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Press release from Marketwire

Thomson Reuters Reports Second-Quarter 2011 Results

Thursday, July 28, 2011

Thomson Reuters Reports Second-Quarter 2011 Results07:00 EDT Thursday, July 28, 2011NEW YORK, NY--(Marketwire - July 28, 2011) - Thomson Reuters (TSX: TRI) (NYSE: TRI)- Revenues grew 4%, before currency- Underlying operating profit up 17%- Underlying operating profit margin was 20.9%, up 140 basis points- Adjusted earnings per share were $0.51 vs. $0.41 in second quarter 2010- Markets division reorganized to drive growth- 2011 Outlook affirmed</ul>Thomson Reuters (TSX: TRI) (NYSE: TRI), the world's leading source ofintelligent information for businesses and professionals, today reportedresults for the second quarter ended June 30, 2011. The company reportedongoing revenues of $3.2 billion, a 4% increase before currency (9%including currency), and underlying operating profit of $669 million, up17%.Adjusted earnings per share (EPS) were $0.51 compared to $0.41 in theprior-year period. The increase was largely attributable to higherunderlying operating profit and lower integration costs."Thanks to the strong growth of our Professional division and marginimprovement across the company, Thomson Reuters posted healthysecond-quarter results," said Thomas H. Glocer, chief executive officer ofThomson Reuters."Nonetheless, revenue growth in our Markets division is below ourexpectations, and I have decided to accelerate the transformation inMarkets, delayer the organization following a similar move in theProfessional division earlier this year, and make a series of changes inthe leadership team. I am confident that these changes will result inimproved performance."Consolidated Financial Highlights</b> Three Months Ended June 30, ---------------------------------- (Millions of U.S. dollars, except EPS and margin)IFRS Financial Measures 2011 2010 Change ------- ------- -------Revenues $ 3,447 $ 3,216 7%Operating profit $ 833 $ 435 91%Diluted earnings per share (EPS) $ 0.67 $ 0.35 91%Cash flow from operations $ 879 $ 889 -1% Change BeforeNon-IFRS Financial Measures(1) 2011 2010 Change Currency ------- ------- ------- -------Revenues from ongoing businesses $ 3,195 $ 2,942 9% 4%Adjusted EBITDA $ 887 $ 705 26% 20%Adjusted EBITDA margin 27.8% 24.0% 380bp 360bpUnderlying operating profit $ 669 $ 573 17% 9%Underlying operating profit margin 20.9% 19.5% 140bp 100bpAdjusted earnings per share (EPS) $ 0.51 $ 0.41 24%Free cash flow $ 633 $ 644 -2%(1) 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 note at the end of this news release.- Revenues from ongoing businesses were $3.2 billion, a 4% increasebefore currency. Strong growth across the Professional division, up 8%, anda 1% increase in Markets division revenues contributed to the overallincrease.- Adjusted EBITDA increased 26%, and the corresponding margin was 27.8%versus 24.0% in the prior-year period. Excluding currency, adjusted EBITDAincreased 20% and the corresponding margin increased 360 basis points.- Underlying operating profit increased 17% and the corresponding marginwas 20.9%, versus 19.5% in the same period in 2010. Excluding currency,underlying operating profit increased 9% and the corresponding marginincreased 100 basis points.- Adjusted EBITDA growth and underlying operating profit growth acrossboth divisions was due to flow-through from higher revenues, integrationsavings, timing benefits in Markets and the benefit of currency.- Adjusted EPS was $0.51 compared to $0.41 in the prior-year period. Theincrease was largely attributable to higher underlying operating profit andlower integration costs.</ul>Second-Quarter Business Segment Highlights</b>Unless otherwise noted, all revenue growth comparisons in this newsrelease are before the impact of foreign currency as Thomson Reutersbelieves this provides the best basis to measure the performance of itsbusiness. All revenue growth and operating profit comparisons are basedupon results from ongoing businesses and exclude the results of businessesthat have been or are expected to be exited.Professional Division</b> Three Months Ended June 30, ----------------------------------------- (Millions of U.S. dollars, except margin) Change Before 2011 2010 Change Currency ------- ------- ------ --------RevenuesLegal $ 843 $ 761 11% 9%Tax & Accounting $ 252 $ 226 12% 10%Intellectual Property & Science $ 211 $ 197 7% 4% ------- -------Professional Division Total $ 1,306 $ 1,184 10% 8% Margin -------------Adjusted EBITDA 2011 2010 ---- ----Legal $ 314 $ 287 9% 37.2% 37.7%Tax & Accounting $ 72 $ 56 29% 28.6% 24.8%Intellectual Property & Science $ 71 $ 70 1% 33.6% 35.5% ------- -------Professional Division Total $ 457 $ 413 11% 10%Adjusted EBITDA Margin 35.0% 34.9% 10bp 50bpOperating profitLegal $ 236 $ 220 7% 28.0% 28.9%Tax & Accounting $ 50 $ 35 43% 19.8% 15.5%Intellectual Property & Science $ 57 $ 56 2% 27.0% 28.4% ------- -------Professional Division Total $ 343 $ 311 10% 9%Operating Profit Margin 26.3% 26.3% - 20bp- During the second quarter, Thomson Reuters announced its intention tosell its Healthcare business. The planned sale of Healthcare and disposalof three smaller businesses resulted in a realignment of the company'sexisting Intellectual Property and Science businesses into a singleoperating unit. Prior-period results have been reclassified to conform tothe current presentation.