During 2001 and 2002, our results were impacted by non-cash compensation charges for performance-based stock options. Management were granted these options, as part of the leveraged buyout in 1998, for meeting or exceeding specified 2001 and 2002 performance targets. These targets related to the cumulative consolidated cash flow and annual EBITDA (as defined) of our subsidiary, Willis Group Limited, for the years ended December 31, 2001 and 2002. The actual results for those years exceeded the targets and, accordingly, all the outstanding performance options were earned in full.
We maintain defined benefit pension plans that cover almost all our employees in the UK and US. Elsewhere, pension benefits are typically provided through defined contribution plans. The key assumptions in determining pension expense for the defined benefit plans are the expected long-term
Cash used for financing activities amounted to $218 million in 2002 compared with $167 million in 2001 and $23 million in 2000. During 2002 debt repayments amounted to $221 million following repayments of $172 million in 2001 and $32 million in 2000. In 2001, the net proceeds of $282 million from our initial public offering were used to redeem the outstanding $273 million of preference shares in a subsidiary company.
We have audited the accompanying consolidated balance sheets of Willis Group Holdings Limited and subsidiaries as of December 31, 2002 and 2001, and the related consolidated statements of operations, cash flows and stockholders' equity for each of the three years in the period ended December 31, 2002. Our audits also included the financial statement schedule listed in the Index at Item 8. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits.
Foreign Currency Translation-Transactions in currencies other than the functional currency of the entity are recorded at the rates of exchange prevailing at the date of the transaction. Monetary assets
Goodwill-Goodwill represents the excess of the cost of businesses acquired over the fair market value of identifiable net assets at the dates of acquisition. The Company reviews goodwill for impairment whenever facts or circumstances indicate that the carrying amounts may not be recoverable. If an evaluation is required, the estimated future undiscounted cash flows associated with the
Reclassifications-Certain reclassifications have been made to the prior year amounts to conform to the current year presentation.
For the year ended December 31, 2002, time-based and performance-based options to purchase 19,514,534 and 11,091,859 (2001: 19,266,392 and 11,274,672; 2000: 17,865,957 and 11,608,109) shares, respectively, and 198,174 restricted shares (2001 and 2000: nil), respectively, were outstanding. Basic and diluted net income per share are as follows:
The fair value of these contracts is recorded in other assets and other liabilities, with changes in the fair value of effective cashflow hedges recorded in other comprehensive income and changes in fair value of ineffective hedges recorded in general and administrative expenses. Amounts are reclassified from other comprehensive income into earnings when the hedged exposure affects earnings. For the year ended December 31, 2002, the Company has recorded a gain of $7 million in other comprehensive income relating to changes in the fair value on contracts which are effective cashflow hedges as defined in SFAS 133 (2001: gain $6 million). For contracts which were not designated for hedge accounting as defined in SFAS 133, the Company has recorded a gain of $2 million in general and administrative expenses representing the change in the fair value for the year ended December 31, 2002 (2001: loss $6 million).
Guarantees-Guarantees issued by certain of Willis Group Holdings' subsidiaries with respect to the Senior Credit Facility and the Notes are discussed elsewhere in these consolidated financial statements.