- Revenues increased 2% over prior year first quarter (7% constant currency)
-
Adjusted Diluted EPS of
$1.49 , increase of 13% over prior year first quarter -
Diluted EPS of
$1.78 , increase of 53% over prior year first quarter
Total revenues were
Adjusted EBITDA for the first quarter of fiscal 2016 was
Net income attributable to controlling interests for the first quarter
of fiscal 2016 was
“I’m very pleased with our strong first quarter results and the client
focus our associates continue to exhibit while integration planning is
well underway,” said
First Quarter Company Highlights
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
Outlook for Fiscal 2016
This guidance excludes any impact of the proposed merger with Willis.
For fiscal year 2016, the company continues to expect mid-single digit constant currency revenue growth and adjusted EBITDA of around 21%.
Conference Call
The company will host a live webcast and conference call to discuss the
financial results for the first quarter of fiscal 2016. It will be held
on
About
Non-U.S. GAAP Measures
In order to assist readers of our financial statements in understanding the core operating results that the Company’s management uses to evaluate the business and for financial planning, we present the following non-U.S. GAAP measures: (1) Constant Currency Change, (2) Organic Change, (3) Adjusted EBITDA, (4) Adjusted Diluted Earnings Per Share, (5) Adjusted net income and (6) Free Cash Flow. The Company believes these measures are relevant and provide useful information widely used by analysts, investors and other interested parties in our industry to provide a baseline for evaluating and comparing our operating results.
We evaluate our revenue on an as reported, constant currency, and an organic basis. We believe providing constant currency and organic information provides valuable supplemental information regarding our results, consistent with how we evaluate our performance internally.
We consider Adjusted EBITDA and Adjusted Diluted Earnings Per Share to be important financial measures, which we use to internally evaluate and assess our core operations, and benchmark our operating results against our competitors. We use Adjusted EBITDA to evaluate and measure awards made under our performance-based compensation plans. Adjusted EBITDA and Adjusted Diluted Earnings Per Share are important in illustrating what our operating results would have been had we not incurred these acquisition-related expenses. Adjusted Net Income is used solely for the purpose of calculating Adjusted diluted earnings per share. Free Cash Flow is used to evaluate our core operating performance.
The Company’s non-U.S. 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 diluted earnings per share - Adjusted Net Income divided by the weighted average shares of common stock, diluted.
- 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 and the tax-effected gain on the sale of the Human Resources Service Delivery business.
- Free Cash Flow - Cash Flows from Operating Activities less cash used to purchase Fixed Assets and Software for Internal Use.
These non-U.S. 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-U.S. GAAP measures should be considered in addition to, and not as a substitute for, the information contained within our 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, Net income (attributable to common stockholders) to Adjusted net income, Diluted earnings per share to Adjusted Diluted Earnings Per Share and Cash Flows from Operating Activities to Free Cash Flow are included in the accompanying tables to today’s press release.
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. Such statements are based upon the current
beliefs and expectations of
The following factors, among others, could cause actual results to
differ from those set forth in the forward-looking statements: the
ability to consummate the Company’s proposed merger with Willis (the
“proposed transaction”); the ability to obtain requisite regulatory and
shareholder approvals and the satisfaction of other conditions to the
consummation of the proposed transaction on the proposed terms and
schedule; the ability of Willis and
You should not rely upon forward-looking statements as predictions of
future events because these statements are based on assumptions that may
not come true and are speculative by their nature.
