IHS Inc. (NYSE: IHS), a leading global source of critical
information and insight, today reported strong results for the
second quarter ended May 31, 2008. Revenue for the second quarter
of 2008 totaled $207.2 million, surpassing the $200 million mark
for the first time, and representing a 34 percent increase over
second-quarter 2007 revenue of $154.9 million. Net income for the
second quarter of 2008 increased $4.7 million to $23.3 million, or
$0.37 per diluted share, compared to second-quarter 2007 net income
of $18.6 million, or $0.32 per diluted share. Adjusted EBITDA
totaled $53.3 million for the second quarter of 2008, up 49 percent
from $35.8 million in the second quarter of 2007. Adjusted earnings
per diluted share were $0.46 for the second quarter of 2008, an
increase of 24 percent over the prior-year period. Adjusted EBITDA
and adjusted earnings per share are non-GAAP (generally accepted
accounting principles) financial measures used by management to
measure operating performance. Please see the end of this release
for more information about these non-GAAP measures. �We achieved
record quarterly revenue and adjusted EBITDA in the second quarter
while continuing to expand margins and generate increasing cash
flow,� said Jerre Stead, chairman and chief executive officer, IHS.
�Additionally, we closed four important acquisitions and made good
progress on our operational initiatives. The result is a solid
performance for the first half of fiscal 2008.� Second-Quarter 2008
Details Revenue for the second quarter of 2008 totaled $207.2
million, a 34 percent increase over second-quarter 2007 revenue of
$154.9 million. Organic revenue growth in the second quarter of
2008 was nine percent over the prior year; acquisitions added 23
percent and foreign exchange accounted for the remainder of the
revenue increase. The company continued to grow its business in
both operating segments, domestically and internationally. The
Energy segment increased its revenue for the second quarter by 23
percent, to $109.6 million, compared to $88.8 million in the prior
year�s second quarter. The Engineering segment grew its second
quarter revenue by 48 percent, to $97.5 million, compared to $66.1
million in the prior year. Adjusted EBITDA for the second quarter
of 2008 increased 49 percent over the second quarter of last year
and was driven primarily by top-line growth accompanied by margin
expansion. Operating income increased $6.9 million year-over-year
to $32.8 million, up from $25.9 million for the second quarter of
2007. Energy operating income was $38.8 million, up 34 percent over
the prior-year quarter, and Engineering operating income was $17.2
million, up 46 percent over last year. Year-to-Date 2008 Revenue
for the six months of 2008 totaled $406.0 million, a 32 percent
increase over the prior-period revenue of $307.5 million. Organic
growth contributed nine percent of the increase. Acquisitions added
21 percent and foreign exchange movements added the remainder. The
Energy segment grew its revenue during the first six months of
fiscal year 2008 by 25 percent, to $219.9 million, compared to
$175.6 million in the prior-year period. The Engineering segment
grew its year-to-date 2008 revenue by 41 percent, to $186.0
million, compared to $131.9 million in the prior year. Adjusted
EBITDA for the first six months of 2008 totaled $104.1 million, up
45 percent from $71.9 million in the first six months of 2007.
Operating income increased 23 percent year-over-year to $63.7
million, up from $51.8 million for the six months ended May 31,
2007. Energy operating income was $77.9 million, up 39 percent over
the prior-year period, and Engineering operating income was $32.2
million, up 30 percent over last year. Net income for the first six
months of 2008 increased 21 percent to $44.7 million, or $0.71 per
diluted share, compared to the first six months 2007 net income of
$37.0 million, or $0.63 per diluted share. Cash Flows IHS generated
approximately $95.0 million of cash flow from operations during the
six months ended May 31, 2008, as compared to last year�s $65.8
million. Balance Sheet IHS ended the second quarter of 2008 with
$105.4 million of cash and cash equivalents, and $28.5 million of
