Thomson Reuters Corp 6-K, filed May 5, 2022
Thomson Reuters Corp (TRI)
About this 6-K
Thomson Reuters Corp filed this 6-K on May 5, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
| For the month of May 2022 | Commission File Number: 1-31349 |
THOMSON REUTERS CORPORATION
(Translation of registrant’s name into English)
333 Bay Street, Suite 300
Toronto, Ontario M5H 2R2, Canada
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F ☐ Form 40-F ☒
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
The information contained in Exhibit 99.1 and Exhibit 99.2 of this Form 6-K is incorporated by reference into, or as additional exhibits to, as applicable, the registrant’s outstanding registration statements.
Thomson Reuters Corporation is voluntarily furnishing certifications by its Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 as Exhibits 99.3-99.6 of this Form 6-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| THOMSON REUTERS CORPORATION (Registrant) | ||||
| By: | /s/ Marc E. Gold | |||
| Name: | Marc E. Gold | |||
| Title: | Deputy Company Secretary | |||
Date: May 5, 2022
EXHIBIT INDEX
| Exhibit |
Description | |
| 99.1 | Management’s Discussion and Analysis | |
| 99.2 | Unaudited Consolidated Financial Statements | |
| 99.3 | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 99.4 | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 99.5 | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 99.6 | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
Exhibit 99.1
Management’s Discussion and Analysis
This management’s discussion and analysis is designed to provide you with a narrative explanation through the eyes of our management of how we performed, as well as information about our financial condition and future prospects. As this management’s discussion and analysis is intended to supplement and complement our financial statements, we recommend that you read this in conjunction with our consolidated interim financial statements for the three months ended March 31, 2022, our 2021 annual consolidated financial statements and our 2021 annual management’s discussion and analysis. This management’s discussion and analysis contains forward-looking statements, which are subject to risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements. Forward-looking statements include, but are not limited to, our two-year Outlook, including forecasted impacts associated with our Change Program, and our expectations related to general economic conditions and market trends and their anticipated effects on our business segments. For additional information related to forward-looking statements, material assumptions and material risks associated with them, please see the “Outlook,” and “Additional Information—Cautionary Note Concerning Factors That May Affect Future Results” sections of this management’s discussion and analysis. This management’s discussion and analysis is dated as of May 2, 2022.
We have organized our management’s discussion and analysis in the following key sections:
Unless otherwise indicated or the context otherwise requires, references in this discussion to “we,” “our,” “us”, the “Company” and “Thomson Reuters” are to Thomson Reuters Corporation and our subsidiaries.
Basis of presentation
We prepare our consolidated financial statements in U.S. dollars and in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).
Other than EPS, we report our results in millions of U.S. dollars, but we compute percentage changes and margins using whole dollars to be more precise. As a result, percentages and margins calculated from reported amounts may differ from those presented, and growth components may not total due to rounding.
In the first quarter of 2022, we made two changes to our segment reporting to reflect changes in how we manage our businesses. Prior-period amounts have been revised to reflect the current presentation. Refer to the “Additional information” section of this management’s discussion and analysis for further information.
Use of non-IFRS financial measures
In this management’s discussion and analysis, we discuss our results on both an IFRS and non-IFRS basis. We use non-IFRS financial measures, which include ratios that incorporate one or more non-IFRS financial measures, as supplemental indicators of our operating performance and financial position as well as for internal planning purposes, our management incentive programs and our business Outlook. We believe non-IFRS financial measures provide more insight into our performance. Non-IFRS measures do not have 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.
Page 1
See Appendix A of this management’s discussion and analysis for a description of our non-IFRS financial measures, including an explanation of why we believe they are useful measures of our performance, including our ability to generate cash flow. Refer to the “Liquidity and Capital Resources” section of this management’s discussion and analysis and Appendix B for reconciliations of our non-IFRS financial measures to the most directly comparable IFRS measures.
Glossary of key terms
The following terms in this management’s discussion and analysis have the following meanings, unless otherwise indicated:
|
Term |
Definition | |
| “Big 3” segments |
Our combined Legal Professionals, Corporates and Tax & Accounting Professionals segments | |
| Blackstone’s consortium |
The Blackstone Group and its subsidiaries, and private equity funds affiliated with Blackstone | |
| bp |
Basis points — one basis point is equal to 1/100th of 1%; “100bp” is equivalent to 1% | |
| Change Program |
A two-year initiative focused on transforming our company from a holding company to an operating company and from a content provider into a content-driven technology company | |
| constant currency |
A non-IFRS measure derived by applying the same foreign currency exchange rates to the financial results of the current and equivalent prior-year period | |
| COVID-19 |
A novel strain of coronavirus that was characterized a pandemic by the World Health Organization during March 2020 | |
|
EPS |
Earnings per share | |
| LSEG |
London Stock Exchange Group plc | |
| n/a |
Not applicable | |
| n/m |
Not meaningful | |
| organic or organically |
A non-IFRS measure that represents changes in revenues of our existing businesses at constant currency. The metric excludes the distortive impacts of acquisitions and dispositions from not owning the business in both comparable periods | |
| Refinitiv |
The Refinitiv business of LSEG. We owned 45% of Refinitiv prior to its sale on January 29, 2021 | |
| YPL |
York Parent Limited, the entity that owns LSEG shares, which is jointly owned by our company and the Blackstone consortium. A group of current LSEG and former members of Refinitiv senior management also owns part of YPL. References to YPL also include its subsidiaries. YPL was previously known as Refinitiv Holdings Limited prior to the sale of Refinitiv to LSEG on January 29, 2021 | |
| $ and US$ |
U.S. dollars |
Page 2
Our company
Thomson Reuters is a leading provider of business information services. Our products include highly specialized information-enabled software and tools for legal, tax, accounting and compliance professionals combined with the world’s most global news service – Reuters.
We derive most of our revenues from selling information and software solutions, primarily electronically and on a recurring subscription basis. Our solutions blend deep domain knowledge with software and automation tools. We believe our workflow solutions make our customers more productive, by streamlining how they operate, enabling them to focus on higher value activities. Many of our customers use our solutions as part of their workflows, which has led to strong customer retention. We believe that our customers trust us because of our history and dependability and our deep understanding of their businesses and industries, and they rely on our services for navigating a rapidly changing and increasingly complex digital world. Over the years, our business model has proven to be capital efficient and cash flow generative, and it has enabled us to maintain leading and scalable positions in our chosen market segments.
We are organized as five reportable segments described below, which reflect how we manage our businesses.
|
First Quarter 2022 Revenues
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Legal Professionals Serves law firms and governments with research and workflow products, focusing on intuitive legal research powered by emerging technologies and integrated legal workflow solutions that combine content, tools and analytics.
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Corporates Serves corporate customers from small businesses to multinational organizations, including the seven largest global accounting firms, with our full suite of content-enabled technology solutions for in-house legal, tax, regulatory, compliance and IT professionals.
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Tax & Accounting Professionals Serves tax, accounting and audit professionals in accounting firms (other than the seven largest, which are served by our Corporates segment) with research and workflow products, focusing on intuitive tax offerings and automating tax workflows.
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Reuters News Supplies business, financial and global news to the world’s media organizations, professionals and news consumers through Reuters News Agency, Reuters.com, Reuters Events, Thomson Reuters products and the Refinitiv business of LSEG.
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Global Print Provides legal and tax information primarily in print format to customers around the world. | |||
Our businesses are supported by a corporate center that centrally manages commercial and technology operations, including those around our sales capabilities, digital customer experience and product and content development. Our corporate center also centrally manages functions such as finance, legal and human resources, and our Change Program. We report “Corporate costs” which includes expenses for corporate functions and our Change Program.
Page 3
Key Financial Highlights
The momentum we experienced in 2021 continued to build into the first quarter of 2022, as both sales and revenue exceeded our expectations. Our businesses continue to benefit from the increasing complexity of regulation in our legal, tax and risk-related markets.
In May 2022, we raised our total company and “Big 3” revenue growth Outlook for the full year of 2022, reflecting our increasing confidence in our business performance. We reaffirmed all other measures in our two-year Outlook, including our adjusted EBITDA margin, as we continue to invest in our business and customer success initiatives and absorb heightened inflationary pressures. Refer to the “Outlook” section of this management’s discussion and analysis for additional information.
Our Change Program to transition from a holding company to an operating company, and from a content provider into a content-driven technology company, is on track. In the first quarter of 2022, we further progressed program initiatives to migrate more of our revenue to cloud solutions, increase the proportion of sales we make through our digital channels, and improve our customers’ experience interacting with us. As of March 31, 2022, we have achieved $305 million of annualized run-rate operating expense savings from the program.
Recent Global Events
The global economy is experiencing substantial disruption due to the Russian military invasion of Ukraine on February 24, 2022 and the ongoing impacts from COVID-19. In response to the invasion, several countries have imposed economic sanctions that are affecting global financial markets and exacerbating economic challenges such as inflation and global supply-chain disruption. While our Reuters News business continues to report from Ukraine in order to provide unbiased and reliable news, our operations in Ukraine and Russia are not material to our business. We have taken steps to comply with applicable restrictions arising from sanctions that apply to our company. We have also relocated services previously performed under outsourcing contracts in the region. We are closely monitoring the crisis to assess potential impacts on our businesses.
Consolidated results
|
Three months ended March 31,
|
||||||||||||||||
|
Change
|
||||||||||||||||
| (millions of U.S. dollars, except per share amounts and margins) | 2022
|
2021
|
Total
|
Constant
|
||||||||||||
| IFRS Financial Measures |
||||||||||||||||
| Revenues |
1,674 | 1,580 | 6% | |||||||||||||
| Operating profit |
414 | 387 | 7% | |||||||||||||
| Diluted earnings per share |
$ | 2.06 | $ | 10.13 | (80%) | |||||||||||
| Net cash provided by operating activities |
275 | 380 | (28%) | |||||||||||||
| Non-IFRS Financial Measures(1) |
||||||||||||||||
| Revenues |
1,674 | 1,580 | 6% | 7% | ||||||||||||
| Organic revenue growth |
7% | |||||||||||||||
| Adjusted EBITDA |
600 | 558 | 7% | 7% | ||||||||||||
| Adjusted EBITDA margin |
35.8% | 35.3% | 50bp | 20bp | ||||||||||||
| Adjusted EPS |
$0.66 | $0.58 | 14% | 14% | ||||||||||||
| Free cash flow |
86 | 239 | (64%) | |||||||||||||
“Big 3” Segments – Legal Professionals, Corporates and Tax & Accounting Professionals Combined
|
Three months ended March 31,
|
||||||||||||||||
|
Change
|
||||||||||||||||
| (millions of U.S. dollars, except margins) | 2022
|
2021
|
Total
|
Constant
|
||||||||||||
| Non-IFRS Financial Measures(1) |
||||||||||||||||
| Revenues |
1,362 | 1,277 | 7% | 7% | ||||||||||||
| Organic revenue growth |
7% | |||||||||||||||
| Adjusted EBITDA |
584 | 523 | 11% | 11% | ||||||||||||
| Adjusted EBITDA margin |
42.9% | 41.0% | 190bp | 160bp | ||||||||||||
| (1) | Refer to Appendices A and B of this management’s discussion and analysis for additional information and reconciliations of our non-IFRS financial measures to the most directly comparable IFRS financial measures. |
Page 4
Revenues increased 6% in total reflecting growth across four of our five business segments. Foreign currency negatively impacted revenues by 1%. Revenues increased 7% on both a constant currency and organic basis. Recurring revenues grew 7% (78% of our revenues) and transactions revenues grew 8%. Revenue growth in the quarter included a benefit of approximately 100bp from transactional revenues that we do not expect to recur, and to a lesser extent, timing.
Revenues for our “Big 3” segments (81% of total revenues) increased 7% in total, in constant currency and on an organic basis. The increase in organic revenues was driven by 8% growth in recurring revenues (85% of “Big 3” revenues) and 6% growth in transactions revenues. This performance reflects the fourth consecutive quarter that our “Big 3” segments have grown at least 6%.
Operating profit increased 7% as higher revenues more than offset higher costs, which included investments associated with our Change Program. Adjusted EBITDA and the related margin increased due to the same factors.
Diluted EPS was $2.06 per share and included a benefit from an increase in the value of our investment in LSEG. Diluted EPS in the prior-year period was $10.13 per share and included the gain of approximately $8.1 billion on the sale of Refinitiv to LSEG. Adjusted EPS, which excludes the change in value of our LSEG investment, the gain on the sale of Refinitiv and other adjustments, increased to $0.66 per share from $0.58 per share in the prior-year period, primarily due to higher adjusted EBITDA.
Net cash provided by operating activities decreased due to higher payments associated with our Change Program as well as higher annual incentive plan bonuses. Free cash flow decreased due to lower cash flows from operating activities and higher capital expenditures associated with the Change Program.
Change Program Update
In the first quarter of 2022, we began the second and final year of our two-year Change Program, which is intended to drive growth and efficiency by transitioning our company from a holding company into an operating company, and from a content provider into a content-driven technology company. Our Change Program remains on track to achieve our overall objectives, which are to:
| ● | Make it easier for our customers to do business with us; |
| ● | Significantly modernize and simplify our product portfolio and product development groups; |
| ● | Reduce complexity in our operations and technology organization; and |
| ● | Continue to simplify our organizational structure to enable a more innovative culture. |
We have invested the following amounts in our Change Program on technology, organizational and market-related initiatives.
|
Change Program Investments
| ||||||||||||
| (millions of U.S. dollars) | First Quarter
|
Cumulative
|
Total
|
|||||||||
| Change Program investments |
||||||||||||
| Operating expenses |
34 | 217 | 343 - 383 | |||||||||
| Accrued capital expenditures |
28 | 140 | 212 - 252 | |||||||||
| Total investment |
62 | 357 | 600 | |||||||||
We continue to migrate more of our revenue to cloud solutions, increase the proportion of sales we make through our digital channels, and improve our customers’ experience interacting with us. As of March 31, 2022, we achieved $305 million of annualized run-rate operating expense savings. We expect to achieve $500 million of annualized run-rate operating expense savings by the end of 2022, and to achieve our full targeted amount of $600 million by the end of 2023. Refer to the “Outlook” section of the management’s discussion and analysis for additional information about our Change Program.
Page 5
Our revenues and operating profit on a consolidated basis do not tend to be significantly impacted by seasonality as we record a large portion of our revenues ratably over the contract term and our costs are generally incurred evenly throughout the year. However, our revenues from quarter to consecutive quarter can be impacted by the release of certain tax products, which tend to be concentrated in the fourth quarter and, to a lesser extent, in the first quarter of the year. The timing of costs related to the Change Program impacted the seasonality of our expenses and operating profit in 2022 and 2021.
The section below contains non-IFRS measures where indicated. Refer to Appendices A and B of this management’s discussion and analysis for additional information and reconciliations of our non-IFRS financial measures to the most directly comparable IFRS financial measures.
Consolidated results
|
Three months ended March 31,
|
||||||||||||||||
| Change | ||||||||||||||||
| (millions of U.S. dollars, except per share amounts and margins) | 2022 | 2021 | Total | Constant Currency |
||||||||||||
| IFRS Financial Measures |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Revenues |
1,674 | 1,580 | 6% |
|
|
| ||||||||||
| Operating profit |
414 | 387 | 7% |
|
|
| ||||||||||
| Diluted EPS |
$2.06 | $10.13 | (80%) |
|
|
| ||||||||||
| Non-IFRS Financial Measures |
||||||||||||||||
| Revenues |
1,674 | 1,580 | 6% | 7% | ||||||||||||
| Organic revenue growth |
7% | |||||||||||||||
| Adjusted EBITDA |
600 | 558 | 7% | 7% | ||||||||||||
| Adjusted EBITDA margin |
35.8% | 35.3% | 50bp | 20bp | ||||||||||||
| Adjusted EBITDA less accrued capital expenditures(1) |
478 | 452 | 6% | |||||||||||||
| Adjusted EBITDA less accrued capital expenditures margin(1) |
28.6% | 28.6% | - | |||||||||||||
| Adjusted EPS |
$0.66 | $0.58 | 14% | 14% | ||||||||||||
| (1) | As of December 31, 2021, we changed the basis for reporting capital expenditures. First-quarter 2021 amounts have been revised to reflect the change. Refer to Appendix A of this management’s discussion and analysis for additional information. |
“Big 3” Segments – Legal Professionals, Corporates and Tax & Accounting Professionals Combined
|
Three months ended March 31,
|
||||||||||||||||
| Change | ||||||||||||||||
| (millions of U.S. dollars, except margins) | 2022 | 2021 | Total | Constant Currency |
||||||||||||
| Non-IFRS Financial Measures |
||||||||||||||||
| Revenues |
1,362 | 1,277 | 7% | 7% | ||||||||||||
| Organic revenue growth |
7% | |||||||||||||||
| Adjusted EBITDA |
584 | 523 | 11% | 11% | ||||||||||||
| Adjusted EBITDA margin |
42.9% | 41.0% | 190bp | 160bp | ||||||||||||
Revenues
|
Three months ended March 31,
|
||||||||||||||||||||
| Change | ||||||||||||||||||||
| (millions of U.S. dollars) | 2022 | 2021 | Total | Constant Currency |
Organic | |||||||||||||||
| Recurring revenues |
1,300 | 1,220 | 7% | 7% | 7% | |||||||||||||||
| Transactions revenues |
232 | 217 | 7% | 8% | 8% | |||||||||||||||
| Global Print revenues |
142 | 143 | (1%) | - | - | |||||||||||||||
|
Revenues |
1,674 | 1,580 | 6% | 7% | 7% | |||||||||||||||
Page 6
Revenues increased 6% in total driven by growth across four of our five business segments. Foreign currency had a 1% negative impact on revenue growth. On both a constant currency and organic basis, revenues increased 7%. Recurring revenues grew 7% (78% of our revenues) and transactions revenues grew 8%. Global Print revenues declined slightly in total, but were unchanged compared to the prior-year period on both a constant currency and organic basis. Revenue growth in the quarter included a benefit of approximately 100bp from transactional revenues that we do not expect to recur, and to a lesser extent, timing.
Revenues for our “Big 3” segments (81% of total revenues) increased 7% in total, in constant currency and on an organic basis. The increase in organic revenues was driven by 8% growth in recurring revenues (85% of “Big 3” revenues) and 6% growth in transactions revenues. This performance reflects the fourth consecutive quarter that our “Big 3” segments have grown at least 6%.
Foreign currency negatively impacted revenue growth due to the strengthening of the U.S. dollar against most major currencies, including the British pound sterling, Euro, Australian dollar and Argentine peso, which more than offset the weakening of the U.S. dollar against the Brazilian real, compared to the prior-year period.
Operating profit, adjusted EBITDA and adjusted EBITDA less accrued capital expenditures
Operating profit increased 7% as higher revenues more than offset higher costs, which included investments associated with the Change Program.
Adjusted EBITDA and the related margin increased due to the factors noted above. Investments in the Change Program negatively impacted the first-quarter 2022 adjusted EBITDA margin by 210bp.
Adjusted EBITDA less accrued capital expenditures increased as higher adjusted EBITDA more than offset higher accrued capital expenditures. The related margin was unchanged. Accrued capital expenditures in the first quarter of 2022 included $28 million (2021 — $9 million) associated with the Change Program.
Operating expenses
|
Three months ended March 31,
|
||||||||||||||||
| Change | ||||||||||||||||
| (millions of U.S. dollars) | 2022 | 2021 | Total | Constant Currency |
||||||||||||
| Operating expenses | 1,081 | 1,018 | 6% | 6% | ||||||||||||
Operating expenses increased in total and on a constant currency basis primarily due to higher costs associated with the Change Program as well as product, marketing and sales expenses related to higher revenues. However, the increase in costs was mitigated by savings from our Change Program. Change Program costs were $34 million in the first quarter of 2022 (2021 — $11 million) and included spending on severance as well as costs to drive technology and digital sales efficiencies.
Depreciation and amortization
|
Three months ended March 31,
|
||||||||||||
| (millions of U.S. dollars) | 2022 | 2021 | Change | |||||||||
| Depreciation |
38 | 46 | (17%) | |||||||||
| Amortization of computer software |
114 | 115 | (1%) | |||||||||
|
Subtotal |
152 | 161 | (5%) | |||||||||
| Amortization of other identifiable intangible assets |
26 | 31 | (17%) | |||||||||
| ● | Depreciation and amortization of computer software on a combined basis decreased primarily because the prior-year period included the write-down of assets associated with real estate leases we have vacated. |
| ● | Amortization of other identifiable intangible assets decreased due to the completion of amortization of assets acquired in previous years. |
Other operating (losses) gains, net
|
Three months ended March 31,
|
||||||||
| (millions of U.S. dollars) | 2022 | 2021 | ||||||
| Other operating (losses) gains, net | (1) | 17 | ||||||
Page 7
In the first quarter of 2022, other operating losses, net, were not significant. In the first quarter of 2021, other operating gains, net, included a benefit from the revaluation of warrants that we held in Refinitiv prior to its sale to LSEG on January 29, 2021 and income from a license that allows LSEG’s Refinitiv business to use the “Reuters” mark.
Net interest expense
|
Three months ended March 31,
|
||||||||||||
| (millions of U.S. dollars) | 2022 | 2021 | Change | |||||||||
| Net interest expense | 48 | 51 | (6%) | |||||||||
The decrease in net interest expense was primarily due to lower interest costs associated with tax liabilities and net pension obligations. As substantially all of our long-term debt obligations paid interest at fixed rates (after swaps), the net interest expense on our term debt was essentially unchanged compared to the prior-year period.
Other finance (income) costs
|
Three months ended March 31,
|
||||||||
| (millions of U.S. dollars) | 2022 | 2021 | ||||||
| Other finance (income) costs | (94) | 6 | ||||||
In the first quarter of 2022, other finance income included $78 million of gains associated with foreign exchange contracts related to a portion of our indirect investment in LSEG, which is denominated in British pounds sterling, as well as net foreign exchange gains on intercompany funding arrangements. Other finance costs in the prior-year period reflected net foreign exchange losses on intercompany funding arrangements.
