宏盟集團 (OMC) 2010 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Omnicom third quarter 2010 earnings release conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, this conference call is being recorded.

At this time, I'd like to now introduce you to today's conference call host, Executive Vice President, Chief Financial Officer of Omnicom Group, Mr. Randall Weisenburger. Please go ahead.

Thank you and good morning. First thank you all for taking the time to listen to our third quarter 2010 earnings call. We hope everyone's had a chance to review our earnings release. We've posted to our website both the press release and a presentation covering the information that we'll present this morning. This call is also being simulcast and will be archived on our website.

Before we start, I've been asked to remind everyone to read the forward-looking statements and other information that is included on page one of our investor presentation, and to point out that certain of the statements made today may constitute forward-looking statements and that these statements are our present expectations and actual events or results may differ materially.

We will begin the call with some brief remarks from John Wren, then following John's remarks we'll review our financial performance for the quarter and then both John and I will be happy to take questions.

Good morning, everyone, and thanks for joining our call. We're pleased to announce strong third quarter results that continue the progress we've made during 2010 to show improvements over last year. In particular I want to highlight three things today. First, organic growth continues to trend positively across our businesses and globally we achieved 6.7% growth, making this our strongest quarter of the year. Second, while improvements in the economy are inconsistent from region to region, we have been pleasantly surprised by the continued growth in the United States and renewed strength in Europe's major markets. Third, as we look forward to 2011 and 2012 we've identified a number of actions which will allow us to improve our margins towards our goal of returning to 2007 levels. Additionally, we expect to increase our acquisition activity in emerging markets, form additional alliances with new partners, especially in the areas of emerging technology and divest of several slow growth low margin businesses.

All of these positive trends are occurring in the midst of an economic picture that is generally improving but still fragile. In the US, we are seeing continued growth in our business as the economy slowly recovers. Following the strong quarter of growth in the first and second quarters, our third quarter growth was 8.4%, even after accounting for the loss of the Chrysler business. The Chrysler loss globally reduced our organic growth for the quarter by 1.5%. And for those of you that haven't been following it, we have two more quarters to cycle through the impact of Chrysler. Despite that loss the overall automobile category, which represents about 11% of our business, grew by 8%.

Also in the US with respect to clients, every client that I speak to seems to have a renewed focus on top line growth. With that said, we're going to continue to remain cautious, wait for their budgets, at least until after we understand the implications of the upcoming elections and until the unemployment picture in the US starts to improve.

Outside of the US, we're also seeing an improving picture. We continue to see double-digit top line growth in Asia and the Middle East. Growth in Africa and South America remain strong and in line with our expectations. In Europe, we're pleased with the results in the UK and France, and we're also seeing improvement in Germany. In the other countries in Europe, the picture remains mixed as the economies try to recover.

When turning to disciplines, we also continue to see growth across all of our disciplines. All the areas showed strong growth in the quarter over last year. And each discipline showed strong sequential growth with the exception of our specialty line of business, while still in line with our third quarter expectations, it was less than the first six months of the year due to more difficult comps. Our growth is also coming from across the spectrum of industries we serve. Revenues are up in every significant industry category with the exception of travel and entertainment, which showed a modest decline for the quarter compared to 2009.

In general, in looking at organic growth, it seems-- it continues to be driven by strong retention strategies we have in place and our focus on delivering value to our existing clients. It's also the result of our success in generating new business wins. For the quarter we generated in excess of $900 million in new business. And we continue to see a pretty robust pipeline and our agencies continue to work to provide innovative solutions to meet the evolving needs of our clients and perspective clients.

On the margin front, our results are slightly better than the third quarter of 2009 and in line with what we've expected. But as I mentioned in my opening remarks, our goal is to restore margins by 2012 to at least our 2007 levels.

For the past several quarters I've talked about our strong balance sheet and the flexibility it gives us to look for strategic and reasonably priced acquisitions. As you know, in mid-September we announced an increased stake in the Clemenger Group, the largest communications group in Australia and New Zealand. That acquisition, which we expect to close in the first quarter 2011, will give us the incentives and the flexibility to truly leverage the skills, reputation and people of Clemenger to grow our combined businesses.

