THOMSON REUTERS CORP NEW YORK, July 28, 2016 /PRNewswire/ -- Thomson Reuters (TSX / NYSE: TRI) today reported results for the second quarter ended June 30, 2016. The company also re-affirmed its 2016 full-year outlook.
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"Our core business showed resilience and we continued to make progress throughout the second quarter despite a challenging backdrop and turbulent market conditions for many of our largest customers," said Jim Smith, president and chief executive officer of Thomson Reuters. "We are tracking to our full-year target and are well positioned to help our customers navigate the global trends affecting their industries."
Consolidated Financial Highlights - Second Quarter
(All amounts are from continuing operations, except cash flow measures)
Three Months Ended June 30,
---------------------------
(Millions of U.S. dollars, except earnings per share (EPS) and margins)
IFRS Financial Measures 2016 2015(1) Change
---- ------ ------
Revenues $2,769 $2,802 -1%
Operating profit $401 $345 16%
Diluted EPS $0.39 $0.26 50%
Cash flow from operations (includes discontinued operations) $770 $951 -19%
Non-IFRS Financial Measures (2) 2016 2015(1) Change Change Before Currency
---- ------ ------ -----------------------
Revenues $2,769 $2,802 -1% 0%
Adjusted EBITDA $757 $771 -2% -2%
Adjusted EBITDA margin 27.3% 27.5% -20bp -60bp
Underlying operating profit $505 $510 -1% -2%
Underlying operating profit margin 18.2% 18.2% 0bp -30bp
Adjusted EPS $0.50 $0.45 11% 9%
Free cash flow (includes discontinued operations) $525 $709 -26%
(1) Unless otherwise indicated,
results exclude the company's
Intellectual Property & Science
(IP & Science) business, which
has been classified as a
discontinued operation for 2016
reporting purposes. Earlier
this month, the company signed
a definitive agreement to sell
IP & Science. 2015 amounts
(except cash flow measures) are
restated to conform to the
current year's presentation.
(2) In addition to results reported
in accordance with IFRS, the
company uses certain non-IFRS
financial measures as
supplemental indicators of its
operating performance and
financial position. These and
other non-IFRS financial
measures are defined and
reconciled to the most directly
comparable IFRS measures in the
tables appended to this news
release. Additional information
is provided in the explanatory
footnotes to the appended
tables.
IFRS Financial Measures
-- Revenues declined 1% due to the impact of currency and lower recoveries
revenues
-- Operating profit increased 16% to $401 million
-- The increase was driven by favorable fair value adjustments
associated with foreign currency derivatives embedded in certain
customer contracts
-- Diluted EPS increased 50% to $0.39
-- The increase was driven by the favorable changes in fair value
described above and the benefit of lower common shares outstanding
-- Cash flow from operations, which includes discontinued operations,
decreased 19% to $770 million due to unfavorable timing of movements in
working capital
Non-IFRS Financial Measures
-- Revenues declined 1%. Before currency, revenues were unchanged
-- Excluding recoveries, revenues increased 1% (before currency)
-- Adjusted EBITDA decreased 2% to $757 million with a margin of 27.3% vs.
27.5% in the prior-year period. Currency had a 40 basis point favorable
impact on the margin
-- Underlying operating profit decreased 1% to $505 million with a margin
of 18.2% unchanged compared to the prior-year period. Currency had a 30
basis point favorable impact on the margin
-- Adjusted EPS increased 11% to $0.50, an increase of $0.05 per share.
Currency had a $0.01 favorable impact
Other Business Highlights
-- Repurchased 6.3 million shares at a cost of $258 million in the second
quarter. In the first half of the year, the company repurchased 18
million shares at a cost of $690 million
-- Signed definitive agreement to sell IP & Science business for $3.55
billion in cash, with a closing expected later in the year
Highlights by Business Unit
Unless otherwise noted, all revenue growth comparisons in this news release are before the impact of foreign currency (constant currency) as Thomson Reuters believes this provides the best basis to measure the performance of its business.
Financial & Risk
-- Revenues decreased 1%. Revenues grew approximately 2% before the impact
of lower recoveries revenues and commercial pricing adjustments related
to the migration of certain customers to new platforms.
-- Recurring revenues were unchanged (77% of the segment's revenues in
the quarter) as the impact of an annual price increase and a
positive net sales trend was offset by lower revenues resulting from
the pricing adjustments referred to above and macro-economic
conditions affecting large European banks and banks in several
emerging markets.
-- Transactions revenues were up 1% (14% of the segment's revenues in
the quarter). Transaction volumes were muted in advance of the
British referendum on June 23 on EU membership (Brexit) yet
experienced a significant increase on the day after the vote as over
$480 billion was traded through the company's foreign exchange
platforms on that date.
-- Low-margin recoveries revenues decreased 17% (9% of the segment's
revenues in the quarter) as some third-party partners continue to
move to direct billing with their customers. The decline in these
revenues is expected to lessen in the second half of the year.
-- Recoveries represent revenues for content or services provided
by third parties and distributed through Financial & Risk's
platform. Reductions in recoveries revenue have no impact on
EBITDA or operating profit.
-- By geography, revenues in the Americas were up 1% (up 2% excluding
recoveries). Revenues in Asia were up 1% (up 3% excluding recoveries).
Revenues in Europe, Middle East and Africa (EMEA) decreased 5% (down 2%
excluding recoveries).
-- EBITDA increased 3% and the margin increased 140 basis points to 29.1%
compared to 27.7% in the prior-year period. Excluding the impact of
currency, the margin increased 90 basis points. The increase in the
margin was primarily due to savings related to efficiency initiatives,
platform closures completed in 2015 and the reduction in low margin
recoveries revenues.
-- Operating profit increased 8% and the margin increased 180 basis points
to 19.5% compared to 17.7% in the prior-year period. Excluding the
impact of currency, the margin increased 130 basis points. The operating
profit margin improvement reflected the same factors that impacted
EBITDA.
