- Total revenue1 increased 3% to
$2.1 billion with constant currency growth of 5% and flat organic revenue - Cash flows from operating activities were
$685 million , up 126% compared to$303 million in the prior year - Free cash flow was
$550 million , up 201% compared to$183 million in the prior year - Diluted Earnings per Share were
$0.72 for the quarter, down 32% over prior year - Adjusted Diluted Earnings per Share were
$1.80 for the quarter, up 1.0% over prior year - Income from Operations was
$163 million or 7.7% of revenue, down 90 basis points over the prior year quarter - Adjusted Operating Income was
$296 million or 14.0% of revenue, down 60 basis points compared to the prior year quarter
“I am pleased with our second quarter results. Our strong execution and our focus during this challenging environment helped us deliver another quarter of solid financial performance,” said
Second Quarter Company Highlights
Revenue was
For the first half of 2020, revenue was
Income from operations for the second quarter of 2020 was
Income from operations for the first half of 2020 was
________________________________
1 The revenue amounts included in this release are presented on a
Net income for the second quarter of 2020 was
Net income for the first half of 2020 was
Cash flows from operating activities for the six months ended
Risks and Uncertainties Related to the COVID-19 Pandemic
The extent to which COVID-19 continues to impact our business and financial position will depend on future developments, which are difficult to predict, including the severity and scope of the COVID-19 outbreak as well as the types of measures imposed by governmental authorities to contain the virus or address its impact and the duration of those actions and measures. We continue to expect that the COVID-19 pandemic will negatively impact our revenue and operating results for the remainder of 2020, and potentially beyond. During the second quarter of 2020, the COVID-19 pandemic had a negative impact on revenue growth, particularly in our businesses that are discretionary in nature, but otherwise it generally had no material impact on our overall results. Some of our discretionary, project-based businesses saw a reduction in demand, and potential negative impacts on our revenue and operating results may lag behind the developments thus far related to the COVID-19 pandemic. We continue to closely monitor the spread and impact of COVID-19 while adhering to government health directives. We have thorough business continuity and incident management processes in place that have been activated. We are prioritizing the safety and wellbeing of our colleagues. We are communicating frequently with clients and critical vendors, while meeting our objectives via remote working capabilities, overseen and coordinated by our incident management response team. For additional information on the risks posed by COVID-19, see additional disclosures in the Company’s Quarterly Report on Form 10-Q for the quarter ended
Segment Highlights
Corporate Risk & Broking
The Corporate Risk & Broking (CRB) segment had revenue of
Investment,
The Investment,
Benefits Delivery & Administration
The Benefits Delivery & Administration (BDA) segment had revenue of
2020 Guidance Update
Due to the uncertainties caused by the COVID-19 pandemic,
Conference Call
The Company will host a live webcast and conference call to discuss the financial results for the second quarter. It will be held on
About
Willis Towers Watson Non-GAAP Measures
In order to assist readers of our consolidated financial statements in understanding the core operating results that Willis Towers Watson’s management uses to evaluate the business and for financial planning, we present the following non-GAAP measures: (1) Constant Currency Change, (2) Organic Change, (3) Adjusted Operating Income/Margin, (4) Adjusted EBITDA/Margin, (5) Adjusted Net Income, (6) Adjusted Diluted Earnings Per Share, (7) Adjusted Income Before Taxes, (8) Adjusted Income Taxes/Tax Rate and (9) Free Cash Flow.
The Company believes that 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 performance, and in the case of free cash flow, our liquidity results.
Within these measures referred to as ‘adjusted’, we adjust for significant items which will not be settled in cash, or which we believe to be items that are not core to our current or future operations. Some of these items may not be applicable for the current quarter, however they are expected to be part of our full-year results. These items include the following:
- Transaction and integration expenses - Management believes it is appropriate to adjust for transaction and integration expenses when they relate to a specific significant program with a defined set of activities and costs that are not expected to continue beyond a defined period of time, or significant acquisition-related transaction expenses. We believe the adjustment is necessary to present how the Company is performing, both now and in the future when the incurrence of these costs will have concluded.