- Revenues were up 8%, driven by solid growth across all businesses, inparticular Legal which grew 9% and Tax & Accounting which grew 10%.- EBITDA increased 11% compared to the prior-year period. Thecorresponding margin was 35.0% compared to 34.9% for the prior-year period.EBITDA margin was largely unchanged as flow-through from higher revenueswas partly offset by the dilutive effect from acquisitions.- Operating profit was up 10% compared to the prior-year period. Thecorresponding margin was 26.3%, unchanged from the prior-year period.Acquisitions negatively impacted the margin by 140 basis points.</ul>Legal</b>- Revenues increased 9% from the prior-year period. US Law Firm Solutionsgrew 2% led by a 12% increase in Business of Law (FindLaw and Elite) andoffset by a 2% decline in research-related revenues. Corporate, Government& Academic and Risk & Compliance revenues increased 16% (5% organic and 11%from acquisitions). Global businesses grew 19% (5% organic and 14% fromacquisitions) with strong growth in Latin America and Canada.- EBITDA increased 9% and the associated margin was 37.2%, compared to37.7% in the prior-year period.- Operating profit increased 7% and the associated margin was 28.0%,compared to 28.9% in the prior-year period. The decrease was primarily dueto the dilutive effect of acquisitions.- WestlawNext has been sold to over 24,000 customers since its launch inFebruary 2010 -- representing 41% of Westlaw's revenue base. Customerfeedback continues to be very positive.</ul>Tax & Accounting</b>- Revenues were up 10%. The Professional business grew 13%, the Corporatebusiness grew 5% led by growth in income tax provisions and indirect taxproducts and the Knowledge Solutions business grew 7% primarily from stronggrowth in Checkpoint.- EBITDA increased 29% and the related margin increased 380 basis pointsto 28.6% primarily driven by strong flow-through from revenues and theresult of efficiency initiatives.- Operating profit increased 43% and the related margin increased 430basis points to 19.8%. The increase was due to strong flow-through fromrevenues, efficiency initiatives and the decline of acquisitionaccounting-related costs.</ul>Intellectual Property & Science</b>- Revenues were up 4% from the prior-year period. Growth was driven byScientific & Scholarly Research revenues which were up 5%, led by Web ofKnowledge subscriptions and the Life Sciences business, which was up 11%due to strong demand for biology and disease analytics products andacquisitions. IP Solutions was up 2%, driven by growth in Patents andServices.- EBITDA was up 1% with the corresponding margin decreasing 190 basispoints to 33.6%.- Operating profit was up 2% with the corresponding margin decreasing to27.0%. The decline in EBITDA and operating profit margins was primarily dueto investments in content and technology initiatives to drive growth.</ul>Markets Division</b> Three Months Ended June 30, ----------------------------------- (Millions of U.S. dollars, except margin) Change Before 2011 2010 Change Currency ------- ------- ------- --------RevenuesSales & Trading $ 940 $ 868 8% 1%Investment & Advisory $ 558 $ 550 1% -2%Enterprise $ 312 $ 265 18% 10%Media $ 84 $ 79 6% -1% ------- -------Markets Division Total $ 1,894 $ 1,762 7% 1%Adjusted EBITDA $ 532 $ 427 25% 13%Adjusted EBITDA Margin 28.1% 24.2% 390bp 300bpOperating Profit $ 388 $ 312 24% 11%Operating Profit Margin 20.5% 17.7% 280bp 170bp- Revenues increased 1%. Strong revenue growth in Enterprise, Commodities& Energy and Tradeweb was partly offset by weakness in InvestmentManagement and Exchange Traded Instruments. Revenue growth would have been2% excluding a 6% decline in recoveries (pass-through revenues fromthird-party services such as exchange fees).- Recurring subscription-related revenues increased 1%.Transactions-related revenues increased 7%, primarily due to the increasein the company's ownership in Tradeweb. Outright revenues increased 19%.- By geography, revenues in Asia increased 5%; revenues in Europe, MiddleEast and Africa (EMEA) increased 2% while revenues in the Americas declined1%.- EBITDA was $532 million, up 25%, with a related margin of 28.1%.Excluding currency, EBITDA increased 13% and the related margin rose 300basis points.- Operating profit was $388 million, up 24%, with a related margin of20.5%. Excluding currency, operating profit increased 11% and the marginrose 170 basis points due to flow-through of integration savings and timingof expenses.- Markets has sold or migrated more than 28,000 Thomson Reuters Eikondesktops since the launch of the new desktop offering in September 2010.</ul>Sales & Trading</b>- Revenues were up 1% driven by 7% organic growth at Tradeweb and thecompany's increased ownership in the business. Revenue growth was partlyoffset by a 10% decline in recoveries. Excluding recoveries, revenues grew4%.