Form 6-K — Thomson Reuters Corporation (May 2021)
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A Form 6-K report of foreign private issuer furnished to the Securities and Exchange Commission by Thomson Reuters Corporation for the month of May 2021, Commission File Number 1-31349, signed May 6, 2021. The exhibit index lists Exhibit 99.1, management's discussion and analysis; Exhibit 99.2, unaudited consolidated financial statements; and Exhibits 99.3-99.6, officer certifications under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. The management's discussion and analysis, dated as of May 3, 2021, covers the three months ended March 31, 2021. It reports revenues of 1,580 million U.S. dollars against 1,520, diluted earnings per share of $10.13 against $0.39, and adjusted EPS of $0.58 against $0.48. The report closes with the Section 906 certifications of the President and Chief Executive Officer and the Chief Financial Officer.
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“Form 6-K — Thomson Reuters Corporation (May 2021).”
Original at ir.thomsonreuters.com. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/dr0072-ir-network/
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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 2021 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 6, 2021
EXHIBIT INDEX
Exhibit
Number 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, 2021, our 2020 annual consolidated financial statements and our 2020 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 quarterly and
three-year outlook, including forecasted impacts associated with our Change Program, and our expectations related to general economic conditions
(including the impact of the COVID-19 pandemic on the U.S. and global economies) 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 3, 2021.
We have organized our management’s discussion and analysis in the following key sections:
• Executive Summary – an overview of our business and key financial highlights 3
• Results of Operations – a comparison of our current and prior-year period results 7
• Liquidity and Capital Resources – a discussion of our cash flow and debt 14
• Outlook – our quarterly and three-year financial outlook, including material assumptions and material risks 19
• Related Party Transactions – a discussion of transactions with our principal and controlling shareholder, The Woodbridge Company Limited
(Woodbridge) 22
• Subsequent Events – a discussion of material events occurring after March 31, 2021 and through the date of this management’s discussion and
analysis 22
• Changes in Accounting Policies – a discussion of changes in our accounting policies 22
• Critical Accounting Estimates and Judgments – a discussion of critical estimates and judgments made by our management in applying
accounting policies 22
• Additional Information – other required disclosures 22
• Appendix – supplemental information 24
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.
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 measures as
supplemental indicators of our operating performance and financial position as well as for internal planning purposes 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
Our non-IFRS financial measures include:
●
Adjusted EBITDA and the related margin;
●
Adjusted EBITDA less capital expenditures and the related margin;
●
Adjusted earnings and adjusted earnings per share (EPS);
●
Net debt and our leverage ratio of net debt to adjusted EBITDA; and
●
Free cash flow.
We also report changes in our revenues, operating expenses, adjusted EBITDA and the related margin, and adjusted EPS before the impact of foreign
currency or at “constant currency”. These measures remove the impacts from changes in foreign currency exchange rates to provide better comparability
of our business trends from period to period. To provide greater insight into the revenue growth of our existing businesses on a constant currency basis,
we report organic revenue growth (as defined in the glossary below and in Appendix A).
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
We use the following terms in this management’s discussion and analysis.
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 into a leading
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
F&R Our former Financial & Risk business, now the Refinitiv business of LSEG
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 (now the Refinitiv Our former F&R business. We owned 45% of Refinitiv from October 1, 2018 through January 29, 2021
business of LSEG)
York Parent Limited (YPL) The entity that owns LSEG shares, which is jointly owned by our company and the Blackstone consortium. A group of current 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 Ltd. prior to the sale of Refinitiv to LSEG on January 29, 2021.
$ and US$ U.S. dollars
Page 2
Executive Summary
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 in five reportable segments supported by a corporate center:
First Quarter 2021 Revenues
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.
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.
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.
Reuters News
Supplies business, financial, national and international news to professionals via
desktop terminals, including through Refinitiv, the world’s media organizations,
industry events and directly to consumers.
Global Print
Provides legal and tax information primarily in print format to customers around the
world.
Our corporate center 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. Costs
associated with our Change Program are reported within our corporate center.
Page 3
Key Financial Highlights
Our first quarter performance reflected a strong start to the year. Our customers are becoming more confident in an improving economic environment,
resulting in strong sales across our businesses. We are encouraged by the momentum we see building, but despite the improving outlook, risks remain
as the global pandemic is still significantly impacting many parts of the world.
In February 2021, we announced our Change Program to transition from a holding company to an operating company, and from a content provider to a
content-driven technology company. The program is currently on track. In the first quarter, we supplemented our existing teams with experienced talent to
strengthen skill sets across product development, digital, technology, strategy and change management and we began to make investments to achieve
our Change Program objectives.
Our first-quarter performance met or exceeded our first quarter business outlook communicated in February 2021. In May 2021, we announced our
outlook for the second quarter and an increase to the low end of our revenue outlook for the full year of 2021, which reflects our increasing confidence in
our business performance. We also reaffirmed all other measures in our three-year outlook. Refer to the “Outlook” section of this management’s
discussion and analysis for additional information.
Consolidated results
Three months ended March 31,
Change
Constant
(millions of U.S. dollars, except per share amounts and margins) 2021 2020 Total Currency
IFRS Financial Measures
Revenues 1,580 1,520 4%
Operating profit 387 290 34%
Diluted earnings per share $ 10.13 $ 0.39 n/m
Cash flow from operations 380 176 115%
Non-IFRS Financial Measures(1)
Revenues 1,580 1,520 4% 3%
Organic revenue growth 3%
Adjusted EBITDA 558 480 16% 15%
Adjusted EBITDA margin 35.3% 31.6% 370bp 360bp
Adjusted EPS $0.58 $0.48 21% 19%
Free cash flow 239 35 570%
Supplemental financial results – “Big 3” Segments—Legal Professionals, Corporates and Tax & Accounting Professionals Combined
Three months ended March 31,
Change
Constant
(millions of U.S. dollars, except margins) 2021 2020 Total Currency
“Big 3” Non-IFRS Financial Measures(1)
Revenues 1,277 1,211 5% 5%
Organic revenue growth 5%
Adjusted EBITDA 523 431 21% 20%
Adjusted EBITDA margin 41.0% 35.6% 540bp 510bp
(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.
Revenues increased 4% in total and 3% on both a constant currency and organic basis. The increase in organic revenues was driven by 3% growth in
recurring revenues (77% of total revenues).
Revenues for our “Big 3” segments (81% of total revenues) increased 5% in total, in constant currency and on an organic basis. The increase in organic
revenues was driven by 4% growth in recurring revenues (84% of “Big 3” revenues) and 8% growth in transactions revenues.
Page 4
Operating profit increased 34%, primarily due to higher revenues and a favorable impact from the revaluation of warrants that we held in Refinitiv until
they were exercised in connection with the closing of the sale to LSEG on January 29, 2021. Adjusted EBITDA and the related margin, which excludes
the impact of the warrant revaluation among other items, increased due to higher revenues and lower costs, which reflected the impact from our 2020
cost-reduction initiatives.
Diluted EPS increased to $10.13 per share compared to $0.39 per share in the prior-year period due to the gain on sale of our investment in Refinitiv to
LSEG. Adjusted EPS, which excludes the gain from the sale of our investment in Refinitiv, as well as other adjustments, increased to $0.58 per share
from $0.48 per share in the prior-year period due to higher adjusted EBITDA, which more than offset higher depreciation and amortization of computer
software, as well as higher interest and tax expense.
Cash flow from operations increased primarily because of favorable movements in working capital, which included lower bonus payments in 2021 due
to the impact of COVID-19 in 2020. Higher revenues and lower costs from 2020 cost-reduction initiatives also contributed. Free cash flow increased for
the same reasons.
Below is a comparison of our actual revenue performance for the first quarter of 2021 to the related quarterly outlook.
First-Quarter First-Quarter
Non-IFRS Financial Measures (1) 2021 Outlook 2021 Performance
Total Thomson Reuters
Revenue growth (before currency) Between 1.5% and 2.5% 3.2% ✓
Organic revenue growth Between 1.5% and 2.5% 2.9% ✓
“Big 3” segments
Revenue growth (before currency) Between 4.0% and 5.0% 4.9% ✓
Organic revenue growth Between 4.0% and 5.0% 4.5% ✓
The total Thomson Reuters revenue growth outlook included an anticipated decline in Global Print revenues of between 13% and 15% before currency
and on an organic basis. In the first quarter, Global Print outperformed the outlook as revenues declined 9% on both bases.
(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.
Change Program Update
Our outlook incorporates significant investments for our Change Program in 2021 and 2022. These investments are 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.
The objectives of our Change Program 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.
In the first quarter of 2021, we supplemented our existing teams with experienced talent to strengthen skill sets across product development, digital,
technology, strategy and change management and we began to make investments to achieve our objectives. We spent $20 million ($11 million of
operating expenses and $9 million of capital expenditures) on technology and market-related initiatives. We achieved $19 million of annualized run-rate
savings toward our overall savings targets.
Sale of Refinitiv to LSEG
On January 29, 2021, our company and Blackstone’s consortium closed the sale of Refinitiv to LSEG in an all share transaction. As a result, we indirectly
own LSEG shares through our direct investment in YPL, an entity jointly owned by our company, Blackstone’s consortium and certain current and former
members of Refinitiv senior management. As of March 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 22% voting interest in LSEG). At the same date, we owned
42.74% of YPL and indirectly owned approximately 72.4 million LSEG shares. As of May 3, 2021, these shares had a market value of approximately $7.4
billion based on LSEG’s closing share price on that day.
Page 5
Subject to certain exceptions, Thomson Reuters and Blackstone’s consortium have otherwise agreed to be subject to a lock-up for their LSEG shares
through January 29, 2023. In each of years three and four following closing (starting on January 30, 2023 and January 30, 2024, respectively), Thomson
Reuters and Blackstone’s consortium will become entitled to sell in aggregate one-third of the LSEG shares that were issued. The lock-up arrangement
will terminate on January 29, 2025. The ability of current and former members of Refinitiv senior management to sell shares held by them is also subject
to certain restrictions.
YPL is entitled to nominate three non-executive LSEG directors for as long as it holds at least 25% of LSEG shares, two LSEG directors for as long as it
holds at least 17.5% but less than 25% of LSEG shares and one LSEG director for as long as it holds at least 10% but less than 17.5% of LSEG shares.
For so long as YPL is entitled to nominate three directors, one nominee will be a Thomson Reuters representative. Once YPL is released from the lock-up
agreement described above, any disposals of LSEG shares will be subject to orderly marketing restrictions. A standstill restriction also applies to YPL
under which it (and the underlying investors) have agreed not to, among other matters, acquire further LSEG shares, or make a takeover offer for LSEG
for designated time periods. YPL has also committed to vote its LSEG shares in line with the LSEG Board’s recommendation.
Reuters News’ 30-year agreement to supply news and editorial content to Refinitiv continues under the same terms and conditions after the closing and is
scheduled to run to 2048.
Thomson Reuters accounts for its indirect investment in LSEG at fair value, based on the share price of LSEG, within “Share of post-tax earnings (losses)
in equity method investments” in the consolidated income statement. The investment is subject to equity accounting because the LSEG shares are held
through YPL, over which Thomson Reuters 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, the investment in LSEG shares held by YPL is accounted for at fair
value. LSEG dividends distributed to Thomson Reuters from YPL will reduce the investment and will be included in “Other investing activities” in the
consolidated statement of cash flow.
Gain on sale of Refinitiv to LSEG and subsequent sale of LSEG shares
Thomson Reuters recognized a gain of approximately $8.1 billion related to the January sale of Refinitiv to LSEG within “Share of post-tax earnings
(losses) in equity method investments” in the consolidated income statement. As of the January 29, 2021 closing date, Thomson Reuters indirectly owned
approximately 82.5 million LSEG shares, which included 4.5 million shares from the exercise of warrants Thomson Reuters previously held in Refinitiv.
The transaction was predominantly tax deferred for Thomson Reuters except for approximately $640 million that is payable in 2021. On March 19, 2021,
as permitted under a lock-up exception, Thomson Reuters instructed YPL to sell approximately 10.1 million LSEG shares for pre-tax net proceeds of
$994 million. Over the course of 2021, Thomson Reuters will pay approximately $225 million of tax on the sale of these shares and will use the remaining
after-tax proceeds to pay the approximately $640 million of taxes on the LSEG transaction. The proceeds from the sale of the shares by YPL were
distributed to Thomson Reuters as a dividend that reduced the value of the investment. The proceeds were presented in “Net cash provided by investing
activities” within the consolidated statement of cash flow.
Page 6
Results of Operations
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 seasonality of our operating profit may be further impacted in 2021 by the timing of significant Change Program costs we
expect to incur to transform ourselves from a holding company to an operating company and into a content-driven technology company. The seasonality
of our revenues and operating expenses were impacted by COVID-19 in 2020.
Consolidated results
Three months ended March 31,
Change
Constant
(millions of U.S. dollars, except per share amounts and margins) 2021 2020 Total Currency
IFRS Financial Measures
Revenues 1,580 1,520 4%
Operating profit 387 290 34%
Diluted EPS $10.13 $0.39 n/m
Non-IFRS Financial Measures(1)
Revenues 1,580 1,520 4% 3%
Organic revenue growth 3%
Adjusted EBITDA 558 480 16% 15%
Adjusted EBITDA margin 35.3% 31.6% 370bp 360bp
Adjusted EBITDA less capital expenditures 438 338 29%
Adjusted EBITDA less capital expenditures margin 27.7% 22.3% 540bp
Adjusted EPS $0.58 $0.48 21% 19%
(1) Refer to Appendices A and B of the management’s discussion and analysis for additional information and reconciliations of our non-IFRS financial measures to the most directly comparable
IFRS financial measures.
