##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2009
 OR
 o
    
    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: 001-16159
 WATSON WYATT WORLDWIDE, INC.
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    52-2211537
(I.R.S. Employer Identification No.)901 N. Glebe Road Arlington, VA
    
    22203(Address of principal executive offices)
    
    (zip code)
 (703) 258-8000
  þ o
  o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o(Do not check if a smaller reporting
company)
    
    Smaller reporting company o
  o þ




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##### 



WATSON WYATT WORLDWIDE, INC.
INDEX TO FORM 10-Q
  PART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (Unaudited)Condensed Consolidated Statements of OperationsThree
Months Ended September 30, 2009 and 2008
    
    
    1Condensed Consolidated Balance SheetsSeptember 30, 2009
and June 30, 2009
    
    
    2Condensed Consolidated Statements of Cash FlowsThree
Months Ended September 30, 2009 and 2008
    
    
    3Condensed Consolidated Statement of Changes in
Stockholders EquityThree Months Ended September 30, 2009
    
    
    4Notes to the Condensed Consolidated Financial Statements
    
    
    5Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    24Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    41Item 4.
    
    Controls and Procedures
    
    
    41PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    42Item 1A.
    
    Risk Factors
    
    
    42Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    43Item 3.
    
    Defaults Upon Senior Securities
    
    
    43Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    43Item 5.
    
    Other Information
    
    
    43Item 6.
    
    Exhibits
    
    
    44Signatures
    
    
    45Certifications
    
    
    46EX-10.23EX-10.24EX-10.25EX-31.1EX-31.2EX-32




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WATSON WYATT WORLDWIDE, INC.


Condensed Consolidated Statements of Operations
 Three months ended September 30,2009
    
    
    2008Revenue
    
    $
    401,345
    
    
    $
    426,126Costs of providing services:Salaries and employee benefits
    
    
    236,081
    
    
    
    235,879Professional and subcontracted services
    
    
    16,159
    
    
    
    26,315Occupancy, communications and other
    
    
    39,872
    
    
    
    49,997General and administrative expenses
    
    
    39,770
    
    
    
    43,887Depreciation and amortization
    
    
    17,934
    
    
    
    18,864Transaction and integration expenses
    
    
    8,388
    
    
    
    358,204
    
    
    
    374,942Income from operations
    
    
    43,141
    
    
    
    51,184Income from affiliates
    
    
    947
    
    
    
    1,695Interest income
    
    
    350
    
    
    
    1,031Interest expense
    
    
    (449
    )
    
    
    (569
    )Other non-operating income / (expense)
    
    
    1,142
    
    
    
    (19
    )Income before income taxes
    
    
    45,131
    
    
    
    53,322Provision for income taxes
    
    
    15,350
    
    
    
    18,162Net income
    
    $
    29,781
    
    
    $
    35,160Earnings per share:Net income  Basic
    
    $
    0.70
    
    
    $
    0.82Net income  Diluted
    
    $
    0.69
    
    
    $
    0.82Weighted average shares of common stock,
basic (000)
    
    
    42,673
    
    
    
    42,935Weighted average shares of common stock,
diluted (000)
    
    
    42,888
    
    
    
    43,085
 
 1




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##### Table of Contents



WATSON WYATT WORLDWIDE, INC.


Condensed Consolidated Balance Sheets
 September 30,
    
    
    June 30,2009
    
    
    2009AssetsCash and cash equivalents
    
    $
    111,389
    
    
    $
    209,832Receivables from clients:Billed, net of allowances of $5,207 and $4,452
    
    
    185,148
    
    
    
    190,991Unbilled, at estimated net realizable value
    
    
    130,786
    
    
    
    111,419315,934
    
    
    
    302,410Deferred income taxes
    
    
    10,666
    
    
    
    13,739Other current assets
    
    
    60,151
    
    
    
    39,619Total current assets
    
    
    498,140
    
    
    
    565,600Investment in affiliates
    
    
    24,235
    
    
    
    23,361Fixed assets, net
    
    
    168,855
    
    
    
    174,857Deferred income taxes
    
    
    109,539
    
    
    
    111,912Goodwill
    
    
    540,896
    
    
    
    542,754Intangible assets, net
    
    
    180,492
    
    
    
    186,233Other assets
    
    
    21,865
    
    
    
    21,602Total Assets
    
    $
    1,544,022
    
    
    $
    1,626,319LiabilitiesAccounts payable and accrued liabilities
    
    $
    144,081
    
    
    $
    123,073Accrued salary and discretionary compensation
    
    
    55,798
    
    
    
    162,351Other current liabilities
    
    
    46,483
    
    
    
    51,716Total current liabilities
    
    
    246,362
    
    
    
    337,140Revolving credit facility
    
    
    10,000
    
    
    
    Accrued retirement benefits
    
    
    272,599
    
    
    
