宏盟集團 (OMC) 2002 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Omnicom Group conference call. At this time all participants are in a listen-only mode. Later we'll conduct a question-and-answer session. As a reminder, this conference call is being record.

I'll turn the conference all to Executive Vice President and Chief Financial Officer of Omnicom Group, Mr. Randall Weisenburger. Please go ahead.

Thank you. And thank you, everyone on the call for taking the time listen to our third-quarter 2002 earnings call.

We hope everyone has had a chance to review our earnings at least. In addition we've posted to our website both the press release, the slide presentation covering most of the information that we'll present this morning. This call is also simulcast and will be archived on our webcast.

We'll begin the call with brief remarks from John Wren regarding our performance and the state of the industry, and then following Johns' remarks, we'll review our financial performance for the quarter in more detail, and at the end, both John and I will be happy to take questions.

For everyone's convenience we'll plan to end the call before the market opens. Thank you for joining the call this morning.

Our performance this quarter and for the nine months is in line with our expectations.

We have stated in the past that the advertising and marketing communication industry has been difficult and our objectives have been to achieve 10% reported growth for the year. Those objectives remain unchanged.

Concerns regarding the state of the economy, the consumer oil prices and the potential war with Iraq have had a negative impact on worldwide client spending. Our response has been to manage through the period, and we'll continue to do so.

Our operating companies continue to perform very well despite these challenges. And our continued strength versus the rest of our sector can be attributed to the quality of our people and the stability of our management teams. They've done an outstanding job through this period in staying focused on our clients and the fundamentals of our business.

With that, since I can anticipate they'll be a lot of questions at the end, I'm going to turn this over to Randy, and we'll go through the numbers. Thank you.

Thank you, John.

We'll try to go through this quickly to save time for Q&A at the end.

Let's see, to summarize and to repeat what John said, we'd have to say that the overall environment remains difficult, however, in the quarter we did see some positive signs like some of the numbers reported by some of the larger media companies although those signs were not consistent across our businesses nor were they consistent really from week to week or market to market. Overall that may well be a sign that we've hit the bottom.

We did in the quarter continue to benefit from generally low interest rates and from positive FX rates from a weaker dollar but most importantly, as a company, we continued to benefit from the underlying strength of our agencies and the competitive drive of the employees.

As a result, while we wish it were easier, we are pleased to be able to report that the third quarter was Omnicom's 45th consecutive quarter of year-over-year growth in both revenues and earnings.

To summarize the numbers, revenues in the quarter increased $197 million to $1.768 billion. That was an increase of 12.6% over last year and net income increased 10.6% to $126.1 million.

For the nine months revenues increased 10% to $5.417 billion and net income increased 10% to $442 million. From an earnings per share basis, diluted earnings for the quarter increased 11.5% to 68 cents per share and for the nine months EPS increased almost 10% to $2.36 a share up from $2.15 last year. For this call I'll do the footnote that I normally do earlier. I'll do it right now. When we're comparing to 2001, we will adjust or we have adjusted all of the 2001 numbers as if FAS 142 was implemented at the beginning of 2001 to make the numbers comparable.

Analyzing our revenue performance for the quarter, organic growth in the quarter totaled $74.9 million, which accounted for 4.7% of our year-over-year growth. This is up from 1.5% organic growth reported last quarter and 3.7% reported in Q1.

While we're pleased that numbers are up from Q1 and Q2 we recognize that Q3 was our easiest comparable quarter that we're going to have this year. For the nine months, organic growth totaled $158.6 million accounting for 3.2% year-over-year growth. Incremental revenues in the quarter from acquisitions totaled $76.2 million adding about 4.9% growth and for the nine months acquisitions added $309.8 million or 6.3% growth. The substantial portion of the acquisition revenues actually came from acquisitions completed in the second half of last year.

For the second consecutive quarter foreign exchange had a positive impact on our reported revenue. This quarter that impact was $46.4 million or about 3%. For the nine months FX was also positive with an impact, a positive impact of $30.2 million or about .6%.