Revenues
Three months ended March 31,
Change
Constant
(millions of U.S. dollars) 2021 2020 Total Currency Organic
Recurring revenues 1,220 1,168 5% 4% 3%
Transactions revenues 217 198 9% 9% 9%
Global Print revenues 143 155 (7%) (9%) (9%)
Eliminations/Rounding - (1)
Revenues 1,580 1,520 4% 3% 3%
Revenues increased 4% in total and 3% on both a constant currency and organic basis. The increase in organic revenues was driven by 3% growth in
recurring revenues (77% of total revenues). While growth in transactions revenues was mostly offset by a 9% decline in Global Print revenues, the
performance of Global Print was better than expected.
Revenues for our “Big 3” segments (81% of total revenues) increased 5% in total, in constant currency and on an organic basis. The increase in organic
revenues was driven by 4% growth in recurring revenues (84% of “Big 3” revenues) and 8% growth in transactions revenues.
Foreign currency favorably impacted revenue growth due to the weakening of the U.S. dollar against most major currencies, including the British pound
sterling, Euro and Australian dollar, which more than offset the strengthening of the U.S. dollar against the Brazilian real and Argentine peso, compared to
the prior-year period.
Page 7
Operating profit, adjusted EBITDA and adjusted EBITDA less capital expenditures
Operating profit increased 34%, primarily due to higher revenues and a favorable impact from the revaluation of warrants that we held in Refinitiv prior to
its sale to LSEG on January 29, 2021.
Adjusted EBITDA and the related margin, which excludes the impact of the warrant revaluation among other items, increased due to higher revenues and
lower costs, which reflected the impact from our 2020 cost-reduction initiatives. We incurred $11 million of operating expenses associated with our
Change Program in the first quarter of 2021.
Adjusted EBITDA less capital expenditures and the related margin increased due to higher adjusted EBITDA and lower capital expenditures. Capital
expenditures in the first quarter of 2021 included $9 million associated with our Change Program.
Operating expenses
Three months ended March 31,
Change
Constant
(millions of U.S. dollars) 2021 2020 Total Currency
Operating expenses 1,018 1,017 - (2%)
Remove fair value adjustments(1) 4 23
Operating expenses, excluding fair value adjustments 1,022 1,040 (2%) (2%)
(1) 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. Fair value
adjustments are excluded from our calculation of adjusted EBITDA. Refer to Appendix B of this management’s discussion and analysis for reconciliations of our non-IFRS financial measures to
the most directly comparable IFRS financial measures.
Operating expenses, excluding fair value adjustments, decreased 2% in both total and constant currency, reflecting our cost reduction initiatives in 2020.
In the first quarter of 2021, operating expenses included $11 million related to our Change Program for technology and market-related initiatives. We also
achieved $19 million of savings on an annualized run-rate basis toward our overall Change Program savings targets.
Depreciation and amortization
Three months ended March 31,
(millions of U.S. dollars) 2021 2020 Change
Depreciation 46 40 17%
Amortization of computer software 115 111 3%
Subtotal 161 151 7%
Amortization of other identifiable intangible assets 31 30 3%
●
Depreciation and amortization of computer software on a combined basis increased due to the write-down of assets associated with real estate
leases we have vacated in connection with transitioning a small portion of our employees to working remotely on a permanent basis. The increase
also reflected higher expenses from newly acquired assets, including those associated with recently acquired businesses, which more than offset
benefits from the completion of depreciation and amortization for certain assets acquired in previous years.
●
Amortization of other identifiable intangible assets increased slightly as expenses associated with recent acquisitions more than offset the completion
of amortization of assets acquired in previous years.
Other operating gains (losses), net
Three months ended March 31,
(millions of U.S. dollars) 2021 2020
Other operating gains (losses), net 17 (32)
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. In the first quarter of 2020, other operating losses, net, included a loss from the revaluation of warrants that we held in Refinitiv,
which more than offset gains associated with the sale of certain real estate properties and a distribution from an investment.
Page 8
Net interest expense
Three months ended March 31,
(millions of U.S. dollars) 2021 2020 Change
Net interest expense 51 45 11%
The increase in net interest expense reflected C$1.4 billion (approximately US$1 billion) of five-year notes issued in May 2020, as well as lower interest
income.
Other finance costs (income)
Three months ended March 31,
(millions of U.S. dollars) 2021 2020
Other finance costs (income) 6 (47)
Other finance costs (income) primarily included gains or losses from fluctuations of foreign currency exchange rates on certain intercompany funding
arrangements. The first quarter of 2020 also included gains related to changes in foreign exchange contracts.
Share of post-tax earnings (losses) in equity method investments
Three months ended March 31,
(millions of U.S. dollars) 2021 2020
YPL (formerly Refinitiv Holdings Ltd.) 6,295 (58)
Other equity method investments 2 4
Share of post-tax earnings (losses) in equity method investments 6,297 (54)
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 to LSEG on January 29, 2021, partially offset by $1,612 million of losses from the decline in the value of our indirect investment in LSEG
subsequent to the sale date and $168 million of post-tax losses related to the Refinitiv operations prior to the sale.
Tax expense
Three months ended March 31,
(millions of U.S. dollars) 2021 2020
Tax expense 1,594 47
The increase in tax expense was driven by our earnings in equity method investments, primarily from the gain on sale of our former investment in 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 9
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) 2021 2020
Tax expense (benefit)
Tax items impacting comparability:
Corporate tax laws and rates(1) 1 27
Deferred tax adjustments(2) - 3
Subtotal 1 30
Tax related to:
Amortization of other identifiable intangible assets (7) (6)
Share of post-tax earnings (losses) in equity method investments 1,538 (14)
Other items 4 (11)
Subtotal 1,535 (31)
Total 1,536 (1)
(1) In the first quarter of 2021, this amount included changes in deferred tax liabilities due to changes in foreign tax rates. In the first quarter of 2020, this amount primarily related to a minimum tax
that we did not ultimately pay due to the taxable gains that arose on the sale of an investment in the fourth quarter of 2020. However, IFRS required that we accrue the tax before that
transaction took place.
(2) Relates primarily to requirements associated with disposals and acquisitions.
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) 2021 2020
Tax expense 1,594 47
Remove: Items from above impacting comparability (1,536) 1
Other adjustment:
Interim period effective tax rate normalization(1) (1) (4)
Total tax expense on adjusted earnings 57 44
(1) Adjustment to reflect income taxes based on estimated full-year effective tax rate, including normalization of benefits from favorable developments relating to tax disputes. 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
Earnings from discontinued operations, net of tax, includes the following:
Three months ended March 31,
(millions of U.S. dollars) 2021 2020
Earnings from discontinued operations, net of tax 3 2
Earnings from discontinued operations, net of tax, included residual income and expenses related to our former F&R business.
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Net earnings and diluted EPS
Three months ended March 31,
(millions of U.S. dollars, except per share amounts) 2021 2020 Change
Net earnings 5,036 193 n/m
Diluted EPS $10.13 $0.39 n/m
Net earnings and diluted EPS increased due to the gain on sale of our investment in Refinitiv to LSEG.
Adjusted earnings and adjusted EPS
Three months ended March 31,
Change
Constant
(millions of U.S. dollars, except per share amounts) 2021 2020 Total Currency
Adjusted earnings 288 239 21%
Adjusted EPS $ 0.58 $ 0.48 21% 19%
Adjusted earnings and the related per share amount increased as higher adjusted EBITDA more than offset higher depreciation and amortization of
computer software, as well as higher interest and tax expense.
Segment results
The following is a discussion of our five reportable segments and our Corporate costs for the three months ended March 31, 2021. 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
Constant
(millions of U.S. dollars, except margins) 2021 2020 Total Currency Organic
Recurring revenues 621 587 6% 4% 4%
Transactions revenues 47 39 20% 17% 17%
Revenues 668 626 7% 5% 5%
Segment adjusted EBITDA 279 230 21% 18%
Segment adjusted EBITDA margin 41.8% 36.7% 510bp 460bp
Revenues increased in total and on both a constant currency and organic basis. The increase in organic revenues was due to growth in recurring
revenues (93% of the Legal Professionals segment) and transactions revenues (7% of the Legal Professionals segment). Revenues from law firms, which
includes revenues from large global law firms and represent just over two-thirds of the segment’s revenues, increased 4%, and the segment’s Global
business, representing smaller law firms outside the U.S., increased 5%. U.S. government revenues grew 8%.
The increase in recurring revenues on an organic basis reflected strong growth from Westlaw Edge and Practical Law. Transactions revenues also
increased and included higher revenues from Elite. The Government business contributed to both recurring and transactions revenue growth.
Segment adjusted EBITDA and the related margin increased primarily due to higher revenues and lower expenses from cost savings initiatives in 2020.
Foreign currency benefited the year-over-year change in segment adjusted EBITDA margin by 50bp.
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Corporates
Three months ended March 31,
Change
Constant
(millions of U.S. dollars, except margins) 2021 2020 Total Currency Organic
Recurring revenues 295 281 5% 4% 4%
Transactions revenues 89 86 4% 4% 4%
Revenues 384 367 5% 4% 4%
Segment adjusted EBITDA 146 117 25% 25%
Segment adjusted EBITDA margin 38.1% 31.9% 620bp 630bp
Revenues increased in total and on both a constant currency and organic basis. The increase in organic revenues was due to growth in recurring
revenues (77% of the Corporates segment) as well as in transactions revenues (23% of the Corporates segment), which was driven by the segment’s
Confirmation business, which provides audit confirmation services. Recurring revenues increased 4% despite a 2% reduction in revenue growth due to a
loss of revenues related to the impact of the U.S. federal Affordable Care Act that were recorded in the prior-year period but did not reoccur in the first
quarter of 2021.
Segment adjusted EBITDA and the related margin increased primarily due to higher revenues and lower expenses due to cost savings initiatives in 2020.
Foreign currency negatively impacted the year-over-year change in segment adjusted EBITDA margin by 10bp.
Tax & Accounting Professionals
Three months ended March 31,
Change
Constant
(millions of U.S. dollars, except margins) 2021 2020 Total Currency Organic
Recurring revenues 160 158 2% 4% 4%
Transactions revenues 65 60 7% 7% 7%
Revenues 225 218 3% 5% 5%
Segment adjusted EBITDA 98 84 17% 17%
Segment adjusted EBITDA margin 43.7% 38.7% 500bp 470bp
Revenues increased in total and on both a constant currency and organic basis. The increase in organic revenues was driven by growth in both recurring
revenues (71% of the Tax & Accounting Professionals segment), as well as in transactions revenues (29% of the Tax & Accounting Professionals
segment) despite the extension of the U.S. tax filing deadline to May 2021 from April 2021 that resulted in lower transactional Pay-Per-Return tax filing
revenues in the first quarter of 2021.
Organic revenues grew 5% and included a negative impact from the acceleration of the release date of some of our UltraTax U.S. state tax software from
January 2021 to December 2020 to align with the traditional December release of our U.S. federal tax software. If the UltraTax state tax software had
been released in January 2021, organic revenue growth for the segment would have been 8% in the first quarter of 2021.
We expect Tax & Accounting Professional’s revenues to grow between 10% and 15% in the second quarter of 2021 reflecting the shift of Pay-Per-Return
revenues from the first quarter to the second quarter of 2021 due to the delay in the U.S. tax filing deadline. In 2020, Pay-Per-Return revenues shifted
from the second quarter to the third quarter when the U.S. tax filing deadline was extended to July 15.
Segment adjusted EBITDA and the related margin increased primarily due to higher revenues and lower expenses due to cost savings initiatives in 2020.
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.
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Reuters News
Three months ended March 31,
Change
Constant
(millions of U.S. dollars, except margins) 2021 2020 Total Currency Organic
Recurring revenues 144 142 2% - -
Transactions revenues 16 13 23% 22% 22%
Revenues 160 155 3% 2% 2%
Segment adjusted EBITDA 28 19 45% 65%
Segment adjusted EBITDA margin 17.6% 12.6% 500bp 750bp
Revenues increased in total and on both a constant currency and organic basis. The increase in organic revenues was driven by growth in transactions
revenues from the segment’s Professional business, which includes Reuters Events. Recurring revenues were essentially unchanged on an organic
basis.
The segment’s revenue performance was slightly better than the first quarter outlook provided in February 2021. For the second quarter, we expect
Reuters News revenues on a constant currency and organic basis to grow between 2% and 3%, primarily due to the Reuters Events business. Reuters
Events is currently holding all of its events virtually. However, it continues to assess when it can resume in-person events based on the advice of local
health guidelines and customer feedback. Full-year total revenues are expected to increase between 1% and 3%.
Reuters News and the Refinitiv business of LSEG have an agreement pursuant to which Reuters News supplies news and editorial content to Refinitiv
through October 1, 2048. In the first quarter of 2021, Reuters News recorded revenues of $85 million under this agreement.