- The Treasury business was flat in the quarter with growth impacted by2010 subscription cancellations.- Revenues from Commodities & Energy grew 5% primarily due to anacquisition, while Exchange Traded Instruments declined 7%, due to plannedshutdowns of low-margin products and the continued reduction of recoveriesrevenues as exchanges move to direct billing.</ul>Investment & Advisory </b>- Revenues declined 2%. Increases in Corporates, Investment Banking andWealth Management revenues were offset by weak performance in InvestmentManagement which declined 8%.- Improving performance in Investment Management is a key objective ofthe recent reorganization of the Markets division which is described below.</ul>Enterprise</b>- Revenues grew 10%, driven by continued strong customer demand. TheEnterprise Real Time Solutions business grew 9% as customers continued toinvest in low-latency data feeds and hosting solutions. The EnterpriseContent business grew 20%, driven by growth in pricing and reference data.The Platform business grew 15%, driven by strong performance in bothrecurring and outright revenues. Omgeo's revenues declined 3% due to lowervolumes.- Thomson Reuters Elektron continued to gain momentum as customers inestablished and emerging markets adopted its combination of hosted anddeployed information and trading solutions. In total, 12 data hostingcenters are up and running.</ul>Media</b>- Revenues decreased 1% as a result of lower online sales.- The News Agency business was flat due to tight customer budgets. TheConsumer business was down 3% in the second quarter, due to lower onlinesales primarily in EMEA and the Americas.</ul>Financial Highlights - Six Months</b> Six Months Ended June 30, ---------------------------------- (Millions of U.S. dollars, except EPS and margin)IFRS Financial Measures 2011 2010 Change ------- ------- -------Revenues $ 6,777 $ 6,356 7%Operating profit $ 1,229 $ 756 63%Diluted earnings per share (EPS) $ 0.97 $ 0.50 94%Cash flow from operations $ 1,079 $ 1,193 -10% Change BeforeNon-IFRS Financial Measures(1) 2011 2010 Change Currency ------- ------- ------- -------Revenues from ongoing businesses $ 6,303 $ 5,877 7% 4%Adjusted EBITDA $ 1,608 $ 1,400 15% 11%Adjusted EBITDA margin 25.5% 23.8% 170bp 160bpUnderlying operating profit $ 1,205 $ 1,103 9% 5%Underlying operating profit margin 19.1% 18.8% 30bp 10bpAdjusted earnings per share (EPS) $ 0.88 $ 0.74 19%Free cash flow $ 573 $ 637 -10%- Revenues from ongoing businesses were $6.3 billion, a 4% increasebefore currency. Strong growth across the Professional division, up 8%, anda 2% increase in Markets division revenues contributed to the overallincrease.- Adjusted EBITDA increased 15%, and the corresponding margin was 25.5%versus 23.8% in the prior-year period primarily due to flow-through fromhigher revenues, integration savings and timing benefits in Markets and thebenefit of currency. Excluding currency, EBITDA increased 11% and thecorresponding margin increased 160 basis points.- Underlying operating profit increased 9% and the corresponding marginwas 19.1%, versus 18.8% in the same period in 2010. Underlying operatingprofit growth across both divisions was partly offset by the dilutiveeffects of acquisitions. Excluding currency, underlying operating profitincreased 5% and the corresponding margin increased 10 basis points.- Adjusted EPS was $0.88 compared to $0.74 in the prior-year period. Theincrease was largely attributable to higher underlying operating profit andlower integration costs.- Free cash flow was $573 million, down 10% compared to the prior-yearperiod. Corporate expenses were $137 million versus $107 million in theprior-year period.</ul>Integration Programs</b>At the end of the second quarter of 2011, Thomson Reuters had achievedcombined run-rate savings of $1.54 billion from the Reuters integration andlegacy savings programs. An incremental $40 million in run-rate savings wasachieved during the second quarter of 2011 and included the retirement oflegacy products.Integration-related costs totaled $42 million in the second quarter and areforecast to be approximately $200 million for the full-year 2011.Business Outlook (Before Currency)</b>The information in this section is forward-looking and should be read inconjunction with the section below entitled "Special Note RegardingForward-Looking Statements, Material Assumptions and Material Risks."Thomson Reuters today reaffirmed its business outlook for 2011 that waspreviously communicated in February. The business outlook is provided forongoing businesses and based on 2010 results that have been restated toremove the results of the Healthcare business as well as other disposals.Thomson Reuters expects revenues to grow mid-single digits in 2011.Thomson Reuters expects adjusted EBITDA margin to increase by at least 300basis points in 2011 reflecting revenue growth and the completion ofintegration programs.Thomson Reuters expects underlying operating profit margin to increase byat least 100 basis points in 2011.The company expects that strong adjusted EBITDA growth in 2011 willcontribute