01—Abstract
Summary
Summary of the 10-K filed February 17, 2012. Cited figures are marked; the original filing is the authoritative source.
Omnicom Group Inc. (NYSE: OMC) reported 2011 revenue of $13,872.5 milliona, up 10.6% from $12,542.5 million in 2010, with organic growth of 6.1%, foreign exchange adding 2.6% and acquisitions net of dispositions adding 1.9%.
Operating income rose to $1,671.1 millionb (operating margin 12.0% versus 11.6%), and net income attributable to Omnicom was $952.6 million, or $3.33 per diluted share, compared with $827.7 million, or $2.70, in 2010. Results were helped by a $123.4 million non-cash remeasurement gain from acquiring control of the Clemenger Group, partly offset by $131.3 million of first-quarter 2011 repositioning charges, including $201 million of total severance for the year. Management expects 2012 revenue to increase modestly, in excess of average nominal GDP growth in its major markets, excluding foreign exchange impacts, and expects foreign exchange to reduce 2012 revenue by approximately 1.5%.
Europe remained weak in 2011 due to the sovereign debt crisis, which management flagged as a risk to client spending. Cash and cash equivalents ended the year at $1,781.2 million, and net debt rose to $1,388.1 millionc from $876.2 million. The company repurchased $849.0 million of common stock and paid $269.1 million in dividends.
Convertible notes totaling $659.4 milliond carry put dates on July 31, 2012 ($252.7 million) and June 17, 2013 ($406.6 million), which management expects to fund from cash and its $2.5 billion Credit Agreement. The filing states that the company's largest client represented 2.6% of 2011 revenue and its top 100 clients represented approximately 50% of revenue. KPMG LLP issued an unqualified opinion on the financial statements and found internal control over financial reporting effective as of December 31, 2011.
02—Key points
Key Highlights
- Revenue rose 10.6% to $13,872.5 million, with organic growth of 6.1%, foreign exchange adding 2.6% and acquisitions net of dispositions adding 1.9%.
- Diluted net income per share was $3.33, up from $2.70, and net income attributable to Omnicom was $952.6 million, up from $827.7 million.
- Operating margin improved to 12.0% from 11.6%, and EBITA margin improved to 12.7% from 12.2%.
- A $123.4 million non-cash remeasurement gain on the Clemenger Group acquisition boosted 2011 results, while $131.3 million of repositioning charges weighed on them.
- Net debt increased to $1,388.1 million from $876.2 million, and cash and cash equivalents fell to $1,781.2 million.
- $659.4 million of convertible notes have put dates in 2012 ($252.7 million) and 2013 ($406.6 million), which management expects to fund from cash and its $2.5 billion Credit Agreement.
- Management expects 2012 revenue to grow modestly, above average nominal GDP growth in major markets, excluding a roughly 1.5% foreign exchange headwind.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 17, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $13.87B$12.54B | +10.6% |
| Operating Expenses | $12.20B$11.08B | +10.1% |
| Operating Income | $1.67B$1.46B | +14.4% |
| Interest Expense | $158.10M$134.70M | +17.4% |
| Net Income | $952.60M$827.70M | +15.1% |
| EPS (Basic) | $3.38$2.74 | +23.4% |
| EPS (Diluted) | $3.33$2.70 | +23.3% |
| Shares Outstanding (Basic) | 279.00M299.60M | −6.9% |
| Shares Outstanding (Diluted) | 283.30M303.50M | −6.7% |
05—Questions
Frequently Asked Questions
How concentrated is Omnicom's client base?
The filing states that Omnicom's largest client accounted for 2.6% of 2011 revenue, and no other client accounted for more than 2.1%. The top 100 clients collectively represented approximately 50% of 2011 revenue.
What drove the increase in 2011 earnings?
Revenue growth of 10.6% and an improvement in operating margin to 12.0% drove the increase. Net income also benefited from a $123.4 million non-cash remeasurement gain on the Clemenger Group acquisition, which was partly offset by $131.3 million of repositioning charges recorded in the first quarter.
What are the near-term debt repurchase obligations?
Holders of the 2032 Notes can put $252.7 million back to Omnicom on July 31, 2012, and holders of the 2038 Notes can put $406.6 million on June 17, 2013. Management expects to have sufficient cash and unused credit commitments to fund these repurchases, and it has a $2.5 billion Credit Agreement that runs to October 2016.
What is management's outlook for 2012?
Barring unforeseen events and excluding foreign exchange, management expects 2012 revenue to increase modestly, in excess of average nominal GDP growth in its major markets. Assuming exchange rates at February 10, 2012 hold, foreign exchange is expected to reduce 2012 revenue by approximately 1.5%.
What risks does the filing highlight?
The filing cites the European sovereign debt crisis, which could reduce client spending and extend a downturn beyond Europe, as well as credit market conditions, client spending cuts or payment delays, and the risk of material losses on media purchases in a severe economic downturn. Omnicom also notes its exposure to international operations, including currency fluctuations and foreign exchange controls.
06—Continue