    292,555Deferred rent and accrued lease losses
    
    
    27,516
    
    
    
    28,434Other noncurrent liabilities
    
    
    114,350
    
    
    
    113,554Total Liabilities
    
    
    670,827
    
    
    
    771,683Commitments and contingenciesStockholders EquityClass A Common Stock  $.01 par value:99,000,000 shares authorized;
43,813,451 and 43,813,451 issued and
42,647,702 and 42,657,431 outstanding
    
    
    438
    
    
    
    438Additional paid-in capital
    
    
    447,350
    
    
    
    452,938Treasury stock, at cost - 1,165,749 and 1,156,020 shares
    
    
    (61,079
    )
    
    
    (63,299
    )Retained earnings
    
    
    635,216
    
    
    
    608,634Accumulated other comprehensive loss
    
    
    (149,676
    )
    
    
    (145,073
    )Total Stockholders Equity
    
    
    872,249
    
    
    
    853,638Non-controlling interest
    
    
    946
    
    
    
    998Total Equity
    
    
    873,195
    
    
    
    854,636Total Liabilities and Total Equity
    
    $
    1,544,022
    
    
    $
    1,626,319
 
 2




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WATSON WYATT WORLDWIDE, INC.
 
 Condensed Consolidated Statements of Cash Flows
 Three months ended September 30,2009
    
    
    2008Cash flows used in operating activities:Net income
    
    $
    29,781
    
    
    $
    35,160Adjustments to reconcile net income to net cash
from operating activities:Provision for doubtful receivables from clients
    
    
    1,407
    
    
    
    3,615Depreciation
    
    
    14,538
    
    
    
    14,827Amortization of intangible assets
    
    
    3,396
    
    
    
    4,037Provision for (benefit from) deferred income taxes
    
    
    6,080
    
    
    
    (7,946
    )Income from affiliates
    
    
    (947
    )
    
    
    (1,695
    )Distribution from affiliates
    
    
    146
    
    
    
    144Other, net
    
    
    (1,578
    )
    
    
    1,663Changes in operating assets and liabilities (net of business acquisitions)Receivables from clients
    
    
    (14,931
    )
    
    
    1,492Other current assets
    
    
    (20,532
    )
    
    
    (7,503
    )Other assets
    
    
    (263
    )
    
    
    2,162Accounts payable and accrued liabilities
    
    
    (83,125
    )
    
    
    (100,646
    )Income taxes payable and deferred
    
    
    483
    
    
    
    (3,190
    )Accrued retirement benefits
    
    
    (19,956
    )
    
    
    (2,409
    )Deferred rent and accrued lease losses
    
    
    (918
    )
    
    
    (968
    )Other noncurrent liabilities
    
    
    3,733
    
    
    
    (12,328
    )Cash flows used in operating activities:
    
    
    (82,686
    )
    
    
    (73,585
    )Cash flows used in investing activities:Business acquisitions and contingent consideration payments
    
    
    
    
    
    
    (538
    )Purchases of fixed assets
    
    
    (6,166
    )
    
    
    (10,013
    )Capitalized software costs
    
    
    (5,079
    )
    
    
    (5,594
    )Contingent proceeds from divestitures
    
    
    1,142
    
    
    
    (19
    )Cash flows used in investing activities:
    
    
    (10,103
    )
    
    
    (16,164
    )Cash flows (used in) from financing activities:Borrowings under Credit Facility
    
    
    10,000
    
    
    
    105,000Dividends paid
    
    
    (3,199
    )
    
    
    (3,195
    )Repurchases of common stock
    
    
    (13,328
    )
    
    
    (73,613
    )Issuances of common stock and excess tax benefit
    
    
    1,516
    
    
    
    1,535Cash flows (used in) from financing activities:
    
    
    (5,011
    )
    
    
    29,727Effect of exchange rates on cash
    
    
    (643
    )
    
    
    2,865Decrease in cash and cash equivalents
    
    
    (98,443
    )
    
    
    (57,157
    )Cash and cash equivalents at beginning of period
    
    
    209,832
    
    
    
    124,632Cash and cash equivalents at end of period
    
    $
    111,389
    
    
    $
    67,475Supplemental disclosures:Cash paid for interest
    
    $
    450
    
    
    $
    395Cash paid for income taxes, net of refunds
    
    $
    17,319
    
    
    $
    14,251
 
 3




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WATSON WYATT WORLDWIDE, INC.
 
