Thomson Reuters Corp (TRI) 2002 Q1 法說會逐字稿

Ladies and Gentlemen, thank you for standing by, and welcome to the Thompson 1st quarter results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Instructions will be given at that time. If you should require assistance during the call, please press zero and then star and as a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mr. John Kachegen. Please go ahead.

Thank you, Lois. Good morning, everyone. My name is John Kachegen and on behalf of the Thompson Corporation, I would like to thank you for joining us this morning to discuss our results for the first quarter of 2002. All of you listening to our open conference call this morning and also our Webcast should have a copy of our 1st quarter earnings release and also the set of slides in support of them, but, if you don't, both the release and the slides are available now on TheThompson.com, our corporate Website. As always, a reminder that our regulatory filing, which will contain greater market group narrative than our press release and a full cash flow statement and interim balance sheet will be available on our website early next week. Before we begin our presentation, I would like to refer you to the Safe Harbor statement that is on the last page of the slide package. I'm not going to read the slide, but I do want to refer to it and make sure that you are aware of it. Our President and CEO Dick Harrington will start our program off with a few remarks about our anticipated offering in U.S. listing, CFO, Bob Velejo, will then take us through the financial results from Thompson and each market group ,and Ron Slosser, President and CEO of scientific and healthcare market groups, will also give us an update on what's happening in his businesses. Now it gives me great pleasure to introduce the President and CEO of the Thompson Corporation, Dick Harrington.

Good morning, everyone. I just want to welcome everyone to the call and to briefly discuss our latest news before Bob, Ron and John review the quarterly results with you. As you may know by now, this morning Thompson filed a prospectus with the regulatory authorities in the United States and Canada to offer our common shares to the public. In connection with the offering, we are also proposing to list on the New York Stock Exchange. We intend to complete the offering and listing in June. After a full road show. Now, given security regulations, I am limited in what I can say regarding this offering and listing. So I will not be taking any questions about the offering or the listing during the Q & A session. But I would like to offer a few thoughts on the subject before turning the call back to Bob to discuss the quarter. Most of you know that we have periodically reviewed our listing options in the United States and after careful consideration, we have decided that now is the right time for the listing. Our strategic transformation into a focused integrated information solutions provider is largely complete. The four core markets in which we operate are fundamental to economic development globally and have the potential for consistent long-term growth. We believe that as a result of our transformation, each of our market groups has sufficient scale and scope to compete effectively on a global basis and that we have greatly improved our ability to evolve and grow as a provider of integrated information solutions and generate strong financial results. We have planned to offer $1.3 to $1.5 billion U.S. dollars worth of shares depending on the exercise of the greenshoot through a combination of primary and secondary shares. Out of that amount, $500 million will be new shares issued by the Thompson Corporation and the balance will come from the sale of shares currently held by the Wood Bridge Company, the Thompson Family Holding Company. Thompson does not have any significant or urgent capital needs. We intend to use the proceeds from the primary offering for general corporate purposes and repayment of existing debt. Our major objectives to this offering are to increase liquidity for our common shares, establish a significant U.S. shareholder base and promote greater awareness of us in the United States capital markets. By selling some of its shares in this offering, Wood Bridge is facilitating our achievement of objectives while limiting the dilution of our shareholders. Wood Bridge has substantial net worth and does not need to raise funds by the sale of our common shares in this offering. Our heritage is Canadian, but our future is global and visibility of the Thompson Corporation within the U.S. will strengthen our ability to drive our growth. Thank you for your time and I will turn the call over to Bob now.

