Willis Group Holdings plc Pre-Merger Results:
- 4Q15 Organic Commissions & Fees growth was 4.8% compared to 4Q14; 280 basis points of organic spread; reported 4Q15 revenue growth of 1.7% compared to 4Q14
- 4Q15 Underlying EBITDA of
$201 million equating to 20.6% of total revenues; reported EBITDA of$50 million equating to 5.1% of total revenues - Reported 4Q15 net loss of
$(24) million , or$(0.35) per diluted share; includes adjustments of$1.44 per diluted share - Reported full-year 2015 net income of
$5.41 per diluted share; includes adjustments of$0.98 per diluted share
“While I’m encouraged by the solid quarterly results of both Willis Group and Towers Watson, I’m even more excited that as of
Willis Group Financial Results
Select Willis Group GAAP and non-GAAP financial measures
Three months ended December 31, |
Twelve months ended December 31, |
|||||||||||||
Reported measures | 2015 | 2014 | 2015 | 2014 | ||||||||||
Reported commissions and fees growth | 3.3 | % | 3.1 | % | 1.1 | % | 3.7 | % | ||||||
Reported total expenses growth | 18.7 | % | 5.8 | % | 7.8 | % | 5.4 | % | ||||||
Reported operating margin | 0.2 | % | 14.5 | % | 11.2 | % | 17.0 | % | ||||||
Reported diluted EPS(3) | $ | (0.35 | ) | $ | 1.12 | $ | 5.41 | $ | 5.32 | |||||
Underlying measures(1)(2) | ||||||||||||||
Underlying commissions and fees growth | 9.5 | % | 7.2 | % | 7.6 | % | 4.6 | % | ||||||
Underlying total expenses growth | 8.5 | % | 7.1 | % | 7.1 | % | 5.7 | % | ||||||
Underlying operating margin | 15.7 | % | 16.3 | % | 18.5 | % | 18.4 | % | ||||||
Underlying diluted EPS(3) | $ | 1.09 | $ | 1.09 | $ | 6.39 | $ | 5.83 | ||||||
Organic measures(1) | ||||||||||||||
Organic commissions and fees growth | 4.8 | % | 3.6 | % | 3.3 | % | 3.8 | % | ||||||
Organic total expenses growth | 2.0 | % | 2.7 | % | 0.9 | % | 4.6 | % | ||||||
Organic operating margin | 16.8 | % | 16.0 | % | 19.5 | % | 18.0 | % |
(1) Please refer to the supplemental financial information attached to this press release for detailed definitions of
(2) In the second quarter 2015, the definition of Underlying Measures was modified to exclude the impact of M&A transaction-related costs. Prior period results, which include
(3) On
Willis Group Fourth Quarter 2015 Financial Results
Underlying diluted earnings per share, which excludes the items noted above, were
Revenues
Fourth quarter 2015 total reported commissions and fees of
Organic commissions and fees, which exclude both the impact of foreign currency movements and the net impact of acquisitions and disposals, grew 4.8%, led by strong growth in
Expenses
Total Expenses
On a reported basis, total expenses for
Underlying total expenses, which exclude restructuring costs, the litigation provision, foreign currency movements, and M&A transaction-related expenses, grew 8.5%. The majority of the increase was driven by additional salary-related expense and other incentives related to recent acquisitions.
Organic total expense growth, which further excludes the net impact of acquisitions and disposals, grew 2.0% compared to the prior year period, driven primarily by increases in incentive-based compensation and other operating expenses, partially offset by lower legal and communications costs.
Salaries, Benefits and Full-Time Equivalents
Underlying salaries and benefits grew 6.9%, driven by the net increase from acquisitions and disposals. Organic salaries and benefits grew 1.6%, as growth in incentive compensation was partially offset by lower salaries as a result of cost management initiatives.
Full-time equivalents, excluding the impact of acquisitions and disposals, increased by approximately 812, or 4.5%, compared to the fourth quarter of 2014, driven primarily by offshore hiring to build out the low-cost hubs as part of the Operational Improvement Program. This growth will be offset by eventual onshore reductions once the parallel run completes. Organic onshore full-time equivalents declined by 139, or 0.9%, compared to the prior year period.
Other Operating Expenses
Reported other operating expenses for
Underlying other operating expenses grew 8.5%. Included in this growth was the
Organic other operating expenses increased by 3.9%, primarily driven by increased travel and premises costs partially offset by decreases driven by cost management initiatives.
Operating Margin
Underlying operating margin, which excludes restructuring costs, litigation provisions, M&A transaction-related expenses and the net impact from foreign currency movements, was 15.7% in the fourth quarter of 2015, a decrease of 60 basis points compared to the fourth quarter 2014, driven primarily by higher acquisition related amortization expense.
Organic operating margin was 16.8% in the fourth quarter of 2015, an increase of 80 basis points from 16.0% in the prior year quarter. The increase reflects mid-single digit organic revenue growth combined with solid execution of
Taxes
The reported tax charge for
Willis Group Segment Highlights
Willis GB
Organic and underlying commissions and fees in Willis GB increased 8.3% and 9.4%, respectively, in the fourth quarter of 2015 compared with the fourth quarter of 2014.
The quarter’s performance reflects strong growth in Financial Lines, Property &
Organic commissions and fees in Willis CW&R decreased 3.7% in the fourth quarter of 2015 compared with the fourth quarter of 2014. The decline was primarily driven by business declines in Fine Arts & Jewelry as well as rate headwinds in Reinsurance.
The segment’s underlying commissions and fees grew 30.3%, favorably impacted by revenues primarily from
Organic commissions and fees in
The segment’s underlying commissions and fees increased 0.6%, as the factors noted above were partially offset by divestitures of several small, non-core businesses over the past 12 months.
Organic commissions and fees in
The segment’s underlying commissions and fees grew 11.4%, favorably impacted by recent acquisitions over the past 12 months.
Operational Improvement Program
Restructuring costs from the program were
Strategic M&A Update
On
Gras Savoye is the largest insurance broker in
For the year ended
Willis Group Twelve Month 2015 Financial Results
Reported net income, attributable to
Total reported commissions and fees were up 1.1% to
Reported operating income and reported operating margin were
Balance Sheet & Capital Management Highlights
As of
During the fourth quarter of 2015,
As a result of the
Total revenues were
Adjusted EBITDA for the second quarter of fiscal 2016 was
Net income attributable to common stockholders for the second quarter of fiscal 2016 was
Benefits
For the quarter, the Benefits segment had revenues of
Exchange Solutions
For the quarter, the Exchange Solutions segment had revenues of
Risk and Financial Services
For the quarter, the Risk and Financial Services segment had revenues of
Talent and Rewards
For the quarter, the Talent and Rewards segment had revenues of
For 2016,
Conference Call, Webcast and Slide Presentation
A conference call to discuss these results and outlook will be held on
A replay of the call will be available through
About
Willis Towers Watson Forward-Looking Statements
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these statements and other forward-looking statements in this document by words such as “may”, “will”, “would”, “expect”, “anticipate”, “believe”, “estimate”, “plan”, “intend”, “continue”, or similar words, expressions or the negative of such terms or other comparable terminology. These statements include, but are not limited to, the benefits of the business combination transaction involving
These factors include risks and uncertainties related to, among other things: changes in general economic, business and political conditions, including changes in the financial markets; consolidation in or conditions affecting the industries in which the company operates; any changes in the regulatory environment in which the company operates; the ability to successfully manage ongoing organizational changes; the ability of the company to successfully integrate the Towers Watson and Willis businesses, operations and employees, and realize anticipated growth, synergies and cost savings; the potential impact of the merger on relationships, including with employees, suppliers, customers and competitors; significant competition that the company faces and the potential for loss of market share and/or profitability; compliance with extensive government regulation; the company’s ability to make divestitures or acquisitions and its ability to integrate or manage such acquired businesses; expectations, intentions and outcomes relating to outstanding litigation; the risk the company would be required to increase its financial provision on the
Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions, and therefore also the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. In light of the significant uncertainties inherent in the forward-looking statements included in this document, our inclusion of this information is not a representation or guarantee by us that our objectives and plans will be achieved.
