Second Quarter Report 2020 — Thomson Reuters
- Issuer
- Source documents
- Document type
- Audit Report
- Case
- Dr0073 Ir Network
Summary
The Thomson Reuters Second Quarter Report for the period ended June 30, 2020, containing management's discussion and analysis dated as of August 4, 2020 and unaudited consolidated financial statements. The discussion covers an executive summary, a COVID-19 update, the outlook, results of operations, liquidity and capital resources, and the proposed sale of Refinitiv to London Stock Exchange Group plc. It describes five reportable segments: Legal Professionals, Corporates, Tax & Accounting Professionals, Reuters News and Global Print. The report states that COVID-19 began to negatively impact revenue in the second quarter, citing cancelled in-person events, deferred print shipments and the extended U.S. Federal tax filing deadline. Note 20 states that The Woodbridge Company Limited beneficially owned approximately 66% of the company's shares as of June 30, 2020.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
Second Quarter Report
Period Ended
June 30, 2020
Management’s Discussion and Analysis and
Unaudited Consolidated Financial Statements
Third Quarter Report Period Ended September 30, 2019 Management’s Discussion and Analysis and Unaudited Consolidated Financial Statements
Thomson Reuters Second Quarter Report 2020
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 the 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 and six months ended June 30, 2020 and our 2019 annual consolidated financial statements, as well as our
2019 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 2020 outlook, 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 and
expectations related to the proposed London Stock Exchange Group plc/Refinitiv transaction. For additional information related to forward-
looking statements, material assumptions and material risks associated with them, please see the “Outlook,” “Additional Information—
Cautionary Note Concerning Factors That May Affect Future Results” and “Risk Factors” sections of this management’s discussion and analysis.
This management’s discussion and analysis is dated as of August 4, 2020.
We have organized our management’s discussion and analysis in the following key sections:
Š Executive Summary – an overview of our business and key financial highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Š COVID-19 Update – a description of the impact on our business and our response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Š Outlook – our financial outlook and material assumptions and material risks related to the outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Š Results of Operations – a comparison of our current and prior-year period results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Š Liquidity and Capital Resources – a discussion of our cash flow and debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Š Related Party Transactions – a discussion of transactions with our principal and controlling shareholder, The Woodbridge Company
Limited (Woodbridge) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Š Proposed LSEG/Refinitiv Transaction – the proposed sale of Refinitiv to LSEG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Š Subsequent Events – a discussion of material events occurring after June 30, 2020 and through the date of this management’s
discussion and analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Š Changes in Accounting Policies – a discussion of changes in our accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Š Critical Accounting Estimates and Judgments – a discussion of critical estimates and judgments made by our management
in applying accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Š Additional Information – other required disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Š Risk Factors – risk factors that supplement and update those in our 2019 annual report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Š Appendix – supplemental information, including regarding Refinitiv’s performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Unless otherwise indicated or the context otherwise requires, references in this discussion to “we,” “our,” “us”, “the company”, ”TRC” and
“Thomson Reuters” are to Thomson Reuters Corporation and our subsidiaries.
COVID-19 pandemic
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. Throughout this management’s discussion and analysis, we discuss the evolving impact of the
COVID-19 pandemic on our business, financial condition and results of operations.
Basis of presentation
We prepare our consolidated financial statements in U.S. dollars in accordance with International Financial Reporting Standards (IFRS), as
issued by the International Accounting Standards Board (IASB). See the “Additional Information” section of this management’s discussion
and analysis for more information regarding adjustments to prior-period segment results and revisions to prior-period financial statements.
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.
Page 1
Thomson Reuters Second Quarter Report 2020
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. Our IFRS and non-IFRS results
include the results of acquired businesses from the date of purchase. 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.
Our non-IFRS financial measures include:
Š Adjusted EBITDA and the related margin;
Š Adjusted EBITDA less capital expenditures and the related margin;
Š Adjusted earnings and adjusted earnings per share (EPS);
Š Net debt and our leverage ratio of net debt to adjusted EBITDA; and
Š 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 Legal Professionals, Corporates and Tax & Accounting Professionals segments, which comprised 80% of our
revenues in each of the second quarter and first six months of 2020
Blackstone The Blackstone Group and its subsidiaries
bp Basis points — one basis point is equal to 1/100th of 1%; “100bp” is equivalent to 1%
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 known as Refinitiv
F&R sale or F&R transaction Our sale of a 55% interest in F&R to private equity funds affiliated with Blackstone, which closed on October 1, 2018
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
Proposed LSEG/Refinitiv Our agreement with private equity funds affiliated with Blackstone to sell Refinitiv to LSEG
transaction
Refinitiv The name of our former F&R business as of the closing of the F&R transaction. We have owned 45% of Refinitiv since
October 1, 2018
$ and US$ U.S. dollars
Page 2
Thomson Reuters Second Quarter Report 2020
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:
Second-Quarter 2020 Revenues
Legal Professionals
10%
Serves law firms and governments with research and workflow products,
focusing on intuitive legal research powered by emerging technologies 11%
and integrated legal workflow solutions that combine content, tools and
analytics. 44%
12%
Corporates
Serves corporate customers, including the seven largest global
accounting firms, with our full suite of offerings across legal, tax, 23%
regulatory and compliance functions.
Legal Professionals Corporates
Tax & Accounting Professionals
Tax & Accounting Reuters News
Serves tax, accounting and audit professionals in accounting firms (other Professionals
than the seven largest firms, which are served by our Corporates Global Print
segment) with research and workflow products, focusing on intuitive tax
offerings and automating tax workflows.
10%
Reuters News
Supplies business, financial, national and international news to 9%
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 81%
around the world.
Recurring Transactions Global Print
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.
Page 3
Thomson Reuters Second Quarter Report 2020
Key Financial Highlights
As expected, COVID-19 began to negatively impact our revenue performance in the second quarter, primarily reflecting the cancellation of
in-person events, customer requests to defer shipments of print materials, and the extension of the U.S. Federal tax filing deadline from the
second quarter to the third quarter. However, we met or exceeded each of the revenue performance metrics in our second-quarter 2020
outlook communicated in May 2020, as set forth below, and we continue to believe that the second quarter will represent the most
significant impact that we will experience from COVID-19 during 2020. In August 2020, we increased our free cash flow outlook and
reaffirmed the rest of our full-year 2020 business outlook that was updated in May 2020 to reflect our estimated impact of COVID-19. Please
see the “Outlook” section of this management’s discussion and analysis for additional information on our business outlook, including
information about our new third-quarter outlook.
Consolidated results
Three months ended June 30,
Change
Constant
(millions of U.S. dollars, except per share amounts and margins) 2020 2019 Total Currency
IFRS Financial Measures
Revenues 1,405 1,423 (1%)
Operating profit 365 447 (18%)
Diluted EPS $0.25 $0.36 (31%)
Cash flow from operations 422 113 288%
Non-IFRS Financial Measures(1)
Revenues 1,405 1,423 (1%) -
Organic revenue growth (2%)
Adjusted EBITDA 479 355 35% 34%
Adjusted EBITDA margin 34.1% 25.0% 910bp 840bp
Adjusted EPS $0.44 $0.29 52% 48%
Free cash flow 305 1 n/m
Supplemental financial results – “Big 3” Segments – Legal Professionals, Corporates and Tax & Accounting Professionals Combined
Three months ended June 30,
Change
Constant
(millions of U.S. dollars, except margins) 2020 2019 Total Currency
Non-IFRS Financial Measures(1)
Revenues 1,117 1,102 1% 3%
Organic revenue growth 2%
Adjusted EBITDA 426 386 10% 11%
Adjusted EBITDA margin 38.1% 34.9% 320bp 270bp
(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 decreased 1% in total and were essentially unchanged in constant currency, despite a benefit from acquisitions. On an organic
basis, revenues decreased 2%, as 3% growth in recurring revenues, which comprised 81% of total revenues, was more than offset by declines
in transactions and Global Print revenues.
Revenues for our “Big 3” segments, which comprised 80% of total revenues, grew 1% in total and 3% in constant currency. On an organic
basis, revenues for the “Big 3” segments increased 2%, as 4% growth in recurring revenues, which comprised 89% of total revenues for the
“Big 3” segments, more than offset a decline in transactions revenues.
Page 4
Thomson Reuters Second Quarter Report 2020
Operating profit decreased 18% as the prior-year period included a significantly higher benefit from the revaluation of warrants that we hold
in Refinitiv relating to the proposed sale of Refinitiv to LSEG. Adjusted EBITDA and the related margin, which excludes the impact of the
warrant revaluation among other items, increased due to the completion of the program, in 2019, to reposition our company following the
separation of F&R as well as lower expenses from our COVID-19 related efforts to mitigate 2020 annual costs by $100 million, which we
discuss later in this management’s discussion and analysis.
Diluted EPS decreased to $0.25 per share from $0.36 per share in the prior-year period primarily due to lower operating profit, which reflects
the impact of the Refinitiv warrant revaluation. Adjusted EPS, which excludes the Refinitiv warrant revaluation as well as other adjustments,
increased to $0.44 per share from $0.29 per share primarily due to higher adjusted EBITDA.
Cash flow from operations increased primarily because the prior-year period included significantly higher costs and investments to
reposition our company following the separation of F&R, favorable working capital movements and savings from our COVID-19 related cost
mitigation efforts. Free cash flow increased for the same reasons and also included proceeds from the sale of some real estate.
Below is a comparison of our actual revenue performance for the second-quarter 2020 compared to the outlook.
Second-Quarter 2020 Second-Quarter 2020
Non-IFRS Financial Measures (1) Outlook Performance Actual
Total Thomson Reuters
Revenue growth (before currency) Between (1%) and (2%) Increased 0.3% ✓
Organic revenue growth Between (2%) and (3%) (1.6%) ✓
Legal Professionals, Corporates and Tax & Accounting Professionals combined (“Big 3”)
Revenue growth (before currency) Between 2.5% and 3.5% 2.9% ✓
Organic revenue growth Between 2% and 3% 2.2% ✓
(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.
COVID-19 Update
The information in this section is forward-looking and should be read in conjunction with the sections entitled “Additional Information -
Cautionary Note Concerning Factors That May Affect Future Results” and “Risk Factors”.
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. The duration of the crisis and the long-term impacts on the global economy remain uncertain. In
the second quarter of 2020, COVID-19 cases increased and then declined in some areas, which resulted in phased re-openings. However,
various areas have seen a rise in COVID-19 cases, which has led to slowdowns, pauses and reversals of the re-opening process.
Thomson Reuters has not experienced any significant disruptions to its business as a result of COVID-19 and continues to be fully
operational. Most employees continue to work remotely from their homes, enabled by technology that allows them to collaborate with
customers and each other. We are developing detailed plans for a gradual, safe re-opening of our offices around the world, though we expect
that the number of people who return to our offices in the next few months will be small and on a voluntary basis. Essential employees who
cannot work from home, such as Reuters News journalists and those working in the company’s Global Print facilities, follow various health
and safety standards. We continue to act and plan based on guidance from global health organizations, relevant governments and evolving
best practices.
We have approximately 500,000 customers that are largely comprised of legal and tax professionals in corporations and professional
service firms, many of whom are also working remotely. Our products enable our customers to remain productive while they work remotely,
because they can access most of our products and services through the Internet. While we have cancelled or postponed nearly all in-person
conferences, primarily in our Reuters Events business, we replaced some of these events with virtual meetings.
Page 5
Thomson Reuters Second Quarter Report 2020
We continue to believe we are well positioned to weather the economic crisis. We have strong businesses that serve large, diverse and
historically stable markets and our businesses have historically generated substantial free cash flow, as they are predominantly subscription
based with high rates of retention. We believe our business is supported by a solid financial foundation with access to liquidity resources that
we believe is adequate to support us through a gradual recovery. As further described in the “Liquidity and Capital Resources” section of this
management’s discussion and analysis, our principal sources of liquidity continue to be cash on hand, cash provided by our operations, our
$1.8 billion syndicated credit facility and our $1.8 billion commercial paper program. From time to time, we also issue debt securities under a
prospectus. As set forth in our full-year 2020 outlook, we now expect to generate between $1.0 billion and $1.1 billion of free cash flow this
year. As of June 30, 2020, we had $946 million of cash on hand and $120 million of current indebtedness. None of our debt securities are
scheduled to mature until 2023. We expect to pay our 2020 annualized dividend of $1.52 per common share and do not anticipate
repurchasing more of our shares for the remainder of the year.
Our business plan continues to assume that the global economy will gradually recover throughout the second half of 2020. We believe that
legal and accounting professionals are critical to the effective functioning of world markets and will continue to purchase our products and
services. We believe it is possible that COVID-19 may result in more lawyers and accountants migrating to technology-driven products like
ours, given their own experiences working remotely. Our core businesses were resilient during past economic downturns, including the
downturn that began in 2008. However, given the subscription nature of our business, it is possible that potential negative effects of
COVID-19 might not be fully reflected in our results of operations until later in 2020 or into 2021.
Outlook
The information in this section is forward-looking and should be read in conjunction with the sections entitled “Additional Information—
Cautionary Note Concerning Factors That May Affect Future Results” and “Risk Factors”.
We recently increased our outlook for free cash flow and reaffirmed the remainder of our 2020 full-year outlook that we previously
communicated in May 2020. While our second quarter performance provides us with increasing confidence about our outlook, it is still too
early to predict with certainty how and when world markets may recover. We have also provided an outlook for the third quarter of 2020.
Our outlook for 2020 below continues to assume constant currency rates and excludes the impact of any future acquisitions or dispositions
that may occur in 2020. We believe that this type of guidance provides useful insight into the performance of our businesses.
2020 Full-Year Outlook- Re-affirmed outlook previously provided on May 5, 2020(1)
Total Thomson Reuters “Big 3” Segments
Non-IFRS Financial Measures(2) Outlook Outlook
Before currency and excluding the impact of future
acquisitions/dispositions
Revenue growth 1.0% - 2.0% 3.0% - 4.0%
Organic revenue growth 0% - 1.0% 3.0% - 4.0%
Adjusted EBITDA margin 31.0% - 32.0% 36.0% - 37.0%
Corporate costs $140 million - $150 million
Free cash flow $1.0 billion - $1.1 billion
Capital expenditures, as a percentage of revenues 7.5% - 8.0%
Depreciation and amortization of computer software $625 million - $650 million
Interest expense $190 million - $215 million
Effective tax rate on adjusted earnings Approximately 17% - 19%
(1) Our company increased its free cash flow outlook from approximately $1.0 billion to between $1.0 billion and $1.1 billion in August 2020.
(2) Refer to Appendix A of this management’s discussion and analysis for additional information of our non-IFRS financial measures.
While experience is not predictive of the future, our outlook is partially grounded in our experience from the prior economic downturn in
2008. We estimate that our former Legal Professionals business, excluding Global Print, grew about 2% organically in 2009 and 2010
following that financial crisis. We believe our Legal Professionals business is better positioned today, primarily because we employ a
subscription model for many of our products rather than a usage model. We have improved price transparency and are more deeply
embedded in our legal customers’ work because we offer more diverse assets such as Westlaw Edge, Practical Law, HighQ and Contract
Express. Our former Tax & Accounting Professionals business never grew less than 3% organically in 2009 and 2010 following the downturn
that began in 2008. Our Tax & Accounting Professionals business consists primarily of the sale of software, which customers do not tend to
replace frequently.
Page 6
Thomson Reuters Second Quarter Report 2020
We expect to mitigate the loss of revenue from COVID-19 on our adjusted EBITDA and free cash flow through a $100 million cost savings
program, which contemplates reduced spending on consulting and advisory services, travel and entertainment, certain development projects
and other discretionary spend. Our free cash flow outlook assumes that we will experience temporary delays in collecting payments from
some customers, but we believe this cash will be collected as the economy improves. We continue to expect to generate strong free cash
flow, that, in combination with our other liquidity resources, we believe will be sufficient to fund our cash requirements for the next 12
months. Refer to the “Liquidity and Capital Resources” section of this management’s discussion and analysis for additional information
regarding our financial condition.
Third-Quarter 2020 Outlook
We expect total revenues on a constant currency basis and total organic revenues for the third quarter of 2020 to grow between 1.0% and
2.0%. Our revenue growth continues to be negatively affected by the Reuters News business and delays in shipping certain Global Print
materials.
Our “Big 3” segments (Legal Professionals, Corporates and Tax & Accounting Professionals) collectively are expected to achieve revenue
growth on a constant currency basis and organic revenue growth of between 3.0% and 4.0% in the third quarter of 2020.
Material Assumptions and Risks
The following table summarizes our material assumptions and risks that may cause actual performance to differ from our expectations
underlying our current 2020 financial outlook, which reflects the global economic crisis caused by the COVID-19 pandemic.
Revenues
Material assumptions Material risks
Š Diminished economic activity through the second quarter followed by Š Business disruptions associated with the COVID-19 pandemic,
a gradual recovery through the second half of 2020 including government enforced quarantines and stay-at-home
Š The financial and operational health of our customer base in both the orders, may continue longer than we expect or may be interrupted
U.S. and global economies will gradually improve, which we believe by secondary outbreaks of the virus, delaying the anticipated
will coincide with the easing of lockdowns and other restrictions recovery of the global economy
Š Š Global economic uncertainty due to the COVID-19 pandemic as
We will incur limited cancellations of subscription contracts during the
economic crisis, as our products and services will remain critical for well as related regulatory reform and changes in the political
legal and tax professionals environment may lead to limited business opportunities for our
Š customers, creating significant cost pressures for them and
During the extended work from home period, our customers will
potentially constraining the number of professionals employed,
continue to access our products remotely and will value high quality
which could lead to lower demand for our products and services
information and tools that drive productivity and efficiency
Š Competitive pricing actions and product innovation could impact
Š We will maintain our ability to acquire some new customers during the
economic crisis, as we enhance our digital platforms and propositions our revenues
or through other sales initiatives Š Our sales, commercial simplification and product initiatives may
Š be insufficient to retain customers or generate new sales
Reuters News will experience a significant reduction in demand in its
Š Factors that we cannot anticipate may reduce the effectiveness of
Reuters Events business due to the cancellation of in-person events,
as well as lower demand in its consumer and news agency business our employees working remotely, including the inability to execute
Š on key product or customer support initiatives or to perform
Our workforce will continue to be effective in a remote working
implementation services remotely
environment for an extended period, including the ability to
Š Factors that we cannot anticipate may require us to suspend or
implement new products and service and support existing products for
our customers cease operations at our Global Print facility or may limit the ability
Š of Reuters News journalists to report on certain global events
Our Global Print facility will continue to remain open and our Reuters
Š Our decline in Global Print revenues may be larger than we
News journalists will continue to be able to report on global events
Š Customer requested shipment delays of print materials will be anticipate if customers do not resume shipments because they are
temporary and that shipments delayed in the second quarter will not able to return to their business locations or for other reasons
resume in the third and fourth quarters of 2020
Š A limited number of our smaller customers will be unable to pay us or
will seek financial accommodations or alternative payment terms due
to their financial condition
Š Customers will continue to seek software-as-a-service or other cloud-
based offerings
Page 7
Thomson Reuters Second Quarter Report 2020
Adjusted EBITDA margin
Material assumptions Material risks
Š Our ability to achieve revenue growth targets Š Same as the risks above related to the revenue outlook
Š Business mix continues to shift to higher-growth product offerings Š The costs of required investments exceed expectations or actual
Š Continued investment in growth markets, customer service, product returns are below expectations
development and digital capabilities Š Acquisition and disposal activity may dilute our adjusted EBITDA
Š We will be able to mitigate a significant portion of the impact of lost margin
revenues on adjusted EBITDA through our cost savings programs, Š Our cost savings programs may be insufficient to offset lost
including reduced spending on consulting and advisory services, travel revenues
and entertainment, certain development initiatives and other
discretionary spend
Free Cash Flow
Material assumptions Material risks
Š Our ability to achieve our revenue and adjusted EBITDA margin Š Same as the risks above related to the revenue and adjusted
targets EBITDA margin outlook
Š Capital expenditures expected to be approximately between 7.5% and Š Capital expenditures may be higher than currently expected
8.0% of revenues in 2020 resulting in higher cash outflows
Š A limited number of our smaller customers will be unable to pay us or Š The timing and amount of tax payments to governments may
will seek financial accommodations or alternative payment terms due differ from our expectations
to their financial condition Š A significant deterioration in the macroeconomic environment
Š Deferrals of payments from our customers will be limited, and our could negatively impact the ability of our customers to pay us
access to credit facilities will be sufficient to bridge any gap leading to reduced free cash flow. The tightening of credit markets
could limit our ability to bridge gaps in payments leading to
unexpected operational impacts on our business
Effective tax rate on adjusted earnings
Material assumptions Material risks
Š Our ability to achieve our adjusted EBITDA target Š Same as the risks above related to adjusted EBITDA
Š The mix of taxing jurisdictions where we recognized pre-tax profit or Š A material change in the geographical mix of our pre-tax profits
losses in 2019 does not significantly change and losses
Š No unexpected changes in tax laws and treaties within the Š A material change in current tax laws or treaties to which we are
jurisdictions where we operate subject, and did not expect
Š The completion of the proposed sale of Refinitiv to LSEG, or the sale of Š The tax rates and calculations that apply to our taxable income
another significant, but non-strategic, equity investment at a could be impacted if these transactions do not occur
significant gain by the end of 2020 Š Depreciation and amortization of computer software as well as
Š Depreciation and amortization of computer software between interest expense may be significantly higher or lower than
$625 million and $650 million expected
Š Interest expense between $190 million and $215 million
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 the occurrence or amount of other operating gains and losses, which include fair value adjustments relating to warrants we hold in
Refinitiv as well as gains or losses that generally arise from business transactions we do not currently anticipate.