- Gains and losses on disposals of operations - Adjustment to remove the gain or loss resulting from disposed operations.
- Pension settlement and curtailment gains and losses - Adjustment to remove significant pension settlement and curtailment gains and losses to better present how the Company is performing.
- Abandonment of long-lived asset - Adjustment to remove the depreciation expense resulting from internally-developed software that was abandoned prior to being placed into service.
- Provisions for significant litigation - We will include provisions for litigation matters which we believe are not representative of our core business operations.
- Tax effect of the CARES Act - Relates to the incremental tax expense impact, primarily from the Base Erosion and Anti-Abuse Tax (“BEAT”), generated from electing certain income tax provisions of the CARES Act.
- Tax effects of internal reorganization - Relates to the
U.S. income tax expense resulting from the completion of internal reorganizations of the ownership of certain businesses that reduced the investments held by ourU.S. -controlled subsidiaries.
We evaluate our revenue on an as reported (
Constant Currency Change – Represents the year-over-year change in revenue 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 prior year revenue, translated at the current year monthly average exchange rates, to the current year as reported revenue, for the same period. We believe constant currency measures provide useful information to investors because they provide transparency to performance by excluding the effects that foreign currency exchange rate fluctuations have on period-over-period comparability given volatility in foreign currency exchange markets.
Organic Change – Excludes the impact of fluctuations in foreign currency exchange rates, as described above and the period-over-period impact of acquisitions and divestitures on current-year revenue. We believe that excluding transaction-related items from our
Adjusted Operating Income/Margin – Income from operations adjusted for amortization, transaction and integration expenses and non-recurring items that, in management’s judgment, significantly affect the period-over-period assessment of operating results. Adjusted operating income margin is calculated by dividing adjusted operating income by revenue. We consider adjusted operating income/margin to be important financial measures, which are used internally to evaluate and assess our core operations and to benchmark our operating results against our competitors.
Adjusted EBITDA/Margin – Net Income adjusted for provision for income taxes, interest expense, depreciation and amortization, transaction and integration expenses, (gain)/loss on disposal of operations and non-recurring items that, in management’s judgment, significantly affect the period-over-period assessment of operating results. Adjusted EBITDA Margin is calculated by dividing adjusted EBITDA by revenue. We consider adjusted EBITDA/margin to be important financial measures, which are used internally to evaluate and assess our core operations, to benchmark our operating results against our competitors and to evaluate and measure our performance-based compensation plans.
Adjusted Net Income – Net Income Attributable to
Adjusted Diluted Earnings Per Share – Adjusted Net Income divided by the weighted-average number of shares of common stock, diluted. Adjusted diluted earnings per share is used to internally evaluate and assess our core operations and to benchmark our operating results against our competitors.
Adjusted Income Before Taxes – Income from operations before income taxes adjusted for amortization, transaction and integration expenses, gains and losses on disposal of operations and non-recurring items that, in management’s judgment, significantly affect the period-over-period assessment of operating results. Adjusted income before taxes is used solely for the purpose of calculating the adjusted income tax rate.
Adjusted Income Taxes/Tax Rate – Provision for income taxes adjusted for taxes on certain items of amortization, transaction and integration expenses, gains and losses on disposal of operations, the tax effects of internal reorganizations, and non-recurring items that, in management’s judgment, significantly affect the period-over-period assessment of operating results, divided by adjusted income before taxes. Adjusted income taxes is used solely for the purpose of calculating the adjusted income tax rate. Management believes that the adjusted income tax rate presents a rate that is more closely aligned to the rate that we would incur if not for the reduction of pre-tax income for the adjusted items and the tax effects of internal reorganizations, which are not core to our current and future operations.