Our forward-looking statements speak only as of the date made and we will not update these forward-looking statements unless the securities laws require us to do so. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this document may not occur, and we caution you against unduly relying on these forward-looking statements.
Willis Towers Watson Non-GAAP Measures
In order to assist readers of our financial statements in understanding the core operating results that Willis Towers Watson’s management uses to evaluate the business and for financial planning,
Willis Towers Watson’s non-GAAP measures and their accompanying definitions are presented as follows:
Constant Currency Change - Represents the year over year change in revenues excluding the impact of foreign currency fluctuations. To calculate this impact, the prior year local currency results are first translated using the current year monthly average exchange rates. The change is calculated by comparing the adjusted prior year revenues to the current year as reported revenues for the same period.
Organic Change - excludes both the impact of fluctuations in foreign currency exchange rates, as described above, as well as the impact of acquisitions and divestitures.
Adjusted Operating Income - operating income adjusted for certain merger and acquisition related items of amortization of intangible assets, transaction and integration expenses and the fair value adjustment of deferred revenue and for restructuring costs and other non-recurring items.
Adjusted EBITDA - net income (attributable to common stockholders) adjusted for provision for income taxes, interest, net, depreciation and amortization, transaction and integration expenses and the fair value adjustment of deferred revenue and for restructuring costs and other non-recurring items.
Adjusted Net Income - net income (attributable to common stockholders) adjusted for certain tax-effected merger and acquisition related items of amortization of intangible assets, transaction and integration expenses and the fair value adjustment of deferred revenue and for restructuring costs and other non-recurring items.
Adjusted Diluted Earnings Per Share - diluted earnings per share adjusted for certain tax effected merger and acquisition related items of transaction and integration expenses, amortization of intangible assets and the fair value adjustment of deferred revenue and for restructuring costs and other non-recurring items.
These non-GAAP measures are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies. Non-GAAP measures should be considered in addition to, and not as a substitute for, the information contained within Willis Towers Watson’s financial statements.
Reconciliations of these measures presented in the Willis Towers Watson’s calendar year 2016 guidance are included in the supplemental earnings slides.
Willis Group Holdings Non-GAAP Supplemental Financial Information
This press release contains references to non-GAAP financial measures as defined in
We believe that investors' understanding of
Underlying commissions and fees, underlying revenues, underlying total expenses, underlying salaries and benefits, underlying other operating expenses, underlying operating income, underlying operating margin, underlying EBITDA, underlying net income and underlying earnings per diluted share (“Underlying measures”).
Underlying measures are calculated by excluding restructuring costs related to the Operational Improvement Program, impact from the devaluation of the Venezuelan Bolivar, certain litigation provisions, gains and losses on disposal of operations, remeasurement of previously held equity interest, non-recurring changes in the deferred tax valuation allowances, from the most directly comparable GAAP measures, and from second quarter 2015, underlying measures also exclude M&A transaction-related costs. Additionally, prior year GAAP measures have been rebased to current period exchange rates to eliminate the year over year impact of foreign currency movements. We believe that excluding such items provides a more complete and consistent comparative analysis of our results of operations.
Organic commissions and fees, revenues, organic total expenses, organic salaries and benefits, organic other operating expenses, organic operating income, organic operating margin and organic EBITDA (“Organic measures”).
Organic measures are calculated by further excluding the twelve month impact from acquisitions and disposals from our underlying measures. We believe that excluding these items provides a more complete and consistent comparative analysis of our results of operations.
Headcount as used in this press release refers to the number of full time equivalents (“FTE”).
In order to assist readers of our financial statements in understanding the core operating results that Towers Watson’s management uses to evaluate the business and for financial planning, Towers Watson presents the following non-GAAP measures: (1) Constant Currency Change, (2) Organic Change, (3) Adjusted EBITDA and (4) Adjusted Net Income. Towers Watson believes these measures are relevant and provide useful information widely used by analysts, investors and other interested parties in their industry to provide a baseline for evaluating and comparing operating results.
Towers Watson evaluates revenue on an as reported, constant currency and organic basis. Towers Watson believes providing constant currency and organic information provides valuable supplemental information regarding results, consistent with how Towers Watson evaluates their performance internally.
Towers Watson considers Adjusted EBITDA to be an important financial measure, which is used to internally evaluate and assess core operations, and benchmark operating results against competitors. Towers Watson uses Adjusted EBITDA to evaluate and measure awards made under their performance-based compensation plans. Adjusted EBITDA and Adjusted Net Income are important in illustrating what Towers Watson’s operating results would have been had Towers Watson not incurred any acquisition-related expenses.
Towers Watson’s non-GAAP measures and their accompanying definitions are presented as follows:
Constant Currency Change - Represents the year over year change in revenues excluding the impact of foreign currency fluctuations. To calculate this impact, the prior year local currency results are first translated using the current year monthly average exchange rates. The change is calculated by comparing the adjusted prior year revenues to the current year as reported revenues for the same period.
Organic Change - excludes both the impact of fluctuations in foreign currency exchange rates, as described above, as well as the impact of acquisitions and divestitures.
Adjusted EBITDA - net income (attributable to common stockholders) adjusted for provision for income taxes, interest, net, depreciation and amortization, transaction and integration expenses, and other non-operating income excluding income from variable interest entity.
Adjusted net income - net income (attributable to common stockholders) adjusted for certain tax-effected merger and acquisition related items of amortization of intangible assets and transaction and integration expenses, the tax-effected gain on the sale of the Human Resources Service Delivery business and the U.S. tax cost of foreign repatriation.
These non-GAAP measures are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies. Non-GAAP measures should be considered in addition to, and not as a substitute for, the information contained within Towers Watson’s financial statements.
