8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): February 1, 2010

HEWITT ASSOCIATES, INC.

(Exact Name of Registrant as Specified in Charter)

Delaware	001-31351	47-0851756
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

100 Half Day Road, Lincolnshire, Illinois	60069
(Address of Principal Executive Offices)	(Zip Code)

Registrants’ telephone number, including area code: (847) 295-5000

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):

q Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

q Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

q Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

q Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On February 1, 2010, Hewitt Associates, Inc. issued a press release announcing its results of operations for the quarter ended December 31, 2009. A copy of the press release is attached as Exhibit 99.1 to this Form 8-K.

In addition to the issuance of a press release, Hewitt Associates, Inc. conducted a conference call regarding its results of operations for the quarter ended December 31, 2009. The script of the conference call is attached as Exhibit 99.2 to this Form 8-K.

i

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

99.1	Press release announcing Hewitt Associates, Inc.’s results of operations for the quarter ended December 31, 2009.
99.2	Script of Hewitt Associates, Inc.’s conference call regarding its results of operations for the quarter ended December 31, 2009.

ii

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

HEWITT ASSOCIATES, INC.
By:	/S/    STEVEN J. KYONO
Name:	Steven J. Kyono
Title:	Senior Vice President, General Counsel and Secretary

Date: February 2, 2010

iii

Exhibit Index

Number	Description
99.1	Press release announcing Hewitt Associates, Inc.’s results of operations for the quarter ended December 31, 2009.
99.2	Script of Hewitt Associates, Inc.’s conference call regarding its results of operations for the quarter ended December 31, 2009.

iv

EX-99.1

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.”

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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.

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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).

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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.

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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.

# # #

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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.

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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.

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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.

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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

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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

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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

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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.

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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.

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EX-99.2

Exhibit 99.2

First Quarter Fiscal 2010

Conference Call Remarks

February 1, 2010

7:30 a.m. CT

SEAN

Good morning.

On the call today are Russ Fradin, our Chairman and CEO, and Rob Schriesheim, our CFO.

During this call, when we discuss revenues, we’re referring to net revenues, or revenues before reimbursements.

And when we mention “underlying” revenue, operating income, net income, and earnings per share amounts, we are using non-GAAP financial measures that provide a better understanding of our underlying performance after excluding unusual items. Today’s press release provides a reconciliation of U.S. GAAP to these and other measures.

On this call, we will make forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Please refer to our most recent SEC filings for more information on risk factors that could cause actual results to differ. Hewitt disclaims any obligation to update or revise any forward-looking statements made on this call.

At the conclusion of the call, we’ll conduct a question and answer session. During the Q&A session, we ask that you please limit yourself to one question. Now I’ll turn it over to Russ.

RUSS

Thanks Sean and good morning everyone. Thank you for joining us.

Before I start, I’d like to introduce our new CFO, Rob Schriesheim. Rob comes to us from Lawson Software, the world’s third largest publicly traded ERP software provider. We’re very pleased to have a seasoned leader of his caliber join the Hewitt team.

Rob recently assumed his CFO duties from John Park as part of the transition we announced in December. I want to thank John for the tremendous contributions he has made over the past four years and wish him continued success.

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Now moving on to our recent results…

I’m happy to report a record-high operating margin of 16.2 percent this quarter along with solid earnings per share of 71 cents. We are pleased with how each of the businesses performed this quarter.

Let me highlight a few of our more noteworthy accomplishments:

First, we are delighted with the $6 million profit in HR BPO. The team is doing a great job with execution as the business continues to improve its cost structure. Even more importantly, our service quality has improved in line with our financial results. I’m pleased to note that we recently renewed contracts with two large existing HR BPO clients. We expanded our relationship with one renewal and maintained the scope of services with the other. We look forward to continuing to provide high quality service to both companies.

Second, Benefits Outsourcing delivered solid margins while continuing to grow participant counts in a challenging employment environment. We grew our large market and mid-market businesses, but project work was a little soft due to the continuing impact of the weak economy. Margins remained comfortably within our target range, even as we continue to invest in growth.

Third, our Consulting business performed reasonably well given the difficult environment for client spending. We saw about what we expected in our fiscal first quarter – a continuation of tight corporate budgets through the end of the calendar year.

Recall that we also faced tough comparisons to last year’s first quarter in Consulting. In that quarter, demand for Retirement and Financial Management Services was particularly strong as companies sought more advice in light of the extreme stock market volatility. Also, the economic downturn had not yet started to meaningfully impact the more discretionary parts of our business.

Fourth, we are making good progress in building for the future to support our growth agenda:

• In a business with as many long-term contracts as Hewitt, we always think of a growth agenda that is centered on client retention and the service experience of our clients’ employees. We continue to invest in service quality, as it reinforces our distinctiveness in the marketplace and supports our retention and growth objectives.

• It is equally important to continually refresh our product lines to remain a leading edge provider. We are putting resources to work in both Outsourcing and Consulting to ensure that our offerings remain as relevant and valuable as ever to our clients.

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• We continue to make additions to our sales force.

