As of September 30, 2023, our company indirectly owned approximately 16.9 million LSEG
shares. In connection with the September 2023 transactions described above, YPL entered into call options to sell approximately 8.2 million LSEG shares with maturity dates in 2023 and 2024 in the event the LSEG share price exceeds specified
levels. Our companys share of these call options covers approximately 3.5 million shares. The approximately 13.4 million LSEG shares owned by our company and not subject to call options are subject to amended lock-up provisions under which it may sell approximately 6.1 million shares between March 2, 2024 and January 29, 2025, and approximately 7.3 million shares thereafter.
We paid $501 million of income tax in the first nine months of 2023 and expect to pay approximately $170 million later this year on
these share sales and the related settlement of foreign exchange contracts. Relative to our remaining shares, we expect to pay 25% capital gains tax on proceeds above our tax basis of $0.8 billion.
See the Liquidity and Capital Resources section of the managements discussion and analysis for information on our use of
proceeds from the sale of LSEG shares.
Given the reduction in its ownership in 2023, YPL is only entitled to nominate one non-executive director to the board of LSEG. As such, Thomson Reuters is no longer entitled to nominate a representative to the board of LSEG.
The market value of our investment in LSEG on October 31, 2023 was approximately $1.7 billion, based on LSEGs closing share price on
that date and approximately 16.9 million shares.
Liquidity and Capital Resources
We have historically maintained a disciplined capital strategy that balances growth, long-term financial leverage, credit ratings and returns to
shareholders. We are focused on having the investment capacity to drive revenue growth, both organically and through acquisitions, while also maintaining our long-term financial leverage and credit ratings and continuing to provide returns to
shareholders. Our principal sources of liquidity are cash and cash equivalents and cash provided by operating activities. From time to time, we also issue commercial paper, borrow under our credit facility, and issue debt securities. Our principal
uses of cash are for debt repayments, debt servicing costs, dividend payments, capital expenditures, share repurchases and acquisitions.
In the first nine months of 2023, we received gross proceeds of $5.4 billion, which included the settlement of foreign exchange contracts, from the sale of approximately 55.1 million LSEG shares. In June 2023, we returned
$2.0 billion of these proceeds to shareholders through a return of capital transaction. On November 1, 2023, we announced the renewal of our normal course issuer bid pursuant to which we plan to repurchase up to $1.0 billion of our
common shares. We plan to use the remaining proceeds to pursue organic and inorganic opportunities in key growth segments as well as for other general corporate purposes. For example, in 2023, we acquired Casetext, Inc., a business that uses
artificial intelligence and machine learning to enable legal professionals to work more efficiently, Imagen Ltd, a media asset management company now part of our Reuters News segment, and SurePrep LLC, a provider of tax automation software and
services. We plan to continue to sell LSEG shares in tranches subject to contractual lock-up provisions. We expect those proceeds will provide us with further options for investment and returns to shareholders
(Refer to the Investment in LSEG section, and the Share repurchases Normal Course Issuer Bid (NCIB) and Return of capital and share consolidation subsections below, of this managements discussion and
analysis for additional information).
Our capital strategy approach has provided us with a strong capital structure and liquidity
position. Our disciplined approach and cash generative business model have allowed us to weather economic volatility in recent years caused by macroeconomic and geopolitical factors, while continuing to invest in our business. While we are closely
monitoring the global disruption caused by Russias invasion of Ukraine and the ongoing Israel Hamas conflict, our operations in those regions are not material to our business.
We expect that the operating leverage of our business will increase our free cash flow if we increase revenues as contemplated by our outlook. We
target a maximum leverage ratio of 2.5x net debt to adjusted EBITDA and have set a target to pay out 50% to 60% of our expected free cash flow as dividends to our shareholders.
As of September 30, 2023, we had $2.5 billion of cash on hand, which includes a portion of the proceeds from the sale of our LSEG
shares. As a result, our net debt to adjusted EBITDA leverage ratio as of September 30, 2023 was 0.8:1, significantly lower than our target of 2.5:1. As calculated under our credit facility covenant, our net debt to adjusted EBITDA leverage
ratio as of September 30, 2023 was 0.7:1, which is also well below the maximum leverage ratio allowed under the credit facility of 4.5:1. Our next scheduled debt maturities are in November 2023 and September 2024. We intend to redeem our
$600 million term debt with cash on hand upon maturity in November 2023.
We believe that our existing sources of liquidity will
be sufficient to fund our expected cash requirements in the normal course of business for the next 12 months.
Certain information
above in this section is forward-looking and should be read in conjunction with the section entitled Additional Information Cautionary Note Concerning Factors That May Affect Future Results.
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