Exhibit 99.1
Hewitt Associates 100 Half Day Road | ||
Lincolnshire, IL 60069 | ||
Tel 847.295.5000 Fax 847.295.7634 | ||
www.hewitt.com
|
News and Information
For Immediate Release
February 1, 2010
Contacts:
Investors: Sean McHugh, (847) 442-4176,sean.mchugh@hewitt.com
Media: Julie Macdonald, (847) 771-0076,julie.macdonald@hewitt.com
Hewitt Associates Reports 2010 First Quarter Results
EPS $0.71; Company Achieves Record 16.2% Operating Margin
Company Maintains Full Year EPS Guidance of $2.85 to $2.95
LINCOLNSHIRE, Ill. — Hewitt Associates, Inc. (NYSE: HEW), a global human resources consulting and outsourcing services company, today reported results for its fiscal 2010 first quarter ended December 31, 2009.
• | Reported net revenues (revenues before reimbursements) were approximately unchanged at $770.1 million, compared with $770.8 million in the prior-year quarter. Net revenues declined 2% after adjusting for foreign currency translation, acquisitions and divestitures, and third-party revenues in both periods. |
• | Reported operating income grew 11% to $124.9 million, compared with $112.4 million in the prior-year quarter. |
• | Reported net income increased to $68.4 million, or $0.71 per diluted share, compared with $64.8 million, or $0.68 per diluted share in the prior-year quarter. |
• | Free cash flow, a non-GAAP measure, declined to $21.9 million in the first quarter, compared with $29.5 million in the prior-year quarter. |
“Hewitt delivered another quarter of solid operating income growth and margin expansion that was in line with our expectations,” said Russ Fradin, chairman and chief executive officer. “We are pleased with how each of our businesses performed in the quarter. HR BPO earned a modest profit, Benefits Outsourcing continued to deliver solid margins, and Consulting performed reasonably well given the challenging business environment. We remain focused on our growth agenda while continuing to provide our clients with quality advice and service.”
- 1 -
Operating Performance
Reported net revenues were $770.1 million, approximately unchanged compared with $770.8 million in the prior-year quarter. Net revenues declined 2% when excluding third-party supplier revenues in both periods and adjusting for the following items:
• | $12.4 million in favorable foreign currency translation. |
• | A $9.7 million contribution from an acquisition. |
• | A $7.2 million prior-year quarter contribution from HR BPO businesses1 divested in the second quarter of fiscal 2009. |
On the same adjusted basis, Benefits Outsourcing net revenues grew 3%, while HR BPO and Consulting declined 11% and 6%, respectively.
Reported operating income increased 11%, to $124.9 million, compared with $112.4 million in the prior-year quarter. Reported operating margin was 16.2%, compared with 14.6% in the prior-year quarter.
Underlying operating income also increased 11% to $124.9 million, compared with $112.4 million in the prior-year quarter, when adjusting for a pretax loss of $0.1 million related to HR BPO operations divested in the second quarter of fiscal 20092. Underlying operating margin was 16.2%, compared with 14.7% in the prior-year quarter. The margin improvement reflects favorable foreign currency translation, lower bad-debt expense, lower performance-based compensation, and lower asset impairment charges, partially offset by lower constant-currency revenues.
The first quarter reported effective tax rate was 39.6%, unchanged compared with the prior-year quarter.
First quarter reported net income increased to $68.4 million, or $0.71 per diluted share, compared with $64.8 million, or $0.68 per diluted share in the prior-year quarter. Underlying net income for the prior-year quarter was $64.6 million, or $0.68 per diluted share, when adjusting for unusual items.
Business Segment Results
Benefits Outsourcing
Benefits Outsourcing segment revenues grew 3% to $404.0 million, compared with $391.6 million in the prior-year quarter. Revenues increased 3% after adjusting for $1.6 million of favorable foreign currency translation. The adjusted increase was primarily the result of higher revenues associated with growth in all businesses and lower adjustments for client service issues. This growth was partially offset by the impact of lost clients, client renewals at lower price points and lower project revenues.