-- Net sales were positive overall and were positive in all regions, except
for EMEA. This marked the ninth consecutive quarter of positive net
sales.
Legal
-- Revenues increased 1%. Excluding US print, revenues grew 3%.
-- Solutions businesses grew 3% (44% of the segment's revenues in the
quarter). Revenue growth was driven by Legal Enterprise Solutions
and businesses in the United Kingdom/Ireland and Latin America.
-- US online legal information grew 2% (41% of the segment's revenues
in the quarter), reflecting growth for the sixth consecutive
quarter.
-- US print declined 8% (15% of the segment's revenues in the quarter).
-- Subscription revenues grew 4% (73% of the segment's revenues in the
quarter). However, transactional revenues declined 4% (12% of the
segment's revenues in the quarter) due to lower Findlaw transactional
revenues which reflected difficult prior-year period comparisons.
-- EBITDA decreased 3% and the margin decreased 110 basis points to 36.6%
compared to 37.7% in the prior-year period. Currency had no impact on
the margin.
-- Operating profit decreased 5% and the margin decreased 120 basis points
to 29.2% compared to 30.4% in the prior-year period. Currency had no
impact on the margin.
Tax & Accounting
-- Revenues increased 1%, primarily driven by the Professional business,
offset by a decline in the Government business. Recurring revenues
increased 7% (87% of the segment's revenues in the quarter).
-- EBITDA decreased 9% and the margin decreased 220 basis points to 25.3%
compared to 27.5% in the prior-year period primarily due to the decline
in Government-related revenues and additional expenses related to
implementation delays in several large contracts. Excluding the impact
of currency, the margin declined 340 basis points.
-- Operating profit decreased 13% and the margin decreased 230 basis points
to 17.0% compared to 19.3% in the prior-year period. Excluding the
impact of currency, the margin declined 290 basis points for the same
reasons that drove EBITDA margin performance.
-- The timing of revenues and expenses can impact margins in any given
quarter for the Tax & Accounting business. Full-year margins are more
reflective of the segment's underlying performance.
Corporate & Other (Including Reuters News)
-- Reuters News revenues were $79 million, up 7% compared to the prior-year
period.
-- Corporate & Other costs were $94 million compared to $86 million in the
prior-year period. The increase was largely due to costs related to the
company's Transformation program.
Discontinued Operations - IP & Science
-- On July 11, 2016, the company announced that it had agreed to sell its
IP & Science business to Onex and Baring Private Equity Asia for $3.55
billion. Net proceeds are expected to be between $3.1 billion and $3.2
billion after taxes and transaction related expenses. The company plans
to use $1 billion of the net proceeds to buy back shares as part of its
previously announced $1.5 billion program, and it plans to use the
balance of proceeds to repay debt and reinvest in the business. Closing
of the transaction is expected later in the year following regulatory
approvals and satisfaction of other customary closing conditions.
-- The IP & Science business has been classified as a discontinued
operation for 2016 reporting purposes.
Consolidated Financial Highlights - Six Months
(All amounts are from continuing operations, except cash flow measures)
Six Months Ended June 30,
-------------------------
(Millions of U.S. dollars, except EPS and
margins)
IFRS Financial Measures 2016 2015(1) Change
---- ------ ------
Revenues $5,562 $5,623 -1%
Operating profit $711 $707 1%
Diluted EPS $0.65 $0.59 10%
Cash flow from operations (includes discontinued operations) $1,228 $1,195 3%
Non-IFRS Financial Measures (2) 2016 2015(1) Change Change Before
Currency
--- --------
Revenues $5,562 $5,623 -1% 1%
Adjusted EBITDA $1,505 $1,505 0% 0%
Adjusted EBITDA margin 27.1% 26.8% 30bp -20bp
Underlying operating profit $1,003 $971 3% 2%
Underlying operating profit margin 18.0% 17.3% 70bp 30bp
Adjusted EPS $0.98 $0.84 17% 14%
Free cash flow (includes discontinued operations) $748 $644 16%
(1) Unless otherwise indicated,
results exclude the company's
IP & Science business, which
has been classified as a
discontinued operation for 2016
reporting purposes. Earlier
this month, the company signed
a definitive agreement to sell
IP & Science. 2015 amounts
(except cash flow measures) are
restated to conform to the
current period's presentation.
(2) In addition to results reported
in accordance with IFRS, the
company uses certain non-IFRS
financial measures as
supplemental indicators of its
operating performance and
financial position. These and
other non-IFRS financial
measures are defined and
reconciled to the most directly
comparable IFRS measures in the
tables appended to this news
release. Additional information
is provided in the explanatory
footnotes to the appended
tables.
IFRS Financial Measures
-- Revenues declined 1% due to the impact of currency and lower recoveries
revenues
-- Operating profit increased 1% as lower depreciation and amortization of
software and other identifiable intangible assets more than offset
unfavorable fair value adjustments
-- Diluted EPS increased 10% to $0.65 due to the same factors that impacted
operating profit and the benefit of lower common shares outstanding
-- Cash flow from operations, which includes discontinued operations,
increased 3% due to lower income tax payments
Non-IFRS Financial Measures
-- Revenues declined 1%. Before currency, revenues increased 1%. Excluding
recoveries, revenues increased 2% (before currency)
-- Adjusted EBITDA was unchanged at $1.5 billion with a margin of 27.1% vs.
26.8% in the prior-year period. Currency had a 50 basis point favorable
impact on the margin
-- Underlying operating profit increased 3% to $1 billion with a margin of
18.0% vs. 17.3% in the prior-year period. Currency had a 40 basis point
favorable impact on the margin
-- Adjusted EPS increased 17% to $0.98, an increase of $0.14 per share.