Thank you, Dick. Good morning, everybody. As is custom, I will now take you through the detailed financials. I'd like the start with a look at some highlights of the 1st quarter. By our measures we've had a solid 1st quarter given the continuing sluggish economy and we are on track to achieving our full year expectations for 2002 as we have articulated earlier this year. Thompson has adopted the CA equivalence of SASB 142 regarding the treatment of goodwill and intangibles. Our analysis of our recurring value compared to the fair value resulted in a pyramid charge of $67 million in the 1st quarter. This impunment relates to some businesses in Thompson Health Care. I would like to remind you that this represents less than 1% of the balance of our identifiable and tangibles and goodwill at the end of March 2002. We also expect to record an additional transition charge up to $100 million from this new standard in the second quarter related to some of our equity investments. Now there was no P&L affect as Canadian GAAP will allow entire amount of this transition adjustment in the 1st quarter and also the impairment of the minority investment second quarter to be charged directly to retained earnings. These charges will be charged to earnings under U.S. GAAP. Now in order to help you understand the implications of this, we have provided quarterly pro forma results for 2001 in our financial package and it should be available on the website. Like to talk a little bit, about our ongoing businesses. Strong revenue performance growth of 13% while EBITDA was flat for the first quarter. However, this performance developed in line with our expectations for the full year. If you strip out the affects of the businesses, we will show you that EBITDA developed quite well in the 1st quarter. It's important to remind everyone that due to seasonal cycles of many of our businesses and especially here in Learning, but it does pertain to all of them generally, our quarterly loss in the first quarter is not indicative of our full-year expectations. And year-over-year, EBITDA growth in the first quarter is not reflective of what we expect to achieve for the full year. Operating profit was down 7% from Q1 of last year as depreciation expense was $9 million or 8% higher. This is totally consistent with our guidance at our year-end meeting. We noted that we expected depreciation would be about 15% higher in 2002 due to a full year of [Hardcort] and shorter life technology related Cap-X. Now, next slide shows why we say our on-going operations developed positively in this quarter. Our grid on the line growth was missed somewhat by the following items: In corporate and other expenses we're $13 million higher for the quarter. The bulk of these are $11 million related to the increase - an increase due to higher costs associated with our share appreciation rights program which is totally expense. This is not operational in nature and is tied to the Thompson share price. As I stated earlier due to seasonal cycles of many of our businesses, 1st quarter loss are not indicative of our full year expectations. This is especially true in the academic side of the Learning business. Our losses in Learning in Q1 were compounded by including the [Hardcort] academic businesses for the first time. [Hardcort] provides significant scale in this academic sector which typically reports a Q1 loss. In addition to the [Hardcort] seasonal losses, our EBITDA was also included one time integration costs for [Hardcort] that are not reflected in the 2001 results, of which I will remind that we had estimated somewhere between 25 to $30 million, would impact 2002, and we have recorded nine of those in the 1st quarter. Early losses academic turn to profits in second half of the year and we have a much stronger base of operations in our learning business. That is why we're confident that we can expand EBITDA margins excluding these [Hardcort] runoffs. Moving on to a summary of our income statement. A loss from continuing operations of $34 million or 5 cents per share for the first quarter compared to earnings of $151 million or 24 cents per share a year ago. Besides it's effect on the EBITDA line, the inclusion of [Hardcort] assets resulted in higher net interests expense and amortization costs. Which would be $40 million. Results for 2001 included a one time gain of $273 million and this is primarily associated with the sale of the Global Mail last year. Amortization comparisons are affect by the adoption of the new accounting rules governing goodwill and identifiable intangibles and you can see the affect this had a on EPS on this next schedule. It's important to note that according to the first call, and this is a blatant product plug, according to first call consensus, our analyst expectations were for a loss of 7 cents in the quarter, so we did a little bit better than the consensus. Looking at our pro forma EPS, on this slide, we try to compare our per share earnings on a more apples-on-apples basis after adjusting for the new accounting rules which do reduce amortization as if they were in effect during 2001. Excluding these one-time items, there was a loss from continuing operations of $32 million or 5 cents per share for the first quarter of 2002 compared to a pro forma earnings of 1 penny for the same period a year ago. Over all acquisitions in the quarter were diluted by 7 cents this year. And, if you add back the 7 cents, and you add back what they impacted last year, which is a penny, then we have profit of about 2 cents in each of the periods. Slide 12 just shows some highlights of our financial position and there will be far greater detail in the regulatory filing. Should note that the decline in shareholder equity is due to the payment of dividends in common shares and the adoption of the new accounting rules which are charged through to equity and the small net loss in the quarter. Moving to cash flow, looking at the cash provided by operations single biggest movements there, on a year- to-year basis, are some higher taxes and interests expense. In terms of acquisitions