Excluding the Revenue Standard Impact
- Reported Revenue was
$1.9 billion , an increase of 3% - Organic Revenue increased 5%
- Net Income increased
$139 million to $85 million or 4.5% of revenue. - Adjusted EBITDA increased 14% to
$368 million or 19.4% of revenue, a margin improvement of 200 basis points - Diluted Earnings per Share increased 258% to
$0.63 - Adjusted Diluted Earnings per Share increased 45% to
$1.62 - Cash flows from operating activities for the nine months ended September 30, 2018 of
$753 million - Free Cash Flow for the nine months ended September 30, 2018 increased 72% to
$544 million
Including the Revenue Standard Impact
- Reported Revenue was
$1.9 billion - Net Income was
$46 million . Adjusted Net Income was$174 million - Adjusted EBITDA was
$313 million or 16.8% of revenue - Diluted Earnings per Share were
$0.33 - Adjusted Diluted Earnings per Share were
$1.32 - Cash flows from operating activities for the nine months ended September 30, 2018 of
$716 million - Free Cash Flow for the nine months ended September 30, 2018 was
$507 million
As of
As required by ASC 606, under the modified retrospective method of adoption, the Company has provided the impact to the affected line items within the condensed consolidated financial statements for 2018. The 2017 comparative financial line items have not been restated in accordance with the new standard. In an effort to allow the reader to better understand the impact this guidance had on our reported results, we have also included our 2018 results, without the adoption effects of ASC 606, as supplemental information.
The Company also adopted ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost which became effective
Excluding the Revenue Standard
Without the impact of ASC 606, revenue for the three months ended
For the nine months ended September 30, 2018, without the impact of ASC 606, revenue was
Net income attributable to
For the nine months ended September 30, 2018, net income attributable to
Net income for the third quarter of 2018 was
For the nine months ended September 30, 2018, net income was
“I’m extremely pleased with our third quarter results,” said
Including the Revenue Standard
With the impact of ASC 606, revenue was
Net income attributable to
For the nine months ended September 30, 2018, net income attributable to
Net income for the third quarter of 2018 was
For the nine months ended September 30, 2018, net income was
Free cash flow for the nine months ended
The Company repurchased approximately
Third Quarter Company Highlights
Segment Highlights
Beginning in 2018, we made certain changes that affect our segment results. These changes include the realignment of certain businesses within our segments, as well as changes to certain allocation methodologies to better reflect the ongoing nature of our businesses. The prior period comparatives have been retrospectively adjusted to reflect our current segment presentation. These changes were unrelated to ASC 606.
Excluding the Revenue Standard
Excluding the impact of ASC 606, for the quarter, the
Including the Revenue Standard
The HCB segment had revenue of
Corporate Risk & Broking
Excluding the Revenue Standard
Excluding the impact of ASC 606, for the quarter, the Corporate Risk & Broking (CRB) segment had revenue of
Including the Revenue Standard
For the quarter, the CRB segment had revenue of
Investment, Risk & Reinsurance
Excluding the Revenue Standard
Excluding the impact of ASC 606, for the quarter, the Investment, Risk & Reinsurance (IRR) segment had revenue of
Including the Revenue Standard
For the quarter, the IRR segment had revenue of
Benefits Delivery and Administration
Excluding the Revenue Standard
Excluding the impact of ASC 606, for the quarter, the Benefits Delivery and Administration (BDA) segment had revenue of
Including the Revenue Standard
The BDA segment had revenue of
Reconciliation of Segment Operating Income to Income/(Loss) from Operations before Income Taxes
For the third quarters of 2018 and 2017, the Company recorded expenses that are excluded from our segment operating income. The following table reconciles the difference.
| Including Revenue Standard |
Excluding Revenue Standard |
Excluding Revenue Standard |
||||||||||
| Three Months Ended September 30, | ||||||||||||
| 2018 | 2018 | 2017 | ||||||||||
| Segment Operating Income | $ | 256 | $ | 308 | $ | 259 | ||||||
| Amortization | (127 | ) | (127 | ) | (141 | ) | ||||||
| Restructuring costs | — | — | (31 | ) | ||||||||
| Transaction and integration expenses | (50 | ) | (50 | ) | (74 | ) | ||||||
| Unallocated, net | (62 | ) | (65 | ) | (39 | ) | ||||||
| Income from Operations | 17 | 66 | (26 | ) | ||||||||
| Interest expense | (51 | ) | (51 | ) | (47 | ) | ||||||
| Other income, net | 70 | 70 | 38 | |||||||||
| Income/(Loss) from operations before income taxes | $ | 36 | $ | 85 | $ | (35 | ) | |||||
Outlook for 2018
Without the impact of ASC 606 for 2018, the Company continues to expect constant currency revenue growth of around 3%, and 4% on an organic basis; and we are increasing our Adjusted Diluted Earnings per Share to be in the range of
Conference Call
The Company will host a live webcast and conference call to discuss the financial results for the third quarter of 2018. It will be held on
About
Select Questions and Answers
Q1: What was the impact of foreign currency movements for the third quarter and on a year-to-date basis?
For the three months ended
Q2: Given that the spend level of integration spending is at
We anticipate our total integration spending for the year will be closer to
Q3: What was the driver of the large improvement (+$32 million) in the “Other Income, Net” line in the third quarter of 2018 compared to the third quarter of 2017?
The “Other Income, Net” line primarily includes the impact of foreign currency, gains and losses on dispositions, and credits related to the non-service cost component of our pension plans. The improvement in the third quarter of 2018 versus the same period in the prior year is primarily attributable to more favorable foreign exchange activity, along with increased pension-related income and the absence of the loss on disposal of operations from the prior year.
Q4: Given the dollar’s fluctuation this year, how should we be thinking about the impact for the remainder of 2018?
For the remainder of 2018, if currency remains stable at today’s rates, we would expect foreign currency translation to be a slight headwind to adjusted diluted earnings per share for the remainder of 2018.
Q5: What is driving the improvement in operating margins in the third quarter?
We started out the quarter with a tough comparable with 4% organic revenue growth in the prior year; and we achieved 5% organic revenue growth in the current quarter which we are pleased with overall. All four segments achieved revenue growth and operating margin improvement. This was driven by a focus on serving our clients’ needs and prudent expense management which we discussed previously on our second quarter earnings call.
