IHS Inc. Reports Second Quarter 2011 Results

IHS Inc. (NYSE: IHS), a leading global source of critical information and insight, today reported results for the second quarter ended May 31, 2011. Revenue for the second quarter of 2011 totaled $325 million, a 22 percent increase over second quarter 2010 revenue of $266 million. Net income for the second quarter of 2011 was $38.7 million, or $0.59 per diluted share, compared to second quarter 2010 net income of $38.5 million, or $0.60 per diluted share.

Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) totaled $95.5 million for the second quarter of 2011, up 16 percent from $82.0 million in the second quarter of 2010. Adjusted earnings per diluted share were $0.83 for the second quarter of 2011, an increase of 6 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.

“Our top-line growth, both on an organic and all-in basis, is strong,” said Jerre Stead, IHS chairman and chief executive officer. “With five acquisitions announced during this past quarter, and our ongoing investment in scalable platforms, our company's ability to deliver future profitable growth is the highest in our history.”

Second Quarter 2011 Details

Revenue for the second quarter of 2011 totaled $325 million, a 22 percent increase over second-quarter 2010 revenue of $266 million. The revenue increase was driven by 7 percent organic growth, 13 percent acquisitive growth, and 3 percent foreign currency movements. The subscription-based business grew 8 percent organically and represented 77 percent of total revenue.

Three Months Ended May 31, Absolute Organic Six Months Ended May 31, Absolute Organic 2011 2010 % change % change 2011 2010 % change % change

Subscriptionrevenue

$ 250,541 $ 205,722

22%

8% $ 484,313 $ 401,208 21% 8%

Non-subscriptionrevenue

74,576 60,758 23% 3% 135,806 106,007 28% 6% Total revenue $ 325,117 $ 266,480

22%

7% $ 620,119 $ 507,215 22% 8%

The company continued to grow its business overall in all three regions. The Americas (North and South America) segment increased its revenue during the second quarter by $28.5 million, or 17 percent, to $196.6 million. The EMEA (Europe, Middle East and Africa) segment grew its second quarter revenue by $20.4 million, or 27 percent, to $95.6 million. The APAC (Asia Pacific) segment's revenue was up $9.8 million, or 42 percent, to $32.9 million.

Adjusted EBITDA for the second quarter of 2011 was $95.5 million, up $13.5 million, or 16 percent, over the prior-year period. Operating income increased $1.6 million, or 3 percent, to $51.0 million. Americas' operating income increased $0.4 million, or 1 percent, to $54.8 million. EMEA's operating income was up $2.3 million, or 13 percent, to $19.6 million. APAC's operating income grew $2.0 million, or 25 percent, to $9.9 million.

Year-to-Date 2011

Revenue for the six months ended May 31, 2011, increased $112.9 million, or 22 percent, to $620 million. Organic revenue growth was 8 percent overall and 8 percent for the subscription-based portion of the business. Acquisitions added 13 percent, and foreign currency movements increased revenue by 2 percent during the first half of 2011. The Americas segment grew its revenue during the six months ended May 31, 2011, by $57.7 million, or 18 percent, to $378 million. The EMEA segment increased its year-to-date 2011 revenue by $36.6 million, or 26 percent, to $180 million. The APAC segment increased its revenue by $18.6 million, or 42 percent, to $62 million, during the first half of 2011.

Adjusted EBITDA for year-to-date 2011 increased $29.3 million, or 19 percent, to $182 million. Operating income increased $5.2 million, or 6 percent, year-over-year to $91 million. Americas’ operating income was $104.1 million, up $3.0 million, or 3 percent, over the prior-year period. EMEA grew its year-to-date 2011 operating income to $36.1 million, up $6.1 million, or 20 percent, over the same period of 2010. APAC’s operating income was $18.1 million, an increase of $4.0 million, or 28 percent, over last year.

Net income for the six months ended May 31, 2011 increased $4.1 million, or 6 percent, to $69.4 million, or $1.06 per diluted share.

