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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): July 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 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
Exhibit No. Exhibit Description
----------- -------------------
99 Press release dated July 23, 2003 announcing earnings
for the second quarter of 2003.
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 July 23, 2003 Willis Group Holdings Limited (the "Registrant") issued a press
release announcing its financial results for the second 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: July 23, 2003
Exhibit 99
Willis Group Reports Record Second Quarter Results;
Increases Dividend by 30% and Approves $100
Million Stock Buyback Plan
NEW YORK--(BUSINESS WIRE)--July 23, 2003--Willis Group Holdings
Limited(NYSE:WSH):
-- Fourteenth consecutive quarter of record results - building a
successful track record
-- Increases quarterly cash dividend 30% to $0.1625 per share, an
annual rate of $0.65
-- Approves $100 million common stock buyback plan
Willis Group Holdings Limited (NYSE: WSH), the global insurance
broker, today reports record results for the quarter and six months
ended June 30, 2003.
Separately, the Board of Directors today approved a 30% increase
in the regular quarterly cash dividend on the Company's common stock
to $0.1625 per share, an annual rate of $0.65 per share. The dividend
is payable on October 14, 2003 to shareholders of record on September
30, 2003.
The Board of Directors also approved a plan to purchase, from time
to time in the open market or through negotiated trades with persons
who are not affiliates of the Company, shares of the Company's common
stock at an aggregate purchase price of up to $100 million. The timing
and extent of the purchases will depend on market conditions. The
funds required for the stock purchase will be provided from the
Company's cash balances and operating cash flow.
Joe Plumeri, Chairman and Chief Executive Officer said, "Over the
past several years, we have diligently enhanced cash flow through
improved performance. This has allowed us to make substantial debt
repayments far ahead of schedule and initiate a quarterly dividend
this past February, less than two years following the initial public
offering of our stock.
"We remain committed to pursuing acquisitions at the appropriate
time and price," Plumeri continued. "However, as we continue to
evaluate the best use of our capital, increasing the dividend now,
given the recent change in the US tax laws, is consistent with our
goal to deploy capital effectively for the benefit of our
shareholders. This action, as well as the Board's authorization for
the common stock buyback plan, illustrates continued confidence in our
long-term growth and profitability."
Net income for the quarter ended June 30, 2003 was $80 million, or
$0.47 per diluted share compared to a loss of $(7) million, or $(0.05)
per diluted share, a year ago. Net income for the six months ended
June 30, 2003 was $197 million, or $1.17 per diluted share, compared
to $61 million, or $0.38 per diluted share, a year ago.
Excluding non-cash compensation for performance-based stock
options and gain or loss on disposal of operations, adjusted net
income for the second quarter increased 39% to $82 million for the
quarter ended June 30, 2003 from $59 million in the same period last
year, while adjusted net income per diluted share rose 40% to $0.49
from $0.35 a year ago.
For the six months ended June 30, 2003, adjusted net income
increased 44% to $205 million from $142 million in the first half of
2002, while adjusted net income per diluted share rose 42% to $1.21
for the six months ended June 30, 2003 from $0.85 in the first half of
2002.
Total revenues for the quarter ended June 30, 2003 increased 20%
to $492 million, up from $411 million for the corresponding quarter
last year. Of this 20% increase in revenues, approximately 4%
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, organic revenue growth was 18%
in the second quarter of 2003.
Total revenues for the six months ended June 30, 2003 increased
21% to $1,047 million, up from $862 million for the corresponding
period in 2002. Of this 21% increase in revenues, approximately 5%
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, organic revenue growth was 18%
in the first half of 2003.
Plumeri said, "By exemplifying a sales culture, maintaining our
steadfast expense discipline, and delivering world-class client
service, we continue to deliver solid revenue growth while enhancing
operating margins and earnings. With 14 consecutive quarters of record
results, we are accumulating a strong track record and continue to
build the platform for success in all market environments."