Share of post-tax earnings in equity method investments
|
Three months ended March 31,
|
||||||||
| (millions of U.S. dollars) | 2022 | 2021 | ||||||
| YPL (formerly Refinitiv Holdings Limited) |
799 | 6,295 | ||||||
| Other equity method investments |
(1) | 2 | ||||||
| Share of post-tax earnings in equity method investments |
798 | 6,297 | ||||||
Our investment in LSEG is subject to equity accounting because the LSEG shares are held through YPL, over which we have significant influence. The investment in LSEG shares held by YPL is accounted for at fair value, based on the share price of LSEG.
In the first quarter of 2022, our share of post-tax earnings in equity method investments was primarily comprised of a $799 million increase in the value of our LSEG investment.
In the first quarter of 2021, our share of post-tax earnings in equity method investments was primarily comprised of an $8,075 million gain from the sale of Refinitiv, in which we owned a 45% interest, to LSEG, which was partially offset by a $1,612 million decline in the value of the LSEG investment after the sale and $168 million of post-tax losses related to the Refinitiv operations prior to the sale.
As of May 2, 2022, we indirectly owned approximately 72.4 million LSEG shares, which had a market value of approximately $7.2 billion based on LSEG’s closing share price on that date.
Tax expense
|
Three months ended March 31,
|
||||||||
| (millions of U.S. dollars) | 2022 | 2021 | ||||||
| Tax expense | 240 | 1,594 | ||||||
Tax expense decreased because the prior-year period included tax expense associated with the gain on sale of Refinitiv to LSEG. Additionally, tax expense in each period reflected the mix of taxing jurisdictions in which pre-tax profits and losses were recognized. Because the geographical mix of pre-tax profits and losses in interim periods may be different from that for the full year, tax expense or benefit in interim periods is not necessarily indicative of tax expense for the full year.
Page 8
The comparability of our tax expense was impacted by various transactions and accounting adjustments during each period. The following table sets forth certain components within income tax expense that impact comparability from period to period, including tax expense associated with items that are removed from adjusted earnings:
|
Three months ended March 31,
|
||||||||||||||||
|
(millions of U.S. dollars)
|
2022
|
2021
|
||||||||||||||
| Tax expense (benefit) |
||||||||||||||||
| Tax items impacting comparability: |
||||||||||||||||
| Corporate tax laws and rates(1) |
|
(10) |
|
|
1 |
| ||||||||||
| Deferred tax adjustments(2) |
|
(34) |
|
|
- |
| ||||||||||
|
Subtotal |
|
(44) |
|
|
1 |
| ||||||||||
| Tax related to: |
||||||||||||||||
| Amortization of other identifiable intangible assets |
|
(4) |
|
|
(7) |
| ||||||||||
| Share of post-tax earnings in equity method investments |
|
192 |
|
|
1,538 |
| ||||||||||
| Other items |
|
18 |
|
|
4 |
| ||||||||||
|
Subtotal |
|
206 |
|
|
1,535 |
| ||||||||||
|
Total |
|
162 |
|
|
1,536 |
| ||||||||||
| (1) | Consists primarily of adjustments to deferred tax balances due to changes in effective state tax rates. |
| (2) | Relates primarily to the recognition of a deferred tax asset for a tax basis step-up attributable to a non-U.S. subsidiary. Amount also includes adjustments required for a business that was classified as held for sale during the period. |
Because the items described above impact the comparability of our tax expense or benefit for each period, we remove them from our calculation of adjusted earnings, along with the pre-tax items to which they relate. The computation of our adjusted tax expense is set forth below:
|
Three months ended March 31,
|
||||||||||||||||
|
(millions of U.S. dollars)
|
2022
|
2021
|
||||||||||||||
|
Tax expense
|
240 | 1,594 | ||||||||||||||
|
Remove: Items from above impacting comparability
|
(162) | (1,536) | ||||||||||||||
|
Other adjustment:
|
||||||||||||||||
|
Interim period effective tax rate normalization(1)
|
(1) | (1) | ||||||||||||||
|
Total tax expense on adjusted earnings
|
77 | 57 | ||||||||||||||
| (1) | Adjustment to reflect income taxes based on estimated full-year effective tax rates. Earnings or losses for interim periods under IFRS generally reflect income taxes based on the estimated effective tax rates of each of the jurisdictions in which we operate. The non-IFRS adjustment reallocates estimated full-year income taxes between interim periods, but has no effect on full-year income taxes. |
Results of Discontinued Operations
|
Three months ended March 31,
|
||||||||||||||||
| (millions of U.S. dollars) | 2022 | 2021 | ||||||||||||||
| (Loss) earnings from discontinued operations, net of tax |
|
(11) |
|
|
3 |
| ||||||||||
In the first quarter of 2022, loss from discontinued operations, net of tax, was primarily comprised of foreign exchange losses arising on a receivable balance from LSEG relating to a tax indemnity.
Page 9
Net earnings and diluted EPS
|
Three months ended March 31,
|
||||||||||||
| (millions of U.S. dollars, except per share amounts) | 2022 | 2021 | Change | |||||||||
| Net earnings |
1,007 | 5,036 | (80%) | |||||||||
|
Diluted EPS |
|
$2.06 |
|
|
$10.13 |
|
|
(80%) |
| |||
Net earnings and diluted EPS in the first quarter of 2022 included a benefit from an increase in the value of our investment in LSEG. Net earnings and diluted EPS decreased from the prior-year period, which included a gain of approximately $8.1 billion on the sale of Refinitiv to LSEG in January 2021.
Adjusted earnings and adjusted EPS
|
Three months ended March 31,
|
||||||||||||||||
| Change | ||||||||||||||||
| (millions of U.S. dollars, except per share amounts) | 2022 | 2021 | Total | Constant Currency |
||||||||||||
| Adjusted earnings |
|
322 |
|
|
288 |
|
|
12% |
|
|||||||
| Adjusted EPS |
$ |
0.66 |
|
$ |
0.58 |
|
|
14% |
|
|
14% |
| ||||
Adjusted earnings and the related per share amount increased primarily due to higher adjusted EBITDA.
Segment results
The following is a discussion of our five reportable segments and our Corporate costs for the three months ended March 31, 2022. We assess revenue growth for each segment, as well as the businesses within each segment, in constant currency and on an organic basis. See Appendix A of this management’s discussion and analysis for additional information.
Legal Professionals
|
Three months ended March 31,
|
||||||||||||||||||||
| Change | ||||||||||||||||||||
| (millions of U.S. dollars, except margins) | 2022 | 2021 | Total | Constant Currency |
Organic | |||||||||||||||
| Recurring revenues |
|
653 |
|
|
621 |
|
|
5% |
|
|
6% |
|
|
6% |
| |||||
|
Transactions revenues |
|
45 |
|
|
47 |
|
|
(4%) |
|
|
(3%) |
|
|
(2%) |
| |||||
| Revenues |
698 | 668 | 4% | 5% | 6% | |||||||||||||||
| Segment adjusted EBITDA |
305 | 279 | 9% | 10% | ||||||||||||||||
| Segment adjusted EBITDA margin |
43.7% | 41.8% | 190bp | 190bp | ||||||||||||||||
Revenues increased in total, constant currency and on an organic basis. The increase in organic revenues, which grew 6% for the fourth consecutive quarter, was due to growth in recurring revenues (94% of the Legal Professionals segment) that was driven by 9% growth in the Government business, as well as growth in Westlaw Edge, Practical Law, FindLaw and the segment’s businesses in Canada and Asia & Emerging Markets. Transactions revenues on an organic basis (6% of the Legal Professionals segment) slightly declined.
Segment adjusted EBITDA and the related margin increased as higher revenues more than offset slightly higher expenses, which were mitigated by cost savings from our Change Program. Foreign currency had no impact on segment adjusted EBITDA margins.
Page 10
Corporates
|
Three months ended March 31,
|
||||||||||||||||||||
| Change | ||||||||||||||||||||
| (millions of U.S. dollars, except margins) | 2022 | 2021 | Total | Constant Currency |
Organic | |||||||||||||||
| Recurring revenues |
|
316 |
|
|
293 |
|
|
8% |
|
|
8% |
|
|
8% |
| |||||
|
Transactions revenues |
|
95 |
|
|
89 |
|
|
7% |
|
|
8% |
|
|
8% |
| |||||
| Revenues |
411 | 382 | 8% | 8% | 8% | |||||||||||||||
| Segment adjusted EBITDA |
157 | 145 | 8% | 7% | ||||||||||||||||
| Segment adjusted EBITDA margin |
38.1% | 38.0% | 10bp | (20)bp | ||||||||||||||||
Revenues increased in total, constant currency and on an organic basis. Revenue growth benefited from transactions revenue that we do not expect to recur. The increase in organic revenues included strong growth in recurring revenues (77% of the Corporates segment), which was driven by Practical Law, CLEAR and Indirect Tax. Transactions revenues (23% of the Corporates segment) increased on an organic basis driven by the Confirmation business as well as the segment’s businesses in Latin America and in Asia & Emerging Markets.
Segment adjusted EBITDA increased primarily due to the impact of higher revenues. The related margin increased slightly as the impact of higher revenues was largely offset by higher expenses. Foreign currency benefited the year-over-year change in segment adjusted EBITDA margin by 30bp.
Tax & Accounting Professionals
|
Three months ended March 31,
|
||||||||||||||||||||
| Change | ||||||||||||||||||||
| (millions of U.S. dollars, except margins) | 2022 | 2021 | Total | Constant Currency |
Organic | |||||||||||||||
| Recurring revenues |
|
182 |
|
|
162 |
|
|
12% |
|
|
12% |
|
|
12% |
| |||||
|
Transactions revenues |
|
71 |
|
|
65 |
|
|
10% |
|
|
10% |
|
|
10% |
| |||||
| Revenues |
253 | 227 | 11% | 11% | 11% | |||||||||||||||
| Segment adjusted EBITDA |
122 | 99 | 23% | 22% | ||||||||||||||||
| Segment adjusted EBITDA margin |
48.3% | 43.8% | 450bp | 420bp | ||||||||||||||||
Revenues increased in total, constant currency and on an organic basis. The increase in organic revenues was driven by growth in recurring revenues (72% of the Tax & Accounting Professionals segment) from UltraTax and the segment’s businesses in Latin America. The increase in transactions revenues (28% of the Tax & Accounting Professionals segment) included higher tax preparation fees due to a year-over-year timing benefit from the change in the U.S. federal tax filing deadlines for individuals, which returned to April 2022 compared to an extended deadline in May 2021. The timing benefit contributed 150bp to the segment’s total organic revenue growth rate in the first quarter. However, the benefit will reverse in the second quarter with a similar negative impact on the segment’s total organic growth rate.
Segment adjusted EBITDA and the related margin increased as higher revenues more than offset slightly higher expenses, which were mitigated by cost savings from the Change Program. Foreign currency benefited the year-over-year change in segment adjusted EBITDA margin by 30bp.
Tax & Accounting Professionals is a more seasonal business relative to our other businesses, with a higher percentage of its segment adjusted EBITDA historically generated in the fourth quarter and to a slightly lesser extent, the first quarter, due to the release of certain tax products. Small movements in the timing of revenues and expenses can impact quarterly margins.
Page 11
Reuters News
|
Three months ended March 31,
|
||||||||||||||||||||
| Change | ||||||||||||||||||||
| (millions of U.S. dollars, except margins) | 2022 | 2021 | Total | Constant Currency |
Organic | |||||||||||||||
| Recurring revenues |
155 | 149 | 5% | 6% | 6% | |||||||||||||||
| Transactions revenues |
21 | 16 | 27% | 32% | 32% | |||||||||||||||
| Revenues |
176 | 165 | 7% | 9% | 9% | |||||||||||||||
| Segment adjusted EBITDA |
37 | 28 | 31% | 23% | ||||||||||||||||
| Segment adjusted EBITDA margin |
21.0% | 17.1% | 390bp | 240bp | ||||||||||||||||
Revenues increased in total, constant currency and on an organic basis driven by growth across the segment’s Professional businesses, which include digital advertising, custom content and Reuters Events, as well as from an increase from the segment’s news and editorial agreement with LSEG.
Reuters News and LSEG’s Refinitiv business have an agreement pursuant to which Reuters News supplies news and editorial content to Refinitiv through October 1, 2048. In the first quarter of 2022, Reuters News recorded revenues of $90 million (2021 — $85 million) under this agreement.
Segment adjusted EBITDA and the related margin increased as higher revenues more than offset higher expenses. Foreign currency benefited the year-over-year change in segment adjusted EBITDA margin by 150bp.
Global Print
|
Three months ended March 31,
|
||||||||||||||||||||
| Change | ||||||||||||||||||||
| (millions of U.S. dollars, except margins) | 2022 | 2021 | Total | Constant Currency |
Organic | |||||||||||||||
|
Revenues |
|
142 |
|
|
143 |
|
|
(1%) |
|
|
- |
|
|
- |
| |||||
| Segment adjusted EBITDA |
|
53 |
|
|
57 |
|
|
(8%) |
|
|
(7%) |
|
||||||||
|
Segment adjusted EBITDA margin |
|
37.0% |
|
|
39.9% |
|
|
(290)bp |
|
|
(300)bp |
|
||||||||
Revenues decreased in total, but were unchanged in constant currency and on an organic basis, which was better than the decline we expected due to higher third-party revenues for printing services and timing of new sales. We expect revenues to normalize to a mid-single digit decline later in 2022.
Segment adjusted EBITDA and the related margin decreased due to the dilutive effect of third-party print revenues. Foreign currency benefited the year-over-year change in segment adjusted EBITDA margin by 10bp.
Corporate costs
|
Three months ended March 31,
|
||||||||
| (millions of U.S. dollars) | 2022 | 2021 | ||||||
|
Corporate costs |
|
74 |
|
|
50 |
| ||
Corporate costs increased primarily due to higher costs associated with the Change Program. In the first quarter of 2022, Change Program expenses were $34 million compared to $11 million in the prior-year period.
Page 12
Liquidity and Capital Resources
We have historically maintained a disciplined capital strategy that balances growth, long-term financial leverage, credit ratings and returns to shareholders. We are focused on having the investment capacity to drive revenue growth, both organically and through acquisitions, while also maintaining our long-term financial leverage and credit ratings and continuing to provide returns to shareholders. Our principal sources of liquidity are cash and cash equivalents and cash provided by operating activities. From time to time, we also issue commercial paper, borrow under our credit facility and issue debt securities. Our principal uses of cash are for debt repayments, debt servicing costs, dividend payments, capital expenditures, share repurchases and acquisitions.
Our capital strategy approach has provided us with a strong capital structure and liquidity position. At March 31, 2022, we had $0.7 billion of cash on hand, and none of our debt securities are scheduled to mature until 2023. Our disciplined approach and cash generative business model have allowed us to weather the economic volatility caused by the COVID-19 pandemic since March 2020, while continuing to invest in our business. While we are closely monitoring the global disruption caused by Russia’s invasion of Ukraine in February 2022, our operations in the region are not material to our business.
We expect that the operating leverage of our business will increase our free cash flow if we increase revenues as contemplated by our Outlook. We target a maximum leverage ratio of 2.5x net debt to adjusted EBITDA and have set a target to pay out 50% to 60% of our expected free cash flow as dividends to our shareholders. In the future, we expect that proceeds from sales of LSEG shares after the expiration of the applicable contractual lock-up provisions will provide us with further options for investment and returns to shareholders.
Our net debt to adjusted EBITDA leverage ratio as of March 31, 2022 was approximately 1.6:1, which is lower than our target of 2.5:1. As calculated under our credit facility covenant, our net debt to adjusted EBITDA leverage ratio at March 31, 2022 was 1.5:1, which is well below the maximum leverage ratio allowed under the credit facility of 4.5:1.
We believe that our existing sources of liquidity will be sufficient to fund our expected cash requirements in the normal course of business for the next 12 months.
Cash flow
Summary of consolidated statement of cash flow
|
Three months ended March 31,
|
||||||||||||
| (millions of U.S. dollars) |
2022 |
2021 |
$ Change |
|||||||||
| Net cash provided by operating activities |
|
275 |
|
|
380 |
|
|
(105) |
| |||
| Net cash (used in) provided by investing activities |
|
(179) |
|
|
829 |
|
|
(1,008) |
| |||
| Net cash used in financing activities |
|
(220) |
|
|
(411) |
|
|
191 |
| |||
|
Translation adjustments |
|
- |
|
|
(1) |
|
|
1 |
| |||
| (Decrease) increase in cash and cash equivalents |
|
(124) |
|
|
797 |
|
|
(921) |
| |||
| Cash and cash equivalents at beginning of period |
|
778 |
|
|
1,787 |
|
|
(1,009) |
| |||
| Cash and cash equivalents at end of period |
|
654 |
|
|
2,584 |
|
|
(1,930) |
| |||
| Non-IFRS Financial Measure(1) |
||||||||||||
| Free cash flow |
|
86 |
|
|
239 |
|
|
(153) |
| |||
| (1) | Refer to Appendices A and B of this management’s discussion and analysis for additional information and reconciliations of our non-IFRS financial measures to the most directly comparable IFRS financial measure. |
Operating activities. Net cash provided by operating activities decreased due to higher payments associated with our Change Program as
well as higher annual incentive plan bonuses.
Investing activities. Net cash used in investing activities in the first quarter of 2022 included $171 million of capital expenditures. In the first quarter of 2021, net cash provided by investing activities included a $994 million dividend from YPL in connection with the sale of LSEG shares, which was partly offset by $120 million of capital expenditures.
Financing activities. Net cash used in financing activities included dividends paid to our common shareholders of $209 million and $194 million in the first quarters of 2022 and 2021, respectively. The first quarter of 2021 also included $200 million of share repurchases. Refer to the ”Dividends” and “Share repurchases” subsections below for additional information.
Page 13
Cash and cash equivalents. Cash and cash equivalents as of March 31, 2022 were lower compared to the beginning of the year as cash generated from operating activities was more than offset by capital expenditures and dividends to common shareholders. The March 31, 2021 balance included $994 million of cash received from a YPL dividend following the sale of 10.1 million LSEG shares.
Free cash flow. Free cash flow decreased due to lower cash flows from operating activities and higher capital expenditures associated with the Change Program.
Additional information about our debt and credit arrangements, dividends and share repurchases is as follows:
| ● | Commercial paper program. Our $1.8 billion commercial paper program provides cost-effective and flexible short-term funding. There was no outstanding commercial paper at March 31, 2022. |
| ● | Credit facility. We have a $1.8 billion syndicated credit facility agreement which matures in December 2024 and may be used to provide liquidity for general corporate purposes (including acquisitions or support for our commercial paper program). There were no outstanding borrowings under the credit facility at March 31, 2022. Based on our current credit ratings, the cost of borrowing under the facility is priced at LIBOR/EURIBOR plus 112.5 basis points. We have the option to request an increase, subject to approval by applicable lenders, in the lenders’ commitments in an aggregate amount of $600 million for a maximum credit facility commitment of $2.4 billion. If our debt rating is downgraded by Moody’s or S&P, our facility fees and borrowing costs may increase, although availability would be unaffected. Conversely, an upgrade in our ratings may reduce our facility fees and borrowing costs. We also monitor the lenders that are party to our facility and believe they continue to be able to lend to us. |
| The U.K. Financial Conduct Authority, which regulates LIBOR, phased out the majority of LIBOR rates globally at the end of 2021. We have no material agreements with third parties that use or reference LIBOR, except for the LIBOR-based benchmarks in our external credit facility, for which adequate LIBOR benchmarks will remain in effect until June 2023. |
| We guarantee borrowings by our subsidiaries under the credit facility. We must also maintain a ratio of net debt as defined in the credit agreement (total debt after swaps less cash and cash equivalents) as of the last day of each fiscal quarter to EBITDA as defined in the credit agreement (earnings before interest, income taxes, depreciation and amortization and other modifications described in the credit agreement) for the last four quarters ended of not more than 4.5:1. If we complete an acquisition with a purchase price of over $500 million, the ratio of net debt to EBITDA would temporarily increase to 5.0:1 for three quarters after completion, at which time the ratio would revert to 4.5:1. As of March 31, 2022, we were in compliance with this covenant as our ratio of net debt to EBITDA, as calculated under the terms of our syndicated credit facility, was 1.5:1. |
| ● | Long-term debt. We did not issue notes or make any debt repayments in the three months ended March 31, 2022. Thomson Reuters Corporation and one of its U.S. subsidiaries, TR Finance LLC, may collectively issue up to $3.0 billion of unsecured debt securities from time to time through August 6, 2022 under a base shelf prospectus. Any debt securities issued by TR Finance LLC will be fully and unconditionally guaranteed on an unsecured basis by Thomson Reuters Corporation and three U.S. subsidiary guarantors, which are also indirect 100%-owned and consolidated subsidiaries of Thomson Reuters Corporation. Except for TR Finance LLC and the subsidiary guarantors, none of Thomson Reuters Corporation’s other subsidiaries have guaranteed or would otherwise become obligated with respect to any issued TR Finance LLC debt securities. Neither Thomson Reuters Corporation nor TR Finance LLC has issued any debt securities under the prospectus. We expect to file a new base shelf prospectus later this year in connection with the expiration of the current base shelf prospectus. Please refer to Appendix D of this management’s discussion and analysis for condensed consolidating financial information of the Company, including TR Finance LLC and the subsidiary guarantors. |
| ● | Credit ratings. Our access to financing depends on, among other things, suitable market conditions and the maintenance of suitable long-term credit ratings. Our credit ratings may be adversely affected by various factors, including increased debt levels, decreased earnings, declines in customer demand, increased competition, a deterioration in general economic and business conditions and adverse publicity. Any downgrades in our credit ratings may impede our access to the debt markets or result in higher borrowing rates. |
| The following table sets forth the credit ratings from rating agencies in respect of our outstanding securities as of the date of this management’s discussion and analysis: |
| Moody’s |
S&P Global Ratings |
DBRS Limited |
Fitch | |||||
| Long-term debt |
Baa2 |
BBB |
BBB (high) |
BBB+ | ||||
| Commercial paper |
P-2 |
A-2 |
R-2 (high) |
F1 | ||||
|
Trend/Outlook |
Positive |
Stable |
Stable |
Stable | ||||
Page 14
| These credit ratings are not recommendations to purchase, hold, or sell securities and do not address the market price or suitability of a specific security for a particular investor. Credit ratings may not reflect the potential impact of all risks on the value of securities. We cannot assure you that our credit ratings will not be lowered in the future or that rating agencies will not issue adverse commentaries regarding our securities. |
| ● | Dividends. Dividends on our common shares are declared in U.S. dollars. In February 2022, we announced a 10% or $0.16 per share increase in the annualized dividend rate to $1.78 per common share (beginning with the common share dividend that we paid in March 2022). In our consolidated statement of cash flow, dividends paid on common shares are shown net of amounts reinvested in our company under our dividend reinvestment plan (DRIP). Registered holders of common shares may participate in our DRIP, under which cash dividends are automatically reinvested in new common shares. Common shares are valued at the weighted-average price at which the shares traded on the Toronto Stock Exchange (TSX) during the five trading days immediately preceding the record date for the dividend. |
| Details of dividends declared per common share and dividends paid on common shares are as follows: |
| Three months ended March 31, | ||||||||
| (millions of U.S. dollars, except per share amounts) |
2022 |
2021 |
||||||
|
Dividends declared per common share |
$ |
0.445 |
|
$ |
0.405 |
| ||
| Dividends declared |
|
216 |
|
|
200 |
| ||
|
Dividends reinvested |
|
(7) |
|
|
(6) |
| ||
|
Dividends paid |
|
209 |
|
|
194 |
| ||
| ● | Share repurchases – Normal Course Issuer Bid (NCIB). We buy back shares (and subsequently cancel them) from time to time as part of our capital strategy. In the first quarter of 2022, we did not repurchase any shares. In the first quarter of 2021, we repurchased 2.5 million common shares totaling $200 million at an average price per share of $81.45 under an NCIB that expired on January 3, 2022. Our expired NCIB enabled us to repurchase up to 20 million common shares at prevailing market prices in amounts and at times determined by us. The NCIB permitted us to purchase shares in open market transactions on the TSX, the NYSE and/or other exchanges and alternative trading systems, if eligible, or by such other means as were permitted by the TSX and/or NYSE or under applicable law, including private agreement purchases if we received an issuer bid exemption order from applicable securities regulatory authorities in Canada for such purchases. Common shares that we purchased under the NCIB were cancelled. |
| Decisions regarding any future repurchases will depend on factors, such as market conditions, share price and other opportunities to invest capital for growth. When we have an effective NCIB, we may elect to suspend or discontinue our share repurchases at any time, in accordance with applicable laws. In addition, when we have an effective NCIB, we may from time to time when we do not possess material nonpublic information about ourselves or our securities, enter into a pre-defined plan with our broker to allow for the repurchase of shares at times when we ordinarily would not be active in the market due to our own internal trading blackout periods, insider trading rules or otherwise. Any such plans entered into with our broker will be adopted in accordance with applicable Canadian securities laws and the requirements of Rule 10b5-1 under the U.S. Securities Exchange Act of 1934, as amended. |
Financial position
Our total assets were $22.8 billion at March 31, 2022, compared to $22.1 billion at December 31, 2021. The increase was driven by an increase in the value of our LSEG investment.