Willis Towers Watson Non-GAAP Measures
In order to assist readers of our condensed 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, (4) Adjusted EBITDA, (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.
Additionally, in 2018, we adopted ASC 606, which had a material impact on the amount, timing and classification of certain revenue and costs included in our condensed consolidated financial statements. Since the Company adopted the guidance using the modified retrospective method, it has provided the impact to the affected financial statement line items within the condensed consolidated financial statements for 2018; the 2017 comparative financial statement line items have not been restated in accordance with the new standard. In an effort to help the reader better understand the impact that this guidance had on our non-GAAP measures, we have presented these measures as reported, as well as without the adoption of ASC 606.
Furthermore, the compensation for senior executives under certain long-term incentive programs is determined based on the results of our non-GAAP measures for the period 2016 through 2018 calculated without the adoption of ASC 606. Therefore, to ensure transparency, we consider it necessary to also provide the non-GAAP measures without the adoption of ASC 606. This will enable financial statement users the ability to evaluate management’s performance based on the same elements utilized for performance-based remuneration.
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:
- Restructuring costs and transaction and integration expenses - Management believes it is appropriate to adjust for restructuring costs and 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 one-time Merger-related transaction expenses. We believe the adjustment is necessary to present how the Company is performing, both now and in the future when these programs 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.
- Provisions for significant litigation - We will include provisions for litigation matters which we believe are not representative of our core business operations.
- Venezuelan currency devaluation - Foreign exchange losses incurred as a consequence of the Venezuelan government’s enforced changes to exchange rate mechanisms.
- 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 our U.S.-controlled subsidiaries.
- Tax effect of U.S. Tax Reform - Relates to the (1) U.S. income tax adjustment of deferred taxes upon the change in the federal corporate tax rate, (2) the impact of the one-time transition tax on accumulated foreign earnings net of foreign tax credits, and (3) the re-measurement of our net deferred tax liabilities associated with the U.S. tax on certain foreign earnings offset with a write-off of deferred tax assets that will no longer be realizable under U.S. Tax Reform.
We evaluate our revenue on an as reported (U.S. GAAP), constant currency and organic basis. We believe presenting constant currency and organic information provides valuable supplemental information regarding our comparable results, consistent with how we evaluate our performance internally.
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, the period-over-period impact of acquisitions and divestitures, and the impact of adopting ASC 606 on 2018 revenue. We believe that excluding transaction-related items from our U.S. GAAP financial measures provides useful supplemental information to our investors, and it is important in illustrating what our core operating results would have been had we not included these transaction-related items, since the nature, size and number of these translation-related items can vary from period to period.
Adjusted Operating Income – Income from Operations adjusted for amortization, restructuring costs, transaction and integration expenses, and non-recurring items that, in management’s judgment, significantly affect the period-over-period assessment of operating results.
Adjusted EBITDA – Net Income adjusted for provision for income taxes, interest expense, depreciation and amortization, restructuring costs, 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 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 Income Before Taxes – Income from operations before income taxes adjusted for amortization, restructuring costs, 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 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, restructuring costs, transaction and integration expenses, (gain)/loss on disposal of operations, the tax effects of internal reorganizations and U.S. Tax Reform, 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.
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.
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 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 U.S. GAAP measures (including the information under “Outlook for 2018” above), due to variability and difficulty in making accurate forecasts and projections and/or certain information not being ascertainable or accessible; and because not all of the information, such as foreign currency impacts necessary for a quantitative reconciliation of these forward-looking non-GAAP financial measures to the most directly comparable U.S. GAAP financial measure, is available to the Company without unreasonable efforts. For the same reasons, the Company is unable to address the probable significance of the unavailable information. The Company provides non-GAAP financial measures that it believes will be achieved, however it cannot accurately predict all of the components of the adjusted calculations and the U.S. GAAP measures may be materially different than the non-GAAP measures.
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 Towers Watson and Willis, including the combined company’s future financial and operating results, plans, objectives, expectations and intentions, the impact of changes to tax laws on our financial results 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; changes in demand for our services, including any decline in defined benefit pension plans or the purchasing of insurance; changes in general economic, business and political conditions, including changes in the financial markets; significant competition that the company faces and the potential for loss of market share and/or profitability; the impact of seasonality and differences in timing of renewals; the risk of increased liability or new legal claims arising from our new and existing products and services, and expectations, intentions and outcomes relating to outstanding litigation; the risk 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 relying on these forward-looking statements.
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INVESTORS
Supplemental Segment Information
(In millions of U.S. dollars)
(Unaudited)
The Company adopted ASC 606, Revenue from Contracts with Customers, as of
In an effort to better understand the impact the ASC 606 guidance had on our reported results, we have included the results as reported, as well as without the adoption of ASC 606, as supplemental information.