Free Cash Flow – Cash flows from operating activities less cash used to purchase fixed assets and software for internal use. Free Cash Flow is a liquidity measure and is not meant to represent residual cash flow available for discretionary expenditures. Management believes that free cash flow presents the core operating performance and cash-generating capabilities of our business operations.
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 our condensed consolidated financial statements.
Reconciliations of these measures are included in the accompanying tables with the following exception.
The Company does not reconcile its forward-looking non-GAAP financial measures to the corresponding
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, such things as our outlook, the impact of the COVID-19 pandemic on our business, our pending business combination with Aon plc, future capital expenditures, ongoing working capital efforts, future share repurchases, growth in revenue, the impact of changes to tax laws on our financial results, existing and evolving business strategies and acquisitions and dispositions, demand for our services and competitive strengths, goals, the benefits of new initiatives, growth of our business and operations, our ability to successfully manage ongoing organizational and technology changes, including investments in improving systems and processes, and plans and references to future successes, including our future financial and operating results, plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of Willis Towers Watson’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. All forward-looking disclosure is speculative by its nature.
There are important risks, uncertainties, events and factors that could cause our actual results or performance to differ materially from those in the forward-looking statements contained herein, including the following: the ability of the company to successfully establish, execute and achieve its global business strategy as it evolves; changes in demand for our services, including any decline in consulting services, defined benefit pension plans or the purchasing of insurance; changes in general economic, business and political conditions, including changes in the financial markets; the risk that the COVID-19 pandemic substantially and negatively impacts the demand for our products and services and cash flows, and/or continues to materially impact our business operations, including increased demand on our information technology resources and systems and related risks of cybersecurity breaches or incidents; the risks relating to or arising from our pending business combination with Aon plc announced in
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 relying on these forward-looking statements.
Contact
INVESTORS
Supplemental Segment Information
(In millions of
(Unaudited)
REVENUE | |||||||||||||||||||||||||||||||||
Components of Revenue Change(i) | |||||||||||||||||||||||||||||||||
Three Months Ended |
As Reported | Currency | Constant Currency |
Acquisitions/ | Organic | ||||||||||||||||||||||||||||
2020 | 2019 | % Change | Impact | Change | Divestitures | Change | |||||||||||||||||||||||||||
$ | 767 | $ | 797 | (4 | )% | (2 | )% | (2 | )% | 0 | % | (2 | )% | ||||||||||||||||||||
