IHS Inc. Reports First Quarter 2011 Results

IHS Inc. (NYSE: IHS), a leading global source of critical information and insight, today reported results for the first quarter ended February 28, 2011. Revenue for the first quarter of 2011 totaled $295 million, a 23 percent increase over first quarter 2010 revenue of $241 million. Net income for the first quarter of 2011 was $30.7 million, or $0.47 per diluted share, compared to first quarter 2010 net income of $26.8 million, or $0.42 per diluted share.

Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) totaled $86.5 million for the first quarter of 2011, up 22 percent from $70.7 million in the first quarter of 2010. Adjusted earnings per diluted share were $0.75 for the first quarter of 2011, an increase of 21 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.

“Organic revenue growth continued to accelerate during the first quarter,” said Jerre Stead, IHS chairman and chief executive officer. “And we are making very good progress with our multiple initiatives and investments, as well as integrating our recent acquisitions. These important investments will drive profitable growth in the years to come.”

First Quarter 2011 Details

Revenue for the first quarter of 2011 totaled $295 million, a 23 percent increase over first-quarter 2010 revenue of $241 million. The revenue increase was driven by 9 percent organic growth, 13 percent acquisitive growth, and minimal foreign currency movements. The subscription-based business grew 8 percent organically and represented 79 percent of total revenue.

Three Months Ended February 28, Absolute Organic 2011 2010 % change % change Subscription revenue $ 233,772 $ 195,486

20%

8% Non-subscription revenue 61,230 45,249

35%

10% Total revenue $ 295,002 $ 240,735

23%

The company continued to grow its business overall in all three regions. The Americas (North and South America) segment increased its revenue during the first quarter by $29.2 million, or 19 percent, to $181.2 million. The EMEA (Europe, Middle East and Africa) segment grew its first quarter revenue by $16.2 million, or 24 percent, to $84.4 million. The APAC (Asia Pacific) segment's revenue was up $8.8 million, or 43 percent, to $29.4 million.

Adjusted EBITDA for the first quarter of 2011 was $86.5 million, up $15.8 million, or 22 percent, over the prior-year period. Operating income increased $3.6 million, or 10 percent, to $40.3 million. Americas' operating income increased $2.7 million, or 6 percent, to $49.3 million. EMEA's operating income was up $3.8 million, or 30 percent, to $16.5 million. APAC's operating income grew $2.0 million, or 31 percent, to $8.3 million.

Cash Flows

IHS generated $79.3 million of cash flow from operations during the three months ended February 28, 2011, representing a 43 percent increase over last year's $55.4 million.

Balance Sheet

IHS ended first quarter 2011 with $251.7 million of cash and cash equivalents and $298.4 million of debt.

“The first quarter was a solid start to our year,” stated Michael J. Sullivan, executive vice president and chief financial officer. “We were able to increase the rate of top-line organic growth, grow margins on a normalized basis, generate robust free cash flow, and continue to invest in our future.”

Outlook (forward-looking statement)

For the year ending November 30, 2011, IHS expects:

An increase in its all-in revenue to a range of $1.23 to $1.26 billion; and
All-in adjusted EBITDA in a range of $378 to $388 million.

Additionally, for the year ending November 30, 2011, we also expect:

Depreciation and amortization expense to be approximately $75 million;
Net interest expense of approximately $7 million;
Stock-based compensation expense to be approximately $82 million;
Net pension expense to be approximately $11 million;
An adjusted tax rate of approximately 28 percent; and
Fully diluted shares to be approximately 66 million.

The above outlook assumes constant currencies and no further acquisitions, restructurings or unanticipated events.

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 first quarter 2011 results on March 17, 2011, 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 income taxes, depreciation and amortization. Adjusted EBITDA further excludes (i) non-cash items (e.g., stock-based compensation expense and non-cash pension and post-retirement expense) and (ii) items that management does not consider to be useful in assessing our operating performance (e.g., acquisition-related costs, restructuring charges, income or loss from discontinued operations, and gain or loss on sale of assets). Adjusted earnings per diluted share exclude similar 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 many of our investors, 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 term loan and revolving credit agreement.

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, stock-based compensation, non-cash pension and post-retirement expense) or (ii) items that we do not consider to be useful in assessing our operating performance (e.g., income taxes, acquisition-related costs, restructuring charges, income or loss from discontinued operations, and gain or loss 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 source of information and insight in pivotal areas that shape today's business landscape: energy, economics, geopolitical risk, sustainability and supply chain management. Businesses and governments 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 employs more than 4,400 people in more than 30 countries around the world.

