Watson Wyatt Worldwide Reports Strong Third Quarter on Better Than Expected Revenues; Raises Fiscal 2006 Guidance.ARLINGTON Arlington, county, United States Arlington, county (1990 pop. 170,936), N Va., across the Potomac River from Washington, D.C. Arlington is a residential and commercial suburb of Washington. , Va. -- Watson Wyatt Worldwide, Inc. (NYSE NYSE See: New York Stock Exchange : WW), a leading international human capital and financial management consulting Noun 1. management consulting - a service industry that provides advice to those in charge of running a business service industry - an industry that provides services rather than tangible objects firm, today announced financial results for the third quarter of fiscal 2006, which ended March 31, 2006. Revenues were $343.1 million for the quarter, an increase from $187.6 million for the third quarter of fiscal 2005. Income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the third quarter of fiscal 2006 was $29.3 million, or $0.69 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, an increase from $14.3 million or $0.44 per diluted share in the prior-year third quarter. All business segments performed well this quarter, and the increase in revenue and earnings was mainly driven by the acquisition of the European-based consulting operations from Watson Wyatt LLP LLP - Lower Layer Protocol effective July July: see month. 31, 2005. "We had outstanding results this quarter, with solid growth across all segments," said John Haley John Haley former Little Rock lawyer, former attorney for Jim Guy Tucker and Jim Guy Tucker's co-defendant. On February 20, 1998, John Haley pleaded guilty to one misdemeanor count tax fraud to the Internal Revenue Service. , president and chief executive officer. "Our revenues exceeded guidance primarily due to better than expected growth in our European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. benefits business, as well as in Insurance and Financial Services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. and Investment Consulting. While some of our growth was driven by regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. change, the market is clearly embracing our messages and services. We are intensely focused on our target market, and our people are doing a superb job serving our clients." "Given our better than expected performance this quarter, we are increasing our revenue and EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. guidance for fiscal 2006," Haley Ha·ley , Alex 1921-1992. American writer best known for Roots (1976), a fictionalized chronicle tracing his family history back to its African origins. Noun 1. said. "We continue to see significant demand for our services as companies consider various alternatives for the best way to handle employee benefit and retirement programs." Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma Results Effective July 31, 2005, the Company acquired the European-based consulting operations of Watson Wyatt LLP, its long-time strategic alliance partner. To provide comparability with previous quarters, the Company provides pro forma results. The prior-year pro forma results have been prepared assuming that the Company's acquisition of the European consulting business of Watson Wyatt LLP had occurred on July 1, 2004. The Company's management uses these pro forma results internally to focus on period-to-period changes in the Company's business and believes this information is helpful to investors. The pro forma numbers could also assist shareholders in assessing the impact of the acquisition of the European business by providing comparable prior-year information as a basis for comparison. Revenues for the third quarter of fiscal 2006 were $343.1 million, an increase of 12% from pro forma revenues of $306.7 million. Earnings per diluted share of $0.69 for the third quarter are nearly double the $0.35 pro forma earnings pro forma earnings Income not necessarily calculated in accordance with generally accepted accounting principles. For example, a company might report pro forma earnings that exclude depreciation expense and nonrecurring expenses such as restructuring costs. per diluted share in the prior-year third quarter. Exchange rates had an unfavorable impact on pro forma revenues of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 2 percentage points and a negative impact of $0.02 per diluted share on pro forma net income. Operating Highlights Operating highlights are discussed on a GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). and a pro forma basis. --Benefits group revenues (representing 55% of third-quarter revenues) were $188.6 million for the third quarter of fiscal 2006, up from $109.5 million in the prior-year third quarter. Revenues increased 13% over pro forma revenues of $167.5 million in the prior-year third quarter. Our European Benefits group achieved an impressive 21% revenue growth, primarily due to the impact of regulatory changes in the U.K. Our U.S. Benefits group also had a strong quarter with 8% revenue growth, largely due to plan design and administration for new and existing clients. --Technology and administration solutions group revenues (representing 10% of third-quarter revenues) were $35.4 million for the third quarter of fiscal 2006, compared to prior-year third-quarter revenues of $17.0 million. Revenues increased 12% from prior-year pro forma revenues of $31.8 million primarily due to a number of projects that went into service during the quarter and for which