IHS IHS Holding Limited

IHS Inc. (NYSE:IHS), one of the leading global providers of critical technical information, decision-support tools and related services, today reported results for the full year and fourth quarter ended November 30, 2005. Revenue for fiscal 2005 was $476.1 million, representing an increase of 21 percent compared to $394.0 million for fiscal 2004. Net income for fiscal 2005 was $41.8 million, or $0.75 per diluted share, compared to $61.3 million, or $1.11 per diluted share, for fiscal 2004. Revenue for the fourth quarter of fiscal 2005 totaled $126.0 million, representing an increase of six percent over fourth-quarter 2004 revenue of $118.4 million. Net income for the fourth quarter of 2005 decreased 39 percent to $16.4 million, or $0.29 per diluted share, compared to fourth-quarter 2004 net income of $26.9 million, or $0.49 per diluted share. Full-year and fourth-quarter 2004 net income amounts include an after-tax gain of $23.0 million, or $0.42 per diluted share related to the sale of an investment in an affiliate. IHS generated approximately $48.3 million and $11.5 million of cash flow from operations in the full year and fourth quarter of 2005, respectively. The company also successfully completed an initial public offering during the fourth quarter of 2005. Adjusted EBITDA totaled $86.7 million for fiscal 2005, up 17 percent compared to $74.4 million in fiscal 2004. Adjusted EBITDA totaled $28.6 million in the fourth quarter of 2005, up 15 percent from $24.8 million in the fourth quarter of 2004. Adjusted EBITDA, a non-GAAP financial measure, is used by management to measure operating performance. EBITDA is defined as net income plus net interest, taxes, depreciation and amortization. Adjusted EBITDA excludes non-cash items, gains and losses on sales of assets and investments and other items that management does not utilize in assessing operating performance (as further described in the attached financial schedules). Management believes that it is useful to eliminate these items in order to focus on what it deems to be a more reliable indicator of ongoing operating performance. Management believes that investors may find adjusted EBITDA useful for the same reasons, although investors are cautioned that non-GAAP financial measures, such as adjusted EBITDA, are not a substitute for GAAP disclosures. Non-GAAP results are presented only as a supplement to the financial statements based on U.S. generally accepted accounting principles (GAAP). Reconciliations of comparable GAAP measurements to non-GAAP measurements, such as EBITDA and adjusted EBITDA, are provided within the schedules attached to this release. "We believe that our strong results in 2005 demonstrate that we are meeting the needs of an expanding market," said Charles Picasso, IHS President and CEO. "We grew the top line organically in both of our Energy and Engineering business segments by expanding our subscription base. We also enhanced our product offerings, including integrating several smaller strategic acquisitions, enhanced content and functionality of some of our existing products, continued to drive efficiencies across the organization, and generated significant cash flows. We are leveraging our global opportunity by providing customers with one-stop access to critical information and insight in our targeted industries." Full-Year 2005 Our 21-percent overall revenue growth in 2005 was primarily comprised of eight-percent organic growth and 10-percent growth from acquisitions completed within the last year. Drivers of organic growth included expansion in the subscription base and strong demand for services and decision-support tools. Revenue within our Energy segment increased 30 percent in fiscal 2005 to $242.3 million, compared to $185.8 million in 2004. Organic revenue growth contributed 13 percentage points of the increase. The balance of revenue growth was primarily driven by acquisitions. Engineering segment revenue increased 12 percent in fiscal 2005 to $233.8 million, compared to $208.2 million in 2004. Organic revenue growth contributed three percentage points of the increase. The remainder of Engineering's revenue growth was primarily driven by the combination of acquisitions and the unwinding of a joint venture. Fourth-Quarter 2005 Overall revenue growth for IHS in the fourth quarter of 2005 was primarily attributable to six-percent organic growth. One important item affecting the year-over-year organic revenue growth comparison was a seasonal standards product in our Engineering division, which is released and primarily sold in the fourth quarter once every three years -- including our fiscal 2004, when it accounted for $3.7 million of revenue. Excluding this product release from the comparison, organic growth was nine percent. Drivers of organic growth included expansion of the subscription base and strong growth rates within our services businesses. Energy segment revenue increased 11 percent in the fourth quarter of fiscal 2005 to $63.4 million, compared to $57.2 