How concentrated is Omnicom's client base?

The largest client represented 3.6% of 2006 consolidated revenue, and no other client exceeded 2.9%. The 100 largest clients together represented 46.2% of 2006 revenue, and the ten largest represented 18.3%.

Can the convertible notes create a near-term cash need?

Yes. Holders may require repurchase of up to $2.0 billion of convertible notes at specified dates. The filing states that if these puts are exercised, the company expects sufficient cash and unused credit commitments to fund them, and that $1,574.0 million of the $2,041.5 million could be due in less than one year.

What is the status of the shareholder litigation?

A securities class action and a shareholder derivative action remain pending in New York courts. The derivative case concerns Communicade internet investments and the Seneca contribution. Management states the defendants believe the allegations are baseless and that it is currently unable to determine the outcome or its effect on financial position or results.

How did Omnicom's revenue break down by discipline in 2006?

Traditional media advertising generated $4,866.4 million (42.8%), CRM $4,081.1 million (35.9%), public relations $1,150.1 million (10.1%), and specialty communications $1,279.3 million (11.2%). CRM grew the fastest, at 13.0%.

OMC 10-K FY2006 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed February 27, 2007. Cited figures are marked; the original filing is the authoritative source.

Omnicom Group Inc. (NYSE: OMC) describes itself in its 2006 annual report as a strategic holding company providing advertising, marketing and corporate communications services through multiple agencies in all major markets.

Revenue rose 8.5% to $11,376.9 million^a in 2006 from $10,481.1 million in 2005, with organic growth of $797.6 million (7.6%), foreign exchange adding $72.3 million, and acquisitions adding $25.9 million. Operating profit increased to $1,483.5 million, and the operating margin was 13.0% versus 12.8% in 2005. Net income rose 9.3% to $864.0 million, and diluted EPS rose 14.4% to $4.99 from $4.36.

Cash flow from operations was $1,741.2 million^b in 2006, versus $991.2 million in 2005. The company issued $1.0 billion of 5.90% Senior Notes due 2016 (gross proceeds $995.1 million) and repurchased treasury shares for $1,344.6 million, including a $458.7 million accelerated share repurchase. Total debt was $3,066.3 million at year-end, against cash and short-term investments of $1,928.8 million, leaving net debt of $1,137.5 million.

The company holds $2.5 billion^c of unused committed credit facilities, and its debt ratings are A- (S&P), Baa1 (Moody's) and A- (Fitch). The filing also flags risks. Holders of convertible notes can require repurchase of up to $2.0 billion at specified dates, and the 100 largest clients represented 46.2% of 2006 revenue.

Two shareholder lawsuits, a securities class action and a derivative action, remain pending, and management states it is unable to determine their outcome. KPMG LLP issued an unqualified opinion, and management concluded internal control over financial reporting was effective as of December 31, 2006.

02—Key points

Key Highlights

Revenue grew 8.5% to $11,376.9 million in 2006, with organic growth contributing $797.6 million.
Operating profit rose to $1,483.5 million, and operating margin increased to 13.0% from 12.8% in 2005.
Net income increased 9.3% to $864.0 million; diluted EPS rose 14.4% to $4.99.
Net cash from operating activities was $1,741.2 million, up from $991.2 million in 2005.
The company issued $1.0 billion of 5.90% Senior Notes due 2016 and spent $1,344.6 million repurchasing treasury shares.
Dividends declared per share increased to $1.000 from $0.925.
Convertible note holders can require repurchase of up to $2.0 billion at specified dates, a key liquidity risk noted by the company.

03—Questions

Frequently Asked Questions

How concentrated is Omnicom's client base?
The largest client represented 3.6% of 2006 consolidated revenue, and no other client exceeded 2.9%. The 100 largest clients together represented 46.2% of 2006 revenue, and the ten largest represented 18.3%.
Can the convertible notes create a near-term cash need?
Yes. Holders may require repurchase of up to $2.0 billion of convertible notes at specified dates. The filing states that if these puts are exercised, the company expects sufficient cash and unused credit commitments to fund them, and that $1,574.0 million of the $2,041.5 million could be due in less than one year.
What is the status of the shareholder litigation?
A securities class action and a shareholder derivative action remain pending in New York courts. The derivative case concerns Communicade internet investments and the Seneca contribution. Management states the defendants believe the allegations are baseless and that it is currently unable to determine the outcome or its effect on financial position or results.
How did Omnicom's revenue break down by discipline in 2006?
Traditional media advertising generated $4,866.4 million (42.8%), CRM $4,081.1 million (35.9%), public relations $1,150.1 million (10.1%), and specialty communications $1,279.3 million (11.2%). CRM grew the fastest, at 13.0%.

04—Continue

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