Commenting on the current insurance marketplace, Plumeri said,
"While rates for some very large, complex property and energy
placements have declined, the global carriers need to maintain pricing
discipline and are seeking rate increases for property risks in
certain classes. Many clients continue to see rate increases,
especially for casualty lines. From our global vantage, some markets
have lagged the US in rate increases, and have further to go to reach
appropriate rate levels.
"As investment returns have declined over the past several years,
there has been a greater focus placed on profitable underwriting,"
Plumeri offered. "Insurers' combined ratios, which are impacted by
pricing shifts, will continue to shape the duration and volatility of
the market, and those ratios must approach levels that generate
suitable shareholder returns."
At June 30, 2003, total long-term debt was $490 million, down 28%
from $677 million a year ago. Total stockholders' equity at quarter
end was approximately $1,052 million. The capitalization ratio, or the
ratio of total long-term debt to total long-term debt and
stockholders' equity, declined to 32% at quarter end compared to 44% a
year ago. There was approximately $178 million of immediately
available cash at June 30, 2003, providing significant financial
flexibility to support the cash needs of the Company.
Willis Group Holdings Limited 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 more than 100 countries, its global
team of 13,000 associates serves clients in some 180 countries.
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 quarter and six months ended June 30, 2003 and
2002.
WILLIS GROUP HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
Three months Six months
ended ended
June 30, June 30,
------------- -------------
2003 2002 2003 2002
---- ---- ---- ----
Revenues:
Commissions and fees $ 472 $ 393 $1,012 $ 829
Interest income 20 18 35 33
----- ----- ------ -----
Total Revenues 492 411 1,047 862
----- ----- ------ -----
Expenses:
General and administrative expenses
(excluding non-cash compensation) 346 294 697 591
Non-cash compensation - performance
options (Note 1) 5 78 13 96
Depreciation expense 9 8 18 16
Amortization of intangibles - - 1 -
(Gain) loss on disposal of operations (4) 1 (4) 1
----- ----- ------ -----
Total Expenses 356 381 725 704
----- ----- ------ -----
Operating Income 136 30 322 158
Interest expense 13 17 28 34
----- ----- ------ -----
Income before Income Taxes, Equity in
Net Income of Associates and Minority
Interest 123 13 294 124
Income tax expense 44 20 105 63
----- ----- ------ -----
Income (Loss) before Equity in Net
Income of Associates and Minority
Interest 79 (7) 189 61
Equity in net income of associates 1 1 11 7
Minority interest - (1) (3) (7)
----- ----- ------ -----
Net Income (Loss) $ 80 $ (7) $ 197 $ 61
====== ===== ====== =====
Net Income (Loss) per Share
- Basic $0.53 $(0.05) $ 1.31 $0.41
- Diluted $0.47 $(0.05) $ 1.17 $0.38
===== ====== ====== =====
Average Number of Shares Outstanding
- Basic 152 147 150 147
- Diluted 169 147 169 159
===== ===== ====== =====
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 June 30, 2003, the Company has recognized $251
million, or approximately 89% of the total estimated charge. The
remaining estimated charge of $30 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
(loss). 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 gain
or loss on disposal of operations. Operating income is the most
directly comparable GAAP measure, and the following table reconciles
adjusted operating income to operating income for the quarters and six
months ended June 30, 2003 and 2002:
Three months ended
June 30,
---------------------
2003 2002 %Change
---- ---- -------
Operating Income, GAAP basis $ 136 $ 30 353%
Excluding:
Non-cash compensation - performance options 5 78
(Gain) loss on disposal of operations (4) 1
----- ------
Adjusted Operating Income $ 137 $ 109 26%
===== ======
Operating Margin, GAAP basis, or Operating Income
as a percentage of Total Revenues 28% 7%
===== ======
