Omnicom Group ends third quarter with $2.25 billion of net debt

By Lisa Kerner

Charlotte, N.C., Oct. 15 - Omnicom Group Inc.'s performance for the third quarter and year to date "remains strong," president and chief executive officer John Wren said during the company's earnings call on Tuesday.

Wren, who remains "cautiously optimistic" about economic conditions, said the company's organic growth was up more than 4.1% in the quarter, bolstered by strong U.S. and U.K. growth.

A highlight of the "eventful" third quarter was Omnicom's announcement in July that it will merge with Paris-based Publicis Groupe SA, according to chief financial officer Randy Weisenburger. As a result of the announcement, Omnicom has suspended its stock repurchases.

At Sept. 30, the company had about $1 billion of free cash flow, compared with $966 million for the nine months ended Sept. 30, 2012.

Omnicom's use of free cash flow in 2013 included dividends ($213 million), capital expenditures ($123 million) and stock repurchases ($492 million).

Net free cash flow was $15.7 million at Sept. 30, versus a negative $379.9 million a year ago.

Total debt at quarter's end was "just over" $4 billion, said Weisenburger, while net debt grew by $30 million to $2.25 billion.

The company's debt included $19 million of bank loans, $253 million of convertible notes and $3.75 billion of senior notes, according to the presentation.

Omnicom's ratio of total debt to EBITDA was 1.9 times for the 12 months ended Sept. 30, and its ratio of net debt to EBITDA was 2.9 times.

Financial highlights

"Our agencies are continuing to have a good year despite the relatively weak economic environment," Weisenburger said.

Omnicom's third-quarter revenue was up 2.5% at just under $3.5 billion. Domestic revenue was up 3.2%, while international revenue was up 1.6%.

"From an earnings perspective, our agencies had another excellent quarter," the CFO said.

EBITDA rose 4.5% from the prior-year period to $433 million. The resulting EBITDA margin grew 25 basis points to 12.4%.

Net interest expense grew by $2.5 million to $42.8 million from the prior-year quarter and by $2.1 million sequentially due to the accrual of contingent interest on the company's remaining convertible bonds, according to Weisenburger.

Omnicom is a New York-based marketing and corporate communications company.

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