Thomson Reuters Reports Fourth-Quarter and Full-Year 2017 Results

Thomson Reuters Reports Fourth-Quarter and Full-Year 2017 Results

PR Newswire

TORONTO, Feb. 8, 2018

TORONTO, Feb. 8, 2018 /PRNewswire/ -- Thomson Reuters (TSX/NYSE: TRI) today reported results for the fourth quarter and full year ended December 31, 2017. As already announced on January 30, 2018, the company achieved its full-year 2017 Outlook (as updated in August).  

Thomson Reuters logo

"Our 2017 fourth-quarter and full-year results show continued progress in key areas," said Jim Smith, president and chief executive officer of Thomson Reuters. "Moving forward, we remain extremely excited about the future prospects for F&R through our strategic partnership with Blackstone, and our renewed focus to accelerate growth in the core businesses of Thomson Reuters. Our ability to capitalize on opportunities at the intersection of regulation and commerce has never been stronger."

Consolidated Financial Highlights - Three Months Ended December 31

(Millions of U.S. dollars, except for adjusted EBITDA margin and earnings per share (EPS))

(unaudited)






2016 Excluding Q4 2016 Severance
Charges(2)

IFRS Financial Measures(1)

2017

2016

Change


2016

Change

Change at
Constant
Currency

Revenues

$2,944

$2,860

3%





Operating profit

$445

$294

51%





Diluted EPS (includes discontinued operations (3))

$0.81

$3.03

-73%





Cash flow from operations (includes discontinued operations (3))

$755

$998

-24%





Non-IFRS Financial Measures(1)








Revenues

$2,944

$2,860

3%


$2,860

3%

1%

Adjusted EBITDA

$874

$635

38%


$847

3%

1%

Adjusted EBITDA margin

29.7%

22.2%

750bp


29.6%

10bp

10bp

Adjusted EPS

$0.60

$0.31

94%


$0.60

0%

-5%

Free cash flow (includes discontinued operations (3))

$506

$755

-33%


$794

-36%










Revenues increased 3% due to higher recurring revenues and a positive impact from foreign currency. 

Operating profit increased 51%, primarily because the prior year included $212 million of severance charges.

Diluted EPS, which includes discontinued operations, decreased 73% to $0.81, primarily because the prior-year period included a $2.0 billion gain on the sale of the IP & Science business. The current-year period reflected $304 million of tax benefits from the enactment of the US Tax Cuts and Jobs Act of 2017.

Cash flow from operations decreased 24%, as the prior-year period benefited from a $200 million tax benefit related to a $500 million pension contribution made in the first quarter of 2017.     

(1)

In addition to results reported in accordance with International Financial Reporting Standards (IFRS), the company uses certain non-IFRS financial measures as supplemental indicators of its operating performance and financial position. These and other non-IFRS financial measures are defined and reconciled to the most directly comparable IFRS measures in the tables appended to this news release.

(2)

Results exclude the impact of $212 million of fourth-quarter 2016 charges from adjusted EBITDA and adjusted EPS. Free cash flow excludes 2016 cash payments of $39 million associated with these charges. Refer to the tables appended to this news release for a reconciliation of 2016 adjusted EBITDA, the related margin, adjusted EPS and free cash flow including and excluding the charges.

(3)

Discontinued operations are comprised solely of our Intellectual Property & Science business (IP & Science), which was sold in October 2016.

Highlights by Business Unit – Three Months Ended December 31

(Millions of U.S. dollars, except for adjusted EBITDA margins) 

(unaudited)

 



Three Months Ended

December 31,


 

Change



2017

2016


Total

Foreign  Currency

Constant Currency

Revenues








Financial & Risk


$1,551

$1,508


3%

2%

1%

Legal


881

864


2%

1%

1%

Tax & Accounting


443

416


6%

0%

6%

Corporate & Other (Reuters News)


75

77


-3%

2%

-5%

Eliminations


(6)

(5)





Revenues


$2,944

$2,860


3%

2%

1%









Adjusted EBITDA 








Financial & Risk


$481

$289


66%

0%

66%

Legal


314

296


6%

1%

5%

Tax & Accounting


156

131


19%

-1%

20%

Corporate & Other (includes Reuters News)


