IHS IHS Holding Limited

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.