-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IAYRdli/M0E6kKELa4/XHw3lGVXO0PQRT47kUpxb8wqDXWySavrWde+HXPs0rQv0 KjbHCF7yLWN/lH2E64P+JA== 0000950172-99-000360.txt : 19990402 0000950172-99-000360.hdr.sgml : 19990402 ACCESSION NUMBER: 0000950172-99-000360 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981103 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARSH & MCLENNAN COMPANIES INC CENTRAL INDEX KEY: 0000062709 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 362668272 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-05998 FILM NUMBER: 99583130 BUSINESS ADDRESS: STREET 1: 1166 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2123455000 MAIL ADDRESS: STREET 1: 1166 AVE OF THE AMERICAS STREET 2: 27TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10036 FORMER COMPANY: FORMER CONFORMED NAME: MARLENNAN CORP DATE OF NAME CHANGE: 19760505 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- AMENDMENT NO. 2 TO FORM 8-K ON FORM 8-K/A AMENDMENT TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 November 3, 1998 - ----------------------------------------------------------------------------- (Date of earliest event reported) Marsh & McLennan Companies, Inc. ----------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 1-5998 36-266-8272 - ---------------------------------------------------------------------------- (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) incorporation) 1166 Avenue of the Americas, New York, New York 10036 - --------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (212) 345-5000 -------------------------------------------------------------------------- (Registrant's telephone number, including area code) Exhibit Index at page 6 The undersigned registrant, Marsh & McLennan Companies, Inc. (the "Registrant") hereby amends the following items, financial statements, exhibits, or other portions of the Current Report on Form 8-K filed by the Registrant on December 23, 1998 (the "Original Form 8-K Filing") as set forth below. ITEM 2. ACQUISITION AND DISPOSITION OF ASSETS. On November 12, 1998, the Registrant filed a Current Report on Form 8- K reporting its acquisition of ordinary shares (the "Ordinary Shares") and 7.25% Convertible Bonds 2008 (the "Convertible Bonds") of Sedgwick Group plc ("Sedgwick") and stated that it would file no later than January 15, 1999, historical financial statements for Sedgwick and pro forma financial information for the Registrant giving effect to the acquisition. Such financial information was filed in the Original Form 8-K Filing and is amended in part hereby. Subsequent to the issuance of the Company's 1997 consolidated financial statements, management determined that certain costs which were accrued in connection with the 1997 acquisition of Johnson & Higgins and certain London real estate consolidations should be expensed as incurred. Consequently, the 1997 results of operations presented herein have been restated to reflect a $53 million reduction in the special charges originally reported. The effect of this restatement was to increase 1997 net income and retained earnings by $34.8 million and to increase basic net income per share and diluted net income per share by $.14 per share. Information Concerning Forward-Looking Statements This report contains certain statements relating to future results which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements may include, without limitation, discussions concerning revenue and expense growth, cost savings and efficiencies expected from the integration of Sedgwick. Please refer to the Registrant's 1997 Annual Report on Form 10-K/A and its Quarterly Reports on Form 10-Q under "Information Concerning Forward- Looking Statements" for specific factors which would cause actual results to differ materially from such forward-looking statements. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements of Business Acquired. The audited financial statements of Sedgwick for the year ended December 31, 1997 and the unaudited financial statements for the nine-months ended September 30, 1998 are filed as Exhibits 99.1 and 99.2 to the Original Form 8-K Filing and are not being filed herewith. (b) Pro Forma Financial Information. The Registrant hereby amends the pro forma financial data required to be filed herewith and restates such items in their entirety as Exhibit 99.3 hereto. 