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Omnicom Group Annual Report, Year Ended Dec 31, 2005

Filing Date
Filed February 24, 2006
Period End
December 31, 2005
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 February 24, 2006. Cited figures are marked; the original filing is the authoritative source.

Omnicom Group Inc. (OMC), a strategic holding company, reported 2005 revenue of $10.48 billiona, up 7.5% from $9.75 billion in 2004, with organic growth of 7.3%.

Operating profit rose 10.2% to $1.34 billionb, and the operating margin improved to 12.8% from 12.5%. Net income increased 9.3% to $790.7 million, and diluted EPS rose 12.4% to $4.36 from $3.88. Revenue was about evenly split between U.S. and non-U.S. operations, with U.S. revenue growing 10.0% and international revenue growing 4.7%.

Traditional media advertising was the largest discipline at about 44% of revenue. The balance sheet shows cash and cash equivalents of $835.8 millionc and short-term investments of $374.1 million at year-end 2005. Total assets were $15.92 billion, and shareholders' equity was $3.95 billion.

Convertible notes totaled $2.34 billiond, and holders of the 2031, 2032 and 2033 notes may require repurchase at specified dates. Management reported $2.5 billion in unused committed credit facilities and states that current resources are sufficient for foreseeable cash requirements. Two shareholder lawsuits, a securities class action and a derivative action, remain pending, and management says it cannot determine their outcome.

For investors, the filing shows steady top-line growth, margin expansion and rising earnings per share, supported by share repurchases of $731.8 million in 2005. Key items to monitor are the put rights on convertible notes, which total $2.3 billion, and the pending litigation tied to the internet investments made by Communicade.

02—Key points

Key Highlights

  1. Revenue rose 7.5% to $10,481.1 million in 2005, with organic growth of 7.3%.
  2. Operating margin improved to 12.8% from 12.5%, and operating profit grew 10.2% to $1,339.8 million.
  3. Net income increased 9.3% to $790.7 million, and diluted EPS rose 12.4% to $4.36.
  4. Cash and cash equivalents were $835.8 million at year-end 2005, with $2.5 billion in unused committed credit facilities.
  5. Convertible notes totaling $2,339.3 million carry holder put rights that could require cash repurchase at specified dates.
  6. Purchases of treasury shares totaled $731.8 million in 2005.
  7. Securities class action and shareholder derivative suits tied to Communicade internet investments remain pending, with no outcome determinable by management.

03—Questions

Frequently Asked Questions

  1. How did Omnicom perform financially in 2005?

    Revenue increased 7.5% to $10,481.1 million, operating profit rose 10.2% to $1,339.8 million, and net income grew 9.3% to $790.7 million. Diluted EPS was $4.36, up from $3.88 in 2004.

  2. What are the main risks related to Omnicom's convertible debt?

    Holders of the 2031, 2032 and 2033 convertible notes, totaling $2,339.3 million, may require repurchase for par value on specified dates. Management states it expects sufficient cash and unused credit commitments to fund any put. A ratings downgrade would raise interest costs on bank facilities but would not accelerate the notes.

  3. Is Omnicom facing any material legal proceedings?

    Yes. A consolidated securities class action in the U.S. District Court for the Southern District of New York and two shareholder derivative actions in New York state court are pending. They relate to organic growth calculations, Communicade internet investments and contingent acquisition obligations. Management says the defendants believe the allegations are baseless and that it cannot determine the outcome.

  4. How is Omnicom's revenue split geographically and by discipline?

    Revenue is about evenly divided between U.S. and non-U.S. operations. U.S. revenue grew 10.0% to $5,743.9 million, and international revenue grew 4.7% to $4,737.2 million. By discipline, traditional media advertising was about 44% of revenue, CRM about 34%, specialty communications about 12% and public relations about 10%.

  5. What did Omnicom do with its cash in 2005?

    Operating cash flow was $991.2 million. The company spent $162.7 million on capital expenditures, paid $164.0 million in dividends and $268.6 million in acquisition payments, net of cash acquired and sale proceeds, and bought back $731.8 million of treasury shares. It also repaid $188.4 million of long-term debt.

04—Continue

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