debt. �Our underlying subscription-based business continues to
perform very well, helping generate top-line growth, margin
expansion and a record $62.5 million of cash flow from operations
during the second quarter,� stated Michael J. Sullivan, executive
vice president and chief financial officer. �As a result, we have
now fully paid off the money we borrowed at the start of the second
quarter related to the three acquisitions announced March 3, 2008.�
Share Repurchase Program During the second quarter of 2008, IHS
repurchased 27,700 shares of its common stock for approximately
$1.7 million, or $60.00 per share. During the first six months of
2008, IHS repurchased 94,200 shares of its common stock for
approximately $5.5 million, or $58.88 per share. Outlook
(Forward-Looking Statement) We expect all-in revenue growth in the
range of 21 to 23 percent for the full year ending November 30,
2008. We are also revising our annual adjusted EBITDA guidance
upward, and currently anticipate adjusted EBITDA to grow 28 to 30
percent for fiscal 2008. See discussion of adjusted EBITDA and
non-GAAP financial measures at the end of this release. As
previously announced, IHS will hold a conference call to discuss
second quarter results on June 18, 2008, at 3:00 p.m. MDT (5:00
p.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 the
financial statements based on U.S. generally accepted accounting
principles (GAAP). The non-GAAP financial information is provided
to enhance the reader�s understanding of our financial performance,
but no non-GAAP measure should 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 and adjusted earnings
per diluted share, are provided within the schedules attached to
this release. EBITDA is defined as net income plus or minus net
interest plus taxes, depreciation and amortization. Adjusted EBITDA
includes our share of adjusted EBITDA from an unconsolidated joint
venture and 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 (as further
described in the attached financial schedules). Adjusted earnings
per diluted share exclude similar non-cash items as adjusted
EBITDA. None of these non-GAAP financial measures are recognized
terms under GAAP and do not purport to be an alternative to net
income as an indicator of operating performance or any other GAAP
measure. Management uses these non-GAAP measures in its operational
and financial decision-making, believing that it is useful to
eliminate certain items in order to focus on what it deems 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 and adjusted earnings per diluted share
metrics. Management also believes 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. EBITDA, adjusted EBITDA, and adjusted
earnings per diluted share are also used by research analysts,
investment bankers and lenders to assess our operating performance.
For example, a measure similar to EBITDA is required by the lenders
under our credit facility. 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
management believes the measures provide users with valuable
insight into key components of GAAP financial disclosures. For
example, a company with greater GAAP net income may not be as
appealing to investors if its net income is more heavily comprised
of gains on asset sales. Likewise, eliminating the effects of
interest income and expense moderates the impact of a company's
capital structure on its performance. All of the items included in
the reconciliation from net income to adjusted EBITDA are either
(i) non-cash items (e.g., depreciation and amortization) or (ii)
items that management does not consider to be useful in assessing
our operating performance (e.g., income taxes and gain on sale of
assets). In the case of the non-cash items, management believes
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
eliminating 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, management believes 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. 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 a
leading global source of critical information and insight for
customers in a broad range of industries. Our customer product and
service solutions span four major areas of information: energy,
