Thomson Reports Third-Quarter 2007 Results



    
    Revenues increase 11%; organic revenue up 6%

    Diluted EPS increases to $4.61 from $0.65 primarily due to one-time gain

    Proposed Reuters acquisition progressing

    (All amounts are in U.S. dollars)
    

    STAMFORD, Conn., Oct. 25 /CNW/ -- The Thomson Corporation (NYSE:   TOC;
TSX: TOC), a leading provider of information solutions to business and
professional customers worldwide, today reported that revenues for the third
quarter of 2007 increased 11% to $1.8 billion, and operating profit declined
1% to $312 million.  The decline in operating profit was due to $53 million of
expenses related to the Reuters acquisition and a series of efficiency
initiatives (THOMSONplus) and a $13 million charge related to an anticipated
legal settlement.  Operating profit was up 16% before these costs. Diluted
earnings per share increased to $4.61 in the third quarter, from $0.65 in the
year-ago period, primarily driven by the gain from the sale of Thomson
Learning's higher education, careers and library reference assets in July.
    
    (Logo:  http://www.newscom.com/cgi-bin/prnh/20020227/NYW014LOGO )
    
    "Building on a successful first half of the year, our business continued
to demonstrate strong momentum in the quarter," said Richard J. Harrington,
Thomson President and Chief Executive Officer. "Organic revenue was up 6%,
with each of our business segments experiencing solid growth in profitability.
While our overall operating profit was down slightly due to some special
items, underlying profit continued to grow at a double-digit rate and the
related operating margins expanded nicely."
    "Our business remains robust, with strong, sustained demand from our
customers for our essential workflow solutions," said Mr. Harrington. "About
80% of our revenues in the quarter were derived from electronic solutions,
software and services that grew at a double-digit rate.  We have a large base
of loyal customers who generally subscribe to our services anywhere from one
to five years, leading to recurring revenues of more than 80%.  These revenue
dynamics are fundamental to our business model."
    "We also continue to make progress related to our proposed acquisition of
Reuters and believe it will enable Thomson to best capitalize on long-term
trends in the marketplace," said Mr. Harrington. "Combined, Thomson-Reuters
will be able to effectively address business and financial customers' growing
demand for broader, faster and more integrated information and solutions.  Our
respective businesses are extremely complementary, with little overlap in
either geographic presence or product offering.  Together, we will have a
global footprint with strong brands in North America, Europe and Asia.  We
believe the transaction will enhance competition and our customers continue to
provide us with positive feedback on the benefits and value of bringing
Thomson and Reuters together."

    
    Consolidated Third-Quarter Financial Highlights
    -- Revenues increased 11% to $1.8 billion, led by strong growth in the
       Legal, Tax & Accounting, Scientific and Financial business segments.
       Organic revenue growth was 6%.
    -- Operating profit decreased 1% to $312 million. Operating profit margin
       was 17.3% compared with 19.4% in the prior-year period.  The decline
       was due to $29 million of Reuters transaction-related costs, $24
       million of THOMSONplus-related investments and a $13 million charge
       related to an anticipated legal settlement.  Excluding the Reuters
       transaction-related costs, THOMSONplus investments and the legal
       settlement, operating profit increased 16% and operating profit margin
       increased 80 basis points over the prior year, to 21.0%.
    -- Earnings attributable to common shares were $3.0 billion, or $4.61
       diluted earnings per share, compared to $418 million, or $0.65 diluted
       earnings per share, in the third quarter of 2006.  Earnings in the
       third quarter of 2007 included $2.7 billion related to discontinued
       operations, net of tax, primarily related to the gain from the sale of
       Thomson Learning's higher education assets.   After adjusting for
       discontinued operations as well as costs related to the proposed
       Reuters transaction, other income, tax benefits and the normalization
       of the tax rate, earnings were $310 million, or $0.48 per share,
       compared to $199 million, or $0.31 per share, in the third quarter of
       2006.  Earnings also benefited from interest income realized from the
       proceeds of the Thomson Learning higher education assets.
    -- Net cash provided by operations was $427 million, compared to $633
       million in the third quarter of 2006.  Free cash flow was $275 million,
       compared to $461 million a year ago.  The change primarily reflected
       the composition of businesses in discontinued operations and costs
       associated with their disposition.
    

    
    Third-Quarter Operational Highlights
    -- In July, Thomson received proceeds of approximately $7.6 billion from
       the closing of the previously announced sale of Thomson Learning's
       higher education, careers and library reference assets and Nelson
       Canada.
    -- In July, Thomson also announced it had agreed to sell its Prometric
       business to Educational Testing Service (ETS) for approximately $435
       million.  The sale closed on October 12.
    -- Earlier this month, Thomson Financial announced plans to form a long-
       term, strategic partnership with nine global dealers to further expand
       electronic trading using the TradeWeb platform. Under the terms of the
       agreement, the dealers will invest approximately $180 million to
       purchase a 15% stake in TradeWeb's established markets. Thomson and the
       dealers also agreed to fund additional investment in asset class
       expansion. The transaction is expected to close in the next few months.
    -- Thomson continued to drive operational efficiency through a series of
       initiatives (THOMSONplus), which achieved annualized run-rate savings
       of $85 million at the end of the third quarter of 2007. THOMSONplus is
       ahead of schedule. As a result, the company expects to spend $130
       million in 2007, $30 million more than originally estimated. However,
       the aggregate amount expected to be spent on the program will remain
       unchanged at $250 million. Most importantly, Thomson now expects to
       achieve its annualized run-rate savings target of $150 million by the
       middle of next year, six months ahead of its original schedule.
    