Where You Can Find Additional Information
In connection with the proposed merger of
| TOWERS WATSON & CO. | ||||||||||||||||||||||
| Supplemental Segment Information | ||||||||||||||||||||||
| (In Thousands of U.S. Dollars) | ||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||
| Segment Revenue | ||||||||||||||||||||||
| Revenue for the Three | Components of Revenue Change | |||||||||||||||||||||
| Months Ended September 30, | As Reported | Currency | Constant Currency | Acquisitions | Organic | |||||||||||||||||
| 2015 | 2014 | Change | Impact | Change | Divestitures | Change | ||||||||||||||||
| Benefits | $ | 448,024 | $ | 465,587 | (4 | )% | (5 | )% | 1 | % | 0 | % | 1 | % | ||||||||
| Exchange Solutions | 118,491 | 86,282 | 37 | % | 0 | % | 37 | % | 9 | % | 28 | % | ||||||||||
| Risk & Financial Services | 137,723 | 148,026 | (7 | )% | (8 | )% | 1 | % | 0 | % | 1 | % | ||||||||||
| Talent & Rewards | 160,291 | 153,294 | 5 | % | (5 | )% | 10 | % | 0 | % | 10 | % | ||||||||||
| Reportable Segments | $ | 864,529 | $ | 853,189 | ||||||||||||||||||
| Reconciliation of Reportable Segment Revenue to Consolidated Revenue | ||||||||||||||||||||||
| Three Months Ended September 30, | ||||||||||||||||||||||
| 2015 | 2014 | |||||||||||||||||||||
| Reportable Segments | $ | 864,529 | $ | 853,189 | ||||||||||||||||||
| Reimbursable Expenses and Other | 31,092 | 24,918 | ||||||||||||||||||||
| Consolidated Revenues | $ | 895,621 | $ | 878,107 | ||||||||||||||||||
| Reconciliation of As Reported Revenue change to Constant Currency change and Organic change | ||||||||||||||||||||||
| Components of Revenue Change | ||||||||||||||||||||||
| Three Months ended September 30, | As Reported | Currency | Constant Currency | Acquisitions | Organic | |||||||||||||||||
| 2015 | 2014 | Change | Impact | Change | Divestitures | Change | ||||||||||||||||
| Revenue | $ | 895,621 | $ | 878,107 | 2 | % | (5 | )% | 7 | % | 1 | % | 6 | % | ||||||||
| TOWERS WATSON & CO. | ||||||||
| Supplemental Segment Information | ||||||||
| (In Thousands of U.S. Dollars) | ||||||||
| (Unaudited) | ||||||||
| Segment Net Operating Income | ||||||||
| Three Months Ended September 30, | ||||||||
| 2015 | 2014 | |||||||
| Benefits | $ | 151,460 | $ | 155,759 | ||||
| Exchange Solutions | 21,516 | 14,012 | ||||||
| Risk & Financial Services | 33,502 | 35,561 | ||||||
| Talent & Rewards | 47,465 | 36,843 | ||||||
| Reportable Segments | $ | 253,943 | $ | 242,175 | ||||
| Reconciliation of Reportable Segment Net Operating Income to Income from Operations | ||||||||
| Three Months Ended September 30, | ||||||||
| 2015 | 2014 | |||||||
| Reportable Segments | $ | 253,943 | $ | 242,175 | ||||
| Differences in Allocation Methods | 9,791 | 15,712 | ||||||
| Amortization of Intangible Assets | (16,869 | ) | (17,537 | ) | ||||
| Transaction and Integration Expenses | (9,330 | ) | - | |||||
| Stock-Based Compensation | (2,465 | ) | (5,552 | ) | ||||
| Discretionary Compensation | (101,369 | ) | (92,364 | ) | ||||
| Payroll Tax on Discretionary Compensation | (5,618 | ) | (5,519 | ) | ||||
| Other, net | 1,317 | (10,917 | ) | |||||
| Income from Operations | $ | 129,400 | $ | 125,998 | ||||
| TOWERS WATSON & CO. | ||||||||||||||
| Reconciliation of Non-GAAP Measures | ||||||||||||||
| (In Thousands of U.S. Dollars, Except Per Share Data) | ||||||||||||||
| (Unaudited) | ||||||||||||||
| Three Months Ended September 30, | ||||||||||||||
| 2015 | 2014 | |||||||||||||
| Net Income (attributable to common stockholders) | $ | 123,382 | $ | 81,558 | ||||||||||
| Adjusted for certain items: | ||||||||||||||
| Amortization of intangible assets | 11,315 | 11,383 | ||||||||||||
| Transaction and integration expenses including severance | 6,258 | - | ||||||||||||
| Gain on sale of HRSD business | (37,154 | ) | - | |||||||||||
| Adjusted Net Income (attributable to common stockholders) | $ | 103,801 | $ | 92,941 | ||||||||||
| Weighted average shares of common stock, diluted (000) | 69,475 | 70,596 | ||||||||||||
| Diluted EPS (attributable to common stockholders) | $ | 1.78 | $ | 1.16 | ||||||||||
| Adjusted for certain items: | ||||||||||||||
| Amortization of intangible assets | 0.16 | 0.16 | ||||||||||||
| Transaction and integration expenses including severance | 0.09 | - | ||||||||||||
| Gain on sale of HRSD business | (0.54 | ) | - | |||||||||||