Benefits Outsourcing segment income increased 1% to $103.9 million, compared with $102.5 million in the prior-year quarter. Segment margin was 25.7%, compared with 26.2% in the prior-year quarter. The margin decline was principally due to higher compensation and related expenses, partially offset by higher revenues and favorable foreign currency translation.
1 | HR BPO divested businesses include Latin America (February 2009) and relocation services (March 2009). Pre-disposition contributions have been excluded from “underlying” and “as adjusted” amounts for year-over-year comparative purposes. |
2 | In assessing operating performance, the Company also reviews its results once unusual adjustments have been removed. The Company believes that doing so provides a better understanding of underlying operating performance. A reconciliation of GAAP to underlying net revenues, operating income, net income, earnings per share, free cash flow, and Adjusted EBITDA (each a non-GAAP measure) is included in this press release. |
- 2 -
As of December 31, 2009, the Company was live with approximately 20.8 million end-user Benefits Outsourcing participants, compared with approximately 19.1 million as of December 31, 20083.
Human Resources Business Process Outsourcing
HR BPO segment revenues declined 13% to $114.1 million, compared with $130.7 million in the prior-year quarter. Revenues decreased 11% after excluding third-party supplier revenues in both periods and adjusting for a $7.2 million contribution in the prior-year quarter from divested businesses and $2.7 million of favorable foreign currency translation. The adjusted revenue decline was principally driven by client terminations and liquidations.
HR BPO segment income was $6.5 million, compared with a loss of $5.2 million in the prior-year quarter. Underlying segment income was $6.5 million, compared with a loss of $5.0 million in the prior-year quarter, when adjusting for a pretax loss of $0.1 million in the prior-year quarter related to divested HR BPO operations. The underlying improvement reflects staff reductions related to lost clients, infrastructure cost management, and lower asset impairment charges, partially offset by lower revenues.
As of December 31, 2009, the Company was live with approximately 706,000 client employees with HR BPO services, compared with approximately 986,000 as of December 31, 2008.
Consulting
Consulting segment revenues grew 1% to $260.8 million, compared with $259.2 million in the prior-year quarter. Consulting revenues declined 6% after adjusting for a $9.7 million contribution from an acquisition and $8.1 million of favorable foreign currency translation. The adjusted decline was principally driven by revenue decreases related to Talent and Organizational Consulting services globally and Communication services in North America, both a result of a continued adverse economic environment.
Consulting segment income declined 10% to $33.6 million, compared with $37.5 million in the prior-year quarter. Segment margin was 12.9%, compared with 14.5% in the prior-year quarter. The margin decrease was principally due to lower constant-currency revenues, partially offset by lower bad debt expense.
Unallocated Shared Service Costs
First quarter unallocated shared service costs were $19.1 million, or 2.5% of net revenues, compared with $22.4 million, or 2.9% of net revenues, in the prior-year quarter. The decrease in expenses relative to net revenues reflects lower performance-based compensation expense.
Cash Flow
Cash flow from operations was $38.4 million in the first quarter, compared with $64.4 million in the prior-year quarter. Free cash flow, a non-GAAP measure, was $21.9 million, compared with $29.5 million in the prior-year quarter. The decrease in free cash flow reflects lower client collections, partially offset by lower capital expenditures and prepaid expenses.
Adjusted EBITDA, a non-GAAP measure, was $159.9 million in the first quarter, compared with $151.4 million in the prior-year quarter. The increase reflects improved HR BPO operating performance.
3 | Benefits Outsourcing end-user participant counts now reflect Absence Management service participants (in addition to Defined Benefit, Defined Contribution, and Health and Welfare) and adjustments resulting from an improved tracking methodology implemented in the fiscal first quarter of 2010. Prior-year counts have been conformed to this new overall basis of presentation as follows: FY09 Q1 (19.1MM); Q2 (19.2MM); Q3 (19.6MM); Q4 (20.6MM). |
- 3 -
Share Repurchase
During the first quarter, the Company repurchased 323,000 of its outstanding common shares at an average price of $39.56 per share for a total of $12.8 million. From January 1, 2010 through January 29, 2010, the Company repurchased an additional 249,000 shares at an average price of $41.20 per share for a total of $10.3 million. At January 29, 2010, the Company had approximately $203 million remaining under its current $300 million authorization.