to a 20% - 25% increase in reported free cash flow.Dividend</b>As previously announced, Thomson Reuters increased its 2011 annual dividendby $0.08 per share to $1.24 per share. A quarterly dividend of $0.31 pershare is payable on September 15, 2011 to shareholders of record as ofAugust 18, 2011.Recent Developments</b>The company announced on July 21, 2011 that it was streamlining its Marketsdivision by combining the current Sales & Trading and Investment & Advisorybusinesses into one unit to be called "Financial Professionals &Marketplaces" to focus on services for professionals delivered to screensand trading marketplaces. The current Enterprise business has also beenexpanded into "Enterprise Solutions" to focus on services andinfrastructure for financial firms as a whole. These changes are designedto accelerate growth by simplifying the business while improvingcollaboration across the company.On June 6, 2011, the company announced its intention to divest itsHealthcare business. The Healthcare business provides data, analytics andperformance benchmarking solutions and services to companies, governmentagencies and healthcare professionals. The sale process is ongoing and thecompany expects the divestiture to close before the end of the year.Thomson Reuters</b>Thomson Reuters is the world's leading source of intelligent informationfor businesses and professionals. We combine industry expertise withinnovative technology to deliver critical information to leading decisionmakers in the financial, legal, tax and accounting, healthcare and scienceand media markets, powered by the world's most trusted news organization.With headquarters in New York and major operations in London and Eagan,Minnesota, Thomson Reuters employs more than 55,000 people and operates inover 100 countries. Thomson Reuters shares are listed on the Toronto andNew York Stock Exchanges (symbol: TRI). For more information, go to www.thomsonreuters.com.NON-IFRS FINANCIAL MEASURES</b>Thomson Reuters prepares its financial statements in accordance withInternational Financial Reporting Standards (IFRS), as issued by theInternational Accounting Standards Board (IASB).This news release includes certain non-IFRS financial measures. ThomsonReuters uses these non-IFRS financial measures as supplemental indicatorsof its operating performance and financial position. These measures do nothave any standardized meanings prescribed by IFRS and therefore areunlikely to be comparable to the calculation of similar measures used byother companies, and should not be viewed as alternatives to measures offinancial performance calculated in accordance with IFRS. Non-IFRSfinancial measures are defined and reconciled to the most directlycomparable IFRS measures in the appended tables.SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS, MATERIAL ASSUMPTIONSAND MATERIAL RISKS</b>Certain statements in this news release, including, but not limited to,statements in the "Integration Programs" and "Business Outlook (BeforeCurrency)" sections and Mr. Glocer's comments, are forward-looking. Theseforward-looking statements are based on certain assumptions and reflect ourcompany's current expectations. As a result, forward-looking statements aresubject to a number of risks and uncertainties that could cause actualresults or events to differ materially from current expectations. There isno assurance that the events described in any forward-looking statementwill materialize. A business outlook is provided for the purpose ofpresenting information about current expectations for 2011. Thisinformation may not be appropriate for other purposes. You are cautionednot to place undue reliance on forward-looking statements which reflectexpectations only as of the date of this news release. Except as may berequired by applicable law, Thomson Reuters disclaims any obligation toupdate or revise any forward-looking statements.The material assumptions underlying the company's 2011 business outlook arebased on various external and internal assumptions. Economic and marketassumptions include, but are not limited to, positive global GDP growth ledby rapidly developing economies and a continued increase in the number ofprofessionals around the world and their demand for high qualityinformation and services. Internal financial and operational assumptionsinclude, but are not limited to, the successful execution of the company'songoing product release programs, globalization strategy, other growthinitiatives and efficiency programs.Some of the material risk factors that could cause actual results or eventsto differ materially from those expressed in or implied by forward-lookingstatements in this news release include, but are not limited to, changes inthe general economy; actions of competitors; increased accessibility tofree or relatively inexpensive information sources; failure to develop newproducts, services, applications and functionalities to meet customers'needs, attract new customers or expand into new geographic markets; failureto maintain a high renewal rate for subscription-based services; failuresor disruptions of network