The information above in this section is forward-looking and should be read in conjunction with the sections in this document entitled “Additional
Information—Cautionary Note Concerning Factors That May Affect Future Results” and “Risk Factors”.
Page 8
Thomson Reuters Second Quarter Report 2020
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 a 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. We believe that our revenues in the second quarter of 2020 reflected the lowest level we will report for any of
the four quarters in the full year of 2020, due to the impact of COVID-19. In 2019, the seasonality of our operating profit was impacted by
significant costs to reposition our business following the sale of a majority interest in F&R.
Consolidated results
Three months ended June 30, Six months ended June 30,
Change Change
(millions of U.S. dollars, except per share amounts Constant Constant
and margins) 2020 2019 Total Currency 2020 2019 Total Currency
IFRS Financial Measures
Revenues 1,405 1,423 (1%) 2.925 2,910 1%
Operating profit 365 447 (18%) 655 721 (9%)
Diluted EPS $0.25 $0.36 (31%) $0.64 $0.56 14%
Non-IFRS Financial Measures(1)
Revenues 1,405 1,423 (1%) - 2,925 2,910 1% 2%
Organic revenue growth (2%) -
Adjusted EBITDA 479 355 35% 34% 959 752 27% 27%
Adjusted EBITDA margin 34.1% 25.0% 910bp 840bp 32.8% 25.8% 700bp 650bp
Adjusted EBITDA less capital expenditures 334 253 32% 672 512 31%
Adjusted EBITDA less capital expenditures margin 23.8% 17.9% 590bp 23.0% 17.6% 540bp
Adjusted EPS $0.44 $0.29 52% 48% $0.92 $0.65 42% 40%
Supplemental financial results – “Big 3” Segments – Legal Professionals, Corporates and Tax & Accounting Professionals Combined
Three months ended June 30, Six months ended June 30,
Change Change
Constant Constant
(millions of U.S. dollars, except margins) 2020 2019 Total Currency 2020 2019 Total Currency
Non-IFRS Financial Measures(1)
Revenues 1,117 1,102 1% 3% 2,328 2,270 3% 4%
Organic revenue growth 2% 3%
Adjusted EBITDA 426 386 10% 11% 857 818 5% 5%
Adjusted EBITDA margin 38.1% 34.9% 320bp 270bp 36.8% 36.0% 80bp 60bp
(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 June 30, Six months ended June 30,
Change Change
Constant Constant
(millions of U.S. dollars) 2020 2019 Total Currency Organic 2020 2019 Total Currency Organic
Recurring revenues 1,139 1,115 2% 4% 3% 2,307 2,250 3% 4% 4%
Transactions revenues 133 143 (8%) (6%) (19%) 331 331 - 1% (11%)
Global Print revenues 134 164 (19%) (17%) (17%) 289 329 (12%) (11%) (11%)
Eliminations/Rounding (1) 1 (2) -
Revenues 1,405 1,423 (1%) - (2%) 2,925 2,910 1% 2% -
Page 9
Thomson Reuters Second Quarter Report 2020
Revenues decreased 1% in total and were essentially unchanged in constant currency in the second quarter, despite a benefit from
acquisitions. Growth in recurring revenues, which comprised 81% of our revenues, was offset by declines in transactions and Global Print
revenues. COVID-19 impacted our second-quarter revenue performance as declines in transaction revenues reflected lower activity in our
Tax & Accounting Professionals segment due to the U.S. Government extending the Federal tax filing deadline from April 15 to July 15, and
declines in our Global Print revenues included the impact of shipping delays requested by customers who continue to work remotely. In the
six-month period, revenues increased 1% in total and 2% in constant currency as growth in recurring revenues more than offset a decline in
Global Print revenues. Transactions revenues increased in constant currency due to a benefit from acquisitions.
On an organic basis, revenues decreased 2% in the second quarter and were essentially unchanged in the six-month period. In both periods,
growth in recurring revenues was offset by declines in transactions and Global Print revenues.
Revenues for our “Big 3” segments, which comprised 80% of total revenues in both periods, grew 1% in total and 3% in constant currency in
the second quarter and increased 3% in total and 4% in constant currency in the six-month period. On an organic basis, revenues for the
“Big 3” segments increased in both periods as higher recurring revenues more than offset declines in transactions revenues.
Foreign currency negatively impacted revenue growth in both periods due to the strengthening of the U.S. dollar primarily against the British
pound sterling, Brazilian real and Argentine peso, compared to the prior-year periods.
Operating profit, adjusted EBITDA and adjusted EBITDA less capital expenditures
Operating profit decreased 18% in the second quarter and 9% in the six-month period as the prior-year periods included a significantly higher
benefit from the revaluation of warrants that we hold in Refinitiv relating to the proposed sale of Refinitiv to LSEG. This unfavorable impact
was partly offset by lower costs, which reflected the completion of the program in 2019 to reposition our company following the separation of
F&R as well as COVID 19-related cost mitigation efforts. In May 2020, we announced that we planned to mitigate our loss of revenues from
COVID-19 by reducing our costs by $100 million. We achieved about two-thirds of our targeted costs savings in the second quarter of 2020.
Adjusted EBITDA and the related margin, which excludes the impact from the warrant revaluation, among other items, increased in both
periods in total and in constant currency due to lower costs. The improvement in our adjusted EBITDA margin was distorted by the benefit
from significantly lower costs due to completing our program to reposition our business in 2019. Excluding this benefit, our adjusted EBITDA
margin increased 290bp in the second quarter and 60bp in the six-month period. Both periods included the benefits from our COVID-19
related cost reduction program. However, the margin improvement in the six-month period was partly offset by unfavorable expense timing
in the first quarter compared to the prior-year period. Foreign currency benefited adjusted EBITDA margins by 70bp and 50bp in the second
quarter and six-month period, respectively.
Adjusted EBITDA less capital expenditures and the related margin increased in both periods as higher adjusted EBITDA more than offset
higher capital expenditures.
Operating expenses
Three months ended June 30, Six months ended June 30,
Change Change
Constant Constant
(millions of U.S. dollars) 2020 2019 Total Currency 2020 2019 Total Currency
Operating expenses 929 1,070 (13%) (11%) 1,946 2,161 (10%) (7%)
Operating expenses in both periods decreased in total and in constant currency. In both periods, lower costs reflected the completion of our
program in 2019 to reposition our company following the separation of F&R and the benefits of our COVID 19-related cost reduction
program, which more than offset higher expenses due to acquisitions. The six-month period also included unfavorable expense timing in the
first quarter compared to the prior year period. The second quarter and six-month period included additional reserves for estimated bad debt
expense related to customers who may become financially distressed due to COVID-19.
Page 10
Thomson Reuters Second Quarter Report 2020
Depreciation and amortization
Three months ended June 30, Six months ended June 30,
(millions of U.S. dollars) 2020 2019 Change 2020 2019 Change
Depreciation 43 38 14% 83 72 15%
Amortization of computer software 118 104 14% 229 209 10%
Subtotal 161 142 14% 312 281 11%
Amortization of other identifiable intangible assets 30 25 15% 60 52 14%
Š Depreciation and amortization of computer software on a combined basis increased in both periods as higher expenses from newly
acquired assets, including those associated with recently acquired businesses, more than offset the completion of depreciation and
amortization for certain assets acquired in previous years.
Š Amortization of other identifiable intangible assets increased in both periods as expenses associated with recent acquisitions more than
offset the completion of amortization of assets acquired in previous years.
Other operating gains, net
Three months ended June 30, Six months ended June 30,
(millions of U.S. dollars) 2020 2019 2020 2019
Other operating gains, net 80 261 48 305
Other operating gains, net, included a benefit, in all periods, from the revaluation of warrants that we hold in Refinitiv due to an increase in
the share price of LSEG in connection with the proposed transaction to sell Refinitiv to LSEG (see the “Proposed LSEG/Refinitiv Transaction”
section of this management’s discussion and analysis for additional information). Operating gains, net, included $54 million (2019 – $256
million) and $1 million (2019 – $275 million) in the three and six months ended June 30, 2020, respectively, related to the warrants. The
three months and six months ended June 30, 2020 included gains associated with the sale of certain real estate and the six months ended
June 30, 2020 also included a gain associated with a distribution from an investment. The six months ended June 30, 2019 also included
gains from the sale of several small businesses.
Net interest expense
Three months ended June 30, Six months ended June 30,
(millions of U.S. dollars) 2020 2019 Change 2020 2019 Change
Net interest expense 52 37 40% 97 72 35%
The increase in net interest expense in both periods was due to lower interest income, as the 2019 periods included interest income on
proceeds from the F&R transaction that had been set aside to fund acquisitions.
Other finance costs (income)
Three months ended June 30, Six months ended June 30,
(millions of U.S. dollars) 2020 2019 2020 2019
Other finance costs (income) 13 18 (34) 29
Other finance costs (income) primarily included gains or losses from fluctuations of foreign currency exchange rates on certain intercompany
funding arrangements. The 2020 period also included gains related to changes in foreign exchange contracts and the ineffective portion of
cash flow hedges.
Share of post-tax (losses) earnings in equity method investments
Three months ended June 30, Six months ended June 30,
(millions of U.S. dollars) 2020 2019 2020 2019
Refinitiv (45% ownership interest) (155) (141) (213) (259)
Other equity method investments 2 3 6 8
Share of post-tax losses in equity method investments (153) (138) (207) (251)
Page 11
Thomson Reuters Second Quarter Report 2020
Our share of the post-tax losses from our 45% interest in Refinitiv reflects interest expense for Refinitiv’s debt, as well as expenses to scale
the business to facilitate a targeted cost savings run rate of up to $650 million by the end of 2020. The reduction of Refinitiv’s loss in the
six-month period reflects a benefit from the repricing of debt. Refinitiv achieved run-rate savings of $567 million as of June 30, 2020 and
believes it is on track to achieve its full annual cost savings run-rate target by the end of 2020. We provide additional information about the
performance of our investment in Refinitiv in Appendix C of this management’s discussion and analysis.
Tax expense
Three months ended June 30, Six months ended June 30,
(millions of U.S. dollars) 2020 2019 2020 2019
Tax expense 16 47 63 48
The 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.
We assess the recoverability of deferred tax assets at the end of each reporting period. The evolution of our business and changes in tax laws
in various jurisdictions may provide opportunities to utilize tax loss carryforwards or other tax attributes for which the company has not
recognized deferred tax assets. To the extent that recent trends continue, it is possible that the company will recognize deferred tax assets
ranging from $50 million to $100 million within the next 12 months.
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 June 30, Six months ended June 30,
(millions of U.S. dollars) 2020 2019 2020 2019
Tax expense (benefit)
Tax items impacting comparability:
Corporate tax laws and rates(1) 19 - 46 -
Deferred tax adjustments(2) (10) (4) (7) (15)
Subtotal 9 (4) 39 (15)
Tax related to:
Amortization of other identifiable intangible assets (7) (4) (13) (9)
Share of post-tax losses in equity method investments (39) (36) (53) (67)
Other operating gains, net 18 70 5 77
Other items - - 2 -
Subtotal (28) 30 (59) 1
Total (19) 26 (20) (14)
(1) Primarily relates to a minimum tax that we do not expect to ultimately pay due to the taxable gains that would arise on the anticipated closing of the LSEG transaction or the
sale of another significant, but non-strategic, equity investment at a significant gain by the end of 2020. However, IFRS requires that we accrue the tax until such time as that
transaction takes place. This amount also includes changes in deferred tax liabilities due to changes in tax laws and rates, and changes to U.S. state deferred tax liabilities
resulting from changes in apportionment factors.
(2) Relates primarily to the recognition of deferred tax assets that arose in prior years and adjustments required due to acquisitions and disposals.
Page 12
Thomson Reuters Second Quarter Report 2020
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 June 30, Six months ended June 30,
(millions of U.S. dollars) 2020 2019 2020 2019
Tax expense 16 47 63 48
Remove: Items from above impacting comparability 19 (26) 20 14
Other adjustment:
Interim period effective tax rate normalization(1) 10 8 6 8
Total tax expense on adjusted earnings 45 29 89 70
(1) Adjustment to reflect income taxes based on estimated full-year effective tax rate. 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
Loss from discontinued operations, net of tax, includes the following:
Three months ended June 30, Six months ended June 30,
(millions of U.S. dollars) 2020 2019 2020 2019
Loss from discontinued operations, net of tax 5 27 3 37
The results of discontinued operations included residual income and expenses which were borne by our company following the sale of a
majority interest in F&R in October 2018.
Net earnings and diluted EPS
Three months ended June 30, Six months ended June 30,
(millions of U.S. dollars, except per share amounts) 2020 2019 Change 2020 2019 Change
Net earnings 126 180 (30%) 319 284 12%
Diluted EPS $0.25 $0.36 (31%) $0.64 $0.56 14%
Net earnings and diluted EPS decreased in the second quarter due to lower operating profit. In the six-month period, net earnings and
diluted EPS increased as lower losses from the company’s 45% equity interest in Refinitiv, currency benefits from the revaluation of certain
intercompany funding arrangements and a lower loss from discontinued operations more than offset higher income tax expense and lower
operating profit.
Adjusted earnings and adjusted EPS
Three months ended June 30, Six months ended June 30,
Change Change
Constant Constant
(millions of U.S. dollars, except per share amounts)) 2020 2019 Total Currency 2020 2019 Total Currency
Adjusted earnings 221 146 51% 460 327 41%
Adjusted EPS $0.44 $0.29 52% 48% $0.92 $0.65 42% 40%
Adjusted earnings and the related per share amount increased in both periods as higher adjusted EBITDA more than offset higher
depreciation and amortization of computer software and higher interest expense.
Page 13
Thomson Reuters Second Quarter Report 2020
Segment results
The following is a discussion of our five reportable segments and our Corporate costs for the three and six months ended June 30, 2020. We
assess revenue growth for each segment, as well as the businesses within each segment, in constant currency.
See Appendix A of this management’s discussion and analysis for additional information.
Legal Professionals
Three months ended June 30, Six months ended June 30,
Change Change
Constant Constant
(millions of U.S. dollars, except margins) 2020 2019 Total Currency Organic 2020 2019 Total Currency Organic
Recurring revenues 580 557 4% 5% 3% 1,167 1,113 5% 6% 4%
Transactions revenues 40 48 (18%) (17%) (19%) 79 92 (15%) (14%) (13%)
Revenues 620 605 2% 3% 1% 1,246 1,205 3% 4% 3%
Segment adjusted EBITDA 254 229 11% 11% 484 458 6% 6%
Segment adjusted EBITDA margin 40.9% 37.8% 310bp 280bp 38.8% 38.0% 80bp 70bp
Revenues in total and in constant currency increased in both periods. The increase in constant currency was driven by growth in recurring
revenues (94% of the segment in the second quarter) and contributions from the acquisitions of HighQ and Pondera Solutions, which were
partly offset by a decline in transactions revenues (6% of the segment in the second quarter). Revenues from law firms, which includes
revenues from large global law firms and represent just over two-thirds of the segment’s revenues, increased 1% in the second quarter (3% in
the six-month period), and the segment’s Global business, representing smaller law firms outside the U.S., increased 3% in both periods.
U.S. Government revenues grew 11% in both periods, which included the benefits from contracts signed in the fourth quarter of 2019 with the
U.S. Department of Justice and the Administrative Office of the U.S. Courts. We expect the U.S. Government revenue growth rate in the
second half of 2020 will be similar to the growth rate experienced in the second quarter.
Organic revenues increased in both periods as growth in recurring revenues led by Westlaw Edge, the newest version of our legal research
platform, more than offset an expected decline in transactions revenues due to delays in Elite installations, slower sales, and the cancellation
of some in-person events.
Segment adjusted EBITDA and the related margin increased in both periods due to higher revenues and the benefits from COVID-19 related
cost mitigation efforts, which more than offset higher bad debt expense related to customers who may become financially distressed due to
COVID-19. The six-month period was negatively impacted by unfavorable expense timing in the first quarter compared to the prior-year
period. Foreign currency benefited the year-over-year change in segment adjusted EBITDA margin by 30bp and 10bp in the second quarter
and six-month period, respectively.
Corporates
Three months ended June 30, Six months ended June 30,
Change Change
Constant Constant
(millions of U.S. dollars, except margins) 2020 2019 Total Currency Organic 2020 2019 Total Currency Organic
Recurring revenues 282 267 6% 7% 7% 563 530 6% 8% 7%
Transactions revenues 47 48 (4%) (2%) (2%) 133 131 1% 2% (2%)
Revenues 329 315 4% 6% 5% 696 661 5% 6% 5%
Segment adjusted EBITDA 118 98 21% 21% 235 209 13% 13%
Segment adjusted EBITDA margin 35.9% 30.9% 500bp 450bp 33.8% 31.5% 230bp 180bp
Revenues in total and in constant currency increased in both periods. The increase in constant currency was driven by growth in recurring
revenues (86% of the Corporates segment in the second quarter). Transactions revenues (14% of the Corporates segment in the second
quarter) declined slightly in the second quarter and increased slightly in the six-month period. Both periods included the benefits from the
July 2019 acquisitions of Confirmation and HighQ which were essentially offset by the loss of revenues from the sale of the Pangea3/Legal
Managed Services (LMS) business in May 2019.