| SEGMENT REVENUE | Excluding Revenue Standard | ||||||||||||||||||||||||||||
| Components of Revenue Change(i) | |||||||||||||||||||||||||||||
| Three Months Ended September 30, | As Reported | Currency | Constant Currency | Acquisitions | Organic | ||||||||||||||||||||||||
| 2018 | 2017 | % Change | Impact | Change | Divestitures | Change | |||||||||||||||||||||||
| Human Capital & Benefits | $ | 738 | $ | 733 | 1% | (1)% | 2% | 0% | 2% | ||||||||||||||||||||
| Corporate Risk & Broking | 616 | 600 | 3% | (1)% | 4% | 0% | 4% | ||||||||||||||||||||||
| Investment, Risk & Reinsurance | 337 | 321 | 5% | (2)% | 7% | (2)% | 9% | ||||||||||||||||||||||
| Benefits Delivery & Administration | 200 | 181 | 10% | 0% | 10% | 0% | 10% | ||||||||||||||||||||||
| SEGMENT REVENUE | $ | 1,891 | $ | 1,835 | 3% | (1)% | 4% | (1)% | 5% | ||||||||||||||||||||
(i) Components of revenue change may not add due to rounding
| SEGMENT REVENUE | Excluding Revenue Standard | |||||||||||||||||||||||||||
| Components of Revenue Change(i) | ||||||||||||||||||||||||||||
| Nine Months Ended September 30, | As Reported | Currency | Constant Currency | Acquisitions | Organic | |||||||||||||||||||||||
| 2018 | 2017 | % Change | Impact | Change | Divestitures | Change | ||||||||||||||||||||||
| Human Capital & Benefits | $ | 2,510 | $ | 2,408 | 4% | 2% | 2% | (1)% | 3% | |||||||||||||||||||
| Corporate Risk & Broking | 2,043 | 1,916 | 7% | 3% | 4% | 0% | 4% | |||||||||||||||||||||
| Investment, Risk & Reinsurance | 1,255 | 1,186 | 6% | 3% | 3% | (2)% | 5% | |||||||||||||||||||||
| Benefits Delivery & Administration | 590 | 540 | 9% | 0% | 9% | 0% | 9% | |||||||||||||||||||||
| SEGMENT REVENUE | $ | 6,398 | $ | 6,050 | 6% | 3% | 3% | (1)% | 4% | |||||||||||||||||||
(i) Components of revenue change may not add due to rounding
| SEGMENT REVENUE | Including Revenue Standard | |||||||||||||||||||||||||||
| Components of Revenue Change(i) | ||||||||||||||||||||||||||||
| Three Months Ended September 30, | As Reported | Currency | Acquisitions | ASC 606 | Organic | |||||||||||||||||||||||
| 2018 | 2017 | % Change | Impact | Divestitures | Impact | Change | ||||||||||||||||||||||
| Human Capital & Benefits | $ | 778 | $ | 733 | 6% | (1)% | 0% | 5% | 2% | |||||||||||||||||||
| Corporate Risk & Broking | 622 | 600 | 4% | (1)% | 0% | 1% | 4% | |||||||||||||||||||||
| Investment, Risk & Reinsurance | 317 | 321 | (1)% | (2)% | (2)% | (6)% | 9% | |||||||||||||||||||||
| Benefits Delivery & Administration | 127 | 181 | (30)% | 0% | 0% | (40)% | 10% | |||||||||||||||||||||
| SEGMENT REVENUE | $ | 1,844 | $ | 1,835 | 0% | (1)% | (1)% | (2)% | 5% | |||||||||||||||||||
(i) Components of revenue change may not add due to rounding
| SEGMENT REVENUE | Including Revenue Standard | |||||||||||||||||||||||||||
| Components of Revenue Change(i) | ||||||||||||||||||||||||||||
| Nine Months Ended September 30, | As Reported | Currency | Acquisitions | ASC 606 | Organic | |||||||||||||||||||||||
| 2018 | 2017 | % Change | Impact | Divestitures | Impact | Change | ||||||||||||||||||||||
| Human Capital & Benefits | $ | 2,390 | $ | 2,408 | (1)% | 2% | (1)% | (5)% | 3% | |||||||||||||||||||
| Corporate Risk & Broking | 2,036 | 1,916 | 6% | 3% | 0% | 0% | 4% | |||||||||||||||||||||
| Investment, Risk & Reinsurance | 1,276 | 1,186 | 8% | 3% | (2)% | 2% | 5% | |||||||||||||||||||||
| Benefits Delivery & Administration | 368 | 540 | (32)% | 0% | 0% | (41)% | 9% | |||||||||||||||||||||
| SEGMENT REVENUE | $ | 6,070 | $ | 6,050 | 0% | 2% | (1)% | (5)% | 4% | |||||||||||||||||||
(i) Components of revenue change may not add due to rounding
Reconciliation of Segment Revenue to Revenue
| Including Revenue Standard |
Excluding Revenue Standard |
Excluding Revenue Standard |
||||||||||
| Three Months Ended September 30, | ||||||||||||
| 2018 | 2018 | 2017 | ||||||||||
| Segment Revenue | $ | 1,844 | $ | 1,891 | $ | 1,835 | ||||||
| Reimbursable expenses and other | 15 | 10 | 17 | |||||||||
| Revenue | $ | 1,859 | $ | 1,901 | $ | 1,852 | ||||||
Reconciliation of Segment Revenue to Revenue
| Including Revenue Standard |
Excluding Revenue Standard |
Excluding Revenue Standard |
||||||||||
| Nine Months Ended September 30, | ||||||||||||
| 2018 | 2018 | 2017 | ||||||||||
| Segment Revenue | $ | 6,070 | $ | 6,398 | $ | 6,050 | ||||||
| Reimbursable expenses and other | 71 | 76 | 74 | |||||||||
| Revenue | $ | 6,141 | $ | 6,474 | $ | 6,124 | ||||||
The components of the change in Revenue generated for the three and nine months ended
| Excluding Revenue Standard | ||||||||||||||||||||||||||||
| Components of Revenue Change(i) | ||||||||||||||||||||||||||||
| Three Months Ended September 30, |
As Reported | Currency | Constant Currency |
Acquisitions | Organic | |||||||||||||||||||||||
| 2018 | 2017 | % Change | Impact | Change | Divestitures | Change | ||||||||||||||||||||||
| Revenue | $ | 1,901 | $ | 1,852 | 3% | (1)% | 4% | (1)% | 5% | |||||||||||||||||||
(i) Components of revenue change may not add due to rounding
| Excluding Revenue Standard | ||||||||||||||||||||||||||||
| Components of Revenue Change(i) | ||||||||||||||||||||||||||||
| Nine Months Ended September 30, |
As Reported | Currency | Constant Currency |
Acquisitions | Organic | |||||||||||||||||||||||
| 2018 | 2017 | % Change | Impact | Change | Divestitures | Change | ||||||||||||||||||||||
| Revenue | $ | 6,474 | $ | 6,124 | 6% | 2% | 3% | (1)% | 4% | |||||||||||||||||||
(i) Components of revenue change may not add due to rounding
| Including Revenue Standard | ||||||||||||||||||||||||||||
| Components of Revenue Change(i) | ||||||||||||||||||||||||||||
| Three Months Ended September 30, |
As Reported | Currency | Acquisitions | ASC 606 | Organic | |||||||||||||||||||||||
| 2018 | 2017 | % Change | Impact | Divestitures | Impact | Change | ||||||||||||||||||||||
| Revenue | $ | 1,859 | $ | 1,852 | 0% | (1)% | (1)% | (2)% | 5% | |||||||||||||||||||
(i) Components of revenue change may not add due to rounding
| Including Revenue Standard | ||||||||||||||||||||||||||||
| Components of Revenue Change(i) | ||||||||||||||||||||||||||||
| Nine Months Ended September 30, |
As Reported | Currency | Acquisitions | ASC 606 | Organic | |||||||||||||||||||||||
| 2018 | 2017 | % Change | Impact | Divestitures | Impact | Change | ||||||||||||||||||||||
| Revenue | $ | 6,141 | $ | 6,124 | 0% | 2% | (1)% | (5)% | 4% | |||||||||||||||||||
(i) Components of revenue change may not add due to rounding
SEGMENT OPERATING INCOME/(LOSS)(i)
| Including Revenue Standard |
Excluding Revenue Standard |
Excluding Revenue Standard |
||||||||||
| Three Months Ended September 30, | ||||||||||||
| 2018 | 2018 | 2017 | ||||||||||
| Human Capital & Benefits | $ | 194 | $ | 157 | $ | 143 | ||||||
| Corporate Risk & Broking | 66 | 58 | 48 | |||||||||
| Investment, Risk & Reinsurance | 29 | 52 | 32 | |||||||||
| Benefits Delivery & Administration | (33 | ) | 41 | 36 | ||||||||
| Segment Operating Income | $ | 256 | $ | 308 | $ | 259 | ||||||
(i) Segment operating income excludes certain costs, including amortization of intangibles, restructuring costs, 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 US GAAP purposes.
