Edgar Filing: OMNICOM GROUP INC.

2013 10-K

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________________________

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR FISCAL YEAR ENDED DECEMBER 31, 2013

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Commission File Number: 1-10551

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OMNICOM GROUP INC.

(Exact name of registrant as specified in its charter)



New York		13-1514814
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

437 Madison Avenue, New York, NY		10022
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (212) 415-3600

____________________________________________________________

Securities Registered Pursuant to Section 12(b) of the Act:



Title of each class		Name of each exchange on which registered
Common Stock, $.15 Par Value		New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None

____________________________________________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.



Yes þ	No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.



Yes o	No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.



Yes þ	No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding twelve months (or for such shorter period that the registrant was required to submit and post such files).



Yes þ	No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.



Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



Yes o	No þ

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The aggregate market value of the voting and non-voting common stock held by non-affiliates as of June 30, 2013 was $16,138,873,000.

As of January 31, 2014, there were 258,204,902 shares of Omnicom Group Inc. Common Stock outstanding.

Portions of the Omnicom Group Inc. Definitive Proxy Statement for the Annual Meeting of Shareholders scheduled to be held on May 20, 2014 are incorporated by reference into Part III of this report to the extent described herein.

OMNICOM GROUP INC.

ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2013

TABLE OF CONTENTS



		Page
	PART I
Item 1	Business	1
Item 1A.	Risk Factors	3
Item 1B.	Unresolved Staff Comments	6
Item 2.	Properties	7
Item 3.	Legal Proceedings	7
Item 4.	Mine Safety Disclosures	8

	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	8
Item 6.	Selected Financial Data	9
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 8.	Financial Statements and Supplementary Data	30
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	30
Item 9A.	Controls and Procedures	30
Item 9B.	Other Information	30

	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	*
Item 11.	Executive Compensation	*
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	*
Item 13.	Certain Relationships and Related Transactions, and Director Independence	*
Item 14.	Principal Accounting Fees and Services	*

	PART IV
Item 15.	Exhibits, Financial Statement Schedules	31

Signatures		35

Management Report on Internal Control Over Financial Reporting		F-1

Reports of Independent Registered Public Accounting Firm		F-2

Consolidated Financial Statements		F-4

Notes to Consolidated Financial Statements		F-9

__________

The information regarding Executive Officers of the Registrant is included in Part I, Item 1, “Business.” Additional information called for by Items 10, 11, 12, 13 and 14, to the extent not included in this document, is incorporated herein by reference to the information to be included under the captions “Corporate Governance,” “Transactions with Related Persons,” “Executive Compensation,” “Directors Compensation for Fiscal 2013,” “Equity Compensation Plans,” “Stock Ownership” and “Fees Paid to Independent Auditors” in our definitive proxy statement, which is expected to be filed with the SEC by April 10, 2014.

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements (including within the meaning of the Private Securities Litigation Reform Act of 1995) concerning the Company, Publicis Groupe S.A., or Publicis, Publicis Omnicom Group, the proposed Business Combination and other matters. These statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or financial condition, or otherwise, based on current beliefs of the management of the Company as well as assumptions made by, and information currently available to, the Company’s management. Forward-looking statements may be accompanied by words such as “aim,” “anticipate,” “believe,” “plan,” “could,” “would,” “should,” “estimate,” “expect,” “forecast,” “future,” “guidance,” “intend,” “may,” “will,” “possible,” “potential,” “predict,” “project” or similar words, phrases or expressions. These forward-looking statements are subject to various risks and uncertainties, many of which are outside the Company’s control. Therefore, you should not place undue reliance on such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include failure to obtain applicable regulatory or shareholder approvals for the proposed Business Combination in a timely manner or otherwise; potential delays in the initiation or completion of the process to register the pending transaction with the Securities and Exchange Commission, or the SEC, and certain European securities regulators and commence solicitation of proxies in connection with shareholder approval; failure to satisfy other closing conditions to the proposed transactions; resolution of open issues, complexities and challenges relating to the merger of Omnicom and Publicis in a timely manner as necessary to consummate the pending transaction; risks that the new businesses, information technology and financial reporting systems, operations and management will not be integrated successfully or that the combined companies will not realize estimated cost savings, value of certain tax assets, synergies and growth or that such benefits may take longer to realize than expected; failure to realize anticipated benefits of the combined operations; risks relating to unanticipated costs of integration; losses on media purchases and production costs incurred on behalf of clients; reductions in client spending, a slowdown in client payments and changes in client communication requirements; failure to manage potential conflicts of interest between or among clients; unanticipated changes relating to competitive factors in the advertising and marketing industries; ability to hire and retain key personnel; ability to successfully integrate the businesses of Omnicom and Publicis; the potential impact of announcement or consummation of the proposed transactions on relationships with third parties, including clients, employees and competitors; ability to attract new clients and retain existing clients in the manner anticipated; reliance on information technology systems; changes in legislation or governmental regulations affecting the Company; international, national or local economic, social or political conditions that could adversely affect the Company or its clients; conditions in the credit markets; risks associated with assumptions the Company makes in connection with its critical accounting estimates and legal proceedings; and the Company’s international operations, which are subject to the risks of currency fluctuations and currency repatriation restrictions. The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties that affect Omnicom’s business, including those described in the “Risk Factors” in this Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, other Current Reports on Form 8-K and other documents filed from time to time with the SEC. Except as required under applicable law, the Company does not assume any obligation to update these forward-looking statements.

AVAILABLE INFORMATION

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and any amendments to those reports are electronically filed with or furnished to the U.S. Securities Exchange Commission, or the SEC. Any report we file with or furnish to the SEC is available free of charge on our website at www.omnicomgroup.com/investorrelations, as soon as is reasonably practicable after such material is filed with or furnished to the SEC. The information found on our website is not part of this or any other report we file with or furnish to the SEC. Any document that we file with or furnish to the SEC may be read and copied at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information regarding the Public Reference Room. Our filings are also available on the SEC’s website at www.sec.gov.

PART I

Introduction

This report is both our 2013 annual report to shareholders and our 2013 Annual Report on Form 10-K required under the federal securities laws.

We are a strategic holding company, providing professional services to clients through multiple agencies operating in all major markets around the world. Our companies provide advertising, marketing and corporate communications services. The terms “Omnicom,” “the Company,” “we,” “our” and “us” each refer to Omnicom Group Inc. and our subsidiaries unless the context indicates otherwise.

Item 1. Business

Pending Business Combination

On July 27, 2013, the Company and Publicis Groupe S.A. (“Publicis”) entered into a Business Combination Agreement (the “Business Combination Agreement”) pursuant to which the Company and Publicis agreed, subject to the terms and conditions of the Business Combination Agreement, to combine their respective businesses (the “Business Combination”). In the Business Combination, Publicis will merge (the “Publicis Merger”) with and into Publicis Omnicom Group N.V., a newly-formed Dutch holding company (“Publicis Omnicom Group” or “HoldCo”), with Publicis Omnicom Group being the surviving entity in the Publicis Merger, and immediately after consummation of the Publicis Merger, a corporation wholly-owned by Publicis Omnicom Group will merge (the “Omnicom Merger” and together with the Publicis Merger, the “Mergers”) with and into the Company, with the Company being the surviving corporation in the Omnicom Merger.

In the Publicis Merger, each issued and outstanding share of Publicis will be exchanged for 1.000000 ordinary share of Publicis Omnicom Group. In addition, prior to completion of the Publicis Merger, Publicis intends to declare and pay a special dividend, in cash, in an amount equal to €1.00 per Publicis share (the “Publicis Transaction Dividend”). In the Omnicom Merger, each share of common stock of the Company will be converted into the right to receive 0.813008 of a Publicis Omnicom Group ordinary share, together with cash in lieu of fractional shares, subject to adjustment to account for certain changes in outstanding shares and certain excluded asset values as set forth in the Business Combination Agreement. Similarly, prior to completion of the Omnicom Merger, the Company intends to declare and pay a special cash dividend of $2.00 per share of the Company’s outstanding common stock (the “Omnicom Transaction Dividend” and, together with the Publicis Transaction Dividend, the “Transaction Dividends”), subject to adjustment to account for certain changes in outstanding shares of the parties and certain excluded asset values, in each case as set forth in the Business Combination Agreement, and, if necessary, to equalize the cumulative amount of regular dividends paid by the Company after July 27, 2013 with the cumulative amount of regular Publicis dividends paid after July 27, 2013. However, dividends of up to $0.80 per share in the aggregate paid to holders of the Company's common stock in respect of record dates after July 27, 2013 and before the Mergers are not included in this equalization. The payment of the Transaction Dividends is also subject to applicable law.

Completion of the transactions contemplated by the Business Combination Agreement (which include the Mergers, the Publicis Transaction Dividend, and the Omnicom Transaction Dividend, collectively, the “Transactions”) will require resolution of all open issues, complexities and challenges and will be subject to the satisfaction or waiver, if legally permitted, of certain conditions including (a) approval and adoption of the Business Combination Agreement and the Omnicom Merger by the holders of two-thirds of the outstanding shares of common stock of the Company, approval of the Cross-Border Merger Terms (as described in the Business Combination Agreement), and the Publicis Merger by the holders of two-thirds of the voting rights attached to the Publicis shares present at a meeting of the Publicis shareholders, and the approval of the Publicis Transaction Dividend by the holders of a majority of the voting rights attached to the Publicis shares present at a meeting of the Publicis shareholders; (b) approval by requisite governmental regulators and authorities, including approvals under applicable competition laws; (c) the listing of the Publicis Omnicom Group ordinary shares on applicable stock exchanges; (d) the absence of any law or order prohibiting the completion of the Transactions; and (e) the absence of a material adverse effect on either the Company or Publicis. Therefore, completion of the Transactions is unlikely to occur before the third quarter of 2014.

The completion of the Transactions contemplated by the Business Combination Agreement will have a material effect on our future results of operations and financial position.

Our Business

Omnicom, a strategic holding company, was formed in 1986 by the merger of several leading advertising, marketing and corporate communications companies. We are a leading global advertising, marketing and corporate communications company and we operate in a highly competitive industry. The proliferation of media channels, including the rapid development and integration of interactive technologies and mediums, has fragmented consumer audiences targeted by our clients. These developments make it more complex for marketers to reach their target audiences in a cost-effective way, causing them to turn

to marketing service providers such as Omnicom for a customized mix of advertising and marketing communications services designed to make the best use of their total marketing expenditures.

Our agencies operate in all major markets around the world and provide a comprehensive range of services, which we group into four fundamental disciplines: advertising, customer relationship management, or CRM, public relations and specialty communications. The services included in these disciplines are:



advertising		investor relations
brand consultancy		marketing research
corporate social responsibility consulting		media planning and buying
crisis communications		mobile marketing
custom publishing		multi-cultural marketing
data analytics		non-profit marketing
database management		organizational communications
direct marketing		package design
entertainment marketing		product placement
environmental design		promotional marketing
experiential marketing		public affairs
field marketing		public relations
financial/corporate business-to-business advertising		reputation consulting
graphic arts		retail marketing
healthcare communications		search engine marketing
instore design		social media marketing
interactive marketing		sports and event marketing

Although the medium used to reach a client’s target audience may differ across each of these disciplines, we develop and deliver the marketing message in a similar way by providing client-specific consulting services.

Our business model was built and continues to evolve around our clients. While our agencies operate under different names and frame their ideas in different disciplines, we organize our services around our clients. The fundamental premise of our business is to deliver our services and allocate our resources based on the specific requirements of our clients. As clients increase their demands for marketing effectiveness and efficiency, they have tended to consolidate their business with larger, multi-disciplinary agencies or integrated groups of agencies. Accordingly, our business model demands that multiple agencies within Omnicom collaborate in formal and informal virtual networks that cut across internal organizational structures to execute against our clients’ specific marketing requirements. We believe that this organizational philosophy, and our ability to execute it, differentiates us from our competitors.

Our agency networks and our virtual networks provide us with the ability to integrate services across all disciplines and geographies. This means that the delivery of our services can, and does, take place across agencies, networks and geographic regions simultaneously. Further, we believe that our virtual network strategy facilitates better integration of services required by the demands of the marketplace for advertising and marketing communications services. Our over-arching business strategy is to continue to use our virtual networks to grow our business relationships with our clients.

The various components of our business and material factors that affected us in 2013 are discussed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” or MD&A, of this report. None of our acquisitions or dispositions in the three year period ended December 31, 2013 was material to our financial position or results of operations. For information concerning our acquisitions, see Note 5 to our consolidated financial statements.

Geographic Regions and Segments

Our revenue is almost evenly divided between our United States and international operations. For financial information concerning our domestic and international operations and segment reporting, see our MD&A and Note 8 to our consolidated financial statements.

Our Clients

Consistent with our fundamental business strategy, our agencies serve similar clients, in similar industries, and in many cases the same clients, across a variety of geographic regions and locations. Our clients operate in virtually every industry sector of the global economy. Furthermore, in many cases, multiple agencies or networks serve different brand and/or product groups within the same clients. For example, in 2013, our largest client was served by more than 175 of our agencies and represented 2.7% of revenue and no other client accounted for more than 2.5% of revenue. In 2013, our top 100 clients, ranked

by revenue, were each served, on average, by more than 50 of our agencies and collectively represented approximately 51% of revenue.

Our Employees

At December 31, 2013, we employed approximately 71,800 people. We are not party to any significant collective bargaining agreements. The skill sets of our workforce across our agencies and within each discipline are similar. Common to all is the ability to understand a client’s brand or product and their selling proposition and to develop a unique message to communicate the value of the brand or product to the client’s target audience. Recognizing the importance of this core competency, we have established tailored training and education programs for our client service professionals around this competency. See our MD&A for a discussion of the effect of salary and related costs on our results of operations.