(77)

(81)


n/a

n/a

n/a

Adjusted EBITDA


$874

$635


38%

2%

36%









Adjusted EBITDA Margin 








Financial & Risk


31.0%

19.2%


1180bp

-30bp

1210bp

Legal


35.6%

34.3%


130bp

0bp

130bp

Tax & Accounting


35.2%

31.5%


370bp

-40bp

410bp

Corporate & Other (includes Reuters News)


n/a

n/a


n/a

n/a

n/a

Adjusted EBITDA margin


29.7%

22.2%


750bp

-10bp

760bp









Excluding 2016 Severance Charges from Prior-Year Period Amounts and Margins

Adjusted EBITDA  








Financial & Risk


$481

$456


5%

2%

3%

Legal


314

322


-2%

1%

-3%

Tax & Accounting


156

149


5%

0%

5%

Corporate & Other (includes Reuters News)


(77)

(80)


n/a

n/a

n/a

Adjusted EBITDA


$874

$847


3%

2%

1%









Adjusted EBITDA margin








Financial & Risk


31.0%

30.2%


80bp

0bp

80bp

Legal


35.6%

37.3%


-170bp

-20bp

-150bp

Tax & Accounting


35.2%

35.8%


-60bp

-40bp

-20bp

Corporate & Other (includes Reuters News)


n/a

n/a


n/a

n/a

n/a

Adjusted EBITDA margin


29.7%

29.6%


10bp

0bp

10bp

n/a – not applicable








Unless otherwise noted, all revenue growth comparisons by business unit in this news release are at constant currency (or exclude the impact of foreign currency) as Thomson Reuters believes this provides the best basis to measure their performance.

Financial & Risk

Revenues increased 1% to $1.6 billion.  Organic revenues were unchanged and acquisitions contributed 1%. 

 

Adjusted EBITDA increased 66% to $481 million and the margin increased to 31.0% from 19.2%. The increase was primarily driven by the impact of severance charges incurred in the fourth quarter of 2016.

Net sales were positive in the quarter.

Legal

Revenues increased 1% to $881 million.

Adjusted EBITDA increased 6% to $314 million and the margin increased to 35.6% from 34.3% due to the impact of the severance charges incurred in the fourth quarter of 2016.

Tax & Accounting

Revenues increased 6% to $443 million.

Adjusted EBITDA increased 19% to $156 million and the margin increased to 35.2% from 31.5%, primarily due to the impact of severance charges incurred in the fourth quarter of 2016.

Corporate & Other (Including Reuters News)

Reuters News revenues were $75 million, down 5%.

Corporate & Other costs at the adjusted EBITDA level were $77 million compared to $81 million in the prior-year period. The reduction was driven by the company's ongoing simplification initiatives, partly offset by investments relating to improving customer experience.

Consolidated Financial Highlights – Full-Year 2017

(Millions of U.S. dollars, except for adjusted EBITDA margin and EPS)

(unaudited)






2016 Excluding Q4 2016 Severance Charges(2)

IFRS Financial Measures(1)

2017

2016

Change


2016

Change

Change at
Constant
Currency

Revenues

$11,333

$11,166

1%





Operating profit

$1,755

$1,390

26%





Diluted EPS (includes discontinued operations (3))

$1.94

$4.13

-53%





Cash flow from operations (includes discontinued operations (3))

$2,029

$2,984

-32%





Non-IFRS Financial Measures(1)








Revenues

$11,333

$11,166

1%


$11,166

1%

2%

Adjusted EBITDA

$3,437

$2,954

16%


$3,166

9%

8%

Adjusted EBITDA margin

30.3%

26.5%

380bp


28.4%

190bp

170bp

Adjusted EPS

$2.51

$1.79

40%


$2.07

21%

20%

Free cash flow (includes discontinued operations (3))

$1,032

$2,022

-49%


$2,061

-50%










Revenues increased 1% due to higher recurring revenues, partly offset by a negative impact from foreign currency.