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. MARSH & MCLENNAN COMPANIES, INC. By: /s/ Gregory Van Gundy ----------------------------------- Name: Gregory Van Gundy Title: Secretary Date: March 31, 1999 EXHIBIT INDEX Exhibit No. Exhibit ----------- ------- 99.3 Unaudited Pro Forma Condensed Combined Financial Statements. EX-99 2 EXHIBIT 99.3 - CONDENSED COMBINED FINANCIAL STATEMENTS EXHIBIT 99.3 UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS The following unaudited pro forma condensed combined statements of income for the nine months ended September 30, 1998 and the year ended December 31, 1997 (as amended) and the unaudited pro forma condensed combined balance sheet as of September 30, 1998 give effect to the acquisition of Sedgwick. The purchase method of accounting has been applied to the transaction. The pro forma statements of income assume the acquisition occurred on January 1, 1997 and the pro forma balance sheet assumes the transaction occurred on September 30, 1998. The unaudited pro forma statements of income do not include potential cost savings that may be realized as a result of the acquisition or the effect of a special charge that is expected to include, among other items, the Registrant's cost (non-goodwill) related to severance arrangements, the closing of existing facilities and the issuance of certain deferred stock units. The Registrant has indicated that it anticipates ultimately achieving gross pretax cost savings in the range of $200 million per year, over a period of years. See "Information Concerning Forward-Looking Statements". The unaudited pro forma condensed combined financial statements have been prepared by the Registrant based upon the assumptions disclosed in the notes to the pro forma condensed combined financial statements and reflect the Registrant's expectation that it will acquire 100% of Sedgwick's issued share capital and issued convertible bonds. The unaudited pro forma financial statements presented herein are shown for illustrative purposes only and do not purport to be indicative of the results which would have been reported if the transaction had occurred on the dates indicated or which may occur in the future. The unaudited pro forma condensed combined financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1998 and Annual Report on Form 10-K/A for the year ended December 31, 1997 and the Sedgwick financial statements included in Exhibits 99.1 and 99.2 of this Form 8-K. MARSH & MCLENNAN COMPANIES, INC. PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED) (In millions, except per share figures)
Historical (1) ---------------------------------- Marsh & McLennan Sedgwick Group, Pro Forma Pro Forma Companies, Inc. as adjusted (a) Adjustments Combined ----------------- --------------- ----------- --------- Revenue $ 5,245 $1,214 $ $6,459 Expense 4,160 1,282 27 (b) 5,469 ------- ------ ----- ------ Operating Income (Loss) 1,085 (68) (27) 990 Interest, net (77) (4) (75) (c) (156) ------ ----- --- --------- Income (Loss) Before Income Taxes 1,008 (72) (102) 834 Provision (Benefit) for Income Taxes 398 (19) (26) (d) 353 ------- ----- --- -------- Net Income (Loss) $ 610 $ (53) $(76) 481 ======= ===== ========= ======== Basic Net Income Per Share $ 2.38 $ 1.81 ======= ======== Diluted Net Income Per Share $ 2.28 $ 1.73 ======= ======== Average Number of Shares Outstanding - Basic 256 10 (e) 266 ======= ===== ====== Average Number of Shares Outstanding - Diluted 264 10 (e) 274 ======= ===== ====== (1) Sedgwick's net loss for the nine months ended September 30, 1998 includes a $16 million exceptional pretax gain and a $200 million exceptional pretax charge.
See accompanying notes to pro forma condensed combined financial statements. MARSH & MCLENNAN COMPANIES, INC. PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED) (In millions, except per share figures)
Historical (1) --------------------------------- Marsh & McLennan Sedgwick Group, Pro Forma ProForma Companies, Inc. as adjusted (a) Adjustments Combined (as amended) --------------- ----------- (as amended) ---------------- ------------ Revenue $6,009 $1,588 $ $7,597 Expense 5,211 1,436 36(b) 6,683 ------ ------- ------ ------ Operating Income (Loss) 798 152 (36) 914 Interest, net (83) (6) (100)(c) (189) -------- ------- ------ ------ Income (Loss) Before Income Taxes 715 146 (136) 725 Provision (Benefit) for Income Taxes 281 61 (35)(d) 307 -------- ------- ------ ------ Net Income (Loss) $ 434 $ 85 $(101) $ 418 ======= ======== ====== ====== Basic Net Income Per Share $ 1.77 (2) $ 1.64 ======= ======= Diluted Net Income Per Share $ 1.73 (2) $ 1.61 ======= ====== Average Number of Shares Outstanding - Basic 245 (2) 10(e) 255 ======= ====== ===== Average Number of Shares Outstanding - Diluted 251 (2) 10(e) 261 ======= ====== ===== (1) Marsh & McLennan's expense includes special charges amounting to $244 million for the year ended December 31, 1997. (2) Restated to reflect the three-for-two stock split in the form of a stock distribution issued on June 26, 1998.