At March 31, 2022, our current assets were slightly higher than our current liabilities. Typically, our current liabilities exceed our current assets because current liabilities include a significant amount of deferred revenue, which arises from the sale of subscription-based products and services that many customers pay for in advance. The cash received from these advance payments is used to currently fund the operating, investing and financing activities of our business. However, for accounting purposes, these advance payments must be deferred and recognized over the term of the subscription. As such, we typically reflect a negative working capital position in our consolidated statement of financial position. In the ordinary course of business, deferred revenue does not represent a cash obligation, but rather an obligation to perform services or deliver products, and therefore when we are in that situation, we do not believe it is indicative of a liquidity issue, but rather an outcome of the required accounting for our business model.
Page 15
Net debt and leverage ratio of net debt to adjusted EBITDA
| March 31, |
December 31, |
|||||||
| (millions of U.S. dollars) |
2022 |
2021 |
||||||
|
Long-term indebtedness |
|
3,800 |
|
|
3,786 |
| ||
| Total debt |
|
3,800 |
|
|
3,786 |
| ||
|
Swaps |
|
(120) |
|
|
(99) |
| ||
| Total debt after swaps |
|
3,680 |
|
|
3,687 |
| ||
| Remove fair value adjustments for hedges(1) |
|
(2) |
|
|
(10) |
| ||
| Total debt after currency hedging arrangements |
|
3,678 |
|
|
3,677 |
| ||
| Remove transaction costs, premiums or discounts included in the carrying value of debt |
|
32 |
|
|
33 |
| ||
| Add: Lease liabilities (current and non-current) |
|
261 |
|
|
261 |
| ||
| Less: cash and cash equivalents(2) |
|
(654) |
|
|
(778) |
| ||
| Net debt(3) |
|
3,317 |
|
|
3,193 |
| ||
| Leverage ratio of net debt to adjusted EBITDA |
||||||||
| Adjusted EBITDA(3) |
|
2,012 |
|
|
1,970 |
| ||
| Net debt / adjusted EBITDA(3) |
|
1.6:1 |
|
|
1.6:1 |
| ||
| (1) | Represents the interest-related fair value component of hedging instruments that are removed to reflect net cash outflow upon maturity. |
| (2) | Includes cash and cash equivalents of $76 million and $70 million at March 31, 2022 and December 31, 2021, respectively, held in subsidiaries which have regulatory restrictions, contractual restrictions or operate in countries where exchange controls and other legal restrictions apply and were therefore not available for general use by our company. |
| (3) | Amounts represent non-IFRS financial measures. For additional information about our liquidity, we provide our leverage ratio of net debt to adjusted EBITDA. Refer to Appendix A and Appendix B of this management’s discussion and analysis for additional information of our non-IFRS financial measures and reconciliations to the most comparable IFRS measure. |
At March 31, 2022, our total debt position (after swaps) was $3.7 billion. The maturity dates for our term debt are well balanced with no significant concentration in any one year. At March 31, 2022, the average maturity of our term debt was approximately eight years at an average interest rate (after swaps) of slightly over 4%, all of which is fixed. Our leverage ratio of net debt to adjusted EBITDA was below our target ratio of 2.5:1. The increase in our net debt is primarily due to the decrease in our cash and cash equivalents (refer to the “Cash Flow” section of this management’s discussion and analysis for additional information).
Off-balance sheet arrangements, commitments and contractual obligations
For a summary of our other off-balance sheet arrangements, commitments and contractual obligations please see our 2021 annual management’s discussion and analysis. There were no material changes to these arrangements, commitments and contractual obligations during the three months ended March 31, 2022.
Contingencies
Lawsuits and legal claims
We are engaged in various legal proceedings, claims, audits and investigations that have arisen in the ordinary course of business. These matters include, but are not limited to, employment matters, commercial matters, defamation claims and intellectual property infringement claims. The outcome of all of the matters against us is subject to future resolution, including the uncertainties of litigation. Based on information currently known to us and after consultation with outside legal counsel, management believes that the ultimate resolution of any such matters, individually or in the aggregate, will not have a material adverse impact on our financial condition taken as a whole.
Page 16
Uncertain tax positions
We are subject to taxation in numerous jurisdictions and we are routinely under audit by many different taxing authorities in the ordinary course of business. There are many transactions and calculations during the course of business for which the ultimate tax determination is uncertain, as taxing authorities may challenge some of our positions and propose adjustments or changes to our tax filings.
As a result, we maintain provisions for uncertain tax positions that we believe appropriately reflect our risk. These provisions are made using our best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. When appropriate, we perform an expected value calculation to determine our provisions. We review the adequacy of these provisions at the end of each reporting period and adjust them based on changing facts and circumstances. Due to the uncertainty associated with tax audits, it is possible that at some future date, liabilities resulting from such audits or related litigation could vary significantly from our provisions. However, based on currently enacted legislation, information currently known to us and after consultation with outside tax advisors, management believes that the ultimate resolution of any such matters, individually or in the aggregate, will not have a material adverse impact on our financial condition taken as a whole.
Prior to 2022, we paid $379 million of tax as required under notices of assessment issued by the U.K. tax authority, HM Revenue & Customs (HMRC), under the Diverted Profits Tax (DPT) regime. In February 2022, HMRC issued DPT notices aggregating $74 million, which we paid in March 2022. These assessments collectively related to the 2015, 2016, 2017 and 2018 taxation years of certain of our current and former U.K. affiliates.
HMRC still has the statutory authority to amend the above assessments for the 2016, 2017 and 2018 taxation years by issuing a supplementary DPT notice for each year. Based on recent discussions with HMRC, management believes that HMRC may issue supplementary notices within the next 12 months that would be almost entirely related to businesses we have sold, which are subject to indemnity arrangements. If that occurs, we will be required to pay additional taxes to HMRC shortly thereafter that could be as much as $350 million in aggregate (largely related to the 2018 taxation year).
As we do not believe these current and former U.K. affiliates fall within the scope of the DPT regime, we will continue contesting these assessments (including any amended by HMRC) through all available administrative and judicial remedies and intend to vigorously defend our position. Payments made by us are not a reflection of our view on the merits of the case. As the assessments largely relate to businesses that we have sold, the majority are subject to indemnity arrangements under which we have been or will be required to pay additional taxes to HMRC or the indemnity counterparty.
Because we believe that our position is supported by the weight of law, we do not believe that the resolution of this matter will have a material adverse effect on our financial condition taken as a whole. As we expect to receive refunds of substantially all of the aggregate of amounts paid and potential future payments pursuant to these notices of assessment, we expect to continue recording substantially all of these payments as non-current receivables from HMRC or the indemnity counterparty on our financial statements. We expect that our existing sources of liquidity (as discussed earlier in this section) will be sufficient to fund any required additional payments if HMRC issues supplementary notices.
For additional information, please see the “Risk Factors” section of our 2021 annual report, which contains further information on risks related to legal and tax matters.
The information in this section is forward-looking and should be read in conjunction with the section entitled “Additional Information — Cautionary Note Concerning Factors That May Affect Future Results”.
In May 2022, we raised our total company and “Big 3” revenue growth Outlook for the full year 2022, which reflects our increasing confidence in our business performance. We reaffirmed all other measures in our two-year Outlook, including our adjusted EBITDA margin, as we continue to invest in our business and customer success initiatives and absorb heightened inflationary pressures.
The Change Program is expected to be largely complete by the end of 2022 and is projected to require an investment of $600 million. We invested $295 million in 2021 and plan to invest approximately $305 million in 2022. We expect to expense approximately 60% of the investments and to capitalize approximately 40% of the investments, which will be amortized over future periods. By 2023, we believe the financial benefits that will result from these initiatives include:
| ● | Organic revenue growth of 5.5% - 6.0% including additional annual revenues of $100 million; |
| ● | Adjusted EBITDA margin of 39% - 40%; |
| ● | Free cash flow of $1.9 billion - $2.0 billion; |
| ● | Annual operating expense savings of $600 million, of which $200 million is expected to be reinvested in growth initiatives; and |
| ● | Accrued capital expenditures as a percentage of revenues between 6.0% - 6.5%. |
Page 17
Our Outlook incorporates the forecasted impacts associated with our Change Program, assumes constant currency rates relative to 2021 and does not factor in the impact of any acquisitions or divestitures that may occur in future periods. We believe this type of guidance provides useful insight into the performance of our business.
The following table sets forth the May 2022 updates to our full-year 2022 revenue growth Outlook from what we previously communicated in February 2022. All other measures in our 2022 Outlook are unchanged.
| Total Thomson Reuters | 2022 Outlook (Originally communicated in February 2022) |
2022 Outlook (Updated in May 2022) | ||
| Revenue growth |
Approximately 5.0% |
Approximately 5.5% | ||
| Organic revenue growth(1) |
Approximately 5.0% |
Approximately 5.5% | ||
| “Big 3” Segments(1) | 2022 Outlook (Originally communicated in February 2022) |
2022 Outlook (Updated in May 2022) | ||
| Revenue Growth |
6.0% - 6.5% |
Approximately 6.5% | ||
| Organic revenue growth |
6.0% - 6.5% |
Approximately 6.5% | ||
Our two-year Outlook (as updated in May 2022) along with our 2021 actual results are presented in the table below, which includes non-IFRS financial measures.
| Total Thomson Reuters | 2021 Actual | 2022 Outlook |
|
2023 Outlook |
|
|||||||||||||||
| Revenue growth |
|
6.1% |
|
|
Approximately 5.5% |
|
|
5.5% - 6.0% |
|
|||||||||||
| Organic revenue growth(1) |
|
5.2% |
|
|
Approximately 5.5% |
|
|
5.5% - 6.0% |
|
|||||||||||
| Adjusted EBITDA margin(1) |
|
31.0% |
|
|
Approximately 35% |
|
|
39% - 40% |
||||||||||||
| Corporate costs |
|
$325 million |
|
|
$280 million - $330 million |
|
|
$110 million - $120 million |
|
|||||||||||
| Core corporate costs |
$142 million | $120 million - $130 million | $110 million - $120 million | |||||||||||||||||
| Change Program operating expenses |
$183 million | $160 million - $200 million | $0 | |||||||||||||||||
| Free cash flow(1) |
|
$1.3 billion |
|
|
Approximately $1.3 billion |
|
|
$1.9 billion - $2.0 billion |
|
|||||||||||
| Accrued capital expenditures as a percentage of revenues(1) |
|
8.5% |
|
|
7.5% - 8.0% |
|
|
6.0% - 6.5% |
|
|||||||||||
| Change Program accrued capital expenditures |
$112 million | $100 million - $140 million | $0 | |||||||||||||||||
| Depreciation and amortization of computer software |
|
$651 million |
|
|
$620 million - $645 million |
|
|
$580 million - $605 million |
|
|||||||||||
| Interest expense |
|
$196 million |
|
|
$190 million - $210 million |
|
|
$190 million - $210 million |
|
|||||||||||
| Effective tax rate on adjusted earnings(1) |
|
13.9% |
|
|
19% - 21% |
|
|
n/a |
|
|||||||||||
| “Big 3” Segments(1) | 2021 Actual | 2022 Outlook |
|
2023 Outlook |
|
|||||||||||||||
| Revenue growth |
|
6.9% |
|
|
Approximately 6.5% |
|
|
6.5% - 7.0% |
|
|||||||||||
| Organic revenue growth |
|
6.2% |
|
|
Approximately 6.5% |
|
|
6.5% - 7.0% |
|
|||||||||||
| Adjusted EBITDA margin |
|
38.8% |
|
|
Approximately 42% |
|
|
44% - 45% |
|
|||||||||||
| (1) | Non-IFRS financial measures. Refer to Appendices A and B of this management’s discussion and analysis for additional information and reconciliations of our non-IFRS financial measures to the most directly comparable IFRS financial measures. |
We also expect our total company second-quarter 2022 revenue growth rate will be comparable to our updated full-year 2022 Outlook and our adjusted EBITDA margin will be approximately 200bp lower than the 2022 full-year Outlook target. We anticipate $130 million to $150 million of total Change Program spend in the first half of 2022 and $160 million to $180 million in the second half of 2022.
Page 18
The following table summarizes our material assumptions and material risks that may cause actual performance to differ from our expectations underlying our financial Outlook.
|
Revenues | ||
|
Material assumptions
|
Material risks | |
| ● Improved global economic conditions throughout 2022 to 2023, despite periods of volatility due to disruption caused by the Russia-Ukraine conflict and the ongoing COVID-19 pandemic
● Continued need for trusted products and services that help customers navigate evolving and complex legal, tax, accounting, regulatory, geopolitical and commercial changes, developments and environments, and for cloud-based digital tools that drive productivity
● Continued ability to deliver innovative products that meet evolving customer demands
● Acquisition of new customers through expanded and improved digital platforms, simplification of the product portfolio and through other sales initiatives
● Improvement in customer retention through commercial simplification efforts and customer service improvements |
● Global economic uncertainty due to the Russia-Ukraine conflict and related government sanctions, the ongoing COVID-19 pandemic, regulatory reform as well as changes in the political environment or other events may exacerbate global inflation, supply chain issues and macroeconomic factors. These conditions could lead to limited business opportunities for our customers, creating significant cost pressures for some of them and potentially constraining the number of professionals employed, which could lead to lower demand for our products and services
● Business disruptions associated with the COVID-19 pandemic, including government enforced quarantines and stay-at-home orders, may continue longer than we expect or may be more restrictive in the event of future outbreaks and resurgences of the virus, delaying the anticipated recovery of the global economy
● Demand for our products and services could be reduced by changes in customer buying patterns, or our inability to execute on key product design or customer support initiatives
● Competitive pricing actions and product innovation could impact our revenues
● Our sales, commercial simplification and product design initiatives may be insufficient to retain customers or generate new sales
| |
|
Adjusted EBITDA margin
| ||
|
Material assumptions
|
Material risks | |
| ● Our ability to achieve revenue growth targets
● Business mix continues to shift to higher-growth product offerings
● Change Program expenses of $160 million to $200 million in 2022
● Change Program investments drive higher adjusted EBITDA margin through higher revenues and efficiencies by 2023 |
● Same as the risks above related to the revenue Outlook
● The costs to execute our Change Program may be higher than current expectations, or the expected benefits by 2023 may be lower than current expectations
● Acquisition and disposal activity may dilute adjusted EBITDA margin
| |
|
Free Cash Flow
| ||
|
Material assumptions
|
Material risks | |
| ● Our ability to achieve our revenue and adjusted EBITDA margin targets
● Accrued capital expenditures expected to be between 7.5% and 8.0% of revenues in 2022 and between 6.0% and 6.5% of revenues in 2023 |
● Same as the risks above related to the revenue and adjusted EBITDA margin Outlook
● A weaker macroeconomic environment could negatively impact working capital performance, including the ability of our customers to pay us
● Accrued capital expenditures may be higher than currently expected
● The timing and amount of tax payments to governments may differ from our expectations
| |
|
Effective tax rate on adjusted earnings
| ||
|
Material assumptions
|
Material risks | |
| ● Our ability to achieve our adjusted EBITDA target
● The mix of taxing jurisdictions where we recognized pre-tax profit or losses in 2021 does not significantly change
● Minimal changes in tax laws and treaties within the jurisdictions where we operate
● No significant gains that will prevent the imposition of certain minimum taxes
● No significant benefits from the finalization of prior tax years
● Depreciation and amortization of computer software between $620 million and $645 million in 2022
● Interest expense between $190 million and $210 million in 2022
|
● Same as the risks above related to adjusted EBITDA
● A material change in the geographical mix of our pre-tax profits and losses
● A material change in current tax laws or treaties to which we are subject, and did not expect
● Depreciation and amortization of computer software as well as interest expense may be significantly higher or lower than expected | |
Page 19
Our Outlook contains various non-IFRS financial measures. We believe that providing reconciliations of forward-looking non-IFRS financial measures in our Outlook would be potentially misleading and not practical due to the difficulty of projecting items that are not reflective of ongoing operations in any future period. The magnitude of these items may be significant. Consequently, for Outlook purposes only, we are unable to reconcile these measures to the most comparable IFRS measures because we cannot predict, with reasonable certainty, the impact of changes in foreign exchange rates which impact (i) the translation of our results reported at average foreign currency rates for the year; and (ii) other finance income or expense related to intercompany financing arrangements and foreign exchange contracts. Additionally, we cannot reasonably predict (i) our share of post-tax earnings or losses in equity method investments, which is subject to changes in the stock price of LSEG; or (ii) the occurrence or amount of other operating gains and losses, which generally arise from business transactions we do not currently anticipate.
As of May 2, 2022, our principal shareholder, Woodbridge, beneficially owned approximately 67% of our common shares.
Transactions with 3 Times Square Associates LLC. (3XSQ Associates)
We have an investment in 3XSQ Associates, an entity jointly owned by a subsidiary of our company and Rudin Times Square Associates LLC (Rudin), that owns and operates the 3 Times Square property and building in New York, New York. During the first quarter of 2022, our investment increased by $10 million due to capital contributions, of which $4 million was unpaid at March 31, 2022. We also paid approximately $2 million of rent to 3XSQ Associates for office space in the building. We follow the equity method of accounting for our investment.
Except for the above transactions, there were no new significant related party transactions during the first quarter of 2022. Refer to the “Related Party Transactions” section of our 2021 annual management’s discussion and analysis, which is contained in our 2021 annual report, as well as note 31 of our 2021 annual consolidated financial statements for information regarding related party transactions.
Acquisition
In April 2022, we acquired ThoughtTrace, a business that uses artificial intelligence and machine learning to read, organize and manage document workflows.
Changes in Accounting Policies
Please refer to the “Changes in Accounting Policies” section of our 2021 annual management’s discussion and analysis, which is contained in our 2021 annual report, for information regarding changes in accounting policies. Since the date of our 2021 annual management’s discussion and analysis, there have not been any significant changes to our accounting policies.
Critical Accounting Estimates and Judgments
The preparation of financial statements requires management to make estimates and judgments about the future. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Please refer to the “Critical Accounting Estimates and Judgments” section of our 2021 annual management’s discussion and analysis, which is contained in our 2021 annual report, for additional information. Since the date of our 2021 annual management’s discussion and analysis, there have not been any significant changes to our critical accounting estimates and judgments.
The global economy is experiencing substantial disruption due to the Russian military invasion of Ukraine on February 24, 2022 and the ongoing impacts from COVID-19. In response to the invasion, several countries have imposed economic sanctions that are affecting global financial markets and exacerbating economic challenges such as inflation and global supply-chain disruption. Due to the significant uncertainty created by these circumstances, some of management’s estimates and judgments may be more variable and may change materially in the future.