Executive Officers of the Registrant

At January 31, 2014, our executive officers were:



Name	Position	Age
Bruce Crawford	Chairman of the Board	85
John D. Wren	President and Chief Executive Officer	61
Randall J. Weisenburger	Executive Vice President and Chief Financial Officer	55
Peter Mead	Vice Chairman	74
Philip J. Angelastro	Senior Vice President Finance and Controller	49
Michael J. O’Brien	Senior Vice President, General Counsel and Secretary	52
Dennis E. Hewitt	Treasurer	69

Each executive officer has held his present position for at least five years.

Additional information about our directors and executive officers will appear under the captions “Corporate Governance,” “Transactions with Related Persons,” “Election of Directors,” “Executive Compensation,” “Directors Compensation for Fiscal 2013” and “Stock Ownership” in our definitive proxy statement, which is expected to be filed with the SEC by April 10, 2014.

Item 1A. Risk Factors

Our entry into the Business Combination Agreement with Publicis may have adverse impacts.

In order to complete the Business Combination with Publicis, customary closing conditions must be satisfied, including receipt of approvals by governmental regulators and authorities, including approvals under applicable competition laws, approval by our and Publicis shareholders of the Transactions contemplated by the Business Combination Agreement, the listing of the Publicis Omnicom Group shares on the applicable stock exchanges, and the absence of a material adverse effect on either our business or the Publicis business. It is not certain that these conditions will be met or waived, that we and Publicis will be able to obtain the necessary approvals, or that we will be able to resolve all open issues, complexities and challenges necessary to consummate successfully the business combination as provided for under the Business Combination Agreement, or at all.

We face risks and uncertainties due both to the pendency of the business combination as well as the potential failure to consummate the business combination, including:


•	we may not realize any or all of the potential benefits combining the businesses of Omnicom and Publicis;


•	even if the business combination is not consummated, we will remain liable for significant transaction costs, including legal, financial advisory, accounting, and other costs relating to the business combination;


•	we may have to pay a termination fee of $500 million in cash to Publicis under some circumstances if the Business Combination Agreement is terminated before we complete the business combination;


•	the pending business combination could have an adverse impact on our relationships with employees, clients and suppliers, and prospective clients or other third parties may delay or decline entering into agreements with us as a result of the announcement of the proposed business combination; and


•	the attention of our management and employees may be diverted from our day-to-day operations.

The occurrence of any of these events individually or in combination could have a material adverse effect on our share price, business and cash flows, results of operations and financial position.

Global economic conditions could adversely impact our business and results of operations and financial position.

Global economic conditions have a direct impact on our business and financial performance. In particular, current global economic conditions pose a risk that our clients may reduce future spending on advertising and marketing services which could reduce the demand for our services. If domestic or global economic conditions worsen or do not improve, our results of operations and financial position could be adversely affected. We will continue to closely monitor economic conditions, client revenue levels and other factors and, in response to reductions in our client revenue, if necessary, we will take actions available to us to align our cost structure and manage working capital. There can be no assurance whether, or to what extent, our efforts to mitigate any impact of future economic conditions, reductions in our client revenue, changes in client creditworthiness and other developments will be effective.

A reduction in client spending, a delay in client payments or conditions in the credit markets could have a material adverse effect on our working capital.

Global economic uncertainty, turmoil in the credit markets or a contraction in the availability of credit may make it more difficult for businesses, including us, to meet their working capital requirements and could lead clients to seek to change their financial relationship with their vendors, including us, and could cause our clients to reduce spending on our services, delay the payment for our services or take additional actions that would negatively affect our working capital. We could need to obtain additional financing to fund our day-to-day working capital requirements in such circumstances. There is no assurance that such additional financing would be available on favorable terms, if at all. Such circumstances could have a material adverse effect on our results of operations and financial position.

In an economic downturn, the risk of a material loss related to media purchases and production costs incurred on behalf of our clients could significantly increase and methods for managing or mitigating such risk may be less available or unavailable.

In the normal course of business, our agencies enter into contractual commitments with media providers and production companies on behalf of our clients at levels that can substantially exceed the revenue from our services. These commitments are included in accounts payable when the services are delivered by the media providers or production companies. If permitted by local law and the client agreement, many of our agencies purchase media and production services for our clients as an agent for a disclosed principal. In addition, while operating practices vary by country, media type and media vendor, in the United States and certain foreign markets, many of our agencies’ contracts with media and production providers specify that our agencies are not liable to the media and production providers under the theory of sequential liability until and to the extent we have been paid by our client for the media or production services.

Where purchases of media and production services are made by our agencies as a principal or are not subject to the theory of sequential liability, the risk of a material loss as a result of payment default by our clients could increase significantly and such a loss could have a material adverse effect on our results of operations and financial position.

In addition, methods of managing the risk of payment default, including obtaining credit insurance, requiring payment in advance, mitigating the potential loss in the marketplace or negotiating with media providers, may be less available or unavailable during a severe economic downturn.

Companies periodically review and change their advertising, marketing and corporate communications services business models and relationships. If we are unable to remain competitive or retain key clients, our business and results of operations and financial position may be adversely affected.

The markets we operate in are highly competitive and are expected to remain so. Key competitive considerations for retaining existing business and winning new business include our ability to develop marketing solutions that meet client needs in a rapidly changing environment, the quality and effectiveness of the services we offer and our ability to efficiently serve clients, particularly large international clients, on a broad geographic basis. While many of our client relationships are long-standing, from time to time clients put their advertising, marketing and corporate communications services business up for competitive review. We have won and lost accounts in the past as a result of these reviews. To the extent that we are not able to remain competitive or retain key clients, our revenue may be adversely affected, which could have a material adverse effect on our results of operations and financial position.

The success of our acquiring and retaining clients depends on our ability to avoid and manage conflicts of interest arising from other client relationships, the retention of key personnel and maintaining a highly skilled workforce.

Our ability to retain existing clients and to attract new clients may, in some cases, be limited by clients’ perceptions of, or policies concerning, conflicts of interest arising from other client relationships. If we are unable to maintain multiple agencies to manage multiple client relationships and avoid potential conflicts of interests, our business, results of operations and financial position may be adversely affected.

Our employees are our most important assets and our ability to attract and retain key personnel is an important aspect of our competitiveness. If we are unable to attract and retain key personnel, including highly skilled technically proficient personnel, our ability to provide our services in the manner our customers have come to expect may be adversely affected, which could harm our reputation and result in a loss of clients, which could have a material adverse effect on our results of operations and financial position.

Approximately 51% of our revenue in 2013 came from our 100 largest clients and the loss of several of these clients could have a material adverse impact on our results of operations and financial position.

Our clients generally are able to reduce advertising and marketing spending or cancel projects at any time on short notice for any reason. It is possible that our clients could reduce spending in comparison to historical patterns, or they could reduce future spending. A significant reduction in advertising and marketing spending by our largest clients, or the loss of several of our largest clients, if not replaced by new clients or an increase in business from existing clients, would adversely affect our revenue and could have a material adverse effect on our results of operations and financial position.

We rely extensively on information technology systems.

We rely on information technology systems and infrastructure to process transactions, summarize results and manage our business, including maintaining client marketing and advertising information. Our information technology systems are potentially vulnerable to system failures and network disruptions, malicious intrusion and random attack. Likewise, data security incidents and breaches by employees and others with or without permitted access to our systems may pose a risk that sensitive data may be exposed to unauthorized persons or to the public. Additionally, we utilize third parties, including cloud providers, to store, transfer or process data. While we have taken what we believe are prudent measures to protect our data and information technology systems, there can be no assurance that our efforts will prevent system failures or network disruptions or breaches in our systems, or in systems of third parties we use, that could adversely affect our reputation or business.

Government regulations and consumer advocates may limit the scope and content of our services, which could affect our ability to meet our clients’ needs, which could have a material adverse effect on our results of operations and financial position.

Government agencies and consumer groups directly or indirectly affect or attempt to affect the scope, content and manner of presentation of advertising, marketing and corporate communications services, through regulation or other governmental action. Any limitation on the scope or content of our services could affect our ability to meet our clients’ needs, which could have a material adverse effect on our results of operations and financial position. In addition, there has been a tendency on the part of businesses to resort to the judicial system to challenge advertising practices. Such actions by businesses or governmental agencies could have a material adverse effect on our results of operations and financial position.

Additionally, government or legislative action may limit the tax deductibility of advertising expenditures by certain industries or for certain products and services. These actions could cause our clients affected by such actions to reduce their spending on our services which could have a material adverse effect on our results of operations and financial position.

Further, laws and regulations, related to user privacy, use of personal information and Internet tracking technologies have been proposed or enacted in the United States and certain international markets. These laws and regulations could affect the acceptance of new communications technologies and the use of current communications technologies as advertising mediums. These actions could affect our business and reduce demand for certain of our services, which could have a material adverse effect on our results of operations and financial position.

We are a global service business and face certain risks of doing business abroad, which could have a material adverse effect on our results of operations and financial position and liquidity.

We face a number of risks normally associated with a global service business. The operational and financial performance of our businesses are typically tied to overall economic and regional market conditions, competition for client assignments and talented staff, new business and the risks associated with extensive international operations. We also must comply with applicable U.S. local and other international anti-corruption laws, including the Foreign Corrupt Practices Act of 1977, which can be complex and stringent, in all jurisdictions where we operate. These risks could have a material adverse effect on our results of operations and financial position. For financial information on our operations by geographic region, see Note 8 to our consolidated financial statements.

We are exposed to risks from operating in developing countries and high-growth markets.

We conduct business in numerous developing countries and high-growth markets around the world. Our operations outside the United States are also exposed to risks that include: slower receipt of payments; social, political and economic instability, currency fluctuation and currency repatriation restrictions. In addition, commercial laws in developing countries and high-growth markets can be undeveloped, vague, inconsistently enforced or frequently changed. If we are deemed not to be in compliance with applicable laws in countries and markets where we conduct business, our prospects and business in those countries and markets could be harmed, which could then have a material adverse impact on our results of operations and financial position.

Downgrades of our debt credit ratings could adversely affect us.

Standard and Poor’s Rating Service, or S&P, rates our long-term debt BBB+ and Moody’s Investors Service, or Moody's, rates our long-term debt Baa1. Our short-term debt ratings are A2 and P2 by the respective rating agencies. Our outstanding Senior Notes, Convertible Notes due July 31, 2032, or the 2032 Notes, and $2.5 billion Credit Agreement, or the Credit Agreement, do not contain provisions that require acceleration of cash payment upon a ratings downgrade. However, the interest rates and fees on our Credit Agreement would increase if our long-term debt credit ratings are downgraded. Also, our access to the capital markets could be adversely affected by downgrades in our short-term or long-term debt credit ratings. Our 2032 Notes would become convertible into shares of our common stock if the credit ratings assigned to the 2032 Notes are downgraded to BBB or lower by S&P or Baa3 or lower by Moody’s.

We may be unsuccessful in evaluating material risks involved in completed and future acquisitions.

We regularly evaluate potential acquisition of businesses that we believe are complementary to our businesses and client needs. As part of the evaluation, we conduct business, legal and financial due diligence with the goal of identifying and evaluating material risks involved in any particular transaction. Despite our efforts, we may be unsuccessful in ascertaining or evaluating all such risks. As a result, we might not realize the intended advantages of any given acquisition. If we fail to identify certain material risks from one or more acquisitions, our results of operations and financial position could be adversely affected.

Our goodwill may become impaired, which could adversely effect our results of operations and financial position.

In accordance with generally accepted accounting principles in the United States, or U.S. GAAP or GAAP, we have recorded a significant amount of goodwill in our consolidated financial statements resulting from our acquisition activities, which principally represents the specialized know-how of the workforce at the acquired businesses. As discussed in Note 3 to our consolidated financial statements, we test the carrying value of goodwill for impairment at least annually at the end of the second quarter and whenever events or circumstances indicate the carrying value may not be recoverable. The estimates and assumptions about future results of operations and cash flows made in connection with the impairment testing could differ from future actual results of operations and cash flows. While we have concluded, for each year presented in the financial statements included in this report, that our goodwill is not impaired, future events could cause us to conclude that the asset values associated with a given operation may become impaired. Any resulting impairment charge, although non-cash, could have a material adverse effect on our results of operations and financial position.

We could be affected by future laws or regulations enacted in response to climate change concerns and other actions.

Generally, our businesses are not directly affected by current cap and trade laws and other regulatory requirements aimed at mitigating the impact of climate change by reducing emissions or otherwise; although, our businesses could be in the future. However, we could be indirectly affected by increased prices for goods or services provided to us by companies that are directly affected by these laws and regulations and pass their increased costs through to their customers. Further, if our clients are impacted by such laws or requirements, either directly or indirectly, their spending for advertising and marketing services may decline, which could adversely impact our results of operations and financial position. Additionally, to comply with potential future changes in environmental laws and regulations, we may need to incur additional costs. At this time, we cannot estimate what impact such costs may have on our results of operations and financial position.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We have offices throughout the world. The facility requirements of our businesses are similar across geographic regions and disciplines. Our facilities are primarily used by our employees to provide professional services to our clients. We believe that our facilities are in suitable and well-maintained condition for our current operations. Our principal corporate offices are located at 437 Madison Avenue, New York, New York; One East Weaver Street, Greenwich, Connecticut and 1800 N. Military Trail, Boca Raton, Florida. We also maintain executive offices in London, England; Shanghai, China and Singapore.

