Segment Information

12 Months Ended

Jun. 30, 2012

Segment Information [Abstract]

Segment Information

Note 16 — Segment Information

Towers Watson has four reportable operating segments or practice areas:

• Benefits
• Risk and Financial Services
• Talent and Rewards
• Exchange Solutions

Towers Watson's chief operating decision maker is the chief executive officer. It was determined that Towers Watson operational data used by the chief operating decision maker is that of the fourreportable segments. Management bases strategic goals and decisions on these segments and the data presented below is used to assess the adequacy of strategic decisions, the method of achieving these strategies and related financial results.

In connection with the acquisition of Extend Health, Inc. in May 2012,we added a fourth segment called Exchange Solutions. This was determined as a stand-alone fourth segment due to the differences between the Extend Health's business strategy, market and operating margins and that of the other three segments.

Management evaluates the performance of its segments and allocates resources to them based on net operating income on a pre-bonus, pre-tax basis. Revenue on our consolidated statement of operations includes reimbursable expenses which are billable amounts that were directly incurred on behalf of our clients. Our revenue for our reportable segments shown in the table below is net of reimbursable expenses.

The table below presents specified information about reported segments as of and for the fiscal year ended June 30, 2012:

			Risk and		Talent and		Exchange
	Benefits		Financial Services		Rewards		Solutions		Total
Revenue (net of reimbursable expenses)	$	1,922,689	$	817,591	$	570,537	$	3,617	$	3,314,434
Net operating income (loss)		646,418		211,601		113,608		(714)		970,913
Depreciation and amortization		23,219		8,443		7,401		99		39,162
Receivables		548,629		185,950		140,575		619		875,773

The table below presents specified information about reported segments as of and for the fiscal year ended June 30, 2011:

			Risk and		Talent and		Exchange
	Benefits		Financial Services		Rewards		Solutions		Total
Revenue (net of reimbursable expenses)	$	1,857,047	$	740,721	$	543,507	$	-	$	3,141,275
Net operating income		609,133		181,970		96,791		-		887,894
Depreciation and amortization		21,888		6,239		7,342		-		35,469
Receivables		460,492		167,709		119,921		-		748,122

The table below presents specified information about reported segments as of and for the fiscal year ended June 30, 2010:

			Risk and		Talent and		Exchange
	Benefits		Financial Services		Rewards		Solutions		Total
Revenue (net of reimbursable expenses)	$	1,470,817	$	494,961	$	351,709	$	-	$	2,317,487
Net operating income		441,159		112,373		17,417		-		570,949
Depreciation and amortization		26,509		6,520		8,736		-		41,765
Receivables		400,169		132,487		107,465		-		640,121

A reconciliation of the information reported by segment to the consolidated amounts follows as of and for the fiscal years ended June 30, (in thousands):

		Fiscal Year Ended June 30,
		2012		2011		2010
Revenue:
	Total segment revenue	$	3,314,434	$	3,141,275	$	2,317,487
	Reimbursable expenses and other		103,302		118,176		70,342
	Revenue	$	3,417,736	$	3,259,451	$	2,387,829
Net Operating Income:
	Total segment net operating income	$	970,913	$	887,894	$	570,949
	Differences in allocation methods (1)		(7,078)		18,934		7,012
	Amortization of intangibles		(65,575)		(51,989)		(31,280)
	Transaction and integration expenses		(86,130)		(100,535)		(87,644)
	Stock-based compensation(2)		(42,308)		(76,000)		(48,006)
	Discretionary compensation		(318,455)		(337,694)		(236,154)
	Change in accounting method for pension(3)		(2,963)		-		-
	Other, net		(48,488)		(27,447)		(10,432)
	Income from operations	$	399,916	$	313,163	$	164,445
Depreciation and Amortization Expense:
	Total segment expense	$	39,162	$	35,469	$	41,765
	Intangible asset amortization, not allocated to segments		65,575		51,989		31,280
	Information technology and other		48,154		43,117		28,039
	Total depreciation and amortization expense	$	152,891	$	130,575	$	101,084
Receivables:
	Total segment receivables — billed and unbilled (4)	$	875,773	$	748,122	$	640,121
	Valuation differences and other		8,578		30,808		(2,607)
	Total billed and unbilled receivables		884,351		778,930		637,514
	Assets not reported by segment		4,472,627		4,320,020		3,936,103
	Total assets	$	5,356,978	$	5,098,950	$	4,573,617

• Depreciation, general and administrative, pension, and medical costs are allocated to our segments based on budgeted expenses determined at the beginning of the fiscal year as management believes that these costs are largely uncontrollable to the segment. To the extent that the actual expense base upon which allocations are made differs from the forecast/budget amount, a reconciling item will be created between internally allocated expenses and the actual expense that we report for GAAP purposes.
• Stock-based compensation excludes RSUs granted in conjunction with our performance bonus, which are included in discretionary compensation.
• The Company had a net impact of $3.0million during the year as a result of the cumulative effect of the change in accounting method (see Note 1) of $6.2 million offset by a reduction in net periodic cost of $3.2million.
• Total segment receivables, which reflect the receivable balances used by management to make business decisions, are included for management reporting purposes net of deferred revenue.

The following represents total revenue and long-lived assets information by geographic area as and for the fiscal years ended June 30:

	Revenue						Long-Lived Assets
	2012		2011		2010		2012		2011		2010
North America	$	1,858,521	$	1,865,299	$	1,325,876	$	2,263,592	$	1,536,071	$	1,331,241
Europe		1,267,585		1,158,567		888,076		1,110,367		1,607,604		1,352,990
Rest of World		291,630		235,585		173,877		66,131		63,650		49,232
	$	3,417,736	$	3,259,451	$	2,387,829	$	3,440,090	$	3,207,325	$	2,733,463

Revenue is based on the country of domicile for the legal entity that originated the revenue. Exclusive of the United States and the United Kingdom, revenue from no single country constituted more than 10% of consolidated revenue. Revenue from no single customer constituted more than one percent of consolidated revenue.