01—Abstract
Summary
Summary of the 10-K filed February 23, 2011. Cited figures are marked; the original filing is the authoritative source.
Omnicom Group Inc. is a strategic holding company providing advertising, marketing and corporate communications services through multiple agencies in all major markets worldwide.
In 2010, revenue rose 7.0% to $12,542.5 milliona from $11,720.7 million, with organic growth contributing $749.1 million. Operating income increased 6.2% to $1,460.2 million, and net income attributable to Omnicom Group Inc. rose 4.4% to $827.7 million, or $2.70 per diluted share (versus $2.53 in 2009). Salary and service costs rose to 73.5% of revenue from 72.1%, while office and general expenses fell to 14.9% from 16.2%.
The company ended 2010 with cash and short-term investments of $2,300.0 millionb and total debt of $3,176.2 million, leaving net debt of $876.2 million. During 2010 it issued $1.0 billion of 4.45% Senior Notes due 2020, repurchased $66.5 million of convertible notes, and bought back $1,296.0 million of common stock. It also entered a new $2.0 billion credit facility in December 2010 that expires December 9, 2013.
Dividends declared rose to $0.80c per share from $0.60. Management highlighted a strategic review that it expects to reduce annual revenue by $250 million to $300 million by disposing of or repositioning non-core businesses, with related charges of $90 million to $110 million expected in the first quarter of 2011.
It also expects a non-cash gain of approximately $120 milliond from the early-2011 increase in its Clemenger Group stake to almost 75%. Convertible notes totaling $660 million can be put to the company in August 2011 and June 2013, and the filing states the company expects to fund these from available cash and its credit facility.
02—Key points
Key Highlights
- Revenue increased 7.0% to $12,542.5 million in 2010, with organic growth of $749.1 million and foreign exchange adding $17.1 million.
- Operating income rose 6.2% to $1,460.2 million; diluted EPS increased to $2.70 from $2.53.
- Net income attributable to Omnicom Group Inc. was $827.7 million, up $34.7 million or 4.4%.
- Cash and short-term investments were $2,300.0 million at year-end 2010; net debt was $876.2 million, up $213.3 million from the prior year-end.
- Share repurchases totaled $1,296.0 million in 2010, and dividends declared rose to $0.80 per share from $0.60.
- A strategic review may reduce annual revenue by $250 million to $300 million, with charges of $90 million to $110 million expected in Q1 2011.
- Holders may put up to $660 million of convertible notes to the company in August 2011 and June 2013; credit ratings are BBB+ (S&P), Baa1 (Moody's) and A- (Fitch).
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 23, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $12.54B$11.72B | +7.0% |
| Operating Expenses | $11.08B$10.35B | +7.1% |
| Operating Income | $1.46B$1.37B | +6.2% |
| Interest Expense | $134.70M$122.20M | +10.2% |
| Net Income | $827.70M$793.00M | +4.4% |
| EPS (Basic) | $2.74$2.54 | +7.9% |
| EPS (Diluted) | $2.70$2.53 | +6.7% |
| Shares Outstanding (Basic) | 299.60M308.20M | −2.8% |
| Shares Outstanding (Diluted) | 303.50M310.40M | −2.2% |
05—Questions
Frequently Asked Questions
How did Omnicom perform financially in 2010?
Revenue grew 7.0% to $12,542.5 million, operating income rose 6.2% to $1,460.2 million, and net income attributable to Omnicom Group Inc. increased 4.4% to $827.7 million. Diluted EPS was $2.70, compared with $2.53 in 2009. Salary and service costs rose to 73.5% of revenue, while office and general expenses fell to 14.9%.
How concentrated is Omnicom's client base?
The largest client represented 3.0% of 2010 revenue, and no other client accounted for more than 2.4%. The top 100 clients together accounted for 50.6% of 2010 revenue.
What restructuring or portfolio changes are planned for 2011?
Management is reviewing its agencies to identify non-core and underperforming businesses for repositioning or disposal, which it expects to reduce revenue by $250 million to $300 million annually. Related severance, lease termination and asset impairment charges of $90 million to $110 million are expected in the first quarter of 2011. The company also expects a non-cash gain of approximately $120 million from its increased Clemenger Group stake.
What debt obligations could require cash in the near term?
Holders of the 2032 Notes may put $252.7 million to the company in August 2011, and holders of the 2038 Notes may put $406.7 million in June 2013. The company says it expects to have sufficient cash and unused credit to fund any puts. At year-end 2010, it had $2.0 billion of available credit under its facility and total debt of $3,176.2 million.
How much did Omnicom return to shareholders in 2010?
The company repurchased $1,296.0 million of common stock and paid dividends of $229.7 million. Dividends declared per share rose to $0.80 from $0.60 in 2009. Shares outstanding were 285.5 million at December 31, 2010, down from 308.4 million a year earlier.
06—Continue