SEGMENT OPERATING INCOME/(LOSS)(i)
| Including Revenue Standard |
Excluding Revenue Standard |
Excluding Revenue Standard |
||||||||||
| Nine Months Ended September 30, | ||||||||||||
| 2018 | 2018 | 2017 | ||||||||||
| Human Capital & Benefits | $ | 536 | $ | 660 | $ | 610 | ||||||
| Corporate Risk & Broking | 288 | 289 | 269 | |||||||||
| Investment, Risk & Reinsurance | 379 | 379 | 335 | |||||||||
| Benefits Delivery & Administration | (96 | ) | 132 | 109 | ||||||||
| Segment Operating Income | $ | 1,107 | $ | 1,460 | $ | 1,323 | ||||||
(i) Segment operating income excludes certain costs, including amortization of intangibles, restructuring costs, 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 US GAAP purposes.
Reconciliation of Segment Operating Income to Income/(Loss) from operations before income taxes
| Including Revenue Standard |
Excluding Revenue Standard |
Excluding Revenue Standard |
||||||||||
| Three Months Ended September 30, | ||||||||||||
| 2018 | 2018 | 2017 | ||||||||||
| Segment Operating Income | $ | 256 | $ | 308 | $ | 259 | ||||||
| Amortization | (127 | ) | (127 | ) | (141 | ) | ||||||
| Restructuring costs | — | — | (31 | ) | ||||||||
| Transaction and integration expenses | (50 | ) | (50 | ) | (74 | ) | ||||||
| Unallocated, net(i) | (62 | ) | (65 | ) | (39 | ) | ||||||
| Income from Operations | 17 | 66 | (26 | ) | ||||||||
| Interest expense | (51 | ) | (51 | ) | (47 | ) | ||||||
| Other income, net | 70 | 70 | 38 | |||||||||
| Income/(Loss) from operations before income taxes | $ | 36 | $ | 85 | $ | (35 | ) | |||||
(i) 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 U.S. GAAP purposes.
Reconciliation of Segment Operating Income to Income from operations before income taxes
| Including Revenue Standard |
Excluding Revenue Standard |
Excluding Revenue Standard |
||||||||||
| Nine Months Ended September 30, | ||||||||||||
| 2018 | 2018 | 2017 | ||||||||||
| Segment Operating Income | $ | 1,107 | $ | 1,460 | $ | 1,323 | ||||||
| Amortization | (408 | ) | (408 | ) | (441 | ) | ||||||
| Restructuring costs | — | — | (85 | ) | ||||||||
| Transaction and integration expenses | (148 | ) | (148 | ) | (177 | ) | ||||||
| Unallocated, net(i) | (212 | ) | (207 | ) | (184 | ) | ||||||
| Income from Operations | 339 | 697 | 436 | |||||||||
| Interest expense | (154 | ) | (154 | ) | (139 | ) | ||||||
| Other income, net | 189 | 189 | 115 | |||||||||
| Income from operations before income taxes | $ | 374 | $ | 732 | $ | 412 | ||||||
(i) 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 U.S. GAAP purposes.
Reconciliation of Non-GAAP Measures
(In millions of U.S. dollars, except per share data)
(Unaudited)
The Company adopted ASC 606, Revenue from Contracts with Customers, as of
RECONCILIATION OF NET INCOME/(LOSS) ATTRIBUTABLE TO WILLIS TOWERS WATSON TO ADJUSTED DILUTED EARNINGS PER SHARE
| Including Revenue Standard |
Excluding Revenue Standard |
Excluding Revenue Standard |
||||||||||||||
| Three Months Ended September 30, | ||||||||||||||||
| 2018 | 2018 | 2017 | ||||||||||||||
| Net Income/(Loss) attributable to Willis Towers Watson | $ | 44 | $ | 83 | $ | (54 | ) | |||||||||
| Adjusted for certain items: | ||||||||||||||||
| Amortization | 127 | 127 | 141 | |||||||||||||
| Restructuring costs | — | — | 31 | |||||||||||||
| Transaction and integration expenses | 50 | 50 | 74 | |||||||||||||
| Pension settlement and curtailment gains and losses | (4 | ) | (4 | ) | — | |||||||||||
| Loss on disposal of operations | — | — | 10 | |||||||||||||
| Tax effect on certain items listed above(i) | (44 | ) | (44 | ) | (74 | ) | ||||||||||
| Tax effects of internal reorganization | 1 | 1 | 22 | |||||||||||||
| Adjusted Net Income | $ | 174 | $ | 213 | $ | 150 | ||||||||||
| Weighted average shares of common stock, diluted | 132 | 132 | 134 | |||||||||||||
| Diluted Earnings/(Loss) Per Share | $ | 0.33 | $ | 0.63 | $ | (0.40 | ) | |||||||||
| Adjusted for certain items:(ii) | ||||||||||||||||
| Amortization | 0.97 | 0.97 | 1.05 | |||||||||||||
| Restructuring costs | — | — | 0.23 | |||||||||||||
| Transaction and integration expenses | 0.38 | 0.38 | 0.55 | |||||||||||||
| Pension settlement and curtailment gains and losses | (0.03 | ) | (0.03 | ) | — | |||||||||||
| Loss on disposal of operations | — | — | 0.08 | |||||||||||||
| Tax effect on certain items listed above(i) | (0.33 | ) | (0.33 | ) | (0.55 | ) | ||||||||||
| Tax effects of internal reorganization | — | — | 0.16 | |||||||||||||
| Adjusted Diluted Earnings Per Share | $ | 1.32 | $ | 1.62 | $ | 1.12 | ||||||||||
(i) The tax effect was calculated using an effective tax rate for each item.
