Attached files
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8-K - 8-K - WILLIS TOWERS WATSON PLC | twq420158k.htm |
EX-99.1 - EXHIBIT 99.1 - WILLIS TOWERS WATSON PLC | exhibit991-8k.htm |
EX-99.3 - EXHIBIT 99.3 - WILLIS TOWERS WATSON PLC | exhibit993-8k.htm |
EX-23.1 - EXHIBIT 23.1 - WILLIS TOWERS WATSON PLC | exhibit2318k.htm |
EX-99.4 - EXHIBIT 99.4 - WILLIS TOWERS WATSON PLC | exhibit994-8k.htm |
Exhibit 99.2
Non-GAAP financial measures and reported financial results for the three and six months ended December 31, 2015 and December 31, 2014 (Amounts in thousands of U.S. Dollars)
In order to assist readers of Towers Watson & Co.'s ("Towers Watson", the "Company" or "we") financial statements in understanding the core operating results that the Company’s management uses to evaluate the business and for financial planning, we present the following non-U.S. GAAP measures: (1) Constant Currency Change, (2) Organic Change, (3) Adjusted EBITDA, and (4) Adjusted Net Income (attributable to common stockholders). The Company believes these measures are relevant and provide useful information widely used by analysts, investors and other interested parties in our industry to provide a baseline for evaluating and comparing our operating results.
These non-U.S. GAAP measures are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies. Non-U.S. GAAP measures should be considered in addition to, and not as a substitute for, the information contained within our financial statements filed as Exhibit 99.1 to this Form 8-K.
Constant Currency Change and Organic Change
We evaluate our revenue on an as reported, constant currency and organic basis. We believe providing constant currency and organic information provides valuable supplemental information regarding our results, consistent with how we evaluate our performance internally.
• | Constant Currency Change - Represents the year over year change in revenues excluding the impact of foreign currency fluctuations. To calculate this impact, the prior year local currency results are first translated using the current year monthly average exchange rates. The change is calculated by comparing the adjusted prior year revenues to the current year as reported revenues for the same period. |
• | Organic Change - The organic presentation excludes both the impact of fluctuations in foreign currency exchange rates, as described above, as well as the impact of acquisitions and divestitures. |
The constant currency and organic change results, and a reconciliation from the as reported results for consolidated revenues and by segment and line of business are reported in the tables below.
Adjusted EBITDA
We consider Adjusted EBITDA to be an important financial measure, which is used to internally 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 EBITDA is defined as net income (attributable to common stockholders) adjusted for provision for income taxes, interest, net, depreciation and amortization, transaction and integration expenses, and other non-operating income.
Adjusted Net Income (attributable to common stockholders)
Adjusted Net Income (attributable to common stockholders) is defined as net income (attributable to common stockholders) adjusted for certain tax-effected merger and acquisition related items of amortization of intangible assets, transaction and integration expenses, the tax-effected gain on the sale of the HRSD business, and the tax cost related to our repatriation of cash held outside of the U.S. This measure is used solely for the purpose of calculating adjusted diluted earnings per share.
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Segment Revenue:
Segment revenue excludes amounts that were directly incurred on behalf of our clients and reimbursed by them (reimbursed expenses); however, these amounts are included in consolidated revenue.
