News
Marsh & McLennan Companies Reports First Quarter 2015 Results
April 30, 2015 at 7:00 AM EDT
Media Contact
Email:media@mmc.com
Underlying Revenue Growth Across All Operating Companies
GAAP EPS Grows 10% to
Adjusted EPS Rises 12% to
"We are off to a good start and are on track to deliver underlying revenue growth, margin expansion, and solid growth in earnings per share this year," concluded Mr. Glaser.
Consolidated Results
In the first quarter of 2015, consolidated revenue was
In the first quarter, the stronger U.S. dollar and the effects of lower
interest rates adversely affected EPS by approximately
Risk and Insurance Services
Risk & Insurance Services revenue was
Marsh's revenue in the first quarter was
Consulting
Consulting revenue in the first quarter was
Mercer's revenue was
Other Items
In March, the Company issued
Conference Call
A conference call to discuss first quarter 2015 results will be held
today at
About
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
This press release contains "forward-looking statements," as defined in the Private Securities Litigation Reform Act of 1995. These statements, which express management's current views concerning future events or results, use words like "anticipate," "assume," "believe," "continue," "estimate," "expect," "future," "intend," "plan," "project" and similar terms, and future or conditional tense verbs like "could," "may," "might," "should," "will" and "would." For example, we may use forward-looking statements when addressing topics such as: the outcome of contingencies; the expected impact of acquisitions and dispositions; the impact of competition; pension obligations; the impact of foreign currency exchange rates; our effective tax rates; changes in our business strategies and methods of generating revenue; the development and performance of our services and products; changes in the composition or level of our revenues; our cost structure, dividend policy, cash flow and liquidity; future actions by regulators; and the impact of changes in accounting rules.
Forward-looking statements are subject to inherent risks and uncertainties. Factors that could cause actual results to differ materially from those expressed or implied in our forward-looking statements include, among other things:
- our ability to maintain adequate safeguards to protect the security of confidential, personal or proprietary information, and the potential for the improper disclosure or use of such information, whether due to human error, improper action by employees, vendors or third parties, or as a result of a cyberattack;
- the impact of fluctuations in foreign currency exchange rates, particularly in light of the recent strengthening of the U.S. dollar against most other currencies worldwide;
- the impact of competition on our business, including the impact of our corporate tax rate as compared to our competitors;
- the impact on our global pension obligations of changes in discount rates and asset returns, as well as projected salary increases, mortality rates, demographics, and inflation, and the impact of cash contributions required to be made to our global defined benefit pension plans due to changes in the funded status of those plans;
- our exposure to potential liabilities arising from errors and omissions claims against us;
-
our exposure to potential civil remedies or criminal penalties if we
fail to comply with foreign and U.S. laws that are applicable in the
domestic and international jurisdictions in which we operate,
including trade sanctions laws relating to countries such as
Cuba ,Iran ,Russia ,Sudan andSyria , anti-corruption laws such as the U.S. Foreign Corrupt Practices Act and theU.K. Bribery Act 2010 and local laws prohibiting corrupt payments to government officials; - the extent to which we are able to retain existing clients and attract new business, and our ability to effectively incentivize and retain key employees;
- our ability to make acquisitions and dispositions and to integrate, and realize expected synergies, savings or benefits from, the businesses we acquire;
- our ability to successfully recover should we experience a disaster or other business continuity problem;
- the impact of changes in interest rates and deterioration of counterparty credit quality on our cash balances and the performance of our investment portfolios;
- the impact of potential rating agency actions on our cost of financing and ability to borrow, as well as on our operating costs and competitive position;
- changes in applicable tax or accounting requirements; and
- potential income statement effects from the application of FASB's ASC Topic No. 740 ("Income Taxes") regarding accounting treatment of uncertain tax benefits and valuation allowances, including the effect of any subsequent adjustments to the estimates we use in applying this accounting standard.
The factors identified above are not exhaustive.
