10-QPeriod: Q3 FY2008

MARSH & MCLENNAN COMPANIES, INC. Quarterly Report for Q3 Ended Sep 30, 2008

Filed November 7, 2008For Securities:MRSHMMC

Summary

Marsh & McLennan Companies (MMC) reported a net loss of $8 million for the third quarter of 2008, a significant decline from the $1.945 billion net income in the prior year's quarter. This downturn was heavily influenced by the absence of a large gain from the sale of Putnam Investments in the prior year and the inclusion of a $540 million goodwill impairment charge in the year-to-date results, primarily impacting the Risk Consulting & Technology segment. Revenue for the third quarter showed modest growth of 5% to $2.8 billion, with underlying revenue up 2%, driven by the Consulting and Risk & Insurance Services segments. However, operating income decreased to $70 million from $116 million year-over-year, impacted by higher restructuring charges and a professional liability claim. The company's balance sheet shows a decrease in cash and cash equivalents to $1.46 billion from $2.13 billion at the start of the year, alongside a reduction in total assets and equity, reflecting the challenging economic environment. Investors should note the significant year-over-year net income drop and the impact of the goodwill impairment. While revenue showed growth, the decline in operating income and the increase in restructuring costs are key concerns. The company's liquidity remains adequate, with a substantial revolving credit facility, but the overall financial performance in this quarter is overshadowed by the prior year's sale gain and current economic pressures. The ongoing legal proceedings and potential liabilities remain a significant factor to monitor.

Financial Highlights

30 data points
Beta

Revenue

$2.82B

Net Income

-$8.00M

-0.3% Net Margin

EPS (Diluted)

$-0.02

Cash & Equivalents

$1.46B

Free Cash Flow

$510.00M

Financial Statements
Beta
Revenue$2.82B
Operating Expenses$2.75B
Operating Income$64.00M
Interest Expense$54.00M
Net Income-$8.00M
EPS (Basic)$-0.02
EPS (Diluted)$-0.02
Shares Outstanding (Basic)513.00M
Shares Outstanding (Diluted)516.00M

Key Highlights

  • 1Reported a net loss of $8 million for Q3 2008, compared to a net income of $1.945 billion in Q3 2007.
  • 2Consolidated revenue for Q3 2008 increased 5% to $2.8 billion, with underlying revenue up 2%.
  • 3Operating income for Q3 2008 decreased to $70 million from $116 million in the prior year, impacted by higher restructuring charges and a professional liability claim.
  • 4Included a $540 million goodwill impairment charge in the nine-month results, primarily affecting the Risk Consulting & Technology segment.
  • 5Cash and cash equivalents decreased to $1.46 billion as of September 30, 2008, from $2.13 billion as of December 31, 2007.
  • 6Consulting segment revenue grew 9% in Q3, driven by Mercer's strong performance, while Risk & Insurance Services revenue saw a 1% increase.
  • 7The company faces significant ongoing legal proceedings and contingencies that could materially impact future financial results.

Frequently Asked Questions

The significant decrease in net income from $1.945 billion in Q3 2007 to a net loss of $8 million in Q3 2008 is primarily due to the absence of a large gain on the sale of Putnam Investments, which was recorded in the prior year's quarter. Additionally, the current year's results were impacted by a $540 million goodwill impairment charge recognized in the first nine months.

Consolidated revenue for the third quarter of 2008 increased by 5% to $2.8 billion compared to the prior year's quarter. Underlying revenue, which excludes currency impacts and acquisitions/dispositions, grew by 2%. The Consulting and Risk & Insurance Services segments were the primary drivers of this revenue growth.

Key concerns for investors include the significant year-over-year decline in net income, increased operating expenses due to restructuring charges and a professional liability claim, and the substantial goodwill impairment charge. The company also faces numerous ongoing legal proceedings and contingencies, which could result in significant financial liabilities and impact future results. Fluctuations in foreign currency exchange rates and market conditions also pose risks.

As of September 30, 2008, Marsh & McLennan Companies had $1.46 billion in cash and cash equivalents, a decrease from $2.13 billion at the beginning of the year. The company also has a $1.2 billion multi-currency revolving credit facility, of which no amount was outstanding at the end of the quarter, indicating adequate liquidity.