We lease substantially all our office space under operating leases that expire at various dates. Lease obligations of our foreign operations are generally denominated in their local currency. Office base rent expense was $369.3 million, $380.1 million and $368.8 million in 2013, 2012 and 2011, respectively, net of rent received from non-cancelable third-party subleases of $10.6 million, $10.4 million and $12.8 million, respectively.

Future minimum office base rent under non-cancelable operating leases, net of rent receivable from existing non-cancelable third-party subleases, is (in millions):



	Net Rent
2014	$	343.7
2015	250.1
2016	189.0
2017	134.5
2018	110.0
Thereafter	302.9
	$	1,330.2

See Note 15 to our consolidated financial statements for a description of our lease commitments and our MD&A for a description of the impact of leases on our operating expenses.

Item 3. Legal Proceedings

A putative class action challenging the Business Combination was filed on August 5, 2013 on behalf of Omnicom shareholders in the Supreme Court of the State of New York, New York County. The action, entitled Ansfield v. Wren, et al., names as defendants Omnicom and its board of directors, as well as Publicis and HoldCo. It alleges that the members of the Omnicom board breached their fiduciary duties by, among other things, approving a merger that is purportedly detrimental to Omnicom’s shareholders. The action also alleges that Publicis aided and abetted the Omnicom board’s breach of their fiduciary duties. The action seeks an injunction barring or rescinding the Business Combination, damages and attorneys’ fees and costs.

Two additional purported class actions were subsequently filed in the Supreme Court of the State of New York, New York County: Lee v. Omnicom Group, et al., filed on August 14, 2013, and Fultz v. Crawford et al., filed on August 20, 2013. Both of these actions name as defendants Omnicom and its board of directors, as well as Publicis, and make substantially the same allegations and seek substantially the same relief as the Ansfield case.

On August 19, 2013, plaintiffs in the Ansfield and Lee actions filed a motion to consolidate those actions with each other and with all subsequently filed or transferred actions arising out of the same facts and circumstances, to select plaintiffs as lead plaintiffs and to approve plaintiffs’ selection of counsel as co-lead counsel. On October 3, 2013, plaintiffs in all three cases asked the Court to consolidate the three cases, and to approve lead plaintiffs and plaintiffs’ selection of counsel as co-lead counsel.

On October 24, 2013, the Court approved plaintiffs’ motion to consolidate the Ansfield, Lee, and Fultz actions with each other and with all subsequently filed or transferred actions arising out of the same facts and circumstances under the caption: In re Omnicom Group Inc. Shareholder Litigation, Index No. 652737/2013, and in the same order appointed co-lead counsel. On October 29, 2013, the Court approved the parties’ stipulation requiring plaintiffs to file an amended complaint within three weeks after HoldCo files a preliminary proxy statement/prospectus.

Omnicom believes the consolidated lawsuit is without merit and intends to defend vigorously against it. Due to the inherent uncertainties of such matters, and because discovery is not yet completed, we are unable to predict potential outcomes or estimate of the range of potential damages, if any. Management does not presently expect that the outcome of this matter will have a material adverse effect on our results of operations or financial position.

In the ordinary course of business, we are involved in various other legal proceedings. We do not presently expect that these other proceedings will have a material adverse effect on our results of operations or financial position.

Item 4. Mine Safety Disclosures

Not Applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is listed and traded on the New York Stock Exchange under the symbol “OMC.” On January 31, 2014, there were 2,359 holders of record of our common stock.

The quarterly high and low sales prices reported on the New York Stock Exchange Composite Tape for our common stock and the dividends paid per share for 2013 and 2012 were:



	High		Low		Dividends Paid Per Share
2013

First Quarter	$	60.05	$	50.40	$	0.40
Second Quarter	64.29		57.73		0.40
Third Quarter	70.50		59.70		0.40
Fourth Quarter	74.50		61.35		0.40

2012

First Quarter	$	51.38	$	43.83	$	0.30
Second Quarter	52.19		45.65		0.30
Third Quarter	54.76		47.03		0.30
Fourth Quarter	53.07		45.11		0.30

Stock repurchase activity during the three months ended December 31, 2013 was:



Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs

October 2013	37,697	$	64.75	—	—
November 2013	6,695	65.66		—	—
December 2013	15,587	70.39		—	—
	59,979	$	66.32	—	—

During the three months ended December 31, 2013, we withheld 59,979 shares from employees to satisfy estimated statutory income tax obligations related to stock option exercises and vesting of restricted stock. The value of the common stock withheld was based on the closing price of our common stock on the applicable exercise or vesting date. There were no purchases of our common stock in the open market during the three months ended December 31, 2013.

There were no unregistered sales of equity securities during the three months ended December 31, 2013.

For information on securities authorized for issuance under our equity compensation plans, see “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” which relevant information will be included under the caption “Equity Compensation Plans” in our definitive proxy statement, which is expected to be filed with the SEC by April 10, 2014.

Item 6. Selected Financial Data

The following selected financial data should be read in conjunction with our consolidated financial statements and related notes that begin on page F-1 of this report, as well as our MD&A.



	(In millions, except per share amounts)
For the years ended December 31:	2013		2012		2011		2010		2009

Revenue	$	14,584.5	$	14,219.4	$	13,872.5	$	12,542.5	$	11,720.7
Operating Income	1,825.3		1,804.2		1,671.1		1,460.2		1,374.9
Net Income - Omnicom Group Inc.	991.1		998.3		952.6		827.7		793.0
Net Income Per Common Share - Omnicom Group Inc.:
Basic	3.73		3.64		3.38		2.74		2.54
Diluted	3.71		3.61		3.33		2.70		2.53
Dividends Declared Per Common Share	1.60		1.20		1.00		0.80		0.60
	(In millions)
At December 31:	2013		2012		2011		2010		2009

Cash and cash equivalents and short-term investments	$	2,728.7	$	2,698.9	$	1,805.0	$	2,300.0	$	1,594.8
Total Assets	22,098.7		22,151.9		20,505.4		19,566.1		17,920.7
Long-Term Obligations:
Long-term notes payable	3,780.7		3,789.1		2,523.5		2,465.1		1,494.6
Convertible debt	252.7		659.4		659.4		659.5		726.0
Long-term liabilities	685.1		739.9		602.0		576.5		462.0
Total Shareholders’ Equity	3,582.4		3,460.8		3,504.3		3,580.5		4,194.8

In 2013, we incurred expenses in connection with the proposed merger with Publicis of $41.4 million, which are primarily comprised of professional fees. The impact on Operating Income, Net Income - Omnicom Group Inc. and Diluted Net Income per Common Share - Omnicom Group Inc. for the year ended December 31, 2013 was $41.4 million, $34.9 million and $0.13, respectively.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

PENDING BUSINESS COMBINATION

In the Publicis Merger, each issued and outstanding share of Publicis will be exchanged for 1.000000 ordinary share of Publicis Omnicom Group. In addition, prior to completion of the Publicis Merger, Publicis intends to declare and pay a special dividend, in cash, in an amount equal to €1.00 per Publicis share (the “Publicis Transaction Dividend”). In the Omnicom Merger, each share of common stock of the Company will be converted into the right to receive 0.813008 of a Publicis Omnicom Group ordinary share, together with cash in lieu of fractional shares, subject to adjustment to account for certain changes in outstanding shares and certain excluded asset values as set forth in the Business Combination Agreement. Similarly, prior to completion of the Omnicom Merger, the Company intends to declare and pay a special cash dividend of $2.00 per share of the Company’s outstanding common stock (the “Omnicom Transaction Dividend” and, together with the Publicis Transaction Dividend, the “Transaction Dividends”), subject to adjustment to account for certain changes in outstanding shares of the parties and certain excluded asset values, in each case as set forth in the Business Combination Agreement, and, if necessary, to equalize the cumulative amount of regular dividends paid by the Company after July 27, 2013 with the cumulative amount of regular Publicis dividends paid after July 27, 2013. However, dividends of up to $0.80 per share in the aggregate paid to holders of the Company’s common stock in respect of record dates after July 27, 2013 and before the Mergers are not included in this equalization. The payment of the Transaction Dividends is also subject to applicable law.

The completion of the Transactions contemplated by the Business Combination Agreement will have a material effect on our future results of operations and financial position.

EXECUTIVE SUMMARY

We are a strategic holding company. We provide professional services to clients through multiple agencies around the world. On a global, pan-regional and local basis, our agencies provide these services in the following disciplines: advertising, customer relationship management, or CRM, public relations and specialty communications. Our business model was built and continues to evolve around our clients. While our agencies operate under different names and frame their ideas in different disciplines, we organize our services around our clients. The fundamental premise of our business is that our clients’ specific requirements should be the central focus in how we deliver our services and allocate our resources. This client-centric business model results in multiple agencies collaborating in formal and informal virtual networks that cut across internal organizational structures to deliver consistent brand messages for a specific client and execute against each of our clients’ specific marketing requirements. We continually seek to grow our business with our existing clients by maintaining our client-centric approach, as well as expanding our existing business relationships into new markets and with new clients. In addition, we pursue selective acquisitions of complementary companies with strong entrepreneurial management teams that typically currently serve or have the ability to serve our existing client base.

As a leading global advertising, marketing and corporate communications company, we operate in all major markets around the world and have a large and diverse client base. In 2013, our largest client accounted for 2.7% of revenue and no other client accounted for more than 2.5% of revenue. Our top 100 clients accounted for approximately 51% of revenue in 2013. Our business is spread across a significant number of industry sectors with no one industry comprising more than 14% of revenue in 2013. Although our revenue is generally balanced between the United States and international markets and we have a large and diverse client base, we are not immune to general economic downturns.

As described in more detail below, in 2013 revenue increased 2.6% compared to 2012. Increased revenue in the United States and continued growth in both high-growth markets and emerging markets of Asia and Latin America was partially offset by the on-going economic weakness in the Euro Zone.

Global economic conditions have a direct impact on our business and financial performance. In particular, current global economic conditions pose a risk that our clients may reduce future spending on advertising and marketing services which could reduce the demand for our services. In 2013 the United States experienced modest economic growth and the major economies of Asia and Latin America continued to expand. While economic conditions in the Euro Zone began to stabilize in the second half of 2013, the continuing fiscal issues faced by many countries in the European Union has caused economic difficulty in certain of our Euro Zone markets. We will continue to closely monitor economic conditions, client revenue levels and other factors and, in response to reductions in our client revenue, if necessary, we will take actions available to us to align our cost structure and manage working capital. There can be no assurance whether, or to what extent, our efforts to mitigate any impact of future economic conditions, reductions in our client revenue, changes in client creditworthiness and other developments will be effective.

Certain business trends have had a positive impact on our business and industry. These trends include our clients increasingly expanding the focus of their brand strategies from national markets to pan-regional and global markets and integrating traditional and non-traditional marketing channels, as well as utilizing new communications technologies and emerging digital platforms. Additionally, in an effort to gain greater efficiency and effectiveness from their total marketing budgets, clients continue to require greater coordination of marketing activities. We believe these trends have benefited our business in the past and over the medium and long term will continue to provide a competitive advantage to us.

In the near term, barring unforeseen events and excluding the impact from changes in foreign exchange rates and the effect of the pending merger with Publicis, as a result of continued improvement in operating performance by many of our agencies and new business activities, we expect our 2014 revenue to increase modestly in excess of the weighted average nominal GDP growth in our major markets. We expect to continue to identify acquisition opportunities intended to build upon the core capabilities of our strategic business platforms, expand our operations in the emerging markets and enhance our capabilities to leverage new technologies that are being used by marketers today.

Given our size and breadth, we manage our business by monitoring several financial indicators. The key indicators that we review focus on revenue and operating expenses. We analyze revenue growth by reviewing the components and mix of the growth, including growth by major geographic region, growth by major marketing discipline, impact from foreign currency fluctuations, growth from acquisitions and growth from our largest clients. In recent years, our revenue has been divided almost evenly between our domestic and international operations.

In 2013 revenue increased 2.6% compared to 2012. Organic growth increased revenue 3.5%. Acquisitions, net of dispositions reduced revenue 0.3% and the impact of changes in foreign exchange rates reduced revenue by 0.6%. Across our geographic markets, revenue increased 2.8% in the United States, 6.2% in the United Kingdom, 1.8% in our other markets, primarily Asia and Latin America, and 0.9% in our Euro markets. The change in revenue in 2013 compared to 2012 in our four fundamental disciplines was: advertising increased 3.6%, CRM increased 1.3%, public relations increased 2.9% and specialty communications increased 2.0%.

We measure operating expenses in two distinct cost categories: salary and service costs and office and general expenses. Salary and service costs consist of employee compensation and related costs and direct service costs. Office and general expenses consist of rent and occupancy costs, technology costs, depreciation and amortization and other overhead expenses. Each of our agencies requires professionals with the skill sets that are common across our disciplines. At the core of the skill sets is the ability to understand a client’s brand or product and its selling proposition and the ability to develop a unique message to communicate the value of the brand or product to the client’s target audience. The facility requirements of our agencies are also similar across geographic regions and disciplines, and their technology requirements are generally limited to personal computers, servers and off-the-shelf software. Because we are a service business, we monitor salary and service costs and office and general costs in relation to revenue.

Salary and service costs tend to fluctuate in conjunction with changes in revenue. Salary and service costs increased 3.1% in 2013 compared to 2012, reflecting growth in revenue and an increase in employee compensation, including incentive compensation and severance, as well as increases related to changes in the mix of our business during the year.