Reconciliation of the As Reported Change to Constant Currency Change, the As Reported Change to Organic Change, Net income (attributable to common stockholders) to Adjusted EBITDA and Net income (attributable to common stockholders) to Adjusted Net Income are included in the accompanying tables to this press release.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(in millions, except per share data)
(Unaudited)
Three months ended December 31, |
Twelve months ended December 31, |
|||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Revenues | ||||||||||||||||
Commissions and fees | $ | 970 | $ | 939 | $ | 3,809 | $ | 3,767 | ||||||||
Investment income | 2 | 4 | 12 | 16 | ||||||||||||
Other income | 2 | 15 | 8 | 19 | ||||||||||||
Total revenues | 974 | 958 | 3,829 | 3,802 | ||||||||||||
Expenses | ||||||||||||||||
Salaries and benefits (including share-based compensation of $18 million, $10 million, $64 million, $52 million) | 608 | 600 | 2,306 | 2,314 | ||||||||||||
Other operating expenses | 283 | 165 | 799 | 659 | ||||||||||||
Depreciation expense | 25 | 22 | 95 | 92 | ||||||||||||
Amortization of intangible assets | 23 | 16 | 76 | 54 | ||||||||||||
Restructuring costs | 33 | 16 | 126 | 36 | ||||||||||||
Total expenses | 972 | 819 | 3,402 | 3,155 | ||||||||||||
Operating income | 2 | 139 | 427 | 647 | ||||||||||||
Other (income) expense, net | (29 | ) | (18 | ) | (55 | ) | (6 | ) | ||||||||
Interest expense | 39 | 34 | 142 | 135 | ||||||||||||
(Loss) income before income taxes and interest in earnings of associates | (8 | ) | 123 | 340 | 518 | |||||||||||
Income tax expense (benefit) | 4 | 35 | (33 | ) | 159 | |||||||||||
(Loss) income before interest in earnings of associates | (12 | ) | 88 | 373 | 359 | |||||||||||
Interest in (losses) earnings of associates, net of tax | (6 | ) | (5 | ) | 11 | 14 | ||||||||||
Net (loss) income | (18 | ) | 83 | 384 | 373 | |||||||||||
Less: net income attributable to noncontrolling interests | (6 | ) | (7 | ) | (11 | ) | (11 | ) | ||||||||
Net (loss) income attributable to Willis Group Holdings | $ | (24 | ) | $ | 76 | $ | 373 | $ | 362 |
CONDENSED CONSOLIDATED INCOME STATEMENTS
(in millions, except per share data)
(Unaudited)
Three months ended December 31, |
Twelve months ended December 31, |
|||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Earnings per Share - Basic and Diluted | ||||||||||||||||
Net (loss) income attributable to Willis Group Holdings plc shareholders: | ||||||||||||||||
— Basic | $ | (0.35 | ) | $ | 1.13 | $ | 5.49 | $ | 5.40 | |||||||
— Diluted | (0.35 | ) | 1.12 | 5.41 | 5.32 | |||||||||||
Average number of shares outstanding(1) | ||||||||||||||||
— Basic | 68 | 67 | 68 | 67 | ||||||||||||
— Diluted | 68 | 68 | 69 | 68 | ||||||||||||
Shares outstanding at December 31 | 69 | 67 | 69 | 67 |
(1) Immediately following the Merger, Willis effected a consolidation (i.e., a reverse stock split under Irish law) of Willis ordinary shares whereby every 2.6490 Willis ordinary shares were consolidated into one Willis ordinary share (the “Consolidation”). This effect has been retroactively applied to the current and prior periods.
SUMMARY DRAFT BALANCE SHEETS
(in millions) (unaudited)
December 31, 2015 |
December 31, 2014 |
|||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 532 | $ | 635 | ||||
Accounts receivable, net | 1,259 | 1,044 | ||||||
Fiduciary assets | 10,458 | 8,948 | ||||||
Other current assets | 255 | 212 | ||||||
Total current assets | 12,504 | 10,839 | ||||||
Non-current assets | ||||||||
Fixed assets, net | 563 | 483 | ||||||
Goodwill | 3,770 | 2,937 | ||||||
Other intangible assets, net | 1,107 | 450 | ||||||
Investments in associates | 13 | 169 | ||||||
Deferred tax assets | 111 | 19 | ||||||
Pension benefits asset | 617 | 314 | ||||||
Other non-current assets | 209 | 210 | ||||||
Total non-current assets | 6,390 | 4,582 | ||||||
Total assets | $ | 18,894 | $ | 15,421 | ||||
Liabilities and equity | ||||||||
Current liabilities | ||||||||
Fiduciary liabilities | $ | 10,458 | $ | 8,948 | ||||
Deferred revenue and accrued expenses | 752 | 619 | ||||||
Income taxes payable | 45 | 33 | ||||||
Short-term debt and current portion of long-term debt | 988 | 167 | ||||||
Other current liabilities | 558 | 444 | ||||||
Total current liabilities | 12,801 | 10,211 | ||||||
Non-current liabilities | ||||||||
Long-term debt | 2,278 | 2,130 | ||||||
Liability for pension benefits | 281 | 284 | ||||||
Deferred tax liabilities | 298 | 147 | ||||||
Provisions for liabilities | 295 | 194 | ||||||
Other non-current liabilities | 533 | 389 | ||||||
Total non-current liabilities | 3,685 | 3,144 | ||||||
Total liabilities | 16,486 | 13,355 | ||||||
Redeemable noncontrolling interest | 53 | 59 | ||||||
Total Willis Group Holdings stockholders' equity | 2,222 | 1,985 | ||||||
Noncontrolling interests | 133 | 22 | ||||||
Total equity | 2,355 | 2,007 | ||||||
Total liabilities and equity | $ | 18,894 | $ | 15,421 |
SUMMARY DRAFT CASH FLOW STATEMENTS
(in millions) (unaudited)
Three months ended December 31, |
Twelve months ended December 31, |
|||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Cash flows from operating activities | ||||||||||||||||
Net (loss) income | $ | (18 | ) | $ | 83 | $ | 384 | $ | 373 | |||||||
Adjustments to reconcile net income (loss) to total net cash provided by operating activities | — | 63 | 38 | 257 | ||||||||||||
Changes in operating assets and liabilities, net of effects from purchase of subsidiaries | 148 | 50 | (179 | ) | (153 | ) | ||||||||||
Net cash provided by operating activities | $ | 130 | $ | 196 | $ | 243 | $ | 477 | ||||||||
Net cash used in investing activities | $ | (595 | ) | $ | (159 | ) | $ | (943 | ) | $ | (276 | ) | ||||
Net cash provided by (used in) financing activities | $ | 547 | $ | (40 | ) | $ | 641 | $ | (323 | ) | ||||||
Increase (decrease) in cash and cash equivalents | 82 | (3 | ) | (59 | ) | (122 | ) | |||||||||
Effect of exchange rate changes on cash and cash equivalents | (16 | ) | (18 | ) | (44 | ) | (39 | ) | ||||||||
Cash and cash equivalents, beginning of period | 466 | 656 | 635 | 796 | ||||||||||||
Cash and cash equivalents, end of period | $ | 532 | $ | 635 | $ | 532 | $ | 635 |
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
1. Underlying and organic commissions and fees
The following tables reconcile reported commissions and fees growth to underlying and organic commissions and fees growth for the three and twelve months ended
Three months ended December 31, | ||||||||||||||||||||||
2015 | 2014 | % Change(1) |
Foreign currency movements |
Underlying commissions and fees growth |
Acquisitions and disposals |
Organic commissions and fees growth |
||||||||||||||||
Willis GB | $ | 186 | $ | 177 | 5.1 | % | (4.3 | )% | 9.4 | % | 1.1 | % | 8.3 | % | ||||||||
Willis Capital, Wholesale and Reinsurance | 142 | 110 | 29.1 | % | (1.2 | )% | 30.3 | % | 34.0 | % | (3.7 | )% | ||||||||||
Willis North America | 320 | 320 | — | % | (0.6 | )% | 0.6 | % | (1.3 | )% | 1.9 | % | ||||||||||
Willis International | 322 | 332 | (3.0 | )% | (14.4 | )% | 11.4 | % | 2.4 | % | 9.0 | % | ||||||||||
Total | $ | 970 | $ | 939 | 3.3 | % | (6.2 | )% | 9.5 | % | 4.7 | % | 4.8 | % | ||||||||
Twelve months ended December 31, | ||||||||||||||||||||||
2015 | 2014 | % Change(1) |
Foreign currency movements |
Underlying commissions and fees growth |
Acquisitions and disposals |
Organic commissions and fees growth |
||||||||||||||||
Willis GB | $ | 637 | $ | 662 | (3.8 | )% | (5.4 | )% | 1.6 | % | (0.2 | )% | 1.8 | % | ||||||||
Willis Capital, Wholesale and Reinsurance | 811 | 749 | 8.3 | % | (4.2 | )% | 12.5 | % | 11.5 | % | 1.0 | % | ||||||||||
Willis North America | 1,298 | 1,318 | (1.5 | )% | (0.4 | )% | (1.1 | )% | (3.5 | )% | 2.4 | % | ||||||||||
Willis International | 1,063 | 1,038 | 2.4 | % | (18.7 | )% | 21.1 | % | 13.5 | % | 7.6 | % | ||||||||||
Total | $ | 3,809 | $ | 3,767 | 1.1 | % | (6.5 | )% | 7.6 | % | 4.3 | % | 3.3 | % |
(1) Percentages may differ due to rounding.
