Willis Net Income Drops On KKR Charge
By Mark E. Ruquet
NU Online News Service, July 31, 10:08 a.m. EST?Global Insurance broker Willis Group reported its net income dropped in the second quarter on a $78 million charge to Kohlberg, Kravis Roberts and Company for the firm's 1998 buyout. However, operating cash earnings rose 136 percent.
The firm, headquartered in London, reported net income fell from a gain of $17 million for the three months ending June 30, 2001, to a loss of $7 million for the second quarter this year. Net income per share dropped from a gain of 12 cents per share for the three months of 2001 to a second-quarter loss of 5 cents per share.
All of this was on a gain in total revenues of 22 percent, or $74 million. Revenues for the second quarter of 2001 were $337 million compared to $411 million this year.
Willis said it is reducing its debt load, slashing 26 percent of total long-term debt to $677 million, down $232 million from last year. The firm paid $110 million of the long-term debt for the first half of this year, said Joe Plumeri, Willis chairman and chief executive officer. The reduction in debt earned the firm an upgrade in its credit rating by Standard and Poor's to double ?B' plus from double ?B.'
Willis reported that the charge ($65 million, 44 cents per share after tax) is "a non-cash charge for performance stock options" that "recognized performance-based options granted" as part of the 1998 buyout deal with New York City-based KKR for "meeting or exceeding 2001 and 2002 targets."
Willis reported that operating cash earnings for the second quarter increased 136 percent, rising from $25 million for the second quarter of 2001 to $59 million for the same period of 2002.
The firm said this figure shows "the results of the company's trading and finance costs without the impact of non-cash and non-recurring items."
In an investor's Web cast, Mr. Plumeri said the broker's business continues to be upbeat in a hardening market. The firm has kept two accounts for every one it has lost so far during this year. The firm continues to see continual organic growth and the acquisition of new business, which accounted for about 50 percent of the firm's growth, he said.
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