What's driving the foreign exchange is primarily the U.K. pound and the euro which both significantly strengthened versus the dollar this quarter and so far for the year. That impact was partially offset by negative movements or strengthening of the dollar versus the currencies in Latin America and South Africa.

Year-to-date it seems that the strengthening in the pound and the euro may have more to do with the turmoil in the U.S. equity markets than with the relative economic conditions of the markets.

Generally across our businesses we continue to experience weaker market conditions in the U.K. and Europe than the United States. That will be apparent as we go through our geographic mix of numbers.

On a constant currency basis revenue growth is approximately 9.5% for both the quarter and for the nine months. Revenue mix for the quarter. Marketing services accounted for approximately 57.6% of our revenue, traditional media advertising 42.4%. For the nine months, the mix was 56.6% marketing, services and 43.4% traditional media advertising.

As for the relative growth rates, marketing services increased 16.8% in the quarter and was up 11.4% year-to-date and traditional media advertising had growth of 7.3% in the quarter and was up 8.5% year-to-date.

Within marketing services the breakdown was 33.9%, CRM, 11.3% specialty communications and public relations was 12.4%. For the nine months, CRM was 31.6%, specialty communications 12.2% and PR is 12.8%.

As for the respective growth rates, CRM increasing 20.2% in the quarter, and was up 16.6% for the year. We had very steady performance across our CRM businesses. Specialty communications, driven by the strong performance of our healthcare agencies, and offset somewhat by weak conditions in recruitment and financial sectors increased 15.9% in the quarter and 18.9% for the nine months. And finally public relations, which despite being up 9% in the quarter continues to be a very difficult sector. Year-to-date PR was down 4.8%. It's our one sector that was down year-over-year.

Geographic mix for the business for the quarter, 56.1% was from the U.S., 43.9% International, this compares to 57.8% U.S. and 42.2% International for the nine months. While our U.S. business was stronger than our international business in the quarter, our international revenue mix benefited from the weaker dollar in the quarter. The U.K. and Euro markets combine for approximately 31.2% and 29.7% of our revenues for the quarter and the nine months respectively. In the United States total revenue growth for the quarter was $160.4 million, or 19.3%.

Incremental revenue from acquisitions totaled $56.8 million, that accounted for about 6.8% of our growth. In organic growth totaled $103.6 million, accounted for 12.5% that have growth.

For the nine months, total revenue growth in the U.S. was $478.1 million or about 18%, the incremental revenue from acquisitions totaled $246.4 million and organic growth totaled $231.7 million.

International revenues for the quarter had total reported growth of 5% or $37.1 million. Organic growth was negative 3.9% or $28.7 million. That was offset by incremental acquisition revenues of $19.4 million and a positive FX impact of $46.4 million.

For the nine month international revenue increased $20.4 million or .9%. That consisted of negative organic growth of $73.2 million or about 3.2% offset by incremental acquisition revenue of $63.4 million and a positive FX impact of $30.2 million.

Moving on to net new business wins, this quarter our streak of a billion dollar plus quarters ended, I have to say despite the continued efforts and focus of our agencies. They've done a very good job in a difficult environment. As a level of market activity turned down over the past several quarters we've been pretty consistent noting that, if any quarter we were hit with one or more sizable losses, and we're not able to achieve a comparable sizable wins, we would likely fall short of our internal target of $1 billion.

This quarter we had both the loss of Qwest which we actually won in Q2 and walked away from in Q3 and then on the last day of the quarter it was announced that we had lost the Gillette media pitch and, as a result, net new business wins for the quarter totaled only $876 million. Through the nine months, the total was still over $3 billion.

And although it doesn't keep our streak alive we're happy to say that Q4 is off to a very good start and, at least at this point, it would seem that we should break the billion dollar target in the fourth quarter and $4 billion for the year.

