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Towers Watson Reports Fourth Quarter Results

Source: Towers Watson


Posted on 20 Aug 2010

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The recently merged Towers Watson, a leading global professional services company, today announced financial results for the fourth quarter of fiscal year 2010, which ended June 30, 2010.

Revenues were $750 million for the quarter, an increase from $397 million for the fourth quarter of fiscal 2009. The increase in revenues is driven by the merger between Towers Perrin and Watson Wyatt that became effective on January 1, 2010. Reported results for the fourth quarter of fiscal 2009 include only the financial results of Watson Wyatt. On a pro forma basis that includes Towers Perrin actual results in the fourth quarter of fiscal 2009, revenues declined 3% (-2% constant currency). The decline reflects the current economic environment. For the six months ended June 30, 2010, revenues were $1.55 billion.

EBITDA was $64 million, or 8.5% of revenues, for the quarter. In the fourth quarter of fiscal 2009, EBITDA was $72 million, or 18.2% of revenues. The decline in EBITDA as a percentage of revenues is due primarily to transaction and integration costs as well as non-cash stock-based compensation arising from the merger. Adjusted EBITDA was $118 million, or 15.8% of revenues, for the quarter. Adjusted EBITDA as a percentage of revenues is down from the prior year quarter due to a change in the mix of work and is consistent with merger expectations. For the six months ended June 30, 2010, adjusted EBITDA was $251 million, or 16.1% of revenues. Adjusted EBITDA excludes transaction and integration costs as well as non-cash stock-based compensation arising from the merger.

Net income was $58 million for the quarter, an increase from $31 million for the fourth quarter of fiscal 2009. The increase in net income was largely due to the income tax benefit, offset in part by transaction and integration costs, non-cash stock-based compensation arising from the merger and amortization of merger accounting intangible assets.

"We have now operated as Towers Watson for six months, and overall the merger integration is going well," said John Haley, chief executive officer. "We have accomplished a great deal and are laying the foundation to achieve our long-term growth and profitability goals."

Since prior period reported results include only the financial results of Watson Wyatt and are not comparable, the company discusses pro forma segment revenues to provide comparability with the prior year. The pro forma revenues assume the merger between Towers Perrin and Watson Wyatt occurred on January 1, 2009. The company's management uses the pro forma revenues internally to focus on period-to-period changes in the business and believes this information is helpful to stockholders.

For the quarter, the Benefits segment had revenues of $441 million. On a pro forma, constant currency basis, revenues were down about 3% compared to the fourth quarter of fiscal 2009. Declines in revenues from Retirement, and Technology and Administration Solutions were offset in part by an increase in revenues from Health and Group Benefits. The Benefits segment had a net operating income (NOI) margin of 28% in the fourth quarter of fiscal 2010.

For the quarter, the Risk and Financial Services segment had revenues of $164 million. On a pro forma, constant currency basis, revenues were flat compared to the fourth quarter of fiscal 2009. Slight declines in revenues from Risk Consulting and Software, and Brokerage were offset by an increase in revenues from Investment Consulting. The Risk and Financial Services segment had an NOI margin of 17% in the fourth quarter of fiscal 2010.

For fiscal 2011, the company expects to report revenues in the range of $3.05 billion to $3.2 billion, including $750 million to $780 million for the first quarter of fiscall 2011.


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