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

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

EXECUTIVE SUMMARY

Impact of the COVID-19 Pandemic on our Business

In 2020, the COVID-19 pandemic negatively impacted our business and results of operations. Efforts to mitigate the impact of the pandemic, including government actions to restrict travel, limit public gatherings, shelter-in-place orders and mandatory closures of businesses, resulted in many of our clients reducing or suspending their spending for our advertising, marketing and corporate communication services. As a result, for the year ended December 31, 2020, revenue decreased $1,782.6 million, or 11.9%, compared to 2019, primarily due to the impact of the COVID-19 pandemic. We anticipate that the negative impact from the pandemic on our revenue will continue through the first quarter of 2021 as compared to the prior year period. However, we expect organic revenue growth for the first half of 2021. The impact of the COVID-19 pandemic on our revenue has been, and may continue to be, material, depending on several factors, including the potential for prolonged or additional governmental actions to mitigate the effects of the pandemic. It is possible that the COVID-19 pandemic will accelerate certain trends that began pre-pandemic, particularly those relating to online commerce, brand building and how we deploy our personnel. We expect that some of these trends will benefit our agencies and provide revenue growth opportunities, as well as increasing flexibility with respect to our use of physical locations and our cost structure, but some trends may negatively affect us including potential disruption by new participants and technologies.

In response to the impact of the COVID-19 pandemic, in the second quarter of 2020, we took actions to align our cost structure and reduce our workforce and facility requirements and continued the review of businesses for disposal and assets for impairment. As a result, we recorded a pre-tax charge of $277.9 million, which is comprised of incremental severance of $150.0 million, real estate operating lease right-of-use, or ROU, asset and other asset impairment charges of $55.8 million, other exit costs of $47.0 million and dispositions and other charges of $25.1 million (see Note 1 to the consolidated financial statements). These actions reduced headcount by over 6,000 and reduced the related facility requirements, which should result in significant reductions in future operating expenses.

In addition, during 2020, we reduced salary and service costs by $162.6 million related to reimbursements and tax credits under government programs in several countries, including the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, in the United States, the Kurzarbeit program in Germany, and other government reimbursement programs in the U.K., France, Canada and other jurisdictions (see Note 1 to the consolidated financial statements). Further, in the fourth quarter of 2020, we recorded asset impairment charges of $55.8 million associated with underperforming assets, which is included in salary and service costs.

The COVID-19 pandemic negatively impacted most of our clients' businesses. As a result, clients have cut costs, including postponing or reducing marketing communication expenditures. While certain industries such as healthcare and pharmaceuticals, technology and telecommunications, financial services and consumer products have been less affected, as long as the COVID-19

pandemic remains a threat, global economic conditions continue to be volatile and such uncertainty cuts across all clients, industries and geographies. Overall, while we have a diversified portfolio of service offerings, clients and geographies, demand for our services can be expected to continue to be adversely affected as marketers reduce expenditures in the short term due to the uncertain impact of the pandemic on the global economy. We expect global economic performance and our performance to vary by geography until the impact of the COVID-19 pandemic on the global economy moderates.

Although we have experienced a decrease in our cash flow from operating activities, we took numerous proactive steps to strengthen our liquidity and financial position that are intended to mitigate the potential impact of the COVID-19 pandemic on our liquidity. In February 2020, we issued $600 million 2.45% Senior Notes due April 30, 2030, or the 2.45% Notes. In March 2020, the net proceeds from the issuance of the 2.45% Notes were used to redeem the remaining $600 million principal amount of our 4.45% Senior Notes due August 15, 2020, or the 2020 Notes. As a result, we have no notes maturing until May 2022. In April 2020, we issued $600 million of 4.20% Senior Notes due June 1, 2030, or the 4.20% Notes, and we entered into a new $400 million 364 day revolving credit facility, or the 364 Day Credit Facility. The 364 Day Credit Facility is in addition to our existing $2.5 billion multi-currency revolving credit facility, or Credit Facility, which we extended to mature in February 2025. In addition, in March 2020, we suspended our share repurchase activity.

Results of Operations for the Year Ended December 31, 2020

We are a strategic holding company providing advertising, marketing and corporate communications services to clients through our branded networks and agencies around the world. On a global, pan-regional and local basis, our networks and agencies provide a comprehensive range of services in the following fundamental disciplines: advertising, CRM, which includes CRM Consumer Experience and CRM Execution & Support, public relations and healthcare. Our business model was built and continues to evolve around our clients. While our networks and agencies operate under different names and frame their ideas in different disciplines, we organize our services around our clients. Our fundamental business principle is that our clients’ specific marketing requirements are the central focus of how we structure our service offerings and allocate our resources. This client-centric business model requires that multiple agencies within Omnicom collaborate in formal and informal virtual client networks utilizing our key client matrix organization structure. This collaboration allows us to cut across our internal organizational structures to execute our clients’ marketing requirements in a consistent and comprehensive manner. 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, we pursue selective acquisitions of complementary companies with strong entrepreneurial management teams that typically currently serve or could serve our existing clients.

As a leading global advertising, marketing and corporate communications company, we operate in all major markets and have a large and diverse client base. In 2020, our largest client represented 3.4% of revenue and our 100 largest clients, which represent many of the world's major marketers, represented approximately 54% of revenue. Our clients operate in virtually every sector of the global economy with no one industry representing more than 16% of our revenue in 2020. 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.

Global economic conditions have a direct impact on our business and financial performance. Adverse global or regional economic conditions, such as those currently arising from the COVID-19 pandemic, pose a risk that our clients may reduce, postpone or cancel spending on advertising, marketing and corporate communications services, which would reduce the demand for our services. 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. As a result of the impact related to the COVID-19 pandemic, we experienced a significant decline in our year-over-year organic revenue growth in the second, third and fourth quarters of 2020, which will likely continue at least through the first half of 2021. We anticipate that the negative impact from the pandemic on our revenue will continue through the first quarter of 2021 as compared to the prior year period. However, we expect organic revenue growth for the first half of 2021.

In 2020, revenue decreased $1,782.6 million, or 11.9%, compared to 2019. Changes in foreign exchange rates reduced revenue $60.9 million, or 0.4%, acquisition revenue, net of disposition revenue, reduced revenue $56.7 million, or 0.4%, reflecting the disposition of certain non-strategic businesses, and organic growth reduced revenue $1,665.0 million, or 11.1%.

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.

Beginning in March 2020 and continuing through the fourth quarter of 2020, our business experienced the effects from reductions in client spending due to the impact related to the COVID-19 pandemic. The spending reductions impacted all our businesses and markets. The most significantly impacted businesses were our advertising discipline, CRM Consumer Experience discipline, especially in our event marketing businesses, and CRM Execution & Support discipline, primarily in our field marketing and merchandising businesses. In North America, we experienced a decline in organic revenue attributable to the COVID-19 pandemic in all our disciplines, except healthcare. In Europe and the Middle East and Africa, almost all businesses

and regions experienced a decline in organic revenue resulting from the COVID-19 pandemic, which was marginally offset by an increase primarily from the strengthening of the British Pound and Euro against the U.S. Dollar. In addition, the economic and political conditions in the U.K. and the E.U. resulting from the implementation of the Brexit Agreement remain uncertain and could negatively impact our businesses in the U.K. and the E.U. In Latin America, the impact of the COVID-19 pandemic compounded by the continuing unstable economic and political conditions in Brazil resulted in negative organic growth in Brazil and throughout the region. In addition, the weakening of foreign currency exchange rates against the U.S. Dollar in all countries further contributed to the reduction in revenue in the region. In Asia-Pacific, almost all our businesses in the region experienced negative organic growth as a result of the COVID-19 pandemic, and the weakening of most currencies against the U.S. Dollar had a marginal negative impact on revenue. The economic and fiscal issues, including the impact related to the COVID-19 pandemic, facing the countries we operate in can be expected to continue to cause economic uncertainty and volatility; however, the impact on our business varies by country. We monitor economic conditions closely, as well as client revenue levels and other factors. In response to reductions in our revenue that are expected to continue at least through the first half of 2021, beginning in the second quarter of 2020, we took actions to align our cost structure with changes in client demand and manage our working capital. However, there can be no assurance whether, or to what extent, our efforts to mitigate any impact of the current and future adverse economic conditions, reductions in client revenue, changes in client creditworthiness and other developments will be effective or that additional actions will not be necessary.