Corporate Risk & Broking | 701 | 690 | 2 | % | (2 | )% | 4 | % | 0 | % | 4 | % | |||||||||||||||||||||
Investment, |
413 | 409 | 1 | % | (1 | )% | 2 | % | 0 | % | 2 | % | |||||||||||||||||||||
Benefits Delivery & Administration | 209 | 126 | 66 | % | 0 | % | 66 | % | 69 | % | (3 | )% | |||||||||||||||||||||
Segment Revenue | 2,090 | 2,022 | 3 | % | (2 | )% | 5 | % | 5 | % | 1 | % | |||||||||||||||||||||
Reimbursable expenses and other | 23 | 26 | |||||||||||||||||||||||||||||||
Revenue | $ | 2,113 | $ | 2,048 | 3 | % | (2 | )% | 5 | % | 5 | % | 0 | % |
Components of Revenue Change(i) | |||||||||||||||||||||||||||||||||
Six Months Ended |
As Reported | Currency | Constant Currency |
Acquisitions/ | Organic | ||||||||||||||||||||||||||||
2020 | 2019 | % Change | Impact | Change | Divestitures | Change | |||||||||||||||||||||||||||
$ | 1,617 | $ | 1,626 | (1 | )% | (1 | )% | 1 | % | 0 | % | 1 | % | ||||||||||||||||||||
Corporate Risk & Broking | 1,440 | 1,418 | 2 | % | (2 | )% | 4 | % | 0 | % | 4 | % | |||||||||||||||||||||
Investment, |
1,028 | 998 | 3 | % | (1 | )% | 4 | % | 0 | % | 4 | % | |||||||||||||||||||||
Benefits Delivery & Administration | 440 | 261 | 69 | % | 0 | % | 69 | % | 70 | % | (1 | )% | |||||||||||||||||||||
Segment Revenue | 4,525 | 4,303 | 5 | % | (2 | )% | 7 | % | 4 | % | 3 | % | |||||||||||||||||||||
Reimbursable expenses and other | 54 | 57 | |||||||||||||||||||||||||||||||
Revenue | $ | 4,579 | $ | 4,360 | 5 | % | (2 | )% | 7 | % | 4 | % | 2 | % |
(i) Components of revenue change may not add due to rounding
SEGMENT OPERATING INCOME/(LOSS) (i)
Three Months Ended |
||||||||
2020 | 2019 | |||||||
$ | 160 | $ | 169 | |||||
Corporate Risk & Broking | 135 | 104 | ||||||
Investment, |
119 | 109 | ||||||
Benefits Delivery & Administration | (9 | ) | (25 | ) | ||||
Segment Operating Income | $ | 405 | $ | 357 |
Six Months Ended |
||||||||
2020 | 2019 | |||||||
$ | 373 | $ | 373 | |||||
Corporate Risk & Broking | 262 | 231 | ||||||
Investment, |
396 | 361 | ||||||
Benefits Delivery & Administration | (20 | ) | (46 | ) | ||||
Segment Operating Income | $ | 1,011 | $ | 919 |
(i) Segment operating income/(loss) excludes certain costs, including amortization of intangibles, restructuring costs, transaction and integration expenses, certain litigation provisions, and to the extent that the actual expense based upon which allocations are made differs from the forecast/budget amount, a reconciling item will be created between internally-allocated expenses and the actual expenses reported for
SEGMENT OPERATING MARGINS
Three Months Ended |
||||||||
2020 | 2019 | |||||||
20.9 | % | 21.1 | % | |||||
Corporate Risk & Broking | 19.2 | % | 15.2 | % | ||||
Investment, |
28.7 | % | 26.9 | % | ||||
Benefits Delivery & Administration | (4.2 | )% | (20.1 | )% |
Six Months Ended |
||||||||
2020 | 2019 | |||||||
23.1 | % | 22.9 | % | |||||
Corporate Risk & Broking | 18.2 | % | 16.3 | % | ||||
Investment, |
38.5 | % | 36.2 | % | ||||
Benefits Delivery & Administration | (4.4 | )% | (17.6 | )% |
RECONCILIATIONS OF SEGMENT OPERATING INCOME TO INCOME FROM OPERATIONS BEFORE INCOME TAXES
Three Months Ended |
||||||||
2020 | 2019 | |||||||
Segment Operating Income | $ | 405 | $ | 357 | ||||
Amortization | (119 | ) | (123 | ) | ||||
Transaction and integration expenses(i) | (14 | ) | — | |||||