Segment adjusted EBITDA and the related margin increased primarily due to higher revenues, cost savings initiatives from 2020 and timing of expenses.
Foreign currency negatively impacted the year-over-year change in segment adjusted EBITDA margin by 250bp.
Global Print
Three months ended March 31,
Change
Constant
(millions of U.S. dollars, except margins) 2021 2020 Total Currency Organic
Revenues 143 155 (7%) (9%) (9%)
Segment adjusted EBITDA 57 63 (9%) (11%)
Segment adjusted EBITDA margin 39.9% 40.5% (60)bp (80)bp
Revenues decreased in total, in constant currency, and on an organic basis. However, the revenue performance was better than expected compared to
the first quarter outlook provided in February 2021 driven by higher third-party revenues for printing services. Global Print revenues are expected to
increase between 1% and 3% in the second quarter as the prior-year period was negatively impacted by delayed shipments at the beginning of the
COVID-19 pandemic. Full-year total revenues are expected to decline between 4% and 7%.
Segment adjusted EBITDA and the related margin decreased due to lower revenues. Foreign currency benefited the year-over-year change in segment
adjusted EBITDA margin by 20bp.
Corporate costs
Three months ended March 31,
(millions of U.S. dollars) 2021 2020
Corporate costs 50 33
Corporate costs increased primarily due to $11 million of costs associated with the Change Program. Although our Change Program costs were lower
than expected in the first quarter of 2021, we continue to expect to spend between $175 million and $200 million in 2021.
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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 on hand, cash provided by our operations, our commercial paper program and credit facility. From time to time, we also issue debt securities. Our
principal uses of cash are for debt repayments, debt servicing costs, dividend payments, capital expenditures, share repurchases and acquisitions.
To date, we have not experienced any significant adverse impacts to our liquidity from the economic crisis caused by COVID-19. We continue to believe
that we can weather the periods of volatility that are likely to occur as a result of the ongoing crisis, as our capital strategy approach has provided us with
a strong capital structure and liquidity position. At March 31, 2021, we had $2.6 billion of cash on hand, of which we are using approximately $860 million
to pay taxes on the sale of Refinitiv to LSEG, and on the subsequent sale of some of the LSEG shares that we received when the transaction closed.
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. We completed a modest share repurchase program during the first quarter of 2021 to offset the dilution associated with our dividend
reinvestment and equity incentive plans, and we plan to maintain our outstanding shares at about 500 million. In the future, we expect that proceeds from
sales of LSEG shares after the expiration of the applicable contractual lock-up provisions, as discussed in the “Executive Summary — Sale of Refinitiv to
LSEG” section of this management’s discussion and analysis, will provide us with further options for investment and returns to shareholders.
Our net debt to adjusted EBITDA leverage ratio as of March 31, 2021 was approximately 0.7:1, 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, 2021 was 0.5:1, which is well below the maximum leverage
ratio allowed under the credit facility of 4.5:1. None of our debt securities are scheduled to mature until 2023.
We believe that our existing sources of liquidity will be sufficient to fund our projected cash requirements for the next 12 months.
The information above and 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”.
Cash flow
Summary of consolidated statement of cash flow
Three months ended March 31,
(millions of U.S. dollars) 2021 2020 $ Change
Net cash provided by operating activities 380 176 204
Net cash provided by (used in) investing activities 829 (249) 1,078
Net cash (used in) provided by financing activities (411) 80 (491)
Increase in cash and bank overdrafts 798 7 791
Translation adjustments (1) (10) 9
Cash and bank overdrafts at beginning of period 1,787 825 962
Cash and bank overdrafts at end of period 2,584 822 1,762
Non-IFRS Financial Measure(1)
Free cash flow 239 35 204
(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 increased primarily due to favorable movements in working capital, primarily due to lower
bonus payments, which reflected the impact of COVID-19 in 2020, and because the prior-year period included costs and investments to reposition our
company following the separation of our former F&R business. In the first quarter of 2021, cash flow from operations also benefited from higher revenues
and lower costs due to COVID-19 related cost-reduction initiatives in 2020.
Page 14
Investing activities. 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. Net cash used in investing activities in the first quarter of 2020
included $142 million of capital expenditures and $124 million to acquire Pondera Solutions, a provider of technology and advanced analytics to combat
fraud, waste and abuse in healthcare and large government programs.
Financing activities. In the first quarter of 2021, net cash used in financing activities was primarily comprised of returns to our common shareholders
through dividends and share repurchases. Net cash provided by financing activities in the first quarter of 2020 included $493 million of proceeds from net
borrowings of debt, which was partly offset by returns to common shareholders. Refer to the “Commercial paper program”, “Credit facility”, “Long-term
debt” and “Share repurchases” subsections below for additional information regarding our debt activity and share repurchases.
Cash and bank overdrafts. The increase in cash and cash and bank overdrafts was primarily due to the $994 million dividend from YPL in connection
with the sale of LSEG shares and $367 million in after-tax net proceeds from the sale of an investment in December 2020.
Free cash flow. Free cash flow increased primarily due to higher cash flows from operating activities.
Additional information about our debt, 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, 2021. In January 2020, we issued $630 million of commercial paper, the proceeds of which were used to
redeem debt obligations ahead of their maturity. Most of the commercial paper was repaid in February and March 2020, primarily from funds
borrowed under our credit facility.
●
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, 2021. In March 2020, we borrowed $1.0 billion under this facility, of which a portion of the proceeds was used to repay
commercial paper. 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.
The U.K. Financial Conduct Authority, which regulates LIBOR, intends to phase out the majority of LIBOR rates globally by the end of 2021. Key
alternative reference rates have been established and progress continues to be made in establishing better liquidity and term structures required to
efficiently replace the existing LIBOR structures. With the exception of the LIBOR-based benchmarks within our external credit facility, we have no
material agreements with third parties that use or reference LIBOR as a benchmark rate which require amendment.
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.
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, 2021, 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 0.5:1.
●
Long-term debt. We did not issue notes or make any debt repayments in the three months ended March 31, 2021. The following table provides
information regarding notes that we repaid in the three months ended March 31, 2020.
MONTH/YEAR TRANSACTION PRINCIPAL AMOUNT (IN MILLIONS)
Notes repaid
January 2020 3.309% Notes, due 2021 C$550
January 2020 3.95% Notes, due 2021 US$139
Page 15
In January 2020, we repaid notes prior to their scheduled maturity dates for $640 million. This amount included early redemption premiums and the
settlement of cross-currency swaps. The repayments were funded with commercial paper borrowings.
In July 2020, we filed a new base shelf prospectus pursuant to which 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. 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. As of May 3, 2021, neither Thomson Reuters Corporation nor TR Finance LLC has issued any
debt securities under the prospectus.
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. Please refer to Appendix D of this management’s discussion and analysis for condensed
consolidating financial information about 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 Stable Stable Stable Stable
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 2021, we announced a $0.10 per share increase in the
annualized dividend to $1.62 per common share (beginning with the common share dividend that we paid in March 2021). 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.
Page 16
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) 2021 2020
Dividends declared per common share $ 0.405 $ 0.380
Dividends declared 200 188
Dividends reinvested (6) (6)
Dividends paid 194 182
●
Share repurchases – Normal Course Issuer Bid (NCIB). We may buy back shares (and subsequently cancel them) from time to time as part of our
capital strategy. Share repurchases are typically executed under a NCIB. Under the current NCIB, we may repurchase up to 5 million common
shares between January 4, 2021 and January 3, 2022 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 may be permitted by the TSX and/or NYSE or under applicable law, including private
agreement purchases if we receive an issuer bid exemption order from applicable securities regulatory authorities in Canada for such purchases. The
price that our company will pay for shares in open market transactions under the NCIB will be the market price at the time of purchase or such other
price as may be permitted by TSX.
Details of share repurchases were as follows:
Three months ended March 31,
2021 2020
Share repurchases (millions of U.S. dollars) 200 200
Shares repurchased (number in millions) 2.5 2.6
Share repurchases – average price per share in U.S. dollars $ 81.45 $ 78.37
In February 2021, we completed the repurchase of $200 million of our common shares under our NCIB. We do not currently intend to repurchase
additional shares in 2021. Decisions regarding any future repurchases will depend on factors, such as market conditions, share price and other
opportunities to invest capital for growth. We may elect to suspend or discontinue our share repurchases at any time, in accordance with applicable
laws. From time to time when we do not possess material nonpublic information about ourselves or our securities, we may 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 $23.8 billion at March 31, 2021, compared to $17.9 billion at December 31, 2020. The increase was due to our equity investments,
which was driven by the sale of Refinitiv to LSEG in January 2021.
At March 31, 2021, the carrying amounts of our total current assets exceeded total current liabilities by $1.0 billion, primarily because of an unusually high
cash balance. Over the course of 2021, we expect to use approximately $860 million of this cash to pay taxes on the gain from the sale of our investment
in Refinitiv to LSEG and on the subsequent sale of some of our LSEG shares that we received in the transaction. From time to time, our current liabilities
may 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 17
Net debt and leverage ratio of net debt to adjusted EBITDA
March 31, December 31,
(millions of U.S. dollars) 2021 2020
Long-term indebtedness 3,788 3,772
Total debt 3,788 3,772
Swaps (110) (100)
Total debt after swaps 3,678 3,672
Remove fair value adjustments for hedges(1) (5) 1
Total debt after currency hedging arrangements 3,673 3,673
Remove transaction costs, premiums or discounts included in the carrying value of debt 37 38
Add: Lease liabilities (current and non-current) 280 306
Less: cash and cash equivalents(2) (2,584) (1,787)
Net debt(3) 1,406 2,230
Leverage ratio of net debt to adjusted EBITDA
Adjusted EBITDA(3)(4) 2,053 1,975
Net debt / adjusted EBITDA(3) 0.7:1 1.1:1
(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 $47 million and $43 million at March 31, 2021 and December 31, 2020, respectively, held in subsidiaries which have regulatory restrictions and are
therefore not available for general use by our company.
(3) Amount represents non-IFRS measures. For additional information about our liquidity, we provide our leverage ratio of net debt to adjusted EBITDA. Refer to Appendix A of this management’s
discussion and analysis for additional information of our non-IFRS financial measures.
(4) For purposes of this calculation, adjusted EBITDA is computed on a rolling 12 month basis and includes adjusted EBITDA of $558 million, $525 million, $491 million and $479 million for the
three months ended March 31, 2021, December 31, 2020, September 30, 2020 and June 30, 2020, respectively. Refer to Appendix B of this management’s discussion and analysis, our 2020
annual report, and our interim reports for the three months ended September 30, 2020 and June 30, 2020, for additional information regarding the calculation of adjusted EBITDA in each of
these periods.
At March 31, 2021, 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, 2021, the average maturity of our term debt was approximately nine 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 decrease in our
net debt is primarily due to the increase 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 2020 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, 2021.
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.
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.
Page 18
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.
In February 2018, the U.K. tax authority, HM Revenue & Customs (HMRC), issued notices of assessment under the Diverted Profits Tax (DPT) regime for
the 2015 taxation year of certain of our current and former U.K. affiliates. We paid $31 million in tax, as required under the notices. As management does
not believe that these U.K. affiliates fall within the scope of the Diverted Profits Tax regime, we appealed these assessments in July 2019 to obtain a
refund. In February 2021, HMRC issued DPT notices for the 2016 taxation year aggregating $87 million, which we paid in March 2021, as required under
the notices. In addition, based on recent discussions with HMRC, management believes it is reasonably possible that HMRC may issue similar notices in
the next 6 to 12 months for one or more other taxation years, largely related to businesses that we have sold and that are subject to indemnity
arrangements. If that occurs, we will be required to pay additional taxes to HMRC, including those attributable to the indemnity counterparty, shortly
thereafter. If we are required to make any additional tax payments, which could be as much as $600 million to $700 million, we intend to vigorously
defend our position by contesting the assessments through all available administrative and judicial remedies. The large majority of the anticipated
amounts in dispute relates to our F&R business, in which we sold a majority interest in 2018. Any payment made by us would not be a reflection of our
view on the merits of the case. Because management believes 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 a result, we would expect to record substantially all of any
potential future payments as non-current receivables from HMRC and the indemnity counterparty on our financial statements since we would expect to
receive refunds of substantially all of any amounts paid pursuant to these notices of assessment. We expect that our existing sources of liquidity will be
sufficient to fund any required payments.
For additional information, please see the “Risk Factors” section of our 2020 annual report, which contains further information on risks related to legal and
tax matters.
Outlook
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”.
Our first-quarter performance met or exceeded our first quarter business outlook communicated in February 2021. In May 2021, we announced our
outlook for the second quarter and an increase to the low end of our revenue outlook for the full year of 2021 to reflect our increasing confidence in our
business performance. We also reaffirmed all other measures in our three-year outlook.
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 to a content-driven technology company. Our outlook incorporates the forecasted impacts associated with the Change Program, which is
expected to take 24 months (2021 – 2022) to largely complete and is projected to require an investment of between $500 million and $600 million during
the course of that time. By 2023, we believe the financial benefits that will result from these initiatives include:
●
Organic revenue growth of 5% - 6% including additional annual revenues of $100 million;
●
Adjusted EBITDA margin of 38% - 40%;
●
Free cash flow of $1.8 billion – $2.0 billion;
●
Annual operating expense savings of $600 million, of which $200 million is expected to be reinvested in growth initiatives; and
●
Capital expenditures as a percentage of revenue between 6% - 6.5%.