Prior to the COVID-19 pandemic, certain business trends generally had a positive impact on our business and industry. These trends include 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. As clients increase their demands for marketing effectiveness and efficiency, they have made it a practice to consolidate their business within one service provider in the pursuit of a single engagement covering all consumer touch points. We have structured our business around these trends. While the current economic environment caused many clients to reduce spending for our services, certain trends such as increased spending on digital marketing platforms, and our key client matrix organization structure approach to collaboration and integration of our services and solutions provide a competitive advantage to our business. We expect this advantage to continue over the medium and long term.

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, among others, advertising, brand consulting, content marketing, corporate social responsibility consulting, crisis communications, custom publishing, data analytics, database management, digital/direct marketing, digital transformation, entertainment marketing, experiential marketing, field marketing, financial/corporate business-to-business advertising, graphic arts/digital imaging, healthcare marketing and communications, in-store design, interactive marketing, investor relations, marketing research, media planning and buying, merchandising and point of sale, mobile marketing, multi-cultural marketing, non-profit marketing, organizational communications, package design, product placement, promotional marketing, public affairs, public relations, retail marketing, sales support, search engine marketing, shopper marketing, social media marketing and sports and event marketing.

We continually evaluate our portfolio of businesses to identify areas for investment and acquisition opportunities, as well as to identify non-strategic or underperforming businesses for disposition. In the first and second quarters of 2019, we disposed of certain businesses, primarily in our CRM Execution & Support discipline.

Given our size and breadth, we manage our business by monitoring several financial indicators. The key indicators that we focus on are revenue and operating expenses. 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 acquisitions, net of dispositions, and growth from our largest clients. Operating expenses are comprised of cost of services, selling, general and administrative expenses, or SG&A, and depreciation and amortization.

In 2020, our revenue decreased 11.9% compared to 2019. Changes in foreign exchange rates reduced revenue 0.4%, acquisition revenue, net of disposition revenue, reduced revenue 0.4%, and organic growth decreased revenue 11.1% as all our markets were negatively impacted by the COVID-19 pandemic. The change in revenue across our principal regional markets were: North America decreased 10.6%, Europe decreased 12.2%, Asia-Pacific decreased 8.8% and Latin America decreased 31.7%. The change in revenue in 2020, compared to 2019, in our fundamental disciplines was: Advertising decreased 13.1%, CRM Consumer Experience decreased 15.6%, CRM Execution & Support decreased 16.7%, Public Relations decreased 5.6% and Healthcare increased 3.4%.

We measure cost of services in two distinct categories: salary and service costs and occupancy and other costs. As a service business, salary and service costs make up the significant portion of our operating expenses and substantially all these costs comprise the essential components directly linked to the delivery of our services. Salary and service costs include employee compensation and benefits, freelance labor and third-party service costs, which include third-party supplier costs and client-related travel costs. Occupancy and other costs consist of the indirect costs related to the delivery of our services, including office rent and other occupancy costs, equipment rent, technology costs, general office expenses and other expenses.

SG&A expenses, which decreased 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.

In 2020, salary and service costs, which tend to fluctuate with changes in revenue, decreased $1,399.4 million, or 12.8%, compared to 2019. Salary and related service costs in 2020 decreased $644.3 million, or 9.3%, year-over-year, primarily as a result of the severance and furlough actions we took in the second quarter of 2020. Also, during 2020, we reduced salary and service costs by $162.6 million related to reimbursements and tax credits under government programs in several countries (see Note 1 to the consolidated financial statements). Third-party service costs, which include expenses incurred with third-party vendors primarily when we act as a principal when performing services for our clients, decreased $755.1 million, or 18.5%, year-over-year reflecting the decrease in revenue and the impact of actions we took to align our cost structure. Occupancy and other costs, which are less directly linked to changes in revenue than salary and service costs, decreased $83.3 million, or 6.8%, in 2020 as compared to 2019. Operating profit decreased $523.5 million to $1,598.8 million. Operating margin decreased to 12.1% from 14.2%, and EBITA margin decreased to 12.8% from 14.8% year-over-year. In 2020, operating profit, operating margin and EBITA margin included a net decrease aggregating $171.1 million related to the COVID-19 repositioning costs recorded in the second quarter and asset impairment charges recorded in the fourth quarter, partially offset by an increase related to reimbursements and tax credits under government programs in several countries (see Note 1 to the consolidated financial statements).

In 2020, net interest expense increased $5.5 million year-over-year to $189.5 million. Interest expense on debt decreased $27.6 million to $199.6 million, primarily reflecting a reduction in interest expense from our refinancing activity at lower interest rates in the second half of 2019 and the first quarter of 2020, partially offset by a loss of $7.7 million on the early redemption of the remaining $600 million principal amount of the 2020 Notes in the first quarter of 2020 and the interest expense from the issuance of the 4.20% Notes in April 2020 (see Note 7 to the consolidated financial statements). Interest income in 2020 decreased $28.0 million year-over-year to $32.3 million primarily due to lower rates.

Our effective tax rate for 2020 increased year-over-year to 27.1% from 26.0%. The non-deductibility in certain jurisdictions of a portion of the COVID-19 repositioning costs recorded in the second quarter of 2020 had the effect of increasing our effective tax rate for 2020. This increase was substantially offset by a lower effective tax rate on our foreign earnings resulting from a change in legislation. In 2019, income tax expense was reduced by $10.8 million primarily from the net favorable settlements of uncertain tax positions in certain jurisdictions. After considering these items, our effective rate for 2020 would have approximated the rate for 2019.

Net income - Omnicom Group Inc. in 2020 decreased $393.7 million to $945.4 million from $1,339.1 million in 2019. The year-over-year decrease is due to the factors described above. Diluted net income per share - Omnicom Group Inc. decreased to $4.37 in 2020, compared to $6.06 in 2019, due to the factors described above, as well as the impact of the reduction in our weighted average common shares outstanding resulting from repurchases of our common stock through March 2020, net of shares issued for restricted stock awards, stock option exercises and the employee stock purchase plan during the year. As discussed above and in Note 1 to the consolidated financial statements, our results of operations for 2020 included COVID-19 repositioning costs and asset impairment charges, which were partially offset by an increase attributable to reimbursements and tax credits under government programs in several countries. The after-tax impact of these items on net income - Omnicom Group Inc. was $146.8 million.

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 than most of our accounting policies 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 2, for a more complete understanding of the critical accounting policies discussed below.

Estimates

We prepare our financial statements in conformity with U.S. GAAP and are required to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We use a fair value approach in testing goodwill for impairment and when evaluating our equity method investments to determine if an other-than-temporary impairment has occurred. Actual results could differ from those estimates and assumptions.

Acquisitions and Goodwill

The evaluation of potential acquisitions is based on various factors, including specialized know-how, reputation, geographic coverage, competitive position and service offerings of the target businesses, as well as our experience and judgment.

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 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 assets we acquire are intangible assets primarily consisting of the know-how of the personnel, which is treated as part of goodwill and is not required to be valued separately under U.S. GAAP. For each acquisition, we undertake a detailed review to identify other intangible assets that are required to be valued separately. 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 each fiscal year and whenever events or circumstances indicate the carrying value may not be recoverable. Under FASB ASC Topic 350, Intangibles - Goodwill and Other, 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 the goodwill impairment test. We performed the annual impairment test and compared the fair value of each of our reporting units to its respective carrying value, including goodwill. We identified our regional reporting units as components of our operating segments, which are our five global 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 key client matrix organization structure 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 in FASB ASC Topic 350. 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 occupancy and other 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 by multiple agencies in various regions as they work together to integrate the acquired agency into our virtual client network 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 discounted expected 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”) for each reporting unit.

At June 30, 2020 we adjusted our assumptions to reflect the economic conditions in light of the impact on our business related to the COVID-19 pandemic, including downward adjustment to our revenue and earnings assumptions, reducing our long-term growth rate and increasing the weighted average cost of capital, or WACC, for each reporting unit and limiting our estimate of our equity value to reflect the decline in our share price that occurred during the first half of 2020. In addition, the assumptions reflected the expected cost reductions from our severance and real estate facility repositioning actions (see Notes 1 and 11 to the consolidated financial statements).