 Condensed Consolidated Statement of Changes in Stockholders Equity
 Class ACommonStock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AccumulatedOutstanding
    
    
    Class A
    
    
    Additional
    
    
    Treasury
    
    
    
    
    
    
    Other(number of shares,
    
    
    Common
    
    
    Paid-in
    
    
    Stock,
    
    
    Retained
    
    
    Comprehensivein thousands)
    
    
    Stock
    
    
    Capital
    
    
    at Cost
    
    
    Earnings
    
    
    Loss
    
    
    TotalBalance at June 30, 2009
    
    
    42,657
    
    
    $
    438
    
    
    $
    452,938
    
    
    $
    (63,299
    )
    
    $
    608,634
    
    
    $
    (145,073
    )
    
    $
    853,638Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,781
    
    
    
    
    
    
    
    29,781Foreign currency
translation adjustment,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,603
    )
    
    
    (4,603
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,178Cash dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,199
    )
    
    
    
    
    
    
    (3,199
    )Repurchases of common stock
    
    
    (305
    )
    
    
    
    
    
    
    
    
    
    
    (13,328
    )
    
    
    
    
    
    
    
    
    
    
    (13,328
    )Issuances of common stock
and excess tax benefit
    
    
    295
    
    
    
    
    
    
    
    (5,588
    )
    
    
    15,548
    
    
    
    
    
    
    
    
    
    
    
    9,960Balance at September 30, 2009
    
    
    42,647
    
    
    $
    438
    
    
    $
    447,350
    
    
    $
    (61,079
    )
    
    $
    635,216
    
    
    $
    (149,676
    )
    
    $
    872,249
 
 4




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WATSON WYATT WORLDWIDE, INC.
 
 Notes to the Condensed Consolidated Financial Statements
 Note 1  Basis of Presentation.
    Note 2  Proposed Merger with Towers, Perrin, Forster & Crosby, Inc.
     5




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6




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Note 3  Segment Information.
  (1)
    
    Benefits Group(2)
    
    Human Capital Group(3)
    
    Technology and Administration Solutions Group(4)
    
    Investment Consulting Group(5)
    
    Insurance & Financial Services Group
 7




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Technology and
    
    Investment
    
    Insurance &Benefits
    
    Human Capital
    
    Administration
    
    Consulting
    
    Financial ServicesGroup
    
    Group
    
    Solutions
    
    Group
    
    Group
    
    Other
    
    TotalRevenue (net of
reimbursable
expenses)
    
    $
    223,670
    
    
    $
    37,680
    
    
    $
    55,457
    
    
    $
    44,729
    
    
    $
    24,182
    
    
    $
    10,616
    
    
    $
    396,334Net operating income
    
    
    63,417
    
    
    
    2,684
    
    
    
    17,083
    
    
    
    15,123
    
    
    
    292
    
    
    
    2,627
    
    
    
    101,226Receivables
    
    
    211,389
    
    
    
    32,624
    
    
    
    27,201
    
    
    
    28,253
    
    
    
    20,073
    
    
    
    7,883
    
    
    
    327,423
  Technology and
    
    Investment
    
    Insurance &Benefits
    
    Human Capital
    
    Administration
    
    Consulting
    
    Financial ServicesGroup
    
    Group
    
    Solutions
    
    Group
    
    Group
    
    Other
    
    TotalRevenue (net of
reimbursable
expenses)
    
    $
    232,705
    
    
    $
    49,602
    
    
    $
    53,218
    
    
    $
    42,107
    
    
    $
    27,806
    
    
    $
    11,447
    
    
    $
    416,885Net operating income
    
    
    61,523
    
    
    
    6,842
    
    
    
    14,461
    
    
    
    12,527
    
    
    
    834
    
    
    
    3,391
    
    
    
    99,578Receivables
    
    
    243,394
    
    
    
    45,170
    
    
    
    20,681
    
    
    
    29,827
    
    
    
    27,355
    
    
    
    7,985
    
    
    
    374,412
  8




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As of and For theThree Months Ended September 302009
    
    
    2008Revenue:Total segment revenue
    
    $
    396,334
    
    
    $
    416,885Reimbursable expenses and other not included in
total segment revenue
    
    
    5,011
    
    
    
    9,241Consolidated revenue
    
    $
    401,345
    
    
    $
    426,126Net Operating Income:Total segment net operating income
    
    $
    101,226
    
    
    $
    99,578Income from affiliates
    
    
    947
    
    
    
    1,695Differences in allocation methods (1)
    
    
    (372
    )
    
    
    (2,960
    )Discretionary compensation
    
    
    (47,963
    )
    
    
    (42,258
    )Other, net
    
    
    (8,707
    )
    
    
    (2,733
    )Income before income taxes
    
    $
    45,131
    
    
    $
    53,322Receivables:Total segment receivables  billed and unbilled (2)
    
    $
    327,423
    
    
    $
    374,412Net valuation differences
    
    
    (11,489
    )
    
    
    (13,762
    )Total billed and unbilled receivables
    
    
    315,934
    
    
    
    360,650Assets not reported by segment
    
    
    1,228,088
    
    
    
    1,212,224Consolidated total assets
    
    $
    1,544,022
    
    
    $
    1,572,874
 
 (1)
    
    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 U.S. GAAP
purposes.(2)
    