Currency had a $0.02 favorable impact
-- Free cash flow for the first six months of the year increased 16% to
$748 million compared to $644 million in the prior-year period
Future Changes to Definitions of Adjusted Earnings and Adjusted EPS
When the company reports its results for the third quarter of 2016, it plans to redefine adjusted earnings and adjusted EPS in relation to certain tax computations to better align these definitions with current market practices and to reflect guidance recently issued by the U.S. Securities and Exchange Commission. These changes will not impact the company's reporting of revenues, adjusted EBITDA, underlying operating profit or free cash flow.
Appendix A to this news release reflects the changes that the company plans to make to adjusted earnings and adjusted EPS and also includes reconciliations from earnings attributable to common shareholders to adjusted earnings and adjusted EPS on a redefined basis for 2015, 2014 and 2013. Additional details and reconciliations for 2015, 2014, 2013 and for the first and second quarters of 2016 (excluding the results for IP & Science for each period) may be found in the Investor Relations section of the company's website.
Business Outlook (Before Currency)
Thomson Reuters today re-affirmed its full-year business outlook for 2016, which was previously communicated in February 2016. The company's 2016 Outlook assumes constant currency rates compared to 2015 and all metrics below (except for free cash flow) exclude the IP & Science business, which has been classified as a discontinued operation for 2016 reporting purposes. The 2016 Outlook is based on the expected performance of the company's remaining businesses and does not factor in the impact of any other acquisitions or divestitures that may occur during the year.
The company continues to expect:
-- Low single-digit revenue growth
-- 2% to 3% revenue growth excluding Financial & Risk's recoveries
revenues, which are low margin revenues and are expected to decline
as partners move to direct billing with their customers
-- Adjusted EBITDA margin to range between 27.3% and 28.3%
-- Comparable 2015 adjusted EBITDA margin (excluding IP & Science
business) was 27.3%
-- Underlying operating profit margin to range between 18.4% and 19.4%
-- Comparable 2015 underlying operating profit margin (excluding IP &
Science business) was 18.1%
-- Free cash flow to range between $1.7 billion and $1.9 billion in 2016
The information in this section is forward-looking and should be read in conjunction with the section below entitled "Special Note Regarding Forward-Looking Statements, Material Assumptions and Material Risks."
Dividend and Share Repurchases
In February 2016, the Thomson Reuters board of directors approved a $0.02 per share annualized increase in the dividend to $1.36 per common share. A quarterly dividend of $0.34 per share is payable on September 15, 2016 to common shareholders of record as of August 18, 2016.
From January 1, 2016 through June 30, 2016, the company repurchased approximately 18 million shares at a cost of $690 million. Of this amount, 6.3 million shares were repurchased in the second quarter at a cost of $258 million. Under the current $1.5 billion share repurchase program announced in February 2016, the company has repurchased approximately 13.3 million shares at a cost of $517 million.
Thomson Reuters
Thomson Reuters is the world's leading source of news and information for professional markets. Our customers rely on us to deliver the intelligence, technology and expertise they need to find trusted answers. The business has operated in more than 100 countries for more than 100 years. Thomson Reuters shares are listed on the Toronto and New York Stock Exchanges (symbol: TRI). For more information, visit www.thomsonreuters.com.
NON-IFRS FINANCIAL MEASURES
Thomson Reuters prepares its financial statements in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).
This news release includes certain non-IFRS financial measures, such as adjusted EBITDA and the related margin, underlying operating profit and the related margin, free cash flow, adjusted EPS, and selected measures before the impact of foreign currency. Thomson Reuters uses these non-IFRS financial measures as supplemental indicators of its operating performance and financial position. These measures do not have any standardized meanings prescribed by IFRS and therefore are unlikely to be comparable to the calculation of similar measures used by other companies, and should not be viewed as alternatives to measures of financial performance calculated in accordance with IFRS. Non-IFRS financial measures are defined and reconciled to the most directly comparable IFRS measures in the appended tables.
The company's outlook contains various non-IFRS financial measures. For outlook purposes only, the company is unable to reconcile these non-IFRS measures to the most comparable IFRS measures because it cannot predict, with reasonable certainty, the 2016 impact of changes in foreign exchange rates or the company's share price which impact (i) the translation of its results reported at average foreign currency rates for the year, (ii) fair value adjustments associated with foreign currency derivatives embedded in certain customer contracts, (iii) the valuation of certain share-based awards and (iv) other finance income or expense related to foreign exchange contracts and intercompany financing arrangements. Additionally, the company cannot reasonably predict the occurrence or amount of other operating gains and losses, which generally arise from business transactions that it does not anticipate.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS, MATERIAL ASSUMPTIONS AND MATERIAL RISKS
Certain statements in this news release, including, but not limited to, statements in the "2016 Business Outlook (Before Currency)" section, Mr. Smith's comments and statements regarding the company's expected uses of proceeds from the planned sale of its IP & Science business, are forward-looking. As a result, forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. There is no assurance that the events described in any forward-looking statement will materialize. A business outlook is provided for the purpose of presenting information about current expectations for 2016. This information may not be appropriate for other purposes. You are cautioned not to place undue reliance on forward-looking statements which reflect expectations only as of the date of this news release. Except as may be required by applicable law, Thomson Reuters disclaims any obligation to update or revise any forward-looking statements.
The company's 2016 Business Outlook is based on various external and internal assumptions. Economic and market assumptions include, but are not limited to, GDP growth in most of the countries where Thomson Reuters operates and a continued increase in the number of professionals around the world and their demand for high quality information and workflow solutions. Internal financial and operational assumptions include, but are not limited to, the successful execution of sales initiatives, ongoing product release programs, our globalization strategy and other growth and efficiency initiatives. The 2016 Business Outlook also assumes that the closing of the sale of the company's IP & Science business will be later in 2016.
