Omnicom Group (OMC) 10-K risk factor changes: FY2018 vs FY2017

Our ability to acquire new clients and [removed: to] retain existing clients may, in some cases, be limited by clients’ perceptions of, or policies concerning, conflicts of interest arising from other client relationships.

Our international operations represent approximately [removed: 46%] [added: 48%] of our [added: 2018] revenue.

We operate in all major international markets including the Euro Zone, the United Kingdom, [added: or the U.K.,] Australia, Brazil, Canada, China and Japan.

As a result, both adverse and beneficial fluctuations in foreign exchange rates [removed: would] impact our business, results of operations and financial position.

In addition, funds transferred to the United States can be adversely or beneficially impacted by [added: changes in] foreign currency exchange [removed: changes.][added: rates.]

We also [removed: may] have access to sensitive or personal data or information that is subject to privacy laws and regulations.

[removed: Despite our efforts] [added: Our systems and processes] to protect [removed: our systems] [added: against, detect, prevent, respond to] and [removed: networks] [added: mitigate cybersecurity incidents] and [removed: sensitive] [added: our organizational training for employees to develop an understanding of cybersecurity risks] and [removed: personal data or information, we] [added: threats] may be [removed: vulnerable] [added: unable] to [added: prevent] material security breaches, theft, modification or loss of data, employee malfeasance and additional known and unknown threats.

[removed: Cybersecurity incidents at these providers] [added: Our insurance may not protect us against damages resulting from cybersecurity incidents, which] could adversely affect our business and reputation.

The operational and financial performance of our international businesses are affected by global and regional economic conditions, competition for new business and [removed: talented] staff, currency [added: exchange rate] fluctuation, political conditions, regulatory environment and other risks associated with extensive international operations.

These laws and regulations are complex and [removed: stringent] [added: stringent,] and any violation could have an adverse effect on our business and reputation.

For financial information by geographic region, see Note [removed: 7] [added: 8] to the consolidated financial statements.

Generally, our businesses are not directly affected by current [removed: cap and trade] laws and other [removed: regulatory requirements] [added: regulations] aimed at mitigating the impact of climate change by reducing emissions or otherwise, although our businesses could be in the future.

We have substantial operations in the U.K. and the Euro Zone.

In June 2016, voters in the U.K. elected to withdraw from the European Union, or E.U. (commonly referred to as “Brexit”).

Unless the E.U. agrees to an extension, the U.K. is scheduled to exit the E.U. on March, 29, 2019, and it is possible that the U.K. may exit without an agreement in place.

The uncertainties related to Brexit have cross-border operational, financial and tax implications, among others, and any economic volatility that may arise in the U.K., the E.U. or elsewhere may adversely affect our business.

We install new systems or upgrade our existing systems to prevent, detect, address and mitigate cybersecurity incidents and we provide employee awareness training of cybersecurity risks.

On a global, pan-regional and local basis, our networks and agencies provide a comprehensive range of services in the following fundamental disciplines: advertising, [removed: CRM,which as described below] [added: CRM, which] includes CRM Consumer Experience and CRM Execution & Support, public relations and healthcare.

We [removed: continually seek] [added: use our client-centric approach] to grow our business [removed: with our existing clients] by [removed: maintaining our client-centric approach, as well as] expanding our [added: service offerings to] existing [removed: business relationships] [added: clients, moving] into new markets and [removed: with] [added: obtaining] new clients.

In addition, we pursue selective acquisitions of complementary companies with strong entrepreneurial management teams that typically currently serve or [removed: have the ability to] [added: could] serve our existing [removed: client base.][added: clients.]

In [removed: 2017,] [added: 2018,] our largest client represented 3.0% of revenue and our 100 largest clients, which represent many of the world's major marketers, comprised approximately 51% of revenue.

Our clients operate in virtually every sector of the global economy with no one industry comprising more than 14% of our revenue in [removed: 2017.][added: 2018.]

[removed: In 2017, changes in] [added: The impact of] foreign exchange rates [added: in 2017] increased revenue by [removed: $42.9 million,] [added: 0.3%,] or [removed: 0.3%.][added: $42.9 million.]

In Brazil, unstable economic and political conditions contributed to the continuing volatility in the [removed: market and our agencies experienced negative growth.][added: market.]

Most of our businesses in [removed: Asia continue their modest] [added: Asia-Pacific had positive] growth consistent with recent periods.

The economic and fiscal issues facing [added: the] countries [added: we operate] in [removed: Europe and Latin America continue to] [added: can] cause economic uncertainty [removed: in those regions;] [added: and volatility;] however, the impact on our business varies by country.

We [removed: will continue to] monitor economic conditions closely, as well as 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 our working capital.

In addition, [removed: during 2017,] [added: in 2018,] we [removed: continued] [added: completed] the process of forming practice areas within our global network structure to bring together agencies operating in common [removed: disciplines to leverage existing resources and to create, in close coordination with our key client matrix organization, additional custom client solutions.][added: disciplines.]

In the near term, barring unforeseen events and excluding the impact of changes in foreign exchange rates, [removed: as a result] [added: because] of continued improvement in operating performance by many of our agencies and new business activities, we expect our [removed: 2018] [added: organic] revenue to increase modestly [added: for 2019] and over the long term to be in excess of the weighted average nominal GDP growth in our major markets.

[removed: In addition, we] [added: We] continually evaluate our portfolio of businesses to identify [added: areas for investment and acquisition opportunities, as well as to identify] non-strategic or underperforming businesses for disposition.

We analyze revenue growth by reviewing the components and mix of the growth, including growth by principal regional market and marketing discipline, the impact from foreign currency exchange rate changes, growth from [removed: acquisitions] [added: acquisitions, net of dispositions] and growth from our largest clients.

Operating expenses are comprised of cost of services, selling, general and [removed: administrative,] [added: administrative expenses,] or SG&A, [removed: expenses] and depreciation and amortization.

[removed: The change in revenue in 2017 across] [added: Across] our principal regional [removed: markets] [added: markets, the changes in revenue] were: North America decreased [removed: 5.3%,] [added: 2.8%,] Europe increased [removed: 5.7%, Latin America] [added: 6.0%, Asia-Pacific] increased [removed: 16.8%] [added: 3.6%] and [removed: Asia Pacific increased 0.9%.][added: Latin America decreased 7.5%.]

In North America, modest growth in the United States [removed: and Canada] was offset by [added: a decrease in revenue primarily resulting from] the [added: impact of the adoption of ASC 606, the] disposition of our specialty print media business in the second [removed: quarter.][added: quarter of 2017 and negative performance in Canada.]

In [removed: Asia Pacific,] [added: Asia-Pacific, organic] growth in most countries in the region, especially Australia, [removed: India, Japan] [added: China, New Zealand] and [removed: Singapore,] [added: India,] was partially offset by disposition activity.

The change in revenue in [removed: 2017] [added: 2018] compared to [removed: 2016,] [added: 2017,] in our [removed: service] [added: four fundamental] disciplines was: [removed: advertising decreased 0.6%,] [added: Advertising increased 1.3%,] CRM Consumer Experience [removed: decreased 3.2%,] [added: increased 0.2%,] CRM Execution & Support decreased [removed: 1.6%, public relations] [added: 11.0%, Public Relations] increased [removed: 0.1%] [added: 1.7%] and [removed: healthcare] [added: Healthcare] increased [removed: 3.3%.][added: 12.7%.]

As a service business, salary and service costs make up [removed: the vast majority] [added: a significant portion] of our operating expenses and substantially all these costs comprise the essential components directly linked to the delivery of our services.

SG&A [removed: expenses] [added: expenses, which increased slightly year-over-year,] primarily consist of third-party marketing costs, professional fees and compensation and benefits and occupancy and other costs of our corporate and executive offices, which includes group-wide finance and accounting, treasury, legal and governance, human resource oversight and similar costs.

Operating expenses [removed: for 2017] decreased [removed: 1.4%] [added: $196.6 million, or 1.5% in 2017] compared to 2016.

Salary and service costs, which tend to fluctuate with changes in revenue, decreased [removed: $190.9] [added: $191.8] million, or 1.7%, in 2017 compared to 2016.

Occupancy and other costs, which are less directly linked to changes in revenue than salary and service costs, increased [removed: $1.5] [added: $68.8] million, or [removed: 0.1%,] [added: 5.5%,] in [removed: 2017] [added: 2018] compared to [removed: 2016.][added: 2017.]

As a result, operating margin [added: in 2017] increased [added: to 13.6% from 13.2% in 2016 and EBITA margin increased] year-over-year to [removed: 13.5%] [added: 14.4%] from [removed: 13.0%.][added: 13.9%.]

