Thomson Reuters Corp (TRI) 2007 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to The Thomson Corporation first-quarter 2007 earnings 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. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, the Vice President of Investor Relations, Mr. Frank Golden. Please go ahead.

Good morning and thank you for joining us. Those of you listening should have a copy of today's earnings release and related slides, which are posted on our website at Thomson.com.

Let me begin with a few points regarding today's release. This quarter marks the first time we are presenting the Company's financials in the five business segments structure. Recall that effective January 1, the Company was reorganized into five segments; Legal, Financial, Tax and Accounting, Scientific and Healthcare.

Let me also point out that three small healthcare businesses, which are being sold, have been added to discontinued operations this quarter. These businesses recorded revenue of $19 million last year; $3 million for the first quarter of 2006 and operating profit of $4 million for the full year 2006.

Dick Harrington, our President and CEO, will begin this morning by reviewing our results for the first quarter and updating you on the Company's priorities for 2007. Bob Daleo, our CFO, will then take us through the details of the quarterly results and we will the Company's financial metrics. Following Dick and Bob's presentations, we will open the call for questions and I do ask that you please limit yourself to one question each to enable us to get through as many questions as possible.

Now the following discussion contains forward-looking statements that relate to future results and events are based on Thomson's current expectations. Actual results may differ materially from those currently expected due to a number of risks and uncertainties discussed in the documents that we provide to the regulatory agencies.

This presentation also contains disclosures of certain non-GAAP financial measures. As required by regulatory rules, we have provided a reconciliation of each of these measures to the most directly comparable GAAP measure in the Investor Relations section of our website found at Thomson.com. Let me now introduce the President and CEO of The Thomson Corporation, Dick Harrington.

Good morning and thank you for joining us. I will begin this morning with a review of our results for the first quarter, which carried forward the positive momentum from 2006. I will then provide you with the progress reported on our priorities for 2007.

Before I review the first-quarter results, let me discuss what is driving our success. Given the solid first-quarter and full-year 2006 results, it is clear that our strategy is working and momentum is building. Workflow solutions are driving organic revenue growth. For example, Checkpoint, a workflow solution targeted to tax and accounting professionals, achieved organic growth of nearly 30%. What is particularly impressive is that this marks the 17th consecutive quarter that Checkpoint has grown by more than 15%.

And Westlaw, a workflow solution targeted to attorneys, achieved 9% organic growth on a revenue base of over $1 billion. This is equally impressive as this marks the eighth consecutive quarter that Westlaw's revenue growth exceeded 8%.

At the same time, our efficiency initiatives are taking hold. Operating margins in the businesses are rising as we reduce our cost base and increase effectiveness across the organization. And our strategy is driving strong operating results across all of our financial metrics.

Going forward, we are confident that our strong operating and financial position gives us leverage to capitalize on the opportunities that lie ahead.

Let me now turn to the first-quarter's financial highlights. We entered 2007 strongly positioned to drive growth in returns. After posting an 8% revenue increase in 2006, 6% being organic, we continued that momentum in the first quarter of this year.

Revenue for the quarter was up 10% excluding exchange and organic revenue growth was 6%. The Legal and Tax and Accounting businesses were the strongest performers though every segment contributed. Our workflow solutions continue to drive organic revenue growth. In fact, 85% of revenue was derived from electronic solutions software and services, which grew 12% in the first quarter.

Strong revenue growth and good flow-through in the businesses were the primary reasons for an 8% increase in operating profit. This is after accounting for $34 million of THOMSONplus cost. Excluding these costs from both periods, operating profit increased 20%. Adjusted earnings were also up solidly for the quarter, increasing 11%. Financially, we are off to a good start, but there is much more to be accomplished.

On our last earnings call, I outlined three priorities for 2007. Our first priority is to successfully complete the sale of Thomson Learning and invest the proceeds to drive shareholder value. The sales process for Learning is well underway and has attracted a high level of interest. We expect the dispositions to close in the third quarter.