Also during the quarter, we increased our ownership in our media operations in the Middle East and moved to 100% ownership of our field marketing operations in China. The combination of our two field marketing ventures will give us coverage now in over 100 cities in China. And finally, we disposed of four underperforming businesses that we had in Europe.

So as we look to the fourth quarter and into 2011 and 2012 we feel confident in how we are positioned. We recognize the continued risk to the economy but also see real growth opportunities in a wide range of areas around the globe. Consistent with our strategic plan, we continue to build our digital skill sets both inside existing agencies and with new acquisitions. We also continue to look for strongly managed organizations that will help us expand our presence in rapidly growing markets. And finally, as always, we're working to retain, recruit and train our talented Management teams and professionals around the world. I will now turn the call back to Randy who will take you through the third quarter numbers.

Thank you, John. As John said, the third quarter continued the trend both of solid year-over-year growth as well as the sequential improvement in revenue that we've experienced each quarter this year. The US and the emerging markets continue to perform well and we're beginning to see even broader signs of stability and improvement in the European markets. As a result, year-over-year revenue increased 5.5% to just below $3 billion for the quarter. Operating income increased 6.5% to $314 million, and that resulted in an operating income or EBIT margin of 10.5% up about ten basis points. And our EBITA, which we believe is a better metric of our operating performance, increased 7.3% to $332 million, and our EBITA margin was 11.1% which was up about 20 basis points from last year.

Our agencies continue to make good progress at realigning their costs with revenue. As we've progressed through the year, our agencies have done a good job at controlling labor costs and general operating expenses and are now beginning to make solid strides at realigning occupancy and infrastructure costs, which are typically much slower to adjust. At the same time, we've continued to invest heavily to extend our capabilities in the emerging markets of Asia, the Middle East and Africa, as well as further enhancing our digital capabilities across disciplines.

Net interest expense for the quarter was $29.8 million, up $900,000 from last year and up about $6 million from Q2. The increase versus Q2 was primarily the result of our issuance of $1 billion of 10-year senior notes in August and the amortization of the [sweetener] paid on the 2038 notes in July offset by lower borrowing under our revolving credit facilities and further improvement in our working capital management effort.

On the tax front, our reported tax rate for the quarter was about 34.1%, up slightly from the 34% last year. Net income for the quarter increased 5.4% to $174.6 million. And diluted earnings per share in the quarter increased 7.5% to $0.57 per share. For reference, the diluted share count for the quarter was 303.5 million shares.

Analyzing our revenue performance a bit further, FX growth, in addition to having fairly significant volatility during the quarter, on a year-over-year basis, the dollar experienced mixed results versus our major currencies. The dollar strengthened against the euro and the pound and weakened versus the yen, the real and the Canadian and Australian dollars. The aggregate result was a negative FX impact for the quarter of $53 million, or about 1.9%. Assuming rates remain at their current levels, FX will continue to be negative in the fourth quarter, but only by about 1%. For the full year, FX would end up marginally positive at about one half of 1%. Revenue growth from acquisitions net of dispositions increased revenue by $19.6 million in the quarter, or about 0.7 of 1%. That was due primarily to the acquisition of impact BBDO in the Middle East at the end of 2009.

As John mentioned, we did complete two acquisitions in the quarter and we've also closed several more small transactions already this quarter. We also disposed of four underperforming businesses in the third quarter. In conjunction with our current initiatives to increase operating margins, we are also undertaking a global review of all of our businesses to eliminate any underperforming noncore operations.

Driven by both the success of our new business efforts, the improving economics environment and easier year-over-year comparisons, organic revenue was a very strong 6.7%, increasing our revenue by $190.3 million. It's also worth pointing out that the Chrysler loss had a negative impact on our organic growth in the quarter of about 1.5%. We will cycle on the Chrysler loss in the second quarter of next year.