    Total segment receivables, which reflects the receivable balances used by management to
make business decisions, are included for management reporting purposes net of deferred revenue 
cash collections and invoices generated in excess of revenue recognized in the segment revenue. 9




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Note 4  Share-based Compensation.
  2001 Deferred Stock Unit Plan for Selected Employees
 Deferred Stock Units
 SBI Program
   10




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Amended Compensation Plan for Outside Directors
   2001 Employee Stock Purchase Plan
  2000 Long-Term Incentive Plan
    11




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Three Months EndedSeptember 30,2009
    
    2008Stock option grants:Risk-free interest rate
    
    
    1.4
    %
    
    
    Expected lives in years
    
    
    3
    
    
    
    Expected volatility
    
    
    37.0
    %
    
    
    Dividend yield
    
    
    0.7
    %
    
    
    Weighted-average grant date fair value of options granted
    
    $
    10.21
    
    
    
    Number of shares granted
    
    
    125,648
    
    
    
    
 Note 5  Retirement Benefits.
 Defined Benefit Plans
  Components of Net Periodic Benefit Cost for Defined Benefit Pension Plans
  Three Months Ended September 30,2009
    
    
    2008North
    
    
    
    
    
    
    NorthAmerica
    
    
    U.K.
    
    
    America
    
    
    U.K.Service Cost
    
    $
    5,983
    
    
    $
    1,512
    
    
    $
    7,160
    
    
    $
    1,851Interest Cost
    
    
    12,293
    
    
    
    5,265
    
    
    
    12,066
    
    
    
    6,200Expected Return on Plan Assets
    
    
    (11,553
    )
    
    
    (4,668
    )
    
    
    (12,826
    )
    
    
    (6,314
    )Amortization of Net Loss/(Gain)
    
    
    3,542
    
    
    
    703
    
    
    
    1,867
    
    
    
    (100
    )Amortization of Prior Service
(Credit)/Cost
    
    
    (406
    )
    
    
    11
    
    
    
    (565
    )
    
    
    13Net Periodic Benefit Cost
    
    $
    9,859
    
    
    $
    2,823
    
    
    $
    7,702
    
    
    $
    1,650
 12




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North America
    
    U.K.Discount rate
    
    
    7.21
    %
    
    
    6.30
    %Expected long-term rate of return on assets
    
    
    8.61
    %
    
    
    6.81
    %Rate of increase in compensation levels
    
    
    3.29
    %
    
    
    5.45
    %
 Employer Contributions
   Defined Contribution Plans
   Health Care Benefits
  Postretirement Benefits
  13




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Components of Net Periodic Benefit Cost for Other Postretirement Plans
  Three Months Ended September 302009
    
    
    2008Service cost
    
    $
    297
    
    
    $
    329Interest cost
    
    
    653
    
    
    
    724Expected return on plan assets
    
    
    
    
    
    
    Amortization of unrecognized net gain
    
    
    (275
    )
    
    
    (201
    )Amortization of prior service credit
    
    
    (143
    )
    
    
    (166
    )Net periodic benefit cost
    
    $
    532
    
    
    $
    686
 Employer Contributions
  Note 6  Goodwill and Intangible Assets.
  Technology
    
    
    
    
    
    
    Insuranceand
    
    
    
    
    
    
    andHuman
    
    
    Administration
    
    
    Investment
    
    
    FinancialBenefits
    
    
    Capital
    
    
    Solutions
    
    
    Consulting
    
    
    ServicesGroup
    
    
    Group
    
    
    Group
    
    
    Group
    
    
    Group
    
    
    All Other
    
    
    TotalBalance as of
June 30, 2009
    
    $
    343,158
    
    
    $
    30,644
    
    
    $
    51,796
    
    
    $
    52,308
    
    
    $
    63,634
    
    
    $
    1,214
    
    
    $
    542,754Goodwill acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Translation
adjustment
    
    
    2,100
    
    
    
    (42
    )
    
    
    (1,324
    )
    
    
    (867
    )
    
    
    (1,725
    )
    
    
    
    
    
    
    (1,858
    )Balance as of
September 30, 2009
    
    $
    345,258
    
    
    $
    30,602
    
    
    $
    50,472
    
    
    $
    51,441
    
    
    $
    61,909
    
    
    $
    1,214
    
    
    $
    540,896
 14




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Trademark &
    
    
    Customer related
    
    
    Core/developed
    
    
    Non-competetrade name
    
    
    intangible
    
    
    technology
    
    
    agreements
    
    
    TotalBalance as of
June 30, 2009
    
    $
    100,511
    
    
    $
    78,843
    
    
    $
    6,757
    
    
    $
    122
    
    
    $
    186,233Intangible assets
acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization expense
    
    
    
    
    
    
    (2,235
    )
    
    
    (1,106
    )
    
    
    (55
    )
    