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
2. Underlying and Organic total expenses, salaries and benefits and other operating expenses
The following tables reconcile total expenses, salaries and benefits and other operating expenses, respectively, the most directly comparable GAAP measures, to underlying and organic total expenses, underlying and organic salaries and benefits, and underlying and organic other operating expenses, for the three and twelve months ended December 31, 2015 and 2014:
Three months ended December 31, |
Twelve months ended December 31, |
||||||||||||||||||||
2015 | 2014 | % Change(1) | 2015 | 2014 | % Change(1) | ||||||||||||||||
Reported Total expenses | $ | 972 | $ | 819 | 18.7 | % | $ | 3,402 | $ | 3,155 | 7.8 | % | |||||||||
Excluding: | |||||||||||||||||||||
Restructuring costs | (33 | ) | (16 | ) | (126 | ) | (36 | ) | |||||||||||||
M&A transaction-related costs(2) | (48 | ) | (5 | ) | (84 | ) | (7 | ) | |||||||||||||
Litigation provision(3) | (70 | ) | — | (70 | ) | — | |||||||||||||||
Foreign currency movements(4) | — | (41 | ) | — | (197 | ) | |||||||||||||||
Underlying Total expenses | $ | 821 | $ | 757 | 8.5 | % | $ | 3,122 | $ | 2,915 | 7.1 | % | |||||||||
Net expenses from acquisitions and disposals | (53 | ) | (4 | ) | (210 | ) | (29 | ) | |||||||||||||
Organic Total expenses | $ | 768 | $ | 753 | 2.0 | % | $ | 2,912 | $ | 2,886 | 0.9 | % |
Three months ended December 31, |
Twelve months ended December 31, |
||||||||||||||||||||
2015 | 2014 | % Change(1) | 2015 | 2014 | % Change(1) | ||||||||||||||||
Reported Salaries and benefits | $ | 608 | $ | 600 | 1.3 | % | $ | 2,306 | $ | 2,314 | (0.3 | )% | |||||||||
Excluding: | |||||||||||||||||||||
M&A transaction-related costs(2) | (1 | ) | — | (3 | ) | — | |||||||||||||||
Foreign currency movements(4) | — | (32 | ) | — | (148 | ) | |||||||||||||||
Underlying Salaries and benefits | $ | 607 | $ | 568 | 6.9 | % | $ | 2,303 | $ | 2,166 | 6.3 | % | |||||||||
Net expenses from acquisitions and disposals | (34 | ) | (4 | ) | (134 | ) | (25 | ) | |||||||||||||
Organic Total Salaries and benefits | $ | 573 | $ | 564 | 1.6 | % | $ | 2,169 | $ | 2,141 | 1.3 | % |
Three months ended December 31, |
Twelve months ended December 31, |
||||||||||||||||||||
2015 | 2014 | % Change(1) | 2015 | 2014 | % Change(1) | ||||||||||||||||
Reported Other operating expenses | $ | 283 | $ | 165 | 71.5 | % | $ | 799 | $ | 659 | 21.2 | % | |||||||||
Excluding: | |||||||||||||||||||||
M&A transaction-related costs(2) | (47 | ) | (5 | ) | (81 | ) | (7 | ) | |||||||||||||
Litigation provision(3) | (70 | ) | — | (70 | ) | — | |||||||||||||||
Foreign currency movements(4) | — | (7 | ) | — | (42 | ) | |||||||||||||||
Underlying Other operating expenses | $ | 166 | $ | 153 | 8.5 | % | $ | 648 | $ | 610 | 6.2 | % | |||||||||
Net expenses from acquisitions and disposals | (7 | ) | — | (40 | ) | (4 | ) | ||||||||||||||
Organic Other operating expenses | $ | 159 | $ | 153 | 3.9 | % | $ | 608 | $ | 606 | 0.3 | % |
(1) Percentages may differ due to rounding.
(2) In the second quarter 2015, the definition of underlying measures was modified to exclude the impact from M&A transaction-related costs. Prior period results, which include
(3) In light of our review of current facts and circumstances relating to ongoing non-ordinary course litigation arising out of Willis' operations, particularly the
(4) For prior periods, underlying measures have been rebased to current period exchange rates to remove the impact of foreign currency movements when comparing periods.
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
3. Underlying and organic revenue, operating income, and operating margin
The following table reconciles total revenues and operating income, respectively the most directly comparable GAAP measures, to underlying and organic revenue, and underlying and organic operating income, for the three and twelve months ended December 31, 2015 and 2014:
Three months ended December 31, |
Twelve months ended December 31, |
||||||||||||||||||||
2015 | 2014 | % Change(1) |
2015 | 2014 | % Change(1) |
||||||||||||||||
Total revenues | $ | 974 | $ | 958 | 1.7 | % | $ | 3,829 | $ | 3,802 | 0.7 | % | |||||||||
Excluding: | |||||||||||||||||||||
Foreign currency movements(4) | — | (54 | ) | — | (230 | ) | |||||||||||||||
Underlying revenue | $ | 974 | $ | 904 | 7.7 | % | $ | 3,829 | $ | 3,572 | 7.2 | % | |||||||||
Net revenue from acquisitions and disposals | (51 | ) | (8 | ) | (211 | ) | (54 | ) | |||||||||||||
Organic revenue | $ | 923 | $ | 896 | 3.0 | % | $ | 3,618 | $ | 3,518 | 2.8 | % | |||||||||
Operating income | 2 | 139 | (98.6 | )% | 427 | 647 | (34.0 | )% | |||||||||||||
Excluding: | |||||||||||||||||||||
Restructuring costs | 33 | 16 | 126 | 36 | |||||||||||||||||
M&A transaction-related costs(2) | 48 | 5 | 84 | 7 | |||||||||||||||||
Litigation provision(3) | 70 | — | 70 | — | |||||||||||||||||
Foreign currency movements(4) | — | (13 | ) | — | (33 | ) | |||||||||||||||
Underlying operating income | $ | 153 | $ | 147 | 4.1 | % | $ | 707 | $ | 657 | 7.6 | % | |||||||||
Net operating loss (income) from acquisitions and disposals | 2 | (4 | ) | (1 | ) | (25 | ) | ||||||||||||||
Organic operating income | $ | 155 | $ | 143 | 8.4 | % | $ | 706 | $ | 632 | 11.7 | % | |||||||||
Operating margin, or operating income as a percentage of total revenues | 0.2 | % | 14.5 | % | 11.2 | % | 17.0 | % | |||||||||||||
Underlying operating margin, or underlying operating income as a percentage of total underlying revenues | 15.7 | % | 16.3 | % | 18.5 | % | 18.4 | % | |||||||||||||
Organic operating margin, or organic operating income as a percentage of total organic revenues | 16.8 | % | 16.0 | % | 19.5 | % | 18.0 | % |
(1) Percentages may differ due to rounding.