Our outlook also assumes constant currency rates relative to 2020 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. Some of the financial measures in the
Outlook below are provided on a non-IFRS basis. 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 19
The following table provides the updates to our 2021 revenue growth outlook. All other measures in our 2021 outlook are unchanged.
Total Thomson Reuters Outlook
2021 Outlook (Originally
communicated in 2021 Outlook (Updated
February 2021) in May 2021)
Revenue growth 3.0% - 4.0% 3.5% - 4.0%
Organic revenue growth 3.0% - 4.0% 3.5% - 4.0%
“Big 3” Segments Outlook
2021 Outlook (Originally
communicated in 2021 Outlook (Updated
February 2021) in May 2021)
Revenue Growth 4.5% - 5.5% 5.0% - 5.5%
Organic revenue growth 4.5% - 5.5% 5.0% - 5.5%
The following table sets forth our three-year business outlook provided in February 2021, updated to reflect the May 2021 update to our full year 2021
outlook.
2021, 2022 and 2023 Full-Year Outlook
Total Thomson Reuters Outlook
2021 (Updated) 2022 2023
Before currency, includes the Change Program impact
and excludes the impact of future acquisitions/dispositions
Revenue growth 3.5% - 4.0% 4.0% - 5.0% 5.0% - 6.0%
Organic revenue growth 3.5% - 4.0% 4.0% - 5.0% 5.0% - 6.0%
Adjusted EBITDA margin 30% - 31% 34% - 35% 38% - 40%
Corporate costs $305 million - $340 million $245 million - $280 million $110 million - $120 million
Core corporate costs $130 million - $140 million $120 million - $130 million $110 million - $120 million
Change Program operating expenses $175 million - $200 million $125 million - $150 million $0
Free cash flow $1.0 billion - $1.1 billion $1.2 billion - $1.3 billion $1.8 billion - $2.0 billion
Capital expenditures, as a percentage of revenues 9.0% - 9.5% 7.5% - 8.0% 6.0% - 6.5%
Change Program capital expenditures $125 million - $150 million $75 million - $100 million $0
Depreciation and amortization of computer
software $650 million - $675 million $620 million - $645 million $580 million - $605 million
Interest expense $190 million - $210 million $190 million - $210 million $190 million - $210 million
Effective tax rate on adjusted earnings 16% - 18% n/a n/a
“Big 3” Segments Outlook
2021 (Updated) 2022 2023
Before currency, includes the Change Program impact
and excludes the impact of future acquisitions/dispositions
Revenue growth 5.0% - 5.5% 5.5% - 6.5% 6.0% - 7.0%
Organic revenue growth 5.0% - 5.5% 5.5% - 6.5% 6.0% - 7.0%
Adjusted EBITDA margin 38% - 39% 41% - 42% 43% - 45%
Change Program Investment in 2021
In 2021, we plan to invest between $300 million and $350 million in the Change Program, of which we expect to spend between $85 million and
$110 million in the first six months, and between $215 million and $240 million in the last six months. In each period and in the full year, we expect to
expense 60% of the investments and to capitalize 40% of the investments, which will be amortized over future periods.
Page 20
Second-Quarter 2021 Outlook
●
Total revenues and total organic revenues are expected to increase between 5.5% and 6.5%. Second quarter revenue growth is forecast to be the
high point for year given the impact of COVID-19 in the second quarter of 2020.
●
“Big 3” total revenues and organic revenues are expected to increase between 6.0% and 7.0%.
●
Tax & Accounting Professionals revenues are expected to increase between 10% and 15%.
●
Reuters News revenues are expected to increase between 2.0% and 3.0%.
●
Global Print revenues are expected to increase between 1.0% and 3.0%.
The following table summarizes our material assumptions and 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 2021 to 2023, despite periods Business disruptions associated with the COVID-19 pandemic, including
of volatility due to disruption caused by COVID-19 and the measures intended government enforced quarantines and stay-at-home orders, may continue
to mitigate its impact longer than we expect or may be interrupted by future outbreaks and
●
Continued need for trusted products and services that help customers navigate resurgences of the virus, delaying the anticipated recovery of the global
evolving and complex legal, tax, accounting, regulatory, geopolitical and economy
●
commercial changes, developments and environments, and for cloud-based Global economic uncertainty due to the COVID-19 pandemic as well as
digital tools that drive productivity related regulatory reform and changes in the political environment may
●
Continued ability to deliver innovative products that meet evolving customer lead to limited business opportunities for our customers, creating
demands significant cost pressures for some of them and potentially constraining
● the number of professionals employed, which could lead to lower demand
Acquisition of new customers through expanded and improved digital platforms,
for our products and services
simplification of the product portfolio and through other sales initiatives ●
● Demand for our products and services could be reduced by changes in
Improvement in customer retention through commercial simplification efforts
customer buying patterns, or our inability to execute on key product
and customer service improvements
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 ●
Same as the risks above related to the revenue outlook
●
Business mix continues to shift to higher-growth product offerings ●
The costs to execute our Change Program may be higher than current
●
Change Program expenses of $500 million to $600 million in 2021 and 2022 expectations, or the expected benefits by 2023 may be lower than current
●
Change Program investments drive higher adjusted EBITDA margin through expectations
●
higher revenues and efficiencies by 2023 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 Same as the risks above related to the revenue and adjusted EBITDA
●
Capital expenditures expected to be between 9% and 9.5% of revenues in margin outlook
●
2021; between 7.5% and 8% of revenues in 2022; and between 6% and 6.5% A weaker macroeconomic environment could negatively impact working
of revenues in 2023 capital performance, including the ability of our customers to pay us
●
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 Same as the risks above related to adjusted EBITDA
● ●
The mix of taxing jurisdictions where we recognized pre-tax profit or losses in A material change in the geographical mix of our pre-tax profits and losses
2020 does not significantly change ●
A material change in current tax laws or treaties to which we are subject,
●
No unexpected changes in tax laws and treaties within the jurisdictions where and did not expect
we operate ●
Depreciation and amortization of computer software as well as interest
●
Depreciation and amortization of computer software between $650 million and expense may be significantly higher or lower than expected
$675 million in 2021
●
Interest expense between $190 million and $210 million in 2021
Page 21
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 non-IFRS
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. Additionally, we cannot reasonably predict (i) our share of post-tax earnings (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.
While our first-quarter 2021 performance provides us with increasing confidence about our outlook, the global economy continues to experience
substantial disruption due to concerns regarding the spread of COVID-19, as well as from the measures intended to mitigate its impact. Any worsening of
the global economic or business environment could impact our ability to achieve our outlook.
Related Party Transactions
As of May 3, 2021, Woodbridge beneficially owned approximately 66% of our common shares.
On March 19, 2021, we received a dividend of $994 million from YPL, an equity method investment, related to the sale of LSEG shares (see the
“Executive Summary — Sale of Refinitiv to LSEG” section of this management’s discussion and analysis for additional information).
Except for the above transaction, there were no new significant related party transactions during the first quarter of 2021. Refer to the “Related Party
Transactions” section of our 2020 annual management’s discussion and analysis, which is contained in our 2020 annual report, as well as note 31 of our
2020 annual consolidated financial statements for information regarding related party transactions.
Subsequent Events
There were no material events occurring after March 31, 2021 through the date of this management’s discussion and analysis.
Changes in Accounting Policies
Please refer to the “Changes in Accounting Policies” section of our 2020 annual management’s discussion and analysis, which is contained in our 2020
annual report, for information regarding changes in accounting policies. Since the date of our 2020 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 2020 annual management’s discussion and
analysis, which is contained in our 2020 annual report, for additional information. Since the date of our 2020 annual management’s discussion and
analysis, there have not been any significant changes to our critical accounting estimates and judgments.
Additional Information
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.
Page 22
We are engaged in a long-term efficiency initiative which impacts our financial reporting. We are enhancing our order-to-cash (OTC) applications and
related workflow processes in phases over multiple years. Key elements of the OTC solutions are order management, billing, cash management and
collections functionality. We expect to reduce the number of applications and to streamline and automate processes across our organization through this
initiative.
As we are implementing this initiative in phases over an extended period, the nature and extent of activity will vary by quarter. The initiative could result in
material changes to our internal control over financial reporting depending on the nature and volume of work completed, as we will continue to modify the
design and documentation of the related internal control processes and procedures, as necessary.
Except as described above, there was no change in our internal control over financial reporting during the first quarter of 2021 that materially affected, or
is reasonably likely to materially affect, our internal control over financial reporting.
Share capital
As of May 3, 2021, we had outstanding 495,654,574 common shares, 6,000,000 Series II preference shares, 3,044,665 stock options and a total of
2,597,064 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 2020 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 quarterly and the three-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, the Company’s
expectations regarding share repurchases, and the funding of any required HMRC payments. 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 COVID-19
pandemic, 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. In
particular, the full extent of the impact of the COVID-19 pandemic on our business, operations and financial results will depend on numerous evolving
factors that we may not be able to accurately 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 2020 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
the COVID-19 pandemic and any worsening of the global business and economic environment as a result. There is no assurance that any forward-
looking statement will materialize.
Our company’s quarterly and three-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 COVID-19 pandemic), as well as other factors that the Company believes are appropriate under the
circumstances.
Our 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 23
Appendix A
Non-IFRS Financial Measures
We use non-IFRS financial measures as supplemental indicators of our operating performance and financial position. Additionally, we use non-IFRS
measures as performance metrics as the basis for management incentive programs. 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.
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
IFRS Measure/Reconciliation
Segment adjusted EBITDA, consolidated adjusted EBITDA and the related margins
Segment adjusted EBITDA represents earnings from Provides a consistent basis to evaluate operating Earnings from continuing operations
continuing operations before tax expense or benefit, net profitability and performance trends by excluding items that
interest expense, other finance costs or income, depreciation, we do not consider to be controllable activities for this
amortization of software and other identifiable intangible purpose.
assets, our share of post-tax earnings or losses in equity
method investments, other operating gains and losses, Represents a measure commonly reported and widely used
certain asset impairment charges, fair value adjustments and by investors as a valuation metric. Additionally, this measure
corporate related items. is used to assess our ability to incur and service debt.
Consolidated adjusted EBITDA is comprised of adjusted
EBITDA from each reportable segment and Corporate costs.
The related margins are expressed as a percentage of
revenues.
Adjusted EBITDA less capital expenditures and the related margin
Adjusted EBITDA less capital expenditures. The related Provides a basis for evaluating the operating profitability and Earnings from continuing operations
margin is expressed as a percentage of revenues. capital intensity of a business in a single measure. This
measure captures investments regardless of whether they are
expensed or capitalized.
Page 24
How We Define It Why We Use It and Why It Is Useful to Investors Most Directly Comparable
IFRS Measure/Reconciliation
Adjusted earnings and adjusted EPS
Net earnings: Provides a more comparable basis to analyze earnings and is Net earnings and diluted earnings per
●
Excluding the post-tax impacts of fair value adjustments, also a measure commonly used by shareholders to measure share
amortization of other identifiable intangible assets, other our performance.
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. We calculate 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.
●
We also deduct dividends declared on preference shares.
Adjusted EPS is calculated from adjusted earnings using
diluted weighted-average shares.
In interim periods, we also adjust our reported earnings and Because the geographical mix of pre-tax profits and losses in
earnings per share to reflect a normalized effective tax rate. interim periods may be different from that for the full year, our
Specifically, the normalized effective rate is computed as the effective tax rate computed in accordance with IFRS may be
estimated full-year effective tax rate applied to pre-tax more volatile by quarter. Therefore, we believe that using the
adjusted earnings of the interim period. The reported effective expected full-year effective tax rate provides more
tax rate is based on separate annual effective income tax comparability among interim periods. The adjustment to
rates for each taxing jurisdiction that are applied to each normalize the effective tax rate reallocates estimated full-year
interim period’s pre-tax income. income taxes between interim periods, but has no effect on
full-year tax expense or on cash taxes paid.
Net debt and leverage ratio of net debt to adjusted EBITDA
Net debt: Provides a commonly used measure of a company’s Total debt (current indebtedness plus
Total indebtedness (excluding the associated unamortized leverage. long-term indebtedness)
transaction costs and premiums or discount) plus the
currency related fair value of associated hedging instruments, Given that we hedge some of our debt to reduce risk, we
and lease liabilities less cash and cash equivalents. 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.
Net debt to adjusted EBITDA: Provides a commonly used measure of a For adjusted EBITDA, refer to the
Net debt is divided by adjusted EBITDA for the previous company’s ability to pay its debt. Our non-IFRS measure is definition above for the most directly
twelve-month period ending with the current fiscal quarter. aligned with the calculation of our internal target and is more comparable IFRS measure
conservative than the maximum ratio allowed under our
contractual covenants in our credit facility.
Free cash flow
Net cash provided by operating activities, proceeds from Helps assess our ability, over the long term, to create value Net cash provided by operating activities
disposals of property and equipment, and other investing for our shareholders as it represents cash available to repay
activities, less capital expenditures, payments of lease debt, pay common dividends and fund share repurchases and
principal and dividends paid on our preference shares. new acquisitions.
