EXHIBIT 99.2
THOMSON REUTERS CORPORATION
CONSOLIDATED INCOME STATEMENT
(unaudited)
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||
(millions of U.S. dollars, except per share amounts) | Notes | 2019 | 2018 | 2019 | 2018 | |||||||||||||||
CONTINUING OPERATIONS | ||||||||||||||||||||
Revenues |
| 2 |
|
| 1,413 |
|
| 1,284 |
|
| 4,323 |
|
| 3,974 |
| |||||
Operating expenses |
| 5 |
|
| (1,059) |
|
| (966) |
|
| (3,220) |
|
| (2,882) |
| |||||
Depreciation |
| (38) |
|
| (24) |
|
| (110) |
|
| (83) |
| ||||||||
Amortization of computer software |
| (117) |
|
| (96) |
|
| (326) |
|
| (294) |
| ||||||||
Amortization of other identifiable intangible assets |
| (28) |
|
| (26) |
|
| (80) |
|
| (83) |
| ||||||||
Other operating gains, net |
| 6 |
|
| 91 |
|
| 1 |
|
| 396 |
|
| 13 |
| |||||
Operating profit |
| 262 |
|
| 173 |
|
| 983 |
|
| 645 |
| ||||||||
Finance costs, net: | ||||||||||||||||||||
Net interest expense |
| 7 |
|
| (40) |
|
| (82) |
|
| (112) |
|
| (241) |
| |||||
Other finance (costs) income |
| 7 |
|
| (3) |
|
| (11) |
|
| (32) |
|
| 10 |
| |||||
Income before tax and equity method investments |
| 219 |
|
| 80 |
|
| 839 |
|
| 414 |
| ||||||||
Share ofpost-tax (losses) earnings in equity method investments |
| 8 |
|
| (304) |
|
| 1 |
|
| (555) |
|
| 5 |
| |||||
Tax benefit (expense) |
| 9 |
|
| 13 |
|
| (128) |
|
| (35) |
|
| (152) |
| |||||
(Loss) earnings from continuing operations |
| (72) |
|
| (47) |
|
| 249 |
|
| 267 |
| ||||||||
Earnings (loss) from discontinued operations, net of tax |
| 10 |
|
| 28 |
|
| 349 |
|
| (9) |
|
| 381 |
| |||||
Net (loss) earnings |
| (44) |
|
| 302 |
|
| 240 |
|
| 648 |
| ||||||||
(Loss) earnings attributable to: | ||||||||||||||||||||
Common shareholders |
| (44) |
|
| 272 |
|
| 240 |
|
| 558 |
| ||||||||
Non-controlling interests |
| - |
|
| 30 |
|
| - |
|
| 90 |
| ||||||||
(Loss) earnings per share: |
| 11 |
| |||||||||||||||||
Basic and diluted (loss) earnings per share: | ||||||||||||||||||||
From continuing operations |
| ($0.14) |
|
| ($0.06) |
|
| $0.49 |
|
| $0.38 |
| ||||||||
From discontinued operations |
| 0.05 |
|
| 0.45 |
|
| (0.02) |
|
| 0.41 |
| ||||||||
Basic and diluted (loss) earnings per share |
| ($0.09) |
|
| $0.39 |
|
| $0.47 |
|
| $0.79 |
|
The related notes form an integral part of these consolidated financial statements
Page 36
THOMSON REUTERS CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||
(millions of U.S. dollars) | Notes | 2019 | 2018 | 2019 | 2018 | |||||||||||||
Net (loss) earnings |
| (44) |
|
| 302 |
|
| 240 |
|
| 648 |
| ||||||
Other comprehensive (loss) income: | ||||||||||||||||||
Items that have been or may be subsequently reclassified to net earnings: | ||||||||||||||||||
Cash flow hedges adjustments to net earnings | 7 |
| 5 |
|
| (24) |
|
| (14) |
|
| 44 |
| |||||
Cash flow hedges adjustments to equity |
| (8) |
|
| 20 |
|
| 6 |
|
| (38) |
| ||||||
Foreign currency translation adjustments to equity |
| (62) |
|
| (49) |
|
| (27) |
|
| (250) |
| ||||||
Share of other comprehensive loss in equity method investments | 8 |
| (84) |
|
| - |
|
| (110) |
|
| - |
| |||||
Related tax benefit on share of other comprehensive loss in equity method investments |
| 21 |
|
| - |
|
| 27 |
|
| - |
| ||||||
Reclassification of foreign currency translation adjustments on disposal of businesses |
| - |
|
| - |
|
| 9 |
|
| - |
| ||||||
| (128) |
|
| (53) |
|
| (109) |
|
| (244) |
| |||||||
Items that will not be reclassified to net earnings: | ||||||||||||||||||
Fair value adjustments on financial assets | 12 |
| 4 |
|
| - |
|
| 5 |
|
| - |
| |||||
Remeasurement on defined benefit pension plans |
| (70) |
|
| 15 |
|
| (80) |
|
| 126 |
| ||||||
Related tax benefit (expense) on remeasurement on defined benefit pension plans |
| 21 |
|
| (2) |
|
| 23 |
|
| (29) |
| ||||||
Share of other comprehensive (loss) income in equity method investments | 8 |
| (1) |
|
| - |
|
| 8 |
|
| - |
| |||||
Related tax expense on share of other comprehensive (loss) income in equity method investments |
| - |
|
| - |
|
| (2) |
|
| - |
| ||||||
| (46) |
|
| 13 |
|
| (46) |
|
| 97 |
| |||||||
Other comprehensive loss |
| (174) |
|
| (40) |
|
| (155) |
|
| (147) |
| ||||||
Total comprehensive (loss) income |
| (218) |
|
| 262 |
|
| 85 |
|
| 501 |
| ||||||
Comprehensive (loss) income for the period attributable to: | ||||||||||||||||||
Common shareholders: | ||||||||||||||||||
Continuing operations |
| (246) |
|
| (51) |
|
| 94 |
|
| 172 |
| ||||||
Discontinued operations |
| 28 |
|
| 283 |
|
| (9) |
|
| 239 |
| ||||||
Non-controlling interests – discontinued operations |
| - |
|
| 30 |
|
| - |
|
| 90 |
| ||||||
Total comprehensive (loss) income |
| (218) |
|
| 262 |
|
| 85 |
|
| 501 |
|
The related notes form an integral part of these consolidated financial statements.
Page 37
THOMSON REUTERS CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(unaudited)
September 30, | December 31, | |||||||||||
(millions of U.S. dollars) | Notes | 2019 | 2018 | |||||||||
Cash and cash equivalents |
| 12 |
|
| 1,147 |
|
| 2,706 |
| |||
Trade and other receivables |
| 1,112 |
|
| 1,313 |
| ||||||
Other financial assets |
| 12 |
|
| 55 |
|
| 76 |
| |||
Prepaid expenses and other current assets |
| 554 |
|
| 434 |
| ||||||
Current assets |
| 2,868 |
|
| 4,529 |
| ||||||
Computer hardware and other property, net |
| 527 |
|
| 473 |
| ||||||
Computer software, net |
| 952 |
|
| 908 |
| ||||||
Other identifiable intangible assets, net |
| 3,416 |
|
| 3,324 |
| ||||||
Goodwill |
| 5,664 |
|
| 5,076 |
| ||||||
Equity method investments |
| 8 |
|
| 1,530 |
|
| 2,186 |
| |||
Other financial assets |
| 12 |
|
| 455 |
|
| 53 |
| |||
Othernon-current assets |
| 13 |
|
| 542 |
|
| 446 |
| |||
Deferred tax |
| 30 |
|
| 31 |
| ||||||
Total assets |
| 15,984 |
|
| 17,026 |
| ||||||
LIABILITIES AND EQUITY | ||||||||||||
Liabilities | ||||||||||||
Current indebtedness |
| 12 |
|
| - |
|
| 3 |
| |||
Payables, accruals and provisions |
| 14 |
|
| 1,048 |
|
| 1,549 |
| |||
Deferred revenue |
| 818 |
|
| 815 |
| ||||||
Other financial liabilities |
| 12 |
|
| 104 |
|
| 95 |
| |||
Current liabilities |
| 1,970 |
|
| 2,462 |
| ||||||
Long-term indebtedness |
| 12 |
|
| 3,229 |
|
| 3,213 |
| |||
Provisions and othernon-current liabilities |
| 15 |
|
| 1,260 |
|
| 1,268 |
| |||
Other financial liabilities |
| 12 |
|
| 293 |
|
| 79 |
| |||
Deferred tax |
| 643 |
|
| 794 |
| ||||||
Total liabilities |
| 7,395 |
|
| 7,816 |
| ||||||
Equity | ||||||||||||
Capital |
| 16 |
|
| 5,396 |
|
| 5,348 |
| |||
Retained earnings |
| 4,177 |
|
| 4,739 |
| ||||||
Accumulated other comprehensive loss |
| (984) |
|
| (877) |
| ||||||
Total equity |
| 8,589 |
|
| 9,210 |
| ||||||
Total liabilities and equity |
| 15,984 |
|
| 17,026 |
|
Contingencies (note 19)
The related notes form an integral part of these consolidated financial statements.