IHS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except for share and per-share amounts)

As of As of

February 28, 2011

November 30, 2010 (Unaudited) (Audited) Assets Current assets: Cash and cash equivalents $ 251,677 $ 200,735 Accounts receivable, net 288,155 256,552 Income tax receivable 13,627 — Deferred subscription costs 49,623 41,449 Deferred income taxes 23,299 33,532 Other 28,837 20,466 Total current assets 655,218 552,734 Non-current assets: Property and equipment, net 102,229 93,193 Intangible assets, net 377,005 384,568 Goodwill, net 1,140,007 1,120,830 Other 7,880 4,377 Total non-current assets 1,627,121 1,602,968 Total assets $ 2,282,339 $ 2,155,702 Liabilities and stockholders’ equity Current liabilities: Short-term debt $ 17,115 $ 19,054 Accounts payable 41,220 35,854 Accrued compensation 24,312 51,233 Accrued royalties 27,768 24,338 Other accrued expenses 44,488 51,307 Income tax payable — 4,350 Deferred subscription revenue 479,705 392,132 Total current liabilities 634,608 578,268 Long-term debt 281,303 275,095 Accrued pension liability 27,093 25,104 Accrued post-retirement benefits 10,157 10,056 Deferred income taxes 72,282 73,586 Other liabilities 18,923 17,512 Commitments and contingencies Stockholders’ equity: Class A common stock, $0.01 par value per share, 160,000,000 shares authorized, 67,107,987 and 66,250,283 shares issued, and 64,838,960 and 64,248,547 shares outstanding at February 28, 2011 and November 30, 2010, respectively 671 662 Additional paid-in capital 570,363 541,108 Treasury stock, at cost: 2,269,027 and 2,001,736 shares at February 28, 2011 and November 30, 2010, respectively (123,058 ) (101,554 ) Retained earnings 891,213 860,497 Accumulated other comprehensive loss (101,216 ) (124,632 ) Total stockholders’ equity 1,237,973 1,176,081 Total liabilities and stockholders’ equity $ 2,282,339 $ 2,155,702

IHS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for per-share amounts)

Three Months Ended February 28, 2011 2010 (Unaudited) Revenue: Products $ 260,869 $ 212,682 Services 34,133 28,053 Total revenue 295,002 240,735 Operating expenses: Cost of revenue: Products 109,558 89,123 Services 18,626 16,083

Total cost of revenue (includes stock-based compensation expense of $854 and $1,432 for the three months ended February 28, 2011 and 2010, respectively)

128,184 105,206 Selling, general and administrative (includes stock-based compensation expense of $21,244 and $17,870 for the three months ended February 28, 2011 and 2010, respectively) 101,772 84,652 Depreciation and amortization 18,201 13,830 Acquisition-related costs 3,306 — Net periodic pension and post-retirement expense 2,732 1,194 Other expense (income), net 505 (885 ) Total operating expenses 254,700 203,997 Operating income 40,302 36,738 Interest income 185 104 Interest expense (1,662 ) (365 ) Non-operating expense, net (1,477 ) (261 ) Income from continuing operations before income taxes 38,825 36,477 Provision for income taxes (8,116 ) (9,528 ) Income from continuing operations 30,709 26,949 Income (loss) from discontinued operations, net 7 (126 ) Net income $ 30,716 $ 26,823 Basic earnings per share: Income from continuing operations $ 0.48 $ 0.42 Income (loss) from discontinued operations, net $ — $ — Net income $ 0.48 $ 0.42 Weighted average shares used in computing basic earnings per share 64,485 63,539 Diluted earnings per share: Income from continuing operations $ 0.47 $ 0.42 Income (loss) from discontinued operations, net $ — $ — Net income $ 0.47 $ 0.42 Weighted average shares used in computing diluted earnings per share 65,415 64,429

IHS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Three Months Ended February 28, 2011 2010 (Unaudited) Operating activities: Net income $ 30,716 $ 26,823 Reconciliation of net income to net cash provided by operating activities: Depreciation and amortization 18,201 13,830 Stock-based compensation expense 22,098 19,302 Excess tax benefit from stock-based compensation (7,925 ) (4,471 ) Non-cash net periodic pension and post-retirement expense 2,603 851 Deferred income taxes 7,868 7,901 Change in assets and liabilities: Accounts receivable, net (30,683 ) (36,425 ) Other current assets (13,971 ) (8,282 ) Accounts payable 4,327 3,696 Accrued expenses (24,365 ) (25,697 ) Income tax payable (10,045 ) (6,831 ) Deferred subscription revenue 80,384 65,519 Other liabilities 60 (804 ) Net cash provided by operating activities 79,268 55,412 Investing activities: Capital expenditures on property and equipment (15,541 ) (7,172 ) Acquisitions of businesses, net of cash acquired — (18,500 ) Intangible assets acquired (2,400 ) — Change in other assets (547 ) (986 ) Settlements of forward contracts (145 ) (819 ) Net cash used in investing activities (18,633 ) (27,477 ) Financing activities: Proceeds from borrowings 320,000 20,000 Repayment of borrowings (315,832 ) (3,224 ) Payment of debt issuance costs (6,302 ) — Excess tax benefit from stock-based compensation 7,925 4,471 Proceeds from the exercise of employee stock options 1,504 189 Repurchases of common stock (21,504 ) (18,151 ) Net cash provided by (used in) financing activities (14,209 ) 3,285 Foreign exchange impact on cash balance 4,516 (5,979 ) Net increase in cash and cash equivalents 50,942 25,241 Cash and cash equivalents at the beginning of the period 200,735 124,201 Cash and cash equivalents at the end of the period $ 251,677 $ 149,442

IHS INC.