The assumptions used for the long-term growth rate and WACC in our evaluations as of June 30, 2020 and 2019 were:


	2020	2019
Long-Term Growth Rate	3%	4%
WACC	10.6% - 10.8%	10.1% - 10.6%

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. For the past ten years, the average historical revenue growth rate of our reporting units and the Average Nominal GDP, or NGDP, growth of the countries comprising the major markets that account for substantially all of our revenue was approximately 4.2% and 4.3%, respectively. We considered this history when determining the long-term growth rates used in our annual impairment test at June 30, 2020 and lowered it to reflect the potential future effects of the unprecedented COVID-19 pandemic on the global economy, which are not reflected in the 10-year historical analysis. We believe marketing expenditures over the long term have a high correlation to NGDP. Based on our historical performance, we also believe that our long-term growth rate will exceed NGDP growth in the markets we operate in, which are similar across our reporting units. For our annual test as of June 30, 2020, we used an estimated long-term growth rate of 3.0%.

When performing the annual impairment test as of June 30, 2020 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 2020. In the first half of 2020, our revenue declined 11.7%, which excluded our net disposition activity and the impact from changes in foreign exchange rates. The COVID-19 pandemic significantly impacted the global economy. Government actions taken to mitigate the impact of the pandemic negatively impacted many of our clients' businesses, and in turn, clients have reduced their demand for our services. In addition, the assumptions reflected the expected cost reductions from our severance and real estate facility repositioning actions (see Notes 1 and 13 to the consolidated financial statements).

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

Based on the results of our impairment test, we concluded that our goodwill at June 30, 2020 was not impaired, because the fair value of each of our reporting units was in excess of its respective net book value. For our reporting units with negative book value, we concluded that the fair value of their total assets was in excess of book value. The minimum decline in fair value that one of our reporting units would need to experience in order to fail the goodwill impairment test was approximately 20%. Notwithstanding our belief that the assumptions we used for WACC and long-term growth rate in our impairment testing were 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, 2020 revealed that if the WACC increased by 1% and/or the long-term growth rate decreased by 1%, the fair value of each of our reporting units would continue to be in excess of its respective net book value and would pass the impairment test.

We will continue to perform our impairment test each year at June 30th unless events or circumstances trigger the need for an interim impairment test. There were no events through December 31, 2020 that would change our impairment assessment. 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 as of the valuation date. 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 significant. 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 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 condition. Additional information about acquisitions and goodwill appears in Notes 2, 5 and 6 to the consolidated financial statements.

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods or services (the performance obligation) in an amount that reflects the consideration we expect to receive in exchange for those goods or services (the transaction price). 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. Our client contracts are primarily fees for service on a rate per hour or per project basis. 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. 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. The transaction price of a contract is allocated to each distinct performance obligation based on its relative stand-alone selling price and is recognized as revenue when, or as, the customer receives the benefit of the performance obligation. Clients typically receive and consume the benefit of our services as they are performed. Substantially all our client contracts provide that we are compensated for services performed to date and allow for cancellation by either party on short notice, typically 90 days, without penalty.

Generally, our short-term contracts, which normally take 30 to 90 days to complete, are performed by a single agency and consist of a single performance obligation. As a result, we do not consider the underlying services as separate or distinct performance obligations because our services are highly interrelated, occur in close proximity, and the integration of the various components of a marketing message is essential to overall service. In certain of our long-term client contracts, which have a term of up to one year, the performance obligation is a stand-ready obligation, because we provide a constant level of similar services over the term of the contract. In other long-term contracts, when our services are not a stand-ready obligation, we consider our services distinct performance obligations and allocate the transaction price to each separate performance obligation based on its stand-alone selling price, including contracts for strategic media planning and buying services, which are considered to be multiple performance obligations, and we allocate the transaction price to each distinct service based on the staffing plan and the stand-alone selling price. In substantially all of our creative services contracts, we have distinct performance obligations for our services, including certain creative services contracts where we act as an agent and arrange, at the client’s direction, for third parties to perform studio production efforts.

Revenue Recognition Methods. A substantial portion of our revenue is recognized over time, as the services are performed, because the client receives and consumes the benefit of our performance throughout the contract period, or we create an asset with no alternative use and are contractually entitled to payment for our performance to date in the event the client terminates the contract for convenience. For these client contracts, other than when we have a stand-ready obligation to perform services, revenue is recognized over time using input measures that correspond to the level of staff effort expended to satisfy the performance obligation on a rate per hour or equivalent basis. For client contracts when we have a stand-ready obligation to perform services on an ongoing basis over the life of the contract, typically for periods up to one year, where the scope of these arrangements is broad and there are no significant gaps in performing the services, we recognize revenue using a time-based measure resulting in a straight-line revenue recognition. From time to time, there may be changes in the client service requirements during the term of a contract and the changes could be significant. These changes are typically negotiated as new contracts covering the additional requirements and the associated costs, as well as additional fees for the incremental work to be performed.

To a lesser extent, for certain other contracts where our performance obligations are satisfied in phases, we recognize revenue over time using certain output measures based on the measurement of the value transferred to the customer, including milestones achieved. Where the transaction price or a portion of the transaction price is derived from commissions based on a percentage of purchased media from third parties, the performance obligation is not satisfied until the media is run and we have an enforceable contract providing a right to payment. Accordingly, revenue for commissions is recognized at a point in time, typically when the media is run, including when it is not subject to cancellation by the client or media vendor.

Principal vs. Agent. In substantially all our businesses, we incur third-party costs on behalf of clients, including direct costs and incidental, or out-of-pocket costs. Third-party direct costs incurred in connection with the creation and delivery of advertising or marketing communication services include, among others: purchased media, studio production services, specialized talent, including artists and other freelance labor, event marketing supplies, materials and services, promotional items, market research and third-party data and other related expenditures. Out-of-pocket costs include, among others: transportation, hotel, meals and telecommunication charges incurred by us in the course of providing our services. Billings related to out-of-pocket costs are included in revenue since we control the goods or services prior to delivery to the client.

However, the inclusion of billings related to third-party direct costs in revenue depends on whether we act as a principal or as an agent in the client arrangement. In most of our businesses, including advertising, which also includes studio production efforts and media planning and buying services, public relations, healthcare advertising and most of our CRM Consumer Experience businesses, we act as an agent and arrange, at the client's direction, for third parties to perform certain services. In these cases, we do not control the goods or services prior to the transfer to the client. As a result, revenue is recorded net of these costs, equal to the amount retained for our fee or commission.

In certain businesses we may act as principal when contracting for third-party services on behalf of our clients. In our events business and most of our CRM Execution & Support businesses, including field marketing and certain specialty marketing businesses, we act as principal because we control the specified goods or services before they are transferred to the client and we are responsible for providing the specified goods or services, or we are responsible for directing and integrating third-party vendors to fulfill our performance obligation at the agreed upon contractual price. In such arrangements, we also take pricing risk under the terms of the client contract. In certain specialty media buying businesses, we act as principal when we control the buying process for the purchase of the media and contract directly with the media vendor. In these arrangements, we assume the pricing risk under the terms of the client contract. When we act as principal, we include billable amounts related to third-party costs in the transaction price and record revenue over time at the gross amount billed, including out-of-pocket costs, consistent with the manner that we recognize revenue for the underlying services contract. However, in media buying contracts where we act as principal, we recognize revenue at a point in time, typically when the media is run, including when it is not subject to cancellation by the client or media vendor.

Variable Consideration. Some of our client arrangements include variable consideration provisions, which include performance incentives, tiered commission structures and vendor rebates in certain markets outside of the United States. Variable consideration is estimated and included in total consideration at contract inception based on either the expected value method or the most likely outcome method. These estimates are based on historical award experience, anticipated performance and other factors known at the time. Performance incentives are typically recognized in revenue over time. Variable consideration for our media businesses in certain international markets includes rebate revenue and is recognized when it is probable that the media will be run, including when it is not subject to cancellation by the client. In addition, when we receive rebates or credits from vendors for transactions entered into on behalf of clients, they are remitted to the clients in accordance with contractual requirements or retained by us based on the terms of the client contract or local law. Amounts passed on to clients are recorded as a liability and amounts retained by us are recorded as revenue when earned, typically when the media is run.

NEW ACCOUNTING STANDARDS

See Note 22 to the consolidated financial statements for information on the adoption of new accounting standards and accounting standards not yet adopted.