    
    Third-Quarter Business Segment Highlights
    Legal
    -- Revenues increased 11% to $856 million.  Organic revenue growth was 8%,
       acquisitions added 1%, and foreign exchange contributed 2%.
    -- Organic revenue was driven by strong online growth led by Westlaw's 9%
       revenue increase, including solid contributions from Westlaw Litigator
       and ResultsPlus and solid growth across all customer segments.
       Revenues from the segment's international online legal business grew at
       a double-digit rate.  FindLaw's revenue grew 30% driven by strong
       revenue increases in the software and services business due to new
       sales, new product introductions and improved retention.  Print and CD
       related revenues increased 4%, in part due to some timing in shipments.
    -- Segment operating profit grew 6% to $274 million, aided by strong
       revenue growth and efficiency projects.  The related margin decreased
       170 basis points, to 32.0%, due primarily to an anticipated legal
       settlement of $13 million recorded in the quarter.
    

    
    Financial
    -- Revenues grew 7% to $544 million.  Organic revenue growth was 5% and
       foreign exchange added 2%.
    -- Organic revenue growth was driven by Investment Management, Omgeo,
       Enterprise Solutions, Corporate Services and Investment Banking.
       Investment Management growth was driven by Thomson ONE as well as
       continued demand for Thomson Quantitative Analytics, StreetEvents and
       Datafeeds.  Business in Europe and Asia continued to experience strong
       double-digit revenue growth in the quarter.
    -- Segment operating profit grew 21% to $117 million, and the related
       margin increased 240 basis points to 21.5%, aided by solid revenue
       growth, efficiency initiatives and operating leverage.
    

    
    Tax & Accounting
    -- Revenues increased 19% to $142 million.  Organic revenues grew 10%, and
       growth from acquisitions was 9%.  The revenue growth reflected the
       acquisition of CrossBorder Solutions, eProperty Tax and Deloitte Sales
       & Use Tax which have expanded Tax & Accounting's presence in the
       corporate tax market.
    -- Organic revenue growth in the quarter was attributable to strong
       performances from Checkpoint and core software products targeted to
       accountants and corporations as a result of strong new sales and high
       retention rates, as well as higher transactional revenue.
    -- Segment operating profit grew 24% to $26 million as a result of the
       flow-through from strong revenue performance and efficiency
       initiatives.  Operating profit margin grew by 70 basis points to 18.3%.
    -- It should be noted that a significant portion of this segment's
       revenues and operating profits have historically been generated in the
       fourth quarter.
    

    
    Scientific
    -- Revenues grew 8% to $160 million.  Organic revenues contributed 5%,
       acquisitions added 1%, and foreign exchange added an additional 2%.
    -- Strong performances from Scientific's information solutions and
       services, including ISI Web of Knowledge, Web of Science and solutions
       targeted to corporate customers, continued to drive growth in the
       quarter. Software solutions also contributed to Scientific's growth in
       the quarter.  However, revenue growth was partially offset by declines
       in legacy online and print products.
    -- Segment operating profit grew 8% to $41 million, and the related margin
       of 25.6% was essentially flat compared to the prior year.
    

    
    Healthcare
    -- Revenues increased 26% to $102 million.  Revenues from acquisitions
       contributed 30% in the quarter, offset by a 4% decline in organic
       revenues primarily due to timing of the shipping of an annual PDR
       supplement in the second quarter of 2007 that was distributed last year
       in the third quarter.  Revenue growth continued to be driven by
       Solucient, which further strengthened Thomson's management decision
       support products for healthcare providers.
    -- Segment operating profit increased 50% to $15 million, with operating
       profit margin increasing 240 basis points, to 14.7%.
    -- It should be noted that a significant portion of this segment's
       revenues and operating profits have historically been generated in the
       fourth quarter.
    Corporate and Other
    
    Corporate and Other expenses in the third quarter of 2007 were $95
million, a $43 million increase compared to $52 million in the prior-year
period.  The increase was primarily due to $29 million of costs related to the
proposed Reuters transaction and an $11 million increase in investments in
THOMSONplus-related initiatives to $24 million, from $13 million a year ago.
    
    Discontinued Operations
    
    The gain on the sale of the former Thomson Learning businesses accounted
for the majority of results in Discontinued Operations.

