United states securities and exchange commission
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- Bu səhifədəki naviqasiya:
- Years Ended December 31 2016 2015
- Impact of Foreign Currency Exchange Rate Fluctuations
- LIQUIDITY AND FINANCIAL CONDITION Liquidity Executive Summary
- Cash and Short-Term Investments
- Statement of Financial Position Classification
- Short-term Investments Fiduciary Assets
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Free Cash Flow We use free cash flow, defined as cash flow provided by operations minus capital expenditures, as a non-GAAP measure of our core operating performance. This supplemental information related to free cash flow represents a measure not in accordance with U.S. GAAP and should be viewed in addition to, not instead of, our Consolidated Financial Statements and Notes thereto. The use of this non-GAAP measure does not imply or represent the residual cash flow for discretionary expenditures. 34
Impact of Foreign Currency Exchange Rate Fluctuations We conduct business in more than 120 countries, and, because of this, foreign currency exchange rate fluctuations have a significant impact on our business. Foreign currency exchange rate movements may be significant and may distort true period-to-period comparisons of changes in revenue or pretax income. Therefore, to give financial statement users meaningful information about our operations, we have provided an illustration of the impact of foreign currency exchange rate fluctuations on our financial results. The methodology used to calculate this impact isolates the impact of the change in currencies between periods by translating the last year’s revenue, expenses, and net income using the current year’s foreign currency exchange rates. Translating prior year results at current year foreign currency exchange rates, currency fluctuations had a favorable impact of $0.01 on diluted earnings per share during the year ended December 31, 2016 ; currency fluctuations had unfavorable impacts of $0.38 and $0.11 on diluted earnings per share in the years ended 2015 and 2014 , respectively, when prior year results were translated at rates prevalent in those years. Currency fluctuations had unfavorable impacts of $0.01, $0.41, and $0.11 on diluted earnings per share in the years ended December 31, 2016 , 2015 , and 2014 , respectively, when prior year results were translated at rates prevalent in those years. These translations are performed for comparative purposes only and do not impact the accounting policies or practices for amounts included in the Consolidated Financial Statements and Notes thereto. LIQUIDITY AND FINANCIAL CONDITION Liquidity Executive Summary We believe that our balance sheet and strong cash flow provide us with adequate liquidity. Our primary sources of liquidity are cash flow from operations, available cash reserves, committed credit facilities, and debt capacity available through public debt markets, both short and long-term. Our primary uses of liquidity are operating expenses, capital expenditures, acquisitions, share repurchases, pension contributions, and shareholder dividends. We believe that cash flows from operations and available debt financing will be sufficient to meet our liquidity needs, including principal and interest payments on debt obligations, capital expenditures, pension contributions, and anticipated working capital requirements, for the foreseeable future. Cash on our balance sheet includes funds available for general corporate purposes, as well as amounts restricted as to their use. Funds held on behalf of clients in a fiduciary capacity are segregated and shown together with uncollected insurance premiums in Fiduciary assets in the Consolidated Statement of Financial Position, with a corresponding amount in Fiduciary liabilities. Fiduciary funds generally cannot be used for general corporate purposes and are not a source of liquidity. Cash and cash equivalents and Short-term investments decreased $19 million to $721 million in 2016 as compared to 2015 . During 2016 , cash flow from operating activities increased $317 million to $2.3 billion . Additional sources of funds in 2016 included proceeds from the sale of businesses of $107 million and issuances of debt, net of repayments of $522 million . The primary uses of funds in 2016 included share repurchases of $1.3 billion , acquisitions of businesses of $879 million , dividends to shareholders of $345 million , and capital expenditures of $222 million . To manage unforeseen situations, we have committed credit lines of approximately $1.3 billion and we endeavor to manage our obligations to ensure we maintain our current investment grade ratings. At December 31, 2016 , we had no borrowings on these credit lines.
Net cash provided by operating activities during 2016 increased $317 million in 2015 , or 16% , to $2.3 billion . This amount represents net income reported by the Company, as adjusted for gains or losses on sales of businesses, financial instruments and foreign exchange, and our non-cash expenses, which include share-based compensation, depreciation, and amortization, as well as changes in working capital that relate primarily to the timing of payments of accounts payable and accrued liabilities and collection of receivables. The increase from the prior year was primarily driven by net income, as adjusted for non-cash charges, and reductions in pension contributions. 35
We expect cash generated by operations for 2016 to be sufficient to service our debt and contractual obligations, finance capital expenditures, purchases shares under our share repurchase program, and pay dividends to our shareholders. Although cash from operations is expected to be sufficient to service these activities, we have the ability to access the commercial paper markets or borrow under our credit facilities to accommodate any timing differences in cash flows. We have committed credit facilities of approximately $1.3 billion , all of which was available at December 31, 2016 , and can access these facilities on a same day or next day basis. Additionally, under current market conditions, we believe that we could access capital markets to obtain debt financing for longer-term funding, if needed.