product lifecycle management, environmental and security. By
focusing on our customers first, we deliver data and expertise that
enable innovative and successful decision-making. Customers range
from governments and multinational companies to smaller companies
and technical professionals in more than 180 countries. IHS has
been in business since 1959 and employs more than 3,000 people in
35 locations around the world. IHS is a registered trademark of IHS
Inc. All other company and product names may be trademarks of their
respective owners. Copyright � 2008 IHS Inc. All rights reserved.
IHS INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share
and per-share amounts) � � May 31, November 30, 2008 2007
(Unaudited) Assets Current assets: Cash and cash equivalents $
105,371 $ 148,484 Short-term investments � 10,518 Accounts
receivable, net 169,801 175,542 Deferred subscription costs 42,830
35,910 Deferred income taxes 21,435 17,681 Other 17,683 � 14,112 �
Total current assets 357,120 402,247 Non-current assets: Property
and equipment, net 58,009 58,756 Equity investments in joint
venture 73,002 � Intangible assets, net 223,292 206,359 Goodwill,
net 616,199 564,582 Prepaid pension asset 93,229 91,116 Other 835 �
747 � Total non-current assets 1,064,566 � 921,560 � Total assets $
1,421,686 � $ 1,323,807 � Liabilities and stockholders� equity
Current liabilities: Short-term debt $ 28,485 $ 3,062 Accounts
payable 26,092 37,550 Accrued compensation 19,104 37,014 Accrued
royalties 20,599 22,684 Other accrued expenses 41,299 37,435 Income
tax payable 7,902 15,255 Deferred subscription revenue 288,346 �
239,395 � Total current liabilities 431,827 392,395 Long-term debt
� 37 Accrued pension liability 11,413 11,965 Accrued
post-retirement benefits 8,717 10,203 Deferred income taxes 68,666
60,461 Other liabilities 7,380 7,619 Minority interests 252 219
Commitments and contingencies Stockholders� equity: Class A common
stock, $0.01 par value per share, 80,000,000 shares authorized,
50,081,100 and 49,831,293 shares issued and 48,703,869 and
48,758,518 shares outstanding at May 31, 2008 and November 30,
2007, respectively 500 498 Class B common stock, $0.01 par value
per share, 13,750,000 shares authorized, issued and outstanding at
May 31, 2008 and November 30, 2007 138 138 Additional paid-in
capital 411,908 381,124 Treasury stock, at cost; 1,377,231 and
1,072,775 shares at May 31, 2008 and November 30, 2007,
respectively (64,709 ) (46,045 ) Retained earnings 529,915 483,804
Accumulated other comprehensive income 15,679 � 21,389 � Total
stockholders� equity 893,431 � 840,908 � Total liabilities and
stockholders� equity $ 1,421,686 � $ 1,323,807 � IHS�INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except
per-share amounts) � � Three Months Ended May 31, Six Months Ended
May 31, 2008 � 2007 2008 � 2007 (Unaudited) Revenue: Products $
171,522 $ 129,136 $ 331,211 $ 252,115 Services 35,671 � 25,764 �
74,759 � 55,406 � Total revenue 207,193 154,900 405,970 307,521
Operating expenses: Cost of revenue: Products 71,481 50,274 134,575
99,007 Services 21,699 � 17,479 � 47,765 � 34,484 � Total cost of
revenue (includes stock-based compensation expense of $376, $105,
$687 and $456 for the three and six months ended May 31, 2008 and
2007, respectively) 93,180 67,753 182,340 133,491 Selling, general
and administrative (includes stock-based compensation expense of
$10,001; $5,940; $22,391 and $12,925 for the three and six months
ended May 31, 2008 and 2007, respectively) 72,923 56,607 144,809
114,498 Depreciation and amortization 9,683 4,921 18,506 9,501
Restructuring and other charges � 9 � � Gain on sales of assets,
net � (5 ) (119 ) (756 ) Net periodic pension and post-retirement
benefits (1,086 ) (354 ) (2,179 ) (622 ) Other expense (income),
net (323 ) 84 � (1,136 ) (360 ) Total operating expenses 174,377 �
129,015 � 342,221 � 255,752 � Operating income 32,816 25,885 63,749
51,769 Interest income 697 1,694 1,914 3,348 Interest expense (843
) (76 ) (979 ) (209 ) Non-operating income (loss), net (146 ) 1,618
� 935 � 3,139 � Income from continuing operations before income
taxes, minority interests and income from equity-method investment
32,670 27,503 64,684 54,908 Provision for income taxes (10,425 )