Let me remind you that our decision to sell Learning was a strategic one based on the opportunities around our business model. Investing the proceeds from the sale of Learning is about opportunities and opportunities are driving the process. I want to emphasize that we are using a disciplined measured approach to investing the proceeds in opportunities that have business models similar to ours. As you have heard me say before, our investment strategy will focus on driving growth and creating value for shareholders.

Our second priority is to continue to increase organic revenue growth by building out new and existing workflow solutions. The 6% organic revenue growth we achieved this quarter confirms that we are on the right path.

Our third priority is to drive operational efficiency and effectiveness across the Company. We are making solid progress, which is reflected in margin improvement in the business units.

Let me conclude by saying I am very encouraged by our strong start for the year and we are looking forward to continuing the momentum. Our unified business model and focused strategy are delivering solid results while strengthening our market position. And our efficiency initiatives are facilitating higher margins and greater effectiveness across the Company. We have never had greater opportunity to solidify and expand our competitive position. And we have never been better equipped to capture that opportunity. Let me now introduce Bob Daleo.

Thank you, Dick and good morning, everyone. I want to echo Dick's comments regarding how we believe the solid start to the year sustained the momentum from 2006 and continues to validate our growth strategy. I will begin by reviewing the first-quarter consolidated results. Then I will discuss the results of our five business segments. I will then provide an update on corporate expenses in the THOMSONplus initiative. I will review some of our key performance metrics and I will close by providing an update on how we are tracking as compared to the 2007 outlook we provided on the last call.

Now let me begin with the consolidated financials. For continuing operations, first-quarter revenue growth was 11% -- 6% organic, 4% from acquisitions and 1% from foreign exchange. Operating profit was up 8% for the quarter, while the operating margin declined 40 basis points to 13.5%. However, as Dick has already noted, excluding $34 million of THOMSONplus costs in the quarter, and $7 million from the previous year period, the operating profit margin increased 130 basis points.

Now you will note throughout the presentation, there is a consistent theme of margin expansion across our business units resulting from revenue flow-through and savings associated with our various efficiency initiatives.

Let me also point out that even with the sale of Thomson Learning division, there is still some seasonality to our business. For example, for the last two years, about 23% of our revenue was generated in each of the first three quarters and about 30% in the fourth quarter. Likewise, about one-third of our profits occurred in the fourth quarter.

I will now discuss the first-quarter results for each of the business units -- business segments starting with Legal. Our Legal segment had another quarter of strong revenue and operating profit growth. Revenue grew 10%. 7% of this was organic, 1% came from acquisitions and 2% from exchange.

Online solutions software and services, which comprised nearly 70% of total revenue in the quarter, continued to drive growth, up 12% of which 10% was organic. Print revenue represented 31% of total revenue for the quarter and was up 2%. Operating profit increased 17% and the operating profit margin rose 160 basis points to 27.7%.

Now Thomson Financial had another solid quarter of revenue and operating profit growth. Revenue increased 8%. 4% was organic -- 2% from acquisitions and 2% from exchange. The core solutions businesses -- investment management, investment banking and corporate services -- achieved combined organic growth of 7% and Omgeo, TF's straight-through processing businesses, achieved double-digit growth.

The international operations, excluding the impact of exchange, performed well with Europe up 11% of which 5% was organic and Asia, up over 23% where 18% was organic. This performance reflected the success of new localized solutions and expanded operational capabilities in both of these markets. Now this includes a new Japanese language version of Thomson ONE Investment Management. And overall, we continue to migrate clients to Thomson ONE desktops, which are up over 20% from a year ago.

Now these gains were dampened somewhat for two reasons. First, fixed income grew only 2%, impacted by a 9% decline in treasury volumes and a 4% decline in US agency volumes versus a year ago. The lack of volatility and a flattened yield curve continued to negatively impact these trading volumes. Where market conditions are more favorable, trading volumes continued to rise such as in mortgage-backed securities, which were up 11%.

In the first quarter, TradeWeb launched its Asian operations now enabling seamless global trading on the platform for the first time. Retail wealth management was down slightly in the quarter due to difficult prior-year comparisons resulting from the discontinuation of a low-maintenance contract, which we referred to last year and also some declines in legacy desktops.