    
    Consolidated Financial Highlights for Nine-Months 2007
    -- Revenues increased 11%, to $5.3 billion, driven by 6% organic growth.
    -- Operating profit increased 7%, to $893 million, driven by solid
       improvements in all business segments. Excluding Reuters transaction-
       related costs, THOMSONplus investments and the legal settlement,
       operating profit increased 19% and the related margin improved 130
       basis points to 19.4%.
    -- Earnings attributable to common shares were $3.6 billion, or $5.53
       diluted earnings per share, for the nine months of 2007, compared with
       $725 million, or $1.12 diluted earnings per share, in the prior-year
       period.  Earnings included $2.8 billion, net of tax, for results of
       discontinued operations, primarily representing the gain from the sale
       of Thomson Learning's higher education, careers and library reference
       assets and Nelson Canada.  After adjusting for discontinued operations,
       as well as costs related to the proposed Reuters transaction, other
       income, tax benefits and the normalization of the tax rate, earnings
       were $709 million, or $1.10 per share, compared to $540 million, or
       $0.84 per share, for the nine months of 2006.
    -- Net cash provided by operations was $1.2 billion, compared to $1.3
       billion in the previous year period. Free cash flow was $638 million,
       versus $886 million for the first nine months of 2006.   The change
       primarily reflected the composition of businesses in discontinued
       operations and costs associated with their disposition.
    Status of Proposed Acquisition of Reuters Group PLC
    
    Thomson's proposed acquisition of Reuters Group PLC is progressing.  The
combined business, to be named Thomson-Reuters, will create a global leader in
electronic information services, trading systems and news.  The transaction is
currently being reviewed by the European Commission, the U.S. Department of
Justice, the Canadian Competition Bureau and other regulatory authorities.
Thomson and Reuters recently provided a regulatory update on October 8, 2007.
    "We continue to hold productive discussions with regulators, and we
remain hopeful that we can work with them to expedite the process and complete
the transaction in or around the first quarter of 2008," said Mr. Harrington.
    
    Dividend
    
    The Board of Directors declared a quarterly dividend of $0.245 per common
share payable on December 17, 2007 to holders of record as of November 21,
2007.
    
    Business Outlook
    
    The following represents the company's current business outlook for full-
year 2007.

    
    -- Revenue growth is expected to be at the high end of the company's long-
       term target range of 7%-9%, prior to the deployment of the proceeds
       from the sale of Thomson Learning and excluding the impact of currency
       translation.
    -- Operating profit margin is expected to be at or above 2006 levels,
       despite increasing investments in efficiency initiatives and excluding
       the impact of costs related to the proposed acquisition of Reuters
       Group PLC.
    -- Cash generated by continuing operations is expected to grow, excluding
       cash generated through deployment of the Thomson Learning sale
       proceeds.
    
    The primary change to Thomson's 2007 outlook, from that communicated on
February 8, 2007, is to exclude the expected impact of Reuters-related costs
on operating profit margin. The company's proposed acquisition of Reuters was
announced in May 2007.
    As required by UK disclosure requirements associated with providing
profit-related forecasts at this time, the bases and assumptions for the
preparation of the company's revenue and operating profit margin outlook are
appended to this news release, along with related letters from
PricewaterhouseCoopers LLP, Perella Weinberg Partners UK LLP and Bear, Stearns
& Co. Inc.
    
    The Thomson Corporation
    
    The Thomson Corporation (www.thomson.com) is a global leader in providing
essential electronic workflow solutions to business and professional
customers.  With operational headquarters in Stamford, Conn., Thomson provides
value-added information, software tools and applications to professionals in
the fields of law, tax, accounting, financial services, scientific research
and healthcare.  The Corporation's common shares are listed on the New York
and Toronto stock exchanges (NYSE:   TOC; TSX: TOC).
    The Thomson Corporation will webcast a discussion of third-quarter
results beginning at 8:30 am ET today.  To participate in the webcast, please
visit www.thomson.com and click the "Investor Relations" link located at the
top of the page.
    The Corporation's financial statements are prepared in accordance with
Canadian generally accepted accounting principles (GAAP) and are reported in
U.S. dollars.  When applicable, prior periods are restated for discontinued
operations.
    This news release includes certain non-GAAP financial measures, such as
adjusted earnings from continuing operations and free cash flow.  We use these
non-GAAP financial measures as supplemental indicators of our operating
performance and financial position.  These measures do not have any
standardized meanings prescribed by GAAP and therefore are unlikely to be
comparable to the calculation of similar measures used by other companies, and
should not be viewed as alternatives to measures of financial performance
calculated in accordance with GAAP.  Reconciliations of these non-GAAP
financial measures to the most directly comparable GAAP measures are set forth
in the following tables.
    