Page 14
Thomson Reuters Second Quarter Report 2020
On an organic basis, revenue growth in both periods reflected the growth in recurring revenues due to the strong performance of our legal
and tax products, which more than offset organic declines in transactions revenues.
Segment adjusted EBITDA and the related margins increased in both periods due to higher revenues and the benefits from COVID-19 related
cost mitigation efforts. Foreign currency benefited the year-over-year change in segment adjusted EBITDA margin by 50bp each in the
second quarter and six-month period.
Tax & Accounting Professionals
Three months ended June 30, Six months ended June 30,
Change Change
Constant Constant
(millions of U.S. dollars, except margins) 2020 2019 Total Currency Organic 2020 2019 Total Currency Organic
Recurring revenues 136 147 (7%) (3%) 4% 294 320 (8%) (5%) 1%
Transactions revenues 32 35 (8%) (6%) (14%) 92 84 11% 12% (4%)
Revenues 168 182 (8%) (4%) - 386 404 (4%) (1%) -
Segment adjusted EBITDA 54 59 (9%) (6%) 138 151 (8%) (6%)
Segment adjusted EBITDA margin 31.9% 32.3% (40)bp (80)bp 35.7% 37.3% (160)bp (190)bp
As expected, revenues in total and in constant currency declined in both periods. On both bases, recurring revenues (81% of the segment in
the second quarter) declined due to the loss of revenues from the sale of the Aumentum government business in November 2019.
Transactions revenues (19% of the segment in the second quarter) declined in the second quarter, despite a benefit from the acquisition of
Confirmation, due to the delay of transactional Pay-Per-Return tax filings resulting from the extended U.S. Federal tax filing deadline to
July 15, 2020. In the six-month period, transactions revenues increased in total and in constant currency due to contributions from the
acquisition of Confirmation.
On an organic basis, revenues in both periods were essentially unchanged as growth in recurring revenues was offset by declines in
transactions revenues. In the second quarter, Tax & Accounting’s Professionals revenues would have increased by 3% on an organic basis if
the Pay-Per-Return tax filings had not been delayed until the third quarter. In the six-month period, recurring organic revenue growth was
negatively impacted by the permanent acceleration of the release date of some of our UltraTax state software from January 2020 to
December 2019 to align with the traditional December release of our U.S. federal tax software. Recurring revenue growth would have been
6% without this impact. We expect Tax & Accounting Professionals to achieve above 5% organic revenue growth in the third and fourth
quarters of 2020.
Segment adjusted EBITDA and the related margins decreased in both periods primarily due to lower revenues. Foreign currency benefited
the year-over-year change in segment adjusted EBITDA margin by 40bp and 30bp in the second quarter and six-month period, respectively.
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.
Reuters News
Three months ended June 30, Six months ended June 30,
Change Change
Constant Constant
(millions of U.S. dollars, except margins) 2020 2019 Total Currency Organic 2020 2019 Total Currency Organic
Recurring revenues 141 144 (2%) (2%) (2%) 283 287 (2%) (1%) (1%)
Transactions revenues 14 12 19% 26% (54%) 27 24 14% 15% (45%)
Revenues 155 156 (1%) - (11%) 310 311 - - (8%)
Segment adjusted EBITDA 25 19 24% 6% 44 42 3% (12%)
Segment adjusted EBITDA margin 15.6% 12.5% 310bp 70bp 14.1% 13.6% 50bp (170)bp
Page 15
Thomson Reuters Second Quarter Report 2020
Revenues in total declined slightly in both periods. On an organic basis, revenues declined 11% and 8% for the three and six month periods,
respectively. The decline in organic revenues related to the cancellation of in-person conferences in response to COVID-19 in our Reuters
Events business, which we acquired in the fourth quarter of 2019. While we were able to convert some of these conferences to virtual events,
we were not able to recoup all of the lost revenue from the cancellations. Reuters News revenues on a constant currency basis were
essentially unchanged in both periods because the loss of in-person events revenues does not impact our comparison of the current and
prior-period actual results, since we did not own the Reuters Events business in the prior-year period. However, the loss of revenues caused a
decline in organic revenues because we include the organic impact from recently acquired businesses in our computation of organic growth,
as though we had owned the Reuters Events business in both periods.
In the third quarter of 2020, we expect Reuters News total revenues in constant currency to decline between 2% and 4% and we have
postponed all in-person conferences in our Reuters Events business through the third quarter of 2020. If we are unable to resume in-person
conferences, we plan to host virtual events in the second half of the year. However, these events are only expected to recoup a small portion
of the revenue that would be lost to in-person conferences. Full-year total revenues for Reuters News are expected to decline between 4%
and 6%.
Segment adjusted EBITDA and the related margin increased in the second quarter due to currency and certain one-time benefits. In the
six-month period, segment adjusted EBITDA and the related margin increased due to currency, which more than offset higher expenses
associated with Reuters Events in-person conferences that were cancelled and higher investments. Foreign currency benefited the year-over-
year change in segment adjusted EBITDA margin by 240bp and 220bp in the second quarter and six-month period, respectively.
Global Print
Three months ended June 30, Six months ended June 30,
Change Change
Constant Constant
(millions of U.S. dollars, except margins) 2020 2019 Total Currency Organic 2020 2019 Total Currency Organic
Revenues 134 164 (19%) (17%) (17%) 289 329 (12%) (11%) (11%)
Segment adjusted EBITDA 54 72 (25%) (24%) 117 146 (20%) (19%)
Segment adjusted EBITDA margin 40.5% 44.1% (360)bp (390)bp 40.5% 44.4% (390)bp (420)bp
Revenues decreased in total, in constant currency, and on an organic basis in both periods, as expected, exacerbated by the continuing delay
in shipments requested by some of our customers.
In the third quarter of 2020, we expect Global Print’s revenues to decline between 7% and 15%, partially due to continuing delays in shipping
print materials as many customers continue to work from home and are not at their offices to accept shipments due to the phased
re-opening of the U.S. and other countries, which have experienced slowdowns from resurgences of COVID-19 cases. As these print materials
have historically been viewed as critical content by law firms and government agencies, we currently expect most of these shipments will
eventually take place by the end of 2020. We expect Global Print’s revenues to decline between 7% and 11% for the full year.
Segment adjusted EBITDA and the related margins decreased in both periods primarily due to lower revenues. Foreign currency benefited
the year-over-year change in segment adjusted EBITDA margin by 30bp each in the second quarter and six-month period.
Corporate costs
Three months ended June 30, Six months ended June 30,
(millions of U.S. dollars) 2020 2019 2020 2019
Corporate costs 26 122 59 254
Corporate costs decreased in both periods primarily because the 2019 periods included costs and investments to reposition our business
following the separation of F&R from the rest of our company, including acceleration of digital strategies, replication of capabilities that we
lost with the separation from Refinitiv and severance. In the first six months of 2020, corporate costs were lower than planned in the first half
of the year because of certain timing benefits that are not expected to continue in the second half of the year.
Page 16
Thomson Reuters Second Quarter Report 2020
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. Our approach has provided us with a strong capital structure and liquidity position that we believe will enable us to weather
the economic crisis caused by COVID-19. In the first quarter of 2020, before the designation of COVID-19 as a pandemic, we redeemed about
$640 million of debt prior to its scheduled maturity in 2021, using borrowings under our commercial paper program. As the economic crisis
began to emerge, we borrowed $1.0 billion under our $1.8 billion syndicated credit facility, primarily to repay commercial paper, but also as a
precautionary measure given the economic uncertainty caused by COVID-19. In the second quarter of 2020, we repaid the $1.0 billion of
borrowings under our credit facility using proceeds from a new issuance of long-term debt that matures in 2025. At June 30, 2020, we had
$946 million of cash on hand. Our net debt to adjusted EBITDA leverage ratio as of June 30, 2020 was approximately 1.9:1, 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 the end of the
second quarter of 2020 was 1.7:1, 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 intend to pay an annualized dividend of $1.52 per share in 2020 to our common shareholders and to maintain our target to pay 50% to
60% of our expected free cash flow as dividends to our shareholders. We completed the repurchase of $200 million of our common shares in
February 2020, and do not anticipate repurchasing more of our shares for the remainder of the year.
We expect that our existing sources of liquidity, cash on hand, cash generated from our operations and funds available from our credit and
commercial paper facilities, 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 sections entitled “Additional
Information—Cautionary Note Concerning Factors That May Affect Future Results” and “Risk Factors”.
Cash flow
Summary of consolidated statement of cash flow
Three months ended June 30, Six months ended June 30,
(millions of U.S. dollars) 2020 2019 $ Change 2020 2019 $ Change
Net cash provided by operating activities 422 113 309 598 83 515
Net cash used in investing activities (93) (77) (16) (342) (153) (189)
Net cash used in financing activities (205) (186) (19) (125) (527) 402
Increase (decrease) in cash and bank overdrafts 124 (150) 274 131 (597) 728
Translation adjustments - - - (10) 2 (12)
Cash and bank overdrafts at beginning of period 822 2,258 (1,436) 825 2,703 (1,878)
Cash and bank overdrafts at end of period 946 2,108 (1,162) 946 2,108 (1,162)
Non-IFRS Financial Measure(1)
Free cash flow 305 1 304 340 (176) 516
(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 in both periods primarily because the prior-year periods included
(i) significantly higher costs and investments to reposition our company following the separation of F&R, (ii) residual employee-related costs
and tax expenditures related to the operations of our former F&R business, and (iii) in the six-month period, a $167 million contribution to a
pension plan. Both periods also benefited from savings from our COVID-19 related cost mitigation efforts and lower tax payments. The
second quarter of 2020 also included favorable working capital movements.
Investing activities. Net cash used in investing activities increased in the second quarter of 2020 primarily due to higher capital expenditures
which were $145 million (2019- $102 million). In the six-month period of 2020, net cash used in investing activities increased due to higher
capital expenditures, which were $287 million (2019- $240 million), and higher acquisition spending. In the first quarter of 2020, we
acquired Pondera Solutions, a provider of technology and advanced analytics to combat fraud, waste and abuse in healthcare and large
government programs. Both periods of 2020 included proceeds from the sale of certain real estate and both periods in 2019 included
proceeds from the sales of several small businesses.
Page 17
Thomson Reuters Second Quarter Report 2020
Financing activities. Net cash used in financing activities increased slightly in the second quarter of 2020 due to higher dividend payments.
In the six-month period of 2020, net cash used in financing activities decreased because the period included $492 million in proceeds from
net borrowings of debt. Refer to the “Commercial paper program”, “Credit facility”, and “Long-term debt” subsections below for additional
information regarding our debt activity. In the first six months of 2020, we returned $564 million to shareholders (2019- $539 million)
through dividends and share repurchases.
Cash and bank overdrafts. The reduction in cash and cash equivalents in both periods was driven by spending on acquisitions that was
funded from proceeds that we set aside from the F&R transaction.
Free cash flow. Free cash flow increased in both periods primarily due to higher cash from operating activities.
Additional information about our debt, dividends and share repurchases is as follows:
Š Commercial paper program. Our $1.8 billion commercial paper program provides cost-effective and flexible short-term funding. In
January 2020, we issued $630 million of commercial paper, the proceeds of which were used to redeem debt obligations early ahead of
their maturity. Most of our commercial paper borrowings were repaid in February and March 2020, primarily from funds borrowed under
our credit facility, as discussed below. At June 30, 2020, we had $120 million of outstanding commercial paper. In July 2020, we repaid
all of our outstanding commercial paper.
Š 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 June 30, 2020. We borrowed $1.0 billion under this facility in the first quarter of 2020, which was
repaid in the second quarter of 2020. 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.
In July 2017, the U.K. Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of
2021. As a result, public and private sector industry initiatives are currently underway to identify an alternative reference rate.
If our debt rating is downgraded by Moody’s or Standard & Poor’s, 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 June 30, 2020, we were in compliance with this covenant as our ratio of net debt to adjusted EBITDA, as
calculated under the terms of our syndicated credit facility, was 1.7:1.
Š Long-term debt. The following table provides information regarding notes that we issued and repaid in the six months ended June 30,
2020.
MONTH/YEAR TRANSACTION PRINCIPAL AMOUNT (IN MILLIONS)
Notes issued
May 2020 2.239% Notes, due 2025 C$1,400
Notes repaid
January 2020 3.309% Notes, due 2021 C$550
January 2020 3.95% Notes, due 2021 US$139
The new notes issued in May 2020 were immediately swapped into U.S. dollars and we used the $999 million of net proceeds for general
corporate purposes, which included repayment of borrowings under our credit facility.
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.
Page 18
Thomson Reuters Second Quarter Report 2020
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 August 4, 2020,
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 E of this management’s discussion and
analysis for consolidating summary financial information about TR Finance LLC and the subsidiary guarantors.
Š 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.
In June 2020, Moody’s affirmed our credit ratings and raised our Outlook to Stable from Negative, citing the strength of our business and
strong liquidity position, among other items.
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.
Š Dividends. Dividends on our common shares are declared in U.S. dollars. In February 2020, we announced an $0.08 per share increase in
the annualized dividend to $1.52 per common share (beginning with the common share dividend that we paid in March 2020). In our
consolidated statement of cash flow, dividends paid on common shares are shown net of amounts reinvested in our company under our
dividend reinvestment plan (DRIP). Registered holders of common shares may participate in our DRIP, under which cash dividends are
automatically reinvested in new common shares. Common shares are valued at the weighted-average price at which the shares traded on
the Toronto Stock Exchange (TSX) during the five trading days immediately preceding the record date for the dividend.
Details of dividends declared per common share and dividends paid on common shares are as follows:
Three months ended June 30, Six months ended June 30,
(millions of U.S. dollars, except per share amounts) 2020 2019 2020 2019
Dividends declared per share $0.38 $0.36 $0.76 $0.72
Dividends declared 188 180 376 361
Dividends reinvested (6) (5) (12) (12)
Dividends paid 182 175 364 349
Page 19
Thomson Reuters Second Quarter Report 2020
Š Share repurchases. We may buy back shares (and subsequently cancel them) from time to time as part of our capital strategy. Our share
repurchases are typically effected under a normal course issuer bid (NCIB). Under the NCIB, we may repurchase up to 25 million common
shares between August 19, 2019 and August 18, 2020 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. We intend to renew our NCIB in August 2020 for an
additional 12 month period, but we do not anticipate repurchasing more of our shares for the remainder of the year.
In October 2019, we announced plans to repurchase up to an additional $200 million of our common shares in 2020. These repurchases
were completed in February 2020.
We did not repurchase any shares in the second quarter of 2020 and 2019. Details of share repurchases for the six-month periods were as
follows:
Six months ended June 30,
2020 2019
Share repurchases (millions of U.S. dollars) 200 190
Shares repurchased (number in millions) 2.6 3.5
Share repurchases – average price per share in U.S. dollars $78.37 $53.93
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 $16.9 billion at June 30, 2020, relatively unchanged from $17.3 billion at December 31, 2019. At June 30, 2020, the
carrying amounts of our total current assets exceeded the carrying amounts of our total current liabilities by $0.9 billion. Normally, our total
current liabilities exceed our total current assets principally 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 20
Thomson Reuters Second Quarter Report 2020
Net debt and leverage ratio of net debt to adjusted EBITDA
June 30, December 31,
(millions of U.S. dollars) 2020 2019
Current indebtedness 120 579
Long-term indebtedness 3,699 2,676
Total debt 3,819 3,255
Swaps (17) 62
Total debt after swaps 3,802 3,317
Remove fair value adjustments for hedges (12) -
Total debt after currency hedging arrangements 3,790 3,317
Remove transaction costs and discounts included in the carrying value of debt 40 36
Add: Lease liabilities (current and non-current) 324 322
Less: cash and cash equivalents(2) (946) (825)
Net debt (1) 3,208 2,850
Leverage ratio of net debt to adjusted EBITDA
Adjusted EBITDA(1)(3) 1,700 1,493
Net debt / adjusted EBITDA(1) 1.9:1 1.9:1
(1) Amounts represent non-IFRS measures. For additional information about our liquidity given the COVID-19 economic crisis, 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.
(2) Includes cash and cash equivalents of $45 million and $34 million at June 30, 2020 and December 31, 2019, respectively, held in subsidiaries which have regulatory restrictions,
contractual restrictions or operate in countries where exchange controls and other legal restrictions apply and are therefore not available for general use by our company.
(3) For purposes of this calculation, adjusted EBITDA is computed on a rolling twelve-month basis and includes adjusted EBITDA of $479 million, $480 million, $396 million and
$345 million for the three months ended June 30, 2020, March 31, 2020, December 31, 2019 and September 30, 2019, respectively. Refer to Appendix B of this management’s
discussion and analysis and Appendix C of our 2019 annual management’s discussion and analysis, which is contained in our 2019 annual report, for additional information
regarding the calculation of adjusted EBITDA in each of these periods.
At June 30, 2020, our total debt position was $3.8 billion. The maturity dates for our term debt are well balanced with no significant
concentration in any one year. At June 30, 2020, the average maturity of our term debt was approximately 10 years at an average interest
rate of less than 5%, all of which is fixed. Our leverage ratio of net debt to adjusted EBITDA was below our target ratio of 2.5:1. The increase
in our net debt is primarily due to an increase in our total debt (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 2019 annual
management’s discussion and analysis. There were no material changes to these arrangements, commitments and contractual obligations
during the six months ended June 30, 2020.
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 21
Thomson Reuters Second Quarter Report 2020
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. 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.
For additional information, please see the “Risk Factors” section of our 2019 annual report, which contains further information on risks related to
legal and tax matters.
Related Party Transactions
As of August 4, Woodbridge beneficially owned approximately 66% of our shares.
There were no new significant related party transactions during the first six months of 2020. Refer to the “Related Party Transactions”
section of our 2019 annual management’s discussion and analysis, which is contained in our 2019 annual report, as well as note 32 of our
2019 annual consolidated financial statements for information regarding related party transactions.
Proposed LSEG/Refinitiv Transaction
On August 1, 2019, we and private equity funds affiliated with Blackstone agreed to sell Refinitiv to LSEG in an all share transaction for a
total enterprise value of approximately $27 billion (as of the announcement date). Refinitiv is currently owned 55% by Blackstone and 45%
by Thomson Reuters. We expect that the transaction will result in Blackstone and Thomson Reuters ultimately holding a combined 37%
economic interest in LSEG (of which a 15% economic interest would be attributed to Thomson Reuters) and a combined voting interest in
LSEG of less than 30%. Thomson Reuters’ interest in LSEG shares will be held in an entity jointly owned by Blackstone and Thomson Reuters
(the “Blackstone/Thomson Reuters Entity”). Upon the closing of this transaction, Thomson Reuters is projected to indirectly own
approximately 82.5 million LSEG shares, which would have a market value of approximately $9.1 billion based on LSEG’s closing share price
on August 4, 2020. Our estimated ownership interest above reflects our expected acquisition of an additional interest in Refinitiv pursuant to
a warrant agreement entered into with Blackstone, which will be exercised in connection with the transaction closing. The proposed
transaction is subject to regulatory clearances and other customary closing conditions and is expected to close by the end of 2020 or early in
2021. Although it is currently expected that LSEG will only issue shares as consideration for the transaction, LSEG may, at its option, settle up
to $2.5 billion of the consideration in cash. Payment of any cash consideration will reduce the number of LSEG shares issued to the
Blackstone/Thomson Reuters Entity.