million in the comparable fiscal 2004 fourth quarter. That segment's organic revenue growth contributed substantially all of the increase. Engineering segment revenue increased two percent in the fourth quarter of fiscal 2005 to $62.6 million, compared to $61.3 million in the comparable 2004 fourth quarter. Engineering segment's organic revenue growth was flat compared to the prior year, but adjusting for the same product mentioned above, Engineering organic growth would have been seven percent. Balance Sheet IHS ended the 2005 fiscal year with $132.4 million of cash and cash equivalents on the balance sheet, and virtually no debt. "Our balance sheet provides us with financial flexibility which, when coupled with our solid operating results and cash flows, supports our growth strategies for the future," stated Michael Sullivan, Senior Vice President and CFO. Outlook (forward-looking statement) IHS currently anticipates organic revenue growth in a range of seven to nine percent for the full year fiscal 2006 ending November 30, 2006. The company further expects adjusted EBITDA to grow 10 to 13 percent for the full year fiscal 2006. Adjusted EBITDA excludes non-cash items, gains and losses on sales of assets and investments and other items that management does not utilize in assessing our operating performance, such as the net periodic pension and post-retirement benefits and the estimated cost of restricted stock grants. "Building on our robust fourth-quarter and full-year results, we believe we are positioned well for fiscal 2006, in terms of our strong financial performance and progress in implementing our strategic and operational plans to enhance IHS' role as a global leader and growth company," said Mr. Picasso. As previously announced, IHS will hold a conference call to discuss fourth-quarter and full-year results on January 12, 2006, at 3:00 p.m. MST (5:00 p.m. EST). The conference call will be simultaneously webcast on the company's website (www.ihs.com). IHS Forward-Looking Statements This release may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. Such statements may include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products, and services, and statements regarding future performance. Forward-looking statements are generally identified by the words "expect," "anticipate," "believe," "intend," "estimate," "plan" and similar expressions. Although IHS and its management believe that the expectations reflected in such forward-looking statements are reasonable, investors are cautioned that forward-looking information and statements are subject to various risks and uncertainties -- many of which are difficult to predict and generally beyond the control of IHS -- that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include those discussed or identified by IHS from time to time in its public filings. Other than as required by applicable law, IHS does not undertake any obligation to update or revise any forward-looking information or statements. Please consult our public filings at www.sec.gov or www.ihs.com. About IHS Inc. (www.ihs.com) IHS (NYSE:IHS) is one of the leading global providers of critical technical information, decision-support tools and related services to customers in a number of industries including energy, defense, aerospace, construction, electronics, and automotive through two operating segments, Engineering and Energy. Our Engineering and Energy segments each represent approximately one-half of IHS' total revenues. We serve customers ranging from governments and large multinational corporations to smaller companies and technical professionals in more than 100 countries. Our customers rely on our offerings to facilitate decision making, support key processes and improve productivity. We have been in business for more than 45 years and employ more than 2,300 people around the world. IHS and IHS Energy are registered trademarks of IHS Inc. All other company and product names may be trademarks of their respective owners. Copyright (C) 2005 IHS Inc. All rights reserved. -0- *T IHS INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per-share amounts) As of November 30, -------------------- 2004 2005 -------------------- (Unaudited) Assets Current assets: Cash and cash equivalents $124,452 $132,365 Short-term investments -- 27,223 Accounts receivable, net 117,873 136,950 Deferred subscription costs 25,727 27,918 Deferred income taxes 12,173 11,351 Other 11,625 10,638 -------------------- Total current assets 291,850 346,445 Non-current assets: Property and equipment, net 49,591 46,580 Intangible assets, net 26,821 27,456 Goodwill, net 301,880 296,394 Prepaid pension asset 81,242 88,516 Other 1,260 1,765 -------------------- Total non-current assets 460,794 460,711 -------------------- Total assets $752,644 $807,156 ==================== Liabilities and stockholders' equity Current liabilities: Short-term capital leases $48 $-- Accounts payable 39,516 41,625 Accrued compensation 28,869 20,135 Accrued royalties 26,307 26,139 Other accrued expenses 