    CAUTIONARY NOTE CONCERNING FACTORS THAT MAY AFFECT FUTURE RESULTS
    
    This news release, in particular the discussion of the proposed
acquisition of Reuters and the section under the heading "Business Outlook"
includes forward-looking statements, such as the Corporation's beliefs and
expectations regarding its financial performance in 2007.  These statements
are based on certain assumptions and reflect the Corporation's current
expectations.  Forward-looking statements also include statements about the
Corporation's beliefs and expectations related to its anticipated run-rate
savings and costs related to THOMSONplus as well as the timing for the
program, its beliefs that the proposed acquisition of Reuters will position
Thomson to best capitalize on long-term trends in the marketplace and that the
combined business will be able to effectively address customers' growing
demands for integrated information and solutions, and that its recently
announced partnership with the global dealers will expand electronic trading
using TradeWeb.  While Thomson believes that the proposed transaction with
Reuters will be approved by antitrust/competition authorities, there can be no
assurance that required approvals will be obtained, how long it will take to
obtain such approvals or what conditions, if any, such authorities may impose.
All forward-looking statements in this news release are subject to a number of
risks and uncertainties that could cause actual results or events to differ
materially from current expectations.  These risks and uncertainties include
the failure of Reuters shareholders to approve the proposed transaction; the
effect of regulatory conditions, if any, imposed by regulatory authorities;
the reaction of Thomson's and Reuters' customers, employees and suppliers to
the proposed transaction; the ability to promptly and effectively integrate
the businesses of Thomson and Reuters after the transaction closes; and the
diversion of management time on transaction-related issues. Some of the other
factors that could cause actual results or events to differ materially from
current expectations are actions of competitors; failure to fully derive
anticipated benefits from acquisitions and divestitures; failure to develop
additional products and services to meet customers' needs, attract new
customers or expand into new geographic markets; and changes in the general
economy.  Additional factors are discussed in the Corporation's materials
filed with the securities regulatory authorities in Canada and the United
States from time to time, including the Corporation's latest annual
information form, which is also contained in its most recently filed annual
report on Form 40-F.  In preparing its Business Outlook, the Corporation's
material assumptions were that (i) there will be no change to existing
prevailing worldwide macroeconomic conditions through the end of 2007 relative
to 2006; (ii) there will be no material adverse events which will have a
significant impact on Thomson's financial results; (iii) a portion of
Thomson's anticipated 2007 revenue growth will come from tactical acquisitions
made during the year; (iv) the Business Outlook reflects the continuing
operations of Thomson's business as of September 30, 2007; (v) the Business
Outlook includes investments associated with Thomson's various efficiency
initiatives, including THOMSONplus; and (vi) the Business Outlook excludes
costs related to the Reuters transaction. The Business Outlook has been
calculated excluding the impact of currency translation. The Corporation
disclaims any intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise, other than as required by law.
    
    ADDITIONAL INFORMATION
    
    Each of PricewaterhouseCoopers LLP, Perella Weinberg Partners UK LLP and
Bear, Stearns & Co. Inc. has given and has not withdrawn its written consent
to (i) the issue of this news release with the inclusion of its letter
appended to this release and (ii) the reference to its name in the form and
context in which it is included in this news release.
    Statements that relate to potential earnings enhancements in this news
release should not be interpreted to mean that earnings per share will
necessarily be greater than those for the relevant preceding financial period.
    This document does not constitute an offer for sale of any securities or
an offer or an invitation to purchase any such securities.  Following
satisfaction or waiver of the pre-conditions to the proposed Reuters
transaction, documents relating to the proposed transaction will be furnished
to or filed with the SEC.  Shareholders are urged to read such documents
regarding the proposed transaction if and when they become available, because
they will contain important information. Shareholders will be able to obtain
free copies of these documents, as well as other filings containing
information about the companies, without charge, at the SEC's website at
www.sec.gov, at the Canadian securities regulatory authorities' website at
www.sedar.com and from Thomson.  These documents will also be available for
inspection and copying at the public reference room maintained by the SEC at
100 F Street, N.E., Washington, D.C. 20549, United States.  For further
information about the public reference room, call the SEC at +1 800-732-0330.

    
    Media Contact:
    Fred Hawrysh
    Global Director, External Communications
    (203) 539-8314
    fred.hawrysh@thomson.com
    

    
    Investor Contact:
    Frank J. Golden
    Vice President, Investor Relations
    (203) 539-8470
    frank.golden@thomson.com
    




    
                      Consolidated Statement of Earnings
           (millions of U.S. dollars, except per common share data)
                                 (unaudited)
    

    
                            Three Months Ended         Nine Months Ended
                            ------------------         -----------------
                               September 30,             September 30,
                               -------------             -------------
                             2007         2006         2007         2006
                             ----         ----         ----         ----
    Revenues                 1,801        1,622        5,278        4,756
    Cost of sales, selling,
     marketing, general and
     administrative
     expenses              (1,307)      (1,141)      (3,848)      (3,425)
    Depreciation             (116)        (108)        (348)        (322)
    Amortization              (66)         (59)        (189)        (178)
                           -------      -------      -------      -------
    Operating profit           312          314          893          831
    Net other (expense) income (6)          (5)            6           36
    Net interest income
     (expense) and other
     financing costs            40         (60)         (64)        (168)
    Income taxes              (31)         (42)         (46)         (89)
                           -------      -------      -------      -------
    Earnings from continuing
     operations                315          207          789          610
    Earnings from discontinued
     operations, net of tax  2,654          212        2,781          119
                           -------      -------      -------      -------
    Net earnings             2,969          419        3,570          729
    Dividends declared on
     preference shares         (1)          (1)          (4)          (4)
                           -------      -------      -------      -------
    Earnings attributable to
     common shares           2,968          418        3,566          725
    