• And finally, in addition to these initiatives, we will selectively make smaller acquisitions. We continue to manage an active acquisition pipeline. It is difficult to speculate on the timing of specific opportunities, but note that we are in various stages of evaluating many good opportunities that will support both our Consulting and Outsourcing businesses.

So in summary, we delivered a very positive start to our fiscal year. And given the performance of our businesses to date, we remain comfortable with our overall outlook for the year.

Before I turn the call over to Rob, I’ll briefly comment on the partial divestiture of our Executive Compensation Consulting business in North America that we announced this morning.

This small spin off was done to better serve the interests of our clients. As you may have followed in the news, there’s been increasing public and political scrutiny around perceived conflicts of interest for compensation advisors. Though we disagree with these views, we felt we needed to recognize the reality that some of our Board clients for Executive Compensation services wanted a complete separation of the business.

This spin off does not change our commitment to providing world class executive compensation services to the marketplace, including building a full-service executive compensation practice around the world.

In the U.S. specifically, we will:

• Continue to provide services to Board clients that are comfortable with our current arrangements and practices;

• Put additional emphasis on further growing our executive compensation practice for management; and

• Expand our industry-leading data business.

Now here’s Rob with our financial results and detailed comments on guidance.

ROB

Thanks Russ, and good morning everyone. It’s a pleasure to be with you today. I’ve been on board for almost a month and have spent a great deal of time getting to know the team and reviewing the business. Now that we are reporting the quarter, I look forward to meeting and working with the investment community.

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Let me begin by highlighting our consolidated results for the first quarter.

Reported net revenues were flat compared to the prior-year quarter. Net revenues declined 2 percent after adjusting for currency translation, acquisitions and divestitures, and third party revenues.

Reported operating income grew 11 percent to $125 million, compared to $112 million in last year’s quarter.

There were no unusual items in the first quarter of this year, so reported and underlying results are the same.

Underlying results for last year’s first quarter exclude a $7 million revenue contribution from the HR BPO businesses that we divested in the second quarter of 2009. The associated contributions to operating and net income were not material – so reported and underlying results were essentially the same for last year’s first quarter.

Consolidated underlying operating margin increased by 150 basis points to 16.2 percent in the first quarter. This was mostly driven by operating improvement in our HR BPO business and lower shared service costs.

Our effective tax rate for the current quarter was 39.6 percent, unchanged from last year’s first quarter. The current quarter’s rate reflects the impact of the mix of income across tax jurisdictions that offset some structural improvements in foreign and state tax rates. We continue to expect a fiscal 2010 full year effective tax rate to be in the range of 37 to 38 percent.

Reported and underlying net income for the first quarter grew 6 percent to $68 million, or 71 cents per diluted share, compared with $65 million, or 68 cents per diluted share last year.

Cash flow from operations was $38 million, compared with $64 million in the prior year. Free cash flow was $22 million, compared with $29 million in the prior year. This decline in free cash flow reflects lower collections that were partially offset by lower capital expenditures and prepaid expenses.

Capital expenditures were $17 million in the first quarter, compared with $35 million in the prior-year quarter. The decrease reflects reduced spending in real estate and IT hardware and software – with the IT spending impacted by timing of purchases this year. For 2010, we expect capex in the range of $120 million to $130 million.

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Regarding our share repurchase authorization, we bought back 323,000 shares for a total of $13 million during the first quarter. In the second quarter through January 29^th, we’ve repurchased another 249,000 shares totaling $10 million. This brings our cumulative repurchase total to $97 million against the overall $300 million authorization.

Our buyback execution reflects our continued interest in acquisition opportunities as a priority in deploying our cash in situations in which we can earn well in excess of our long term cost of capital in support of profitable growth. Looking at the balance of 2010, we intend to continue to focus on acquisition opportunities while at the same time making good progress on our existing authorization.

Now let me give you a few first quarter segment highlights. As a reminder, my comments regarding underlying results are adjusted for the HR BPO divestitures that I mentioned a moment ago. Unless otherwise noted, all quarterly comparisons are on a year-over-year basis.

In Benefits Outsourcing, reported revenues grew 3 percent in the first quarter. Revenues also grew 3 percent when adjusting for a small amount of favorable currency translation. The increase reflects 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.

Beginning this quarter we have revised how we present our Benefits Outsourcing end-user participant counts. Our measure now includes Absence Management services in addition to our Defined Benefit, Defined Contribution, and Health and Welfare services. Also, as a result of implementing an improved tracking methodology, we have made some adjustments to more accurately reflect our participant counts. Prior-year results have been revised accordingly and can be found in today’s earnings release.

On a comparable basis, and including Absence Management, first quarter Benefits Outsourcing participant counts increased 9 percent year-over-year to 20.8 million. New large company implementations – including meaningful growth in Absence Management – drove the increase over last year. About half of this year-over-year increase in participants was driven by growth in Absence Management, with the remainder driven by growth in our core services – which included good growth in the mid market.

We are pleased with our new client and new service participant growth in this challenging environment. The solid momentum in our Point Solutions business – which includes Absence Management services – reflects good progress in our strategy to provide add-on standalone services to complement our core Benefits Outsourcing offerings.