We mentioned a couple of the significant losses in the quarter. Some of the significant gains were Deloitte Consulting, "Long John" Silver, AARP, STAPLES, Hershey Bar and Lipton Tea or Unilever.

Moving down the P&L on the expense side. Our operating income for the quarter was $211.4 million and operating margins were about 12%. That was down about 110 basis points from last year and for the nine months operating income was $770.7 million with operating margins of about 14.2% which are down about 70 basis points from last year.

The year-over-year decline in margins is primarily due to greater than expected severance and other personnel costs resulting from our agencies's actions to actively manage their cost structures on a location by location basis as well as lingering excess infrastructure cost although we continue to make pretty good progress in managing our real estate costs. They have -- these costs have added up to year-to-date and in the quarter.

While we're not happy with the decline in margins, we do feel that our agencies in general have done a very good job in getting their cost structures in line with the current business levels and they appear to be very well positioned to take advantage of any improvements in the market or in new business wins going forward.

Net interest expense for the quarter was approximately $5.6 million, that's down from $18.1 million in the third quarter of last year and down from $5.9 million reported in Q2. For the nine months interest expense was $22.8 million down from $57.9 million last year, the year-over-year decrease in interest for the quarter was due in part to the conversion of - conversion to equity of our 2 1/4% convertible bond issue at the year of 2001. Second, generally lower short-term interest rates and the benefits we've achieved from our current convertible bond issues.

In the quarter we had very good cash management. We finished the quarter with our total debt levels down about $87 million from the end of Q2.

On the tax front our tax rate for the quarter was 33.9%. It was about 170 basis point improvement over last year and for nine months the rate was 36.3% which is about a 60 basis point improvement over last year.

As we've reported for some time, we continue to focus on improving our tax structure and our tax planning capabilities. The reduction in Q3 reflects the realization of some of the recently implemented international tax planning initiatives.

As a result of these initiatives, we expect our full year tax rate to be between 35.8% and 36% going forward. That's a pretty substantial reduction.

Finally on the EPS front. As previously mentioned diluted earnings for the quarter was 68 cents per share, that was a 11.5% increase from the 61 cents reported last year. The 2001 figure has been adjusted to reflect the elimination of goodwill amortization, what I mentioned earlier about FAS 142, and for the ninth nine months diluted earnings were $2.36, that was an increase of 9.8% over last year, again FAS 142 adjusted last year.

For the quarter the weighted average number of shares outstanding for the basic calculation was 185.9 million, and for the diluted calculation was approximately 186.7 million. For the nine months the weighted average number of shares outstanding for the basic calculation was 186.1 and for the diluted calculation, was approximately 187.9.

And with that, operator, we'll turn it over to Q&A. If you would be so kind.

Ladies and gentlemen, if you would like to ask a question please press the one on your touch-tone phone at this time. You'll hear a tone indicating you have been placed in queue and you may remove yourself from queue by pressing the pound key.

If you're using a speaker phone we ask that you please pick up your handset before pressing any numbers. Again if you have any questions please press the one on your touch-tone phone.

We'll first move to the line of Alexia Quadrani with Bear Stearns. Please go ahead.

Good morning. John, Randy, are you seeing any follow through from the strength that we're seeing in broadcast market [INAUDIBLE] TV? Meaning are the industries that have recently picked up their spending in TV, are they showing any interest in increasing their creative work?

The answer to your question is yes, although I wouldn't yet call it a trend. The - you know, you read all the press reports and the speculation of balance going on, and ultimately nothing can be further from the truth.

Clients are being forced to spend more money for the same 30, 60 second spots that they've had in the past. That came on pretty quickly in the quarter.

Clients will not run commercials that are five years old when they're paying for that kind of media, not in the near or long term. So you're seeing that move. I think you'll continue to see it going forward, and we're pretty confident of that. I don't think anything has been in place long enough for me to call it a trend though.

I have to caveat that, as a piece of our business, 44% of our business is traditional media advertising.

That's worldwide.