Page 38
THOMSON REUTERS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOW
(unaudited)
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||
(millions of U.S. dollars) | Notes | 2019 | 2018 | 2019 | 2018 | |||||||||||||||
Cash provided by (used in): | ||||||||||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||||||
(Loss) earnings from continuing operations |
| (72) |
|
| (47) |
|
| 249 |
|
| 267 |
| ||||||||
Adjustments for: | ||||||||||||||||||||
Depreciation |
| 38 |
|
| 24 |
|
| 110 |
|
| 83 |
| ||||||||
Amortization of computer software |
| 117 |
|
| 96 |
|
| 326 |
|
| 294 |
| ||||||||
Amortization of other identifiable intangible assets |
| 28 |
|
| 26 |
|
| 80 |
|
| 83 |
| ||||||||
Net losses (gains) on disposals of businesses and investments |
| 1 |
|
| - |
|
| (20) |
|
| - |
| ||||||||
Deferred tax |
| (65) |
|
| 82 |
|
| (145) |
|
| 57 |
| ||||||||
Other |
| 17 |
|
| 233 |
|
| 49 |
|
| 314 |
|
| 107 |
| |||||
Pension contribution |
| - |
|
| - |
|
| (167) |
|
| - |
| ||||||||
Changes in working capital and other items |
| 17 |
|
| 20 |
|
| 37 |
|
| (242) |
|
| (63) |
| |||||
Operating cash flows from continuing operations |
| 300 |
|
| 267 |
|
| 505 |
|
| 828 |
| ||||||||
Operating cash flows from discontinued operations |
| (36) |
|
| 583 |
|
| (158) |
|
| 1,244 |
| ||||||||
Net cash provided by operating activities |
| 264 |
|
| 850 |
|
| 347 |
|
| 2,072 |
| ||||||||
INVESTING ACTIVITIES | ||||||||||||||||||||
Acquisitions, net of cash acquired |
| 18 |
|
| (816) |
|
| (32) |
|
| (821) |
|
| (60) |
| |||||
Proceeds from disposals of businesses and investments, net of taxes paid |
| 5 |
|
| 6 |
|
| 62 |
|
| 6 |
| ||||||||
Capital expenditures |
| (125) |
|
| (110) |
|
| (365) |
|
| (420) |
| ||||||||
(Payments) proceeds from disposals of property and equipment |
| (2) |
|
| - |
|
| - |
|
| 27 |
| ||||||||
Other investing activities |
| 1 |
|
| 1 |
|
| 5 |
|
| 19 |
| ||||||||
Investing cash flows from continuing operations |
| (937) |
|
| (135) |
|
| (1,119) |
|
| (428) |
| ||||||||
Investing cash flows from discontinued operations |
| - |
|
| (110) |
|
| 29 |
|
| (356) |
| ||||||||
Net cash used in investing activities |
| (937) |
|
| (245) |
|
| (1,090) |
|
| (784) |
| ||||||||
FINANCING ACTIVITIES | ||||||||||||||||||||
Proceeds from debt |
| - |
|
| - |
|
| - |
|
| 1,370 |
| ||||||||
Repayments of debt |
| - |
|
| (500) |
|
| - |
|
| (1,370) |
| ||||||||
Net borrowings under short-term loan facilities |
| - |
|
| 17 |
|
| - |
|
| 78 |
| ||||||||
Payments of lease principal |
| (12) |
|
| - |
|
| (35) |
|
| - |
| ||||||||
Repurchases of common shares |
| 16 |
|
| (98) |
|
| (129) |
|
| (288) |
|
| (488) |
| |||||
Dividends paid on preference shares |
| - |
|
| (1) |
|
| (2) |
|
| (2) |
| ||||||||
Dividends paid on common shares |
| 16 |
|
| (175) |
|
| (232) |
|
| (524) |
|
| (707) |
| |||||
Other financing activities |
| 1 |
|
| 9 |
|
| 38 |
|
| 10 |
| ||||||||
Financing cash flows from continuing operations |
| (284) |
|
| (836) |
|
| (811) |
|
| (1,109) |
| ||||||||
Financing cash flows from discontinued operations |
| - |
|
| (25) |
|
| - |
|
| (60) |
| ||||||||
Net cash used in financing activities |
| (284) |
|
| (861) |
|
| (811) |
|
| (1,169) |
| ||||||||
(Decrease) increase in cash and bank overdrafts |
| (957) |
|
| (256) |
|
| (1,554) |
|
| 119 |
| ||||||||
Translation adjustments |
| (4) |
|
| (9) |
|
| (2) |
|
| (21) |
| ||||||||
Cash and bank overdrafts at beginning of period |
| 2,108 |
|
| 1,231 |
|
| 2,703 |
|
| 868 |
| ||||||||
Cash and bank overdrafts at end of period |
| 1,147 |
|
| 966 |
|
| 1,147 |
|
| 966 |
| ||||||||
Cash and bank overdrafts at end of period comprised of: |
| |||||||||||||||||||
Cash and cash equivalents |
| 1,147 |
|
| 507 |
|
| 1,147 |
|
| 507 |
| ||||||||
Cash and cash equivalents in assets held for sale |
| - |
|
| 461 |
|
| - |
|
| 461 |
| ||||||||
Bank overdrafts |
| - |
|
| (2) |
|
| - |
|
| (2) |
| ||||||||
| 1,147 |
|
| 966 |
|
| 1,147 |
|
| 966 |
| |||||||||
Supplemental cash flow information is provided in note 17. | ||||||||||||||||||||
Interest paid |
| (18) |
|
| (31) |
|
| (114) |
|
| (173) |
| ||||||||
Interest received |
| 12 |
|
| 4 |
|
| 39 |
|
| 9 |
| ||||||||
Income taxes paid |
| 17 |
|
| (110) |
|
| (55) |
|
| (279) |
|
| (150) |
|
Operating cash flows include interest received and interest paid, which is net of debt-related hedges.
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 39
THOMSON REUTERS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited)
(millions of U.S. dollars)
| Stated
| Contributed
| Total
| Retained
| Unrecognized
| Foreign
| Total accumulated
| Total
| ||||||||||||||||||||||||||||
Balance, December 31, 2018 |
| 3,443 |
|
| 1,905 |
|
| 5,348 |
|
| 4,739 |
|
| 10 |
|
| (887) |
|
| (877) |
|
| 9,210 |
| ||||||||||||
Impact of IFRS 16 (see note 1) |
| - |
|
| - |
|
| - |
|
| 11 |
|
| - |
|
| - |
|
| - |
|
| 11 |
| ||||||||||||
Balance after IFRS 16 adoption |
| 3,443 |
|
| 1,905 |
|
| 5,348 |
|
| 4,750 |
|
| 10 |
|
| (887) |
|
| (877) |
|
| 9,221 |
| ||||||||||||
Net earnings |
| - |
|
| - |
|
| - |
|
| 240 |
|
| - |
|
| - |
|
| - |
|
| 240 |
| ||||||||||||
Other comprehensive loss |
| - |
|
| - |
|
| - |
|
| (48) |
|
| (25) |
|
| (82) |
|
| (107) |
|
| (155) |
| ||||||||||||
Total comprehensive income (loss) |
| - |
|
| - |
|
| - |
|
| 192 |
|
| (25) |
|
| (82) |
|
| (107) |
|
| 85 |
| ||||||||||||
Dividends declared on preference shares |
| - |
|
| - |
|
| - |
|
| (2) |
|
| - |
|
| - |
|
| - |
|
| (2) |
| ||||||||||||
Dividends declared on common shares |
| - |
|
| - |
|
| - |
|
| (541) |
|
| - |
|
| - |
|
| - |
|
| (541) |
| ||||||||||||
Shares issued under Dividend Reinvestment |
| 17 |
|
| - |
|
| 17 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 17 |
| ||||||||||||
Repurchases of common shares |
| (28) |
|
| - |
|
| (28) |
|
| (222) |
|
| - |
|
| - |
|
| - |
|
| (250) |
| ||||||||||||
Stock compensation plans |
| 151 |
|
| (92) |
|
| 59 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 59 |
| ||||||||||||
Balance, September 30, 2019 |
| 3,583 |
|
| 1,813 |
|
| 5,396 |
|
| 4,177 |
|
| (15) |
|
| (969) |
|
| (984) |
|
| 8,589 |
|
(millions of U.S. dollars)
| Stated
| Contributed
| Total
| Retained
| Unrecognized
| Foreign
| AOCL
| Shareholders’
| Non-
| Total
| ||||||||||||||||||||||||||||||||||
Balance, December 31, 2017 |
| 9,306 |
|
| 243 |
|
| 9,549 |
|
| 7,201 |
|
| 16 |
|
| (3,689) |
|
| (3,673) |
|
| 13,077 |
|
| 498 |
|
| 13,575 |
| ||||||||||||||
Impact of IFRS 15 adoption |
| - |
|
| - |
|
| - |
|
| 172 |
|
| - |
|
| - |
|
| - |
|
| 172 |
|
| - |
|
| 172 |
| ||||||||||||||
Balance after IFRS 15 adoption |
| 9,306 |
|
| 243 |
|
| 9,549 |
|
| 7,373 |
|
| 16 |
|
| (3,689) |
|
| (3,673) |
|
| 13,249 |
|
| 498 |
|
| 13,747 |
| ||||||||||||||
Net earnings |
| - |
|
| - |
|
| - |
|
| 558 |
|
| - |
|
| - |
|
| - |
|
| 558 |
|
| 90 |
|
| 648 |
| ||||||||||||||
Other comprehensive income (loss) |
| - |
|
| - |
|
| - |
|
| 97 |
|
| 6 |
|
| (250) |
|
| (244) |
|
| (147) |
|
| - |
|
| (147) |
| ||||||||||||||
Total comprehensive income (loss) |
| - |
|
| - |
|
| - |
|
| 655 |
|
| 6 |
|
| (250) |
|
| (244) |
|
| 411 |
|
| 90 |
|
| 501 |
| ||||||||||||||
Change in ownership interest of subsidiary |
| - |
|
| - |
|
| - |
|
| 29 |
|
| - |
|
| - |
|
| - |
|
| 29 |
|
| (1) |
|
| 28 |
| ||||||||||||||
Distributions to non-controlling interests |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| (60) |
|
| (60) |
| ||||||||||||||
Dividends declared on preference shares |
| - |
|
| - |
|
| - |
|
| (2) |
|
| - |
|
| - |
|
| - |
|
| (2) |
|
| - |
|
| (2) |
| ||||||||||||||
Dividends declared on common shares |
| - |
|
| - |
|
| - |
|
| (732) |
|
| - |
|
| - |
|
| - |
|
| (732) |
|
| - |
|
| (732) |
| ||||||||||||||
Shares issued under DRIP |
| 25 |
|
| - |
|
| 25 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 25 |
|
| - |
|
| 25 |
| ||||||||||||||
Repurchases of common shares |
| (159) |
|
| - |
|
| (159) |
|
| (329) |
|
| - |
|
| - |
|
| - |
|
| (488) |
|
| - |
|
| (488) |
| ||||||||||||||
Pre-defined share repurchase plan |
| (147) |
|
| - |
|
| (147) |
|
| (365) |
|
| - |
|
| - |
|
| - |
|
| (512) |
|
| - |
|
| (512) |
| ||||||||||||||
Stock compensation plans |
| 113 |
|
| (70) |
|
| 43 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 43 |
|
| - |
|
| 43 |
| ||||||||||||||
Balance, September 30, 2018 |
| 9,138 |
|
| 173 |
|
| 9,311 |
|
| 6,629 |
|
| 22 |
|
| (3,939) |
|
| (3,917) |
|
| 12,023 |
|
| 527 |
|
| 12,550 |
|
The related notes form an integral part of these consolidated financial statements.
Page 40
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 information-based tools 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, 2018, except as described below. 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, 2018. These interim financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2018, which are included in the Company’s 2018 annual report.
On October 1, 2018, the Company sold a 55% interest in its Financial & Risk business to private equity funds managed by Blackstone. The Company retained a 45% interest in the business, which is now known as Refinitiv. The Financial & Risk business was reported as a discontinued operation from the beginning of 2018 to the closing date.
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.
References to “$” are to U.S. dollars and references to “C$” are to Canadian dollars.
Revision of prior-period financial statements
Since October 1, 2018, the Company has included its share ofpost-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’spost-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’spost-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 the quarter, the Company will revise its previously issued financial statements as set forth below. Additionally, in conjunction with this revision, the Company will correct other unrelated misstatements in the applicable prior periods which were also not material to any of its previously issued financial statements. These unrelated misstatements included the reclassification of certain revenues and expenses which pertained to the accounting for foreign currency in hyperinflationary economies between the third and fourth quarters of 2018, but had no impact on the Company’s full-year 2018 audited financial statements.