Page 20
Basis of presentation
Revision to segment results
In the first quarter of 2022, we made two changes to our segment reporting to reflect how we currently manage our businesses. The changes (i) reflect the transfer of certain revenues from our Corporates business to our Tax & Accounting Professionals business where they are better aligned; and (ii) record intercompany revenue in Reuters News for content-related services that it provides to Legal Professionals, Corporates and Tax & Accounting Professionals. Previously, these services had been reported as a transfer of expense from Reuters News to these businesses. These changes impact the financial results of our segments, but do not change our consolidated financial results. The table below summarizes the changes.
| Three months ended March 31, 2021 | ||||||||||||
| (millions of U.S. dollars) | As Reported | Adjustments | As Revised | |||||||||
| Revenues |
||||||||||||
| Legal Professionals |
668 | - | 668 | |||||||||
| Corporates |
384 | (2) | 382 | |||||||||
|
Tax & Accounting Professionals |
225 | 2 | 227 | |||||||||
| “Big 3” Segments Combined |
1,277 | - | 1,277 | |||||||||
| Reuters News |
160 | 5 | 165 | |||||||||
| Global Print |
143 | - | 143 | |||||||||
|
Eliminations/Rounding |
- | (5) | (5) | |||||||||
|
Revenues |
1,580 | - | 1,580 | |||||||||
| Adjusted EBITDA |
||||||||||||
| Legal Professionals |
279 | - | 279 | |||||||||
| Corporates |
146 | (1) | 145 | |||||||||
|
Tax & Accounting Professionals |
98 | 1 | 99 | |||||||||
| “Big 3” Segments Combined |
523 | - | 523 | |||||||||
| Reuters News |
28 | - | 28 | |||||||||
| Global Print |
57 | - | 57 | |||||||||
| Corporate costs |
(50) | - | (50) | |||||||||
| Total adjusted EBITDA |
558 | - | 558 | |||||||||
Disclosure controls and procedures
Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in applicable U.S. and Canadian securities law) as of the end of the period covered by this management’s discussion and analysis, have concluded that our disclosure controls and procedures were effective to ensure that all information that we are required to disclose in reports that we file or furnish under the U.S. Securities Exchange Act and applicable Canadian securities law is (i) recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and Canadian securities regulatory authorities; and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Internal control over financial reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.
On January 1, 2022, we implemented a new financial reporting system, Oracle Cloud EPM Financial Consolidation and Close, to consolidate our results and prepare our financial statements. In conjunction with the change, we modified certain processes and procedures that are part of our internal controls over financial reporting.
Except as described above, there was no change in our internal control over financial reporting during the first quarter of 2022 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Page 21
Share capital
As of May 2, 2022, we had outstanding 487,094,609 common shares, 6,000,000 Series II preference shares, 2,305,248 stock options and a total of 2,483,569 time-based restricted share units and performance restricted share units. We have also issued a Thomson Reuters Founders Share which enables Thomson Reuters Founders Share Company to exercise extraordinary voting power to safeguard the Thomson Reuters Trust Principles.
Public securities filings and regulatory announcements
You may access other information about our company, including our 2021 annual report (which contains information required in an annual information form) and our other disclosure documents, reports, statements or other information that we file with the Canadian securities regulatory authorities through SEDAR at www.sedar.com and in the United States with the Securities and Exchange Commission (SEC) at www.sec.gov.
Cautionary note concerning factors that may affect future results
Certain statements in this management’s discussion and analysis are forward-looking, including, but not limited to, our two-year business Outlook, expectations related to the Change Program, statements regarding the Company’s intention to target a dividend payout ratio of between 50% to 60% of its free cash flow, statements regarding the expected future growth of our customer segments or businesses, and expectations regarding the receipt and amount of supplementary DPT notices from the HMRC, and the filing of a new base shelf prospectus. The words “will”, “expect”, “believe”, “target”, “estimate”, “could”, “should”, “intend”, “predict”, “project” and similar expressions identify forward-looking statements. While we believe that we have a reasonable basis for making forward-looking statements in this management’s discussion and analysis, they are not a guarantee of future performance or outcomes or that any other events described in any forward-looking statement will materialize. Forward-looking statements, including those related to the Russia-Ukraine conflict, the COVID-19 pandemic, or other events and macroeconomic factors are subject to a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from current expectations. Many of these risks, uncertainties and assumptions are beyond our company’s control and the effects of them can be difficult to predict.
Certain factors that could cause actual results or events to differ materially from current expectations are discussed in the “Outlook” section above. Additional factors are discussed in the “Risk Factors” section of our 2021 annual report and in materials that we from time to time file with, or furnish to, the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission. Many of those risks are, and could be, exacerbated by a worsening of the global geopolitical, business and economic environments. There is no assurance that any forward-looking statement will materialize.
The Company’s two-year business Outlook is based on information currently available to the Company and is based on various external and internal assumptions made by the Company in light of its experience and perception of historical trends, current conditions and expected future developments (including those related to the Russia-Ukraine conflict, the ongoing COVID-19 pandemic), as well as other factors that the Company believes are appropriate under the circumstances.
The Company has provided a business Outlook for the purpose of presenting information about current expectations for the periods presented. 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 management’s discussion and analysis. Except as may be required by applicable law, Thomson Reuters disclaims any obligation to update or revise any forward-looking statements.
Page 22
Non-IFRS Financial Measures
We use non-IFRS financial measures, which include ratios that incorporate one or more non-IFRS financial measures, as supplemental indicators of our operating performance and financial position as well as for internal planning purposes, our management incentive programs and our business Outlook. These measures do not have any standardized meaning prescribed by IFRS and therefore are unlikely to be comparable to the calculation of similar measures used by other companies.
As of December 31, 2021, we changed the basis of capital expenditures used in certain of our non-IFRS financial measures. Historically, we used capital expenditures paid from our consolidated statement of cash flow, as measured under IFRS. However, as we manage capital expenditures on an accrual basis, which includes capital expenditures that remain unpaid at the reporting date, we believe it is more appropriate to use accrued capital expenditures in these measures. The change results in a new non-IFRS financial measure called “Accrued capital expenditures as a percentage of revenues”. We have revised the amounts for the first quarter of 2021 in our management’s discussion & analysis.
The following table sets forth our non-IFRS financial measures including an explanation of why we believe they are useful measures of our performance. Reconciliations to the most directly comparable IFRS measure are reflected in Appendix B and the “Liquidity and Capital Resources” section of this management’s discussion and analysis.
|
How We Define It |
Why We Use It and Why It Is Useful to Investors |
Most Directly
Comparable | ||
| Adjusted EBITDA and the related margin | ||||
|
Represents earnings or losses from continuing operations before tax expense or benefit, net interest expense, other finance costs or income, depreciation, amortization of software and other identifiable intangible assets, our share of post-tax earnings or losses in equity method investments, other operating gains and losses, certain asset impairment charges and fair value adjustments.
The related margin is adjusted EBITDA expressed as a percentage of revenues. |
Provides a consistent basis to evaluate operating profitability and performance trends by excluding items that we do not consider to be controllable activities for this purpose.
Also represents a measure commonly reported and widely used by investors as a valuation metric, as well as to assess our ability to incur and service debt. |
Earnings from continuing operations | ||
| Adjusted EBITDA less accrued capital expenditures and the related margin | ||||
|
Represents adjusted EBITDA less accrued capital expenditures, where accrued capital expenditures include amounts that remain unpaid at the reporting date.
The related margin is adjusted EBITDA less accrued capital expenditures expressed as a percentage of revenues. |
Provides a basis for evaluating the operating profitability and capital intensity of a business in a single measure. This measure captures investments regardless of whether they are expensed or capitalized, and reflects the basis on which management measures capital spending.
|
Earnings from continuing operations | ||
| Accrued capital expenditures as a percentage of revenues | ||||
| Accrued capital expenditures expressed as a percentage of revenues.
|
Reflects the basis on how we manage capital expenditures for internal budgeting purposes.
|
Capital expenditures | ||
| Adjusted earnings and adjusted EPS | ||||
| Net earnings or loss including dividends declared on preference shares but excluding the post-tax impacts of fair value adjustments, amortization of other identifiable intangible assets, other operating gains and losses, certain asset impairment charges, other finance costs or income, our share of post-tax earnings or losses in equity method investments, discontinued operations and other items affecting comparability.
The post-tax amount of each item is excluded from adjusted earnings based on the specific tax rules and tax rates associated with the nature and jurisdiction of each item.
Adjusted EPS is calculated from adjusted earnings using diluted weighted-average shares and does not represent actual earnings or loss per share attributable to shareholders.
|
Provides a more comparable basis to analyze earnings.
These measures are commonly used by shareholders to measure performance. |
Net earnings and diluted earnings per share | ||
Page 23
|
How We Define It |
Why We Use It and Why It Is Useful to Investors |
Most Directly
Comparable | ||
| Effective tax rate on adjusted earnings | ||||
| Adjusted tax expense divided by pre-tax adjusted earnings. Adjusted tax expense is computed as income tax (benefit) expense plus or minus the income tax impacts of all items impacting adjusted earnings (as described above), and other tax items impacting comparability.
In interim periods, we also make an adjustment to reflect income taxes based on the 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 we operate. The non-IFRS adjustment reallocates estimated full-year income taxes between interim periods but has no effect on full-year income taxes.
|
Provides a basis to analyze the effective tax rate associated with adjusted earnings.
Because the geographical mix of pre-tax profits and losses in interim periods may be different from that for the full year, our effective tax rate computed in accordance with IFRS may be more volatile by quarter. Therefore, we believe that using the expected full-year effective tax rate provides more comparability among interim periods. |
Tax expense | ||
| Net debt and leverage ratio of net debt to adjusted EBITDA | ||||
| Net debt: Total indebtedness (excluding the associated unamortized transaction costs and premiums or discount) plus the currency related fair value of associated hedging instruments, and lease liabilities less cash and cash equivalents. |
Provides a commonly used measure of a company’s leverage.
Given that we hedge some of our debt to reduce risk, we include hedging instruments as we believe it provides a better measure of the total obligation associated with our outstanding debt. However, because we intend to hold our debt and related hedges to maturity, we do not consider the interest components of the associated fair value of hedges in our measurements. We reduce gross indebtedness by cash and cash equivalents.
|
Total debt (current indebtedness plus long-term indebtedness) | ||
| Net debt to adjusted EBITDA: Net debt is divided by adjusted EBITDA for the previous twelve-month period ending with the current fiscal quarter. |
Provides a commonly used measure of a company’s ability to pay its debt. Our non-IFRS measure is aligned with the calculation of our internal target and is more conservative than the maximum ratio allowed under our contractual covenants in our credit facility.
|
For adjusted EBITDA, refer to the definition above for the most directly comparable IFRS measure | ||
| Free cash flow | ||||
|
Net cash provided by operating activities, proceeds from disposals of property and equipment, and other investing activities, less capital expenditures, payments of lease principal and dividends paid on our preference shares.
|
Helps assess our ability, over the long term, to create value for our shareholders as it represents cash available to repay debt, pay common dividends and fund share repurchases and acquisitions. |
Net cash provided by operating activities | ||
Page 24
|
How We Define It |
Why We Use It and Why It Is Useful to Investors |
Most Directly
Comparable | ||
| Changes before the impact of foreign currency or at “constant currency” | ||||
| Applicable measures where changes are reported before the impact of foreign currency or at “constant currency”
IFRS Measures: ● Revenues ● Operating expenses
Non-IFRS Measures and ratios: ● Adjusted EBITDA and adjusted EBITDA margin ● Adjusted EPS
Our reporting currency is the U.S. dollar. However, we conduct activities in currencies other than the U.S. dollar. We measure our performance before the impact of foreign currency (or at “constant currency”), which means that we apply the same foreign currency exchange rates for the current and equivalent prior period. To calculate the foreign currency impact between periods, we convert the current and equivalent prior period’s local currency results using the same foreign currency exchange rate. |
Provides better comparability of business trends from period to period. | For each non-IFRS measure and ratio, refer to the definitions above for the most directly comparable IFRS measure. | ||
| Changes in revenues computed on an “organic” basis | ||||
| Represent changes in revenues of our existing businesses at constant currency. The metric excludes the distortive impacts of acquisitions and dispositions from not owning the business in both comparable periods. ● For acquisitions, we calculate organic growth as though we had owned the acquired business in both periods. We compare revenues for the acquired business for the period we owned the business to the same prior-year period revenues for that business, when we did not own it. ● For dispositions, we calculate organic growth as though we did not own the business in either period. We exclude revenues of the disposed business from the point of disposition, as well as revenues from the same prior-year period before the sale.
|
Provides further insight into the performance of our existing businesses by excluding distortive impacts and serves as a better measure of our ability to grow our business over the long term. | Revenues | ||
| “Big 3” segments | ||||
|
Our combined Legal Professionals, Corporates and Tax & Accounting Professionals segments. All measures reported for the “Big 3” segments are non-IFRS financial measures. |
The “Big 3” segments comprised 81% of revenues in the first quarter of 2022 and represent the core of our business information service product offerings. |
Revenues Earnings from continuing operations | ||
Page 25
Appendix B
This appendix provides reconciliations of certain non-IFRS financial measures to the most directly comparable IFRS measure that are not presented elsewhere in this management’s discussion and analysis for the three months ended March 31, 2022 and 2021 and year ended December 31, 2021.
Reconciliation of earnings from continuing operations to adjusted EBITDA and adjusted EBITDA less accrued capital expenditures
| Three months ended March 31, | Year ended December 31, | |||||||||||
| (millions of U.S. dollars, except margins) | 2022 | 2021 | 2021 | |||||||||
| Earnings from continuing operations |
1,018 | 5,033 | 5,687 | |||||||||
| Adjustments to remove: |
||||||||||||
| Tax expense |
240 | 1,594 | 1,607 | |||||||||
| Other finance (income) costs |
(94) | 6 | (8) | |||||||||
| Net interest expense |
48 | 51 | 196 | |||||||||
| Amortization of other identifiable intangible assets |
26 | 31 | 119 | |||||||||
| Amortization of computer software |
114 | 115 | 474 | |||||||||
| Depreciation |
38 | 46 | 177 | |||||||||
| EBITDA |
1,390 | 6,876 | 8,252 | |||||||||
| Adjustments to remove: |
||||||||||||
| Share of post-tax earnings in equity method investments |
(798) | (6,297) | (6,240) | |||||||||
| Other operating losses (gains), net |
1 | (17) | (34) | |||||||||
| Fair value adjustments(1) |
7 | (4) | (8) | |||||||||
| Adjusted EBITDA |
600 | 558 | 1,970 | |||||||||
| Deduct: accrued capital expenditures |
(122) | (106) | (541) | |||||||||
| Adjusted EBITDA less accrued capital expenditures |
478 | 452 | 1,429 | |||||||||
| Adjusted EBITDA margin |
35.8% | 35.3% | 31.0% | |||||||||
| Adjusted EBITDA less accrued capital expenditures margin |
28.6% | 28.6% | 22.5% | |||||||||
| (1) | Fair value adjustments, a component of operating expenses, primarily represent gains or losses due to changes in foreign currency exchange rates on intercompany balances that arise in the ordinary course of business. |
Reconciliation of capital expenditures to accrued capital expenditures
| Three months ended March 31 | Year ended December 31, | |||||||||||
| (millions of U.S. dollars, except percentages) | 2022 | 2021 | 2021 | |||||||||
| Capital expenditures |
171 | 120 | 487 | |||||||||
| Remove: IFRS adjustment to cash basis |
(49) | (14) | 54 | |||||||||
| Accrued capital expenditures |
122 | 106 | 541 | |||||||||
| Accrued capital expenditures as a percentage of revenues |
n/a | n/a | 8.5% | |||||||||
Page 26
Reconciliation of net earnings to adjusted earnings and adjusted EPS
| Three months ended March 31, | Year ended December 31, | |||||||||||
| (millions of U.S. dollars, except per share amounts and share data) | 2022 | 2021 | 2021 | |||||||||
| Net earnings |
1,007 | 5,036 | 5,689 | |||||||||
| Adjustments to remove: |
||||||||||||
| Fair value adjustments(1) |
7 | (4) | (8) | |||||||||
| Amortization of other identifiable intangible assets |
26 | 31 | 119 | |||||||||
| Other operating losses (gains), net |
1 | (17) | (34) | |||||||||
| Other finance (income) costs |
(94) | 6 | (8) | |||||||||
| Share of post-tax earnings in equity method investments |
(798) | (6,297) | (6,240) | |||||||||
| Tax on above items(2) |
206 | 1,535 | 1,475 | |||||||||
| Tax items impacting comparability(2) |
(44) | 1 | (24) | |||||||||
| Loss (earnings) from discontinued operations, net of tax |
11 | (3) | (2) | |||||||||
| Interim period effective tax rate normalization(2) |
1 | 1 | - | |||||||||
| Dividends declared on preference shares |
(1) | (1) | (2) | |||||||||
| Adjusted earnings |
322 | 288 | 965 | |||||||||
| Adjusted EPS |
$0.66 | $0.58 | n/a | |||||||||
| Diluted weighted-average common shares (millions) |
487.5 | 496.9 | n/a | |||||||||
Effective Tax Rate on Adjusted Earnings is computed as follows:
| Year ended December 31, | ||||
| (millions of U.S. dollars, except percentage) | 2021 | |||
| Adjusted earnings |
965 | |||
| Plus: Dividends declared on preference shares |
2 | |||
| Plus: Tax expense on adjusted earnings |
156 | |||
| Pre-tax adjusted earnings |
1,123 | |||
| IFRS tax expense |
1,607 | |||
| Remove tax related to: |
||||
| Amortization of other identifiable intangible assets |
26 | |||
| Share of post-tax earnings in equity method investments |
(1,497) | |||
| Other operating gains, net |
(9) | |||
| Other items |
5 | |||
| Subtotal – Tax on pre-tax items removed from adjusted earnings |
(1,475) | |||
| Remove: Tax items impacting comparability |
24 | |||
| Total: Remove all items impacting comparability |
(1,451) | |||
| Tax expense on adjusted earnings |
156 | |||
| Effective tax rate on adjusted earnings |
13.9% | |||
| (1) | Fair value adjustments, a component of operating expenses, primarily represent gains or losses due to changes in foreign currency exchange rates on intercompany balances that arise in the ordinary course of business. |
| (2) | For three months ended March 31, 2022 and 2021, see the “Results of Operations—Tax expense” section of this management’s discussion and analysis for additional information. |
Page 27
Reconciliation of net cash provided by operating activities to free cash flow
| Three months ended March 31, | Year ended December 31, | |||||||||||
| (millions of U.S. dollars) | 2022 | 2021 | 2021 | |||||||||
| Net cash provided by operating activities |
275 | 380 | 1,773 | |||||||||
| Capital expenditures |
(171) | (120) | (487) | |||||||||
| Other investing activities |
- | 1 | 81 | |||||||||
| Payments of lease principal |
(17) | (21) | (109) | |||||||||
| Dividends paid on preference shares |
(1) | (1) | (2) | |||||||||
| Free cash flow |
86 | 239 | 1,256 | |||||||||
Reconciliation of changes in revenues to changes in revenues excluding the effects of foreign currency (constant currency) as well as acquisitions/divestitures (organic basis)(1)
| Three months ended March 31, | ||||||||||||||||||||||||||||
| Change | ||||||||||||||||||||||||||||
| (millions of U.S. dollars) | 2022 | 2021(2) | Total | Foreign Currency |
Subtotal Constant Currency |
Acquisitions/ (Divestitures) |
Organic | |||||||||||||||||||||
| Revenues |
||||||||||||||||||||||||||||
| Legal Professionals |
698 | 668 | 4% | (1%) | 5% | - | 6% | |||||||||||||||||||||
| Corporates |
411 | 382 | 8% | - | 8% | - | 8% | |||||||||||||||||||||
|
Tax & Accounting Professionals |
253 | 227 | 11% | - | 11% | - | 11% | |||||||||||||||||||||
| “Big 3” Segments Combined |
1,362 | 1,277 | 7% | - | 7% | - | 7% | |||||||||||||||||||||
| Reuters News |
176 | 165 | 7% | (2%) | 9% | - | 9% | |||||||||||||||||||||
| Global Print |
142 | 143 | (1%) | (1%) | - | - | - | |||||||||||||||||||||
|
Eliminations/Rounding |
(6) | (5) | ||||||||||||||||||||||||||
| Total revenues |
1,674 | 1,580 | 6% | (1%) | 7% | - | 7% | |||||||||||||||||||||
| Recurring Revenues |
||||||||||||||||||||||||||||
| Legal Professionals |
653 | 621 | 5% | (1%) | 6% | - | 6% | |||||||||||||||||||||
| Corporates |
316 | 293 | 8% | - | 8% | - | 8% | |||||||||||||||||||||
|
Tax & Accounting Professionals |
182 | 162 | 12% | - | 12% | - | 12% | |||||||||||||||||||||
| “Big 3” Segments Combined |
1,151 | 1,076 | 7% | - | 7% | - | 8% | |||||||||||||||||||||
| Reuters News |
155 | 149 | 5% | (2%) | 6% | - | 6% | |||||||||||||||||||||
|
Eliminations/Rounding |
(6) | (5) | ||||||||||||||||||||||||||
| Total recurring revenues |
1,300 | 1,220 | 7% | (1%) | 7% | - | 7% | |||||||||||||||||||||
| Transactions Revenues |
||||||||||||||||||||||||||||
| Legal Professionals |
45 | 47 | (4%) | (1%) | (3%) | (1%) | (2%) | |||||||||||||||||||||
| Corporates |
95 | 89 | 7% | (1%) | 8% | - | 8% | |||||||||||||||||||||
|
Tax & Accounting Professionals |
71 | 65 | 10% | - | 10% | - | 10% | |||||||||||||||||||||
| “Big 3” Segments Combined |
211 | 201 | 5% | - | 6% | - | 6% | |||||||||||||||||||||
|
Reuters News |
21 | 16 | 27% | (5%) | 32% | - | 32% | |||||||||||||||||||||
| Total transactions revenues |
232 | 217 | 7% | (1%) | 8% | - | 8% | |||||||||||||||||||||
| (1) | Growth percentages are computed using whole dollars. Accordingly, percentages calculated from reported amounts may differ from those presented, and components of growth may not total due to rounding. |
| (2) | Revised to reflect the changes made to our segment reporting in the first quarter of 2022. |
Page 28
| Year ended December 31, | ||||||||||||||||||||||||||||
| Change | ||||||||||||||||||||||||||||
| (millions of U.S. dollars) | 2021(2) | 2020(2) | Total | Foreign Currency |
Subtotal Constant Currency |
Acquisitions/ (Divestitures) |
Organic | |||||||||||||||||||||
| Revenues |
||||||||||||||||||||||||||||
| Legal Professionals |
2,712 | 2,535 | 7% | 1% | 6% | - | 6% | |||||||||||||||||||||
| Corporates |
1,440 | 1,361 | 6% | 1% | 5% | - | 5% | |||||||||||||||||||||
|
Tax & Accounting Professionals |
915 | 842 | 9% | - | 9% | - | 9% | |||||||||||||||||||||
| “Big 3” Segments Combined |
5,067 | 4,738 | 7% | 1% | 6% | - | 6% | |||||||||||||||||||||
| Reuters News |
694 | 645 | 8% | 1% | 7% | - | 7% | |||||||||||||||||||||
| Global Print |
609 | 620 | (2%) | 1% | (3%) | - | (3%) | |||||||||||||||||||||
|
Eliminations/Rounding |
(22) | (19) | ||||||||||||||||||||||||||
| Total revenues |
6,348 | 5,984 | 6% | 1% | 5% | - | 5% | |||||||||||||||||||||
| (1) | Growth percentages are computed using whole dollars. Accordingly, percentages calculated from reported amounts may differ from those presented, and components of growth may not total due to rounding. |
| (2) | Revised to reflect the changes made to our segment reporting in the first quarter of 2022. |
Reconciliation of changes in adjusted EBITDA and the related margin, and consolidated operating expenses and adjusted EPS, excluding the effects of foreign currency(1)
| Three months ended March 31, | ||||||||||||||||||||
| Change | ||||||||||||||||||||
| (millions of U.S. dollars, except margins and per share amounts) | 2022 | 2021(2) | Total | Foreign Currency |
Constant Currency |
|||||||||||||||
| Adjusted EBITDA |
||||||||||||||||||||
| Legal Professionals |
305 | 279 | 9% | (1%) | 10% | |||||||||||||||
| Corporates |
157 | 145 | 8% | 1% | 7% | |||||||||||||||
|
Tax & Accounting Professionals |
122 | 99 | 23% | 1% | 22% | |||||||||||||||
| “Big 3” Segments Combined |
584 | 523 | 11% | - | 11% | |||||||||||||||
| Reuters News |
37 | 28 | 31% | 8% | 23% | |||||||||||||||
| Global Print |
53 | 57 | (8%) | - | (7%) | |||||||||||||||
|
Corporate costs |
(74) | (50) | n/a | n/a | n/a | |||||||||||||||
|
Adjusted EBITDA |
600 | 558 | 7% | - | 7% | |||||||||||||||
| Adjusted EBITDA Margin |
||||||||||||||||||||
| Legal Professionals |
43.7% | 41.8% | 190bp | - | 190bp | |||||||||||||||
| Corporates |
38.1% | 38.0% | 10bp | 30bp | (20)bp | |||||||||||||||
|
Tax & Accounting Professionals |
48.3% | 43.8% | 450bp | 30bp | 420bp | |||||||||||||||
| “Big 3” Segments Combined |
42.9% | 41.0% | 190bp | 30bp | 160bp | |||||||||||||||
| Reuters News |
21.0% | 17.1% | 390bp | 150bp | 240bp | |||||||||||||||
| Global Print |
37.0% | 39.9% | (290)bp | 10bp | (300)bp | |||||||||||||||
|
Adjusted EBITDA margin |
35.8% | 35.3% | 50bp | 30bp | 20bp | |||||||||||||||
| Operating expenses |
1,081 | 1,018 | 6% | - | 6% | |||||||||||||||
|
Adjusted EPS |
$0.66 | $0.58 | 14% | - | 14% | |||||||||||||||
| (1) | Growth percentages and adjusted EBITDA margins are computed using whole dollars. Accordingly, percentages and margins calculated from reported amounts may differ from those presented, and components of growth may not total due to rounding. |
| (2) | Revised to reflect the changes made to our segment reporting in the first quarter of 2022. |
Page 29
Reconciliation of changes in adjusted EBITDA and the related margin(1)
| Year ended December 31, | ||||
| (millions of U.S. dollars, except margins) | 2021(2) | |||
| Adjusted EBITDA |
||||
| Legal Professionals |
1,091 | |||
| Corporates |
496 | |||
|
Tax & Accounting Professionals |
379 | |||
| “Big 3” Segments Combined |
1,966 | |||
| Reuters News |
103 | |||
| Global Print |
226 | |||
|
Corporate costs |
(325) | |||
|
Adjusted EBITDA |
1,970 | |||
| Adjusted EBITDA Margin |
||||
| Legal Professionals |
40.2% | |||
| Corporates |
34.4% | |||
|
Tax & Accounting Professionals |
41.3% | |||
| “Big 3” Segments Combined |
38.8% | |||
| Reuters News |
14.8% | |||
| Global Print |
37.1% | |||
|
Adjusted EBITDA margin |
31.0% | |||
| (1) | Adjusted EBITDA margins are computed using whole dollars. Accordingly, margins calculated from reported amounts may differ from those presented. |
| (2) | Revised to reflect the changes made to our segment reporting in the first quarter of 2022. |
Page 30
Appendix C
Quarterly information (unaudited)
The following table presents a summary of our consolidated operating results for the eight most recent quarters.
