Company Quick10K Filing
Quick10K
Omnicom Group
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$79.30 220 $17,460
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-07-17 Earnings, Exhibits
8-K 2019-07-08 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-06-24 Other Events, Exhibits
8-K 2019-05-23 Shareholder Vote
8-K 2019-04-16 Earnings, Exhibits
8-K 2019-02-14 Off-BS Arrangement
8-K 2019-02-12 Earnings, Exhibits
8-K 2018-12-11 Amend Bylaw, Exhibits
8-K 2018-11-13 Other Events
8-K 2018-10-16 Earnings, Exhibits
8-K 2018-10-12 Officers, Exhibits
8-K 2018-07-17 Earnings, Exhibits
8-K 2018-05-22 Shareholder Vote
8-K 2018-02-15 Officers, Exhibits
SABR Sabre 5,650
BEAT Biotelemetry 1,730
GBL Gamco Investors 584
FTR Frontier Communications 228
GDP Goodrich Petroleum 150
PXS Pyxis Tankers 24
CETX Cemtrex 4
WDNT Worldnet of Nevada 0
NVGI Noble Vici Group 0
WLB Westmoreland Coal 0
OMC 2019-06-30
Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 a2019q2exhibit311.htm
EX-31.2 a2019q2exhibit312.htm
EX-32 a2019q2exhibit32.htm

Omnicom Group Earnings 2019-06-30

OMC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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___________________________________________________________________________________________________

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2019
_________________________
Commission File Number: 1-10551

OMNICOM GROUP INC.
(Exact name of registrant as specified in its charter)
New York
13-1514814
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
 
 
437 Madison Avenue
 
New York
 
New York
10022
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (212) 415-3600
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
____________________________________________________________
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbols
Name of each exchange on which registered
Common Stock, $0.15 Par Value
OMC
New York Stock Exchange
0.800% Senior Notes due 2027
OMC/27
New York Stock Exchange
1.400% Senior Notes due 2031
OMC/31
New York Stock Exchange
____________________________________________________________
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 No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
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 filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
 
 
Emerging growth company
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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No
_________________________
As of July 10, 2019, there were 217,523,691 shares of Omnicom Group Inc. Common Stock outstanding.




OMNICOM GROUP INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2019
TABLE OF CONTENTS
PART I.
FINANCIAL INFORMATION
Page
Item 1.
 
 
Consolidated Balance Sheets - June 30, 2019 and December 31, 2018
 
Consolidated Statements of Income - Three and Six Months Ended June 30, 2019 and 2018
 
Consolidated Statements of Comprehensive Income - Three and Six Months Ended June 30, 2019 and 2018
 
Consolidated Statements of Equity - Three and Six Months Ended June 30, 2019
 
Consolidated Statements of Equity - Three and Six Months Ended June 30, 2018
 
Consolidated Statements of Cash Flows - Six Months Ended June 30, 2019 and 2018
 
Notes to Consolidated Financial Statements
Item 2.
Item 3.
Item 4.
 
 
 
PART II.
OTHER INFORMATION
 
Item 1.
Item 1A.
Item 2.
Item 6.
 
 
 
SIGNATURES
 
FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q 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: 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 our Annual Report on Form 10-K for the year ended December 31, 2018 and in Item 2 “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.

i




PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OMNICOM GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions)
 
June 30, 2019
 
December 31, 2018
 
(Unaudited)
 
 
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
2,898.1

 
$
3,652.4

Short-term investments, at cost
5.4

 
5.5

Accounts receivable, net of allowance for doubtful accounts of $24.9 and $26.8
7,244.9

 
7,666.1

Work in process
1,363.5

 
1,161.5

Other current assets
1,290.9

 
1,241.4

Total Current Assets
12,802.8

 
13,726.9

Property and Equipment at cost, less accumulated depreciation of $1,143.7 and $1,185.0
679.8

 
694.4

Operating Lease Right-Of-Use Assets
1,435.3

 

Equity Method Investments
111.7

 
120.9

Goodwill
9,364.7

 
9,384.3

Intangible Assets, net of accumulated amortization of $748.2 and $737.4
353.5

 
382.8

Other Assets
294.3

 
307.7

TOTAL ASSETS
$
25,042.1

 
$
24,617.0

LIABILITIES AND EQUITY
 
 
 
