Underlying Revenue Growth of 3%
GAAP EPS of $.77 and Adjusted EPS of
$.80
Six Months GAAP and Adjusted EPS Both
Increase 6%
Marsh & McLennan Companies, Inc. (NYSE: MMC), a global
professional services firm offering clients advice and solutions in
risk, strategy and people, today reported financial results for the
second quarter ended June 30, 2015.
Dan Glaser, President and CEO, said: "Given the macro headwinds
we are facing, I am pleased with our performance in the first half
of the year. For the first six months of 2015, adjusted EPS rose
6%. In the second quarter, adjusted EPS of $.80 was a slight
increase from the prior year. Underlying revenue was up 3%,
reflecting growth of 2% in Risk & Insurance Services and 4% in
Consulting. Looking forward, we’re on track to deliver underlying
revenue growth, margin expansion and strong growth in earnings per
share in the second half of the year."
Consolidated Results
Consolidated revenue in the second quarter of 2015 was $3.2
billion, a decline of 2% compared with the second quarter of 2014,
reflecting the continuing impact of the strong US dollar. On an
underlying basis, revenue increased 3%. Operating income was $629
million compared with $647 million in the prior year. Net income
attributable to the Company was $419 million, or $.77 per share,
compared with $431 million, or $.77 per share, in the prior year.
Adjusted earnings per share was $.80 compared with $.79 in last
year’s second quarter.
For the six months ended June 30, 2015, net income attributable
to the Company was $901 million, or $1.66 per share, compared with
$874 million, or $1.57 per share, in 2014. Adjusted earnings per
share increased 6% to $1.70.
Risk and Insurance Services
Risk & Insurance Services revenue was $1.8 billion in the
second quarter of 2015, an increase of 2% on an underlying basis.
Operating income was $427 million compared with $448 million in the
prior year. Adjusted operating income was $445 million compared
with $454 million last year. For the six months of 2015, revenue
was $3.6 billion, an increase of 2% on an underlying basis.
Operating income rose 2% to $960 million from $941 million in 2014.
Adjusted operating income rose 4% to $991 million, compared with
$954 million last year.
Marsh's revenue in the second quarter of 2015 was $1.5 billion,
an increase of 3% on an underlying basis. The U.S./Canada division
had underlying revenue growth of 4%. International operations
produced underlying revenue growth of 2%, EMEA grew 3%, Asia
Pacific was flat and Latin America grew 5%. Guy Carpenter's second
quarter revenue was $275 million, a decrease of 2% on an underlying
basis.
Consulting
Consulting revenue of $1.5 billion in the second quarter
increased 4% on an underlying basis. Operating income rose 1% to
$248 million compared with $247 million in the prior year. Adjusted
operating income was $244 million compared with $247 million last
year. For the six months of 2015, revenue was $2.9 billion, up 4%
on an underlying basis. Operating income rose 5% to $496 million
and adjusted operating income increased 4% to $491 million.
Mercer’s revenue was $1 billion in the second quarter, an
increase of 4% on an underlying basis. Investments, with revenue of
$207 million, grew 8% on an underlying basis; Talent, with revenue
of $123 million, increased 4%; Health, with revenue of $391
million, grew 3%; and Retirement, with revenue of $325 million,
rose 2%. Oliver Wyman Group’s revenue was $441 million in the
second quarter, an increase of 3% on an underlying basis.
Other Items
Marsh & McLennan Companies repurchased 8.2 million shares of
stock for $475 million in the second quarter. Through six months,
the Company has repurchased 13.5 million shares for $775 million.
In May, the Board of Directors renewed the Company's share
repurchase program, allowing management to buy back up to $2
billion of shares going forward. The Board also increased the
quarterly dividend 11%, to $.31 per share, effective with the third
quarter payment on August 14, 2015.
Conference Call
A conference call to discuss second quarter 2015 results will be
held today at 8:30 a.m. Eastern time. To participate in the
teleconference, please dial +1 877 795 3647. Callers from outside
the United States should dial +1 719 325 4895. The access code for
both numbers is 1182028. The live audio webcast may be accessed at
www.mmc.com. A replay of the webcast
will be available approximately two hours after the event.
About Marsh & McLennan Companies
MARSH & McLENNAN COMPANIES (NYSE: MMC) is a global
professional services firm offering clients advice and solutions in
the areas of risk, strategy, and people. Marsh is a leader in insurance broking and risk
management; Guy Carpenter is a leader
in providing risk and reinsurance intermediary services;
Mercer is a leader in talent, health,
retirement, and investment consulting; and Oliver Wyman is a leader in management consulting.