RESULTS OF OPERATIONS - 2020 Compared to 2019 (in millions):


	Year Ended December 31,
	2020			2019
Revenue	$	13,171.1		$	14,953.7
Operating Expenses:
Salary and service costs	9,572.8			10,972.2
Occupancy and other costs	1,138.5			1,221.8
COVID-19 repositioning costs	277.9			—
Cost of services	10,989.2			12,194.0
Selling, general and administrative expenses	360.5			405.9
Depreciation and amortization	222.6			231.5
	11,572.3			12,831.4
Operating Profit	1,598.8			2,122.3
Operating Margin - %	12.1		%	14.2		%





Interest Expense	221.8			244.3
Interest Income	32.3			60.3
Income Before Income Taxes and Income (Loss) From Equity Method Investments	1,409.3			1,938.3


Income Tax Expense	381.7			504.4
Income (Loss) From Equity Method Investments	(6.8)			2.0
Net Income	1,020.8			1,435.9
Net Income Attributed To Noncontrolling Interests	75.4			96.8
Net Income - Omnicom Group Inc.	$	945.4		$	1,339.1

Non-GAAP Financial Measures

We use EBITA and EBITA Margin as additional operating performance measures that exclude the non-cash amortization expense of intangible assets, which primarily consists of amortization of intangible assets arising from acquisitions. We define EBITA as earnings before interest, taxes and amortization of intangible assets, and EBITA Margin as EBITA divided by revenue. EBITA and EBITA Margin are non-GAAP financial measures. We believe that EBITA and EBITA Margin are useful measures for investors to evaluate the performance of our business. 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.

The following table reconciles the U.S. GAAP financial measure of net income - Omnicom Group Inc. to EBITA and EBITA Margin for the periods presented (in millions):


	Year Ended December 31,
	2020			2019
Net Income - Omnicom Group Inc.	$	945.4		$	1,339.1
Net Income Attributed To Noncontrolling Interests	75.4			96.8
Net Income	1,020.8			1,435.9
Income (Loss) From Equity Method Investments	(6.8)			2.0
Income Tax Expense	381.7			504.4
Income Before Income Taxes and Income (Loss) From Equity Method Investments	1,409.3			1,938.3
Interest Expense	221.8			244.3
Interest Income	32.3			60.3
Operating Profit	1,598.8			2,122.3
Add back: Amortization of intangible assets	83.1			83.8
Earnings before interest, taxes and amortization of intangible assets (“EBITA”)	$	1,681.9		$	2,206.1
Revenue	$	13,171.1		$	14,953.7
EBITA	$	1,681.9		$	2,206.1
EBITA Margin - %	12.8		%	14.8		%

Revenue

Revenue for 2020 decreased $1,782.6 million, or 11.9%, compared to 2019. Changes in foreign exchange rates reduced revenue 0.4%, acquisition revenue, net of disposition revenue, reduced revenue 0.4% and negative organic growth decreased revenue 11.1% as all our geographic markets were negatively impacted by the COVID-19 pandemic (see Note 1 to the consolidated financial statements). The change in revenue across our principal regional markets were: North America decreased $901.7 million, Europe decreased $499.7 million, Asia-Pacific decreased $145.8 million and Latin America decreased $128.0 million. In North America, we experienced a decline in organic revenue attributable to the COVID-19 pandemic in all our disciplines, except healthcare. In Europe and the Middle East and Africa, almost all businesses and regions experienced a decline in organic revenue resulting from the COVID-19 pandemic, which was marginally offset by an increase primarily from the strengthening of the British Pound and Euro against the U.S. Dollar. In Latin America, the impact of the COVID-19 pandemic compounded by the continuing unstable economic and political conditions in Brazil resulted in negative organic growth in Brazil and throughout the region. In addition, the weakening of foreign currency exchange rates against the U.S. Dollar in all countries further contributed to the reduction in revenue in the region. In Asia-Pacific, almost all our businesses in the region experienced negative organic growth as a result of the COVID-19 pandemic, and the weakening of most currencies against the U.S. Dollar had a marginal negative impact on revenue.

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


	Total				Domestic				International
	$		%		$		%		$		%
December 31, 2019	$	14,953.7			$	8,033.0			$	6,920.7
Components of revenue change:
Foreign exchange rate impact	(60.9)		(0.4)	%	—		—	%	(60.9)		(0.9)	%
Acquisition revenue, net of disposition revenue	(56.7)		(0.4)	%	(36.8)		(0.5)	%	(19.9)		(0.3)	%
Organic growth	(1,665.0)		(11.1)	%	(810.1)		(10.1)	%	(854.9)		(12.4)	%
December 31, 2020	$	13,171.1	(11.9)	%	$	7,186.1	(10.5)	%	$	5,985.0	(13.5)	%

The components and percentages are calculated as follows:

The foreign exchange impact is calculated by translating the current period’s local currency revenue using the prior period average exchange rates to derive current period constant currency revenue (in this case $13,232.0 million for the Total column). The foreign exchange impact is the difference between the current period revenue in U.S. Dollars and the current period constant currency revenue ($13,171.1 million less $13,232.0 million for the Total column).
Acquisition revenue is calculated as if the acquisition occurred twelve months prior to the acquisition date by aggregating the comparable prior period revenue of acquisitions through the acquisition date. As a result, acquisition revenue excludes the positive or negative difference between our current period revenue subsequent to the acquisition date and the comparable prior period revenue and the positive or negative growth after the acquisition is attributed to organic growth. Disposition revenue is calculated as if the disposition occurred twelve months prior to the disposition date by aggregating the comparable prior period revenue of dispositions through the disposition date. The acquisition revenue and disposition revenue amounts are netted in the table.
Organic growth is calculated by subtracting the foreign exchange rate impact, and the acquisition revenue, net of disposition revenue 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 ($14,953.7 million for the Total column).

Changes in the value of foreign currencies against the U.S. Dollar affect our results of operations and financial position. For the most part, because the revenue and expense of our foreign operations are both denominated in the same local currency, the economic impact on operating margin is minimized. Assuming exchange rates at February 12, 2021 remain unchanged, we expect the impact of changes in foreign exchange rates to increase revenue between 2.5% and 3.0% in the first half of 2021, and by approximately 2.5% for the full year.

Revenue and organic growth in our principal regional markets were (in millions):


	Year Ended December 31,
	2020		2019		$ Change		% Organic Growth
Americas:
North America	$	7,577.1	$	8,478.8	$	(901.7)	(10.1)	%
Latin America	275.4		403.4		(128.0)		(15.1)	%
EMEA:
Europe	3,607.7		4,107.4		(499.7)		(12.4)	%
Middle East and Africa	207.2		314.6		(107.4)		(32.3)	%
Asia-Pacific	1,503.7		1,649.5		(145.8)		(8.5)	%
	$	13,171.1	$	14,953.7	$	(1,782.6)	(11.1)	%

Revenue in Europe, which includes our primary markets of the U.K. and the Euro Zone, decreased $499.7 million in 2020 compared to 2019. Revenue in the U.K., representing 9.7% of revenue, decreased $151.5 million. Revenue in Continental Europe, which comprises the Euro Zone and the other European countries, representing 17.7% of revenue, decreased $348.2 million. The decrease in revenue is due to negative organic growth resulting from the impact of the COVID-19 pandemic.

In the normal course of business, our agencies both gain and lose business from clients each year due to a variety of factors. In 2020, the reduction in spending by existing clients resulting from the COVID-19 pandemic offset the benefit from gains of new business. Under our client-centric approach, we seek to broaden our relationships with all of our clients. In 2020 and 2019, our largest client represented 3.4% and 3.0% of revenue, respectively. Our ten largest and 100 largest clients represented 20.8% and 54.0% of revenue for 2020, respectively, and 19.6% and 51.3% of revenue for 2019, respectively.

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 categories: advertising, CRM, which includes CRM Consumer Experience and CRM Execution & Support, public relations and healthcare.

All our business experienced the effects from client spending reductions related to the COVID-19 pandemic. The spending reductions impacted all our disciplines and markets. The most significantly impacted were our advertising discipline, our CRM Consumer Experience discipline, especially in our event marketing businesses, and our CRM Execution & Support discipline, primarily in our field marketing and merchandising businesses. Our Public Relations discipline was less significantly impacted, and our Healthcare discipline performed well. Revenue and organic growth by discipline were (in millions):


	Year Ended December 31,
	2020				2019				2020 vs. 2019		2020
	$		% of Revenue		$		% of Revenue		$ Change		% Organic Growth
Advertising	$	7,369.0	56.0	%	$	8,483.8	56.7	%	$	(1,114.8)	(12.2)	%
CRM Consumer Experience	2,175.7		16.5	%	2,577.9		17.2	%	(402.2)		(15.8)	%
CRM Execution & Support	1,133.5		8.6	%	1,361.2		9.1	%	(227.7)		(15.1)	%
Public Relations	1,301.8		9.9	%	1,378.9		9.3	%	(77.1)		(4.2)	%
Healthcare	1,191.1		9.0	%	1,151.9		7.7	%	39.2		3.3	%
	$	13,171.1			$	14,953.7			$	(1,782.6)	(11.1)	%

We provide services to clients that operate in various industry sectors. Revenue by sector was:


	Year Ended December 31,
	2020		2019
Food and Beverage	14	%	14	%
Consumer Products	8	%	9	%
Pharmaceuticals and Healthcare	16	%	14	%
Financial Services	8	%	8	%
Technology	9	%	7	%
Auto	10	%	10	%
Travel and Entertainment	7	%	9	%
Telecommunications	6	%	6	%
Retail	7	%	7	%
Services	2	%	2	%
Oil, Gas and Utilities	1	%	2	%
Not-for-Profit	1	%	1	%
Government	3	%	2	%
Education	1	%	1	%
Other	7	%	8	%
	100	%	100	%

Certain industry sectors have been negatively affected by the impact of the COVID-19 pandemic more significantly than others.