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Absence Management price points are significantly lower than our blended core service rate. So, what may appear on the surface to be meaningful price compression principally reflects the change in our business mix.

In addition to the Absence Management mix impact on revenues, we continue to experience some pricing pressure given the economic and competitive environment.

Benefits Outsourcing segment margin declined 40 basis points to 25.7 percent in the first quarter, on both a reported and underlying basis. This was principally due to higher compensation and related expenses associated with increased staffing for new clients. This more than offset the higher revenues and favorable foreign currency translation.

Our Benefits Outsourcing pipeline remains solid. We continue to invest in our sales capabilities and remain focused on closing new opportunities and renewing existing contracts to support our growth initiatives.

In HR BPO, reported revenue declined 13 percent. Revenue decreased 11 percent when adjusting for divestitures, favorable foreign currency translation and third-party revenues. Client terminations and liquidations drove the expected decline.

HR BPO earned a profit of $6 million in the first quarter, compared to a loss of $5 million in last year’s quarter, on both a reported and underlying basis. The improvement was due to lower staffing and overhead cost reduction. In addition, last year’s results included asset impairment charges that did not occur this year. These were partially offset by the decline in revenue.

While we are pleased with this performance, at this point we’re not ready to say this level of profitability is sustainable. The promising results in the first quarter reflect favorable project revenue and the fact that we have not yet added some further staffing and investment resources. Keep in mind that future performance is likely to be lumpy due to the timing of some contractual adjustments and selective investments for growth.

We continue to see good demand for our HR BPO services in the marketplace. As Russ mentioned, we recently renewed our HR BPO work with two large existing clients. I will add that the implementation of the new HR BPO win announced on our fourth quarter call is on schedule and on budget. We continue to selectively target three to four new HR BPO contracts per year using a very disciplined framework to drive profitable growth in this segment.

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In Consulting, segment revenue grew 1 percent on a reported basis for the first quarter. Revenues declined 6 percent when adjusting for the impact of an acquisition and favorable currency translation.

On this same adjusted basis, our Retirement and Financial Management practice grew less than one percent. Recall that the business faced a difficult prior-year comparison of growth in the low teens – reflecting strong demand as companies sought more advice in light of the extreme stock market volatility.

Health Management grew in the low single digits. We are closely monitoring the health care reform agenda, and the water is as murky as ever.

Talent and Organization Consulting revenues declined approximately 20 percent. Recall that we implemented productivity improvements in this business last year, and we remain confident in our capabilities and capacity to serve our clients once corporate spending strengthens.

Communications, our smallest practice, declined approximately 20 percent, sequentially unchanged from the fourth quarter rate.

Consulting margins declined by 160 basis points to 12.9 percent in the first quarter on both a reported and underlying basis. The decline is principally due to lower constant-currency revenues that were partially offset by lower bad debt expense.

Finally, unallocated shared service costs were 2.5 percent of net revenues in the first quarter, compared with 2.9 percent of net revenues in last year’s first quarter, on both a reported and underlying basis. The improvement reflects the impact of accrual adjustments to incentive compensation in both years.

Now, turning to our outlook. Here are a few reminders regarding our guidance:

• One, our plans are not counting on a meaningful recovery in any of our geographies;

• Two, our currency expectations are based on current forward rates; and

• Three, we are not factoring in the impact of acquisition activity that hasn’t already been announced to date.

Our first quarter results lead us to reaffirm our prior guidance for fiscal 2010, even after absorbing what we expect to be some modest dilution related to the partial divestiture of the Consulting Executive Compensation business announced today. Here is a recap of our view on fiscal 2010:

• First, we continue to expect consolidated revenue growth in the low- to mid-single digit range, reflecting positive organic growth as well as the benefit of foreign exchange.

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• This is comprised of solid growth in Consulting, roughly flat revenues in Benefits Outsourcing, and a decline in HR BPO.

• Second, we continue to expect diluted EPS of $2.85 to $2.95.

• We expect underlying operating income growth to moderately exceed diluted EPS growth. This reflects some improvement in Consulting margins, about a break-even performance in HR BPO, and a roughly flat contribution from Benefits Outsourcing.

• We expect a full year effective tax rate in the range of 37 to 38%.

• We also expect to make good progress against our share repurchase authorization.

• The partial divestiture of the Consulting Executive Compensation business announced today is expected to have a dilutive annualized impact to our earnings of approximately 7 to 10 cents per share. Given where we are in the year, we expect fiscal 2010 dilution of a few pennies – which we can absorb in our guidance.

• Lastly, we still anticipate fiscal 2010 free cash flow solidly in excess of net income.

Now I’d like to turn the call back to Russ.

RUSS

Thanks Rob.

Before we start with questions, I’ll wrap up our prepared remarks by saying how pleased we are with our overall first quarter performance as we start the new fiscal year.

As we move ahead in 2010, we will continue to put our resources to work to support our growth agenda – and we won’t lose our focus on operational excellence. We look forward to updating you on our progress.

Operator – we’re ready to take some questions.

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 (http://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.

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