systems or the Internet; detrimental reliance onthird parties for information and other services; changes to law andregulations, including the impact of the Dodd-Frank legislation and similarfinancial services laws around the world; failure to meet the challengesinvolved in operating globally; failure to protect the reputation ofThomson Reuters; impairment of goodwill and identifiable intangible assets;inadequate protection of intellectual property rights; threat of legalactions and claims; downgrading of credit ratings and adverse conditions inthe credit markets; fluctuations in foreign currency exchange and interestrates; failure to recruit and retain high quality management and keyemployees; the effect of factors outside of the control of Thomson Reuterson funding obligations in respect of pension and post-retirement benefitarrangements; actions or potential actions that could be taken by thecompany's principal shareholder, The Woodbridge Company Limited; failure tofully derive anticipated benefits from future or existing acquisitions,joint ventures, investments or dispositions; and failure to achievebenefits from integration programs to the extent, or within the timeperiod, currently expected. These and other factors are discussed inmaterials that Thomson Reuters from time to time files with, or furnishesto, the Canadian securities regulatory authorities and the U.S. Securitiesand Exchange Commission. Thomson Reuters annual and quarterly reports arealso available in the "Investor Relations" section of www.thomsonreuters.com.Thomson Reuters will webcast a discussion of its second-quarter 2011results today beginning at 8:30 a.m. Eastern Daylight Time (EDT). You canaccess the webcast by visiting www.thomsonreuters.com andclicking on "Investor Relations" at the top of the page and then "ThomsonReuters Reports Second-Quarter 2011 Results." An archive of the webcastwill be available in the "Investor Relations" section of the ThomsonReuters website.</b> Thomson Reuters Corporation Division and Business Segment Information (millions of U.S. dollars) (unaudited) Three Months Six Months Ended Ended June 30, June 30, ----------------------------- ----------------------------- 2011 2010 Change Organic 2011 2010 Change Organic ------ ------ ----- ------ ------ ------ ----- ------Revenues Legal (1) $ 843 $ 761 11% 3% $1,631 $1,470 11% 3% Tax & Accounting(1) 252 226 12% 7% 508 470 8% 5% Intellectual Property & Science(1) 211 197 7% 2% 412 389 6% 3% ------ ------ ------ ------Professional Division $1,306 1,184 10% 4% 2,551 2,329 10% 4% Sales & Trading 940 868 8% -1% 1,867 1,758 6% -1% Investment & Advisory 558 550 1% -2% 1,118 1,109 1% -2% Enterprise 312 265 18% 10% 608 528 15% 10% Media 84 79 6% -1% 166 159 4% 0% ------ ------ ------ ------Markets Division 1,894 1,762 7% 0% 3,759 3,554 6% 1%Eliminations (5) (4) (7) (6) ------ ------ ------ ------Revenues from ongoing businesses(2) 3,195 2,942 9% 1% 6,303 5,877 7% 2% Before currency 4% 4%Other businesses(3) 252 274 474 479 ------ ------ ------ ------Revenues $3,447 $3,216 7% $6,777 $6,356 7% ====== ====== ====== ======Adjusted EBITDA(4) Legal(1) $ 314 $ 287 9% $ 572 $ 533 7% Tax & Accounting(1) 72 56 29% 137 113 21% Intellectual Property & Science(1) 71 70 1% 137 134 2% ------ ------ ------ ------Professional Division 457 413 11% 846 780 8%Markets Division 532 427 25% 1,003 902 11%Corporate expenses (60) (45) (129) (95)Integration programs expenses (42) (90) (112) (187) ------ ------ ------ ------AdjustedEBITDA $ 887 $ 705 26% $1,608 $1,400 15% ====== ====== ====== ======Underlying Operating Profit(5) Legal(1) $ 236 $ 220 7% $ 422 $ 402 5% Tax & Accounting(1) 50 35 43% 93 72 29% Intellectual Property & Science(1) 57 56 2% 109 106 3% ------ ------ ------ ------Professional Division 343 311 10% 624 580 8%Markets Division 388 312 24% 718 630 14%Corporate expenses (62) (50) (137) (107) ------ ------ ------ ------Underlying operating profit $ 669 $ 573 17% $1,205 $1,103 9% ====== ====== ====== ====== Thomson Reuters CorporationReconciliation of Operating Profit to Underlying Operating Profit (5) and Adjusted EBITDA (4) (millions of U.S. dollars) (unaudited) Three Months Six Months Ended Ended June 30, June 30, --------------------- ----------------------- 2011 2010 Change 2011 2010 Change ----- ----- ------- ------ ------ -------Operating profit $ 833 $ 435 91% $1,229 $ 756 63%Adjustments: Amortization of other identifiable intangible assets 150 132 294 261 Integration programs expenses 42 90 112 187 Fair value adjustments (8) (36) (10) (27) Other operating (gains) losses, net (286) 34 (319) 33 Operating profit from Other businesses (3) (62) (82) (101) (107) ----- ----- ------ ------Underlying operating profit $ 669 $ 573 17% $1,205 $1,103 9%Adjustments: Integration programs expenses (42) (90) (112) (187) Depreciation and amortization of computer software (excluding Other businesses (3)) 260 222 515 484 ----- ----- ------ ------Adjusted EBITDA $ 887 $ 705 26% $1,608 $1,400 15% ===== ===== ====== ======Underlying operating profit margin 20.9% 19.5% 140bp 19.1% 18.8% 30bp ===== ===== ====== ======Adjusted EBITDA