With annual revenue of $13 billion and 57,000 colleagues worldwide,
Marsh & McLennan Companies provides analysis, advice and
transactional capabilities to clients in more than 130 countries.
The Company is committed to being a responsible corporate citizen
and making a positive impact in the communities in which it
operates. Visit www.mmc.com for more
information and follow us on LinkedIn
and Twitter @MMC_Global.
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 competition on our
business, including the impact of our corporate tax rate, which is
higher than the tax rate of our international competitors;
- 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 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;
- 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 and its subsidiaries operate in a dynamic
business environment in which new risks may emerge frequently.
Accordingly, we caution readers not to place undue reliance on any
forward-looking statements, which are based only on information
currently available to us and speak only as of the dates on which
they are made. The Company undertakes no obligation to update or
revise any forward-looking statement to reflect events or
circumstances arising after the date on which it is made. Further
information concerning Marsh & McLennan Companies and its
businesses, including information about factors that could
materially affect our results of operations and financial
condition, is contained in the Company's filings with the
Securities and Exchange Commission, including the "Risk Factors"
section and the "Management’s Discussion and Analysis of Financial
Condition and Results of Operations" section of our most recently
filed Annual Report on Form 10-K.
Marsh & McLennan Companies, Inc.
Consolidated Statements of Income
(In millions, except per share
figures)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2015 2014
2015 2014
Revenue
$ 3,225 $ 3,300
$ 6,440
$ 6,564
Expense: Compensation and
Benefits
1,826 1,876
3,556 3,715 Other Operating
Expenses
770 777
1,520 1,529
Operating Expenses 2,596 2,653
5,076 5,244
Operating Income 629
647
1,364 1,320
Interest Income 3 5
6
10
Interest Expense (40 ) (42 )
(76
) (84 )
Investment Income (Loss)
3 (2 )
5 11
Income Before
Income Taxes 595 608
1,299 1,257
Income Tax
Expense 166 168
372 360
Income from Continuing Operations 429 440
927 897
Discontinued Operations, Net of Tax —
(2 )
(3 ) (3 )
Net Income Before
Non-Controlling Interests 429 438
924 894
Less: Net Income Attributable to Non-Controlling Interests
10 7
23 20
Net Income
Attributable to the Company $ 419 $ 431
$ 901 $ 874
Basic Net Income
Per Share - Continuing Operations $ 0.78
$ 0.79
$ 1.68 $ 1.60
-
Net Income Attributable to the Company $ 0.78
$ 0.78
$ 1.68 $ 1.59
Diluted Net Income Per Share - Continuing Operations
$ 0.77 $ 0.78
$ 1.66
$ 1.58
- Net Income Attributable to the
Company $ 0.77 $ 0.77
$
1.66 $ 1.57
Average Number of Shares
Outstanding - Basic 535 549
537 548
- Diluted 541 556
543 556
Shares Outstanding at
6/30 531 546
531 546
Marsh & McLennan Companies,
Inc.
Supplemental Information - Revenue
Analysis
Three Months Ended June 30,
2015
(Millions) (Unaudited)
Components of Revenue Change*
Three Months Ended June
30,
% Change GAAP
Revenue
Currency Impact
Acquisitions/Dispositions
Impact
Underlying Revenue
2015 2014
Risk and Insurance Services Marsh
$ 1,470 $ 1,490 (1 )% (6 )% 2 % 3 % Guy Carpenter
275 295 (6 )% (5 )% — (2 )% Subtotal
1,745 1,785 (2 )% (6 )% 2 % 2 % Fiduciary Interest Income
5 6 Total Risk and Insurance Services
1,750 1,791 (2 )% (6 )% 2 % 2 %
Consulting Mercer
1,046 1,071 (2 )% (7 )% 1 % 4 %
Oliver Wyman Group
441 449 (2 )% (6 )% 2 % 3 %
Total Consulting
1,487 1,520 (2 )% (7 )% 1 % 4
%
Corporate / Eliminations (12 ) (11 )
Total Revenue $ 3,225 $ 3,300 (2
)% (7 )% 1 % 3 %
Revenue Details
The following table provides more detailed revenue information
for certain of the components presented above:
Components of Revenue Change*
Three Months Ended June
30,
% Change GAAP
Revenue
Currency Impact
Acquisitions/
Dispositions Impact
Underlying Revenue
2015 2014
Marsh: EMEA
$ 439 $
478 (8 )% (11 )% — 3 % Asia Pacific
176 194 (10 )% (9 )% — —
Latin America
95 102 (7 )% (16 )% 4 % 5 %
Total International
710 774 (8 )% (11 )%
1
%
2 % U.S. / Canada
760 716 6 % (1 )% 3 % 4 %
Total Marsh
$ 1,470 $ 1,490 (1 )% (6 )%
2 % 3 %
Mercer: Health
$ 391 $ 393 (1 )% (4 )%
— 3 % Retirement
325 345 (6 )% (8 )% — 2 % Investments
207 210 (2 )% (12 )% 3 % 8 % Talent
123 123
(1 )% (8 )% 3 % 4 % Total Mercer
$ 1,046
$ 1,071 (2 )% (7 )% 1 % 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.