    
    (3,396
    )Translation adjustment
    
    
    (2,902
    )
    
    
    611
    
    
    
    (58
    )
    
    
    4
    
    
    
    (2,345
    )Balance as of
September 30, 2009
    
    $
    97,609
    
    
    $
    77,219
    
    
    $
    5,593
    
    
    $
    71
    
    
    $
    180,492
  September 30, 2009
    
    
    June 30, 2009Gross
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationIntangible assets:Trademark & trade name
    
    $
    98,011
    
    
    $
    402
    
    
    $
    100,913
    
    
    $
    402Customer related intangibles
    
    
    109,432
    
    
    
    32,213
    
    
    
    108,821
    
    
    
    29,978Core/developed technology
    
    
    23,467
    
    
    
    17,874
    
    
    
    23,525
    
    
    
    16,768Non-compete agreements
    
    
    1,277
    
    
    
    1,206
    
    
    
    1,273
    
    
    
    1,151Total intangible assets
    
    $
    232,187
    
    
    $
    51,695
    
    
    $
    234,532
    
    
    $
    48,299
   15




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##### Table of Contents



Fiscal year ending June 30:
    
    Amount2010
    
    $
    9,9482011
    
    
    10,2652012
    
    
    10,0012013
    
    
    8,9262014
    
    
    8,926Thereafter
    
    
    34,817Total
    
    $
    82,883
 Note 7  Earnings Per Share.
  Three Months Ended September 30,2009
    
    
    2008Net income
    
    $
    29,781
    
    
    $
    35,160Weighted average outstanding shares of
common stock
    
    
    42,673
    
    
    
    42,935Dilutive effect of employee stock plans
    
    
    215
    
    
    
    150Common stock and stock equivalents
    
    
    42,888
    
    
    
    43,085Earnings per share:Net income-Basic
    
    $
    0.70
    
    
    $
    0.82Net income-Diluted
    
    $
    0.69
    
    
    $
    0.82
 16




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Note 8  Investments in Affiliates.
 PCIC
       June 30,2009
    
    2008Revenue
    
    $
    44,797
    
    
    $
    46,788Operating Expenses
    
    
    20,517
    
    
    
    35,258Income before taxes
    
    
    24,280
    
    
    
    11,530Net income
    
    $
    16,012
    
    
    $
    7,601
 17




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##### Table of Contents



December 31,2008
    
    
    2007Current assets
    
    $
    194,620
    
    
    $
    172,639Noncurrent assets
    
    
    66,655
    
    
    
    64,552Total assets
    
    $
    261,275
    
    
    $
    237,191Current liabilities
    
    $
    27,984
    
    
    $
    28,751Noncurrent liabilities
    
    
    201,458
    
    
    
    198,584Stockholders equity
    
    
    31,833
    
    
    
    9,856Total liabilities and stockholders equity
    
    $
    261,275
    
    
    $
    237,191
 Fifth Quadrant
  Dubai
  IFA
    18




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##### Table of Contents



Note 9  Comprehensive Income/(Loss).
  Note 10  Commitments and Contingent Liabilities.
  Letters of Credit:
  Indemnification Agreements:
 Legal Proceedings
  Watson Wyatt v. SBC Holdings, Inc. (Stroh Brewery Company):
 19




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##### Table of Contents



Department of Labor Investigation:
 ExxonMobil Superannuation Plan (Australia)
  Note 11  Recent Accounting Pronouncements
 Adopted in fiscal year 2009
 The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No. 162
 20




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21




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##### Table of Contents



Not yet adopted
   Note 12  Income Taxes.
     Open Tax Years(fiscal year ending)United States  Federal
    
    2006 and forwardUnited States  Various States
    
    2005 and forwardCanada  Federal
    
    2005 and forwardGermany
    
    2003 and forwardUnited Kingdom
    
    2007 and forward
 22




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##### Table of Contents



Note 13  Subsequent Events.
  $500 million unsecured senior revolving credit facility for Jupiter Saturn Holding Company
   Amendment No. 1 to the Agreement and Plan of Merger dated June 26, 2009
   23




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 Executive Overview
 General
  September 30,
    
    June 30,2009
    
    2009Benefits Group
    
    
    3,320
    
    
    
    3,325Human Capital Group
    
    
    750
    
    
    
    825Technology and Administration Solutions Group
    
    
    1,040
    
    
    
    1,060Investment Consulting Group
    
    
    570
    
    
    
    565Insurance & Financial Services Group
    
    
    395
    
    
    
    415Other (incl. Communication)
    
    
    415
    
    
    
    450Business Services (incl. Corporate and field support)
    
    
    1,040
    
    
    
    1,060Total associates
    
    
    7,530
    
    
    
    7,700
 FORTUNE
  24




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##### Table of Contents



Principal Services
  Benefits Group -
 
    
    Design and management of benefit programs;
 