[added: |] Earnings before interest, taxes and amortization of intangible [removed: assets, or EBITA margin, in 2017 was 14.2%, as compared to 13.8% in 2016.][added: assets (“EBITA”) | $ | 2,236.0 | | | $ | 2,197.6 | |]

Net interest expense increased [removed: $7.7] [added: $10.2] million year-over-year to [removed: $174.8] [added: $198.9] million in 2017.

[removed: Interest] [added: Net interest] expense increased [removed: $14.8] [added: $10.3] million to [removed: $224.5] [added: $209.2] million in [added: 2018 compared to] 2017.

See Note [removed: 10] [added: 11] to the consolidated financial statements for additional information.

The increase is attributable to the estimated impact of the Tax Act of $106.3 million partially offset by the recognition of an excess tax benefit from share-based compensation of $20.8 million resulting from the adoption of FASB ASU [removed: 2016-09 (see Note 1 to] [added: 2016-09, which requires that beginning in 2017 excess tax benefits and deficiencies arising from share-based compensation be recognized in results of operations in] the [removed: consolidated financial statements).][added: period when the restricted stock awards vest or stock options are exercised.]

Net income - Omnicom Group Inc. [removed: for 2017] decreased $60.2 million, or 5.2%, to $1,088.4 million [added: in 2017] from $1,148.6 million in 2016.

The impact of the [removed: Tax Act reduced] [added: adoption of ASC 606 on net income - Omnicom Group Inc.,] diluted net income per share - Omnicom Group Inc. [removed: $0.45.][added: and the consolidated financial statements was not material.]

In addition, the impact of the reduction in our weighted average common shares outstanding resulting from repurchases of our common stock, net of shares issued for restricted stock [removed: awards,] [added: awards and] stock option exercises and [added: shares issued under our] employee stock purchase plan improved diluted net income per share - Omnicom Group [removed: Inc] [added: Inc.] in 2017 compared to 2016.

In circumstances where control is obtained and less than 100% of a business is acquired, goodwill is recorded as if 100% [removed: were acquired.]

In [removed: 2017,] [added: 2018,] we completed [removed: four] [added: six] acquisitions of new subsidiaries.

The main economic components of each agency are employee compensation and related costs and direct service costs and occupancy and other costs, which include rent and occupancy costs, technology costs that are generally limited to [added: personal computers, servers and off-the-shelf software and other overhead expenses.]

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 [removed: amortization)] [added: amortization),] and (3) when available, consideration of recent and similar acquisition transactions.

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 [removed: (“WACC”).][added: (“WACC”) for each reporting unit.]

The assumptions used for the long-term growth rate and WACC in our evaluations as of June 30, [removed: 2017] [added: 2018] and [removed: 2016] [added: 2017] were:

| | [added: |] 2017 | | [added: |] 2016 | [added: |]

As described in more detail below, in 2018, revenue increased $16.6 million, or 0.1%, compared to 2017.

In addition, the impact of the adoption of ASC 606 (see Note 1 to the consolidated financial statements) reduced revenue by $146.1 million, or 1.0%.

Revenue is typically lower in the first and third quarters and higher in the second and fourth quarters, reflecting client spending patterns during the year and additional project work that usually occurs in the fourth quarter.

Additionally, certain global events targeted by major marketers for advertising expenditures, such as the FIFA World Cup and the Olympics, and certain national events, such as the U.S. election process, may affect our revenue period-over-period in certain businesses.

Typically, these events do not have a significant impact on our revenue in any period.

In 2018, our agencies in North America continued their modest growth with uneven performance across our service disciplines.

In Europe, while mixed by country, most of our businesses had strong growth, however, the continuing uncertain economic and political conditions in the E.U., have been complicated by the status of Brexit.

This action leverages existing resources and, in close coordination with our key client matrix organization, enhances the development of custom client solutions.

During the third quarter of 2018, we disposed of certain businesses, primarily in our CRM Execution & Support discipline, and recorded a net gain of $178.4 million primarily related to the sale of Sellbytel, our European-based outsourced sales, service and support company.

Also, during the third quarter, we took certain repositioning actions in an effort to continue to improve our strategic position and achieve operating efficiencies, and we recorded charges of $149.4 million for incremental severance, office lease consolidation and termination, asset write-offs, and other charges.

We expect the reduction to our earnings for the disposition activity to be substantially offset by savings achieved from the operating efficiencies and cost reductions, as well as any incremental earnings from new acquisition activity, and we expect a net reduction to revenue of approximately 3% to 3.5% in the first half of 2019 and 2.5% for the full year.

In 2018, our revenue increased 0.1% compared to 2017.

Changes in foreign exchange rates increased revenue 0.6%, acquisition revenue, net of disposition revenue, reduced revenue 2.1%, and organic growth increased revenue 2.6%.

Organic revenue growth in the United States was led by our CRM Consumer Experience, healthcare, advertising and media and public relations businesses, and was partially offset by a decrease in our CRM Execution & Support discipline.

The revenue increase in Europe resulted from strong organic revenue in the region, particularly in France, Spain and the Czech Republic, modest organic revenue growth in the U.K., and the strengthening of the Euro and the British Pound against the U.S. Dollar in the first half of the year, which was partially offset by disposition activity and negative performance in Germany.

The decrease in revenue in Latin America was primarily a result of the weakening of the Brazilian Real against the U.S. Dollar.

Operating expenses, which include the net gain from the disposition of subsidiaries and the repositioning charges, as described above (see Note 13 to the consolidated financial statements), decreased $33.1 million, in 2018 compared to 2017.

The year-over-year increase primarily reflects the incremental severance and other charges of $73.7 million incurred in connection with the repositioning actions taken in the third quarter of 2018.

The year-over-year change reflects a decrease of $4.7 million, which was offset by $73.5 million of repositioning charges primarily related to office lease consolidation and termination actions taken in the third quarter of 2018.

The net gain on disposition of subsidiaries and repositioning expenses, increased operating profit and operating margin year-over year by $29.0 million and 0.2%, respectively.

Interest expense on debt increased $17.4 million to $241.9 million in 2018.

Interest income in 2018 increased $7.5 million, compared to the prior year.

Our effective tax rate for 2018, decreased period-over-period to 25.6% from 36.9% in 2017.

The decrease was primarily attributable to the reduction of the U.S. federal statutory income tax rate to 21% from 35% resulting from the Tax Act which was enacted in December 2017.

Additionally, income tax expense for 2018 reflects the following: a reduction of approximately $19 million, primarily as a result of the successful resolution of foreign tax claims, a reduction of $25.0 million related to the net income tax effect of the net gain on disposition of subsidiaries and repositioning actions (see Note 13 to the consolidated financial statements) and additional income tax expense of $28.9 million, reflecting the finalization of the provisional estimate of the effect of the Tax Act recorded in the fourth quarter of 2017 (see Note 11 to the consolidated financial statements).

Net income - Omnicom Group Inc. in 2018 increased, due to the factors described above, $238.0 million, or 21.9%, to $1,326.4 million from $1,088.4 million in 2017.

The net gain on disposition of subsidiaries and repositioning actions, after the allocable share of $6.9 million to noncontrolling interests, and the additional income tax expense from the finalization of the provisional estimate of the effect of the Tax Act, increased net income - Omnicom Group Inc. $18.2 million.

The net gain on disposition of subsidiaries and repositioning actions net of the additional income tax expense from the finalization of the provisional estimate of the effect of the Tax Act, increased diluted net income per share - Omnicom Group Inc. $0.08.

were acquired.

| | 2018 | | 2017 |

While our businesses in Europe had improved performance, the continuing uncertain economic and political conditions in the E.U. have been further complicated by the United Kingdom's ongoing negotiations with the European Council to withdraw from the E.U. During the first half of 2018, weakness in certain Latin American economies we operate in has the potential to affect our near-term performance in that region.

Effective January 1, 2018, we adopted ASC 606 (see Note 1 to the consolidated financial statements).

As described below, in accordance with ASC 606 we changed certain aspects of our revenue recognition accounting policy.

Therefore, comparative prior periods have not been adjusted and continue to be reported under FASB ASC Topic 605, Revenue Recognition.

We measure revenue by estimating the transaction price based on the consideration specified in the client arrangement.

Revenue is recognized as the performance obligations are satisfied.

Our revenue is primarily derived from the planning and execution of advertising communications and marketing services in the following fundamental disciplines: Advertising, which includes creative advertising services and strategic media planning and buying services, Customer Relationship Management or CRM, which includes CRM Consumer Experience and CRM Execution & Support, Public Relations and Healthcare Advertising.

Revenue is recorded net of sales, use and value added taxes.

Performance Obligations

In substantially all our disciplines, the performance obligation is to provide advisory and consulting services at an agreed-upon level of effort to accomplish the specified engagement.