Supplemental Information
On January 28, 2010, the Company signed an agreement to divest a portion of its North America Executive Compensation (“EC”) consulting business focused on advising Boards of Directors in two phases. Its operations are included in the Consulting segment. This partial divestiture is in response to competitive issues stemming from recent regulations promulgated by the Securities and Exchange Commission regarding the independence of consulting firms that provide EC services. The first phase, which involves a select group of consultants leaving the Company to form Meridian Compensation Partners (“Meridian”), a fully-independent EC services boutique, closed on January 28, 2010. The second phase, which involves a second group of consultants leaving the Company to join Meridian, is expected to close during the first quarter of fiscal 2011. As a result of the divestiture, the Company will test the goodwill (which totaled $39.4 million at December 31, 2009) and related assets of the reporting unit impacted by this partial divestiture in the second quarter of fiscal 2010. Please refer to today’s divestiture press release for additional information.
Business Outlook
“We are maintaining our full-year earnings guidance as we continue to plan for a soft environment consistent with our previous view,” said Rob Schriesheim, chief financial officer. “Note that our guidance now includes the absorption of what we expect to be some modest earnings per share dilution over the balance of the fiscal year related to the divestiture announced today.”
In addition to reporting results in accordance with U.S. GAAP, the Company assesses its performance once unusual items have been removed. The following guidance reflects the Company’s expectations for fiscal 2010 on this underlying basis (which excludes the impact of unusual items in the prior-year) and is consistent with fiscal 2010 guidance provided on November 10, 2009:
• | Low- to mid-single digit total Company net revenue growth, with solid growth in Consulting, a flat performance in Benefits Outsourcing, and a decline in HR BPO; |
• | Diluted earnings per share of $2.85 to $2.95, with operating income growth moderately exceeding diluted EPS growth, an effective tax rate in the range of 37 to 38 percent, and continued execution against its share repurchase authorization. |
Conference Call
At 7:30 a.m. (CT) today, management will host a conference call with investors to discuss fiscal 2010 first quarter results. The live presentation is accessible through the Investor Relations section of Hewitt’s website at www.hewitt.com. The webcast will be archived on the site for approximately one month.
- 4 -
About Hewitt Associates
Hewitt Associates (NYSE: HEW) provides leading organizations around the world with expert human resources consulting and outsourcing solutions to help them anticipate and solve their most complex benefits, talent, and related financial challenges. Hewitt works with companies to design, implement, communicate, and administer a wide range of human resources, retirement, investment management, health care, compensation, and talent management strategies. With a history of exceptional client service since 1940, Hewitt has offices in more than 30 countries and employs approximately 23,000 associates who are helping make the world a better place to work. For more information, please visit www.hewitt.com.
Forward-Looking Information
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of Hewitt’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Factors that could cause actual results to differ materially from those expressed or implied include general economic conditions and the factors discussed under the “Risk Factors” heading in the Business section of the Company’s most recent annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) and available at the SEC’s internet site (www.sec.gov). Hewitt disclaims any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or any other reason.
