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

News provided by

Thomson Reuters

Feb 08, 2018, 06:30 ET

TORONTO, Feb. 8, 2018 /CNW/ -- 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).  

"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. 

  • At constant currency, revenues increased 1%.

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

  • Adjusted EBITDA increased 38% to $874 million and the margin increased 750 basis points to 29.7% from 22.2%.
    • Excluding the severance charges from the prior-year period, adjusted EBITDA increased 3% and the margin increased 10 basis points.

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.

  • Adjusted EPS, which excludes the gain and tax benefit, among other items, was $0.60 compared to $0.31 per share in the prior-year period.  
    • Excluding the severance charges in the prior-year period, adjusted EPS was unchanged. Currency had a $0.03 favorable impact.

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.     

  • Free cash flow decreased 33% to $506 million reflecting the same factor.

(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%. 

  • Revenues by type:
    • Recurring revenues were unchanged (77% of total)
    • Transactions revenues grew 7% (16% of total)
      • Growth was due to increased revenue from Tradeweb and contributions from acquisitions, partially offset by the impact of lower foreign exchange trading revenues.
    • Recoveries revenues decreased 6% (7% of total) 
  • Revenues by geography:
    • Revenues were up 2% in the Americas, unchanged in Europe, Middle East and Africa (EMEA), and down 1% in Asia Pacific.

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.

  • In constant currency and excluding the severance charges from the prior-year period, adjusted EBITDA was up 3% and the margin increased 80 basis points, driven by savings from the company's simplification initiatives.

Net sales were positive in the quarter.

Legal

Revenues increased 1% to $881 million.

  • Recurring revenues grew 3% (75% of total)
  • US Print revenues declined 7% (14% of total)
  • Transactions revenues declined 1% (11% of total)

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.

  • In constant currency and excluding the severance charges from the prior-year period, adjusted EBITDA declined 3% and the margin decreased by 150 basis points.

Tax & Accounting

Revenues increased 6% to $443 million.

  • Recurring revenues grew 5% (88% of total)
  • Transactions revenues grew 11% (12% of total)

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.

  • In constant currency and excluding the severance charges from the prior-year period, adjusted EBITDA was up 5% and the margin decreased 20 basis points.

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.

  • Including depreciation and amortization of software, Corporate & Other costs were $84 million compared to $92 million in the prior-year period.

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.

  • At constant currency, revenues increased 2%.

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%.

  • Excluding the severance charges from the prior year, adjusted EBITDA increased 9% and the margin increased 190 basis points.

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.

  • Adjusted EPS, which excludes the gain and the tax benefits, among other items, was $2.51 compared to $1.79 per share in the prior year.
    • Excluding the charges from the prior year, adjusted EPS increased 21%, or $0.44 per share, driven by higher adjusted EBITDA. Currency had a $0.03 favorable impact. 

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. 

  • Free cash flow decreased 49% to $1.0 billion reflecting similar factors as noted above.

(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%.

  • Revenues by type:
    • Recurring revenues grew 1% (77% of total)
    • Transactions revenues grew 6% (16% of total)
      • Growth was due to increased revenue from Tradeweb and contributions from acquisitions, partially offset by the impact of lower foreign exchange trading revenues.
    • Recoveries revenues decreased 6% (7% of total) 
  • Revenues by geography:
    • Revenues were up 3% in the Americas, and were unchanged in EMEA and Asia Pacific. Excluding the impact of lower recoveries, all regions reported revenue growth.

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.

  • In constant currency and excluding the severance charges from the prior year, adjusted EBITDA was up 6% and the margin increased 140 basis points.

Net sales for the full year were positive.

Legal

Revenues increased 1% to $3.4 billion.

  • Recurring revenues grew 3% (76% of total)
  • US Print revenues declined 6% (13% of total)
  • Transactions revenues declined 6% (11% of total)

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.

  • In constant currency and excluding the severance charges from the prior year, adjusted EBITDA was up 2% and the margin increased 30 basis points.

Tax & Accounting

Revenues increased 6% to $1.6 billion.

  • Recurring revenues grew 5% (85% of total)
  • Transactions revenues grew 18% (15% of total)

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.

  • In constant currency and excluding the severance charges from the prior year, adjusted EBITDA was up 14% and the margin increased 220 basis points.

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.

  • Including depreciation and amortization of software, Corporate & Other costs were $289 million compared to $381 million in the prior year.

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

[email protected]

[email protected]

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








SOURCE Thomson Reuters

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