(2) In the second quarter 2015, the definition of underlying measures was modified to exclude the impact from M&A transaction-related costs. Prior period results, which include
(3) In light of our review of current facts and circumstances relating to ongoing non-ordinary course litigation arising out of Willis' operations, particularly the
(4) For prior periods, underlying measures have been rebased to current period exchange rates to remove the impact of foreign currency movements when comparing periods.
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
4. Underlying and organic EBITDA
The following tables reconcile net income(loss) attributable to
Three months ended December 31, |
Twelve months ended December 31, |
||||||||||||||||||||||
2015 | 2014 | % Change(1) |
2015 | 2014 | % Change(1) |
||||||||||||||||||
Net (loss) income attributable to Willis Group Holdings plc | $ | (24 | ) | $ | 76 | (131.6 | )% | $ | 373 | $ | 362 | 3 | % | ||||||||||
Excluding: | |||||||||||||||||||||||
Net income attributable to non-controlling interests | 6 | 7 | 11 | 11 | |||||||||||||||||||
Interest in losses (earnings) of associates, net of tax | 6 | 5 | (11 | ) | (14 | ) | |||||||||||||||||
Income taxes | 4 | 35 | (33 | ) | 159 | ||||||||||||||||||
Interest expense | 39 | 34 | 142 | 135 | |||||||||||||||||||
Other (income) expense, net | (29 | ) | (18 | ) | (55 | ) | (6 | ) | |||||||||||||||
Depreciation | 25 | 22 | 95 | 92 | |||||||||||||||||||
Amortization | 23 | 16 | 76 | 54 | |||||||||||||||||||
EBITDA | $ | 50 | $ | 177 | (71.8 | )% | $ | 598 | $ | 793 | (24.6 | )% | |||||||||||
Excluding: | |||||||||||||||||||||||
Restructuring costs | 33 | 16 | 126 | 36 | |||||||||||||||||||
M&A transaction-related costs(2) | 48 | 5 | 84 | 7 | |||||||||||||||||||
Litigation provision(3) | 70 | — | 70 | — | |||||||||||||||||||
Foreign currency movements(4) | — | (15 | ) | — | (40 | ) | |||||||||||||||||
Underlying EBITDA | $ | 201 | $ | 183 | 9.8 | % | $ | 878 | $ | 796 | 10.3 | % | |||||||||||
EBITDA from acquisitions and disposals | (10 | ) | (4 | ) | (37 | ) | (25 | ) | |||||||||||||||
Organic EBITDA | $ | 191 | $ | 179 | 6.7 | % | $ | 841 | $ | 771 | 9.1 | % | |||||||||||
EBITDA, or EBITDA as a percentage of total revenues | 5.1 | % | 18.5 | % | 15.6 | % | 20.9 | % | |||||||||||||||
Underlying EBITDA margin, or underlying EBITDA as a percentage of underlying revenues | 20.6 | % | 20.2 | % | 22.9 | % | 22.3 | % | |||||||||||||||
Organic EBITDA margin, or underlying EBITDA as a percentage of organic revenues | 20.7 | % | 20.0 | % | 23.2 | % | 21.9 | % | |||||||||||||||
(1) Percentages may differ due to rounding.
(2) In the second quarter 2015, the definition of underlying measures was modified to exclude the impact from M&A transaction-related costs. Prior period results, which include
(3) In light of our review of current facts and circumstances relating to ongoing non-ordinary course litigation arising out of Willis' operations, particularly the
(4) For prior periods, underlying measures have been rebased to current period exchange rates to remove the impact of foreign currency movements when comparing periods.
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
5. Underlying net income and earnings per diluted share
The following tables reconcile net (loss) income attributable to
Per diluted share | |||||||||||||||||||||
Three months ended December 31, |
Three months ended December 31, |
||||||||||||||||||||
2015 | 2014 | % Change(1) |
2015 | 2014 | % Change(1) |
||||||||||||||||
Net (loss) income attributable to Willis Group Holdings plc | $ | (24 | ) | $ | 76 | n/m | $ | (0.35 | ) | $ | 1.12 | n/m | |||||||||
Excluding: | |||||||||||||||||||||
Restructuring costs, net of tax ($2, $5) | 31 | 11 | 0.45 | 0.16 | |||||||||||||||||
M&A transaction-related costs, net of tax ($4, $nil)(2) | 44 | 5 | 0.64 | 0.07 | |||||||||||||||||
Litigation provision, net of tax ($28, $nil)(3) | 42 | — | 0.61 | — | |||||||||||||||||
Venezuela currency devaluation | 27 | — | 0.39 | — | |||||||||||||||||
Deferred tax valuation allowance(4) | 14 | — | 0.20 | — | |||||||||||||||||
Gain on remeasurement of equity interests, net of tax ($nil, $nil) | (59 | ) | — | (0.85 | ) | — | |||||||||||||||
Net gain on disposal of operations ($nil, $9) | — | (4 | ) | — | (0.06 | ) | |||||||||||||||
Foreign currency movements(5) | — | (13 | ) | — | (0.20 | ) | |||||||||||||||
Underlying net income | $ | 75 | $ | 75 | — | % | $ | 1.09 | $ | 1.09 | — | % | |||||||||
Average diluted shares outstanding | 69 | 68 |
Per diluted share | |||||||||||||||||||||
Twelve months ended December 31, |
Twelve months ended December 31, |
||||||||||||||||||||
2015 | 2014 | % Change(1) |
2015 | 2014 | % Change(1) |
||||||||||||||||
Net Income attributable to Willis Group Holdings plc | $ | 373 | $ | 362 | 3.0 | % | $ | 5.41 | $ | 5.32 | 1.7 | % | |||||||||
Excluding: | |||||||||||||||||||||
Restructuring costs, net of tax ($28, $8) | 98 | 28 | 1.42 | 0.41 | |||||||||||||||||
M&A transaction-related costs, net of tax ($10, $nil)(2) | 74 | 7 | 1.07 | 0.10 | |||||||||||||||||
Litigation provision, net of tax ($28, $nil)(3) | 42 | — | 0.61 | — | |||||||||||||||||
Venezuela currency devaluation, net of tax ($nil, $1) | 30 | 13 | 0.44 | 0.19 | |||||||||||||||||
Deferred tax valuation allowance(4) | (96 | ) | 21 | (1.40 | ) | 0.31 | |||||||||||||||
Gain on remeasurement of equity interests, net of tax ($nil, $nil) | (59 | ) | — | (0.85 | ) | — | |||||||||||||||
Net gain on disposal of operations ($4, $10) | (21 | ) | (2 | ) | (0.31 | ) | (0.03 | ) | |||||||||||||
Foreign currency movements(5) | — | (32 | ) | — | (0.47 | ) | |||||||||||||||
Underlying net income | $ | 441 | $ | 397 | 11.1 | % | $ | 6.39 | $ | 5.83 | 9.6 | % | |||||||||
Average diluted shares outstanding | 69 | 68 |
(1) Percentages may differ due to rounding.
