UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____
COMMISSION FILE NUMBER: 0-20724
WATSON WYATT & COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 53-0181291
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
6707 DEMOCRACY BOULEVARD
SUITE 800
BETHESDA, MD 20817
(Address of principal executive offices, including zip code)
(301) 581-4600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of May 6, 1998.
Common Stock, $1.00 par value 16,254,990
- ------------------------------ ----------
Class Number of Shares
<PAGE>
<TABLE>
<CAPTION>
WATSON WYATT & COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of U.S. Dollars, Except Per Share Amounts)
Quarters Ended March 31, Nine Months Ended March 31,
------------------------------ ------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Fees $ 124,558 $ 119,278 $ 377,828 $ 361,008
Costs of providing services:
Salaries and employee benefits 70,293 63,715 199,959 183,345
Occupancy and communications 15,422 15,493 46,229 55,956
Professional and subcontracted services 11,626 8,278 37,699 36,979
Other 6,666 6,243 21,290 18,260
------------ ------------ ------------ ------------
104,007 93,729 305,177 294,540
General and administrative expenses 12,849 12,472 36,556 33,005
Depreciation and amortization 5,576 5,140 14,797 14,932
------------ ------------ ------------ ------------
122,432 111,341 356,530 342,477
Income from operations 2,126 7,937 21,298 18,531
Other:
Interest income 119 701 605 1,158
Interest expense (1,168) (573) (2,594) (1,340)
Loss from affiliates (215) (376) (219) (208)
------------ ------------ ------------ ------------
Income before income taxes and minority interest 862 7,689 19,090 18,141
Provision for income taxes:
Current 470 3,345 8,953 7,854
Deferred - - - -
------------ ------------ ------------ ------------
470 3,345 8,953 7,854
------------ ------------ ------------ ------------
Income before minority interest 392 4,344 10,137 10,287
Minority interest in net (income) loss of
consolidated subsidiaries 86 (2) (55) (86)
------------ ------------ ------------ ------------
Net income from continuing operations 478 4,342 10,082 10,201
Discontinued operations:
Loss from operations of discontinued Outsourcing
Business (less applicable income tax benefit of
$1,895, $2,425 and $4,772, $5,872 respectively) (1,664) (3,586) (7,102) (8,599)
Loss on disposal of Outsourcing Business, including
provision of $12,100 for operating losses during
phaseout period (less applicable income tax benefit
of $48,148) (71,652) - (71,652) -
============ ============ ============ ============
Net (loss) income $ (72,838) $ 756 $ (68,672) $ 1,602
============ ============ ============ ============
Earnings per share, continuing operations $ 0.03 $ 0.26 $ 0.58 $ 0.59
============ ============ ============ ============
(Loss) earnings per share, net (loss) income $ (4.30) $ 0.04 $ (3.92) $ 0.09
============ ============ ============ ============
</TABLE>
See accompanying notes
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<PAGE>
WATSON WYATT & COMPANY
CONSOLIDATED BALANCE SHEETS
(Thousands of U.S. Dollars)
March 31, June 30,
1998 1997
---------- ---------
(Unaudited)
ASSETS
Cash and cash equivalents $ 11,004 $ 26,257
Receivables from clients:
Billed, net of allowances of $4,082 and $2,525 72,984 67,393
Unbilled 64,171 56,368
---------- ---------
137,155 123,761
Income taxes receivable 45,590 -
Other current assets 6,658 7,287
---------- ---------
Total current assets 200,407 157,305
Investment in affiliates 17,654 52,516
Fixed assets 35,251 37,045
Deferred income taxes 39,095 39,025
Deferred software and development costs 8,070 32,869
Other intangible assets 2,524 2,661
Other assets 9,466 10,357
---------- ---------
$ 312,467 $ 331,778
========== =========
LIABILITIES, REDEEMABLE COMMON STOCK, AND PERMANENT SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 112,797 $ 103,415
Note payable and book overdrafts 28,637 408
Income taxes payable - 3,563
Deferred income taxes 28,536 28,612
---------- ---------
Total current liabilities 169,970 135,998
Accrued retirement benefits 83,096 86,697
Deferred rent and accrued lease losses 11,957 14,938
Other noncurrent liabilities 44,226 9,908
Minority interest in subsidiaries 273 351
Redeemable Common Stock - $1 par value:
25,000,000 shares authorized;
16,476,915 and 18,130,429 issued