Cash Flows

IHS generated $201 million of cash flow from operations during the six months ended May 31, 2011, representing a 12 percent increase over last year's $179 million.

Balance Sheet

IHS ended second quarter 2011 with $147 million of cash and cash equivalents and $295 million of debt.

“Our strong organic growth and robust cash flow generation allows us to continue our significant investment in the business,” stated Michael J. Sullivan, executive vice president and chief financial officer. “We have many investment opportunities which will deliver profitable growth in the future.”

Outlook (forward-looking statement)

For the year ending November 30, 2011, IHS is increasing both its revenue and its Adjusted EBITDA guidance and expects:

All-in revenue in a range of $1.285 to $1.315 billion; and
All-in Adjusted EBITDA in a range of $390 to $398 million.

Additionally, for the year ending November 30, 2011, IHS also expects:

Depreciation and amortization expense to be approximately $86 million;
Net interest expense of approximately $8 million;
Adjusted EPS between $3.33 and $3.43;
Stock-based compensation expense to be approximately $84 million;
Net pension expense to be approximately $11 million;
An adjusted tax rate of approximately 26-27%; and
Fully diluted shares to be approximately 66 million.

Finally, in addition to this updated full-year guidance, IHS is providing insight into its profit expectations for the third quarter of the year. IHS expects all-in Adjusted EBITDA for the third quarter of 2011 to be in a range of $97-99 million. Aside from this one-time look at a quarterly projection, IHS expects to continue its practice of providing guidance on an annual basis.

The above outlook assumes constant currencies and no further acquisitions 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 second quarter 2011 results on June 22, 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 the leading source of information and insight in critical areas that shape today’s business landscape, including energy and power; design and supply chain; defense, risk and security; environmental, health and safety (EHS) and sustainability; country and industry forecasting; and commodities, pricing and cost. 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 5,100 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 May 31, 2011 November 30, 2010 (Unaudited) (Audited) Assets Current assets: Cash and cash equivalents $ 147,114 $ 200,735 Accounts receivable, net 244,239 256,552 Income tax receivable 6,665 — Deferred subscription costs 47,827 41,449 Deferred income taxes 34,419 33,532 Other 28,563 20,466 Total current assets 508,827 552,734 Non-current assets: Property and equipment, net 117,676 93,193 Intangible assets, net 453,146 384,568 Goodwill, net 1,291,025 1,120,830 Other 8,169 4,377 Total non-current assets 1,870,016 1,602,968 Total assets $ 2,378,843 $ 2,155,702 Liabilities and stockholders’ equity Current liabilities: Short-term debt $ 17,120 $ 19,054 Accounts payable 40,430 35,854 Accrued compensation 33,859 51,233 Accrued royalties 20,161 24,338 Other accrued expenses 52,891 51,307 Income tax payable — 4,350 Deferred subscription revenue 492,051 392,132 Total current liabilities 656,512 578,268 Long-term debt 277,553 275,095 Accrued pension liability 29,047 25,104 Accrued post-retirement benefits 10,182 10,056 Deferred income taxes 87,344 73,586 Other liabilities 16,680 17,512 Commitments and contingencies Stockholders’ equity:

Class A common stock, $0.01 par value per share, 160,000,000 sharesauthorized, 67,152,304 and 66,250,283 shares issued, and 64,874,828 and 64,248,547 sharesoutstanding at May 31, 2011 and November 30, 2010, respectively

672 662 Additional paid-in capital 590,627 541,108

Treasury stock, at cost: 2,277,476 and 2,001,736 shares at May 31, 2011 and November 30,2010, respectively

(123,804 ) (101,554 ) Retained earnings 929,935 860,497 Accumulated other comprehensive loss (95,905 ) (124,632 ) Total stockholders’ equity 1,301,525 1,176,081 Total liabilities and stockholders’ equity $ 2,378,843 $ 2,155,702