the Company was able to begin recognizing revenues. The pipeline continues to be strong with 44 projects in the implementation phase and 39 projects in service delivery. --Human capital group revenues (representing 8% of total revenues for the quarter) were $27.6 million in the third quarter of fiscal 2006, an increase from prior-year third quarter revenues of $14.6 million. Pro forma revenues for the third quarter of fiscal 2005 were $22.7 million. Third quarter fiscal 2006 revenues reflect the reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. of $3.0 million in revenues related to Watson Wyatt Data Services from the "Other segment" into the human capital group. Excluding the reclassification, revenue growth over the pro forma revenues for the prior-year third quarter was 8%. Revenue growth continued to be driven primarily by demand for data services and executive compensation consulting. --Insurance & financial services group revenues (representing 8% of total revenues for the quarter) were $27.8 million for the third quarter of fiscal 2006. Third quarter fiscal 2006 revenues increased 18% over pro forma revenues of $23.7 million for the prior-year third quarter. Our growth compared to prior-year third quarter is particularly strong due to significant project work and an expansion of our operations in Amsterdam Amsterdam, city, Netherlands Amsterdam (ăm`stərdăm', Dutch ämstərdäm`), city (1994 pop. 724,096), constitutional capital and largest city of the Kingdom of the Netherlands, North Holland prov. . --Investment consulting group revenues (representing 6% of total revenues for the quarter) were $20.7 million for the third quarter of fiscal 2006 as compared to $5.0 million in the prior-year third quarter. Revenues increased 15% over pro forma revenues of $18.0 million in the third quarter of fiscal 2005, due to an increase in demand for investment strategy and fund manager selection services. --International revenues, comprising Asia Pacific and Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. (representing 7% of total revenues for the quarter), were $23.8 million for the third quarter of fiscal 2006, an increase of 7% over prior-year third quarter fiscal 2005 revenues of $22.2 million. Results were strong in Australia Australia (ôstrāl`yə), smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop. , Taiwan Taiwan (tī`wän`), Portuguese Formosa, officially Republic of China, island nation (2005 est. pop. 22,894,000), 13,885 sq mi (35,961 sq km), in the Pacific Ocean, separated from the mainland of S China by the 100-mi-wide (161-km) Taiwan , Mexico Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. and Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. , and were partially offset by the Company's divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of its New Zealand New Zealand (zē`lənd), island country (2005 est. pop. 4,035,000), 104,454 sq mi (270,534 sq km), in the S Pacific Ocean, over 1,000 mi (1,600 km) SE of Australia. The capital is Wellington; the largest city and leading port is Auckland. operations in the first quarter of fiscal 2006. Outlook for Fourth Quarter and Fiscal Year 2006 For the fourth quarter of fiscal 2006, the Company expects revenue to be in the range of $320 million to $330 million. In addition, the Company expects fourth quarter earnings per diluted share to be in the range of $0.41 to $0.43. For fiscal year 2006, the Company is increasing previous revenue and earnings guidance, with revenues expected to be in the range of $1.24 billion to $1.26 billion and earnings per diluted share expected to be in the range of $1.86 to $1.90. Conference Call The Company will host a live webcast and conference call to discuss the financial results for the third quarter of fiscal 2006. It will be held on Tuesday Tuesday: see week. , May 9, 2006, beginning at 9:00 a.m. Eastern Time, and can be accessed via the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the by going to www.watsonwyatt.com or www.earnings.com. The replay of the webcast will be available two hours after the live call for a period of one year. The replay is also available for one week after the call by dialing 719-457-0820, confirmation number 4981194. The conference call will include a presentation of slides that are available on the websites. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Statements in this press release regarding projections and expectations of future earnings, revenues, operations, business trends and other such items are forward-looking statements within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. A number of risks and uncertainties exist which could cause actual results to differ materially from the results reflected in these forward-looking statements. Such factors include but are not limited to the Company's ability to integrate the business of Watson Wyatt LLP into its own business, processes and systems, and achieve the anticipated results; its continued ability to recruit RECRUIT. A newly made soldier. and retain qualified associates; the success of its marketing, client development and sales programs after the acquisition; its ability to maintain client relationships and to attract new clients after the acquisition; declines in demand for the Company's services; outcomes of litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. ; the ability of the Company to obtain professional liability insurance; a significant decrease in the demand for the consulting, actuarial ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin and other services the Company offers as a result of changing economic conditions or other factors; actions by competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. offering human resources The fancy word for "people." The human resources department within an organization, years ago known as the "personnel department," manages the administrative aspects of the employees. consulting services Noun 1. consulting service - service provided by a professional advisor (e.g., a lawyer or doctor or CPA etc.) service - work done by one person or group that benefits another; "budget separately for goods and services" , including public accounting and consulting firms Noun 1. consulting firm - a firm of experts providing professional advice to an organization for a fee consulting company business firm, firm, house - the members of a business organization that owns or operates one or more establishments; "he worked for a , technology consulting firms and internet/intranet development firms; the Company's ability to achieve cost reductions after the acquisition; foreign currency exchange and interest rate fluctuations; exposure to Watson Wyatt LLP liabilities that have not been expressly assumed; general economic and business conditions that adversely affect the Company or its clients after the acquisition; the level of capital resources required for future acquisitions and business opportunities; regulatory developments abroad and domestically that impact our business practices; legislative and technological developments that may affect the demand for or costs of the Company's services; and other factors discussed under "Risk Factors" in the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. dated August 24, 2005, and the proxy See proxy server. (networking) proxy - A process that accepts requests for some service and passes them on to the real server. A proxy may run on dedicated hardware or may be purely software. statement/prospectus filed on June June: see month. 23, 2005, both of which are on file with the Securities and Exchange Commission. These statements are based on assumptions that may not come true. All forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. disclosure is speculative Speculative Securities that involve a high level of risk. speculative Of or relating to an asset or a group of assets with uncertain returns. The greater the degree of uncertainty the more speculative the asset. by its nature. The Company undertakes no obligation to update any of the forward-looking information included in this report, whether as a result of new information, future events, changed expectations or otherwise. About Watson Wyatt Worldwide Watson Wyatt Worldwide is a leading global human capital and financial management consulting firm. The firm specializes in employee benefits, human capital strategies, technology solutions, and insurance and financial services with over 6,000 associates in 30 countries.
WATSON WYATT WORLDWIDE, INC.
Consolidated Statements of Operations
(Thousands of U.S. Dollars, Except Per Share Data)
Three Months Ended Nine Months Ended
March 31, March 31,
----------------------------------------
2006 2005 2006 2005
-------- -------- -------- --------
(Unaudited) (Unaudited)
Revenue $343,072 $187,560 $924,722 $538,800
-------- -------- -------- --------
Costs of providing
services:
Salaries and employee
benefits 191,582 101,730 514,339 294,000
Professional and
subcontracted services 17,884 13,795 56,490 37,318
Occupancy,
communications and
other 41,689 27,110 118,229 79,111
General and
administrative expenses 39,300 18,764 107,895 55,133
Depreciation and
amortization 11,510 5,161 32,319 14,654
-------- -------- -------- --------
301,965 166,560 829,272 480,216
-------- -------- -------- --------
Income from operations 41,107 21,000 95,450 58,584
Income (loss) from
affiliates 310 889 1,732 5,819
Interest income 1,047 761 2,344 1,914
Interest expense (1,344) (144) (3,703) (435)
Other non-operating
income (loss) 44 (1,181) (2,106) (1,209)
-------- -------- -------- --------
Income from continuing
operations before income
taxes 41,164 21,325 93,717 64,673
Provision for income taxes 11,828 6,985 33,314 25,527
-------- -------- -------- --------
Income from continuing
operations 29,336 14,340 60,403 39,146
Discontinued operations:
Adjustment to reduce
estimated loss on
disposal of discontinued
operations,less applicable
income tax expense for the
three months and nine
months ended March 31, 2006
and 2005 1,035 739 1,035 739
Sublease income from
discontinued operations,
less applicable income tax
expense for the three
months and nine months
ended March 31, 2006
and 2005 10 9 27 17
-------- -------- -------- --------
Net income $ 30,381 $ 15,088 $ 61,465 $ 39,902
======== ======== ======== ========
Basic earnings per share:
Income from continuing
operations $ 0.69 $ 0.44 $ 1.47 $ 1.20
Income from discontinued
operations 0.02 0.02 0.03 0.02
-------- -------- -------- --------
Net income $ 0.71 $ 0.46 $ 1.50 $ 1.22
======== ======== ======== ========
Diluted earnings per
share:
Income from continuing
operations $ 0.69 $ 0.44 $ 1.46 $ 1.19
Income from discontinued
operations 0.02 0.02 0.03 0.02
-------- -------- -------- --------
Net income $ 0.71 $ 0.46 $ 1.49 $ 1.21
======== ======== ======== ========
Weighted average shares of
common stock, basic (000) 42,234 32,647 41,074 32,507
======== ======== ======== ========
Weighted average shares of
common stock,
diluted (000) 42,466 32,936 41,341 32,814
======== ======== ======== ========
WATSON WYATT WORLDWIDE, INC.