Office and general expenses are less directly linked to changes in revenue than salary and service costs. Office and general expenses decreased 0.7% in 2013 compared to 2012, reflecting our continuing efforts to control the cost structures of our agencies.

In the second half of 2013 we incurred $41.4 million of expenses in connection with the pending merger with Publicis, which are primarily comprised of professional fees. The merger expenses are shown as a separate component of operating expenses and we expect to incur additional merger expenses in 2014.

Operating margins decreased to 12.5% in 2013 from 12.7% in 2012 and EBITA margins decreased to 13.2% in 2013 from 13.4% in 2012. Excluding the merger expenses of $41.4 million, operating margins for 2013 increased to 12.8% from 12.7% in 2012 and EBITA margins for 2013 increased to 13.5% from 13.4% in 2012.

Net interest expense increased to $164.4 million in 2013 from $144.6 million in 2012. Interest expense increased $17.5 million to $197.2 million. The increase in interest expense in 2013 is primarily attributable to the issuance of our 3.625% Senior Notes due May 1, 2022, or the 2022 Notes, of which $750 million were issued in April 2012 and $500 million were issued in August 2012. Interest income decreased $2.3 million to $32.8 million in 2013.

Our effective tax rate increased to 34.0% in 2013 from 31.8% in 2012. Excluding the income tax effect of the merger expenses of $6.5 million, which reflects the estimated impact of the non-deductibility of a significant portion of the merger expenses, our effective tax rate for 2013 was 33.6%, which is consistent with our expected effective tax rate for 2013 and reflects the full year effect of the reduction in income tax expense resulting from the implementation of the legal reorganization in the Asia Pacific region, which occurred in the fourth quarter of 2012.

Net income - Omnicom Group Inc. decreased $7.2 million, or 0.7%, to $991.1 million in 2013 from $998.3 million in 2012. The year-over-year decrease in net income - Omnicom Group Inc. is due to the factors described above. Diluted net income per common share - Omnicom Group Inc. increased 2.8% to $3.71 in 2013, compared to $3.61 in 2012 due to the factors described above, as well as the impact of the reduction in our weighted average common shares outstanding. The reduction in our weighted average shares outstanding was the result of repurchases of our common stock, net of stock option exercises and shares issued under our employee stock purchase plan and shares issued upon conversion of our Convertible Notes due June 15, 2033, or 2033 Notes, and our Convertible Notes due July 1, 2038, or 2038 Notes. In connection with the pending merger with Publicis, beginning in the third quarter of 2013 we suspended repurchases of our common stock in the open market. Excluding the net effect of the merger expenses, net income - Omnicom Group Inc. for 2013 was $1,026.0 million and diluted net income per common share - Omnicom Group Inc. was $3.84.

See the Reconciliation of Results of Operations to 2013 Non-GAAP Financial Measures on page 16 for a description of the Non-GAAP Financial Measures discussed above.

CRITICAL ACCOUNTING POLICIES

The following summary of our critical accounting policies provides a better understanding of our financial statements and the related discussion in this MD&A. We believe that the following policies may involve a higher degree of judgment and complexity in their application and represent the critical accounting policies used in the preparation of our financial statements. Readers are encouraged to consider this summary together with our financial statements and the related notes, including Note 3, Significant Accounting Policies, for a more complete understanding of the critical accounting policies discussed below.

Estimates

Our financial statements are prepared in conformity with U.S. GAAP and require us to make estimates and assumptions that affect the amounts of assets, liabilities, revenue and expenses that are reported in the consolidated financial statements and accompanying notes. We use a fair value approach in testing goodwill for impairment and when evaluating our cost-method investments to determine if an other-than-temporary impairment has occurred. Actual results could differ from those estimates and assumptions.

Acquisitions and Goodwill

We have made and expect to continue to make selective acquisitions. In making acquisitions, the valuation of potential acquisitions is based on various factors, including specialized know-how, reputation, competitive position, geographic coverage and service offerings of the target businesses, as well as our experience and judgment.

Business combinations are accounted for using the acquisition method and, accordingly, the assets acquired, including identified intangible assets, the liabilities assumed and any noncontrolling interest in the acquired business are recorded at their acquisition date fair values. In circumstances where control is obtained and less than 100% of an entity is acquired, we record 100% of the goodwill acquired. Acquisition-related costs, including advisory, legal, accounting, valuation and other costs, are expensed as incurred. Certain of our acquisitions are structured with contingent purchase price obligations (earn-outs). Contingent purchase price obligations are recorded as liabilities at the acquisition date fair value. Subsequent changes in the fair value of the liabilities are recorded in our results of operations. The results of operations of acquired businesses are included in our results of operations from the acquisition date. In 2013, we completed 8 acquisitions of new subsidiaries and made additional investments in businesses in which we had an existing minority ownership interest. Goodwill increased $69.9 million in 2013, which included contingent purchase price payments (earn-outs) for acquisitions completed prior to January 1, 2009 of $14.5 million. Contingent purchase price obligations for acquisitions completed prior to January 1, 2009 are accrued, in accordance with U.S. GAAP, when the contingency is resolved and payment is certain.

Our acquisition strategy is focused on acquiring the expertise of an assembled workforce in order to continue to build upon the core capabilities of our various strategic business platforms and agency brands through the expansion of their geographic reach and/or their service capabilities to better serve our clients. Additional key factors we consider include the competitive position and specialized know-how of the acquisition targets. Accordingly, as is typical in most service businesses, a substantial portion of the intangible asset value we acquire is the know-how of the people, which is treated as part of goodwill and is not valued separately. For each acquisition, we undertake a detailed review to identify other intangible assets and a valuation is performed for all such identified assets. A significant portion of the identifiable intangible assets acquired is derived from customer relationships, including the related customer contracts, as well as trade names. In valuing these identified intangible assets, we typically use an income approach and consider comparable market participant measurements.

We evaluate goodwill for impairment at least annually at the end of the second quarter of the year and whenever events or circumstances indicate the carrying value may not be recoverable. We identified our regional reporting units as components of our operating segments, which are our five agency networks. The regional reporting units of each agency network are responsible for the agencies in their region. They report to the segment managers and facilitate the administrative and logistical requirements of our client-centric strategy for delivering services to clients in their regions. We have concluded that for each of our operating segments, their regional reporting units have similar economic characteristics and should be aggregated for purposes of testing goodwill for impairment at the operating segment level. Our conclusion was based on a detailed analysis of the aggregation criteria set forth in FASB ASC Topic 280, Segment Reporting, and the guidance set forth in FASB ASC Topic 350, Intangibles - Goodwill and Other. Consistent with our fundamental business strategy, the agencies within our regional reporting units serve similar clients in similar industries, and in many cases the same clients. In addition, the agencies within our regional reporting units have similar economic characteristics. The main economic components of each agency are employee compensation and related costs and direct service costs and office and general costs, which include rent and occupancy costs, technology costs that are generally limited to personal computers, servers and off-the-shelf software and other overhead expenses. Finally, the expected benefits of our acquisitions are typically shared across multiple agencies and regions as they work together to integrate the acquired agency into our client service strategy.

Goodwill Impairment Review - Estimates and Assumptions

We use the following valuation methodologies to determine the fair value of our reporting units: (1) the income approach, which utilizes discounted expected future cash flows, (2) comparative market participant multiples for EBITDA (earnings before interest, taxes, depreciation and amortization) and (3) when available, consideration of recent and similar acquisition transactions.

In applying the income approach, we use estimates to derive the expected discounted cash flows (“DCF”) for each reporting unit that serves as the basis of our valuation. These estimates and assumptions include revenue growth and operating margin, EBITDA, tax rates, capital expenditures, weighted average cost of capital and related discount rates and expected long-term cash flow growth rates. All of these estimates and assumptions are affected by conditions specific to our businesses, economic conditions related to the industry we operate in, as well as conditions in the global economy. The assumptions that have the most significant effect on our valuations derived using a DCF methodology are: (1) the expected long-term growth rate of our reporting units' cash flows and (2) the weighted average cost of capital (“WACC”).

The range of assumptions for the long-term growth rate and WACC used in our evaluations as of June 30, 2013 and 2012 were:



	June 30,
	2013	2012

Long-Term Growth Rate	4%	4%
WACC	10.1% - 10.7%	10.3% - 10.9%

Long-term growth rate represents our estimate of the long-term growth rate for our industry and the markets of the global economy we operate in. The average historical revenue growth rate of our reporting units for the past ten years was approximately 6.8% and the Average Nominal GDP growth of the countries comprising our major markets that account for substantially all of our revenue was 4.3% over the same period. We considered this history when determining the long-term growth rates used in our annual impairment test at June 30, 2013. We believe marketing expenditures over the long term have a high correlation to GDP. We also believe, based on our historical performance, that our long-term growth rate will exceed Average Nominal GDP growth in the markets we operate in. For our annual test as of June 30, 2013, we used an estimated long-term growth rate of 4% for our reporting units.

When performing our annual impairment test as of June 30, 2013 and estimating the future cash flows of our reporting units, we considered the current macroeconomic environment, as well as industry and market specific conditions at mid-year 2013. In the first half of 2013, we experienced an increase in our revenue of 2.8%, which excludes growth from acquisitions and the impact from changes in foreign exchange rates. While economic conditions in the Euro Zone began to stabilize in the second half of 2013, the continuing fiscal issues faced by many countries in the European Union has caused economic difficulty in certain of our Euro Zone markets. We considered the effect of these conditions in our annual impairment test.

The WACC is comprised of: (1) a risk-free rate of return, (2) a business risk index ascribed to us and to companies in our industry comparable to our reporting units based on a market derived variable that measures the volatility of the share price of equity securities relative to the volatility of the overall equity market, (3) an equity risk premium that is based on the rate of return on equity of publicly traded companies with business characteristics comparable to our reporting units and (4) a current after-tax market rate of return on debt of companies with business characteristics similar to our reporting units, each weighted by the relative market value percentages of our equity and debt.

Our five reporting units vary in size with respect to revenue and the amount of debt allocated to them. These differences drive variations in fair value among our reporting units. In addition, these differences as well as differences in book value, including goodwill, cause variations in the amount by which fair value exceeds book value among the reporting units. The reporting unit goodwill balances and debt vary by reporting unit primarily because our three legacy agency networks were acquired at the formation of Omnicom and were accounted for as a pooling of interests that did not result in any additional debt or goodwill being recorded. The remaining two agency networks were built through a combination of internal growth and acquisitions that were accounted for using the acquisition method and as a result, they have a relatively higher amount of goodwill and debt.

Goodwill Impairment Review - Conclusion

Under U.S. GAAP, we have the option of either assessing qualitative factors to determine whether it is more-likely-than-not that the carrying value of our reporting units exceeds their respective fair value or proceeding directly to Step 1 of the goodwill impairment test. Although not required, we performed Step 1 of the annual impairment test and compared the fair value of each of our reporting units to its respective carrying value, including goodwill. Based on the results of our impairment test, we concluded that our goodwill was not impaired at June 30, 2013, because the fair value of each of our reporting units was substantially in excess of their respective net book value. The minimum decline in fair value that one of our reporting units would need to experience in order to fail Step 1 of the goodwill impairment test was approximately 70%. Notwithstanding our belief that the assumptions we used in our impairment testing for our WACC and long-term growth rate are reasonable, we performed a sensitivity analysis for each of our reporting units. The results of this sensitivity analysis on our impairment test as of June 30, 2013 revealed that if WACC increased by 1% and/or long-term growth rate decreased by 1%, the fair value of each of our reporting units would continue to be substantially in excess of their respective net book values and would pass Step 1 of the impairment test.

We will continue to perform our impairment test at the end of the second quarter of each year unless events or circumstances trigger the need for an interim impairment test. The estimates used in our goodwill impairment test do not constitute forecasts or projections of future results of operations, but rather are estimates and assumptions based on historical results and assessments of macroeconomic factors affecting our reporting units. We believe that our estimates and assumptions are reasonable, but they are subject to change from period to period. Actual results of operations and other factors will likely differ from the estimates used in our discounted cash flow valuation and it is possible that differences could be material. A change in the estimates we use could result in a decline in the estimated fair value of one or more of our reporting units from the amounts derived as of our latest valuation and could cause us to fail Step 1 of our goodwill impairment test if the estimated fair value for the reporting unit is less than the carrying value of the net assets of the reporting unit, including its goodwill. A large decline in estimated fair value of a reporting unit could result in a non-cash impairment charge and may have an adverse effect on our results of operations and financial position.

Subsequent to our annual impairment test at June 30, 2013, there were no events or circumstances that triggered the need for an interim impairment test. Additional information about acquisitions and goodwill appears in Notes 3, 5 and 6 to our consolidated financial statements.

Revenue Recognition

We recognize revenue in accordance with FASB ASC Topic 605, Revenue Recognition, and applicable SEC Staff Accounting Bulletins. Substantially all of our revenue is derived from fees for services based on a rate per hour or equivalent basis. Revenue is realized when the service is performed in accordance with the client arrangement and upon the completion of the earnings process. Prior to recognizing revenue, persuasive evidence of an arrangement must exist, the sales price must be fixed or determinable, delivery, performance and acceptance must be in accordance with the client arrangement and collection must be reasonably assured. These principles are the foundation of our revenue recognition policy and apply to all client arrangements in each of our service disciplines: advertising, CRM, public relations and specialty communications. Certain of our businesses earn a portion of their revenue as commissions based upon performance in accordance with client arrangements. Because the services that we provide across each of our disciplines are similar and delivered to clients in similar ways, all of the key elements in revenue recognition apply to client arrangements in each of our four disciplines.