Page 25
How We Define It Why We Use It and Why It Is Useful to Investors Most Directly Comparable
IFRS Measure/Reconciliation
Changes before the impact of foreign currency or at “constant currency”
Applicable measures where changes are Provides better comparability of business trends from period For each non-IFRS measure, refer to the
reported before the impact of foreign currency or at “constant to period. definitions above for the most directly
currency” comparable IFRS measure.
Our reporting currency is the U.S. dollar. However, we
IFRS Measures: conduct activities in currencies other than the U.S. dollar. We
●
Revenues measure our performance before the impact of foreign
●
Operating expenses currency (or at “constant currency”), which means that we
apply the same foreign currency exchange rates for the
Non-IFRS Measures: current and equivalent prior period. To calculate the foreign
●
Adjusted EBITDA and adjusted EBITDA margin currency impact between periods, we convert the current and
●
Adjusted EPS equivalent prior period’s local currency results using the same
foreign currency exchange rate.
Changes in revenues computed on an “organic” basis
Represent changes in revenues of our existing businesses at Provides further insight into the performance of our existing Revenues
constant currency. The metric excludes the distortive impacts businesses by excluding distortive impacts and serves as a
of acquisitions and dispositions from not owning the business better measure of our ability to grow our business over the
in both comparable periods. long term.
●
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.
Page 26
Appendix B
This appendix provides reconciliations of certain non-IFRS 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, 2021 and 2020.
Reconciliation of earnings from continuing operations to adjusted EBITDA and adjusted EBITDA less capital expenditures
Three months ended March 31,
(millions of U.S. dollars, except margins) 2021 2020
Earnings from continuing operations 5,033 191
Adjustments to remove:
Tax expense 1,594 47
Other finance costs (income) 6 (47)
Net interest expense 51 45
Amortization of other identifiable intangible assets 31 30
Amortization of computer software 115 111
Depreciation 46 40
EBITDA 6,876 417
Adjustments to remove:
Share of post-tax (earnings) losses in equity method investments (6,297) 54
Other operating (gains) losses, net (17) 32
Fair value adjustments (4) (23)
Adjusted EBITDA 558 480
Deduct: capital expenditures (120) (142)
Adjusted EBITDA less capital expenditures 438 338
Adjusted EBITDA margin 35.3% 31.6%
Adjusted EBITDA less capital expenditures margin 27.7% 22.3%
Reconciliation of net earnings to adjusted earnings and adjusted EPS
Three months ended March 31,
(millions of U.S. dollars, except per share amounts and share data) 2021 2020
Net earnings 5,036 193
Adjustments to remove:
Fair value adjustments (4) (23)
Amortization of other identifiable intangible assets 31 30
Other operating (gains) losses, net (17) 32
Other finance costs (income) 6 (47)
Share of post-tax (earnings) losses in equity method investments (6,297) 54
Tax on above items(1) 1,535 (31)
Tax items impacting comparability(1) 1 30
Earnings from discontinued operations, net of tax (3) (2)
Interim period effective tax rate normalization(1) 1 4
Dividends declared on preference shares (1) (1)
Adjusted earnings 288 239
Adjusted EPS $0.58 $0.48
Diluted weighted-average common shares (millions) 496.9 498.1
(1) 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,
(millions of U.S. dollars) 2021 2020
Net cash provided by operating activities 380 176
Capital expenditures (120) (142)
Proceeds from disposal of property and equipment - 19
Other investing activities 1 1
Payments of lease principal (21) (18)
Dividends paid on preference shares (1) (1)
Free cash flow 239 35
Reconciliation of 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
Subtotal
Foreign Constant Acquisitions/
(millions of U.S. dollars) 2021 2020 Total Currency Currency (Divestitures) Organic
Revenues
Legal Professionals 668 626 7% 1% 5% 1% 5%
Corporates 384 367 5% - 4% - 4%
Tax & Accounting Professionals 225 218 3% (1%) 5% - 5%
“Big 3” Segments Combined 1,277 1,211 5% 1% 5% - 5%
Reuters News 160 155 3% 2% 2% - 2%
Global Print 143 155 (7%) 1% (9%) - (9%)
Eliminations/Rounding - (1)
Total revenues 1,580 1,520 4% 1% 3% - 3%
Reconciliation of changes in recurring revenues excluding the effects of foreign currency (constant currency) as well as
acquisitions/divestitures (organic basis)(1)
Three months ended March 31,
Change
Subtotal
Foreign Constant Acquisitions/
(millions of U.S. dollars) 2021 2020 Total Currency Currency (Divestitures) Organic
Recurring Revenues
Legal Professionals 621 587 6% 1% 4% 1% 4%
Corporates 295 281 5% - 4% - 4%
Tax & Accounting Professionals 160 158 2% (2%) 4% - 4%
“Big 3” Segments Combined 1,076 1,026 5% 1% 4% - 4%
Reuters News 144 142 2% 2% - - -
Total recurring revenues 1,220 1,168 5% 1% 4% - 3%
(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.
Page 28
Reconciliation of changes in transactions revenues excluding the effects of foreign currency (constant currency) as well as
acquisitions/divestitures (organic basis)(1)
Three months ended March 31,
Change
Subtotal
Foreign Constant Acquisitions/
(millions of U.S. dollars) 2021 2020 Total Currency Currency (Divestitures) Organic
Transactions Revenues
Legal Professionals 47 39 20% 3% 17% - 17%
Corporates 89 86 4% - 4% - 4%
Tax & Accounting Professionals 65 60 7% 1% 7% - 7%
“Big 3” Segments Combined 201 185 8% 1% 8% - 8%
Reuters News 16 13 23% 1% 22% - 22%
Total transactions revenues 217 198 9% 1% 9% - 9%
(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.
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
Foreign Constant
(millions of U.S. dollars, except margins and per share amounts) 2021 2020 Total Currency Currency
Adjusted EBITDA
Legal Professionals 279 230 21% 3% 18%
Corporates 146 117 25% - 25%
Tax & Accounting Professionals 98 84 17% (1%) 17%
“Big 3” Segments Combined 523 431 21% 2% 20%
Reuters News 28 19 45% (20%) 65%
Global Print 57 63 (9%) 2% (11%)
Corporate costs (50) (33) n/a n/a n/a
Consolidated adjusted EBITDA 558 480 16% 1% 15%
Adjusted EBITDA Margin
Legal Professionals 41.8% 36.7% 510bp 50bp 460bp
Corporates 38.1% 31.9% 620bp (10)bp 630bp
Tax & Accounting Professionals 43.7% 38.7% 500bp 30bp 470bp
“Big 3” Segments Combined 41.0% 35.6% 540bp 30bp 510bp
Reuters News 17.6% 12.6% 500bp (250)bp 750bp
Global Print 39.9% 40.5% (60)bp 20bp (80)bp
Corporate costs n/a n/a n/a n/a n/a
Consolidated adjusted EBITDA margin 35.3% 31.6% 370bp 10bp 360bp
Consolidated operating expenses 1,018 1,017 - 2% (2%)
Consolidated adjusted EPS $0.58 $0.48 21% 2% 19%
(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.
Page 29
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 March 31, December 31, September 30, June 30, March 31, December 31, September 30, June 30,
amounts) 2021 2020 2020 2020 2020 2019 2019 2019
Revenues 1,580 1,616 1,443 1,405 1,520 1,583 1,413 1,423
Operating profit 387 956 318 365 290 216 262 447
Earnings (loss) from continuing operations 5,033 587 240 131 191 1,321 (72) 207
Earnings (loss) from discontinued operations, net of
tax 3 (25) 1 (5) 2 3 28 (27)
Net earnings (loss) 5,036 562 241 126 193 1,324 (44) 180
Earnings (loss) attributable to common
shareholders 5,036 562 241 126 193 1,324 (44) 180
Basic earnings (loss) per share
From continuing operations $10.15 $1.18 $0.48 $0.26 $0.38 $2.64 $(0.14) $0.41
From discontinued operations - (0.05) - (0.01) 0.01 0.01 0.05 (0.05)
$10.15 $1.13 $0.48 $0.25 $0.39 $2.65 $(0.09) $0.36
Diluted earnings (loss) per share
From continuing operations $10.13 $1.18 $0.48 $0.26 $0.38 $2.63 $(0.14) $0.41
From discontinued operations - (0.05) - (0.01) 0.01 0.01 0.05 (0.05)
$10.13 $1.13 $0.48 $0.25 $0.39 $2.64 $(0.09) $0.36
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. Revenues in second quarter of 2020 were negatively impacted by delayed print
shipments and timing of pay-per-return revenues in our Tax & Accounting Professionals segment, both due to the COVID-19 pandemic. Foreign currency
had a slightly negative impact on our revenues through December 31, 2020. Acquisitions positively impacted revenues beginning in the third quarter of
2019 when we acquired HighQ and Confirmation, but the impact was partly offset by the loss of revenues from certain businesses that we sold.
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 become more profitable, and when our revenues decline, we become less profitable. In 2020, operating
profit benefited from lower costs due to the completion of the repositioning of our company in 2019 following the sale of F&R in October 2018 and,
beginning with the second quarter of 2020, our COVID-19 related cost-reduction 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. In 2019, our operating profit was significantly
impacted by costs and investments to reposition our business. In the third quarter of 2019, operating profit also benefited from a significant gain on the
revaluation of warrants that we held in our former Refinitiv investment.
Net earnings (loss) – The increase in net earnings in the first quarter of 2021 was due to the gain on sale of our investment in Refinitiv to LSEG. Net
earnings in the fourth quarter of 2019 was due to a $1.2 billion deferred tax benefit associated with the reorganization of certain foreign operations.
Page 30
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. 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 business; 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, 2021, our 2020 annual consolidated financial statements, as well as our 2020 annual
management’s discussion and analysis included in our 2020 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 on March 2, 2020 and
set forth in SEC Release No. 33-10762.