Operating profit for Thomson Financial grew 20% and the margin rose 180 basis points. During the quarter, Financial completed a series of changes that will streamline the organization for even greater efficiency. Among these changes is a continued expansion of the global workforce and today, over 30% of Thomson Financial's workforce supports 24/7 operations and are located in low-cost centers.

Tax and Accounting's revenue growth continues at a strong pace, up 13% for the quarter of which 9% was organic. Organic revenue growth is being driven by higher new sales and improved retention across each of its three segments -- research and guidance, professional software and services and corporate software and services.

Operating profit increased 27% and the margin rose over 250 basis points due to the strong revenue growth and the benefit of efficiency programs. The Tax and Accounting segment is a seasonal business with over one-third of its annual revenue and over 50% of its operating profit historically generated in the fourth quarter. However, the first-quarter results continued to reflect the strong position we have in the market and our very encouraging start to the year.

Scientific revenues were up 7% for the quarter -- 4% organic, 1% acquisition and 2% exchange. The information solutions businesses which comprise about 50% of Scientific's total revenue were up 14% and include Web of Science, Thomson Pharma and Corporate Solutions. Thomson Pharma continues to gain traction in the pharmaceutical market as we see good growth in customer and seat additions. The Web of Science had another strong quarter with double-digit growth and renewal rates continuing to exceed 95%.

These gains were somewhat offset by declines in legacy online and print products, which were down 9% for the quarter and these products comprised about 35% of the overall revenues. Operating profit increased 21% with the margin up 270 basis points.

Healthcare's revenue increased 42% in the first quarter, largely driven by acquisitions. Solution and other small acquisitions contributed 39% of the growth with the remaining 3% organic. The law of small numbers does apply when you calculate Healthcare's first-quarter results. For example, a $400,000 improvement in operating profit this quarter would have meant a 10% increase versus the prior year. This is a seasonal business with about 20% of the full-year revenues generated in each of the first three quarters and 40% in the last. Consequently, the first-quarter results are not reflective of what we expect for the full year.

The management decision support businesses saw good organic revenue growth, but were impacted by several contract cancellations. Clinical decision support revenue was essentially flat. Operating income was flat year-over-year as acquisition expenses offset moderate profit growth in the core businesses. We certainly expect profitability to increase as the year progresses.

Now let me discuss corporate costs. The organizational realignment implemented last year resulted in the elimination of some costs and the transfer of other costs to corporate that had previously been in the business units. These costs are related to functions such as data center network management, technology procurement, accounting finance and some administrative functions. In addition, a new office of the COO and an office of the Vice Chairman were established at corporate.

These changes gave rise to a $15 million increase in non-THOMSONplus related costs compared to a year ago. The $57 million of corporate costs for the quarter is a good run rate number for the full year. However, we expect that over time these corporate costs will decline as more savings are achieved from efficiency initiatives and the capabilities that our shared service centers ramp up.

THOMSONplus costs were $34 million, a $27 million increase from a year ago. Now about $10 million of these costs were accelerated from what we expected in the latter half of this year. THOMSONplus continues to be on track and to date, has resulted in approximately $50 million in annual run rate savings. We remain on track to generate total annual run rate savings of $150 million by year-end 2008.

And we are also making significant progress on related systems initiatives. By the end of the second quarter, three quarters of the Company as measured by revenue will be on the SAP system. This includes North American Legal, Tax and Accounting and Financial. This will provide us with greater transparency, flexibility and efficiencies. The remaining businesses will convert to SAP in the second half of the year.

Now let me turn to the quarterly metrics. We had strong growth across each of the segments with revenue up 11% in the quarter. On an organic basis, revenue increased by 6%, which was led by strong performances at Legal and Tax and Accounting. Electronic software and services, which comprised 85% of our revenue, an increase of 1% over a year ago and as mentioned previously, they grew 12% in the quarter. And finally, recurring revenue remained unchanged versus the prior year, finishing the quarter at about 84% of total revenues.