and outstanding; at redemption value 87,328 96,091
Permanent shareholders' equity:
Adjustment for redemption value greater than
amounts paid in by shareholders (34,074) (37,674)
Retained (deficit) earnings (48,025) 24,633
Cumulative translation (loss) gain (2,284) 836
Commitments and contingencies
---------- ---------
$ 312,467 $ 331,778
========== =========
See accompanying notes
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<TABLE>
<CAPTION>
WATSON WYATT & COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of U.S. Dollars)
Nine Months Ended March 31,
------------------------------
1998 1997
------------ -----------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (68,672) $ 1,602
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Non-cash charge for loss on disposal of Outsourcing Business 119,800 -
Tax effect of non-cash charge for loss on disposal of Outsourcing Business (48,148) -
Provision for doubtful receivables from clients (2,867) 6,800
Depreciation 11,357 10,181
Amortization of deferred software and development costs
and other intangible assets 9,230 7,371
Change in deferred income taxes (147) -
Loss from affiliates 1,637 5,076
Minority interest in net income of consolidated subsidiaries 55 86
Other (154) (59)
(Increase) decrease in assets:
Receivables from clients (10,527) (13,192)
Income taxes receivable 2,558 -
Other current assets 629 (309)
Other assets 590 (3,573)
(Decrease) increase in liabilities:
Accounts payable and accrued liabilities (9,355) (5,648)
Income taxes payable (3,563) (10,672)
Accrued retirement benefits (3,601) 4,935
Deferred rent and accrued lease losses (2,981) 5,935
Other noncurrent liabilities (3,693) (950)
----------- ----------
Net cash (used) provided by operating activities (7,852) 7,583
----------- ----------
Cash flows from investing activities:
Purchases of fixed assets (8,854) (10,213)
Investment in software and development costs (2,506) (5,535)
Investment in affiliates (12,001) (11,570)
----------- -----------
Net cash used in investing activities (23,361) (27,318)
----------- -----------
Cash flows from financing activities:
Net borrowings and bank overdrafts 28,229 5,700
Issuances of Redeemable Common Stock 525 15,098
Repurchases of Redeemable Common Stock (9,674) (14,689)
----------- -----------
Net cash provided by financing activities 19,080 6,109
----------- -----------
Cumulative translation (loss) gain (3,120) 56
----------- -----------
Decrease in cash and cash equivalents (15,253) (13,570)
Cash and cash equivalents at beginning of period 26,257 21,694
----------- -----------
Cash and cash equivalents at end of period $ 11,004 $ 8,124
=========== ===========
</TABLE>
See accompanying notes
-4-
<PAGE>
<TABLE>
<CAPTION>
WATSON WYATT & COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN PERMANENT SHAREHOLDERS' EQUITY
(Thousands of U.S. Dollars)
Excess of Redemption
Retained Cumulative Value Over Amounts
Earnings Translation Paid in by
(Deficit) Gain (Loss) Shareholders
------------ ------------- --------------
<S> <C> <C> <C>
Balance at June 30, 1997 $ 24,633 $ 836 $ (37,674)
Net loss (68,672) - -
Effect of repurchases of 1,759,767 shares of
common stock (various prices per share) (3,986) - 3,986
Foreign currency translation adjustment - (3,120) -
Adjustment of redemption value for change
in formula book value per share - - (386)
------------ ------------- --------------
Balance at March 31, 1998 (unaudited) $ (48,025) $ (2,284) $ (34,074)
============ ============= ==============
</TABLE>
See accompanying notes
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<PAGE>
WATSON WYATT & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying unaudited consolidated financial statements of Watson Wyatt
& Company and its subsidiaries, (collectively, "Watson Wyatt" or "the
Company"), are presented in accordance with the rules and regulations of the
Securities and Exchange Commission ("SEC") and do not include all of the
disclosures normally required by generally accepted accounting principles. In
the opinion of management, these statements reflect all adjustments,
consisting only of normal recurring adjustments, which are necessary for a
fair presentation of the consolidated financial statements for the interim
periods. The consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto
contained in the Company's Form 10-K for the year ended June 30, 1997.