| Adjusted Diluted EPS (attributable to common stockholders) | $ | 1.49 | $ | 1.32 | ||||||||||
| Three Months Ended September 30, | ||||||||||||||
| 2015 | 2014 | |||||||||||||
| Net Income (attributable to common stockholders) | $ | 123,382 | $ | 81,558 | ||||||||||
| Provision for Income Taxes | 60,558 | 44,062 | ||||||||||||
| Interest, net | 880 | 1,265 | ||||||||||||
| Depreciation and Amortization | 44,192 | 44,869 | ||||||||||||
| Transaction and Integration Expenses | 9,330 | - | ||||||||||||
| Other Non-Operating Income (a) | (55,421 | ) | (831 | ) | ||||||||||
| Adjusted EBITDA and Adjusted EBITDA Margin | $ | 182,921 | 20.4 | % | $ | 170,923 | 19.5 | % | ||||||
| (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 $55.4 million for the three months ended September 30, 2015. |
| TOWERS WATSON & CO. | ||||||||
| Condensed Consolidated Statements of Operations | ||||||||
| (In Thousands of U.S. Dollars, Except Per Share Data) | ||||||||
| (Unaudited) | ||||||||
| Three Months Ended September 30, | ||||||||
| 2015 | 2014 | |||||||
| Revenue | $ | 895,621 | $ | 878,107 | ||||
| Costs of providing services: | ||||||||
| Salaries and employee benefits | 544,472 | 533,528 | ||||||
| Professional and subcontracted services | 65,112 | 62,205 | ||||||
| Occupancy | 31,745 | 36,073 | ||||||
| General and administrative expenses | 71,370 | 75,434 | ||||||
| Depreciation and amortization | 44,192 | 44,869 | ||||||
| Transaction and integration expenses | 9,330 | - | ||||||
| 766,221 | 752,109 | |||||||
| Income from operations | 129,400 | 125,998 | ||||||
| Income from affiliates | 51 | - | ||||||
| Interest income | 1,192 | 1,063 | ||||||
| Interest expense | (2,072 | ) | (2,328 | ) | ||||
| Other non-operating income | 55,370 | 831 | ||||||
| INCOME BEFORE INCOME TAXES | 183,941 | 125,564 | ||||||
| Provision for income taxes | 60,558 | 44,062 | ||||||
| NET INCOME BEFORE NON-CONTROLLING INTERESTS | 123,383 | 81,502 | ||||||
| Less: Income (loss) attributable to non-controlling interests | 1 | (56 | ) | |||||
| NET INCOME (attributable to common stockholders) | $ | 123,382 | $ | 81,558 | ||||
| Earnings per share: | ||||||||
| Basic earnings per share (attributable to common stockholders) | $ | 1.78 | $ | 1.16 | ||||
| Diluted earnings per share (attributable to common stockholders) | $ | 1.78 | $ | 1.16 | ||||
| Dividends declared per share | $ | 0.15 | $ | 0.15 | ||||
| Weighted average shares of common stock, basic (000) | 69,381 | 70,182 | ||||||
| Weighted average shares of common stock, diluted (000) | 69,475 | 70,596 | ||||||
| TOWERS WATSON & CO. | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (In Thousands of U.S. Dollars, Except Share Data) | ||||||||
| (Unaudited) | ||||||||
| September 30, | June 30, | |||||||
| 2015 | 2015 | |||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | 699,966 | $ | 715,151 | ||||
| Fiduciary assets | 33,054 | 38,075 | ||||||
| Short-term investments | 59,444 | 127,156 | ||||||
| Receivables from clients: | ||||||||
| Billed, net of allowances of $11,623 and $7,665 | 481,271 | 479,536 | ||||||
| Unbilled, at estimated net realizable value | 332,551 | 320,827 | ||||||
| 813,822 | 800,363 | |||||||
| Other current assets | 122,962 | 155,487 | ||||||
| Total current assets | 1,729,248 | 1,836,232 | ||||||
| Fixed assets, net | 396,967 | 390,681 | ||||||
| Deferred income taxes | 61,515 | 62,772 | ||||||
| Goodwill | 2,229,560 | 2,278,351 | ||||||
| Intangible assets, net | 642,900 | 654,087 | ||||||
| Other assets | 204,164 | 172,051 | ||||||
| Total Assets | $ | 5,264,354 | $ | 5,394,174 | ||||
| Liabilities | ||||||||
| Accounts payable, accrued liabilities and deferred income | $ | 398,088 | $ | 424,403 | ||||
| Employee-related liabilities | 339,094 | 581,115 | ||||||
| Fiduciary liabilities | 33,054 | 38,075 | ||||||
| Term loan - current | 25,000 | 25,000 | ||||||
| Other current liabilities | 42,922 | 62,281 | ||||||
| Total current liabilities | 838,158 | 1,130,874 | ||||||
| Revolving credit facility | 160,000 | 40,000 | ||||||
| Term loan | 168,750 | 175,000 | ||||||
| Accrued retirement benefits and other employee-related liabilities | 628,139 | 648,655 | ||||||
| Professional liability claims reserve | 237,074 | 235,856 | ||||||
| Other noncurrent liabilities | 234,652 | 216,277 | ||||||
