, we would be
required to restate diluted EPS for prior periods. If adopted in its current
form, the application would result in a reduction of our diluted EPS.

Contingent Acquisition Obligations

Certain of our acquisitions are structured with additional contingent
purchase price obligations. We utilize contingent purchase price structures in
an effort to minimize the risk to us associated with potential future negative
changes in the performance of the acquired entity during the post-acquisition
transition period. The amount of future contingent purchase price payments that
we would be required to pay for prior acquisitions, assuming that the acquired
businesses perform over the relevant future periods at their current profit
levels, is approximately $365 million as of June 30, 2004. The ultimate amount
payable cannot be predicted with reasonable certainty because it is dependent
upon future results of operations of subject businesses and subject to changes
in foreign currency exchange rates. In accordance with GAAP, we have not
recorded a liability for these items on our balance sheet since the definitive

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)

amount is not determinable or distributable. Actual results can differ from
these estimates and the actual amounts that we pay are likely to be different
from these estimates. Our obligations change from period to period as a result
of payments made during the current period, changes in the previous estimate of
the acquired entities' performance, changes in foreign currency exchange rates
and other factors. These differences could be significant. The contingent
purchase price obligations as of June 30, 2004, calculated assuming that the
acquired businesses perform over the relevant future periods at their current
profit levels, are as follows:

(Dollars in Millions)
-------------------------------------------------------------------
Remainder There-
2004 2005 2006 2007 after Total
---- ---- ---- ---- ----- -----
$ 72 $ 157 $ 55 $ 53 $ 28 $ 365

In addition, owners of interests in certain of our subsidiaries or
affiliates have the right in certain circumstances to require us to purchase
additional ownership stakes in those companies. Assuming that the subsidiaries
and affiliates perform over the relevant periods at their current profit levels,
the aggregate amount we could be required to pay in future periods is
approximately $253 million, $151 million of which relate to obligations that are
currently exercisable. The ultimate amount payable relating to these
transactions will vary because it is dependent on the future results of
operations of the subject businesses, the timing of the exercise of these
rights, changes in foreign currency exchange rates and other factors. The actual
amount that we pay is likely to be different from this estimate, and the
difference could be significant. The obligations that exist for these agreements
as of June 30, 2004, calculated using the assumptions above, are as follows:

(Dollars in Millions)
--------------------------------------------
Currently Not Currently
Exercisable Exercisable Total
----------- ----------- -----
Subsidiary agencies $ 127 $ 93 $ 220
Affiliated agencies 24 9 33
------- ------- -------
Total $ 151 $ 102 $ 253
======= ======= =======

If these rights were exercised, there would likely be an increase in our net
income as a result of our increased ownership and a reduction of minority
interest expense.

Liquidity and Capital Resources

Our principal non-discretionary funding requirement is our working capital
requirements. In addition, we have contractual obligations related to our debt
and convertible notes, our recurring business operations primarily related to
lease obligations, as well as certain contingent acquisition obligations related
to acquisitions made in prior years.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)

Our principal discretionary cash requirements include dividend payments to
our shareholders, purchases of treasury stock, payments for strategic
acquisitions and capital expenditures.

We have a seasonal working capital cycle. Working capital requirements are
lowest at year-end and higher during the quarters. This occurs because in the
majority of our businesses we act as agent on behalf of our clients, including
when we place media and incur production costs on their behalf. We generally
require collection from our clients prior to our payment for the media and
production cost obligations and these obligations are greatest at the end of the
year.

Historically, on an annual basis, our discretionary and non-discretionary
spending has been funded from operating cash flow. However, during the year we
manage liquidity by utilizing our credit facilities discussed below.

Liquidity: We had cash and cash equivalents totaling $658.2 million and
$1,528.7 million at June 30, 2004 and December 31, 2003, respectively. We also
had short-term investments totaling $20.2 million at both June 30, 2004 and
December 31, 2003. Consistent with our historical trends in the first six months
of the year, we had negative cash flow from operations of $263.9 million. We
funded this deficit primarily with cash on hand and by managing our working
capital.

Capital Resources: On May 24, 2004, we amended and extended our existing
revolving credit facilities with a consortium of banks, resulting in a five-year
$1,500.0 million revolving credit facility which matures May 24, 2009, and a
$500.0 million 364-day revolving credit facility with a maturity date of May 23,
2005. These facilities amended our previous three-year, $835.0 million and
$1,200 million, 364-day revolving credit facilities. We are also an active
participant in the commercial paper market with a $1,500.0 million program. Each
of our bank credit facilities provide credit support for issuances under this
program. As of June 30, 2004, no commercial paper was outstanding and we had no
other borrowings outstanding under these credit facilities. The 364-day facility
includes a provision which allows us to convert all amounts outstanding at
expiration of the facility into a one-year term loan. The consortium consists of
27 banks, each committing a pro rata amount to the five-year and 364-day
facilities. Citibank N.A. acts as administrative agent, ABN Amro acts as
syndication agent and JPMorgan Chase Bank and HSBC Bank USA act as
co-documentation agents for the facilities. Other significant lending
institutions include Societe Generale, Bank of America, Wachovia and Sumitomo
Mitsui. These facilities provide us with the ability to classify our borrowings
that could come due within one year as long-term debt, as it is our intention to
keep the borrowings outstanding on a long-term basis.