Page 41
The effect of the revision is provided in the tables below:
Three months ended September 30, 2018 | Three months ended December 31, 2018 | |||||||||||||||||||||||||||
CONSOLIDATED INCOME STATEMENT | As Reported | Revision | As Revised | As Reported | Revision | As Revised | ||||||||||||||||||||||
Revenues |
| 1,292 |
|
| (8) |
|
| 1,284 |
|
| 1,519 |
|
| 8 |
|
| 1,527 |
| ||||||||||
Operating expenses |
| (985) |
|
| 19 |
|
| (966) |
|
| (1,230) |
|
| (19) |
|
| (1,249) |
| ||||||||||
Operating profit |
| 162 |
|
| 11 |
|
| 173 |
|
| 146 |
|
| (11) |
|
| 135 |
| ||||||||||
Income before tax and equity method investments |
| 69 |
|
| 11 |
|
| 80 |
|
| 130 |
|
| (11) |
|
| 119 |
| ||||||||||
Share ofpost-tax earnings (losses) in equity method investments |
| 1 |
|
| - |
|
| 1 |
|
| (217) |
|
| (21) |
|
| (238) |
| ||||||||||
Tax (expense) benefit |
| (128) |
|
| - |
|
| (128) |
|
| 11 |
|
| 5 |
|
| 16 |
| ||||||||||
Loss from continuing operations |
| (58) |
|
| 11 |
|
| (47) |
|
| (76) |
|
| (27) |
|
| (103) |
| ||||||||||
Net earnings |
| 291 |
|
| 11 |
|
| 302 |
|
| 3,402 |
|
| (27) |
|
| 3,375 |
| ||||||||||
Earnings attributable to common shareholders |
| 261 |
|
| 11 |
|
| 272 |
|
| 3,402 |
|
| (27) |
|
| 3,375 |
| ||||||||||
Basic and diluted loss per share from continuing operations |
| ($0.08) |
|
| $0.02 |
|
| ($0.06) |
|
| ($0.14) |
|
| ($0.05) |
|
| ($0.19) |
| ||||||||||
Basic and diluted earnings per share |
| $0.37 |
|
| $0.02 |
|
| $0.39 |
|
| $6.18 |
|
| ($0.05) |
|
| $6.13 |
| ||||||||||
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | ||||||||||||||||||||||||||||
Net earnings |
| 291 |
|
| 11 |
|
| 302 |
|
| 3,402 |
|
| (27) |
|
| 3,375 |
| ||||||||||
Foreign currency translation adjustments to equity |
| (38) |
|
| (11) |
|
| (49) |
|
| (48) |
|
| 11 |
|
| (37) |
| ||||||||||
Other comprehensive (loss) income |
| (29) |
|
| (11) |
|
| (40) |
|
| 2,972 |
|
| 11 |
|
| 2,983 |
| ||||||||||
Total comprehensive income |
| 262 |
|
| - |
|
| 262 |
|
| 6,374 |
|
| (16) |
|
| 6,358 |
| ||||||||||
Comprehensive income (loss) for the period attributable to common shareholders: continuing operations |
| (51) |
|
| - |
|
| (51) |
|
| (307) |
|
| (16) |
|
| (323) |
| ||||||||||
CONSOLIDATED STATEMENT OF CASH FLOW | ||||||||||||||||||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||||||||||||||
Loss from continuing operations |
| (58) |
|
| 11 |
|
| (47) |
|
| (76) |
|
| (27) |
|
| (103) |
| ||||||||||
Adjustments for: | ||||||||||||||||||||||||||||
Deferred tax |
| 82 |
|
| - |
|
| 82 |
|
| (224) |
|
| (5) |
|
| (229) |
| ||||||||||
Other |
| 60 |
|
| (11) |
|
| 49 |
|
| 276 |
|
| 32 |
|
| 308 |
| ||||||||||
Net cash provided by (used in) operating activities |
| 850 |
|
| - |
|
| 850 |
|
| (10) |
|
| - |
|
| (10) |
|
Page 42
Nine months ended September 30, 2018 | Year ended December 31, 2018 | |||||||||||||||||||||||||||
CONSOLIDATED INCOME STATEMENT | As Reported | Revision | As Revised | As Reported | Revision | As Revised | ||||||||||||||||||||||
Revenues |
| 3,982 |
|
| (8) |
|
| 3,974 |
|
| 5,501 |
|
| – |
|
| 5,501 |
| ||||||||||
Operating expenses |
| (2,901) |
|
| 19 |
|
| (2,882) |
|
| (4,131) |
|
| – |
|
| (4,131) |
| ||||||||||
Operating profit |
| 634 |
|
| 11 |
|
| 645 |
|
| 780 |
|
| – |
|
| 780 |
| ||||||||||
Income before tax and equity method investments |
| 403 |
|
| 11 |
|
| 414 |
|
| 533 |
|
| – |
|
| 533 |
| ||||||||||
Share ofpost-tax earnings (losses) in equity method investments |
| 5 |
|
| – |
|
| 5 |
|
| (212) |
|
| (21) |
|
| (233) |
| ||||||||||
Tax expense |
| (152) |
|
| – |
|
| (152) |
|
| (141) |
|
| 5 |
|
| (136) |
| ||||||||||
Earnings from continuing operations |
| 256 |
|
| 11 |
|
| 267 |
|
| 180 |
|
| (16) |
|
| 164 |
| ||||||||||
Net earnings |
| 637 |
|
| 11 |
|
| 648 |
|
| 4,039 |
|
| (16) |
|
| 4,023 |
| ||||||||||
Earnings attributable to common shareholders |
| 547 |
|
| 11 |
|
| 558 |
|
| 3,949 |
|
| (16) |
|
| 3,933 |
| ||||||||||
Basic earnings per share from continuing operations |
| $0.36 |
|
| $0.02 |
|
| $0.38 |
|
| $0.27 |
| ($ | 0.02) |
|
| $0.25 |
| ||||||||||
Basic earnings per share |
| $0.77 |
|
| $0.02 |
|
| $0.79 |
|
| $5.91 |
| ($ | 0.02) |
|
| $5.89 |
| ||||||||||
Diluted earnings per share from continuing operations |
| $0.36 |
|
| $0.02 |
|
| $0.38 |
|
| $0.27 |
| ($ | 0.03) |
|
| $0.24 |
| ||||||||||
Diluted earnings per share |
| $0.77 |
|
| $0.02 |
|
| $0.79 |
|
| $5.91 |
| ($ | 0.03) |
|
| $5.88 |
| ||||||||||
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | ||||||||||||||||||||||||||||
Net earnings |
| 637 |
|
| 11 |
|
| 648 |
|
| 4,039 |
|
| (16) |
|
| 4,023 |
| ||||||||||
Foreign currency translation adjustments to equity |
| (239) |
|
| (11) |
|
| (250) |
|
| (287) |
|
| - |
|
| (287) |
| ||||||||||
Other comprehensive (loss) income |
| (136) |
|
| (11) |
|
| (147) |
|
| 2,836 |
|
| - |
|
| 2,836 |
| ||||||||||
Total comprehensive income |
| 501 |
|
| - |
|
| 501 |
|
| 6,875 |
|
| (16) |
|
| 6,859 |
| ||||||||||
Comprehensive income (loss) for the period attributable to common shareholders: continuing operations |
| 172 |
|
| - |
|
| 172 |
|
| (135) |
|
| (16) |
|
| (151) |
| ||||||||||
CONSOLIDATED STATEMENT OF CASH FLOW | ||||||||||||||||||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||||||||||||||
Earnings from continuing operations |
| 256 |
|
| 11 |
|
| 267 |
|
| 180 |
|
| (16) |
|
| 164 |
| ||||||||||
Adjustments for: | ||||||||||||||||||||||||||||
Deferred tax |
| 57 |
|
| – |
|
| 57 |
|
| (167) |
|
| (5) |
|
| (172) |
| ||||||||||
Other |
| 118 |
|
| (11) |
|
| 107 |
|
| 394 |
|
| 21 |
|
| 415 |
| ||||||||||
Net cash provided by operating activities |
| 2,072 |
|
| – |
|
| 2,072 |
|
| 2,062 |
|
| – |
|
| 2,062 |
|
Page 43
Three months ended March 31, 2019 | 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 | As Reported | Revision | As Revised | |||||||||||||||||||||||||||||||||||
Share ofpost-tax losses in equity method investments |
|
(97) |
|
|
(16) |
|
|
(113) |
|
|
(126) |
|
|
(12) |
|
|
(138) |
|
|
(223) |
|
|
(28) |
|
|
(251) |
| |||||||||||||||||
Tax expense |
|
(5) |
|
|
4 |
|
|
(1) |
|
|
(50) |
|
|
3 |
|
|
(47) |
|
|
(55) |
|
|
7 |
|
|
(48) |
| |||||||||||||||||
Earnings from continuing operations |
|
126 |
|
|
(12) |
|
|
114 |
|
|
216 |
|
|
(9) |
|
|
207 |
|
|
342 |
|
|
(21) |
|
|
321 |
| |||||||||||||||||
Net earnings |
|
116 |
|
|
(12) |
|
|
104 |
|
|
189 |
|
|
(9) |
|
|
180 |
|
|
305 |
|
|
(21) |
|
|
284 |
| |||||||||||||||||
Earnings attributable to common shareholders |
|
116 |
|
|
(12) |
|
|
104 |
|
|
189 |
|
|
(9) |
|
|
180 |
|
|
305 |
|
|
(21) |
|
|
284 |
| |||||||||||||||||
Basic earnings per share from continuing operations |
|
$0.25 |
|
($ |
0.02) |
|
|
$0.23 |
|
|
$0.43 |
|
|
($0.02) |
|
|
$0.41 |
|
|
$0.68 |
|
($ |
0.04) |
|
|
$0.64 |
| |||||||||||||||||
Basic earnings per share |
|
$0.23 |
|
($ |
0.02) |
|
|
$0.21 |
|
|
$0.38 |
|
|
($0.02) |
|
|
$0.36 |
|
|
$0.60 |
|
($ |
0.04) |
|
|
$0.56 |
| |||||||||||||||||
Diluted earnings per share from continuing operations |
|
$0.25 |
|
($ |
0.03) |
|
|
$0.22 |
|
|
$0.43 |
|
|
($0.02) |
|
|
$0.41 |
|
|
$0.68 |
|
($ |
0.04) |
|
|
$0.64 |
| |||||||||||||||||
Diluted earnings per share |
|
$0.23 |
|
($ |
0.03) |
|
|
$0.20 |
|
|
$0.37 |
|
|
($0.01) |
|
|
$0.36 |
|
|
$0.60 |
|
($ |
0.04) |
|
|
$0.56 |
| |||||||||||||||||
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | ||||||||||||||||||||||||||||||||||||||||||||
Net earnings |
|
116 |
|
|
(12) |
|
|
104 |
|
|
189 |
|
|
(9) |
|
|
180 |
|
|
305 |
|
|
(21) |
|
|
284 |
| |||||||||||||||||
Total comprehensive income |
|
114 |
|
|
(12) |
|
|
102 |
|
|
210 |
|
|
(9) |
|
|
201 |
|
|
324 |
|
|
(21) |
|
|
303 |
| |||||||||||||||||
Comprehensive income for the period attributable to common shareholders: continuing operations |
|
124 |
|
|
(12) |
|
|
112 |
|
|
237 |
|
|
(9) |
|
|
228 |
|
|
361 |
|
|
(21) |
|
|
340 |
| |||||||||||||||||
CONSOLIDATED STATEMENT OF CASH FLOW | ||||||||||||||||||||||||||||||||||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||||||||||||||||||||||||||||||
Earnings from continuing operations |
|
126 |
|
|
(12) |
|
|
114 |
|
|
216 |
|
|
(9) |
|
|
207 |
|
|
342 |
|
|
(21) |
|
|
321 |
| |||||||||||||||||
Adjustments for: | ||||||||||||||||||||||||||||||||||||||||||||
Deferred tax |
|
(64) |
|
|
(4) |
|
|
(68) |
|
|
(9) |
|
|
(3) |
|
|
(12) |
|
|
(73) |
|
|
(7) |
|
|
(80) |
| |||||||||||||||||
Other |
|
130 |
|
|
16 |
|
|
146 |
|
|
(77) |
|
|
12 |
|
|
(65) |
|
|
53 |
|
|
28 |
|
|
81 |
| |||||||||||||||||
Changes in working capital and other items |
|
(168) |
|
|
28 |
|
|
(140) |
|
|
(94) |
|
|
(28) |
|
|
(122) |
|
|
(262) |
|
|
– |
|
|
(262) |
| |||||||||||||||||
Operating cash flows from continuing operations |
|
(1) |
|
|
28 |
|
|
27 |
|
|
206 |
|
|
(28) |
|
|
178 |
|
|
205 |
|
|
– |
|
|
205 |
| |||||||||||||||||
Net cash (used in) provided by operating activities |
|
(58) |
|
|
28 |
|
|
(30) |
|
|
141 |
|
|
(28) |
|
|
113 |
|
|
83 |
|
|
– |
|
|
83 |
| |||||||||||||||||
INVESTING ACTIVITIES | ||||||||||||||||||||||||||||||||||||||||||||
Capital expenditures |
|
(110) |
|
|
(28) |
|
|
(138) |
|
|
(130) |
|
|
28 |
|
|
(102) |
|
|
(240) |
|
|
– |
|
|
(240) |
| |||||||||||||||||
Investing cash flows from continuing operations |
|
(77) |
|
|
(28) |
|
|
(105) |
|
|
(105) |
|
|
28 |
|
|
(77) |
|
|
(182) |
|
|
– |
|
|
(182) |
| |||||||||||||||||
Net cash used in investing activities |
|
(48) |
|
|
(28) |
|
|
(76) |
|
|
(105) |
|
|
28 |
|
|
(77) |
|
|
(153) |
|
|
– |
|
|
(153) |
|
December 31, 2018 | March 31, 2019 | June 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENT OF FINANCIAL POSITION | As Reported | Revision | As Revised | As Reported | Revision | As Revised | As Reported | Revision | As Revised | |||||||||||||||||||||||||||||||||||
Equity method investments |
| 2,207 |
|
| (21) |
|
| 2,186 |
|
| 2,074 |
|
| (37) |
|
| 2,037 |
|
| 1,969 |
|
| (49) |
|
| 1,920 |
| |||||||||||||||||
Total assets |
| 17,047 |
|
| (21) |
|
| 17,026 |
|
| 16,459 |
|
| (37) |
|
| 16,422 |
|
| 16,453 |
|
| (49) |
|
| 16,404 |
| |||||||||||||||||
Deferred tax |
| 799 |
|
| (5) |
|
| 794 |
|
| 711 |
|
| (9) |
|
| 702 |
|
| 712 |
|
| (12) |
|
| 700 |