in the 1st quarter of 2002, we made only three small tactical acquisitions; whereas, last year we acquired [Finelaw] and made investments in a number of learning adventures. The additions to [INAUDIBLE] equipment decrease reflects the large one time projects that were completed in 2001. Such as legal and regulatory groups businesses and implementation and the relocation of Thompson financial to its 195 Broadway headquarters. These results are in line meaning declining capital expenditures in line with our long-term objective regarding our overall capital efficiency. I'd now like to move on and discuss each of the market groups and their financial performance in the quarter. Starting with Thompson Legal and Regulatory. Revenues and EBITDA increased 7% for the 1st quarter. WestLaw On-line Services continued to grow globally. In the U.S., WestLaw revenues increased 8%, usage grew 38%. On-line revenue in Europe increased 60% with WestLaw UK Spain, Denmark and Sweden significantly exceeding our expectations. In expanding customer base, at Creative Solutions, our tax software business contributed to our 33% revenue growth in that business. Revenues from newly acquired companies also benefited our overall growth. [INAUDIBLE], which we acquired as part of the [Hardcort] acquisition, is a provider of bar exam review materials and courses that help to build relationship continuity from the law student to the practicing attorney. NewsEdge, a general news and information service, is on plan regarding its integration with dialogue. Now these positive performances were partly offset by the affect of unfavorable exchange rates. That's primarily due to the devaluation of the Peso in Argentina. A decline in dialogue revenue primarily as a result of the economy's impact on some of our key customers. And fewer global trademark searches year-overyear. Although I'm pleased to report that this market is showing some signs of recovery compared to the 4th quarter. Thompson Learning, our revenues increased 65%. And the year [INAUDIBLE] losses increased $2 million in the quarter and as I've said these losses are seasonal and not indicative of Thompson Learning's likely outcome for the full year. Now, [Hardcort] affected the 1st quarter performance. It also provided significant scale and revenues to the academic sector which typically reports a seasonal loss. Also provided substantial lifelong learning revenues. EBITDA in 2002 includes integration and other one-time costs of about $9 million, and approximately $4 million in seasonal losses that were not included in Q1 results. On a pro forma basis, that means adding back [Hardcort] to 2001 as if we had owned it, revenues increased 8% and EBITDA increased over 40%. I want to keep everyone in mind that these are small numbers but still they are quite significant in terms of what they indicate. They indicate good growth and improved efficiencies in higher education and our international sectors. And this is offset by continued weakness in the IT industry and the restructuring cost in the library and reference sector. Moving on to Thompson Financial. Perhaps of all of our groups, the financial environment remains the most difficult with fewer deals getting made and the industry is is still focused on cost cutting. This was reflected in the financials 1st quarter revenues but we are encouraged by the fact that we're still able to expand margins in such an environment. Revenues and investment banking and sales and trading market sectors were most affected by the slow down in the global market environment which continued into this 1st quarter. This was offset in part by strong revenue gains by [Ongio] or joint venture for global straight through post trade processing. Revenue comparisons should improve during remainder of the year compared to the prior year. Q4 2001 revenues were down 4% and in the 1st quarter we're down 2%. We believe this is our toughest quarterly comparison as we grew the core business last year by 9%. Now EBITDA margins improved 1 percentage point reflecting efficiencies from our leveraging and integrations. And there have been a great deal of work in this area going on and have been done within this weakening environment, but in fact, over the past 12 months this group has taken out $50 million of costs related to integrating Prime Mark and Grayson and we will continue to take costs out of the balance of 2002. We do have modest expectations for balance of the year in terms of growth for this business. Moving on to scientific and health care. Revenues grew 8% and EBITDA increased 18%. Higher revenue growth in the scientific sector both in patent subscriptions and strong growth in citation patenting genetic information helped fuel this while growth in drug information and subscriptions also added. Higher revenues and EBITDA from our fast growing continuing medical education sector is also reflected in these results. Revenues in EBITDA from recently acquired Gardner Caldwell which now positions TSH, as we refer to it, as a leading global provider in this vast growing sector. This performance is offset in part by lower revenues from our advertising sensitive primary care and specialty magazines. These were down approximately 7% from the same period last year. Prior year restructuring efforts in health care resulted in greater efficiencies in this segment. Moving on to corporate and other, you will recall a slide similar to this in our 2001 full year results. Included in corporate and other is the non-core media group. These are assets that we have previously identified {INAUDIBLE] divestiture. At Thompson Media, we did see a slight fall off in revenues in this quarter. They decreased by 11%. As a good portion of this revenue is advertising based. About 40% of the revenue is advertising based. However, we have reorganized the business. We've begun to see the benefits of leveraging and we've taken costs out. From a corporate expenses, I already mentioned that the large measure of these increases relate to Shadow Stock program that we have. I'd now like to turn this over to Ron Slosser.