See accompanying notes to pro forma condensed combined financial statements. MARSH & MCLENNAN COMPANIES, INC. PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF SEPTEMBER 30, 1998 (UNAUDITED) (In millions of dollars)
Historical (1) ---------------------------------- Marsh & McLennan Sedgwick Group, Pro Forma Pro Forma Companies, Inc. as adjusted (f) Adjustments(g) Combined ---------------- --------------- -------------- --------- ASSETS Current Assets: Cash and cash equivalents $ 667 $ 340 $ - $ 1,007 Receivables 1,704 642 - 2,346 Less - allowance for doubtful accounts (68) (54) - (122) --------- --------- -------- -------- Net receivables 1,636 588 0 2,224 Prepaid dealer commissions - current portion 311 - - 311 Deferred tax assets 119 3 - 122 Other current assets 113 88 - 201 -------- --------- -------- -------- Total current assets 2,846 1,019 - 3,865 ------- -------- -------- -------- Long-term securities 752 1,083 - 1,835 Fixed assets, net 934 373 - 1,307 Intangible assets 2,822 360 1,450(h) 4,632 Prepaid dealer commissions 823 - - 823 Other assets 551 70 - 621 -------- --------- -------- -------- $8,728 $2,905 $1,450 $13,083 ======== ========= ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt $ 480 $ 44 $ 200(i) $ 724 Accounts payable and accrued liabilities 1,880 309 2,189 Accrued income taxes 354 47 - 401 -------- -------- --------- -------- Total current liabilities 2,714 400 200 3,314 -------- -------- --------- -------- Fiduciary liabilities 2,570 571 3,141 Less - cash and investments held in a fiduciary capacity (2,570) (571) - (3,141) ------- -------- --------- -------- - - - - ------- -------- --------- -------- Long-term debt 1,280 235 1,386(i) 2,901 ------- -------- --------- -------- Other liabilities 1,157 1,605 - 2,762 ------- -------- --------- -------- Commitments and contingencies - - - - Stockholders' equity: Preferred stock - - - - Common stock 261 91 (91)(j) 271 10 (e) Other stockholders' equity 3,490 574 (574)(j) 4,009 519 (e) ------- -------- --------- -------- 3,751 665 (136) 4,280 Less - treasury shares (174) (174) -------- -------- --------- -------- Total stockholders' equity 3,577 665 (136) 4,106 ------- -------- --------- -------- $8,728 $2,905 $1,450 $13,083 ======= ======== ========= ========
See accompanying notes to pro forma condensed combined financial statements. NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS A description of the adjustments reflected in the pro forma condensed combined financial statements follows: (a) Certain amounts included in the Sedgwick consolidated statements of income (interest income, interest expense, equity in income of affiliates and minority interest in income of subsidiaries) have been reclassified to conform with the Registrant's financial statement presentation and have been presented in accordance with U.S. Generally Accepted Accounting Principles. (See note 32 of the financial statements in Exhibit 99.1 and Additional information for US investors in Exhibit 99.2) Results for the year ended December 31, 1997 and the nine months ended September 30, 1998 have been translated at(pound) = US$1.64 and(pound) = US$1.65, respectively. (b) To reflect the incremental estimated annual goodwill amortization charge associated with the acquisition of Sedgwick (the "acquisition"). Goodwill is estimated at $1.45 billion and is being amortized over a forty-year period. (c) To record the additional annual interest expense associated with the estimated $1.586 billion of incremental debt that is expected to be incurred by the Registrant as a result of the acquisition. The assumed interest rate of 6.31% represents the weighted average interest rate of the expected incremental debt based on prevailing rates. The actual interest rate may vary from the assumed rate. The annual effect on pretax income of a one-eighth percent variance in this rate is $2.0 million. (d) To record the tax effect of the pro forma adjustments related to the additional annual interest expense. The assumed tax rate of 35% represents the federal tax benefit on the estimated incremental interest expense. The Registrant does not anticipate any state and local tax benefit on this interest expense. (e) To reflect the issuance of $529 million (10 million shares) of the Registrant's $1 par value common stock representing the estimated portion of the acquisition cost to be financed through equity. (f) Certain amounts included in the Sedgwick consolidated balance sheet have been reclassified to conform with the Registrant's financial statement presentation. In particular, fiduciary cash and investments of $571 million have been offset against the related liabilities and presented in the liability section of the balance sheet. In addition, receivables and payables for uncollected premiums and claims are presented in footnote disclosure in the Registrant's financial statements. The balance sheet has been translated at(pound) = US$1.70. (g) The Registrant's management is in the preliminary stages of identifying the impact of purchase related matters, principally related to severance, duplicative real estate, and adjustments of asset and liability balances to fair values. The preliminary estimate of these purchase related matters of $600 million and the related income tax benefit of $210 million, which may differ from the final resolution of such items, are not included in the pro forma financial statements. (h) Represents the excess of the $2.115 billion acquisition consideration over the $665 million acquired net assets of Sedgwick. The Registrant's management is in the process of, but has not completed, identifying intangibles or fair values of assets acquired and liabilities assumed. Since there are no known adjustments at this time, the fair values of assets and liabilities are assumed to be the carrying values on the Sedgwick balance sheet and the excess of the acquisition consideration over the acquired net assets has been allocated to goodwill. The preliminary purchase price allocation to the underlying assets and liabilities of Sedgwick, including goodwill, is subject to further refinement as the Registrant's management continues to review the estimated fair values of the assets acquired and the liabilities assumed. The final purchase price allocation could be materially different from this preliminary allocation. (i) To reflect the incremental debt assumed to be incurred to finance $1.586 billion of the acquisition. (j) To record the elimination of $665 million of Sedgwick stockholders' equity. -----END PRIVACY-ENHANCED MESSAGE-----