Pro-Forma Consolidated Statements of Operations
(Thousands of U.S. Dollars, Except Per Share Data)
Three Months Ended Nine Months Ended
March 31, March 31,
---------------------------------------
2006 2005 2006 2005
-------- -------- -------- ---------
(Unaudited) (Unaudited)
Revenue $343,072 $306,661 $961,641 $891,233
-------- -------- -------- ---------
Costs of providing services:
Salaries and employee
benefits 191,582 176,762 535,675 505,098
Professional and
subcontracted services 17,884 17,804 57,681 50,340
Occupancy, communications
and other 41,689 39,618 121,419 114,442
General and administrative
expenses 39,300 35,934 114,493 109,808
Depreciation and
amortization 11,510 10,081 33,743 28,646
-------- -------- -------- ---------
301,965 280,199 863,011 808,334
-------- -------- -------- ---------
Income from operations 41,107 26,462 98,630 82,899
Income from affiliates 310 (1,306) 1,244 (261)
Interest expense, net (297) (865) (1,772) (2,519)
Other non-operating income 44 (1,198) 1,496 (1,226)
-------- -------- -------- ---------
Income from continuing
operations before income
taxes 41,164 23,093 99,598 78,893
Provision for income taxes 11,828 8,263 34,309 27,989
-------- -------- -------- ---------
Income from continuing
operations 29,336 14,830 65,289 50,904
Basic earnings per share: $ 0.69 $ 0.36 $ 1.59 $ 1.22
Diluted earnings per share: $ 0.69 $ 0.35 $ 1.58 $ 1.21
Weighted average shares of
common stock, basic (000) 42,234 41,737 41,074 41,597
======== ======== ======== =========
Weighted average shares of
common stock, diluted (000) 42,466 42,026 41,341 41,904
======== ======== ======== =========
WATSON WYATT WORLDWIDE, INC.