Operating Expenses

Operating expenses were (in millions):


	Year Ended December 31,
	2020				2019				2020 vs. 2019
	$		% of Revenue		$		% of Revenue		$ Change		% Change
Revenue	$	13,171.1			$	14,953.7			$	(1,782.6)	(11.9)	%
Operating Expenses:
Salary and service costs:
Salary and related service costs	6,250.9		47.5	%	6,895.2		46.1	%	(644.3)		(9.3)	%
Third-party service costs	3,321.9		25.2	%	4,077.0		27.3	%	(755.1)		(18.5)	%
	9,572.8		72.7	%	10,972.2		73.4	%	(1,399.4)		(12.8)	%
Occupancy and other costs	1,138.5		8.6	%	1,221.8		8.2	%	(83.3)		(6.8)	%
COVID-19 repositioning costs	277.9		2.1	%	—		—	%	277.9		—	%
Cost of services	10,989.2				12,194.0				(1,204.8)
Selling, general and administrative expenses	360.5		2.7	%	405.9		2.7	%	(45.4)		(11.2)	%
Depreciation and amortization	222.6		1.7	%	231.5		1.5	%	(8.9)		(3.8)	%
	11,572.3		87.9	%	12,831.4		85.8	%	(1,259.1)		(9.8)	%
Operating Profit	$	1,598.8	12.1	%	$	2,122.3	14.2	%	$	(523.5)	(24.7)	%

second quarter and asset impairment charges, which are included in salary and service costs, recorded in the fourth quarter, partially offset by an increase related to reimbursements and tax credits under government programs in several countries during the year (see Note 1 to the consolidated financial statements).

Net Interest Expense

Income Taxes

Net Income and Net Income Per Share - Omnicom Group Inc.

Net income - Omnicom Group Inc. in 2020 decreased $393.7 million to $945.4 million from $1,339.1 million in 2019. The year-over-year decrease is due to the factors described above. Diluted net income per share - Omnicom Group Inc. decreased to $4.37 in 2020, compared to $6.06 in 2019, due to the factors described above, as well as the impact of the reduction in our weighted average common shares outstanding resulting from repurchases of our common stock through March 2020, net of shares issued for restricted stock awards, stock option exercises and the employee stock purchase plan during the year. As discussed above and in Note 1 to the consolidated financial statements, our results of operations for 2020 included COVID-19 repositioning costs and asset impairment charges, which were partially offset by an increase attributable to reimbursements and tax credits under government programs in several countries. The after-tax affect of these items on net income - Omnicom Group Inc. was $146.8 million.

The impact on net income Omnicom Group Inc. of these actions was (in millions):


	COVID-19 Repositioning Costs		Impairment Charges - Underperforming Assets		Reimbursements and Tax Credits Under Government Programs		Total

















Increase (decrease) to income before income taxes	$	(277.9)	$	(55.8)	$	162.6	$	(171.1)
Increase (decrease) in income tax expense	(54.8)		(8.7)		39.2		(24.3)
Increase (decrease) in net income Omnicom Group Inc.	$	(223.1)	$	(47.1)	$	123.4	$	(146.8)

RESULTS OF OPERATIONS - 2019 Compared to 2018 (in millions):


	Year Ended December 31,
	2019			2018
Revenue	$	14,953.7		$	15,290.2
Operating Expenses:
Salary and service costs	10,972.2			11,306.1
Occupancy and other costs	1,221.8			1,309.6
Net gain on disposition of subsidiaries	—			(178.4)
Cost of services	12,194.0			12,437.3
Selling, general and administrative expenses	405.9			455.4
Depreciation and amortization	231.5			264.0
	12,831.4			13,156.7
Operating Profit	2,122.3			2,133.5
Operating Margin - %	14.2		%	14.0		%





Interest Expense	244.3			266.4
Interest Income	60.3			57.2
Income Before Income Taxes and Income From Equity Method Investments	1,938.3			1,924.3


Income Tax Expense	504.4			492.7
Income From Equity Method Investments	2.0			8.9
Net Income	1,435.9			1,440.5
Net Income Attributed To Noncontrolling Interests	96.8			114.1
Net Income - Omnicom Group Inc.	$	1,339.1		$	1,326.4

Our results for 2018 include the effect of the net gain on disposition of subsidiaries of $178.4 million and repositioning charges of $149.4 million, after the allocation of $6.9 million to noncontrolling interests, and the additional income tax expense of $3.9 million from the finalization of the provisional estimate of the effect of the Tax Cut and Jobs Act of 2017, or Tax Act, substantially offset by the impact of a lower tax rate on the net gain on disposition of subsidiaries. The following discussion of our results of operations compares 2019 to 2018 as reported and adjusted for the effects of these transactions. See page 24 for a reconciliation of the adjusted 2018 amounts.

Non-GAAP Financial Measures

The following table reconciles the U.S. GAAP financial measure of net income - Omnicom Group Inc. to EBITA and EBITA Margin for the periods presented (in millions):


	Year Ended December 31,
	2019			2018
Net Income - Omnicom Group Inc.	$	1,339.1		$	1,326.4
Net Income Attributed To Noncontrolling Interests	96.8			114.1
Net Income	1,435.9			1,440.5
Income From Equity Method Investments	2.0			8.9
Income Tax Expense	504.4			492.7
Income Before Income Taxes and Income From Equity Method Investments	1,938.3			1,924.3
Interest Expense	244.3			266.4
Interest Income	60.3			57.2
Operating Profit	2,122.3			2,133.5
Add back: Amortization of intangible assets	83.8			102.5
Earnings before interest, taxes and amortization of intangible assets (“EBITA”)	$	2,206.1		$	2,236.0
Revenue	$	14,953.7		$	15,290.2
EBITA	$	2,206.1		$	2,236.0
EBITA Margin - %	14.8		%	14.6		%

Revenue

In 2019, revenue decreased $336.5 million, or 2.2%, to $14,953.7 million from $15,290.2 million in 2018. Changes in foreign exchange rates reduced revenue $315.9 million, acquisition revenue, net of disposition revenue, reduced revenue $445.1 million, and organic growth increased revenue $424.5 million. The impact of changes in foreign exchange rates reduced revenue 2.1%, or $315.9 million, primarily resulting from the weakening of substantially all foreign currencies, especially the Euro, British Pound, Australian Dollar, Brazilian Real and Canadian Dollar against the U.S. Dollar.

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


	Total				Domestic				International
	$		%		$		%		$		%
December 31, 2018	$	15,290.2			$	7,999.8			$	7,290.4
Components of revenue change:
Foreign exchange rate impact	(315.9)		(2.1)	%	—		—	%	(315.9)		(4.3)	%
Acquisition revenue, net of disposition revenue	(445.1)		(2.9)	%	(180.6)		(2.3)	%	(264.5)		(3.6)	%
Organic growth	424.5		2.8	%	213.8		2.7	%	210.7		2.9	%
December 31, 2019	$	14,953.7	(2.2)	%	$	8,033.0	0.4	%	$	6,920.7	(5.1)	%

The components and percentages are calculated as follows:

The foreign exchange impact is calculated by translating the current period’s local currency revenue using the prior period average exchange rates to derive current period constant currency revenue (in this case $15,269.6 million for the Total column). The foreign exchange impact is the difference between the current period revenue in U.S. Dollars and the current period constant currency revenue ($14,953.7 million less $15,269.6 million for the Total column).
Acquisition revenue is calculated as if the acquisition occurred twelve months prior to the acquisition date by aggregating the comparable prior period revenue of acquisitions through the acquisition date. As a result, acquisition revenue excludes the positive or negative difference between our current period revenue subsequent to the acquisition date and the comparable prior period revenue and the positive or negative growth after the acquisition is attributed to organic growth. Disposition revenue is calculated as if the disposition occurred twelve months prior to the disposition date by aggregating the comparable prior period revenue of dispositions through the disposition date. The acquisition revenue and disposition revenue amounts are netted in the table.
Organic growth is calculated by subtracting the foreign exchange rate impact, and the acquisition revenue, net of disposition revenue 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 ($15,290.2 million for the Total column).