|
|
Quarters ended | |||||||||||||||||||||||||||||||
| (millions of U.S. dollars, except per share amounts) |
March 31, 2022 |
December 31, 2021 |
September 30, 2021 |
June 30, 2021 |
March 31, 2021 |
December 31, 2020 |
September 30, 2020 |
June 30, 2020 |
||||||||||||||||||||||||
| Revenues |
1,674 | 1,710 | 1,526 | 1,532 | 1,580 | 1,616 | 1,443 | 1,405 | ||||||||||||||||||||||||
| Operating profit |
414 | 257 | 282 | 316 | 387 | 956 | 318 | 365 | ||||||||||||||||||||||||
| Earnings (loss) from continuing operations |
1,018 | (177) | (241) | 1,072 | 5,033 | 587 | 240 | 131 | ||||||||||||||||||||||||
| (Loss) earnings from discontinued operations, net of tax |
(11) | 2 | 1 | (4) | 3 | (25) | 1 | (5) | ||||||||||||||||||||||||
| Net earnings (loss) |
1,007 | (175) | (240) | 1,068 | 5,036 | 562 | 241 | 126 | ||||||||||||||||||||||||
| Earnings (loss) attributable to common shareholders |
1,007 | (175) | (240) | 1,068 | 5,036 | 562 | 241 | 126 | ||||||||||||||||||||||||
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| Basic earnings (loss) per share |
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| From continuing operations |
$2.09 | $(0.36) | $(0.49) | $2.16 | $10.15 | $1.18 | $0.48 | $0.26 | ||||||||||||||||||||||||
| From discontinued operations |
(0.02) | - | - | (0.01) | - | (0.05) | - | (0.01) | ||||||||||||||||||||||||
|
|
$2.07 | $(0.36) | $(0.49) | $2.15 | $10.15 | $1.13 | $0.48 | $0.25 | ||||||||||||||||||||||||
| Diluted earnings (loss) per share |
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| From continuing operations |
$2.09 | $(0.36) | $(0.49) | $2.16 | $10.13 | $1.18 | $0.48 | $0.26 | ||||||||||||||||||||||||
| From discontinued operations |
(0.03) | - | - | (0.01) | - | (0.05) | - | (0.01) | ||||||||||||||||||||||||
|
|
$2.06 | $(0.36) | $(0.49) | $2.15 | $10.13 | $1.13 | $0.48 | $0.25 | ||||||||||||||||||||||||
Revenues – Our revenues do not tend to be significantly impacted by seasonality as we record a large portion of our revenues ratably over a contract term. However, our revenues from quarter to consecutive quarter can be impacted by the release of certain tax products, which tend to be concentrated in the fourth quarter and, to a lesser extent, in the first quarter of the year. The COVID-19 pandemic caused some of our revenue to shift from our traditional patterns. Specifically, revenues in our Tax & Accounting Professionals segment in the first quarter of 2022 and the second quarter of 2021 benefited from year-over-year timing of U.S. federal tax deadlines. In 2021, revenues in our Global Print segment benefited from more professionals returning to work. In contrast, revenues in 2020 were negatively impacted by delayed print shipments and deferrals of tax return filing revenues due to extended U.S. federal tax deadlines. As most of our business is conducted in U.S. dollars, foreign currency had a minimal impact on our revenues throughout the eight-quarter period. Acquisitions or divestitures of businesses did not significantly impact our revenues throughout the eight-quarter period.
Operating profit – Similarly, our operating profit does not tend to be significantly impacted by seasonality, as most of our operating expenses are fixed. As a result, when our revenues increase, we generally become more profitable, and when our revenues decline, we generally become less profitable. In the first quarter of 2022 and throughout 2021, our operating profit was impacted by the timing of costs associated with our Change Program. Beginning in the second quarter of 2020, operating profit benefited from our COVID-19 related cost mitigation initiatives. In the fourth quarter of 2020, operating profit also benefited from a significant gain from the sale of an investment and a gain from an amendment to a pension plan.
Net earnings (loss) – Our net earnings are impacted by changes in the value of our LSEG investment. The first quarter of 2022 and second quarter of 2021 reflected increases in the value of our LSEG investment. The net loss in the third and fourth quarters of 2021 reflected decreases in the value of our LSEG investment. Net earnings in the first quarter of 2021 were significantly higher than other periods due to the gain on sale of Refinitiv to LSEG.
Page 31
Appendix D
Guarantor Supplemental Financial Information
The following tables set forth consolidating summary financial information in connection with the full and unconditional guarantee by Thomson Reuters Corporation and three U.S. subsidiary guarantors, which are also indirect 100%-owned and consolidated subsidiaries of Thomson Reuters Corporation (referred to as the Guarantor Subsidiaries), of any debt securities issued by TR Finance LLC under a trust indenture to be entered into between Thomson Reuters Corporation, TR Finance LLC, the Guarantor Subsidiaries, Computershare Trust Company of Canada, and Deutsche Bank Trust Company Americas. TR Finance LLC is an indirect 100%-owned subsidiary of Thomson Reuters Corporation and was formed with the sole purpose of issuing debt securities. TR Finance LLC has no significant assets or liabilities, as well as no subsidiaries or ongoing business operations of its own. The ability of TR Finance LLC to pay interest, premiums, operating expenses and to meet its debt obligations will depend upon the credit support of Thomson Reuters Corporation and the subsidiary guarantors. See the “Liquidity and Capital Resources” section of this management’s discussion and analysis for additional information.
The tables below contain condensed consolidating financial information for the following:
| ● | Parent – Thomson Reuters Corporation, the direct or indirect owner of all of its subsidiaries |
| ● | Subsidiary Issuer – TR Finance LLC |
| ● | Guarantor Subsidiaries on a combined basis |
| ● | Non-Guarantor Subsidiaries – Other subsidiaries of Thomson Reuters Corporation on a combined basis that will not guarantee TR Finance LLC debt securities |
| ● | Eliminations – Consolidating adjustments |
| ● | Thomson Reuters on a consolidated basis |
The Guarantor Subsidiaries referred to above are comprised of the following indirect 100%-owned and consolidated subsidiaries of Thomson Reuters Corporation:
| ● | Thomson Reuters Applications Inc., which operates part of the Company’s Legal Professionals, Tax & Accounting Professionals and Corporates businesses; |
| ● | Thomson Reuters (Tax & Accounting) Inc., which operates part of the Company’s Tax & Accounting Professionals and Corporates businesses; and |
| ● | West Publishing Corporation, which operates part of the Company’s Legal Professionals, Corporates and Global Print businesses. |
Thomson Reuters Corporation accounts for its investments in subsidiaries using the equity method for purposes of the condensed consolidating financial information. Where subsidiaries are members of a consolidated tax filing group, Thomson Reuters Corporation allocates income tax expense pursuant to the tax sharing agreement among the members of the group, including application of the percentage method whereby members of the consolidated group are reimbursed for losses when they occur, regardless of the ability to use such losses on a standalone basis. We believe that this allocation is a systematic, rational approach for allocation of income tax balances. Adjustments necessary to consolidate the Parent, Guarantor Subsidiaries and Non-Guarantor Subsidiaries are reflected in the “Eliminations” column.
This basis of presentation is not intended to present the financial position of Thomson Reuters Corporation and the results of its operations for any purpose other than to comply with the specific requirements for guarantor reporting and should be read in conjunction with our consolidated interim financial statements for the three months ended March 31, 2022, our 2021 annual consolidated financial statements, as well as our 2021 annual management’s discussion and analysis included in our 2021 annual report.
The following condensed consolidating financial information is provided in compliance with the requirements of Section 13.4 of National Instrument 51-102 -Continuous Disclosure Obligations providing for an exemption for certain credit support issuers. Thomson Reuters Corporation has also elected to provide the following supplemental financial information in accordance with Article 13 of Regulation S-X, as adopted by the SEC and set forth in SEC Release No. 33-10762.
Page 32
The following condensed consolidating financial information has been prepared in accordance with IFRS, as issued by the IASB and is unaudited.
CONDENSED CONSOLIDATING INCOME STATEMENT
| Three months ended March 31, 2022 | ||||||||||||||||||||||||
| (millions of U.S. dollars) | Parent | Subsidiary Issuer |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||||
| CONTINUING OPERATIONS |
||||||||||||||||||||||||
| Revenues |
- | - | 586 | 1,307 | (219) | 1,674 | ||||||||||||||||||
| Operating expenses |
(3) | - | (445) | (852) | 219 | (1,081) | ||||||||||||||||||
| Depreciation |
- | - | (13) | (25) | - | (38) | ||||||||||||||||||
| Amortization of computer software |
- | - | (3) | (111) | - | (114) | ||||||||||||||||||
| Amortization of other identifiable intangible assets |
- | - | (13) | (13) | - | (26) | ||||||||||||||||||
| Other operating losses, net |
- | - | - | (1) | - | (1) | ||||||||||||||||||
| Operating (loss) profit |
(3) | - | 112 | 305 | - | 414 | ||||||||||||||||||
| Finance (costs) income, net: |
||||||||||||||||||||||||
| Net interest expense |
(40) | - | - | (8) | - | (48) | ||||||||||||||||||
| Other finance income |
3 | - | 1 | 90 | - | 94 | ||||||||||||||||||
| Intercompany net interest income (expense) |
28 | - | (12) | (16) | - | - | ||||||||||||||||||
| (Loss) income before tax and equity method investments |
(12) | - | 101 | 371 | - | 460 | ||||||||||||||||||
| Share of post-tax earnings in equity method investments |
- | - | - | 798 | - | 798 | ||||||||||||||||||
| Share of post-tax earnings in subsidiaries |
1,019 | - | 4 | 76 | (1,099) | - | ||||||||||||||||||
| Tax expense |
- | - | (25) | (215) | - | (240) | ||||||||||||||||||
| Earnings from continuing operations |
1,007 | - | 80 | 1,030 | (1,099) | 1,018 | ||||||||||||||||||
| Loss from discontinued operations, net of tax |
- | - | - | (11) | - | (11) | ||||||||||||||||||
| Net earnings |
1,007 | - | 80 | 1,019 | (1,099) | 1,007 | ||||||||||||||||||
| Earnings attributable to common shareholders |
1,007 | - | 80 | 1,019 | (1,099) | 1,007 | ||||||||||||||||||
Page 33
CONDENSED CONSOLIDATING INCOME STATEMENT
| Three months ended March 31, 2021 | ||||||||||||||||||||||||
| (millions of U.S. dollars) | Parent | Subsidiary Issuer |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||||
| CONTINUING OPERATIONS |
||||||||||||||||||||||||
| Revenues |
- | - | 1,092 | 884 | (396) | 1,580 | ||||||||||||||||||
| Operating expenses |
(2) | - | (954) | (458) | 396 | (1,018) | ||||||||||||||||||
| Depreciation |
- | - | (16) | (30) | - | (46) | ||||||||||||||||||
| Amortization of computer software |
- | - | (5) | (111) | 1 | (115) | ||||||||||||||||||
| Amortization of other identifiable intangible assets |
- | - | (13) | (18) | - | (31) | ||||||||||||||||||
| Other operating (losses) gains, net |
- | - | (1) | 18 | - | 17 | ||||||||||||||||||
| Operating (loss) profit |
(2) | - | 103 | 285 | 1 | 387 | ||||||||||||||||||
| Finance (costs) income, net: |
||||||||||||||||||||||||
| Net interest expense |
(39) | - | (1) | (11) | - | (51) | ||||||||||||||||||
| Other finance (costs) income |
(16) | - | - | 10 | - | (6) | ||||||||||||||||||
| Intercompany net interest income (expense) |
28 | - | (12) | (16) | - | - | ||||||||||||||||||
| (Loss) income before tax and equity method investments |
(29) | - | 90 | 268 | 1 | 330 | ||||||||||||||||||
| Share of post-tax earnings in equity method investments |
- | - | - | 6,297 | - | 6,297 | ||||||||||||||||||
| Share of post-tax earnings in subsidiaries |
5,065 | - | 2 | 67 | (5,134) | - | ||||||||||||||||||
| Tax expense |
- | - | (23) | (1,571) | - | (1,594) | ||||||||||||||||||
| Earnings from continuing operations |
5,036 | - | 69 | 5,061 | (5,133) | 5,033 | ||||||||||||||||||
| Earnings from discontinued operations, net of tax |
- | - | - | 3 | - | 3 | ||||||||||||||||||
| Net earnings |
5,036 | - | 69 | 5,064 | (5,133) | 5,036 | ||||||||||||||||||
| Earnings attributable to common shareholders |
5,036 | - | 69 | 5,064 | (5,133) | 5,036 | ||||||||||||||||||
Page 34
CONDENSED CONSOLIDATING STATEMENT OF FINANCIAL POSITION
| March 31, 2022 | ||||||||||||||||||||||||
| (millions of U.S. dollars) | Parent | Subsidiary Issuer |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||||
| Cash and cash equivalents |
6 | - | 173 | 475 | - | 654 | ||||||||||||||||||
| Trade and other receivables |
2 | - | 454 | 526 | - | 982 | ||||||||||||||||||
| Intercompany receivables |
3,733 | - | 430 | 2,682 | (6,845) | - | ||||||||||||||||||
| Other financial assets |
- | - | 6 | 43 | - | 49 | ||||||||||||||||||
| Prepaid expenses and other current assets |
- | - | 220 | 225 | - | 445 | ||||||||||||||||||
| Current assets excluding assets held for sale |
3,741 | - | 1,283 | 3,951 | (6,845) | 2,130 | ||||||||||||||||||
| Assets held for sale |
- | - | 67 | 144 | - | 211 | ||||||||||||||||||
| Current assets |
3,741 | - | 1,350 | 4,095 | (6,845) | 2,341 | ||||||||||||||||||
| Property and equipment, net |
- | - | 188 | 291 | - | 479 | ||||||||||||||||||
| Computer software, net |
- | - | 10 | 816 | 826 | |||||||||||||||||||
| Other identifiable intangible assets, net |
- | - | 1,123 | 2,179 | - | 3,302 | ||||||||||||||||||
| Goodwill |
- | - | 3,783 | 2,099 | - | 5,882 | ||||||||||||||||||
| Equity method investments |
- | - | - | 7,545 | - | 7,545 | ||||||||||||||||||
| Other non-current assets |
120 | - | 129 | 1,063 | - | 1,312 | ||||||||||||||||||
| Intercompany receivables |
222 | - | - | 779 | (1,001) | - | ||||||||||||||||||
| Investments in subsidiaries |
16,830 | - | 77 | 4,591 | (21,498) | - | ||||||||||||||||||
| Deferred tax |
- | - | - | 1,142 | - | 1,142 | ||||||||||||||||||
| Total assets |
20,913 | - | 6,660 | 24,600 | (29,344) | 22,829 | ||||||||||||||||||
| LIABILITIES AND EQUITY |
||||||||||||||||||||||||
| Liabilities |
||||||||||||||||||||||||
| Payables, accruals and provisions |
83 | - | 303 | 664 | - | 1,050 | ||||||||||||||||||
| Current tax liabilities |
- | - | 1 | 210 | - | 211 | ||||||||||||||||||
| Deferred revenue |
- | - | 317 | 507 | - | 824 | ||||||||||||||||||
| Intercompany payables |
2,402 | - | 281 | 4,162 | (6,845) | - | ||||||||||||||||||
| Other financial liabilities |
- | - | 21 | 57 | - | 78 | ||||||||||||||||||
| Current liabilities excluding liabilities associated with assets held for sale |
2,485 | - | 923 | 5,600 | (6,845) | 2,163 | ||||||||||||||||||
| Liabilities associated with assets held for sale |
- | - | 35 | 123 | - | 158 | ||||||||||||||||||
| Current liabilities |
2,485 | - | 958 | 5,723 | (6,845) | 2,321 | ||||||||||||||||||
| Long-term indebtedness |
3,800 | - | - | - | - | 3,800 | ||||||||||||||||||
| Provisions and other non-current liabilities |
3 | - | 69 | 809 | - | 881 | ||||||||||||||||||
| Intercompany payables |
- | - | 779 | 222 | (1,001) | - | ||||||||||||||||||
| Deferred tax |
- | - | 186 | 1,016 | - | 1,202 | ||||||||||||||||||
| Total liabilities |
6,288 | - | 1,992 | 7,770 | (7,846) | 8,204 | ||||||||||||||||||
| Equity |
||||||||||||||||||||||||
| Total equity |
14,625 | - | 4,668 | 16,830 | (21,498) | 14,625 | ||||||||||||||||||
| Total liabilities and equity |
20,913 | - | 6,660 | 24,600 | (29,344) | 22,829 | ||||||||||||||||||
Page 35
CONDENSED CONSOLIDATING STATEMENT OF FINANCIAL POSITION
| December 31, 2021 | ||||||||||||||||||||||||
| (millions of U.S. dollars) | Parent | Subsidiary Issuer |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||||
| Cash and cash equivalents |
15 | - | 237 | 526 | - | 778 | ||||||||||||||||||
| Trade and other receivables |
- | - | 690 | 367 | - | 1,057 | ||||||||||||||||||
| Intercompany receivables |
3,477 | - | 648 | 2,545 | (6,670) | - | ||||||||||||||||||
| Other financial assets |
- | - | 6 | 102 | - | 108 | ||||||||||||||||||
| Prepaid expenses and other current assets |
2 | - | 236 | 224 | - | 462 | ||||||||||||||||||
| Current assets excluding assets held for sale |
3,494 | - | 1,817 | 3,764 | (6,670) | 2,405 | ||||||||||||||||||
| Assets held for sale |
- | - | 8 | 40 | - | 48 | ||||||||||||||||||
| Current assets |
3,494 | - | 1,825 | 3,804 | (6,670) | 2,453 | ||||||||||||||||||
| Property and equipment, net |
- | - | 201 | 301 | - | 502 | ||||||||||||||||||
| Computer software, net |
- | - | 12 | 810 | - | 822 | ||||||||||||||||||
| Other identifiable intangible assets, net |
- | - | 1,136 | 2,195 | - | 3,331 | ||||||||||||||||||
| Goodwill |
- | - | 3,822 | 2,118 | - | 5,940 | ||||||||||||||||||
| Equity method investments |
- | - | - | 6,736 | - | 6,736 | ||||||||||||||||||
| Other non-current assets |
100 | - | 144 | 982 | - | 1,226 | ||||||||||||||||||
| Intercompany receivables |
230 | - | - | 778 | (1,008) | - | ||||||||||||||||||
| Investments in subsidiaries |
15,899 | - | 71 | 4,526 | (20,496) | - | ||||||||||||||||||
| Deferred tax |
- | - | - | 1,139 | - | 1,139 | ||||||||||||||||||
| Total assets |
19,723 | - | 7,211 | 23,389 | (28,174) | 22,149 | ||||||||||||||||||
| LIABILITIES AND EQUITY |
||||||||||||||||||||||||
| Liabilities |
||||||||||||||||||||||||
| Payables, accruals and provisions |
51 | - | 398 | 877 | - | 1,326 | ||||||||||||||||||
| Current tax liabilities |
- | - | - | 169 | - | 169 | ||||||||||||||||||
| Deferred revenue |
- | - | 634 | 240 | - | 874 | ||||||||||||||||||
| Intercompany payables |
2,049 | - | 497 | 4,124 | (6,670) | - | ||||||||||||||||||