Adjusted Operating Margin, or Adjusted Operating
Income as a percentage of Total Revenues 28% 27%
===== ======
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION (cont'd)
(in millions, except per share data)
(unaudited)
Six months ended
June 30,
--------------------
2003 2002 %Change
---- ---- -------
Operating Income, GAAP basis $ 322 $ 158 104%
Excluding:
Non-cash compensation - performance options 13 96
(Gain) loss on disposal of operations (4) 1
----- ------
Adjusted Operating Income $ 331 $ 255 30%
===== ======
Operating Margin, GAAP basis, or Operating Income
as a percentage of Total Revenues 31% 18%
===== ======
Adjusted Operating Margin, or Adjusted Operating
Income as a percentage of Total Revenues 32% 30%
===== ======
Adjusted Net Income:
Adjusted net income is defined as net income (loss) excluding
non-cash compensation for performance-based stock options and net gain
or loss on disposal of operations. Net income (loss) is the most
directly comparable GAAP measure, and the following table reconciles
adjusted net income to net income (loss) for the quarters and six
months ended June 30, 2003 and 2002:
Per Diluted Share
Three months ended Three months ended
June 30, June 30,
----------------------- ----------------------
2003 2002 % Change 2003 2002 % Change
---- ---- -------- ---- ---- --------
Net Income (Loss),
GAAP basis $ 80 $ (7) n/a $ 0.47 $ (0.05) n/a
Excluding:
Non-cash compensation
- performance
options, net of tax
(nil, $13) 5 65 0.03 0.44
(Gain) loss on
disposal of
operations, net of
tax ($(1), nil) (3) 1 (0.01) 0.01
Dilutive effect of
performance options
assumed earned in
full from the
beginning of 2002 and
other potentially
issuable shares (a) - (0.05)
---- ---- ------ -------
Adjusted Net Income $ 82 $ 59 39% $ 0.49 $ 0.35 40%
==== ==== ====== =======
Diluted shares
outstanding, GAAP
basis 169 147
Dilutive effect of
performance options
assumed earned in
full from the
beginning of 2002 and
other potentially
issuable shares (a) - 20
---- ----
Diluted shares
outstanding, adjusted
basis 169 167
==== ====
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION (cont'd)
(in millions, except per share data)
(unaudited)
Per Diluted Share
Six months ended Six months ended
June 30, June 30,
------------------- ----------------------
2003 2002 %Change 2003 2002 % Change
---- ---- ------- ---- ---- --------
Net Income, GAAP basis $197 $ 61 223% $ 1.17 $ 0.38 208%
Excluding:
Non-cash compensation
- performance
options, net of tax
($2, $16) 11 80 0.06 0.50
(Gain) loss on
disposal of
operations, net of
tax ($(1), nil) (3) 1 (0.02) 0.01
Dilutive effect of
performance options
assumed earned in full
from the beginning of
2002(a) - (0.04)
---- ---- --- ------
Adjusted Net Income $205 $142 44% $ 1.21 $ 0.85 42%
==== ==== ====== =======
Diluted shares
outstanding, GAAP
basis 169 159
Dilutive effect of
performance options
assumed earned in full
from the beginning of
2002(a) - 8
---- ----
Diluted shares
outstanding, adjusted
basis 169 167
==== ====
(a) 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 or the six months ended June 30, 2002 but
was included for the quarter and six months ended June 30, 2003. We
believe it is a helpful aid to comparability to show the dilutive
effect of performance options for the quarter and six months ended
June 30, 2002 on the assumption that the performance options had been
earned in full from the beginning of 2002.
Forward Looking Information: Our stated 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 (loss) per diluted share. We are not in a
position to reconcile adjusted net income per diluted share to net
income (loss) per diluted share for this forward-looking information.
Historically, reconciling items have consisted of non-cash
compensation for performance-based stock options, estimated at $27
million and $16 million for 2003 and 2004, respectively; gain or loss
on disposal 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
or
Media:
Nicholas Jones, +44 20 7488-8190
jonesnr@willis.com
or
Dan Prince, 212-837-0806
prince_da@willis.com