Revenue and organic growth in our principal regional markets were (in millions):


	Year Ended December 31,
	2019		2018		$ Change		% Organic Growth
Americas:
North America	$	8,478.8	$	8,442.5	$	36.3	2.8	%
Latin America	403.4		457.5		(54.1)		(0.2)	%
EMEA:
Europe	4,107.4		4,375.4		(268.0)		3.1	%
Middle East and Africa	314.6		304.4		10.2		6.5	%
Asia-Pacific	1,649.5		1,710.4		(60.9)		2.2	%
	$	14,953.7	$	15,290.2	$	(336.5)	2.8	%

Revenue in Europe, which includes our primary markets of the U.K. and the Euro Zone, decreased $268.0 million in 2019 as compared to the prior year. Revenue in the U.K., representing 9.6% of total revenue, decreased $23.7 million, primarily due to the weakening of the British Pound against the U.S. Dollar. Revenue in Continental Europe, which comprises the Euro Zone and the other European countries, representing 17.9% of total revenue, decreased $244.3 million, primarily due to disposition activity and the unfavorable impact from changes in foreign exchange rates.

In North America, improved organic growth in the United States and Canada was substantially offset by a decrease in revenue resulting from disposition activity in the United States and the weakening of the Canadian Dollar against the U.S. Dollar. Organic revenue growth in the United States was led by our advertising and media, CRM Consumer Experience and healthcare businesses, and was partially offset by a decrease in organic revenue growth primarily in our CRM Execution & Support businesses. In Europe, modest organic growth in the region, especially in the U.K. and Spain, was offset by the weakening of substantially all currencies in the region against the U.S. Dollar, disposition activity and negative performance in France. In Latin America, the weakening of currencies in the region against the U.S. Dollar and negative performance and disposition activity in Brazil offset modest organic growth in Chile and Mexico. In Asia-Pacific, organic growth in most countries in the region, especially Japan, New Zealand and India, was offset by the weakening of most currencies in the region against the U.S. Dollar, disposition activity and negative performance in China, which faced a difficult comparison due to strong organic growth in 2018.

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 2019 was an overall gain in new business. Under our client-centric approach, we seek to broaden our relationships with all of our clients. In 2019 and 2018, our largest client represented 3.0% of revenue. Our ten largest and 100 largest clients represented 19.6% and 51.3% of revenue in 2019, respectively, and 19.1% and 50.7% of revenue in 2018, respectively.

Revenue and organic growth by discipline were (in millions):


	Year Ended December 31,
	2019				2018				2019 vs. 2018		2019
	$		% of Revenue		$		% of Revenue		$ Change		% Organic Growth
Advertising	$	8,451.7	56.5	%	$	8,281.0	54.2	%	$	170.7	4.5	%
CRM Consumer Experience	2,610.0		17.5	%	2,629.6		17.1	%	(19.6)		1.6	%
CRM Execution & Support	1,361.2		9.1	%	1,891.6		12.4	%	(530.4)		(3.2)	%
Public Relations	1,378.9		9.2	%	1,435.1		9.4	%	(56.2)		(2.0)	%
Healthcare	1,151.9		7.7	%	1,052.9		6.9	%	99.0		9.5	%
	$	14,953.7			$	15,290.2			$	(336.5)	2.8	%

We provide services to clients that operate in various industry sectors. Revenue by sector was:


	Year Ended December 31,
	2019		2018
Food and Beverage	14	%	14	%
Consumer Products	9	%	9	%
Pharmaceuticals and Health Care	14	%	14	%
Financial Services	8	%	8	%
Technology	7	%	8	%
Auto	10	%	10	%
Travel and Entertainment	9	%	8	%
Telecommunications	6	%	5	%
Retail	7	%	8	%
Services	2	%	2	%
Oil, Gas and Utilities	2	%	2	%
Not-for-Profit	1	%	2	%
Government	2	%	2	%
Education	1	%	—	%
Other	8	%	8	%
	100	%	100	%

Operating Expenses

Operating expenses for 2019 compared to 2018 were (in millions):


	Year Ended December 31,
	2019				2018				2019 vs. 2018
	$		% of Revenue		$		% of Revenue		$ Change		% Change
Revenue	$	14,953.7			$	15,290.2			$	(336.5)	(2.2)	%
Operating Expenses:
Salary and service costs:
Salary and service costs	6,895.2		46.1	%	7,127.1		46.6	%	(231.9)		(3.3)	%
Third-party service costs	4,077.0		27.3	%	4,179.0		27.3	%	(102.0)		(2.4)	%
	10,972.2		73.4	%	11,306.1		73.9	%	(333.9)		(3.0)	%
Occupancy and other costs	1,221.8		8.2	%	1,309.6		8.6	%	(87.8)		(6.7)	%
Net gain on disposition of subsidiaries	—		—	%	(178.4)		(1.2)	%	178.4
Cost of services	12,194.0				12,437.3				(243.3)
Selling, general and administrative expenses	405.9		2.7	%	455.4		3.0	%	(49.5)		(10.9)	%
Depreciation and amortization	231.5		1.5	%	264.0		1.7	%	(32.5)		(12.3)	%
	12,831.4		85.8	%	13,156.7		86.0	%	(325.3)		(2.5)	%
Operating Profit	$	2,122.3	14.2	%	$	2,133.5	14.0	%	$	(11.2)	(0.5)	%

Operating expenses in 2019 decreased $325.3 million, or 2.5%, year-over-year, primarily as a result of our disposition activity in 2019 and 2018, and the weakening of substantially all foreign currencies against the U.S. Dollar. Operating expenses for 2018 also included a net reduction of $29.0 million, comprised of a $178.4 million reduction for the impact of the net gain on disposition of subsidiaries, partially offset by an increase in operating expenses of $149.4 million for repositioning charges, which included $73.7 million in salary and service costs for incremental severance and $73.5 million in occupancy and other costs for office lease termination and consolidation. Salary and service costs, which tend to fluctuate with changes in revenue, decreased $333.9 million, or 3.0%, in 2019 compared to 2018 due to our disposition activity in 2019 and 2018, as well as the incremental severance charge of $73.7 million recorded in 2018 that did not affect 2019. Occupancy and other costs, which are less directly linked to changes in revenue than salary and service costs, decreased $87.8 million, or 6.7%, in 2019 compared to 2018 due to our disposition activity in 2019 and 2018, and the office lease termination and consolidation charge of $73.5 million recorded in 2018 that did not affect 2019. Operating margin increased 0.2% to 14.2% year-over-year and EBITA margin increased 0.2% year-over-year to 14.8%. The net decrease in operating expenses of $29.0 million in 2018 related to the net gain on disposition of subsidiaries partially offset by the charges for the repositioning actions, increased both operating margin and EBITA margin for 2018 by 0.2%. Adjusting for the net decrease of $29.0 million in 2018 in operating expenses, Non-GAAP operating margin for 2019 increased to 14.2% from 13.8% in 2018 and adjusted EBITA margin for 2019 increased to 14.8% from 14.4% in 2018. The year-over-year increase primarily reflects a change in the mix of our business during the current period, including the positive effects following the disposition of underperforming businesses in the current and prior year and our repositioning activity in the third quarter of 2018, as well as our ongoing efforts to manage our cost structure and increase the efficiency of the operations of our agencies.

Net Interest Expense

In 2019, net interest expense decreased $25.2 million year-over-year to $184.0 million. In 2019, interest expense on debt decreased $14.7 million to $227.2 million, primarily reflecting a reduction in interest expense from refinancing activity in the third quarter of 2019 at lower interest rates, including the maturity and retirement of the 2019 Notes and the settlement of the outstanding fixed-to-floating interest rate swaps, partially offset by a loss on the partial redemption of the 2020 Notes and the issuance of the Euro Notes (see Note 7 to the consolidated financial statements). Interest income in 2019 increased $3.1 million year-over-year to $60.3 million due to higher cash balances at our treasury centers.

