IHS Inc. (NYSE: IHS), the leading global source of information
and analytics, today reported results for the second quarter ended
May 31, 2014.
- Revenue of $568 million, up 36 percent
from the prior-year period
- Total organic revenue growth of 6
percent, anchored by 6 percent subscription organic revenue
growth
- Adjusted EBITDA of $173 million, up 33
percent from the prior-year period
- Adjusted earnings per diluted share
(Adjusted EPS) of $1.47, up 17 percent from the prior-year
period
- Free cash flow of $195 million, up 83
percent from the prior-year period
Adjusted EBITDA, Adjusted EPS, and free cash flow are non-GAAP
financial measures used by management to measure operating
performance. These terms are defined elsewhere in this release.
Please see schedules appearing later in this release for
reconciliations of non-GAAP financial measures to the most directly
comparable GAAP measures.
Second Quarter and Year-to-Date 2014 Financial
Performance
Three months ended May 31,
Change Six months ended May 31,
Change (in thousands, except percentages
and per share data) 2014 2013
$ % 2014
2013 $ % Revenue $ 568,008 $
418,143 $ 149,865 36 % $ 1,092,466 $ 800,668 $ 291,798 36 %
Net income $ 55,492 $ 42,890 $ 12,602 29 % $ 87,914 $ 67,561 $
20,353 30 % Adjusted EBITDA $ 172,733 $ 130,156 $ 42,577 33 % $
328,908 $ 248,350 $ 80,558 32 % GAAP EPS $ 0.81 $ 0.65 $
0.16 25 % $ 1.28 $ 1.01 $ 0.27 27 % Adjusted EPS $ 1.47 $ 1.26 $
0.21 17 % $ 2.75 $ 2.34 $ 0.41 18 % Cash flow from
operations $ 221,113 $ 129,480 $ 91,633 71 % $ 374,974 $ 261,166 $
113,808 44 % Free cash flow $ 194,687 $ 106,411 $ 88,276 83 % $
323,938 $ 218,730 $ 105,208 48 %
“We were pleased to deliver on our expanding organic growth
objectives,” said Scott Key, IHS president and chief executive
officer. “Encouragingly, our growth was broad-based, with progress
and performance in each of the three regions and in each product
category.”
“We had very strong cash flow in the quarter and have delivered
over $500 million of free cash flow over the last twelve months,”
said Todd Hyatt, IHS chief financial officer. “This has allowed us
to de-lever from 3.7 times to 2.9 times in less than a year.”
Second Quarter and Year-to-Date 2014 Revenue
Performance
Second quarter 2014 revenue increased 36 percent compared to the
second quarter of 2013, and year-to-date 2014 revenue increased 36
percent compared to the same period in 2013. The components of
revenue growth are described below by segment and in total.
Increase in revenue Second quarter 2014 vs.
second quarter 2013 Year-to-date 2014 vs.
year-to-date 2013 (All amounts represent
Foreign
Foreign percentage points) Organic
Acquisitive Currency Organic
Acquisitive Currency Americas 4 % 43 % (1 )% 5 % 45 %
(1 )% EMEA 10 % 9 % 4 % 8 % 9 % 3 % APAC 4 % 6 % — % 2 % 7 % (1 )%
Total 6 % 30 % 1 %
5 % 31 % — %
The subscription-based business grew 6 percent organically in
the second quarter of 2014 compared to the second quarter of 2013,
as described in the following table.