Current Liabilities:
 
 
 
Accounts payable
$
10,445.9

 
$
11,464.3

Customer advances
1,094.1

 
1,159.0

Current portion of debt
899.5

 
499.6

Short-term debt
608.5

 
8.1

Taxes payable
123.4

 
180.6

Other current liabilities
1,896.7

 
1,958.6

Total Current Liabilities
15,068.1

 
15,270.2

Long-Term Liabilities
975.1

 
1,197.8

Long-Term Liability - Operating Leases
1,317.9

 

Long-Term Debt
4,025.9

 
4,384.1

Deferred Tax Liabilities
438.0

 
413.7

Commitments and Contingent Liabilities (Note 13)

 


Temporary Equity - Redeemable Noncontrolling Interests
257.7

 
244.3

Equity:
 
 
 
Shareholders’ Equity:
 
 
 
Preferred stock

 

Common stock
44.6

 
44.6

Additional paid-in capital
726.2

 
728.8

Retained earnings
7,384.7

 
7,016.1

Accumulated other comprehensive income (loss)
(1,234.9
)
 
(1,228.5
)
Treasury stock, at cost
(4,510.4
)
 
(4,013.9
)
Total Shareholders’ Equity
2,410.2

 
2,547.1

Noncontrolling interests
549.2

 
559.8

Total Equity
2,959.4

 
3,106.9

TOTAL LIABILITIES AND EQUITY
$
25,042.1

 
$
24,617.0



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

1




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

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Revenue
$
3,719.8

 
$
3,859.6

 
$
7,188.7

 
$
7,489.2

Operating Expenses:
 
 
 
 
 
 
 
   Salary and service costs
2,665.2

 
2,772.9

 
5,232.8

 
5,485.7

   Occupancy and other costs
315.4

 
319.6

 
624.7

 
639.9

Cost of services
2,980.6

 
3,092.5

 
5,857.5

 
6,125.6

   Selling, general and administrative expenses
107.7

 
117.4

 
211.2

 
222.9

   Depreciation and amortization
57.8

 
67.4

 
117.4

 
136.8

 
3,146.1

 
3,277.3

 
6,186.1

 
6,485.3

Operating Profit
573.7

 
582.3

 
1,002.6

 
1,003.9

Interest Expense
66.6

 
66.4

 
129.6

 
128.6

Interest Income
16.4

 
13.9

 
33.4

 
29.3

Income Before Income Taxes and Income From Equity
    Method Investments
523.5

 
529.8

 
906.4

 
904.6

Income Tax Expense
130.6

 
136.7

 
233.2

 
227.7

Income From Equity Method Investments
1.2

 
1.7

 
0.7

 
2.6

Net Income
394.1

 
394.8

 
673.9

 
679.5

Net Income Attributed To Noncontrolling Interests
23.4

 
30.6

 
40.0

 
51.2

Net Income - Omnicom Group Inc.
$
370.7

 
$
364.2

 
$
633.9

 
$
628.3

Net Income Per Share - Omnicom Group Inc.:
 
 
 
 
 
 
 
Basic
$
1.69

 
$
1.61

 
$
2.86

 
$
2.75

Diluted
$
1.68

 
$
1.60

 
$
2.85

 
$
2.73

 
 
 
 
 
 
 
 
Dividends Declared Per Common Share
$
0.65

 
$
0.60

 
$
1.30

 
$
1.20























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

2




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


 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Net Income
$
394.1

 
$
394.8

 
$
673.9

 
$
679.5

Other Comprehensive Income:
 
 
 
 
 
 
 
Cash flow hedge:
 
 
 
 
 
 
 
Amortization of loss included in interest expense
1.4

 
1.4

 
2.8

 
2.8

Income tax effect
(0.4
)
 
(0.4
)
 
(0.8
)
 
(0.8
)
 
1.0

 
1.0

 
2.0

 
2.0

Defined benefit pension plans and postemployment arrangements:
 
 
 
 
 
 
 