    
    Basic earnings per
     common share            $4.63        $0.65        $5.56        $1.12
                           =======      =======      =======      =======
    

    
    Diluted earnings per
     common share            $4.61        $0.65        $5.53        $1.12
                           =======      =======      =======      =======
    

    
    Basic weighted
     average common
     shares            641,285,936  642,384,089  641,078,123  645,000,569
                       ===========  ===========  ===========  ===========
    Diluted weighted
     average common
     shares            644,471,731  644,419,186  644,289,469  646,734,711
                       ===========  ===========  ===========  ===========
    



    
         Reconciliation of Earnings Attributable to Common Shares to
               Adjusted Earnings from Continuing Operations(1)
           (millions of U.S. dollars, except per common share data)
                                 (unaudited)
    

    
                                    Three Months              Nine Months
                                    ------------              -----------
                                       Ended                     Ended
                                       -----                     -----
                                   September 30,             September 30,
                                   -------------             -------------
                                 2007         2006         2007         2006
                                 ----         ----         ----         ----
    Earnings attributable to
     common shares              2,968          418        3,566          725
    Adjustments:
     One-time items:
      Net other (income) expense    6            5          (6)         (36)
      Reuters transaction costs    29            -           31            -
      Tax on above item           (7)            -          (8)          (1)
      Tax benefits               (12)         (10)         (61)         (21)
     Interim period effective
      tax rate normalization(2)  (20)          (2)         (32)          (8)
    Discontinued operations   (2,654)        (212)      (2,781)        (119)
                              -------      -------      -------      -------
    Adjusted earnings from
     continuing operations        310          199          709          540
                              =======      =======      =======      =======
    Adjusted diluted earnings
     per common share from
     continuing operations      $0.48        $0.31        $1.10        $0.84
                              =======      =======      =======      =======
    

    
    Notes
    (1) Adjusted earnings from continuing operations and adjusted earnings per
        common share from continuing operations are earnings attributable to
        common shares and per share amounts after adjusting for non-recurring
        items, discontinued operations, and other items affecting
        comparability.  Thomson uses these measures to assist in comparisons
        from one period to another.  Adjusted earnings per common share from
        continuing operations do not represent actual earnings per share
        attributable to shareholders.
    (2) Adjustment to reflect income taxes based on the estimated full-year
        effective tax rate of the consolidated group.  Reported earnings for
        interim periods reflect income taxes based on estimated effective tax
        rates of each of the group's jurisdictions.  The adjustment
        reallocates estimated full-year income taxes between interim periods,
        but has no effect on full-year income taxes.
    



    
                          Consolidated Balance Sheet
                          (millions of U.S. dollars)
                                 (unaudited)
    

    
                                                   September 30,  December 31,
                                                       2007           2006
                                                  ----------------------------
    Assets
    Cash and cash equivalents                          7,455            334
    Accounts receivable, net of allowances             1,327          1,362
    Inventories                                           85             72
    Prepaid expenses and other current assets            452            296
    Deferred income taxes                                152            153
    Current assets of discontinued operations             92          1,048
                                                  ----------------------------
    Current assets                                     9,563          3,265
    

    
    Computer hardware and other property, net            643            625
    Computer software, net                               694            647
    Identifiable intangible assets, net                3,484          3,456
    Goodwill                                           6,804          6,543
    Other non-current assets                           1,180          1,082
    Non-current assets of discontinued operations        550          4,514
                                                  ----------------------------
    Total assets                                      22,918         20,132
                                                  ============================
    

    
    Liabilities and shareholders' equity
    Liabilities
    Short-term indebtedness                                3            333
    Accounts payable and accruals                      2,562          1,304
    Deferred revenue                                     949            964
    Current portion of long-term debt                    403            264
    Current liabilities of discontinued operations        79            874
                                                  ----------------------------
    Current liabilities                                3,996          3,739
    

    
    Long-term debt                                     3,418          3,681
    Other non-current liabilities                        833            785
    Deferred income taxes                              1,031            997
    Non-current liabilities of discontinued operations    56            449
                                                  ----------------------------
    Total liabilities                                  9,334          9,651
    

    
    Shareholders' equity
    Capital                                            2,904          2,799
    Retained earnings                                 10,163          7,169
    Accumulated other comprehensive income               517            513
                                                  ----------------------------
    Total shareholders' equity                        13,584         10,481
                                                  ----------------------------
    Total liabilities and shareholders' equity        22,918         20,132
                                                  ============================
    



    
                     Consolidated Statement of Cash Flow
                    (millions of U.S. dollars, unaudited)
    