(ii) Per share values and totals were calculated using extended values.
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO WILLIS TOWERS WATSON TO ADJUSTED DILUTED EARNINGS PER SHARE
| Including Revenue Standard |
Excluding Revenue Standard |
Excluding Revenue Standard |
||||||||||||||
| Nine Months Ended September 30, | ||||||||||||||||
| 2018 | 2018 | 2017 | ||||||||||||||
| Net Income attributable to Willis Towers Watson | $ | 317 | $ | 606 | $ | 323 | ||||||||||
| Adjusted for certain items: | ||||||||||||||||
| Amortization | 408 | 408 | 441 | |||||||||||||
| Restructuring costs | — | — | 85 | |||||||||||||
| Transaction and integration expenses | 148 | 148 | 177 | |||||||||||||
| Pension settlement and curtailment gains and losses | 16 | 16 | — | |||||||||||||
| Loss on disposal of operations | 9 | 9 | 10 | |||||||||||||
| Venezuela currency devaluation | — | — | 2 | |||||||||||||
| Tax effect on certain items listed above(i) | (139 | ) | (139 | ) | (219 | ) | ||||||||||
| Tax effects of internal reorganization | 1 | 1 | 41 | |||||||||||||
| Adjusted Net Income | $ | 760 | $ | 1,049 | $ | 860 | ||||||||||
| Weighted average shares of common stock, diluted | 132 | 132 | 137 | |||||||||||||
| Diluted Earnings Per Share | $ | 2.39 | $ | 4.58 | $ | 2.36 | ||||||||||
| Adjusted for certain items:(ii) | ||||||||||||||||
| Amortization | 3.08 | 3.08 | 3.23 | |||||||||||||
| Restructuring costs | — | — | 0.62 | |||||||||||||
| Transaction and integration expenses | 1.12 | 1.12 | 1.30 | |||||||||||||
| Pension settlement and curtailment gains and losses | 0.12 | 0.12 | — | |||||||||||||
| Loss on disposal of operations | 0.07 | 0.07 | 0.07 | |||||||||||||
| Venezuela currency devaluation | — | — | 0.02 | |||||||||||||
| Tax effect on certain items listed above(i) | (1.05 | ) | (1.05 | ) | (1.60 | ) | ||||||||||
| Tax effects of internal reorganization | — | — | 0.30 | |||||||||||||
| Adjusted Diluted Earnings Per Share | $ | 5.74 | $ | 7.92 | $ | 6.30 | ||||||||||
(i) The tax effect was calculated using an effective tax rate for each item.
(ii) Per share values and totals were calculated using extended values.
RECONCILIATION OF NET INCOME/(LOSS) TO ADJUSTED EBITDA
| Including Revenue Standard |
Excluding Revenue Standard |
Excluding Revenue Standard |
||||||||||||||||||||||
| Three Months Ended September 30, | ||||||||||||||||||||||||
| 2018 | 2018 | 2017 | ||||||||||||||||||||||
| Net Income/(Loss) | $ | 46 | 2.5 | % | $ | 85 | 4.5 | % | $ | (54 | ) | (2.9 | )% | |||||||||||
| (Benefit from)/Provision for income taxes | (10 | ) | — | 19 | ||||||||||||||||||||
| Interest expense | 51 | 51 | 47 | |||||||||||||||||||||
| Depreciation | 53 | 59 | 54 | |||||||||||||||||||||
| Amortization | 127 | 127 | 141 | |||||||||||||||||||||
| Restructuring costs | — | — | 31 | |||||||||||||||||||||
| Transaction and integration expenses | 50 | 50 | 74 | |||||||||||||||||||||
| Pension settlement and curtailment gains and losses | (4 | ) | (4 | ) | — | |||||||||||||||||||
| Loss on disposal of operations | — | — | 10 | |||||||||||||||||||||
| Adjusted EBITDA and Adjusted EBITDA Margin | $ | 313 | 16.8 | % | $ | 368 | 19.4 | % | $ | 322 | 17.4 | % | ||||||||||||
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
| Including Revenue Standard |
Excluding Revenue Standard |
Excluding Revenue Standard |
||||||||||||||||||||||
| Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2018 | 2018 | 2017 | ||||||||||||||||||||||
| Net Income | $ | 332 | 5.4 | % | $ | 621 | 9.6 | % | $ | 339 | 5.5 | % | ||||||||||||
| Provision for income taxes | 42 | 111 | 73 | |||||||||||||||||||||
| Interest expense | 154 | 154 | 139 | |||||||||||||||||||||
| Depreciation | 153 | 169 | 151 | |||||||||||||||||||||
| Amortization | 408 | 408 | 441 | |||||||||||||||||||||
| Restructuring costs | — | — | 85 | |||||||||||||||||||||
| Transaction and integration expenses | 148 | 148 | 177 | |||||||||||||||||||||
| Pension settlement and curtailment gains and losses | 16 | 16 | — | |||||||||||||||||||||
| Loss on disposal of operations | 9 | 9 | 10 | |||||||||||||||||||||
| Venezuela currency devaluation | — | — | 2 | |||||||||||||||||||||
| Adjusted EBITDA and Adjusted EBITDA Margin | $ | 1,262 | 20.6 | % | $ | 1,636 | 25.3 | % | $ | 1,417 | 23.1 | % | ||||||||||||
RECONCILIATION OF INCOME/(LOSS) FROM OPERATIONS TO ADJUSTED OPERATING INCOME
| Including Revenue Standard |
Excluding Revenue Standard |
Excluding Revenue Standard |
||||||||||||||||||||||
| Three Months Ended September 30, | ||||||||||||||||||||||||
| 2018 | 2018 | 2017 | ||||||||||||||||||||||
| Income/(Loss) from operations | $ | 17 | 0.9 | % | $ | 66 | 3.5 | % | $ | (26 | ) | (1.4 | )% | |||||||||||
| Adjusted for certain items: | ||||||||||||||||||||||||
| Amortization | 127 | 127 | 141 | |||||||||||||||||||||
| Restructuring costs | — | — | 31 | |||||||||||||||||||||