Amortization of prior service cost
1.3

 
1.9

 
2.6

 
3.9

Amortization of actuarial losses
0.5

 
2.2

 
1.0

 
4.2

Income tax effect
(0.9
)
 
(1.3
)
 
(1.6
)
 
(2.4
)
 
0.9

 
2.8

 
2.0

 
5.7

Available-for-sale securities:
 
 
 
 
 
 
 
Reclassification

 

 

 
0.3

 

 

 

 
0.3

 
 
 
 
 
 
 
 
Foreign currency translation adjustment
(18.8
)
 
(325.8
)
 
12.9

 
(237.1
)
 
 
 
 
 
 
 
 
Other Comprehensive Income
(16.9
)
 
(322.0
)
 
16.9

 
(229.1
)
 
 
 
 
 
 
 
 
Comprehensive Income
377.2

 
72.8

 
690.8

 
450.4

Comprehensive Income Attributed To Noncontrolling Interests
23.4

 
0.9

 
41.0

 
26.5

Comprehensive Income - Omnicom Group Inc.
$
353.8

 
$
71.9

 
$
649.8

 
$
423.9



























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

3





OMNICOM GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
Three and Six Months Ended June 30, 2019
(In millions, except per share amounts)
(Unaudited)

 
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, 2018
297.2

 
$
44.6

 
$
728.8

 
$
7,016.1

 
$
(1,228.5
)
 
$
(4,013.9
)
 
$
2,547.1

 
$
559.8

 
$
3,106.9

Cumulative effect of accounting change
 
 
 
 
 
 
22.3

 
(22.3
)
 
 
 

 

 

Net income
 
 
 
 
 
 
263.2

 
 
 
 
 
263.2

 
16.5

 
279.7

Other comprehensive income (loss)
 
 
 
 
 
 
 
 
32.8

 
 
 
32.8

 
1.0

 
33.8

Dividends to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(17.0
)
 
(17.0
)
Acquisition of noncontrolling interests
 
 
 
 
0.4

 
 
 
 
 
 
 
0.4

 
(5.0
)
 
(4.6
)
Increase in noncontrolling interests from business combinations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.0

 
1.0

Change in temporary equity
 
 
 
 
(18.2
)
 
 
 
 
 
 
 
(18.2
)
 

 
(18.2
)
Common stock dividends declared ($0.65 per share)
 
 
 
 
 
 
(144.6
)
 
 
 
 
 
(144.6
)
 


 
(144.6
)
Share-based compensation
 
 
 
 
16.8

 
 
 
 
 
 
 
16.8

 


 
16.8

Stock issued, share-based compensation
 
 
 
 
(9.8
)
 
 
 
 
 
11.7

 
1.9

 


 
1.9

Common stock repurchased
 
 
 
 
 
 
 
 
 
 
(286.1
)
 
(286.1
)
 


 
(286.1
)
Balance as of March 31, 2019
297.2

 
44.6

 
718.0

 
7,157.0

 
(1,218.0
)
 
(4,288.3
)
 
2,413.3

 
556.3

 
$
2,969.6

Net income
 
 
 
 
 
 
370.7

 
 
 
 
 
370.7

 
23.4

 
394.1

Other comprehensive income (loss)
 
 
 
 
 
 
 
 
(16.9
)
 
 
 
(16.9
)
 

 
(16.9
)
Dividends to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(29.1
)
 
(29.1
)
Acquisition of noncontrolling interests
 
 
 
 
1.7

 
 
 
 
 
 
 
1.7

 
(1.4
)
 
0.3

Increase in noncontrolling interests from business combinations
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

Change in temporary equity
 
 
 
 
6.1

 
 
 
 
 
 
 
6.1

 
 
 
6.1

Common stock dividends declared ($0.65 per share)
 
 
 
 
 
 
(143.0
)
 
 
 
 
 
(143.0
)
 
 
 
(143.0
)
Share-based compensation
 
 
 
 
17.5

 
 
 
 
 
 
 
17.5

 
 
 
17.5

Stock issued, share-based compensation
 
 
 
 
(17.1
)
 
 
 
 
 
19.4

 
2.3

 
 
 
2.3

Common stock repurchased
 
 
 
 
 
 
 
 
 