margin 27.8% 24.0% 380bp 25.5% 23.8% 170bp ===== ===== ====== ====== Thomson Reuters Corporation Reconciliation of Earnings from Continuing Operations to Adjusted EBITDA (4) (millions of U.S. dollars) (unaudited) Three Months Six Months Ended Ended June 30, June 30, -------------------- ---------------------- 2011 2010 Change 2011 2010 Change ------ ---- ------ ------ ------ ------Earnings from continuing operations $ 572 $303 89% $ 827 $ 437 89%Adjustments: Tax expense 174 79 226 110 Other finance (income) cost, net (9) (39) (16) 24 Net interest expense 98 95 199 188 Amortization of other identifiable intangible assets 150 132 294 261 Amortization of computer software 162 133 326 274 Depreciation 110 105 217 243 ------ ---- ------ ------EBITDA $1,257 $808 56% $2,073 $1,537 35%Adjustments: Share of post tax earnings in equity method investees (2) (3) (7) (3) Other operating (gains) losses, net (286) 34 (319) 33 Fair value adjustments (8) (36) (10) (27) EBITDA from Other businesses (3) (74) (98) (129) (140) ------ ---- ------ ------Adjusted EBITDA $ 887 $705 26% $1,608 $1,400 15% ====== ==== ====== ======Adjusted EBITDA margin 27.8% 24.0% 380bp 25.5% 23.8% 170bp ====== ==== ====== ====== Thomson Reuters Corporation Reconciliation of Underlying Operating Profit to Adjusted EBITDA (4) by Division and Business Segment (millions of U.S. dollars) (unaudited) Three Months Ended Three Months Ended June 30, 2011 June 30, 2010 ---------------------------- ---------------------------- Add: Add: Depreciation Depreciation and and Amortization Amortization of of Underlying Computer Underlying Computer Operating Software Adjusted Operating Software Adjusted Profit -- EBITDA Profit -- EBITDA -------- --------- -------- -------- --------- -------- Legal(1) $ 236 $ 78 $ 314 $ 220 $ 67 $ 287 Tax & Accounting(1) 50 22 72 35 21 56 Intellectual Property & Science(1) 57 14 71 56 14 70 -------- --------- -------- -------- --------- --------Professional Division 343 114 457 311 102 413Markets Division 388 144 532 312 115 427Corporate expenses (62) 2 (60) (50) 5 (45)Integration programs expenses na na (42) na na (90) -------- --------- -------- -------- --------- -------- $ 669 $ 260 $ 887 $ 573 $ 222 $ 705 ======== ========= ======== ======== ========= ======== Six Months Ended Six Months Ended June 30, 2011 June 30, 2010 ---------------------------- ---------------------------- Add: Add: Depreciation Depreciation and and Amortization Amortization of of Underlying Computer Underlying Computer Operating Software Adjusted Operating Software Adjusted Profit -- EBITDA Profit -- EBITDA -------- --------- -------- -------- --------- -------- Legal(1) $ 422 $ 150 $ 572 $ 402 $ 131 $ 533 Tax & Accounting(1) 93 44 137 72 41 113 Intellectual Property & Science(1) 109 28 137 106 28 134 -------- --------- -------- -------- --------- --------Professional Division 624 222 846 580 200 780Markets Division 718 285 1,003 630 272 902Corporate expenses (137) 8 (129) (107) 12 (95)Integration programs expenses na na (112) na na (187) -------- --------- -------- -------- --------- -------- $ 1,205 $ 515 $ 1,608 $ 1,103 $ 484 $ 1,400 ======== ========= ======== ======== ========= ======== Thomson Reuters Corporation Reconciliation of Earnings Attributable to Common Shareholders to Adjusted Earnings from Continuing Operations (6)(millions of U.S. dollars, except as otherwise indicated and except for per share data) (unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 2011 2010 2011 2010 -------- -------- -------- -------- Earnings attributable to common shareholders $ 563 $ 290 $ 813 $ 417 Adjustments: Operating profit from Other businesses (3) (62) (82) (101) (107)Fair value adjustments (8) (36) (10) (27) Other operating (gains) losses, net (286) 34 (319) 33 Other finance (income) costs (9) (39) (16) 24 Share of post tax earnings in equity method investees (2) (3) (7) (3) Tax on above items 115 30 127 29 Interim period effective tax rate normalization (7) 15 7 5 (11) Discrete tax item (46) - (46) - Amortization of other identifiable intangible assets 150 132 294 261 Discontinued operations - 6 (2) 6 Dividends declared on preference shares (1) - (2) (1) -------- -------- -------- -------- Adjusted earnings from continuing operations $ 429 $ 339 $ 736 $ 621 ======== ======== ======== ======== Adjusted earnings per share from continuing operations $ 0.51 $ 0.41 $ 0.88 $ 0.74 ======== ======== ======== ======== ======== ======== ======== ======== Diluted weighted average common shares (in millions) 839.8 835.8 839.0 835.3 ======== ======== ======== ========(1) Thomson Reuters reorganized its reportable segments in the second quarter of 2011. The company's four reportable segments are Legal, Tax & Accounting, Intellectual Property & Science and Markets. Prior-period amounts have been reclassified to reflect the current presentation.(2) Revenues from ongoing businesses are revenues from reportable segments (which excludes Other businesses (see note (3) below)) less eliminations.