    
    Actuarial services including development of funding and risk management strategies;
 
    
    Expatriate and international human resource strategies;
 
    
    Mergers and acquisitions;
 
    
    Strategic workforce planning; and
 
    
    Compliance and governance
 Human Capital Group
 
    
    Advice concerning compensation plans, including broad-based and executive compensation,
stock and other long-term incentive programs;
 
    
    Strategies to align workforce performance with business objectives;
 
    
    Organization effectiveness consulting, including talent management;
 
    
    Strategies for attracting, retaining and motivating employees; and
 
    
    Data services
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##### Table of Contents



Technology and Administration Solutions Group -
 
    
    Web-based applications for health and welfare, pension and compensation administration;
 
    
    Administration outsourcing solutions for health and welfare and pension benefits;
 
    
    Call center strategy, design and tools;
 
    
    Strategic human resource technology and service delivery consulting;
 
    
    Targeted online compensation and benefits statements, content management and call center
case management solutions; and
 
    
    Integrated talent management suite
 Investment Consulting Group -
 
    
    Investment consulting services to pension plans and other institutional funds;
 
    
    Input on governance and regulatory issues;
 
    
    Analysis of asset allocation and investment strategies;
 
    
    Investment structure analysis, selection and evaluation of managers and performance
monitoring; and
 
    
    Implementation/fiduciary services for defined benefit and defined contribution
investment programs via our Advanced Investment Solutions (AIS) services
 Insurance & Financial Services Group
 
    
    Independent actuarial and strategic advice;
 
    
    Assessment and advice regarding financial condition and risk management; and
 
    
    Financial modeling software tools for product design and pricing, planning and
projections, reporting, valuations and risk management
  26




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##### Table of Contents



Financial Statement Overview
    Three months
    
    Fiscal YearGeographic Region
    
    2010
    
    2009
    
    2008United States
    
    
    46
    %
    
    
    43
    %
    
    
    41
    %United Kingdom
    
    
    30
    
    
    
    32
    
    
    
    32Germany
    
    
    4
    
    
    
    4
    
    
    
    5Canada
    
    
    4
    
    
    
    4
    
    
    
    4Netherlands
    
    
    3
    
    
    
    3
    
    
    
    4Greater China
    
    
    2
    
    
    
    2
    
    
    
    2
      27




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Critical Accounting Policies and Estimates
  Revenue Recognition
     28




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Valuation of Billed and Unbilled Receivables from Clients
  Discretionary Compensation
   29




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Income Taxes
  Pension Assumptions
   30




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##### Table of Contents



North America
  Year Ended June 302009
    
    2008
    
    2007Discount rate
    
    
    7.21
    %
    
    
    6.91
    %
    
    
    6.25
    %Expected long-term rate of return on assets
    
    
    8.61
    %
    
    
    8.75
    %
    
    
    8.75
    %Rate of increase in compensation levels
    
    
    3.29
    %
    
    
    4.08
    %
    
    
    3.84
    %
    Effect on FY2010Change in Assumption
    
    Pre-Tax Pension Expense25 basis point decrease in discount rate
    
    +$3.0 million25 basis point increase in discount rate
    
    -$2.9 million25 basis point decrease in expected return on assets
    
    +$1.2 million25 basis point increase in expected return on assets
    
    -$1.2 million
  United Kingdom
  Year Ended June 302009
    
    2008
    
    2007Discount rate
    
    
    6.30
    %
    
    
    6.50
    %
    
    
    5.80
    %Expected long-term rate of return on assets
    
    
    6.81
    %
    
    
    6.46
    %
    
    
    5.69
    %Rate of increase in compensation levels
    
    
    5.45
    %
    
    
    5.65
    %
    
    
    4.95
    %
 31




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##### Table of Contents



Effect on FY2010Change in Assumption
    
    Pre-Tax Pension Expense25 basis point decrease in discount rate
    
    +$2.4 million25 basis point increase in discount rate
    
    -$2.1 million25 basis point decrease in expected return on assets
    
    +$0.8 million25 basis point increase in expected return on assets
    
    -$0.8 million
  Incurred But Not Reported Claims
  32




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##### Table of Contents



Goodwill and Intangible Assets
  Results of Operations
  Condensed Consolidated Statements of Operations
 Three months ended September 302009
    
    
    2008
    
    
    2009
    
    
    2008Revenue
    
    $
    401,345
    
    
    $
    426,126
    
    
    
    100
    %
    
    
    100
    %Costs of providing services:Salaries and employee benefits
    
    
    236,081
    
    
    
    235,879
    
    
    
    58.8
    
    
    
    55.4Professional and subcontracted services
    
    
    16,159
    
    
    
    26,315
    
    
    
    4.0
    
    
    
    6.2Occupancy, communications and other
    
    
    39,872
    
    
    
    49,997
    
    
    