 
(241.5
)
 
(241.5
)
 
 
 
(241.5
)
Balance as of June 30, 2019
297.2

 
$
44.6

 
$
726.2

 
$
7,384.7

 
$
(1,234.9
)
 
$
(4,510.4
)
 
$
2,410.2

 
$
549.2

 
$
2,959.4
















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


4




OMNICOM GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
Three and Six Months Ended June 30, 2018
(In millions, except per share amounts)
(Unaudited)

 
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, 2017
297.2

 
$
44.6

 
$
828.3

 
$
6,210.6

 
$
(963.0
)
 
$
(3,505.4
)
 
$
2,615.1

 
$
537.1

 
$
3,152.2

Cumulative effect of accounting changes
 
 
 
 
 
 
23.6

 
 
 
 
 
23.6

 
0.4

 
24.0

Net income
 
 
 
 
 
 
264.1

 
 
 
 
 
264.1

 
20.6

 
284.7

Other comprehensive income (loss)
 
 
 
 
 
 
 
 
87.9

 
 
 
87.9

 
5.0

 
92.9

Dividends to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(16.3
)
 
(16.3
)
Acquisition of noncontrolling interests
 
 
 
 
(22.8
)
 
 
 
 
 
 
 
(22.8
)
 
(11.7
)
 
(34.5
)
Increase in noncontrolling interests from business combinations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
55.3

 
55.3

Change in temporary equity
 
 
 
 
9.1

 
 
 
 
 
 
 
9.1

 

 
9.1

Common stock dividends declared ($0.60 per share)
 
 
 
 
 
 
(138.2
)
 
 
 
 
 
(138.2
)
 
 
 
(138.2
)
Share-based compensation
 
 
 
 
17.5

 
 
 
 
 
 
 
17.5

 
 
 
17.5

Stock issued, share-based compensation
 
 
 
 
0.9

 
 
 
 
 
1.9

 
2.8

 
 
 
2.8

Common stock repurchased
 

 
 

 
 
 
 

 
 
 
(232.7
)
 
(232.7
)
 
 
 
(232.7
)
Balance as of March 31, 2018
297.2

 
44.6

 
833.0

 
6,360.1

 
(875.1
)
 
(3,736.2
)
 
2,626.4

 
590.4

 
3,216.8

Net income
 
 
 
 
 
 
364.2

 
 
 
 
 
364.2

 
30.6

 
394.8

Other comprehensive income (loss)
 
 
 
 
 
 
 
 
(292.2
)
 
 
 
(292.2
)
 
(29.8
)
 
(322.0
)
Dividends to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(41.0
)
 
(41.0
)
Acquisition of noncontrolling interests
 
 
 
 
(15.0
)
 
 
 
 
 
 
 
(15.0
)
 
(13.1
)
 
(28.1
)
Increase in noncontrolling interests from business combinations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.4

 
0.4

Change in temporary equity
 
 
 
 
(11.1
)
 
 
 
 
 
 
 
(11.1
)
 
 
 
(11.1
)
Common stock dividends declared ($0.60 per share)
 
 
 
 
 
 
(136.6
)
 
 
 
 
 
(136.6
)
 
 
 
(136.6
)
Share-based compensation
 
 
 
 
17.6

 
 
 
 
 
 
 
17.6

 
 
 
17.6

Stock issued, share-based compensation
 
 
 
 
(13.0
)
 
 
 
 
 
17.6

 
4.6

 
 
 
4.6

Common stock repurchased
 

 
 

 
 
 
 

 
 
 
(236.5
)
 
(236.5
)
 
 
 
(236.5
)
Balance as of June 30, 2018
297.2

 
$
44.6

 
$
811.5

 
$
6,587.7

 
$
(1,167.3
)
 
$
(3,955.1
)
 
$
2,321.4

 
$
537.5

 
$
2,858.9


















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


5




OMNICOM GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
Six Months Ended June 30,
 
2019
 
2018
Cash Flows from Operating Activities:
 
 
 
Net income
$
673.9

 
$
679.5

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
Depreciation and amortization of right-of-use assets
74.6

 
82.3

Amortization of intangible assets
42.8

 
54.5

Amortization of net deferred gain on interest rate swaps
(6.4
)
 