(3) Other businesses are businesses that have been or are expected to be exited through sale or shut-down that did not qualify for discontinued operations classification. Other businesses do not qualify as a component of the company's four reportable segments, nor as a separate reportable segment. (millions of U.S. dollars) Three Months Ended Six Months Ended June 30, June 30, ------------------- ------------------- Other businesses 2011 2010 2011 2010 --------- --------- --------- --------- Revenues $ 252 $ 274 $ 474 $ 479 Operating profit $ 62 $ 82 $ 101 $ 107 Depreciation and amortization of computer software 12 16 28 33 --------- --------- --------- --------- EBITDA $ 74 $ 98 $ 129 $ 140 ========= ========= ========= =========(4) Thomson Reuters defines adjusted EBITDA as underlying operating profit excluding the related depreciation and amortization of computer software but including integration programs expense. Adjusted EBITDA margin is adjusted EBITDA expressed as a percentage of revenues from ongoing businesses.(5) Underlying operating profit is operating profit from reportable segments and corporate expenses. Underlying operating profit margin is the underlying operating profit expressed as a percentage of revenues from ongoing businesses.(6) Adjusted earnings from continuing operations and adjusted earnings per share from continuing operations include dividends declared on preference shares and integration programs expense, 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, the results of Other businesses (see note (3) above), other net finance (income) costs, Thomson Reuters share of post-tax (earnings) losses in equity method investees, discontinued operations and other items affecting comparability. Adjusted earnings per share from continuing operations is calculated using diluted weighted average shares and does not represent actual earnings per share attributable to shareholders.(7) Adjustment to reflect income taxes based on estimated full-year effective tax rate. Reported earnings for interim periods reflect income taxes based on the estimated effective tax rates of each of the jurisdictions in which Thomson Reuters operates. The adjustment reallocates estimated full-year income taxes between interim periods, but has no effect on full year income taxes. 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, ------------------------ ------------------------ 2011 2010 2011 2010 ----------- ----------- ----------- -----------Revenues $ 3,447 $ 3,216 $ 6,777 $ 6,356Operating expenses (2,478) (2,377) (5,030) (4,789)Depreciation (110) (105) (217) (243)Amortization of computer software (162) (133) (326) (274)Amortization of other identifiable intangible assets (150) (132) (294) (261)Other operating gains (losses), net 286 (34) 319 (33) ----------- ----------- ----------- -----------Operating profit 833 435 1,229 756Finance costs, net: Net interest expense (98) (95) (199) (188) Other finance income (costs) 9 39 16 (24) ----------- ----------- ----------- -----------Income before tax and equity method investees 744 379 1,046 544Share of post tax earnings in equity method investees 2 3 7 3Tax expense (174) (79) (226) (110) ----------- ----------- ----------- -----------Earnings from continuing operations 572 303 827 437(Losses) earnings from discontinued operations, net of tax - (6) 2 (6) ----------- ----------- ----------- -----------Net earnings $ 572 $ 297 $ 829 $ 431 =========== =========== =========== ===========Earnings attributable to: Common shareholders 563 290 813 417 Non-controlling interests 9 7 16 14Basic and diluted earnings per share $ 0.67 $ 0.35 $ 0.97 $ 0.50 =========== =========== =========== ===========Basic weighted average common shares 837,096,717 831,962,410 836,129,383 831,429,258 =========== =========== =========== ===========Diluted weighted average common shares 839,846,235 835,827,289 839,025,585 835,335,292 =========== =========== =========== =========== Thomson Reuters Corporation Consolidated Statement of Financial Position (millions of U.S. dollars) (unaudited) June 30, December 31, 2011 2010 ------------ ------------AssetsCash and cash equivalents $ 713 $ 864Trade and other receivables 1,653 1,809Other financial assets 97 74Prepaid expenses and other current assets 662 912 ------------ ------------Current assets excluding assets held for sale 3,125 3,659Assets held for sale 1,144 - ------------ ------------Current assets 4,269 3,659Computer hardware and other property, net 1,464 1,567Computer software, net 1,573 1,613Other identifiable intangible assets, net 8,620 8,714Goodwill 18,906 18,892Other financial assets 524 460Other non-current assets 567 558Deferred tax 61 68 ------------ ------------Total assets $ 35,984 $ 35,531 ============ ============Liabilities and equityLiabilitiesCurrent indebtedness $ 634 $ 645Payables, accruals and provisions 2,502 2,924Deferred revenue 1,223 1,300Other financial liabilities 117 142 ------------ ------------Current liabilities excluding liabilities associated with assets held for sale 4,476 5,011Liabilities associated with assets held for sale 219 - ------------ ------------Current liabilities 4,695 5,011Long-term indebtedness 6,955 6,873Provisions and other non-current