Three months ended May 31,
Percent change Six months ended May
31, Percent change (in thousands,
except percentages) 2014 2013
Total Organic 2014
2013 Total Organic Subscription
revenue $ 426,346 $ 313,923 36 % 6 % $ 843,720 $ 621,650 36 % 6 %
Non-subscription revenue 141,662 104,220 36 % 4 %
248,746 179,018 39 % 3 % Total revenue $ 568,008 $
418,143 36 % 6 % $ 1,092,466 $ 800,668 36 % 5 %
Second Quarter and Year-to-Date 2014 Segment
Performance
On a consolidated basis, IHS continued to deliver solid organic
revenue growth. Segment results were as follows:
- Americas. Second quarter revenue for
Americas increased $119 million, or 46 percent, to $377 million,
and included 5 percent organic growth for the subscription-based
business. Second quarter Adjusted EBITDA for Americas increased $27
million, or 25 percent, to $135 million. Second quarter operating
income for Americas increased $14 million, or 18 percent, to $94
million.Year-to-date revenue for Americas increased $240 million,
or 49 percent, to $727 million. Year-to-date Adjusted EBITDA for
Americas increased $57 million, or 28 percent, to $259 million.
Year-to-date operating income for Americas increased $30 million,
or 21 percent, to $171 million.Americas results for both the second
quarter and year-to-date 2014 periods benefited from the inclusion
of R. L. Polk.
- EMEA. Second quarter revenue for EMEA
increased $26 million, or 23 percent, to $139 million, and included
9 percent organic growth for the subscription-based business.
Second quarter Adjusted EBITDA for EMEA increased $13 million, or
48 percent, to $40 million. Second quarter operating income for
EMEA increased $14 million, or 68 percent, to $34 million. EMEA
profit benefited from revenue growth and prior investment in scaled
infrastructure.Year-to-date revenue for EMEA increased $43 million,
or 19 percent, to $266 million. Year-to-date Adjusted EBITDA for
EMEA increased $21 million, or 41 percent, to $72 million.
Year-to-date operating income for EMEA increased $23 million, or 62
percent, to $59 million.
- APAC. Second quarter revenue for APAC
increased $5 million, or 10 percent, to $52 million, and included
10 percent organic growth for the subscription-based business.
Second quarter Adjusted EBITDA for APAC increased $3 million, or 25
percent, to $14 million. Second quarter operating income for APAC
increased $3 million, or 26 percent, to $13 million.Year-to-date
revenue for APAC increased $8 million, or 9 percent, to $100
million. Year-to-date Adjusted EBITDA for APAC increased $3
million, or 16 percent, to $24 million. Year-to-date operating
income for APAC increased $3 million, or 15 percent, to $23
million.
Outlook (forward-looking statement)
For the year ending November 30, 2014, IHS expects:
- Revenue in a range of $2.17 billion to
$2.23 billion, including 6-7 percent organic growth on the
subscription base;
- Adjusted EBITDA in a range of $675
million to $705 million; and
- Adjusted EPS in a range of $5.50 to
$5.85 per diluted share.
Additionally, for the year ending November 30, 2014, IHS
expects:
- Depreciation expense to be
approximately $75-80 million;
- Amortization expense related to
acquired intangible assets to be approximately $135-140
million;
- Net interest expense to be
approximately $55-60 million;
- Stock-based compensation expense to be
approximately $185-195 million;
- An adjusted tax rate of approximately
28-30 percent;
- An effective GAAP tax rate of
approximately 20-22 percent; and
- Fully diluted shares to be
approximately 69-70 million.
The above outlook assumes no further currency movements,
acquisitions, divestitures, pension mark-to-market adjustments or
unanticipated events. See discussion of non-GAAP financial measures
at the end of this release.
As previously announced, IHS will hold a conference call to
discuss second quarter 2014 results on June 19, 2014, at 8:00
a.m. EDT. The conference call will be simultaneously webcast on the
company’s website: www.ihs.com.
Use of Non-GAAP Financial Measures
Non-GAAP results are presented only as a supplement to our
financial statements based on U.S. generally accepted accounting
principles (GAAP). Non-GAAP financial information is provided to
enhance the reader’s understanding of our financial performance,
but none of these non-GAAP financial measures are recognized terms
under GAAP and non-GAAP measures should not be considered in
isolation or as a substitute for financial measures calculated in
accordance with GAAP. Reconciliations of the most directly
comparable GAAP measures to non-GAAP measures, such as Adjusted
EBITDA, Adjusted net income, Adjusted EPS, and free cash flow are
provided within the schedules attached to this release.
