Business Context and Reporting Period
This Form 8-K is filed by Willis Group Holdings Limited (Willis Group Holdings) on June 21, 2006. The filing serves to retrospectively adjust the Company's Annual Report on Form 10-K for the year ended December 31, 2005, to reflect changes in accounting policies and internal reporting structures effective January 1, 2006. Additionally, the filing provides financial information regarding subsidiaries that may guarantee debt securities under a new shelf registration.
Key Financial Metrics
The filing does not provide specific numerical values for revenue, profit, cash flow, margins, debt, or liquidity within the text of this report. Instead, it references attached exhibits containing adjusted historical financial data for the five years ended December 31, 2005, and adjusted audited consolidated financial statements for the three years ended December 31, 2005. The filing explicitly states that the changes in revenue analysis methodology have no impact on the financial statements.
Material Changes Versus Prior Period
The Company implemented three significant changes effective January 1, 2006, which required retrospective adjustments to prior period reporting:
- Share-based Compensation: Adoption of SFAS 123R using the modified-retrospective transition method. Compensation cost recognized from January 1, 2006, includes costs for unvested payments granted prior to 2006 (based on original SFAS 123) and new grants (based on SFAS 123R).
- Pension Accounting: Changed the methodology for determining the market-related value of UK pension plan assets from a calculated value (recognizing gains/losses over five years) to a fair value basis. This aligns the UK methodology with that already used for US plan assets.
- Revenue Analysis: Revised the internal reporting structure. Revenues for North America Global Markets and International Global Markets, previously reported within the Global division, are now reported in the North America and International divisions, respectively. Revenue allocation methods between Global and North America divisions were also refined.
Guidance, Outlook, and Risks
Shelf Registration: Willis Group Holdings intends to file a new shelf registration on Form S-3 to offer debt securities, preferred stock, common stock, and other securities. Subsidiaries Trinity Acquisition Limited and Willis North America Inc. may also offer debt securities guaranteed by certain subsidiaries.
Regulatory Compliance: To comply with Rule 3-10 of Regulation S-X, the filing includes specific financial information for Trinity Acquisition Limited in the adjusted financial statements (Exhibit 99.03 and 99.04) to support the potential issuance of subsidiary debt securities.
Management Commentary: Management states that the shift to fair value for UK pension assets more fairly reflects the actual value of plan assets. The filing notes that, other than the specific adjustments described, the Form 8-K does not modify or update disclosures in the Form 10-K or Form 10-Q.
Investor Verification Checklist
- Review Exhibit 99.01 for adjusted selected historical financial data for the five years ended December 31, 2005.
- Examine Exhibit 99.02 for the adjusted Management's Discussion and Analysis (MD&A) for the year ended December 31, 2005.
- Analyze Exhibit 99.03 for adjusted audited consolidated financial statements for the three years ended December 31, 2005, specifically Footnote 19 regarding Trinity Acquisition Limited.
- Check Exhibit 99.04 for unaudited condensed consolidated statements for the quarter ended March 31, 2006, including Footnote 13 regarding Trinity Acquisition Limited.
- Verify the impact of the SFAS 123R adoption on share-based compensation expenses in the adjusted statements.