Operating profit increased 26%, primarily because the prior year included $212 million of severance charges. Higher revenues and lower operating expenses, reflecting the company's ongoing simplification initiatives, also contributed, despite the unfavorable impact of fair value adjustments associated with foreign currency derivatives embedded in certain customer contracts.

Adjusted EBITDA increased 16% to $3.4 billion and the margin increased to 30.3% from 26.5%.

Diluted EPS, which includes discontinued operations, decreased 53% to $1.94 primarily because the prior year included a $2.0 billion gain on the sale of the IP & Science business. The current-year period reflected $304 million of tax benefits from the enactment of the US Tax Cuts and Jobs Act of 2017.

Cash flow from operations declined 32%, primarily due to a $500 million pension contribution in January 2017, $103 million of higher payments related to 2016 severance charges, the loss of cash flows from the IP & Science business, which was sold in October 2016 ($140 million year on year reduction), and higher tax payments. 

(1)

 In addition to results reported in accordance with IFRS, the company uses certain non-IFRS financial measures as supplemental indicators of its operating performance and financial position. These and other non-IFRS financial measures are defined and reconciled to the most directly comparable IFRS measures in the tables appended to this news release.

(2)

Results exclude the impact of $212 million of fourth-quarter 2016 charges from adjusted EBITDA and adjusted EPS. Free cash flow excludes 2016 cash payments of $39 million associated with these charges. Refer to the tables appended to this news release for a reconciliation of 2016 adjusted EBITDA, the related margin, adjusted EPS and free cash flow including and excluding the charges.

(3)

Discontinued operations are comprised solely of our Intellectual Property & Science business (IP & Science), which was sold in October 2016.

Highlights by Business Unit – Full-Year 2017

(Millions of U.S. dollars, except for adjusted EBITDA margins)

(unaudited)

 


Year Ended






December 31,


Change



2017

2016


Total

Foreign 
Currency

Constant
Currency

Revenues








Financial & Risk


$6,112

$6,057


1%

0%

1%

Legal


3,390

3,367


1%

0%

1%

Tax & Accounting


1,551

1,452


7%

1%

6%

Corporate & Other (Reuters News)


296

304


-3%

0%

-3%

Eliminations


(16)

(14)





Revenues


$11,333

$11,166


1%

-1%

2%









Adjusted EBITDA 








Financial & Risk


$1,916

$1,629


18%

1%

17%

Legal


1,279

1,232


4%

0%

4%

Tax & Accounting


495

414


20%

1%

19%

Corporate & Other (includes Reuters News)


(253)

(321)


n/a

n/a

n/a

Adjusted EBITDA


$3,437

$2,954


16%

0%

16%









Adjusted EBITDA Margin 








Financial & Risk


31.3%

26.9%


440bp

10bp

430bp

Legal


37.7%

36.6%


110bp

10bp

100bp

Tax & Accounting


31.9%

28.5%


340bp

-10bp

350bp

Corporate & Other (includes Reuters News)


n/a

n/a


n/a

n/a

n/a

Adjusted EBITDA margin


30.3%

26.5%


380bp

10bp

370bp

















Excluding 2016 Severance Charges from Prior-Year Period Amounts and Margins  

Adjusted EBITDA  








Financial & Risk


$1,916

$1,796


7%

1%

6%

Legal


1,279

1,258


2%

0%

2%

Tax & Accounting


495

432


15%

1%

14%

Corporate & Other (includes Reuters News)


(253)

(320)


n/a

n/a

     n/a

Adjusted EBITDA


$3,437

$3,166


9%

1%

8%









Adjusted EBITDA margin








Financial & Risk


31.3%

29.7%


160bp

20bp

140bp

Legal


37.7%

37.4%


30bp

0bp

30bp

Tax & Accounting


31.9%

29.8%


210bp

-10bp

220bp

Corporate & Other (includes Reuters News)


n/a

n/a


n/a

n/a

n/a

Adjusted EBITDA margin


30.3%

28.4%


190bp

20bp

170bp

 

n/a – not applicable



















Financial & Risk

Revenues increased 1% to $6.1 billion.  Organic revenues were unchanged and acquisitions contributed 1%.