We use non-GAAP measures in our operational and financial
decision-making, believing that it is useful to exclude certain
items in order to focus on what we deem to be a more reliable
indicator of ongoing operating performance and our ability to
generate cash flow from operations. As a result, internal
management reports used during monthly operating reviews feature
the Adjusted EBITDA, Adjusted net income, Adjusted EPS, and free
cash flow metrics. We also believe that investors may find non-GAAP
financial measures useful for the same reasons, although investors
are cautioned that non-GAAP financial measures are not a substitute
for GAAP disclosures.
Because not all companies use identical calculations, our
presentation of non-GAAP financial measures may not be comparable
to other similarly-titled measures of other companies. However,
these measures can still be useful in evaluating our performance
against our peer companies because we believe the measures provide
users with valuable insight into key components of GAAP financial
disclosures.
IHS Forward-Looking Statements:
This release contains “forward-looking statements” within the
meaning of the safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995. Forward-looking
statements can be identified by words such as: “anticipate,”
“intend,” “plan,” “goal,” “seek,” “aim,” “strive,” “believe,”
“project,” “predict,” “estimate,” “expect,” “continue,” “strategy,”
“future,” “likely,” “may,” “might,” “should,” “will,” the negative
of these terms and similar references to future periods. Examples
of forward-looking statements include, among others, statements we
make regarding guidance relating to net income, net income per
share, and expected operating results, such as revenue growth and
earnings.
Forward-looking statements are neither historical facts nor
assurances of future performance. Instead, they are based only on
our current beliefs, expectations and assumptions regarding the
future of our business, future plans and strategies, projections,
anticipated events and trends, the economy and other future
conditions. Because forward-looking statements relate to the
future, they are subject to inherent uncertainties, risks and
changes in circumstances that are difficult to predict and many of
which are outside of our control. Our actual results and financial
condition may differ materially from those indicated in the
forward-looking statements. Therefore, you should not rely on any
of these forward-looking statements. Important factors that could
cause our actual results and financial condition to differ
materially from those indicated in the forward-looking statements
include, among others, the following: economic and financial
conditions, including volatility in interest and exchange rates;
our ability to successfully manage risks associated with changes in
demand for our products and services as well as changes in our
targeted industries; our ability to develop new platforms to
deliver our products and services, pricing, and other competitive
pressures, and changes in laws and regulations governing our
business; the extent to which we are successful in gaining new
long-term relationships with customers or retaining existing ones
and the level of service failures that could lead customers to use
competitors’ services; our ability to successfully identify and
integrate acquisitions into our existing businesses and manage
risks associated therewith; and the other factors described under
the caption “Risk Factors” in our most recent annual report on Form
10-K, along with our other filings with the U.S. Securities and
Exchange Commission.
Any forward-looking statement made by us in this release is
based only on information currently available to us and speaks only
as of the date on which it is made. We undertake no obligation to
publicly update any forward-looking statement, whether written or
oral, that may be made from time to time, whether as a result of
new information, future developments or otherwise.
Please consult our public filings at www.sec.gov or www.ihs.com.
About IHS Inc. (www.ihs.com)
IHS Inc. (NYSE: IHS) is the leading source of information,
insight and analytics in critical areas that shape today’s business
landscape. Businesses and governments in more than 165 countries
around the globe rely on the comprehensive content, expert
independent analysis and flexible delivery methods of IHS to make
high-impact decisions and develop strategies with speed and
confidence. IHS has been in business since 1959 and became a
publicly traded company on the New York Stock Exchange in 2005.
Headquartered in Englewood, Colorado, USA, IHS is committed to
sustainable, profitable growth and employs approximately 8,000
people in 31 countries around the world.