Income Taxes

Our effective tax rate for 2019 increased slightly year-over-year to 26.0% from 25.6% in 2018. The effective tax rate for 2019 includes a reduction of $10.8 million primarily from the net favorable settlement of uncertain tax positions in the second quarter of 2019. The effective tax rate for 2018 reflects a net increase of $3.9 million related to an increase in income tax expense for an adjustment to the provisional amounts related to the Tax Act, substantially offset by the impact of a lower tax rate on the net gain on disposition of subsidiaries.

Net Income and Net Income Per Share - Omnicom Group Inc.

Net income - Omnicom Group Inc. in 2019 increased, due to the factors described above, $12.7 million, or 1.0%, to $1,339.1 million from $1,326.4 million in 2018. The net gain on disposition of subsidiaries and repositioning charges, after the allocated 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. in 2018 by $18.2 million. Diluted net income per share - Omnicom Group Inc. increased 3.9% to $6.06 in 2019, compared to $5.83 in 2018, due to the factors described above, as well as 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 awards, stock option exercises and the employee stock purchase plan. The net gain on disposition of subsidiaries and repositioning charges 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. in 2018 by $0.08, and Non-GAAP diluted net income per share - Omnicom Group Inc. increased 5.4% in 2019 compared to 2018 adjusted for these items.

Reconciliation of Non-GAAP Financial Measures

Non-GAAP operating profit, adjusted EBITA, Non-GAAP net income – Omnicom Group Inc., and Non-GAAP diluted net income per share – Omnicom Group Inc. are Non-GAAP financial measures which adjusts the 2018 financial measures for the impact of the net gain on disposition of subsidiaries of $178.4 million and repositioning charges of $149.4 million, a net increase of $3.9 million in income tax expense, and an allocation of $6.9 million to noncontrolling interests for these items. Accordingly, when comparing operating profit, EBITA, net income - Omnicom Group Inc. and diluted net income per share - Omnicom Group Inc. for 2019 to 2018, we also present the 2018 reported amounts and EBITA on page 14 adjusted for the effects of these transactions. We believe these Non-GAAP measures aid investors by providing additional insight into our operational performance and help clarify trends affecting our business. For comparability of reporting, management considers Non-GAAP measures in conjunction with GAAP financial results in evaluating business performance. These Non-GAAP financial measures presented should not be considered a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.

The following table reconciles our financial results presented above to the Non-GAAP Financial Measures (in millions, except per share amounts):


	Year Ended December 31,
	2019		2018
Non-GAAP operating profit and adjusted EBITA:
Net Income - Omnicom Group Inc.	$	1,339.1	$	1,326.4
Net Income Attributed To Noncontrolling Interests	96.8		114.1
Net Income	1,435.9		1,440.5
Income From Equity Method Investments	2.0		8.9
Income Tax Expense	504.4		492.7
Income Before Income Taxes and Income From Equity Method Investments	1,938.3		1,924.3
Interest Expense	244.3		266.4
Interest Income	60.3		57.2
Operating profit	2,122.3		2,133.5
Net gain on disposition of subsidiaries	—		(178.4)
Repositioning charges	—		149.4
Non-GAAP operating profit	2,122.3		2,104.5
Add back: Amortization of intangible assets	83.8		102.5
Adjusted EBITA	$	2,206.1	$	2,207.0
Non-GAAP net income - Omnicom Group Inc. and Non-GAAP diluted net income per share Omnicom Group Inc.:
Net income - Omnicom Group Inc.	$	1,339.1	$	1,326.4
Net pre-tax gain on disposition of subsidiaries and repositioning actions	—		(29.0)
Net income tax benefit of gain on disposition of subsidiaries and repositioning actions	—		(25.0)
Allocation to noncontrolling interests	—		6.9
Net increase in tax expense related to the Tax Act	—		28.9
Non-GAAP net income - Omnicom Group Inc.	$	1,339.1	$	1,308.2

Diluted Net Income Per Share - Omnicom Group Inc.	$	6.06	$	5.83
Net gain on disposition of subsidiaries, repositioning actions and impact of Tax Act	—		(0.08)
Non-GAAP diluted net income per share - Omnicom Group Inc.	$	6.06	$	5.75

Weighted average shares	220.9		227.6

LIQUIDITY AND CAPITAL RESOURCES

Although we experienced a decrease in our cash flow from operations, we took numerous proactive steps to strengthen our liquidity and financial position that are intended to mitigate the impact of the COVID-19 pandemic on our liquidity. In February 2020, we issued $600 million of the 2.45% Notes. In March 2020, the net proceeds from the issuance of the 2.45% Notes were used to redeem the remaining $600 million principal amount of the 2020 Notes. As a result, we have no notes maturing until May 2022. In April 2020, we issued $600 million of the 4.20% Notes, and we entered into the $400 million 364 Day Credit facility maturing on April 2, 2021. The 364 Day Credit Facility is in addition to our existing $2.5 billion Credit Facility. Additionally, in March 2020, we suspended our share repurchase activity.

Cash Sources and Requirements

Our primary liquidity sources are our operating cash flow and cash and cash equivalents. Additional liquidity sources include our $2.5 billion Credit Facility maturing on February 14, 2025, the $400 million 364 Day Credit Facility maturing on April 2, 2021, the uncommitted credit lines aggregating $1.1 billion, the ability to issue up to $2 billion of commercial paper and access the capital markets. Our liquidity funds our non-discretionary cash requirements and our discretionary spending.

Borrowings under our credit facilities may use LIBOR as the benchmark interest rate. The LIBOR benchmark rate is expected to be phased out by the end of June 2023. We do not expect that the discontinuation of the LIBOR rate will have a material impact on our liquidity or results of operations.

Working capital is our principal non-discretionary funding requirement. In addition, we have contractual obligations related

to our long-term debt (principal and interest payments), recurring business operations, primarily related to lease obligations, and

contingent purchase price obligations (earn-outs) from acquisitions. Our principal discretionary cash spending includes dividend

payments to common shareholders, capital expenditures, strategic acquisitions and repurchases of our common stock. Our typical working capital cycle results in a short-term borrowing requirement that normally peaks during the second quarter of the year due to the timing of payments for incentive compensation, income taxes and contingent purchase price obligations.

Cash and cash equivalents increased $1,294.8 million from December 31, 2019. The components of the increase, including the net increase from our refinancing activities, were (in millions):


Sources
Cash flow from operations			$	1,724.6
Less: Increase in operating capital			(30.9)
Principal cash sources			1,693.7
Uses
Capital expenditures	$	(75.4)
Dividends paid to common shareholders	(562.7)
Dividends paid to noncontrolling interest shareholders	(95.5)
Acquisition payments, including payment of contingent purchase price obligations and acquisition of additional noncontrolling interests, net of proceeds from sale of investments	(117.4)
Repurchases of common stock, net of proceeds from stock plans	(217.9)
Principal cash uses			(1,068.9)
Principal cash sources in excess of principal cash uses			624.8
Effect of foreign exchange rate changes on cash and cash equivalents			114.7
Other net financing and investing activities			524.4
Increase in operating capital			30.9
Increase in cash and cash equivalents			$	1,294.8

Principal cash sources and principal cash uses are Non-GAAP liquidity 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 consolidated statement of cash flows. We believe that this presentation is meaningful to understand the primary sources and uses of our cash flow and the effect on our cash and cash equivalents. Non-GAAP liquidity measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with U.S. GAAP. Non-GAAP liquidity 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.

At December 31, 2020, we have the following contractual obligations:

Principal payments on long-term debt of $5.8 billion, of which $1.25 billion is due in 2022 and $750 million in due in 2024 (see Note 7 to the consolidated financial statements). Depending on the conditions in the credit markets we may refinance this debt, or we may use cash from operations, including temporally accessing our Credit Facility, to repay this debt.
Interest payments on long-term debt due within the next five years aggregate $684.1 million, of which $176.4 million is payable in 2021.
The liability for minimum lease payments for operating leases and finance leases due within the next five years aggregate $1.2 billion, of which $363.5 million is due in 2021 (see Note 16 to the consolidated financial statements).
At December 31, 2020, the obligation for our defined benefit pension plans was $309.3 million and the liability for our postemployment arrangements was $164.6 million. In 2020, we contributed $9.1 million to our defined benefit plans and paid $8.7 million for our postemployment arrangements. We do not expect these payments to increase significantly in 2021 (see Note 12 to the consolidated financial statements).
The liability of contingent purchase price payments (earn-outs) at December 31, 2020, was $71.9 million, of which $32.1 million is payable in 2021 (see Note 5 to the consolidated financial statements).
The liability for the transition tax on accumulated foreign earnings due in the next five years is $105.6 million, of which $11.6 million is payable in 2021 (see Note 11 to the consolidated financial statements).