(6.4
)
Share-based compensation
34.3

 
35.1

Other, net
(5.5
)
 
13.9

Use of operating capital
(1,306.6
)
 
(1,431.8
)
Net Cash Used In Operating Activities
(492.9
)
 
(572.9
)
Cash Flows from Investing Activities:
 
 
 
Capital expenditures
(48.8
)
 
(89.8
)
Acquisition of businesses and interests in affiliates, net of cash acquired
(0.7
)
 
(207.3
)
Proceeds from disposition of subsidiaries and sale of investments
74.2

 
4.0

Net Cash Provided By (Used In) Investing Activities
24.7

 
(293.1
)
Cash Flows from Financing Activities:
 
 
 
Change in short-term debt
611.1

 
9.7

Dividends paid to common shareholders
(280.4
)
 
(278.1
)
Repurchases of common stock
(527.6
)
 
(469.2
)
Proceeds from stock plans
3.9

 
6.5

Acquisition of additional noncontrolling interests
(3.1
)
 
(40.3
)
Dividends paid to noncontrolling interest shareholders
(46.1
)
 
(57.3
)
Payment of contingent purchase price obligations
(30.2
)
 
(51.3
)
Other, net
(24.3
)
 
(22.4
)
Net Cash Used In Financing Activities
(296.7
)
 
(902.4
)
Effect of foreign exchange rate changes on cash and cash equivalents
10.6

 
(114.3
)
 
 
 
 
Net Decrease in Cash and Cash Equivalents
(754.3
)
 
(1,882.7
)
Cash and Cash Equivalents at the Beginning of Period
3,652.4

 
3,796.0

Cash and Cash Equivalents at the End of Period
$
2,898.1

 
$
1,913.3




















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

6




OMNICOM GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 unaudited consolidated financial statements were prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP or GAAP, for interim financial information and Article 10 of Regulation S-X of the Securities and Exchange Commission, or SEC. Accordingly, certain information and footnote disclosure have been condensed or omitted.
In our opinion, the accompanying unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation, in all material respects, of the information contained herein. These unaudited consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2018, or 2018 10-K. Results for the interim periods are not necessarily indicative of results that may be expected for the year.
Accounting Changes
Except for the changes discussed below, Omnicom has consistently applied the accounting policies to all periods presented in these unaudited consolidated financial statements.
Adoption of ASC 842
On January 1, 2019, we adopted FASB Accounting Standards Codification, or ASC, Topic 842, Leases, or ASC 842, which requires the recognition of the right-of-use assets and related operating and finance lease liabilities on the balance sheet. As permitted by ASC 842, we elected the adoption date of January 1, 2019, which is the date of initial application. As a result, the consolidated balance sheet prior to January 1, 2019 was not restated, continues to be reported under ASC Topic 840, Leases, or ASC 840, which did not require the recognition of operating lease liabilities on the balance sheet, and is not comparative. Under ASC 842, all leases are required to be recorded on the balance sheet and are classified as either operating leases or finance leases. The lease classification affects the expense recognition in the income statement. Operating lease charges are recorded entirely in operating expenses. Finance lease charges are split, where amortization of the right-of-use asset is recorded in operating expenses and an implied interest component is recorded in interest expense. The expense recognition for operating leases and finance leases under ASC 842 is substantially consistent with ASC 840. As a result, there is no significant difference in our results of operations presented in our consolidated income statement and consolidated statement of comprehensive income for each period presented.
We adopted ASC 842 using a modified retrospective approach for all leases existing at January 1, 2019. The adoption of ASC 842 had a substantial impact on our balance sheet. The most significant impact was the recognition of the operating lease right-of-use assets and the liability for operating leases. The accounting for finance leases (capital leases) was substantially unchanged. Accordingly, upon adoption, leases that were classified as operating leases under ASC 840 were classified as operating leases under ASC 842, and we recorded an adjustment of $1,490.1 million to operating lease right-of-use assets and the related lease liability. The lease liability is based on the present value of the remaining minimum lease payments, determined under ASC 840, discounted using our secured incremental borrowing rate at the effective date of January 1, 2019, using the original lease term as the tenor. As permitted under ASC 842, we elected several practical expedients that permit us to not reassess (1) whether a contract is or contains a lease, (2) the classification of existing leases, and (3) whether previously capitalized costs continue to qualify as initial indirect costs. The application of the practical expedients did not have a significant impact on the measurement of the operating lease liability.
The impact of the adoption of ASC 842 on the balance sheet at December 31, 2018 was (in millions):
 