As outlined earlier, first-quarter operating margins saw a slight decline relative to 2006, but this was essentially due to negative impact of $34 million of THOMSONplus costs versus the $7 million a year ago and including THOMSONplus costs, the margin increased, as you can see, 530 basis points. Revenue growth and further efficiencies in the business units are driving margin expansion. We expect to realize additional leverage from our THOMSONplus program, which will enable us to continue to expand margins above the 20% range beginning next year.

In the first quarter, capital expenditures rose to 5.9% of revenues compared to 4.4% a year ago. With a full year 2007, we continue to expect run rate capital expenditures as (inaudible) revenue to be in the 6% to 7% range. However, as I discussed in our call in February, spending related to THOMSONplus initiatives and the expansion of our Eagan, Minnesota facility is expected to cost $[100] million over the next two years, bringing total capital spending to about 8% of revenue during the period. Over the long term, we continue to expect capital expenditures as a percentage of revenue to be in the 7% range.

Free cash flow growth was up 25% in the first quarter to $137 million. This number includes a -$52 million impact from discontinued operations compared to a $60 million negative impact in the prior period. It also factors in $25 million in THOMSONplus cash costs, originally $7 million in 2006.

Adjusting for these items, the year-over-year free cash flow growth is 21%. This growth comes in spite of the fact that CapEx costs increased to $32 million in the quarter and highlights the underlying strong cash performance of our businesses. I will remind you on a full-year basis that last year's $1.4 billion free cash flow figure included a bit over $300 million from the Learning division.

Earnings attributable to common shares were $223 million, representing a 67% increase over the prior period. Adjusted earnings were $145 million or 11% higher than last year. Significant adjustments in the quarter included removing the impact of tax benefits derived from recognition of some net operating losses and a tax credit from a change in the Australian tax law, the normalization of the tax rate, which we have been doing now for the past several years, and adjustments for discontinued operations, including Thomson Learning, and adjustments for taxes related to this division. Now, after adjusting for all these items, earnings per share rose 15% to $0.23 from $0.20 a year ago.

This morning, the Company announced that it will renew its share buyback program for another year, authorizing the purchase of up to 15 million of its common shares. Since the program was instituted in 2005, we have repurchased nearly 20 million common shares. And given the strong free cash flow generating capacity of the Company, in February, we announced a dividend increase in double digits for the second consecutive year.

As I've stated before, our capacity to return cash to shareholders is an outcome of our growth-oriented investment philosophy and not an alternative to it. We continue to focus on investing in our businesses for the long term to deliver both growth and returns.

And lastly, based on the strong first-quarter results, our 2007 outlook is unchanged from that provided in February. However, I would like to point out two metrics. First, as the business grows this year and THOMSONplus savings increase, we continue to expect to be at or above 2006 operating margin levels. Second, our effective tax rate of 15.6% in the quarter is lower than our full-year projected estimated rate of 20% and was actually slightly lower than our first-quarter rate last year. However, we continue to believe our full-year effective tax rate will be in the 20% range.

In conclusion, let me reiterate that we are pleased with the progress we have made in the first quarter and retain our belief that 2007 will be another strong year of operating performance at Thomson. Now I would like to turn the call back over to Frank.

Thanks very much, Bob. And now we would like to open the call for questions, so could we take the first question, please?

(OPERATOR INSTRUCTIONS). Karl Choi.

Hi, good morning. I just wonder if you can talk a little bit more about the Healthcare business. You mentioned some project cancellations at the management decision support business. Just wonder if you can shed a little bit more light on that?

The Healthcare cancellation -- there were a couple of contracts that canceled early both late last year in the quarter and early this year. One was a, which we did anticipate, was a large contract in California and two were more recent. They are in the Medstat business. And in spite of that, the business had organic growth that was close to 6% and Medstat has traditionally generated growth rates in the high single digits and we expect that, with the sales that we have now in line in the pipeline, that the business will get back on track to that kind of a growth rate.

Vince Valentini.

