REG-Marsh & McLennan Marsh & McLennan Companies Reports Fourth Quarter and Full-Year 2017 Results <Origin Href="QuoteRef">MMC.N</Origin> - Part 2
01/02/2018 13:30
- Part 2: For the preceding part double click ID:nBw6XBbgPa
$ 1,134 $ (185 ) $ 2,708
Operating margin 24.5 % 18.1 % N/A 20.2 %
Adjusted operating margin 24.7 % 18.6 % N/A 20.5 %
(a) Includes severance and related charges from restructuring
activities and the Mercer business restructure (initially announced
in Q4 2016), adjustments to restructuring liabilities related to
future rent under non-cancellable leases and other real estate
costs, as well as restructuring costs related to the integration of
recent acquisitions.
(b) Primarily includes the change in fair value as measured each
quarter of contingent consideration related to acquisitions.
(c) Reflects the settlement of the final legacy litigation,
originally filed in 2006, regarding Marsh’s use of market service
agreements.
(d) Pension settlement charge resulting from lump sum settlements
elected by participants in certain U.K. pension plans. Recognition
of these payments as a partial settlement was required because in
each respective plan the lump sum payments exceeded the total of
interest and service cost for the year.
(e) Relates to a net gain on the deconsolidation of Marsh India and
contingent proceeds related to the disposal of Mercer's U.S. defined
contribution recordkeeping business. The amounts are excluded from
GAAP revenue in the calculation of adjusted operating margin.
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
Three and Twelve Months Ended December 31
(Millions) (Unaudited)
Adjusted income, net of tax and Adjusted Earnings per Share
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 and the impact
related to recently enacted U.S. tax reform legislation. Adjusted EPS is
calculated by dividing the Company’s adjusted income, net of tax , by MMC's
average number of shares outstanding-diluted for the relevant period. The
following tables reconcile adjusted income, net of tax to GAAP income from
continuing operations and adjusted EPS to GAAP EPS for the three and twelve
months ended December 31, 2017 and 2016.
Three Months Ended December 31, 2017 Three Months Ended December 31, 2016
Amount Adjusted EPS Amount Adjusted EPS
Income from continuing operations $ 28 $ 441
Less: Non-controlling interest, net of tax 1 5
Subtotal $ 27 $ 0.05 $ 436 $ 0.84
Operating income adjustments $ 69 $ 43
Impact of income taxes (12 ) (14 )
Subtotal 57 29
Impact of U.S. tax reform* 460 —
517 1.00 29 0.05
Adjusted income, net of tax $ 544 $ 1.05 $ 465 $ 0.89
Twelve Months Ended December 31, 2017 Twelve Months Ended December 31, 2016
Amount Adjusted EPS Amount Adjusted EPS
Income from continuing operations $ 1,510 $ 1,795
Less: Non-controlling interest, net of tax 20 27
Subtotal $ 1,490 $ 2.87 $ 1,768 $ 3.38
Operating income adjustments $ 113 $ 44
Impact of income taxes (28 ) (21 )
Subtotal 85 23
Impact of U.S. tax reform* 460 —
545 1.05 23 0.04
Adjusted income, net of tax $ 2,035 $ 3.92 $ 1,791 $ 3.42
*The provisional estimates are based on the Company's initial
analysis of the Tax Cuts and Jobs Act (the "Act"). Given the
significant complexity of the Act, anticipated guidance from the
U.S. Treasury about implementing the Act, and the potential for
additional guidance from the Securities and Exchange Commission or
the Financial Accounting Standards Board related to the Act, these
estimates may be adjusted during 2018.
Marsh & McLennan Companies, Inc.
Supplemental Information
Three and Twelve Months Ended December 31
(Millions) (Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2017 2016 2017 2016
Consolidated
Compensation and Benefits $ 2,098 $ 1,918 $ 7,884 $ 7,461
Other operating expenses 901 813 3,284 3,086
Total Expenses $ 2,999 $ 2,731 $ 11,168 $ 10,547
Depreciation and amortization expense $ 78 $ 77 $ 312 $ 308
Identified intangible amortization expense 47 31 169 130
Total $ 125 $ 108 $ 481 $ 438
Stock option expense $ 1 $ 3 $ 20 $ 21
Capital expenditures $ 85 $ 79 $ 302 $ 253
Risk and Insurance Services
Compensation and Benefits $ 1,084 $ 953 $ 4,031 $ 3,732
Other operating expenses 462 427 1,728 1,658
Total Expenses $ 1,546 $ 1,380 $ 5,759 $ 5,390
Depreciation and amortization expense $ 37 $ 34 $ 143 $ 139
Identified intangible amortization expense 39 26 139 109
Total $ 76 $ 60 $ 282 $ 248
Consulting
Compensation and Benefits $ 926 $ 879 $ 3,509 $ 3,385
Other operating expenses 492 438 1,761 1,624
Total Expenses $ 1,418 $ 1,317 $ 5,270 $ 5,009
Depreciation and amortization expense $ 23 $ 25 $ 99 $ 100
Identified intangible amortization expense 8 5 30 21
Total $ 31 $ 30 $ 129 $ 121
Marsh & McLennan Companies, Inc.