We expect that the LSEG transaction will be predominantly tax-deferred for Thomson Reuters. We estimate that $500 million to
$600 million of tax will become payable when the deal closes, depending on the price of LSEG shares at that time. We intend to fund this tax
liability by either selling down some of our LSEG shares (as permitted under a lock-up agreement the Blackstone/Thomson Reuters Entity
has agreed to be subject to for their LSEG shares) and/or by employing other means such that we do not expect the tax payment to
materially impact our liquidity position. At the time we can exercise our right to sell our shares, in years 3 and 4 after the closing of the
transaction, we would pay tax on such sales at the U.S. corporate tax rate, which is currently 25%.
After the transaction closes, Thomson Reuters’ free cash flow will benefit from any future dividends paid by LSEG to its shareholders. Once
applicable post-closing lock-up periods expire, if we sell LSEG shares, we will generate cash which we would decide at the time how to best
utilize. Additionally, Reuters News’ 30-year agreement with Refinitiv signed in October 2018 will continue after the closing of the transaction
within the combined business.
For additional information about the proposed LSEG/Refinitiv transaction, please see the “Proposed LSEG/Refinitiv Transaction” section of
our 2019 annual management’s discussion and analysis, which is contained in our 2019 annual report.
Subsequent Events
There were no material events occurring after June 30, 2020 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 2019 annual management’s discussion and analysis, which is contained in
our 2019 annual report, for information regarding changes in accounting policies. Since the date of our 2019 annual management’s
discussion and analysis, there have not been any significant changes to our accounting policies.
Page 22
Thomson Reuters Second Quarter Report 2020
Critical Accounting Estimates and Judgments – Impact of COVID-19 Pandemic
The global economic crisis caused by the COVID-19 pandemic has created significant uncertainty about the future. As a result, some of the
estimates and judgments that management makes in preparing its financial statements may be more variable and may change materially in
the future. Management initially assessed its critical accounting estimates and judgments in light of COVID-19 in conjunction with its interim
report for the three months ended March 31, 2020. In the second quarter, management re-assessed these estimates and judgments and
made no significant changes. For purposes of its business planning and valuation estimates, the company continues to assume that the
global economy will gradually recover throughout the second half of 2020. The following provides information regarding management’s
critical accounting estimates and judgments relative to the global economic crisis caused by COVID-19.
Allowance for doubtful accounts and sales adjustments
The company provided additional reserves of $6 million and $15 million in the three months and six months ended June 30, 2020 to reflect
that some of its smaller legal and tax customers may not be able to pay for the products and services the company has provided and, in
limited situations, for credits the company may issue to customers in financial distress. While we have offered payment plans to some of our
smaller customers who may require more time to pay, very few have elected this option to date.
Computer software
The company has not experienced, nor does it expect, material changes to product demand and it does not plan to discontinue any products
as a result of the crisis that would require impairment or shortened useful lives.
Other identifiable intangible assets and goodwill
At October 1, 2019, the date of the company’s last impairment test, the estimated fair value less costs of disposal of each cash generating
unit (CGU), which comprise each of its reportable segments, exceeded their carrying value by over 100%. The company’s sensitivity analysis
demonstrated that no reasonably possible change in its assumptions due to the COVID-19 pandemic, including higher discount rates and
reduction in cash flows, would cause the carrying amounts of any CGU, including the carrying value of the indefinite lived tradenames, to
exceed its recoverable amount.
Equity method investments and related warrants
Equity method investments consisted primarily of the company’s 45% investment in Refinitiv. On August 1, 2019, the company and private
equity funds affiliated with Blackstone agreed to sell Refinitiv to LSEG for a value that is substantially in excess of the carrying value of the
company’s investment, as measured by the share price of LSEG at June 30, 2020. The proposed transaction, which was approved by LSEG
shareholders in November 2019, remains subject to regulatory clearances and other customary closing conditions and is expected to close by
the end of 2020 or early in 2021. The company expects to record a significant gain on the transaction upon closing and therefore concluded
that there was no impairment to its investment in Refinitiv at June 30, 2020.
Reflecting the terms of the agreement, the company valued the related warrants in Refinitiv at June 30, 2020 primarily based on the number
of incremental shares in Refinitiv to which the company is contractually entitled upon closing, the share price of LSEG on June 30, 2020, and
management’s assessment that the deal remains highly probable of closing by the end of 2020 or early in 2021.
The company holds other investments aggregating $0.2 billion in a variety of industries, including real estate, technology and media, which
could become impaired in the future due to economic conditions caused by the pandemic.
Employee future benefits
The assets and obligations for the company’s most significant benefit plans in the U.S. and the U.K. are remeasured each quarter with an
offset to other comprehensive income or loss. For the six months ended June 30, 2020, the company recorded remeasurement gains of
$23 million. There were no funding requirements triggered by changes in the value of assets and liabilities associated with the company’s
material defined benefit plans due to increased market volatility associated with the economic crisis.
Income taxes
Relevant tax reform related to the economic crisis, most notably the impact of the Coronavirus Aid, Relief and Economic Security (CARES)
Act in the United States, did not have a material impact on the computation of income taxes. The company concluded that its updated
projections relating to COVID-19 did not impact its ability to realize its deferred tax assets.
Page 23
Thomson Reuters Second Quarter Report 2020
Critical judgments in applying accounting policies
Revenue recognition
Management has elevated its focus on collectability in making its revenue recognition judgments while the crisis persists.
Uncertain tax positions
The company made no changes in its judgments of uncertain tax positions as a result of the COVID-19 pandemic.
Additional Information
Basis of presentation
Prior-period amounts have been revised to correct certain immaterial misstatements, as reflected in our consolidated financial statements
for the year ended December 31, 2019. Refer to the “Revision of prior-period financial statements” section below and our interim
consolidated financial statements for the three and six months ended June 30, 2020 for additional information.
Additionally, we adjusted our prior-period segment amounts to reflect the current presentation. In the first quarter of 2020, in connection
with the completion of our program to reposition our businesses after the separation from Refinitiv, we re-assessed our methodology for
allocating costs to our business segments and adjusted our allocations. The 2019 segment amounts were also adjusted to reflect the transfer
of certain revenues primarily from the Corporates segment to the Legal Professionals segment, where they are better aligned. These changes
impacted the 2019 financial results of the segments, but did not change the consolidated 2019 financial results. The table below summarizes
the changes:
Three months ended June 30, Six months ended June 30,
(millions of U.S. dollars) As Reported Adjustments As Revised As Reported Adjustments As Revised
Revenues
Legal Professionals 603 2 605 1,197 8 1,205
Corporates 318 (3) 315 670 (9) 661
Eliminations/Rounding - 1 1 (1) 1 -
Total revenues 1,423 - 1,423 2,910 - 2,910
Adjusted EBITDA
Legal Professionals 232 (3) 229 459 (1) 458
Corporates 102 (4) 98 220 (11) 209
Tax & Accounting Professionals 60 (1) 59 153 (2) 151
Reuters News 10 9 19 26 16 42
Global Print 73 (1) 72 147 (1) 146
Corporate costs/Rounding (122) - (122) (253) (1) (254)
Total adjusted EBITDA 355 - 355 752 - 752
Revision of prior-period financial statements
On October 1, 2018, we sold a 55% interest in our F&R business to private equity funds affiliated with Blackstone. We retained a 45% interest
in the business, which is now known as Refinitiv. Since October 1, 2018, we have included our share of post-tax losses from our 45% interest
in Refinitiv, an equity method investment, in our net earnings. In the third quarter of 2019, a misstatement was identified that understated
our share of Refinitiv’s post-tax losses since the fourth quarter of 2018. The misstatement related to an accounting principle difference for
preferred stock issued by Refinitiv to the Blackstone consortium between U.S. GAAP, the basis on which Refinitiv prepares its financial
statements, and IFRS, the basis on which Thomson Reuters prepares its financial statements. This misstatement did not impact our
revenues, operating profit, segment measures, adjusted EBITDA, adjusted EPS, cash generated from operating activities or free cash flow.
We concluded that the misstatement was immaterial to our previously issued financial statements. However, as the impact of correcting the
cumulative misstatement in the third quarter of 2019 would have been material to net earnings in that quarter, we have revised our
previously issued financial statements to correct the misstatement.
Page 24
Thomson Reuters Second Quarter Report 2020
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
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, operation and documentation of the related internal control processes and procedures, as necessary.
Following the separation of the F&R business from our company in October 2018, a significant number of employees who performed
accounting and reporting functions were transferred to Refinitiv. Transition services agreements have been in place between Thomson
Reuters and Refinitiv since the companies separated. While a number of key controls continue to be performed under the transition services
agreements, there were no material changes in key controls over our financial reporting processes.
Except as described above, there was no change in our internal control over financial reporting during the last fiscal quarter of 2020 that
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Share capital
As of August 4, 2020, we had outstanding 496,555,302 common shares, 6,000,000 Series II preference shares, 3,731,678 stock options and
a total of 2,976,301 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 2019 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 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, statements regarding the
potential or expected impact of the COVID-19 pandemic on Thomson Reuters, its customers and the general economy, statements about the
company’s 2020 business outlook and other expectations regarding the future financial and operational performance of the company and its
individual business segments (notably regarding revenues for the Government business of the Legal Professionals segment, Tax & Accounting
Professionals segment revenues, the Reuters Events business and Reuters News segment revenues, Global Print segment shipments and revenues,
and Transactions revenues), the number of LSEG shares that Thomson Reuters is projected to indirectly own upon closing of the proposed sale of
Refinitiv, the company’s current expectations regarding the timing for closing of the proposed LSEG/Refinitiv transaction, Refinitiv’s belief
regarding achieving its full annual cost savings run-rate target by the end of 2020, the company’s expectations regarding its liquidity and capital
resources, the company’s expectations regarding its cost savings program, and the company’s expectations regarding dividends and share
repurchases. 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
Page 25
Thomson Reuters Second Quarter Report 2020
management’s discussion and analysis, they are not a guarantee of future performance or outcomes and there is no assurance that the 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 2019 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 2020 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 an outlook for the purpose of presenting information about current expectations for 2020. 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.
Risk Factors
We are updating and supplementing the risk factors disclosed in our 2019 annual report and our first-quarter 2020 management’s discussion
and analysis with the risk factor below. This risk factor updates and should be read together with the risk factors in our 2019 annual report and
our first-quarter 2020 management’s discussion and analysis.
The COVID-19 pandemic has, and likely will continue to, adversely affect our business, financial condition and results of operations. We
have been, and likely will continue to be, adversely affected by uncertainty, downturns and changes in the markets that we serve, in
particular in the legal, tax and accounting industries.
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. COVID-19 and related containment measures have already caused a global economic downturn
and it is likely that the current outbreak and continued spread of COVID-19 will cause a global recession. We are unable to predict the extent
and duration of any such downturn or recession or the ultimate impact of the pandemic on demand for our products and services due to
various uncertainties, such as the duration and severity of the outbreak, actions that may be taken by governmental authorities, businesses
and individuals in response to the pandemic, and the effect on our customers. In the second quarter of 2020, we began to experience
negative impacts from COVID-19 and related containment measures on our revenue performance. We expect to continue to be adversely
affected and the impact of the pandemic on our business in the future could be material. While we have implemented measures and plans
designed to mitigate the effects of COVID-19, our efforts may prove to be inadequate.
Our performance depends on the financial health and strength of our customers, which in turn is primarily dependent on the general
economy in the United States (79% of our 2019 revenues) and secondarily on the general economies in Europe, Asia Pacific, Canada and
Latin America. Cost-cutting, reduced spending or reduced activity by any of our customer segments may decrease demand for, and usage of,
some of our products and services. This could adversely affect our financial results by reducing our revenues, which could in turn reduce the
profitability of some of our products and services. Cost-cutting by customers has also caused us to further simplify our organization and take
additional steps beyond those we might otherwise take to optimize our own cost structure as a means to maintain or improve profitability.
While we expect to mitigate the impact of lower 2020 revenues on our adjusted EBITDA and our free cash flow through a $100 million cost
savings program, which contemplates reduced spending on consulting and advisory services, travel and entertainment, certain development
projects and other discretionary spend, this may be insufficient and we may need to more aggressively reduce our costs in the future.
Page 26
Thomson Reuters Second Quarter Report 2020
Because a high proportion of our revenues are recurring (78% of our 2019 revenues), we believe that our revenue patterns are generally more
stable compared to other business models that primarily involve the sale of products in discrete or one-off arrangements. However, this also
means that there is often a lag in realizing the impact of current sales or cancellations in our reported revenues, as we recognize revenues
over the term of the arrangement. Because of this lag effect, our revenues are typically slower to decline when economic conditions worsen,
but are also often slower to return to growth when economic activity improves, as compared to other businesses that are not subscription-
based. Our transactions revenues (10% of our 2019 revenues), which include professional fees from service and consulting arrangements,
fluctuate when economic conditions worsen, such as during the COVID-19 pandemic.
In 2019, we derived 78% of our revenues from our Legal Professionals, Corporates and Tax & Accounting Professionals businesses, which
primarily serve professionals in the legal, tax and accounting industries. Global uncertainty and changing economic conditions can impact
these industries. In the legal industry, COVID-19 and related containment measures have caused many courts to cancel or postpone legal
proceedings and transactional work has slowed in various practice areas. As a result of COVID-19, our customers are focusing on the health
and safety of their employees and businesses and are looking to reduce costs. Some of our customers may also slow down decision-making
or delay planned renewals or implementations as a result of the pandemic, which may disrupt historical spending patterns. Slowdowns in
work for law or tax and accounting firms may result in reduced demand for some of our products and services. While we expect that a limited
number of our smaller customers will be unable to pay us or will seek financial accommodations or alternative payment terms due to their
financial condition, if a greater number of customers or some of our larger customers are unable or unwilling to pay us, it could adversely
impact our revenues and financial condition.
COVID-19 has impacted the Global Print segment, which had declining revenues prior to the pandemic. While our manufacturing plant in
Minnesota remains open as it has been classified an “essential business”, in the second quarter we experienced significant customer
requests to delay shipments while customers were not in their business locations to accept the shipments due to government mandated
business shutdowns in the U.S. and many other countries. As these materials have historically been viewed as critical content for law firms
and government agencies, we expect that most of these shipments will eventually take place in the third and fourth quarters of 2020 if the
economy re-opens and stabilizes. However, there is no assurance that will occur within the time periods expected, or at all. An accelerated
decline in Global Print revenues related to the COVID-19 pandemic could adversely affect our profitability (as Global Print has higher margins
than our overall business) as well as our cash flows.
COVID-19 has impacted our Reuters News business and we currently expect the segment’s full-year 2020 revenues to decline. In the first six
months of 2020, our Reuters Events business (which we acquired in the fourth quarter of 2019) cancelled or postponed nearly all in-person
conferences through August 2020 in response to COVID-19. It is possible that organic revenues from Reuters News could also decline in the
fourth quarter of 2020, if the Reuters Events business is unable to resume in-person conferences. We are unable to predict when Reuters
Events will be able to resume in-person conferences.
COVID-19 has caused us to modify several of our business practices and operations and we may take further actions as may be required by
government authorities or that we believe are in the best interests of our employees, customers, partners, suppliers and other stakeholders. Most of
our employees are currently working from home, which can introduce additional operational risks, including cybersecurity risks. Working from home
arrangements have impacted the way that we conduct our product development, customer support, sales and other activities, which could have an
adverse effect on our operations. While our sales force is pursuing new sales and renewals while working from home, prolonged restrictions or
limitations on the ability of our sales force to travel to meet prospective or existing customers in person may adversely affect our ability to generate
future revenues. In certain countries, such as India, we have a large number of employees performing and supporting critical operations. An
extended closure of any facilities performing critical operations could in the future disrupt our ability to provide our services and solutions. Illness and
workforce disruptions could also lead to the unavailability of senior management or other key personnel and adversely impact our ability to perform
critical functions. We cannot provide any assurance that our measures will be sufficient to mitigate the risks posed by COVID-19.
Many of the risks discussed in the Risk Factors section of our 2019 annual report, our first-quarter 2020 management’s discussion and
analysis and in this management’s discussion and analysis are, and could be, exacerbated by the COVID-19 pandemic and any worsening of
the global business and economic environment as a result. Developments related to COVID-19 have been rapidly changing, and additional
impacts and risks may arise that we may not currently be aware of or able to appropriately respond to, including if the pandemic is prolonged
or expands more widely around the world. While we are closely monitoring the impact of COVID-19, the future impact of the pandemic is
highly uncertain and cannot be predicted and there is no assurance that the pandemic will not have a material adverse impact in the future
on our business, financial condition or results of operations. The extent of the impact, individually or in the aggregate, will depend on future
developments, including actions taken to contain the financial and economic impact of the pandemic. Even after the pandemic and related
containment measures subside, we may continue to experience adverse impacts to our business, financial condition and results of
operations, the extent of which may be material.
Page 27
Thomson Reuters Second Quarter Report 2020
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 for the most directly comparable IFRS measure are reflected in Appendix B and the “Liquidity and Capital
Resources” section of our 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
continuing operations before tax expense or benefit, profitability and performance trends by excluding operations
net interest expense, other finance costs or income, items that we do not consider to be controllable
depreciation, amortization of software and other activities for this purpose.
identifiable intangible assets, our share of post-tax
Represents a measure commonly reported and
earnings or losses in equity method investments,
widely used by investors as a valuation metric.
other operating gains and losses, certain asset
Additionally, this measure is used to assess our
impairment charges, fair value adjustments and
ability to incur and service debt.
corporate related items.
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 Provides a basis for evaluating the operating Earnings from continuing
related margin is expressed as a percentage of profitability and capital intensity of a business in a operations
revenues. single measure. This measure captures
investments regardless of whether they are
expensed or capitalized.
Page 28
Thomson Reuters Second Quarter Report 2020
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 Net earnings and diluted earnings
Š excluding the post-tax impacts of fair value earnings and is also a measure commonly used by per share
adjustments, amortization of other identifiable shareholders to measure our performance.
intangible assets, other operating gains and
losses, certain asset impairment charges, other
finance costs or income, our share of post-tax
earnings or losses in equity method investments,
discontinued operations and other items
affecting comparability. 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.
Š 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 Because the geographical mix of pre-tax profits and
earnings and earnings per share to reflect a losses in interim periods may be different from that
normalized effective tax rate. Specifically, the for the full-year, our effective tax rate computed in
normalized effective rate is computed as the accordance with IFRS may be more volatile by
estimated full-year effective tax rate applied to quarter. Therefore, we believe that using the
pre-tax adjusted earnings of the interim period. The expected full-year effective tax rate provides more
reported effective tax rate is based on separate comparability among interim periods. The
annual effective income tax rates for each taxing adjustment to normalize the effective tax rate
jurisdiction that are applied to each interim period’s reallocates estimated full-year income taxes
pre-tax income. 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 commonly used measures of a company’s Total debt (current indebtedness
Total indebtedness (including the associated fair leverage. plus long-term indebtedness)
value of hedging instruments, but excluding the
Given that we hedge some of our debt to reduce risk,
associated unamortized transaction costs and
we include hedging instruments as we believe it
premiums or discounts and the interest-related fair
provides a better measure of the total obligation
value component of hedging instruments), and lease
associated with our outstanding debt. However,
liabilities less cash and cash equivalents.