IHS is a registered trademark of IHS Inc. All other company and
product names may be trademarks of their respective owners.
© 2014 IHS Inc. All rights reserved.
IHS INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per-share amounts)
As of As of
May 31, 2014
November 30, 2013
(Unaudited) (Audited) Assets Current assets:
Cash and cash equivalents $ 220,998 $ 258,367 Accounts receivable,
net 416,771 459,263 Income tax receivable 164 — Deferred
subscription costs 63,289 49,327 Deferred income taxes 59,757
70,818 Other 59,896 43,065 Total
current assets 820,875 880,840
Non-current assets: Property and equipment, net 267,250 245,566
Intangible assets, net 1,077,083 1,144,464 Goodwill 3,064,631
3,065,181 Other 18,627 23,562 Total
non-current assets 4,427,591 4,478,773
Total assets $ 5,248,466 $ 5,359,613
Liabilities
and stockholders’ equity Current liabilities: Short-term debt $
140,911 $ 395,527 Accounts payable 57,372 57,001 Accrued
compensation 60,979 89,460 Accrued royalties 33,652 36,289 Other
accrued expenses 112,949 98,187 Income tax payable — 9,961 Deferred
revenue 667,264 560,010 Total current
liabilities 1,073,127 1,246,435 Long-term debt 1,715,595 1,779,065
Accrued pension and postretirement liability 31,210 27,191 Deferred
income taxes 349,434 361,267 Other liabilities 51,775 38,692
Commitments and contingencies Stockholders’ equity: Class A common
stock, $0.01 par value per share, 160,000,000 shares authorized,
69,051,356 and 67,901,101 shares issued, and 68,123,301 and
67,382,298 shares outstanding at May 31, 2014 and November 30,
2013, respectively 691 679 Additional paid-in capital 870,215
788,670 Treasury stock, at cost: 928,055 and 518,803 shares at May
31, 2014 and November 30, 2013, respectively (93,374 ) (45,945 )
Retained earnings 1,308,434 1,220,520 Accumulated other
comprehensive loss (58,641 ) (56,961 ) Total
stockholders’ equity 2,027,325 1,906,963
Total liabilities and stockholders’ equity $ 5,248,466
$ 5,359,613
IHS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In
thousands, except for per-share amounts) (Unaudited)
Three months ended May 31,
Six months ended May 31, 2014
2013 2014 2013 Revenue $
568,008 $ 418,143 $ 1,092,466 $ 800,668
Operating expenses:
Cost of revenue (includes stock-based compensation expense of
$1,511; $1,294; $3,371 and $2,976 for the three and six months
ended May 31, 2014 and 2013, respectively) 224,945 172,424 437,870
332,499 Selling, general and administrative (includes stock-based
compensation expense of $34,521; $29,505; $76,625 and $67,585 for
the three and six months ended May 31, 2014 and 2013, respectively)
203,644 143,609 401,360 285,838 Depreciation and amortization
49,142 32,877 98,779 65,356 Restructuring charges 860 3,231 4,035
8,019 Acquisition-related costs 77 1,665 1,017 3,560 Net periodic
pension and postretirement expense 2,834 2,242 5,670 4,482 Other
expense (income), net (267 ) 511 1,308
2,930 Total operating expenses 481,235
356,559 950,039 702,684
Operating income 86,773 61,584 142,427 97,984
Interest income 235 303 486 647 Interest expense (14,610 )
(6,164 ) (29,855 ) (12,284 ) Non-operating
expense, net (14,375 ) (5,861 ) (29,369 )
(11,637 ) Income from continuing operations before income
taxes 72,398 55,723 113,058 86,347 Provision for income taxes
(16,906 ) (12,840 ) (25,144 ) (18,793 )
Income from continuing operations 55,492 42,883 87,914 67,554
Income from discontinued operations, net — 7
— 7
Net income $ 55,492