Marsh & McLennan
Companies, Inc. Supplemental Information - Revenue
Analysis Six Months Ended June 30, 2015
(Millions) (Unaudited)
Components of Revenue Change*
Six Months Ended June
30,
% Change GAAP
Revenue
Currency Impact
Acquisitions/Dispositions
Impact
Underlying Revenue
2015 2014
Risk and Insurance Services Marsh
$ 2,900 $ 2,942 (1 )% (7 )% 2 % 3 % Guy Carpenter
643 676 (5 )% (4 )% (1 )% — Subtotal
3,543 3,618 (2 )% (6 )% 2 % 2 % Fiduciary Interest Income
10 12 Total Risk and Insurance Services
3,553 3,630 (2 )% (6 )% 2 % 2 %
Consulting Mercer
2,083 2,132 (2 )% (7 )% 1 % 4 %
Oliver Wyman Group
825 820 1 % (6 )% 2 % 5 %
Total Consulting
2,908 2,952 (1 )% (7 )% 1 % 4
%
Corporate / Eliminations (21 ) (18 )
Total Revenue $ 6,440 $ 6,564 (2
)% (6 )% 1 % 3 %
Revenue Details
The following table provides more detailed revenue information
for certain of the components presented above:
Components of Revenue Change*
Six Months Ended June
30,
% Change GAAP
Revenue
Currency Impact
Acquisitions/Dispositions
Impact
Underlying Revenue
2015 2014
Marsh: EMEA
$ 1,002 $
1,095 (8 )% (11 )% 1 % 2 % Asia Pacific
324 345 (6 )% (8 )%
— 2 % Latin America
176 186 (5 )% (14 )% 4 % 5
% Total International
1,502 1,626 (8 )% (11 )% 1 % 2 % U.S.
/ Canada
1,398 1,316 6 % (1 )% 4 % 4 % Total
Marsh
$ 2,900 $ 2,942 (1 )% (7 )% 2 % 3
%
Mercer: Health
$ 775 $ 781 (1 )% (4 )% — 3 %
Retirement
656 702 (7 )% (8 )% — 1 % Investments
412
409 1 % (11 )% 2 % 10 % Talent
240 240 — (7 )%
3 % 4 % Total Mercer
$ 2,083 $ 2,132 (2
)% (7 )% 1 % 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.
Marsh & McLennan Companies,
Inc.Non-GAAP MeasuresThree Months Ended June
30(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 June 30, 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 June 30, 2015 Operating
income (loss) $ 427 $ 248
$ (46 ) $ 629 Add
(Deduct) impact of Noteworthy Items: Restructuring charges (a)
2 — 1 3 Adjustments to acquisition
related accounts (b)
16 (4 ) —
12 Other
— — (1 )
(1 ) Operating income adjustments 18
(4 ) — 14
Adjusted operating income (loss) $ 445
$ 244 $ (46 ) $
643 Operating margin 24.4 %
16.7 % N/A 19.5 % Adjusted
operating margin 25.4 % 16.4 %
N/A 19.9 % Three Months Ended June 30,
2014 Operating income (loss) $ 448 $ 247 $
(48 ) $ 647 Add impact of Noteworthy Items: Restructuring
charges (a) 2 — 2 4 Adjustments to acquisition related accounts (b)
4 — — 4 Other — — 1 1
Operating
income adjustments 6 — 3 9
Adjusted operating income (loss) $ 454 $ 247 $
(45 ) $ 656
Operating margin 25.0 % 16.2 % N/A 19.6 %
Adjusted operating margin 25.4 % 16.2 % N/A 19.9 %
(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.
