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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): April 23, 2003
WILLIS GROUP HOLDINGS LIMITED
(Exact name of Registrant as specified in its charter)
BERMUDA 001-16503 98-0352587
(Jurisdiction of incorporation (Commission File (IRS Employer
or organization) Number) Identification No.)
Ten Trinity Square
London EC3P 3AX, England
(Address of principal executive offices)
Registrant's telephone number, including area code: +44 20 7488 8111
Not Applicable
(Former name or former address, if changed since last report.)
Item 9. Regulation FD Disclosure.
The following information and the information included in the press release
attached hereto as Exhibit 99, is disclosed pursuant to Item 12 - Results of
Operations and Financial Condition. It is being furnished under Item 9 of this
Form 8-K in accordance with interim guidance issued by the SEC in release No.
33-8216.
On April 23, 2003 Willis Group Holdings Limited issued a press release
announcing its financial results for the first quarter of 2003. A copy of this
press release is attached hereto as Exhibit 99 (information provided under Item
12 - Results of Operations and Financial Condition). The information in this
Current Report on Form 8-K, including the exhibit, is furnished pursuant to Item
12 of Form 8-K and shall not be deemed "filed" for the purposes of Section 18 of
the Securities Exchange Act of 1934 or otherwise subject to liability under that
Section. In addition, the information in this Current Report on Form 8-K,
including the exhibit, shall not be deemed to be incorporated by reference into
the filings of the Registrant under the Securities Act of 1933.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
WILLIS GROUP HOLDINGS LIMITED
By: /s/ Mary E. Caiazzo
--------------------------------------
Mary E. Caiazzo
Assistant General Counsel
Date: April 23, 2003
Exhibit 99
Willis Group Reports Record First Quarter Results
NEW YORK--(BUSINESS WIRE)--April 23, 2003--Willis Group Holdings
Limited (NYSE: WSH), the global insurance broker, today reports record
results for the quarter ended March 31, 2003.
Net income for the quarter ended March 31, 2003 was $117 million,
or $0.69 per diluted share compared to $68 million, or $0.43 per
diluted share, a year ago. Excluding non-cash compensation for
performance-based stock options, adjusted net income increased 48% to
$123 million for the quarter ended March 31, 2003 from $83 million in
the same period last year, while adjusted net income per diluted share
rose 46% to $0.73 from $0.50 a year ago.
Total revenues for the quarter ended March 31, 2003 increased 23%
to $555 million, up from $451 million for the corresponding quarter
last year. Of this increase in revenues of 23%, approximately 7%
represented the effect of foreign currency exchange rate movements and
approximately (2)% was attributable to the effect of acquisitions and
disposals. Adjusting for these items, total revenues on an underlying
(organic) basis were 18% higher in the first quarter of 2003 compared
with 2002.
Joe Plumeri, Chairman and Chief Executive Officer said, "Our first
quarter results reaffirm our business model and acknowledge our sales
culture and discipline. The majority of our organic revenue growth was
attributable to net new business rather than higher premium rates.
This illustrates that our pipelines are robust, that our sales efforts
are succeeding and that clients endorse our client-advocate model
which builds all efforts around them and their unique business needs."
At March 31, 2003, total long-term debt was $499 million, down 35%
from $767 million a year ago. Total stockholders' equity at quarter
end was approximately $970 million. The capitalization ratio, or the
ratio of total long-term debt to total long-term debt and
stockholders' equity, declined to 34% at quarter end compared to 50% a
year ago. There was approximately $93 million of immediately available
cash at March 31, 2003, providing significant financial flexibility to
support the cash needs of the Company.
"During the first quarter, we made further debt reductions and
improved our capitalization ratio," said Plumeri. "This progress, as
well as our improved financial performance over the past year, was
recognized during the first quarter of 2003 as one of the major rating
agencies upgraded our debt ratings and reaffirmed a positive outlook
on the Company."
Commenting on the current insurance marketplace, Plumeri said,
"Insurance premium rates continue to rise in most lines and
geographies. These increases have moderated in some areas, principally
property related, as new capacity has allowed placements to be
completed at reasonable rates. Our global reach and expertise means we
are well-placed to solve our clients' problems in this difficult
marketplace."