| Transaction and integration expenses | 50 | 50 | 74 | |||||||||||||||||||||
| Adjusted operating income | $ | 194 | 10.4 | % | $ | 243 | 12.8 | % | $ | 220 | 11.9 | % | ||||||||||||
RECONCILIATION OF INCOME FROM OPERATIONS TO ADJUSTED OPERATING INCOME
| Including Revenue Standard |
Excluding Revenue Standard |
Excluding Revenue Standard |
||||||||||||||||||||||
| Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2018 | 2018 | 2017 | ||||||||||||||||||||||
| Income from operations | $ | 339 | 5.5 | % | $ | 697 | 10.8 | % | $ | 436 | 7.1 | % | ||||||||||||
| Adjusted for certain items: | ||||||||||||||||||||||||
| Amortization | 408 | 408 | 441 | |||||||||||||||||||||
| Restructuring costs | — | — | 85 | |||||||||||||||||||||
| Transaction and integration expenses | 148 | 148 | 177 | |||||||||||||||||||||
| Adjusted operating income | $ | 895 | 14.6 | % | $ | 1,253 | 19.4 | % | $ | 1,139 | 18.6 | % | ||||||||||||
RECONCILIATION OF GAAP INCOME TAXES/TAX RATE TO ADJUSTED INCOME TAXES/TAX RATE
| Including Revenue Standard |
Excluding Revenue Standard |
Excluding Revenue Standard |
||||||||||||||
| Three Months Ended September 30, | ||||||||||||||||
| 2018 | 2018 | 2017 | ||||||||||||||
| Income/(Loss) from operations before income taxes | $ | 36 | $ | 85 | $ | (35 | ) | |||||||||
| Adjusted for certain items: | ||||||||||||||||
| Amortization | 127 | 127 | 141 | |||||||||||||
| Restructuring costs | — | — | 31 | |||||||||||||
| Transaction and integration expenses | 50 | 50 | 74 | |||||||||||||
| Pension settlement and curtailment gains and losses | (4 | ) | (4 | ) | — | |||||||||||
| Loss on disposal of operations | — | — | 10 | |||||||||||||
| Adjusted income before taxes | $ | 209 | $ | 258 | $ | 221 | ||||||||||
| (Benefit from)/Provision for income taxes | $ | (10 | ) | $ | — | $ | 19 | |||||||||
| Tax effect on certain items listed above(i) | 44 | 44 | 74 | |||||||||||||
| Tax effects of internal reorganization | (1 | ) | (1 | ) | (22 | ) | ||||||||||
| Adjusted income taxes | $ | 33 | $ | 43 | $ | 71 | ||||||||||
| GAAP tax rate | (28.1 | )% | 0.1 | % | (53.0 | )% | ||||||||||
| Adjusted tax rate | 15.9 | % | 16.7 | % | 32.1 | % | ||||||||||
(i) The tax effect was calculated using an effective tax rate for each item.
RECONCILIATION OF GAAP INCOME TAXES/TAX RATE TO ADJUSTED INCOME TAXES/TAX RATE
| Including Revenue Standard |
Excluding Revenue Standard |
Excluding Revenue Standard |
||||||||||||||
| Nine Months Ended September 30, | ||||||||||||||||
| 2018 | 2018 | 2017 | ||||||||||||||
| Income from operations before income taxes | $ | 374 | $ | 732 | $ | 412 | ||||||||||
| Adjusted for certain items: | ||||||||||||||||
| Amortization | 408 | 408 | 441 | |||||||||||||
| Restructuring costs | — | — | 85 | |||||||||||||
| Transaction and integration expenses | 148 | 148 | 177 | |||||||||||||
| Pension settlement and curtailment gains and losses | 16 | 16 | — | |||||||||||||
| Loss on disposal of operations | 9 | 9 | 10 | |||||||||||||
| Venezuela currency devaluation | — | — | 2 | |||||||||||||
| Adjusted income before taxes | $ | 955 | $ | 1,313 | $ | 1,127 | ||||||||||
| Provision for income taxes | $ | 42 | $ | 111 | $ | 73 | ||||||||||
| Tax effect on certain items listed above(i) | 139 | 139 | 219 | |||||||||||||
| Tax effects of internal reorganization | (1 | ) | (1 | ) | (41 | ) | ||||||||||
| Adjusted income taxes | $ | 180 | $ | 249 | $ | 251 | ||||||||||
| GAAP tax rate | 11.3 | % | 15.2 | % | 17.7 | % | ||||||||||
| Adjusted tax rate | 18.9 | % | 19.0 | % | 22.3 | % | ||||||||||
(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
| Including Revenue Standard |
Excluding Revenue Standard |
Excluding Revenue Standard |
||||||||||||||
| Nine Months Ended September 30, | ||||||||||||||||
| 2018 | 2018 | 2017 | ||||||||||||||
| Cash flows from operating activities | $ | 716 | $ | 753 | $ | 515 | ||||||||||
| Less: Additions to fixed assets and software for internal use | (209 | ) | (209 | ) | (198 | ) | ||||||||||
| Free Cash Flow | $ | 507 | $ | 544 | $ | 317 | ||||||||||
Condensed Consolidated Statements of Income
(In millions of U.S. dollars, except per share data)
(Unaudited)
| With Adoption of ASC 606 |
Without Adoption of ASC 606 |
With Adoption of ASC 606 |
Without Adoption of ASC 606 |
|||||||||||||
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Revenue | $ | 1,859 | $ | 1,852 | $ | 6,141 | $ | 6,124 | ||||||||
| Costs of providing services | ||||||||||||||||
| Salaries and benefits | 1,238 | 1,212 | 3,890 | 3,676 | ||||||||||||
| Other operating expenses | 374 | 366 | 1,203 | 1,158 | ||||||||||||
| Depreciation | 53 | 54 | 153 | 151 | ||||||||||||
| Amortization | 127 | 141 | 408 | 441 | ||||||||||||
| Restructuring costs | — | 31 | — | 85 | ||||||||||||
| Transaction and integration expenses | 50 | 74 | 148 | 177 | ||||||||||||
