IHS IHS Holding Limited

IHS Inc. (NYSE: IHS), the leading global source of information and analytics, today reported results for the second quarter ended May 31, 2015.

• Revenue of $591 million, up 4 percent from the prior-year period
• Total organic revenue growth of 1 percent, with 5 percent subscription organic revenue growth
• Adjusted EBITDA of $185 million, up 7 percent from the prior-year period
• Adjusted earnings per diluted share (Adjusted EPS) of $1.50, up 2 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 2015 Financial Performance

                Three months ended May 31, Change Six months ended May 31, Change

(in thousands, exceptpercentages and per sharedata)

2015     2014 $     % 2015     2014 $     % Revenue $ 591,407 $ 568,008 $ 23,399 4 % $ 1,137,668 $ 1,092,466 $ 45,202 4 %   Net income $ 50,952 $ 55,492 $ (4,540 ) (8 )% $ 90,472 $ 87,914 $ 2,558 3 % Adjusted EBITDA $ 185,096 $ 172,733 $ 12,363 7 % $ 354,391 $ 328,908 $ 25,483 8 %   GAAP EPS $ 0.74 $ 0.81 $ (0.07 ) (9 )% $ 1.31 $ 1.28 $ 0.03 2 % Adjusted EPS $ 1.50 $ 1.47 $ 0.03 2 % $ 2.85 $ 2.75 $ 0.10 4 %   Cash flow from operations $ 146,246 $ 221,113 $ (74,867 ) (34 )% $ 334,284 $ 374,974 $ (40,690 ) (11 )% Free cash flow $ 116,020 $ 194,687 $ (78,667 ) (40 )% $ 265,246 $ 323,938 $ (58,692 ) (18 )%  

“I am pleased to be back once again in the CEO role at IHS,” said Jerre Stead, IHS chairman and chief executive officer. “This company has always had tremendous people and assets, and we have immense opportunity to better capture the full potential from them.”

“We continue to see strength in our Industrials product offerings growth, offset by lower Resources revenue as a result of market pressure in our energy product offerings,” said Todd Hyatt, IHS chief financial officer. “Despite the macro industry situation, we like our energy assets and are encouraged by the resiliency of the subscription business, which we expect will deliver flat sales in an environment where energy spend has been significantly reduced.”

Second Quarter and Year-to-Date 2015 Revenue Performance

Second quarter 2015 revenue increased 4 percent compared to the second quarter of 2014, and year-to-date 2015 revenue increased 4 percent compared to the same period in 2014. The components of revenue growth are described below by segment and in total.

    Change in revenue Second quarter 2015 vs. second quarter 2014     Year-to-date 2015 vs. year-to-date 2014

(All amounts represent percentagepoints)

Organic     Acquisitive    

ForeignCurrency

Organic     Acquisitive     Foreign

Currency

Americas 1% 7 % (1)% 1% 5% (1)% EMEA 1% 2 % (5)% 1% 2% (4)% APAC (2)% 6 % (2)% 2% 7% (2)% Total 1% 6 % (2)% 1% 5% (2)%    

The subscription-based business grew 5 percent organically in the second quarter of 2015 compared to the same period of 2014, as described in the following table.

                Three months ended May 31, Percent change Six months ended May 31, Percent change

(in thousands, exceptpercentages)

2015     2014 Total     Organic 2015     2014 Total     Organic Subscription revenue $ 459,681 $ 426,346 8% 5% $ 907,488 $ 843,720 8% 6% Non-subscription revenue 131,726   141,662   (7)% (12)% 230,180   248,746   (7)% (13)% Total revenue $ 591,407   $ 568,008   4% 1% $ 1,137,668   $ 1,092,466   4% 1%  

Second Quarter and Year-to-Date 2015 Segment Performance

Segment results were as follows:

• Americas. Second quarter revenue for Americas increased $25 million, or 7 percent, to $402 million, and included 6 percent organic growth for the subscription-based business. Second quarter Adjusted EBITDA for Americas increased $7 million, or 5 percent, to $143 million. Second quarter operating income for Americas decreased $7 million, or 8 percent, to $86 million.

Year-to-date revenue for Americas increased $41 million, or 6 percent, to $768 million. Year-to-date Adjusted EBITDA for Americas increased $13 million, or 5 percent, to $271 million. Year-to-date operating income for Americas decreased $12 million, or 7 percent, to $160 million.

• EMEA. Second quarter revenue for EMEA decreased $2 million, or 2 percent, to $137 million, and included 3 percent organic growth for the subscription-based business. Second quarter Adjusted EBITDA for EMEA was largely unchanged at $40 million. Second quarter operating income for EMEA decreased $3 million, or 8 percent, to $32 million.