(2) In the second quarter 2015, the definition of underlying measures was modified to exclude the impact from M&A transaction-related costs. Prior period results, which include
(3) In light of our review of current facts and circumstances relating to ongoing non-ordinary course litigation arising out of Willis' operations, particularly the
(4) The
(5) For prior periods, underlying measures have been rebased to current period exchange rates to remove the impact of foreign currency movements when comparing periods.
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
6. Operational Improvement Program restructuring costs
By segment:
Twelve months ended December 31, 2014 |
Three months ended December 31, 2015 |
Year to date December 31, 2015 |
Total Cumulative Restructuring Costs |
||||||||||||
Willis GB | $ | 10 | $ | 2 | $ | 27 | $ | 37 | |||||||
Willis Capital, Wholesale and Reinsurance | 1 | 1 | 9 | 10 | |||||||||||
Willis North America | 3 | 9 | 31 | 34 | |||||||||||
Willis International | 5 | 9 | 26 | 31 | |||||||||||
Corporate & other | 17 | 12 | 33 | 50 | |||||||||||
Total restructuring costs | $ | 36 | $ | 33 | $ | 126 | $ | 162 |
By type of restructuring cost:
Twelve months ended December 31, 2014 |
Three months ended December 31, 2015 |
Year to date December 31, 2015 |
Total Cumulative Restructuring Costs |
||||||||||||
Termination benefits | $ | 16 | $ | 2 | $ | 36 | $ | 52 | |||||||
Professional services & program staff costs | 20 | 31 | 90 | 110 | |||||||||||
Total restructuring costs | $ | 36 | $ | 33 | $ | 126 | $ | 162 |
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
7. Condensed consolidated income statements by quarter
2014 | 2015 | ||||||||||||||||||||||||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | FY | Q1 | Q2 | Q3 | Q4 | FY | ||||||||||||||||||||||||||||||||
Revenues | |||||||||||||||||||||||||||||||||||||||||
Commissions and fees | $ | 1,090 | $ | 930 | $ | 808 | $ | 939 | $ | 3,767 | $ | 1,081 | $ | 917 | $ | 841 | $ | 970 | $ | 3,809 | |||||||||||||||||||||
Investment income | 4 | 4 | 4 | 4 | 16 | 3 | 3 | 4 | 2 | 12 | |||||||||||||||||||||||||||||||
Other income | 3 | 1 | — | 15 | 19 | 3 | 2 | 1 | 2 | 8 | |||||||||||||||||||||||||||||||
Total revenues | 1097 | 935 | 812 | 958 | 3,802 | 1,087 | 922 | 846 | 974 | 3,829 | |||||||||||||||||||||||||||||||
Expenses | |||||||||||||||||||||||||||||||||||||||||
Salaries and benefits | 570 | 575 | 569 | 600 | 2,314 | 567 | 561 | 570 | 608 | 2,306 | |||||||||||||||||||||||||||||||
Other operating expenses | 165 | 173 | 156 | 165 | 659 | 160 | 179 | 177 | 283 | 799 | |||||||||||||||||||||||||||||||
Depreciation expense | 23 | 24 | 23 | 22 | 92 | 22 | 23 | 25 | 25 | 95 | |||||||||||||||||||||||||||||||
Amortization of intangible assets | 13 | 12 | 13 | 16 | 54 | 14 | 16 | 23 | 23 | 76 | |||||||||||||||||||||||||||||||
Restructuring costs | — | 3 | 17 | 16 | 36 | 31 | 38 | 24 | 33 | 126 | |||||||||||||||||||||||||||||||
Total expenses | 771 | 787 | 778 | 819 | 3,155 | 794 | 817 | 819 | 972 | 3,402 | |||||||||||||||||||||||||||||||
Operating income | 326 | 148 | 34 | 139 | 647 | 293 | 105 | 27 | 2 | 427 | |||||||||||||||||||||||||||||||
Other expense (income), net | — | 3 | 9 | (18 | ) | (6 | ) | 6 | (23 | ) | (9 | ) | (29 | ) | (55 | ) | |||||||||||||||||||||||||
Interest expense | 32 | 35 | 34 | 34 | 135 | 33 | 35 | 35 | 39 | 142 | |||||||||||||||||||||||||||||||
Income (loss) before income taxes and interest in earnings (losses) of associates | 294 | 110 | (9 | ) | 123 | 518 | 254 | 93 | 1 | (8 | ) | 340 | |||||||||||||||||||||||||||||
Income tax expense (benefit) | 63 | 59 | 2 | 35 | 159 | 56 | 19 | (112 | ) | 4 | (33 | ) | |||||||||||||||||||||||||||||
Income (loss) before interest in earnings (losses) of associates | 231 | 51 | (11 | ) | 88 | 359 | 198 | 74 | 113 | (12 | ) | 373 | |||||||||||||||||||||||||||||
Interest in earnings (losses) of associates, net of tax | 19 | (3 | ) | 3 | (5 | ) | 14 | 16 | (2 | ) | 3 | (6 | ) | 11 | |||||||||||||||||||||||||||
Net income (loss) | 250 | 48 | (8 | ) | 83 | 373 | 214 | 72 | 116 | (18 | ) | 384 | |||||||||||||||||||||||||||||
Net (income) loss attributable to non-controlling interests | (4 | ) | (1 | ) | 1 | (7 | ) | (11 | ) | (4 | ) | (2 | ) | 1 | (6 | ) | (11 | ) | |||||||||||||||||||||||
Net income (loss) attributable to Willis group Holdings | $ | 246 | $ | 47 | $ | (7 | ) | $ | 76 | $ | 362 | $ | 210 | $ | 70 | $ | 117 | $ | (24 | ) | $ | 373 | |||||||||||||||||||