    
                              Three Months Ended         Nine Months Ended
                              ------------------         -----------------
                                 September 30,             September 30,
                                 -------------             -------------
                               2007         2006         2007         2006
                             ---------------------     ---------------------
    Cash provided by (used in):
    Operating activities
    --------------------
    Net earnings                2,969          419        3,570          729
    Remove earnings from
     discontinued
     operations               (2,654)        (212)      (2,781)        (119)
    Add back (deduct) items
     not involving cash:
      Depreciation                116          108          348          322
      Amortization                 66           59          189          178
      Net gains on disposals
       of businesses and
       investments                 --           --          (8)         (44)
      Deferred income taxes       (9)         (26)         (70)          (3)
      Other, net                   65           56          200          165
    Pension contributions          --          (4)          (3)          (9)
    Changes in working capital
     and other items            (110)         (33)        (206)        (151)
    Cash (used in) provided by
     operating activities -
     discontinued operations     (16)          266         (82)          261
                             ---------------------     ---------------------
    Net cash provided by
     operating activities         427          633        1,157        1,329
                             ---------------------     ---------------------
    

    
    Investing activities
    --------------------
    Acquisitions                 (132)       (196)        (315)        (408)
    Proceeds from disposals         --          --           11           60
    Capital expenditures, less
     proceeds from disposals     (143)       (110)        (383)        (270)
    Other investing activities    (10)        (11)         (33)         (26)
    Capital expenditures of
     discontinued operations       (2)        (47)         (97)        (130)
    Other investing activities
     of discontinued operations      4         (3)          (2)         (13)
    Proceeds from sales of
     discontinued operations,
     net of income taxes paid    7,577         86         8,050          105
    Acquisitions by
     discontinued operations        --        (29)         (54)         (35)
                             ---------------------     ---------------------
    Net cash provided by
     (used in) investing
     activities                  7,294       (310)        7,177        (717)
                             ---------------------     ---------------------
    

    
    Financing activities
    --------------------
    Repayments of debt           (229)          --        (249)         (73)
    Net (repayments) borrowings
     under short-term loan
     facilities                  (234)         143        (370)          299
    Premium on call options       (76)          --         (76)           --
    Repurchase of common shares     --        (67)         (75)        (358)
    Dividends paid on preference
     shares                        (1)         (1)          (4)          (4)
    Dividends paid on common
     shares                      (153)       (138)        (459)        (415)
    Other financing activities,
     net                             4           5           19           21
                             ---------------------     ---------------------
    Net cash used in financing
     activities                  (689)        (58)      (1,214)        (530)
                             ---------------------     ---------------------
    Translation adjustments          1           2            1            2
                             ---------------------     ---------------------
    Increase in cash and
     cash equivalents            7,033         267        7,121           84
    Cash and cash equivalents
     at beginning of period        422         224          334          407
                             ---------------------     ---------------------
    Cash and cash equivalents
     at end of period            7,455         491        7,455          491
                             =====================     =====================
    


    Reconciliation of Net Cash Provided by Operating Activities to Free Cash
    
                                   Flow(1)
                    (millions of U.S. dollars, unaudited)
    

    
                                Three Months Ended        Nine Months Ended
                                ------------------        -----------------
                                   September 30,             September 30,
                                   -------------             -------------
                                 2007         2006         2007         2006
                                 ----         ----         ----         ----
    Net cash provided by
     operating activities         427          633        1,157        1,329
    Capital expenditures        (143)        (110)        (383)        (270)
    Other investing activities   (10)         (11)         (33)         (26)
    Capital expenditures of
     discontinued operations      (2)         (47)         (97)        (130)
    Other investing activities
     of discontinued operations     4          (3)          (2)         (13)
    Dividends paid on preference
     shares                       (1)          (1)          (4)          (4)
                               -----------------------------------------------
    Free cash flow                275          461          638          886
                               ===============================================
    

    
    (1) Free cash flow is net cash provided by operating activities less
    capital expenditures, other investing activities and dividends paid on
    preference shares.  Thomson uses free cash flow as a performance measure
    because it represents cash available to repay debt, pay common dividends
    and fund acquisitions.
    



    
                        Business Segment Information(*)
                          (millions of U.S. dollars)
                                 (unaudited)
    


    
                            Three Months Ended         Nine Months Ended
                            ------------------         -----------------
                               September 30,              September 30,
                               -------------              -------------
                         2007      2006  Change     2007      2006  Change
                         ----      ----  ------     ----      ----  ------
    Revenues:
     Legal                856       769     11%    2,458     2,228     10%
     Financial            544       508      7%    1,611     1,497      8%
     Tax & Accounting     142       119     19%      457       387     18%
     Scientific           160       148      8%      471       440      7%
     Healthcare           102        81     26%      294       216     36%
     Intercompany
      eliminations        (3)       (3)             (13)      (12)
                      -------   -------          -------   -------
    Total revenues      1,801     1,622     11%    5,278     4,756     11%
                      =======   =======          =======   =======
    