Page 31
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, 2021
Subsidiary Guarantor Non-Guarantor
(millions of U.S. dollars) Parent Issuer Subsidiaries 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 32
CONDENSED CONSOLIDATING INCOME STATEMENT
Three months ended March 31, 2020
Subsidiary Guarantor Non-Guarantor
(millions of U.S. dollars) Parent Issuer Subsidiaries Subsidiaries Eliminations Consolidated
CONTINUING OPERATIONS
Revenues - - 1,070 809 (359) 1,520
Operating expenses (3) - (938) (435) 359 (1,017)
Depreciation - - (16) (24) - (40)
Amortization of computer software - - (6) (106) 1 (111)
Amortization of other identifiable
intangible assets - - (13) (17) - (30)
Other operating gains (losses), net - - 3 (35) - (32)
Operating (loss) profit (3) - 100 192 1 290
Finance (costs) income, net:
Net interest expense (36) - - (9) - (45)
Other finance income (costs) 93 - (1) (45) - 47
Intercompany net interest income (expense) 26 - (12) (14) - -
Income before tax and equity method investments 80 - 87 124 1 292
Share of post-tax losses in equity method investments - - - (54) - (54)
Share of post-tax earnings in subsidiaries 113 - 5 53 (171) -
Tax expense - - (34) (13) - (47)
Earnings from continuing operations 193 - 58 110 (170) 191
Earnings from discontinued operations, net of tax - - - 2 - 2
Net earnings 193 - 58 112 (170) 193
Earnings attributable to common shareholders 193 - 58 112 (170) 193
Page 33
CONDENSED CONSOLIDATING STATEMENT OF FINANCIAL POSITION
March 31, 2021
Subsidiary Guarantor Non-Guarantor
(millions of U.S. dollars) Parent Issuer Subsidiaries Subsidiaries Eliminations Consolidated
Cash and cash equivalents 6 - 332 2,246 - 2,584
Trade and other receivables 15 - 644 390 - 1,049
Intercompany receivables 3,507 - 219 3,605 (7,331) -
Other financial assets - - 5 72 - 77
Prepaid expenses and other current assets - - 221 227 - 448
Current assets 3,528 - 1,421 6,540 (7,331) 4,158
Property and equipment, net - - 226 274 - 500
Computer software, net - - 8 809 (2) 815
Other identifiable intangible assets, net - - 1,136 2,261 - 3,397
Goodwill - - 3,731 2,246 - 5,977
Equity method investments - - - 6,870 - 6,870
Other non-current assets 111 - 131 642 - 884
Intercompany receivables 221 - - 778 (999) -
Investments in subsidiaries 17,872 - 178 4,077 (22,127) -
Deferred tax - - - 1,179 - 1,179
Total assets 21,732 - 6,831 25,676 (30,459) 23,780
LIABILITIES AND EQUITY
Liabilities
Payables, accruals and provisions 94 - 375 590 - 1,059
Current tax liabilities - - 2 1,128 - 1,130
Deferred revenue - - 570 262 - 832
Intercompany payables 3,030 - 581 3,720 (7,331) -
Other financial liabilities - - 18 139 - 157
Current liabilities 3,124 - 1,546 5,839 (7,331) 3,178
Long-term indebtedness 3,788 - - - - 3,788
Provisions and other non-current liabilities 3 - 69 882 - 954
Intercompany payables - - 778 221 (999) -
Deferred tax - - 183 860 - 1,043
Total liabilities 6,915 - 2,576 7,802 (8,330) 8,963
Equity
Total equity 14,817 - 4,255 17,874 (22,129) 14,817
Total liabilities and equity 21,732 - 6,831 25,676 (30,459) 23,780
Page 34
CONDENSED CONSOLIDATING STATEMENT OF FINANCIAL POSITION
December 31, 2020
Subsidiary Guarantor Non-Guarantor
(millions of U.S. dollars) Parent Issuer Subsidiaries Subsidiaries Eliminations Consolidated
Cash and cash equivalents 3 - 359 1,425 - 1,787
Trade and other receivables 1 - 735 415 - 1,151
Intercompany receivables 3,406 - 245 3,298 (6,949) -
Other financial assets - - 5 607 - 612
Prepaid expenses and other current assets 1 - 212 212 - 425
Current assets 3,411 - 1,556 5,957 (6,949) 3,975
Property and equipment, net - - 241 304 - 545
Computer software, net - - 12 821 (3) 830
Other identifiable intangible assets, net - - 1,150 2,277 - 3,427
Goodwill - - 3,731 2,245 - 5,976
Equity method investments - - - 1,136 - 1,136
Other non-current assets 101 - 132 555 - 788
Intercompany receivables 245 - - 778 (1,023) -
Investments in subsidiaries 12,854 - 175 4,056 (17,085) -
Deferred tax - - - 1,204 - 1,204
Total assets 16,611 - 6,997 19,333 (25,060) 17,881
LIABILITIES AND EQUITY
Liabilities
Payables, accruals and provisions 39 - 421 699 - 1,159
Current tax liabilities - - 1 250 - 251
Deferred revenue - - 611 255 - 866
Intercompany payables 2,617 - 681 3,651 (6,949) -
Other financial liabilities 200 - 19 157 - 376
Current liabilities 2,856 - 1,733 5,012 (6,949) 2,652
Long-term indebtedness 3,772 - - - - 3,772
Provisions and other non-current liabilities 3 - 72 1,008 - 1,083
Intercompany payables - - 778 245 (1,023) -
Deferred tax - - 183 211 - 394
Total liabilities 6,631 - 2,766 6,476 (7,972) 7,901
Equity
Total equity 9,980 - 4,231 12,857 (17,088) 9,980
Total liabilities and equity 16,611 - 6,997 19,333 (25,060) 17,881
Page 35
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
Subsidiary Guarantor Non-Guarantor
(millions of U.S. dollars) Parent Issuer Subsidiaries Subsidiaries Eliminations Consolidated
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)
Increase (decrease) in cash and bank overdrafts 3 - (27) 822 - 798
Three months ended March 31, 2020
Net cash (used in) provided by operating activities (36) - 81 131 - 176
Net cash used in investing activities (75) - (2) (197) 25 (249)
Net cash provided by (used in) by financing
activities 107 - (164) 162 (25) 80
(Decrease) increase in cash and bank overdrafts (4) - (85) 96 - 7
Page 36
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 2021 2020
CONTINUING OPERATIONS
Revenues 2 1,580 1,520
Operating expenses 5 (1,018) (1,017)
Depreciation (46) (40)
Amortization of computer software (115) (111)
Amortization of other identifiable intangible assets (31) (30)
Other operating gains (losses), net 6 17 (32)
Operating profit 387 290
Finance costs, net:
Net interest expense 7 (51) (45)
Other finance (costs) income 7 (6) 47
Income before tax and equity method investments 330 292
Share of post-tax earnings (losses) in equity method investments 8 6,297 (54)
Tax expense 9 (1,594) (47)
Earnings from continuing operations 5,033 191
Earnings from discontinued operations, net of tax 3 2
Net earnings 5,036 193
Earnings attributable to common shareholders 5,036 193
Earnings per share: 10
Basic earnings per share:
From continuing operations $10.15 $0.38
From discontinued operations - 0.01
Basic earnings per share $10.15 $0.39
Diluted earnings per share:
From continuing operations $10.13 $0.38
From discontinued operations - 0.01
Diluted earnings per share $10.13 $0.39
The related notes form an integral part of these consolidated financial statements.
Page 37
THOMSON REUTERS CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
Three months ended March 31,
(millions of U.S. dollars) Notes 2021 2020
Net earnings 5,036 193
Other comprehensive (loss) income:
Items that have been or may be subsequently reclassified to net earnings:
Cash flow hedges adjustments to net earnings 7 (15) 3
Cash flow hedges adjustments to equity 9 (3)
Foreign currency translation adjustments to equity 5 (217)
Share of other comprehensive loss in equity method investments 8 (98) (101)
Related tax benefit on share of other comprehensive loss in equity method investments 23 25
(76) (293)
Items that will not be reclassified to net earnings:
Fair value adjustments on financial assets 11 (2) (8)
Remeasurement on defined benefit pension plans 96 (42)
Related tax (expense) benefit on remeasurement on defined benefit pension plans (23) 13
Share of other comprehensive loss in equity method investments 8 - (6)
Related tax benefit on share of other comprehensive loss in equity method investments - 2
71 (41)
Other comprehensive loss (5) (334)
Total comprehensive income (loss) 5,031 (141)
Comprehensive income (loss) for the period attributable to:
Common shareholders:
Continuing operations 5,028 (143)
Discontinued operations 3 2
Total comprehensive income (loss) 5,031 (141)
The related notes form an integral part of these consolidated financial statements.
Page 38
THOMSON REUTERS CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(unaudited)
March 31, December 31,
(millions of U.S. dollars) Notes 2021 2020
Cash and cash equivalents 11 2,584 1,787
Trade and other receivables 1,049 1,151
Other financial assets 11 77 612
Prepaid expenses and other current assets 448 425
Current assets 4,158 3,975
Property and equipment, net 500 545
Computer software, net 815 830
Other identifiable intangible assets, net 3,397 3,427
Goodwill 5,977 5,976
Equity method investments 8 6,870 1,136
Other non-current assets 12 884 788
Deferred tax 1,179 1,204
Total assets 23,780 17,881
LIABILITIES AND EQUITY
Liabilities
Payables, accruals and provisions 13 1,059 1,159
Current tax liabilities 1,130 251
Deferred revenue 832 866
Other financial liabilities 11 157 376
Current liabilities 3,178 2,652
Long-term indebtedness 11 3,788 3,772
Provisions and other non-current liabilities 14 954 1,083
Deferred tax 1,043 394
Total liabilities 8,963 7,901
Equity
Capital 15 5,465 5,458
Retained earnings 10,119 5,211
Accumulated other comprehensive loss (767) (689)
Total equity 14,817 9,980
Total liabilities and equity 23,780 17,881
Contingencies (note 18)
The related notes form an integral part of these consolidated financial statements.
Page 39
THOMSON REUTERS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOW
(unaudited)
Three months ended March 31,
(millions of U.S. dollars) Notes 2021 2020
Cash provided by (used in):
OPERATING ACTIVITIES
Earnings from continuing operations 5,033 191
Adjustments for:
Depreciation 46 40
Amortization of computer software 115 111
Amortization of other identifiable intangible assets 31 30
Share of post-tax (earnings) losses in equity method investments 8 (6,297) 54
Deferred tax 674 (3)
Other 16 30 11
Changes in working capital and other items 16 785 (243)
Operating cash flows from continuing operations 417 191
Operating cash flows from discontinued operations (37) (15)
Net cash provided by operating activities 380 176
INVESTING ACTIVITIES
Acquisitions, net of cash acquired 17 (3) (124)
Proceeds (payments) from disposals of businesses and investments 5 (3)
Dividend from sale of LSEG shares 8 994 -
Capital expenditures (120) (142)
Proceeds from disposals of property and equipment - 19
Other investing activities 1 1
Taxes paid on sale of Refinitiv and LSEG shares (6) -
Investing cash flows from continuing operations 871 (249)
Investing cash flows from discontinued operations (42) -
Net cash provided by (used in) investing activities 829 (249)
FINANCING ACTIVITIES
Proceeds from debt 11 - 1,020
Repayments of debt 11 - (645)
Net borrowings under short-term loan facilities 11 - 118
Payments of lease principal (21) (18)
Repurchases of common shares 15 (200) (200)
Dividends paid on preference shares (1) (1)
Dividends paid on common shares 15 (194) (182)
Other financing activities 5 (12)
Net cash (used in) provided by financing activities (411) 80
Increase in cash and bank overdrafts 798 7
Translation adjustments (1) (10)
Cash and bank overdrafts at beginning of period 1,787 825
Cash and bank overdrafts at end of period 2,584 822
Cash and bank overdrafts at end of period comprised of:
Cash and cash equivalents 2,584 823
Bank overdrafts - (1)
2,584 822
Supplemental cash flow information is provided in note 16.
Interest paid, net of debt related hedges (14) (21)
Interest received 1 3
Income taxes paid 16 (86) (16)
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 40
THOMSON REUTERS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited)
Total
Unrecognized Foreign accumulated
Stated (loss) gain on currency other
share Contributed Total Retained financial translation comprehensive Total
(millions of U.S. dollars) capital surplus capital earnings instruments adjustments loss (“AOCL”) 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 Dividend Reinvestment
Plan (“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
Unrecognized Foreign
Stated loss on currency
share Contributed Total Retained financial translation AOCL Total
(millions of U.S. dollars) capital surplus capital earnings instruments adjustments equity
Balance, December 31, 2019 3,576 1,801 5,377 4,965 (3) (779) (782) 9,560
Net earnings - - - 193 - - - 193
Other comprehensive loss - - - (33) (26) (275) (301) (334)
Total comprehensive income (loss) - - - 160 (26) (275) (301) (141)
Dividends declared on preference shares - - - (1) - - - (1)
Dividends declared on common shares - - - (188) - - - (188)
Shares issued under DRIP 6 - 6 - - - - 6
Repurchases of common shares (see note 15) 2 - 2 (2) - - - -
Stock compensation plans 49 (49) - - - - - -
Balance, March 31, 2020 3,633 1,752 5,385 4,934 (29) (1,054) (1,083) 9,236
The related notes form an integral part of these consolidated financial statements.
Page 41
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 Company’s Audit Committee of the
Board of Directors on May 3, 2021.
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, 2020. 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, 2020. In March 2020, the World Health Organization characterized a novel strain of the coronavirus, known as COVID-19, as a
pandemic. The global economy continues to experience substantial disruption due to concerns regarding the spread of COVID-19, as well as from the
measures intended to mitigate its impact. Due to the significant uncertainty about the duration and impact of the global economic crisis caused by the
COVID-19 pandemic, 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, 2020, which are included in the Company’s 2020
annual report.
References to “$” are to U.S. dollars and references to “C$” are to Canadian dollars.
Page 42
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).
Legal Tax & Accounting
Revenues by type Professionals Corporates Professionals Reuters News Global Print Total
Three months ended March 31, 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
Recurring 621 587 295 281 160 158 144 142 - - 1,220 1,168
Transactions 47 39 89 86 65 60 16 13 - - 217 198
Global Print - - - - - - - - 143 155 143 155
Eliminations/Rounding - - - - - - - - - - - (1)
Total 668 626 384 367 225 218 160 155 143 155 1,580 1,520
Revenues by geography Legal Tax & Accounting
(country of destination) Professionals Corporates Professionals Reuters News Global Print Total
Three months ended March 31, 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
U.S. 526 503 323 308 187 182 49 104 101 115 1,186 1,212
Canada (country of domicile) 16 13 2 3 10 9 1 1 17 16 46 42
Other 5 4 12 12 21 21 2 2 4 4 44 43
Americas (North America, Latin
America, South America) 547 520 337 323 218 212 52 107 122 135 1,276 1,297
U.K. 68 59 26 27 4 4 66 7 9 9 173 106
Other 17 16 12 9 - - 27 27 4 3 60 55
EMEA (Europe, Middle East
and Africa) 85 75 38 36 4 4 93 34 13 12 233 161
Asia Pacific 36 31 9 8 3 2 15 14 8 8 71 63
Eliminations/Rounding - - - - - - - - - - - (1)
Total 668 626 384 367 225 218 160 155 143 155 1,580 1,520
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, national and international news to professionals via desktop terminals, including through
Refinitiv, the world’s media organizations, industry events and directly to consumers.
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Global Print
The Global Print segment provides legal and tax information primarily in print format to customers around the world.
The Company also reports “Corporate costs”, which includes expenses for corporate functions and does not qualify as a reportable segment.
Three months ended March 31,
2021 2020
Revenues
Legal Professionals 668 626
Corporates 384 367
Tax & Accounting Professionals 225 218
Reuters News 160 155
Global Print 143 155
Eliminations/Rounding - (1)
Consolidated revenues 1,580 1,520
Adjusted EBITDA
Legal Professionals 279 230
Corporates 146 117
Tax & Accounting Professionals 98 84
Reuters News 28 19
Global Print 57 63
Corporate costs (50) (33)
Adjusted EBITDA 558 480
Fair value adjustments (see note 5) 4 23
Depreciation (46) (40)
Amortization of computer software (115) (111)
Amortization of other identifiable intangible assets (31) (30)
Other operating gains (losses), net 17 (32)
Consolidated operating profit 387 290
Net interest expense (51) (45)
Other finance (costs) income (6) 47
Share of post-tax earnings (losses) in equity method investments 6,297 (54)
Tax expense (1,594) (47)
Earnings from continuing operations 5,033 191
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.