Marsh & McLennan Companies,
Inc.Non-GAAP MeasuresSix Months Ended June
30(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 six months ended June 30, 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 Six Months Ended June 30, 2015 Operating
income (loss) $ 960 $ 496
$ (92 ) $ 1,364
Add (Deduct) impact of Noteworthy Items: Restructuring charges (a)
2 — 3 5 Adjustments to acquisition
related accounts (b)
29 (5 ) —
24 Other
— — (1 )
(1 ) Operating income adjustments 31
(5 ) 2 28
Adjusted operating income (loss) $ 991
$ 491 $ (90 ) $
1,392 Operating margin 27.0 %
17.1 % N/A 21.2 % Adjusted
operating margin 27.9 % 16.9 %
N/A 21.6 % Six Months Ended June 30,
2014 Operating income (loss) $ 941 $ 472 $
(93 ) $ 1,320 Add impact of Noteworthy Items: Restructuring
charges (a) 2 — 4 6 Adjustments to acquisition related accounts (b)
11 — — 11 Other — — 1 1
Operating
income adjustments 13 — 5 18
Adjusted operating income (loss) $ 954 $ 472 $
(88 ) $ 1,338
Operating margin 25.9 % 16.0 % N/A 20.1
%
Adjusted operating margin 26.3 % 16.0 % N/A 20.4 %
(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.
Marsh & McLennan Companies,
Inc.Non-GAAP MeasuresThree and Six Months Ended June
30(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 June 30, 2015 Three Months Ended
June 30, 2014
Amount
Diluted EPS
Amount
DilutedEPS
Income from continuing operations
$ 429
$ 440 Less: Non-controlling interest, net of tax
10 7
Subtotal
$ 419 $ 0.77 $ 433 $
0.78 Operating income adjustments
$ 14 $ 9 Impact of
income taxes
(2 ) (3 )
12 0.03
6 0.01 Adjusted income, net of tax
$
431 $ 0.80 $ 439 $ 0.79
Six Months Ended June 30, 2015 Six
Months Ended June 30, 2014
Amount
Diluted EPS
Amount
DilutedEPS
Income from continuing operations
$ 927 $ 897 Less:
Non-controlling interest, net of tax
23 20
Subtotal
$ 904 $ 1.66 $ 877 $ 1.58
Operating income adjustments
$ 28 $ 18 Impact of
income taxes
(7 ) (6 )
21 0.04
12 0.02 Adjusted income, net of tax
$
925 $ 1.70 $ 889 $ 1.60
Marsh & McLennan Companies, Inc.
Supplemental Information
(Millions) (Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2015 2014
2015 2014 Depreciation and
amortization expense
$ 79 $ 74
$ 156 $
149 Identified intangible amortization expense
$ 24 $
20
$ 48 $ 42 Stock option expense
$ 5 $
3
$ 13 $ 10 Capital expenditures
$ 85 $
103
$ 176 $ 202
Marsh &
McLennan Companies, Inc. Consolidated Balance Sheets
(Millions)
(Unaudited)
June 30,
2015
December 31,
2014
ASSETS Current assets: Cash and cash equivalents
$ 930 $ 1,958 Net receivables
3,659 3,377
Other current assets
710 720
Total current
assets 5,299 6,055 Goodwill and intangible assets
8,155 7,933 Fixed assets, net
807 809 Pension related
assets
1,148 967 Deferred tax assets
785 876 Other
assets
1,219 1,200
TOTAL ASSETS
$ 17,413 $ 17,840
LIABILITIES
AND EQUITY Current liabilities: Short-term debt
$
111 $ 11 Accounts payable and accrued liabilities
1,748 1,883 Accrued compensation and employee benefits
974 1,633 Accrued income taxes
209 178 Dividends
payable
166 —
Total current liabilities
3,208 3,705 Fiduciary liabilities
4,869 4,552
Less - cash and investments held in a fiduciary capacity
(4,869 ) (4,552 ) — — Long-term debt
3,825
3,376 Pension, post-retirement and post-employment benefits
2,072 2,244 Liabilities for errors and omissions
357
341 Other liabilities
1,079 1,041
Total equity
6,872 7,133
TOTAL LIABILITIES AND
EQUITY $ 17,413 $ 17,840
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150728005838/en/
Marsh & McLennan CompaniesMedia:Edward L. Dandridge,
+1-212-345-9751ed.dandridge@mmc.comorInvestors:Keith
Walsh, +1-212-345-0057keith.walsh@mmc.com
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