Unallocated, net(ii) | (109 | ) | (58 | ) | ||||
Income from Operations | 163 | 176 | ||||||
Interest expense | (62 | ) | (56 | ) | ||||
Other income, net | 76 | 67 | ||||||
Income from operations before income taxes | $ | 177 | $ | 187 |
Six Months Ended |
||||||||
2020 | 2019 | |||||||
Segment Operating Income | $ | 1,011 | $ | 919 | ||||
Amortization | (240 | ) | (250 | ) | ||||
Transaction and integration expenses(i) | (23 | ) | (6 | ) | ||||
Unallocated, net(ii) | (225 | ) | (128 | ) | ||||
Income from Operations | 523 | 535 | ||||||
Interest expense | (123 | ) | (110 | ) | ||||
Other income, net | 168 | 122 | ||||||
Income from operations before income taxes | $ | 568 | $ | 547 |
(i) Includes transaction costs related to the proposed Aon combination and
(ii) Includes certain costs, primarily related to corporate functions which are not directly related to the segments, and certain differences between budgeted expenses determined at the beginning of the year and actual expenses that we report for
Reconciliations of Non-GAAP Measures
(In millions of
(Unaudited)
RECONCILIATIONS OF NET INCOME ATTRIBUTABLE TO WILLIS TOWERS WATSON TO ADJUSTED DILUTED EARNINGS PER SHARE
Three Months Ended |
||||||||
2020 | 2019 | |||||||
Net Income attributable to |
$ | 94 | $ | 138 | ||||
Adjusted for certain items: | ||||||||
Amortization | 119 | 123 | ||||||
Transaction and integration expenses | 14 | — | ||||||
Loss on disposal of operations | 2 | — | ||||||
Tax effect on certain items listed above(i) | (30 | ) | (29 | ) | ||||
Tax effect of the CARES Act | 35 | — | ||||||
Adjusted Net Income | $ | 234 | $ | 232 | ||||
Weighted-average shares of common stock, diluted | 130 | 130 | ||||||
Diluted Earnings Per Share | $ | 0.72 | $ | 1.06 | ||||
Adjusted for certain items:(ii) | ||||||||
Amortization | 0.91 | 0.94 | ||||||
Transaction and integration expenses | 0.11 | — | ||||||
Loss on disposal of operations | 0.02 | — | ||||||
Tax effect on certain items listed above(i) | (0.23 | ) | (0.22 | ) | ||||
Tax effect of the CARES Act | 0.27 | — | ||||||
Adjusted Diluted Earnings Per Share | $ | 1.80 | $ | 1.78 |
Six Months Ended |
||||||||
2020 | 2019 | |||||||
Net Income attributable to |
$ | 399 | $ | 425 | ||||
Adjusted for certain items: | ||||||||
Abandonment of long-lived asset | 35 | — | ||||||
Amortization | 240 | 250 | ||||||
Transaction and integration expenses | 23 | 6 | ||||||
Loss on disposal of operations | 2 | — | ||||||
Tax effect on certain items listed above(i) | (65 | ) | (61 | ) | ||||
Tax effect of the CARES Act | 35 | — | ||||||
Adjusted Net Income | $ | 669 | $ | 620 | ||||
Weighted-average shares of common stock, diluted | 130 | 130 | ||||||
Diluted Earnings Per Share | $ | 3.07 | $ | 3.26 | ||||
Adjusted for certain items:(ii) | ||||||||
Abandonment of long-lived asset | 0.27 | — | ||||||
Amortization | 1.84 | 1.92 | ||||||
Transaction and integration expenses | 0.18 | 0.05 | ||||||
Loss on disposal of operations | 0.02 | — | ||||||
Tax effect on certain items listed above(i) | (0.50 | ) | (0.47 | ) | ||||
Tax effect of the CARES Act | 0.27 | — | ||||||
Adjusted Diluted Earnings Per Share | $ | 5.14 | $ | 4.76 |
(i) The tax effect was calculated using an effective tax rate for each item.
(ii) Per share values and totals may differ due to rounding.