About 40% to 45% of that is domestic. Our business is also predominantly fee-based so there's not going to necessarily be an immediate movement in our revenues with the pickup in media spend.

Yeah, we're fortunate that it doesn't work the other way either. But I just always with a want to point that out as the question comes up pretty constantly.

On the cost side, are the layoffs still going on and should we expect to see the same type of severance expense depressing the margins year-over-year in the fourth quarter?

We continue adjust the business to what happens in the business. And it's done on a location by location basis.

To the extent that you're severing people outside of the United States, that tends to be more expensive because of social laws and customs. So we're not doing wholesale layoffs anywhere. There's nothing across-the-board going on. We're just adjusting to local market conditions as they occur.

The good news about the severance cost is, once we've incurred them, we've incurred them. And if we right size our business in a particular market, as Randy pointed out in the call, we're able to take advantage of the rebounds when they show up. So it's a constant monitoring process. There is no overall answer to your question.

And just one last question. In terms of your acquisition strategy. I think at one point Randy had mentioned the reasonable goal or reasonable sort of assumption for spending for 2002 would be around $600 million all inclusive and you seem to be trailing a little bit shy of that. Are you still planning on being active in terms of the acquisitions in the fourth quarter?

Yeah. We haven't changed our acquisition strategy.

I said $625 to $675 a just to make a slight correction to that and that's cash.

We obviously over a couple of summer months we're a bit preoccupied with some other distractions. So it may have, you know, slowed some -- slowed the timing down of some things so I would suspect that it was quite a few things on the plate for the fourth quarter. We'll see if we get them closed but I would think that that prediction is still --

It's an it's a comfortable estimate. Our acquisitions are -- we haven't altered our policy one bit really. I mean, we're making investments in companies where we share clients and where these companies can be integrated into our operations. And I suspect one impact this year more than any other is a bit on pricing is because of the overall adjustments in multiples. But nothing terribly inconsistent.

We're deliberately going through process and what's been true for every year is -- continues to be true. Very few of the companies we actually look at do we actually complete a transaction with. We're very disciplined about that. We continue to be so --

Okay. Thank you.

Thank you, Alexia.

We'll move next to the line of Eve Glass with Merrill Lynch. Your line is open.

Thanks. I was wondering if you could give us update on financing situation and if you've renegotiated any of your revolvers or extended them out?

We've begun been in the process of, yeah, you know, redoing or renewing our bank credit facilities.

I would suspect over the next, you know, two to four weeks we'll be able to make a definitive announcement about that process. So far it's gone, you know, very well. We have very strong relationships with our bank group. I don't see any issues with renewing those facilities.

This is being done really in the ordinary course while it's gotten some attention. This is the time that we had expected to do it. So, you know, things are moving as expected.

Can you give us an update on your thoughts about the convert and whether or not it'll get put or how you will refinance that?

Uhm, there's not a lot of update to say.

The converts are, you know, we think very good credit securities for Omnicom. They have some nice advantages to our shareholders.

It is our, you know, intention and expectation that we will be able to keep the converts outstanding. You know, that decision or what we have to do in order to keep the converts outstanding, you can't really make those decisions until you get a lot closer to the put date. But we're certainly monitoring it as we go.

We have also just as a backup, we have with the financing facilities that we have in place now and as well as the financing facilities that we expect to be putting in place, we will have more than adequate capacity to cash fund the put of one of those -- of the February convert if it is put. If we're unable to keep it outstanding.

And then basically we have six months to refinance that debt before the second convert is putable in August. So we're very comfortable with the way the capital structure is laid out. And, frankly, some of the concerns I think are overdone.

But obviously we're very focused on it because it is, you know, it's coming up within the next six months.

Okay. Thanks. And then on another front, regarding your margins, can you actually quantify severance this quarter versus last year and then were there any additional, say, legal expenses in the quarter that aided to the lower margins?

Basically there's a lot of excess cost in the quarter.