Year-to-date revenue for EMEA decreased $2 million, or 1 percent, to $264 million. Year-to-date Adjusted EBITDA for EMEA increased $3 million, or 4 percent, to $75 million. Year-to-date operating income for EMEA decreased $2 million, or 4 percent, to $57 million.

• APAC. Second quarter revenue for APAC increased $1 million, or 1 percent, to $53 million, and included 4 percent organic growth for the subscription-based business. Second quarter Adjusted EBITDA for APAC increased $2 million, or 13 percent, to $15 million. Second quarter operating income for APAC increased $1 million, or 6 percent, to $14 million.

Year-to-date revenue for APAC increased $6 million, or 7 percent, to $106 million. Year-to-date Adjusted EBITDA for APAC increased $4 million, or 17 percent, to $29 million. Year-to-date operating income for APAC increased $2 million, or 7 percent, to $25 million.

Share Repurchase Programs

IHS has completed its previously announced $100 million share repurchase program, and today announced that its board of directors has approved a new program to repurchase up to $500 million of IHS Class A common stock. IHS may repurchase shares in open market purchases or through privately negotiated transactions in compliance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended, subject to market conditions, applicable legal requirements and other relevant factors. The repurchase program does not obligate IHS to repurchase any set dollar amount or number of shares and is scheduled to expire on November 30, 2017, but may be suspended at any time at the company's discretion. The amount authorized under the new share repurchase program includes share repurchases of our Class A common stock associated with minimum statutory tax withholdings for employee equity award vests, as previously disclosed and approved by our board of directors.

“Our share repurchase programs demonstrate our continued confidence in the IHS strategy of delivering long-term profitable growth and our commitment to delivering value to our shareholders,” said Stead.

Outlook (forward-looking statement)

For the year ending November 30, 2015, IHS raises guidance as follows:

• Revenue in a range of $2.30 billion to $2.34 billion, including 5-6 percent subscription organic growth and negative non-subscription organic growth;
• Adjusted EBITDA in a range of $725 million to $740 million; and
• Adjusted EPS in a range of $5.80 to $6.00 per diluted share.

Additionally, for the year ending November 30, 2015, IHS expects:

• Depreciation expense to be approximately $85-90 million;
• Amortization expense related to acquired intangible assets to be approximately $145-150 million;
• Net interest expense to be approximately $73-77 million; and
• Stock-based compensation expense to be approximately $135-145 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 2015 results on June 23, 2015, 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 EBITDA, 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 manage system failures, capacity constraints, and cyber risks; 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; our ability to satisfy our debt obligations and our other ongoing business obligations; 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 150 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 about 8,800 people in 32 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.

© 2015 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, 2015 November 30, 2014 (Unaudited) (Audited) Assets Current assets: Cash and cash equivalents $ 225,879 $ 153,156 Accounts receivable, net 365,265 421,374 Income tax receivable — 2,283 Deferred subscription costs 62,747 51,021 Deferred income taxes 71,288 81,780 Other 70,490   60,973   Total current assets 795,669   770,587   Non-current assets: Property and equipment, net 316,999 301,419 Intangible assets, net 1,129,553 1,091,109 Goodwill 3,426,282 3,157,324 Other 24,326   27,991   Total non-current assets 4,897,160   4,577,843   Total assets $ 5,692,829   $ 5,348,430   Liabilities and stockholders’ equity Current liabilities: Short-term debt $ 36,001 $ 36,257 Accounts payable 52,116 52,245 Accrued compensation 60,545 101,875 Accrued royalties 32,327 37,346 Other accrued expenses 118,956 131,147 Income tax payable 7,772 — Deferred revenue 680,863   596,187   Total current liabilities 988,580 955,057 Long-term debt 2,093,091 1,806,098 Accrued pension and postretirement liability 27,867 29,139 Deferred income taxes 362,285 347,419 Other liabilities 57,852 51,171 Commitments and contingencies Stockholders’ equity: Class A common stock, $0.01 par value per share, 160,000,000 shares authorized, 70,000,939 and 69,391,577 shares issued, and 68,428,175 and 68,372,176 shares outstanding at May 31, 2015 and November 30, 2014, respectively 700 694 Additional paid-in capital 985,796 956,381 Treasury stock, at cost: 1,572,764 and 1,019,401 shares at May 31, 2015 and November 30, 2014, respectively (173,396 ) (105,873 ) Retained earnings 1,505,541 1,415,069 Accumulated other comprehensive loss (155,487 ) (106,725 ) Total stockholders’ equity 2,163,154   2,159,546   Total liabilities and stockholders’ equity $ 5,692,829   $ 5,348,430            