 

 

Adjusted EBITDA increased 18% to $1.9 billion and the margin increased to 31.3% from 26.9% due to the impact of severance charges incurred in the fourth quarter of 2016, savings from the company's simplification initiatives and higher revenues.

Net sales for the full year were positive.

Legal

Revenues increased 1% to $3.4 billion.

Adjusted EBITDA increased 4% to $1.3 billion and the margin increased to 37.7% from 36.6%. The increase was driven by the impact of severance charges incurred in the fourth quarter of 2016, higher revenues and savings from ongoing simplification initiatives.

Tax & Accounting

Revenues increased 6% to $1.6 billion.

Adjusted EBITDA increased 20% to $495 million and the margin increased to 31.9% from 28.5%. The increase was driven by higher revenues, savings from the company's simplification initiatives and the impact of severance charges incurred in the fourth quarter of 2016.

Corporate & Other (Including Reuters News)

Reuters News revenues were $296 million, down 3%.

Corporate & Other costs at the adjusted EBITDA level were $253 million compared to $321 million in the prior year. The reduction was driven by the company's ongoing simplification initiatives, partly offset by investments relating to improving customer experience and costs related to real estate consolidation initiatives.

Business Update: Proposed Financial & Risk Strategic Partnership with Blackstone

On January 30, 2018, Thomson Reuters announced that it signed a definitive agreement to enter into a strategic partnership with private equity funds managed by Blackstone related to the company's Financial & Risk business. As part of the transaction, Thomson Reuters has agreed to sell a 55% majority stake in Financial & Risk and will retain a 45% interest in the business. The transaction values the Financial & Risk business at approximately $20 billion. Thomson Reuters will receive approximately $17 billion in gross proceeds at closing (subject to purchase price adjustments). Thomson Reuters will maintain full ownership of its Legal, Tax & Accounting and the Reuters News businesses. The transaction is expected to close in the second half of the year and is subject to specified regulatory approvals and customary closing conditions.

Financial & Risk will be classified as a discontinued operation for 2018 reporting purposes.

Dividend

On January 30, 2018, Thomson Reuters announced that its board of directors approved maintaining its dividend at $1.38 per common share. A quarterly dividend of $0.345 per share is payable on March 15, 2018 to common shareholders of record as of February 22, 2018.

Note on 2018 Business Outlook

As announced on January 30, 2018, Thomson Reuters plans to provide a 2018 Business Outlook when it reports first-quarter results in early May as a result of the company's recently signed agreement to form a strategic partnership for Financial & Risk with Blackstone, and the related allocation of costs that will need to be made between Thomson Reuters and the proposed new partnership.

Thomson Reuters

Thomson Reuters is the world's leading source of news and information for professional markets. Our customers rely on us to deliver the intelligence, technology and expertise they need to find trusted answers. The business has operated in more than 100 countries for more than 100 years. Thomson Reuters shares are listed on the Toronto and New York Stock Exchanges (symbol: TRI). For more information, visit www.thomsonreuters.com.

NON-IFRS FINANCIAL MEASURES

Thomson Reuters prepares its financial statements in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).

This news release includes certain non-IFRS financial measures, such as adjusted EBITDA and the related margin (other than at the business unit or segment level), free cash flow, adjusted EPS, and selected measures excluding the impact of foreign currency and the impact of the fourth quarter 2016 severance charges. Thomson Reuters uses these non-IFRS financial measures as supplemental indicators of its operating performance and financial position. These measures do not have any standardized meanings prescribed by IFRS and therefore are unlikely to be comparable to the calculation of similar measures used by other companies, and should not be viewed as alternatives to measures of financial performance calculated in accordance with IFRS. Non-IFRS financial measures are defined and reconciled to the most directly comparable IFRS measures in the appended tables. The term "organic" refers to Thomson Reuters existing businesses before the impact of acquisitions.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS, MATERIAL ASSUMPTIONS AND MATERIAL RISKS

Certain statements in this news release, including, but not limited to, Mr. Smith's comments and statements regarding the proposed strategic partnership with Blackstone involving the Financial & Risk business, are forward-looking. As a result, forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. There is no assurance that a transaction involving all or part of the Financial & Risk business will be completed or that the events described in any other forward-looking statement will materialize. You are cautioned not to place undue reliance on forward-looking statements which reflect expectations only as of the date of this news release. Except as may be required by applicable law, Thomson Reuters disclaims any obligation to update or revise any forward-looking statements.