As for our mix of business, brand advertising accounted for 44.5% of our revenue and marketing services 55.5%. As for their respective organic growth rates brand advertising was up 6.5% in the quarter and marketing services was up 6.9%. Within the marketing services category, CRM had 7.3% organic growth, and within this sector, field marketing and branding had the best performances both achieving double-digit growth. Public relations had organic growth of 5.4% and specialty communications was up 6.8%.

In addition to having positive organic growth across almost every industry we serve, we also had positive organic growth across all of our disciplines. Even our recruitment marketing business had positive organic growth in the quarter which alone may be a sign of improving economic conditions.

Our geographic mix of business in the quarter was 54% US and 46% international. In the United States, revenue increased $126 million, or 8.4%. There were no acquisitions or dispositions affecting our domestic operations during the quarter, so all of the change in the quarter is attributable to organic growth. International revenue increased $31 million, or about 2.3%. FX decreased revenue by $53 million, or 3.9%. Acquisitions added about 1.4%, and organic growth was positive 4.8%, or about $64 million.

Internationally, we continue to have strong performances in the emerging markets of Asia, Latin America, the Middle East and Africa. In the euro markets, we experienced 1.2% organic growth. This was actually the first quarter of positive organic growth for the region in aggregate since the third quarter of 2008, with almost all of the individual markets again showing quarter-on-quarter sequential improvement. And the other European markets, the UK and Russia both stood out with strong positive performances.

Turning to cash flow, our primary sources of cash, net income, plus stock-based compensation, depreciation and amortization totaled about $835 million year-to-date. And our primary uses of cash during the first nine months had been dividends at about $169 million, capital expenditures totaled about $98 million, acquisitions including earnout payments totaled $142 million and share repurchases net of the proceeds received from stock issuances under our share plans totaled approximately $462 million. As the current credit picture chart shows, including changes in working capital, our year-over-year net debt position improved by about $275 million to $1.52 billion.

As I already mentioned, during the quarter we completed the issuance of $1 billion of 10-year 4.45% senior notes with the corresponding increase in our total debt and cash positions. As a result of the new notes, our total debt to EBITDA ratio is about 1.9 times, and our interest coverage ratio remained consistent with last quarter at 12.9 times. And finally, from a liquidity perspective, we finished the quarter in a strong position with cash and undrawn committed credit facilities totaling about $4.2 billion, and we had an additional uncommitted facilities available totaling $581 million. And with that I'm now going to ask the Operator to open the call for questions.

Thank you very much. (Operator Instructions). And our first question comes from the line of Alexia Quadrani with JPMorgan. Please go ahead.

Thank you, a couple of questions. First, John, you had mentioned that your clients are very focused on revenues, which is obviously a good sign. Is there any further color you can give us in terms on how budgets may be forming? Are there thoughts on spending levels for next year?

It's a little early, Alexia. We are working with clients and listening very closely to them about what their plans are for next year but as of yet we haven't seen the numbers in sufficient detail in order to aggregate them and have a strong sense of what the actual numbers will be. That aside, increasingly every single client is interested in increasing its market share, and that's where the focus is in the conversations that I've been having.

And then you mentioned the margins getting back to, hoping to get back to at least 2007 levels by 2012. I know a lot of this is dependent on the revenue environment, but do you-- internally are you projecting that the bulk of that move might be next year?

We are going to move as fast as we can and we have, again, if market conditions and revenues stay where they are, we know the actions that we want to take. We don't know the exact timing of the quarter in which they'll hit, but the trends are there, all the positive actions have been identified. And so at this moment, until we have more to say, I'd like to simply leave my comments where I have.

Okay. And just a housekeeping question, on the impact of the businesses you've sold in the quarter as well as the acquisitions, what should we expect for fourth quarter? I'm trying to get a sense of size. Will they be sort of net positive on the acquisition front for revenues next quarter?

Yes, yes the companies we disposed of were small.

Okay, thank you.

Thank you.