| |||||||||||||||||
Total liabilities |
| 7,821 |
|
| (5) |
|
| 7,816 |
|
| 7,491 |
|
| (9) |
|
| 7,482 |
|
| 7,355 |
|
| (12) |
|
| 7,343 |
| |||||||||||||||||
Retained earnings |
| 4,755 |
|
| (16) |
|
| 4,739 |
|
| 4,473 |
|
| (28) |
|
| 4,445 |
|
| 4,577 |
|
| (37) |
|
| 4,540 |
| |||||||||||||||||
Total equity |
| 9,226 |
|
| (16) |
|
| 9,210 |
|
| 8,968 |
|
| (28) |
|
| 8,940 |
|
| 9,098 |
|
| (37) |
|
| 9,061 |
| |||||||||||||||||
Total liabilities and equity |
| 17,047 |
|
| (21) |
|
| 17,026 |
|
| 16,459 |
|
| (37) |
|
| 16,422 |
|
| 16,453 |
|
| (49) |
|
| 16,404 |
|
Page 44
September 30, 2018 | ||||||||||||
CONSOLIDATED STATEMENT OF FINANCIAL POSITION | As Reported | Revision | As Revised | |||||||||
Retained earnings |
| 6,618 |
|
| 11 |
|
| 6,629 |
| |||
Accumulated other comprehensive loss |
| (3,906) |
|
| (11) |
|
| (3,917) |
| |||
Total shareholders’ equity |
| 12,023 |
|
| – |
|
| 12,023 |
| |||
Total equity |
| 12,550 |
|
| – |
|
| 12,550 |
|
Changes in accounting policy
Effective January 1, 2019, the Company adopted IFRS 16,Leases (“IFRS 16”), which introduced a single lease accounting model that eliminated the prior distinction between operating and finance leases for lessees. IFRS 16 was adopted using the modified retrospective method, including a set of practical expedients and elections. Under this approach, the cumulative effect of adoption of $11 million was recorded as an adjustment to retained earnings at January 1, 2019 and comparative period information was not restated. From January 1, 2019, the Company:
● | Recognizesright-of-use assets and lease liabilities on the consolidated statement of financial position for leases having a term of more than 12 months; |
● | Depreciatesright-of-use assets on a straight-line basis over the shorter of the estimated useful life of the asset or the remaining lease term; |
● | Presents interest expense on lease liabilities as a component of “Finance costs, net,” within the consolidated income statement; |
● | Presents the principal portion of its total lease payments within “Financing activities” and the interest portion within “Operating activities” on the consolidated statement of cash flow; and |
● | Recognizes a receivable, which arises from sublease arrangements, equal to the net investment in the lease on the consolidated statement of financial position. |
Prior to January 1, 2019, the Company classified all lease commitments as operating and did not record them on the consolidated statement of financial position. Operating lease payments were recognized as expense on a straight-line basis over the lease term in “Operating expenses” within the consolidated income statement and operating lease payments were reported as “Operating activities” in the consolidated statement of cash flow.
The Company applied certain practical expedients and elections at January 1, 2019, the initial application date of IFRS 16. Specifically, the Company:
● | Continued to treat contracts determined to be leases under the prior accounting standard as leases under IFRS 16; |
● | Measuredright-of-use assets and lease liabilities, regardless of commencement date, using incremental borrowing rates as of January 1, 2019; |
● | Retained prior assessments of onerous lease contracts under IAS 37Provisions, Contingent Liabilities and Contingent Assets; and |
● | Excluded from recognized assets and liabilities, as applicable (a) initial direct costs to enter the lease, (b) leases with a remaining term of 12 months or less from January 1, 2019 and(c) low-value leases, all of which will continue to be accounted for as “Operating expenses” in the consolidated income statement. |
The following table reconciles operating lease commitments at December 31, 2018 to lease liabilities recognized in the consolidated statement of financial position at January 1, 2019, the date of initial application:
January 1,
| ||||
2019 | ||||
Operating lease commitments at December 31, 2018
|
|
329
|
| |
Leases beginning after January 1, 2019
|
|
(65)
|
| |
Operating lease commitments subject to IFRS 16 adoption
|
|
264
|
| |
Discounted at 4.1%, the weighted-average incremental borrowing rate at January 1, 2019
|
|
(26)
|
| |
Exemption for short-term leases
|
|
(41)
|
| |
Lease liabilities at January 1, 2019
|
|
197
|
|
Page 45
The following table sets forth the adoption impacts on the consolidated statement of financial position at January 1, 2019:
December 31,
|
January 1,
| |||||||||||
2018 As
|
IFRS 16 Adoption
|
2019
| ||||||||||
Revised
|
Adjustment
|
Opening Balance
| ||||||||||
Other financial assets – current
|
|
76
|
|
|
6
|
|
|
82
|
| |||
Prepaid expenses and other current assets
|
|
434
|
|
|
(5)
|
|
|
429
|
| |||
Computer hardware and other property, net
|
|
473
|
|
|
128
|
|
|
601
|
| |||
Other financialassets – non-current
|
|
53
|
|
|
34
|
|
|
87
|
| |||
Total assets
|
|
17,026
|
|
|
163
|
|
|
17,189
|
| |||
Payables, accruals and provisions
|
|
1,549
|
|
|
(31)
|
|
|
1,518
|
| |||
Other financial liabilities – current
|
|
95
|
|
|
43
|
|
|
138
|
| |||
Provisions and othernon-current liabilities
|
|
1,268
|
|
|
(14)
|
|
|
1,254
|
| |||
Other financialliabilities – non-current
|
|
79
|
|
|
154
|
|
|
233
|
| |||
Total liabilities
|
|
7,816
|
|
|
152
|
|
|
7,968
|
| |||
Retained earnings
|
|
4,739
|
|
|
11
|
|
|
4,750
|
|
Total assets increased by $163 million, primarily due to the recognition ofright-of-use assets of $128 million, and net investments in subleases of $40 million. Total liabilities increased by $152 million, as the recognition of $197 million of new lease liabilities was offset by the reclassification of liabilities associated with the former operating leases.
Effective January 1, 2019, the Company adopted IAS 19 amendments,Plan Amendment, Curtailment or Settlement, which clarifies the accounting for amendments, curtailments or settlements for defined benefit plans. These changes require an entity to remeasure its defined benefit liability and use the updated assumptions from the remeasurement to determine current service and net interest for the remainder of the reporting period after the change. The IAS 19 amendments did not have a material impact on the consolidated income statement and cash flow for the three and nine months ended September 30, 2019 and financial position for the nine months ended September 30, 2019.
Effective January 1, 2019, the Company adopted International Financial Reporting Interpretations Committee (“IFRIC”) 23,Uncertainty over Income Tax Treatments, which adds to the requirements of IAS 12,Income Taxes, by specifying how to reflect the effects of uncertainty in the accounting for income taxes. An uncertainty arises when it is unclear how a tax law applies to a particular transaction, or whether a taxation authority will accept a company’s tax treatment. IFRIC 23 did not have a material impact on the consolidated income statement and cash flow for the three and nine months ended September 30, 2019 and financial position for the nine months ended September 30, 2019.
Accounting Policies
Leases
For periods beginning from January 1, 2019:
A contract is or contains a lease if it conveys the right to control the use of an identified asset for a specified period in exchange for consideration. When the Company leases assets from third parties, the Company is the lessee. When the Company leases assets to third parties, the Company is the lessor.
Lessee
At the lease commencement date, aright-of-use asset for the underlying leased asset and corresponding lease liability are recognized in the consolidated statement of financial position measured on a present value basis. Lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the Company uses its incremental borrowing rate, which is the interest rate that the Company would pay to borrow funds to obtain an asset of a similar value to theright-of-use asset with a comparable security, economic environment and term.
Theright-of-use asset is included in “Computer hardware and other property, net” and the lease liability is included in “Other financial liabilities” (current ornon-current, based on maturity) within the consolidated statement of financial position.
Page 46
Right-of-use assets are measured on a number of factors including:
● | The initial amount of the lease liability; |
● | Lease payments made at or before the commencement date; and |
● | Initial direct costs and expected restoration costs. |
Lease liabilities are measured as the present value ofnon-cancellable payments over the lease term, which may include:
● | Fixed payments (includingin-substance fixed payments), less any lease incentives receivable; |
● | Variable lease payments that are based on an index or a rate (including inflation-linked payments); |
● | Amounts expected to be payable by the lessee under residual value guarantees; |
● | Exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and |
● | Penalty payments for terminating the lease, if the lease term reflects the lessee exercising that option. |
Where exercise of renewal or termination options is deemed reasonably certain, such assumptions are reflected in the valuation of the leaseright-of-use asset and liability. The reasonably certain assessment is made at the lease commencement date andre-assessed if there is a material change in circumstances supporting the assessment.
Lease payments are apportioned between the liability and a finance charge, which is reported within “Finance costs, net” in the consolidated income statement. Theright-of-use asset is depreciated over the shorter of the asset’s useful life or the lease term on a straight-line basis and presented within “Depreciation” in the consolidated income statement.
Most of the Company’s leases are comprised of property leases, for which fixed payments covering lease andnon-lease components are included in the value of theright-of-use assets and lease liabilities.
Payments for leases with a term of 12 months or less andlow-value leases are recognized on a straight-line basis within “Operating expenses” in the consolidated income statement and are not recognized in the consolidated statement of financial position.