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, 2015     2014 2015     2014 Revenue $ 591,407 $ 568,008 $ 1,137,668 $ 1,092,466 Operating expenses: Cost of revenue (includes stock-based compensation expense of $1,444; $1,511; $2,858; and $3,371 for the three and six months ended May 31, 2015 and 2014, respectively) 228,903 224,945 443,849 437,870 Selling, general and administrative (includes stock-based compensation expense of $32,900; $34,521; $64,976; and $76,625 for the three and six months ended May 31, 2015 and 2014, respectively) 210,480 203,644 406,418 401,360 Depreciation and amortization 58,910 49,142 114,829 98,779 Restructuring charges 7,369 860 21,653 4,035 Acquisition-related costs 301 77 477 1,017 Net periodic pension and postretirement expense 497 2,834 993 5,670 Other expense (income), net 2,018   (267 ) 1,094   1,308   Total operating expenses 508,478   481,235   989,313   950,039   Operating income 82,929 86,773 148,355 142,427 Interest income 180 235 340 486 Interest expense (17,454 ) (14,610 ) (34,448 ) (29,855 ) Non-operating expense, net (17,274 ) (14,375 ) (34,108 ) (29,369 ) Income from continuing operations before income taxes 65,655 72,398 114,247 113,058 Provision for income taxes (14,703 ) (16,906 ) (23,775 ) (25,144 ) Net income $ 50,952   $ 55,492   $ 90,472   $ 87,914     Basic earnings per share $ 0.74   $ 0.81   $ 1.32   $ 1.29   Weighted average shares used in computing basic earnings per share 68,802   68,216   68,752   68,015     Diluted earnings per share $ 0.74   $ 0.81   $ 1.31   $ 1.28   Weighted average shares used in computing diluted earnings per share 69,111   68,697   69,258   68,730        

IHS INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)(Unaudited)

  Six months ended May 31, 2015     2014 Operating activities: Net income $ 90,472 $ 87,914 Reconciliation of net income to net cash provided by operating activities: Depreciation and amortization 114,829 98,779 Stock-based compensation expense 67,834 79,996 Impairment of assets 1,243 — Excess tax benefit from stock-based compensation (5,193 ) (10,327 ) Net periodic pension and postretirement expense 993 5,670 Pension and postretirement contributions (2,285 ) (1,650 ) Deferred income taxes (3,944 ) 28,907 Change in assets and liabilities: Accounts receivable, net 67,628 38,871 Other current assets (29,725 ) (23,153 ) Accounts payable (7,002 ) 119 Accrued expenses (53,476 ) (16,666 ) Income tax 20,242 (20,656 ) Deferred revenue 70,140 105,570 Other liabilities 2,528   1,600   Net cash provided by operating activities 334,284   374,974   Investing activities: Capital expenditures on property and equipment (69,038 ) (51,036 ) Acquisitions of businesses, net of cash acquired (369,908 ) — Intangible assets acquired — (714 ) Change in other assets (339 ) 2,762 Settlements of forward contracts 2,419   1,309   Net cash used in investing activities (436,866 ) (47,679 ) Financing activities: Proceeds from borrowings 440,000 30,000 Repayment of borrowings (153,263 ) (348,086 ) Excess tax benefit from stock-based compensation 5,193 10,327 Repurchases of common stock (105,247 ) (47,429 ) Net cash provided by (used in) financing activities 186,683   (355,188 ) Foreign exchange impact on cash balance (11,378 ) (9,476 ) Net increase (decrease) in cash and cash equivalents 72,723 (37,369 ) Cash and cash equivalents at the beginning of the period 153,156   258,367   Cash and cash equivalents at the end of the period $ 225,879   $ 220,998                    

IHS INC.SUPPLEMENTAL REVENUE DISCLOSURE(In thousands)(Unaudited)