Thanks. And our next question then comes from the line of John Janedis with UBS. Please go ahead.

Hi, thank you, good morning. Guys, your euro currency markets have been posting flattish organic this year, you mentioned you've turned the quarter. How much of the spend there is from governments and is the outlook there for growth to improve much going forward?

The outlook for government spending or the outlook for--?

Well the overall confident-- but specifically how much of the business is from individual governments? Is it a big piece of business for you guys?

No, no it's not. It's very very small. Wren, you may have it.

Yes, in last quarter globally, government revenue was around $30 million, $35 million. So very small piece of business. And as far as Europe goes, as we've been saying for a couple quarters now, while the results vary widely by market, we're seeing much broader stabilization and pockets of growth. As I mentioned, we had very strong performance in the UK actually for the last couple quarters. We had improving performances in almost every market across Europe, although we still have a couple, a few countries, actually that still have negative year-over-year organic growth, mostly the so-called [PIGS] markets.

Okay, thanks. And just one quick is, can you remind us of the size of the project business in the fourth quarter and your confidence level around seeing a pickup there relative to the last couple of years?

Well project business and ability for clients to increase or to cut back is always an unknown to the level of a couple hundred million dollars until we get another couple weeks into this quarter. So we'll have a better view after we've seen September's actual numbers and we get--

October's actually. Pardon me, forgive me, we've just reported September's numbers. We're in Beijing with our Board of Directors, so it's nighttime for us, so forgive me. And when we see October's numbers and we get into the first or second week in November we'll have after clearer view as to the type of projects and the level of projects that'll occur in the fourth quarter.

Thank you very much.

Sure, thank you.

Thanks. And our next question comes from the line of Brian Shipman with Jefferies. Please go ahead.

Thanks. Good morning, good evening to you. Could you talk a bit more about your acquisition strategy? What regions are you focused on, which disciplines are most interesting to you? And then as an aside, how are you able to purchase 100% of sales power, aren't there Chinese ownership restrictions? And then I have a follow up.

The areas that we're focusing on for acquisition are emerging markets, and then I'd say the markets have simply-- that may not be quite classified as emerging, but they will be soon. Areas in South America where we're not a majority, areas in the Middle East where we have opportunities, as well as China, Vietnam, India, Indonesia, those type of markets. From a service point of view, we continue to support our strongest and biggest businesses. In some of those markets it's improving or increasing the size of our general market advertising brands, in other markets it's our specialty businesses, public relations, and in certain markets, CRM, all which today you can probably classify between traditional and digital that I daresay in the next 12 to 24 months those distinctions will fade in all of our conversations.

As far as China, across most of our lines of business, there are not ownership restrictions.

Interesting. And without getting into specifics on the cost initiatives you talked about in terms of timing, et cetera, is it possible to expand on the types of initiatives you're focused on? This year you had mentioned previously that you'd try to pay your people better, what's the outlook there for 2011?

Well, in general we think we pay our people properly, and we've been able to incentivize them properly for their performance, and we continue to accrue for those costs and are working always towards making certain that not only can we create the best working environment, but we're paying people fairly. Sorry, with the first part of your question?

There's a number of different initiatives. We're obviously trying to make sure our costs are in line with our revenue location by location. We're going through each of our operations and looking at those costs relative to where their revenues are currently at and relative to their forecasts. We're also, as I mentioned, going through each of our operations and evaluating a combination of underperforming noncore businesses and making decisions whether or not we should divest of those businesses or make the efforts to make them performing businesses.

Great, thank you very much.

Sure, thank you.

Thanks. And our next question comes from the line of Matt Chesler with Deutsche Bank. Please go ahead.

Thank you for taking my call. Just wanted to see if your-- these current cost initiatives, do they have impact on some of your previous stated messaging about that they're not being much margin expansion for the current year? And should we expect any of those actions to hit before year end or is that messaging still consistent?

I think the messaging is consistent. Many of those initiatives actually have an upfront cost to them. So we plan on paying for those costs and being able to achieve the objectives that we've laid out. But initiatives like that aren't free.