As described in more detail below, in 2017 our revenue decreased $143.3 million, or 0.9%, compared to 2016.

Changes in foreign exchange rates negatively impacted revenue in the first six months of 2017.

Beginning in the third quarter of 2017, the Euro and a number of other foreign currencies strengthened against the U.S. Dollar.

As a result, changes in foreign exchange rates for 2017 had a marginal effect on our revenue.

Acquisition revenue, net of disposition revenue, reduced revenue $647.3 million, or 4.2%, primarily reflecting the sale of our specialty print media and organic growth increased revenue $461.1 million, or 3.0%.

In 2017, our agencies in North America continued their modest growth as activity in the United States varied across our service disciplines and growth slowed in the second half of the year relative to the first half.

Our businesses in the United Kingdom, or the U.K., and Europe had solid performance.

However, while improving in 2017, the continuing uncertain economic and political conditions in the European Union, or the EU, have been further complicated by the official notification from the U.K. to the European Council to withdraw from the EU.

We expect to complete this process in 2018.

In Europe, growth in substantially all markets and the strengthening of the Euro against the U.S. Dollar was partially offset by the weakening of the British Pound against the U.S. Dollar.

The increase in revenue in Latin America was a result of our acquisition activity in Colombia, growth in Mexico and the strengthening of the Brazilian Real against the U.S. Dollar, which was substantially offset by the continued economic weakness in Brazil and negative performance in that market.

In an effort to monitor the changing needs of our clients and to better capture the expanded scope of our services, in the fourth quarter of 2017, we realigned our service disciplines.

As a result, our CRM discipline was grouped into two separate categories: CRM Consumer Experience, which includes Omnicom Precision Marketing Group’s digital / direct marketing agencies, as well as our branding agencies, shopper marketing agencies and our experiential marketing agencies; and, CRM Execution & Support, which includes field marketing, sales support, merchandising and point of sale, as well as other specialized marketing and custom communications services.

Also, we realigned and renamed our former specialty communications discipline so that it now exclusively includes agencies offering healthcare marketing and communications services.

The decrease in advertising primarily reflects the sale of our specialty print media business in April 2017.

Operating profit increased $50.8 million year-over-year.

Interest income increased $7.1 million to $49.7 million in 2017 compared to 2016.

On December 22, 2017, the Tax Act was enacted into law.

The Tax Act reduced the U.S. federal statutory income tax rate to 21% from 35% for tax years beginning after December 31, 2017 and made several changes to existing tax law that affect our tax assets and liabilities related to previously reported taxable income.

The significant changes require that we record tax expense on the accumulated earnings of our foreign subsidiaries and adjust our previously reported deferred tax positions to reflect the impact of the revised statutory federal rate as of the enactment date.

In December 2017, the SEC issued Staff Accounting Bulletin 118, or SAB 118, which provides guidance on accounting for the impact of the Tax Act.

SAB 118 provides that provisional amounts should be recognized in our financial statements where accounting for certain effects of the Tax Act are not complete and a reasonable estimate of the effects of the Tax Act can be made.

Accordingly, at December 31, 2017, we have estimated the effect of the Tax Act and recorded a net increase to income tax expense of $106.3 million.

Our estimate is based on our understanding of the Tax Act and currently available guidance.

We expect to revise this estimate in future periods as further information becomes available.

Our effective tax rate for 2017 was 36.9% compared to 32.6% for 2016.

ASU 2016-09 requires that beginning in 2017 excess tax benefits and deficiencies arising from share-based compensation be recognized in results of operations in the period when the restricted stock awards vest or stock options are exercised.

In prior years, excess tax benefits and deficiencies from share-based compensation were recorded in additional paid-in capital.

The effect of the Tax Act on income tax expense for 2017 is presented below in Results of Operations 2017 Compared to 2016.

While we are still evaluating the impact of the Tax Act on our 2018 annual effective tax rate, we expect the Tax Act to reduce our effective tax rate between 3.5% and 4.5%, which excludes the impact of tax benefits or deficiencies on share-based compensation.

At this point, we can not predict the 2018 impact from share-based compensation because it is subject to changes in our share price.

The year-over-year decrease is due to the impact of the Tax Act of $106.3 million, which is partially offset by the after tax increase from the factors described above.

Diluted net income per share - Omnicom Group Inc. decreased 2.7% to $4.65 in 2017, compared to $4.78 in 2016.

The effect of the Tax Act on net income - Omnicom Group Inc. and diluted net income per share - Omnicom Group Inc. is presented below in Results of Operations 2017 Compared to 2016.

personal computers, servers and off-the-shelf software and other overhead expenses.

Economic conditions in the Euro Zone are unsettled and the continuing fiscal issues faced by many countries in the European Union has caused economic difficulty in certain of our Euro Zone markets.

During the first half of 2017, weakness in most Latin American economies we operate in has the potential to affect our near-term performance in that region.

We recognize revenue in accordance with FASB ASC Topic 605, Revenue Recognition, and applicable SEC Staff Accounting Bulletins.

Revenue is realized when the service is performed in accordance with the client arrangement and upon the completion of the earnings process.

Our primary client arrangements include: fixed fee contracts where revenue is recognized based on the level of effort completed to date, retainer agreements where revenue is recognized on a straight-line basis over the contract period, and media commissions where revenue is recognized when the media is run.

We manage our exposure to foreign [added: currency] exchange [added: rate risk] and interest rate risk through various strategies, including the use of derivative financial instruments.

We use forward foreign exchange contracts as economic hedges to manage the cash flow volatility arising from foreign [added: currency] exchange rate fluctuations.

Based on the results of the model, we estimate with 95% confidence a maximum one-day change in the net fair value of our derivative financial instruments at December 31, [removed: 2017] [added: 2018] was not significant.

Foreign [added: Currency] Exchange Risk

Our international operations represent approximately [removed: 46%] [added: 48%] of our revenue.

For the most part, because the revenue and [removed: expense] [added: expenses] of our foreign operations are [removed: both] denominated in the same local currency, the economic impact on operating margin is minimized.

The effects of [added: foreign] currency exchange transactions on our results of operations are discussed in Note 2 to the consolidated financial statements.

While our major international markets include the Euro Zone, the [removed: United Kingdom,] [added: U.K.,] Australia, Brazil, Canada, China and Japan, our agencies transact business in more than 50 different currencies.

As an integral part of our global treasury operations, we centralize our cash and use multicurrency [removed: pools] [added: pools, and] to [added: a lesser extent forward foreign exchange contracts, to] manage the foreign [added: currency] exchange risk that arises from imbalances between subsidiaries and their respective treasury centers from which they borrow or invest funds.

To manage that risk, we had outstanding forward foreign exchange contracts with an aggregate notional amount of [removed: $92.8] [added: $86.1] million and [removed: $99.0] [added: $136.3] million at December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] respectively.

[removed: Additionally,] [added: In addition,] there are circumstances where revenue and expense transactions are not denominated in the same currency.

[removed: To manage that risk,] [added: At December 31, 2018, there were no outstanding forward foreign exchange contracts and at December 31, 2017,] we had outstanding forward foreign exchange contracts with an aggregate notional amount of [removed: $136.3 million and $94.0 million at December 31, 2017 and 2016, respectively.][added: $92.8 million.]

The net fair value of the forward foreign contracts at December 31, [removed: 2017] [added: 2018] and [removed: 2016] [added: 2017] was a current [removed: asset] [added: liability] of [removed: $0.9] [added: $0.1] million and a current [removed: liability] [added: asset] of [removed: $1.1] [added: $0.9] million, respectively.

Based on market conditions, we may terminate the swaps to reduce our exposure to rising interest rates or to monetize any gain and lock in a reduction in interest [removed: expense over the term of the underlying debt.][added: expense.]

At December 31, [removed: 2017,] [added: 2018,] the total notional amount of the outstanding fixed-to-floating interest rate swaps was $1.25 billion.

A discussion of our interest rate swaps is included in Note [removed: 6] [added: 7] to the consolidated financial statements.

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 represented 3.0% of revenue in [removed: 2017.][added: 2018.]

Gains or losses on termination will be amortized to interest expense over the term of the underlying debt.

However, in certain circumstances, subsidiaries borrowing or investing with a treasury center operating in a different currency creates foreign exchange exposure.

We operate in a highly competitive industry and compete against other global, national and regional advertising and marketing services [added: companies, as well as technology, social media and professional services] companies.

These developments make it more complex for marketers to reach their target audiences in a cost-effective way, causing them to turn to global service providers such as Omnicom for a customized mix of advertising and marketing services designed to [removed: make the best use of] [added: optimize] their total marketing expenditure.