    9.9
    
    
    
    11.7General and administrative expenses
    
    
    39,770
    
    
    
    43,887
    
    
    
    9.9
    
    
    
    10.3Depreciation and amortization
    
    
    17,934
    
    
    
    18,864
    
    
    
    4.5
    
    
    
    4.4Transaction and integration expenses
    
    
    8,388
    
    
    
    
    
    
    
    2.1
    
    
    
    358,204
    
    
    
    374,942
    
    
    
    89.3
    
    
    
    88.0Income from operations
    
    
    43,141
    
    
    
    51,184
    
    
    
    10.7
    
    
    
    12.0Income from affiliates
    
    
    947
    
    
    
    1,695
    
    
    
    0.2
    
    
    
    0.4Interest income
    
    
    350
    
    
    
    1,031
    
    
    
    0.1
    
    
    
    0.2Interest expense
    
    
    (449
    )
    
    
    (569
    )
    
    
    (0.1
    )
    
    
    (0.1
    )Other non-operating income/(expense)
    
    
    1,142
    
    
    
    (19
    )
    
    
    0.3
    
    
    
    Income before income taxes
    
    
    45,131
    
    
    
    53,322
    
    
    
    11.2
    
    
    
    12.5Provision for income taxes
    
    
    15,350
    
    
    
    18,162
    
    
    
    3.8
    
    
    
    4.2Net income
    
    $
    29,781
    
    
    $
    35,160
    
    
    
    7.4
    %
    
    
    8.3
    %
 33




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##### Table of Contents



Three Months Ended September 30, 2009 Compared to the Three Months Ended September 30, 2008
 Revenue
    
    
    Benefits decreased revenues $9.0 million, or 4 percent, from the first quarter of fiscal
year 2009 due to the strengthening of the U.S. dollar. On a constant currency basis,
Benefits revenues increased 1 percent over the first quarter of fiscal year 2009 due to
modest increases in retirement and health care consulting.
 
    
    Technology and Administration Solutions increased revenues $2.2 million, or 4 percent,
over the first quarter of fiscal year 2009, due to increases in both North America and
Europe. On a constant currency basis, Technology and Administration Solutions revenues
increased 11 percent over the first quarter of fiscal year 2009. In the U.K., our growth
was due to an increase in revenues from several large clients that were implemented in
fiscal year 2009, as well as from additional project work at some existing clients. In the
U.S., our growth was primarily due to an increase in ongoing administration work.
 
    
    Human Capital Group decreased revenues $11.9 million, or 24 percent, from the first
quarter of fiscal year 2009. On a constant currency basis, Human Capital Group revenues
decreased 22 percent from the first quarter of fiscal year 2009. Revenues declined in all
regions and in all service areas.
 
    
    Investment Consulting increased revenues $2.6 million, or 6 percent, over the first
quarter of fiscal year 2009. On a constant currency basis, Investment Consulting Group
revenues increased 17 percent over the first quarter of fiscal year 2009. Revenues
increased due to an increase in implemented consulting activities and strategy projects.
 
    
    Insurance and Financial Services decreased revenues $3.6 million, or 13 percent, from
the first quarter of fiscal year 2009. On a constant currency basis, Insurance and
Financial Services revenues decreased 4 percent from the first quarter of fiscal year 2009.
Revenues decreased due to a decline in project activity in Europe.
 34




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##### Table of Contents



Salaries and Employee Benefits .
  Professional and Subcontracted Services .
  Occupancy, Communications and Other.
  General and Administrative Expenses.
  Depreciation and Amortization.
  Transaction and Integration Expenses.
  35




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##### Table of Contents



Income From Affiliates.
  Interest Expense.
  Interest Income.
  Other Non-Operating Income/(Loss)
  Provision for Income Taxes.
  Net Income.
  Earnings Per Share.
  36




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##### Table of Contents



Liquidity and Capital Resources
     Cash Used in Operating Activities.
   Cash Used in Investing Activities.
   37




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##### Table of Contents



Cash Used in Financing Activities.
  Off-Balance Sheet Arrangements and Contractual Obligations
 Remaining payments due by fiscal year as of September 30 , 20092011
    
    
    2013Contractual Cash
    
    
    
    
    
    Remaining
    
    
    through
    
    
    throughObligations (in thousands)
    
    Total
    
    
    2010
    
    
    2012
    
    
    2014
    
    
    ThereafterLease Commitments
    
    $
    290,367
    
    
    
    46,968
    
    
    
    103,216
    
    
    
    71,032
    
    
    
    69,151Revolving Credit Facility
    
    
    10,080
    
    
    
    10,080
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    300,447
    
    
    
    57,048
    
    
    
    103,216
    
    
    
    71,032
    
    
    