So I mean I think originally we said that our margins should be flat this year, we're still aiming at that level. And then now we've said that we're going to improve our margins beginning in next year and for the coming quarters after that.

Okay. Congratulations on your debt raise, it went well. But you've got $1 billion worth of capital to deploy as you choose. I think we've already seen a picture of how you intend to deploy the capital with a number of acquisitions. You noted Clemenger BBDO step up and some of these other deals. There was no buyback activity during the quarter, can you just comment, did that financial transaction have anything to do with taking a breather in buyback activity? And then just in general, what are you thinking about going forward? And at what point of buyback activity would you need to go to the Board for approval, and what is within your -- what sort of flexibility do you have within the existing authorization structure?

Well I'll let Randy handle most of that. As I said earlier, we're in Beijing having a Board meeting, and that Board meeting is tomorrow, and so these are items which are all on our agenda to be discussed with our Board.

So first of all, we raised the money when we did. We thought the pricing and the structure, the availability of capital was almost too good to pass up, 4.45% pretax. So we thought it was very good cost of capital, give us a lot of flexibility going forward. As far as current authorization goes, we've said it now for awhile that this year we're authorized to spend all of our free cash on a combination of dividends, acquisitions and share repurchases. I think through the nine months we are dead on that schedule. We'll obviously generate a fairly significant amount of free cash flow in the fourth quarter, so that's going to definitely give us some availability under the current structure. And as John pointed out, we're at a Board meeting, so we'll see what the decisions are for going forward.

I certainly don't want to leave anybody with the impression the money we have is burning a hole in our pocket and we're going to change any of our prior disciplines in terms of the scrutiny and the return on equity that we insist that we get from acquisitions that we do. So you will find that all our actions are to improve our brands, to improve our service to our clients, and we're not been engaged nor can I foresee us being engaged in paying silly prices for companies. So all of that will, in fact, get discussed, including our cash position and what we might want to do with it in tomorrow's meeting.

All right, thank you.

Thanks. And our next question comes from the line of Ben Swinburne with Morgan Stanley. Please go ahead.

Thank you, good evening, guys. Just going back to your comment on long-term margin expansion, or getting back to 2007 levels in 2012, obviously the revenue component is an unknown but things are moving in the right direction. But maybe two other areas just on the sort of occupancy and infrastructure side, I'm sure that Randy as a component of your long-term outlook in getting margins up, even in sort of a range of revenue scenarios, and also are you assuming some asset sales or dispositions as part of your global review that you mentioned in your prepared remarks as part of that margin story over time?

Yes, we're basically reviewing everything. We have a couple businesses that we want to see either dramatic improvement and/or divest them, so we're going through those steps right now. As far as the infrastructure, we're committed to getting all of these costs in line almost irrespective of the revenue scenarios. It's obviously much easier and much more fun getting costs in line in a high growth or a substantial growth environment because it's just not as hard to do it. But we are committed across the Company to get the costs in line and get back to those 2007 level margins by no later than 2012. I have 100% confidence that we'll be able to achieve that.

And maybe I'll ask the question, I don't know if it's even really relevant any more, since as John pointed out the lines are blurring, but since I get asked the question, I will ask you, are you making any implicit assumption about digital margins or digital mix shift over the next couple years as you look at that long-term target? Or as at this point it's just impossible to really slice and dice it that way?

Yes, we have not sliced and diced it that way. Fundamentally I believe that anything that's not digital will soon be digital or soon be very, very unimportant. So what we have not-- what we've done is take a look at our current mix of business, our-- where we're located, where we need to be located, the types of services in each one of those markets. And we've restored a lot of businesses coming off of last year, and we've increased that scrutiny to look at what we feel are noncore businesses, which turn out to be at this point low growth and low margin opportunities. Those are the type of business that we'll consider for disposal, and we'll do that in consultation with our Board. But in the aggregate while we're doing that, I don't think there's anything terribly dramatic in that statement, so as you get into your modeling and all the rest of it, hopefully this will become clearer.