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 company’s ability to pay its debt. Our non-IFRS definition above for the most directly
previous twelve-month period ending with the measure is aligned with the calculation of our comparable IFRS measure
current fiscal quarter. internal target and is more conservative than the
maximum ratio allowed under our contractual
covenants in our credit facility.
Free cash flow
Net cash provided by operating activities, proceeds Helps assess our ability, over the long term, to create Net cash provided by operating
from disposals of property and equipment, and value for our shareholders as it represents cash activities
other investing activities, less capital expenditures, available to repay debt, pay common dividends and
payments of lease principal, dividends paid on our fund share repurchases and new acquisitions.
preference shares, and dividends paid to
non-controlling interests.
Page 29
Thomson Reuters Second Quarter Report 2020
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 For each non-IFRS measure, refer to
reported before the impact of foreign currency or at from period to period. the definitions above for the most
“constant currency” directly comparable IFRS measure.
Our reporting currency is the U.S. dollar. However,
IFRS Measures: we conduct activities in currencies other than the
Š Revenues U.S. dollar. We measure our performance before the
Š Operating expenses impact of foreign currency (or at “constant
currency”), which means that we apply the same
Non-IFRS Measures: foreign currency exchange rates for the current and
Š Adjusted EBITDA and adjusted EBITDA margin
equivalent prior period. To calculate the foreign
Š Adjusted EPS
currency impact between periods, we convert the
current and 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 Provides further insight into the performance of our Revenues
businesses at constant currency. The metric existing businesses by excluding distortive impacts
excludes the distortive impacts of acquisitions and and serves as a better measure of our ability to grow
dispositions from not owning the business in both our business over the long term.
comparable periods.
Š 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.
Š 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 30
Thomson Reuters Second Quarter Report 2020
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 and six months ended June 30, 2020 and 2019.
Reconciliation of earnings from continuing operations to adjusted EBITDA and adjusted EBITDA less capital expenditures
Three months ended June 30, Six months ended June 30,
(millions of U.S. dollars, except margins) 2020 2019 2020 2019
Earnings from continuing operations 131 207 322 321
Adjustments to remove:
Tax expense 16 47 63 48
Other finance costs (income) 13 18 (34) 29
Net interest expense 52 37 97 72
Amortization of other identifiable intangible assets 30 25 60 52
Amortization of computer software 118 104 229 209
Depreciation 43 38 83 72
EBITDA 403 476 820 803
Adjustments to remove:
Share of post-tax losses in equity method investments 153 138 207 251
Other operating gains, net (80) (261) (48) (305)
Fair value adjustments 3 2 (20) 3
Adjusted EBITDA 479 355 959 752
Deduct: Capital expenditures (145) (102) (287) (240)
Adjusted EBITDA less capital expenditures 334 253 672 512
Adjusted EBITDA margin 34.1% 25.0% 32.8% 25.8%
Adjusted EBITDA less capital expenditures margin 23.8% 17.9% 23.0% 17.6%
Reconciliation of net earnings to adjusted earnings and adjusted EPS
Three months ended June 30, Six months ended June 30,
(millions of U.S. dollars, except per share amounts and share data) 2020 2019 2020 2019
Net earnings 126 180 319 284
Adjustments to remove:
Fair value adjustments 3 2 (20) 3
Amortization of other identifiable intangible assets 30 25 60 52
Other operating gains, net (80) (261) (48) (305)
Other finance costs (income) 13 18 (34) 29
Share of post-tax losses in equity method investments 153 138 207 251
Tax on above items(1) (28) 30 (59) 1
Tax items impacting comparability(1) 9 (4) 39 (15)
Loss from discontinued operations, net of tax 5 27 3 37
Interim period effective tax rate normalization(1) (10) (8) (6) (8)
Dividends declared on preference shares - (1) (1) (2)
Adjusted earnings 221 146 460 327
Adjusted EPS $0.44 $0.29 $0.92 $0.65
Diluted weighted-average common shares (millions) 497.6 503.0 497.6 503.2
(1) See the “Results of Operations—Tax expense” section of this management’s discussion and analysis for additional information.
Page 31
Thomson Reuters Second Quarter Report 2020
Reconciliation of net cash provided by operating activities to free cash flow
Three months ended June 30, Six months ended June 30,
(millions of U.S. dollars) 2020 2019 2020 2019
Net cash provided by operating activities 422 113 598 83
Capital expenditures (145) (102) (287) (240)
Proceeds from disposals of property and equipment 45 2 64 2
Other investing activities 1 1 2 4
Payments of lease principal (18) (12) (36) (23)
Dividends paid on preference shares - (1) (1) (2)
Free cash flow 305 1 340 (176)
Reconciliation of changes in revenues excluding the effects of foreign currency (constant currency) as well as acquisitions/divestitures
(organic basis)(1)
Three months ended June 30,
Change
Subtotal
Foreign Constant Acquisitions/
(millions of U.S. dollars) 2020 2019 Total Currency Currency (Divestitures) Organic
Revenues
Legal Professionals 620 605 2% (1%) 3% 2% 1%
Corporates 329 315 4% (2%) 6% 1% 5%
Tax & Accounting Professionals 168 182 (8%) (4%) (4%) (3%) -
“Big 3” Segments Combined 1,117 1,102 1% (2%) 3% 1% 2%
Reuters News 155 156 (1%) (1%) - 11% (11%)
Global Print 134 164 (19%) (1%) (17%) - (17%)
Eliminations/Rounding (1) 1
Total revenues 1,405 1,423 (1%) (2%) - 2% (2%)
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 June 30,
Change
Subtotal
Foreign Constant Acquisitions/
(millions of U.S. dollars) 2020 2019 Total Currency Currency (Divestitures) Organic
Recurring Revenues
Legal Professionals 580 557 4% (1%) 5% 2% 3%
Corporates 282 267 6% (2%) 7% 1% 7%
Tax & Accounting Professionals 136 147 (7%) (4%) (3%) (7%) 4%
“Big 3” Segments Combined 998 971 3% (2%) 4% - 4%
Reuters News 141 144 (2%) - (2%) - (2%)
Total recurring revenues 1,139 1,115 2% (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 32
Thomson Reuters Second Quarter Report 2020
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 June 30,
Change
Subtotal
Foreign Constant Acquisitions/
(millions of U.S. dollars) 2020 2019 Total Currency Currency (Divestitures) Organic
Transactions Revenues
Legal Professionals 40 48 (18%) (1%) (17%) 2% (19%)
Corporates 47 48 (4%) (1%) (2%) - (2%)
Tax & Accounting Professionals 32 35 (8%) (2%) (6%) 8% (14%)
“Big 3” Segments Combined 119 131 (10%) (1%) (9%) 3% (12%)
Reuters News 14 12 19% (8%) 26% 80% (54%)
Total transactions revenues 133 143 (8%) (2%) (6%) 14% (19%)
Reconciliation of changes in revenues excluding the effects of foreign currency (constant currency) as well as acquisitions/divestitures
(organic basis)(1)
Six months ended June 30,
Change
Subtotal
Foreign Constant Acquisitions/
(millions of U.S. dollars) 2020 2019 Total Currency Currency (Divestitures) Organic
Revenues
Legal Professionals 1,246 1,205 3% (1%) 4% 1% 3%
Corporates 696 661 5% (1%) 6% 1% 5%
Tax & Accounting Professionals 386 404 (4%) (3%) (1%) (1%) -
“Big 3” Segments Combined 2,328 2,270 3% (1%) 4% 1% 3%
Reuters News 310 311 - (1%) - 8% (8%)
Global Print 289 329 (12%) (1%) (11%) - (11%)
Eliminations/Rounding (2) -
Total revenues 2,925 2,910 1% (1%) 2% 2% -
Reconciliation of changes in recurring revenues excluding the effects of foreign currency (constant currency) as well as acquisitions/
divestitures (organic basis)(1)
Six months ended June 30,
Change
Subtotal
Foreign Constant Acquisitions/
(millions of U.S. dollars) 2020 2019 Total Currency Currency (Divestitures) Organic
Recurring Revenues
Legal Professionals 1,167 1,113 5% (1%) 6% 2% 4%
Corporates 563 530 6% (1%) 8% 1% 7%
Tax & Accounting Professionals 294 320 (8%) (3%) (5%) (6%) 1%
“Big 3” Segments Combined 2,024 1,963 3% (1%) 4% - 4%
Reuters News 283 287 (2%) - (1%) - (1%)
Total recurring revenues 2,307 2,250 3% (1%) 4% - 4%
(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 33
Thomson Reuters Second Quarter Report 2020
Reconciliation of changes in transactions revenues excluding the effects of foreign currency (constant currency) as well as acquisitions/
divestitures (organic basis)(1)
Six months ended June 30,
Change
Subtotal
Foreign Constant Acquisitions/
(millions of U.S. dollars) 2020 2019 Total Currency Currency (Divestitures) Organic
Transactions Revenues
Legal Professionals 79 92 (15%) (1%) (14%) (1%) (13%)
Corporates 133 131 1% (1%) 2% 4% (2%)
Tax & Accounting Professionals 92 84 11% (2%) 12% 16% (4%)
“Big 3” Segments Combined 304 307 (1%) (1%) - 5% (5%)
Reuters News 27 24 14% (1%) 15% 60% (45%)
Total transactions revenues 331 331 - (1%) 1% 12% (11%)
(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 June 30,
Change
Foreign Constant
(millions of U.S. dollars, except margins and per share amounts) 2020 2019 Total Currency Currency
Adjusted EBITDA
Legal Professionals 254 229 11% - 11%
Corporates 118 98 21% - 21%
Tax & Accounting Professionals 54 59 (9%) (3%) (6%)
“Big 3” Segments Combined 426 386 10% (1%) 11%
Reuters News 25 19 24% 18% 6%
Global Print 54 72 (25%) (1%) (24%)
Corporate costs (26) (122) n/a n/a n/a
Consolidated adjusted EBITDA 479 355 35% 1% 34%
Adjusted EBITDA Margin
Legal Professionals 40.9% 37.8% 310bp 30bp 280bp
Corporates 35.9% 30.9% 500bp 50bp 450bp
Tax & Accounting Professionals 31.9% 32.3% (40)bp 40bp (80)bp
“Big 3” Segments Combined 38.1% 34.9% 320bp 50bp 270bp
Reuters News 15.6% 12.5% 310bp 240bp 70bp
Global Print 40.5% 44.1% (360)bp 30bp (390)bp
Corporate costs n/a n/a n/a n/a n/a
Consolidated adjusted EBITDA margin 34.1% 25.0% 910bp 70bp 840bp
Consolidated operating expenses 929 1,070 (13%) (2%) (11%)
Consolidated adjusted EPS $0.44 $0.29 52% 3% 48%
(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 34
Thomson Reuters Second Quarter Report 2020
Reconciliation of changes in adjusted EBITDA and the related margin, and consolidated operating expenses and adjusted EPS, excluding
the effects of foreign currency(1)
Six months ended June 30,
Change
Foreign Constant
(millions of U.S. dollars, except margins and per share amounts) 2020 2019 Total Currency Currency
Adjusted EBITDA
Legal Professionals 484 458 6% (1%) 6%
Corporates 235 209 13% - 13%
Tax & Accounting Professionals 138 151 (8%) (2%) (6%)
“Big 3” Segments Combined 857 818 5% (1%) 5%
Reuters News 44 42 3% 15% (12%)
Global Print 117 146 (20%) - (19%)
Corporate costs (59) (254) n/a n/a n/a
Consolidated adjusted EBITDA 959 752 27% - 27%
Adjusted EBITDA Margin
Legal Professionals 38.8% 38.0% 80bp 10bp 70bp
Corporates 33.8% 31.5% 230bp 50bp 180bp
Tax & Accounting Professionals 35.7% 37.3% (160)bp 30bp (190)bp
“Big 3” Segments Combined 36.8% 36.0% 80bp 20bp 60bp
Reuters News 14.1% 13.6% 50bp 220bp (170)bp
Global Print 40.5% 44.4% (390)bp 30bp (420)bp
Corporate costs n/a n/a n/a n/a n/a
Consolidated adjusted EBITDA margin 32.8% 25.8% 700bp 50bp 650bp
Consolidated operating expenses 1,946 2,161 (10%) (3%) (7%)
Consolidated adjusted EPS $0.92 $0.65 42% 2% 40%
(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 35
Thomson Reuters Second Quarter Report 2020
Appendix C
Information about Refinitiv
Our company owns a 45% interest in Refinitiv, which was formerly our wholly owned F&R business. 55% of Refinitiv is owned by private
equity funds affiliated with Blackstone. An affiliate of Canada Pension Plan Investment Board and an affiliate of GIC invested alongside
Blackstone. Our IFRS results include our 45% share of Refinitiv’s results reported in a single line item on our consolidated income statement
titled “Share of post-tax losses in equity method investments.” Our non-IFRS measures, including adjusted earnings, exclude our
share of post-tax results in Refinitiv and other equity method investments.
The table below sets forth selected financial information for 100% of Refinitiv for the three and six months ended June 30, 2020 and 2019 on
both an IFRS and non-IFRS basis. Refinitiv reports on a US GAAP basis and provides a reconciliation to IFRS in accordance with Thomson
Reuters’ accounting policies. A reconciliation from the IFRS measures to the related non-IFRS measures is included in this appendix.
On August 1, 2019, we and private equity funds affiliated with Blackstone agreed to sell Refinitiv to LSEG in an all share transaction, but
LSEG may, at its option, settle up to $2.5 billion of the consideration in cash. Please see the “Proposed LSEG/Refinitiv Transaction” section
of this management’s discussion and analysis for additional information.
The following information, which has been provided by Refinitiv, is unaudited.
Three months ended June 30 Six months ended June 30
Change Change
Before Currency Before Currency
& Excluding & Excluding
Businesses Businesses
(millions of U.S. dollars, except margins) 2020 2019 Total Disposed 2020 2019 Total Disposed
IFRS Measures
Revenues 1,588 1,550 2% 3% 3,221 3,117 3% 4%
Net loss (326) (302) (419) (545)
Cash flow from operations 403 273 349 73
Capital expenditures, less proceeds from disposals 157 106 343 237
Debt at June 30, 2020 and June 30, 2019 14,128 13,983
Non-IFRS Measures
Adjusted EBITDA 611 555 1,231 1,112
Adjusted EBITDA margin 38.5% 35.8% 38.2% 35.7%
Free cash flow 238 89 (7) (252)
Page 36
Thomson Reuters Second Quarter Report 2020
The following reconciliations of IFRS measures to non-IFRS measures are based on Refinitiv’s definition of non-GAAP measures, which is not
the same as the definitions used by Thomson Reuters.
Reconciliation of net loss to adjusted EBITDA
Three months ended June 30, Six months ended June 30,
(millions of U.S. dollars, except margins) 2020 2019 2020 2019
Net loss (326) (302) (419) (545)
Adjustments to remove:
Tax expense (benefit) 8 (38) 8 (60)
Finance costs 277 269 443 504
Depreciation and amortization 486 482 957 945
EBITDA 445 411 989 844
Adjustments to remove:
Share of post-tax earnings in equity method investments (1) (1) (2) (1)
Other operating losses (gains) 45 - (9) 1
Fair value adjustments 15 16 21 38
Share-based compensation 8 3 21 7
Transformation-related costs 99 126 211 223
Adjusted EBITDA 611 555 1,231 1,112
Adjusted EBITDA margin 38.5% 35.8% 38.2% 35.7%
Reconciliation of net cash provided by operating activities to free cash flow
Three months ended June 30, Six months ended June 30,
(millions of U.S. dollars) 2020 2019 2020 2019
Net cash provided by operating activities 403 273 349 73
Capital expenditures, less proceeds from disposals (157) (106) (343) (237)
Other investing activities - 1 1 -
Dividends paid to non-controlling interests (8) (79) (14) (88)
Free cash flow 238 89 (7) (252)
Page 37
Thomson Reuters Second Quarter Report 2020
Appendix D
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 June 30, March 31, December 31, September 30, June 30, March 31, December 31, September 30,
amounts) 2020 2020 2019 2019 2019 2019 2018 2018
Revenues 1,405 1,520 1,583 1,413 1,423 1,487 1,527 1,284
Operating profit 365 290 216 262 447 274 135 173
Earnings (loss) from continuing operations 131 191 1,321 (72) 207 114 (103) (47)
(Loss) earnings from discontinued operations, net
of tax (5) 2 3 28 (27) (10) 3,478 349
Net earnings (loss) 126 193 1,324 (44) 180 104 3,375 302
Earnings (loss) attributable to common
shareholders 126 193 1,324 (44) 180 104 3,375 272
Basic earnings (loss) per share
From continuing operations $0.26 $0.38 $2.64 $(0.14) $0.41 $0.23 $(0.19) $(0.06)
From discontinued operations (0.01) 0.01 0.01 0.05 (0.05) (0.02) 6.32 0.45
$0.25 $0.39 $2.65 $(0.09) $0.36 $0.21 $6.13 $0.39
Diluted earnings (loss) per share
From continuing operations $0.26 $0.38 $2.63 $(0.14) $0.41 $0.22 $(0.19) $(0.06)
From discontinued operations (0.01) 0.01 0.01 0.05 (0.05) (0.02) 6.32 0.45
$0.25 $0.39 $2.64 $(0.09) $0.36 $0.20 $6.13 $0.39
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. Beginning with the fourth quarter of 2018, our
revenues included new revenues in our Reuters News business for providing news and editorial content to Refinitiv under a 30-year
agreement signed in October 2018. Foreign currency had a slightly negative impact on our revenues for most of the eight-quarter period,
while acquisitions positively impacted revenues beginning in the third quarter of 2019 when we acquired HighQ and Confirmation.
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. Operating profit was significantly impacted by costs and investments to reposition our business following the closing of the F&R
transaction from the second quarter of 2018 through the fourth quarter of 2019 when the program was completed. In the second quarter of
2019, operating profit benefited from a significant gain on the revaluation of warrants that we hold in Refinitiv. In 2020, operating profit
benefited from lower costs, due to the completion of our program in 2019, to reposition Thomson Reuters following its separation from F&R.
Net earnings (loss) – The increase in 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. The increase in net earnings in the fourth quarter of 2018 was due to a $3.4 billion gain on
the sale of a majority interest in our F&R business.
Page 38
Thomson Reuters Second Quarter Report 2020
Appendix E
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 consolidating summary financial information for the following:
Š Parent – Thomson Reuters Corporation, the direct or indirect owner of all of its subsidiaries
Š Subsidiary Issuer – TR Finance LLC
Š Guarantor Subsidiaries on a combined basis
Š Non-Guarantor Subsidiaries – Other subsidiaries of Thomson Reuters Corporation on a combined basis that will not guarantee TR
Finance LLC debt securities
Š Eliminations – Consolidating adjustments
Š 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.
Š Thomson Reuters Applications Inc., which operates part of the company’s Legal Professionals, Tax & Accounting Professionals and
Corporates businesses;
Š Thomson Reuters (Tax & Accounting) Inc., which operates part of the company’s Tax & Accounting Professionals business; and
Š 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 and six months ended June 30, 2020, our 2019 annual consolidated financial
statements, as well as our 2019 annual management’s discussion and analysis included in our 2019 annual report.
The following consolidating summary 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 in advance of the effective date of January 4, 2021, as
permitted by the adopting release.