| Other financial liabilities |
- | - | 22 | 153 | - | 175 | ||||||||||||||||||
| Current liabilities excluding liabilities associated with assets held for sale |
2,100 | - | 1,551 | 5,563 | (6,670) | 2,544 | ||||||||||||||||||
| Liabilities associated with assets held for sale |
- | - | 11 | 26 | - | 37 | ||||||||||||||||||
| Current liabilities |
2,100 | - | 1,562 | 5,589 | (6,670) | 2,581 | ||||||||||||||||||
| Long-term indebtedness |
3,786 | - | - | - | - | 3,786 | ||||||||||||||||||
| Provisions and other non-current liabilities |
3 | - | 74 | 866 | - | 943 | ||||||||||||||||||
| Intercompany payables |
- | - | 779 | 229 | (1,008) | - | ||||||||||||||||||
| Deferred tax |
- | - | 199 | 806 | - | 1,005 | ||||||||||||||||||
| Total liabilities |
5,889 | - | 2,614 | 7,490 | (7,678) | 8,315 | ||||||||||||||||||
| Equity |
||||||||||||||||||||||||
| Total equity |
13,834 | - | 4,597 | 15,899 | (20,496) | 13,834 | ||||||||||||||||||
| Total liabilities and equity |
19,723 | - | 7,211 | 23,389 | (28,174) | 22,149 | ||||||||||||||||||
Page 36
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
| (millions of U.S. dollars) | Parent | Subsidiary Issuer |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||||
|
Three months ended March 31, 2022 |
||||||||||||||||||||||||
| Net cash (used in) provided by operating activities |
(16) | - | 73 | 218 | - | 275 | ||||||||||||||||||
| Net cash provided by (used in) investing activities |
- | - | 21 | (200) | - | (179) | ||||||||||||||||||
| Net cash provided by (used in) financing activities |
7 | - | (158) | (69) | - | (220) | ||||||||||||||||||
| Decrease in cash and cash equivalents |
(9) | - | (64) | (51) | - | (124) | ||||||||||||||||||
|
Three months ended March 31, 2021 |
||||||||||||||||||||||||
| Net cash (used in) provided by operating activities |
(13) | - | 60 | 333 | - | 380 | ||||||||||||||||||
| Net cash (used in) provided by investing activities |
- | - | (3) | 867 | (35) | 829 | ||||||||||||||||||
| Net cash provided by (used in) financing activities |
16 | - | (84) | (378) | 35 | (411) | ||||||||||||||||||
| Translation adjustments |
- | - | - | (1) | - | (1) | ||||||||||||||||||
| Increase (decrease) in cash and cash equivalents |
3 | - | (27) | 821 | - | 797 | ||||||||||||||||||
Page 37
Exhibit 99.2
Unaudited Consolidated Financial Statements
THOMSON REUTERS CORPORATION
CONSOLIDATED INCOME STATEMENT
(unaudited)
| Three months ended March 31, | ||||||||||||
| (millions of U.S. dollars, except per share amounts) | Notes | 2022 | 2021 | |||||||||
| CONTINUING OPERATIONS |
||||||||||||
| Revenues |
|
2 |
|
|
1,674 |
|
|
1,580 |
| |||
| Operating expenses |
|
5 |
|
|
(1,081) |
|
|
(1,018) |
| |||
| Depreciation |
|
(38) |
|
|
(46) |
| ||||||
| Amortization of computer software |
|
(114) |
|
|
(115) |
| ||||||
| Amortization of other identifiable intangible assets |
|
(26) |
|
|
(31) |
| ||||||
| Other operating (losses) gains, net |
|
6 |
|
|
(1) |
|
|
17 |
| |||
| Operating profit |
|
414 |
|
|
387 |
| ||||||
| Finance costs, net: |
||||||||||||
| Net interest expense |
|
7 |
|
|
(48) |
|
|
(51) |
| |||
| Other finance income (costs) |
|
7 |
|
|
94 |
|
|
(6) |
| |||
| Income before tax and equity method investments |
|
460 |
|
|
330 |
| ||||||
| Share of post-tax earnings in equity method investments |
|
8 |
|
|
798 |
|
|
6,297 |
| |||
| Tax expense |
|
9 |
|
|
(240) |
|
|
(1,594) |
| |||
| Earnings from continuing operations |
|
1,018 |
|
|
5,033 |
| ||||||
| (Loss) earnings from discontinued operations, net of tax |
|
(11) |
|
|
3 |
| ||||||
| Net earnings |
|
1,007 |
|
|
5,036 |
| ||||||
| Earnings attributable to common shareholders |
|
1,007 |
|
|
5,036 |
| ||||||
| Earnings per share: |
|
10 |
|
|||||||||
| Basic earnings (loss) per share: |
||||||||||||
| From continuing operations |
|
$2.09 |
|
|
$10.15 |
| ||||||
| From discontinued operations |
|
(0.02) |
|
|
- |
| ||||||
| Basic earnings per share |
|
$2.07 |
|
|
$10.15 |
| ||||||
| Diluted earnings (loss) per share: |
||||||||||||
| From continuing operations |
|
$2.09 |
|
|
$10.13 |
| ||||||
| From discontinued operations |
|
(0.03) |
|
|
- |
| ||||||
| Diluted earnings per share |
|
$2.06 |
|
|
$10.13 |
| ||||||
The related notes form an integral part of these consolidated financial statements.
Page 38
THOMSON REUTERS CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
| Three months ended March 31, | ||||||||||
| (millions of U.S. dollars) | Notes | 2022 | 2021 | |||||||
| Net earnings |
|
1,007 |
|
|
5,036 |
| ||||
| Other comprehensive income (loss): |
||||||||||
| Items that have been or may be subsequently reclassified to net earnings: |
||||||||||
| Cash flow hedges adjustments to net earnings |
7 |
|
(13) |
|
|
(15) |
| |||
| Cash flow hedges adjustments to equity |
|
20 |
|
|
9 |
| ||||
| Foreign currency translation adjustments to equity |
|
(26) |
|
|
5 |
| ||||
| Share of other comprehensive loss in equity method investments |
8 |
|
- |
|
|
(98) |
| |||
| Related tax benefit on share of other comprehensive loss in equity method investments |
|
- |
|
|
23 |
| ||||
|
|
(19) |
|
|
(76) |
| |||||
| Items that will not be reclassified to net earnings: |
||||||||||
| Fair value adjustments on financial assets |
12 |
|
(4) |
|
|
(2) |
| |||
| Remeasurement on defined benefit pension plans |
|
46 |
|
|
96 |
| ||||
| Related tax expense on remeasurement on defined benefit pension plans |
|
(11) |
|
|
(23) |
| ||||
|
|
31 |
|
|
71 |
| |||||
| Other comprehensive income (loss) |
|
12 |
|
|
(5) |
| ||||
| Total comprehensive income |
|
1,019 |
|
|
5,031 |
| ||||
| Comprehensive income for the period attributable to: |
||||||||||
| Common shareholders: |
||||||||||
| Continuing operations |
|
1,030 |
|
|
5,028 |
| ||||
| Discontinued operations |
|
(11) |
|
|
3 |
| ||||
| Total comprehensive income |
|
1,019 |
|
|
5,031 |
| ||||
The related notes form an integral part of these consolidated financial statements.
Page 39
THOMSON REUTERS CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(unaudited)
| March 31, | December 31, | |||||||||||
| (millions of U.S. dollars) | Notes | 2022 | 2021(1) | |||||||||
| Cash and cash equivalents |
|
12 |
|
|
654 |
|
|
778 |
| |||
| Trade and other receivables |
|
982 |
|
|
1,057 |
| ||||||
| Other financial assets |
|
12 |
|
|
49 |
|
|
108 |
| |||
| Prepaid expenses and other current assets |
|
445 |
|
|
462 |
| ||||||
| Current assets excluding assets held for sale |
|
2,130 |
|
|
2,405 |
| ||||||
| Assets held for sale |
|
11 |
|
|
211 |
|
|
48 |
| |||
| Current assets |
|
2,341 |
|
|
2,453 |
| ||||||
| Property and equipment, net |
|
479 |
|
|
502 |
| ||||||
| Computer software, net |
|
826 |
|
|
822 |
| ||||||
| Other identifiable intangible assets, net |
|
3,302 |
|
|
3,331 |
| ||||||
| Goodwill |
|
5,882 |
|
|
5,940 |
| ||||||
| Equity method investments |
|
8 |
|
|
7,545 |
|
|
6,736 |
| |||
| Other non-current assets |
|
13 |
|
|
1,312 |
|
|
1,226 |
| |||
| Deferred tax |
|
1,142 |
|
|
1,139 |
| ||||||
| Total assets |
|
22,829 |
|
|
22,149 |
| ||||||
| LIABILITIES AND EQUITY |
||||||||||||
| Liabilities |
||||||||||||
| Payables, accruals and provisions |
|
14 |
|
|
1,050 |
|
|
1,326 |
| |||
| Current tax liabilities |
|
211 |
|
|
169 |
| ||||||
| Deferred revenue |
|
824 |
|
|
874 |
| ||||||
| Other financial liabilities |
|
12 |
|
|
78 |
|
|
175 |
| |||
| Current liabilities excluding liabilities associated with assets held for sale |
|
2,163 |
|
|
2,544 |
| ||||||
| Liabilities associated with assets held for sale |
|
11 |
|
|
158 |
|
|
37 |
| |||
| Current liabilities |
|
2,321 |
|
|
2,581 |
| ||||||
| Long-term indebtedness |
|
12 |
|
|
3,800 |
|
|
3,786 |
| |||
| Provisions and other non-current liabilities |
|
15 |
|
|
881 |
|
|
943 |
| |||
| Deferred tax |
|
1,202 |
|
|
1,005 |
| ||||||
| Total liabilities |
|
8,204 |
|
|
8,315 |
| ||||||
| Equity |
||||||||||||
| Capital |
|
16 |
|
|
5,485 |
|
|
5,496 |
| |||
| Retained earnings |
|
9,974 |
|
|
9,149 |
| ||||||
| Accumulated other comprehensive loss |
|
(834) |
|
|
(811) |
| ||||||
| Total equity |
|
14,625 |
|
|
13,834 |
| ||||||
| Total liabilities and equity |
|
22,829 |
|
|
22,149 |
| ||||||
Contingencies (note 18)
| (1) | Amounts have been reclassified to reflect the current presentation. |
The related notes form an integral part of these consolidated financial statements.
Page 40
THOMSON REUTERS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOW
(unaudited)
| Three months ended March 31, | ||||||||||||
| (millions of U.S. dollars) | Notes | 2022 | 2021 | |||||||||
| Cash provided by (used in): |
||||||||||||
| OPERATING ACTIVITIES |
||||||||||||
| Earnings from continuing operations |
1,018 | 5,033 | ||||||||||
| Adjustments for: |
||||||||||||
| Depreciation |
38 | 46 | ||||||||||
| Amortization of computer software |
114 | 115 | ||||||||||
| Amortization of other identifiable intangible assets |
26 | 31 | ||||||||||
| Share of post-tax earnings in equity method investments |
8 | (798) | (6,297) | |||||||||
| Deferred tax |
166 | 674 | ||||||||||
| Other |
17 | (39) | 30 | |||||||||
| Changes in working capital and other items |
17 | (191) | 785 | |||||||||
| Operating cash flows from continuing operations |
334 | 417 | ||||||||||
| Operating cash flows from discontinued operations |
(59) | (37) | ||||||||||
| Net cash provided by operating activities |
275 | 380 | ||||||||||
| INVESTING ACTIVITIES |
||||||||||||
| Acquisitions, net of cash acquired |
(8) | (3) | ||||||||||
| Proceeds from disposals of businesses and investments |
- | 5 | ||||||||||
| Dividend from sale of LSEG shares |
8 | - | 994 | |||||||||
| Capital expenditures |
(171) | (120) | ||||||||||
| Other investing activities |
- | 1 | ||||||||||
| Taxes paid on sale of Refinitiv and LSEG shares |
- | (6) | ||||||||||
| Investing cash flows from continuing operations |
(179) | 871 | ||||||||||
| Investing cash flows from discontinued operations |
- | (42) | ||||||||||
| Net cash (used in) provided by investing activities |
(179) | 829 | ||||||||||
| FINANCING ACTIVITIES |
||||||||||||
| Payments of lease principal |
(17) | (21) | ||||||||||
| Repurchases of common shares |
16 | - | (200) | |||||||||
| Dividends paid on preference shares |
(1) | (1) | ||||||||||
| Dividends paid on common shares |
16 | (209) | (194) | |||||||||
| Other financing activities |
7 | 5 | ||||||||||
| Net cash used in financing activities |
(220) | (411) | ||||||||||
| Translation adjustments |
- | (1) | ||||||||||
| (Decrease) increase in cash and cash equivalents |
(124) | 797 | ||||||||||
| Cash and cash equivalents at beginning of period |
778 | 1,787 | ||||||||||
| Cash and cash equivalents at end of period |
654 | 2,584 | ||||||||||
| Supplemental cash flow information is provided in note 17. |
||||||||||||
| Interest paid, net of debt related hedges |
(14) | (14) | ||||||||||
| Interest received |
1 | 1 | ||||||||||
| Income taxes paid |
17 | (35) | (86) | |||||||||
Interest received and interest paid are reflected as operating cash flows.
Income taxes paid are reflected as either operating or investing cash flows depending on the nature of the underlying transaction.
The related notes form an integral part of these consolidated financial statements.
Page 41
THOMSON REUTERS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited)
| (millions of U.S. dollars) | Stated share capital |
Contributed surplus |
Total capital |
Retained earnings |
Unrecognized gain on financial instruments |
Foreign currency translation adjustments |
Total accumulated other comprehensive loss (“AOCL”) |
Total equity |
||||||||||||||||||||||||||||
| Balance, December 31, 2021 |
3,813 | 1,683 | 5,496 | 9,149 | 25 | (836) | (811) | 13,834 | ||||||||||||||||||||||||||||
| Net earnings |
- | - | - | 1,007 | - | - | - | 1,007 | ||||||||||||||||||||||||||||
| Other comprehensive income (loss) |
- | - | - | 35 | 3 | (26) | (23) | 12 | ||||||||||||||||||||||||||||
| Total comprehensive income (loss) |
- | - | - | 1,042 | 3 | (26) | (23) | 1,019 | ||||||||||||||||||||||||||||
| Dividends declared on preference shares |
- | - | - | (1) | - | - | - | (1) | ||||||||||||||||||||||||||||
| Dividends declared on common shares |
- | - | - | (216) | - | - | - | (216) | ||||||||||||||||||||||||||||
| Shares issued under Dividend Reinvestment Plan (“DRIP”) |
7 | - | 7 | - | - | - | - | 7 | ||||||||||||||||||||||||||||
| Stock compensation plans |
85 | (103) | (18) | - | - | - | - | (18) | ||||||||||||||||||||||||||||
| Balance, March 31, 2022 |
3,905 | 1,580 | 5,485 | 9,974 | 28 | (862) | (834) | 14,625 | ||||||||||||||||||||||||||||
| (millions of U.S. dollars) | Stated share capital |
Contributed surplus |
Total capital |
Retained earnings |
Unrecognized (loss) gain on financial instruments |
Foreign currency translation adjustments |
AOCL | Total equity |
||||||||||||||||||||||||||||
| Balance, December 31, 2020 |
3,719 | 1,739 | 5,458 | 5,211 | (8) | (681) | (689) | 9,980 | ||||||||||||||||||||||||||||
| Net earnings |
- | - | - | 5,036 | - | - | - | 5,036 | ||||||||||||||||||||||||||||
| Other comprehensive income(loss) |
- | - | - | 73 | 14 | (92) | (78) | (5) | ||||||||||||||||||||||||||||
| Total comprehensive income (loss) |
- | - | - | 5,109 | 14 | (92) | (78) | 5,031 | ||||||||||||||||||||||||||||
| Dividends declared on preference shares |
- | - | - | (1) | - | - | - | (1) | ||||||||||||||||||||||||||||
| Dividends declared on common shares |
- | - | - | (200) | - | - | - | (200) | ||||||||||||||||||||||||||||
| Shares issued under DRIP |
6 | - | 6 | - | - | - | - | 6 | ||||||||||||||||||||||||||||
| Stock compensation plans |
72 | (71) | 1 | - | - | - | - | 1 | ||||||||||||||||||||||||||||
| Balance, March 31, 2021 |
3,797 | 1,668 | 5,465 | 10,119 | 6 | (773) | (767) | 14,817 | ||||||||||||||||||||||||||||
The related notes form an integral part of these consolidated financial statements.
Page 42
Thomson Reuters Corporation
Notes to Consolidated Financial Statements (unaudited)
(unless otherwise stated, all amounts are in millions of U.S. dollars)
Note 1: Business Description and Basis of Preparation
General business description
Thomson Reuters Corporation (the “Company” or “Thomson Reuters”) is an Ontario, Canada corporation with common shares listed on the Toronto Stock Exchange (“TSX”) and the New York Stock Exchange (“NYSE”) and Series II preference shares listed on the TSX. The Company is a leading provider of business information services. The Company’s products include highly specialized information-enabled software and tools for legal, tax, accounting and compliance professionals combined with the world’s most global news service - Reuters.
These unaudited interim consolidated financial statements (“interim financial statements”) were approved by the Audit Committee of the Board of Directors of the Company on May 2, 2022.
Change Program
In February 2021, the Company announced a two-year Change Program to transition from a holding company to an operating company, and from a content provider into a content-driven technology company (see note 5).
Basis of preparation
The interim financial statements were prepared using the same accounting policies and methods as those used in the Company’s consolidated financial statements for the year ended December 31, 2021. The interim financial statements comply with International Accounting Standard 34, Interim Financial Reporting (“IAS 34”). Accordingly, certain information and footnote disclosure normally included in annual financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), have been omitted or condensed.
The preparation of financial statements in accordance with IAS 34 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the Company’s accounting policies. The areas involving more judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements have been disclosed in note 2 of the consolidated financial statements for the year ended December 31, 2021.
The global economy is experiencing substantial disruption due to the Russian military invasion of Ukraine on February 24, 2022 and the ongoing impacts from COVID-19. In response to the invasion, several countries have imposed economic sanctions that are affecting global financial markets and exacerbating economic challenges such as inflation and global supply-chain disruption. Due to the significant uncertainty created by these circumstances, some of management’s estimates and judgments may be more variable and may change materially in the future.
The accompanying interim financial statements include all adjustments, composed of normal recurring adjustments, considered necessary by management to fairly state the Company’s results of operations, financial position and cash flows. The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These interim financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2021, which are included in the Company’s 2021 annual report.
References to “$” are to U.S. dollars and references to “C$” are to Canadian dollars.
Revision to Segment Results
In the first quarter of 2022, the Company made two changes to its segment reporting to reflect how it currently manages its businesses. The changes (i) reflect the transfer of certain revenues from its Corporates business to its Tax & Accounting Professionals business where they are better aligned; and (ii) record intercompany revenue in Reuters News for content-related services that it provides to Legal Professionals, Corporates and Tax & Accounting Professionals. Previously, these services had been reported as a transfer of expense from Reuters News to these businesses. These changes impact the financial results of the Company’s segments, but do not change the Company’s consolidated financial results. The table below summarizes the changes.