The results of operations for the nine months ended March 31, 1998 are
not necessarily indicative of the results that can be expected for the entire
fiscal year ending June 30, 1998. Certain prior year amounts have been
reclassified to conform to the current year presentation.
2. Under the Company's bylaws, the Company is obligated to repurchase its
Redeemable Common Stock. Accordingly, the redemption value of outstanding
shares is classified as Redeemable Common Stock and not as permanent
shareholders' equity. Redeemable Common Stock is equal to the number of
shares outstanding multiplied by the Formula Book Value per share, which was
$5.30 per share at March 31, 1998 and June 30, 1997. Permanent shareholders'
equity includes an adjustment for the difference between the redemption value
of the Redeemable Common Stock and the amounts actually paid by shareholders
for the shares.
3. During the nine months ended March 31, 1998, the Company repurchased
1,759,767 shares of common stock at various prices per share depending upon
the date of redemption. The computation of earnings per share is based upon
the weighted average number of shares of common stock outstanding during the
period. The number of shares used in the computation is 16,935,000 and
16,841,000 for the three months ended March 31, 1998 and 1997, respectively,
and 17,503,000 and 17,197,000 for the nine months ended March 31, 1998 and
1997, respectively. The Company has no convertible debt or stock options
outstanding that would dilute earnings per share.
4. The annual sale of common stock to eligible purchasers (as defined in the
Company's bylaws), which in recent years has been announced in December and
completed in March, was deferred until current important issues of business
strategy and financial investments were resolved.
5. During fiscal year 1997, the Company recorded sublease and lease termination
losses of $12.1 million, of which $10.3 million related to the relocation of
the corporate office space. The corporate office relocation to a less
expensive suburban location results in a reduction of occupancy expense in
future years.
6. On April 6, 1998, the Company entered into a Redemption, Restructuring, and
Indemnity Agreement ("the Restructuring Agreement") with State Street Bank
and Trust Co. ("State Street") and Wellspring Resources, LLC ("Wellspring")
by which Wellspring redeemed the Company's 50% interest in Wellspring
effective April 1, 1998. The restructuring effected pursuant to the
Restructuring Agreement implements a Discontinuation Plan approved by the
Company's Board of Directors on
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<PAGE>
February 18, 1998 which provided for the Company's exit from the total Benefits
Administration Outsourcing Business ("Outsourcing Business").
Following the redemption of the Company's interest in Wellspring, Wellspring
will continue to operate as a wholly-owned subsidiary of State Street. Certain
outsourcing contracts retained by the Company when Wellspring was initially
formed in 1996 ("Retained Clients"), will continue to be performed by the
Company until their respective contract expirations. Two of the three Retained
Clients' contracts expire within the next year. The Company has identified
alternative resolutions for the contractual relationship with the third client.
The Company and the client are in discussion as to which alternative is mutually
advantageous. The Company will continue to provide services under these
agreements using facilities and personnel provided by Wellspring until these
arrangements expire.
In connection with the restructuring transactions, the Company has agreed to
indemnify Wellspring for certain costs and losses incurred as a result of
services provided by Wellspring on the Company's behalf. Further, the Company
has been released from certain liabilities relating to the Wellspring business
in connection with the redemption.