Consolidated Balance Sheets
(Millions) (Unaudited)
December 31, 2017 December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents $ 1,205 $ 1,026
Net receivables 4,133 3,643
Other current assets 224 215
Total current assets 5,562 4,884
Goodwill and intangible assets 10,363 9,495
Fixed assets, net 712 725
Pension related assets 1,693 776
Deferred tax assets 669 1,097
Other assets 1,430 1,213
TOTAL ASSETS $ 20,429 $ 18,190
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt $ 262 $ 312
Accounts payable and accrued liabilities 2,083 1,969
Accrued compensation and employee benefits 1,718 1,655
Accrued income taxes 199 146
Total current liabilities 4,262 4,082
Fiduciary liabilities 4,847 4,241
Less - cash and investments held in a fiduciary capacity (4,847 ) (4,241 )
— —
Long-term debt 5,225 4,495
Pension, post-retirement and post-employment benefits 1,888 2,076
Liabilities for errors and omissions 301 308
Other liabilities 1,311 957
Total equity 7,442 6,272
TOTAL LIABILITIES AND EQUITY $ 20,429 $ 18,190
Marsh & McLennan Companies, Inc.
Supplemental Information
Revised Presentation Under the New Retirement Benefits Accounting Standard
(Millions) (Unaudited)
On January 1, 2018, new accounting guidance became effective that changes the
presentation of net periodic pension and postretirement benefit cost ("net
benefit cost") under ASC 715. Under the new standard, the service cost
component of net benefit cost will continue to be included in compensation and
benefit costs in operating income. All other components of net benefit cost,
which include interest cost, expected return on plan assets, amortization of
gains and losses and settlements costs or credits, will be reported in a
separate line item below operating income. This change in presentation will
have no impact on income before income taxes, net income, earnings per share
or cash flow. To aid investors in their understanding of these presentation
changes, the tables below provide the restatements of both 2017 and 2016
results that will be reflected when the Company files its 2018 financial
statements.
2016 2017
Consolidated Income Statements FY Q1 Q2 Q3 Q4 FY
Revenue $ 13,211 $ 3,503 $ 3,495 $ 3,341 $ 3,685 $ 14,024
Expense:
Compensation and Benefits As Reported 7,461 1,945 1,935 1,906 2,098 7,884
Add: Other Net Benefit Credits (a) 233 60 63 62 16 201
Compensation and Benefits As Restated 7,694 2,005 1,998 1,968 2,114 8,085
Other Operating Expenses 3,086 749 796 838 901 3,284
Operating Expenses As Restated 10,780 2,754 2,794 2,806 3,015 11,369
Operating Income As Restated 2,431 749 701 535 670 2,655
Other Net Benefit Credits (a) 233 60 63 62 16 201
Interest Income 5 2 2 2 3 9
Interest Expense (189 ) (58 ) (60 ) (60 ) (59 ) (237 )
Investment Income (Loss) — — 5 (2 ) 12 15
Income Before Income Taxes $ 2,480 $ 753 $ 711 $ 537 $ 642 $ 2,643
Operating Income and Margin
Risk and Insurance Services
GAAP Operating Income
Originally Reported $ 1,753 $ 613 $ 528 $ 314 $ 416 $ 1,871
Other Net Benefit Credits (a) (172 ) (45 ) (46 ) (46 ) (3 ) (140 )
As Restated $ 1,581 $ 568 $ 482 $ 268 $ 413 $ 1,731
GAAP Operating Margin
Originally Reported 24.5 % 30.8 % 27.5 % 17.8 % 21.2 % 24.5 %
As Restated 22.1 % 28.6 % 25.2 % 15.2 % 21.0 % 22.7 %
Consulting
GAAP Operating Income
Originally Reported $ 1,103 $ 241 $ 283 $ 329 $ 321 $ 1,174
Other Net Benefit Credits (a) (65 ) (16 ) (18 ) (18 ) (12 ) (64 )
As Restated $ 1,038 $ 225 $ 265 $ 311 $ 309 $ 1,110
GAAP Operating Margin
Originally Reported 18.1 % 15.8 % 17.8 % 20.7 % 18.5 % 18.2 %
As Restated 17.0 % 14.7 % 16.6 % 19.6 % 17.8 % 17.2 %
Consolidated
GAAP Operating Income
Originally Reported $ 2,664 $ 809 $ 764 $ 597 $ 686 $ 2,856
Other Net Benefit Credits (a) (233 ) (60 ) (63 ) (62 ) (16 ) (201 )
As Restated $ 2,431 $ 749 $ 701 $ 535 $ 670 $ 2,655
GAAP Operating Margin
Originally Reported 20.2 % 23.1 % 21.9 % 17.9 % 18.6 % 20.4 %
As Restated 18.4 % 21.4 % 20.1 % 16.0 % 18.2 % 18.9 %
(a) The net benefit credit in the fourth quarter of 2017 includes
the U.K. pension settlement charge of $54 million, which is excluded
from our adjusted results.
Media:
Marsh & McLennan Companies
Laura Schooler, +1 212-345-0370
laura.schooler@mmc.com (mailto:laura.schooler@mmc.com)
or
Investors:
Marsh & McLennan Companies
Dan Farrell, +1 212-345-3713
daniel.farrell@mmc.com (mailto:daniel.farrell@mmc.com)
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Marsh & McLennan Companies
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