And one thing to make sure that our message is clear, all of our businesses across disciplines believe integrated media or integrated communications methodology is critical and that they are developing the skill sets to be able to utilize all of the technologies as they come out. That's why we don't really see the distinction between digital and not digital. We think it's really more about our agencies being able to work in all of the technologies that are coming up, that frankly are coming at a pretty fast pace and we think that's going to continue to accelerate.

And my final comment on that is we're absolutely bullish on our ability to execute on an integrated basis and so we're seeing increasing opportunities to do that. In clients, if you follow some of the speeches that they're making, know that that's probably part of the secret sauce in terms of getting true value for their campaigns and are much more open to discussing those type of opportunities with us than ever before.

And if I could just sneak one last one in about Q4, your year-on-year compares toughen quite a bit just because I think international was actually positive last year in Q4. So is it safe for us to assume, not safe to assume, but would you tell to us to assume we see an organic slowdown in Q4 versus Q3, or way too early?

Randy can add, we didn't practice this one.

We're very comfortable with the health of our businesses. Project businesses in the fourth quarter always have an impact on what gets defined as organic growth because I think what $30 million and there's a point or something--

Yes and you hit one point though right. I mean in part of looking at this year's organic growth, a lot of it is also looking at last year, that year-over-year comparison is much more complicated in the current environment because of just the volatility that's occurred over the last couple of years. Our businesses are improving sequentially. The economy seem to be improving sequentially. The year-over-year measurements sometimes a little bit distorted. But I think our fourth quarter, it looks like it's going to be fairly strong.

Terrific.

The markets definitely look like they're improving.

Great. Thank you, guys.

Thank you.

Thanks. And our next question comes from the line of Craig Huber with Access 342. Please go ahead.

Yes, hi a few things. First, can you quantify for what that strong organic revenue growth was in the quarter in the UK market? I think you mentioned the euro piece was up about 1% or so.

You're saying what was our UK organic growth?

Yes.

It was 8.9% in the quarter.

Okay. And then also this goal of getting back to 2007 margin levels of 13.1% or so by 2012, just listening to your commentary, I assume most that though your feeling it would come from organic revenue growth?

No, not necessarily. We've -- we can't go backwards, obviously. I mean if the market stalls, then there's a change in situation. We'll come back to you and tell you the impact. But we've identified quite a number of areas, quite a numbers of things are already starting to take place which allow us to make that kind of a statement. So as long as markets stay at their current pace of growth, we're pretty confident about what we'll be able to achieve.

Yes, I think that's-- as we said there's a number of initiatives going on that are going to increase the efficiency across our businesses that I'm pretty confident in most revenue scenarios we'll be able to achieve those objectives.

And then also over the last ten plus years, your Company has been very consistent only doing small tuck-in acquisitions, I assume going forward that probably won't change. So this $1 billion that you just raised in August in your debt offering there, I assume you want to plan on using most of that for share buybacks. I know you touched on this a bit here, but you're waiting on Board authorization, but should investors assume that?

I don't want to pre-empt my Board. And as I said, the money is not burning a hole in my pocket, so we'll sensibly deploy it over the coming quarters as we need to.

I think your first statement though is a safe statement. The Company's had a lot of financial discipline over the years. It continues to have that same financial discipline and our acquisition strategy really hasn't changed. So that -- raising that capital wasn't because we saw some large acquisition that we were looking at or something.

Okay, thank you.

Thanks. And our next question then comes from the line of Dan Salmon with BMO Capital Markets. Please go ahead.

Thanks, guys. I think all my questions have been taken care of.

Great thank you then. We're going to go on to the line of Peter Stabler with Credit Suisse. Please go ahead.

Thanks very much. Getting back to the four disposals, could you tell us is there any themes to those businesses? I know they're small, but just wondering if the nature of these businesses is consistent?