Page 39
Thomson Reuters Second Quarter Report 2020
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 June 30, 2020
Subsidiary Guarantor Non-Guarantor
(millions of U.S. dollars) Parent Issuer Subsidiaries Subsidiaries Eliminations Consolidated
CONTINUING OPERATIONS
Revenues - - 995 740 (330) 1,405
Operating expenses (5) - (863) (391) 330 (929)
Depreciation - - (17) (26) - (43)
Amortization of computer software - - (6) (112) - (118)
Amortization of other identifiable intangible
assets - - (14) (16) - (30)
Other operating (losses) gains, net - - (14) 94 - 80
Operating (loss) profit (5) - 81 289 - 365
Finance (costs) income, net:
Net interest expense (39) - (1) (12) - (52)
Other finance costs (9) - - (4) - (13)
Intercompany net interest income (expense) 26 - (13) (13) - -
(Loss) income before tax and equity method
investments (27) - 67 260 - 300
Share of post-tax losses in equity method
investments - - - (153) - (153)
Share of post-tax earnings in subsidiaries 153 - 6 31 (190) -
Tax (expense) benefit - - (36) 20 - (16)
Earnings from continuing operations 126 - 37 158 (190) 131
Loss from discontinued operations, net of tax - - - (5) - (5)
Net earnings 126 - 37 153 (190) 126
Earnings attributable to common shareholders 126 - 37 153 (190) 126
Page 40
Thomson Reuters Second Quarter Report 2020
CONDENSED CONSOLIDATING INCOME STATEMENT
Three months ended June 30, 2019
Subsidiary Guarantor Non-Guarantor
(millions of U.S. dollars) Parent Issuer Subsidiaries Subsidiaries Eliminations Consolidated
CONTINUING OPERATIONS
Revenues - - 986 776 (339) 1,423
Operating expenses (2) - (890) (517) 339 (1,070)
Depreciation - - (19) (19) - (38)
Amortization of computer software - - (4) (101) 1 (104)
Amortization of other identifiable intangible
assets - - (15) (10) - (25)
Other operating (losses) gains, net - - (1) 262 - 261
Operating (loss) profit (2) - 57 391 1 447
Finance (costs) income, net:
Net interest (expense) income (40) - - 3 - (37)
Other finance income (costs) 18 - - (36) - (18)
Intercompany net interest income (expense) 112 - (5) (107) - -
Income before tax and equity method
investments 88 - 52 251 1 392
Share of post-tax losses in equity method
investments - - - (138) - (138)
Share of post-tax earnings in subsidiaries 92 - 4 38 (134) -
Tax expense - - (14) (33) - (47)
Earnings from continuing operations 180 - 42 118 (133) 207
Loss from discontinued operations, net of tax - - - (27) - (27)
Net earnings 180 - 42 91 (133) 180
Earnings attributable to common shareholders 180 - 42 91 (133) 180
Page 41
Thomson Reuters Second Quarter Report 2020
CONDENSED CONSOLIDATING INCOME STATEMENT
Six months ended June 30, 2020
Subsidiary Guarantor Non-Guarantor
(millions of U.S. dollars) Parent Issuer Subsidiaries Subsidiaries Eliminations Consolidated
CONTINUING OPERATIONS
Revenues - - 2,065 1,549 (689) 2,925
Operating expenses (8) - (1,801) (826) 689 (1,946)
Depreciation - - (33) (50) - (83)
Amortization of computer software - - (12) (218) 1 (229)
Amortization of other identifiable intangible
assets - - (27) (33) - (60)
Other operating (losses) gains, net - - (11) 59 - 48
Operating (loss) profit (8) - 181 481 1 655
Finance (costs) income, net:
Net interest expense (75) - (1) (21) - (97)
Other finance income (costs) 84 - (1) (49) - 34
Intercompany net interest income (expense) 52 - (25) (27) - -
Income before tax and equity method
investments 53 - 154 384 1 592
Share of post-tax losses in equity method
investments - - - (207) - (207)
Share of post-tax earnings in subsidiaries 266 - 11 84 (361) -
Tax (expense) benefit - - (70) 7 - (63)
Earnings from continuing operations 319 - 95 268 (360) 322
Loss from discontinued operations, net of tax - - - (3) - (3)
Net earnings 319 - 95 265 (360) 319
Earnings attributable to common shareholders 319 - 95 265 (360) 319
Page 42
Thomson Reuters Second Quarter Report 2020
CONDENSED CONSOLIDATING INCOME STATEMENT
Six months ended June 30, 2019
Subsidiary Guarantor Non-Guarantor
(millions of U.S. dollars) Parent Issuer Subsidiaries Subsidiaries Eliminations Consolidated
CONTINUING OPERATIONS
Revenues - - 2,038 1,528 (656) 2,910
Operating expenses (6) - (1,801) (1,010) 656 (2,161)
Depreciation - - (38) (34) - (72)
Amortization of computer software - - (9) (201) 1 (209)
Amortization of other identifiable intangible
assets - - (31) (21) - (52)
Other operating gains, net - - 16 305 (16) 305
Operating (loss) profit (6) - 175 567 (15) 721
Finance (costs) income, net:
Net interest (expense) income (78) - - 6 - (72)
Other finance (costs) income (134) - - 105 - (29)
Intercompany net interest income (expense) 175 - (9) (166) - -
(Loss) income before tax and equity method
investments (43) - 166 512 (15) 620
Share of post-tax losses in equity method
investments - - - (251) - (251)
Share of post-tax earnings in subsidiaries 327 - 1 115 (443) -
Tax (expense) benefit - - (51) 3 - (48)
Earnings from continuing operations 284 - 116 379 (458) 321
Loss from discontinued operations, net of tax - - - (37) - (37)
Net earnings 284 - 116 342 (458) 284
Earnings attributable to common shareholders 284 - 116 342 (458) 284
Page 43
Thomson Reuters Second Quarter Report 2020
CONDENSED CONSOLIDATING STATEMENT OF FINANCIAL POSITION
June 30, 2020
Subsidiary Guarantor Non-Guarantor
(millions of U.S. dollars) Parent Issuer Subsidiaries Subsidiaries Eliminations Consolidated
Cash and cash equivalents 4 - 282 660 - 946
Trade and other receivables 1 - 692 400 - 1,093
Intercompany receivables 3,327 - 325 3,089 (6,741) -
Other financial assets - - 6 486 - 492
Prepaid expenses and other current assets 2 - 187 320 - 509
Current assets 3,334 - 1,492 4,955 (6,741) 3,040
Property and equipment, net - - 254 330 - 584
Computer software, net - - 36 861 (4) 893
Other identifiable intangible assets, net - - 1,176 2,269 - 3,445
Goodwill - - 3,726 2,095 - 5,821
Equity method investments - - - 1,291 - 1,291
Other non-current assets 17 - 127 542 - 686
Intercompany receivables 377 - - 778 (1,155) -
Investments in subsidiaries 11,631 - 41 3,935 (15,607) -
Deferred tax - - - 1,143 - 1,143
Total assets 15,359 - 6,852 18,199 (23,507) 16,903
LIABILITIES AND EQUITY
Liabilities
Current indebtedness 120 - - - - 120
Payables, accruals and provisions 58 - 314 773 - 1,145
Deferred revenue - - 546 216 - 762
Intercompany payables 2,171 - 926 3,644 (6,741) -
Other financial liabilities - - 19 113 - 132
Current liabilities 2,349 - 1,805 4,746 (6,741) 2,159
Long-term indebtedness 3,699 - - - - 3,699
Provisions and other non-current liabilities 2 - 77 1,166 - 1,245
Intercompany payables - - 778 377 (1,155) -
Deferred tax - - 216 275 - 491
Total liabilities 6,050 - 2,876 6,564 (7,896) 7,594
Equity
Total equity 9,309 - 3,976 11,635 (15,611) 9,309
Total liabilities and equity 15,359 - 6,852 18,199 (23,507) 16,903
Page 44
Thomson Reuters Second Quarter Report 2020
CONDENSED CONSOLIDATING STATEMENT OF FINANCIAL POSITION
December 31, 2019
Subsidiary Guarantor Non-Guarantor
(millions of U.S. dollars) Parent Issuer Subsidiaries Subsidiaries Eliminations Consolidated
Cash and cash equivalents 5 - 169 651 - 825
Trade and other receivables 1 - 749 417 - 1,167
Intercompany receivables 3,289 - 440 2,699 (6,428) -
Other financial assets - - 6 527 - 533
Prepaid expenses and other current assets 1 - 194 351 - 546
Current assets 3,296 - 1,558 4,645 (6,428) 3,071
Property and equipment, net - - 272 343 - 615
Computer software, net - - 47 859 (6) 900
Other identifiable intangible assets, net - - 1,203 2,315 - 3,518
Goodwill - - 3,658 2,195 - 5,853
Equity method investments - - - 1,551 - 1,551
Other non-current assets - - 124 487 - 611
Intercompany receivables 283 - - 778 (1,061) -
Investments in subsidiaries 11,605 - 27 4,025 (15,657) -
Deferred tax - - - 1,176 - 1,176
Total assets 15,184 - 6,889 18,374 (23,152) 17,295
LIABILITIES AND EQUITY
Liabilities
Current indebtedness 578 - - 1 - 579
Payables, accruals and provisions 44 - 484 845 - 1,373
Deferred revenue - - 583 250 - 833
Intercompany payables 2,031 - 668 3,729 (6,428) -
Other financial liabilities 262 - 19 153 - 434
Current liabilities 2,915 - 1,754 4,978 (6,428) 3,219
Long-term indebtedness 2,676 - - - - 2,676
Provisions and other non-current liabilities 33 - 82 1,149 - 1,264
Intercompany payables - - 778 283 (1,061) -
Deferred tax - - 223 353 - 576
Total liabilities 5,624 - 2,837 6,763 (7,489) 7,735
Equity
Total equity 9,560 - 4,052 11,611 (15,663) 9,560
Total liabilities and equity 15,184 - 6,889 18,374 (23,152) 17,295
Page 45
Thomson Reuters Second Quarter Report 2020
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
Subsidiary Guarantor Non-Guarantor
(millions of U.S. dollars) Parent Issuer Subsidiaries Subsidiaries Eliminations Consolidated
Three months ended June 30, 2020
Net cash (used in) provided by operating activities (65) - 346 141 - 422
Net cash provided by (used in) investing activities 28 - (9) 101 (213) (93)
Net cash provided by (used in) financing activities 40 - (139) (319) 213 (205)
Increase (decrease) in cash and bank overdrafts 3 - 198 (77) - 124
Three months ended June 30, 2019
Net cash (used in) provided by operating activities (58) - 67 104 - 113
Net cash provided by (used in) investing activities - - 26 (53) (50) (77)
Net cash provided by (used in) financing activities 44 - (100) (180) 50 (186)
Decrease in cash and bank overdrafts (14) - (7) (129) - (150)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
Subsidiary Guarantor Non-Guarantor
(millions of U.S. dollars) Parent Issuer Subsidiaries Subsidiaries Eliminations Consolidated
Six months ended June 30, 2020
Net cash (used in) provided by operating activities (101) - 427 272 - 598
Net cash used in investing activities (47) - (11) (96) (188) (342)
Net cash provided by (used in) financing activities 147 - (303) (157) 188 (125)
(Decrease) increase in cash and bank overdrafts (1) - 113 19 - 131
Six months ended June 30, 2019
Net cash (used in) provided by operating activities (54) - 158 (21) - 83
Net cash provided by (used in) investing activities - - 49 (152) (50) (153)
Net cash provided by (used in) financing activities 50 - (128) (499) 50 (527)
Decrease in cash and bank overdrafts (4) - 79 (672) - (597)
Page 46
Thomson Reuters Second Quarter Report 2020
THOMSON REUTERS CORPORATION
CONSOLIDATED INCOME STATEMENT
(unaudited)
Three months ended June 30, Six months ended June 30,
(millions of U.S. dollars, except per share amounts) Notes 2020 2019 2020 2019
CONTINUING OPERATIONS
Revenues 3 1,405 1,423 2,925 2,910
Operating expenses 6 (929) (1,070) (1,946) (2,161)
Depreciation (43) (38) (83) (72)
Amortization of computer software (118) (104) (229) (209)
Amortization of other identifiable intangible assets (30) (25) (60) (52)
Other operating gains, net 7 80 261 48 305
Operating profit 365 447 655 721
Finance costs, net:
Net interest expense 8 (52) (37) (97) (72)
Other finance (costs) income 8 (13) (18) 34 (29)
Income before tax and equity method investments 300 392 592 620
Share of post-tax losses in equity method investments 9 (153) (138) (207) (251)
Tax expense 10 (16) (47) (63) (48)
Earnings from continuing operations 131 207 322 321
Loss from discontinued operations, net of tax (5) (27) (3) (37)
Net earnings 126 180 319 284
Earnings attributable to common shareholders 126 180 319 284
Earnings (loss) per share: 11
Basic and diluted earnings per share:
From continuing operations $0.26 $0.41 $0.65 $0.64
From discontinued operations (0.01) (0.05) (0.01) (0.08)
Basic and diluted earnings per share $0.25 $0.36 $0.64 $0.56
The related notes form an integral part of these consolidated financial statements.
Page 47
Thomson Reuters Second Quarter Report 2020
THOMSON REUTERS CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
Three months ended June 30, Six months ended June 30,
(millions of U.S. dollars) Notes 2020 2019 2020 2019
Net earnings 126 180 319 284
Other comprehensive income (loss):
Items that have been or may be subsequently reclassified to net earnings:
Cash flow hedges adjustments to net earnings 8 (37) (10) (34) (19)
Cash flow hedges adjustments to equity 17 5 14 14
Foreign currency translation adjustments to equity 22 2 (195) 35
Share of other comprehensive income (loss) in equity method
investments 9 54 5 (47) (26)
Related tax (expense) benefit on share of other comprehensive income
(loss) in equity method investments (14) (2) 11 6
Reclassification of foreign currency translation adjustments on disposal
of businesses - 9 - 9
42 9 (251) 19
Items that will not be reclassified to net earnings:
Fair value adjustments on financial assets 12 13 3 5 1
Remeasurement on defined benefit pension plans 65 (3) 23 (10)
Related tax (expense) benefit on remeasurement on defined benefit
pension plans (15) - (2) 2
Share of other comprehensive income (loss) in equity method
investments 9 3 15 (3) 9
Related tax (expense) benefit on share of other comprehensive income
(loss) in equity method investments (1) (3) 1 (2)
65 12 24 -
Other comprehensive income (loss) 107 21 (227) 19
Total comprehensive income 233 201 92 303
Comprehensive income (loss) for the period attributable to:
Common shareholders:
Continuing operations 238 228 95 340
Discontinued operations (5) (27) (3) (37)
Total comprehensive income 233 201 92 303
The related notes form an integral part of these consolidated financial statements.
Page 48
Thomson Reuters Second Quarter Report 2020
THOMSON REUTERS CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(unaudited)
June 30, December 31,
(millions of U.S. dollars) Notes 2020 2019
Cash and cash equivalents 12 946 825
Trade and other receivables 1,093 1,167
Other financial assets 12 492 533
Prepaid expenses and other current assets 509 546
Current assets 3,040 3,071
Property and equipment, net 584 615
Computer software, net 893 900
Other identifiable intangible assets, net 3,445 3,518
Goodwill 5,821 5,853
Equity method investments 9 1,291 1,551
Other non-current assets 13 686 611
Deferred tax 1,143 1,176
Total assets 16,903 17,295
LIABILITIES AND EQUITY
Liabilities
Current indebtedness 12 120 579
Payables, accruals and provisions 14 1,145 1,373
Deferred revenue 762 833
Other financial liabilities 12 132 434
Current liabilities 2,159 3,219
Long-term indebtedness 12 3,699 2,676
Provisions and other non-current liabilities 15 1,245 1,264
Deferred tax 491 576
Total liabilities 7,594 7,735
Equity
Capital 16 5,413 5,377
Retained earnings 4,924 4,965
Accumulated other comprehensive loss (1,028) (782)
Total equity 9,309 9,560
Total liabilities and equity 16,903 17,295
Contingencies (note 19)
The related notes form an integral part of these consolidated financial statements.
Page 49
Thomson Reuters Second Quarter Report 2020
THOMSON REUTERS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOW
(unaudited)
Three months ended June 30, Six months ended June 30,
(millions of U.S. dollars) Notes 2020 2019 2020 2019
Cash provided by (used in):
OPERATING ACTIVITIES
Earnings from continuing operations 131 207 322 321
Adjustments for:
Depreciation 43 38 83 72
Amortization of computer software 118 104 229 209
Amortization of other identifiable intangible assets 30 25 60 52
Net (gains) losses on disposals of businesses and investments (2) 3 1 (21)
Deferred tax (34) (12) (37) (80)
Other 17 138 (67) 200 77
Pension contribution - - - (167)
Changes in working capital and other items 17 (7) (120) (250) (258)
Operating cash flows from continuing operations 417 178 608 205
Operating cash flows from discontinued operations 5 (65) (10) (122)
Net cash provided by operating activities 422 113 598 83
INVESTING ACTIVITIES
Acquisitions, net of cash acquired 18 2 (1) (122) (5)
Proceeds from disposals of businesses and investments 4 23 1 57
Capital expenditures (145) (102) (287) (240)
Proceeds from disposals of property and equipment 45 2 64 2
Other investing activities 1 1 2 4
Investing cash flows from continuing operations (93) (77) (342) (182)
Investing cash flows from discontinued operations - - - 29
Net cash used in investing activities (93) (77) (342) (153)
FINANCING ACTIVITIES
Proceeds from debt 12 999 - 2,019 -
Repayments of debt 12 (1,000) - (1,645) -
Net borrowings under short-term loan facilities 12 - - 118 -
Payments of lease principal (18) (12) (36) (23)
Repurchases of common shares 16 - - (200) (190)
Dividends paid on preference shares - (1) (1) (2)
Dividends paid on common shares 16 (182) (175) (364) (349)
Other financing activities (4) 2 (16) 37
Net cash used in financing activities (205) (186) (125) (527)
Increase (decrease) in cash and bank overdrafts 124 (150) 131 (597)
Translation adjustments - - (10) 2
Cash and bank overdrafts at beginning of period 822 2,258 825 2,703
Cash and bank overdrafts at end of period 946 2,108 946 2,108
Cash and bank overdrafts at end of period comprised of:
Cash and cash equivalents 946 2,108 946 2,108
Supplemental cash flow information is provided in note 17.