Based on past performance and current expectations, we believe that our operating cash flow will be sufficient to meet our non-discretionary cash requirements for the next twelve months.

Cash Management

Our regional treasury centers in North America, Europe and Asia manage our cash and liquidity. Each day, operations with excess funds invest those funds with their regional treasury center. Likewise, operations that require funds borrow from their regional treasury center. Treasury centers with excess cash invest on a short-term basis with third parties, generally with maturities ranging from overnight to less than 90 days. Certain treasury centers have notional pooling arrangements that are used to manage their cash and set-off foreign exchange imbalances. The arrangements require each treasury center to have its own notional pool account and to maintain a notional positive account balance. Additionally, under the terms of the arrangement, set-off of foreign exchange positions are limited to the long and short positions within their own account. To the extent that our treasury centers require liquidity, they have the ability to issue up to a total of $2 billion of U.S. Dollar-denominated commercial paper or borrow under the Credit Facility, 364 Day Credit Facility, or the uncommitted credit lines. This process enables us to manage our debt more efficiently and utilize our cash more effectively, as well as manage our risk to foreign exchange rate imbalances. 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 credit lines. We have a policy governing counterparty credit risk with financial institutions that hold our cash and cash equivalents and we have deposit limits for each institution. In countries where we conduct treasury operations, generally the counterparties are either branches or subsidiaries of institutions that are party to the Credit Facility. These institutions generally have credit ratings equal to or better than our credit ratings. In countries where we do not conduct treasury operations, all cash and cash equivalents are held by counterparties that meet specific minimum credit standards.

At December 31, 2020, our foreign subsidiaries held approximately $2.3 billion of our total cash and cash equivalents of $5.6 billion. Most of the cash is available to us, net of any foreign withholding taxes payable upon repatriation to the United States.

At December 31, 2020, our net debt position, which we define as total debt, including short-term debt, less cash and cash equivalents and short-term investments decreased $624.4 million as compared to December 31, 2019. The decrease in net debt primarily resulted from the excess of principal cash sources over principal cash uses of $624.8 million.

The components of net debt were (in millions):


	December 31,
	2020		2019
Short-term debt	$	3.9	$	10.1
Long-term debt, including current portion	5,807.3		5,134.3
Total debt	5,811.2		5,144.4
Cash and cash equivalents and short-term investments	5,600.5		4,309.3
Net debt	$	210.7	$	835.1

Net debt is a Non-GAAP liquidity measure. This presentation, together with the comparable U.S. GAAP liquidity measures, reflects one of the key metrics used by us to assess our cash management. Non-GAAP liquidity measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with U.S. GAAP. Non-GAAP liquidity measures as reported by us may not be comparable to similarly titled amounts reported by other companies.

Debt Instruments and Related Covenants

On February 19, 2020, we issued $600 million of the 2.45% Notes. The net proceeds from the issuance, after deducting the underwriting discount and offering expenses, were $592.6 million and were used to redeem the remaining $600 million principal amount of the 2020 Notes on March 23, 2020. In connection with the redemption, we recorded a loss on extinguishment of $7.7 million in interest expense. Following the redemption, there were no 2020 Notes outstanding.

On April 1, 2020, in response to the potential effects on market liquidity arising from the COVID-19 pandemic, we issued $600 million of the 4.20% Notes. The net proceeds from the issuance, after deducting the underwriting discount and offering expenses, were $592.5 million and were used for general corporate purposes, which included working capital expenditures, fixed asset expenditures and repayment of commercial paper and short-term debt.

The 2.45% Notes and the 4.20% Notes are senior unsecured obligations of Omnicom that rank equal in right of payment with all existing and future unsecured senior indebtedness.

Omnicom and its wholly owned finance subsidiary, Omnicom Capital Inc., or OCI, are co-obligors under the senior notes due 2022, 2024 and 2026. These notes are a joint and several liability of Omnicom and OCI, and Omnicom unconditionally guarantees OCI’s obligations with respect to the notes. OCI provides funding for our operations by incurring debt and lending the proceeds to our operating subsidiaries. OCI’s assets primarily 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 Omnicom to obtain funds from our subsidiaries through dividends, loans or advances. Such notes are senior unsecured obligations that rank equal in right of payment with all existing and future unsecured senior indebtedness.

Omnicom and OCI have, jointly and severally, fully and unconditionally guaranteed OFHP’s obligations with respect to the Euro denominated notes due 2027 and 2031. OFHP’s assets consist of its investments in several wholly owned finance companies that function as treasury centers that provide funding for various operating companies in Europe, Brazil, Australia and other countries in the Asia-Pacific region. The finance companies’ assets consist of cash and cash equivalents and intercompany loans that they make or have made to the operating companies in their respective regions and the related interest receivable. There are no restrictions on the ability of Omnicom, OCI or OFHP to obtain funds from their subsidiaries through dividends, loans or advances. The Euro denominated notes and the related guarantees are senior unsecured obligations that rank equal in right of payment with all existing and future unsecured senior indebtedness of OFHP and each of Omnicom and OCI, respectively.

The Credit Facility and the 364 Day Credit Facility each contain a financial covenant that requires us to maintain a Leverage Ratio of consolidated indebtedness to consolidated EBITDA (earnings before interest, taxes, depreciation, amortization and non-cash charges) of no more than 3.5 times for the most recently ended 12-month period. On October 26, 2020, we amended the Credit Facility and the 364 Day Credit Facility to provide additional flexibility with respect to the Leverage Ratio covenant. The amendments increase the maximum Leverage Ratio to 4.0 times through December 31, 2021 for the Credit Agreement and to 4.0 times through the maturity for the 364 Day Credit Facility. At December 31, 2020, we were in compliance with these covenants as our Leverage Ratio was 3.0 times. The Credit Facility and the 364 Day Credit Facility do not limit our ability to declare or pay dividends or repurchase our common stock.

At December 31, 2020, our long-term and short-term debt was rated BBB+ and A2 by S&P and Baa1 and P2 by Moody's. Our access to the commercial paper market and the cost of these borrowings are affected by market conditions and our credit ratings. Our long-term debt, Credit Facility and the 364 Day Credit Facility do not contain provisions that require acceleration of cash payments in the event of a downgrade in our credit ratings.

Credit Markets and Availability of Credit

In light of the uncertainty of future economic conditions, we will continue to take actions available to us to respond to changing economic conditions, and we will continue to actively manage our discretionary expenditures. We have not repurchased any of our common stock since March 13, 2020, and we do not plan to resume our repurchases until we believe economic conditions have begun to stabilize. We will continue to monitor and manage the level of credit made available to our clients. We believe that these actions, in addition to the availability of our Credit Facility and 364 Day Credit Facility, are sufficient to fund our near-term working capital needs and our discretionary spending. For additional information about our credit facilities, see Note 7 to the consolidated financial statements.

We have typically funded our day-to-day liquidity by issuing commercial paper. In the third and fourth quarters of 2020, we reduced our commercial paper issuances as compared to the prior year period primarily as a result of the issuance of the 4.20% Notes in April 2020. In 2019, we issued short-term debt in a private placement to reduce our commercial paper issuances. This short-term debt was redeemed in the third quarter of 2019. Additional liquidity sources include our Credit Facility, 364 Day Credit Facility or the uncommitted credit lines. At December 31, 2020, there were no outstanding commercial paper issuances or borrowings under the Credit Facility, the 364 Day Credit Facility or the uncommitted credit lines.

Commercial paper activity was (dollars in millions):


	Year Ended December 31,
	2020			2019			2018
Average amount outstanding during the year	$	50.1		$	272.3		$	411.7
Maximum amount outstanding during the year	$	401.2		$	825.0		$	1,218.7
Average days outstanding	4.6			4.0			5.7
Weighted average interest rate	1.52		%	2.40		%	2.19		%

We expect to continue issuing commercial paper to fund our day-to-day liquidity. However, disruptions in the credit markets may lead to periods of illiquidity in the commercial paper market and higher credit spreads. To mitigate any disruption in the credit markets and to fund our liquidity, we may borrow under the Credit Facility, 364 Day Credit Facility or the uncommitted credit lines or access the capital markets if favorable conditions exist. We will continue to monitor closely our liquidity and conditions in the credit markets. We cannot predict with any certainty the impact on us of any disruptions in the credit markets. In such circumstances, we may need to obtain additional financing to fund our day-to-day working capital requirements. Such additional financing may not be available on favorable terms, or at all.

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