Marsh & McLennan Companies, Inc. Consolidated Statements of Income (In millions, except per share figures) (Unaudited) |
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Three Months Ended March 31, |
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2015 | 2014 | |||||||
Revenue | $ | 3,215 | $ | 3,264 | ||||
Expense: | ||||||||
Compensation and Benefits | 1,730 | 1,839 | ||||||
Other Operating Expenses | 750 | 752 | ||||||
Operating Expenses | 2,480 | 2,591 | ||||||
Operating Income | 735 | 673 | ||||||
Interest Income | 3 | 5 | ||||||
Interest Expense | (36 | ) | (42 | ) | ||||
Investment Income | 2 | 13 | ||||||
Income Before Income Taxes | 704 | 649 | ||||||
Income Tax Expense | 206 | 192 | ||||||
Income from Continuing Operations | 498 | 457 | ||||||
Discontinued Operations, Net of Tax | (3 | ) | (1 | ) | ||||
Net Income Before Non-Controlling Interests | 495 | 456 | ||||||
Less: Net Income Attributable to Non-Controlling Interests | 13 | 13 | ||||||
Net Income Attributable to the Company | $ | 482 | $ | 443 | ||||
Basic Net Income Per Share | ||||||||
- Continuing Operations | $ | 0.90 | $ | 0.81 | ||||
- Net Income Attributable to the Company | $ | 0.89 | $ | 0.81 | ||||
Diluted Net Income Per Share | ||||||||
- Continuing Operations | $ | 0.89 | $ | 0.80 | ||||
- Net Income Attributable to the Company | $ | 0.88 | $ | 0.80 | ||||
Average Number of Shares Outstanding | ||||||||
- Basic | 539 | 548 | ||||||
- Diluted | 545 | 556 | ||||||
Shares Outstanding at 3/31 | 538 | 549 | ||||||
Marsh & McLennan Companies, Inc. Supplemental Information - Revenue Analysis Three Months Ended March 31, 2015 (Millions) (Unaudited) |
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Components of Revenue Change* | ||||||||||||||||||||
Three Months Ended March 31, |
% Change GAAP Revenue |
Currency Impact |
Acquisitions/ Dispositions Impact |
Underlying Revenue |
||||||||||||||||
2015 | 2014 | |||||||||||||||||||
Risk and Insurance Services | ||||||||||||||||||||
Marsh | $ | 1,430 | $ | 1,452 | (2 | )% | (7 | )% | 3 | % | 3 | % | ||||||||
Guy Carpenter | 368 | 381 | (4 | )% | (4 | )% | (2 | )% | 2 | % | ||||||||||
Subtotal | 1,798 | 1,833 | (2 | )% | (6 | )% | 2 | % | 3 | % | ||||||||||
Fiduciary Interest Income | 5 | 6 | ||||||||||||||||||
Total Risk and Insurance Services
|
1,803 | 1,839 | (2 | )% | (6 | )% | 2 | % | 3 | % | ||||||||||
Consulting | ||||||||||||||||||||
Mercer | 1,037 | 1,061 | (2 | )% | (6 | )% | - | 4 | % | |||||||||||
Oliver Wyman Group | 384 | 371 | 4 | % | (6 | )% | 2 | % | 8 | % | ||||||||||
Total Consulting | 1,421 | 1,432 | (1 | )% | (6 | )% | 1 | % | 5 | % | ||||||||||
Corporate / Eliminations | (9 | ) | (7 | ) | ||||||||||||||||
Total Revenue | $ | 3,215 | $ | 3,264 | (1 | )% | (6 | )% | 1 | % | 4 | % | ||||||||
Revenue Details
The following table provides more detailed revenue information for certain of the components presented above:
Components of Revenue Change* | |||||||||||||||||||||||||||||||||||||
Three Months Ended March 31, |
% Change GAAP Revenue |
Currency Impact |
Acquisitions/ Dispositions Impact |
Underlying Revenue |
|||||||||||||||||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||||||||||||||||||
Marsh: | |||||||||||||||||||||||||||||||||||||
EMEA | $ | 563 | $ | 617 | (9 | )% | (12 | )% | 1 | % | 2 | % | |||||||||||||||||||||||||
Asia Pacific | 148 | 151 | (2 | )% | (7 | )% | - | 5 | % | ||||||||||||||||||||||||||||
Latin America | 81 | 84 | (3 | )% | (13 | )% | 4 | % | 6 | % | |||||||||||||||||||||||||||
Total International | 792 | 852 | (7 | )% | (11 | )% | 1 | % | 3 | % | |||||||||||||||||||||||||||