Diluted earnings per share | |||||||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to Willis Group Holdings shareholders | $ | 3.57 | $ | 0.68 | $ | (0.10 | ) | $ | 1.12 | $ | 5.32 | $ | 3.04 | $ | 1.01 | $ | 1.70 | $ | (0.35 | ) | $ | 5.41 | |||||||||||||||||||
Average number of shares outstanding | |||||||||||||||||||||||||||||||||||||||||
- Diluted | 69 | 69 | 67 | 68 | 68 | 69 | 69 | 69 | 68 | 69 |
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
8. Segment Information by Quarter
2014 | 2015 | ||||||||||||||||||||||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | FY | Q1 | Q2 | Q3 | Q4 | FY | ||||||||||||||||||||||||||||||
Commissions and fees | |||||||||||||||||||||||||||||||||||||||
Willis GB | $ | 150 | $ | 187 | $ | 148 | $ | 177 | $ | 662 | $ | 142 | $ | 170 | $ | 139 | $ | 186 | $ | 637 | |||||||||||||||||||
Willis CWR | 303 | 192 | 144 | 110 | 749 | 296 | 190 | 183 | 142 | 811 | |||||||||||||||||||||||||||||
Willis North America | 354 | 323 | 321 | 320 | 1,318 | 356 | 314 | 308 | 320 | 1,298 | |||||||||||||||||||||||||||||
Willis International | 283 | 228 | 195 | 332 | 1,038 | 287 | 243 | 211 | 322 | 1,063 | |||||||||||||||||||||||||||||
Total commissions and fees | $ | 1,090 | $ | 930 | $ | 808 | $ | 939 | $ | 3,767 | $ | 1,081 | $ | 917 | $ | 841 | $ | 970 | $ | 3,809 | |||||||||||||||||||
Total Revenues | |||||||||||||||||||||||||||||||||||||||
Willis GB | $ | 153 | $ | 190 | $ | 149 | $ | 177 | $ | 669 | $ | 143 | $ | 171 | $ | 141 | $ | 186 | $ | 641 | |||||||||||||||||||
Willis CWR | 304 | 193 | 145 | 124 | 766 | 297 | 191 | 184 | 143 | 815 | |||||||||||||||||||||||||||||
Willis North America | 355 | 323 | 322 | 323 | 1,323 | 359 | 316 | 309 | 321 | 1,305 | |||||||||||||||||||||||||||||
Willis International | 285 | 229 | 196 | 334 | 1,044 | 288 | 244 | 212 | 324 | 1,068 | |||||||||||||||||||||||||||||
Total Revenues | $ | 1,097 | $ | 935 | $ | 812 | $ | 958 | $ | 3,802 | $ | 1,087 | $ | 922 | $ | 846 | $ | 974 | $ | 3,829 | |||||||||||||||||||
Operating income | |||||||||||||||||||||||||||||||||||||||
Willis GB | $ | 22 | $ | 57 | $ | 21 | $ | 48 | $ | 148 | $ | 21 | $ | 39 | $ | 24 | $ | 59 | $ | 143 | |||||||||||||||||||
Willis CWR | 168 | 63 | 9 | (16 | ) | 224 | 153 | 36 | 9 | (40 | ) | 158 | |||||||||||||||||||||||||||
Willis North America | 83 | 47 | 45 | 57 | 232 | 78 | 32 | 34 | 43 | 187 | |||||||||||||||||||||||||||||
Willis International | 84 | 23 | (10 | ) | 98 | 195 | 70 | 19 | (12 | ) | 88 | 165 | |||||||||||||||||||||||||||
Corporate and other(a) | (31 | ) | (42 | ) | (31 | ) | (48 | ) | (152 | ) | (29 | ) | (21 | ) | (28 | ) | (148 | ) | (226 | ) | |||||||||||||||||||
Total operating income | $ | 326 | $ | 148 | $ | 34 | $ | 139 | $ | 647 | $ | 293 | $ | 105 | $ | 27 | $ | 2 | $ | 427 | |||||||||||||||||||
Organic commissions and fees growth | |||||||||||||||||||||||||||||||||||||||
Willis GB | (6.3 | )% | 6.9 | % | (5.1 | )% | (2.2 | )% | (1.5 | )% | 1.1 | % | (2.3 | )% | (0.7 | )% | 8.3 | % | 1.8 | % | |||||||||||||||||||
Willis CWR | 6.3 | % | 2.7 | % | 3.6 | % | 2.8 | % | 4.3 | % | 1.3 | % | (2.3 | )% | 8.8 | % | (3.7 | )% | 1.0 | % | |||||||||||||||||||
Willis North America | 5.4 | % | 3.5 | % | 4.2 | % | (1.8 | )% | 2.7 | % | 4.7 | % | 2.5 | % | — | % | 1.9 | % | 2.4 | % | |||||||||||||||||||
Willis International | 7.2 | % | 6.1 | % | 5.6 | % | 15.0 | % | 8.8 | % | 5.3 | % | 7.1 | % | 8.6 | % | 9.0 | % | 7.6 | % | |||||||||||||||||||
Total organic commissions and fees growth | 4.2 | % | 4.5 | % | 2.5 | % | 3.6 | % | 3.8 | % | 3.4 | % | 1.6 | % | 3.3 | % | 4.8 | % | 3.3 | % | |||||||||||||||||||
Operating margin | |||||||||||||||||||||||||||||||||||||||
Willis GB | 14.4 | % | 30.0 | % | 14.1 | % | 27.1 | % | 22.1 | % | 14.9 | % | 23.1 | % | 17.0 | % | 31.7 | % | 22.3 | % | |||||||||||||||||||
Willis CWR | 55.3 | % | 32.6 | % | 6.2 | % | (12.9 | )% | 29.2 | % | 51.7 | % | 19.3 | % | 4.9 | % | (28.0 | )% | 19.4 | % | |||||||||||||||||||
Willis North America | 23.4 | % | 14.6 | % | 14.0 | % | 17.6 | % | 17.5 | % | 21.6 | % | 10.2 | % | 11.0 | % | 13.4 | % | 14.3 | % | |||||||||||||||||||
Willis International | 29.5 | % | 10.0 | % | (5.1 | )% | 29.3 | % | 18.7 | % | 24.4 | % | 7.6 | % | (5.7 | )% | 27.2 | % | 15.4 | % | |||||||||||||||||||
Total operating margin | 29.7 | % | 15.8 | % | 4.2 | % | 14.5 | % | 17.0 | % | 26.9 | % | 11.4 | % | 3.2 | % | 0.2 | % | 11.2 | % |
(a) Corporate and other includes certain leadership, project and other costs relating to group functions and the non-servicing or financing elements of the defined benefit pension scheme cost (income).
Towers Watson & Co.
SUPPLEMENTAL FINANCIAL INFORMATION
(in thousands) (unaudited)
9.