As Reported December 31, 2018
 
Adoption of
ASC 842
Increase (Decrease)
 
Balance
January 1, 2019
Other current assets
$
1,241.4

 
$
(29.2
)
 
$
1,212.2

Operating lease right-of-use assets

 
1,306.5

 
1,306.5

Total assets
24,617.0

 
1,277.3

 
25,894.3

Other current liabilities
1,958.6

 
172.5

 
2,131.1

Long-term liability - Operating leases

 
1,258.5

 
1,258.5

Long-term liabilities
1,197.8

 
(153.7
)
 
1,044.1

Total liabilities and equity
24,617.0

 
1,277.3

 
25,894.3



7




We lease substantially all our office space, office furniture and technology equipment used to conduct our business. We adopted ASC 842 effective January 1, 2019. For contracts entered into on or after the effective date, at the inception of a contract we assess whether the contract is, or contains, a lease. Our assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether we have the right to direct the use of the asset. At inception of a lease, we allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. Leases entered into prior to January 1, 2019, were accounted for under ASC 840 and were not reassessed.
Leases are classified as either finance leases or operating leases. 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 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 represent office space leases, and substantially all our finance leases represent office furniture and technology equipment leases.
For all leases a right-of-use asset and lease liability are recognized at the lease commencement date. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease.
The right-of-use 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 right-of-use assets are reviewed for impairment. The lease liability is initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, our secured incremental borrowing rate for the same term as the underlying lease. For our real estate and other operating leases, we use our secured incremental borrowing rate. For our 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 lease liability comprise: the fixed noncancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early.
Some of our real estate leases contain variable lease payments, including 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. Lease components are included in the measurement of the initial lease liability, including fixed payments for real estate taxes and insurance for certain office space leases. 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 consists of the lease payments plus any initial direct costs, primarily brokerage commissions, and is recognized on a straight-line basis over the lease term. Included in lease expense are any 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 right-of-use asset on a straight-line basis over the lease term and interest expense determined on an amortized cost basis, and finance lease payments are allocated between a reduction of the lease liability and interest expense.
We have elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less. The effect of short-term leases on our right-of-use asset and lease liability was not material.
Adoption of ASU 2018-02
On January 1, 2019, we adopted ASU 2018-02, Income Statement - Reporting Comprehensive Income: Reclassification of Certain Tax effects from Accumulated Other Comprehensive Income, or ASU 2018-02, which requires the reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects arising from the change in the reduction of the U.S. federal statutory income tax rate to 21% from 35%. The tax effects of items included in accumulated comprehensive income at December 31, 2017 did not reflect the appropriate tax rate. The adoption of ASU 2018-02 resulted in reclassification between accumulated other comprehensive income and retained earnings of $22.3 million, and had no impact on our results of operations or financial position.

8




2. 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 branding, shopper marketing and experiential marketing agencies, and 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. Our 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. In addition 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.
Revenue by discipline for the three and six months ended June 30, 2019 and 2018 was (in millions):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Advertising
$
2,093.9

 
$
2,067.6

 
$
4,015.3

 
$
3,968.9

CRM Consumer Experience
659.5

 
660.0

 
1,265.3

 
1,294.9

CRM Execution & Support
326.1

 
498.7

 
675.6

 
1,007.2

Public Relations
349.3

 
362.7

 
683.4

 
709.1

Healthcare
291.0

 
270.6

 
549.1

 
509.1

 
$
3,719.8

 
$
3,859.6

 
$
7,188.7

 
$
7,489.2


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.
Revenue in our principal geographic markets for the three and six months ended June 30, 2019 and 2018 was (in millions):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Americas:
 
 
 
 
 
 
 