Thank you, Bob. My first slide provides a snapshot of what my market group looks like today. Thompson Scientific and Health Care overview. We provide integrated information, services and solutions to researchers and other professionals in the health care, academic, scientific and government marketplaces. The group services more than 8 million customers in 130 countries and employs approximately 4,000 people. Scientific, we are a secondary information publisher providing comprehensive integrated information solutions enabling every aspect of the research process from discovery through product creation. Our primary revenue model is subscription. In healthcare, we are a provider of drug information, clinical information, continuing medical education and communication services to pharmaceutical companies, physicians, hospitals and managed care organizations. MedStatt is our healthcare decision support company providing database management software applications, market research and analysis to facilitate the purchase, administration and delivery of healthcare benefits. On the next slide, our marketing environment for 2002. Consolidation creates more sophisticated and demanding end users seeking multi- disciplinary data that can be integrated into their databases with a high need to get more product to market faster which increases their information needs. The pharmaceutical trends we see are in need for more market specific tools and content, greater emphasis on continuing medical education, CME, reduced health care magazine advertising spend this year. Technology remains a key differentiator requiring expanded functionality, integrated content applications and tools. On the next slide, we have our growth drivers. I will hold off discussing the first bullet because I believe that my next two slides address this quite well. $30 billion in U.S. drug company R&D spending in 2001 was a 19% increase over 2000. Pharmaceutical industries R&D percentage of sales increased from 11.9% in 1980 to 18.5% in 2001. $16 billion a year is spent on physician/drug, education and promotion and basic patent applications are increasing in excess of 10% per year. These are all positive growth drivers for our business. Our major initiatives for 2002 We will continue our expansion of drug and clinical information through new platform delivery and content expansion. We will seek expansion of CME franchises through folding acquisitions such as Physician's World and Gardner Caldwell. The web of science, you will see on the next slide what we are doing with one of Thompson's longest standing Web based product offerings. Einstein's Web of Science, the Web of Science provides a single point of entry for scientific researchers. It is our destination site. This electronic service extends our users access to research information by offering integrated collections of citation databases covering over 8,500 journals, reading patents and [INAUDIBLE] databases, meetings, conferences and other web sites selected by our educators. We are continuously enhancing the Web of Science. Our version 5.0 was released in January and includes many enhanced search capabilities, such as set combinations and advance complex line query searches. We have the opportunities to sell the entire Web of Knowledge, a new solution platform we came out with in the 1st quarter to the installed base of customers which will allow them to manage Thompson Scientific information plus third party linked information with their proprietary R&D projects around the world. This product has very good growth and expanding margins and in the last few years, we've seen 100% renewal rates. Some operating highlights for 2002. As Bob mentioned the health care restructuring efforts in 2001 have improved our margins. We have expanded the information we deliver to the doctors PDA's right at the patient's bedside. This is our point-of-care strategy. Willy Verlog] in April, on April 9 and Practice on April 24th are two good examples of how we are expanding our strong content information base within TSH. [WILLY] is a German patent information and integrated solutions company and Practice is a clinical information database company. Gardner Caldwell acquisition in December of last year and Physician's World acquired in August of 2000 combined with Thompson Health Care revenues are expected to reach $100 million for Thompson CME businesses this year. This is a fast growing global market and Thompson is best positioned to take advantage of this opportunity. I will now turn it back to Bob who will take us through the outlook for 2002.