In the majority of our businesses, we act as an agent and record revenue equal to the net amount retained when the fee or commission is earned. Although we may bear credit risk with respect to these activities, the arrangements with our clients are such that we act as an agent on their behalf. In these cases, costs incurred with third-party suppliers are excluded from our revenue. In certain arrangements, we act as principal and we contract directly with third-party suppliers and media providers and production companies and we are responsible for payment. In these circumstances, revenue is recorded at the gross amount billed since revenue has been earned for the sale of goods or services.

Some of our client arrangements include performance incentive provisions designed to link a portion of our revenue to our performance relative to quantitative and qualitative goals. We recognize performance incentives in revenue when the specific quantitative goals are achieved, or when our performance against qualitative goals is determined by our clients.

Additional information about our revenue recognition policy appears in Note 3 to our consolidated financial statements.

Share-Based Compensation

Share-based compensation is measured at the grant date fair value based on the fair value of the award. We use the Black-Scholes option valuation model to determine the fair value of stock option awards. This valuation model uses several assumptions and estimates such as expected life, rate of risk free interest, volatility and dividend yield. If different assumptions and estimates were used to determine the fair value, our actual results of operations and cash flows would likely differ from the estimates used and it is possible that differences could be material. The fair value of restricted stock awards is determined using the closing price of our common stock on the grant date. Additional information about these assumptions and estimates appears in Note 3 to our consolidated financial statements.

Share-based compensation expense was $86.3 million, $80.8 million and $74.5 million, in 2013, 2012 and 2011, respectively. Information about our specific awards and stock plans can be found in Note 10 to our consolidated financial statements.

NEW ACCOUNTING STANDARDS

Additional information regarding new accounting guidance can be found in Note 20 to our consolidated financial statements. Note 3 to our consolidated financial statements provides a summary of our significant accounting policies.

RESULTS OF OPERATIONS - 2013 Compared to 2012 (in millions):



	2013			2012

Revenue	$	14,584.5		$	14,219.4
Operating Expenses:
Salary and service costs	10,724.4			10,406.8
Office and general expenses	1,993.4			2,008.4
Merger expenses	41.4			—
Total Operating Expenses	12,759.2			12,415.2
Add back: Amortization of intangible assets	100.8			101.1
	12,658.4			12,314.1
Earnings before interest, taxes and amortization of intangible assets (“EBITA”)	1,926.1			1,905.3
EBITA Margin - %	13.2		%	13.4		%
Deduct: Amortization of intangible assets	100.8			101.1
Operating Income	1,825.3			1,804.2
Operating Margin - %	12.5		%	12.7		%
Interest Expense	197.2			179.7
Interest Income	32.8			35.1
Income Before Income Taxes and Income (Loss) From Equity Method Investments	1,660.9			1,659.6
Income Tax Expense	565.2			527.1
Income (Loss) From Equity Method Investments	15.9			(15.0		)
Net Income	1,111.6			1,117.5
Net Income Attributed To Noncontrolling Interests	(120.5		)	(119.2		)
Net Income - Omnicom Group Inc.	$	991.1		$	998.3

EBITA, which we define as earnings before interest, taxes and amortization of intangible assets, and EBITA Margin, which we define as EBITA divided by Revenue, are Non-GAAP financial measures. We use EBITA and EBITA Margin as additional operating performance measures, which exclude the non-cash amortization expense of acquired intangible assets. The table above reconciles EBITA and EBITA Margin to the U.S. GAAP financial measure of Operating Income for the periods presented. We believe that EBITA and EBITA Margin are useful measures to evaluate the performance of our businesses. Non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with U.S. GAAP. Non-GAAP financial measures reported by us may not be comparable to similarly titled amounts reported by other companies.

Reconciliation of Results of Operations to 2013 Non-GAAP Financial Measures (in millions, except per share amounts):

The following table reconciles our reported results of operations for the year ended December 31, 2013 to the 2013 Non-GAAP financial measures presentation. Due to the size of the proposed merger with Publicis, we are providing Non-GAAP financial measures that exclude expenses, which are primarily comprised of professional fees, incurred in connection with the proposed merger.



	2013 As Reported			Merger Expenses			2013 Non-GAAP Financial Measures

EBITA	$	1,926.1		$	41.4		$	1,967.5

Operating Income	$	1,825.3		$	41.4		$	1,866.7

Income Tax Expense	$	565.2		$	6.5		$	571.7

Net Income - Omnicom Group Inc.	$	991.1		$	34.9		$	1,026.0

Net income allocated to participating securities	(25.1		)	(0.9		)	(26.0		)
Net income available for common shares	$	966.0		$	34.0		$	1,000.0

Diluted Net Income per Common Share - Omnicom Group Inc.	$	3.71		$	0.13		$	3.84

We believe that investors should consider the 2013 Non-GAAP financial measures as they are indicative of our expected ongoing performance and reflect how management evaluates our operating results. These Non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with U.S. GAAP. These Non-GAAP financial measures reported by us may not be comparable to similarly titled amounts reported by other companies.

Revenue

In 2013 revenue increased $365.1 million, or 2.6%, to $14,584.5 million from $14,219.4 million in 2012. Organic growth increased revenue $501.1 million. Acquisitions, net of dispositions, reduced revenue $51.7 million and the impact of changes in foreign exchange rates reduced revenue $84.3 million.

The components of 2013 revenue change in the United States (“Domestic”) and the remainder of the world (“International”) were (in millions):



	Total					Domestic					International
	$			%		$			%		$			%

December 31, 2012	$	14,219.4				$	7,363.7				$	6,855.7
Components of revenue change:
Foreign exchange impact	(84.3		)	(0.6	)%	—			—	%	(84.3		)	(1.2	)%
Acquisitions, net of dispositions	(51.7		)	(0.3	)%	(63.8		)	(0.9	)%	12.1			0.1	%
Organic growth	501.1			3.5	%	269.8			3.7	%	231.3			3.4	%
December 31, 2013	$	14,584.5		2.6	%	$	7,569.7		2.8	%	$	7,014.8		2.3	%

The components and percentages are calculated as follows:

•

The foreign exchange impact is calculated by first converting the current period’s local currency revenue using the average exchange rates from the equivalent prior period to arrive at a constant currency revenue (in this case $14,668.8 million for the Total column). The foreign exchange impact equals the difference between the current period revenue in U.S. dollars and the current period revenue in constant currency ($14,584.5 million less $14,668.8 million for the Total column).


•	The acquisition component is calculated by aggregating the applicable prior period revenue of the acquired businesses, less revenue of any business included in the prior period revenue that was disposed of subsequent to the period.


•	Organic growth is calculated by subtracting both the foreign exchange and acquisition components from total revenue growth.


•	The percentage change is calculated by dividing the individual component amount by the prior period revenue base of that component ($14,219.4 million for the Total column).

In 2013, changes in foreign exchange rates reduced revenue by 0.6%, or $84.3 million, compared to 2012. The most significant impacts resulted from the strengthening of the U.S. Dollar against the Japanese Yen, Australian Dollar, Brazilian Real, British Pound, Canadian Dollar and South African Rand, partially offset by the weakening of the U.S. Dollar against the Euro.

Assuming exchange rates at January 31, 2014 remain unchanged, we expect changes in foreign exchange rates to have a marginally negative impact on 2014 revenue.

Revenue for 2013 and the percentage change in revenue and organic growth from 2012 in our primary geographic markets were (in millions):



	$		% Change		% Organic Growth

United States	$	7,569.7	2.8	%	3.7	%
Euro Markets	2,333.7		0.9	%	(2.2	)%
United Kingdom	1,332.8		6.2	%	6.6	%
Rest of the world	3,348.3		1.8	%	6.0	%
	$	14,584.5	2.6	%	3.5	%

Revenue for 2013 and the percentage change in revenue and organic growth from 2012 in our principal regional markets were (in millions):



	$		% Change		% Organic Growth
Americas:
North America	$	8,159.7	2.7	%	3.7	%
Latin America	437.4		1.4	%	9.2	%
EMEA:
Europe	4,168.5		3.0	%	1.4	%
Middle East and Africa	238.9		(0.2	)%	5.3	%

Asia Pacific	1,580.0		1.4	%	6.1	%
	$	14,584.5	2.6	%	3.5	%

In the normal course of business, our agencies both gain and lose business from clients each year due to a variety of factors. The net change in 2013 was an overall gain in new business. Under our client-centric approach, we seek to broaden our relationships with all of our clients. Our largest client represented 2.7% and 2.6% of revenue in 2013 and 2012, respectively, and no other client represented more than 2.5% and 2.6% of revenue in 2013 and 2012, respectively. Our ten largest and 100 largest clients represented 19.1% and 51.3% of revenue in 2013, respectively and 19.0% and 51.7% of revenue in 2012, respectively.

Driven by our clients’ continuous demand for more effective and efficient marketing activities, we strive to provide an extensive range of advertising, marketing and corporate communications services through various client-centric networks that are organized to meet specific client objectives. These services include advertising, brand consultancy, corporate social responsibility consulting, crisis communications, custom publishing, data analytics, database management, direct marketing, entertainment marketing, environmental design, experiential marketing, field marketing, financial/corporate business-to-business advertising, interactive marketing, marketing research, media planning and buying, mobile marketing, multi-cultural marketing, non-profit marketing, public affairs, public relations, reputation consulting, retail marketing, search engine marketing, social media marketing and sports and event marketing. In an effort to monitor the changing needs of our clients and to further expand the scope of our services to key clients, we monitor revenue across a broad range of disciplines and group them into the following four categories: advertising, CRM, public relations and specialty communications.

Revenue for 2013 and 2012 and the percentage change in revenue and organic growth from 2012 by discipline was (in millions):



	Year Ended December 31,

	2013				2012				2013 vs. 2012
	$		% of Revenue		$		% of Revenue		$ Change		% Change		% Organic Growth

Advertising	$	7,048.3	48.3	%	$	6,805.0	47.9	%	$	243.3	3.6	%	4.8	%
CRM	5,144.0		35.3	%	5,080.3		35.7	%	63.7		1.3	%	2.1	%
Public relations	1,327.8		9.1	%	1,290.8		9.1	%	37.0		2.9	%	1.5	%
Specialty communications	1,064.4		7.3	%	1,043.3		7.3	%	21.1		2.0	%	4.8	%
	$	14,584.5			$	14,219.4			$	365.1	2.6	%	3.5	%

We operate in a number of industry sectors. The percentage of our revenue by industry sector for 2013 and 2012 was:



Industry	2013		2012

Food and Beverage	13.5	%	13.3	%
Consumer Products	9.9	%	9.4	%
Pharmaceuticals and Health Care	9.9	%	9.7	%
Financial Services	7.4	%	7.9	%
Technology	9.2	%	8.9	%
Auto	8.1	%	8.5	%
Travel and Entertainment	6.3	%	6.0	%
Telecommunications	6.4	%	6.4	%
Retail	7.1	%	6.8	%
Other	22.2	%	23.1	%

Operating Expenses

Operating expenses for 2013 compared to 2012 were (in millions):



	Year Ended December 31,

	2013						2012						2013 vs. 2012
	$		% of Revenue		% of Total Operating Expenses		$		% of Revenue		% of Total Operating Expenses		$ Change			% Change

Revenue	$	14,584.5					$	14,219.4					$	365.1		2.6	%
Operating Expenses:
Salary and service costs	10,724.4		73.5	%	84.1	%	10,406.8		73.2	%	83.8	%	317.6			3.1	%
Office and general expenses	1,993.4		13.7	%	15.6	%	2,008.4		14.1	%	16.2	%	(15.0		)	(0.7	)%
Merger expenses	41.4		0.3	%	0.3	%	—		—	%	—	%	41.4			—	%
Operating Expenses	12,759.2		87.5	%			12,415.2		87.3	%			344.0			2.8	%
Operating Income	$	1,825.3	12.5	%			$	1,804.2	12.7	%			$	21.1		1.2	%

Office and general expenses are less directly linked to changes in our revenue than salary and service costs. Office and general expenses decreased 0.7% in 2013 compared to 2012, reflecting our continuing efforts to control the cost structures of our agencies.

Net Interest Expense

Net interest expense increased to $164.4 million in 2013 from $144.6 million in 2012. Interest expense increased $17.5 million to $197.2 million. The increase in interest expense is primarily attributable to the issuance of $750 million of our 2022 Notes in April 2012 and $500 million of our 2022 Notes in August 2012. Interest income decreased $2.3 million to $32.8 million in 2013.

Income Taxes

Income (Loss) From Equity Method Investments

Income (loss) from equity method investments increased $30.9 million to $15.9 million in 2013 compared to a loss of $15.0 million in 2012, primarily resulting from a net impairment charge of $29.2 million recorded in 2012 for an other-than-temporary decline in the carrying value of our equity investment in Egypt.

Net Income Per Common Share - Omnicom Group Inc.

Net income - Omnicom Group Inc. decreased $7.2 million, or 0.7%, to $991.1 million in 2013 from $998.3 million in 2012. The year-over-year decrease in net income - Omnicom Group Inc. is due to the factors described above. Diluted net income per common share - Omnicom Group Inc. increased 2.8% to $3.71 in 2013, compared to $3.61 in 2012 due to the factors described above, as well as the slight reduction in our weighted average common shares outstanding. The reduction in our weighted average common shares outstanding was the result of repurchases of our common stock through the second quarter of 2013, net of stock option exercises, shares issued under our employee stock purchase plan and shares issued upon the conversion of our 2033 Notes and 2038 Notes. In connection with the pending merger with Publicis, beginning in the third quarter of 2013 we suspended repurchases of our common stock in the open market. Excluding the net effect of the merger expenses, net income - Omnicom Group Inc. for 2013 was $1,026.0 million and diluted net income per common share - Omnicom Group Inc. was $3.84.