$ 42,890 $ 87,914 $ 67,561 Basic
earnings per share Income from continuing operations $ 0.81 $ 0.65
$ 1.29 $ 1.03 Income from discontinued operations, net $ — $
— $ — $ — Net income $ 0.81 $ 0.65
$ 1.29 $ 1.03 Weighted average shares used in
computing basic earnings per share 68,216
65,888 68,015 65,840
Diluted earnings per share Income from continuing operations $ 0.81
$ 0.65 $ 1.28 $ 1.01 Income from discontinued operations, net $ —
$ — $ — $ — Net income $ 0.81 $
0.65 $ 1.28 $ 1.01 Weighted average shares
used in computing diluted earnings per share 68,697
66,421 68,730 66,584
IHS INC. CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (In thousands) (Unaudited)
Six months ended May 31, 2014
2013 Operating activities: Net income $ 87,914
$ 67,561 Reconciliation of net income to net cash provided by
operating activities: Depreciation and amortization 98,779 65,356
Stock-based compensation expense 79,996 70,561 Impairment of assets
— 1,629 Excess tax benefit from stock-based compensation (10,327 )
(11,802 ) Net periodic pension and postretirement expense 5,670
4,482 Pension and postretirement contributions (1,650 ) (11,876 )
Deferred income taxes 28,907 (26,462 ) Change in assets and
liabilities: Accounts receivable, net 38,871 37,053 Other current
assets (23,153 ) (15,803 ) Accounts payable 119 (10,430 ) Accrued
expenses (16,666 ) (11,585 ) Income tax payable (20,656 ) 27,561
Deferred revenue 105,570 75,998 Other liabilities 1,600
(1,077 )
Net cash provided by operating
activities 374,974 261,166
Investing activities: Capital expenditures on property and
equipment (51,036 ) (42,436 ) Acquisitions of businesses, net of
cash acquired — (155,505 ) Intangible assets acquired (714 ) —
Change in other assets 2,762 (2,317 ) Settlements of forward
contracts 1,309 128
Net cash used in
investing activities (47,679 ) (200,130 )
Financing activities: Proceeds from borrowings 30,000 45,000
Repayment of borrowings (348,086 ) (97,001 ) Excess tax benefit
from stock-based compensation 10,327 11,802 Proceeds from the
exercise of employee stock options — 285 Repurchases of common
stock (47,429 ) (83,365 )
Net cash used in
financing activities (355,188 ) (123,279 )
Foreign exchange impact on cash balance (9,476 )
(15,634 ) Net decrease in cash and cash equivalents (37,369 )
(77,877 ) Cash and cash equivalents at the beginning of the period
258,367 345,008 Cash and cash
equivalents at the end of the period $ 220,998 $ 267,131
IHS INC. SUPPLEMENTAL REVENUE
DISCLOSURE (In thousands) (Unaudited)
Three months ended May 31,
Percent change Six months ended May 31,
Percent change 2014
2013 Total Organic 2014
2013 Total Organic
Revenue by segment: Americas $ 376,787 $ 257,625 46 % 4 % $
727,207 $ 486,791 49 % 5 % EMEA 138,847 112,944 23 % 10 % 265,708
222,415 19 % 8 % APAC 52,374 47,574 10 % 4 %
99,551 91,462 9 % 2 %
Total revenue $ 568,008 $
418,143 36 % 6 % $ 1,092,466 $ 800,668 36 % 5 %
Revenue
by transaction type: Subscription $ 426,346 $ 313,923 36 % 6 %
$ 843,720 $ 621,650 36 % 6 % Non-subscription 141,662
104,220 36 % 4 % 248,746 179,018 39 % 3 %
Total
revenue $ 568,008 $ 418,143 36 % 6 % $ 1,092,466 $ 800,668 36 %
5 %
Revenue by product category: Resources $ 243,876
$ 221,680 10 % 6 % $ 461,370 $ 412,196 12 % 7 % Industrials 181,346
64,359 182 % 1 % 353,069 126,848 178 % — % Horizontal products
142,786 132,104 8 % 7 % 278,027 261,624
6 % 6 %
Total revenue $ 568,008 $ 418,143 36 % 6 % $
1,092,466 $ 800,668 36 % 5 %
IHS INC.