(8,909 ) (21,024 ) (17,952 ) Income from continuing operations
before minority interests and income from equity-method investment
22,245 18,594 43,660 36,956 Minority interests (31 ) (12 ) (15 ) 3
Income from equity-method investment 1,044 � � � 1,044 � � � Net
income $ 23,258 � $ 18,582 � $ 44,689 � $ 36,959 � Net income per
share: Basic (Class A and Class B common stock) $ 0.37 � $ 0.32 � $
0.72 � $ 0.64 � Diluted (Class A and Class B common stock) $ 0.37 �
$ 0.32 � $ 0.71 � $ 0.63 � Weighted average shares: Basic (Class A
common stock) 48,471 � 43,626 � 48,347 � 43,733 � Basic (Class B
common stock) 13,750 � 13,750 � 13,750 � 13,750 � Diluted (Class A
common stock) 63,086 � 58,281 � 63,045 � 58,328 � Diluted (Class B
common stock) 13,750 � 13,750 � 13,750 � 13,750 � IHS�INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) � Six Months
Ended May 31, 2008 � 2007 (Unaudited) Operating activities Net
income $ 44,689 $ 36,959 Reconciliation of net income to net cash
provided by operating activities: Depreciation and amortization
18,506 9,501 Stock-based compensation expense 23,078 13,381 Gain on
sales of assets, net (119 ) (756 ) Distributions from equity-method
investment 378 � Non-cash net periodic pension and post-retirement
benefits (3,122 ) (1,997 ) Undistributed earnings of unconsolidated
subsidiaries, net (1,233 ) 140 Minority interests 15 (234 )
Deferred income taxes 2,075 (1,015 ) Change in assets and
liabilities: Accounts receivable, net 5,800 24,825 Other current
assets (10,078 ) (5,565 ) Accounts payable (9,956 ) (25,388 )
Accrued expenses (17,304 ) (15,492 ) Income taxes (1,867 ) 5,311
Deferred subscription revenue 44,568 26,092 Other liabilities (457
) � � Net cash provided by operating activities 94,973 65,762
Investing activities Capital expenditures on property and equipment
(5,351 ) (3,645 ) Change in other assets (2,654 ) (3,496 ) Sales
and maturities of investments 10,500 2,008 Acquisitions of
businesses, net of cash acquired (130,878 ) (14,607 ) Proceeds from
sales of assets 140 � 2,461 � Net cash used in investing activities
(128,243 ) (17,279 ) Financing activities Proceeds from borrowings
50,000 � Repayment of borrowings (43,095 ) (500 ) Tax benefit from
equity compensation plans 454 121 Repurchases of common stock
(18,664 ) (15,663 ) Net cash used in financing activities (11,305 )
(16,042 ) Foreign exchange impact on cash balance 1,462 � (189 )
Net (decrease) increase in cash and cash equivalents (43,113 )
32,252 Cash and cash equivalents at the beginning of the period
148,484 � 180,034 � Cash and cash equivalents at the end of the
period $ 105,371 � $ 212,286 � IHS�INC. RECONCILIATION OF NON-GAAP
FINANCIAL MEASUREMENT TO MOST DIRECTLY COMPARABLE GAAP FINANCIAL
MEASUREMENT (In thousands) � � IHS Inc. Three Months Ended May 31,
Six Months Ended May 31, 2008 � � 2007 2008 � 2007 (Unaudited) �
Net income $ 23,258 $ 18,582 $ 44,689 $ 36,959 Interest income (697
) (1,694 ) (1,914 ) (3,348 ) Interest expense 843 76 979 209
Provision for income taxes 10,425 8,909 21,024 17,952 Depreciation
and amortization 9,683 � 4,921 � 18,506 � 9,501 � EBITDA 43,512
30,794 83,284 61,273 Stock-based compensation expense 10,377 6,045
23,078 13,381 Restructuring and offering charges � 9 � � Gain on
sales of assets, net � (5 ) (119 ) (756 ) Non-cash net periodic
pension and post-retirement benefits (1,559 ) (1,017 ) (3,122 )
(1,997 ) Income from equity-method investment (1,044 ) � (1,044 ) �
50% of Lloyd�s-Register Fairplay�s adjusted EBITDA 2,022 � � �
2,022 � � � Adjusted EBITDA $ 53,308 � $ 35,826 � $ 104,099 � $
71,901 � � Lloyd�s-Register Fairplay Three Months Ended May 31, Six
Months Ended May 31, 2008 2007(a) 2008 2007(a) (Unaudited) � Net
income $ 2,798 $ � $ 2,798 $ � Interest expense, net 10 � 10 �
Provision for income taxes 1,066 � 1,066 � Depreciation and
amortization 170 � � � 170 � � � EBITDA / Adjusted EBITDA $ 4,044 �
$ � � $ 4,044 � $ � � 50% of Adjusted EBITDA $ 2,022 � $ � � $
2,022 � $ � � � Summary Lloyd�s-Register Fairplay Adjusted F/S
Three Months Ended May 31, Six Months Ended May 31, 2008 2007(a)
2008 2007(a) (Unaudited) � Revenue $ 10,138 $ � $ 10,138 $ �
Operating expenses (6,255 ) � � (6,255 ) � � Operating income $