RESULTS OF OPERATIONS - 2012 Compared to 2011 (in millions):




	2012			2011

Revenue	$	14,219.4		$	13,872.5
Operating Expenses:
Salary and service costs	10,406.8			10,276.9
Office and general expenses	2,008.4			1,924.5
Total Operating Expenses	12,415.2			12,201.4
Add back: Amortization of intangible assets	101.1			91.4
	12,314.1			12,110.0
Earnings before interest, taxes and amortization of intangible assets (“EBITA”)	1,905.3			1,762.5
EBITA Margin - %	13.4		%	12.7		%
Deduct: Amortization of intangible assets	101.1			91.4
Operating Income	1,804.2			1,671.1
Operating Margin - %	12.7		%	12.0		%
Interest Expense	179.7			158.1
Interest Income	35.1			36.0
Income Before Income Taxes and Income (Loss) From Equity Method Investments.	1,659.6			1,549.0
Income Tax Expense	527.1			505.8
Income (Loss) From Equity Method Investments	(15.0		)	17.2
Net Income	1,117.5			1,060.4
Net Income Attributed To Noncontrolling Interests	(119.2		)	(107.8		)
Net Income - Omnicom Group Inc.	$	998.3		$	952.6

Revenue

Revenue in 2012 increased 2.5% to $14,219.4 million from $13,872.5 million in 2011. Organic growth increased revenue by $561.9 million and acquisitions, net of dispositions, increased revenue by $95.0 million. Changes in foreign exchange rates reduced revenue by $310.0 million.

The components of 2012 revenue change in the United States (“Domestic”) and the remainder of the world (“International”) were (in millions):



	Total					Domestic					International
	$			%		$			%		$			%

December 31, 2011	$	13,872.5				$	7,048.7				$	6,823.8
Components of revenue change:
Foreign exchange impact	(310.0		)	(2.2	)%	—			—	%	(310.0		)	(4.5	)%
Acquisitions, net of dispositions	95.0			0.7	%	(2.8		)	—	%	97.8			1.4	%
Organic growth	561.9			4.0	%	317.8			4.5	%	244.1			3.6	%
December 31, 2012	$	14,219.4		2.5	%	$	7,363.7		4.5	%	$	6,855.7		0.5	%

The components and percentages are calculated as follows:

•

The foreign exchange impact is calculated by first converting the current period’s local currency revenue using the average exchange rates from the equivalent prior period to arrive at a constant currency revenue (in this case $14,529.4 million for the Total column). The foreign exchange impact equals the difference between the current period revenue in U.S. Dollars and the current period revenue in constant currency ($14,219.4 million less $14,529.4 million for the Total column).


•	The acquisition component is calculated by aggregating the applicable prior period revenue of the acquired businesses, less revenue of any business included in the prior period revenue that was disposed of subsequent to the prior period.


•	Organic growth is calculated by subtracting both the foreign exchange and acquisition components from total revenue growth.


•	The percentage change is calculated by dividing the individual component amount by the prior period revenue base of that component ($13,872.5 million for the Total column).

In 2012, changes in foreign exchange rates reduced revenue by 2.2%, or $310.0 million, compared to 2011. The most significant impacts resulted from the weakening of the U.S. Dollar against the Euro, Brazilian Real and British Pound.

Revenue in 2012 and the percentage change in revenue and organic growth from 2011 in our primary geographic markets were (in millions):



	$		% Change		% Organic Growth

United States	$	7,363.7	4.5	%	4.5	%
Euro Markets	2,311.9		(10.4	)%	(1.8	)%
United Kingdom	1,255.1		2.3	%	1.5	%
Rest of the world	3,288.7		9.0	%	9.0	%
	$	14,219.4	2.5	%	4.0	%

Revenue for 2012 and the percentage change in revenue and organic growth from 2011 in our principal regional markets were (in millions):



	$		% Change		% Organic Growth
Americas:
North America	$	7,944.7	5.0	%	5.1	%
Latin America	431.2		(4.8	)%	6.6	%
EMEA:
Europe	4,045.6		(4.7	)%	0.3	%
Middle East and Africa	239.3		(2.0	)%	1.4	%

Asia Pacific	1,558.6		14.3	%	9.4	%
	$	14,219.4	2.5	%	4.0	%

In the normal course of business, our agencies both gain and lose business from clients each year due to a variety of factors. The net result in 2012 was an overall gain in new business. Under our client-centric approach, we seek to broaden our relationships with our largest clients. Revenue from our largest client represented 2.6% of our revenue in each of 2012 and 2011, respectively. No other client represented more than 2.6% of our revenue in 2012 or more than 2.1% of our revenue in 2011. Our ten largest and 100 largest clients represented 19.0% and 51.7% of 2012 revenue, respectively, and 18.0% and 50.3% of 2011 revenue, respectively.

Revenue for 2012 and 2011 and the percentage change in revenue and organic growth from 2011 by discipline was (in millions):



	Year Ended December 31,

	2012				2011				2012 vs. 2011
	$		% of Revenue		$		% of Revenue		$ Change			% Change		% Organic Growth

Advertising	$	6,805.0	47.9	%	$	6,523.9	47.0	%	$	281.1		4.3	%	6.3	%
CRM	5,080.3		35.7	%	5,052.9		36.4	%	27.4			0.5	%	2.7	%
Public relations	1,290.8		9.1	%	1,230.3		8.9	%	60.5			4.9	%	3.3	%
Specialty communications	1,043.3		7.3	%	1,065.4		7.7	%	(22.1		)	(2.1	)%	(2.3	)%
	$	14,219.4			$	13,872.5			$	346.9		2.5	%	4.0	%

We operate in a number of industry sectors. The percentage of our revenue by industry sector for 2012 and 2011 was:



Industry	2012		2011

Food and Beverage	13.3	%	13.6	%
Consumer Products	9.4	%	9.3	%
Pharmaceuticals and Health Care	9.7	%	10.1	%
Financial Services	7.9	%	9.5	%
Technology	8.9	%	8.7	%
Auto	8.5	%	7.5	%
Travel and Entertainment	6.0	%	5.9	%
Telecommunications	6.4	%	7.1	%
Retail	6.8	%	6.6	%
Other	23.1	%	21.7	%

Operating Expenses

Operating expenses for 2012 compared to 2011 were (in millions):



	Year Ended December 31,

	2012						2011						2012 vs. 2011
	$		% of Revenue		% of Total Operating Expenses		$		% of Revenue		% of Total Operating Expenses		$ Change		% Change

Revenue	$	14,219.4					$	13,872.5					$	346.9	2.5	%
Operating Expenses:
Salary and service costs	10,406.8		73.2	%	83.8	%	10,276.9		74.1	%	84.2	%	129.9		1.3	%
Office and general expenses	2,008.4		14.1	%	16.2	%	1,924.5		13.9	%	15.8	%	83.9		4.4	%
Operating Expenses	12,415.2		87.3	%			12,201.4		88.0	%			213.8		1.8	%
Operating Income	$	1,804.2	12.7	%			$	1,671.1	12.0	%			$	133.1	8.0	%

Repositioning Actions and Remeasurement Gain

In 2011, we recorded $131.3 million of charges related to our repositioning actions. Additionally, in the first quarter of 2011 we recorded a $123.4 million remeasurement gain related to the acquisition of the controlling interest in the Clemenger Group, our affiliate in Australia and New Zealand.

The impact on operating expenses of these transactions for the year ended December 31, 2011 was (in millions):



	Increase (Decrease)

	Repositioning Actions		Remeasurement Gain

Salary and service costs	$	92.8	—
Office and general expenses	38.5		$	(123.4	)
	$	131.3	$	(123.4	)

Operating Expenses

Salary and services costs tend to fluctuate in conjunction with changes in revenue. Salary and service costs increased 1.3% in 2012 compared to 2011. Salary and service costs for 2011 reflects $92.8 million of charges related to our repositioning actions. The increase in 2012 costs resulted from growth in our business, as well as increased use of freelance labor, partially offset by lower compensation costs, including incentive compensation primarily as a result of the repositioning actions taken in 2011 and tight controls restricting the frequency of salary increases. Excluding the $92.8 million of severance charges taken in 2011, salary and service costs as a percentage of revenue in 2012 would have been flat as compared to 2011.

Office and general expenses are less directly linked to changes in our revenue than salary and service costs. Office and general expenses increased 4.4% in 2012 compared to 2011, reflecting a decrease of $123.4 million related to the non-cash remeasurement gain recorded in connection with the acquisition of the controlling interest in the Clemenger Group in 2011, partially offset by $38.5 million of charges related to our repositioning actions in the first quarter of 2011. Excluding the $84.9 million net decrease, office and general expenses in 2012 would have been flat as compared to 2011.

Operating margins increased to 12.7% in 2012 from 12.0% in 2011 and EBITA margins increased to 13.4% in 2012 from 12.7% in 2011. Excluding the $131.3 million attributable to our repositioning actions and the $123.4 million remeasurement gain, operating margin and EBITA margin for 2011 would have been 12.1% and 12.8%, respectively. The year-over-year margin improvement was driven by our revenue growth, as well as lower operating costs resulting from the actions taken in 2011 to improve our operations, rebalance our workforce and drive efficiencies in our back office functions.

Net Interest Expense

Net interest expense increased to $144.6 million in 2012 from to $122.1 million in 2011. Interest expense increased $21.6 million to $179.7 million. The increase in interest expense was primarily due to increased interest expense resulting from the issuance of our 2022 Notes in 2012. The increase in interest expense was partially offset by lower commercial paper issuances in 2012. Interest income decreased $0.9 million to $35.1 million in 2012.

Income Taxes

Our effective tax rate for 2012 decreased to 31.8% from 32.7% for 2011. In the fourth quarter of 2012, income tax expense was reduced by $53 million, primarily resulting from a reduction in the deferred tax liabilities for unremitted foreign earnings of certain of our operating companies located in the Asia Pacific region, as well as lower statutory tax rates in other foreign jurisdictions. In an effort to support our continued expansion and pursue operational efficiencies in the Asia Pacific region, we completed a legal reorganization in certain countries within the region. As a result of the reorganization, our unremitted foreign earnings in the affected countries are subject to lower effective tax rates as compared to the U.S. statutory tax rate. Therefore we recorded a reduction in our deferred tax liabilities to reflect the lower tax rate that these earnings are subject to. In future periods we expect an ongoing annual reduction in income tax expense of approximately $11 million. The reduction in income tax expense was partially offset by a charge of approximately $16 million resulting from U.S. state and local tax accruals recorded for uncertain tax positions, net of U.S. federal income tax benefit.

Income tax expense for 2011 reflects a $39.5 million tax benefit related to charges incurred in connection with our repositioning actions, a provision of $2.8 million related to the remeasurement gain and a provision of $9.0 million for agreed upon adjustments to income tax returns that were under examination in 2011. Excluding these items, our effective tax rate for 2011 would have been 34.3%.

Income (Loss) From Equity Method Investments

Income (loss) from equity method investments decreased $32.2 million to a loss of $15.0 million in 2012 compared to income of $17.2 million in 2011, primarily resulting from a net impairment charge of $29.2 million recorded in 2012 for an other-than-temporary decline in the carrying value of our equity investment in Egypt.

Net Income Per Common Share - Omnicom Group Inc.

Net income - Omnicom Group Inc. increased $45.7 million, or 4.8%, to $998.3 million in 2012 from $952.6 million in 2011. The year-over-year increase in net income - Omnicom Group Inc. is due to the factors described above. Diluted net income per common share - Omnicom Group Inc. increased 8.4% to $3.61 in 2012, as compared to $3.33 in 2011 due to the factors described above, as well as the impact of the reduction in our weighted average common shares outstanding. This reduction was the result of repurchases of our common stock, net of stock option exercises and shares issued under our employee stock purchase plan.

LIQUIDITY AND CAPITAL RESOURCES

Cash Sources and Requirements

Historically, the majority of our non-discretionary cash requirements have been funded from operating cash flow and cash on hand. Working capital is our principal non-discretionary funding requirement. In addition, we have contractual obligations related to our Senior Notes and 2032 Notes, our recurring business operations, primarily related to lease obligations, as well as contingent purchase price obligations (earn-outs) for acquisitions made in prior years.

Our principal discretionary cash uses include dividend payments, capital expenditures, payments for strategic acquisitions and repurchases of our common stock. In connection with the pending merger with Publicis, beginning in the third quarter of 2013 we suspended repurchases of our common stock in the open market. Our discretionary spending is funded from operating cash flow and cash on hand. In addition, depending on the level of our discretionary activity and conditions in the capital markets, we may use other available sources of funding, such as issuing commercial paper, borrowing under our Credit Agreement or other long-term borrowings, to finance these activities. We expect that we should be able to fund both our non-discretionary cash requirements and our discretionary spending for 2014 without incurring additional long-term debt. However, we may access the capital markets at any time if favorable conditions exist.

We have a seasonal cash requirement normally peaking during the second quarter primarily due to the timing of payments for incentive compensation, income taxes and contingent purchase price obligations. This typically results in a net borrowing requirement that decreases over the course of the year.