| Total Liabilities | 2,266,773 | 2,446,662 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders' Equity | ||||||||
|
Class A Common Stock — $0.01 par value: 300,000,000 shares authorized; 74,552,661 issued, and 69,441,212 and 69,281,754 outstanding |
746 | 746 | ||||||
| Additional paid-in capital | 1,862,634 | 1,870,745 | ||||||
| Treasury stock, at cost — 5,111,449 and 5,270,907 shares | (416,309 | ) | (429,286 | ) | ||||
| Retained earnings | 2,178,980 | 2,066,104 | ||||||
| Accumulated other comprehensive loss | (643,966 | ) | (576,298 | ) | ||||
| Total Stockholders' Equity | 2,982,085 | 2,932,011 | ||||||
| Non-controlling interest | 15,496 | 15,501 | ||||||
| Total Equity | 2,997,581 | 2,947,512 | ||||||
| Total Liabilities and Total Equity | $ | 5,264,354 | $ | 5,394,174 | ||||
| TOWERS WATSON & CO. | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (In Thousands of U.S. Dollars) | ||||||||
| (Unaudited) | ||||||||
| Three Months Ended September 30, | ||||||||
| 2015 | 2014 | |||||||
| Cash flows used in operating activities: | ||||||||
| Net income before non-controlling interests | $ | 123,383 | $ | 81,502 | ||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Provision for doubtful receivables from clients | 8,232 | 7,994 | ||||||
| Depreciation | 27,323 | 27,332 | ||||||
| Amortization of intangible assets | 16,869 | 17,537 | ||||||
| Gain on sale of business, pretax | (55,390 | ) | - | |||||
| Provision for deferred income taxes | 45,395 | 25,893 | ||||||
| Stock-based compensation | 3,734 | 11,174 | ||||||
| Other, net | 245 | 975 | ||||||
| Changes in operating assets and liabilities (net of business acquisitions) | ||||||||
| Receivables from clients | (40,693 | ) | (960 | ) | ||||
| Fiduciary assets | 5,015 | (3,655 | ) | |||||
| Other current assets | (15,501 | ) | (24,418 | ) | ||||
| Other noncurrent assets | (984 | ) | (4,240 | ) | ||||
| Accounts payable, accrued liabilities and deferred income | (37,107 | ) | (59,649 | ) | ||||
| Employee-related liabilities | (237,044 | ) | (173,084 | ) | ||||
| Fiduciary liabilities | (5,015 | ) | 3,655 | |||||
| Accrued retirement benefits and other employee-related liabilities | (38,788 | ) | (65,744 | ) | ||||
| Professional liability claims reserves | 3,955 | 4,995 | ||||||
| Other current liabilities | 4,224 | 5,255 | ||||||
| Other noncurrent liabilities | 1,147 | (9,299 | ) | |||||
| Income tax related accounts | 30,428 | (50,445 | ) | |||||
| Cash flows used in operating activities | (160,572 | ) | (205,182 | ) | ||||
| Cash flows from/(used in) investing activities: | ||||||||
| Cash paid for business acquisitions | (15,964 | ) | (1,255 | ) | ||||
| Net proceeds from sale of business | 65,264 | - | ||||||
| Fixed assets and software for internal use | (15,002 | ) | (15,714 | ) | ||||
| Capitalized software costs | (21,189 | ) | (17,900 | ) | ||||
| Purchases of held-to-maturity investments | (12,632 | ) | (127,431 | ) | ||||
| Redemptions of held-to-maturity investments | 74,153 | 107,330 | ||||||
| Purchases of available-for-sale securities | (207 | ) | (11 | ) | ||||
| Sales and redemptions of available-for-sale securities | - | 11,721 | ||||||
| Cash flows from/(used in) investing activities | 74,423 | (43,260 | ) | |||||
| Cash flows from financing activities: | ||||||||
| Borrowings under credit facility | 384,500 | 145,000 | ||||||
| Repayments under credit facility | (294,500 | ) | (10,000 | ) | ||||
| Repayments of notes payable | (6,250 | ) | (6,250 | ) | ||||
| Cash paid on retention liability | - | (284 | ) | |||||
| Dividends paid | (10,506 | ) | (9,723 | ) | ||||
| Repurchases of common stock | - | (37,350 | ) | |||||
| Payroll tax payments on vested shares | (12,039 | ) | (10,363 | ) | ||||
| Issuance of common stock and excess tax benefits | 12,065 | 4,229 | ||||||
| Other financing activities | 15,000 | - | ||||||
| Cash flows from financing activities | 88,270 | 75,259 | ||||||
| Effect of exchange rates on cash | (17,306 | ) | (11,316 | ) | ||||
| Decrease in cash and cash equivalents | (15,185 | ) | (184,499 | ) | ||||
| Cash and cash equivalents at beginning of period | 715,151 | 727,849 | ||||||
| Cash and cash equivalents at end of period | $ | 699,966 | $ | 543,350 | ||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20151102005342/en/
Source:
Towers Watson
Investor Contact:
Aida Sukys, +1
703-258-8033
aida.sukys@towerswatson.com