3,883 � $ 3,883 � Net income $ 2,798 $ � $ 2,798 $ � 50% of net
income $ 1,399 $ � $ 1,399 $ � Amortization expense for purchased
intangibles (493 ) � (493 ) � Tax benefit on amortization expense
for purchased intangibles 138 � � � 138 � � � Income from
equity-method investment $ 1,044 � $ � � $ 1,044 � $ � � � (a)
Note: We acquired a 50% interest in Lloyd�s-Register Fairplay on
March 3, 2008. IHS INC.RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASUREMENTS TO MOST DIRECTLY COMPARABLE GAAP FINANCIAL
MEASUREMENTS (In thousands) � Three Months Ended May 31, 2008 �
2007 (Unaudited) � Energy $ 109,648 $ 88,828 Engineering 97,545
66,072 Shared Services � � � � Revenue $ 207,193 � $ 154,900 � �
Energy $ 38,753 $ 28,873 Engineering 17,209 11,825 Shared Services
(23,146 ) (14,813 ) Operating income $ 32,816 � $ 25,885 � � Three
Months Ended May 31, 2008 Energy � Engineering � Shared Services �
Consolidated (Unaudited) � Operating income $ 38,753 $ 17,209 $
(23,146 ) $ 32,816 Adjustments: Stock-based compensation expense �
� 10,377 10,377 Depreciation and amortization 4,313 4,541 829 9,683
Non-cash net periodic pension and post-retirement benefits � �
(1,559 ) (1,559 ) Minority interest � (31 ) � (31 ) 50% of
Lloyd�s-Register Fairplay�s adjusted EBITDA � � 2,022 � � � 2,022 �
Adjusted EBITDA $ 43,066 � $ 23,741 � $ (13,499 ) $ 53,308 � �
Three Months Ended May 31, 2007 Energy Engineering Shared Services
Consolidated (Unaudited) � Operating income $ 28,873 $ 11,825 $
(14,813 ) $ 25,885 Adjustments: Stock-based compensation expense �
� 6,045 6,045 Depreciation and amortization 2,917 1,407 597 4,921
Restructuring and offering charges (1 ) 10 � 9 (Gain) loss on sales
of assets, net 1 (6 ) � (5 ) Non-cash net periodic pension and
post-retirement benefits � � (1,017 ) (1,017 ) Minority interest �
� (12 ) � � (12 ) Adjusted EBITDA $ 31,790 � $ 13,224 � $ (9,188 )
$ 35,826 � IHS�INC. RECONCILIATION OF NON-GAAP FINANCIAL
MEASUREMENT TO MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENT
(In thousands) � Six Months Ended May 31, 2008 � 2007 (Unaudited) �
Energy $ 219,947 $ 175,574 Engineering 186,023 131,947 Shared
Services � � � � Revenue $ 405,970 � $ 307,521 � � Energy $ 77,905
$ 55,918 Engineering 32,201 24,810 Shared Services (46,357 )
(28,959 ) Operating income $ 63,749 � $ 51,769 � � Six Months Ended
May 31, 2008 Energy � Engineering � Shared Services � Consolidated
(Unaudited) � Operating income $ 77,905 $ 32,201 $ (46,357 ) $
63,749 Adjustments: Stock-based compensation expense � � 23,078
23,078 Depreciation and amortization 8,371 8,667 1,468 18,506 Gain
on sales of assets, net � (119 ) � (119 ) Non-cash net periodic
pension and post-retirement benefits � � (3,122 ) (3,122 ) Minority
interest � (15 ) � (15 ) 50% of Lloyd�s-Register Fairplay�s
adjusted EBITDA � 2,022 � � � 2,022 � Adjusted EBITDA $ 86,276 $
42,756 � $ (24,933 ) $ 104,099 � � Six Months Ended May 31, 2007
Energy Engineering Shared Services Consolidated (Unaudited) �
Operating income $ 55,918 $ 24,810 $ (28,959 ) $ 51,769
Adjustments: Stock-based compensation expense � � 13,381 13,381
Depreciation and amortization 5,595 2,812 1,094 9,501 Gain on sales
of assets, net � � (756 ) (756 ) Non-cash net periodic pension and
post-retirement benefits � � (1,997 ) (1,997 ) Minority interest �
3 � � � 3 � Adjusted EBITDA $ 61,513 $ 27,625 � $ (17,237 ) $
71,901 � IHS�INC. SUPPLEMENTAL INFORMATION (In thousands, except
per-share amounts) � � Three Months Ended May 31, Six Months Ended
May 31, 2008 � 2007 2008 � 2007 (Unaudited) � Net cash provided by
operating activities $ 62,493 $ 42,665 $ 94,973 $ 65,762 Capital
expenditures on property and equipment (2,278 ) (340 ) (5,351 )
(3,645 ) Free cash flow $ 60,215 � $ 42,325 � $ 89,622 � $ 62,117 �
� Three Months Ended May 31, Six Months Ended May 31, 2008 2007
2008 2007 (Unaudited) � Earnings per diluted share $ 0.37 $ 0.32 $
0.71 $ 0.63 Stock-based compensation expense 0.10 0.07 0.23 0.14
Gain on sales of assets, net � � � (0.01 ) Non-cash net periodic
pension and post-retirement benefits (0.02 ) (0.01 ) (0.03 ) (0.02
) Adjusted earnings per diluted share $ 0.46 � $ 0.37 � $ 0.91 � $
0.75 � Note: amounts may not sum due to rounding.
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