Yes, thanks very much. Two things on the Learning process. Is it expected that you will have just two buyers. One, for Prometric and one for the entire higher education business or are you looking at breaking this up and having multiple sales that you need to conclude by the end of the second quarter? And the second thing is just on the taxes to pay, is there any update there you can give us on how much tax you think you will incur and what your cost base is?

Vince, this is Dick. On the sale, yes, first of all, you have the -- it's really two processes. One is the higher education assets, which includes higher education, careers and our library reference group and the other one is Prometric and we would expect them to both be completed hopefully in the third quarter, probably at the beginning of the third quarter, but in the third quarter and the second question was the taxes.

Yes, I think we have said in the past, about somewhere between 10% and 15%. Is that about right?

Correct.

About 10% -- do you hear that, Vince? About 10% to 15% of the tax -- would be taxes on the sale.

I hear you, Bob. Just for clarity, 10% to 15% of the gross proceeds or that's a tax rate on the gain?

Of the gross proceeds.

Yes, okay. That's what I thought. Thank you.

Lisa Monaco.

Good morning. Just two quick questions. One, Bob, I am wondering if in Legal you could just elaborate on -- are there specific areas of where you are seeing the margin improvement? Then just on Scientific, I think you mentioned some softness in some online legacy products. Could you just elaborate on that? Thanks.

In terms of the margin improvement in Legal, it really -- there are, like I said, there are two things driving that. One is the good revenue growth and the second thing is the programs that we initiate across the Company to drive efficiencies. The North American Legal or West is the largest part of that business, so obviously they see the most significant improvements. But we have seen it across all the business segments, including international operations as well. So it really is a broad-based improvement. It is both isolated to any one particular area.

In terms of the legacy online -- was that question in relation to Scientific?

Yes, it is.

That is -- the legacy online is a business called Dialog, which is an aggregator and so our decline is very representative of the industry as these online aggregators tend to lose position to the direct desktop and we in fact are driving that ourselves. So it certainly is not unexpected to see that kind of decline, but our businesses also vend our products through Dialog as well. So it is very traditional.

Could I just add to that? This is Dick. It is not dissimilar to what happened at Legal and Regulatory five or six, seven years ago. As online was growing, print was declining. In this particular case, it happens to be aggregator online going to desktop capabilities and the difference -- the reason why it has the impact is because we haven't passed the tipping point yet, but hopefully we will get there within the next year or two.

Okay. And then just following up on Legal, Bob, can you tell us for the international operations, are margins below the segment's overall average?

Yes, they would be. It's a matter of scale. That's all it is.

Okay. Thank you.

Jeff Fan.

Yes, I was just wondering -- last year, at your investor day, we got to see a lot of new solutions that were either launched or about to be launched. Can you give us some update on some of those new products and how or whether they contributed to the organic growth this quarter and perhaps how much contribution they came in and the products I am referring to obviously -- I am not sure if you mentioned Litigator already, but perhaps some revenue numbers there. And then there are also other products like Medical Litigator, Transactor, etc. So I wanted to get your sense of how those contributed in the quarter. Thanks.

Yes, I think the -- if you go -- the Litigator for the quarter, Frank, do you recall what that was up?

(multiple speakers)

I was going to say it was up --

Well, Westlaw, overall was up 9% and the Westlaw --

Litigator suite was up 32%. The Litigator suite was up 32%, Jeff. That would include the Medical Litigator. However, that was just launched in February. Okay? So it would have minimal impact. I think on the Healthcare, obviously the big things are -- it is not only the launch of the product itself, it is also -- a lot of those were version 1, version 2, getting into version 3, getting into the more sophisticated versions. So Thomson Pharma had again double-digit growth.

The Web of Science as we continue to upgrade it had very strong growth. Actually all of them -- I think the key is they all had good growth because that is how they all arrived at that 12% organic growth. Some were higher like the Litigator at 38%. I am trying to think, just go through quickly. Thomson Financial and Thomson ONE continue to put out new versions of new ONE, Checkpoint with new versions of Checkpoint that drove that growth, which I mentioned, was about 29%.