Plumeri concluded, "We are confident in the outlook for future
growth at Willis, and are on course to exceed our goal to grow
adjusted net income per diluted share by 25% or better in 2003. Our
long-term goal is to grow these earnings by 15% or better each year,
in all market environments."
Willis Group Holdings is a leading global insurance broker,
developing and delivering professional insurance, reinsurance, risk
management, financial and human resource consulting and actuarial
services to corporations, public entities and institutions around the
world. With over 300 offices in about 80 countries, its global team of
13,000 associates serves clients in 180 countries. Willis has
particular expertise in serving the needs of clients in such major
industries as construction, aerospace, marine and energy. Additional
information on Willis may be found on its web site www.willis.com.
This press release may contain certain statements relating to
future results, which are forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially
from historical results or those anticipated, depending on a variety
of factors such as general economic conditions in different countries
around the world, fluctuations in global equity and fixed income
markets, changes in premium rates, the competitive environment and the
actual cost of resolution of contingent liabilities. Further
information concerning the Company and its business, including factors
that potentially could materially affect the Company's financial
results, are contained in the Company's filings with the Securities
and Exchange Commission.
This press release includes supplemental financial information
which may contain references to non-GAAP financial measures as defined
in Regulation G of SEC rules. Consistent with Regulation G, a
reconciliation of this supplemental financial information to our
generally accepted accounting principles (GAAP) information follows.
We present such non-GAAP supplemental financial information as we
believe such information is of interest to the investment community
because it provides additional meaningful methods of evaluating
certain aspects of the Company's operating performance from period to
period on a basis that may not be otherwise apparent on a GAAP basis.
This supplemental financial information should be viewed in addition
to, not in lieu of, the Company's consolidated statements of
operations for the three months ended March 31, 2003 and 2002.
WILLIS GROUP HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
Three months
ended March 31,
-------------------
2003 2002
--------- ---------
Revenues:
Commissions and fees $ 540 $ 436
Interest income 15 15
--------- ---------
Total Revenues 555 451
--------- ---------
Expenses:
General and administrative expenses (excluding
non-cash compensation) 351 297
Non-cash compensation - performance options
(Note 1) 8 18
Depreciation expense 9 8
Amortization of intangibles 1 -
--------- ---------
Total Expenses 369 323
--------- --------
Operating Income 186 128
Interest expense 15 17
--------- ---------
Income before Income Taxes, Equity in Net Income
of Associates and Minority Interest 171 111
Income tax expense 61 43
--------- ---------
Income before Equity in Net Income of Associates
and Minority Interest 110 68
Equity in net income of associates 10 6
Minority interest (3) (6)
--------- ---------
Net Income $ 117 $ 68
========= =========
Net Income per Share
- Basic $ 0.79 $ 0.46
- Diluted $ 0.69 $ 0.43
========= =========
Average Number of Shares Outstanding
- Basic 149 147
- Diluted 169 159
========= =========
WILLIS GROUP HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (cont'd)
(in millions, except per share data)
(unaudited)
Note 1: Non-Cash Compensation - Performance Options
The non-cash compensation charge recognizes performance-based
stock options granted to management as part of the 1998 buyout
arrangement for meeting or exceeding 2001 and 2002 targets. In
accordance with GAAP, a quarterly charge is recognized, on a
cumulative basis, calculated in accordance with the vesting schedule
and the period-end stock price until the end of the performance
period, when the stock price became fixed. The performance period
ended on December 31, 2002 when the stock price was $28.67. On a
cumulative basis at March 31, 2003, the Company has recognized $246
million, or approximately 87% of the total estimated charge. The
remaining estimated charge of $36 million will be recognized quarterly
through 2004 in accordance with the vesting schedule.
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data)
(unaudited)
Definitions of Non-GAAP Financial Measures:
We believe that investors' understanding of the Company's
performance is enhanced by our disclosure of the following non-GAAP
financial measures. Our method of calculating these measures may
differ from those used by other companies and therefore comparability
may be limited.