Cash used for investing activities in 2016 was $954 million . The primary drivers of the cash used for investing activities were $879 million for acquisitions of businesses, net of cash acquired, $222 million for capital expenditures, and $21 million of net purchases of long-term investments, partially offset by $107 million of sale of businesses and $61 million of net sales of short-term investments. Cash used for investing activities in 2015 was $138 million . The primary drivers of the cash flow used for investing activities were $290 million for capital expenditures, $46 million of net purchases of long-term investments, and $16 million for acquisitions of businesses, net of cash acquired, partially offset by sales of businesses of $205 million and net sales of short-term investments of $9 million. Cash used for investing activities in 2014 was $545 million . The primary drivers of the cash used for investing activities were $479 million for acquisitions of businesses, net of cash acquired, and $256 million for capital expenditures, partially offset by net sales of long-term investments, sale of businesses of $48 million, and net sales of short-term investments of $32 million. Financing Activities Cash used for financing activities during 2016 was $1.3 billion . The primary drivers of the cash used for financing activities were share repurchases of $1.3 billion , dividends paid to shareholders of $345 million , and net cash payments of $129 million related to issuance of shares, partially offset by issuances of debt, net of repayments , of $522 million . Cash used for financing activities during 2015 was $1.7 billion . The primary drivers of the cash flow used for financing activities were share repurchases of $1.6 billion, dividends paid to shareholders of $323 million, and net cash payments of $30 million related to issuance of shares, partially offset by issuances of debt, net of repayments, of $253 million. Cash used for financing activities during 2014 was $1.3 billion . The primary drivers of the cash flow used for financing activities were share repurchases of $2.3 billion, dividends paid to shareholders of $273 million, and issuance of shares for employee benefit plans of $105 million, partially offset by issuances of debt, net of repayments, of $1.3 billion. Cash and Short-Term Investments At December 31, 2016 , our Cash and cash equivalents and Short-term investments were $721 million , a decrease of $19 million from December 31, 2015 , primarily related to share repurchases of $1.3 billion , payments for the acquisition of businesses of $879 million , cash dividends of $345 million , capital expenditures of $222 million , and cash contributions to our major defined benefit plans of $123 million , partially offset by $2.3 billion in Cash flow from operating activities, the net issuances of debt of $522 million , and proceeds for the sale of businesses of $107 million . Of the total balance as of December 31, 2016 , $82 million was restricted as to its use, which was comprised of $53 million of operating funds in the U.K., as required by the FCA, and $29 million held as collateral for various business purposes. At December 31, 2016 , $1.9 billion of cash and cash equivalents and short-term investments were held in the U.S. and overdrawn cash and cash equivalents and short-term investments of $1.2 billion were held in other countries. Due to differences in tax rates, the repatriation of funds from certain countries into the U.S. could have an unfavorable tax impact. We maintain multi-currency cash pools with third-party banks in which various Aon entities participate. Individual Aon entities are permitted to overdraw on their individual accounts provided the overall balance does not fall below zero. At December 31, 2016 and 2015 , non-U.S. cash balances of one or more entities were negative; however, the overall balance was positive. At December 31, 2015 , our Cash and cash equivalents and Short-term investments were $740 million , a decrease of $28 million from December 31, 2014 , primarily related to share repurchases of $1.6 billion and dividends to shareholders of $323 million, partially offset by $2.0 billion in Cash flow from operating activities and the net issuances of debt of $253 million. Of the total balance as of December 31, 2015 , $105 million was restricted as to its use, which was comprised of $65 million of operating funds in the U.K., as required by the FCA, and $40 million held as collateral for various business purposes. At
In our capacity as an insurance broker or agent, we collect premiums from insureds and, after deducting our commission, remit the premiums to the respective insurance underwriter. We also collect claims or refunds from underwriters on behalf of insureds, which are then returned to the insureds. Unremitted insurance premiums and claims are held by us in a fiduciary capacity. In addition, some of our outsourcing agreements require us to hold funds on behalf of clients to pay obligations on their behalf. The levels of fiduciary assets and liabilities can fluctuate significantly depending on when we collect the premiums, claims and refunds, make payments to underwriters and insureds, collect funds from clients and make payments on their behalf, and from the impact of foreign currency movements. Fiduciary assets, because of their nature, are generally invested in very liquid securities with highly-rated, credit-worthy financial institutions. In our Consolidated Statements of Financial Position, the amount we report for Fiduciary assets and Fiduciary liabilities are equal. Our Fiduciary assets included cash and short-term investments of $3.8 billion and $3.4 billion at December 31, 2016 and December 31, 2015 , respectively, and fiduciary receivables of $5.7 billion and $6.5 billion at December 31, 2016 and 2015 , respectively. While we earn investment income on the fiduciary assets held in cash and investments, the cash and investments cannot be used for general corporate purposes. As disclosed in Note 13 “Fair Value Measurements and Financial Instruments” of the Notes to Consolidated Financial Statements, the majority of our investments carried at fair value are money market funds. These money market funds are held throughout the world with various financial institutions. We are not aware of any market liquidity issues that would materially impact the fair value of these investments. As of December 31, 2016 , our investments in money market funds had a fair value of $1.4 billion and are reported as Short-term investments or Fiduciary assets in the Consolidated Statements of Financial Position depending on their nature and initial maturity. The following table summarizes our Fiduciary assets and non-fiduciary Cash and cash equivalents and Short-term investments as of December 31, 2016 (in millions):
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