Supplemental Segment Data
(Thousands of U.S. Dollars)
Three Months Ended Nine Months Ended
March 31, March 31,
----------------------------------------
2006 2005 2006 2005
-------- -------- -------- ---------
(Unaudited) (Unaudited)
Revenue
(net of reimbursable expenses)
------------------------------
Benefits Group $188,573 $109,482 $504,966 $305,503
Technology and Administration
Solutions Group 35,449 17,030 96,296 53,785
Human Capital Group 27,568 14,633 80,414 41,998
Insurance & Financial Services
Group 27,847 - 65,449 -
Investment Consulting Group 20,735 5,005 52,626 13,705
International - Comprising
Asia Pacific and Latin
America 23,828 22,190 68,251 65,487
Other 8,058 9,082 26,324 31,811
-------- -------- -------- ---------
Total segment revenue 332,058 177,422 894,326 512,289
Reimbursable expenses and
other 11,014 10,138 30,396 26,511
-------- -------- -------- ---------
Consolidated revenue $343,072 $187,560 $924,722 $538,800
======== ======== ======== =========
Net operating income
------------------------------
Benefits Group $ 55,051 $ 24,693 $130,157 $ 63,280
Technology and Administration
Solutions Group 8,708 874 24,339 8,975
Human Capital Group 3,469 3,622 12,217 10,589
Insurance & Financial Services
Group 8,075 - 13,599 -
Investment Consulting Group 4,581 136 8,319 626
International - Comprising
Asia Pacific and Latin
America 2,122 263 2,797 2,074
Other (1,056) (488) (2,272) 3,025
-------- -------- -------- ---------
Total segment net operating
income 80,950 29,100 189,156 88,569
Discretionary compensation (33,073) (11,400) (80,305) (31,813)
Other income (expense), net (6,713) 3,625 (15,134) 7,917
-------- -------- -------- ---------
Income before income taxes $ 41,164 $ 21,325 $ 93,717 $ 64,673
======== ======== ======== =========
March 31,
------------------
2006 2005
-------- --------
(Unaudited)
Associates (fiscal year end
full-time equivalents)
------------------------------
Benefits Group 2,330 1,530
Technology and Administration
Solutions Group 720 300
Human Capital Group 410 165
Insurance & Financial Services
Group 330 -
Investment Consulting Group 270 70
International - Comprising
Asia Pacific and Latin
America 830 900
Other 550 510
-------- --------
Total segment associates 5,440 3,475
Corporate 560 225
-------- --------
Total 6,000 3,700
======== ========
WATSON WYATT WORLDWIDE, INC.
Pro-forma Segment Data
(Thousands of U.S. Dollars)
Three months ended March 31, 2005
------------------------------------
(Unaudited)
Watson Wyatt Watson Pro forma
Holdings Wyatt LLP Revenues
------------ --------- ---------
Revenue
(net of reimbursable expenses)
-------------------------------
Benefits Group $ 109,482 $ 58,038 $ 167,520
Technology and Administration
Solutions Group 17,030 14,761 31,791
Human Capital Group 14,633 8,115 22,748
Insurance & Financial Services
Group - 23,688 23,688
Investment Consulting Group 5,005 12,968 17,973
International - Comprising Asia
Pacific and Latin America 22,190 - 22,190
Other 9,082 153 9,235
------------ --------- ---------
Total segment revenue 177,422 117,723 295,145
Reimbursable expenses and other 10,138 1,378(A) 11,516
------------ --------- ---------
Consolidated revenue $ 187,560 $ 119,101 $ 306,661
============ ========= =========
Three Months Ended March 31,
------------------------------------
2006 2005
------------ ---------
(Unaudited) % change
Revenue (net of reimbursable
expenses)
-------------------------------
Benefits Group $ 188,573 $ 167,520 12.6%
Technology and Administration
Solutions Group 35,449 31,791 11.5%
Human Capital Group 27,568 22,748 21.2%
Insurance & Financial Services
Group 27,847 23,688 17.6%
Investment Consulting Group 20,735 17,973 15.4%
International - Comprising Asia
Pacific and Latin America 23,828 22,190 7.4%
Other 8,058 9,235 -12.7%
------------ --------- ---------
Total segment revenue 332,058 295,145 12.5%
Reimbursable expenses and other 11,014 11,516 -4.4%
------------ --------- ---------
Consolidated revenue $ 343,072 $ 306,661 11.9%
============ ========= =========
(A) Watson Wyatt LLP reimbursable expenses and other includes
inter-company eliminations.
WATSON WYATT WORLDWIDE, INC.