No, I mean the consistency of them I would say is that they're in noncore and they have proven over time to be low growth, low margin businesses. And the places that they were-- the services were we could replicate in other markets with additional talent with other talent, so we decided to dispose of those businesses or rather than manage them. Because not so much at the Omnicom level, but when you get into the brands, it takes almost as much time to manage a small office as it does a big office, because you have many of the same concerns about the quality of people and their careers and all the rest. So where we've been able to identify noncore, low growth, low margin businesses, and they're generally in smaller markets, we've elected to dispose of those because it improves the quality of our product, it allows our Management to focus on the clients and the types of things which are going to generate growth in the future. And we've held them long enough and we know them well enough to project what we feel was their growth opportunities and decided the effort was not there for us to continue with them, so we've decided to dispose of them.

Great, John. And then I was wondering if I could ask a question on contract duration. First of all, can you give us a sense of what percentage of your revenues are kind of tied to annual contracts? And then do you think that through the recovery, or through the recession and now the recovery, have you seen any fundamental changes to contract duration or the length of agreements that clients are willing to sign?

I think there's two questions in what you're asking. Most of our contracts have, I'll say relatively short, I think 90-day to six month notice provisions in them. But I think in the-- generally in the fee-based contracts, they're laying out kind of a statement of work or a scope of work that probably covers a 12-month period, and we're working against that scope of work. It doesn't mean that they can't terminate us in the middle of that, that would really be more than notice provision.

Right.

I'd also add that most of our clients have, irrespective of what the actual term of the contract says, what our lawyers work on, have been very long-term relationships and very stable relationships.

Great. I guess where I was trying to go with that was, do you think the level of visibility you're going to have is going to return to normalized levels?

I think our level of visibility is not that dramatically different than what it was before. It's really our confidence in that visibility. The last couple of years have been a pretty volatile economic time. And while people have commitments and people have expectations, obviously with the dramatic change from their expectation, they're going to modify how they proceed, and we're going to feel some of those effects. And in that volatility, I mean we didn't have a lot of confidence as to what was going to happen three months out or six months out. We definitely knew what our agreement said, we had forecast of revenues, we had projects that people were work on. We were going through the same process we were going through during every other period. And our new business percentage at the beginning of 2009 wasn't a lot different than our new business percentage and our revenue forecast at that time beginning of 2010.

They weren't any different at the beginning of 2008 either, but nobody expected the fall off in business that occurred at the end of 2008. So yes I don't think-- the nature of business hasn't changed, the volatility in the economy changed a lot. Right now we feel like it's certainly stabilizing or has stabilized and is back in much more of a normal prediction level.

Great, thanks, Randy. And one housekeeping item, if I could. Do you have with you the organic and then total reported increases for the salary line and O&G line?

No, I wouldn't have that on an organic basis, anyway. I don't know how to -- that's not something that we compute. And I don't, given where I'm at, have the answer to the second part of that question. What we do is if you'd should me a quick e-mail with the question, I'll get the answer and get it back to you.

Great, thanks very much.

Sure, thank you. And we've probably got time for maybe one more call, or one more question, I should say.

Okay great. And that question then comes from the line of David Bank with RBC Capital Markets. Please go ahead.

Thanks very much, I'll make it quick. On the cost side, can you just remind us whether or not the, sort of the bulk of the BBDO Detroit restructuring was incurred in the fourth quarter or was there any carryover into first quarter?

I think the bulk of it was in the fourth quarter. Inevitably I'm sure something carried over in the first quarter because things aren't that clean. We also had a gain in the fourth quarter of last year that pretty much offset that charge of the restructuring cost.

Okay. Okay, thanks very much.

Sure, that was easy. Well thank you all very much. We appreciate you taking the time for the call, and we'll -- if there's any other questions we didn't get to either shoot them to me as an e-mail or give my office a call and we'll get back to you as soon as we can. And we'll talk to you next quarter.

Great, thank you.

Thank you very much. And ladies and gentlemen, that does conclude our conference for today. Thanks for your participation and for using AT&T's Executive TeleConference. You may now disconnect.