Some of the material risk factors that could cause actual results or events to differ materially from those expressed in or implied by forward-looking statements in this news release include, but are not limited to, changes in the general economy; actions of competitors; failure to develop new products, services, applications and functionalities to meet customers' needs, attract new customers or expand into new geographic markets and identify areas of higher growth; failures or disruptions of telecommunications, network systems or the Internet; fraudulent or unpermitted data access or other cyber-security or privacy breaches; increased accessibility to free or relatively inexpensive information sources; failure to maintain a high renewal rate for subscription-based services; dependency on third parties for data, information and other services; changes to law and regulations, including the impact of the Dodd-Frank legislation and similar financial services laws around the world; tax matters, including changes to tax laws, regulations and treaties; fluctuations in foreign currency exchange and interest rates; failure to adapt to recent organizational changes and effectively implement strategic initiatives; failure to recruit, motivate and retain high quality management and key employees; failure to meet the challenges involved in operating globally; failure to derive fully the anticipated benefits from existing or future acquisitions, joint ventures, investments or dispositions; failure to protect the brands and reputation of Thomson Reuters; impairment of goodwill and identifiable intangible assets; inadequate protection of intellectual property rights; threat of legal actions and claims; risk of antitrust/competition-related claims or investigations; downgrading of credit ratings and adverse conditions in the credit markets; the effect of factors outside of the control of Thomson Reuters on funding obligations in respect of pension and post-retirement benefit arrangements; and actions or potential actions that could be taken by the company's principal shareholder, The Woodbridge Company Limited. These and other factors are discussed in materials that Thomson Reuters from time to time files with, or furnishes to, the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission. Thomson Reuters annual and quarterly reports are also available in the "Investor Relations" section of www.thomsonreuters.com.
CONTACTS
MEDIA INVESTORS
David Crundwell Frank J. Golden
Senior Vice President, Corporate
Affairs Senior Vice President, Investor Relations
+1 646 223 5285 +1 646 223 5288
david.crundwell@tr.com frank.golden@tr.com
Thomson Reuters will webcast a discussion of its second-quarter 2016 results today beginning at 8:30 a.m. Eastern Time (ET). You can access the webcast by visiting the "Investor Relations" section of www.thomsonreuters.com. An archive of the webcast will be available following the presentation.
Thomson Reuters Corporation
Consolidated Income Statement
(millions of U.S. dollars, except per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2016 2015(1) 2016 2015(1)
---- ------ ---- ------
CONTINUING OPERATIONS
Revenues $2,769 $2,802 $5,562 $5,623
Operating expenses (1,991) (2,091) (4,100) (4,125)
Depreciation (80) (85) (161) (178)
Amortization of computer software (172) (176) (341) (356)
Amortization of other identifiable intangible assets (132) (140) (260) (280)
Other operating gains, net 7 35 11 23
Operating profit 401 345 711 707
Finance costs, net:
Net interest expense (103) (107) (196) (212)
Other finance income (costs) 9 (5) (25) 39
Income before tax and equity method investments 307 233 490 534
Share of post-tax (losses) earnings in equity method (1) 3 - 7
investments
Tax (expense) benefit (2) (10) 24 (35)
--- --- --- ---
Earnings from continuing operations 304 226 514 506
Earnings from discontinued operations, net of tax 46 55 108 95
--- --- --- ---
Net earnings $350 $281 $622 $601
==== ==== ==== ====
Earnings attributable to:
Common shareholders 337 262 599 567
Non-controlling interests 13 19 23 34
Earnings per share:
Basic earnings per share:
From continuing operations $0.39 $0.26 $0.65 $0.60
From discontinued operations 0.06 0.07 0.14 0.12
---- ---- ---- ----
Basic earnings per share $0.45 $0.33 $0.79 $0.72
===== ===== ===== =====
Diluted earnings per share:
From continuing operations $0.39 $0.26 $0.65 $0.59
From discontinued operations 0.06 0.07 0.14 0.12
---- ---- ---- ----
Diluted earnings per share $0.45 $0.33 $0.79 $0.71
===== ===== ===== =====
Basic weighted-average common shares 751,598,761 785,441,698 756,163,267 789,793,561
=========== =========== =========== ===========
Diluted weighted-average common shares 753,350,217 788,852,919 757,795,444 793,192,368
=========== =========== =========== ===========
(1) Prior-year period amounts have
been restated to reflect the
current presentation.
Thomson Reuters Corporation
Consolidated Statement of Financial Position
(millions of U.S. dollars)
(unaudited)
June 30, December 31,
2016 2015(1)
---- ------
Assets
Cash and
cash
equivalents $686 $966
Trade and
other
receivables 1,479 1,755
Other
financial
assets 115 176
Prepaid
expenses
and
other
current
assets 698 683
--- ---
Current
assets
excluding
assets
held for
sale 2,978 3,580
Assets
held for
sale 1,700 -
Current
assets 4,678 3,580
Computer
hardware
and
other
property,
net 968 1,067
Computer
software,
net 1,403 1,486
Other
identifiable
intangible
assets,
net 6,007 6,417
Goodwill 14,838 15,878
Other
financial
assets 114 116
Other
non-
current
assets 555 544
Deferred
tax 46 47
--- ---
Total
assets $28,609 $29,135
======= =======
Liabilities and equity
Liabilities
Current
indebtedness $1,904 $1,595
Payables,
accruals
and
provisions 2,002 2,278
Deferred
revenue 999 1,319
Other
financial
liabilities 221 238
--- ---
Current
liabilities
excluding
liabilities
associated
with
assets
held for
sale 5,126 5,430
Liabilities
associated
with
assets
held for
sale 576 -
Current
liabilities 5,702 5,430
Long-
term
indebtedness 6,870 6,829
Provisions
and
other
non-
current
liabilities 2,344 2,124
Other
financial
liabilities 341 387
Deferred
tax 1,039 1,265
----- -----
Total
liabilities 16,296 16,035
Equity
Capital 9,721 9,852
Retained
earnings 5,938 6,458
Accumulated
other
comprehensive
loss (3,828) (3,697)
------ ------
Total
shareholders'
equity 11,831 12,613
Non-
controlling
interests 482 487
--- ---
Total
equity 12,313 13,100
------ ------
Total
liabilities
and
equity $28,609 $29,135
======= =======
(1) Prior-year period amounts have
been restated to reflect the
current presentation.