# # #
- 5 -
HEWITT ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except for share and per share amounts)
Three Months Ended December 31, | |||||||||||
2009 | 2008 | % Change | |||||||||
Revenues: | |||||||||||
Revenues before reimbursements (net revenues) (1) | $ | 770,145 | $ | 770,763 | (0.1 | )% | |||||
Reimbursements | 25,390 | 23,209 | 9.4 | % | |||||||
Total revenues | 795,535 | 793,972 | 0.2 | % | |||||||
Operating expenses: | |||||||||||
Compensation and related expenses | 473,447 | 480,908 | (1.6 | )% | |||||||
Asset impairment | — | 2,615 | (100.0 | )% | |||||||
Reimbursable expenses | 25,390 | 23,209 | 9.4 | % | |||||||
Other operating expenses | 135,806 | 134,008 | 1.3 | % | |||||||
Selling, general and administrative expenses | 36,021 | 40,875 | (11.9 | )% | |||||||
Total operating expenses | 670,664 | 681,615 | (1.6 | )% | |||||||
Operating income | 124,871 | 112,357 | 11.1 | % | |||||||
Other (expense) income, net: | |||||||||||
Interest expense | (9,656 | ) | (10,685 | ) | (9.6 | )% | |||||
Interest income | 919 | 4,301 | (78.6 | )% | |||||||
Other (expense) income, net | (2,907 | ) | 1,281 | n/m | |||||||
Total other expense, net | (11,644 | ) | (5,103 | ) | 128.2 | % | |||||
Income before income taxes | 113,227 | 107,254 | 5.6 | % | |||||||
Provision for income taxes | 44,827 | 42,488 | 5.5 | % | |||||||
Net income | $ | 68,400 | $ | 64,766 | 5.6 | % | |||||
Earnings per share: | |||||||||||
Basic | $ | 0.73 | $ | 0.69 | |||||||
Diluted | $ | 0.71 | $ | 0.68 | |||||||
Weighted average shares: | |||||||||||
Basic | 93,796,731 | 93,932,257 | |||||||||
Diluted | 95,926,701 | 95,441,054 |
(1) | Net revenues include $11.2 million and $10.3 million of third-party supplier revenues for the three months ended December 31, 2009 and 2008, respectively. Generally, the third-party supplier arrangements are marginally profitable. The related third-party supplier expenses are included in other operating expenses. |
- 6 -
HEWITT ASSOCIATES, INC.
UNDERLYING NET REVENUES, OPERATING INCOME, NET INCOME, AND
EARNINGS PER SHARE
(Unaudited)
(In thousands except for share and per share amounts)
In assessing operating performance, the Company also reviews its results once unusual adjustments have been removed. The Company believes that doing so provides a better understanding of underlying operating performance. For the three months ended December 31, 2009 and 2008, underlying net revenues, operating income, net income, and earnings per share were:
Three Months Ended December 31, | ||||||||
2009 | 2008 | |||||||
Revenues before reimbursements (net revenues), as reported | $ | 770,145 | $ | 770,763 | ||||
Adjustments: | ||||||||
HR BPO divestitures (1) | — | (7,229 | ) | |||||
Total adjustments | — | (7,229 | ) | |||||
Underlying revenues before reimbursements (net revenues) | 770,145 | 763,534 | ||||||
Operating income, as reported | 124,871 | 112,357 | ||||||
Adjustments: | ||||||||
HR BPO divestitures (1) | — | 70 | ||||||
Total adjustments | — | 70 | ||||||
Underlying operating income | 124,871 | 112,427 | ||||||
% of underlying net revenues | 16.2 | % | 14.7 | % | ||||
Total other income (expense), net | (11,644 | ) | (5,103 | ) | ||||
HR BPO divestitures (1) | — | (290 | ) | |||||
Underlying other income, net | (11,644 | ) | (5,393 | ) | ||||
Underlying income before income taxes | 113,227 | 107,034 | ||||||
Provision for income taxes | 44,827 | 42,401 | ||||||
Underlying net income | $ | 68,400 | $ | 64,633 | ||||
Underlying earnings per share: | ||||||||
Basic | $ | 0.73 | $ | 0.69 | ||||
Diluted | $ | 0.71 | $ | 0.68 | ||||
Shares outstanding: | ||||||||
Basic | 93,796,731 | 93,932,257 | ||||||
Diluted | 95,926,701 | 95,441,054 |
(1) | HR BPO divested businesses include Latin America (February 2009) and relocation services (March 2009). Latin America and relocation services comparative pre-disposition amounts have been excluded from “underlying” and “as adjusted” amounts for year-over-year comparative purposes. Adjustments to other income (expense), net primarily relate to the exclusion of interest income, interest expense, and foreign currency gain on divested operations. |
- 7 -
HEWITT ASSOCIATES, INC.