To give you an idea of the margin impact for the quarter, basically it was, the difference on the year-over-year basis in margins was about $20.6 million.

Given our overall, you know, cost structure and amount of labor content and real estate content in our cost structure, that's a relatively modest, you know, differential. Some of the excess cost had been made up by prior cost moves. So as the incremental impact this quarter, you know, was benefited by the earlier cost actions that were taken.

And we're actually at -- an interesting position. In addition to adjusting our cost location by location, we've done a lot of trading. We've hired as much as we've taken people down and reduced head count in certain locations.

We've also taken this occasion to hire people and to effectively upgrade our staffing position because we've learned from the prior session of what the impact of being able to take advantage of that, this environment, exists.

The other things we haven't -- we've not walked away from any of our long-term programs. We've invested probably more money this year in the education of our employees than we have in the past. So we're managing this environment as much, if not more, for the future as we are about worrying too much about what the impact of these cost services, as Randy said, $20 million is not a significant number over the amount of revenue and payroll and other costs that this company incurs.

Actually, it's kind of an interesting note. On a current quarter basis, we would make more money if we didn't take many of the cost actions that we've taken.

Sure.

When you get outside the United States and, frankly, even in many of the markets, many of the areas in the United States, you cannot, you know, execute severance in a quarter and actually have, you know, improved performance in that quarter.

There is certainly a cost greater than one quarter's payroll as you get outside the United States. Many times it's more than a year's cost.

So you've got, you know, accelerated cost by taking the right actions on a long-term basis. As John mentioned, we have not gone and cut any of our long-term investment programs or internal training programs, et cetera,[ audio cut out - 30 seconds] so we're very much focused on the future of the business and not levering the future for the current.

All right.Thank you.

For our next question will move to the line of William Bird with Salomon Smith Barney. Please go ahead.

Could you comment on trends in Europe and also on your margin expectations going forward? Thanks.

Trends in Europe. Europe continues to be a difficult environment. It's the spending decreases that we've seen are real. They started in our case in the second quarter.

It Randy reported a negative absolute dollar amount of about $73 million year-to-date. That came in two chunks. That came $45 million which we reported the last quarter. In the second quarter, I mean, and $28 million this quarter.

We're adjusting our businesses accordingly. We're not losing clients. This is just conservatism and changes in some spending habits. It hasn't been going on long enough, Bill, for me to feel that it's a trend.

And in looking at some of my competitors's recent reports, they don't seem to be experiencing the exact same experience in continental Europe. So that's something we're going to continue to pour into as we go through the final forecast for the year and then planning for next year and beyond.

With respect to margins, our goal is to optimize margins in accordance with whatever the business conditions are with a view towards the long-term and sustained growth of the company. And given the severance cost that we've incurred and all the other things that Randy referred to for the nine months, we're down 70 basis points, we think it's quite manageable given the nature of those costs.

So we haven't seen any permanent impact on margins. They're you all associated with actions that we've taken.

Yeah, I'd say that on a long-term basis our margins are overall cost structure has improved over the last nine months. But I can reiterate that we're not willing to take, not willing to lever the future for the current.

We're going to take the right cost measures for the company on a long-term basis as those cost measures are seen. If that has a current impact on the margins it has a current you impact on the margins, but that will benefit us as the business levels out and starts to rebound.

Randy, did you provide a figure on how much severance was taken in the quarter?

I didn't. I don't have that number totaled up yet from, you know, from all the different P&L's.

What I did note was that the difference in margins on a year-over-year basis in the quarter was only about $20.6 million and actually even on a full-year basis the difference in margins is about $38 million for the nine-month period year-over-year. So those are not very large numbers given the magnitude of the actions that we've taken for our total payroll or real estate cost.

Is there anything to update on the credit rating agencies and, you know, what would it take to get out the penalty box?

No.