At December 31, 2013, our cash and cash equivalents increased by $32.2 million from December 31, 2012. The components of the increase for 2013 are (in millions):



Sources

Cash flow from operations				$	1,809.0
Less change in operating capital				351.3

Principal cash sources				1,457.7
Uses

Capital expenditures	$	(212.0	)
Dividends paid	(318.4		)
Dividends paid to shareholders of noncontrolling interests	(100.6		)
Acquisition payments of $32.8, net of cash acquired, plus contingent purchase price obligations of $70.5 and acquisition of additional shares of noncontrolling interests of $8.9 less net proceeds from sale of investments of $16.6	(95.6		)
Repurchases of common stock of $575.3, net of proceeds from stock option exercises and stock sold to our employee stock purchase plan of $52.3 and tax benefits of $37.8	(485.2		)
Principal cash uses				(1,211.8		)

Principal cash sources in excess of principal cash uses				245.9
Foreign exchange rate changes				(128.8		)
Financing activities and other				(436.2		)
Add back change in operating capital				351.3
Increase in cash and cash equivalents				$	32.2

Principal Cash Sources and Principal Cash Uses amounts are Non-GAAP financial measures. These amounts exclude changes in working capital and other investing and financing activities, including commercial paper issuances and redemptions used to fund working capital changes. This presentation reflects the metrics used by us to assess our sources and uses of cash and was derived from our statement of cash flows. We believe that this presentation is meaningful for understanding the primary sources and primary uses of our cash flow. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with U.S. GAAP. Non-GAAP financial measures as reported by us may not be comparable to similarly titled amounts reported by other companies. Additional information regarding our cash flows can be found in our consolidated financial statements.

Cash Management

We manage our cash and liquidity centrally through our regional treasury centers in North America, Europe and Asia. The treasury centers are managed by our wholly-owned finance subsidiaries. Each day, operations with excess funds invest these funds with their regional treasury center. Likewise, operations that require funds borrow from their regional treasury center. The treasury centers aggregate the net position which is either invested with or borrowed from third parties. To the extent that our treasury centers require liquidity, they have the ability to access local currency uncommitted lines of credit, the Credit Agreement or issue up to a total of $1.5 billion of U.S. Dollar-denominated commercial paper. This process enables us to manage our debt balances more efficiently and utilize our cash more effectively, as well as better manage our risk to foreign exchange rate changes. In countries where we either do not conduct treasury operations or it is not feasible for one of our treasury centers to fund net borrowing requirements on an intercompany basis, we arrange for local currency uncommitted lines of credit.

Our cash and cash equivalents increased $32.2 million and our short-term investments decreased $2.4 million from December 31, 2012. Short-term investments principally consist of time deposits with financial institutions that we expect to convert into cash within our current operating cycle, generally one year.

At December 31, 2013 our total cash and cash equivalents were $2.7 billion, of which our foreign subsidiaries held approximately $2.3 billion. The majority of the cash and cash equivalents held by our foreign subsidiaries is available to us, net of any taxes payable upon repatriation to the United States. Changes in international tax rules or changes in U.S. tax rules and regulations covering international operations and foreign tax credits may affect our future reported financial results or the way we conduct our business.

We have policies governing counterparty credit risk with financial institutions that hold our cash and cash equivalents and we have deposit limits for each financial institution. In countries where we conduct treasury operations, generally the counterparties are either branches or subsidiaries of the financial institutions that are party to our Credit Agreement. These financial institutions generally have credit ratings equal to or better than our credit ratings. In countries where we do not conduct treasury operations, we ensure that all cash and cash equivalents are held by counterparties that meet specific minimum credit standards.

Our cash and cash equivalents and short-term investments increased $29.8 million from the prior year end. Our net debt position at December 31, 2013, which we define as total debt outstanding less cash and cash equivalents and short-term investments, decreased $445.4 million as compared to December 31, 2012 as follows (in millions):



	2013		2012
Debt:
Short-term borrowings, due in less than one year	$	5.9	$	6.4
5.90% Senior Notes due April 15, 2016	1,000.0		1,000.0
6.25% Senior Notes due July 15, 2019	500.0		500.0
4.45% Senior Notes due August 15, 2020	1,000.0		1,000.0
3.625% Senior Notes due May 1, 2022	1,250.0		1,250.0
Convertible Notes due July 31, 2032	252.7		252.7
Convertible Notes due June 15, 2033	—		0.1
Convertible Notes due July 1, 2038	—		406.6
Other debt	0.5		0.4
Unamortized premium (discount) on Senior Notes, net	14.7		16.0
Deferred gain from termination of interest rate swaps on Senior Notes due 2016	15.9		23.1
Total debt	4,039.7		4,455.3
Cash and cash equivalents and short-term investments	2,728.7		2,698.9
Net debt	$	1,311.0	$	1,756.4

Net Debt, which we define as total debt less cash and cash equivalents and short-term investments as reconciled above, is a Non-GAAP financial measure. This presentation, together with the comparable U.S. GAAP measures, reflects one of the key metrics used by us to assess our cash management performance. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with US GAAP. Non-GAAP financial measures as reported by us may not be comparable to similarly titled amounts reported by other companies.

On May 16, 2013, we called our 2033 Notes and our 2038 Notes for redemption on June 17, 2013 at a redemption price of 100% of the principal amount. As provided in the indenture governing the 2033 Notes and the 2038 Notes, prior to redemption the noteholders had the right to convert their 2033 Notes and 2038 Notes into shares of our common stock at a conversion rate of 19.4174 shares per $1,000 principal amount at any time prior to June 13, 2013. Substantially all the noteholders exercised their conversion right. We paid $406.1 million in cash representing the principal amount of the 2033 Notes and 2038 Notes that were converted and issued 1,499,792 shares of our common stock to satisfy the conversion premium. On June 17, 2013, we paid $0.6 million to redeem the remaining 2033 Notes and 2038 Notes that were not converted.

Debt Instruments and Related Covenants

We have committed and uncommitted lines of credit. Our $2.5 billion Credit Agreement expires on October 12, 2016. We have the ability to classify borrowings under the Credit Agreement as long-term. The Credit Agreement provides support for up to $1.5 billion of commercial paper issuances and such issuances reduce the amount available under the Credit Agreement.

Depending on market conditions at the time, we typically fund our day-to-day liquidity by issuing commercial paper, borrowing under our uncommitted lines of credit or borrowing under our Credit Agreement. At December 31, 2013, there were no outstanding commercial paper issuances or borrowings under the Credit Agreement.

Commercial paper activity for the three years ended December 31, 2013 was (dollars in millions):



	2013			2012			2011

Average amount outstanding during the year	$	471.7		$	288.5		$	626.5
Maximum amount outstanding during the year	$	1,027.5		$	837.2		$	1,132.9
Total issuances during the year	$	11,786.9		$	13,935.1		$	22,843.9
Average days outstanding	14.6			7.6			10.0
Weighted average interest rate	0.33		%	0.41		%	0.36		%

At December 31, 2013, short-term borrowings of $5.9 million represent bank overdrafts and lines of credit of our international subsidiaries. These bank overdrafts and lines of credit are treated as unsecured loans pursuant to the agreements supporting the facilities.

The Credit Agreement contains financial covenants that require us to maintain a Leverage Ratio of consolidated indebtedness to consolidated EBITDA to no more than 3 times for the most recently ended 12-month period (under the Credit Agreement, EBITDA is defined as earnings before interest, taxes, depreciation and amortization) and an Interest Coverage Ratio of consolidated EBITDA to interest expense of at least 5 times for the most recently ended 12-month period. At December 31, 2013 we were in compliance with these covenants, as our Leverage Ratio was 1.9 times and our Interest Coverage Ratio was 10.7 times. The Credit Agreement does not limit our ability to declare or pay dividends.

S&P rates our long-term debt BBB+ and Moody’s rates our long-term debt Baa1. Our short-term debt credit ratings are A2 and P2 by the respective rating agencies. Our outstanding Senior Notes, 2032 Notes and Credit Agreement do not contain provisions that require acceleration of cash payments should our debt credit ratings be downgraded. However, the interest rates and fees on the Credit Agreement will increase if our long-term debt credit ratings are lowered. Our 2032 Notes would become convertible into shares of our common stock if the credit ratings assigned to the 2032 Notes are downgraded to BBB or lower by S&P or Baa3 or lower by Moody’s.

Omnicom Capital Inc., or OCI, our wholly-owned finance subsidiary, together with us, is a co-obligor under our Senior Notes and our 2032 Notes. Our Senior Notes and 2032 Notes are a joint and several liability of us and OCI and we unconditionally guarantee OCI’s obligations with respect to the Senior Notes and the 2032 Notes. OCI provides funding for our operations by incurring debt and lending the proceeds to our operating subsidiaries. OCI’s assets consist of cash and cash equivalents and intercompany loans made to our operating subsidiaries and the related interest receivable. There are no restrictions on the ability of OCI or us to obtain funds from our subsidiaries through dividends, loans or advances. Our Senior Notes and 2032 Notes are senior unsecured obligations that rank in equal right of payment with all existing and future unsecured senior indebtedness.

At December 31, 2013, the carrying value of our debt and the amount available under the Credit Agreement were (in millions):



	Debt		Available Credit

Short-term borrowings, due in less than one year	$	5.9	$	—
Commercial Paper issuances	—		—
Borrowings under the Credit Agreement	—		2,500.0
5.90% Senior Notes due April 15, 2016	1,000.0		—
6.25% Senior Notes due July 15, 2019	500.0		—
4.45% Senior Notes due August 15, 2020	1,000.0		—
3.625% Senior Notes due May 1, 2022	1,250.0		—
Convertible Notes due July 31, 2032	252.7		—
Other debt	0.5		—
	4,009.1		2,500.0
Unamortized premium (discount) on Senior Notes, net	14.7		—
Deferred gain from termination of interest rate swaps on Senior Notes due 2016	15.9		—
	$	4,039.7	$	2,500.0

Credit Markets and Availability of Credit

We will continue to take actions available to us to respond to changing economic conditions and actively manage our discretionary expenditures and we will continue to monitor and manage the level of credit made available to our clients. We believe that these actions, in addition to operating cash flow and the availability of our Credit Agreement, are sufficient to fund our working capital needs and our discretionary spending.

In funding our day-to-day liquidity, we have historically been a participant in the commercial paper market. We expect to continue funding our day-to-day liquidity through the commercial paper market. However, prior disruptions in the credit markets led to periods of illiquidity in the commercial paper market and higher credit spreads. During these periods of disruption, we used our uncommitted lines of credit and borrowed under our Credit Agreement to mitigate these conditions and to fund our day-to-day liquidity. We will continue to closely monitor our liquidity and the credit markets. We cannot predict with any certainty the impact on us of any future disruptions in the credit markets.

Contractual Obligations and Other Commercial Commitments

We enter into numerous contractual and commercial undertakings in the normal course of business. The following tables should be read in conjunction with our consolidated financial statements.

Contractual obligations at December 31, 2013 were (in millions):



			Obligation Due
	Total Obligation		2014		2015 - 2016		2017 - 2018		After 2018
Long-term notes payable:
Principal	$	3,750.5	$	0.4	$	1,000.1	$	—	$	2,750.0
Interest	980.8		180.1		318.3		242.1		240.3
Convertible Notes	252.7		—		252.7		—		—
Lease obligations	1,438.9		394.6		482.7		256.3		305.3
Deferred tax liability - retired convertible debt	329.0		66.0		132.0		131.0		—
Contingent purchase price obligations	220.2		74.5		103.6		35.4		6.7
Defined benefit pension plans benefit obligation	185.7		4.6		13.1		14.3		153.7
Postemployment arrangements benefit obligation	104.2		9.3		18.0		14.1		62.8
Uncertain tax positions	137.8		1.9		46.0		85.7		4.2
	$	7,399.8	$	731.4	$	2,366.5	$	778.9	$	3,523.0

Contractual commitments at December 31, 2013 were (in millions):



			Commitment Expires
	Total Commitment		2014		2015 - 2016		2017 - 2018		After 2018
Standby letters of credit	$	7.9	$	3.2	$	3.6	$	1.0	$	0.1
Guarantees	93.5		69.9		17.8		3.1		2.7
	$	101.4	$	73.1	$	21.4	$	4.1	$	2.8

On July 31, 2014, our 2032 Notes may be put back to us for cash and we have the right to redeem the 2032 Notes at any time on or after July 31, 2014. At December 31, 2013, the 2032 Notes are potentially convertible into 18.313 shares of our common stock per $1,000 principal amount, subject to normal anti-dilution adjustments. If the put right is exercised, $252.7 million could be due in 2014. At December 31, 2013, we classified our 2032 Notes as long-term in our balance sheet because our Credit Agreement does not expire until October 2016 and it is our intention to fund any repurchase with the Credit Agreement.

Consistent with our acquisition strategy and past practice, certain of our acquisitions include an initial payment at closing and provide for future additional contingent purchase price payments (earn-outs). We use contingent purchase price structures in an effort to minimize the risk to us associated with potential future negative changes in the performance of the acquired business during the post-acquisition transition period. Contingent purchase price obligations are recorded as liabilities at the acquisition date fair value. Subsequent changes in the fair value of the liability are recorded in our results of operations.

The unfunded benefit obligation for our defined benefit pension plans and liability for our postemployment arrangements was $217.7 million at December 31, 2013. In 2013, we contributed $5.5 million to our defined benefit pension plans and paid $13.4 million in benefits for our postemployment arrangements. We do not expect these payments to increase significantly in 2014.