We had short-term bank loans of $41.4 million and $42.4 million at June
30, 2004 and December 31, 2003, respectively, which are comprised of domestic
borrowings and bank overdrafts of our international subsidiaries and are treated
as unsecured loans pursuant to our bank agreements.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)

At June 30, 2004, we also had a total of $2,339.3 million aggregate
principal amount of convertible notes outstanding, including $847.0 million
Liquid Yield Option Notes due 2031, which were issued in February 2001, $892.3
million Zero Coupon Zero Yield Convertible Notes due 2032, which were issued in
March 2002, and $600.0 million Zero Coupon Zero Yield Convertible Notes due
2033, which were issued in June 2003.

On July 29, 2004, we offered to pay holders of our Zero Coupon Zero Yield
Notes due 2032, $27.50 per $1,000 principal amount of notes as an incentive to
the holders who do not put their notes to us for repurchase and who consent to
certain amendments to the indenture under which the notes were issued. None of
the notes were put to us for repurchase. Under the amendments, we would pay
cash, not stock as originally provided for in the indenture, to noteholders for
the initial principal amount of notes surrendered for conversion. The remainder
of the conversion value would be paid in cash or shares, at our election. In
addition, the method by which contingent cash interest is determined will be
amended. Only consenting noteholders will be bound by the amendments to the
indenture. If all noteholders consent, the total payment will be $24.5 million,
which we will amortize ratably over the next 12 months.

At June 30, 2004, we had Euro-denominated bonds outstanding of (euro)152.4
million or $186.0 million. The bonds pay a fixed rate of 5.2% to maturity in
June 2005. While an increase in the value of the Euro against the U.S. dollar
will result in a greater liability for interest and principal, there will be a
corresponding increase in the dollar value of our Euro-denominated net assets.

Our outstanding debt and amounts available under these facilities as of
June 30, 2004 ($ in millions) were as follows:

Debt Available
Outstanding Credit
----------- ------

Bank loans (due in less than 1 year)................................... $ 41.4 --
$1,500.0 Million Revolver - due May 24, 2009......................... -- $ 1,500.0
$500.0 Million - due May 23, 2005...................................... -- 500.0
(euro)152.4 million 5.20% Euro notes - due June 24, 2005............. 186.0 --
Convertible notes - due February 7, 2031............................. 847.0 --
Convertible notes - due July 31, 2032................................ 892.3 --
Convertible notes - due June 15, 2033................................ 600.0 --
Loan notes and sundry - various through 2012......................... 24.6 --
---------- -----------
Total...................................................................... $ 2,591.3 $ 2,000.0
========== ==========

We believe that our operating cash flow combined with our available lines
of credit and our access to the capital markets are sufficient to support our
foreseeable cash requirements, including working capital, capital expenditures,
dividends and acquisitions.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

Our results of operations are subject to risk from the translation to the
U.S. dollar of the revenue and expenses of our foreign operations, which are
generally denominated in the local currency. For the most part, our revenues and
the expenses incurred related to those revenues are denominated in the same
currency. This minimizes the impact that fluctuations in exchange rates will
have on profit margins.

Our 2003 Annual Report on Form 10-K for the year ended December 31, 2003,
provides a more detailed discussion of the market risks affecting our
operations. As of June 30, 2004, no material change had occurred in our market
risks from the disclosure contained in that 10-K.

Forward-Looking Statements

"Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Quantitative and Qualitative Disclosures About Market Risk"
set forth in this report contain disclosures which are forward-looking
statements within the meaning of the federal securities laws. Forward-looking
statements include all statements that do not relate solely to historical or
current facts, and can be identified by the use of words such as "may," "will,"
"expect," "project," "estimate," "anticipate," "envisage," "plan" or "continue."
These forward-looking statements are based upon our current plans or
expectations and are subject to a number of uncertainties and risks that could
significantly affect current plans and anticipated actions and our future
financial condition and results. The uncertainties and risks include, but are
not limited to, changes in general economic conditions, competitive factors,
client communication requirements, the hiring and retention of human resources
and other factors. In addition, our international operations are subject to the
risk of currency fluctuations, exchange controls and similar risks discussed
above. As a consequence, current plans, anticipated actions and future financial
condition and results may differ from those expressed in any forward-looking
statements made by us or on our behalf, and those differences could be material.