U.S. / Canada | 638 | 600 | 6 | % | (1 | )% | 5 | % | 3 | % | |||||||||||||||||||||||||||
Total Marsh | $ | 1,430 | $ | 1,452 | (2 | )% | (7 | )% | 3 | % | 3 | % | |||||||||||||||||||||||||
Mercer: | |||||||||||||||||||||||||||||||||||||
Health | $ | 384 | $ | 388 | (1 | )% | (4 | )% | - | 3 | % | ||||||||||||||||||||||||||
Retirement | 331 | 357 | (7 | )% | (7 | )% | - | - | |||||||||||||||||||||||||||||
Investments | 205 | 199 | 3 | % | (10 | )% | 1 | % | 13 | % | |||||||||||||||||||||||||||
Talent | 117 | 117 | - | (6 | )% | 3 | % | 4 | % | ||||||||||||||||||||||||||||
Total Mercer | $ | 1,037 | $ | 1,061 | (2 | )% | (6 | )% | - | 4 | % | ||||||||||||||||||||||||||
Notes |
Underlying revenue measures the change in revenue using consistent currency exchange rates, excluding the impact of certain items that affect comparability such as: acquisitions, dispositions and transfers among businesses. |
* Components of revenue change may not add due to rounding. |
Non-GAAP Measures
Three
Months Ended
(Millions) (Unaudited)
The Company presents below certain additional financial measures that are "non-GAAP measures," within the meaning of Regulation G under the Securities Exchange Act of 1934. These measures are: adjusted operating income (loss); adjusted operating margin; and adjusted income, net of tax. |
The Company presents these non-GAAP measures to provide investors with additional information to analyze the Company's performance from period to period. Management also uses these measures to assess performance for incentive compensation purposes and to allocate resources in managing the Company's businesses. However, investors should not consider these non-GAAP measures in isolation from, or as a substitute for, the financial information that the Company reports in accordance with GAAP. The Company's non-GAAP measures reflect subjective determinations by management, and may differ from similarly titled non-GAAP measures presented by other companies. |
Adjusted Operating Income (Loss) and Adjusted Operating Margin |
Adjusted operating income (loss) is calculated by excluding the impact of certain noteworthy items from the Company's GAAP operating income or loss. The following tables identify these noteworthy items and reconcile adjusted operating income (loss) to GAAP operating income or loss, on a consolidated and segment basis, for the three months ended March 31, 2015 and 2014. The following tables also present adjusted operating margin, which is calculated by dividing adjusted operating income by consolidated or segment GAAP revenue. |
Risk & Insurance Services |
Consulting |
Corporate/
Eliminations |
Total | |||||||||||||
Three Months Ended March 31, 2015 | ||||||||||||||||
Operating income (loss) | $ | 533 | $ | 248 | $ | (46 | ) | $ | 735 | |||||||
Add (Deduct) impact of Noteworthy Items: | ||||||||||||||||
Restructuring charges (a) | - | - | 2 | 2 | ||||||||||||
Adjustments to acquisition related accounts (b) | 13 | (1 | ) | - | 12 | |||||||||||
Operating income adjustments | 13 | (1 | ) | 2 | 14 | |||||||||||
Adjusted operating income (loss) | $ | 546 | $ | 247 | $ | (44 | ) | $ | 749 | |||||||
Operating margin | 29.6 | % | 17.4 | % | N/A | 22.9 | % | |||||||||
Adjusted operating margin | 30.3 | % | 17.4 | % | N/A | 23.3 | % | |||||||||
Three Months Ended March 31, 2014 | ||||||||||||||||
Operating income (loss) | $ | 493 | $ | 225 | $ | (45 | ) | $ | 673 | |||||||
Add (Deduct) impact of Noteworthy Items: | ||||||||||||||||
Restructuring charges (a) | - | - | 2 | 2 | ||||||||||||
Adjustments to acquisition related accounts (b) | 7 | - | - | 7 | ||||||||||||
Operating income adjustments | 7 | - | 2 | 9 | ||||||||||||