Lessor
Lessor arrangements are classified as finance leases when substantially all the risks and rewards of the underlying asset transfer to the lessee. A receivable, equal to the net investment in the lease, is recognized on the consolidated statement of financial position at the commencement date with an offset to the underlying asset. The receivable is measured as the present value ofnon-cancellable payments to be received by the Company over the lease term. The payments are discounted using the interest rate implicit in the lease, if this can be readily determined, or at the Company’s incremental borrowing rate, if the implicit rate cannot be determined. A gain or loss is recorded in “Other operating gains (losses), net,” within the consolidated income statement for the difference between the carrying value of the underlying asset and the lease receivable. Lease payments are apportioned between the lease receivable and finance income, which is reported within “Finance costs, net” in the consolidated income statement.
When the Company retains the risks and rewards of the underlying asset, the arrangement is classified as an operating lease. Payments received under operating leases are recognized as income on a straight-line basis over the lease term within “Operating expenses” in the consolidated income statement. The carrying value of the underlying asset is retained on the consolidated statement of financial position and amortized over the remaining term, determined as the shorter of the estimated useful life of the asset or the remaining lease term.
Page 47
Note 2: Revenues
Revenues by type and geography
The following tables disaggregate revenues by type and geography and reconcile them to reportable segments for the three and nine months ended September 30, 2019 and 2018 (see note 3).
Revenues by type | Legal Professionals | Corporates | Tax & Accounting Professionals | Reuters News | Global Print | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Three months ended September 30, | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recurring |
| 560 |
|
| 541 |
|
| 275 |
|
| 247 |
|
| 140 |
|
| 129 |
|
| 143 |
|
| 59 |
|
| - |
|
| - |
|
| 1,118 |
|
| 976 |
| ||||||||||||||||||||||||||||||||||||
Transactions |
| 45 |
|
| 54 |
|
| 45 |
|
| 51 |
|
| 26 |
|
| 20 |
|
| 12 |
|
| 12 |
|
| - |
|
| - |
|
| 128 |
|
| 137 |
| ||||||||||||||||||||||||||||||||||||
Global Print |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 168 |
|
| 171 |
|
| 168 |
|
| 171 |
| ||||||||||||||||||||||||||||||||||||
Eliminations |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| (1) |
|
| - |
| ||||||||||||||||||||||||||||||||||||
Total | 605 | 595 | 320 | 298 | 166 | 149 | 155 | 71 | 168 | 171 | 1,413 | 1,284 |
Revenues by type | Legal Professionals | Corporates | Tax & Accounting Professionals | Reuters News | Global Print | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nine months ended September 30, | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||
Recurring |
| 1,665 |
|
| 1,613 |
|
| 813 |
|
| 734 |
|
| 460 |
|
| 434 |
|
| 430 |
|
| 184 |
|
| - |
|
| - |
|
| 3,368 |
|
| 2,965 |
| ||||||||||||||||||||||||
Transactions |
| 137 |
|
| 160 |
|
| 177 |
|
| 189 |
|
| 110 |
|
| 108 |
|
| 36 |
|
| 31 |
|
| - |
|
| - |
|
| 460 |
|
| 488 |
| ||||||||||||||||||||||||
Global Print |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 497 |
|
| 522 |
|
| 497 |
|
| 522 |
| ||||||||||||||||||||||||
Eliminations |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| (2) |
|
| (1) |
| ||||||||||||||||||||||||
Total |
| 1,802 |
|
| 1,773 |
|
| 990 |
|
| 923 |
|
| 570 |
|
| 542 |
|
| 466 |
|
| 215 |
|
| 497 |
|
| 522 |
|
| 4,323 |
|
| 3,974 |
|
Revenues by geography (country of destination) | Legal Professionals | Corporates | Tax & Accounting Professionals | Reuters News | Global Print | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Three months ended September 30, | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. |
| 493 |
|
| 479 |
|
| 262 |
|
| 238 |
|
| 134 |
|
| 123 |
|
| 103 |
|
| 20 |
|
| 110 |
|
| 122 |
|
| 1,102 |
|
| 982 |
| ||||||||||||||||||||||||||||||||||||
Canada (country of domicile) |
| 9 |
|
| 18 |
|
| 2 |
|
| 3 |
|
| 4 |
|
| 3 |
|
| 1 |
|
| 1 |
|
| 26 |
|
| 20 |
|
| 42 |
|
| 45 |
| ||||||||||||||||||||||||||||||||||||
Other |
| 6 |
|
| 5 |
|
| 15 |
|
| 14 |
|
| 21 |
|
| 14 |
|
| 2 |
|
| 3 |
|
| 6 |
|
| 3 |
|
| 50 |
|
| 39 |
| ||||||||||||||||||||||||||||||||||||
Americas (North America, Latin | 508 | 502 | 279 | 255 | 159 | 140 | 106 | 24 | 142 | 145 | 1,194 | 1,066 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.K. |
| 54 |
|
| 52 |
|
| 24 |
|
| 27 |
|
| 3 |
|
| 4 |
|
| 8 |
|
| 7 |
|
| 11 |
|
| 10 |
|
| 100 |
|
| 100 |
| ||||||||||||||||||||||||||||||||||||
Other |
| 14 |
|
| 16 |
|
| 9 |
|
| 9 |
|
| 1 |
|
| 1 |
|
| 26 |
|
| 26 |
|
| 5 |
|
| 5 |
|
| 55 |
|
| 57 |
| ||||||||||||||||||||||||||||||||||||
EMEA (Europe, Middle East | 68 | 68 | 33 | 36 | 4 | 5 | 34 | 33 | 16 | 15 | 155 | 157 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asia Pacific |
| 29 |
|
| 25 |
|
| 8 |
|
| 7 |
|
| 3 |
|
| 4 |
|
| 15 |
|
| 14 |
|
| 10 |
|
| 11 |
|
| 65 |
|
| 61 |
| ||||||||||||||||||||||||||||||||||||
Eliminations |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| (1) |
|
| - |
| �� | |||||||||||||||||||||||||||||||||||
Total |
| 605 |
|
| 595 |
|
| 320 |
|
| 298 |
|
| 166 |
|
| 149 |
|
| 155 |
|
| 71 |
|
| 168 |
|
| 171 |
|
| 1,413 |
|
| 1,284 |
|
Revenues by geography (country of destination) | Legal Professionals | Corporates | Tax & Accounting Professionals | Reuters News | Global Print | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nine months ended September 30, | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. |
| 1,472 |
|
| 1,440 |
|
| 808 |
|
| 738 |
|
| 462 |
|
| 439 |
|
| 309 |
|
| 57 |
|
| 346 |
|
| 369 |
|
| 3,397 |
|
| 3,043 |
| ||||||||||||||||||||||||||||||||||||
Canada (country of domicile) |
| 31 |
|
| 39 |
|
| 8 |
|
| 8 |
|
| 21 |
|
| 20 |
|
| 2 |
|
| 2 |
|
| 64 |
|
| 60 |
|
| 126 |
|
| 129 |
| ||||||||||||||||||||||||||||||||||||
Other |
| 19 |
|
| 17 |
|
| 45 |
|
| 48 |
|
| 62 |
|
| 55 |
|
| 7 |
|
| 7 |
|
| 17 |
|
| 18 |
|
| 150 |
|
| 145 |
| ||||||||||||||||||||||||||||||||||||
Americas (North America, Latin | 1,522 | 1,496 | 861 | 794 | 545 | 514 | 318 | 66 | 427 | 447 | 3,673 | 3,317 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.K. |
| 154 |
|
| 159 |
|
| 77 |
|
| 79 |
|
| 14 |
|
| 15 |
|
| 21 |
|
| 21 |
|
| 30 |
|
| 35 |
|
| 296 |
|
| 309 |
| ||||||||||||||||||||||||||||||||||||
Other | 45 | 48 | 28 | 29 | 1 | 1 | 82 | 84 | 13 | 11 | 169 | 173 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EMEA (Europe, Middle East |
| 199 |
|
| 207 |
|
| 105 |
|
| 108 |
|
| 15 |
|
| 16 |
|
| 103 |
|
| 105 |
|
| 43 |
|
| 46 |
|
| 465 |
|
| 482 |
| ||||||||||||||||||||||||||||||||||||
Asia Pacific |
| 81 |
|
| 70 |
|
| 24 |
|
| 21 |
|
| 10 |
|
| 12 |
|
| 45 |
|
| 44 |
|
| 27 |
|
| 29 |
|
| 187 |
|
| 176 |
| ||||||||||||||||||||||||||||||||||||
Eliminations |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| (2) |
|
| (1) |
| ||||||||||||||||||||||||||||||||||||
Total |
| 1,802 |
|
| 1,773 |
|
| 990 |
|
| 923 |
|
| 570 |
|
| 542 |
|
| 466 |
|
| 215 |
|
| 497 |
|
| 522 |
|
| 4,323 |
|
| 3,974 |
|
Page 48
Note 3: Segment Information
The Company is organized as five reportable segments reflecting how the businesses are managed: Legal Professionals, Corporates, Tax & Accounting Professionals, Reuters News and Global Print. In the second quarter of 2019, the Company changed the name of its Tax Professionals segment to Tax & Accounting Professionals to better reflect the nature of the customers served by the segment. The Company did not change the way that it manages the business. 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.
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), as well as governmental taxing authorities with research and workflow products, focusing on intuitive tax offerings and automating tax workflows.
Reuters News
The Reuters News segment provides real-time, multi-media news and information services to newspapers, television and cable networks, radio stations and websites around the globe, as well as to Refinitiv.
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.
Page 49
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenues | ||||||||||||||||
Legal Professionals |
| 605 |
|
| 595 |
|
| 1,802 |
|
| 1,773 |
| ||||
Corporates |
| 320 |
|
| 298 |
|
| 990 |
|
| 923 |
| ||||
Tax & Accounting Professionals |
| 166 |
|
| 149 |
|
| 570 |
|
| 542 |
| ||||
Reuters News |
| 155 |
|
| 71 |
|
| 466 |
|
| 215 |
| ||||
Global Print |
| 168 |
|
| 171 |
|
| 497 |
|
| 522 |
| ||||
Eliminations |
| (1) |
|
| - |
|
| (2) |
|
| (1) |
| ||||
Consolidated revenues |
| 1,413 |
|
| 1,284 |
|
| 4,323 |
|
| 3,974 |
| ||||
Adjusted EBITDA | ||||||||||||||||
Legal Professionals |
| 227 |
|
| 206 |
|
| 686 |
|
| 595 |
| ||||
Corporates |
| 110 |
|
| 105 |
|
| 330 |
|
| 311 |
| ||||
Tax & Accounting Professionals |
| 35 |
|
| 32 |
|
| 188 |
|
| 153 |
| ||||
Reuters News |
| 5 |
|
| 5 |
|
| 31 |
|
| 21 |
| ||||
Global Print |
| 71 |
|
| 76 |
|
| 218 |
|
| 233 |
| ||||
Corporate costs |
| (103) |
|
| (111) |
|
| (356) |
|
| (222) |
| ||||
Adjusted EBITDA |
| 345 |
|
| 313 |
|
| 1,097 |
|
| 1,091 |
| ||||
Fair value adjustments (see note 5) |
| 9 |
|
| 5 |
|
| 6 |
|
| 1 |
| ||||
Depreciation |
| (38) |
|
| (24) |
|
| (110) |
|
| (83) |
| ||||
Amortization of computer software |
| (117) |
|
| (96) |
|
| (326) |
|
| (294) |
| ||||
Amortization of other identifiable intangible assets |
| (28) |
|
| (26) |
|
| (80) |
|
| (83) |
| ||||
Other operating gains, net |
| 91 |
|
| 1 |
|
| 396 |
|
| 13 |
| ||||
Consolidated operating profit |
| 262 |
|
| 173 |
|
| 983 |
|
| 645 |
| ||||
Net interest expense |
| (40) |
|
| (82) |
|
| (112) |
|
| (241) |
| ||||
Other finance (costs) income |
| (3) |
|
| (11) |
|
| (32) |
|
| 10 |
| ||||
Share ofpost-tax (losses) earnings in equity method investments |
| (304) |
|
| 1 |
|
| (555) |
|
| 5 |
| ||||
Tax benefit (expense) |
| 13 |
|
| (128) |
|
| (35) |
|
| (152) |
| ||||
(Loss) earnings from continuing operations |
| (72) |
|
| (47) |
|
| 249 |
|
| 267 |
|
In accordance with IFRS 8,Operating Segments, the Company discloses certain information about its reportable segments based upon measures used by management in assessing the performance of those reportable segments. These measures are defined below and may not be comparable to similar measures of other companies.