Thomson Reuters Corporation
Consolidated Statement of Cash Flow
(millions of U.S. dollars)
(unaudited)
Three Months
Ended Six Months Ended
June 30, June 30,
-------- --------
2016 2015(1) 2016 2015(1)
---- ------ ---- ------
Cash provided by (used
in):
Operating activities
Earnings
from
continuing
operations $304 $226 $514 $506
Adjustments for:
Depreciation 80 85 161 178
Amortization
of
computer
software 172 176 341 356
Amortization
of
other
identifiable
intangible
assets 132 140 260 280
Net
gains
on
disposals
of
businesses
and
investments (1) (25) (2) (25)
Deferred
tax (26) (40) (84) (65)
Other 47 115 225 96
Changes
in
working
capital
and
other
items (10) 159 (381) (366)
--- --- ---- ----
Operating
cash
flows
from
continuing
operations 698 836 1,034 960
Operating
cash
flows
from
discontinued
operations 72 115 194 235
--- --- --- ---
Net
cash
provided
by
operating
activities 770 951 1,228 1,195
--- --- ----- -----
Investing activities
Acquisitions,
net
of
cash
acquired (65) (7) (111) (15)
(Payments
for)
proceeds
from
disposals
of
businesses
and (1) 75 1 75
investments,
net of taxes
paid
Capital
expenditures,
less
proceeds
from
disposals (212) (210) (445) (500)
Other
investing
activities 1 1 20 3
--- --- --- ---
Investing
cash
flows
from
continuing
operations (277) (141) (535) (437)
Investing
cash
flows
from
discontinued
operations (14) (13) (25) (26)
--- --- --- ---
Net
cash
used
in
investing
activities (291) (154) (560) (463)
---- ---- ---- ----
Financing activities
Proceeds
from
debt 498 - 498 -
Repayments
of
debt (500) - (503) -
Net
(repayments)
borrowings
under
short-
term
loan
facilities (138) 170 304 570
Repurchases
of
common
shares (258) (348) (690) (696)
Dividends
paid
on
preference
shares - - (1) (1)
Dividends
paid
on
common
shares (248) (254) (497) (512)
Dividends
paid
to
non-
controlling
interests (20) (20) (29) (27)
Other
financing
activities 9 11 13 52
--- --- --- ---
Net
cash
used
in
financing
activities (657) (441) (905) (614)
---- ---- ---- ----
(Decrease)
increase
in
cash
and
bank
overdrafts (178) 356 (237) 118
Translation
adjustments (5) 3 (1) (9)
Cash
and
bank
overdrafts
at
beginning
of
period 867 765 922 1,015
--- --- --- -----
Cash
and
bank
overdrafts
at
end
of
period $684 $1,124 $684 $1,124
==== ====== ==== ======
Cash and bank
overdrafts at end of
period comprised of:
Cash
and
cash
equivalents $686 $1,289 $686 $1,289
Bank
overdrafts (2) (165) (2) (165)
--- ---- --- ----
$684 $1,124 $684 $1,124
==== ====== ==== ======
(1) Prior-year period amounts have
been restated to reflect the
current presentation.
Thomson Reuters Corporation
Reconciliation of Changes in Revenues, Adjusted EBITDA, Underlying Operating Profit and the Related Margins
Excluding the Effects of Foreign Currency by Business Segment
(millions of U.S. dollars, except for margins)
(unaudited)
Three Months Ended
June 30, Change
--------
2016 2015(1) Total Foreign Before
Currency (4) Currency (4)
----------- -----------
Revenues
--------
Financial & Risk $1,524 $1,552 -2% -1% -1%
Legal 846 852 -1% -2% 1%
Tax & Accounting 324 327 -1% -2% 1%
Corporate & Other (includes Reuters News) 79 74 7% 0% 7%
Eliminations (4) (3)
--- ---
Revenues $2,769 $2,802 -1% -1% 0%
====== ======
Change
Total Foreign Before
Currency (4) Currency (4)
----------- -----------
Adjusted EBITDA (2)
------------------
Financial & Risk $443 $430 3% 1% 2%
Legal 310 321 -3% -1% -2%
Tax & Accounting 82 90 -9% 2% -11%
Corporate & Other (includes Reuters News) (78) (70) n/a n/a n/a
--- ---
Adjusted EBITDA $757 $771 -2% 0% -2%
==== ====
Adjusted EBITDA Margin (2)
-------------------------
Financial & Risk 29.1% 27.7% 140bp 50bp 90bp
Legal 36.6% 37.7% -110bp 0bp -110bp
Tax & Accounting 25.3% 27.5% -220bp 120bp -340bp
Corporate & Other (includes Reuters News) n/a n/a n/a n/a n/a
Adjusted EBITDA margin 27.3% 27.5% -20bp 40bp -60bp
Change
Total Foreign Before
Currency (4) Currency (4)
----------- -----------
Underlying Operating Profit (3)
------------------------------
Financial & Risk $297 $274 8% 2% 6%
Legal 247 259 -5% -2% -3%
Tax & Accounting 55 63 -13% 1% -14%
Corporate & Other (includes Reuters News) (94) (86) n/a n/a n/a
--- ---
Underlying operating profit $505 $510 -1% 1% -2%
==== ====
Underlying Operating Profit Margin (3)
-------------------------------------
Financial & Risk 19.5% 17.7% 180bp 50bp 130bp
Legal 29.2% 30.4% -120bp 0bp -120bp
Tax & Accounting 17.0% 19.3% -230bp 60bp -290bp
Corporate & Other (includes Reuters News) n/a n/a n/a n/a n/a
Underlying operating profit margin 18.2% 18.2% 0bp 30bp -30bp
Thomson Reuters Corporation
Reconciliation of Changes in Revenues, Adjusted EBITDA, Underlying Operating Profit and the Related Margins
Excluding the Effects of Foreign Currency by Business Segment
(millions of U.S. dollars, except for margins)
(unaudited)
Six Months Ended
June 30, Change
--------
2016 2015(1) Total Foreign Before
Currency (4) Currency (4)
----------- -----------
Revenues
--------
Financial & Risk $3,033 $3,104 -2% -1% -1%
Legal 1,668 1,676 0% -1% 1%
Tax & Accounting 713 700 2% -3% 5%