[removed: Our branded] [added: On a global, pan-regional and local basis, our] networks and agencies [removed: operate in all major global markets and] provide a comprehensive range of services in the following fundamental disciplines: advertising, customer relationship management, or CRM, [added: which includes CRM Consumer Experience and CRM Execution & Support,] public relations and healthcare.

[removed: As a result, our] CRM [removed: discipline was grouped into two separate categories: CRM] Consumer [removed: Experience, which] [added: Experience] includes [removed: Omnicom] [added: Omnicom’s] Precision Marketing [removed: Group’s digital / direct marketing] [added: Group and digital/direct] agencies, as well as our [removed: branding agencies,] [added: branding,] shopper marketing [removed: agencies] and [removed: our] experiential marketing [removed: agencies; and,] [added: agencies and] CRM Execution & [removed: Support, which] [added: Support] includes field marketing, sales support, merchandising and point of sale, as well as other specialized marketing and custom communications services.

| [removed: digital / direct] [added: digital/direct] marketing | | package design |

In addition, [removed: during 2017,] [added: in 2018,] we [removed: continued] [added: substantially completed] the process of forming practice areas within our global network structure to bring together agencies operating in common [removed: disciplines to leverage existing resources and to create, in close coordination with our key client matrix organization, additional custom client solutions.][added: disciplines.]

The various components of our business, including revenue by discipline and geographic area, and material factors that affected us in [removed: 2017] [added: 2018] 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, individually or in the aggregate, in the [removed: three year] [added: three-year] period ended December 31, [removed: 2017] [added: 2018] was material to our results of operations or financial position.

For information about our acquisitions, see Note [removed: 4] [added: 5] to the consolidated financial statements.

In many cases, multiple agencies or networks serve different brand, product [removed: groups,] [added: groups] or both within the same client.

For example, in [removed: 2017] [added: 2018] our largest client represented 3.0% of revenue and was served by more than [removed: 250] [added: 225] of our agencies.

Our 100 largest clients, which represent many of the world's major marketers, comprised approximately 51% of revenue and were each served, on average, by more than [removed: 50] [added: 60] of our agencies.

At December 31, [removed: 2017,] [added: 2018,] we employed approximately [removed: 77,300] [added: 70,400] people worldwide.

At January 31, [removed: 2018,] [added: 2019,] our executive officers were:

| John D. Wren | [removed: President] [added: Chairman of the Board] and Chief Executive Officer | [removed: 65] [added: 66] |

| Philip J. Angelastro | Executive Vice President and Chief Financial Officer | [removed: 53] [added: 54] |

| Michael J. O’Brien | Senior Vice President, General Counsel and Secretary | [removed: 56] [added: 57] |

| Andrew L. Castellaneta | Senior Vice President, Chief Accounting Officer | [removed: 59] [added: 60] |

| Peter L. Swiecicki | Senior Vice President, Finance and Controller | [removed: 59] [added: 60] |

| Jonathan B. Nelson | CEO, Omnicom Digital | [removed: 50] [added: 51] |

Each executive officer has held his present position for at least five years, except: Mr. [removed: Angelastro] [added: Wren] was named [removed: Executive Vice President] [added: Chairman of the Board] and Chief [removed: Financial] [added: Executive] Officer in [removed: September 2014] [added: May 2018] and previously served as [removed: Senior Vice] President [removed: Finance] and [removed: Controller] [added: Chief Executive Officer] from [removed: 2002 until September 2014;] [added: 1997 to May 2018;] Mr. [removed: Sherman] [added: Angelastro] was named Executive Vice President [added: and Chief Financial Officer] in [removed: April] [added: September] 2014 and previously served as [removed: Chief Executive Officer of JWT North America from June 2013 to April 2014] [added: Senior Vice President Finance] and [removed: previously held various positions with BBDO Worldwide] [added: Controller] from [removed: 1997] [added: 2002] until [removed: 2013;] [added: September 2014;] Mr. Castellaneta was named Senior Vice President, Chief Accounting Officer in January 2015 and previously served as Assistant Controller from 2000 until January 2015; [removed: and,] [added: and] Mr. Swiecicki was named Senior Vice President, Finance and Controller in January 2015 and previously served as Director of Business Operations from 2013 until January 2015 [removed: and previously held] [added: after holding] various positions with BBDO Worldwide from 1983 until 2013.

Additional information about our directors and executive officers will appear in our definitive proxy statement, which is expected to be filed with the [removed: SEC] [added: United States Securities and Exchange Commission, or SEC,] by April [removed: 12, 2018.][added: 10, 2019.]

Advertising includes creative services, as well as strategic media planning and buying and data analytics services.

Public relations services include corporate communications, crisis management, public affairs and media and media relations services.

Healthcare includes advertising and media services to global healthcare clients.

We use our client-centric approach to grow our business by expanding our service offerings to existing clients, moving into new markets and obtaining new clients.

In addition to collaborating through our client service models, our agencies and networks collaborate across internally developed technology platforms.

Annalect, our proprietary data and analytics platform, serves as the strategic resource for all of our agencies and networks to share when developing client service strategies across our virtual networks.

Omni, our people-based precision marketing and insights platform, identifies and defines personalized consumer experiences at scale across creative, media and CRM, as well as other disciplines.

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.

A comprehensive listing of our service offerings includes:

This action leverages existing resources and, in close coordination with our key client matrix organization, enhances the development of custom client solutions.

| | | |

| --- | --- | --- |

| | | |

Available Information

We file annual, quarterly and current reports and any amendments to those reports, proxy statements and other information with the SEC.

Documents we file with the SEC are available free of charge on our website at http://investor.omnicomgroup.com, as soon as reasonably practicable after such material is filed with the SEC.

The information included on or available through our website is not part of this or any other report we file with the SEC.

Any document that we file with the SEC is available on the SEC’s website at www.sec.gov.

In an effort to monitor the changing needs of our clients and to better capture the expanded scope of our services, in the fourth quarter of 2017, we realigned our service disciplines.

Also, we realigned and renamed our former specialty communications discipline so that it now exclusively includes agencies offering healthcare marketing and communications services.

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 advertising, marketing and corporate communications services.

Services across our disciplines include:

While our networks and agencies operate under different names and frame their ideas in different disciplines, we organize our services around our clients.

We believe that this organizational philosophy, our ability to execute on it and our key client matrix organization structure differentiates us from our competition.

Geographic Regions

Our United States operations represent approximately 54% of our revenue.

As discussed more fully in the Critical Accounting Policies section of the MD&A, our branded networks and agencies conduct business on a global basis and operate in the following geographic regions: The Americas, which includes North America and Latin America; EMEA, which includes Europe, the Middle East and Africa; and, Asia Pacific, which includes Australia, China, India, Japan, Korea, New Zealand, Singapore and other Asian countries.

The networks have regional reporting units that are responsible for the agencies in their region.

Agencies within the regional reporting units serve similar clients in similar industries and in many cases the same clients and have similar economic characteristics.

Accordingly, financial information by geographic region is provided in the MD&A and Note 7 to the consolidated financial statements.

| Bruce Crawford | Chairman of the Board | 88 |

| Peter K. Sherman | Executive Vice President | 54 |

| Dennis E. Hewitt | Treasurer | 73 |

[removed: On] [added: In] December [removed: 14,] 2016, two of our subsidiaries received subpoenas from the U.S. Department of Justice Antitrust Division concerning its ongoing investigation of video production and post-production practices in the advertising industry.

In November 2018, the Company received confirmation that the investigation of the Company's subsidiaries had been closed without any action taken against the Company, its subsidiaries or employees.

The Company is fully cooperating with the investigation.

While the ultimate effect of the investigation is inherently uncertain, we do not at this time believe that the investigation will have a material adverse effect on our results of operations or financial position.

However, the ultimate resolution of these matters could be different from our current assessment and the differences could be material.

FOR FISCAL YEAR ENDED DECEMBER 31, [removed: 2017][added: 2018]

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate web site, if any,] every interactive data file required to be submitted [removed: 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 [removed: and post] such files).

The aggregate market value of the voting and non-voting common stock held by non-affiliates as of June 30, [removed: 2017] [added: 2018] was [removed: $19,093,687,000.][added: $16,936,300,000.]

As of January 31, [removed: 2018,] [added: 2019,] there were [removed: 230,267,646] [added: 223,690,798] 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 [removed: 22, 2018] [added: 20, 2019] are incorporated by reference into Part III of this report to the extent described herein.

ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, [removed: 2017][added: 2018]

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| Item 10. | [removed: Directors,] [added: [Directors,] Executive Officers and Corporate [removed: Governance] [added: Governance](#s63CA4D9459F25DBF9C55F264F30D54BB)] | [removed: [30](#s9E5501DC388B5AD6A8DA2531797E7C5D)] [added: [30](#s0FB54BF5379859FDA046721D749660FE)] |

| Item 11. | [removed: Executive Compensation] [added: [Executive Compensation](#s818D70DE42B35FF888ADD42755E6E5FF)] | [removed: [30](#s9E5501DC388B5AD6A8DA2531797E7C5D)] [added: [30](#s0FB54BF5379859FDA046721D749660FE)] |

| Item 12. | [removed: Security] [added: [Security] Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters] [added: Matters](#s8180A1B0B2855537A6868BEB798E90C1)] | [removed: [30](#s9E5501DC388B5AD6A8DA2531797E7C5D)] [added: [30](#s0FB54BF5379859FDA046721D749660FE)] |

| Item 13. | Certain Relationships and Related Transactions, and Director Independence | [removed: [30](#s9E5501DC388B5AD6A8DA2531797E7C5D)] [added: [30](#s0FB54BF5379859FDA046721D749660FE)] |

| Item 14. | [removed: Principal] [added: [Principal] Accounting Fees and [removed: Services] [added: Services](#s72BAEA8BF4E55B47B7BAA2EC88B43DAE)] | [removed: [30](#s9E5501DC388B5AD6A8DA2531797E7C5D)] [added: [30](#s0FB54BF5379859FDA046721D749660FE)] |

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| Item 16. | Form 10-K Summary | [removed: [33](#s8D3ECA787C7B507485C4211E8D48ECC2)] [added: [33](#s32A5A8FCBD645C9D9183BC615A2A48FC)] |

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| [Notes to Consolidated Financial [removed: Statements](#sE3AFA30382A05620BAA56FC420D8DA07)] [added: Statements](#s8C18ABC6DE385556A4A3538CE920A1EA)] | | [removed: [F-9](#sC9999A3C99B55E618D00C8CDF197784B)] [added: [F-8](#s6A8AA433DB8453B5BD5CB49FD7C10040)] |

| [removed: Selected] [added: [Selected] Quarterly Financial [removed: Data] [added: Data](#s4EC2DF234FDA52FAB3827E61FD9AA601)] | | [removed: [F-33](#sA01A9DFDBA9D53FFAEAEE33FCE30F239)] [added: [F-34](#s4EC2DF234FDA52FAB3827E61FD9AA601)] |

| [removed: Schedule] [added: [Schedule] II - Valuation and Qualifying [removed: Accounts] [added: Accounts](#sFC7B355CC75C57D5B7DC4B62F4C46A33)] | | [removed: [S-1](#s63C6772F01EA545887918EFB7537B2CD)] [added: [S-1](#sFC7B355CC75C57D5B7DC4B62F4C46A33)] |

Factors that could cause actual results to differ materially from those in the forward-looking statements include: international, national or local economic conditions that could adversely affect the Company or its clients; losses on media purchases and production costs incurred on behalf of clients; reductions in client spending, a slowdown in client payments and a deterioration in the credit markets; [added: the] ability to attract new clients and retain existing clients in the manner anticipated; changes in client advertising, marketing and corporate communications requirements; failure to manage potential conflicts of interest between or among clients; unanticipated changes relating to competitive factors in the advertising, marketing and corporate communications industries; ability to hire and retain key personnel; currency exchange rate fluctuations; reliance on information technology systems; changes in legislation or governmental regulations affecting the Company or its clients; 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 repatriation restrictions, social or political conditions and regulatory environment.

This report is our [removed: 2017] [added: 2018] annual report to shareholders and our [removed: 2017] [added: 2018] Annual Report on Form 10-K, or [removed: 2017] [added: 2018] 10-K.

Omnicom Group [removed: Inc. was] [added: Inc., a New York corporation] formed in [removed: 1986 and] [added: 1986,] through its branded networks and agencies provides advertising, marketing and corporate communications services to over 5,000 clients in more than 100 countries.

10-K 1 a2018q410-k.htm 10-K

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| [Signatures](#s00100CE33ECE5D68A375BBD0535101A5) | | [34](#s00100CE33ECE5D68A375BBD0535101A5) |

10-K 1 a2017q410-k.htm 10-K

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| [Item 2.](#s8092ADC81D1355D6ABED67FA87972FF7) | [Properties](#sE574F63DB8F25464A7845D87C2730BE7) | [6](#sE574F63DB8F25464A7845D87C2730BE7) |

| [Signatures](#s69478284AB1850218872769D73B70443) | | [34](#s69478284AB1850218872769D73B70443) |

AVAILABLE INFORMATION

We file annual, quarterly and current reports and any amendments to those reports, proxy statements and other information with the United States Securities and Exchange Commission, or SEC.

Documents we file with the SEC are available free of charge on our website at http://investor.omnicomgroup.com, as soon as reasonably practicable after such material is filed with the SEC.

The information included on or available through our website is not part of this or any other report we file with the SEC.

Any document that we file with the SEC is available on the SEC’s website at www.sec.gov and also 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 operation of the Public Reference Room.

Office base rent expense was [removed: $330.4] [added: $287.8] million, [removed: $334.1] [added: $330.4] million and [removed: $331.5] [added: $334.1] million in [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015,] [added: 2016,] respectively, net of rent received from non-cancelable third-party subleases.

See Note [removed: 14] [added: 16] to the consolidated financial statements for a description of our lease commitments, which comprise a significant component of our occupancy and other costs.

| 2019 | $ | 308.5 | |

| 2020 | 266.3 | | |

| 2021 | 219.6 | | |

| 2022 | 183.5 | | |

| 2023 | 150.3 | | |

| Thereafter | 662.4 | | |

| | $ | 1,790.6 | |

See Note 22 to the consolidated financial statements for a discussion of the impact of the adoption of FASB Accounting Standards Codification Topic 842, Leases.

| 2018 | $ | 295.6 | |

| 2019 | 236.8 | | |

| 2020 | 191.5 | | |

| 2021 | 165.6 | | |

| 2022 | 142.4 | | |

| Thereafter | 624.0 | | |

| | $ | 1,655.9 | |

Our common stock is listed and traded on the New York Stock Exchange under the symbol “OMC.” As of January 31, [removed: 2018,] [added: 2019,] there were [removed: 2,074] [added: 2,014] registered holders of our common stock.

Common stock repurchases during the three months ended December 31, [removed: 2017] [added: 2018] were:

During the three months ended December 31, [removed: 2017,] [added: 2018,] we purchased [removed: 560,000] [added: 600,000] shares of our common stock in the open market for general corporate purposes and withheld [removed: 64,178] [added: 165,089] shares from employees to satisfy estimated statutory income tax obligations related to vesting of restricted stock awards and stock option exercises.

There were no unregistered sales of equity securities during the three months ended December 31, [removed: 2017.][added: 2018.]

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 in our definitive proxy statement, which is expected to be filed with the SEC by April [removed: 12, 2018.][added: 10, 2019.]

| October 1 - 31, 2018 | | 504,601 | | | $ | 71.56 | | | — | | — |

| November 1 - 30, 2018 | | — | | | — | | | | — | | — |

| December 1 - 31, 2018 | | 260,488 | | | 70.91 | | | | — | | — |

| | | 765,089 | | | $ | 71.34 | | | — | | — |

The quarterly high and low sales prices for our common stock and dividends paid per share for 2017 and 2016 were:

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | High | | | | Low | | | | Dividends Paid Per Share | | |

| 2017 | | | | | | | | | | | | |

| First Quarter | | $ | 87.43 | | | $ | 83.67 | | | $ | 0.55 | |

| Second Quarter | | 86.71 | | | | 79.86 | | | | 0.55 | | |

| Third Quarter | | 83.64 | | | | 71.63 | | | | 0.55 | | |

| Fourth Quarter | | 78.70 | | | | 65.32 | | | | 0.60 | | |

| 2016 | | | | | | | | | | | | |

| First Quarter | | $ | 84.23 | | | $ | 66.48 | | | $ | 0.50 | |

| Second Quarter | | 85.95 | | | | 75.61 | | | | 0.55 | | |

| Third Quarter | | 87.50 | | | | 79.94 | | | | 0.55 | | |

| Fourth Quarter | | 89.66 | | | | 78.67 | | | | 0.55 | | |

| October 1 - 31, 2017 | | 49,710 | | | $ | 75.14 | | | — | | — |

| November 1 - 30, 2017 | | 103 | | | 67.15 | | | | — | | — |

| December 1 - 31, 2017 | | 574,365 | | | 73.72 | | | | — | | — |

| | | 624,178 | | | $ | 73.83 | | | — | | — |

| For the years ended December 31: | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | |

| Revenue | $ | [removed: 15,273.6] [added: 15,290.2] | | | $ | [removed: 15,416.9] [added: 15,273.6] | | | $ | [removed: 15,134.4] [added: 15,416.9] | | | $ | [removed: 15,317.8] [added: 15,134.4] | | | $ | [removed: 14,584.5] [added: 15,317.8] | |

| Operating Profit | [removed: 2,059.7] [added: 2,133.5] | | | | [removed: 2,008.9] [added: 2,083.8] | | | | [removed: 1,920.1] [added: 2,030.5] | | | | [removed: 1,944.1] [added: 1,920.1] | | | | [removed: 1,825.3] [added: 1,944.1] | | |

| Net Income - Omnicom Group Inc. | [removed: 1,088.4] [added: 1,326.4] | | | | [removed: 1,148.6] [added: 1,088.4] | | | | [removed: 1,093.9] [added: 1,148.6] | | | | [removed: 1,104.0] [added: 1,093.9] | | | | [removed: 991.1] [added: 1,104.0] | | |

| Basic | [removed: 4.68] [added: 5.85] | | | | [removed: 4.80] [added: 4.68] | | | | [removed: 4.43] [added: 4.80] | | | | [removed: 4.27] [added: 4.43] | | | | [removed: 3.73] [added: 4.27] | | |

| Diluted | [removed: 4.65] [added: 5.83] | | | | [removed: 4.78] [added: 4.65] | | | | [removed: 4.41] [added: 4.78] | | | | [removed: 4.24] [added: 4.41] | | | | [removed: 3.71] [added: 4.24] | | |

| Dividends Declared Per Common Share | [removed: 2.25] [added: 2.40] | | | | [removed: 2.15] [added: 2.25] | | | | [removed: 2.00] [added: 2.15] | | | | [removed: 1.90] [added: 2.00] | | | | [removed: 1.60] [added: 1.90] | | |

| At December 31: | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | |

| Cash and cash equivalents and short-term investments | $ | [removed: 3,796.4] [added: 3,657.9] | | | $ | [removed: 3,022.8] [added: 3,796.4] | | | $ | [removed: 2,619.7] [added: 3,022.8] | | | $ | [removed: 2,390.3] [added: 2,619.7] | | | $ | [removed: 2,728.7] [added: 2,390.3] | |

| Total [removed: Assets] [added: assets] | [removed: 24,931.2] [added: 24,617.0] | | | | [removed: 23,165.4] [added: 24,931.2] | | | | [removed: 22,110.7] [added: 23,165.4] | | | | [removed: 21,428.4] [added: 22,110.7] | | | | [removed: 21,980.4] [added: 21,428.4] | | |

| [removed: Long-Term Liabilities] [added: Long-term liabilities] | [removed: 1,091.2] [added: 1,197.8] | | | | [removed: 892.3] [added: 1,091.2] | | | | [removed: 800.5] [added: 892.3] | | | | [removed: 774.3] [added: 800.5] | | | | [removed: 685.1] [added: 774.3] | | |

| Total [removed: Shareholders’ Equity] [added: shareholders’ equity] | [removed: 2,615.1] [added: 2,547.1] | | | | [removed: 2,162.0] [added: 2,615.1] | | | | [removed: 2,452.4] [added: 2,162.0] | | | | [removed: 2,850.0] [added: 2,452.4] | | | | [removed: 3,582.4] [added: 2,850.0] | | |

See Note [removed: 10] [added: 1] to the consolidated financial statements for additional information.

| Long-term debt, including current portion | 4,883.7 | | | | 4,912.9 | | | | 4,920.6 | | | | 4,565.6 | | | | 4,542.5 | | |

In 2018, we adopted FASB Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers, or ASC 606.

As a result of the adoption of ASC 606, in 2018 revenue and operating profit decreased $146.1 million and $6.6 million, respectively.

In 2017, the Tax Cuts and Jobs Act, or Tax Act, reduced net income - Omnicom Group Inc. See Note 11 to the consolidated financial statements for additional information regarding the impact of the Tax Act on income tax expense.

| Long-term debt | 4,912.9 | | | | 4,920.5 | | | | 3,564.2 | | | | 4,542.1 | | | | 3,763.3 | | |

| Convertible debt | — | | | | — | | | | — | | | | — | | | | 252.7 | | |

As discussed in Item 7 below, in 2017 the Tax Cuts and Jobs Act, or Tax Act, reduced Net income - Omnicom Group Inc. by $106.3 million and diluted Net income per share - Omnicom Group Inc. by $0.45.

Management, including our CEO and CFO, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, [removed: 2017.][added: 2018.]

Based on that evaluation, our CEO and CFO concluded that, as of December 31, [removed: 2017,] [added: 2018,] 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, [removed: 2017] [added: 2018] are appropriate.

Based on that evaluation, our CEO and CFO concluded that our internal control over financial reporting was effective as of December 31, [removed: 2017.][added: 2018.]

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, [removed: 2017,] [added: 2018,] dated February [removed: 15, 2018,] [added: 12, 2019,] which is included on page F-2 of this [removed: 2017] [added: 2018] 10-K.

The information regarding Executive Officers of the Registrant is included in Part I, Item 1, “Business.” Additional information called for by this Item, to the extent not included in this document, is incorporated herein by reference to the information to be included under the captions “Item 1 - Election of Directors,” “Stock Ownership Information - Section 16(a) Beneficial Ownership Reporting Compliance” and “Additional Information - Shareholder Proposals and Director Nominations [removed: For The 2019] [added: for the 2020] Annual Meeting” in our definitive proxy statement, or Proxy Statement, which is expected to be filed with the SEC within 120 days of the fiscal year ended December 31, [removed: 2017.][added: 2018.]

The information called for by this Item is incorporated herein by reference to the information to be included under the captions “Executive Compensation,” “Item 1 - Election of Directors - Directors' Compensation [removed: For] [added: for] Fiscal [removed: 2017”] [added: 2018”] and “Item 1 - Election of Directors - Board [added: Policies and] Processes - Compensation Committee Interlocks and Insider Participation” in our Proxy Statement.

The information called for by this Item is incorporated herein by reference to the information to be included under the captions [removed: “Additional Information] [added: “Item 1] - [added: Election of Directors - Omnicom Board of Directors -] Transactions with Related Persons” and “Item 1 - Election of Directors - Omnicom Board of [removed: Directors”] [added: Directors - Director Independence”] in our Proxy Statement.

| | [Management Report on Internal Control Over Financial [removed: Reporting](#sF4D3D076C2135AD0A7F56CC5AA7143D5)] [added: Reporting](#s0D8FCE7242C350A09EF6F5830B491530)] | [removed: [F-1](#sF4D3D076C2135AD0A7F56CC5AA7143D5)] [added: [F-1](#s0D8FCE7242C350A09EF6F5830B491530)] |

| | [Report of Independent Registered Public Accounting [removed: Firm](#sDAA7A97003D351568154C1E1B891B8CD)] [added: Firm](#s84FEC0A418135D65B396198C815F5959)] | [removed: [F-2](#sDAA7A97003D351568154C1E1B891B8CD)] [added: [F-2](#s84FEC0A418135D65B396198C815F5959)] |

| | Consolidated Balance Sheets at December 31, [removed: 2017] [added: 2018] and [removed: 2016] [added: 2017] | [removed: [F-4](#s99AD9D4FDCD8514696E4377DE4C53A06)] [added: [F-3](#s7ABCA3FD72DA5AEFAF30F40C0A91EE03)] |

| | Consolidated Statements of Income for the Three Years Ended December 31, [removed: 2017] [added: 2018] | [removed: [F-5](#sA0AAB28B4ECF5A14B3FFD476D411E48B)] [added: [F-4](#s5DE9EB529AD156E583D241BFF52E5EAD)] |

| | Consolidated Statements of Comprehensive Income for the Three Years Ended December 31, [removed: 2017] [added: 2018] | [removed: [F-6](#sEF9B33732849522BBC0CCD6441FE6E87)] [added: [F-5](#sBB2664B3631A5EAAB721E5E583FBEF7B)] |

| | Consolidated Statements of Equity for the Three Years Ended December 31, [removed: 2017] [added: 2018] | [removed: [F-7](#sDDB93D79836E58F48D75DF44657C4E07)] [added: [F-6](#sC56E3E04744554C9806BE6A3F6D8138C)] |

| | Consolidated Statements of Cash Flows for the Three Years Ended December 31, [removed: 2017] [added: 2018] | [removed: [F-8](#sC0AC349D3C2554ACA94375C09E9526C6)] [added: [F-7](#s459EDB9F2C5C5941870B607D6F0EFF5A)] |