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.
●
Consolidated adjusted EBITDA is comprised of adjusted EBITDA from reportable segments and Corporate costs.
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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 seasonality of the Company’s operating profit may be further impacted in 2021 by the timing of significant
Change Program costs it expects to incur to transform itself from a holding company to an operating company and into a content-driven technology
company. The seasonality of the Company’s revenues and operating expenses was impacted by COVID-19 in 2020.
Note 5: Operating Expenses
The components of operating expenses include the following:
Three months ended March 31,
2021 2020
Salaries, commissions and allowances 584 561
Share-based payments 18 17
Post-employment benefits 37 33
Total staff costs 639 611
Goods and services(1) 288 330
Content 71 68
Telecommunications 12 12
Facilities 12 19
Fair value adjustments(2) (4) (23)
Total operating expenses 1,018 1,017
(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.
Note 6: Other Operating Gains (Losses), Net
Other operating gains (losses), net, were $17 million and $(32) million for the three months ended March 31, 2021 and 2020, respectively. 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 London Stock
Exchange Group (“LSEG”) on January 29, 2021 (see note 8). The three months ended March 31, 2020 included a loss from the revaluation of warrants
that the Company held in Refinitiv, which more than offset gains associated with the sale of certain real estate properties and a distribution from an
investment.
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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,
2021 2020
Interest expense:
Debt 40 37
Derivative financial instruments — hedging activities (1) -
Other, net 7 3
Fair value (gains) losses on cash flow hedges, transfer from equity (15) 3
Net foreign exchange losses (gains) on debt 15 (3)
Net interest expense — debt and other 46 40
Net interest expense — leases 2 2
Net interest expense — pension and other post-employment benefit plans 4 5
Interest income (1) (2)
Net interest expense 51 45
Three months ended March 31,
2021 2020
Net losses (gains) due to changes in foreign currency exchange rates 6 (36)
Net gains on derivative instruments - (11)
Other finance costs (income) 6 (47)
Net losses (gains) due to changes in foreign currency exchange rates
Net losses (gains) 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 gain on derivative instruments were principally comprised of amounts relating to foreign exchange contracts.
Note 8: Equity Method Investments
On January 29, 2021, the Company and The Blackstone Group and its subsidiaries, and private equity funds affiliated with Blackstone (“Blackstone’s
consortium”) closed the sale of Refinitiv to LSEG in an all share transaction. As a result, equity method investments at March 31, 2021 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 incorporated under the laws of the Cayman Islands and jointly owned by the Company,
Blackstone’s consortium and certain current and former members of Refinitiv senior management. As of March 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 22%
voting interest in LSEG). At the same date, the Company owned 42.74% of YPL and indirectly owned approximately 72.4 million LSEG shares.
Subject to certain exceptions, the Company and Blackstone’s consortium have otherwise agreed to be subject to a lock-up for their LSEG shares through
January 29, 2023. In each of years three and four following closing (starting on January 30, 2023 and January 30, 2024, respectively), the Company and
Blackstone’s consortium will become entitled to sell in aggregate one-third of the LSEG shares that were issued. The lock-up arrangement will terminate
on January 29, 2025. The ability of current and former members of Refinitiv senior management to sell shares held by them is also subject to certain
restrictions.
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YPL is entitled to nominate three non-executive LSEG directors for as long as it holds at least 25% of LSEG shares, two LSEG directors for as long as it
holds at least 17.5% but less than 25% of LSEG shares and one LSEG director for as long as it holds at least 10% but less than 17.5% of LSEG shares.
For so long as YPL is entitled to nominate three directors, one nominee will be a Thomson Reuters representative. Once YPL is released from the lock-up
agreement described above, any disposals of LSEG shares will be subject to orderly marketing restrictions. A standstill restriction also applies to YPL
under which it (and the underlying investors) have agreed not to, among other matters, acquire further LSEG shares, or make a takeover offer for LSEG
for designated time periods. YPL has also committed to vote its LSEG shares in line with the LSEG Board’s recommendation.
The Company accounts for its indirect investment in LSEG at fair value, based on the share price of LSEG, within “Share of post-tax earnings (losses) in
equity method investments” in the consolidated income statement. The investment 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, the investment in LSEG shares held by YPL is accounted for at fair value.
LSEG dividends distributed to the Company from YPL will reduce the investment and will be included in “Other investing activities” in the consolidated
statement of cash flow.
Gain on sale of Refinitiv to LSEG and subsequent sale of LSEG shares
The Company recognized a gain of $8,075 million related to the January sale of Refinitiv to LSEG within “Share of post-tax earnings (losses) in equity
method investments” in the consolidated income statement. As of the January 29, 2021 closing date, the Company indirectly owned approximately
82.5 million LSEG shares, which included 4.5 million shares from the exercise of warrants the Company previously held in Refinitiv. The transaction was
predominantly tax deferred for the Company except for approximately $640 million that is payable in 2021. On March 19, 2021, as permitted under a
lock-up exception, the Company instructed YPL to sell approximately 10.1 million LSEG shares for pre-tax net proceeds of $994 million. Over the course
of 2021, the Company will pay approximately $225 million of tax on the sale of these shares and will use the remaining after-tax proceeds to pay the
approximately $640 million of taxes on the LSEG transaction. 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 provided by investing activities” within the consolidated
statement of cash flow.
The Company’s share of post-tax earnings (losses) in equity method investments as reported in the consolidated income statement is comprised of the
following:
Three months ended March 31,
2021 2020
YPL (formerly RHL) 6,295 (58)
Other equity method investments 2 4
Total share of post-tax earnings (losses) in equity method investments 6,297 (54)
The 2021 period included an $8,075 million gain from the sale of Refinitiv to LSEG, which was partially offset by $1,612 million of losses from the decline
in the value of the Company’s indirect investment in LSEG subsequent to the sale date and $168 million of post-tax losses related to the Refinitiv
operations prior to the sale.
The composition of equity method investments as reported in the consolidated statement of financial position is comprised of the following:
March 31, December 31,
2021 2020
YPL (formerly RHL) 6,711 981
Other equity method investments 159 155
Total equity method investments 6,870 1,136
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Set forth below is summarized financial information for 100% of YPL at March 31, 2021 (formerly RHL at March 31, 2020).
Three months ended March 31,
2021 2020
Revenues 551 1,633
Gain related to the sale of Refinitiv to LSEG 18,645 -
Mark-to-market of LSEG shares (3,574) -
Refinitiv net loss prior to its sale to LSEG (361) (93)
Net earnings (loss) 14,710 (93)
Remove: Net earnings attributable to non-controlling interests (11) (36)
Net earnings (loss) attributable to YPL (formerly RHL) 14,699 (129)
Other comprehensive loss attributable to YPL (formerly RHL) (214) (239)
Total comprehensive income (loss) attributable to YPL (formerly RHL) 14,485 (368)
The Company’s share of net earnings attributable to YPL was $6,295 million through March 31, 2021 and reflected changes in the Company’s percentage
ownership of RHL and YPL during the three-month period.
The following table reconciles the net assets attributable to YPL to the Company’s carrying value of its investment in YPL:
March 31, December 31,
2021 2020
Assets
Current assets 31 2,071
Non-current assets 16,244 21,094
Total assets 16,275 23,165
Liabilities
Current liabilities - 3,995
Non-current liabilities 44 14,268
Total liabilities 44 18,263
Net assets 16,231 4,902
Non-controlling interests - (2,415)
Net assets attributable to YPL (formerly RHL) 16,231 2,487
Net assets attributable to YPL (formerly RHL) - beginning period 2,487 3,278
Net earnings (loss) attributable to YPL (formerly RHL) 14,699 (1,232)
Other comprehensive (loss) income attributable to YPL (formerly RHL) (214) 330
Other adjustments(1) 253 111
Distribution to owner (994) -
Net assets attributable to YPL (formerly RHL) - ending period 16,231 2,487
Thomson Reuters % share 42.74% 45%
Thomson Reuters $ share 6,937 1,119
Historical excluded equity adjustment(2) (226) (138)
Thomson Reuters carrying amount 6,711 981
(1) Consists of equity transactions excluded from total comprehensive income (loss) attributable to YPL.
(2) Represents the cumulative impact of equity transactions excluded from the Company’s investment in YPL.
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Note 9: Taxation
Tax expense was $1,594 million and $47 million for the three months ended March 31, 2021 and 2020, respectively. The three months ended March 31,
2021 includes $1,538 million of tax expense related to the Company’s earnings in equity method investments, primarily from the gain on sale of its former
investment in 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.
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,
2021 2020
Earnings attributable to common shareholders 5,036 193
Less: Dividends declared on preference shares (1) (1)
Earnings used in consolidated earnings per share 5,035 192
Less: Earnings from discontinued operations, net of tax (3) (2)
Earnings used in earnings per share from continuing operations 5,032 190
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,
2021 2020
Weighted-average number of common shares outstanding 495,507,124 495,781,260
Weighted-average number of vested DSUs 432,846 423,767
Basic 495,939,970 496,205,027
Effect of stock options and TRSUs 998,348 1,940,051
Diluted 496,938,318 498,145,078
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Note 11: Financial Instruments
Financial assets and liabilities
Financial assets and liabilities in the consolidated statement of financial position were as follows:
Assets/
Assets/ (Liabilities) Assets at Fair
(Liabilities) at Fair Value through
at Value Other Derivatives
Amortized through Comprehensive Used for
March 31, 2021 Cost Earnings Income or Loss Hedging Total
Cash and cash equivalents 291 2,293 - - 2,584
Trade and other receivables 1,049 - - - 1,049
Other financial assets - current 77 - - - 77
Other financial assets - non-current (see note 12) 34 36 44 110 224
Trade payables (see note 13) (166) - - - (166)
Accruals (see note 13) (719) - - - (719)
Other financial liabilities - current(1) (155) (2) - - (157)
Long-term indebtedness (3,788) - - - (3,788)
Other financial liabilities - non current (see note 14)(2) (200) - - - (200)
Total (3,577) 2,327 44 110 (1,096)
Assets/
Assets/ (Liabilities) Assets at Fair
(Liabilities) at Fair Value through
at Value Other Derivatives
Amortized through Comprehensive Used for
December 31, 2020 Cost Earnings Income or Loss Hedging Total
Cash and cash equivalents 311 1,476 - - 1,787
Trade and other receivables 1,151 - - - 1,151
Other financial assets - current 95 517 - - 612
Other financial assets - non-current (see note 12) 35 17 46 100 198
Trade payables (see note 13) (217) - - - (217)
Accruals (see note 13) (761) - - - (761)
Other financial liabilities - current(1)(3) (374) (2) - - (376)
Long-term indebtedness (3,772) - - - (3,772)
Other financial liabilities - non current (see note 14)(2) (223) (1) - - (224)
Total (3,755) 2,007 46 100 (1,602)
(1) Includes lease liabilities of $80 million (2020 - $83 million).
(2) Includes lease liabilities of $200 million (2020 - $223 million).
(3) Includes a commitment to repurchase up to $200 million of common shares related to the Company’s pre-defined plan with its broker to repurchase the Company’s shares during its internal
trading blackout period. See note 15.
Cash and cash equivalents
Of total cash and cash equivalents, $47 million and $43 million at March 31, 2021 and December 31, 2020, respectively, were held in subsidiaries which
have regulatory restrictions and were therefore not available for general use by the Company.
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Debt-related activity
The Company did not issue notes or make any debt repayments in the three months ended March 31, 2021. The following table provides information
regarding notes that the Company repaid in the three months ended March 31, 2020.
MONTH/YEAR TRANSACTION PRINCIPAL AMOUNT (IN MILLIONS)
Notes repaid
January 2020 3.309% Notes, due 2021 C$550
January 2020 3.95% Notes, due 2021 US$139
In January 2020, the Company repaid notes prior to their scheduled maturity dates for $640 million. This amount included early redemption premiums and
the settlement of cross-currency swaps. The repayments were funded with commercial paper borrowings.
Commercial paper program
Under its commercial paper program, the Company may issue up to $1.8 billion of notes. There was no outstanding commercial paper at March 31, 2021
and December 31, 2020. In January 2020, the Company issued $630 million of commercial paper, the proceeds of which were used to redeem debt
obligations ahead of their maturity. Most of the commercial paper was repaid in February and March 2020, primarily from funds borrowed under the
Company’s credit facility.
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, 2021 and December 31, 2020. In the three months ended March 31, 2020, the Company borrowed $1.0 billion under this facility, of which a
portion of the proceeds was used to repay commercial paper. 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, intends to phase out the majority of LIBOR rates globally by the end of 2021. Key
alternative reference rates have been established and progress continues to be made in establishing better liquidity and term structures required to
efficiently replace the existing LIBOR structures. With the exception of the LIBOR-based benchmarks within the Company’s external credit facility, the
Company has no material agreements with third parties that use or reference LIBOR as a benchmark rate which requires amendment.
The Company must 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, 2021, 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 0.5:1.
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.