Corporate & Other
(includes Reuters News) 154 148 4% -1% 5%
Eliminations (6) (5)
--- ---
Revenues $5,562 $5,623 -1% -2% 1%
====== ======
Change
Total Foreign Before
Currency (4) Currency (4)
----------- -----------
Adjusted EBITDA (2)
------------------
Financial & Risk $880 $831 6% 0% 6%
Legal 608 607 0% 0% 0%
Tax & Accounting 196 216 -9% 2% -11%
Corporate & Other (includes Reuters News) (179) (149) n/a n/a n/a
---- ----
Adjusted EBITDA $1,505 $1,505 0% 0% 0%
====== ======
Adjusted EBITDA Margin (2)
-------------------------
Financial & Risk 29.0% 26.8% 220bp 50bp 170bp
Legal 36.5% 36.2% 30bp 70bp -40bp
Tax & Accounting 27.5% 30.9% -340bp 120bp -460bp
Corporate & Other (includes
Reuters News) n/a n/a n/a n/a n/a
Adjusted EBITDA margin 27.1% 26.8% 30bp 50bp -20bp
Change
Total Foreign Before
Currency (4) Currency (4)
----------- -----------
Underlying Operating Profit (3)
------------------------------
Financial & Risk $592 $515 15% 1% 14%
Legal 485 478 1% 0% 1%
Tax & Accounting 138 161 -14% 2% -16%
Corporate & Other (includes Reuters News) (212) (183) n/a n/a n/a
---- ----
Underlying operating profit $1,003 $971 3% 1% 2%
====== ====
Underlying Operating Profit
Margin (3)
---------------------------
Financial & Risk 19.5% 16.6% 290bp 30bp 260bp
Legal 29.1% 28.5% 60bp 70bp -10bp
Tax & Accounting 19.4% 23.0% -360bp 110bp -470bp
Corporate & Other (includes
Reuters News) n/a n/a n/a n/a n/a
Underlying operating profit
margin 18.0% 17.3% 70bp 40bp 30bp
Thomson Reuters Corporation
Reconciliation of Operating Profit to Adjusted EBITDA (2)
(millions of U.S. dollars)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2016 2015(1) Change 2016 2015(1) Change
---- ------ ------ ---- ------ ------
Operating profit $401 $345 16% $711 $707 1%
Adjustments to remove:
Amortization of other identifiable intangible assets 132 140 260 280
Fair value adjustments (21) 60 43 7
Other operating gains, net (7) (35) (11) (23)
Underlying operating profit $505 $510 -1% $1,003 $971 3%
Remove: depreciation and amortization of computer 252 261 502 534
software
Adjusted EBITDA $757 $771 -2% $1,505 $1,505 0%
==== ==== ====== ======
Underlying operating profit margin (3) 18.2% 18.2% 0bp 18.0% 17.3% 70bp
==== ==== ==== ====
Adjusted EBITDA margin (2) 27.3% 27.5% -20bp 27.1% 26.8% 30bp
==== ==== ==== ====
Thomson Reuters Corporation
Reconciliation of Earnings from Continuing Operations to Adjusted EBITDA (2)
(millions of U.S. dollars)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2016 2015(1) Change 2016 2015(1) Change
---- ------ ------ ---- ------ ------
Earnings from continuing operations $304 $226 35% $514 $506 2%
Adjustments to remove:
Tax expense (benefit) 2 10 (24) 35
Other finance (income) costs (9) 5 25 (39)
Net interest expense 103 107 196 212
Amortization of other identifiable intangible assets 132 140 260 280
Amortization of computer software 172 176 341 356
Depreciation 80 85 161 178
--- --- --- ---
EBITDA $784 $749 $1,473 $1,528
Adjustments to remove:
Share of post-tax losses (earnings) in equity method investments 1 (3) - (7)
Other operating gains, net (7) (35) (11) (23)
Fair value adjustments (21) 60 43 7
Adjusted EBITDA $757 $771 -2% $1,505 $1,505 0%
==== ==== ====== ======
Thomson Reuters Corporation
Reconciliation of Underlying Operating Profit (3) to Adjusted EBITDA (2) by Business Segment
(millions of U.S. dollars)
(unaudited)
Three Months Ended Three Months Ended
June 30, 2016 June 30, 2015(1)
------------- ---------------
Underlying Add: Adjusted Underlying Add: Adjusted
Operating Profit Depreciation EBITDA Operating Profit Depreciation and Amortization of
Computer Software EBITDA
and
Amortization
of Computer Software
---
Financial & Risk $297 $146 $443 $274 $156 $430
Legal 247 63 310 259 62 321
Tax & Accounting 55 27 82 63 27 90
Corporate & Other (includes Reuters News) (94) 16 (78) (86) 16 (70)
$505 $252 $757 $510 $261 $771
==== ==== ==== ==== ==== ====
Six Months Ended Six Months Ended
June 30, 2016 June 30, 2015(1)
------------- ---------------
Underlying Add: Adjusted Underlying Add: Adjusted
Operating Profit Depreciation EBITDA Operating Profit Depreciation and Amortization of
Computer Software EBITDA
and
Amortization
of Computer Software
--------------------
Financial & Risk $592 $288 $880 $515 $316 $831
Legal 485 123 608 478 129 607
Tax & Accounting 138 58 196 161 55 216
Corporate & Other (includes Reuters News) (212) 33 (179) (183) 34 (149)
$1,003 $502 $1,505 $971 $534 $1,505
====== ==== ====== ==== ==== ======
Thomson Reuters Corporation
Reconciliation of Earnings Attributable to Common Shareholders to Adjusted Earnings (5)
(millions of U.S. dollars, except for share and per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
--------
2016 2015(1) Change 2016 2015(1) Change
---- ------ ------ ---- ------ ------
Earnings attributable to common shareholders $337 $262 29% $599 $567 6%
Adjustments to remove:
Fair value adjustments (21) 60 43 7
Other operating gains, net (7) (35) (11) (23)
Other finance (income) costs (9) 5 25 (39)