BUSINESS SEGMENT RESULTS
(Unaudited)
(Dollars in thousands)
Three Months Ended December 31, | |||||||||||
Business Segments | 2009 | 2008 | % Change | ||||||||
Benefits Outsourcing | |||||||||||
Segment net revenues | $ | 404,026 | $ | 391,574 | 3.2 | % | |||||
Segment income | 103,934 | 102,456 | 1.4 | % | |||||||
Segment income as a percentage of segment revenues | 25.7 | % | 26.2 | % | |||||||
HR BPO | |||||||||||
Segment net revenues (1) | $ | 114,079 | $ | 130,691 | (12.7 | )% | |||||
Segment income (loss) | 6,472 | (5,153 | ) | n/m | |||||||
Segment income (loss) as a percentage of segment revenues | 5.7 | % | (3.9 | )% | |||||||
Consulting | |||||||||||
Segment net revenues | $ | 260,825 | $ | 259,160 | 0.6 | % | |||||
Segment income | 33,570 | 37,483 | (10.4 | )% | |||||||
Segment income as a percentage of segment revenues | 12.9 | % | 14.5 | % | |||||||
Total Company | |||||||||||
Segment net revenues (1) | $ | 778,930 | $ | 781,425 | (0.3 | )% | |||||
Intersegment revenues | (8,785 | ) | (10,662 | ) | (17.6 | )% | |||||
Net revenues | 770,145 | 770,763 | (0.1 | )% | |||||||
Reimbursements | 25,390 | 23,209 | 9.4 | % | |||||||
Total revenues | $ | 795,535 | $ | 793,972 | 0.2 | % | |||||
Segment income | $ | 143,976 | $ | 134,786 | 6.8 | % | |||||
Unallocated shared services costs | 19,105 | 22,429 | (14.8 | )% | |||||||
Operating income | $ | 124,871 | $ | 112,357 | 11.1 | % | |||||
(1) | HR BPO net revenues include $11.2 million and $10.3 million of third-party supplier revenues for the three months ended December 31, 2009 and 2008, respectively. Generally, the third-party supplier arrangements are marginally profitable. The related third-party supplier expenses are included in other operating expenses. |
- 8 -
HEWITT ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except for share and per share amounts)
December 31, 2009 | September 30, 2009 | |||||
(Unaudited) | ||||||
ASSETS | ||||||
Current Assets: | ||||||
Cash and cash equivalents | $ | 596,978 | $ | 581,642 | ||
Short-term investments | 74,308 | 60,994 | ||||
Client receivables and unbilled work in process, less allowances of $14,670 and $14,381 at December 31, 2009 and September 30, 2009, respectively | 564,128 | 527,272 | ||||
Prepaid expenses and other current assets | 147,741 | 169,533 | ||||
Funds held for clients | 106,274 | 131,801 | ||||
Short-term deferred contract costs, net | 92,071 | 89,919 | ||||
Deferred income taxes, net | 37,271 | 34,119 | ||||
Total current assets | 1,618,771 | 1,595,280 | ||||
Non-Current Assets: | ||||||
Deferred contract costs, less current portion | 247,065 | 254,905 | ||||
Property and equipment, net | 374,367 | 384,254 | ||||
Other intangible assets, net | 186,574 | 191,479 | ||||
Goodwill | 412,437 | 412,745 | ||||
Long-term investments | 54,264 | 54,442 | ||||
Other non-current assets, net | 28,348 | 31,535 | ||||
Total non-current assets | 1,303,055 | 1,329,360 | ||||
Total Assets | $ | 2,921,826 | $ | 2,924,640 | ||
LIABILITIES | ||||||
Current Liabilities: | ||||||
Accounts payable | $ | 27,146 | $ | 20,790 | ||
Accrued expenses | 170,208 | 164,724 | ||||
Funds held for clients | 106,274 | 131,801 | ||||
Advanced billings to clients | 175,411 | 137,447 | ||||
Accrued compensation and benefits | 269,178 | 393,463 | ||||
Short-term deferred contract revenues, net | 63,107 | 61,356 | ||||
Current portion of long-term debt and capital lease obligations | 49,338 | 36,282 | ||||
Total current liabilities | 860,662 | 945,863 | ||||
Non-Current Liabilities: | ||||||
Deferred contract revenues, less current portion | 183,685 | 192,056 | ||||
Debt and capital lease obligations, less current portion | 601,865 | 618,561 | ||||
Other non-current liabilities | 220,658 | 223,835 | ||||
Deferred income taxes, net | 101,266 | 84,023 | ||||