Some of the material risk factors that could cause actual results or events to differ materially from those expressed in or implied by forward-looking statements in this news release include, but are not limited to, changes in the general economy; actions of competitors; failure to develop new products, services, applications and functionalities to meet customers' needs, attract new customers and retain existing ones, or expand into new geographic markets and identify areas of higher growth; fraudulent or unpermitted data access or other cyber-security or privacy breaches; failures or disruptions of telecommunications, data centers, network systems or the Internet; increased accessibility to free or relatively inexpensive information sources; failure to meet the challenges involved in operating globally; failure to maintain a high renewal rate for recurring, subscription-based services; dependency on third parties for data, information and other services; changes to law and regulations; tax matters, including changes to tax laws, regulations and treaties; fluctuations in foreign currency exchange and interest rates; failure to adapt to organizational changes and effectively implement strategic initiatives; failure to attract, motivate and retain high quality management and key employees; failure to protect the brands and reputation of Thomson Reuters; inadequate protection of intellectual property rights; threat of legal actions and claims; failure to derive fully the anticipated benefits from existing or future acquisitions, joint ventures, investments or dispositions; risk of antitrust/competition-related claims or investigations; impairment of goodwill and other identifiable intangible assets; downgrading of credit ratings and adverse conditions in the credit markets; the effect of factors outside of the control of Thomson Reuters on funding obligations in respect of pension and post-retirement benefit arrangements; and actions or potential actions that could be taken by the company's principal shareholder, The Woodbridge Company Limited. These and other factors are discussed in materials that Thomson Reuters from time to time files with, or furnishes to, the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission. Thomson Reuters annual and quarterly reports are also available in the "Investor Relations" section of www.thomsonreuters.com.

As previously announced, the company will not webcast a discussion of its fourth-quarter and full-year 2017 results today because it pre-released expectations for its results and hosted a conference call on January 30, 2018 after it announced that the company had signed a definitive agreement to enter into a strategic partnership with Blackstone involving its Financial & Risk business. You can access an archive of the January 30, 2018 webcast by visiting the "Investor Relations" section of www.thomsonreuters.com.

 

CONTACTS




MEDIA

INVESTORS

David Crundwell

Frank J. Golden

Senior Vice President, Corporate Affairs

Senior Vice President, Investor Relations

+1 416 649 9904

+1 646 223 5288

david.crundwell@tr.com

frank.golden@tr.com

 

 

Thomson Reuters Corporation

Consolidated Income Statement

(millions of U.S. dollars, except per share data)

(unaudited)



Three Months Ended


Year Ended


December 31,


December 31,


2017

2016


2017

2016

CONTINUING OPERATIONS






Revenues

$2,944

$2,860


$11,333

$11,166

Operating expenses

(2,082)

(2,168)


(8,079)

(8,232)

Depreciation

(74)

(74)


(296)

(313)

Amortization of computer software

(180)

(193)


(699)

(711)

Amortization of other identifiable intangible assets

(114)

(140)


(468)

(528)

Other operating (losses) gains, net

(49)

9


(36)

8

Operating profit

445

294


1,755

1,390

Finance costs, net:






     Net interest expense

(90)

(99)


(362)

(403)

     Other finance (costs) income

(27)

78


(203)

50

Income before tax and equity method investments

328

273


1,190

1,037

Share of post-tax earnings (losses) in equity method
     investments

1

2


(2)

4

Tax benefit (expense)

266

(1)


274

15

Earnings from continuing operations

595

274


1,462

1,056

(Loss) earnings from discontinued operations, net of tax

(4)

1,967


(3)

2,093

Net earnings

$591

$2,241


$1,459

$3,149







Earnings attributable to:






Common shareholders

576

2,226


1,395

3,098

Non-controlling interests

15

15


64

51







Earnings per share:






Basic earnings per share:






   From continuing operations

$0.81

$0.35


$1.94

$1.34

   From discontinued operations

-

2.69


-

2.80

Basic earnings per share

$0.81

$3.04


$1.94

$4.14







Diluted earnings per share:






   From continuing operations

$0.81

$0.35


$1.94

$1.34

   From discontinued operations

-

2.68


-

2.79

Diluted earnings per share

$0.81

$3.03


$1.94

$4.13







Basic weighted-average common shares

711,543,112

732,740,952


718,769,705

747,328,483

Diluted weighted-average common shares

713,001,123

734,538,534


720,193,505

748,961,494

 

 

Thomson Reuters Corporation

Consolidated Statement of Financial Position

(millions of U.S. dollars)

(unaudited)



December 31,   


December 31,

2017


2016

Assets




Cash and cash equivalents

$874


$2,368

Trade and other receivables

1,457


1,392

Other financial assets

98


188

Prepaid expenses and other current assets

548


686

Current assets

2,977


4,634





Computer hardware and other property, net

921


961

Computer software, net

1,458


1,394

Other identifiable intangible assets, net

5,315


5,655

Goodwill

15,042


14,485

Other financial assets

83


135

Other non-current assets

596


537

Deferred tax

79


51

Total assets

$26,471


$27,852





Liabilities and equity




Liabilities




Current indebtedness

$1,644


$1,111

Payables, accruals and provisions

2,086


2,448

Deferred revenue

937


901

Other financial liabilities

129


102

Current liabilities

4,796


4,562





Long-term indebtedness

5,382


6,278

Provisions and other non-current liabilities

1,731


2,258

Other financial liabilities

279


340

Deferred tax

708


1,158

Total liabilities

12,896


14,596





Equity




Capital

9,549


9,589

Retained earnings

7,201


7,477

Accumulated other comprehensive loss

(3,673)


(4,293)

Total shareholders' equity

13,077


12,773

Non-controlling interests

498


483

Total equity

13,575


13,256

Total liabilities and equity

$26,471


$27,852

 

 

Thomson Reuters Corporation

Consolidated Statement of Cash Flow

(millions of U.S. dollars)

(unaudited)



Three Months Ended

December 31,


Year Ended

December 31,


2017

2016


2017

2016

Cash provided by (used in):






Operating activities






Earnings from continuing operations

$595

$274


$1,462

$1,056

Adjustments for:






Depreciation

74

74


296

313

Amortization of computer software

180

193


699

711

Amortization of other identifiable intangible assets

114

140


468

528

Net (gains) losses on disposals of businesses and investments

(1)

1


(36)

(3)

Deferred tax

(317)

119


(511)

(11)

Other

172

(66)


773

288

Pension contribution

-

-


(500)

-

Changes in working capital and other items 

(60)

362


(566)

18

Operating cash flows from continuing operations

757

1,097


2,085

2,900

Operating cash flows from discontinued operations

(2)

(99)


(56)

84

Net cash provided by operating activities

755

998


2,029

2,984







Investing activities






Acquisitions, net of cash acquired

(1)

(1)


(185)

(112)

Proceeds from disposals of businesses and investments

-

1


50

5

Capital expenditures, less proceeds from disposals 

(240)

(247)


(950)

(905)

Other investing activities

7

17


21

40

Investing cash flows from continuing operations

(234)

(230)


(1,064)

(972)

Investing cash flows from discontinued operations, net of taxes paid

-

3,196


17

3,158

Net cash (used in) provided by investing activities

(234)

2,966


(1,047)

2,186







Financing activities






Proceeds from debt

-

-


-

498

Repayments of debt

(1,012)

-


(2,112)

(503)

Net borrowings (repayments) under short-term loan facilities

936

(1,740)


1,641

(1,038)

Repurchases of common shares

(192)

(441)


(1,000)

(1,673)

Dividends paid on preference shares

-

-


(2)

(2)

Dividends paid on common shares

(236)

(240)


(956)