Thanks, Ron. As I mentioned when I opened the discussions, revenues grew 13%. EBITDA was flat, but these have developed in-line with our expectations. And as we noted earlier, our full year expectations really are our long-term expectations. And they are that we will grow at high single-digit rates in terms of revenue and we will continues to expand our margins this year and this statement relates to our margins before one-time cost integration cost of [Hardcort]. We are on track to achieve these results in the year and over the longer term. Now I'm going to turn it back over to John.

Thanks, Bob. The last two slides in your package are for your reading. I'm not going to cover them but I do have a couple of remarks before we start the Q&A portion of our call today. I would like to remind you that our preliminary prospectus and registration statement concerning the offering are available on Edgar and Cedar for your review. And as Dick mentioned we are limited on as to what can be said regarding our offering process, so during the Q & A I'm going to have to ask you to please respect this restriction and limit your question to today's earning announcement when you raise them of Ron or Bob. Thank you, and now I will turn it over to Lois who will tell you how you can cue up to ask those questions.

Thank you. Ladies and Gentlemen, if you wish to ask a question, please press 1 on your touch tone phone. You will hear a tone indicating that you've been placed into cue and you may remove yourself from cue at any time by pressing the pound key. If you are using a speaker phone, please pick up your handset before pressing the number. One more moment for our first question.

Thank you, Lois. I'll lead off the Q & A session with a question that I'd like Bob to address. Bob can you tell us how organic revenues developed for Thompson in the 1st quarter?

Thanks, John. As we with talked about -- I'll talk about it from a whole company perspective. But as I cautioned earlier at the beginning of the year, we were challenged in talking about organic growth of how [Hardcort] is so embedded in our business today. So, I'm gonna couch these trends in looking at organic from a [Hardcort] pro forma perspective, meaning as I indicated to you that Thompson Learning had about 8% organic growth rate on a pro forma basis. On overall basis, the companies organic growth rates can be characterized in low-single digits and these included the decline that we reported in Thompson Financial. In a learning group it would be low single digits. In scientific and health care, it's low single digits but it's important to note that we look at our markets across our markets, we see really a broad range of performance where we have businesses that are performing at high single and indeed double digit performances. Such as, we reported WestLaw at 8%. WestLaw had 8% revenue growths. Within segments in scientific solid double digit performance and we've had markets also that are really still in the midst of a soft environment. In healthcare for example, magazine performance which was down about 7%. So our overall growth in low single digits reflects a real blend of being able to perform at above market rates in some of our key segments and also does reflect some of the realities of the weaker environment in which we operate. Now I probably will get this question later so I'll answer it now, -- what that would translate to in terms of EBITDA performance is around mid-single digit EBITDA growth as well. So these performances on a core basis -- we're pleased with them because they reflect the strength and diversity of our portfolio and certainly indicative in this environment of what the company can do in terms of its over all strength and capabilities.

John.

Thanks, Bob. Lois, We'll now take the first question on the call.

And our first question will come from the line of Douglas Arthur from Morgan Stanley. Please go ahead.

Yeah, You mentioned the press release. The first call analyst was real received - particularly well received in Asia and Europe. I'm wondering if you can you also comment on how it's going in the first-in the US and the integration cost savings. Obviously, were quite significant in the 1st quarter in financial. Can you sort of talk about how that is going to play out for the full year and how some of these new platforms are or are not leveraging that?

I do not have the specifies on first call in the US. I'll ask John. We'll take a note of that and we will get back to you on that. In terms of the over-all savings, we expect to see continued improvement throughout the balance of the year in Thompson Financial as these as this leveraging takes effect. What we -- I said we've taken out about $50 million - those have not fully worked their way through the run rate of the business. It is unfortunate that this kind of performance is being masked by flatter declining revenues and so we would expect that while we would see modest revenue gain on a year to year basis, flatter modest revenue gains that we will continue to see margin expansion through the balance of this year.

Our next question will come from the line of [INAUDIBLE] with Merrill Lynch. Please go ahead.

Thank you. A couple of quick ones and then I'd like to follow up. Can you quantify the percent of first quarter revenues that were subscription based in nature and then electronic revenues as a percent of the total?