    
    Operating Profit:
     Segment operating
      profit
      Legal               274       259      6%      778       693     12%
      Financial           117        97     21%      319       269     19%
      Tax & Accounting     26        21     24%       95        73     30%
      Scientific           41        38      8%      120       105     14%
      Healthcare           15        10     50%       28        20     40%
      Corporate and
       other (1)         (95)      (52)            (258)     (151)
                      -------   -------          -------   -------
    Total segment
     operating profit     378       373      1%    1,082     1,009      7%
    Amortization         (66)      (59)            (189)     (178)
                      -------   -------          -------   -------
    Operating profit      312       314     -1%      893       831      7%
                      =======   =======          =======   =======
    -------------------------------------------------------------------------
    (*)Note
    (1) Corporate and Other includes THOMSONplus costs, corporate costs,
        Reuters transaction costs and certain costs associated with the
        company's stock incentive and phantom stock plans.
    



    Detail of depreciation by segment:


    
                             Three Months Ended        Nine Months Ended
                             ------------------        -----------------
                                September 30,            September 30,
                                -------------            -------------
    

    
                              2007         2006         2007         2006
                           ----------------------     ---------------------
    


    Legal                     (53)         (47)        (153)        (137)

    Financial                 (40)         (45)        (130)        (135)

    Tax & Accounting           (4)          (5)         (15)         (17)



    Scientific                 (9)          (6)         (23)         (16)

    Healthcare                 (6)          (3)         (17)         (11)

    
    Corporate and Other        (4)          (2)         (10)          (6)
                           ----------------------     ---------------------
    

    
                             (116)        (108)        (348)        (322)
                           ======================     =====================
    



    APPENDIX

    
       THOMSON PROFIT FORECAST - BASES/ASSUMPTIONS AND RELATED LETTERS
    Profit forecast definition
    
    The profit forecast of The Thomson Corporation ("Thomson" or the
"company") for the year ending December 31, 2007 is comprised of the following
statements contained in the "Business Outlook" section of the company's
earnings release dated October 25, 2007:

    
    -- Revenue growth is expected to be at the high end of the company's long-
       term target range of 7%-9%, prior to the deployment of the proceeds
       from the sale of Thomson Learning and excluding the impact of currency
       translation; and
    -- Operating profit margin is expected to be at or above 2006 levels,
       despite increasing investments in efficiency initiatives and excluding
       the impact of costs related to the proposed acquisition of Reuters
       Group PLC.
    Basis of preparation
    
    The profit forecast is based on the assumptions below and has been
derived from:

    
    -- Thomson's unaudited consolidated financial statements for the nine
       months ended September 30, 2007; and
    -- Thomson's management forecasts for the three months ending December 31,
       2007.
    
    The profit forecast uses accounting policies consistent with those used
to prepare Thomson's financial statements for the year ended December 31, 2006
and for the nine months ended September 30, 2007, which financial statements
are prepared in accordance with accounting principles generally accepted in
Canada. The profit forecast has been calculated excluding the impact of
currency translation.
    
    Principal Assumptions
    
    The profit forecast has been prepared on the basis of the assumptions
below.
    The assumptions that are outside of the influence of Thomson's management
and directors include:

    
    -- there will be no change to existing prevailing worldwide macroeconomic
       conditions through the end of 2007 relative to 2006; and
    -- there will be no material adverse events which will have a significant
       impact on Thomson's financial results.
    
    The assumptions that Thomson's management and directors can influence
include:

    
    -- a portion of Thomson's anticipated 2007 revenue growth will come from
       tactical acquisitions made during the year;
    -- the profit forecast reflects the continuing operations of Thomson's
       business as at September 30, 2007;
    -- the profit forecast includes investments associated with Thomson's
       various efficiency initiatives, including THOMSONplus; and
    -- the profit forecast excludes costs related to the Reuters transaction.
    




    
                                             PricewaterhouseCoopers LLP
                                             Royal Trust Tower, Suite 3000
                                             Toronto-Dominion Centre
                                             77 King Street West
                                             Toronto, Ontario M5K 1G8
                                             Canada
    

    October 25, 2007

    
    The Directors
    The Thomson Corporation
    Metro Center
    One Station Place
    Stamford, Connecticut 06902
    United States
    

    
    Bear, Stearns & Co. Inc.
    383 Madison Avenue
    New York, New York 10179
    United States
    

    
    Perella Weinberg Partners UK LLP
    20 Grafton Street
    London W1S 4DZ
    United Kingdom
    

    
    Dear Ladies and Gentlemen,
    
    We report on the profit forecast of revenue growth and operating profit
margin comprising the statement by The Thomson Corporation (the "Company") for
the year ending December 31, 2007 (the "Profit Forecast").  The Profit
Forecast and the material assumptions upon which it is based are set out in
the "Business Outlook" section of the Company's third quarter 2007 earnings
release dated today (the "Earnings Release").
    This report is required by Rule 28.3(b) of the City Code on Takeovers and
Mergers issued by the Panel on Takeovers and Mergers (the "City Code") and is
given for the purpose of complying with that rule and for no other purpose.
    