RECONCILIATION OF CONSOLIDATED NON-GAAP FINANCIAL MEASUREMENTS
TO MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS
(In thousands, except for per-share amounts)
(Unaudited) Three months ended May
31, Six months ended May 31, 2014
2013 2014 2013
Net income
$ 55,492 $ 42,890 $ 87,914 $ 67,561
Interest income
(235 ) (303 ) (486 ) (647 ) Interest expense 14,610 6,164 29,855
12,284 Provision for income taxes 16,906 12,840 25,144 18,793
Depreciation 16,090 10,851 31,880 20,731 Amortization related to
acquired intangible assets 33,052 22,026
66,899 44,625
EBITDA
(1)(6) $ 135,915 $ 94,468 $ 241,206 $ 163,347 Stock-based
compensation expense 36,032 30,799 79,996 70,561 Restructuring
charges 860 3,231 4,035 8,019 Acquisition-related costs 77 1,665
1,017 3,560 Impairment of assets — — — 1,629 (Gain) loss on sale of
assets (151 ) — 2,654 1,241 Income from discontinued operations,
net — (7 ) — (7 )
Adjusted EBITDA (2)(6) $ 172,733 $ 130,156
$ 328,908 $ 248,350
Three
months ended May 31, Six months ended May 31,
2014 2013 2014
2013 Net income $ 55,492 $
42,890 $ 87,914 $ 67,561 Stock-based compensation expense 36,032
30,799 79,996 70,561 Amortization related to acquired intangible
assets 33,052 22,026 66,899 44,625 Restructuring charges 860 3,231
4,035 8,019 Acquisition-related costs 77 1,665 1,017 3,560
Impairment of assets — — — 1,629 (Gain) loss on sale of assets (151
) — 2,654 1,241 Income from discontinued operations, net — (7 ) —
(7 ) Income tax effect on adjusting items (24,511 )
(17,108 ) (53,733 ) (41,639 )
Adjusted net
income (3) $ 100,851 $ 83,496 $ 188,782
$ 155,550
Adjusted EPS (4)(6) $ 1.47
$ 1.26 $ 2.75 $ 2.34 Weighted average
shares used in computing Adjusted EPS 68,697
66,421 68,730 66,584
Three months ended May 31, Six months ended May
31, 2014 2013
2014 2013 Net cash
provided by operating activities $ 221,113 $ 129,480 $ 374,974
$ 261,166 Capital expenditures on property and equipment
(26,426 ) (23,069 ) (51,036 ) (42,436 )
Free cash flow (5)(6) $ 194,687 $ 106,411
$ 323,938 $ 218,730
IHS
INC. RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL
MEASUREMENTS TO MOST DIRECTLY COMPARABLE GAAP FINANCIAL
MEASUREMENTS (In thousands) (Unaudited)
Three months ended May 31, 2014
Americas EMEA APAC
Shared Services
Total Operating income $ 93,587 $
34,465 $ 12,938 $ (54,217 ) $ 86,773 Adjustments: Stock-based
compensation expense — — — 36,032 36,032 Depreciation and
amortization 41,395 5,314 475 1,958 49,142 Restructuring charges 87
656 117 — 860 Acquisition-related costs 277 (200 ) — — 77 Gain on
sale of assets (151 ) — — —
(151 )
Adjusted EBITDA $ 135,195 $
40,235 $ 13,530 $ (16,227 ) $ 172,733
Three
months ended May 31, 2013 Americas EMEA
APAC Shared Services Total Operating
income $ 79,515 $ 20,485 $ 10,248 $ (48,664 ) $ 61,584
Adjustments: Stock-based compensation expense — — — 30,799 30,799
Depreciation and amortization 25,181 5,474 476 1,746 32,877
Restructuring charges 2,165 990 76 — 3,231 Acquisition-related
costs 1,503 162 — —
1,665
Adjusted EBITDA $ 108,364
$ 27,111 $ 10,800 $ (16,119 ) $ 130,156
Six
months ended May 31, 2014 Americas EMEA
APAC Shared Services Total Operating
income $ 171,197 $ 59,060 $ 23,000 $ (110,830 ) $ 142,427
Adjustments: Stock-based compensation expense — — — 79,996 79,996
Depreciation and amortization 82,568 11,105 1,088 4,018 98,779