Interest paid, net of debt related hedges (62) (82) (83) (96)
Interest received 1 10 4 27
Income taxes paid 17 (18) (62) (34) (169)
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 50
Thomson Reuters Second Quarter Report 2020
THOMSON REUTERS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited)
Total
Foreign accumulated
Stated Unrecognized currency other
share Contributed Total Retained loss on financial translation comprehensive Total
(millions of U.S. dollars) capital surplus capital earnings instruments adjustments loss (“AOCL”) equity
Balance, December 31, 2019 3,576 1,801 5,377 4,965 (3) (779) (782) 9,560
Net earnings - - - 319 - - - 319
Other comprehensive income (loss) - - - 19 (29) (217) (246) (227)
Total comprehensive income (loss) - - - 338 (29) (217) (246) 92
Dividends declared on preference shares - - - (1) - - - (1)
Dividends declared on common shares - - - (376) - - - (376)
Shares issued under Dividend Reinvestment
Plan (“DRIP”) 12 - 12 - - - - 12
Repurchases of common shares (see note 16) 2 - 2 (2) - - - -
Stock compensation plans 96 (74) 22 - - - - 22
Balance, June 30, 2020 3,686 1,727 5,413 4,924 (32) (996) (1,028) 9,309
Unrecognized Foreign
Stated gain (loss) on currency
share Contributed Total Retained financial translation Total
(millions of U.S. dollars) capital surplus capital earnings instruments adjustments AOCL equity
Balance, December 31, 2018 3,443 1,905 5,348 4,739 10 (887) (877) 9,210
Impact of IFRS 16 - - - 11 - - - 11
Balance after IFRS 16 adoption 3,443 1,905 5,348 4,750 10 (887) (877) 9,221
Net earnings - - - 284 - - - 284
Other comprehensive income (loss) - - - 2 (25) 42 17 19
Total comprehensive income (loss) - - - 286 (25) 42 17 303
Dividends declared on preference shares - - - (2) - - - (2)
Dividends declared on common shares - - - (361) - - - (361)
Shares issued under DRIP 12 - 12 - - - - 12
Repurchases of common shares (18) - (18) (133) - - - (151)
Stock compensation plans 140 (101) 39 - - - - 39
Balance, June 30, 2019 3,577 1,804 5,381 4,540 (15) (845) (860) 9,061
The related notes form an integral part of these consolidated financial statements.
Page 51
Thomson Reuters Second Quarter Report 2020
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 major provider of news and business information services to professionals.
Basis of preparation
The unaudited consolidated interim financial statements (“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, 2019. 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, 2019. 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. Refer to note 2 of these interim
consolidated financial statements for a description of how COVID-19 impacted the Company’s critical accounting estimates that were used to
prepare the interim financial statements for the three and six months ended June 30, 2020.
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, 2019,
which are included in the Company’s 2019 annual report.
Prior-period amounts have been revised to correct certain immaterial misstatements as reflected in the Company’s consolidated financial
statements for the year ended December 31, 2019. Refer to the sections below and note 3 of the consolidated financial statements for the
year ended December 31, 2019 for additional information.
Page 52
Thomson Reuters Second Quarter Report 2020
Additionally, the Company adjusted its prior-period segment amounts to reflect the current presentation. In the first quarter of 2020, in
connection with the completion of the Company’s program to reposition its businesses after the separation of Refinitiv, the Company
re-assessed its methodology for allocating costs to its business segments and adjusted its allocations. The 2019 segment amounts were also
adjusted to reflect the transfer of certain revenues primarily from the Corporates segment to the Legal Professionals segment, where they
are better aligned. These changes impacted the 2019 financial results of the segments, but did not change the consolidated 2019 financial
results. The table below summarizes the changes:
Three months ended June 30, 2019 Six months ended June 30, 2019
As Reported Adjustments As Revised As Reported Adjustments As Revised
Revenues
Legal Professionals 603 2 605 1,197 8 1,205
Corporates 318 (3) 315 670 (9) 661
Eliminations/Rounding - 1 1 (1) 1 -
Total revenues 1,423 - 1,423 2,910 - 2,910
Adjusted EBITDA
Legal Professionals 232 (3) 229 459 (1) 458
Corporates 102 (4) 98 220 (11) 209
Tax & Accounting Professionals 60 (1) 59 153 (2) 151
Reuters News 10 9 19 26 16 42
Global Print 73 (1) 72 147 (1) 146
Corporate costs/Rounding (122) - (122) (253) (1) (254)
Total adjusted EBITDA 355 - 355 752 - 752
References to “$” are to U.S. dollars and references to “C$” are to Canadian dollars.
Revision of prior-period financial statements
On October 1, 2018, the Company sold a 55% interest in its Financial & Risk business to private equity funds affiliated with Blackstone. The
Company retained a 45% interest in the business, which is now known as Refinitiv. Since October 1, 2018, the Company has included its share
of post-tax losses from its 45% interest in Refinitiv, an equity method investment, in its net earnings. In the third quarter of 2019, a
misstatement was identified that understated the Company’s share of Refinitiv’s post-tax losses since the fourth quarter of 2018. The
misstatement related to an accounting principle difference for preferred stock issued by Refinitiv to the Blackstone consortium between U.S.
GAAP, the basis on which Refinitiv prepares its financial statements, and IFRS, the basis on which Thomson Reuters prepares its financial
statements. Specifically, Refinitiv accounts for its preferred stock under U.S. GAAP as equity, but these securities should have been recorded
as debt under IFRS. Accordingly, the Company’s share of Refinitiv’s post-tax losses under IFRS should have been higher to reflect the
associated interest expense. This misstatement did not impact revenues, operating profit, segment measures or cash generated from
operating activities.
The Company performed a materiality evaluation in accordance with the Securities and Exchange Commission’s Staff Accounting Bulletin
(“SAB”) No. 99, Materiality, and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current
Year Financial Statements, and concluded that the misstatement was immaterial to its previously issued financial statements. However, as
the impact of correcting the cumulative misstatement in the third quarter of 2019 would have been material to net earnings in that quarter,
the Company revised its previously issued financial statements. Additionally, in conjunction with this revision, the Company corrected other
unrelated misstatements in the applicable prior periods, which were also not material to any of its previously issued financial statements.
Page 53
Thomson Reuters Second Quarter Report 2020
The effects of the revision are set forth in the table below:
Three months ended June 30, 2019 Six months ended June 30, 2019
CONSOLIDATED INCOME STATEMENT As Reported Revision As Revised As Reported Revision As Revised
Share of post-tax losses in equity method investments (126) (12) (138) (223) (28) (251)
Tax expense (50) 3 (47) (55) 7 (48)
Earnings from continuing operations 216 (9) 207 342 (21) 321
Net earnings 189 (9) 180 305 (21) 284
Earnings attributable to common shareholders 189 (9) 180 305 (21) 284
Basic earnings per share from continuing operations $0.43 ($0.02) $0.41 $0.68 ($0.04) $0.64
Basic earnings per share $0.38 ($0.02) $0.36 $0.60 ($0.04) $0.56
Diluted earnings per share from continuing operations $0.43 ($0.02) $0.41 $0.68 ($0.04) $0.64
Diluted earnings per share $0.37 ($0.01) $0.36 $0.60 ($0.04) $0.56
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Net earnings 189 (9) 180 305 (21) 284
Total comprehensive income 210 (9) 201 324 (21) 303
Comprehensive income for the period attributable to common
shareholders: continuing operations 237 (9) 228 361 (21) 340
CONSOLIDATED STATEMENT OF CASH FLOW
OPERATING ACTIVITIES
Earnings from continuing operations 216 (9) 207 342 (21) 321
Adjustments for:
Deferred tax (9) (3) (12) (73) (7) (80)
Other (79) 12 (67) 49 28 77
Changes in working capital and other items (92) (28) (120) (258) - (258)
Operating cash flows from continuing operations 206 (28) 178 205 - 205
Net cash provided by operating activities 141 (28) 113 83 - 83
INVESTING ACTIVITIES
Capital expenditures (130) 28 (102) (240) - (240)
Investing cash flows from continuing operations (105) 28 (77) (182) - (182)
Net cash used in investing activities (105) 28 (77) (153) - (153)
Note 2: Critical Accounting Estimates and Judgments – Impact of COVID-19 Pandemic
The global economic crisis caused by the COVID-19 pandemic has created significant uncertainty about the future. As a result, some of the
estimates and judgments that management makes in preparing its financial statements may be more variable and may change materially in
the future. Management initially assessed its critical accounting estimates and judgments in light of COVID-19 in conjunction with its interim
report for the three months ended March 31, 2020. In the second quarter of 2020, management re-assessed these estimates and judgments
and made no significant changes. For purposes of its business planning and valuation estimates, the Company continues to assume that the
global economy will gradually recover throughout the second half of 2020. The following provides information regarding management’s
critical accounting estimates and judgments relative to the global economic crisis caused by COVID-19.
Allowance for doubtful accounts and sales adjustments
The Company provided additional reserves of $6 million and $15 million in the three months and six months ended June 30, 2020 to reflect
that some of its smaller legal and tax customers may not be able to pay for the products and services the Company has provided and, in
limited situations, for credits the Company may issue to customers in financial distress. While the Company has offered payment plans to
some of its smaller customers who may require more time to pay, very few have elected this option to date.
Computer software
The Company has not experienced, nor does it expect, material changes to product demand and it does not plan to discontinue any products
as a result of the crisis that would require impairment or shortened useful lives.
Page 54
Thomson Reuters Second Quarter Report 2020
Other identifiable intangible assets and goodwill
At October 1, 2019, the date of the Company’s last impairment test, the estimated fair value less costs of disposal of each cash generating
unit (“CGU“), which comprise each of its reportable segments, exceeded their carrying value by over 100%. The Company’s sensitivity
analysis demonstrated that no reasonably possible change in its assumptions due to the COVID-19 pandemic, including higher discount rates
and reduction in cash flows, would cause the carrying amounts of any CGU, including the carrying value of the indefinite lived tradenames, to
exceed its recoverable amount.
Equity method investments and related warrants
Equity method investments consisted primarily of the Company’s 45% investment in Refinitiv. On August 1, 2019, the Company and private
equity funds affiliated with Blackstone agreed to sell Refinitiv to London Stock Exchange Group plc (“LSEG”) (see note 9) for a value that is
substantially in excess of the carrying value of the Company’s investment, as measured by the share price of LSEG at June 30, 2020. The
proposed transaction, which was approved by LSEG shareholders in November 2019, remains subject to regulatory clearances and other
customary closing conditions and is expected to close by the end of 2020 or early in 2021. The Company expects to record a significant gain
on the transaction upon closing and therefore concluded that there was no impairment to its investment in Refinitiv at June 30, 2020.
Reflecting the terms of the agreement, the Company valued the related warrants (see note 12) in Refinitiv at June 30, 2020 primarily based
on the number of incremental shares in Refinitiv to which the Company is contractually entitled upon closing, the share price of LSEG on
June 30, 2020, and management’s assessment that the deal remains highly probable of closing by the end of 2020 or early in 2021.
The Company holds other investments aggregating $0.2 billion in a variety of industries, including real estate, technology and media, which
could become impaired in the future due to economic conditions caused by the COVID-19 pandemic.
Employee future benefits
The assets and obligations for the Company’s most significant benefit plans in the U.S. and the U.K. are remeasured each quarter with an
offset to other comprehensive income or loss. For the six months ended June 30, 2020, the Company recorded remeasurement gains of
$23 million. There were no funding requirements triggered by changes in the value of assets and liabilities associated with the Company’s
material defined benefit plans due to increased market volatility associated with the economic crisis.
Income taxes
Relevant tax reform related to the economic crisis, most notably the impact of the Coronavirus Aid, Relief and Economic Security (“CARES”)
Act in the United States, did not have a material impact on the computation of income taxes. The Company concluded that its updated
projections relating to COVID-19 did not impact its ability to realize its deferred tax assets.
Critical judgments in applying accounting policies
Revenue recognition
Management has elevated its focus on collectability in making its revenue recognition judgments while the crisis persists.
Uncertain tax positions
The Company made no changes in its judgments of uncertain tax positions as a result of the COVID-19 pandemic.
Note 3: Revenues
Revenues by type and geography
The following tables disaggregate revenues by type and geography and reconciles them to reportable segments for the three and six months
ended June 30, 2020 and 2019 (see note 4).
Legal Tax & Accounting
Revenues by type Professionals Corporates Professionals Reuters News Global Print Total
Three months ended June 30, 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Recurring 580 557 282 267 136 147 141 144 - - 1,139 1,115
Transactions 40 48 47 48 32 35 14 12 - - 133 143
Global Print - - - - - - - - 134 164 134 164
Eliminations/Rounding - - - - - - - - - - (1) 1
Total 620 605 329 315 168 182 155 156 134 164 1,405 1,423
Page 55
Thomson Reuters Second Quarter Report 2020
Legal Tax & Accounting
Revenues by type Professionals Corporates Professionals Reuters News Global Print Total
Six months ended June 30, 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Recurring 1,167 1,113 563 530 294 320 283 287 - - 2,307 2,250
Transactions 79 92 133 131 92 84 27 24 - - 331 331
Global Print - - - - - - - - 289 329 289 329
Eliminations/Rounding - - - - - - - - - - (2) -
Total 1,246 1,205 696 661 386 404 310 311 289 329 2,925 2,910
Revenues by geography Legal Tax & Accounting
(country of destination) Professionals Corporates Professionals Reuters News Global Print Total
Three months ended June 30, 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
U.S. 499 493 270 253 131 143 107 104 97 117 1,104 1,110
Canada (country of domicile) 13 12 2 3 8 8 1 - 16 20 40 43
Other 7 7 11 15 17 20 3 3 4 6 42 51
Americas (North America, Latin
America, South America) 519 512 283 271 156 171 111 107 117 143 1,186 1,204
U.K. 58 49 28 30 6 7 5 7 7 9 104 102
Other 13 18 10 6 2 - 25 28 4 4 54 56
EMEA (Europe, Middle East
and Africa) 71 67 38 36 8 7 30 35 11 13 158 158
Asia Pacific 30 26 8 8 4 4 14 14 6 8 62 60
Eliminations/Rounding - - - - - - - - - - (1) 1
Total 620 605 329 315 168 182 155 156 134 164 1,405 1,423
Revenues by geography Legal Tax & Accounting
(country of destination) Professionals Corporates Professionals Reuters News Global Print Total
Six months ended June 30, 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
U.S. 1,002 987 578 537 313 328 211 206 212 236 2,316 2,294
Canada (country of domicile) 26 22 5 6 17 17 2 1 32 38 82 84
Other 11 13 23 30 38 41 5 5 8 11 85 100
Americas (North America, Latin
America, South America) 1,039 1,022 606 573 368 386 218 212 252 285 2,483 2,478
U.K. 117 100 55 53 10 11 12 13 16 19 210 196
Other 29 31 19 19 2 - 52 56 7 8 109 114
EMEA (Europe, Middle East
and Africa) 146 131 74 72 12 11 64 69 23 27 319 310
Asia Pacific 61 52 16 16 6 7 28 30 14 17 125 122
Eliminations/Rounding - - - - - - - - - - (2) -
Total 1,246 1,205 696 661 386 404 310 311 289 329 2,925 2,910
Note 4: 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, including the seven largest global accounting firms, with the Company’s full suite of
offerings across legal, tax, regulatory and compliance functions.
Page 56
Thomson Reuters Second Quarter Report 2020
Tax & Accounting Professionals
The Tax & Accounting Professionals segment serves tax, accounting and audit professionals in accounting firms (other than the seven largest
firms, 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.
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 June 30, Six months ended June 30,
2020 2019 2020 2019
Revenues
Legal Professionals 620 605 1,246 1,205
Corporates 329 315 696 661
Tax & Accounting Professionals 168 182 386 404
Reuters News 155 156 310 311
Global Print 134 164 289 329
Eliminations/Rounding (1) 1 (2) -
Consolidated revenues 1,405 1,423 2,925 2,910
Adjusted EBITDA
Legal Professionals 254 229 484 458
Corporates 118 98 235 209
Tax & Accounting Professionals 54 59 138 151
Reuters News 25 19 44 42
Global Print 54 72 117 146
Corporate costs (26) (122) (59) (254)
Adjusted EBITDA 479 355 959 752
Fair value adjustments (see note 6) (3) (2) 20 (3)
Depreciation (43) (38) (83) (72)
Amortization of computer software (118) (104) (229) (209)
Amortization of other identifiable intangible assets (30) (25) (60) (52)
Other operating gains, net 80 261 48 305
Consolidated operating profit 365 447 655 721
Net interest expense (52) (37) (97) (72)
Other finance (costs) income (13) (18) 34 (29)
Share of post-tax losses in equity method investments (153) (138) (207) (251)
Tax expense (16) (47) (63) (48)
Earnings from continuing operations 131 207 322 321
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
Š 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.
Page 57
Thomson Reuters Second Quarter Report 2020
Š The Company does not consider these excluded items to be controllable operating activities for purposes of assessing the current
performance of the reportable segments.
Š Each segment includes an allocation of costs, based on usage or other applicable measures, for centralized support services such as
technology, commercial sales operations, facilities, and product and content development, as well as an allocation of product costs when
one segment sells products managed by another segment.
Š Consolidated adjusted EBITDA is comprised of adjusted EBITDA from reportable segments and Corporate costs.
Note 5: 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 a 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 Company believes that its revenues in the
second quarter of 2020 reflected the lowest level it will report for any of the four quarters in the full year of 2020, due to the impact of
COVID-19. In 2019, the seasonality of the Company’s operating profit was impacted by significant costs to reposition its business following
the sale of a majority interest in Financial & Risk.
Note 6: Operating Expenses
The components of operating expenses include the following:
Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
Salaries, commissions and allowances 531 609 1,092 1,231
Share-based payments 18 15 35 27
Post-employment benefits 35 34 68 68
Total staff costs 584 658 1,195 1,326
Goods and services(1) 252 313 582 645
Content 63 66 131 129
Telecommunications 14 13 26 23
Facilities 13 18 32 35
Fair value adjustments(2) 3 2 (20) 3
Total operating expenses 929 1,070 1,946 2,161
(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 7: Other Operating Gains, Net
Other operating gains, net, were $80 million and $261 million for the three months ended June 30, 2020 and 2019, respectively, and
$48 million and $305 million for the six months ended June 30, 2020 and 2019, respectively. All periods included a benefit from the
revaluation of warrants that the Company holds in Refinitiv due to an increase in the share price of LSEG in connection with the proposed
transaction to sell Refinitiv to LSEG (see note 9). Operating gains, net, included $54 million (2019—$256 million) and $1 million (2019—$275
million) in the three and six months ended June 30, 2020, respectively, related to the warrants. The three months and six months ended
June 30, 2020 included gains associated with the sale of certain real estate and the six months ended June 30, 2020 also included a gain
associated with a distribution from an investment. The six months ended June 30, 2019 also included gains from the sale of several small
businesses.
Page 58
Thomson Reuters Second Quarter Report 2020
Note 8: Finance Costs, Net
The components of finance costs, net, include interest expense (income) and other finance costs (income) as follows:
Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
Interest expense:
Debt 39 39 76 77
Derivative financial instruments – hedging activities - - - 1
Other, net 5 5 8 9
Fair value gains on cash flow hedges, transfer from equity (30) (10) (27) (19)
Net foreign exchange losses on debt 30 10 27 19
Net interest expense — debt and other 44 44 84 87
Net interest expense — leases 3 1 5 3
Net interest expense — pension and other
post-employment benefit plans 6 7 11 13
Interest income (1) (15) (3) (31)
Net interest expense 52 37 97 72
Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
Net losses (gains) due to changes in foreign currency
exchange rates 21 18 (15) 29
Net gains on derivative instruments (8) - (19) -
Other finance costs (income) 13 18 (34) 29
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 gains on derivative instruments were principally comprised of amounts relating to foreign exchange contracts and the ineffective portion
of cash flow hedges (see note 12).
Note 9: Equity Method Investments
Equity method investments are primarily comprised of the Company’s 45% investment in Refinitiv.