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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
Primary Derivative Primary Derivative
Debt Instruments Debt Instruments
March 31, 2021 Instruments (Asset) Instruments (Asset)
C$1,400, 2.239% Notes, due 2025 1,109 (110) 1,145 (110)
$600, 4.30% Notes, due 2023 597 - 649 -
$450, 3.85% Notes, due 2024(1) 241 - 263 -
$500, 3.35% Notes, due 2026 497 - 539 -
$350, 4.50% Notes, due 2043(1) 116 - 118 -
$350, 5.65% Notes, due 2043 342 - 442 -
$400, 5.50% Debentures, due 2035 395 - 500 -
$500, 5.85% Debentures, due 2040 491 - 641 -
Total 3,788 (110) 4,297 (110)
Long-term portion 3,788 (110)
Carrying Amount Fair Value
Primary Derivative Primary Derivative
Debt Instruments Debt Instruments
December 31, 2020 Instruments (Asset) Instruments (Asset)
C$1,400, 2.239% Notes, due 2025 1,093 (100) 1,151 (100)
$600, 4.30% Notes, due 2023 597 - 657 -
$450, 3.85% Notes, due 2024(1) 241 - 266 -
$500, 3.35% Notes, due 2026 497 - 557 -
$350, 4.50% Notes, due 2043(1) 116 - 130 -
$350, 5.65% Notes, due 2043 342 - 471 -
$400, 5.50% Debentures, due 2035 395 - 531 -
$500, 5.85% Debentures, due 2040 491 - 696 -
Total 3,772 (100) 4,459 (100)
Long-term portion 3,772 (100)
(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).
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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, 2021 Total
Assets Level 1 Level 2 Level 3 Balance
Money market accounts - 2,293 - 2,293
Other receivables(1) - - 36 36
Financial assets at fair value through earnings - 2,293 36 2,329
Financial assets at fair value through other comprehensive income(2) 23 21 - 44
Derivatives used for hedging(3) - 110 - 110
Total assets 23 2,424 36 2,483
Liabilities
Contingent consideration(4) - - (2) (2)
Financial liabilities at fair value through earnings - - (2) (2)
Total liabilities - - (2) (2)
December 31, 2020 Total
Assets Level 1 Level 2 Level 3 Balance
Money market accounts - 1,476 - 1,476
Warrants(5) - - 517 517
Other receivables(1) - - 17 17
Financial assets at fair value through earnings - 1,476 534 2,010
Financial assets at fair value through other comprehensive income(2) 27 19 - 46
Derivatives used for hedging(3) - 100 - 100
Total assets 27 1,595 534 2,156
Liabilities
Contingent consideration(4) - - (3) (3)
Financial liabilities at fair value through earnings - - (3) (3)
Total liabilities - - (3) (3)
(1) Receivables under indemnification arrangement (see note 18).
(2) Investments in entities over which the Company does not have control, joint control or significant influence.
(3) Comprised of fixed-to-fixed cross-currency swaps on indebtedness.
(4) Obligations to pay additional consideration for prior acquisitions, based upon performance measures contractually agreed at the time of purchase.
(5) Warrants related to the Company’s former investment in Refinitiv (see note 8).
The receivable from the indemnification arrangement is a level 3 in the fair value measurement hierarchy. The increase in the receivable between
December 31, 2020 and March 31, 2021 reflected additional payments that are expected to be recovered and a fair value loss based on interest rates
associated with the indemnifying party’s credit profile.
The following reflects the change in the fair value of the Refinitiv warrants, which are a level 3 in the fair value measurement hierarchy, for the three
months ended March 31, 2021:
Three months ended March 31,
2021
December 31, 2020 517
Gain recognized prior to the sale of Refinitiv to LSEG within operating gains (losses), net 9
Exercise of warrants on date of sale of Refinitiv to LSEG (see note 8) (526)
March 31, 2021 -
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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,
2021.
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 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.
Valuation of the Refinitiv Warrants at December 31, 2020
●
On August 1, 2019, the Company and private equity funds affiliated with Blackstone agreed to sell Refinitiv, in which the Company owned a 45%
interest, to LSEG, in an all share transaction which closed on January 29, 2021 (see note 8). Under the terms of the warrant agreement, the
transaction constituted a change in control whereby the exercise of the warrants in connection with the closing of the transaction entitled the
Company to an additional 4.5 million shares of YPL. The value of the warrants at December 31, 2020 reflected the entry into a definitive agreement
for the sale of the Refinitiv business on August 1, 2019. The closing of the transaction on January 29, 2021 was not considered an adjusting
subsequent event, and therefore the value at December 31, 2020 was not adjusted to incorporate the closing of the transaction. As such, the value
was primarily based on the number of incremental shares in YPL to which the Company was entitled upon closing and the share price of LSEG on
December 31, 2020. The valuation also incorporated (on a weighted-average basis) other outcomes based on the likelihood of the transaction
closing in the first quarter of 2021.
●
The Monte Carlo simulation approach, which was incorporated into the valuation of the Refinitiv warrants, generates values based on the random
outcomes from a probability distribution. Key inputs under the Monte Carlo approach include: the estimated equity value of Refinitiv; the capitalization
structure of Refinitiv; the expected volatility; the risk-free rate of return; annual dividends or distributions; and assumptions about the timing of a
liquidity event.
Note 12: Other Non-Current Assets
March 31, December 31,
2021 2020
Net defined benefit plan surpluses 146 128
Cash surrender value of life insurance policies 338 334
Deferred commissions 104 105
Other financial assets (see note 11) 224 198
Other non-current assets(1) 72 23
Total other non-current assets 884 788
(1) Includes a tax receivable from HM Revenue & Customs (“HMRC”) of $56 million at March 31, 2021 (see note 18).
Note 13: Payables, Accruals and Provisions
March 31, December 31,
2021 2020
Trade payables 166 217
Accruals 719 761
Provisions 110 111
Other current liabilities 64 70
Total payables, accruals and provisions 1,059 1,159
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Note 14: Provisions and Other Non-Current Liabilities
March 31, December 31,
2021 2020
Net defined benefit plan obligations 524 598
Other financial liabilities (see note 11) 200 224
Deferred compensation and employee incentives 109 111
Provisions 113 140
Other non-current liabilities 8 10
Total provisions and other non-current liabilities 954 1,083
Note 15: Capital
Share repurchases - Normal Course Issuer Bid (“NCIB”)
The Company may buy back shares (and subsequently cancel them) from time to time as part of its capital strategy. Share repurchases are typically
executed under a NCIB. Under the current NCIB, the Company may repurchase up to 5 million common shares between January 4, 2021 and January 3,
2022 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
may be permitted by the TSX and/or NYSE or under applicable law, including private agreement purchases if the Company receives an issuer bid
exemption order from applicable securities regulatory authorities in Canada for such purchases. The price that the Company will pay for shares in open
market transactions under the NCIB will be the market price at the time of purchase or such other price as may be permitted by TSX.
Details of share repurchases were as follows:
Three months ended March 31,
2021 2020
Share repurchases (millions of U.S. dollars) 200 200
Shares repurchased (number in millions) 2.5 2.6
Share repurchases - average price per share in U.S. dollars $ 81.45 $ 78.37
In February 2021, the Company completed the repurchase of $200 million of its common shares under its NCIB. Decisions regarding any future
repurchases will depend on factors, such as market conditions, share price, and other opportunities to invest capital for growth. The Company may elect
to suspend or discontinue its share repurchases at any time, in accordance with applicable laws. From time to time when the Company does not possess
material nonpublic information about itself or its securities, it may 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. The Company entered into such a plan with its broker on December 20, 2020.
As a result, the Company recorded a $200 million liability in “Other financial liabilities” within current liabilities at December 31, 2020 with a corresponding
amount recorded in equity in the consolidated statement of financial position.
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,
2021 2020
Dividends declared per common share $0.405 $0.380
Dividends declared 200 188
Dividends reinvested (6) (6)
Dividends paid 194 182
Page 55
Note 16: Supplemental Cash Flow Information
Details of “Other” in the consolidated statement of cash flow are as follows:
Three months ended March 31,
2021 2020
Non-cash employee benefit charges 39 40
Net losses (gains) on foreign exchange and derivative financial instruments 6 (46)
Net losses on disposals of businesses and investments - 3
Revaluation of Refinitiv warrants (see note 11) (9) 53
Fair value adjustments (see note 5) (4) (23)
Other (2) (16)
30 11
Details of “Changes in working capital and other items” are as follows:
Three months ended March 31,
2021 2020
Trade and other receivables 94 35
Prepaid expenses and other current assets (16) (26)
Other financial assets 17 39
Payables, accruals and provisions (129) (235)
Deferred revenue (32) (33)
Other financial liabilities (18) (39)
Income taxes(1) 884 39
Other (15) (23)
785 (243)
(1) Reflects working capital associated with current tax liabilities on the LSEG transaction and subsequent sale of LSEG shares (see note 8).
Details of income taxes paid are as follows:
Three months ended March 31,
2021 2020
Operating activities - continuing operations (36) (11)
Operating activities - discontinued operations (2) (5)
Investing activities - continuing operations (6) -
Investing activities - discontinued operations(1) (42) -
Total income taxes paid (86) (16)
(1) Reflects payments made to HMRC (see note 18).
Note 17: Acquisitions
Acquisitions primarily comprise the purchase of businesses that are integrated into existing operations to broaden the Company’s range of offerings to
customers as well as its presence in global markets. The results of acquired businesses are included in the consolidated financial statements from the
date of acquisition. Acquisitions also include investments in equity method investments.
Page 56
Acquisition activity
The Company did not acquire any businesses in the three months ended March 31, 2021 and acquired one business in the three months ended
March 31, 2020. The related total consideration was as follows:
Three months ended March 31, 2020
2021 2020
Cash Consideration
Business acquired - 123
Less: Cash acquired - (1)
Business acquired, net of cash - 122
Contingent consideration payments 3 2
3 124
The following provides a brief description of the acquisition completed during the three months ended March 31, 2020:
Date Company Acquiring Segment Description
March 2020 Pondera Solutions Legal Professionals A provider of technology and advanced analytics to combat fraud, waste
and abuse in healthcare and large government programs.
Purchase price allocation
Purchase price allocations related to certain acquisitions may be subject to adjustment pending completion of final valuations.
The details of net assets acquired were as follows:
Three months ended March 31,
2020
Cash and cash equivalents 1
Trade receivables 3
Current assets 4
Computer software 16
Other identifiable intangible assets 6
Total assets 26
Payables and accruals (2)
Deferred revenue (1)
Other financial liabilities (2)
Current liabilities (5)
Provisions and other non-current liabilities (1)
Deferred tax (3)
Total liabilities (9)
Net assets acquired 17
Goodwill 106
Total 123
The excess of the purchase price over the net assets acquired was recorded as goodwill and reflects synergies and the value of the acquired workforce.
The majority of goodwill for the acquisition completed in 2020 is not expected to be deductible for tax purposes.
The acquisition transaction was completed by acquiring all equity interests of the acquired business.
Other
The revenues and operating profit of the acquired business since the date of acquisition was not material to the Company’s results of operations.
Page 57
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.
In February 2018, the U.K. tax authority, HM Revenue & Customs (“HMRC”), issued notices of assessment under the Diverted Profits Tax (“DPT”) regime
for the 2015 taxation year of certain of the Company’s current and former U.K. affiliates. The Company paid $31 million in tax, as required under the
notices. As management does not believe that these U.K. affiliates fall within the scope of the Diverted Profits Tax regime, the Company appealed these
assessments in July 2019 to obtain a refund. In February 2021, HMRC issued DPT notices for the 2016 taxation year aggregating $87 million, which the
Company paid in March 2021, as required under the notices. In addition, based on recent discussions with HMRC, management believes it is reasonably
possible that HMRC may issue similar notices in the next 6 to 12 months for one or more other taxation years, largely related to businesses that the
Company has sold and that are subject to indemnity arrangements. If that occurs, the Company will be required to pay additional taxes to HMRC,
including those attributable to the indemnity counterparty, shortly thereafter. If the Company is required to make any additional tax payments, which could
be as much as $600 million to $700 million, it intends to vigorously defend its position by contesting the assessments through all available administrative
and judicial remedies. The large majority of the anticipated amounts in dispute relates to the Company’s Financial & Risk business, in which it sold a
majority interest in 2018. Any payment made by the Company would not be a reflection of its view on the merits of the case. Because management
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 the
Company’s financial condition taken as a whole. As a result, the Company would expect to record substantially all of any potential future payments as
non-current receivables from HMRC and the indemnity counterparty on its financial statements since the Company would expect to receive refunds of
substantially all of any amounts paid pursuant to these notices of assessment. The Company expects that its existing sources of liquidity will be sufficient
to fund any required payments.
Note 19: Related Party Transactions
As of March 31, 2021, the Company’s principal shareholder, The Woodbridge Company Limited, beneficially owned approximately 66% of the Company’s
common shares.
On March 19, 2021, the Company received a dividend of $994 million from YPL, an equity method investment, related to the sale of LSEG shares (see
note 8).
Except for the above transaction, there were no new significant related party transactions during the first quarter of 2021. Refer to “Related party
transactions” disclosed in note 31 of the Company’s consolidated financial statements for the year ended December 31, 2020, which are included in the
Company’s 2020 annual report, for information regarding related party transactions.
Page 58
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 6, 2021
/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 6, 2021
/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, 2021, 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 6, 2021
/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, 2021, 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 6, 2021
/s/ Michael Eastwood
Michael Eastwood
Chief Financial Officer
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