Restructuring charges 1,772 1,941 322 — 4,035 Acquisition-related
costs 696 321 — — 1,017 Loss on sale of assets 2,654
— — — 2,654
Adjusted EBITDA $ 258,887 $ 72,427 $ 24,410 $
(26,816 ) $ 328,908
Six months ended May 31,
2013 Americas EMEA APAC Shared
Services Total Operating income $ 141,648 $
36,471 $ 19,997 $ (100,132 ) $ 97,984 Adjustments: Stock-based
compensation expense — — — 70,561 70,561 Depreciation and
amortization 49,465 11,391 937 3,563 65,356 Restructuring charges
6,061 1,937 21 — 8,019 Acquisition-related costs 3,398 162 — —
3,560 Impairment of assets 1,629 — — — 1,629 Loss on sale of assets
— 1,241 — —
1,241
Adjusted EBITDA $ 202,201 $ 51,202
$ 20,955 $ (26,008 ) $ 248,350
(1) EBITDA is defined as net income plus or minus net interest,
plus provision for income taxes, depreciation and amortization.
(2) Adjusted EBITDA further excludes primarily non-cash items
and other items that we do not consider to be useful in assessing
our operating performance (e.g., stock-based compensation expense,
restructuring charges, acquisition-related costs, asset impairment
charges, gain or loss on sale of assets, pension mark-to-market and
settlement expense, and income or loss from discontinued
operations). All of the items included in the reconciliation from
net income to Adjusted EBITDA are either non-cash items or items
that we do not consider to be useful in assessing our operating
performance. In the case of the non-cash items, we believe that
investors can better assess our operating performance if the
measures are presented without such items because, unlike cash
expenses, these adjustments do not affect our ability to generate
free cash flow or invest in our business. For example, by excluding
depreciation and amortization from EBITDA, users can compare
operating performance without regard to different accounting
determinations such as useful life. In the case of the other items,
we believe that investors can better assess operating performance
if the measures are presented without these items because their
financial impact does not reflect ongoing operating
performance.
(3) Adjusted net income is defined as net income plus primarily
non-cash items and other items that management does not consider to
be useful in assessing our operating performance (e.g., stock-based
compensation expense, amortization related to acquired intangible
assets, restructuring charges, acquisition-related costs, asset
impairment charges, gain or loss on sale of assets, pension
mark-to-market and settlement expense, and income or loss from
discontinued operations, all net of the related tax effects).
(4) Adjusted EPS is defined as Adjusted net income (as defined
above) divided by diluted weighted average shares.
(5) Free cash flow is defined as net cash provided by operating
activities less capital expenditures.
(6) EBITDA, Adjusted EBITDA, Adjusted EPS, and free cash flow
are used by many of our investors, research analysts, investment
bankers, and lenders to assess our operating performance. For
example, a measure similar to Adjusted EBITDA is required by the
lenders under our term loan and revolving credit agreements.
IHS Inc.News Media Contact:Dan Wilinsky,
+1-303-397-2468dan.wilinsky@ihs.comorInvestor Relations
Contact:Eric Boyer, +1-303-397-2969eric.boyer@ihs.com
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