Total non-current liabilities | 1,107,474 | 1,118,475 | ||||
Total Liabilities | $ | 1,968,136 | $ | 2,064,338 | ||
- 9 -
HEWITT ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS – Continued
(In thousands except for share and per share amounts)
December 31, 2009 | September 30, 2009 | |||||||
(Unaudited) | ||||||||
STOCKHOLDERS’ EQUITY | ||||||||
Stockholders’ Equity: | ||||||||
Class A common stock, par value $0.01 per share, 750,000,000 shares authorized, 133,672,366 and 132,844,269 shares issued, 94,014,933 and 93,535,270 shares outstanding, as of December 31, 2009 and September 30, 2009, respectively | $ | 1,337 | $ | 1,328 | ||||
Additional paid-in capital | 1,696,984 | 1,662,687 | ||||||
Cost of common stock in treasury, 39,657,433 and 39,308,999 shares of Class A common stock as of December 31, 2009 and September 30, 2009, respectively | (1,291,511 | ) | (1,277,815 | ) | ||||
Retained earnings | 538,177 | 469,777 | ||||||
Accumulated other comprehensive income, net | 8,703 | 4,325 | ||||||
Total stockholders’ equity | 953,690 | 860,302 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 2,921,826 | $ | 2,924,640 | ||||
- 10 -
HEWITT ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
Three Months Ended December 31, | ||||||||
2009 | 2008 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 68,400 | $ | 64,766 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization, including amortization of deferred contract revenues and costs | 43,566 | 39,668 | ||||||
Share-based compensation | 10,510 | 12,554 | ||||||
Deferred income taxes | 13,171 | 42,065 | ||||||
Fair value adjustment related to financial assets | 15 | 889 | ||||||
Asset impairment | — | 2,615 | ||||||
Changes in operating assets and liabilities, net of effect of acquisitions and dispositions: | ||||||||
Client receivables and unbilled work in process | (35,817 | ) | 18,955 | |||||
Prepaid expenses and other current assets | 25,092 | (16,805 | ) | |||||
Deferred contract costs | (17,051 | ) | (25,725 | ) | ||||
Other assets | 2,284 | (2,023 | ) | |||||
Accounts payable | 6,373 | 9,180 | ||||||
Accrued compensation and benefits | (125,322 | ) | (109,143 | ) | ||||
Accrued expenses | 6,165 | 3,728 | ||||||
Advanced billings to clients | 37,952 | 19,650 | ||||||
Deferred contract revenues | 6,596 | 11,446 | ||||||
Other long-term liabilities | (3,505 | ) | (7,379 | ) | ||||
Net cash provided by operating activities | 38,429 | 64,441 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of investments | (16,110 | ) | — | |||||
Proceeds from sales of investments | 3,050 | 2,525 | ||||||
Additions to property and equipment | (16,514 | ) | (34,958 | ) | ||||
Cash paid for acquisitions and transaction costs, net of cash received | 403 | — | ||||||
Net cash used in investing activities | (29,171 | ) | (32,433 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from the exercise of stock options | 19,884 | 1,165 | ||||||
Excess tax benefits from the exercise of share-based awards | 2,452 | 2,185 | ||||||
Proceeds from short-term borrowings | — | 11,720 | ||||||
Repayments of short-term borrowings, capital leases and long-term debt | (3,653 | ) | (129,543 | ) | ||||
Purchase of Class A common shares for treasury | (13,696 | ) | (11,822 | ) | ||||
Net cash provided by (used in) financing activities | 4,987 | (126,295 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | 1,091 | (16,108 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 15,336 | (110,395 | ) | |||||
Cash and cash equivalents, beginning of period | 581,642 | 541,494 | ||||||
Cash and cash equivalents, end of period | $ | 596,978 | $ | 431,099 | ||||
Supplementary disclosure of cash paid during the period: | ||||||||
Interest paid | $ | 5,903 | $ | 8,140 | ||||
Income taxes paid | $ | 8,323 | $ | 4,124 |
- 11 -
HEWITT ASSOCIATES, INC.