| Total costs of providing services | 1,842 | 1,878 | 5,802 | 5,688 | ||||||||||||
| Income/(Loss) from operations | 17 | (26 | ) | 339 | 436 | |||||||||||
| Interest expense | (51 | ) | (47 | ) | (154 | ) | (139 | ) | ||||||||
| Other income, net | 70 | 38 | 189 | 115 | ||||||||||||
| INCOME/(LOSS) FROM OPERATIONS BEFORE INCOME TAXES | 36 | (35 | ) | 374 | 412 | |||||||||||
| Benefit from/(Provision for) income taxes | 10 | (19 | ) | (42 | ) | (73 | ) | |||||||||
| NET INCOME/(LOSS) | 46 | (54 | ) | 332 | 339 | |||||||||||
| Income attributable to non-controlling interests | (2 | ) | — | (15 | ) | (16 | ) | |||||||||
| NET INCOME/(LOSS) ATTRIBUTABLE TO WILLIS TOWERS WATSON | $ | 44 | $ | (54 | ) | $ | 317 | $ | 323 | |||||||
| Earnings per share | ||||||||||||||||
| Basic earnings/(loss) per share | $ | 0.34 | $ | (0.40 | ) | $ | 2.40 | $ | 2.38 | |||||||
| Diluted earnings/(loss) per share | $ | 0.33 | $ | (0.40 | ) | $ | 2.39 | $ | 2.36 | |||||||
| Weighted average shares of common stock, basic | 131 | 134 | 132 | 136 | ||||||||||||
| Weighted average shares of common stock, diluted | 132 | 134 | 132 | 137 | ||||||||||||
The prior year has been updated for the adoption of ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost which became effective
Condensed Consolidated Balance Sheets
(In millions of U.S. dollars, except share data)
(Unaudited)
| September 30, | December 31, | |||||||
| 2018 | 2017 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 931 | $ | 1,030 | ||||
| Fiduciary assets | 13,146 | 12,155 | ||||||
| Accounts receivable, net | 2,132 | 2,246 | ||||||
| Prepaid and other current assets | 547 | 430 | ||||||
| Total current assets | 16,756 | 15,861 | ||||||
| Fixed assets, net | 944 | 985 | ||||||
| Goodwill | 10,457 | 10,519 | ||||||
| Other intangible assets, net | 3,429 | 3,882 | ||||||
| Pension benefits assets | 955 | 764 | ||||||
| Other non-current assets | 500 | 447 | ||||||
| Total non-current assets | 16,285 | 16,597 | ||||||
| TOTAL ASSETS | $ | 33,041 | $ | 32,458 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Fiduciary liabilities | $ | 13,146 | $ | 12,155 | ||||
| Deferred revenue and accrued expenses | 1,465 | 1,711 | ||||||
| Short-term debt and current portion of long-term debt | 186 | 85 | ||||||
| Other current liabilities | 758 | 804 | ||||||
| Total current liabilities | 15,555 | 14,755 | ||||||
| Long-term debt | 4,498 | 4,450 | ||||||
| Liability for pension benefits | 1,087 | 1,259 | ||||||
| Deferred tax liabilities | 678 | 615 | ||||||
| Provision for liabilities | 585 | 558 | ||||||
| Other non-current liabilities | 448 | 544 | ||||||
| Total non-current liabilities | 7,296 | 7,426 | ||||||
| TOTAL LIABILITIES | 22,851 | 22,181 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| REDEEMABLE NON-CONTROLLING INTEREST | 27 | 28 | ||||||
| EQUITY(i) | ||||||||
| Additional paid-in capital | 10,577 | 10,538 | ||||||
| Retained earnings | 1,102 | 1,104 | ||||||
| Accumulated other comprehensive loss, net of tax | (1,627 | ) | (1,513 | ) | ||||
| Treasury shares, at cost, 17,519 shares in 2018 and 2017, and 40,000 shares, €1 nominal value, in 2018 and 2017 | (3 | ) | (3 | ) | ||||
| Total Willis Towers Watson shareholders' equity | 10,049 | 10,126 | ||||||
| Non-controlling interests | 114 | 123 | ||||||
| Total Equity | 10,163 | 10,249 | ||||||
| TOTAL LIABILITIES AND EQUITY | $ | 33,041 | $ | 32,458 | ||||
(i) Equity includes (a) Ordinary shares
WILLIS TOWERS WATSON
Condensed Consolidated Statements of Cash Flows
(In millions of U.S. dollars)
(Unaudited)
| With Adoption of ASC 606 |
Without Adoption of ASC 606 |
|||||||
| Nine Months Ended September 30, | ||||||||
| 2018 | 2017 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| NET INCOME | $ | 332 | $ | 339 | ||||
| Adjustments to reconcile net income to total net cash from operating activities: | ||||||||
| Depreciation | 158 | 169 | ||||||
| Amortization | 408 | 441 | ||||||
| Net periodic benefit of defined benefit pension plans | (132 | ) | (106 | ) | ||||
| Provision for doubtful receivables from clients | 10 | 15 | ||||||
| Benefit from deferred income taxes | (70 | ) | (56 | ) | ||||
| Share-based compensation | 15 | 48 | ||||||
| Net loss on disposal of operations | 9 | 10 | ||||||
| Non-cash foreign exchange loss | 23 | 79 | ||||||
| Other, net | 5 | (21 | ) | |||||
| Changes in operating assets and liabilities, net of effects from purchase of subsidiaries: | ||||||||
| Accounts receivable | 332 | 31 | ||||||
| Fiduciary assets | (1,298 | ) | (1,233 | ) | ||||
| Fiduciary liabilities | 1,298 | 1,233 | ||||||
| Other assets | (52 | ) | (95 | ) | ||||
| Other liabilities | (340 | ) | (351 | ) | ||||
| Provisions | 18 | 12 | ||||||
| Net cash from operating activities | 716 | 515 | ||||||
| CASH FLOWS USED IN INVESTING ACTIVITIES | ||||||||
| Additions to fixed assets and software for internal use | (209 | ) | (198 | ) | ||||