Yes, Lorin. The subscription based revenues are running still about 60% of the total. And the reason - it's a little bit higher than that actually, that we don't look at it on a quarterly basis is because our overall subscription rates as a percentage of revenue are reflective of the higher education business and the higher education business is much larger in the second half of the year, so if I was to tell you, it was 65% as opposed to 60% that wouldn't be really indicative of what we expect for the full year. But it is in the 60 to 65% range. In terms of electronic revenues, again about 60 over 60% but that would apply as well the impact of academic performance. So it's about 60 and 60 in both cases.

Okay. And then I just want to, I guess, have you refresh our memory on why a couple of the businesses do have seasonality. Not the learning business, I understand that, but why the margins in the legal and regulatory and I believe, also the scientific and healthcare margins are smaller in the first quarter than they typically are for the year.

I think first of all, these is fixed cost businesses and many of them do have a seasonality to the back end of the year and second of all, in terms of some of the margins, as I've mentioned, we have had a few of our businesses that have suffered revenue declines and because you are a fixed cost business you do see some of that margin erosion. It's not a simple answer. But I would go back to that legal -- the learning business is a seasonal business and is the most seasonal but each one of our business, if you were to look at the building of revenues and the building of profits you would see margin growth in each quarter as we go forward so I'm not trying to be evasive. I hope that answers your question.

Our next question will come from the line of Andrew Mitchell from Social Capital Please go ahead.

Yeah, thanks and good morning. Just a couple of questions on financial and learning. On the financial side, it appears that you guys have continued to advance your market share with product introductions and the class selling you've been doing. When do you see yourself exhausting those gains and having to rely more on the core market growth and for Thompson Learning - just wondering on the corporate IT side, are you seeing any noticeable impacts in the forward-looking trends given an improved profit growth outlook?

Okay. I'll take the first one. First of all, we integrate our businesses the way we've talked about. We integrate them not for short-term gain but for long-term growth. And so we believe that in developing our database capabilities, developing our technology capabilities, that we will continue to provide new and innovative ways for our customers to help solve their problems, and so the answer to your question is a short one. Is that we do not anticipate or foresee a decline in our ability to generate organic growth above the market. That's what we focus on, that's what we drive to and we see that as a continual opportunity now and in the future. In terms of learning and lifelong learning in particular, there have been the information technology business [INAUDIBLE] segments has been significantly impacted in the past 12-15 months and that has been reflected in our business. We do see our ability of integrating our [Hardcort] capabilities and providing us with the ability to see some above market growth here. But we must remember that our ability to grow to a certain extent is limited by our customers and the market that we operate in. It's a bit softer here than academic but we are still encouraged by some of the things that we've seen in the 1st quarter.

Our next question comes from the line of Tim Casey from BMO [INAUDIBLE] Please go ahead.

Hi. Good morning. I've got a few questions.

Tim, we intend to issue it as a matter of fact in the filing that will be available shortly we will issue a GAAP reconciliation. We continue to rely on Canadian GAAP and in fact, the differences as you will see in the reconciliations, are getting smaller and smaller.

Our next question will come from the line of Stephanie [INAUDIBLE] of UBS Warburg. Please go ahead. STEPHANIE [INAUDIBLE]: Yes, thanks. Good morning. Couple questions. First off, could you update us where you are in terms of consolidating platforms across your various businesses? Another question. PLR's, you had a real strong revenue growth number for the first quarter, I think you pointed out a bit of impact from acquisitions. Can you quantify that at all or maybe just break out organic growth and finally, in terms of your longer-term revenue growth targets, of sort of 7-9% can you we assume that includes acquisitions? Tactical acquisitions, of course.

I'll answer the last one first. The 7-9% in our minds is over all organic growth rates and some small acquisitions might work their way in there because those are build or buy. Certainly wouldn't be the larger notable acquisitions that we talk about. The second one. I would like to ask Dick Harrington, who's sitting in with us to answer the question about consolidating platforms across the organization. Dick.

The biggest opportunity, [INAUDIBLE] is with Thompson Financial and they are right on schedule. I think, Pat [CHANNING], when he spoke one time, we started off with a close to 100 different platforms and we have them down close to 50 and we expect to have them down to 7 or 8 within another year. The platform consolidation, in the other areas are actually not necessarily complete but they are near the final stages. So we've made great progress on that.