Adjusted EBITDA
● | Segment adjusted EBITDA represents earnings from continuing operations before tax expense or benefit, net interest expense, other finance costs or income, depreciation, amortization of software and other identifiable intangible assets, the Company’s share ofpost-tax earnings or losses in equity method investments, other operating gains and losses, certain asset impairment charges, fair value adjustments, and corporate related items. |
● | The Company does not consider these excluded items to be controllable operating activities for purposes of assessing the current performance of the reportable segments. |
● | Each segment includes an allocation of costs, based on usage or other applicable measures, for centralized support services such as technology, commercial sales operations, real estate, and product and content development, as well as an allocation of product costs when one segment sells products managed by another segment. |
● | Consolidated adjusted EBITDA is comprised of adjusted EBITDA from reportable segments and Corporate costs. |
Page 50
Note 4: Seasonality
The Company’s revenues and operating profit on a consolidated basis do not tend to be significantly impacted by seasonality as it records a large portion of its revenues ratably over 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. Additionally, the seasonality of the Company’s operating profit may be further impacted by the timing of its corporate costs, as it has been incurring significant costs to reposition its business following the sale of Financial & Risk.
Note 5: Operating Expenses
The components of operating expenses include the following:
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Salaries, commissions and allowances | 604 |
| 610 |
| 1,835 |
| 1,788 |
| ||||||||
Share-based payments | 14 |
| 12 |
| 41 |
| 35 |
| ||||||||
Post-employment benefits | 31 |
| 39 |
| 99 |
| 111 |
| ||||||||
Total staff costs | 649 |
| 661 |
| 1,975 |
| 1,934 |
| ||||||||
Goods and services(1) | 325 |
| 199 |
| 970 |
| 662 |
| ||||||||
Data | 63 |
| 61 |
| 192 |
| 173 |
| ||||||||
Telecommunications | 11 |
| 18 |
| 34 |
| 32 |
| ||||||||
Real estate | 20 |
| 32 |
| 55 |
| 82 |
| ||||||||
Fair value adjustments(2) | (9) |
| (5) |
|
| (6) |
|
| (1) |
| ||||||
Total operating expenses | 1,059 |
| 966 |
| 3,220 |
| 2,882 |
|
(1) | Goods and services include professional fees, consulting and outsourcing services, contractors, selling and marketing, and other general and administrative costs. |
(2) | Fair value adjustments primarily represent gains or losses due to changes in foreign currency exchange rates on intercompany balances that arise in the ordinary course of business. |
Note 6: Other Operating Gains, Net
Other operating gains, net, were $91 million and $1 million for the three months ended September 30, 2019 and 2018, respectively, and $396 million and $13 million for the nine months ended September 30, 2019 and 2018, respectively. The three and nine months ended September 30, 2019 included a $91 million and $366 million benefit, respectively, from the revaluation of warrants that the Company holds in Refinitiv (see note 12). Each period also included income related to a license that allows Refinitiv to use the “Reuters” mark to brand its products and services (see note 20), and the nine months ended September 30, 2019 also included net gains from the sale of several small businesses. The nine months ended September 30, 2018 included a gain on the sale of a Canadian wholly-owned subsidiary to a company affiliated with The Woodbridge Company Limited (“Woodbridge”), the Company’s principal shareholder.
Page 51
Note 7: Finance Costs, Net
The components of finance costs, net, include interest expense (income) and other finance costs (income) as follows:
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Interest expense: | ||||||||||||||||
Debt |
| 39 |
|
| 74 |
|
| 116 |
|
| 218 |
| ||||
Derivative financial instruments – hedging activities |
| 1 |
|
| 1 |
|
| 2 |
|
| 4 |
| ||||
Other, net |
| 1 |
|
| 4 |
|
| 10 |
|
| 6 |
| ||||
Fair value losses (gains) on financial instruments: | ||||||||||||||||
Cash flow hedges, transfer from equity |
| 5 |
|
| (24) |
|
| (14) |
|
| 44 |
| ||||
Net foreign exchange (gains) losses on debt |
| (5) |
|
| 24 |
|
| 14 |
|
| (44) |
| ||||
Net interest expense – debt and other |
| 41 |
|
| 79 |
|
| 128 |
|
| 228 |
| ||||
Interest expense – leases(1) |
| 2 |
|
| - |
|
| 5 |
|
| - |
| ||||
Net interest expense – pension and other | 6 | 6 | 19 | 20 | ||||||||||||
Interest income |
| (9) |
|
| (3) |
|
| (40) |
|
| (7) |
| ||||
Net interest expense |
| 40 |
|
| 82 |
|
| 112 |
|
| 241 |
|
(1) | Relates to the 2019 adoption of IFRS 16. See note 1. |
Three months ended September 30,
|
Nine months ended September 30,
| |||||||||||||||
2019
|
2018
|
2019
|
2018
| |||||||||||||
Net losses (gains) due to changes in foreign currency
|
| 4
|
|
| 11
|
|
| 33
|
|
| (7)
|
| ||||
Net gains on derivative instruments |
| (1) |
|
| - |
|
| (1) |
|
| (3) |
| ||||
Other finance costs (income) |
| 3 |
|
| 11 |
|
| 32 |
|
| (10) |
|
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.
Note 8: Equity Method Investments
Equity method investments are primarily comprised of the Company’s 45% investment in Refinitiv.
The Company’s share ofpost-tax (losses) earnings in equity method investments as reported in the consolidated income statement is comprised of the following:
Three months ended September 30,
|
Nine months ended September 30,
| |||||||||||||||
2019
|
2018
|
2019
|
2018
| |||||||||||||
Refinitiv (45% ownership interest) |
| (305) |
|
| - |
|
| (563) |
|
| - |
| ||||
Other equity method investments |
| 1 |
|
| 1 |
|
| 8 |
|
| 5 |
| ||||
Total share ofpost-tax (losses) earnings in equity method investments
|
| (304)
|
|
| 1
|
|
| (555)
|
|
| 5
|
|
Page 52
The composition of equity method investments as reported in the consolidated statement of financial position is comprised of the following:
September 30, | December 31, | |||||||
2019 | 2018 | |||||||
Refinitiv (45% ownership interest) |
| 1,366 |
|
| 2,031 |
| ||
Other equity method investments |
| 164 |
|
| 155 |
| ||
Total equity method investments |
| 1,530 |
|
| 2,186 |
|
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 September 30,
| Nine months ended September 30,
| |||||||
2019
| 2019
| |||||||
Revenues | 1,557 | 4,674 | ||||||
Net loss | (656) | (1,201) | ||||||
Remove: Net earnings attributable tonon-controlling interests | (21) | (50) | ||||||
Net loss attributable to Refinitiv | (677) | (1,251) | ||||||
Other comprehensive loss attributable to Refinitiv | (191) | (227) | ||||||
Total comprehensive loss attributable to Refinitiv | (868) | (1,478) |
September 30,
| December 31,
| |||||||
2019
| 2018
| |||||||
Assets | ||||||||
Current assets |
| 2,753 |
|
| 2,284 |
| ||
Non-current assets |
| 20,508 |
|
| 20,978 |
| ||
Total assets |
| 23,261 |
|
| 23,262 |
| ||
Liabilities | ||||||||
Current liabilities |
| 2,395 |
|
| 1,849 |
| ||
Non-current liabilities |
| 15,574 |
|
| 14,917 |
| ||
Total liabilities |
| 17,969 |
|
| 16,766 |
| ||
Net assets |
| 5,292 |
|
| 6,496 |
| ||
Non-controlling interests |
| (2,054) |
|
| (1,924) |
| ||
Other(1) |
| (202) |
|
| (58) |
| ||
Net assets attributable to Refinitiv |
| 3,036 |
|
| 4,514 |
| ||
Net assets attributable to Refinitiv - beginning period |
| 4,514 |
|
| 5,218 |
| ||
Net loss attributable to Refinitiv |
| (1,251) |
|
| (532) |
| ||
Other comprehensive loss attributable to Refinitiv |
| (227) |
|
| (172) |
| ||
Net assets attributable to Refinitiv - ending period |
| 3,036 |
|
| 4,514 |
| ||
Thomson Reuters % share |
| 45% |
|
| 45% |
| ||
Thomson Reuters carrying amount |
| 1,366 |
|
| 2,031 |
|
(1) | Represents transactions excluded from Thomson Reuters’ 45% share of total comprehensive loss. |
Proposed London Stock Exchange Group plc (“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, 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, approximately 15% of which would be attributed to Thomson Reuters. The proposed transaction is subject to LSEG shareholder approval, regulatory clearances and customary closing conditions and is expected to close in the second half of 2020. The Company expects to record a significant gain on the transaction upon closing.
Page 53
Note 9: Taxation
Tax (benefit) expense was $(13) million and $128 million for the three months ended September 30, 2019 and 2018, respectively, and $35 million and $152 million for the nine months ended September 30, 2019 and 2018, respectively. Tax expense in both periods of 2019 included a $58 million charge related to the enactment of foreign tax reform. The charge reflects the Company’s estimate of the deferred taxes required on temporary differences between the book and tax basis of certain assets, which the Company expects to reverse during periods that it will be subject to the applicable new foreign tax rates. Tax expense in both periods of 2018 included $95 million of charges associated with the separation of Financial & Risk from the rest of the Company. The tax (benefit) expense in each period reflected the mix of taxing jurisdictions in whichpre-tax profits and losses were recognized. Because the geographical mix ofpre-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 (benefit) expense for the full year.
Note 10: Discontinued Operations
On October 1, 2018, the Company sold a 55% interest in its Financial & Risk business. The Company retained a 45% interest in the business, which is now known as Refinitiv. The three and nine months ended September 30, 2018 include the results of Financial & Risk reported as discontinued operations in the consolidated financial statements. The three and nine months ended September 30, 2019 included residual income and expense items related to liabilities associated with businesses that were previously classified as discontinued operations, including Financial & Risk.
Earnings (loss) from discontinued operations are summarized as follows:
Three months ended September 30,
|
Nine months ended September 30,
| |||||||||||||||
2019
|
2018
|
2019
|
2018
| |||||||||||||
Revenues
|
| 1,541
|
|
| -
|
|
| 4,677
|
| |||||||
Expenses
|
| 19
|
|
| (1,059)
|
|
| (18)
|
|
| (3,279)
|
| ||||
Earnings (loss) from discontinued operations before income tax
|
| 19
|
|
| 482
|
|
| (18)
|
|
| 1,398
|
| ||||
Tax benefit (expense)(1)
|
| 9
|
|
| (133)
|
|
| 9
|
|
| (1,017)
|
| ||||
Earnings (loss) from discontinued operations, net of tax
|
| 28
|
|
| 349
|
|
| (9)
|
|
| 381
|
|
(1) | The three and nine months ended September 30, 2018 reflected a $38 million and an $850 million deferred tax charge, respectively, that was recorded when the Financial & Risk business was classified as held for sale. These deferred taxes were not previously required as the business was not considered held for sale until January 2018. |
Note 11: Earnings Per Share
Basic (loss) 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 (loss) 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”).