| | [Notes to Consolidated Financial [removed: Statements](#sE3AFA30382A05620BAA56FC420D8DA07)] [added: Statements](#s8C18ABC6DE385556A4A3538CE920A1EA)] | [removed: [F-9](#sC9999A3C99B55E618D00C8CDF197784B)] [added: [F-8](#s6A8AA433DB8453B5BD5CB49FD7C10040)] |

| | Selected Quarterly Financial Data (Unaudited) | [removed: [F-33](#sA01A9DFDBA9D53FFAEAEE33FCE30F239)] [added: [F-34](#s4EC2DF234FDA52FAB3827E61FD9AA601)] |

| | Schedule II - Valuation and Qualifying Accounts for the Three Years Ended December 31, [removed: 2017] [added: 2018] | [removed: [S-1](#s63C6772F01EA545887918EFB7537B2CD)] [added: [S-1](#sFC7B355CC75C57D5B7DC4B62F4C46A33)] |

| 3(ii) | [By-laws of Omnicom Group Inc., as amended and restated on [removed: March 14, 2016] [added: December 11, 2018] (Exhibit 3.1 to our Current Report on Form 8-K (File No. 1-10551) dated [removed: March 15, 2016] [added: December 14, 2018] and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/29989/000089109216013237/e68734ex3-1.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/29989/000089109218009194/e3252ex3-1.htm)] |

| 21 | [Subsidiaries of the [removed: Registrant.](https://www.sec.gov/Archives/edgar/data/29989/000002998918000004/a2017q4exhibit21.htm)] [added: Registrant.](https://www.sec.gov/Archives/edgar/data/29989/000002998919000007/a2018q4exhibit21.htm)] |

| 23 | [Consent of KPMG [removed: LLP.](https://www.sec.gov/Archives/edgar/data/29989/000002998918000004/a2017q4exhibit23.htm)] [added: LLP.](https://www.sec.gov/Archives/edgar/data/29989/000002998919000007/a2018q4exhibit23.htm)] |

| 31.1 | [Certification of [added: Chairman and] Chief Executive Officer [removed: and President] required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as [removed: amended.](https://www.sec.gov/Archives/edgar/data/29989/000002998918000004/a2017q4exhibit311.htm)] [added: amended.](https://www.sec.gov/Archives/edgar/data/29989/000002998919000007/a2018q4exhibit311.htm)] |

| 31.2 | [Certification of Executive Vice President and Chief Financial Officer required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as [removed: amended.](https://www.sec.gov/Archives/edgar/data/29989/000002998918000004/a2017q4exhibit312.htm)] [added: amended.](https://www.sec.gov/Archives/edgar/data/29989/000002998919000007/a2018q4exhibit312.htm)] |

| 32 | [Certification of the Chief Executive Officer and President and the Executive Vice President and Chief Financial Officer required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section [removed: 1350](https://www.sec.gov/Archives/edgar/data/29989/000002998918000004/a2017q4exhibit32.htm).] [added: 1350](https://www.sec.gov/Archives/edgar/data/29989/000002998919000007/a2018q4exhibit32.htm).] |

| 10.20 | [Separation Agreement, dated October 12, 2018, by and between Omnicom Capital Inc. and Dennis Hewitt (Exhibit 10.1 to our Current Report on Form 8-K (File No. 1-10551) filed on October 18, 2018 and incorporated herein by reference).](http://www.sec.gov/Archives/edgar/data/29989/000089109218007567/e2520ex10-1.htm) |

| 12 | [Computation of Ratio of Earnings to Fixed Charges.](https://www.sec.gov/Archives/edgar/data/29989/000002998918000004/a2017q4exhibit12.htm) |

| February [removed: 15, 2018] [added: 12, 2019] | BY: | /s/ PHILIP J. ANGELASTRO |

| /s/ JOHN D. WREN | [added: Chairman and] Chief Executive Officer and [removed: President and] Director (Principal Executive Officer) | February [removed: 15, 2018] [added: 12, 2019] |

| /s/ PHILIP J. ANGELASTRO | Executive Vice President and Chief Financial Officer (Principal Financial Officer) | February [removed: 15, 2018] [added: 12, 2019] |

| /s/ ANDREW L. CASTELLANETA | Senior Vice President, Chief Accounting Officer (Principal Accounting Officer) | February [removed: 15, 2018] [added: 12, 2019] |

| /s/ ALAN R. BATKIN | Director | February [removed: 15, 2018] [added: 12, 2019] |

| /s/ MARY C. CHOKSI | Director | February [removed: 15, 2018] [added: 12, 2019] |

| /s/ ROBERT CHARLES CLARK | Director | February [removed: 15, 2018] [added: 12, 2019] |

| /s/ LEONARD S. COLEMAN, JR. | Director | February [removed: 15, 2018] [added: 12, 2019] |

| /s/ SUSAN S. DENISON | Director | February [removed: 15, 2018] [added: 12, 2019] |

| /s/ DEBORAH J. KISSIRE | Director | February [removed: 15, 2018] [added: 12, 2019] |

| /s/ GRACIA C. MARTORE | Director | February [removed: 15, 2018] [added: 12, 2019] |

| /s/ LINDA JOHNSON RICE | Director | February [removed: 15, 2018] [added: 12, 2019] |

| /s/ VALERIE M. WILLIAMS | Director | February [removed: 15, 2018] [added: 12, 2019] |

Management is responsible for the preparation of the consolidated financial statements and related information of Omnicom Group [removed: Inc. (“Omnicom”).][added: Inc., or Omnicom.]

Based on that evaluation, our CEO and CFO concluded that our internal control over financial reporting was effective as of December 31, [removed: 2017.][added: 2018.]

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, [removed: 2017,] [added: 2018,] dated February [removed: 15, 2018.][added: 12, 2019.]

The Board of Directors of Omnicom has an Audit Committee comprised of [removed: six] [added: five] independent directors.

We have audited the accompanying consolidated balance sheets of Omnicom Group Inc. and subsidiaries (the “Company”) as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, [removed: 2017,] [added: 2018,] and the related notes and financial statement schedule II (collectively, the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Omnicom Group Inc. and subsidiaries as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, [removed: 2017,] [added: 2018,] in conformity with U.S. generally accepted accounting principles.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Those standards require that we plan and perform the [removed: audit] [added: audits] to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the [added: overall] presentation of the consolidated financial statements.

| | [added: 2018 | | | |] 2017 | | | | 2016 | | |

| Cash and cash equivalents | $ | [removed: 3,796.0] [added: 3,652.4] | | | $ | [removed: 3,002.2] [added: 3,796.0] | |

| Short-term investments, at cost | [removed: 0.4] [added: 5.5] | | | | [removed: 20.6] [added: 0.4] | | |

| Accounts receivable, net of allowance for doubtful accounts of [removed: $32.1] [added: $26.8] and [removed: $24.9] [added: $32.1] | [removed: 8,083.8] [added: 7,666.1] | | | | [removed: 7,510.8] [added: 8,083.8] | | |

| Work in process | [removed: 1,110.6] [added: 1,161.5] | | | | [removed: 1,125.4] [added: 1,110.6] | | |

| Other current assets | [removed: 1,125.2] [added: 1,241.4] | | | | [removed: 1,063.0] [added: 1,125.2] | | |

| Total Current Assets | [removed: 14,116.0] [added: 13,726.9] | | | | [removed: 12,722.0] [added: 14,116.0] | | |

| Property and Equipment at cost, less accumulated depreciation of [removed: $1,279.2] [added: $1,185.0] and [removed: $1,233.4] [added: $1,279.2] | [removed: 690.9] [added: 694.4] | | | | [removed: 674.8] [added: 690.9] | | |

| Equity Method Investments | [removed: 120.3] [added: 120.9] | | | | [removed: 120.4] [added: 120.3] | | |

| Goodwill | [removed: 9,337.5] [added: 9,384.3] | | | | [removed: 8,976.1] [added: 9,337.5] | | |

| Intangible Assets, net of accumulated amortization of [removed: $879.9] [added: $737.4] and [removed: $777.6] [added: $879.9] | [removed: 368.4] [added: 382.8] | | | | [removed: 427.4] [added: 368.4] | | |

| Other Assets | [removed: 298.1] [added: 307.7] | | | | [removed: 244.7] [added: 298.1] | | |

| TOTAL ASSETS | $ | [removed: 24,931.2] [added: 24,617.0] | | | $ | [removed: 23,165.4] [added: 24,931.2] | |

| Accounts payable | $ | [removed: 11,574.6] [added: 11,464.3] | | | $ | [removed: 10,476.7] [added: 11,574.6] | |

| Customer advances | [removed: 1,266.7] [added: 1,159.0] | | | | [removed: 1,186.6] [added: 1,266.7] | | |

| Current portion of debt | [removed: —] [added: 499.6] | | | | [removed: 0.1] [added: —] | | |