You know, I am hope full that this is another step out of the penalty box and putting up another, you know, good, stable quarter of performance I think is going to be helpful with them. We've certainly out performed the forecast that we'd given them for rating agencies at the end of last year and back in March when we issued the last convert and they reaffirmed our credit rating. It's another quarter with KPMG's the new audit firm so I think all of that is very positive.

I think we'll be able to make an announcement as I mentioned earlier, within the next two to four weeks about redoing or reworking or renewing our current bank credit relationships. That's, that process going very well.

I think all of that will, you know, will play well with the rating agencies and I think will, you know, should give them the comfort to take us off the credit watch.

Sure.

The other thing, Bill, is we predicted, and we're certainly coming well within this reduction in the amount of money we're going to spend in acquisitions this year versus last year, I think that plus some other discretionary things we have available to us will only help us get out that have penalty box as you refer to it.

So far, Bill, also state one more fact, I mean, the way this process is going is we met with the rating agencies in March before we did the last convert. We discussed with them what we planned to do. We did it.

At that time we had given them forecasts by quarter for the balance of the year. We executed a convert. They came out. They reconfirmed our rating. We achieved the numbers in the first quarter. They put us on credit watch. We achieved the numbers in the second quarter. Actually we exceeded the numbers in the second quarter and all the credit statistics, we exceed.

All the credit statistics had improved from where we had forecast to them. They're also improved from the same periods last year.

So, you know, I'm pretty hopeful that we'll be able to come out of the penalty box with them. I'm sure that they have some concerns given some of the overall market news and what some of our competitors have done. But, hopefully they'll look through all that.

Thank you.

Our next question will come from the line of Kevin Sullivan with Lehman Brothers. Your line is open.

Hi, good morning. Couple questions. We're seeing elsewhere we're seeing somewhat of a share shift out of marketing services and direct marketing to traditional media. I was hoping to get your comments on that especially since you guys are putting out strong numbers on crm and communications, the strength in healthcare if you could give us some color around that strength especially given some of the news in healthcare advertising. Thanks.

We haven't seen the shift. We've seen the press reports but we haven't seen the shift. And, you know, you get into -- we've seen references in trade articles to what should be small segments of a competitor's businesses in these areas. So we're not experiencing maybe the same thing.

The other thing is we're more of a pure play in advertising and pure marketing services, probably than anyone in the industry. And so we just continue to grind out and adjust with our clients, focus on what our clients' requirements are, and we are not-we're more interested in getting the maximum amount on behalf of our clients as opposed to necessarily focusing on whether or not it happens in a advertising bucket or a CRM bucket. So we don't have-we're not -- we.

You're indifferent to it.

The project business is obviously can be adjusted quicker than media buy can in any week or month but that's not a long-term trend.

It's also not kid ourselves. The economy overall is important. Trends are important. But ultimately it boils down to the execution of each one of our agencies.

If they have the right ideas for the right clients, they're going to be able to grow their businesses.

Our agencies have worked extremely hard in growing their businesses, focused on, you know, new business, focused on expanding their relationships with their existing businesses. You know, much of that is generated, you know, some pretty significant success and they've been able to, you know, out perform the economy.

You know, both in the good times, you know, back '98 '99, 2000 as well as now in the last couple of years in the bad times. Although it's certainly more difficult than it was.

And one final point is we have an incredibly stable management team and that's not just here but that goes down to the lowest levels within the company.

Most of the people responsible for the P&L, most, nearly all people responsible for various profit centers throughout this company have been in place for a long time. And there's a very open dialogue about what we need achieve and what we don't need to achieve so all of that is beneficial.

We probably also have as high a concentration in healthcare specialty advertising which you asked about as anyone. And we're very proud of the brands that we have in that area and their ability to service those clients.

So there's been no real change on the healthcare spending side or from spending from your healthcare clients I should say?

What we've heard from some of the healthcare companies is that there seems to be maybe a slowing of some of the releases from the FDA. I think that's been made up with, you know, some market share increases. We've had some pretty good, new business wins across the healthcare groups.

