omnicare annual reports 1998

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  • 1. OmnicomAN N UA L R E P O RT98

2. Omnicom COMPARATIVE HIGHLIGHTS 1998 1997 % CHANGE (Amounts in Thousands Except Per Share Amounts)$14,199,620 Domestic billings$10,894,800 30% 14,264,680 International billings11,096,300 29% 28,464,300 Worldwide billings* 21,991,100 29%2,098,220 Domestic commissions and fees 1,616,76830% 1,993,822 International commissions and fees1,508,04532% 4,092,042 Worldwide commissions and fees**3,124,81331%1,795,772 Domestic operating expenses 1,398,12128% 1,736,096 International operating expenses1,323,14631% 3,531,868 Worldwide operating expenses2,721,26730% 164,747 Domestic operationsnet income124,73232%120,321 International operationsnet income97,68323%285,068 Worldwide net income222,41528%Common stock data:1.72 Net income per share Basic1.4023%1.68Diluted1.3723% 0.525 Dividends declared per share 0.4517% Weighted average number of common shares andcommon equivalent shares outstanding165,685during the year Basic 159,4194%175,844Diluted 169,4844%168,593 Shares outstanding at year end162,1154% *The term billings is commonly used in the industry to describe the volume of advertising purchased on behalf of clients. In this report, billings were computed by multiplying all income from commissions and fees by 6.67the reciprocal of the customary 15 percent commission which media commonly grant advertising agencies. Commission rates are not uniform, however, and are negotiated with clients. For calculating billings for majority-owned subsidiaries, total subsidiary commissions and fees are used. For calculating billings for minority-owned affiliates, Omnicoms percent of ownership in total affiliate commissions and fees is used. **Commissions and fees of majority-owned subsidiaries only are included. 3. LETTER FROM THE PRESIDENTDEAR FELLOW SHAREHOLDERS: at Cannes the most prestigious creative We are pleased to report that 1998 marked the 12th award show in the industry picking up 94 consecutive year that Omnicom reported record results, Lions awards, 55 more than the next-closest and the fourth quarter of 1998 was the 30th consecutive competitor. Goodby Silverstein captured the quarter of year-over-year growth in revenue and Grand Prix at Cannes and Agency of the Year earnings. honors at the Clios.Total revenues from commissions and fees increased 31 percent to $4.1 billion in 1998, from $3.1Market Recognition billion the previous year. Most notable is the revenueWe are gratified that, once again, the business and balance that Omnicom now produces nearly evenlyfinancial news media has also recognized our split between traditional advertising and marketingperformance. On February 25, 1999, The Wall Street services, and between the United States and the rest ofJournals Shareholder Scoreboard (a ranking of 1,000 the world. This balance and diversification providesmajor U.S. public companies) named Omnicom the both areas of new business opportunity and a bufferNo. 1 advertising company with a five-year average against downturns in individual industries or economicreturn of 40.5 percent and a one-year average return regions.of 38.3 percent. We captured the 30th spot in Net income reached $285 million, an increase ofBusinessWeeks annual ranking of the best performing 28 percent from 1997, and diluted earnings per share companies in the S&P 500. And a Financial Times rose 23 percent to $1.68 per share from $1.37 per share. survey named Omnicom the worlds most respectedcompany in the media/leisure category. Our operating margins increased to 13.7 percent from 12.9 percent in 1997, reflecting a continuingChange and Evolution focus on costs. Our vendor and real-estate managementWe achieved this record performance against a processes, for example, allow all Omnicom agencies,backdrop of economic and industry change. Client no matter how small, to benefit from our economies ofconsolidation has created global brands that, scale.accordingly, require global agency networks capable Reflecting this strong performance, our Board ofof providing an array of corporate communications Directors increased the quarterly cash dividend on ourservices. The continuing fragmentation of media common stock by 20 percent to $.15 a share.means more choices for consumers, more ways for During 1998, each one of our agency brands advertisers to reach their target markets and more continued to strengthen its market leadership position,opportunities for companies with a full complement of while we completed acquisitions that added new communications services. The digital economy is complementary capabilities.creating new economic models of commerce that bearboth enormous opportunities and challenges for clients. We have achieved these results by assembling the worlds most notable advertising, marketing and In anticipation of those trends, we have communication brands and developing an strengthened, restructured and added to our portfolio entrepreneurial