The Company’s share of post-tax (losses) earnings in equity method investments as reported in the consolidated income statement is
comprised of the following:
Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
Refinitiv (45% ownership interest) (155) (141) (213) (259)
Other equity method investments 2 3 6 8
Total share of post-tax losses in equity method investments (153) (138) (207) (251)
The composition of equity method investments as reported in the consolidated statement of financial position is comprised of the following:
June 30, December 31,
2020 2019
Refinitiv (45% ownership interest) 1,125 1,387
Other equity method investments 166 164
Total equity method investments 1,291 1,551
Page 59
Thomson Reuters Second Quarter Report 2020
Set forth below is summarized financial information for 100% of Refinitiv, and a reconciliation to the Company’s carrying value of its
investment.
Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
Revenues 1,588 1,550 3,221 3,117
Net loss (326) (302) (419) (545)
Remove: Net earnings attributable to non-controlling interests (18) (11) (54) (29)
Net loss attributable to Refinitiv (344) (313) (473) (574)
Other comprehensive income (loss) attributable to Refinitiv 128 46 (111) (31)
Total comprehensive loss attributable to Refinitiv (216) (267) (584) (605)
June 30, December 31,
2020 2019
Assets
Current assets 2,285 2,031
Non-current assets 20,252 20,709
Total assets 22,537 22,740
Liabilities
Current liabilities 3,559 3,398
Non-current liabilities 13,944 13,964
Total liabilities 17,503 17,362
Net assets 5,034 5,378
Non-controlling interests (2,298) (2,100)
Other(1) (237) (195)
Net assets attributable to Refinitiv 2,499 3,083
Net assets attributable to Refinitiv - beginning period 3,083 4,514
Net loss attributable to Refinitiv (473) (1,353)
Other comprehensive loss attributable to Refinitiv (111) (78)
Net assets attributable to Refinitiv - ending period 2,499 3,083
Thomson Reuters % share 45% 45%
Thomson Reuters carrying amount 1,125 1,387
(1) Consists primarily of equity transactions excluded from Thomson Reuters 45% share of total comprehensive loss.
Proposed LSEG/Refinitiv Transaction
On August 1, 2019, the Company and private equity funds affiliated with Blackstone agreed to sell Refinitiv to LSEG in an all share
transaction for a total enterprise value of approximately $27 billion (as of the announcement date), but LSEG may, at its option, settle up to
$2.5 billion of the consideration in cash. The transaction is expected to result in Blackstone’s consortium and Thomson Reuters ultimately
holding a combined 37% economic interest in LSEG (of which a 15% economic interest would be attributed to Thomson Reuters) and a
combined voting interest in LSEG of less than 30%. The proposed transaction, which was approved by LSEG shareholders in November 2019,
remains subject to regulatory clearances and other customary closing conditions. The Company expects the transaction to close by the end of
2020 or early in 2021 and expects to record a significant gain on the transaction upon closing.
Note 10: Taxation
Tax expense was $16 million and $47 million for the three months ended June 30, 2020 and 2019, respectively, and $63 million and
$48 million for the six months ended June 30, 2020 and 2019, respectively. The 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 60
Thomson Reuters Second Quarter Report 2020
Note 11: 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 June 30, Six months ended June 30,
2020 2019 2020 2019
Earnings attributable to common shareholders 126 180 319 284
Less: Dividends declared on preference shares - (1) (1) (2)
Earnings used in consolidated earnings per share 126 179 318 282
Less: Loss from discontinued operations, net of tax 5 27 3 37
Earnings used in earnings per share from continuing operations 131 206 321 319
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 June 30, Six months ended June 30,
2020 2019 2020 2019
Weighted-average number of common shares outstanding 495,903,023 500,705,054 495,842,141 501,035,457
Weighted-average number of vested DSUs 414,092 526,158 418,929 522,677
Basic 496,317,115 501,231,212 496,261,070 501,558,134
Effect of stock options and TRSUs 1,263,224 1,809,524 1,318,061 1,594,354
Diluted 497,580,339 503,040,736 497,579,131 503,152,488
Note 12: 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
June 30, 2020 Cost Earnings Income or Loss Hedging Total
Cash and cash equivalents 291 655 - - 946
Trade and other receivables 1,093 - - - 1,093
Other financial assets - current 56 436 - - 492
Other financial assets - non-current (see note 13) 38 - 42 17 97
Current indebtedness (120) - - - (120)
Trade payables (see note 14) (177) - - - (177)
Accruals (see note 14) (609) - - - (609)
Other financial liabilities - current(1) (130) (2) - - (132)
Long-term indebtedness (3,699) - - - (3,699)
Other financial liabilities - non current (see note 15)(2) (245) (5) - - (250)
Total (3,502) 1,084 42 17 (2,359)
Page 61
Thomson Reuters Second Quarter Report 2020
Assets/
Assets/ (Liabilities) Assets at Fair
(Liabilities) at Fair Value through
at Value Other Derivatives
Amortized through Comprehensive Used for
December 31, 2019 Cost Earnings Income or Loss Hedging Total
Cash and cash equivalents 335 490 - - 825
Trade and other receivables 1,167 - - - 1,167
Other financial assets - current 98 435 - - 533
Other financial assets - non-current (see note 13) 45 - 29 - 74
Current indebtedness (579) - - - (579)
Trade payables (see note 14) (265) - - - (265)
Accruals (see note 14) (801) - - - (801)
Other financial liabilities - current(1)(3) (365) (7) - (62) (434)
Long-term indebtedness (2,676) - - - (2,676)
Other financial liabilities - non current (see note 15)(2) (253) (3) - - (256)
Total (3,294) 915 29 (62) (2,412)
(1) Includes lease liabilities of $79 million (2019—$69 million).
(2) Includes lease liabilities of $245 million (2019—$253 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 16.
Cash and cash equivalents
Of total cash and cash equivalents, $45 million and $34 million at June 30, 2020 and December 31, 2019, respectively, were held in
subsidiaries which have regulatory restrictions, contractual restrictions or operate in countries where exchange controls and other legal
restrictions apply and were therefore not available for general use by the Company.
Debt-related activity
The following table provides information regarding notes that the Company issued and repaid in the six months ended June 30, 2020.
MONTH/YEAR TRANSACTION PRINCIPAL AMOUNT (IN MILLIONS)
Notes issued
May 2020 2.239% Notes, due 2025 C$1,400
Notes repaid
January 2020 3.309% Notes, due 2021 C$550
January 2020 3.95% Notes, due 2021 US$139
The new notes issued in May 2020 were immediately swapped into U.S. dollars and the Company used the $999 million of net proceeds for
general corporate purposes, which included repayment of borrowings under the Company’s credit facility.
In January 2020, the Company repaid notes prior to their scheduled maturity dates for $640 million. This amount included early redemption
premiums and settlement of cross-currency swaps. The repayments were funded with commercial paper borrowings.
Cross-currency interest rate swaps
The Company uses fixed-to-fixed cross-currency interest rate swaps to hedge its currency exposures on indebtedness. These instruments
swap Canadian dollar denominated principal and interest payments into U.S. dollars. In connection with the issuance of new Canadian dollar
denominated notes in May 2020, the Company entered into cross-currency interest rate swaps. At June 30, 2020, the Company recorded the
swaps outstanding in the consolidated statement of financial position at fair value, which was an asset of $17 million. The swaps were
designated as cash flow hedges.
Page 62
Thomson Reuters Second Quarter Report 2020
The details of these instruments are set forth below:
Received Paid Hedged Risk Year of Maturity Principal Amount
2020 Cash flow hedges
Canadian dollar fixed U.S. dollar fixed Foreign exchange 2025 US$999
The ineffective portion of the cash flow hedges recognized through earnings was a gain of $7 million, which was recorded in “Other finance
(costs) income” in the consolidated income statement, was reclassified from “Cash flow hedges adjustments to net earnings” in the
consolidated statement of comprehensive income, for the three and six months ended June 30, 2020.
Commercial paper
Under its commercial paper program, the Company may issue up to $1.8 billion of notes. In January 2020, the Company issued $630 million
of commercial paper, most of which was repaid in February and March 2020. At June 30, 2020, current indebtedness included $120 million
of outstanding commercial paper within the consolidated statement of financial position.
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 facility at June 30, 2020. The Company borrowed $1.0 billion in the first quarter of 2020, which it repaid in the second quarter of
2020. 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.
In July 2017, the U.K. Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021.
As a result, public and private sector industry initiatives are currently underway to identify an alternative reference rate.
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 the following three quarters after completion, after which time the ratio would revert to 4.5:1. At June 30, 2020, the
Company’s ratio of 1.7:1 was in compliance with this covenant.
Fair Value
The fair values of cash, trade and other receivables, trade payables and accruals approximate their carrying amounts because of the short-
term maturity of these instruments. The fair value of long-term debt and related derivative instruments is set forth below.
Debt and Related Derivative Instruments
Carrying Amounts
Amounts recorded in the consolidated statement of financial position are referred to as “carrying amounts”. The carrying amounts of primary
debt are reflected in “Long-term indebtedness” and “Current indebtedness” and the carrying amounts of derivative instruments are included
in “Other financial assets” and “Other financial liabilities”, both current and non-current, in the consolidated statement of financial position,
as appropriate.
Fair Value
The fair value of debt is estimated based on either quoted market prices for similar issues or current rates offered to the Company for debt of
the same maturity. The fair value of interest rate swaps is estimated based upon discounted cash flows using applicable current market rates
and considering non-performance risk.
Page 63
Thomson Reuters Second Quarter Report 2020
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
June 30, 2020 Instruments (Asset) Instruments (Asset)
Commercial paper 120 - 120 -
C$1,400, 2.239% Notes, due 2025 1,022 (17) 1,053 (17)
$600, 4.30% Notes, due 2023 596 - 662 -
$450, 3.85% Notes, due 2024(1) 240 - 262 -
$500, 3.35% Notes, due 2026 497 - 544 -
$350, 4.50% Notes, due 2043(1) 116 - 126 -
$350, 5.65% Notes, due 2043 342 - 470 -
$400, 5.50% Debentures, due 2035 395 - 498 -
$500, 5.85% Debentures, due 2040 491 - 630 -
Total 3,819 (17) 4,365 (17)
Current portion 120 -
Long-term portion 3,699 (17)
Carrying Amount Fair Value
Primary Derivative Primary Derivative
Debt Instruments Debt Instruments
December 31, 2019 Instruments Liability Instruments Liability
Bank and other 1 - 1 -
C$550, 3.309% Notes, due 2021 435 62 435 62
$350, 3.95% Notes, due 2021(1) 143 - 143 -
$600, 4.30% Notes, due 2023 596 - 639 -
$450, 3.85% Notes, due 2024(1) 240 - 254 -
$500, 3.35% Notes, due 2026 496 - 513 -
$350, 4.50% Notes, due 2043(1) 116 - 120 -
$350, 5.65% Notes, due 2043 342 - 412 -
$400, 5.50% Debentures, due 2035 395 - 447 -
$500, 5.85% Debentures, due 2040 491 - 592 -
Total 3,255 62 3,556 62
Current portion 579 62
Long-term portion 2,676 -
(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:
Š Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
Š 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
Š Level 3 - inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
Page 64
Thomson Reuters Second Quarter Report 2020
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:
June 30, 2020 Total
Assets Level 1 Level 2 Level 3 Balance
Money market accounts - 655 - 655
Warrants(1) - - 436 436
Financial assets at fair value through earnings - 655 436 1,091
Financial assets at fair value through other comprehensive income(2) 21 21 - 42
Derivatives used for hedging(3) - 17 - 17
Total assets 21 693 436 1,150
Liabilities
Contingent consideration(4) - - (7) (7)
Financial liabilities at fair value through earnings - - (7) (7)
Total liabilities - - (7) (7)
December 31, 2019 Total
Assets Level 1 Level 2 Level 3 Balance
Money market accounts - 490 - 490
Warrants(1) - - 435 435
Financial assets at fair value through earnings - 490 435 925
Financial assets at fair value through other comprehensive income(2) 2 27 - 29
Total assets 2 517 435 954
Liabilities
Forward exchange contracts(5) - (7) - (7)
Contingent consideration(4) - - (3) (3)
Financial liabilities at fair value through earnings - (7) (3) (10)
Derivatives used for hedging(3) - (62) - (62)
Total liabilities - (69) (3) (72)
(1) Warrants related to the Company’s equity method investment in Refinitiv (see note 9).
(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) Used to manage foreign exchange risk on cash flows excluding indebtedness.
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 six months ended June 30, 2020:
Six months ended June 30,
2020
December 31, 2019 435
Gain recognized within other operating gains, net 1
June 30, 2020 436
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 six months
ended June 30, 2020.
Page 65
Thomson Reuters Second Quarter Report 2020
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:
Š quoted market prices or dealer quotes for similar instruments;
Š the fair value of cross-currency interest rate swaps and forward foreign exchange contracts are calculated as the present value of the
estimated future cash flows based on observable yield curves; and
Š the fair value of contingent consideration is calculated based on estimates of future revenue performance.
Valuation of the Refinitiv Warrants
On August 1, 2019, the Company and private equity funds affiliated with Blackstone agreed to sell Refinitiv, in which the Company owns a
45%(1) interest, to LSEG, in an all share transaction that valued Refinitiv at $27 billion (as of the announcement date), but LSEG may, at its
option, settle up to $2.5 billion of the consideration in cash (see note 9). Under the terms of the warrant agreement, the proposed transaction
will constitute a change in control whereby the exercise of the warrants in connection with the closing of the transaction will increase the
Company’s ownership of Refinitiv from 45%(1) to 47.6%(1). Reflecting the entry into a definitive agreement for the sale of the Refinitiv
business, the value of the warrants at June 30, 2020 is primarily based on the number of incremental shares in Refinitiv to which the
Company is entitled upon closing and the share price of LSEG on June 30, 2020. The valuation also incorporates (on a weighted-average
basis) other outcomes based on the likelihood of the proposed transaction closing. In future periods, the warrants will be revalued based on
the share price of LSEG at each reporting date and will reflect management’s continuing assessment about the likelihood that the proposed
transaction will close, including progress towards obtaining regulatory clearances and satisfying customary closing conditions.
The Monte Carlo simulation approach, which is 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. An increase in the equity value would typically result in an increase in the fair value of the warrants and
conversely, a decrease would typically result in a decrease in the fair value of the warrants.
(1) Represents ownership interest before dilution for management equity triggered by a change in control.
Note 13: Other Non-Current Assets
June 30, December 31,
2020 2019
Net defined benefit plan surpluses 133 85
Cash surrender value of life insurance policies 320 320
Deferred commissions 89 82
Other financial assets (see note 12) 97 74
Other non-current assets 47 50
Total other non-current assets 686 611
Note 14: Payables, Accruals and Provisions
June 30, December 31,
2020 2019
Trade payables 177 265
Current tax liabilities(1) 185 124
Accruals 609 801
Provisions 94 119
Other current liabilities 80 64
Total payables, accruals and provisions 1,145 1,373
(1) Includes $214 million (2019—$204 million) of uncertain tax positions, that were partially offset by tax receivables in the same jurisdictions.
Page 66
Thomson Reuters Second Quarter Report 2020
Note 15: Provisions and Other Non-Current Liabilities
June 30, December 31,
2020 2019
Net defined benefit plan obligations 761 714
Other financial liabilities (see note 12) 250 256
Deferred compensation and employee incentives(1) 104 141
Provisions 120 126
Other non-current liabilities 10 27
Total provisions and other non-current liabilities 1,245 1,264
(1) In June 2020, the Company amended its non-employee director compensation plan such that the Directors no longer control the decision on whether DSUs earned as part of
their compensation are settled in cash or common shares. As a result, Director DSUs are now classified as equity settled and $27 million was reclassified to “Contributed
surplus” in the consolidated statement of changes in equity.
Note 16: Capital
Share repurchases
The Company may buy back shares (and subsequently cancel them) from time to time as part of its capital strategy. Share repurchases are
typically effected under a normal course issuer bid (“NCIB”). Under the NCIB, the Company may repurchase up to 25 million common shares
between August 19, 2019 and August 18, 2020 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.
The Company did not repurchase any shares in the three months ended June 30, 2020 and 2019. Details of share repurchases for the six
months ended June 30, 2020 and 2019 were as follows:
Six months ended June 30,
2020 2019
Share repurchases (millions of U.S. dollars) 200 190
Shares repurchased (number in millions) 2.6 3.5
Share repurchases - average price per share in U.S. dollars $78.37 $53.93
In October 2019, the Company announced plans to repurchase up to an additional $200 million of its common shares in 2020. These share
repurchases were completed in February 2020. 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, 2019. As a result, the Company recorded a $200 million liability in “Other financial liabilities” within current liabilities at
December 31, 2019 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 June 30, Six months ended June 30,
2020 2019 2020 2019
Dividends declared per common share $0.38 $0.36 $0.76 $0.72
Dividends declared 188 180 376 361
Dividends reinvested (6) (5) (12) (12)
Dividends paid 182 175 364 349
Page 67
Thomson Reuters Second Quarter Report 2020
Note 17: Supplemental Cash Flow Information
Details of “Other” in the consolidated statement of cash flow are as follows:
Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
Non-cash employee benefit charges 44 39 84 81
Net losses (gains) on foreign exchange and derivative financial instruments 13 18 (33) 28
Share of post-tax losses in equity method investments 153 138 207 251
Revaluation of Refinitiv warrants (see note 12) (54) (256) (1) (275)
Fair value adjustments 3 2 (20) 3
Other (21) (8) (37) (11)
138 (67) 200 77
Details of “Changes in working capital and other items” are as follows:
Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
Trade and other receivables 30 (47) 65 96
Prepaid expenses and other current assets 18 23 (8) 49
Other financial assets 2 (2) 41 33
Payables, accruals and provisions (40) (171) (275) (396)
Deferred revenue (21) 98 (54) 28
Other financial liabilities (2) - (41) (33)
Income taxes 23 12 62 14
Other (17) (33) (40) (49)
(7) (120) (250) (258)
Details of income taxes (paid) received are as follows:
Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
Operating activities - continuing operations (25) (49) (36) (114)
Operating activities - discontinued operations 7 (12) 2 (54)
Investing activities – continuing operations - (1) - (1)
Total income taxes paid (18) (62) (34) (169)
Note 18: 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.
Acquisition activity
The Company acquired one business in the six months ended June 30, 2020, and the related total consideration was as follows:
Six months ended June 30,
Total consideration 2020
Business acquired 121
Less: Cash acquired (1)
Business acquired, net of cash 120
Contingent consideration payments 2
122
Page 68
Thomson Reuters Second Quarter Report 2020
The following provides a brief description of the acquisition completed during the six months ended June 30, 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:
Six months ended June 30,
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 104
Total 121
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 69
Thomson Reuters Second Quarter Report 2020
Note 19: 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. 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.
Note 20: Related Party Transactions
As of June 30, 2020, the Company’s principal shareholder, The Woodbridge Company Limited, beneficially owned approximately 66% of the
Company’s shares.
There were no new significant related party transactions during the six months ended June 30, 2020. Refer to “Related party transactions”
disclosed in note 32 of the Company’s consolidated financial statements for the year ended December 31, 2019, which are included in the
Company’s 2019 annual report, for information regarding related party transactions.
Page 70
Thomson Reuters Second Quarter Report 2020
Thomson Reuters
333 Bay Street, Suite 300
Toronto, Ontario M5H 2R2
Canada
www.thomsonreuters.com
File and source
- File
- dr0073_ir_network.pdf
- Size
- 1,521,300 bytes
- SHA-256
- 0485d6d4ec9ed1773745756cddfb7f7accfbd340e2915e1c33f06d3a24d6878b
- Our copy
- dr0073_ir_network.pdf
- Original
- ir.thomsonreuters.com