In terms of core growth with NTOR, to give you a little bit finer - put a little finer edge on that, in our North American Legal Operations, it's about 3% growth, [INAUDIBLE] 6% growth in tax and in Europe in excess of 7%. We've had some declines, as I mentioned, in dialogue which has gone down about 10% year to year. And a trademark business was down 7% year to year.

Next question, Lois.

The next question will come from the line of Tim Casey with BMO [INAUDIBLE]. Please go ahead.

Hi. Thanks. Bob just back to the GAAP question. So will you be issuing U.S. GAAP financials or just reconciling.

We're gonna issue reconciliation. On a quarterly basis and on an annual basis.

Ok, thank you. You mentioned you were going to do $100 million write down in the 2nd quarter. Is that related to the -- your stake in [VELGLO] media.

It is related to our stake in [VELGLO] media and other equity investments that we have. It's not entirely [VELGLO] media.

We said up to $100 million - and we didn't say we were gonna take $100 million. We said up to $100 million. And the reason we said that was because the companies that we have investments are still evaluating.

Right, ok. Last one. Can you just confirm that the Thompson Financial numbers are more or less an apples-to- apples comparison.

They are absolutely apples- to-apples.

And the [Hardcort] integration costs, it was 9 in the quarter. Did I hear you right? It's about $30 million for the year. The one time?

Yes, we said a range of 25 to 30. We said, that the total of these costs would be about $80 million some of which were taken through the P&L, some of which were, through the segment, some of which were captured on the reorganization line. The $9 million we're talking about are part of what we said would go into the segment.

Thank you very much.

Our next question will come from the line of Randal [INAUDIBLE] please go ahead.

Thanks, in the financial group, can you characterize the performance of ILX as opposed to the maybe [INAUDIBLE] plus?

I wouldn't have the slightest idea how to do that. I know that ILX, is in the sales and training group, and we've seen some softness in that area is related, as I reported, but I wouldn't know how to compare it. I'm sorry I can't help you with that one.

On the [INAUDIBLE], on their conference call earlier this month, they stated that they were taking market share from ILX. Is that a fair characterization of what's happening or.

Oh, oh, no it is not. This is Dick Harrington. That is not a fair characterization of what's happening. ILX terminals are still in the growth stage. Any internal loss received was because of the economic downturn in the financial market.

Ok, terrific. And also wondering if you could give us any kind of sense as to what is happening in the corporate training sector of your business in terms of the revenue profile there.

Over all, in corporate training, corporate training segment is weak right now and our revenue performance on a year-to-year basis is certainly influenced by the integration of our businesses. We fully expect that we will see improvements here because we have yet to see the benefit of really leveraging these businesses and integrating them to offer and apprise solutions. And, I'm certain that we will be reporting some significant contracts with companies over the coming year that will demonstrate that we do have a strong position in this market space.

Our next question will come from the line of Tom Lawless, McDougall, McDougall and [INAUDIBLE]. Please go ahead.

Good morning and thank you. Most of my questions have been answered but could you comment in general terms at least, on the pricing environment by segment and market share.

Wow! Why this is Dick Harrington. I can give you an overall comment because when you talk about segments we have sub segments within the segments so we don't have enough time to go into all of them. But, I think on a general comment, most of of our products and services there is a minor pricing precious. If at all. It's when you get to, obviously, the financial area, there is some pricing pressures because of the condition of the business - I'm sorry - the condition of the industry as it stands now and there is some minor ones in legal regulatory. And we have a little bit -- and we have really virtually no pricing pressures in scientific and health care and very little in the learning group.

Our next question will come from the line of Andrea Huran with RBC Capital Markets. Please go ahead.

Thanks. You mentioned that you'd taken about $50 million of costs out of the financial group but it sounds as if there is still quite a bit more of room to go in terms of consolidating the platforms. Can you quantify the costs you still think you can get out of that division? And then with regards to the [Hardcort] integration, can you give us your expectations for how the balance of the integration charges are going to filter into the quarterly results?

I'll answer the first one. The last one first rather. It is our expectation that these costs are incurred as we complete the implementation that certainly through the 2nd quarter and we would expect by the 3rd quarter we would have most of this integration behind us, so that's how that would go. In terms of TF, I think that we have taken the bulk of the costs out. We haven't - they haven't all flowed through the run rate yet. We might be looking at another $5 or $10 million in improvement but all of that has not, as I said, worked through the run rate of the business yet.