RECONCILIATIONS OF NET INCOME TO ADJUSTED EBITDA
Three Months Ended |
||||||||||||||
2020 | 2019 | |||||||||||||
Net Income | $ | 102 | 4.8 | % | $ | 149 | 7.3 | % | ||||||
Provision for income taxes | 75 | 38 | ||||||||||||
Interest expense | 62 | 56 | ||||||||||||
Depreciation | 67 | 59 | ||||||||||||
Amortization | 119 | 123 | ||||||||||||
Transaction and integration expenses | 14 | — | ||||||||||||
Loss on disposal of operations | 2 | — | ||||||||||||
Adjusted EBITDA and Adjusted EBITDA Margin | $ | 441 | 20.9 | % | $ | 425 | 20.8 | % |
Six Months Ended |
||||||||||||||
2020 | 2019 | |||||||||||||
Net Income | $ | 415 | 9.1 | % | $ | 442 | 10.1 | % | ||||||
Provision for income taxes | 153 | 105 | ||||||||||||
Interest expense | 123 | 110 | ||||||||||||
Depreciation(i) | 165 | 113 | ||||||||||||
Amortization | 240 | 250 | ||||||||||||
Transaction and integration expenses | 23 | 6 | ||||||||||||
Loss on disposal of operations | 2 | — | ||||||||||||
Adjusted EBITDA and Adjusted EBITDA Margin | $ | 1,121 | 24.5 | % | $ | 1,026 | 23.5 | % |
(i) Includes abandonment of long-lived asset of
RECONCILIATIONS OF INCOME FROM OPERATIONS TO ADJUSTED OPERATING INCOME
Three Months Ended |
||||||||||||||
2020 | 2019 | |||||||||||||
Income from operations | $ | 163 | 7.7 | % | $ | 176 | 8.6 | % | ||||||
Adjusted for certain items: | ||||||||||||||
Amortization | 119 | 123 | ||||||||||||
Transaction and integration expenses | 14 | — | ||||||||||||
Adjusted operating income | $ | 296 | 14.0 | % | $ | 299 | 14.6 | % |
Six Months Ended |
||||||||||||||
2020 | 2019 | |||||||||||||
Income from operations | $ | 523 | 11.4 | % | $ | 535 | 12.3 | % | ||||||
Adjusted for certain items: | ||||||||||||||
Abandonment of long-lived asset | 35 | — | ||||||||||||
Amortization | 240 | 250 | ||||||||||||
Transaction and integration expenses | 23 | 6 | ||||||||||||
Adjusted operating income | $ | 821 | 17.9 | % | $ | 791 | 18.1 | % |
RECONCILIATIONS OF GAAP INCOME TAXES/TAX RATE TO ADJUSTED INCOME TAXES/TAX RATE
Three Months Ended |
||||||||
2020 | 2019 | |||||||
Income from operations before income taxes | $ | 177 | $ | 187 | ||||
Adjusted for certain items: | ||||||||
Amortization | 119 | 123 | ||||||
Transaction and integration expenses | 14 | — | ||||||
Loss on disposal of operations | 2 | — | ||||||
Adjusted income before taxes | $ | 312 | $ | 310 | ||||
Provision for income taxes | $ | 75 | $ | 38 | ||||
Tax effect on certain items listed above(i) | 30 | 29 | ||||||
Tax effect of the CARES Act | (35 | ) | — | |||||
Adjusted income taxes | $ | 70 | $ | 67 | ||||
42.2 | % | 19.7 | % | |||||
Adjusted income tax rate | 22.2 | % | 21.4 | % |
Six Months Ended |
||||||||
2020 | 2019 | |||||||
Income from operations before income taxes | $ | 568 | $ | 547 | ||||
Adjusted for certain items: | ||||||||
Abandonment of long-lived asset | 35 | — | ||||||
Amortization | 240 | 250 | ||||||
Transaction and integration expenses | 23 | 6 | ||||||
Loss on disposal of operations | 2 | — | ||||||
Adjusted income before taxes | $ | 868 | $ | 803 | ||||
Provision for income taxes | $ | 153 | $ | 105 | ||||
Tax effect on certain items listed above(i) | 65 | 61 | ||||||
Tax effect of the CARES Act | (35 | ) | — | |||||
Adjusted income taxes | $ | 183 | $ | 166 | ||||
26.9 | % | 19.1 | % | |||||
Adjusted income tax rate | 21.1 | % | 20.6 | % |
(i) The tax effect was calculated using an effective tax rate for each item.
RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES TO FREE CASH FLOW
Six Months Ended |
||||||||
2020 | 2019 | |||||||
Cash flows from operating activities | $ | 685 | $ | 303 | ||||
Less: Additions to fixed assets and software for internal use | (135 | ) | (120 | ) | ||||
Free Cash Flow | $ | 550 | $ | 183 |
Condensed Consolidated Statements of Income
(In millions of
(Unaudited)
Three Months Ended |
Six Months Ended |
|||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenue | $ | 2,113 | $ | 2,048 | $ | 4,579 | $ | 4,360 | ||||||||
Costs of providing services | ||||||||||||||||
Salaries and benefits | 1,363 | 1,278 | 2,757 | 2,626 | ||||||||||||
Other operating expenses | 387 | 412 | 871 | 830 | ||||||||||||
Depreciation | 67 | 59 | 165 | 113 | ||||||||||||
Amortization | 119 | 123 | 240 | 250 | ||||||||||||
Transaction and integration expenses | 14 | — | 23 | 6 | ||||||||||||
Total costs of providing services | 1,950 | 1,872 | 4,056 | 3,825 | ||||||||||||
Income from operations | 163 | 176 | 523 | 535 | ||||||||||||
Interest expense | (62 | ) | (56 | ) | (123 | ) | (110 | ) | ||||||||
Other income, net | 76 | 67 | 168 | 122 | ||||||||||||
INCOME FROM OPERATIONS BEFORE INCOME TAXES | 177 | 187 | 568 | 547 | ||||||||||||
Provision for income taxes | (75 | ) | (38 | ) | (153 | ) | (105 | ) | ||||||||
NET INCOME | 102 | 149 | 415 | 442 | ||||||||||||
Income attributable to non-controlling interests | (8 | ) | (11 | ) | (16 | ) | (17 | ) | ||||||||
NET INCOME ATTRIBUTABLE TO WILLIS TOWERS WATSON | $ | 94 | $ | 138 | $ | 399 | $ | 425 | ||||||||
Earnings per share | ||||||||||||||||
Basic earnings per share | $ | 0.73 | $ | 1.06 | $ | 3.08 | $ | 3.27 | ||||||||
Diluted earnings per share | $ | 0.72 | $ | 1.06 | $ | 3.07 | $ | 3.26 | ||||||||
Weighted-average shares of common stock, basic | 129 | 130 | 130 | 130 | ||||||||||||
Weighted-average shares of common stock, diluted | 130 | 130 | 130 | 130 |
Condensed Consolidated Balance Sheets
(In millions of
(Unaudited)
2020 | 2019 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 1,087 | $ | 887 | ||||
Fiduciary assets | 16,042 | 13,004 | ||||||
Accounts receivable, net | 2,430 | 2,621 | ||||||
Prepaid and other current assets | 363 | 525 | ||||||
Total current assets | 19,922 | 17,037 | ||||||
Fixed assets, net | 989 | 1,046 | ||||||
11,196 | 11,194 | |||||||
Other intangible assets, net | 3,257 | 3,478 | ||||||
Right-of-use assets | 894 | 968 | ||||||
Pension benefits assets | 975 | 868 | ||||||
Other non-current assets | 877 | 835 | ||||||
Total non-current assets | 18,188 | 18,389 | ||||||
TOTAL ASSETS | $ | 38,110 | $ | 35,426 | ||||
LIABILITIES AND EQUITY | ||||||||
Fiduciary liabilities | $ | 16,042 | $ | 13,004 | ||||
Deferred revenue and accrued expenses | 1,504 | 1,784 | ||||||
Current debt | 525 | 316 | ||||||
Current lease liabilities | 144 | 164 | ||||||
Other current liabilities | 804 | 802 | ||||||
Total current liabilities | 19,019 | 16,070 | ||||||
Long-term debt | 5,068 | 5,301 | ||||||
Liability for pension benefits | 1,235 | 1,324 | ||||||
Deferred tax liabilities | 575 | 526 | ||||||
Provision for liabilities | 534 | 537 | ||||||
Long-term lease liabilities | 906 | 964 | ||||||
Other non-current liabilities | 317 | 335 | ||||||
Total non-current liabilities | 8,635 | 8,987 | ||||||