FREE CASH FLOW RECONCILIATION4
(Unaudited)
(Amounts in thousands)
Three Months Ended December 31, | ||||||||
2009 | 2008 | |||||||
Net cash provided by operating activities | $ | 38,429 | $ | 64,441 | ||||
Additions to property and equipment | (16,514 | ) | (34,958 | ) | ||||
Free cash flow | $ | 21,915 | $ | 29,483 |
4 | Free cash flow, a non GAAP measure, is cash flow from operations less capital expenditures and capitalized software costs. The Company believes this measure provides useful information related to the Company’s liquidity, including but not limited to its ability to reduce debt, make strategic investments, and repurchase stock. The Company views free cash flow as a supplement to, and not a substitute for, GAAP measures of liquidity included in its consolidated statements of cash flows. |
- 12 -
HEWITT ASSOCIATES, INC.
ADJUSTED EBITDA RECONCILIATION
(Unaudited)
(Amounts in thousands)
Three Months Ended December 31, | ||||||||
2009 | 2008 | |||||||
Reported net income | $ | 68,400 | $ | 64,766 | ||||
Depreciation and amortization (1) | 43,566 | 39,668 | ||||||
Provision for income taxes | 44,827 | 42,488 | ||||||
Interest expense, net | 8,737 | 6,384 | ||||||
EBITDA | 165,530 | 153,306 | ||||||
Adjustments: | ||||||||
HR BPO divestitures (2) | — | 70 | ||||||
Underlying adjustments | — | 70 | ||||||
Normalized depreciation and amortization addbacks (1) | — | (284 | ) | |||||
Other (income) expense, excluding interest | 2,907 | (1,281 | ) | |||||
Total adjustments | 2,907 | (1,495 | ) | |||||
Adjusted EBITDA before certain non-cash addbacks | 168,437 | 151,811 | ||||||
Certain non-cash addbacks: | ||||||||
Asset impairment | — | 2,615 | ||||||
Net deferrals (3) | (10,586 | ) | (14,145 | ) | ||||
Deferred internal software development costs | (7,949 | ) | (7,110 | ) | ||||
Share-based compensation (4) | 10,475 | 13,761 | ||||||
Other (loss reserve / provision for bad debt) | (435 | ) | 4,506 | |||||
Total certain non-cash addbacks | (8,495 | ) | (373 | ) | ||||
Adjusted EBITDA | $ | 159,942 | $ | 151,438 | ||||
(1) | For the three months ended December 31, 2008, depreciation and amortization includes ($0.3) million of adjustments related to HR BPO divestitures. |
(2) | HR BPO divested assets include Latin America (February 2009) and relocation services (March 2009). Latin America and relocation services comparative pre-disposition amounts have been excluded from “underlying” and “as adjusted” amounts for year-over-year comparative purposes. |
(3) | Net deferrals as presented and the net of revenue and cost deferrals in the Statements of Cash Flows vary by ($0.1) million and $0.1 million for the three months ended December 31, 2009 and 2008, respectively, relating to Balance Sheets and Statements of Operations reclassifications. |
(4) | Share-based compensation as presented in the Statements of Cash Flows varies by $1.2 million for the three months ended December 31, 2008, due to current period amortization expense for a deferred compensation arrangement related to an acquisition in fiscal 2008, the impact of foreign exchange in the current period, and the reclassification of certain prior-year amounts to conform to the current year presentation. |
- 13 -