    69,151
 Operating Leases.
 Credit Agreement.
  Pension Contributions.
 38




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##### Table of Contents



Risk Management
       39




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##### Table of Contents



Disclaimer Regarding Forward-looking Statements
  
    
    our ability to integrate acquired businesses into our own business, processes and
systems, and achieve the anticipated results;
 
    
    foreign currency exchange and interest rate fluctuations;
 
    
    general economic and business conditions that adversely affect us or our clients;
 
    
    our continued ability to recruit and retain qualified associates;
 
    
    the success of our marketing, client development and sales programs after our
acquisitions;
 
    
    our ability to maintain client relationships and to attract new clients after our
acquisitions;
 
    
    declines in demand for our services;
 
    
    outcomes of pending or future professional liability cases and the availability
and capacity of professional liability insurance to fund the outcome of pending cases or
future judgments or settlements;
 
    
    our ability to obtain professional liability insurance;
 
    
    a significant decrease in the demand for the consulting, actuarial and other
services we offer as a result of changing economic conditions or other factors;
 
    
    actions by competitors offering human resources consulting services, including
public accounting and consulting firms, technology consulting firms and Internet/intranet
development firms;
 
    
    our ability to achieve cost reductions after our recent acquisitions;
 
    
    exposure to liabilities that have not been expressly assumed in our acquisition
transactions;
 
    
    the level of capital resources required for future acquisitions and business
opportunities;
 
    
    regulatory developments abroad and domestically that impact our business practice;
 
    
    legislative and technological developments that may affect the demand for or costs
of our services;
  40




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
  Interest Rate Risk
  Foreign Currency Risk
  Translation Exposure
    
 ITEM 4. CONTROLS AND PROCEDURES.
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  41




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##### Table of Contents



Limitations on the Effectiveness of Controls
  
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS.
  
 ITEM 1A. RISK FACTORS.
  42




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##### Table of Contents



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
 Issuer Purchases of Equity Securities
  Total Number of
    
    Maximum Number ofShares Purchased
    
    Shares that May YetTotal Number of
    
    
    
    
    
    as Part of Publicly
    
    Be Purchased UnderShares
    
    Average Price
    
    Announced Plans
    
    the Plans orPeriod
    
    Purchased
    
    Paid per Share
    
    or Programs
    
    ProgramsJuly 1, 2009 through
July 31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    August 1, 2009 through
August 31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    September 1, 2009
through September 30,
2009
    
    
    304,878
    
    
    
    43.71
    
    
    
    304,878
    
    
    
    Total
    
    
    304,878
    
    
    
    
    
    
    
    304,878
    
    
    
    913,145
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
  
 ITEM 5. OTHER INFORMATION.
  43




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##### Table of Contents



ITEM 6. EXHIBITS.
 10.23
    
    Watson Wyatt & Company Holdings 2000 Long-term Incentive Plan (1)10.24
    
    Form of Nonqualified Stock Option Agreement for the Watson
Wyatt & Company Holdings 2000 Long-term Incentive Plan(1)10.25
    
    Commitment Letter among Watson Wyatt Worldwide, Inc. and Towers, Perrin, Forster & Crosby, Inc.,
relating to an unsecured senior revolving credit facility with Bank of America, N.A. Banc of America
Securities LLC, PNC Bank, National Association and PNC Capital Markets, LLC. (1)10.26
    
    Amendment No. 1 to the Agreement and Plan of Merger among Watson Wyatt Worldwide, Inc., Towers,
Perrin, Forster & Crosby, Inc., Jupiter Saturn Holding Company, Jupiter Saturn Delaware Inc., and Jupiter
Saturn Pennsylvania Inc. to amend a previously announced Agreement and Plan of Merger. (3)21
    
    Subsidiaries of Watson Wyatt Worldwide, Inc.(2)31.1
    
    Certification of Chief Executive Officer Pursuant to Securities
Exchange Act Rules 13a-14 and 15d-14, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002(1)31.2
    
    Certification of Chief Financial Officer Pursuant to Securities
Exchange Act Rules 13a-14 and 15d-14, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002(1)32
    
    Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to Title 18, U.S.C. Section 1350, adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(1)
 
 (1)
    
    Filed with this Form 10-Q(2)
    
    Incorporated by reference from Registrants Form 10-K/A, filed on October 20, 2009(3)
    
    Incorporated by reference from Registrants Form 8-K, filed on October 19, 2009. 44




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##### Table of Contents



Signatures
  Watson Wyatt Worldwide, Inc.(Registrant)/s/ John J. Haley
    
    November 9, 2009Name:
    
    John J. Haley
    
    DateTitle:
    
    President andChief Executive Officer/s/ Roger F. Millay
    
    November 9, 2009Name:
    
    Roger F. Millay
    
    DateTitle:
    
    Vice President andChief Financial Officer/s/ Peter L. Childs
    
    November 9, 2009Name:
    
    Peter L. Childs
    
    DateTitle:
    
    Controller
 45