Our next question comes from the line of William Bird with Smith Barney. Please go ahead.

I was wondering if you had any preliminary views on '03 capital spending and has there been any change in expectation on [Hardcort] synergies?

The answer to the last one, there is no change in our expectation of those synergies. In terms of 2003 capital, we had stated at our year-end conference that ,in fact, we thought 2002 would decline from about, I think it was about, almost 10% in 2001 to less than 8%. We would see a gradual continued decline in our capital as a percentage of revenues as we see more synergy and leveraging. It's not because we're going to invest less. It's going to be we continue to see greater efficiency in how we invest.

Our next question comes from the line of Vince [Valentinny]with [INAUDIBLE] Please go ahead.

Thanks very much. First question. The Shadow Stock plan. Is there any way you can quantify if the stock stayed around 53 Canadian, how much incremental cost you would have for the balance of the year?

I can't answer that directly. Can we find out? Vince, I can't answer that direct - I don't have that information. So we will find out and get back to you. We'll post it so everyone can know. There is cost. Even if it's stuck at where it would be, there would be incremental cost that occur as result of [INAUDIBLE]. So, It's a little bit of complex accounting. I'll get that and get back to you. It may be zero but I don't think it is.

Our next question comes from the line of Mark Bringly.

A question for Ron, actually. I wonder if you can talk about the competitive landscape in healthcare. Recently, both have talked about raising their gain in this segment and roll out more solutions point products. Are you seeing signs of that and where do you see the segment going?

I think we have the leading position in the hospital base market with Micro Medics. Two hospitals were all in the majority of 300 beds or larger. Hospitals in the USA, we're in all of the poison centers. The portion of [Hardcort] MD Consult which repurchased, are more on the library side so I think until they start to move into the hospital market we're in a strong position. Walters -- has been trying to come out with a product but we haven't seen that being visible in our marketplace so at this point between drug information and our growing clinical guidelines information we have a lead position there at this time.

Okay. Thanks and maybe just a follow-up for Bob. Have you got a view as yet this year to the -- of the college market and then where would you see yourselves relative to the market as a whole?

Over all market growth, I think I'm going to let Dick answer that. He might have a better handle on that.

It's somewhere around 4 to 5% for the year. And we expect to outgrow that number.

Our next question will come from Vince Valentinny.

Just a couple questions. One on amortization of goodwill issued $49 million was the amounts last year in Q1 that's not in this year. That's a good run rate so we should be looking at $200 million for the full year. Insurance rebates from September 11th and the fallout in New York. Any update off proceeds you might receive and when you might get those and lastly, if you can say sub-description renewals in your businesses across the board but more specifically in financial through the first four months of the year, is there any update on when contracts expire how many of your partnerships are being renewed?

Start with the last one in the sense that we did see a 2% revenue decline and a 4% decline before that. Manufacture of that is in prescriptions, the two biggest business, transaction business which are driven by view so those would be down and then we've had some subscription renewals. We haven't been losing customers in as much as people cut back in tough times on the level of service. In terms of proceeds from insurance, we've been taking the proceeds that we get for the direct out-of-pocket cost which I guess I think to date are about $7 million. As we take them in, we just offset them against the higher cost that we have associated with that. So that's not significant. The larger insurance claims really relate to business interest reps and those are from from being resolved. And receive not recorded any [INAUDIBLE] associated with that. We've taken all of the negatives in terms of loss revenues in [INAUDIBLE] of the P&L. The terms that we do receive a payment we would make that known. In terms of amortization of good will, we expect somewhere between 260 and $270 million on a full year basis and we previously advised that. And in terms of the earlier question in terms of Shadow stock, we don't expect it to stay at $53 for the full year.

Thank you, Bob.

That concludes our conference call today. And I would like to thank all of you who listened in to Dick and Bob and Ron very much for their participation. I'll now let the operator explain how the replay can be accessed.

This conference will be available for replay after 3:00 today through May 9th. You may access the system at any time by dialing 1-800-475-670 1 and entering the access code 634234.