| Capitalized software costs | (41 | ) | (52 | ) | ||||
| Acquisitions of operations, net of cash acquired | (8 | ) | (13 | ) | ||||
| Net proceeds from sale of operations | 4 | — | ||||||
| Other, net | 14 | 1 | ||||||
| Net cash used in investing activities | (240 | ) | (262 | ) | ||||
| CASH FLOWS USED IN FINANCING ACTIVITIES | ||||||||
| Net (payments)/borrowings on revolving credit facility | (654 | ) | 675 | |||||
| Senior notes issued | 998 | 650 | ||||||
| Proceeds from issuance of other debt | — | 32 | ||||||
| Debt issuance costs | (8 | ) | (9 | ) | ||||
| Repayments of debt | (170 | ) | (714 | ) | ||||
| Repurchase of shares | (401 | ) | (462 | ) | ||||
| Proceeds from issuance of shares | 21 | 44 | ||||||
| Payments related to share cancellation | — | (177 | ) | |||||
| Payments of deferred and contingent consideration related to acquisitions | (50 | ) | (43 | ) | ||||
| Cash paid for employee taxes on withholding shares | (30 | ) | (14 | ) | ||||
| Dividends paid | (228 | ) | (209 | ) | ||||
| Acquisitions of and dividends paid to non-controlling interests | (20 | ) | (19 | ) | ||||
| Net cash used in financing activities | (542 | ) | (246 | ) | ||||
| (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS | (66 | ) | 7 | |||||
| Effect of exchange rate changes on cash and cash equivalents | (33 | ) | 35 | |||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 1,030 | 870 | ||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 931 | $ | 912 | ||||
WILLIS TOWERS WATSON
Supplemental Information
(In millions of U.S. dollars, except per share data)
(Unaudited)
In accordance with the modified retrospective adoption requirements of ASC 606, the following represents the impact of adoption on our condensed consolidated statements of income, balance sheet and statement of cash flows.
| Three Months Ended September 30, 2018 | |||||||||||
| Statement of Income | As Reported | Balances Without Adoption of ASC 606 |
Effect of Change |
||||||||
| Revenue | $ | 1,859 | $ | 1,901 | $ | (42 | ) | ||||
| Costs of providing services | |||||||||||
| Salaries and benefits | 1,238 | 1,225 | 13 | ||||||||
| Depreciation | 53 | 59 | (6 | ) | |||||||
| Income from operations | 17 | 66 | (49 | ) | |||||||
| INCOME FROM OPERATIONS BEFORE INCOME TAXES | 36 | 85 | (49 | ) | |||||||
| Benefit from income taxes | 10 | — | 10 | ||||||||
| NET INCOME | 46 | 85 | (39 | ) | |||||||
| NET INCOME ATTRIBUTABLE TO WILLIS TOWERS WATSON | 44 | 83 | (39 | ) | |||||||
| EARNINGS PER SHARE | |||||||||||
| Basic earnings per share | $ | 0.34 | $ | 0.63 | $ | (0.29 | ) | ||||
| Diluted earnings per share | $ | 0.33 | $ | 0.63 | $ | (0.30 | ) | ||||
| Nine Months Ended September 30, 2018 | |||||||||||
| Statement of Income | As Reported | Balances Without Adoption of ASC 606 |
Effect of Change |
||||||||
| Revenue | $ | 6,141 | $ | 6,474 | $ | (333 | ) | ||||
| Costs of providing services | |||||||||||
| Salaries and benefits | 3,890 | 3,849 | 41 | ||||||||
| Depreciation | 153 | 169 | (16 | ) | |||||||
| Income from operations | 339 | 697 | (358 | ) | |||||||
| INCOME FROM OPERATIONS BEFORE INCOME TAXES | 374 | 732 | (358 | ) | |||||||
| Provision for income taxes | (42 | ) | (111 | ) | 69 | ||||||
| NET INCOME | 332 | 621 | (289 | ) | |||||||
| NET INCOME ATTRIBUTABLE TO WILLIS TOWERS WATSON | 317 | 606 | (289 | ) | |||||||
| EARNINGS PER SHARE | |||||||||||
| Basic earnings per share | $ | 2.40 | $ | 4.59 | $ | (2.19 | ) | ||||
| Diluted earnings per share | $ | 2.39 | $ | 4.58 | $ | (2.19 | ) | ||||
| As of September 30, 2018 | |||||||||||
| Balance Sheet | As Reported | Balances Without Adoption of ASC 606 |
Effect of Change | ||||||||
| ASSETS | |||||||||||
| Accounts receivable, net | $ | 2,132 | $ | 2,158 | $ | (26 | ) | ||||
| Prepaid and other current assets | 547 | 478 | 69 | ||||||||
| Fixed assets, net | 944 | 1,050 | (106 | ) | |||||||
| Other non-current assets | 500 | 448 | 52 | ||||||||
| LIABILITIES | |||||||||||
| Deferred revenue and accrued expenses | 1,465 | 1,546 | (81 | ) | |||||||
| Other current liabilities | 758 | 827 | (69 | ) | |||||||
| Deferred tax liabilities | 678 | 579 | 99 | ||||||||
| Provision for liabilities | 585 | 574 | 11 | ||||||||
| EQUITY | |||||||||||
| Retained earnings | 1,102 | 1,073 | 29 | ||||||||
| Nine Months Ended September 30, 2018 | |||||||||||
| Statement of Cash Flows | As Reported | Balances Without Adoption of ASC 606 |
Effect of Change | ||||||||
| Net cash from operating activities | $ | 716 | $ | 753 | $ | (37 | ) | ||||
| Capitalized software costs | (41 | ) | (78 | ) | 37 | ||||||
This change is a result of moving a portion of capitalized software related to client system implementations from Investing activities to Operating activities within the Statement of Cash Flows.
Source: Willis Towers Watson Public Limited Company