The discontinuation of the Company's Outsourcing Business results in the
write-off of the Company's investment in Wellspring, which had a book value at
the disposal date of $45.2 million. In addition, the Company has written off
$14.0 million in unamortized deferred software and development costs net of
related deferred revenues related to the Retained Clients. Further, a provision
of $60.6 million has been recorded for contract termination expenses, lease
guarantees, potential severance and other expenses related to the Company's exit
from the Outsourcing Business.
The Company reported this transaction on Form 8-K with the SEC on April 21,
1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Watson Wyatt & Company, together with its affiliates and consolidated
subsidiaries, provides human resource and employee benefits consulting and
administrative/recordkeeping services. The Company also derives fees from sales
of surveys and licensing of software. The Company works with organizations of
all sizes, from the largest multinationals to public employers and nonprofit
institutions.
Founded in 1946, Watson Wyatt is owned almost entirely by its active employees.
The Company is incorporated in Delaware, and its principal executive offices are
located at 6707 Democracy Boulevard, Bethesda, MD 20817. Together with its
affiliates, it operates globally as Watson Wyatt Worldwide.
Watson Wyatt's fiscal year ends June 30. The financial statements contained in
this quarterly report reflect consolidated balance sheets as of the end of the
third quarter of fiscal year 1998 (March 31, 1998) and as of the end of the
prior fiscal year 1997 (June 30, 1997), and consolidated statements of
operations, of cash flows and of changes in permanent shareholders' equity for
the three and nine months ended March 31, 1998 and 1997.
-7-
<PAGE>
RESULTS OF OPERATIONS--NINE MONTHS ENDED MARCH 31, 1998 COMPARED TO NINE
MONTHS ENDED MARCH 31, 1997.
For the first nine months of fiscal year 1998 the Company produced a net loss of
$68.7 million which includes an after tax loss of $78.8 million for the
discontinuation of the Outsourcing Business. Without this impact of discontinued
operations, the Company's income from operations increased $2.8 million for the
nine month period compared to 1997, driven by revenue increases of $16.8
million. These revenue increases are offset by increasing interest expense and
taxes such that net income from continuing operations decreased $0.1 million.
Fiscal year 1997 results include a sublease and lease termination loss of $4.7
million ($10.3 million before taxes) associated with the relocation of the
corporate offices in Washington, D.C. to a less expensive suburban facility and
$0.8 million ($1.8 million before taxes) in other lease losses.
Fees for the first nine months of fiscal year 1998 total $377.8 million compared
to $361.0 million for the first nine months of fiscal year 1997, an increase of
$16.8 million, or 5%. This increase is due primarily to the Company's North
American and Latin American consulting offices. In addition, the Human Capital,
HR Technology and Retirement practices are experiencing strong revenue growth.
The Company incurred salaries and employee benefit expenses of $200.0 million in
the first nine months of fiscal year 1998, an increase of $16.6 million, or 9%,
from $183.3 million in the prior fiscal year. Similar growth occurred in the
third quarter of fiscal year 1998 compared to the same quarter in fiscal year
1997. The increase in costs is attributable to normal annual salary increases
effective in October and a 6% increase in the number of associates from the same
period in fiscal year 1997.
Occupancy and communication expenses during the third quarter of fiscal year
1998 totaled $15.4 million, a decrease of $0.1 million from the third quarter of
the prior year. For the first nine months of fiscal year 1998, occupancy and
communication expenses totaled $46.2 million, a decrease of $9.7 million, or
17%, from the first nine months of the prior year. Fiscal year 1997 includes the
$12.1 million in sublease and lease termination losses primarily from the
relocation of the corporate office to lower cost space in a suburban location in
the first half of the fiscal year. Excluding these lease losses, occupancy and
communications expenses increased by $2.4 million from last year, due primarily
to normal facility and office expense increases.