North America
$
2,118.4

 
$
2,097.4

 
$
4,107.6

 
$
4,083.1

Latin America
96.9

 
115.1

 
185.8

 
223.5

EMEA:
 
 
 
 
 
 
 
Europe
1,035.9

 
1,142.6

 
1,981.4

 
2,212.7

Middle East and Africa
61.0

 
70.2

 
140.0

 
143.6

Asia-Pacific
407.6

 
434.3

 
773.9

 
826.3

 
$
3,719.8

 
$
3,859.6

 
$
7,188.7

 
$
7,489.2


The Americas comprises North America, which includes the United States, Canada and Puerto Rico, and Latin America, which includes South America and Mexico. EMEA comprises Europe, the Middle East and Africa. Asia-Pacific comprises Australia, China, India, Japan, Korea, New Zealand, Singapore and other Asian countries.

9




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. At June 30, 2019, December 31, 2018 and June 30, 2018 work in process and contract liabilities were (in millions):
 
June 30, 2019
 
December 31, 2018
 
June 30, 2018
Work in process:
 
 
 
 
 
   Contract assets and unbilled fees and costs
$
785.7

 
$
540.1

 
$
709.2

   Media and production costs
577.8

 
621.4

 
644.3

 
$
1,363.5

 
$
1,161.5

 
$
1,353.5

Contract liabilities:
 
 
 
 
 
   Customer advances
$
1,094.1

 
$
1,159.0

 
$
1,147.1


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, which primarily include incentive fees, 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. There were no impairment losses to the contract assets recorded in 2019.
3. New Accounting Standards
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 standard on our results of operations or financial position.
In August 2018, the FASB issued 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. ASU 2018-15 is effective for annual and interim periods beginning after December 15, 2019 and early adoption is permitted at any interim period. ASU 2018-15 may be adopted either on a prospective basis, either upon early adoption or the effective date for implementation costs for new or existing arrangements incurred on or after the adoption date, or on a full retrospective basis to the earliest period presented. We are not yet in a position to assess the adoption date or the adoption method or to assess impact of the new standard on our results of operations or financial position.
4. Net Income per Share
The computations of basic and diluted net income per share for the three and six months ended June 30, 2019 and 2018 were (in millions, except per share amounts):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Net Income Available for Common Shares:
 
 
 
 
 
 
 
Net income - Omnicom Group Inc.
$
370.7

 
$
364.2

 
$
633.9

 
$
628.3

Weighted Average Shares:
 
 
 
 
 
 
 
Basic
219.6

 
226.8

 
221.4

 
228.5

Dilutive stock options and restricted shares
1.3

 
1.3

 
1.1

 
1.3

Diluted
220.9

 
228.1

 
222.5

 
229.8

 
 
 
 
 
 
 
 
Anti-dilutive stock options and restricted shares
0.9

 
1.0

 
0.9

 
1.0

Net Income per Share - Omnicom Group Inc.:
 
 
 
 
 
 
 
Basic
$
1.69

 
$
1.61

 
$
2.86

 
$
2.75

Diluted
$
1.68

 
$
1.60

 
$
2.85

 
$
2.73



10




5. Goodwill and Intangible Assets
Goodwill and intangible assets at June 30, 2019 and December 31, 2018 were (in millions):
 
2019
 
2018
 
Gross
Carrying
Value
 
Accumulated
Amortization
 
Net
Carrying
Value
 
Gross
Carrying
Value
 
Accumulated
Amortization
 
Net
Carrying
Value
Goodwill
$
9,878.3

 
$
(513.6
)
 
$
9,364.7

 
$
9,898.6

 
$
(514.3
)
 
$
9,384.3

Intangible assets:
 
 
 
 
 
 
 
 
 
 
 
Purchased and internally developed software
$
352.3

 
$
(298.9
)
 
$
53.4

 
$
356.4

 
$
(302.2
)
 
$
54.2

Customer related and other
749.4

 
(449.3
)
 
300.1

 
763.8

 
(435.2
)
 
328.6

 
$
1,101.7

 
$
(748.2
)
 
$
353.5

 
$
1,120.2

 
$
(737.4
)
 
$
382.8


Changes in goodwill for the six months ended June 30, 2019 and 2018 were (in millions):