The liability for uncertain tax positions is subject to uncertainty as to when or if the liability will be paid. We have assigned the liability to the periods presented based on our judgment as to when these liabilities will be resolved by the appropriate taxing authorities.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

As a global service business, we operate in multiple foreign currencies and issue debt in the capital markets. In the normal course of business, we are exposed to foreign currency fluctuations and the impact of interest rate changes. We limit these risks through risk management policies and procedures, including the use of derivatives. For foreign currency exposure, derivatives are used as an economic hedge to better manage the cash flow volatility arising from foreign exchange rate fluctuations. For interest rate exposure, derivatives have been used to manage the related cost of debt.

As a result of using derivative instruments, we are exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. To mitigate the counterparty credit risk, we have a policy of only entering into contracts with carefully selected major financial institutions based on specific minimum credit standards and other factors. We do not use derivative financial instruments for trading or speculative purposes.

We evaluate the effects of changes in foreign currency exchange rates, interest rates and other relevant market risks on our derivative instruments. We periodically determine the potential loss from market risk on our derivative instruments by performing a value-at-risk, or VaR, analysis. VaR is a statistical model that utilizes historical currency exchange and interest rate data to measure the potential impact on future earnings of our derivative financial instruments assuming normal market conditions. The VaR model is not intended to represent actual losses but is used as a risk estimation and management tool. Based on the results of the model, we estimate with 95% confidence a maximum one-day loss in fair value on our derivative financial instruments at December 31, 2013 was not material.

Because we use foreign currency instruments as an economic hedge, any gain or loss in fair value incurred on those instruments is generally offset by decreases or increases in the fair value of the underlying exposures.

Foreign Exchange Risk

Our results of operations are subject to risk from the translation to U.S. Dollars of the revenue and expenses of our foreign operations, which are generally denominated in their local currency. The effects of currency exchange rate fluctuation on the translation of our results of operations are discussed in Note 19 of our consolidated financial statements. For the most part, revenue and expenses of our foreign operations are denominated in the same currency. This minimizes the impact of fluctuations in exchange rates on our results of operations.

While our major non-U.S. currency markets are the European Monetary Union, or the EMU, the United Kingdom, Australia, Brazil, Canada, China, and Japan, our agencies conduct business in more than 50 different currencies. As an integral part of our treasury operations, we centralize our cash and use multicurrency pool arrangements to manage the foreign exchange risk between subsidiaries and their respective treasury centers from which they borrow or invest funds.

In certain circumstances, instead of using a multicurrency pool, operations can borrow or invest on an intercompany basis with a treasury center operating in a different currency. To manage the foreign exchange risk associated with these transactions, we use forward foreign exchange contracts. At December 31, 2013, we had outstanding forward foreign exchange contracts with an aggregate notional amount of $207.0 million mitigating the foreign exchange risk of the intercompany borrowing and investment activities.

Also, we use forward foreign exchange contracts to mitigate the foreign currency risk associated with activities when revenue and expenses are not denominated in the same currency. In these instances, amounts are promptly settled or hedged with forward contracts. At December 31, 2013, we had outstanding forward foreign exchange contracts with an aggregate notional amount of $56.2 million mitigating the foreign exchange risk of these activities.

By using these financial instruments, we reduced financial risk of adverse foreign exchange changes by foregoing any gain (reward) which might have occurred if the markets moved favorably.

Interest Rate Risk

From time to time, we have issued debt in the capital markets. In prior years we have used interest rate swaps to manage our overall interest cost. At December 31, 2013, there were no interest rate swaps outstanding.

On July 31, 2014, our 2032 Notes may be put back to us for cash and we have the right to redeem the notes at any time on or after July 31, 2014. If the 2032 Notes are put back to us, our interest expense will change. The extent, if any, of the increase or decrease in interest expense will depend on the portion of the amount repurchased that is refinanced, when we refinance, the type of instrument we use to refinance and the term of the refinancing.

Credit Risk

We provide advertising, marketing and corporate communications services to several thousand clients who operate in nearly every industry sector of the global economy and in the normal course of business, we grant credit to qualified clients. Due to the diversified nature of our client base, we do not believe that we are exposed to a concentration of credit risk as our largest client accounted for 2.7% of revenue in 2013 and no other client accounted for more than 2.5% of revenue. However, during periods of economic downturn, the credit profiles of our clients could change.

Item 8. Financial Statements and Supplementary Data

The financial statements and supplementary data required by this item are listed in Part IV, Item 15.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our SEC reports is recorded, processed, summarized and reported within applicable time periods. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is accumulated and communicated to management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, as appropriate to allow timely decisions regarding required disclosure. Management, including our CEO and CFO, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2013. Based on that evaluation, our CEO and CFO concluded that, as of December 31, 2013, our disclosure controls and procedures are effective to ensure that decisions can be made timely with respect to required disclosures, as well as ensuring that the recording, processing, summarization and reporting of information required to be included in our Annual Report on Form 10-K for the year ended December 31, 2013 are appropriate.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision of management and with the participation of our CEO, CFO and our agencies, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission published in 1992. Based on that evaluation, our CEO and CFO concluded that our internal control over financial reporting was effective as of December 31, 2013. There have not been any changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

KPMG LLP, an independent registered public accounting firm that audited our consolidated financial statements included in this Annual Report on Form 10-K, has issued an attestation report on Omnicom’s internal control over financial reporting as of December 31, 2013, dated February 12, 2014.

Item 9B. Other Information

None.

PART IV

Item 15. Exhibits, Financial Statement Schedules



(a)(1)	Financial Statements:	Page

	Management Report on Internal Control Over Financial Reporting	F-1
	Report of Independent Registered Public Accounting Firm	F-2
	Report of Independent Registered Public Accounting Firm	F-3
	Consolidated Balance Sheets at December 31, 2013 and 2012	F-4
	Consolidated Statements of Income for the Three Years Ended December 31, 2013	F-5
	Consolidated Statements of Comprehensive Income for the Three Years Ended December 31, 2013	F-6
	Consolidated Statements of Equity for the Three Years Ended December 31, 2013	F-7
	Consolidated Statements of Cash Flows for the Three Years Ended December 31, 2013	F-8
	Notes to Consolidated Financial Statements	F-9
	Quarterly Results of Operations (Unaudited)	F-37

(a)(2)	Financial Statement Schedules:
	Schedule II - Valuation and Qualifying Accounts for the Three Years Ended December 31, 2013	S-1

	All other schedules are omitted because they are not applicable.

(a)(3)	Exhibits:



Exhibit Number	Description
2*	Business Combination Agreement, dated as of July 27, 2013, by and between Omnicom Group Inc. and Publicis Groupe S.A. (Exhibit 2.1 to our Current Report on Form 8-K (File No.1-10551) filed on July 29, 2013 and incorporated herein by reference).

3(i)	Restated Certificate of Incorporation of Omnicom Group Inc. (Exhibit 3.1 to our Quarterly Report on Form 10-Q (File No. 1-10551) for the quarter ended September 30, 2011 and incorporated herein by reference).

3(ii)	By-laws of Omnicom Group Inc., as amended and restated on May 22, 2012 (Exhibit 3.2 to our Current Report on Form 8-K (File No. 1-10551) dated May 24, 2012 and incorporated herein by reference).

4.1	Indenture, dated as of March 6, 2002, between Omnicom Group Inc. and JPMorgan Chase Bank, as trustee, in connection with our issuance of $900 million Zero Coupon Zero Yield Convertible Notes due 2032 (“2032 Indenture”) (Exhibit 4.6 to our Annual Report on Form 10-K (File No. 1-10551) for the year ended December 31, 2001 and incorporated herein by reference).

4.2	Form of Zero Coupon Zero Yield Convertible Notes due 2032 (included in Exhibit 4.1 above).

4.3	First Supplemental Indenture to the 2032 Indenture, dated as of February 13, 2004, among Omnicom Group Inc., Omnicom Capital Inc., Omnicom Finance Inc. and JPMorgan Chase Bank, as trustee (Exhibit 4.3 to our Registration Statement on Form S-3 (Registration No. 333-112840) and incorporated herein by reference).

4.4	Second Supplemental Indenture to the 2032 Indenture, dated as of August 12, 2004, among Omnicom Group Inc., Omnicom Capital Inc., Omnicom Finance Inc. and JPMorgan Chase Bank, as trustee (Exhibit 4.1 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (“September 30, 2004 10-Q”) and incorporated herein by reference).

4.5	Third Supplemental Indenture to the 2032 Indenture, dated as of November 4, 2004, among Omnicom Group Inc., Omnicom Capital Inc., Omnicom Finance Inc. and JPMorgan Chase Bank, as trustee (Exhibit 4.3 to our September 30, 2004 10-Q and incorporated herein by reference).

__________

* The annexes, schedules and certain exhibits to the Business Combination Agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Omnicom hereby agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.



4.6	Fourth Supplemental Indenture to the 2032 Indenture, dated as of July 10, 2008, among Omnicom Group Inc., Omnicom Capital Inc., Omnicom Finance Inc. and Deutsche Bank Trust Company Americas, as trustee (Exhibit 99.2 to our Current Report on Form 8-K (File No. 1-10551) dated July 15, 2008 and incorporated herein by reference).

4.7	Fifth Supplemental Indenture to the 2032 Indenture, dated as of August 8, 2008, among Omnicom Group Inc., Omnicom Capital Inc., Omnicom Finance Inc. and Deutsche Bank Trust Company Americas, as trustee (Exhibit 99.1 to our Current Report on Form 8-K (File No. 1-10551) dated August 14, 2008 and incorporated herein by reference).

4.8	Sixth Supplemental Indenture to the 2032 Indenture, dated as of July 20, 2012, among Omnicom Group Inc., Omnicom Capital Inc. and Deutsche Bank Trust Company Americas, as trustee (Exhibit 4.1 to our Current Report on Form 8-K (File No. 1-10551) dated July 20, 2012 ("July 20, 2012 8-K") and incorporated herein by reference).

4.9	Form of Senior Debt Securities Indenture (Exhibit 4.1 to our Registration Statement on Form S-3 (Registration No. 333-132625) dated March 22, 2006 and incorporated herein by reference).

4.10	First Supplemental Indenture to the Form of the Senior Debt Securities Indenture, dated as of March 29, 2006, among Omnicom Group Inc., Omnicom Capital Inc., Omnicom Finance Inc. and JPMorgan Chase Bank, N.A., as trustee, in connection with our issuance of $1.0 billion 5.90% Notes due 2016 (Exhibit 4.2 to our Current Report on Form 8-K (File No. 1-10551) dated March 29, 2006 (“March 29, 2006 8-K”) and incorporated herein by reference).

4.11	Second Supplemental Indenture to the Form of the Senior Debt Securities Indenture, dated as of July 20, 2012, among Omnicom Group Inc., Omnicom Capital Inc. and Deutsche Bank Trust Company Americas, as trustee, (Exhibit 4.3 to the July 20, 2012 8-K and incorporated herein by reference).

4.12	Form of 5.90% Notes due 2016 (Exhibit 4.3 to the March 29, 2006 8-K and incorporated herein by reference).

4.13	Indenture, dated as of July 1, 2009, among Omnicom Group Inc., Omnicom Capital Inc., Omnicom Finance Inc. and Deutsche Bank Trust Company Americas, as trustee (“2009 Base Indenture”) (Exhibit 4.1 to our Current Report on Form 8-K (File No. 1-10551) dated July 1, 2009 (“July 1, 2009 8-K”) and incorporated herein by reference).

4.14	First Supplemental Indenture to the 2009 Base Indenture, dated as of July 1, 2009, among Omnicom Group Inc., Omnicom Capital Inc., Omnicom Finance Inc. and Deutsche Bank Trust Company Americas, as trustee, in connection with our issuance of $500 million 6.25% Senior Notes due 2019 (Exhibit 4.2 to the July 1, 2009 8-K and incorporated herein by reference).

4.15	Second Supplemental Indenture to the 2009 Base Indenture, dated as of August 5, 2010, among Omnicom Group Inc., Omnicom Capital Inc., Omnicom Finance Inc. and Deutsche Bank Trust Company Americas, as trustee, in connection with our issuance of $1.0 billion 4.45% Senior Notes due 2020 (Exhibit 4.1 to our Current Report on Form 8-K (File No. 1-10551) dated August 5, 2010 (“August 5, 2010 8-K”) and incorporated herein by reference).

4.16	Third Supplemental Indenture to the 2009 Base Indenture, dated as of April 23, 2012, among Omnicom Group Inc., Omnicom Capital Inc., Omnicom Finance Inc. and Deutsche Bank Trust Company Americas, as trustee, in connection with our issuance of $750 million 3.625% Senior Notes due 2022 (Exhibit 4.1 to our Current Report on Form 8-K (File No. 1-10551) dated April 23, 2012 and incorporated herein by reference).

4.17	Fourth Supplemental Indenture to the 2009 Base Indenture, dated as of July 20, 2012, among Omnicom Group Inc., Omnicom Capital Inc. and Deutsche Bank Trust Company Americas, as trustee, (Exhibit 4.4 to July 20, 2012 8-K and incorporated herein by reference).

4.18	Fifth Supplemental Indenture to the 2009 Base Indenture, dated as of August 9, 2012, among Omnicom Group Inc., Omnicom Capital Inc. and Deutsche Bank Trust Company Americas, as trustee, in connection with our issuance of $500 million 3.625% Senior Notes due 2022 (Exhibit 4.1 to our Current Report on Form 8-K (File No. 1-10551) dated August 9, 2012 ("August 9, 2012 8-K") and incorporated herein by reference).

4.19	Form of 6.25% Notes due 2019 (Exhibit 4.3 to the July 1, 2009 8-K and incorporated herein by reference).

4.20	Form of 4.45% Notes due 2020 (Exhibit 4.2 to the August 5, 2010 8-K and incorporated herein by reference).