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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 21, 2004
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 Financial Information and Exhibits.
(c) Exhibits.
Exhibit No. Exhibit Description
----------- -------------------
99 Press release dated July 21, 2004 announcing earnings
for the second quarter of 2004.
Item 12. Results of Operations and Financial Condition
On July 21, 2004 Willis Group Holdings Limited issued a press release announcing
its unaudited financial results for the second quarter of 2004. A copy of the
press release is attached hereto as Exhibit 99 and is incorporated herein by
reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WILLIS GROUP HOLDINGS LIMITED
By: /s/ Mary E. Caiazzo
----------------------------------
Mary E. Caiazzo
Assistant General Counsel
Date: July 21, 2004
EXHIBIT INDEX
Exhibit
Number Title
- ------- -----
99 Press release dated July 21, 2004 announcing earnings for the
second quarter of 2004.
EXHIBIT 99
Willis Group Reports Record Second Quarter 2004 Results;
Declares Regular Quarterly Dividend
NEW YORK--(BUSINESS WIRE)--July 21, 2004--Willis Group Holdings
Limited (NYSE:WSH)
Second Quarter 2004 Highlights:
-- Track record continued with eighteenth consecutive quarter of
record results
-- Reported revenues grew 8% (with 6% organic growth); margin
expansion continued
-- Capital deployed - 1.5 million shares repurchased for $55
million; regular quarterly dividend declared
-- Announced agreement in principle to acquire Coyle Hamilton,
Ireland's largest insurance broker
Willis Group Holdings Limited (NYSE:WSH), the global insurance
broker, today reports record results for the quarter and six months
ended June 30, 2004.
Separately, the Board of Directors today approved a regular
quarterly cash dividend on the Company's common stock of $0.1875 per
share, an annual rate of $0.75 per share. The dividend is payable on
October 13, 2004 to shareholders of record on September 30, 2004.
Net income for the quarter ended June 30, 2004 was $96 million, or
$0.57 per diluted share, compared with $80 million, or $0.47 per
diluted share, a year ago. Excluding non-cash compensation for
performance-based stock options and net gain on disposal of
operations, adjusted net income increased 17 percent to $96 million
for the quarter ended June 30, 2004 from $82 million in the same
period last year, while adjusted net income per diluted share rose 16
percent to $0.57 for the second quarter of 2004 from $0.49 a year ago.
The impact of foreign currency translation decreased second quarter
2004 reported earnings by approximately $0.02 per share compared to a
year ago.
Net income for the six months ended June 30, 2004 was $244
million, or $1.44 per diluted share, compared to $197 million, or
$1.17 per diluted share, a year ago. Excluding non-cash compensation
for performance-based stock options, net gain on disposal of
operations, and a subordinated debt redemption premium, adjusted net
income for the six months ended June 30, 2004, increased 25 percent to
$256 million from $205 million in 2003, while adjusted net income per
diluted share rose 25 percent to $1.51 from $1.21 in 2003. The impact
of foreign currency translation increased first half 2004 reported
earnings by approximately $0.01 per share compared to a year ago.
Total reported revenues for the quarter ended June 30, 2004
increased 8 percent to $532 million, from $492 million for the same
period last year. Organic revenue growth was 6 percent, which excluded
the effects of foreign currency translation (1 percent) and net
acquisitions (1 percent). The adjusted operating margin was 28.6
percent for the second quarter of 2004 compared with 27.8 percent for
the same period last year.
Total reported revenues for the six months ended June 30, 2004
increased 14 percent to $1,197 million, up from $1,047 million for the
corresponding period in 2003, or 7 percent on an organic basis. The
adjusted operating margin was 32.4 percent for the first half of 2004,
compared with 31.6 percent for the same period last year.
Joe Plumeri, Chairman and Chief Executive Officer said, "Rates
continued to decline across most lines of insurance during the second
quarter. Despite this trend, we continue the steadfast execution of
our model - build a sales culture, grow revenues, maintain expense
discipline, expand margins and enhance earnings - for continued
success in all market environments."
At June 30, 2004, total long-term debt was $450 million, down 8
percent from $490 million a year ago. During the quarter, the Company
drew down the remaining $150 million of the credit facility in
accordance with the terms of the agreement.
Total stockholders' equity at the quarter end was approximately
$1.4 billion, up 31 percent from a year ago. The capitalization ratio
(total long-term debt to total long-term debt and stockholders'
equity) was 25 percent at quarter-end June 30, 2004. During the second
quarter, the company repurchased 1.5 million shares of its common
stock for $55 million and paid $30 million in dividends to
shareholders. There was approximately $291 million of immediately
available cash at June 30, 2004, providing significant financial
flexibility to support the cash needs of the Company.
On June 23, 2004, the Company announced an agreement in principle
to acquire a majority shareholding in Coyle Hamilton, the Republic of
Ireland's largest privately owned insurance broker with annualized
revenues of approximately EUR 50 million ($60 million). This
transaction is subject to shareholder and customary regulatory
approvals, and is estimated to close in the third quarter 2004. The
Company will initially have a majority interest in Coyle Hamilton,
with remaining interests to be acquired in 2007 and 2009.
Also during the quarter, the Company completed several
transactions consistent with its strategy to enhance ownership
positions in international associate investments. It increased its
ownership in Herzfeld & Levy (Argentina) to 60 percent from 40 percent
and in Willis South Africa to 80 percent from 70 percent.
