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Omnicom Group Annual Report, Year Ended Dec 31, 2002

Filing Date
Filed March 27, 2003
Period End
December 31, 2002
Security
OMC
In the record · 2016–202610-K1110-Q338-K107

OMC filed 11 annual reports (10-K), 33 quarterly reports (10-Q) and 107 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Jul ’17Jul ’17
  2. Material agreement8-K · Jul ’19Jul ’19
  3. Leadership change8-K · Feb ’22Feb ’22
  4. Material agreement8-K · Dec ’25Dec ’25

01—Abstract

Summary

Summary of the 10-K filed March 27, 2003. Cited figures are marked; the original filing is the authoritative source.

Omnicom Group Inc. reported 2002 revenue of $7.54 billiona, up 9.4% from $6.89 billion in 2001, and net income of $643.5 million, up 9.8% from $586.2 million on an as-adjusted basis (diluted EPS $3.44, up 9.9% from $3.13).

Acquisitions added $362.5 millionb to revenue, organic growth added $193.1 million and foreign exchange added $91.3 million. Operating margin declined to 14.7% from 15.4%, and the company describes the business climate as challenging, with near-term demand for marketing services expected to remain unpredictable while political tensions persist. Balance sheet and cash flow: operating cash flow was $1.00 billion in 2002, versus $775.6 million in 2001.

Total assets rose to $11.82 billionc, and goodwill reached $4.85 billion. Convertible notes increased to $1.75 billion after the March 2002 issuance of $900.0 million Zero Coupon Zero Yield notes. Management states that operating cash flow, available credit lines and capital market access are sufficient for foreseeable cash requirements.

Share repurchases totaled $371.7 milliond in 2002. The filing also discloses a securities class action filed June 13, 2002 and a shareholder derivative action filed June 28, 2002, both tied to the company's statements and to the formation of Seneca Investments LLC.

Management is unable to determine the outcome or its effect on financial position. Management also notes contingent acquisition obligations of $471.3 million and additional purchase obligations of $234.5 million that are not recorded as liabilities on the balance sheet.

02—Key points

Key Highlights

  1. Revenue rose 9.4% to $7,536.3 million in 2002; acquisitions contributed $362.5 million, organic growth $193.1 million and foreign exchange $91.3 million.
  2. Net income increased 9.8% to $643.5 million and diluted EPS rose 9.9% to $3.44 from $3.13 (as adjusted for goodwill amortization).
  3. Operating margin declined to 14.7% in 2002 from 15.4% in 2001, while salary and service costs rose to 65.7% of revenue from 64.2%.
  4. Operating cash flow was $1,000.6 million in 2002 versus $775.6 million in 2001; capital expenditures were $117.2 million.
  5. Convertible notes rose to $1,747.0 million, including $900.0 million Zero Coupon Zero Yield notes issued in March 2002, and the company paid $25.4 million in February 2003 to Liquid Yield Option noteholders who did not exercise their put rights.
  6. Securities class action (filed June 13, 2002) and shareholder derivative action (filed June 28, 2002) are pending; management cannot determine the outcome.
  7. Contingent purchase price obligations of $471.3 million and additional subsidiary purchase obligations of $234.5 million are not recorded as liabilities on the balance sheet.

03—Questions

Frequently Asked Questions

  1. How did Omnicom's revenue and profitability perform in 2002?

    Revenue grew 9.4% to $7,536.3 million from $6,889.4 million. Net income rose 9.8% to $643.5 million from $586.2 million as adjusted to exclude goodwill amortization. Diluted EPS was $3.44, up from $3.13. Operating margin fell to 14.7% from 15.4%.

  2. What drove the revenue growth in 2002?

    Acquisitions added $362.5 million, organic growth added $193.1 million and foreign exchange added $91.3 million. Domestic revenue grew 15.3%, while international revenue grew 2.4%.

  3. How is Omnicom funding its obligations and what is its debt position?

    The company reported $695.9 million in cash and short-term investments and total debt of $2,030.5 million at December 31, 2002. It maintains a $800.0 million three-year revolving facility and a $1,025.0 million 364-day facility, with no borrowings outstanding under them at year end. Management believes operating cash flow and available credit are sufficient for foreseeable requirements.

  4. What legal risks does the filing disclose?

    A purported class action filed June 13, 2002 in the Southern District of New York alleges materially false or misleading statements. A shareholder derivative action filed June 28, 2002 in New York state court concerns the formation of Seneca Investments LLC. Management intends to defend the cases vigorously and states it is unable to determine the outcome or financial effect.

  5. What did management say about the outlook?

    Management describes the business climate as challenging due to geopolitical uncertainty and prolonged weak economic conditions. It expects near-term demand for advertising and marketing services to remain unpredictable until political tensions moderate. Long-term trends, including clients globalizing brand strategies and consolidating with fewer providers, are cited as positive.

04—Continue

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