Components of Revenue Change | |||||||||||||||||
Three months ended December 31, | As Reported Change | Currency Impact | Constant Currency Change | Acquisitions and Divestitures | Organic Change | ||||||||||||
2015 | 2014 | ||||||||||||||||
Benefits | $ | 467,378 | $ | 488,453 | (4)% | (4)% | —% | —% | —% | ||||||||
Exchange Solutions | 132,497 | 93,924 | 41% | —% | 41% | 8% | 33% | ||||||||||
Risk & Financial Services | 144,664 | 154,278 | (6)% | (5)% | (1)% | 1% | (2)% | ||||||||||
Talent & Rewards | 174,826 | 183,973 | (5)% | (5)% | —% | (2)% | 2% | ||||||||||
Reportable Segments | $ | 919,365 | $ | 920,628 | |||||||||||||
Components of Revenue Change | |||||||||||||||||
Six months ended December 31, | As Reported Change | Currency Impact | Constant Currency Change | Acquisitions and Divestitures | Organic Change | ||||||||||||
2015 | 2014 | ||||||||||||||||
Benefits | $ | 915,402 | $ | 954,040 | (4)% | (4)% | —% | —% | —% | ||||||||
Exchange Solutions | 250,988 | 180,206 | 39% | —% | 39% | 8% | 31% | ||||||||||
Risk & Financial Services | 282,387 | 302,304 | (7)% | (7)% | —% | 1% | (1)% | ||||||||||
Talent & Rewards | 335,117 | 337,267 | (1)% | (5)% | 4% | (2)% | 6% | ||||||||||
Reportable Segments | $ | 1,783,894 | $ | 1,773,817 |
Reconciliation of As Reported Revenue change to Constant Currency change and Organic Change:
Components of Revenue Change | |||||||||||||||||
Revenue | As Reported Change | Currency Impact | Constant Currency Change | Acquisitions and Divestitures | Organic Change | ||||||||||||
2015 | 2014 | ||||||||||||||||
Three months ended December 31, | $ | 949,615 | $ | 957,922 | (1)% | (4)% | 3% | —% | 3% | ||||||||
Six months ended December 31, | $ | 1,845,236 | $ | 1,836,029 | 1% | (4)% | 5% | 1% | 4% |
Reconciliation of Net Income (attributable to common stockholders) to Adjusted Net Income (attributable to common stockholders):
Three months ended December 31, | Six months ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net Income (attributable to common stockholders) | $ | 11,211 | $ | 110,176 | $ | 134,593 | $ | 191,734 | |||||||
Adjusted for certain items: | |||||||||||||||
Amortization of intangible assets | 16,304 | 11,507 | 27,376 | 22,932 | |||||||||||
Transaction and integration expenses including severance | 55,285 | — | 61,543 | — | |||||||||||
Gain on sale of HRSD business | — | — | (37,154 | ) | — | ||||||||||
US Tax Cost of Foreign Repatriation | 36,817 | — | 36,817 | — | |||||||||||
Adjusted Net Income (attributable to common stockholders) | $ | 119,617 | $ | 121,683 | $ | 223,175 | $ | 214,666 |
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The adjustments to net income attributable to common stockholders are net of tax. In calculating the net of tax amounts, the effective tax rates applied were as follows:
Three months ended December 31, | Six months ended December 31, | ||||||
2015 | 2014 | 2015 | 2014 | ||||
Amortization of intangible assets | 29.95% | 33.41% | 31.81% | 34.13% | |||
Transaction and integration expenses including severance | 31.58% | n/a | 31.72% | n/a | |||
Gain on sale of HRSD business | n/a | n/a | 32.92% | n/a |
Reconciliation of Net Income (attributable to common stockholders) to Adjusted EBITDA
(a) Other non-operating income includes income from affiliates and other non-operating income including a gain on the sale of the Human Resources Service Delivery (HRSD) business of $55.4 million for the six months ended December 31, 2015.
Three months ended December 31, | Six months ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net Income (attributable to common stockholders) | $ | 11,211 | $ | 110,176 | $ | 134,593 | $ | 191,734 | |||||||
Provision for Income Taxes | 55,653 | 55,372 | 116,211 | 99,434 | |||||||||||
Interest, net | 2,159 | 1,292 | 3,039 | 2,557 | |||||||||||
Depreciation and Amortization | 53,752 | 44,107 | 97,944 | 88,976 | |||||||||||
Transaction and Integration Expenses | 80,801 | — | 90,131 | — | |||||||||||
Other Non-Operating Income (a) | 1,286 | (34 | ) | (54,135 | ) | (865 | ) | ||||||||
Adjusted EBITDA | $ | 204,862 | $ | 210,913 | $ | 387,783 | $ | 381,836 | |||||||
Adjusted EBITDA Margin | 21.6 | % | 22.0 | % | 21.0 | % | 20.8 | % |
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