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures designed to ensure that
information required to be included in our SEC reports is recorded, processed,
summarized, analyzed and reported within applicable time periods. During the
90-day period prior to the filing of this report, we conducted an evaluation,
under the supervision and with the participation of our management, including
our CEO and CFO, of the effectiveness of our disclosure controls and procedures.
Based on that evaluation, our CEO and CFO concluded that they believe that our
disclosure controls and procedures were effective to ensure recording,
processing, summarizing, analysis and reporting of information required to be
included in our SEC reports on a timely basis. There have been no significant
changes in our internal controls or other factors that could be reasonably
expected to materially affect the effectiveness of these controls since that
evaluation was completed.

PART II. OTHER INFORMATION

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities

The following table presents information with respect to purchases of
common stock of the Company made during the three months ended June 30,
2004 by us or any of our "affiliated purchasers".

(c)
Total Number (d)
(a) (b) of Shares Purchased Maximum Number
Total Average As Part of Publicly of Shares that May
Number of Price Paid Announced Plans Yet Be Purchased Under
During the month: Shares Purchased(1) Per Share or Programs the Plans or Programs
---------------- ---------------- --------- --------------- -----------------------

April 2004 -- $ -- -- --

May 2004 629,600 $79.26 -- --

June 2004 1,207,100 $79.41 -- --
------------ ------ -------- --------
Total 1,836,700 $79.36 -- --
============ ====== ======== ========

(1) The shares were purchased in the open market for general corporate
purposes.

Item 4. Submission of Matters to a Vote of Security Holders

We held our annual shareholders' meeting on May 25, 2004. At the meeting,
votes were cast for the following proposals as follows:

To elect the following Directors:

Votes For Votes Withheld
--------- --------------
John D. Wren 143,419,590 2,020,108
Bruce Crawford 143,400,708 2,038,990
Robert Charles Clark 143,461,248 1,978,650
Leonard S. Coleman, Jr. 141,702,558 3,737,140
Errol M. Cook 143,472,934 1,966,764
Susan S. Denison 144,235,898 1,203,800
Michael A. Henning 143,489,232 1,950,466
John R. Murphy 142,930,053 2,509,645
John R. Purcell 143,254,517 2,185,181
Linda Johnson Rice 143,674,436 1,765,262
Gary L. Roubos 143,290,832 2,148,866

To ratify the appointment of KPMG as our independent auditors for the
fiscal year 2004:

Votes For Votes Against Votes Withheld
--------- ------------- --------------

143,624,968 1,021,205 793,524

To approve our Director Equity Plan:

Votes For Votes Against Votes Withheld
--------- ------------- --------------

117,868,813 7,683,412 1,137,469

Item 6. Exhibit and Reports on Form 8-K

(a) Exhibits

10.1 364-day Credit Agreement, dated May 24, 2004, among Omnicom Group
Inc, Omnicom Capital Inc., Omnicom Finance PLC, the financial
institutions party thereto, Citibank, N.A., as administrative agent,
ABN Amro Bank N.V., as syndication agent and JPMorgan Chase Bank and
HSBC Bank USA as co-documentation agents.

10.2 5-year Credit agreement, dated May 24, 2004, among Omnicom Group
Inc, Omnicom Capital Inc., Omnicom Finance PLC, the financial
institutions party thereto, Citibank, N.A., as administrative agent,
ABN Amro Bank N.V., as syndication agent and JPMorgan Chase Bank and
HSBC Bank USA as co-documentation agents.

10.3 Executive Salary Continuation Plan Agreement - Kenneth R. Kaess.

31.1 Certification of Chief Executive Office and President required by
Rule 13a-14(a) under the Securities Exchange Act of 1934, as
amended.

31.2 Certification of Executive Vice President and Chief Financial
Officer required by Rule 13a -14(a) under the Securities Exchange
Act of 1934, as amended.

32.1 Certification of the Chief Executive Officer and President and the
Executive Vice President and Chief Financial Officer required by
Rule 13a-14(b) under the Exchange Act of 1934, as amended, and 18
U.S.C. ss. 1350.

(b) Reports on Form 8-K

On April 27, 2004, we furnished a Current Report on Form 8-K under Item 9
(Regulation FD Disclosure) and Item 12 (Results of Operations and
Financial Condition), our press release announcing our financial results
and the first quarter ended March 31, 2004 and the text of materials used
in the related call at which such results were discussed.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

OMNICOM GROUP INC.

August 9, 2004 /s/ Randall J. Weisenburger
------------------------------------
Randall J. Weisenburger
Executive Vice President
and Chief Financial Officer
(on behalf of Omnicom Group Inc.
and as Principal Financial Officer)