Segment Revenue:
Segment Revenue | Components of Revenue Change | ||||||||||||||||||||||||||
Three months ended December 31, |
As Reported | Currency | Constant Currency | Acquisitions | Organic | ||||||||||||||||||||||
2015 | 2014 | Change | Impact | Change | Divestitures | Change | |||||||||||||||||||||
Benefits | $ | 467,378 | $ | 488,453 | (4 | )% | (4 | )% | —% | —% | —% | ||||||||||||||||
Exchange Solutions | 132,497 | 93,924 | 41 | % | —% | 41 | % | 8 | % | 33 | % | ||||||||||||||||
Risk & Financial Services | 144,664 | 154,278 | (6 | )% | (5 | )% | (1 | )% | 1 | % | (2 | )% | |||||||||||||||
Talent & Rewards | 174,826 | 183,973 | (5 | )% | (5 | )% | —% | (2 | )% | 2 | % | ||||||||||||||||
Reportable Segments | $ | 919,365 | $ | 920,628 | |||||||||||||||||||||||
Components of Revenue Change | |||||||||||||||||||||||||||
Six months ended December 31, |
As Reported | Currency | Constant Currency | Acquisitions | Organic | ||||||||||||||||||||||
2015 | 2014 | Change | Impact | Change | Divestitures | Change | |||||||||||||||||||||
Benefits | $ | 915,402 | $ | 954,040 | (4 | )% | (4 | )% | —% | —% | —% | ||||||||||||||||
Exchange Solutions | 250,988 | 180,206 | 39 | % | —% | 39 | % | 8 | % | 31 | % | ||||||||||||||||
Risk & Financial Services | 282,387 | 302,304 | (7 | )% | (7 | )% | —% | 1 | % | (1 | )% | ||||||||||||||||
Talent & Rewards | 335,117 | 337,267 | (1 | )% | (5 | )% | 4 | % | (2 | )% | 6 | % | |||||||||||||||
Reportable Segments | $ | 1,783,894 | $ | 1,773,817 |
Reconciliation of Reportable Segment Revenue to Consolidated Revenue:
Three months ended December 31, | Six months ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Reportable Segments | $ | 919,365 | $ | 920,628 | $ | 1,783,894 | $ | 1,773,817 | |||||||
Reimbursable Expenses and Other | 30,250 | 37,294 | 61,342 | 62,212 | |||||||||||
Consolidated Revenues | $ | 949,615 | $ | 957,922 | $ | 1,845,236 | $ | 1,836,029 |
Reconciliation of As Reported Revenue change to Constant Currency change and Organic Change:
Components of Revenue Change | |||||||||||||||||||||||||||
Revenue | As Reported | Currency | Constant Currency | Acquisitions | Organic | ||||||||||||||||||||||
2015 | 2014 | Change | Impact | Change | Divestitures | Change | |||||||||||||||||||||
Three months ended December 31, | $ | 949,615 | $ | 957,922 | (1 | )% | (4 | )% | 3 | % | —% | 3 | % | ||||||||||||||
Six months ended December 31, | 1,845,236 | 1,836,029 | 1 | % | (4 | )% | 5 | % | 1 | % | 4 | % |
Towers Watson & Co.
SUPPLEMENTAL FINANCIAL INFORMATION
(in thousands) (unaudited)
9.
Segment Net Operating Income:
Three months ended December 31, | Six months ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Benefits | $ | 167,550 | $ | 175,023 | $ | 319,010 | $ | 330,782 | |||||||
Exchange Solutions | 20,045 | 12,462 | 41,561 | 26,474 | |||||||||||
Risk & Financial Services | 36,754 | 41,744 | 70,256 | 77,305 | |||||||||||
Talent & Rewards | 63,903 | 67,568 | 111,368 | 104,411 | |||||||||||
Reportable Segments | $ | 288,252 | $ | 296,797 | $ | 542,195 | $ | 538,972 |
Reconciliation of Reportable Segment Net Operating Income to Income from Operations:
Three months ended December 31, | Six months ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Reportable Segments | $ | 288,252 | $ | 296,797 | $ | 542,195 | $ | 538,972 | |||||||
Differences in Allocation Methods | (5,644 | ) | 11,672 | 4,147 | 27,384 | ||||||||||
Amortization of Intangible Assets | (23,276 | ) | (17,279 | ) | (40,144 | ) | (34,816 | ) | |||||||
Transaction and Integration Expenses | (80,801 | ) | - | (90,131 | ) | - | |||||||||
Stock-Based Compensation | (5,946 | ) | (5,738 | ) | (8,411 | ) | (11,290 | ) | |||||||
Discretionary Compensation | (81,493 | ) | (111,015 | ) | (182,862 | ) | (203,379 | ) | |||||||
Payroll Tax on Discretionary Compensation | (8,709 | ) | (6,327 | ) | (14,327 | ) | (11,846 | ) | |||||||
Other, net | (11,691 | ) | (1,100 | ) | (10,374 | ) | (12,017 | ) | |||||||
Income from Operations | $ | 70,693 | $ | 167,010 | $ | 200,093 | $ | 293,008 |
Towers Watson & Co.
SUPPLEMENTAL FINANCIAL INFORMATION
(in thousands) (unaudited)
9.
Reconciliation of Net Income (attributable to common stockholders) to Adjusted Net Income (attributable to common stockholders):
Three months ended December 31, | Six months ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net Income (attributable to common stockholders) | $ | 11,211 | $ | 110,176 | $ | 134,593 | $ | 191,734 | |||||||
Adjusted for certain items: | |||||||||||||||
Amortization of intangible assets | 16,304 | 11,507 | 27,376 | 22,932 | |||||||||||
Transaction and integration expenses including severance | 55,285 | — | 61,543 | — | |||||||||||
Gain on sale of HRSD business | — | — | (37,154 | ) | — | ||||||||||
US Tax Cost of Foreign Repatriation | 36,817 | — | 36,817 | — | |||||||||||
Adjusted Net Income (attributable to common stockholders) | $ | 119,617 | $ | 121,683 | $ | 223,175 | $ | 214,666 |
The adjustments to net income attributable to common stockholders are net of tax. In calculating the net of tax amounts, the effective tax rates applied were as follows:
Three months ended December 31, | Six months ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Amortization of intangible assets | 29.95 | % | 33.41 | % | 31.81 | % | 34.13 | % | |||||||
Transaction and integration expenses including severance | 31.58 | % | n/a | 31.72 | % | n/a | |||||||||
Gain on sale of HRSD business | n/a | n/a | 32.92 | % | n/a |
Reconciliation of Net Income (attributable to common stockholders) to Adjusted EBITDA
Three months ended December 31, | Six months ended December 31, | ||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||||||
Net Income (attributable to common stockholders) | $ | 11,211 | $ | 110,176 | $ | 134,593 | $ | 191,734 | |||||||||||||||
Provision for Income Taxes | 55,653 | 55,372 | 116,211 | 99,434 | |||||||||||||||||||
Interest, net | 2,159 | 1,292 | 3,039 | 2,557 | |||||||||||||||||||
Depreciation and Amortization | 53,752 | 44,107 | 97,944 | 88,976 | |||||||||||||||||||
Transaction and Integration Expenses | 80,801 | — | 90,131 | — | |||||||||||||||||||
Other Non-Operating Income (a) | 1,286 | (34 | ) | (54,135 | ) | (865 | ) | ||||||||||||||||
Adjusted EBITDA | $ | 204,862 | $ | 210,913 | $ | 387,783 | $ | 381,836 | |||||||||||||||
Adjusted EBITDA Margin | 21.6 | % | 22.0 | % | 21.0 | % | 20.8 | % |
(a) Other non-operating income includes income from affiliates and other non-operating income including a gain on the sale of the Human Resources Service Delivery (HRSD) business of
Investors:Aida Sukys +1 703-258-8033 Email: Aida.Sukys@WillisTowersWatson.comMatt Rohrmann +1 212-915-8180 Email: Matt.Rohrmann@WillisTowersWatson.com Media:Juliet Massey +44 7984 156 739 Email: Juliet.Massey@WillisTowersWatson.com