Plumeri concluded, "With our eighteenth consecutive quarter of
record results, we continue to build a strong track record and
reaffirm our long-term goal to grow adjusted net income per diluted
share by 15 percent or better each year."
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 some 80 countries, its global team of
14,500 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, 2004.
WILLIS GROUP HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
Three months Six months
ended June 30, ended June 30,
----------------------------------
2004 2003 2004 2003
----------------------------------
Revenues:
Commissions and fees $516 $472 $1,164 $1,012
Interest income 16 20 33 35
----------------------------------
Total Revenues 532 492 1,197 1,047
----------------------------------
Expenses:
General and administrative expenses
(excluding non-cash compensation) 369 346 786 697
Non-cash compensation - performance
options (Note 1) 4 5 6 13
Depreciation expense 10 9 21 18
Amortization of intangible assets 1 - 2 1
Net gain on disposal of operations (5) (4) (5) (4)
----------------------------------
Total Expenses 379 356 810 725
----------------------------------
Operating Income 153 136 387 322
Interest expense 4 13 9 28
Premium on redemption of
subordinated debt - - 17 -
----------------------------------
Income before Income Taxes, Equity
in Net Income of Associates and
Minority Interest 149 123 361 294
Income taxes 52 44 124 105
----------------------------------
Income before Equity in Net Income
of Associates and Minority Interest 97 79 237 189
Equity in net income of associates - 1 12 11
Minority interest (1) - (5) (3)
----------------------------------
Net Income $96 $80 $244 $197
==================================
Net Income per Share
- Basic $0.61 $0.53 $1.54 $1.31
- Diluted $0.57 $0.47 $1.44 $1.17
==================================
Average Number of Shares Outstanding
- Basic 158 152 158 150
- Diluted 169 169 169 169
==================================
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 leveraged
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 stock price at the end of the performance period, which ended
on December 31, 2002 when the stock price was $28.67. On a cumulative
basis at June 30, 2004, the Company has recognized $264 million, or
approximately 98 percent of the total estimated charge. The remaining
estimated charge of $6 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.
The net gain or loss on disposal of operations and the non-recurring
subordinated debt redemption premium also impact the volatility of our
reported results. We believe that excluding these items from the
following non-GAAP measures, along with the GAAP measures, provides a
more complete and consistent 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, 2004 and 2003:
Three months ended
June 30,
---------------------
2004 2003 % Change
---------------------
Operating Income, GAAP basis $153 $136 13%
Excluding:
Non-cash compensation - performance options 4 5
Net gain on disposal of operations (5) (4)
------------
Adjusted Operating Income $152 $137 11%
============
Operating Margin, GAAP basis, or Operating Income
as a percentage of Total Revenues 28.8% 27.6%
============
Adjusted Operating Margin, or Adjusted Operating
Income as a percentage of Total Revenues 28.6% 27.8%
============
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION (cont'd)
(in millions, except per share data)
(unaudited)
Six months ended June
30,
---------------------
2004 2003 % Change
---------------------
Operating Income, GAAP basis $387 $322 20%
Excluding:
Non-cash compensation - performance options 6 13
Net gain on disposal of operations (5) (4)
------------
Adjusted Operating Income $388 $331 17%
============
Operating Margin, GAAP basis, or Operating Income
as a percentage of Total Revenues 32.3% 30.8%
============
Adjusted Operating Margin, or Adjusted Operating
Income as a percentage of Total Revenues 32.4% 31.6%
============
Adjusted Net Income:
Adjusted net income is defined as net income excluding non-cash
compensation for performance-based stock options, net gain or loss on
disposal of operations and the non-recurring subordinated debt
redemption premium. Net income is the most directly comparable GAAP
measure, and the following table reconciles adjusted net income to net
income for the quarters and six months ended June 30, 2004 and 2003:
Per Diluted Share
Three months ended Three months ended
June 30, June 30,
-----------------------------------------------
2004 2003 % Change 2004 2003 % Change
-----------------------------------------------
Net Income, GAAP basis $96 $80 20% $0.57 $0.47 21%
Excluding:
Non-cash compensation
- performance
options, net of tax
($1, $nil) 3 5 0.02 0.03
Net gain on disposal
of operations, net of
tax ($(2), $(1)) (3) (3) (0.02) (0.01)
------------- --------------
Adjusted Net Income $96 $82 17% $0.57 $0.49 16%
============= ==============
Diluted shares
outstanding, GAAP
basis 169 169
=============
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION (cont'd)
(in millions, except per share data)
(unaudited)
Per Diluted Share
Six months ended June Six months ended
June 30, June 30,
-----------------------------------------------
% %
2004 2003 Change 2004 2003 Change
-----------------------------------------------
Net Income, GAAP basis $244 $197 24% $1.44 $1.17 23%
Excluding:
Non-cash compensation
- performance
options, net of tax
($1, $2) 5 11 0.03 0.06
Net gain on disposal
of operations, net of
tax ($(2), $(1)) (3) (3) (0.02) (0.02)
Non-recurring premium
on redemption of
subordinated debt,
net of tax ($7) 10 - 0.06 -
-------------- --------------
Adjusted Net Income $256 $205 25% $1.51 $1.21 25%
============== ==============
Diluted shares
outstanding, GAAP
basis 169 169
Forward-Looking Information: Our stated goal is to grow adjusted
net income per diluted share by 15 percent 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 $6 million for the remainder of 2004; net 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: Investors:
Kerry K. Calaiaro, 212-837-0880
Email: 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