10-QPeriod: Q1 FY2011

Aon plc Quarterly Report for Q1 Ended Mar 31, 2011

Filed May 5, 2011For Securities:AON

Summary

Aon plc's first quarter 2011 report shows a significant increase in total revenue, largely driven by the acquisition of Hewitt Associates in the prior year. While overall revenue grew by 45% to $2.8 billion, organic revenue growth was a more modest 2%. The company is focused on three key metrics: organic growth, margin expansion, and earnings per share. Despite revenue growth, adjusted operating margins saw a decline across segments due to higher intangible asset amortization and unfavorable foreign exchange rates. Adjusted diluted earnings per share from continuing operations also slightly decreased year-over-year. The company is actively managing restructuring costs related to the Hewitt integration and previous acquisitions, with substantial savings expected to be realized by 2013. Liquidity remains strong, supported by operating cash flow and available credit facilities.

Financial Highlights

52 data points
Beta

Revenue

$2.76B

Net Income

$246.00M

8.9% Net Margin

EPS (Diluted)

$0.71

Total Assets

$29.80B

Cash & Equivalents

$682.00M

Free Cash Flow

$99.00M

Financial Statements
Beta
Revenue$2.76B
Operating Expenses$2.36B
Operating Income$398.00M
Interest Expense$63.00M
Net Income$246.00M
EPS (Basic)$0.72
EPS (Diluted)$0.71
Shares Outstanding (Basic)339.40M
Shares Outstanding (Diluted)345.40M

Key Highlights

  • 1Total revenue increased by 45% to $2.8 billion, primarily due to the Hewitt acquisition.
  • 2Organic revenue growth was 2%, indicating growth from existing operations.
  • 3Adjusted operating margins declined due to increased intangible asset amortization and foreign exchange impacts.
  • 4Adjusted diluted EPS from continuing operations decreased slightly to $0.80 from $0.83 year-over-year.
  • 5Significant restructuring efforts are underway for the Hewitt integration, with expected cumulative costs of $325 million and anticipated annual savings of $280 million by 2013.
  • 6The company repurchased $350 million of its common stock in Q1 2011 under its authorized share repurchase program.
  • 7Liquidity remains strong with $1.3 billion in cash and cash equivalents and short-term investments, and no borrowings under its $1.3 billion credit facilities.

Frequently Asked Questions

The primary driver of Aon's significant 45% revenue increase to $2.8 billion in the first quarter of 2011 was the acquisition of Hewitt Associates, which was completed in the fourth quarter of 2010.

Operating margins declined due to higher intangible asset amortization expenses, largely attributable to the Hewitt acquisition, and unfavorable foreign exchange rate movements. These factors offset cost savings from ongoing restructuring initiatives.

Aon is implementing a global restructuring plan for the Aon Hewitt integration, expected to cost approximately $325 million through 2013. This plan involves an estimated 1,500 to 1,800 job eliminations and is projected to yield approximately $280 million in annual cost savings by 2013, with total integration savings expected to reach $355 million.

Aon maintains a strong liquidity position, with $1.3 billion in cash and cash equivalents and short-term investments as of March 31, 2011. The company has $1.3 billion in available credit facilities and no outstanding borrowings under these facilities. Cash flow from operations is expected to be sufficient to meet debt obligations, operating expenses, and strategic investments like share repurchases and dividends.