Professional and subcontracted services were $11.6 million during the third
quarter of fiscal year 1998, an increase of $3.3 million over the third quarter
of the prior fiscal year. For the first nine months of fiscal year 1998,
professional and subcontracted services were $37.7 million, an increase of $0.7
million, or 2%, over $37.0 million for the first nine months of fiscal year
1997. The quarterly increase in expenditures is related to timing differences,
as the year to year comparisons for the nine month periods are similar.
Other costs of providing services were $6.7 million for the third quarter of
fiscal year 1998, up $0.4 million from the third quarter of fiscal year 1997.
For the first nine months of fiscal year 1998, other costs of providing services
increased by $3.0 million, or 17%, to $21.3 million from $18.3 million in the
prior year. The expense growth includes a general increase in travel expense of
$1.6 million, office promotional expense of $1.2 million, and the remainder from
increased publications expense.
General and administrative ("G&A") expenses for the third quarter of fiscal year
1998 were $12.8 million, a $0.4 million, or 3%, increase from the third quarter
of fiscal year 1997. For the first nine months of fiscal year 1998, G&A expenses
were $36.6 million, a $3.6 million increase from $33.0 million in the prior
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<PAGE>
fiscal year. The increase in expense is primarily attributable to costs
associated with our business strategy initiatives and higher corporate
advertising and promotional expense.
Depreciation and amortization expense increased $0.4 million in the third
quarter of fiscal year 1998 over the third quarter of fiscal year 1997 due to
the completion of new software products released in the third quarter of fiscal
year 1998. In the nine month period ending March 31, 1998, depreciation and
amortization expense was equivalent to the same period in fiscal year 1997.
Interest expense in 1998 has increased due to higher, sustained debt levels in
the nine month period and the third quarter of 1998 compared to the same periods
in 1997. Increased borrowings occurred due to the delay of the annual stock
sale.
Income before income taxes and minority interest of $19.1 million for the first
nine months of fiscal year 1998 resulted in a tax provision of $9.0 million, or
an effective tax rate of 47%, compared to 43% in 1997. The change in rates
year-to-date reflects changes in income in various tax jurisdictions where the
Company does business.
Loss from affiliates was unchanged year to year at $0.2 million.
LIQUIDITY AND CAPITAL RESOURCES.
The Company relies primarily on funds from operations and short-term borrowings
as its sources of liquidity. The Company believes that it has access to ample
financial resources to finance its growth, support ongoing operations and
finance the discontinuance of the Outsourcing Business. The Company's cash and
cash equivalents at March 31, 1998 totaled $11.0 million, compared to $26.3
million at June 30, 1997. The Company had borrowings outstanding under its line
of credit of $24.9 million at March 31, 1998 and no borrowings at June 30, 1997.
Borrowings have increased due to the cash needs of the Company and the delay of
the annual stock sale.
CASH FROM OPERATIONS. Cash outflows from operating activities were $7.9 million
for the nine months ended March 31, 1998 compared to cash inflows of $7.6
million in the first nine months of the previous year. The major components of
the $15.5 million change are a reduction in the provision for doubtful accounts
of $2.9 million in 1998 compared with a $6.8 million increase in the provision
for the same period in 1997. The change in the provision reflects lower reserve
requirements in 1998 than in 1997. Income taxes payments used $3.6 million in
cash in 1998 compared with $10.7 million in 1997 due to smaller tax payments in
1998 compared to 1997. Accrued retirement benefits used $8.5 million more in
cash in 1998 primarily due to higher payments of non-qualified benefits in 1998
compared with 1997.
Deferred rent used $8.9 million more cash in 1998 than 1997 as amounts accrued
in 1997 were partially paid in 1998.
The remaining changes in uses or provision of cash between 1998 and 1997 net to
$4.9 million and are individually portrayed on the consolidated statements of
cash flows.
CASH FROM INVESTING ACTIVITIES. Investing activities required $4.0 million less
cash in 1998 than 1997 primarily due to lower software development costs through
the first nine months of 1998 compared to the same period in 1997.
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<PAGE>
Anticipated commitments of funds are estimated at $11.3 million for the
remainder of fiscal year 1998, primarily related to purchases of capital assets.