| Short-term debt | [removed: 11.8] [added: 8.1] | | | | [removed: 28.7] [added: 11.8] | | |

| /s/ RONNIE S. HAWKINS | Director | February 12, 2019 |

| Ronnie S. Hawkins | | |

February 12, 2019

| Salary and service costs | 11,306.1 | | | | 11,227.2 | | | | 11,419.0 | | |

| Net gain on disposition of subsidiaries | (178.4 | | ) | | — | | | | — | | |

| Cost of services | 12,437.3 | | | | 12,468.0 | | | | 12,649.6 | | |

| | 13,156.7 | | | | 13,189.8 | | | | 13,386.4 | | |

| Operating Profit | 2,133.5 | | | | 2,083.8 | | | | 2,030.5 | | |

| Interest Expense | 266.4 | | | | 248.6 | | | | 231.3 | | |

| Reclassification | 0.3 | | | | — | | | | — | | |

| Cumulative effect of accounting changes | | | | | | | | | | | | 23.6 | | | | | | | | | | | | 23.6 | | | | 0.4 | | | | 24.0 | | |

| Net income | | | | | | | | | | | | 1,326.4 | | | | | | | | | | | | 1,326.4 | | | | 114.1 | | | | 1,440.5 | | |

| Acquisition of noncontrolling interests | | | | | | | | (39.7 | | ) | | | | | | | | | | | | | | (39.7 | | ) | | (42.3 | | ) | | (82.0 | | ) |

| Balance as of December 31, 2018 | 297.2 | | | $ | 44.6 | | | $ | 728.8 | | | $ | 7,016.1 | | | $ | (1,228.5 | ) | | $ | (4,013.9 | ) | | $ | 2,547.1 | | | $ | 559.8 | | | $ | 3,106.9 | |

| Net income | $ | 1,440.5 | | | $ | 1,192.2 | | | $ | 1,246.7 | |

| Net gain from disposition of subsidiaries | (178.4 | | ) | | — | | | | — | | |

| Proceeds from disposition of subsidiaries | 308.4 | | | | — | | | | — | | |

| Proceeds from sale of investments and other | 15.9 | | | | 66.9 | | | | (7.3 | | ) |

Therefore, comparative prior periods have not been adjusted and continue to be reported under FASB ASC Topic 605, Revenue Recognition, or ASC 605.

Our policy for performance incentives (variable consideration) included in certain client contracts was required to be changed.

This change was the principal adjustment to our reported revenue and operating expenses included in the table below.

However, the change had no impact on operating profit.

Under ASC 606, performance incentives are now treated as variable consideration.

As a result of this change, we recorded a cumulative effect adjustment to increase opening retained earnings at January 1, 2018 by $19.5 million, to reflect the transition requirements of ASC 606.

The effect of this change on our financial position and cash flows was not material.

The impact of the adoption of ASC 606 on revenue, operating expenses and operating profit for the year ended December 31, 2018 was (in millions):

| | As Reported | | | | Adjustments | | | | Excluding Impact of Adoption of ASC 606 | | |

| Revenue | $ | 15,290.2 | | | $ | 146.1 | | | $ | 15,436.3 | |

| Operating Expenses | 13,156.7 | | | | 139.5 | | | | 13,296.2 | | |

| Operating Profit | 2,133.5 | | | | 6.6 | | | | 2,140.1 | | |

The impact of the adoption of ASC 606 on net income - Omnicom Group Inc., diluted net income per share - Omnicom Group Inc. and the unaudited consolidated financial statements was not material.

These investments are measured at cost, less any impairment, adjusted for observable price changes and, upon adoption, we elected to record our equity investments that do not have a readily determinable fair value using the alternative measurement method.

Effective January 1, 2018, we adopted ASU 2017-07, Compensation - Retirement Benefits, or ASU 2017-07.

ASU 2017-07 is applied retrospectively, and accordingly, for 2018, 2017 and 2016 we reclassified $24.5 million, $24.1 million and $21.6 million, respectively, from salary and service costs to interest expense, which increased operating profit, but had no effect on income before income taxes and income from equity method investments, net income - Omnicom Group Inc. or net income per share - Omnicom Group Inc.

We measure revenue by estimating the transaction price based on the consideration specified in the client arrangement.

Revenue is recognized as the performance obligations are satisfied.

Our revenue is primarily derived from the planning and execution of advertising communications and marketing services in the following fundamental disciplines: Advertising, which includes creative advertising services and strategic media planning and buying services, Customer Relationship Management or CRM, which includes CRM Consumer Experience and CRM Execution & Support, Public Relations and Healthcare Advertising.

Performance Obligations

In substantially all our disciplines, the performance obligation is to provide advisory and consulting services at an agreed-upon level of effort to accomplish the specified engagement.

Our client contracts are comprised of diverse arrangements involving fees based on any one or a combination of the following: an agreed fee or rate per hour for the level of effort expended by our employees; commissions based on the client’s spending for media purchased from third parties; qualitative or quantitative incentive provisions specified in the contract; and reimbursement for third-party costs that we are required to include in revenue when we control the vendor services related to these costs and we act as principal.

| | | |

| /s/ BRUCE CRAWFORD | Chairman and Director | February 15, 2018 |

| Bruce Crawford | | |

| /s/ JOHN R. MURPHY | Director | February 15, 2018 |

| John R. Murphy | | |

| /s/ JOHN R. PURCELL | Director | February 15, 2018 |

| John R. Purcell | | |

February 15, 2018

| Cost of services | 12,481.8 | | | | 12,671.2 | | | | 12,491.4 | | |

| | 13,213.9 | | | | 13,408.0 | | | | 13,214.3 | | |

| Operating Profit | 2,059.7 | | | | 2,008.9 | | | | 1,920.1 | | |

| Interest Expense | 224.5 | | | | 209.7 | | | | 181.1 | | |

| Balance as of December 31, 2014 | 397.2 | | | $ | 59.6 | | | $ | 818.6 | | | $ | 9,576.9 | | | $ | (618.2 | ) | | $ | (6,986.9 | ) | | $ | 2,850.0 | | | $ | 471.3 | | | $ | 3,321.3 | |

| Net income | | | | | | | | | | | | 1,093.9 | | | | | | | | | | | | 1,093.9 | | | | 109.5 | | | | 1,203.4 | | |

| Acquisition of noncontrolling interests | | | | | | | | (38.8 | | ) | | | | | | | | | | | | | | (38.8 | | ) | | (24.2 | | ) | | (63.0 | | ) |

| Sale (purchase) of investments, net | 66.9 | | | | (7.3 | | ) | | (0.5 | | ) |

In prior years, excess tax benefits and deficiencies were recorded in additional paid-in capital.

In 2017 we recognized an excess tax benefit of $20.8 million.

ASU 2016-09 requires that cash flows related to the excess tax benefits or deficiencies be classified in operating activities.

Accordingly, we retrospectively adjusted the statement of cash flows for 2016 and 2015 to conform to the current year presentation, resulting in an increase in net cash provided by operating activities and a corresponding decrease in net cash used in financing activities of $21.2 million and $27.2 million, respectively.

Further, ASU 2016-09 permits a policy election to either continue to estimate the number of awards that will be forfeited or to account for forfeitures as they occur.

We elected to account for forfeitures as they occur.

Accordingly, we recorded a cumulative catch-up adjustment to increase additional paid-in capital and reduce opening retained earnings by $4.5 million reflecting the estimate of unvested awards at December 31, 2016 that were not expected to vest.

On January 1, 2017, we adopted FASB ASU 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other than Inventory, or ASU 2016-16, which requires that the income tax effects of intra-entity transfers of assets other than inventory are recognized when the transfer occurs.

On December 31, 2017, we adopted FASB ASU 2017-12, Derivatives and Hedging, or ASU 2017-12, which amended the hedge accounting and recognition and presentation requirements.

The adoption of ASU 2017-12 did not have any impact on our existing hedges, financial position or results of operations.

We recognize revenue in accordance with FASB Accounting Standards Codification, or FASB ASC, Topic 605, Revenue Recognition, and applicable SEC Staff Accounting Bulletins.

Revenue is realized when the service is performed in accordance with the client arrangement and upon the completion of the earnings process.

Our primary client arrangements include: fixed fee contracts where revenue is recognized based on the level of effort completed to date, retainer agreements where revenue is recognized on a straight-line basis over the contract period, and media commissions where revenue is recognized when the media is run.

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, customer relationship management, public relations and healthcare.

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 of our revenue recognition policy 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, in certain markets, 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 the primary obligor.

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 may receive rebates or credits from certain vendors based on transactions entered into on behalf of clients.

See Note 20 for a discussion of the adoption of ASU 2014-09, Revenue from Contracts with Customers ASC Topic 606.