Page 43
|
Three months ended March 31, 2021 |
||||||||||||
|
As Reported |
Adjustments | As Revised | ||||||||||
| Revenues |
||||||||||||
| Legal Professionals |
|
668 |
|
|
- |
|
|
668 |
| |||
| Corporates |
|
384 |
|
|
(2) |
|
|
382 |
| |||
| Tax & Accounting Professionals |
|
225 |
|
|
2 |
|
|
227 |
| |||
| Reuters News |
|
160 |
|
|
5 |
|
|
165 |
| |||
| Global Print |
|
143 |
|
|
- |
|
|
143 |
| |||
|
Eliminations/Rounding |
|
- |
|
|
(5) |
|
|
(5) |
| |||
| Revenues |
|
1,580 |
|
|
- |
|
|
1,580 |
| |||
| Adjusted EBITDA |
||||||||||||
| Legal Professionals |
|
279 |
|
|
- |
|
|
279 |
| |||
| Corporates |
|
146 |
|
|
(1) |
|
|
145 |
| |||
| Tax & Accounting Professionals |
|
98 |
|
|
1 |
|
|
99 |
| |||
| Reuters News |
|
28 |
|
|
- |
|
|
28 |
| |||
| Global Print |
|
57 |
|
|
- |
|
|
57 |
| |||
| Total reportable segments adjusted EBITDA |
|
608 |
|
|
- |
|
|
608 |
| |||
Note 2: Revenues
Revenues by type and geography
The following tables disaggregate revenues by type and geography and reconciles them to reportable segments (see note 3).
| Revenues by type | Legal Professionals |
Corporates | Tax & Accounting Professionals |
Reuters News | Global Print | Eliminations / Rounding |
Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three months ended March 31, | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Recurring |
|
653 |
|
|
621 |
|
|
316 |
|
|
293 |
|
|
182 |
|
|
162 |
|
|
155 |
|
|
149 |
|
|
- |
|
|
- |
|
|
(6) |
|
|
(5) |
|
|
1,300 |
|
|
1,220 |
|
||||||||||||||||||||||||||||||||||||||||||
| Transactions |
|
45 |
|
|
47 |
|
|
95 |
|
|
89 |
|
|
71 |
|
|
65 |
|
|
21 |
|
|
16 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
232 |
|
|
217 |
|
||||||||||||||||||||||||||||||||||||||||||
| Global Print |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
142 |
|
|
143 |
|
|
- |
|
|
- |
|
|
142 |
|
|
143 |
|
||||||||||||||||||||||||||||||||||||||||||
| Total |
698 | 668 | 411 | 382 | 253 | 227 | 176 | 165 | 142 | 143 | (6) | (5) | 1,674 | 1,580 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues by geography (country of destination) |
Legal Professionals |
Corporates | Tax & Accounting Professionals |
Reuters News | Global Print | Eliminations / Rounding |
Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three months ended March 31, | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. |
|
557 |
|
|
526 |
|
|
345 |
|
|
322 |
|
|
206 |
|
|
190 |
|
|
30 |
|
|
54 |
|
|
103 |
|
|
101 |
|
|
(6) |
|
|
(5) |
|
|
1,235 |
|
|
1,188 |
|
||||||||||||||||||||||||||||||||||||||||||
| Canada (country of domicile) |
|
17 |
|
|
16 |
|
|
2 |
|
|
2 |
|
|
10 |
|
|
10 |
|
|
1 |
|
|
1 |
|
|
17 |
|
|
17 |
|
|
- |
|
|
- |
|
|
47 |
|
|
46 |
|
||||||||||||||||||||||||||||||||||||||||||
| Other |
|
8 |
|
|
5 |
|
|
14 |
|
|
11 |
|
|
30 |
|
|
20 |
|
|
2 |
|
|
2 |
|
|
4 |
|
|
4 |
|
|
- |
|
|
- |
|
|
58 |
|
|
42 |
|
||||||||||||||||||||||||||||||||||||||||||
| Americas (North America, Latin America, South America) |
582 | 547 | 361 | 335 | 246 | 220 | 33 | 57 | 124 | 122 | (6) | (5) | 1,340 | 1,276 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.K. |
|
66 |
|
|
68 |
|
|
27 |
|
|
26 |
|
|
4 |
|
|
4 |
|
|
102 |
|
|
66 |
|
|
8 |
|
|
9 |
|
|
- |
|
|
- |
|
|
207 |
|
|
173 |
|
||||||||||||||||||||||||||||||||||||||||||
| Other |
|
16 |
|
|
17 |
|
|
14 |
|
|
12 |
|
|
- |
|
|
- |
|
|
27 |
|
|
27 |
|
|
3 |
|
|
4 |
|
|
- |
|
|
- |
|
|
60 |
|
|
60 |
|
||||||||||||||||||||||||||||||||||||||||||
| EMEA (Europe, Middle East and Africa) |
82 | 85 | 41 | 38 | 4 | 4 | 129 | 93 | 11 | 13 | - | - | 267 | 233 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Asia Pacific |
|
34 |
|
|
36 |
|
|
9 |
|
|
9 |
|
|
3 |
|
|
3 |
|
|
14 |
|
|
15 |
|
|
7 |
|
|
8 |
|
|
- |
|
|
- |
|
|
67 |
|
|
71 |
|
||||||||||||||||||||||||||||||||||||||||||
| Total |
|
698 |
|
|
668 |
|
|
411 |
|
|
382 |
|
|
253 |
|
|
227 |
|
|
176 |
|
|
165 |
|
|
142 |
|
|
143 |
|
|
(6) |
|
|
(5) |
|
|
1,674 |
|
|
1,580 |
|
||||||||||||||||||||||||||||||||||||||||||
Page 44
Note 3: Segment Information
The Company is organized as five reportable segments, reflecting how the businesses are managed. The accounting policies applied by the segments are the same as those applied by the Company. The segments offer products and services to target customers as described below.
Legal Professionals
The Legal Professionals segment serves law firms and governments with research and workflow products, focusing on intuitive legal research powered by emerging technologies and integrated legal workflow solutions that combine content, tools and analytics.
Corporates
The Corporates segment serves corporate customers from small businesses to multinational organizations, including the seven largest global accounting firms, with the Company’s full suite of content-enabled technology solutions for in-house legal, tax, regulatory, compliance and IT professionals.
Tax & Accounting Professionals
The Tax & Accounting Professionals segment serves tax, accounting and audit professionals in accounting firms (other than the seven largest, which are served by the Corporates segment) with research and workflow products, focusing on intuitive tax offerings and automating tax workflows.
Reuters News
The Reuters News segment supplies business, financial and global news to the world’s media organizations, professionals and news consumers through Reuters News Agency, Reuters.com, Reuters Events, Thomson Reuters products and the Refinitiv business of London Stock Exchange Group (“LSEG”).
Global Print
The Global Print segment provides legal and tax information primarily in print format to customers around the world.
Page 45
The Company also reports “Corporate costs”, which includes expenses for corporate functions and the Change Program which are centrally managed. Corporate costs does not qualify as a reportable segment.
|
Three months ended March 31, |
||||||||
| 2022 |
2021 | |||||||
| Revenues |
||||||||
| Legal Professionals |
|
698 |
|
|
668 |
| ||
| Corporates |
|
411 |
|
|
382 |
| ||
| Tax & Accounting Professionals |
|
253 |
|
|
227 |
| ||
| Reuters News |
|
176 |
|
|
165 |
| ||
| Global Print |
|
142 |
|
|
143 |
| ||
|
Eliminations/Rounding |
|
(6) |
|
|
(5) |
| ||
| Revenues |
|
1,674 |
|
|
1,580 |
| ||
| Adjusted EBITDA |
||||||||
| Legal Professionals |
|
305 |
|
|
279 |
| ||
| Corporates |
|
157 |
|
|
145 |
| ||
| Tax & Accounting Professionals |
|
122 |
|
|
99 |
| ||
| Reuters News |
|
37 |
|
|
28 |
| ||
| Global Print |
|
53 |
|
|
57 |
| ||
| Total reportable segments adjusted EBITDA |
|
674 |
|
|
608 |
| ||
| Corporate costs |
|
(74) |
|
|
(50) |
| ||
| Fair value adjustments (see note 5) |
|
(7) |
|
|
4 |
| ||
| Depreciation |
|
(38) |
|
|
(46) |
| ||
| Amortization of computer software |
|
(114) |
|
|
(115) |
| ||
| Amortization of other identifiable intangible assets |
|
(26) |
|
|
(31) |
| ||
| Other operating (losses) gains, net |
|
(1) |
|
|
17 |
| ||
| Operating profit |
|
414 |
|
|
387 |
| ||
| Net interest expense |
|
(48) |
|
|
(51) |
| ||
| Other finance income (costs) |
|
94 |
|
|
(6) |
| ||
| Share of post-tax earnings in equity method investments |
|
798 |
|
|
6,297 |
| ||
| Tax expense |
|
(240) |
|
|
(1,594) |
| ||
| Earnings from continuing operations |
|
1,018 |
|
|
5,033 |
| ||
During the first three months of 2022, Reuters News revenues included $6 million (2021 - $5 million), primarily from content-related services that it provided to the Legal Professionals, Corporates and Tax & Accounting Professionals segments.
In accordance with IFRS 8, Operating Segments, the Company discloses certain information about its reportable segments based upon measures used by management in assessing the performance of those reportable segments. These measures are defined below and may not be comparable to similar measures of other companies.
Segment Adjusted EBITDA
| ● | Segment adjusted EBITDA represents earnings from continuing operations before tax expense or benefit, net interest expense, other finance costs or income, depreciation, amortization of software and other identifiable intangible assets, the Company’s share of post-tax earnings or losses in equity method investments, other operating gains and losses, certain asset impairment charges, fair value adjustments, and corporate related items. |
| ● | The Company does not consider these excluded items to be controllable operating activities for purposes of assessing the current performance of the reportable segments. |
| ● | Each segment includes an allocation of costs, based on usage or other applicable measures, for centralized support services such as technology, customer service, commercial policy, facilities management, and product and content development. Additionally, product costs are allocated when one segment sells products managed by another segment. |
Page 46
Note 4: Seasonality
The Company’s revenues and operating profit on a consolidated basis do not tend to be significantly impacted by seasonality as it records a large portion of its revenues ratably over the contract term and its costs are generally incurred evenly throughout the year. However, the Company’s revenues from quarter to consecutive quarter can be impacted by the release of certain tax products, which tend to be concentrated in the fourth quarter and, to a lesser extent, in the first quarter of the year. The timing of costs related to the Change Program impacted the seasonality of the Company’s expenses and operating profit in 2022 and 2021.
Note 5: Operating Expenses
The components of operating expenses include the following:
|
Three months ended March 31, |
||||||||
| 2022 |
2021 | |||||||
| Salaries, commissions and allowances |
593 |
|
584 |
| ||||
| Share-based payments |
21 |
|
18 |
| ||||
| Post-employment benefits |
37 |
|
37 |
| ||||
| Total staff costs |
651 |
|
639 |
| ||||
| Goods and services(1) |
331 |
|
288 |
| ||||
| Content |
67 |
|
71 |
| ||||
| Telecommunications |
13 |
|
12 |
| ||||
| Facilities |
12 |
|
12 |
| ||||
| Fair value adjustments(2) |
7 |
|
(4) |
| ||||
| Total operating expenses |
1,081 |
|
1,018 |
| ||||
| (1) | Goods and services include professional fees, consulting and outsourcing services, contractors, selling and marketing, and other general and administrative costs. |
| (2) | Fair value adjustments primarily represent gains or losses due to changes in foreign currency exchange rates on intercompany balances that arise in the ordinary course of business. |
Operating expenses in 2022 included $34 million (2021 - $11 million) related to the Change Program. The charges included severance as well as costs to drive technology and digital sales efficiencies.
Note 6: Other Operating (Losses) Gains, Net
Other operating losses, net, of $1 million for the three months ended March 31, 2022 were not significant. Other operating gains, net, of $17 million for the three months ended March 31, 2021 included a benefit from the revaluation of warrants that the Company held in Refinitiv prior to its sale to LSEG on January 29, 2021 and income from a license that allows LSEG’s Refinitiv business to use the “Reuters” mark.
Note 7: Finance Costs, Net
The components of finance costs, net, include interest expense (income) and other finance costs (income) as follows:
| Three months ended March 31, |
||||||||
| 2022 |
2021 |
|||||||
| Interest expense: |
||||||||
| Debt |
|
40 |
|
|
40 |
| ||
| Derivative financial instruments — hedging activities |
|
(1) |
|
|
(1) |
| ||
| Other, net |
|
5 |
|
|
7 |
| ||
| Fair value gains on cash flow hedges, transfer from equity |
(13) | (15) | ||||||
| Net foreign exchange losses on debt |
|
13 |
|
|
15 |
| ||
| Net interest expense — debt and other |
44 | 46 | ||||||
| Net interest expense — leases |
2 | 2 | ||||||
| Net interest expense — pension and other post-employment benefit plans |
3 | 4 | ||||||
| Interest income |
|
(1) |
|
|
(1) |
| ||
| Net interest expense |
|
48 |
|
|
51 |
| ||
Page 47
| Three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Net (gains) losses due to changes in foreign currency exchange rates |
(16) | 6 | ||||||
| Net gains on derivative instruments |
|
(78) |
|
|
- |
| ||
| Other finance (income) costs |
|
(94) |
|
|
6 |
| ||
Net (gains) losses due to changes in foreign currency exchange rates
Net (gains) losses due to changes in foreign currency exchange rates were principally comprised of amounts related to certain intercompany funding arrangements.
Net gains on derivative instruments
Net gains on derivative instruments largely related to foreign exchange contracts, including gains on instruments that are intended to reduce foreign currency risk on a portion of the Company’s indirect investment in LSEG, which is denominated in British pounds sterling.
Note 8: Equity Method Investments
Equity method investments were primarily comprised of the Company’s indirect investment in LSEG shares, which it holds through its direct investment in York Parent Limited and its subsidiaries (“YPL”), formerly Refinitiv Holdings Ltd. (“RHL”). YPL is an entity jointly owned by the Company, Blackstone’s consortium (comprised of The Blackstone Group and its subsidiaries, and private equity funds affiliated with Blackstone), and certain current LSEG and former members of Refinitiv senior management. As of March 31, 2022 and December 31, 2021, YPL held a combination of LSEG ordinary shares and LSEG limited-voting ordinary shares (with the shares carrying in aggregate an approximate 30% economic interest and a 24% voting interest in LSEG). At the same dates, the Company owned 42.82% of YPL and indirectly owned approximately 72.4 million LSEG shares.
The investment in LSEG is subject to equity accounting because the LSEG shares are held through YPL, over which the Company has significant influence. As YPL owns only the financial investment in LSEG shares, which the parties intend to sell over time, and is not involved in operating LSEG or the Refinitiv business of LSEG, the investment in LSEG shares held by YPL is accounted for at fair value, based on the share price of LSEG. As the investment in LSEG is denominated in British pounds sterling, the Company has entered a series of foreign exchange contracts (see note 12) to mitigate currency risk on its investment.
The Company’s share of post-tax earnings in equity method investments as reported in the consolidated income statement is comprised of the following:
| Three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| YPL |
799 | 6,295 | ||||||
| Other equity method investments |
|
(1) |
|
|
2 |
| ||
| Total share of post-tax earnings in equity method investments |
|
798 |
|
|
6,297 |
| ||
In the three months ended March 31, 2022, the Company’s share of post-tax earnings in equity method investments was primarily comprised of a $799 million increase in the value of the LSEG investment.
In the three months ended March 31, 2021, the Company’s share of post-tax earnings in equity method investments was primarily comprised of an $8,075 million gain from the sale of Refinitiv, in which the Company owned a 45% interest, to LSEG, which was partially offset by a $1,612 million decline in the value of the LSEG investment after the sale and $168 million of post-tax losses related to the Refinitiv operations prior to the sale. Additionally, as permitted under a lock-up exception, approximately 10.1 million of the Company’s LSEG shares were sold in March 2021 for pre-tax net proceeds of $994 million. The proceeds from the sale of the shares by YPL were distributed to the Company as a dividend that reduced the value of the investment. The proceeds were presented in “Net cash flows (used in) provided by investing activities” in the consolidated statement of cash flow.
The composition of equity method investments as reported in the consolidated statement of financial position is comprised of the following:
| March 31, |
December 31, |
|||||||||||||||
| 2022 |
2021 |
|||||||||||||||
| YPL |
|
7,373 |
|
|
6,574 |
| ||||||||||
| Other equity method investments |
|
172 |
|
|
162 |
| ||||||||||
| Total equity method investments |
|
7,545 |
|
|
6,736 |
| ||||||||||
Page 48
Set forth below is summarized financial information for 100% of YPL at March 31, 2022 and 2021 (formerly RHL prior to its sale in January 2021).
|
Three months ended March 31, |
||||||||
| 2022 |
2021 |
|||||||
| Revenues |
- | 551 | ||||||
| Gain related to the sale of Refinitiv to LSEG |
- | 18,645 | ||||||
|
Mark-to-market of LSEG shares |
1,865 | (3,574) | ||||||
| Refinitiv net loss prior to its sale to LSEG |
- | (361) | ||||||
| Net earnings |
1,865 | 14,710 | ||||||
| Remove: Net earnings attributable to non-controlling interests |
- | (11) | ||||||
| Net earnings attributable to YPL |
1,865 | 14,699 | ||||||
| Other comprehensive loss attributable to YPL |
- | (214) | ||||||
| Total comprehensive income attributable to YPL |
1,865 | 14,485 | ||||||
The following table reconciles the net assets attributable to YPL (formerly RHL) to the Company’s carrying value of its investment in YPL:
| March 31, |
December 31, |
|||||||
| 2022 |
2021 |
|||||||
| Assets |
||||||||
| Current assets |
|
6 |
|
|
6 |
| ||
| Non-current assets |
|
17,982 |
|
|
16,068 |
| ||
| Total assets |
|
17,988 |
|
|
16,074 |
| ||
| Liabilities |
||||||||
| Current liabilities |
|
4 |
|
|
4 |
| ||
| Non-current liabilities |
|
238 |
|
|
189 |
| ||
| Total liabilities |
|
242 |
|
|
193 |
| ||
| Net assets attributable to YPL |
|
17,746 |
|
|
15,881 |
| ||
| Net assets attributable to YPL - beginning period |
|
15,881 |
|
|
2,487 |
| ||
| Net earnings attributable to YPL |
|
1,865 |
|
|
14,555 |
| ||
| Other comprehensive loss attributable to YPL |
|
- |
|
|
(214) |
| ||
| Other adjustments(1) |
|
- |
|
|
253 |
| ||
| Distribution to owners |
|
- |
|
|
(1,200) |
| ||
| Net assets attributable to YPL - ending period |
|
17,746 |
|
|
15,881 |
| ||
| Thomson Reuters % share |
|
42.82% |
|
|
42.82% |
| ||
| Thomson Reuters $ share |
|
7,599 |
|
|
6,800 |
| ||
| Historical excluded equity adjustment(2) |
|
(226) |
|
|
(226) |
| ||
| Thomson Reuters carrying amount |
|
7,373 |
|
|
6,574 |
| ||
| (1) | Consists of equity transactions excluded from total comprehensive income attributable to YPL. |
| (2) | Represents the cumulative impact of equity transactions excluded from the Company’s investment in YPL. |
Note 9: Taxation
Tax expense was $240 million and $1,594 million for the three months ended March 31, 2022 and 2021, respectively. The three months ended March 31, 2021 included $1,538 million of tax expense related to the Company’s earnings in equity method investments, primarily from the gain on sale of Refinitiv to LSEG. Additionally, tax expense in each period reflected the mix of taxing jurisdictions in which pre-tax profits and losses were recognized. Because the geographical mix of pre-tax profits and losses in interim periods may be different from that for the full year, tax expense or benefit in interim periods is not necessarily indicative of tax expense for the full year.
Page 49
Note 10: Earnings Per Share
Basic earnings per share was calculated by dividing earnings attributable to common shareholders less dividends declared on preference shares by the sum of the weighted-average number of common shares outstanding and vested deferred share units (“DSUs”) outstanding during the period. DSUs represent common shares that certain employees have elected to receive in the future upon vesting of share-based compensation awards or in lieu of cash compensation.
Diluted earnings per share was calculated using the denominator of the basic calculation described above adjusted to include the potentially dilutive effect of outstanding stock options and time-based restricted share units (“TRSUs”).
Earnings used in determining consolidated earnings per share and earnings per share from continuing operations are as follows:
| Three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Earnings attributable to common shareholders |
1,007 | 5,036 | ||||||
| Less: Dividends declared on preference shares |
(1) | (1) | ||||||
| Earnings used in consolidated earnings per share |
1,006 | 5,035 | ||||||
| Less: Loss (earnings) from discontinued operations, net of tax |
11 | (3) | ||||||
| Earnings used in earnings per share from continuing operations |
1,017 | 5,032 | ||||||
The weighted-average number of common shares outstanding, as well as a reconciliation of the weighted-average number of common shares outstanding used in the basic earnings per share computation to the weighted-average number of common shares outstanding used in the diluted earnings per share computation, is presented below:
| Three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Weighted-average number of common shares outstanding |
486,384,727 | 495,507,124 | ||||||
| Weighted-average number of vested DSUs |
324,031 | 432,846 | ||||||
| Basic |
486,708,758 | 495,939,970 | ||||||
| Effect of stock options and TRSUs |
804,458 | 998,348 | ||||||
| Diluted |
487,513,216 | 496,938,318 | ||||||
Note 11: Assets Held for Sale
Assets held for sale included several small businesses and products that the Company intends to sell. The assets and liabilities classified as held for sale in the consolidated statement of financial position are as follows:
| March 31, |
December 31, |
|||||||
| 2022 |
2021 |
|||||||
| Trade and other receivables |
|
40 |
|
|
14 |
| ||
| Other financial assets |
|
86 |
|
|
- |
| ||
| Prepaid expenses and other current assets |
|
3 |
|
|
1 |
| ||
| Property and equipment, net |
|
3 |
|
|
4 |
| ||
| Computer software, net |
|
9 |
|
|
5 |
| ||
| Goodwill |
|
60 |
|
|
14 |
| ||
| Other assets |
|
10 |
|
|
10 |
| ||
| Total assets held for sale |
|
211 |
|
|
48 |
| ||
| Payables, accruals and provisions |
|
11 |
|
|
8 |
| ||
| Deferred revenue |
|
58 |
|
|
26 |
| ||
| Other financial liabilities |
|
88 |
|
|
2 |
| ||
| Other liabilities |
|
1 |
|
|
1 |
| ||
| Total liabilities associated with assets held for sale |
|
158 |
|
|
37 |
| ||
Foreign currency translation gains of $22 million relating to these assets were recorded within accumulated other comprehensive loss in the consolidated statement of financial position at March 31, 2022 (December 31, 2021 – gains of $23 million).