Consolidated Balance Sheets
(Thousands of U.S. Dollars, Except Per Share Data)
March 31, June 30,
----------- ---------
2006 2005
----------- ---------
(Unaudited)
Assets
--------------------------------------------
Cash and cash equivalents $ 92,674 $168,076
Receivables from clients:
Billed, net of allowances of $4,211 and
$2,114 173,831 95,977
Unbilled, net of allowances of $7,241 and
$264 126,711 62,840
----------- ---------
300,542 158,817
Deferred income taxes 19,054 24,718
Other current assets 34,249 12,599
----------- ---------
Total current assets 446,519 364,210
Investment in affiliates 10,045 30,857
Fixed assets, net 135,832 94,033
Deferred income taxes 114,885 92,915
Goodwill 306,146 21,888
Intangible assets 177,926 776
Other assets 6,752 14,000
----------- ---------
Total Assets $1,198,105 $618,679
=========== =========
Liabilities
--------------------------------------------
Accounts payable and accrued liabilities $ 238,250 $122,621
Deferred income taxes - 283
Income taxes payable 21,869 4,648
----------- ---------
Total current liabilities 260,119 127,552
Note payable 45,000 -
Accrued retirement benefits 263,342 205,029
Deferred rent and accrued lease losses 29,292 18,701
Deferred income taxes 361 370
Other noncurrent liabilities 69,960 32,824
----------- ---------
Total Liabilities 668,074 384,476
Commitments and contingencies
Stockholders' Equity
--------------------------------------------
Preferred Stock - No par value:
1,000,000 shares authorized;
none issued and outstanding - -
Class A Common Stock - $.01 par value:
99,000,000 shares authorized;
42,463,451 and 33,372,880 issued and
42,271,095 and 32,627,226 outstanding 425 334
Additional paid-in capital 386,535 147,948
Treasury stock, at cost - 192,356 and
745,654 shares (5,050) (18,705)
Retained earnings 220,052 168,075
Accumulated other comprehensive loss (71,931) (63,449)
----------- ---------
Total Stockholders' Equity 530,031 234,203
----------- ---------
Total Liabilities and Stockholders' Equity $1,198,105 $618,679
=========== =========
WATSON WYATT WORLDWIDE, INC.
Consolidated Statements of Cash Flows
(Thousands of U.S. Dollars)
Nine months ended
March 31,
---------------------
2006 2005
---------- ----------
(Unaudited)
---------------------
Cash flows from operating activities:
Net income $ 61,465 $ 39,902
Adjustments to reconcile net income to net cash
from (used in) operating activities:
Loss on foreign currency forward contract 3,602 -
Income from discontinued operations, net
of income tax expense (1,035) (739)
Provision for doubtful receivables from
clients 6,089 5,967
Depreciation 26,448 14,426
Amortization of intangible assets 5,872 228
Provision for deferred income taxes 9,876 7,029
Income from affiliates (1,732) (5,819)
Distributions from affiliates 1,614 4,624
Other, net 326 755
Changes in operating assets and liabilities
(net of discontinued operations)
Receivables from clients (33,731) (22,124)
Other current assets (4,929) (9,996)
Other assets (684) 1,091
Accounts payable and accrued
liabilities (31,278) (12,126)
Income taxes payable 16,620 (20,824)
Accrued retirement benefits 412 (261)
Deferred rent and accrued lease losses 1,870 394
Other noncurrent liabilities 4,205 (481)
---------- ----------
Net cash from operating activities 65,010 2,046
---------- ----------
Cash flows used in investing activities:
Purchases of marketable securities - (469,400)
Sales and maturities of marketable securities - 489,400
Acquisitions (132,844) (517)
Purchases of fixed assets (24,153) (20,129)
Capitalized software costs (20,477) (8,840)
Proceeds from divestitures 1,496 28
---------- ----------
Net cash used in investing activities (175,978) (9,458)
---------- ----------
Cash flows used in financing activities:
Borrowings 102,000 -
Repayments (57,000) -
Foreign currency forward contract (8,405) -
Dividends paid (9,487) (7,309)
Repurchases of common stock (3,937) (4,188)
Tax benefit of exercise of stock options and
other 1,444 775
Issuances of common stock - exercise of
options 2,921 1,711
Issuances of common stock - employee stock
purchase plan 4,777 5,549
---------- ----------
Net cash provided by (used in) investing
activities 32,313 (3,462)
---------- ----------
Effect of exchange rates on cash 3,253 399
---------- ----------
Decrease in cash and cash equivalents (75,402) (10,475)
Cash and cash equivalents at beginning of period 168,076 136,940
---------- ----------
Cash and cash equivalents at end of period $ 92,674 $ 126,465
========== ==========
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