(980)

Dividends paid to non-controlling interests

(16)

(13)


(66)

(57)

Other financing activities

(25)

21


5

43

Net cash used in financing activities

(545)

(2,413)


(2,490)

(3,712)

(Decrease) increase in cash and bank overdrafts

(24)

1,551


(1,508)

1,458

Translation adjustments

-

(10)


9

(13)

Cash and bank overdrafts at beginning of period

892

826


2,367

922

Cash and bank overdrafts at end of period

$868

$2,367


$868

$2,367







Cash and bank overdrafts at end of period comprised of:






Cash and cash equivalents

$874

$2,368


$874

$2,368

Bank overdrafts

(6)

(1)


(6)

(1)


$868

$2,367


$868

$2,367

 

 

Thomson Reuters Corporation


Reconciliation of Earnings from Continuing Operations to Adjusted EBITDA(1)


(millions of U.S. dollars, except for margins)


(unaudited)





Three Months Ended




Year Ended


December 31,




December 31,



2017

2016

Change


2017

2016

Change









Earnings from continuing operations

$595

$274

117%


$1,462

$1,056

38%

Adjustments to remove:








Tax (benefit) expense

(266)

1



(274)

(15)


Other finance costs (income)

27

(78)



203

(50)


Net interest expense

90

99



362

403


Amortization of other identifiable intangible assets

114

140



468

528


Amortization of computer software

180

193



699

711


Depreciation

74

74



296

313


EBITDA

$814

$703



$3,216

$2,946


Adjustments to remove:








Share of post-tax (earnings)losses in equity 
     method investments

(1)

(2)



2

(4)


Other operating losses (gains), net

49

(9)



36

(8)


Fair value adjustments

12

(57)



183

20


Adjusted EBITDA

$874

$635

38%


$3,437

$2,954

16%

Adjusted EBITDA margin(1)

29.7%

22.2%

750bp


30.3%

26.5%

380bp

 

 

Thomson Reuters Corporation

Reconciliation of Earnings Attributable to Common Shareholders to Adjusted Earnings(2)

(millions of U.S. dollars, except for share and per share data)

(unaudited)



Three Months Ended

December 31,


Year Ended

December 31,




2017

2016

Change


2017

2016

Change

Earnings attributable to common shareholders

$576

$2,226

-74%


$1,395

$3,098

-55%

Adjustments to remove:








Fair value adjustments

12

(57)



183

20


Amortization of other identifiable intangible assets

114

140



468

528


Other operating losses (gains), net

49

(9)



36

(8)


Other finance costs (income)

27

(78)



203

(50)


Share of post-tax (earnings) losses in equity method investments

(1)

(2)



2

(4)


Tax on above items

(67)

(46)



(175)

(184)


Tax items impacting comparability

(301)

21



(304)

34


Loss (earnings) from discontinued operations, net of tax

4

(1,967)



3

(2,093)


Interim period effective tax rate normalization(3)

15

-



-

-


Dividends declared on preference shares

-

-



(2)

(2)


Adjusted earnings

$428

$228

88%


$1,809

$1,339

35%

Adjusted EPS

$0.60

$0.31

94%


$2.51

$1.79

40%

Foreign currency(4)



7%




1%

Constant currency(4)



87%




39%









    Excluding 2016 Severance Charges from Prior-Year Period Amounts 








Adjusted EPS

$0.60

$0.60

0%


$2.51

$2.07

21%

Foreign currency(4)



5%




1%

Constant currency(4)



-5%




20%









Diluted weighted-average common shares (millions)

713.0

734.5



720.2

749.0


 

Refer to page 14 for footnotes.