culture. This allows our people to of agencies. In BBDO Worldwide, DDB Needham provide global clients with all aspects of strategic Worldwide and TBWA Worldwide, we now own three counseling and creative excellence in every worldof the top 10 global advertising networks. In addition, region. Evidence of this success includes: we own four outstanding national advertising agencies:Goodby, Silverstein and Partners in San Francisco; $2.4 billion in net new business billings inGSD&M in Austin; Martin/Williams in Minneapolis; 1998, eclipsing our previous record of $1.8and Merkley Newman Harty in New York. billion set in 1997 and marking the sixth year in a row that net new business wins exceeded All other agency and marketing services brands $1 billion.are housed within Diversified Agency Services, (DAS).Through both internal development and acquisitions Industry recognition for creative DAS, we have assembled a group of communication In 1998, the three Omnicom global agencyand marketing service companies that are leaders in networks (BBDO Worldwide, DDB Needhamspecialty advertising, direct response/consultancy, Worldwide and TBWA Worldwide) againpublic relations and sales promotion. dominated the International Advertising Festival 4. In October 1996, we also formed Optimum MediaInternational Advertising Festival at Cannes and Direction (OMD) in response to client demands fordominating the Clio awards with 58 awards. BBDO unbundled media buying with global capabilities andNew York alone won 19 Clios, making it the most reach. We believe the future of media will reward aawarded U.S. agency. It also captured the Grand Prize handful of large, sophisticated global media brands, for advertising effectiveness for Mars Snickers Hungry? and OMD will become one of those brands. Why Wait? campaign at the Effies, and TV Guidenamed two BBDO spots among its Top 10 for 1998. In Acquisitions USA Todays Ad Meter poll conducted during the 1998Super Bowl, BBDOs Pepsi commercial Flying Geese In March 1998, we completed the acquisition ofranked first among viewers rating the commercials. In the GGT Group. GGT was combined with TBWAseven countries, BBDO Network companies won Worldwide, resulting in TBWA moving from the 18thAgency of the Year honors. largest to the 10th largest agency in the world, and creating our third global advertising network.DDB Needham Worldwide added three officesand representation in one country for a total of 206 Another significant acquisition in 1998 was theoffices in 96 countries. The network also had another completion of the purchase of Fleishman-Hillard,strong year in terms of revenue and profits. New which, together with existing Omnicom public relationsbusiness wins included the global Compaq Computer brands Porter Novelli, Ketchum, Gavin Anderson,account, now one of its four largest clients worldwide. Clark & Weinstock and GPC International, created theAmong other wins, DDB captured US West, Epson, largest group of public relations capabilities in thePolo Ralph Lauren, Mercks Vioxx, Nicorette, Heinzs world.Weight Watchers foods, and additional new businessFinally, we announced in December 1998 that wefrom Parmalat. would acquire those shares of Abbott Mead VickersThe DDB network further solidified its creative (AMV) PLC that we did not already own, this purchasereputation by winning 34 Lions at the International was completed in February 1999. AMV and BBDOAdvertising Festival in Cannes, more than any other have worked together since 1991, and AMVs principalagency for the sixth year in a row. Included in this advertising agency, Abbot Mead VickersBBDO, iscount was the first ever Cyber Lion. It also captured the largest advertising agency in the United Kingdom.ten One Show awards; the only other agency to do In addition, AMVs group of media and marketingso was sister Omnicom agency Goodby, Silverstein & services companies will complement both our OptimumPartners. Media Direction and our other affiliated companies in Europe.Among the nine DDB agencies that were namedagency of the year in their countries, DM9 DDB, Sao Advertising Agency BrandsPaulo, Brazil, also took Agency of the Year honors atBBDO Worldwide again delivered strong growthCannes. In the U.K, BMP DDB won Campaign of the in revenue and profits, while winning significant newYear for Volkswagen and Agency of the Year for its business and capturing awards for creative excellence. overall body of work from Campaign magazine. The In 1998, BBDO continued to expand its global network Volkswagen campaign also prevailed at the International that now includes 291 offices in 73 countries and 27 Automotive Advertising Awards in Michigan, where it multinational clients in 10 or more countries. Incaptured the Gold Triomphe Best of Show, the first addition to the AMV acquisition, I&S/BBDO Tokyotime the Best of Show was awarded to a foreign joined the BBDO network, marking the first time a U.S. campaign. company has taken direct equity in a major JapaneseDD