Page 50
Note 12: Financial Instruments
Financial assets and liabilities
Financial assets and liabilities in the consolidated statement of financial position were as follows:
| March 31, 2022 | Assets/ (Liabilities) at Amortized Cost |
Assets at Fair Value through Earnings |
Assets at Fair Value through Other Comprehensive Income or Loss |
Derivatives Used for Hedging |
Total | |||||||||||||||
| Cash and cash equivalents |
294 | 360 | - | - | 654 | |||||||||||||||
| Trade and other receivables |
982 | - | - | - | 982 | |||||||||||||||
| Other financial assets - current |
13 | 36 | - | - | 49 | |||||||||||||||
| Other financial assets - non-current (see note 13) |
26 | 298 | 64 | 120 | 508 | |||||||||||||||
| Trade payables (see note 14) |
(183) | - | - | - | (183) | |||||||||||||||
| Accruals (see note 14) |
(720) | - | - | - | (720) | |||||||||||||||
| Other financial liabilities - current(1) |
(78) | - | - | - | (78) | |||||||||||||||
| Long-term indebtedness |
(3,800) | - | - | - | (3,800) | |||||||||||||||
| Other financial liabilities - non current (see note 15)(2) |
(217) | - | - | - | (217) | |||||||||||||||
| Total |
(3,683) | 694 | 64 | 120 | (2,805) | |||||||||||||||
| December 31, 2021 | Assets/ (Liabilities) at Amortized Cost |
Assets/ (Liabilities) at Fair Value through Earnings |
Assets at Fair Value through Other Comprehensive Income or Loss |
Derivatives Used for Hedging |
Total | |||||||||||||||
| Cash and cash equivalents |
389 | 389 | - | - | 778 | |||||||||||||||
| Trade and other receivables |
1,057 | - | - | - | 1,057 | |||||||||||||||
| Other financial assets - current |
108 | - | - | - | 108 | |||||||||||||||
| Other financial assets - non-current (see note 13) |
27 | 235 | 68 | 99 | 429 | |||||||||||||||
| Trade payables (see note 14) |
(227) | - | - | - | (227) | |||||||||||||||
| Accruals (see note 14) |
(950) | - | - | - | (950) | |||||||||||||||
| Other financial liabilities - current(1) |
(174) | (1) | - | - | (175) | |||||||||||||||
| Long-term indebtedness |
(3,786) | - | - | - | (3,786) | |||||||||||||||
| Other financial liabilities - non current (see note 15)(2) |
(215) | (19) | - | - | (234) | |||||||||||||||
| Total |
(3,771) | 604 | 68 | 99 | (3,000) | |||||||||||||||
| (1) | Includes lease liabilities of $62 million (2021 - $64 million). |
| (2) | Includes lease liabilities of $199 million (2021 - $197 million). |
Cash and cash equivalents
Of total cash and cash equivalents, $76 million and $70 million at March 31, 2022 and December 31, 2021, respectively, were held in subsidiaries which have regulatory restrictions, contractual restrictions or operate in countries where exchange controls and other legal restrictions apply and were therefore not available for general use by the Company.
Commercial paper program
The Company’s $1.8 billion commercial paper program provides cost effective and flexible short-term funding. There was no outstanding commercial paper at March 31, 2022 and December 31, 2021.
Page 51
Credit facility
The Company has a $1.8 billion syndicated credit facility agreement which matures in December 2024 and may be used to provide liquidity for general corporate purposes (including acquisitions or support for its commercial paper program). There were no outstanding borrowings under the credit facility at March 31, 2022 and December 31, 2021. Based on the Company’s current credit ratings, the cost of borrowing under the facility is priced at LIBOR/EURIBOR plus 112.5 basis points. The Company has the option to request an increase, subject to approval by applicable lenders, in the lenders’ commitments in an aggregate amount of $600 million for a maximum credit facility commitment of $2.4 billion.
The U.K. Financial Conduct Authority, which regulates LIBOR, phased out the majority of LIBOR rates globally at the end of 2021. The Company has no material agreements with third parties that use or reference LIBOR, except for the LIBOR-based benchmarks in the Company’s external credit facility, for which adequate LIBOR benchmarks will remain in effect until June 2023.
The Company guarantees borrowings by its subsidiaries under the credit facility. The Company must also maintain a ratio of net debt as defined in the credit agreement (total debt after swaps less cash and cash equivalents) as of the last day of each fiscal quarter to EBITDA as defined in the credit agreement (earnings before interest, income taxes, depreciation and amortization and other modifications described in the credit agreement) for the last four quarters ended of not more than 4.5:1. If the Company were to complete an acquisition with a purchase price of over $500 million, the ratio of net debt to EBITDA would temporarily increase to 5.0:1 for three quarters after completion, at which time the ratio would revert to 4.5:1. As of March 31, 2022, the Company was in compliance with this covenant as its ratio of net debt to EBITDA, as calculated under the terms of its syndicated credit facility, was 1.5:1.
Fair Value
The fair values of cash and cash equivalents, trade and other receivables, trade payables and accruals approximate their carrying amounts because of the short-term maturity of these instruments. The fair value of long-term debt and related derivative instruments is set forth below.
Debt and Related Derivative Instruments
Carrying Amounts
Amounts recorded in the consolidated statement of financial position are referred to as “carrying amounts”. The carrying amounts of primary debt are reflected in “Long-term indebtedness” and “Current indebtedness” and the carrying amounts of derivative instruments are included in “Other financial assets” and “Other financial liabilities”, both current and non-current, in the consolidated statement of financial position, as appropriate.
Fair Value
The fair value of debt is estimated based on either quoted market prices for similar issues or current rates offered to the Company for debt of the same maturity. The fair value of interest rate swaps is estimated based upon discounted cash flows using applicable current market rates and considering non-performance risk.
The following is a summary of debt and related derivative instruments that hedged the cash flows of debt:
| Carrying Amount
|
Fair Value
|
|||||||||||||||||||
| March 31, 2022 | Primary Debt Instruments |
Derivative Instruments (Asset) |
Primary Debt Instruments |
Derivative Instruments (Asset) |
||||||||||||||||
| C$1,400, 2.239% Notes, due 2025 |
1,117 | (120) | 1,081 | (120) | ||||||||||||||||
| $600, 4.30% Notes, due 2023 |
599 | - | 612 | - | ||||||||||||||||
| $450, 3.85% Notes, due 2024(1) |
241 | - | 246 | - | ||||||||||||||||
| $500, 3.35% Notes, due 2026 |
497 | - | 502 | - | ||||||||||||||||
| $350, 4.50% Notes, due 2043(1) |
116 | - | 116 | - | ||||||||||||||||
| $350, 5.65% Notes, due 2043 |
342 | - | 418 | - | ||||||||||||||||
| $400, 5.50% Debentures, due 2035 |
396 | - | 455 | - | ||||||||||||||||
| $500, 5.85% Debentures, due 2040 |
492 | - | 607 | - | ||||||||||||||||
| Total |
3,800 | (120) | 4,037 | (120) | ||||||||||||||||
| Long-term portion |
3,800 | (120) | ||||||||||||||||||
Page 52
| Carrying Amount
|
Fair Value
|
|||||||||||||||||||
| December 31, 2021 | Primary Debt Instruments |
Derivative Instruments (Asset) |
Primary Debt Instruments |
Derivative Instruments (Asset) |
||||||||||||||||
| C$1,400, 2.239% Notes, due 2025 |
1,103 | (99) | 1,119 | (99) | ||||||||||||||||
| $600, 4.30% Notes, due 2023 |
599 | - | 631 | - | ||||||||||||||||
| $450, 3.85% Notes, due 2024(1) |
241 | - | 256 | - | ||||||||||||||||
| $500, 3.35% Notes, due 2026 |
497 | - | 531 | - | ||||||||||||||||
| $350, 4.50% Notes, due 2043(1) |
116 | - | 128 | - | ||||||||||||||||
| $350, 5.65% Notes, due 2043 |
342 | - | 478 | - | ||||||||||||||||
| $400, 5.50% Debentures, due 2035 |
396 | - | 516 | - | ||||||||||||||||
| $500, 5.85% Debentures, due 2040 |
492 | - | 695 | - | ||||||||||||||||
| Total |
3,786 | (99) | 4,354 | (99) | ||||||||||||||||
| Long-term portion |
3,786 | (99) | ||||||||||||||||||
| (1) | Notes were partially redeemed in October 2018. |
Fair value estimation
The following fair value measurement hierarchy is used for financial instruments that are measured in the consolidated statement of financial position at fair value:
| ● | Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities; |
| ● | Level 2 - inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices); and |
| ● | Level 3 - inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs). |
The levels used to determine fair value measurements for those instruments carried at fair value in the consolidated statement of financial position are as follows:
| March 31, 2022 | Total | |||||||||||||||
| Assets |
Level 1 | Level 2 | Level 3 | Balance | ||||||||||||
| Money market accounts |
- | 360 | - | 360 | ||||||||||||
| Other receivables(1) |
- | - | 275 | 275 | ||||||||||||
|
Foreign exchange contracts(2) |
- | 59 | - | 59 | ||||||||||||
| Financial assets at fair value through earnings |
- | 419 | 275 | 694 | ||||||||||||
| Financial assets at fair value through other comprehensive income(3) |
39 | 25 | - | 64 | ||||||||||||
| Derivatives used for hedging(4) |
- | 120 | - | 120 | ||||||||||||
| Total assets |
39 | 564 | 275 | 878 | ||||||||||||
Page 53
| December 31, 2021 | Total | |||||||||||||||
| Assets |
Level 1 | Level 2 | Level 3 | Balance | ||||||||||||
| Money market accounts |
- | 389 | - | 389 | ||||||||||||
| Other receivables(1) |
- | - | 235 | 235 | ||||||||||||
| Financial assets at fair value through earnings |
- | 389 | 235 | 624 | ||||||||||||
| Financial assets at fair value through other comprehensive income(3) |
46 | 22 | - | 68 | ||||||||||||
| Derivatives used for hedging(4) |
- | 99 | - | 99 | ||||||||||||
| Total assets |
46 | 510 | 235 | 791 | ||||||||||||
| Liabilities |
||||||||||||||||
| Contingent consideration(5) |
- | - | (1) | (1) | ||||||||||||
| Foreign exchange contracts(2) |
- | (19) | - | (19) | ||||||||||||
| Financial liabilities at fair value through earnings |
- | (19) | (1) | (20) | ||||||||||||
| Total liabilities |
- | (19) | (1) | (20) | ||||||||||||
| (1) | Receivables under indemnification arrangement (see note 18). |
| (2) | Relates to the management of foreign exchange risk on a portion of the Company’s indirect investment in LSEG. |
| (3) | Investments in entities over which the Company does not have control, joint control or significant influence. |
| (4) | Comprised of fixed-to-fixed cross-currency swaps on indebtedness. |
| (5) | Obligations to pay additional consideration for prior acquisitions, based upon performance measures contractually agreed at the time of purchase. |
The receivable from the indemnification arrangement is a level 3 in the fair value measurement hierarchy. The increase in the receivable between December 31, 2021 and March 31, 2022 primarily reflected additional payments that are expected to be recovered, net of fair value losses based on interest rates associated with the indemnifying party’s credit profile, which are included within earnings from discontinued operations, net of tax, in the consolidated income statement.
The Company recognizes transfers into and out of the fair value measurement hierarchy levels at the end of the reporting period in which the event or change in circumstances that caused the transfer occurred. There were no transfers between hierarchy levels for the three months ended March 31, 2022.
Valuation Techniques
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
Specific valuation techniques used to value financial instruments include:
| ● | Quoted market prices or dealer quotes for similar instruments; |
| ● | The fair value of cross-currency interest rate swaps and foreign exchange contracts are calculated as the present value of the estimated future cash flows based on observable yield curves; |
| ● | The fair value of other receivables considers estimated future cash flows, current market interest rates and non-performance risk; and |
| ● | The fair value of contingent consideration is calculated based on estimates of future revenue performance. |
Note 13: Other Non-Current Assets
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Net defined benefit plan surpluses |
256 | 239 | ||||||
| Cash surrender value of life insurance policies |
341 | 346 | ||||||
| Deferred commissions |
111 | 127 | ||||||
| Other financial assets (see note 12) |
508 | 429 | ||||||
| Other non-current assets(1) |
96 | 85 | ||||||
| Total other non-current assets |
1,312 | 1,226 | ||||||
| (1) | Includes a tax receivable from HM Revenue & Customs (“HMRC”) of $86 million and $74 million at March 31, 2022 and December 31, 2021, respectively (see note 18). |
Page 54
Note 14: Payables, Accruals and Provisions
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Trade payables |
183 | 227 | ||||||
| Accruals |
720 | 950 | ||||||
| Provisions |
108 | 107 | ||||||
| Other current liabilities |
39 | 42 | ||||||
| Total payables, accruals and provisions |
1,050 | 1,326 | ||||||
Note 15: Provisions and Other Non-Current Liabilities
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Net defined benefit plan obligations |
489 | 506 | ||||||
| Other financial liabilities (see note 12) |
217 | 234 | ||||||
| Deferred compensation and employee incentives |
90 | 99 | ||||||
| Provisions |
78 | 94 | ||||||
| Other non-current liabilities |
7 | 10 | ||||||
| Total provisions and other non-current liabilities |
881 | 943 | ||||||
Note 16: Capital
Share repurchases - Normal Course Issuer Bid (“NCIB”)
The Company buys back shares (and subsequently cancels them) from time to time as part of its capital strategy. In the three months ended March 31, 2021, the Company repurchased 2.5 million common shares totaling $200 million at an average price per share of $81.45 under an NCIB that expired on January 3, 2022. The Company’s expired NCIB enabled it to repurchase up to 20 million common shares at prevailing market prices in amounts and at times determined by the Company. The NCIB permitted the Company to purchase shares in open market transactions on the TSX, the NYSE and/or other exchanges and alternative trading systems, if eligible, or by such other means as were permitted by the TSX and/or NYSE or under applicable law, including private agreement purchases if the Company received an issuer bid exemption order from applicable securities regulatory authorities in Canada for such purchases. Common shares that the Company purchased under the NCIB were cancelled.
Decisions regarding any future repurchases will depend on factors, such as market conditions, share price, and other opportunities to invest capital for growth. When the Company has an effective NCIB, it may elect to suspend or discontinue its share repurchases at any time, in accordance with applicable laws. In addition, when the Company has an effective NCIB, it may from time to time when it does not possess material nonpublic information about itself or its securities, enter into a pre-defined plan with its broker to allow for the repurchase of shares at times when the Company ordinarily would not be active in the market due to its own internal trading blackout periods, insider trading rules or otherwise. Any such plans entered into with the Company’s broker will be adopted in accordance with applicable Canadian securities laws and the requirements of Rule 10b5-1 under the U.S. Securities Exchange Act of 1934, as amended.
Dividends
Dividends on common shares are declared in U.S. dollars. In the consolidated statement of cash flow, dividends paid on common shares are shown net of amounts reinvested in the Company under its dividend reinvestment plan. Details of dividends declared per common share and dividends paid on common shares are as follows:
| Three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Dividends declared per common share |
$0.445 | $0.405 | ||||||
| Dividends declared |
216 | 200 | ||||||
| Dividends reinvested |
(7) | (6) | ||||||
| Dividends paid |
209 | 194 | ||||||
Page 55
Note 17: Supplemental Cash Flow Information
Details of “Other” in the consolidated statement of cash flow are as follows:
| Three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Non-cash employee benefit charges |
42 | 39 | ||||||
| Net (gains) losses on foreign exchange and derivative financial instruments |
(92) | 6 | ||||||
| Revaluation of Refinitiv warrants (see note 6) |
- | (9) | ||||||
| Fair value adjustments (see note 5) |
7 | (4) | ||||||
|
Other |
4 | (2) | ||||||
| (39) | 30 | |||||||
Details of “Changes in working capital and other items” are as follows:
| Three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Trade and other receivables |
43 | 94 | ||||||
| Prepaid expenses and other current assets |
25 | (16) | ||||||
| Other financial assets |
11 | 17 | ||||||
| Payables, accruals and provisions |
(274) | (129) | ||||||
| Deferred revenue |
(9) | (32) | ||||||
| Other financial liabilities |
(11) | (18) | ||||||
| Income taxes(1) |
39 | 884 | ||||||
|
Other |
(15) | (15) | ||||||
| (191) | 785 | |||||||
| (1) | The 2021 period reflects current tax liabilities that were recorded on the LSEG transaction and subsequent sale of LSEG shares (see note 8), for which the tax payments are included in investing activities. |
Details of income taxes paid are as follows:
| Three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Operating activities - continuing operations |
(35) | (36) | ||||||
| Operating activities - discontinued operations |
- | (2) | ||||||
| Investing activities - continuing operations |
- | (6) | ||||||
| Investing activities - discontinued operations(1) |
- | (42) | ||||||
| Total income taxes paid |
(35) | (86) | ||||||
| (1) | Reflects payments made to HMRC (see note 18). |
The Company paid $74 million and $87 million in the three months ended March 31, 2022 and 2021, respectively, related to notices of assessment under the Diverted Profit Tax regime. Of the amount paid in the three months ended March 31, 2022, $18 million (2021- $55 million) was paid directly to HMRC and $56 million (2021- $32 million) was paid to LSEG under an indemnity arrangement that related to businesses the Company sold to LSEG. The payments made directly to HMRC were included as income taxes paid in the consolidated statement of cash flow. The payments made to LSEG were presented in operating and investing activities from discontinued operations in the consolidated statement of cash flow and were not included as taxes paid. See note 18.
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Note 18: Contingencies
Lawsuits and legal claims
The Company is engaged in various legal proceedings, claims, audits and investigations that have arisen in the ordinary course of business. These matters include, but are not limited to, employment matters, commercial matters, defamation claims and intellectual property infringement claims. The outcome of all of the matters against the Company is subject to future resolution, including the uncertainties of litigation. Based on information currently known to the Company and after consultation with outside legal counsel, management believes that the ultimate resolution of any such matters, individually or in the aggregate, will not have a material adverse impact on the Company’s financial condition taken as a whole.
Uncertain tax positions
The Company is subject to taxation in numerous jurisdictions and is routinely under audit by many different taxing authorities in the ordinary course of business. There are many transactions and calculations during the course of business for which the ultimate tax determination is uncertain, as taxing authorities may challenge some of the Company’s positions and propose adjustments or changes to its tax filings.
As a result, the Company maintains provisions for uncertain tax positions that it believes appropriately reflect its risk. These provisions are made using the Company’s best estimates of the amount expected to be paid based on a qualitative assessment of all relevant factors. When appropriate, the Company performs an expected value calculation to determine its provisions. The Company reviews the adequacy of these provisions at the end of each reporting period and adjusts them based on changing facts and circumstances. Due to the uncertainty associated with tax audits, it is possible that at some future date, liabilities resulting from such audits or related litigation could vary significantly from the Company’s provisions. However, based on currently enacted legislation, information currently known by the Company and after consultation with outside tax advisors, management believes that the ultimate resolution of any such matters, individually or in the aggregate, will not have a material adverse impact on the Company’s financial condition taken as a whole.
Prior to 2022, the Company paid $379 million of tax as required under notices of assessment issued by the U.K. tax authority, HM Revenue & Customs (“HMRC”), under the Diverted Profits Tax (“DPT”) regime. In February 2022, HMRC issued DPT notices aggregating $74 million, which the Company paid in March 2022. These assessments collectively related to the 2015, 2016, 2017 and 2018 taxation years of certain of the Company’s current and former U.K. affiliates.
HMRC still has the statutory authority to amend the above assessments for the 2016, 2017 and 2018 taxation years by issuing a supplementary DPT notice for each year. Based on recent discussions with HMRC, management believes that HMRC may issue supplementary notices within the next 12 months that would be almost entirely related to businesses the Company has sold, which are subject to indemnity arrangements. If that occurs, the Company will be required to pay additional taxes to HMRC shortly thereafter that could be as much as $350 million in aggregate (largely related to the 2018 taxation year).
As the Company does not believe these current and former U.K. affiliates fall within the scope of the DPT regime, it will continue contesting these assessments (including any amended by HMRC) through all available administrative and judicial remedies and intends to vigorously defend its position. Payments made by the Company are not a reflection of its view on the merits of the case. As the assessments largely relate to businesses that the Company has sold, the majority are subject to indemnity arrangements under which the Company has been or will be required to pay additional taxes to HMRC or the indemnity counterparty.
Because the Company believes that its position is supported by the weight of law, it does not believe that the resolution of this matter will have a material adverse effect on its financial condition taken as a whole. As the Company expects to receive refunds of substantially all of the aggregate of amounts paid and potential future payments pursuant to these notices of assessment, it expects to continue recording substantially all of these payments as non-current receivables from HMRC or the indemnity counterparty on its financial statements. The Company expects that its existing sources of liquidity will be sufficient to fund any required additional payments if HMRC issues supplementary notices.
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Note 19: Related Party Transactions
As of March 31, 2022, the Company’s principal shareholder, The Woodbridge Company Limited, beneficially owned approximately 67% of the Company’s common shares.
Transactions with 3 Times Square Associates LLC. (“3XSQ Associates”)
The Company has an investment in 3XSQ Associates, an entity jointly owned by a subsidiary of the Company and Rudin Times Square Associates LLC (“Rudin”), that owns and operates the 3 Times Square property and building in New York, New York. During the first quarter of 2022, the Company’s investment increased by $10 million due to capital contributions, of which $4 million was unpaid at March 31, 2022. The Company also paid approximately $2 million of rent to 3XSQ Associates for office space in the building. The Company follows the equity method of accounting for its investment.
Except for the above transactions, there were no new significant related party transactions during the first three months of 2022. Refer to “Related party transactions” disclosed in note 31 of the Company’s consolidated financial statements for the year ended December 31, 2021, which are included in the Company’s 2021 annual report, for information regarding related party transactions.
Note 20: Subsequent Events
Acquisition
In April 2022, the Company acquired ThoughtTrace, a business that uses artificial intelligence and machine learning to read, organize and manage document workflows.
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EXHIBIT 99.3
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Steve Hasker, certify that:
| 1. | I have reviewed this report on Form 6-K of Thomson Reuters Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 5, 2022
| /s/ Steve Hasker |
| Steve Hasker |
| President and Chief Executive Officer |
EXHIBIT 99.4
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael Eastwood, certify that:
| 1. | I have reviewed this report on Form 6-K of Thomson Reuters Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 5, 2022
| /s/ Michael Eastwood |
| Michael Eastwood |
| Chief Financial Officer |
EXHIBIT 99.5
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the report of Thomson Reuters Corporation (the “Corporation”) on Form 6-K for the period ended March 31, 2022, as furnished to the Securities and Exchange Commission on the date hereof (the “Report”), I, Steve Hasker, President and Chief Executive Officer of the Corporation, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.
Date: May 5, 2022
| /s/ Steve Hasker |
| Steve Hasker |
| President and Chief Executive Officer |
EXHIBIT 99.6
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the report of Thomson Reuters Corporation (the “Corporation”) on Form 6-K for the period ended March 31, 2022, as furnished to the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Eastwood, Chief Financial Officer of the Corporation, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.
Date: May 5, 2022
| /s/ Michael Eastwood |
| Michael Eastwood |
| Chief Financial Officer |