The Company's existing revolving credit line matures on January 5, 2001. As of
March 31, 1998, $27.4 million dollars of the credit line was available to the
Company as revolving credit for operating needs, compared to $30.0 million on
March 31, 1997. The Company has a signed letter of commitment to renegotiate and
increase the revolving credit line to levels sufficient to fund the Company's
working capital needs including the Company's exit from the Outsourcing
Business. Pending the renegotiation of the Company's existing line of credit,
certain bank covenants have been waived.
CASH FROM FINANCING ACTIVITIES. The $15.5 million difference in operating cash
was financed by $22.5 million in additional borrowings as the deferral of the
stock sale eliminated the normal cash generation which was $15.0 million in
1997. The Company also redeemed $5.0 million less stock in 1998 than in 1997 due
to changes in requests from retiring and terminating associates.
The Company's ratio of current assets to current liabilities was 1.2 at both
March 31, 1998 and June 30, 1997.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Watson Wyatt is from time to time a defendant in various lawsuits which arise in
the ordinary course of business. These disputes typically involve claims
relating to employment matters or the rendering of professional services. The
management of the Company does not believe that any such currently pending or
threatened litigation is likely to have a material adverse effect on the
business or financial condition of Watson Wyatt.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Amendment to Article 9 of the Restated Bylaws
On April 2, 1998 the shareholders voted to approve an amendment to the Company's
Bylaws. This amendment authorized modifying the formula for determining the
price of the Company's Redeemable Common Stock to eliminate the effect on the
share value of the discontinuation of the Outsourcing Business. The modified
formula, which is called "Modified Formula Book Value," will be used to
determine share price for stock transactions in periods beginning on June 30,
1998.
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<PAGE>
The amendment was approved by the affirmative vote of more than 80% of the
Company's outstanding stock (as required per Section 9 of the Bylaws) as
follows:
For: 15,552,357
Against: 168,768
Abstain: 154,962
In January 1998, the Company deferred the annual sale of Common Stock until the
resolution of important issues of business strategy and financial investments.
The Company does not expect to conduct an annual stock sale before the end of
Fiscal Year 1998.
ITEM 5. OTHER INFORMATION
The Company's Chief Operating Officer, Mr. Paul R. Daoust, has announced his
intention to retire from the Company after nearly twenty-nine years of service,
effective June 30, 1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
None
b. Reports on Form 8-K
The Company filed a Form 8-K with the SEC on April 21, 1998, describing the
discontinuation of the Company's Outsourcing Business. The filing included
pro forma financial statements.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Watson Wyatt & Company
(Registrant)
/S/ A. W. Smith, Jr. May 6, 1998
- ----------------------- ------------
Name: A. W. Smith, Jr. Date
Title: President and Chief
Executive Officer
/S/ Barbara L. Landes May 6, 1998
- --------------------- ------------
Name: Barbara L. Landes Date
Title: Vice President, Finance and
Chief Financial Officer
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 11,004
<SECURITIES> 0
<RECEIVABLES> 141,237
<ALLOWANCES> 4,082
<INVENTORY> 0
<CURRENT-ASSETS> 154,962
<PP&E> 137,787
<DEPRECIATION> 102,537
<TOTAL-ASSETS> 267,022
<CURRENT-LIABILITIES> 124,525
<BONDS> 139,278
0
0
<COMMON> 16,477
<OTHER-SE> (13,532)
<TOTAL-LIABILITY-AND-EQUITY> 267,022
<SALES> 0
<TOTAL-REVENUES> 377,828
<CGS> 305,177
<TOTAL-COSTS> 356,530
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,594
<INCOME-PRETAX> 19,090
<INCOME-TAX> 8,953
<INCOME-CONTINUING> 10,137
<DISCONTINUED> (78,754)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (68,672)
<EPS-PRIMARY> (3.92)
<EPS-DILUTED> 0
</TABLE>