Adjusted operating income (loss) | $ | 500 | $ | 225 | $ | (43 | ) | $ | 682 | |||||||
Operating margin | 26.8 | % | 15.8 | % | N/A | 20.6 | % | |||||||||
Adjusted operating margin | 27.2 | % | 15.8 | % | N/A | 20.9 | % | |||||||||
(a) Primarily severance, future rent under non-cancellable leases, and integration costs related to recent acquisitions. |
(b) Primarily includes the change in fair value as measured each quarter of contingent consideration related to acquisitions. |
Non-GAAP Measures
Three
Months Ended
(Millions) (Unaudited)
Adjusted income, net of tax |
Adjusted income, net of tax is calculated as: the Company's GAAP income from continuing operations, adjusted to reflect the after-tax impact of the operating income adjustments set forth in the preceding tables; divided by MMC's average number of shares outstanding-diluted for the period. |
Reconciliation of the Impact of Non-GAAP Measures on diluted earnings per share - |
Three Months Ended March 31, 2015 | Three Months Ended March 31, 2014 | ||||||||||||||||||||||
Amount |
Diluted EPS |
Amount |
Diluted EPS |
||||||||||||||||||||
Income from continuing operations | $ | 498 | $ | 457 | |||||||||||||||||||
Less: Non-controlling interest, net of tax | 13 | 13 | |||||||||||||||||||||
Subtotal | $ | 485 | $ | 0.89 | $ | 444 | $ | 0.80 | |||||||||||||||
Operating income adjustments | $ | 14 | $ | 9 | |||||||||||||||||||
Impact of income taxes | (5 | ) | (3 | ) | |||||||||||||||||||
9 | 0.02 | 6 | 0.01 | ||||||||||||||||||||
Adjusted income, net of tax | $ | 494 | $ | 0.91 | $ | 450 | $ | 0.81 | |||||||||||||||
Marsh & McLennan Companies, Inc. Supplemental Information (Millions) (Unaudited) |
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Three Months Ended March 31, |
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2015 | 2014 | |||||
Depreciation and amortization expense | $ | 77 | $ | 75 | ||
Identified intangible amortization expense | $ | 24 | $ | 22 | ||
Stock option expense | $ | 8 | $ | 7 | ||
Capital expenditures | $ | 91 | $ | 99 | ||
Marsh & McLennan Companies, Inc. Consolidated Balance Sheets (Millions) |
||||||||
(Unaudited)
March 31, 2015 |
December 31,
2014 |
|||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,104 | $ | 1,958 | ||||
Net receivables | 3,380 | 3,377 | ||||||
Other current assets | 693 | 720 | ||||||
Total current assets | 5,177 | 6,055 | ||||||
Goodwill and intangible assets | 7,832 | 7,933 | ||||||
Fixed assets, net | 794 | 809 | ||||||
Pension related assets | 1,010 | 967 | ||||||
Deferred tax assets | 812 | 876 | ||||||
Other assets | 1,209 | 1,200 | ||||||
TOTAL ASSETS | $ | 16,834 | $ | 17,840 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term debt | $ | 61 | $ | 11 | ||||
Accounts payable and accrued liabilities | 1,699 | 1,883 | ||||||
Accrued compensation and employee benefits | 706 | 1,633 | ||||||
Accrued income taxes | 136 | 178 | ||||||
Dividends payable | 151 | - | ||||||
Total current liabilities | 2,753 | 3,705 | ||||||
Fiduciary liabilities | 4,585 | 4,552 | ||||||
Less - cash and investments held in a fiduciary capacity | (4,585 | ) | (4,552 | ) | ||||
- | - | |||||||
Long-term debt | 3,828 | 3,376 | ||||||
Pension, post-retirement and post-employment benefits | 2,070 | 2,244 | ||||||
Liabilities for errors and omissions | 334 | 341 | ||||||
Other liabilities | 986 | 1,041 | ||||||
Total equity | 6,863 | 7,133 | ||||||
TOTAL LIABILITIES AND EQUITY | $ | 16,834 | $ | 17,840 | ||||
Source:
Media:
Marsh & McLennan Companies
Edward L.
Dandridge, +1 212-345-9751
ed.dandridge@mmc.com
or
Investors:
Marsh
& McLennan Companies
Keith Walsh, +1 212-345-0057
keith.walsh@mmc.com