Share of post-tax losses (earnings) in equity method investments 1 (3) - (7)
Tax on above items (1) (12) (26) 2
Tax items impacting comparability 13 4 6 (2)
Amortization of other identifiable intangible assets 132 140 260 280
Earnings from discontinued operations, net of tax (46) (55) (108) (95)
Interim period effective tax rate normalization (6) (9) 5 (14) 6
Tax charge amortization (7) (16) (16) (32) (32)
Dividends declared on preference shares - - (1) (1)
Adjusted earnings $374 $355 5% $741 $663 12%
==== ==== === ==== ==== ===
Adjusted earnings per share $0.50 $0.45 11% $0.98 $0.84 17%
===== ===== === ===== ===== ===
Foreign currency(4) 2% 3%
Before currency(4) 9% 14%
Diluted weighted-average common shares (millions) 753.4 788.9 757.8 793.2
===== ===== ===== =====
Thomson Reuters Corporation
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow (8)
(millions of U.S. dollars)
(unaudited)
Three Months
Ended Six Months Ended
June 30, June 30,
-------- --------
2016 2015(1) 2016 2015(1)
---- ------ ---- ------
Net cash provided by
operating activities $770 $951 $1,228 $1,195
Capital expenditures,
less proceeds from
disposals (212) (210) (445) (500)
Other investing
activities 1 1 20 3
Dividends paid on
preference shares - - (1) (1)
Dividends paid to
non-controlling
interests (20) (20) (29) (27)
Capital expenditures
from discontinued
operations (14) (13) (25) (26)
Free cash flow $525 $709 $748 $644
==== ==== ==== ====
Footnotes
---------
(1) Prior-year period amounts have been
restated to reflect the
reclassification of the Intellectual
Property & Science segment as a
discontinued operation.
(2) Thomson Reuters defines adjusted
EBITDA as underlying operating profit
excluding the related depreciation
and amortization of computer
software. Adjusted EBITDA margin is
adjusted EBITDA expressed as a
percentage of revenues. Thomson
Reuters uses adjusted EBITDA as it
provides a measure commonly reported
and widely used by investors as an
indicator of a company's operating
performance and ability to incur and
service debt and as a valuation
metric.
(3) Underlying operating profit is
operating profit from reportable
segments and Corporate & Other
(includes Reuters News). Underlying
operating profit margin is the
underlying operating profit expressed
as a percentage of revenues. Thomson
Reuters uses underlying operating
profit as it provides a basis to
evaluate operating profitability and
performance trends, excluding the
impact of items which distort the
performance of the company's
operations.
(4) The changes in revenues, adjusted
EBITDA and underlying operating
profit and the related margins, and
adjusted earnings per share before
currency (at constant currency or
excluding the effects of currency)
are determined by converting the
current and prior-year period's
local currency equivalent using the
same exchange rates.
(5) Adjusted earnings and adjusted
earnings per share (EPS) include
dividends declared on preference
shares and amortization of the 2013
tax charges associated with the
consolidation of technology and
content assets but exclude the pre-
tax impacts of amortization of other
identifiable intangible assets as
well as the post-tax impacts of fair
value adjustments, other operating
(gains) and losses, certain
impairment charges, other finance
(income) costs, Thomson Reuters share
of post-tax (earnings) losses in
equity method investments,
discontinued operations and other
items affecting comparability.
Adjusted earnings per share is
calculated using diluted weighted-
average shares and does not represent
actual earnings or loss per share
attributable to shareholders. Thomson
Reuters uses adjusted earnings and
adjusted EPS as they provide a more
comparable basis to analyze earnings
and they are also measures commonly
used by shareholders to measure the
company's performance.
(6) Adjustment to reflect income taxes
based on estimated full-year
effective tax rate. Earnings or
losses for interim periods under IFRS
reflect income taxes based on the
estimated effective tax rates of each
of the jurisdictions in which Thomson
Reuters operates. The non-IFRS
adjustment reallocates estimated
full-year income taxes between
interim periods, but has no effect on
full-year income taxes.
(7) Reflects amortization of the 2013 tax
charges associated with the
consolidation of the ownership and
management of technology and content
assets. For the non-IFRS measure,
the majority of the charges are
amortized over seven years, the
period over which the tax is expected
to be paid.
(8) Free cash flow (includes free cash
flow from continuing and discontinued
operations) is net cash provided by
operating activities, and other
investing activities less capital
expenditures, dividends paid on the
company's preference shares, and
dividends paid to non-controlling
interests. Thomson Reuters uses free
cash flow as it helps assess the
company's ability, over the long
term, to create value for its
shareholders because it represents
cash available to repay debt, pay
common dividends and fund share
repurchases and new acquisitions.