Thomson Reuters Corporation

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow(5)

(millions of U.S. dollars)

(unaudited)



Three Months Ended


Year Ended

December 31,


December 31,


2017

2016


2017

2016

Net cash provided by operating activities

$755

$998


$2,029

$2,984

Capital expenditures, less proceeds from disposals

(240)

(247)


(950)

(905)

Capital expenditures from discontinued operations

-

-


-

(38)

Other investing activities

7

17


21

40

Dividends paid on preference shares

-

-


(2)

(2)

Dividends paid to non-controlling interests

(16)

(13)


(66)

(57)

Free cash flow

$506

$755


$1,032

$2,022

 

 

 


Thomson Reuters Corporation

Reconciliation of 2016 Adjusted EBITDA(1), Adjusted EPS(2) and Free Cash Flow(5)

Excluding the Fourth-Quarter 2016 Severance Charges

(millions of U.S. dollars, except per share data)

(unaudited)



Three Months Ended


Year Ended

December 31, 2016


December 31, 2016


Actual

Remove Charges

Excluding Charges


Actual

Remove Charges

Excluding Charges

Adjusted EBITDA








Financial & Risk

$289

$167

$456


$1,629

$167

$1,796

Legal

296

26

322


1,232

26

1,258

Tax & Accounting

131

18

149


414

18

432

Corporate & Other (includes Reuters News)

(81)

1

(80)


(321)

1

(320)

Adjusted EBITDA

$635

$212

$847


$2,954

$212

$3,166









Adjusted EPS

$0.31

$0.29

$0.60


$1.79

$0.28

$2.07









Free cash flow (includes discontinued operations)

$755

$39

$794


$2,022

$39

$2,061

Refer to page 14 for footnotes.

 


Footnotes



(1)

Thomson Reuters defines adjusted EBITDA for its business units as 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, Thomson Reuters share of post-tax (earnings) losses in equity method investments, other operating gains and losses, certain asset impairment charges, fair value adjustments and corporate related items. Consolidated adjusted EBITDA is comprised of adjusted EBITDA for its business units and Corporate & Other. Adjusted EBITDA margin is adjusted EBITDA expressed as a percentage of revenues. Thomson Reuters uses adjusted EBITDA because it provides a consistent basis to evaluate operating profitability and performance trends by excluding items that the Company does not consider to be controllable activities for this purpose. Adjusted EBITDA also represents a measure commonly reported and widely used by investors as a valuation metric. Additionally, this measure is used by Thomson Reuters and investors to assess a company's ability to incur and service debt.

(2)

Adjusted earnings and adjusted EPS include dividends declared on preference shares but exclude 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, Thomson Reuters share of post-tax (earnings) losses in equity method investments, discontinued operations and other items affecting comparability. Thomson Reuters calculates the post-tax amount of each item 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 using diluted weighted-average shares and does not represent actual earnings or loss per share attributable to shareholders. Thomson Reuters uses adjusted earnings and adjusted EPS as they provide a more comparable basis to analyze earnings and they are also measures commonly used by shareholders to measure the company's performance.

(3)

Adjustment to reflect income taxes based on estimated full-year effective tax rate. Earnings or losses for interim periods under IFRS reflect income taxes based on the estimated effective tax rates of each of the jurisdictions in which Thomson Reuters operates. The non-IFRS adjustment reallocates estimated full-year income taxes between interim periods, but has no effect on full-year income taxes.

(4)

The changes in revenues, adjusted EBITDA and the related margins, and adjusted earnings per share before currency (at constant currency or excluding the effects of currency) are determined by converting the current and prior-year period's local currency equivalent using the same exchange rates.

(5)

Free cash flow (includes free cash flow from continuing and discontinued operations) is net cash provided by (used in) operating activities, and other investing activities less capital expenditures, dividends paid on the company's preference shares, and dividends paid to non-controlling interests. Thomson Reuters uses free cash flow as it helps assess the company's ability, over the long term, to create value for its shareholders as it represents cash available to repay debt, pay common dividends and fund share repurchases and new acquisitions.

Supplemental


Thomson Reuters Corporation

Depreciation and Amortization of Computer Software by Business Segment

(millions of U.S. dollars)

(unaudited)



Three Months Ended


Year Ended

December 31,


December 31,


2017

2016


2017

2016

Financial & Risk

$147

$150


$581

$585

Legal

64

61


247

248

Tax & Accounting

36

45


131

131

Corporate & Other (includes Reuters News)

7

11


36

60

Total depreciation and amortization of computer software

$254

$267


$995

$1,024









 

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