I am trying to remember -- if I look at the Solutions business, say even the Solutions business and Healthcare was something like 14%. So all those businesses are really in the double-digit, high double-digit -- I'm sorry -- double-digit, but you know somewhere between that probably 10% to 30%. So they are all performing exactly as we expected.

But overall in general, you feel -- it sounds like there is a very high level of confidence regarding the new products that have been launched and certainly regarding the outlook?

Yes, we do.

Okay. Thanks.

Andrew Mitchell.

Thanks very much. Good morning. Two areas -- I am just interested first on the buyback. Have you negotiated any participation from Woodbridge and then secondly, a couple of questions on Financial. It appears that Reuters and Bloomberg have both been raising their prices over the past 12 months and I am just wondering if you can talk about how you are responding to that and whether that gives you any headroom on pricing or marketshare.

Then as a secondary point on Financial, can you provide any more color on the duration of the impact of the negative trends you were citing this quarter on the legacy workstation losses and also the fixed income comps? When do we get through the really tough volume comps? Thank you. I can repeat if you need.

You may have to. Was that one question with A, B, C, D, E, and F?

The first one is buyback, Woodbridge participating there or not.

Woodbridge has the right to participate as any other shareholder does and if they do, obviously they would have to file as such and to my knowledge, at this point, they have not chosen to participate.

Okay.

In terms of Financial, we have been raising prices along with our peers in the business in response to the strength of our products and the environment that our customers enjoy. So I think I have mentioned that we have had in Thomson ONE and many segments close to a 4% price increase that we have announced and secured to our customers, so we have enjoyed that.

In terms of the legacy products, this is in Financial as well. Those legacy products primarily represent the old ILX business, right, which is simply real-time data and that, first of all, is very much a commodity business and second of all, becomes less valuable and so we have seen, first of all, a significant transition from legacy to Thomson ONE and we have worked very hard at that ourselves. As a matter of fact, about over 70% of our Thomson ONE desktops today represent transition from legacy products.

However, there is just a case where some of them just go a way and that is a direct loss. Now these are very low margin to begin with, so while they certainly impact our revenue growth, as you can see from the profitability, they had a phenomenal impact on our operating margin. And I have to say I have lost questions Z. What was that?

My apologies. I was really interested in both cases on that particular front and also on TradeWeb, when you get past the tough year-over-year comps you are experiencing. So on the workstation losses on the ILX side, when you get past those comps, do you think we're going to be facing that kind of erosion on the revenue side and then on TradeWeb, when do you get past the really high volumes that you were seeing in the treasury market previously?

Well, I think we are down 10% year-to-year in volumes. We are down 30% from two years ago, so I guess the question is how deep is the bottom and that is a hard question to answer. So I think that really the strength of TradeWeb has always been to position itself in other areas and make up for that and indeed treasury used to be their largest volume business there and not any longer; mortgage-backed securities are. And as I have said, we have now allowed to have -- we have now expanded the platform to have Asian [trading]. And with this significant decline in our largest product based, still seeing a 2% overall organic growth.

So the business is fairly resilient. And I will remind you that it is also a very profitable business for us. So I can't say how long it will take to get past it, because what really matters is how far is it to the bottom and are we at the bottom now. And I really couldn't answer that question.

Okay. Thank you.

Andrew, let me just add one thing, which I mentioned before when I was talking about the -- kind of the Legacy online. I think if I go across our total business, if you take print and everything else, we are probably somewhere around maybe 20% of what you would call legacy products, right? And some are basically flat, growing a little or declining, and then there are others that are declining a little bit more rapidly. And those that are declining a little bit more rapidly, it is because we are basically transferring them over to a new product. But you always have a fringe market that doesn't transfer, and because we are not going to basically -- we do know not want to lower the price of the new products and services, we are willing to basically take maybe the low end and basically let that go a little bit, and really concentrate on the more highly valued customers and products and services.