    Responsibilities
    
    It is the responsibility of the directors of the Company (the
"Directors") to prepare the Profit Forecast in accordance with the
requirements of the City Code.
    It is our responsibility to form an opinion as required by Rule 28.3(b)
of the City Code as to the proper compilation of the Profit Forecast and to
report that opinion to you.
    Save for any responsibility under Rule 28.3(b) of the City Code to any
person as and to the extent there provided, to the fullest extent permitted by
law we do not assume any responsibility and will not accept any liability to
any other person for any loss suffered by any such other person as a result
of, arising out of, or in connection with this report or our statement,
required by and given solely for the purposes of complying with Rule 28.4 of
the City Code, consenting to its inclusion in the Earnings Release.
    
    Basis of Preparation of the Profit Forecast
    
    The Profit Forecast has been prepared on the basis stated in the Earnings
Release and is based on the Company's unaudited interim financial results for
the 9 months ended September 30, 2007 and the Company's forecast for the year
ending December 31, 2007.  The Profit Forecast is required to be presented on
a basis consistent with the accounting policies used by the Company and its
consolidated subsidiaries (the "Group").
    
    Basis of Opinion
    
    We conducted our work in accordance with the Standards for Investment
Reporting issued by the Auditing Practices Board in the United Kingdom.  Our
work included evaluating the basis on which the historical financial
information included in the Profit Forecast has been prepared and considering
whether the Profit Forecast has been accurately computed based upon the
disclosed assumptions and the accounting policies of the Group.  Whilst the
assumptions upon which the Profit Forecast are based are solely the
responsibility of the Directors, we considered whether anything came to our
attention to indicate that any of the material assumptions adopted by the
Directors which, in our opinion, are necessary for a proper understanding of
the Profit Forecast have not been disclosed or if any material assumption made
by the Directors appears to us to be unrealistic.
    We planned and performed our work so as to obtain the information and
explanations we considered necessary in order to provide us with reasonable
assurance that the Profit Forecast has been properly compiled on the basis
stated.
    Since the Profit Forecast and the assumptions on which it is based relate
to the future and may therefore be affected by unforeseen events, we can
express no opinion as to whether the actual results reported will correspond
to those shown in the Profit Forecast and differences may be material.
    Our work has not been carried out in accordance with auditing standards
generally accepted in the United States of America including auditing
standards of the Public Company Accounting Oversight Board (United States) or
with auditing standards generally accepted in Canada and accordingly should
not be relied upon as if it had been carried out in accordance with those
standards.
    
    Opinion
    
    In our opinion, the Profit Forecast has been properly compiled on the
basis of the material assumptions made by the Directors and the basis of
accounting used is consistent with the accounting policies of the Group.

    Yours faithfully,

    /s/ PricewaterhouseCoopers LLP

    
    PricewaterhouseCoopers LLP
    Chartered Accountants, Licensed Public Accountants
    



    
    PERELLA WEINBERG PARTNERS UK LLP    BEAR, STEARNS & CO. INC.
    20 Grafton Street                   383 Madison Avenue
    London W1S 4DZ                      New York, NY 10179
    

    October 25, 2007

    
    The Board of Directors
    The Thomson Corporation
    Metro Center
    One Station Place
    Stamford, Connecticut 06902
    United States
    

    
    Ladies and Gentlemen,
    
    We refer to the statements regarding the forecasts of revenue growth and
operating profit margin for the full year ending December 31, 2007 (the
"Profit Forecast") of The Thomson Corporation ("Thomson"), as set out in the
"Business Outlook" section of Thomson's third quarter 2007 earnings release
dated today.
    We have discussed the Profit Forecast, together with the bases and
assumptions upon which it has been made, with Thomson's management and
PricewaterhouseCoopers LLP, Thomson's statutory auditors, and have considered
the letter of today's date addressed to you and to us from them regarding the
accounting policies adopted and basis of calculation for the Profit Forecast.
We also understand that the Profit Forecast has been approved by Thomson's
Board of Directors. We have relied on the accuracy and completeness of all the
financial and other information provided by Thomson, or otherwise discussed
with us, and we have assumed such accuracy and completeness for the purposes
of providing this letter.
    On the basis of the foregoing, we consider that the Profit Forecast, for
which you as directors are solely responsible, has been made with due care and
consideration by the directors.
    This report is provided to you solely in connection with Rules 28.3(b)
and 28.4 of the City Code on Takeovers and Mergers and for no other purpose.

    Yours faithfully,

    
    /s/ Graham Davidson                  /s/ John Fargis
    Graham Davidson                      John Fargis
    Perella Weinberg Partners UK LLP     Bear, Stearns & Co. Inc.
    




For further information:

For further information: Media, Fred Hawrysh, Global Director, External 
Communications, +1-203-539-8314, fred.hawrysh@thomson.com, or Investors, 
Frank J. Golden, Vice President, Investor Relations, +1-203-539-8470, 
frank.golden@thomson.com Web Site: http://www.thomson.com/

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