SUPPLEMENTAL REVENUE DISCLOSURE

(In thousands)

Three Months Ended February 28, Absolute Organic 2011 2010 % change % change (Unaudited) Revenue by segment: Americas revenue $ 181,191 $ 151,968 19% 8% EMEA revenue 84,438 68,196 24% 9% APAC revenue 29,373 20,571 43% 15% Total revenue $ 295,002 $ 240,735 23% 9% Revenue by transaction type: Subscription revenue $ 233,772 $ 195,486 20% 8% Consulting revenue 16,516 11,885 39% 14% Transaction revenue 13,338 11,390 17% 7% Other revenue 31,376 21,974 43% 10% Total revenue $ 295,002 $ 240,735 23% 9% Revenue by information domain: Energy revenue $ 121,651 $ 109,935 Product Lifecycle (PLC) revenue 101,780 74,734 Security revenue 26,820 25,399 Environment revenue 20,975 11,207 Macroeconomic Forecasting and Intersection revenue 23,776 19,460 Total revenue $ 295,002 $ 240,735

IHS INC.

RECONCILIATION OF CONSOLIDATED NON-GAAP FINANCIAL MEASUREMENTS TO

MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS

(In thousands, except for per-share amounts)

Three Months Ended February 28, 2011 2010 (Unaudited) Net income $ 30,716 $ 26,823 Interest income (185 ) (104 ) Interest expense 1,662 365 Provision for income taxes 8,116 9,528 Depreciation and amortization 18,201 13,830 EBITDA $ 58,510 $ 50,442 Stock-based compensation expense 22,098 19,302 Acquisition-related costs 3,306 — Non-cash net periodic pension and post-retirement expense 2,603 851 (Income) loss from discontinued operations, net (7 ) 126 Adjusted EBITDA $ 86,510 $ 70,721 Three Months Ended February 28, 2011 Three Months Ended February 28, 2010 Pre-tax After tax Pre-tax After tax Stock-based compensation expense $ 22,098 $ 14,311 $ 19,302 $ 12,160 Acquisition-related costs $ 3,306 $ 2,222 $ — $ — Non-cash net periodic pension and post-retirement expense $ 2,603 $ 1,613 $ 851 $ 527 (Income) loss from discontinued operations, net $ (11 ) $ (7 ) $ 159 $ 126 Three Months Ended February 28, 2011 2010 (Unaudited) Earnings per diluted share $ 0.47 $ 0.42 Stock-based compensation expense 0.22 0.19 Acquisition-related costs 0.03 — Non-cash net periodic pension and post-retirement expense 0.02 0.01 (Income) loss from discontinued operations, net — — Adjusted earnings per diluted share $ 0.75 $ 0.62 Note: Amounts may not sum due to rounding Three Months Ended February 28, 2011 2010 (Unaudited) Net cash provided by operating activities 79,268 55,412 Capital expenditures on property and equipment (15,541 ) (7,172 ) Free cash flow $ 63,727 $ 48,240

IHS INC.

RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASUREMENTS TO

MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS

(In thousands)

(Unaudited)

Three Months Ended February 28, 2011 Americas EMEA APAC Shared Services Total Operating income $ 49,319 $ 16,497 $ 8,261 $ (33,775 ) $ 40,302 Adjustments: Stock-based compensation expense — — — 22,098 22,098 Depreciation and amortization 14,109 3,492 39 561 18,201 Acquisition-related costs 3,234 72 — — 3,306 Non-cash net periodic pension and post-retirement expense — — — 2,603 2,603 Adjusted EBITDA $ 66,662 $ 20,061 $ 8,300 $ (8,513 ) $ 86,510 Three Months Ended February 28, 2010 Americas EMEA APAC Shared Services Total Operating income $ 46,668 $ 12,681 $ 6,301 $ (28,912 ) $ 36,738 Adjustments: Stock-based compensation expense — — — 19,302 19,302 Depreciation and amortization 9,216 4,060 25 529 13,830 Non-cash net periodic pension and post-retirement expense — — — 851 851 Adjusted EBITDA $ 55,884 $ 16,741 $ 6,326 $ (8,230 ) $ 70,721

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