(Loss) earnings used in determining consolidated (loss) earnings per share and (loss) earnings per share from continuing operations are as follows:
Three months ended September 30,
|
Nine months ended September 30,
| |||||||||||||||
2019
|
2018
|
2019
|
2018
| |||||||||||||
(Loss) earnings attributable to common shareholders
|
|
(44)
|
|
|
272
|
|
|
240
|
|
|
558
|
| ||||
Less: Dividends declared on preference shares
|
|
-
|
|
|
(1)
|
|
|
(2)
|
|
|
(2)
|
| ||||
(Loss) earnings used in consolidated earnings per share
|
|
(44)
|
|
|
271
|
|
|
238
|
|
|
556
|
| ||||
Less: (Earnings) loss from discontinued operations, net of tax
|
|
(28)
|
|
|
(349)
|
|
|
9
|
|
|
(381)
|
| ||||
Remove:Non-controlling interests from discontinued operations
|
|
-
|
|
|
30
|
|
|
-
|
|
|
90
|
| ||||
(Loss) earnings used in earnings per share from continuing operations
|
|
(72)
|
|
|
(48)
|
|
|
247
|
|
|
265
|
|
Page 54
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 September 30, | Nine months ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Weighted-average number of common shares outstanding
|
|
500,772,400
|
|
|
700,682,178
|
|
|
500,946,808
|
|
|
706,494,346
|
| ||||
Weighted-average number of vested DSUs
|
|
468,080
|
|
|
530,241
|
|
|
469,122
|
|
|
687,447
|
| ||||
Basic
|
| 501,240,480
|
|
| 701,212,419
|
|
| 501,415,930
|
|
| 707,181,793
|
| ||||
Effect of stock options and TRSUs
|
| -
|
|
| -
|
|
| 1,745,452
|
|
| 893,186
|
| ||||
Diluted
|
|
501,240,480
|
|
|
701,212,419
|
|
|
503,161,382
|
|
|
708,074,979
|
|
Because the Company reported a net loss from continuing operations for the three months ended September 30, 2019 and 2018, the weighted-average number of common shares used for basic and diluted loss per share is the same, as the effect of stock options and other equity incentive awards would reduce the loss per share, and therefore be anti-dilutive.
Note 12: Financial Instruments
Financial assets and liabilities
Financial assets and liabilities in the consolidated statement of financial position are as follows:
September 30, 2019
|
Assets/
|
Assets
|
Assets at Fair
|
Derivatives
|
Total
| |||||||||||||||
Cash and cash equivalents
|
|
473
|
|
|
674
|
|
|
-
|
|
|
-
|
|
|
1,147
|
| |||||
Trade and other receivables
|
|
1,112
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,112
|
| |||||
Other financial assets - current
|
|
54
|
|
|
1
|
|
|
-
|
|
|
-
|
|
|
55
|
| |||||
Other financial assets -non-current
|
|
49
|
|
|
382
|
|
|
24
|
|
|
-
|
|
|
455
|
| |||||
Trade payables (see note 14)
|
|
(165)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(165)
|
| |||||
Accruals (see note 14)
|
|
(697)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(697)
|
| |||||
Other financial liabilities - current(1)
|
|
(104)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(104)
|
| |||||
Long-term indebtedness
|
|
(3,229)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,229)
|
| |||||
Other financial liabilities - non current(2)
|
|
(222)
|
|
|
-
|
|
|
-
|
|
|
(71)
|
|
|
(293)
|
| |||||
Total
|
|
(2,729)
|
|
|
1,057
|
|
|
24
|
|
|
(71)
|
|
|
(1,719)
|
|
(1) | Includes lease liabilities of $55 million recognized in 2019 due to the adoption of IFRS 16. See note 1. |
(2) | Includes lease liabilities of $220 million recognized in 2019 due to the adoption of IFRS 16. See note 1. |
Page 55
December 31, 2018
|
Assets/
|
Assets/
|
Assets at Fair
|
Derivatives
|
Total
| |||||||||||||||
Cash and cash equivalents |
| 316 |
|
| 2,390 |
|
| - |
|
| - |
|
| 2,706 |
| |||||
Trade and other receivables |
| 1,313 |
|
| - |
|
| - |
|
| - |
|
| 1,313 |
| |||||
Other financial assets - current |
| 75 |
|
| 1 |
|
| - |
|
| - |
|
| 76 |
| |||||
Other financial assets -non-current |
| 14 |
|
| 16 |
|
| 23 |
|
| - |
|
| 53 |
| |||||
Current indebtedness |
| (3) |
|
| - |
|
| - |
|
| - |
|
| (3) |
| |||||
Trade payables (see note 14) |
| (326) |
|
| - |
|
| - |
|
| - |
|
| (326) |
| |||||
Accruals (see note 14) |
| (854) |
|
| - |
|
| - |
|
| - |
|
| (854) |
| |||||
Other financial liabilities - current |
| (95) |
|
| - |
|
| - |
|
| - |
|
| (95) |
| |||||
Long-term indebtedness |
| (3,213) |
|
| - |
|
| - |
|
| - |
|
| (3,213) |
| |||||
Other financial liabilities - non current |
| (1) |
|
| (2) |
|
| - |
|
| (76) |
|
| (79) |
| |||||
Total |
| (2,774) |
|
| 2,405 |
|
| 23 |
|
| (76) |
|
| (422) |
|
Cash and cash equivalents
Of total cash and cash equivalents, $36 million and $24 million at September 30, 2019 and December 31, 2018, respectively, were held in subsidiaries which have regulatory restrictions, contractual restrictions or operate in countries where exchange controls and other legal restrictions apply and were therefore not available for general use by the Company.
Commercial paper
Under its commercial paper program, the Company may issue up to $2.0 billion of notes. There was no outstanding commercial paper at September 30, 2019.
Credit facility
The Company has a $2.4 billion credit facility agreement which matures in November 2021 and may be used to provide liquidity for general corporate purposes (including support for its commercial paper program). There were no outstanding borrowings under this credit facility at September 30, 2019. Based on the Company’s credit ratings, the cost of borrowing under the agreement is priced at LIBOR/EURIBOR plus 110 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 $3.0 billion.
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 andnon-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 taking into accountnon-performance risk.
Page 56
The following is a summary of debt and related derivative instruments that hedge the cash flows of debt:
Carrying Amount
|
Fair Value
| |||||||||||||||||||
September 30, 2019
|
Primary Debt
|
Derivative
|
Primary Debt
|
Derivative
| ||||||||||||||||
C$550, 3.309% Notes, due 2021 | 414 | 71 | 423 | 71 | ||||||||||||||||
$350, 3.95% Notes, due 2021(1) | 139 | - | 142 | - | ||||||||||||||||
$600, 4.30% Notes, due 2023 | 596 | - | 644 | - | ||||||||||||||||
$450, 3.85% Notes, due 2024(1) | 241 | - | 254 | - | ||||||||||||||||
$500, 3.35% Notes, due 2026 | 495 | - | 518 | - | ||||||||||||||||
$350, 4.50% Notes, due 2043(1) | 116 | - | 122 | - | ||||||||||||||||
$350, 5.65% Notes, due 2043 | 342 | - | 416 | - | ||||||||||||||||
$400, 5.50% Debentures, due 2035 | 395 | - | 458 | - | ||||||||||||||||
$500, 5.85% Debentures, due 2040
|
| 491
|
|
| -
|
|
| 602
|
|
| -
|
| ||||||||
Total
|
| 3,229
|
|
| 71
|
|
| 3,579
|
|
| 71
|
| ||||||||
Long-term
|
|
3,229
|
|
|
71
|
|
Carrying Amount
|
Fair Value
| |||||||||||||||||||
December 31, 2018
|
Primary Debt
|
Derivative
|
Primary Debt
|
Derivative
| ||||||||||||||||
Bank and other | 3 | - | 3 | - | ||||||||||||||||
C$550, 3.309% Notes, due 2021 | 402 | 76 | 407 | 76 | ||||||||||||||||
$350, 3.95% Notes, due 2021(1) | 138 | - | 139 | - | ||||||||||||||||
$600, 4.30% Notes, due 2023 | 596 | - | 607 | - | ||||||||||||||||
$450, 3.85% Notes, due 2024(1) | 240 | - | 233 | - | ||||||||||||||||
$500, 3.35% Notes, due 2026 | 495 | - | 458 | - | ||||||||||||||||
$350, 4.50% Notes, due 2043(1) | 116 | - | 105 | - | ||||||||||||||||
$350, 5.65% Notes, due 2043 | 341 | - | 364 | - | ||||||||||||||||
$400, 5.50% Debentures, due 2035 | 395 | - | 406 | - | ||||||||||||||||
$500, 5.85% Debentures, due 2040 | 490 | - | 524 | - | ||||||||||||||||
Total
|
|
3,216
|
|
|
76
|
|
|
3,246
|
|
|
76
|
| ||||||||
Current portion | 3 | - | ||||||||||||||||||
Long-term portion
|
|
3,213
|
|
|
76
|
|
(1) | Notes were partially redeemed in October 2018. |
Foreign Exchange Contracts
In the third quarter of 2019, the Company entered into foreign exchange contracts to sell British pound sterling, to manage foreign exchange risk on cash flows excluding indebtedness. At September 30, 2019, the cumulative U.S. dollar notional amount of contracts outstanding was $111 million. The fair value of these contracts was an asset of $1 million, reported within “Other financial assets – current” in the consolidated statement of financial position.
Fair value estimation
The following fair value measurement hierarchy is used for financial instruments that are measured in the consolidated statement of financial position at fair value:
● | Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities; |
● | Level 2 - inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices); and |
● | Level 3 - inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs). |
Page 57
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:
September 30, 2019
| Total | |||||||||||||||
Assets
| Level 1 | Level 2 | Level 3 | Balance | ||||||||||||
Money market accounts
|
|
-
|
|
|
674
|
|
|
-
|
|
|
674
|
| ||||
Forward exchange contracts(1)
|
|
-
|
|
|
1
|
|
|
-
|
|
|
1
|
| ||||
Warrants(2)
|
|
-
|
|
|
-
|
|
|
382
|
|
|
382
|
| ||||
Financial assets at fair value through earnings
|
|
-
|
|
|
675
|
|
|
382
|
|
|
1,057
|
| ||||
Financial assets at fair value through other comprehensive income(3)
|
|
-
|
|
|
24
|
|
|
-
|
|
|
24
|
| ||||
Total assets
|
|
-
|
|
|
699
|
|
|
382
|
|
|
1,081
|
| ||||
Liabilities
| ||||||||||||||||
Derivatives used for hedging(4)
|
|
-
|
|
|
(71)
|
|
|
-
|
|
|
(71)
|
| ||||
Total liabilities
|
|
-
|
|
|
(71)
|
|
|
-
|
|
|
(71)
|
|
December 31, 2018 | Total | |||||||||||||||
Assets | Level 1 | Level 2 | Level 3 | Balance | ||||||||||||
Money market accounts | - | 2,390 | - | 2,390 | ||||||||||||
Warrants(2) | - | - | 16 | 16 | ||||||||||||
Embedded derivatives(5) | - | 1 | - | 1 | ||||||||||||
Financial assets at fair value through earnings | - | 2,391 | 16 | 2,407 | ||||||||||||
Financial assets at fair value through other comprehensive income(3) | 2 | 21 | - | 23 | ||||||||||||
Total assets | 2 | 2,412 | 16 | 2,430 | ||||||||||||
Liabilities | ||||||||||||||||
Contingent consideration(6) | - | - | (2) | (2) | ||||||||||||
Financial liabilities at fair value through earnings | - | - | (2) | (2) | ||||||||||||
Derivatives used for hedging(4) | - | (76) | - | (76) | ||||||||||||
Total liabilities | - | (76) | (2) | (78) |
(1) | Used to manage foreign exchange risk on cash flows excluding indebtedness. |
(2) | Warrants related to the Company’s equity method investment in Refinitiv (see note 8). |
(3) | Investments in entities over which the Company does not have control, joint control or significant influence. |
(4) | Comprised offixed-to-fixed cross-currency swaps on indebtedness. |
(5) | Largely related to U.S. dollar pricing of customer agreements by subsidiaries outside of the U.S. |
(6) | Obligations to pay additional consideration for prior acquisitions, based upon performance measures contractually agreed at the time of purchase. |
The following reflects the change in Refinitiv warrants level 3 fair value measurement for the nine months ended September 30, 2019:
Nine months ended September 30, 2019 | ||||
December 31, 2018 |
| 16 |
| |
Gain recognized within other operating gains, net |
| 366 |
| |
September 30, 2019 |
| 382 |
|
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 nine months ended September 30, 2019.