So as a corporation, we are over the tipping point. What happens as you see within this -- even as you see in this quarter, although healthcare is small -- and, again, a few hundred grand could have changed it one way or the other. But if you look at it, legal regulatory is past that; tax and accounting is past that. Financial is probably right at that tipping point right there, where hopefully after this year it will be past it. And scientific and healthcare, basically maybe a 1.5 years to 2 years away.

But it is all a function of the balance in the (indiscernible) business and what portion would be, I would call, what we would call the electronic solutions, software and services, versus either print or legacy online or some other legacy product.

So in balance as an organization, we're past and that's why we can derive 6% organic growth rate and hopefully higher than that as we go forward. But when you look at unit by unit, each one is a different component, so something -- so I think the -- so your question was a very good question, but it is really the dynamics of the business model.

The good news is the business model we are going to is an excellent business model. The Company has been through it and we have just -- just need a little bit more time until Healthcare and Scientific and really Financial -- the tipping point moves to the positive side.

Thanks very much. That's excellent. Appreciate that color.

Fred Searby.

Hi, one question and then maybe a follow-up. But are you seeing more interest in Learning from strategic or private equity? I am sure you are looking at both. And then if you're not able to answer that, maybe I will sneak one in. Can you give us some context on these organic growth numbers you put out for the different businesses where you think of the major groups you are gaining marketshare just so we understand what the underlying industry growth is? Thank you.

Well, Fred, I'm glad you asked the second one because I am not going to answer the first one. We have interest in the marketplace from a variety of sources and I think if you are patient, like Dick said, later this quarter, early next quarter, we will be able to announce who that buyer is. And in terms of the organic growth -- (multiple speakers) I will let Dick answer that one.

When you do --

I mean for example Learning. You know it is a great number, tax is a great number. What do you think the underlying industry is growing so we can look at how much share you are picking up and obviously in Financial, it looks like you may be losing a little bit of share, but I just wanted to confirm your thoughts on the different business groups? Thanks.

First of all, we have a couple of -- you have to look at a couple different ways. One is you can look -- you can look at the industry, but then you have to look at the segments where we play. So if I look at the Legal industry and I look at the Tax, that whole kind of information, information services is probably growing at about 5% and if you look at some of the results, you'll see from (inaudible) what is happening is that what we have done as well as obviously our competitors, we have driven heavily into the online software and services area.

So that is where we are getting more growth into -- we have expanded the market, so we have been able to basically drive those -- growth in that market, which actually has given us more growth in I would say the traditional market, which was the information market. And so I think you have to look at each particular market that way.

I would say if you look at Legal between ourselves and LexisNexis, we're kind of out of the market, so it is kind of tough to say that the market is growing at -- we are both driving in the online marketplace and we feel we are doing extremely well there with the new products and services we are driving. So we think we are gaining some marketshare in there, but again each of us have different components even of the online thing. So you have to look at each one differently.

If you look at the financial market though, you have to look at it. We are really not in the big sales and trading. We are not in the institutional fixed income, institutional trading (inaudible). We are primarily [IM], investment banking, investment management, retail wealth and corporate. If you look at our investment management and investment banking now, we are growing at 7%, 8% range in that area, so we think that is probably slightly above market.

Hey, Dick, just following up what you were saying here a second ago on the Legal business. I am interested in what you are seeing in terms of competitive dynamics specifically in the Legal business and related to that, are you able to get meaningful pricing in that business or what percentage of revenue growth is price-related? Thanks.

Peter, I think, first of all, I think I would say the competitive environment is a normal competitive environment I think. I would like to think we are both intelligent competitors. We both have a slightly different twist on the business. We are really heavily in litigation, them a little bit more heavy in transaction. We are into a little bit more workflow solutions, kind of holistic for that marketplace, really looking at that marketplace and building it out.

LexisNexis is more about basically the information and moving into public records and other areas. So we both actually have a slightly different model. We do not have the exact same strategy, but I think it is a good market and we have got our particular share and there is no -- and it is a normal competitive market. There is nothing unusual going on in the market.

The second one was --

Pricing.