Because the non-cash compensation charge for performance-based
stock options was based on our stock price at the end of each quarter
until December 31, 2002, changes in our stock price increased the
volatility of our reported operating income and reported net income.
We believe that excluding the non-cash compensation charge from these
measures, along with the GAAP measures, provides a more complete,
comparative analysis of our results of operations.
Adjusted Operating Income:
Adjusted operating income is defined as operating income excluding
non-cash compensation for performance-based stock options and net
gains or losses on disposals of operations. However, there were no
gains or losses on disposals of operations in the first quarter of
2003 and 2002. Operating income is the most directly comparable GAAP
measure, and the following table reconciles adjusted operating income
to operating income for the quarters ended March 31, 2003 and 2002:
Three months ended March 31,
------------------------------
2003 2002 % Change
--------- ---------- ---------
Operating Income, GAAP basis $ 186 $ 128 45%
Excluding:
Non-cash compensation - performance
options 8 18
--------- ----------
Adjusted Operating Income $ 194 $ 146 33%
========= ==========
Operating Margin, GAAP basis, or
Operating Income as a percentage of
Total Revenues 34% 28%
========= ==========
Adjusted Operating Margin, or Adjusted
Operating Income as a percentage of
Total Revenues 35% 32%
========= ==========
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION (cont'd)
(in millions, except per share data)
(unaudited)
Adjusted Net Income:
Adjusted net income is defined as net income excluding non-cash
compensation for performance-based stock options and net gains or
losses on disposals of operations. However, there were no gains or
losses on disposals of operations in the first quarter of 2003 and
2002. Net income is the most directly comparable GAAP measure, and the
following table reconciles adjusted net income to net income for the
quarters ended March 31, 2003 and 2002:
Per Diluted Share
Three months ended Three months
March 31, ended March 31,
--------------------------- ---------------------------
2003 2002 % Change 2003 2002 % Change
-------- -------- --------- -------- -------- ---------
Net Income,
GAAP basis $ 117 $ 68 72% $ 0.69 $ 0.43 60%
Excluding:
Non-cash
compensation
- performance
options, net
of tax
($2, $3) 6 15 0.04 0.09
Dilutive effect
of performance
options
assumed earned
in full from
the beginning
of 2002* - (0.02)
Adjusted Net
Income $ 123 $ 83 48% $ 0.73 $ 0.50 46%
======== ======== ======== ========
Diluted shares
outstanding,
GAAP basis 169 159
Dilutive effect
of performance
options
assumed earned
in full from
the beginning
of 2002* - 7
------- -------
Diluted shares
outstanding,
adjusted basis 169 166
======== ========
* Under GAAP, performance options are not included in the reported
number of diluted shares outstanding until the beginning of the period
in which the performance targets are met. This occurred in the third
quarter of 2002. Accordingly, the dilutive effect of the performance
options was not included in the reported number of diluted shares
outstanding for the quarter ended March 31, 2002 but was included for
the quarter ended March 31, 2003. We believe it is a helpful aid to
comparability to show the dilutive effect of performance options for
the quarter ended March 31, 2002 on the assumption that the
performance options had been earned in full from the beginning of
2002.
Forward Looking Information: As the press release indicates, our
goal is to grow adjusted net income per diluted share by 25% or better
in 2003 and over the long term by 15% or better each year. The most
directly comparable GAAP measure is net income per diluted share. We
are not in a position to reconcile adjusted net income per diluted
share to net income per diluted share for this forward-looking
information. Historically, reconciling items have consisted of
non-cash compensation for performance-based stock options, estimated
at $28 million and $16 million for 2003 and 2004, respectively; gains
or losses on disposals of operations; and the tax effects thereon. We
are unable to provide estimates for future gains or losses on
disposals.
CONTACT: Willis Group Holdings Limited
Investors:
Kerry K. Calaiaro, 212/837-0880
calaiaro_ke@willis.com
Media:
Nicholas Jones, +44 20 7488-8190
jonesnr@willis.com
Dan Prince, 212/837-0806
prince_da@willis.com