Page 58
Valuation Techniques
The fair value of financial instruments that are not traded in an active market (for example,over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
Specific valuation techniques used to value financial instruments include:
● | quoted market prices or dealer quotes for similar instruments; |
● | the fair value of cross-currency interest rate swaps are calculated as the present value of the estimated future cash flows based on observable yield curves; and |
● | 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 values Refinitiv at $27 billion, but LSEG may, at its option, settle up to $2.5 billion of the consideration in cash (see note 8). 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 September 30, 2019 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 September 30, 2019. 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 approval by LSEG shareholders, 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: OtherNon-Current Assets
September 30, | December 31, | |||||||
2019 | 2018 | |||||||
Net defined benefit plan surpluses(1) | 108 | 7 | ||||||
Cash surrender value of life insurance policies | 314 | 300 | ||||||
Deferred commissions | 72 | 82 | ||||||
Othernon-current assets | 48 | 57 | ||||||
Total othernon-current assets | 542 | 446 |
(1) | The funded status of the defined benefit pension plan covering U.K. employees changed from a net obligation to a net surplus as the Company contributed $167 million to the plan in February 2019. |
Note 14: Payables, Accruals and Provisions
September 30, | December 31, | |||||||
2019 | 2018 | |||||||
Trade payables | 165 | 326 | ||||||
Accruals | 697 | 854 | ||||||
Provisions | 107 | 203 | ||||||
Other current liabilities | 79 | 166 | ||||||
Total payables, accruals and provisions | 1,048 | 1,549 |
Page 59
Note 15: Provisions and OtherNon-Current Liabilities
September 30, | December 31, | |||||||
2019 | 2018 | |||||||
Net defined benefit plan obligations | 769 | 708 | ||||||
Deferred compensation and employee incentives | 138 | 128 | ||||||
Provisions | 106 | 128 | ||||||
Uncertain tax positions | 210 | 223 | ||||||
Othernon-current liabilities | 37 | 81 | ||||||
Total provisions and othernon-current liabilities | 1,260 | 1,268 |
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”). In August 2019, the Company renewed its NCIB for an additional 12 months. Under the renewed 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.
Details of share repurchases are as follows:
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Share repurchases (millions of U.S. dollars) | 98 | 129 | 288 | 488 | ||||||||||||
Shares repurchased (number in millions) | 1.5 | 3.1 | 5.0 | 12.2 | ||||||||||||
Share repurchases—average price per share in U.S. dollars | $ | 68.34 | $ | 41.13 | $ | 58.11 | $ | 39.95 |
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 apre-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 Rule10b5-1 under the U.S. Securities Exchange Act of 1934, as amended.
Dividends
Dividends on common shares are declared in U.S. dollars. In the consolidated statement of cash flow, dividends paid on common shares are shown net of amounts reinvested in the Company under its dividend reinvestment plan. Details of dividends declared per common share and dividends paid on common shares are as follows:
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Dividends declared per common share | $0.360 | $0.345 | $1.080 | $1.035 | ||||||||||||
Dividends declared | 180 | 242 | 541 | 732 | ||||||||||||
Dividends reinvested | (5) | (10) | (17) | (25) | ||||||||||||
Dividends paid | 175 | 232 | 524 | 707 |
Page 60
Note 17: Supplemental Cash Flow Information
Details of “Other” in the consolidated statement of cash flow are as follows:
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Non-cash employee benefit charges | 38 | 39 | 119 | 115 | ||||||||||||
Net losses (gains) on foreign exchange and derivative financial instruments | 7 | 8 | 35 | (9) | ||||||||||||
Share ofpost-tax losses (earnings) in equity method investments | 304 | (1) | 555 | (5) | ||||||||||||
Revaluation of Refinitiv warrants (see note 12) | (91) | - | (366) | - | ||||||||||||
Other | (25) | 3 | (29) | 6 | ||||||||||||
233 | 49 | 314 | 107 |
Details of “Changes in working capital and other items” are as follows:
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Trade and other receivables | 58 | 3 | 154 | 64 | ||||||||||||
Prepaid expenses and other current assets | 2 | (49) | 51 | (30) | ||||||||||||
Other financial assets | (5) | 7 | 28 | 48 | ||||||||||||
Payables, accruals and provisions | 50 | 133 | (346) | (63) | ||||||||||||
Deferred revenue | (37) | (57) | (9) | (12) | ||||||||||||
Other financial liabilities | 6 | (4) | (27) | (50) | ||||||||||||
Income taxes | (59) | 29 | (49) | 27 | ||||||||||||
Other | 5 | (25) | (44) | (47) | ||||||||||||
20 | 37 | (242) | (63) |
Details of income taxes (paid) refunded are as follows:
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Operating activities—continuing operations | (119) | (12) | (233) | (55) | ||||||||||||
Operating activities—discontinued operations | 9 | (43) | (45) | (95) | ||||||||||||
Investing activities—continuing operations | - | - | (1) | - | ||||||||||||
Total income taxes paid | (110) | (55) | (279) | (150) |
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. Acquisitions also included investments in equity method investments.
Acquisition activity
The Company acquired two businesses in the three and nine months ended September 30, 2019, and the related total consideration, were as follows:
Three months ended September 30,
| Nine months ended September 30,
| |||||||
Total consideration
| 2019
| 2019
| ||||||
Businesses acquired | 855 | 855 | ||||||
Less: Cash acquired | (36) | (36) | ||||||
Businesses acquired, net of cash | 819 | 819 | ||||||
Investments in businesses | (3) | 2 | ||||||
816 | 821 |
Page 61
The following provides a brief description of certain acquisitions completed during the nine months ended September 30, 2019:
Date | Company | Acquiring Segments | Description | |||
July 2019 | Confirmation | Tax & Accounting Professionals/Corporates | A provider of digital audit confirmation services to accounting firms, banks and law firms. | |||
July 2019 | HighQ | Legal Professionals/Corporates | A provider of collaboration tools to the legal and regulatory market segments. |
Purchase price allocation
Each business combination has been accounted for using the acquisition method. The results of acquired businesses are included in the consolidated financial statements from the dates of acquisition. Purchase price allocations related to certain acquisitions may be subject to adjustment pending completion of final valuations.
The details of net assets acquired were as follows:
Three months ended | Nine months ended September 30, | |||||||
2019 | 2019 | |||||||
Cash and cash equivalents | 36 | 36 | ||||||
Trade receivables | 5 | 5 | ||||||
Prepaid expenses and other current assets | 5 | 5 | ||||||
Current assets | 46 | 46 | ||||||
Computer hardware and other property | 5 | 5 | ||||||
Computer software | 78 | 78 | ||||||
Other identifiable intangible assets | 177 | 177 | ||||||
Othernon-current assets | 1 | 1 | ||||||
Total assets | 307 | 307 | ||||||
Payables and accruals | (7) | (7) | ||||||
Deferred revenue | (16) | (16) | ||||||
Other financial liabilities | (1) | (1) | ||||||
Current liabilities | (24) | (24) | ||||||
Provisions and othernon-current liabilities | (1) | (1) | ||||||
Deferred tax | (55) | (55) | ||||||
Total liabilities | (80) | (80) | ||||||
Net assets acquired | 227 | 227 | ||||||
Goodwill | 628 | 628 | ||||||
Total | 855 | 855 |
The excess of the purchase price over the net tangible and identifiable intangible assets acquired and assumed liabilities was recorded as goodwill and reflects synergies and the value of the acquired workforce. The majority of goodwill for acquisitions completed in 2019 is not expected to be deductible for tax purposes.
Acquisition transactions were completed by acquiring all equity interests or the net assets of the acquired business.
Other
The revenues and operating profit of acquired businesses since the date of acquisition were not material to the Company’s results of operations.
Page 62
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 September 30, 2019, the Company’s principal shareholder, Woodbridge, beneficially owned approximately 66% of the Company’s shares.
Transactions with Refinitiv
As part of the Company’s sale of a 55% interest in its Financial & Risk business, Reuters News and Refinitiv entered into an agreement which has a term of 30 years from October 1, 2018, pursuant to which Reuters News will supply news and editorial content to the Refinitiv partnership for a minimum of $325 million per year. For the nine months ended September 30, 2019, the Company recorded $252 million of revenues under this agreement. For the duration of the agreement, Refinitiv may also license the “Reuters” mark to brand its products and services, subject to certain contractual restrictions. For the nine months ended September 30, 2019, the Company recorded $18 million of income in “Other operating gains, net” within the consolidated income statement under this license.
To facilitate the separation, the Company and Refinitiv agreed to provide certain operational services to each other, including technology and administrative services, for a specified multi-year period. Additionally, the Company and Refinitiv extended property leases to each other. For the nine months ended September 30, 2019, the Company recorded the following amounts as expense or contra-expense, as applicable, related to these transactions:
Provided by Thomson Reuters to Refinitiv Contra-expense | Provided by Refinitiv to Thomson Reuters (Expense) | |||||||
Transitional services | 23 | (45) | ||||||
Properties leased | 29 | (27) |
At September 30, 2019, the consolidated statement of financial position included a receivable from Refinitiv of $210 million and a payable to Refinitiv of $100 million.
Except for the above transactions, there were no other significant related party transactions during the nine months ended September 30, 2019. Refer to “Related party transactions” disclosed in note 31 of the Company’s consolidated financial statements for the year ended December 31, 2018, which are included in the Company’s 2018 annual report, for information regarding related party transactions.
Page 63
Note 21: Subsequent Events
FC Business Intelligence Acquisition
In October 2019, the Company acquired FC Business Intelligence, a globalbusiness-to-business events specialist, that delivershigh-end conferences and exhibitions to diverse sectors including energy, insurance, pharmaceuticals, transportation, travel, strategy and technology. The business will be rebranded Reuters Events and will be operated as part of the Reuters News segment.
Share Repurchases
In October 2019, the Company announced plans to commence a new buyback program which will allow it to repurchase up to an additional $200 million of its common shares later this year and up to an additional $200 million of its common shares in 2020. The completion of this program will depend on factors such as market conditions, share price and other opportunities to invest capital for growth.
Page 64