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Willis Towers Watson Annual Report, Year Ended Dec 31, 2018

Filing Date
Filed February 27, 2019
Period End
December 31, 2018
Security
WTW
In the record · 2016–202610-K1210-Q338-K148

WTW filed 12 annual reports (10-K), 33 quarterly reports (10-Q) and 148 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · May ’17May ’17
  2. Deal closed8-K · Oct ’20Oct ’20
  3. Leadership change8-K · Dec ’22Dec ’22
  4. Leadership change8-K · Nov ’26Nov ’26

01—Abstract

Summary

Summary of the 10-K filed February 27, 2019. Cited figures are marked; the original filing is the authoritative source.

Willis Towers Watson plc reported 2018 revenue of $8.513 billiona, up from $8.202 billion in 2017, with an increase of $311 million or 4%.

Income from operations rose to $809 millionb from $516 million, and net income attributable to Willis Towers Watson was $695 million, or $5.27 diluted earnings per share, compared with $568 million and $4.18 in 2017. Management attributes the growth to strong performance across all four segments. The company adopted ASC 606 on January 1, 2018 using the modified retrospective method; the filing states that this reduced 2018 operating income by $98 million and net income by $80 million, and that without it, adjusted diluted earnings per share would have been $10.33 versus $9.73 as reported.

Cash flow from operations was $1.288 billionc in 2018 versus $862 million in 2017, and free cash flow was $1.020 billion. The company repurchased $602 million of shares and paid $306 million in dividends. Total debt was $4.575 billion at year-end, and the board approved a quarterly dividend of $0.65 per share on February 27, 2019.

Total cash and cash equivalents were $1.033 billiond, and $1.1 billion was available under the $1.25 billion revolving credit facility. Key risks highlighted in the filing include the U.K.'s planned exit from the European Union (Brexit), with 23% of revenue generated in the U.K., regulatory and antitrust investigations in aviation broking, and the Stanford Financial Group litigation, for which a $120 million settlement is pending appeal. The filing also notes pension liabilities, a $4.6 billion debt load, and a U.S. Tax Reform effect on the company's effective tax rate of 16.0% for 2018.

02—Key points

Key Highlights

  1. Revenue rose 4% to $8.513 billion in 2018, with growth driven by all four segments; organic revenue growth was 5%.
  2. Income from operations increased to $809 million from $516 million, and diluted EPS rose to $5.27 from $4.18.
  3. ASC 606 adoption reduced 2018 income from operations by $98 million; without it, income from operations would have been $907 million.
  4. Adjusted EBITDA was $2.036 billion in 2018 versus $1.901 billion in 2017 as reported.
  5. Free cash flow was $1.020 billion, and the company returned capital through $602 million of share repurchases and $306 million of dividends.
  6. Total debt was $4.575 billion at December 31, 2018; the company was in compliance with all financial covenants.
  7. Brexit and regulatory investigations (including EU aviation broking competition proceedings and the CMA investment consulting remedies) remain key uncertainties, with 23% of 2018 revenue generated in the U.K.

03—One dollar

04—Financials

Financial Highlights

Figures from 10-KFY2018filed February 27, 2019
Revenue$8.51BNet Income$695.00M8.2% Net MarginEPS (Diluted)$5.27Total Assets$32.38BCash & Equivalents$1.03BFree Cash Flow$1.29B

Financial Statements

FY2018 against FY2017

Line itemFY2018FY2017Change
Revenue$8.51B$8.20B+3.8%
Operating Expenses$7.70B$7.69B+0.2%
Operating Income$809.00M$516.00M+56.8%
Interest Expense$208.00M$188.00M+10.6%
Net Income$695.00M$568.00M+22.4%
EPS (Basic)$5.29$4.21+25.7%
EPS (Diluted)$5.27$4.18+26.1%
Shares Outstanding (Basic)131.00M135.00M−3.0%
Shares Outstanding (Diluted)132.00M136.00M−2.9%

05—Questions

Frequently Asked Questions

  1. How did Willis Towers Watson perform financially in 2018?

    Revenue grew 4% to $8.513 billion, income from operations rose to $809 million from $516 million, and net income attributable to Willis Towers Watson increased to $695 million from $568 million. Diluted EPS was $5.27 compared with $4.18 in 2017.

  2. What impact did the ASC 606 revenue standard have on 2018 results?

    The company adopted ASC 606 on January 1, 2018 using the modified retrospective method. The filing states that it reduced 2018 revenue by $100 million, income from operations by $98 million, and net income by $80 million. Prior-year comparatives were not restated.

  3. How is the company funding its capital returns and debt obligations?

    Operating cash flow of $1.288 billion funded share repurchases of $602 million and dividends of $306 million. At year-end, $1.1 billion was available under the $1.25 billion revolving credit facility, and the company's $186 million 7.000% senior notes due in 2019 are the mandatory repayment over the next twelve months.

  4. What are the most significant legal and regulatory risks disclosed?

    The filing discloses the Stanford Financial Group litigation, under which the company agreed to a $120 million settlement that will not be paid until appeals are resolved. It also discloses European Commission, FCA, KFTC, and CADE investigations into aviation and aerospace broking, and a CMA investment consulting market investigation with proposed remedies.

06—Continue

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