  Three months ended May 31, Percent change Six months ended May 31, Percent change 2015     2014 Total     Organic 2015     2014 Total     Organic Revenue by segment: Americas $ 401,881 $ 376,787 7 % 1 % $ 767,962 $ 727,207 6 % 1 % EMEA 136,630 138,847 (2 )% 1 % 263,677 265,708 (1 )% 1 % APAC 52,896   52,374   1 % (2 )% 106,029   99,551   7 % 2 % Total revenue $ 591,407   $ 568,008   4 % 1 % $ 1,137,668   $ 1,092,466   4 % 1 %   Revenue by transaction type: Subscription $ 459,681 $ 426,346 8 % 5 % $ 907,488 $ 843,720 8 % 6 % Non-subscription 131,726   141,662   (7 )% (12 )% 230,180   248,746   (7 )% (13 )% Total revenue $ 591,407   $ 568,008   4 % 1 % $ 1,137,668   $ 1,092,466   4 % 1 %   Revenue by product category: Resources $ 234,673 $ 243,876 (4 )% (4 )% $ 452,242 $ 461,370 (2 )% (2 )% Industrials 220,536 181,346 22 % 8 % 417,126 353,069 18 % 7 % Horizontal products 136,198   142,786   (5 )% (1 )% 268,300   278,027   (3 )% (1 )% Total revenue $ 591,407   $ 568,008   4 % 1 % $ 1,137,668   $ 1,092,466   4 % 1 %    

IHS INC.RECONCILIATION OF CONSOLIDATED NON-GAAP FINANCIAL MEASUREMENTS TOMOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS(In thousands, except for per-share amounts)(Unaudited)

  Three months ended May 31, Six months ended May 31, 2015   2014 2015   2014 Net income $ 50,952 $ 55,492 $ 90,472 $ 87,914 Interest income (180 ) (235 ) (340 ) (486 ) Interest expense 17,454 14,610 34,448 29,855 Provision for income taxes 14,703 16,906 23,775 25,144 Depreciation 22,259 16,090 43,172 31,880 Amortization related to acquired intangible assets 36,651   33,052   71,657   66,899   EBITDA (1)(6) $ 141,839 $ 135,915 $ 263,184 $ 241,206 Stock-based compensation expense 34,344 36,032 67,834 79,996 Restructuring charges 7,369 860 21,653 4,035 Acquisition-related costs 301 77 477 1,017 Impairment of assets 1,243 — 1,243 — Loss (gain) on sale of assets —   (151 ) —   2,654   Adjusted EBITDA (2)(6) $ 185,096   $ 172,733   $ 354,391   $ 328,908     Three months ended May 31, Six months ended May 31, 2015 2014 2015 2014 Net income $ 50,952 $ 55,492 $ 90,472 $ 87,914 Stock-based compensation expense 34,344 36,032 67,834 79,996 Amortization related to acquired intangible assets 36,651 33,052 71,657 66,899 Restructuring charges 7,369 860 21,653 4,035 Acquisition-related costs 301 77 477 1,017 Impairment of assets 1,243 — 1,243 — Loss (gain) on sale of assets — (151 ) — 2,654 Income tax effect on adjusting items (27,139 ) (24,511 ) (55,650 ) (53,733 ) Adjusted net income (3) $ 103,721   $ 100,851   $ 197,686   $ 188,782   Adjusted EPS (4)(6) $ 1.50   $ 1.47   $ 2.85   $ 2.75   Weighted average shares used in computing Adjusted EPS 69,111   68,697   69,258   68,730     Three months ended May 31, Six months ended May 31, 2015 2014 2015   2014 Net cash provided by operating activities $ 146,246 $ 221,113 $ 334,284 $ 374,974 Capital expenditures on property and equipment (30,226 ) (26,426 ) (69,038 ) (51,036 ) Free cash flow (5)(6) $ 116,020   $ 194,687   $ 265,246   $ 323,938        

IHS INC.RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASUREMENTS TOMOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS(In thousands)(Unaudited)

  Three months ended May 31, 2015 Americas     EMEA     APAC     Shared Services     Total Operating income $ 86,200 $ 31,775 $ 13,743 $ (48,789 ) $ 82,929 Adjustments: Stock-based compensation expense — — — 34,344 34,344 Depreciation and amortization 49,408 6,257 1,314 1,931 58,910 Restructuring charges 6,693 510 166 — 7,369 Acquisition-related costs 218 83 — — 301 Impairment of assets —   1,243   —   —   1,243   Adjusted EBITDA $ 142,519   $ 39,868   $ 15,223   $ (12,514 ) $ 185,096     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     Six months ended May 31, 2015 Americas EMEA APAC Shared Services Total Operating income $ 159,541 $ 56,948 $ 24,597 $ (92,731 ) $ 148,355 Adjustments: Stock-based compensation expense — — — 67,834 67,834 Depreciation and amortization 95,502 12,534 2,913 3,880 114,829 Restructuring charges 16,056 4,486 1,111 — 21,653 Acquisition-related costs 394 83 — — 477 Impairment of assets —   1,243   —   —   1,243   Adjusted EBITDA $ 271,493   $ 75,294   $ 28,621   $ (21,017 ) $ 354,391     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       (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, gain or loss on debt extinguishment, 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, gain or loss on debt extinguishment, 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.  

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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