liabilities 2,207 2,217Other financial liabilities 24 71Deferred tax 1,600 1,684 ------------ ------------Total liabilities 15,481 15,856EquityCapital 10,407 10,284Retained earnings 10,808 10,518Accumulated other comprehensive loss (1,062) (1,480) ------------ ------------Total shareholders' equity 20,153 19,322Non-controlling interests 350 353 ------------ ------------Total equity 20,503 19,675 ------------ ------------Total liabilities and equity $ 35,984 $ 35,531 ============ ============ Thomson Reuters Corporation Consolidated Statement of Cash Flow (millions of U.S. dollars) (unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 2011 2010 2011 2010 -------- -------- -------- --------Cash provided by (used in):Operating activitiesNet earnings $ 572 $ 297 $ 829 $ 431Adjustments for: Depreciation 110 105 217 243 Amortization of computer software 162 133 326 274 Amortization of other identifiable intangible assets 150 132 294 261 Deferred tax (142) (28) (174) (66) Other (253) 82 (222) 224Changes in working capital and other items (1) 280 168 (191) (168) -------- -------- -------- --------Operating cash flows from continuing operations 879 889 1,079 1,199Operating cash flows from discontinued operations - - - (6) -------- -------- -------- --------Net cash provided by operating activities (1) 879 889 1,079 1,193 -------- -------- -------- --------Investing activitiesAcquisitions, less cash acquired (672) (415) (726) (478)Proceeds from other disposals 495 4 510 18Capital expenditures, less proceeds from disposals (1) (247) (249) (541) (558)Other investing activities 2 4 37 3 -------- -------- -------- --------Investing cash flows from continuing operations (422) (656) (720) (1,015)Investing cash flows from discontinued operations 18 - 39 - -------- -------- -------- --------Net cash used in investing activities (1) (404) (656) (681) (1,015) -------- -------- -------- --------Financing activitiesProceeds from debt - 147 - 638Repayments of debt (48) (442) (53) (913)Net repayments under short-term loan facilities (63) (14) (20) (14)Dividends paid on preference shares (1) - (2) (1)Dividends paid on common shares (248) (232) (465) (463)Other financing activities (14) - (14) (6) -------- -------- -------- --------Net cash used in financing activities (374) (541) (554) (759) -------- -------- -------- --------Translation adjustments on cash and cash equivalents 1 (12) 5 (22) -------- -------- -------- --------Increase (decrease) in cash and cash equivalents 102 (320) (151) (603)Cash and cash equivalents at beginning of period 611 828 864 1,111 -------- -------- -------- --------Cash and cash equivalents at end of period $ 713 $ 508 $ 713 $ 508 ======== ======== ======== ========(1) Certain prior-period amounts have been revised in the consolidated statement of cash flow. Specifically, capital expenditures now include only cash payments, whereas previously they also included accruals relating to capital expenditures. The revision had no impact on prior periods' increase or decrease in cash and cash equivalents, financial position or results of operations. Capital expenditures including accrued amounts were $233 million and $248 million for the three months ended June 30, 2011 and 2010, respectively, and $451 million and $462 million for the six months ended June 30, 2011 and 2010, respectively. Thomson Reuters Corporation Reconciliation of Net Cash Provided by Operating Activities to Underlying Free Cash Flow (1),(2) (millions of U.S. dollars) (unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 2011 2010 2011 2010 -------- -------- -------- --------Net cash provided by operating activities (3) $ 879 $ 889 $ 1,079 $ 1,193Capital expenditures, less proceeds from disposals (3) (247) (249) (541) (558)Other investing activities 2 4 37 3Dividends paid on preference shares (1) - (2) (1) -------- -------- -------- --------Free cash flow (2),(3) 633 644 573 637Integration programs costs 67 107 140 221 -------- -------- -------- --------Underlying free cash flow (1),(3) $ 700 $ 751 $ 713 $ 858 ======== ======== ======== ========(1) Underlying free cash flow is free cash flow excluding one-time cash costs associated with integration programs.(2) Free cash flow is net cash provided by operating activities less capital expenditures, other investing activities and dividends paid on our preference shares. Thomson Reuters uses free cash flow as a performance measure because it represents cash available to repay debt, pay dividends and fund share repurchases and new acquisitions.(3) There was no impact on free cash flow or underlying free cash flow as a result of the revision of prior-period amounts for "net cash provided by operating activities" and "capital expenditures, less proceeds from disposals." See the "Consolidated Statement of Cash Flow" in this news release for additional information.FOR FURTHER INFORMATION PLEASE CONTACT: CONTACTORMEDIAORSenior Vice President, Corporate AffairsCalvin Mitchell+1 646 223 5285calvin.mitchell@thomsonreuters.comORINVESTORSORSenior Vice President, Investor RelationsFrank J. Golden+1 646 223 5288frank.golden@thomsonreuters.com