TOTAL LIABILITIES | 27,654 | 25,057 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
EQUITY(i) | ||||||||
Additional paid-in capital | 10,713 | 10,687 | ||||||
Retained earnings | 2,015 | 1,792 | ||||||
Accumulated other comprehensive loss, net of tax | (2,390 | ) | (2,227 | ) | ||||
(3 | ) | (3 | ) | |||||
Total |
10,335 | 10,249 | ||||||
Non-controlling interests | 121 | 120 | ||||||
Total Equity | 10,456 | 10,369 | ||||||
TOTAL LIABILITIES AND EQUITY | $ | 38,110 | $ | 35,426 |
(i) Equity includes (a) Ordinary shares
Condensed Consolidated Statements of Cash Flows
(In millions of
(Unaudited)
Six Months Ended |
||||||||
2020 | 2019 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
NET INCOME | $ | 415 | $ | 442 | ||||
Adjustments to reconcile net income to total net cash from operating activities: | ||||||||
Depreciation | 165 | 113 | ||||||
Amortization | 240 | 250 | ||||||
Non-cash lease expense | 74 | 72 | ||||||
Net periodic benefit of defined benefit pension plans | (92 | ) | (64 | ) | ||||
Provision for doubtful receivables from clients | 28 | 10 | ||||||
Provision for/(benefit from) deferred income taxes | 40 | (41 | ) | |||||
Share-based compensation | 28 | 27 | ||||||
Net loss on disposal of operations | 2 | — | ||||||
Non-cash foreign exchange (gain)/loss | (12 | ) | 13 | |||||
Other, net | 1 | (6 | ) | |||||
Changes in operating assets and liabilities, net of effects from purchase of subsidiaries: | ||||||||
Accounts receivable | 128 | (82 | ) | |||||
Fiduciary assets | (3,200 | ) | (1,961 | ) | ||||
Fiduciary liabilities | 3,200 | 1,961 | ||||||
Other assets | 82 | (164 | ) | |||||
Other liabilities | (417 | ) | (285 | ) | ||||
Provisions | 3 | 18 | ||||||
Net cash from operating activities | 685 | 303 | ||||||
CASH FLOWS USED IN INVESTING ACTIVITIES | ||||||||
Additions to fixed assets and software for internal use | (135 | ) | (120 | ) | ||||
Capitalized software costs | (33 | ) | (34 | ) | ||||
Acquisitions of operations, net of cash acquired | (66 | ) | (1 | ) | ||||
Net proceeds from sale of operations | 2 | 13 | ||||||
Other, net | (17 | ) | (6 | ) | ||||
Net cash used in investing activities | (249 | ) | (148 | ) | ||||
CASH FLOWS USED IN FINANCING ACTIVITIES | ||||||||
Net borrowings on revolving credit facility | — | (106 | ) | |||||
Senior notes issued | 282 | — | ||||||
Debt issuance costs | (2 | ) | — | |||||
Repayments of debt | (311 | ) | (3 | ) | ||||
Repurchase of shares | — | (51 | ) | |||||
Proceeds from issuance of shares | 5 | 27 | ||||||
Payments of deferred and contingent consideration related to acquisitions | — | (47 | ) | |||||
Cash paid for employee taxes on withholding shares | (1 | ) | (12 | ) | ||||
Dividends paid | (171 | ) | (161 | ) | ||||
Acquisitions of and dividends paid to non-controlling interests | (14 | ) | (21 | ) | ||||
Other, net | (3 | ) | — | |||||
Net cash used in financing activities | (215 | ) | (374 | ) | ||||
INCREASE/(DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 221 | (219 | ) | |||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (22 | ) | (2 | ) | ||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD (i) | 895 | 1,033 | ||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD (i) | $ | 1,094 | $ | 812 |
________
(i) As a result of the acquired
Source: Willis Towers Watson Public Limited Company