Foolish Forecast: Thomson's Numbers

Mind if I rant for a moment?

Thanks. So I'm looking over the recent filings for financial data, legal data, and generally all-things-information powerhouse Thomson (NYSE: TOC  ) , and I'm trying to compile a few facts and figures that might help Fools put the company's Q1 2006 earnings news -- due out tomorrow, by the way -- into context. And as usual, I realize halfway into the exercise that Thomson is a foreign company.

That isn't a big problem in and of itself -- Canada isn't all that foreign, eh? But it does create a headache for investors looking to research the company's SEC filings, 90% of which are designated "6-K." That's the catch-all code the Securities and Exchange Commission uses for nearly everything of interest that a foreign company files with it. The problem is that a 6-K can be almost anything: news of executive-level hirings and firings, a proxy statement, an earnings release -- anything. As a result, any investor who wants to keep tracks of happenings at his or her foreign holdings needs to review every one of the company's 6-Ks on file with the SEC, to be sure that nothing important slips through the cracks.

My point being, the SEC really needs to come up with some more descriptive codes, and names, for documents filed by foreign companies. Something a bit more helpful than "6-K: Report of foreign issuer" would be nice. That's all I'm saying. And now, back to today's regularly scheduled forecast.

What analysts say:

• Buy, sell, or waffle? Fourteen analysts follow Thomson. Of these, five rate the stock a buy and nine a hold.
• Revenues. Analysts believe Thomson's sales grew 4% to $1.92 billion this quarter.
• Earnings. ... And that its profits grew 25% to $0.10 per share.

What management says:
Back in February, Thomson CEO Richard Harrington updated shareholders on his firm's progress toward becoming more of an electronic data provider and less of a "hard-copy data" vendor. At last report, the company was deriving 70% of its sales from the higher-margin "electronic products, software and services business" that Thomson aims to control.

What management does:
In other news, Harrington reiterated his firm's commitment to strong production of free cash flow and its use to fund dividend increases and share buybacks. In 2005, the company "returned more than $750 million to shareholders in 2005 through dividends and share repurchases." Outstanding.

One Fool says:
Why does Thomson emphasize its free cash flow production rather than its reported earnings under generally accepted accounting principles (GAAP)? First, it's because you can't fund a dividend or buy back shares with "accounting profits." For this, you need actual "cash profits" -- which is what we call free cash flow.

Second, it will surprise none of the cynics out there to learn that companies play up their strengths and play down their weaknesses in these earnings reports. In Thomson's case, free cash flow happens to be a strength. Over the past five years, the company was permitted to report just $3.8 billion in total profits under GAAP. However, Thomson generated $6 billion in actual cash profits -- 60% better than the GAAP number suggests.

If I were Thomson, I'd remind people of that, too.

Competitors:

• Advent (Nasdaq: ADVS  )
• Choicepoint (NYSE: CPS  )
• Dow Jones (NYSE: DJ  )
• EDGAR Online (Nasdaq: EDGR  )
• Electronic Data Systems (NYSE: EDS  )
• FactSet (NYSE: FDS  )

Fool contributor Rich Smith does not own shares of any company named above.