Appendix A
Thomson Reuters Corporation
Supplemental Information
Adjusted Earnings and Adjusted EPS - Current Basis Compared to Redefined Basis
Includes IP & Science Results for 2015, 2014 and 2013
(millions of U.S. dollars, except for per share data and percentages)
(unaudited)
When the company reports its results in the third quarter of 2016, it plans to redefine adjusted earnings and adjusted EPS to better align these definitions with current market practices and to reflect guidance recently issued by the U.S. Securities and Exchange Commission. These changes will not impact revenue, adjusted EBITDA, underlying operating profit or free cash flow.
The company's modified definitions of adjusted earnings and adjusted EPS will reflect the following changes:
-- Tax effect of amortization of other identifiable intangible assets - the
company will remove the post-tax impact of amortization of other
identifiable intangible assets (IIA). The company previously removed the
amortization of other identifiable intangible assets on a pre-tax basis.
-- Tax charge amortization - the company will no longer amortize the tax
charge generated from its 2013 sale of technology and content assets to
a related subsidiary over seven years.
To illustrate the impact of these changes, set forth below is a summary of the currently defined amounts compared to the redefined amounts, including IP & Science results, for 2015, 2014 and 2013.
Twelve Months Ended December 31, 2015
-------------------------------------
Changes
-------
Current basis Remove: Deferred Remove: Tax Redefined basis
tax benefit on IIA charge
amortization amortization
------------ ------------
Adjusted earnings $1,672 $(148) $86 $1,610
Adjusted EPS $2.13 $(0.19) $0.11 $2.05
Effective tax rate 11.3% 11.1%
Twelve Months Ended December 31, 2014
-------------------------------------
Changes
-------
Current basis Remove: Deferred Remove: Tax Redefined basis
tax benefit on IIA charge
amortization amortization
------------ ------------
Adjusted earnings $1,497 $(167) $86 $1,416
Adjusted EPS $1.85 $(0.21) $0.11 $1.75
Effective tax rate 13.9% 13.4%
Twelve Months Ended December 31, 2013
-------------------------------------
Changes
-------
Current basis Remove: Deferred Remove: Tax Redefined basis
tax benefit on IIA charge
amortization amortization
------------ ------------
Adjusted earnings $1,283 $(174) $76 $1,185
Adjusted EPS $1.54 $(0.21) $0.10 $1.43
Effective tax rate 11.2% 13.0%
Refer to the Investor Relations section of the Thomson Reuters website for further financial information and reconciliations associated with the company's planned changes to the definitions for adjusted earnings and adjusted EPS, including redefined amounts by quarter.
PREPARED ON A REDEFINED BASIS
Appendix A (continued)
Thomson Reuters Corporation
Supplemental Information
Reconciliation of Earnings Attributable to Common Shareholders to Adjusted Earnings
(millions of U.S. dollars, except for share, per share data and percentages)
(unaudited)
Twelve Months Ended Twelve Months Ended Twelve Months Ended
December 31, 2015 December 31, 2014 December 31, 2013
----------------- ----------------- -----------------
Adjusted Earnings Pre- Tax Adjusted Adjusted Earnings Pre- Tax Adjusted Adjusted Earnings Pre- Tax Adjusted
tax Earnings tax Earnings tax Earnings
---------------------- --- --------- ---------------------- --- -------- ---------------------- --- --------
Earnings attributable to common shareholders $1,311 $(56) $1,255 $1,971 $(62) $1,909 $985 $(848) $137
Adjustments to remove:
Fair value adjustments (7) - (7) (91) - (91) (14) - (14)
Other operating gains, net (15) - (15) (969) - (969) (198) - (198)
Other finance (income) costs (39) - (39) 85 - 85 53 - 53
Share of post-tax earnings in equity method investments (10) - (10) (3) - (3) (20) - (20)
Operating loss from Other Businesses (1) - - 6 - 6 (64) - (64)
Tax on above items - (6) (6) - 12 12 - 64 64
Tax items impacting comparability - 1 1 - (10) (10) - 773 773
Amortization of other identifiable intangible assets 581 - 581 647 - 647 641 - 641
Earnings from discontinued operations, net of tax - - - - - - (10) - (10)
Tax charge amortization - (86) (86) - (86) (86) - (76) (76)
Dividends declared on preference shares (2) - (2) (3) - (3) (3) - (3)
--- --- --- --- --- --- --- --- ---
Adjusted earnings - current 1,819 (147) 1,672 1,643 (146) 1,497 1,370 (87) 1,283
Remove:
Deferred tax benefit on amortization of other identifiable intangible assets - (148) (148) - (167) (167) - (174) (174)
Tax charge amortization - 86 86 - 86 86 - 76 76
Adjusted earnings - redefined $1,819 $(209) $1,610 $1,643 $(227) $1,416 $1,370 $(185) $1,185
Adjusted earnings per share- redefined $2.05 $1.75 $1.43
===== ===== =====
Diluted weighted-average common shares (millions) 784.1 810.9 831.0
===== ===== =====
Adjusted earnings effective tax rate - redefined (2) 11.1% 13.4% 13.0%
==== ==== ====
(1) Other businesses are businesses that
have been exited through sale or
closure that did not qualify for
discontinued operations
classification.
(2) Calculated as income tax expense
divided by pre-tax adjusted
earnings plus non-controlling
interests and preferred dividends
as follows:
Twelve Months Ended December
31,
----------------------------
2015 2014 2013
---- ---- ----
Adjusted pre-tax earnings $1,819 $1,643 $1,370
Add Dividends declared on
preference shares 2 3 3
Add Non-controlling interests 56 50 48
----------------------------- --- --- ---
Pre-Tax Earnings $1,877 $1,696 $1,421
---------------- ------ ------ ------
Tax Expense $209 $227 $185
Adjusted earnings effective
tax rate -redefined 11.1% 13.4% 13.0%
--------------------------- ---- ---- ----
Refer to the Investor Relations section of Thomson Reuters website for further financial information and reconciliations associated with the company's planned changes to the definitions for adjusted earnings and adjusted EPS, including redefined amounts by quarter.
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SOURCE Thomson Reuters