Oh, pricing. I think -- if you look at it, we are probably getting inflation pricing, but where we are really getting the bulk of the pricing is, to be honest with you, is the value that we are adding. So when you look at the Litigator and able to give them kind of a better workflow solution from the Litigator and then we look at the subsegment like medical, etc., as we look at subsegments. We have been able to actually I would say do more value pricing because the product and service offers them more and helps them do their job quicker, better, faster, more professional and that is probably where -- that is probably giving us the biggest benefit.

Tim Casey.

Thanks, good morning. Just a couple. Dick, or Bob, could you expand a bit on the comments you made about seasonality? I guess we have a good understanding of the seasonality at Thomson Financial, but could you differentiate between Thomson Learning and Tax and Accounting and Science versus Healthcare? And second, just if I can sneak one in, Dick, any updates you can provide us on your thoughts regarding a potential new leg for Thomson? You have mentioned insurance and engineering in the past as areas you have looked at. Any update on your thoughts there, please?

Well, I will answer first. No, we really don't have any updates on our thoughts. As we've said, as I said in my remarks, this is all about opportunities. We think there are some good opportunities out there and we will look at that from the -- and we want to make sure whatever we do, we are disciplined and that we basically drive and create shareholder value in the process. So that is the main -- that is still our main overall objective.

As far as the seasonality goes, Tim, when you think about Thomson Tax and Accounting, the most significant part of the accounting or the tax season really occurs -- at even accounting season occurs towards the end of the year and so that is when the products and services of that segment are most heavily used and sold and so that is why the revenue tends to migrate and that probably is the most significant of the five segments that we have that has impact in the fourth quarter.

The other businesses in terms of healthcare, one of the factors there is the Physicians Desk Reference, which is today our largest single print product and that is released in the fourth quarter. And that has revenue perhaps associated with it. And just like in Financial, all these businesses and indeed business in general seems to have a tendency to gravitate for our types of services towards the end of the year whether people tend to renew their products at that time, whether they look at their spending patterns and say, gee, I have some extra funds available, so maybe I will buy some additional products and things like that. It is just that it's a general trend. But the most significant items are the ones I talked about, the accounting for the tax side in Tax and Accounting and the PDR, which is in the fourth quarter.

William Bird.

Yes, do you still expect to spend about $100 million in investment on THOMSONplus this year and would you expect the balance of the spending to be pretty evenly spread this year? Thanks.

The answer to both those questions is yes. Now there may be some timing differences a little bit, but like we have seen in this quarter, but the answer is yes. We should hit around $100 million and we should be spread pretty evenly throughout the balance of the year.

Michael Meltz.

Thank you. Bill stole my question there, but related to that, is there -- can you isolate the savings that you had at the business segment from THOMSONplus in the quarter? Then kind of related to that as well, understanding that Q1 is seasonally small for all the business segments in terms of EBITDA performance, can you just talk about the extent of margin drive you are expecting out of the segment for the rest of the year? Are you expecting that 100 plus basis point improvement at all the business segments to persist?

In terms of the savings in the quarter, the actual savings that were produced at THOMSONplus were about probably less than $10 million. So if you just annualize that, you'd say that is about $40 million and we actually implemented things throughout the quarter so we didn't see the full impact. That is why we are saying now we are at a run rate that is $50 million.

In terms of the margins for the year, I really couldn't tell you specifically what the impact of -- 270 basis point improvement in the first quarter, what does that mean for the full year? I wouldn't want to go into that yet, but I would tell you that what we see in the quarter in terms of the expansion across each of the segments, we would expect to see continued expansions in the coming quarters ahead, but I wouldn't give you any specifics. Just as I would say that we expect to see some higher costs in corporate in the quarters ahead. Net-net though, I think a good way to look at it is look at the Corporation as a whole and net-net, you will see margin expansion for the Corporation occur in each quarter excluding the impact of the THOMSONplus costs.

We have no further questions. Please continue.

Thanks very much. That concludes our call. We would like to thank you for joining us and if you have any follow-ups, feel free to contact me. Thank you.

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