28,262 34,975 Income tax payable 9,114 7,726 Deferred subscription revenue 140,120 149,552 Risk management liabilities -- 2,705 -------------------- Total current liabilities 272,236 282,857 Long-term debt and capital leases 607 262 Accrued pension liability 7,531 6,824 Accrued post-retirement benefits 18,740 20,278 Deferred income taxes 11,533 15,044 Other liabilities 8,065 4,402 Minority interests 1,209 309 Deferred stock units and restricted shares with put rights 11,672 -- Stockholders' equity: Class A common stock, $0.01 par value per share, 80,000,000 shares authorized, 44,078,231 and 41,250,000 issued and outstanding at November 30, 2005 and 2004, respectively 413 441 Class B common stock, $0.01 par value per share, 13,750,000 shares authorized, issued and outstanding at November 30, 2005 and 2004 138 138 Class C common stock, $1.00 par value per share, 1,000 shares authorized, issued and held in treasury at November 30, 2004 -- -- Additional paid-in capital 122,300 168,196 Retained earnings 301,887 343,684 Accumulated other comprehensive loss (3,687) (10,486) Unearned compensation -- (24,793) -------------------- Total stockholders' equity 421,051 477,180 -------------------- Total liabilities and stockholders' equity $752,644 $807,156 ==================== *T -0- *T IHS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per-share amounts) Three Months Ended Years Ended November 30, November 30, -------------------------------------- 2004 2005 2004 2005 -------------------------------------- (Unaudited) (Unaudited) Revenue: Products $100,251 $104,487 $352,367 $395,830 Services 18,189 21,545 41,602 80,287 -------------------------------------- Total revenue 118,440 126,032 393,969 476,117 Operating expenses: Cost of revenue: Products 43,783 43,993 150,357 176,049 Services 10,876 13,857 29,643 51,572 Compensation expense related to equity awards 4,437 324 4,437 551 -------------------------------------- Total cost of revenue 59,096 58,174 184,437 228,172 Selling, general and administrative 39,018 40,099 136,529 162,860 Depreciation and amortization 2,908 2,880 9,642 11,419 Restructuring and other charges -- 1,306 -- 13,703 Compensation expense related to equity awards 17,065 1,403 17,065 4,721 Gain on sales of assets, net (497) -- (5,532) (1,331) Impairment of assets 1,972 -- 1,972 -- Net periodic pension and post- retirement benefits (1,447) (1,310) (5,791) (4,091) Earnings in unconsolidated subsidiaries (43) (51) (437) (129) Other expense (income), net (202) (578) 3,173 (1,059) -------------------------------------- Total operating expenses 117,870 101,923 341,058 414,265 -------------------------------------- Operating income 570 24,109 52,911 61,852 Gain on sale of investment in affiliate 26,601 -- 26,601 -- Interest income 554 932 1,140 3,485 Interest expense (196) (75) (450) (768) -------------------------------------- Non-operating income (expense), net 26,959 857 27,291 2,717 -------------------------------------- Income from continuing operations before income taxes and minority interests 27,529 24,966 80,202 64,569 Provision for income taxes 543 (7,878) (16,644) (20,376) -------------------------------------- Income from continuing operations before minority interests 28,072 17,088 63,558 44,193 Minority interests (221) (132) (275) (146) -------------------------------------- Income from continuing operations 27,851 16,956 63,283 44,047 Discontinued operations: Loss from discontinued operations, net (920) (598) (1,969) (2,250) -------------------------------------- Net income $26,931 $16,358 $61,314 $41,797 ====================================== Income from continuing operations per share: Basic (Class A and Class B common stock) $0.51 $0.31 $1.15 $0.80 ====================================== Diluted (Class A and Class B common stock) $0.51 $0.30 $1.15 $0.79 ====================================== Loss from discontinued operations per share: Basic (Class A and Class B common stock) $(0.02) $(0.01) $(0.04) $(0.04) ====================================== Diluted (Class A and Class B common stock) $(0.02) $(0.01) $(0.04) $(0.04) ====================================== Net income per share: Basic (Class A and Class B common stock) $0.49 $0.30 $1.11 $0.76 ====================================== Diluted (Class A and Class B common stock) $0.49 $0.29 $1.11 $0.75 ====================================== Weighted average shares: Basic (Class A common stock) 41,250 41,435 41,250 41,345 ====================================== Basic (Class B common stock) 13,750 13,750 13,750 13,750 ====================================== Diluted (Class A common stock) 55,000 56,061 55,000 55,895 ====================================== Diluted (Class B common stock) 13,750 13,750 13,750 13,750 ====================================== *T -0- *T IHS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Years Ended November 30, ------------------ 2004 2005 ------------------ (Unaudited) Operating activities Net income $61,314 $41,797 Reconciliation of net income to net cash provided by operating activities: Depreciation and amortization 9,882 11,655 Compensation expense related to equity awards (non- cash portion) 11,872 5,272 Gain on sales of assets, net (5,532) (1,331) Gain on sale of investment in affiliate (26,601) -- Impairment of assets 1,972 -- Net periodic pension and post-retirement benefits (5,791) (4,091) Minority interests 275 (168) Deferred income taxes (1,424) 4,531 Tax benefit from equity compensation plans -- 295 Change in assets and liabilities: Accounts receivable, net 4,557 (26,088) Other current assets (11,755) (2,922) Accounts payable (15,208) 5,033 Accrued expenses 26,232 (3,044) Income taxes 1,035 963 Deferred subscription revenue 16,152 16,388 ------------------ Net cash provided by operating activities 66,980 48,290 Investing activities Capital expenditures on property and equipment (4,444) (5,662) Change in other assets 4,485 (4,171) Purchase of investments -- (28,384) Sales and maturities of investments -- 1,101 Acquisitions of businesses, net of cash acquired (70,331) (3,518) Proceeds from sales of assets and investment in affiliate 104,893 1,331 ------------------ Net cash provided by (used in) investing activities 34,603 (39,303) Financing activities Net payments on debt (157) (390) Cash dividends (1,843) -- ------------------ Net cash used in financing activities (2,000) (390) ------------------ Foreign exchange impact on cash balance 818 (684) ------------------ Net increase in cash and cash equivalents 100,401 7,913 Cash and cash equivalents at the beginning of the year 24,051 124,452 ------------------ Cash and cash equivalents at the end of the year $124,452 $132,365 ================== *T -0- *T IHS INC. SEGMENT INFORMATION (In thousands) Three Months Ended Years Ended November 30, November 30, ------------------------------------ 2004 2005 2004 2005 ------------------------------------ (Unaudited) (Unaudited) Energy revenue $57,158 $63,395 $185,792 $242,312 Engineering revenue 61,282 62,637 208,177 233,805 ------------------------------------ Revenue $118,440 $126,032 $393,969 $476,117 ==================================== Energy operating income $9,008 $14,215 $35,225 $53,003 Engineering operating income 11,617 11,617 32,984 17,993 ------------------------------------ Total segment operating income 20,625 25,832 68,209 70,996 Adjustments: Corporate-level restructuring and other charges -- (1,306) -- (9,297) Compensation expense related to equity awards (21,502) (1,727) (21,502) (5,272) Gain on sales of corporate assets, net -- -- 413 1,334 Net periodic pension and post- retirement benefits 1,447 1,310 5,791 4,091 ------------------------------------ Operating income $570 $24,109 $52,911 $61,852 ==================================== *T -0- *T IHS INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASUREMENT TO MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENT (In thousands) Three Months Ended Years Ended November 30, November 30, ------------------------------------ 2004 2005 2004 2005 ------------------------------------ (Unaudited) (Unaudited) Net income $26,931 $16,358 $61,314 $41,797 Interest income (554) (932) (1,140) (3,485) Interest expense 196 75 450 768 Provision for income taxes (543) 7,878 16,644 20,376 Depreciation and amortization 2,908 2,880 9,642 11,419 ------------------------------------ EBITDA 28,938 26,259 86,910 70,875 Compensation expense related to equity awards 21,502 1,727 21,502 5,272 Restructuring and other charges -- 1,306 -- 13,703 Gain on sales of assets, net (497) -- (5,532) (1,331) Impairment of assets 1,972 -- 1,972 -- Net periodic pension and post- retirement benefits (1,447) (1,310) (5,791) (4,091) Gain on sale of investment in affiliate (26,601) -- (26,601) -- Loss from discontinued operations, net 920 598 1,969 2,250 ------------------------------------ Adjusted EBITDA $24,787 $28,580 $74,429 $86,678 ==================================== *T -0- *T IHS INC. SUPPLEMENTAL INFORMATION (In thousands, except per-share amounts) Three Months Ended November 30, -------------------------- 2004 2005 -------------------------- After- Per After- Per tax share tax share -------------------------- (Unaudited) Compensation expense related to equity awards $13,557 $0.25 $931 $0.02 Restructuring and other charges -- -- 888 0.02 Gain on sales of assets, net (308)(0.01) -- -- Net periodic pension and post-retirement benefits (877)(0.02) (534)(0.01) Loss from discontinued operations, net 920 0.02 598 0.01 Gain on sale of investment (23,009)(0.42) -- -- Years Ended November 30, --------------------------- 2004 2005 --------------------------- After- Per After- Per tax share tax share --------------------------- (Unaudited) Compensation expense related to equity awards $13,557 $0.25 $3,315 $0.06 Restructuring and other charges -- -- 10,574 0.19 Gain on sales of assets, net (3,430)(0.06) (826)(0.02) Impairment of assets 1,223 0.02 -- -- Net periodic pension and post-retirement benefits (3,511)(0.06)(2,404)(0.04) Loss from discontinued operations, net 1,969 0.04 2,250 0.04 Gain on sale of investment (23,009)(0.42) -- -- *T