It's pretty standard fair that when there's an election healthcare, you know, becomes an issue and gets people play with it for a little while.

Changes happen. And I think what-if you talk to most of the healthcare companies they're encouraged by the employment of a FDA commissioner which hopefully will, as we move forward assist them in having somebody to dialogue with about getting their products to the market. So we think it's a very healthy sector. We'll continue to be an incredibly important sector as we move forward.

There's also some discussion over the course of the quarter of, I guess, people frowning on certain types of marketing in the healthcare sector. We're fortunately not really in those sectors. That may have actually been an advantage for our businesses.

Maybe there's actually been a mix shift away from some forms of communication in, you know, towards ours. I'm not sure. But at least the negative areas we weren't really in.

Great. Understood. And one last question. Randy, based on the tax rate assumption you put forth for the year, I guess we should be assuming somewhere in the neighborhood of 34.5 to 35 for the fourth quarter? Does that make sense?

What. I didn't hear the question. I'm sorry, Kevin.

Based on the tax rate assumption you put forth for the year I guess we should be assuming somewhere in the neighborhood of 34 1/2 to 35% of the fourth quarter.

I think that's right.

Thank you very much.

And just to fill that out a little bit and for next year if anyone's working on the models, back to more of a flat line on the four--year rate.

Part of what's happening right now is these tax, you know, we've been working on these international tax initiatives for a while. Obviously before we were, you know, comfortable putting the rates through we wanted to make sure that the structures were, yow, fully in place and all of the opinions, et cetera, were completed. So the full year right rate next year is appropriate.

Our next question will come from the line of David Dout of CIBC World Markets. Go ahead please.

Good morning. Can you touch a little bit on the outlook for the fourth quarter and into next year relative to your previous comments on it.

We're comfortable with our earnings forecast for the fourth quarter. And we're in the process of planning right now which has just started in earnest, the planning process for next year, so it's a little premature for us to talk about it.

I don't think to date we've put out any guidance or, you know, discussions about next year.

Sure.

It's a very bottom's up process here.

Fair enough. Can you also go through some of the countries around the world that have been strong and weep kind of on a relative basis as well as among the media? We see broadcast has been very strong but if there's any view you have on some of the other forms of major media in terms of their strengths or weakness?

Radio's doing well, outdoor's doing well,

I mean -- I'm just trying to get a sense of uhm.

The media companies have reported you know, very good numbers. I would suspect some of that is a year over year comparison in Q3. You have to I think look at a little bit of what happened last year.

On the broadcast front, we think the broadcast companies did a very good job for their businesses in the up front market. They were, you know, very creative in their approach to the marketplace. We have to admire them for it.

From the standpoint of the way we've structured Omnicom, we're pretty much indifferent to that. It's great for our clients if, you know, they get a good opportunity to market in that channel.

As far as around the world, you know, I think Germany is probably what we hear as being, you know, the weakest market across Europe although, you know, it's to early to, you know, to say if that's any kind of a trend.

Latin America from a currency standpoint has been difficult. The elections in Latin America, we've heard a lot of concerns about.

You know, on a local spending, you know, local dollar, local real basis, Latin America is, is okay. It's not a -- it's not a strong market. But it's not a significantly weak market either.

Sounds good. Thank you.

Thank you..

For our next question we'll move to the line of John Campbell of Goldman Sachs. Your line is open.

Morning, John.

Hello?

Mr. Campbell, your line is open. Could you check your mute feature on your telephone?

I'm sorry. My question was answered. Thank you.

Operator:. I've got time for one more question here, and we'll call it a morning,.

Absolutely that'll come from the line of John Batiste Doutier from ABM [Emerald].

I didn't push the button. There must be a mistake.

Okay. With that final question we'll thank everyone for taking the time and if people have follow-up questions we'll be around all day. Thank you again. Bye-bye.

Ladies and gentlemen, that does conclude your conference call for today. Thank you for your participation and for using AT&T's Executive Teleconference Service. You may now disconnect.