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, 2011 2010 2011 2010 Revenue: Products $ 276,375 $ 225,440 $ 537,244 $ 438,122 Services 48,742 41,040 82,875 69,093 Total revenue 325,117 266,480 620,119 507,215 Operating expenses: Cost of revenue: Products 116,533 91,530 226,091 180,653 Services 26,446 21,408 45,072 37,491

Total cost of revenue (includes stock-basedcompensation expense of $930; $1,325; $1,784 and $2,757for the three and six months ended May 31, 2011 and2010, respectively)

142,979 112,938 271,163 218,144

Selling, general and administrative (includes stock-basedcompensation expense of $18,361; $16,315; $39,605and $34,185 for the three and six months ended May 31, 2011and 2010, respectively)

105,668 89,059 207,440 173,711 Depreciation and amortization 20,714 14,269 38,915 28,099 Restructuring charges (credits) 702 (82 ) 702 (82 ) Acquisition-related costs 1,243 — 4,549 — Net periodic pension and post-retirement expense 2,733 1,194 5,465 2,388 Other expense (income), net 108 (229 ) 613 (1,114 ) Total operating expenses 274,147 217,149 528,847 421,146 Operating income 50,970 49,331 91,272 86,069 Interest income 306 94 491 198 Interest expense (2,145 ) (295 ) (3,807 ) (660 ) Non-operating expense, net (1,839 ) (201 ) (3,316 ) (462 ) Income from continuing operations before income taxes 49,131 49,130 87,956 85,607 Provision for income taxes (10,401 ) (10,652 ) (18,517 ) (20,180 ) Income from continuing operations 38,730 38,478 69,439 65,427 Loss from discontinued operations, net (8 ) — (1 ) (126 ) Net income $ 38,722 $ 38,478 $ 69,438 $ 65,301 Basic earnings per share: Income from continuing operations $ 0.60 $ 0.60 $ 1.07 $ 1.03 Loss from discontinued operations, net $ — $ — $ — $ — Net income $ 0.60 $ 0.60 $ 1.07 $ 1.02

Weighted average shares used in computing basic earnings pershare

64,952 63,981 64,784 63,759 Diluted earnings per share: Income from continuing operations $ 0.59 $ 0.60 $ 1.06 $ 1.01 Loss from discontinued operations, net $ — $ — $ — $ — Net income $ 0.59 $ 0.60 $ 1.06 $ 1.01

Weighted average shares used in computing diluted earnings pershare

65,547 64,569 65,493 64,498

IHS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended May 31, 2011 2010 Operating activities: Net income $ 69,438 $ 65,301 Reconciliation of net income to net cash provided by operating activities: Depreciation and amortization 38,915 28,099 Stock-based compensation expense 41,389 36,942 Excess tax benefit from stock-based compensation (8,412 ) (4,674 ) Non-cash net periodic pension and post-retirement expense 5,207 1,704 Deferred income taxes 2,981 8,893 Change in assets and liabilities: Accounts receivable, net 32,166 21,161 Other current assets (9,730 ) (8,812 ) Accounts payable 1,001 1,992 Accrued expenses (24,365 ) (20,260 ) Income tax payable (7,781 ) (6,394 ) Deferred subscription revenue 60,105 55,951 Other liabilities 67 (747 ) Net cash provided by operating activities 200,981 179,156 Investing activities: Capital expenditures on property and equipment (32,531 ) (16,339 ) Acquisitions of businesses, net of cash acquired (202,745 ) (83,567 ) Intangible assets acquired (2,985 ) — Change in other assets (2,317 ) (943 ) Settlements of forward contracts (3,170 ) (1,310 ) Net cash used in investing activities (243,748 ) (102,159 ) Financing activities: Proceeds from borrowings 335,000 75,000 Repayment of borrowings (334,601 ) (43,278 ) Payment of debt issuance costs (6,326 ) — Excess tax benefit from stock-based compensation 8,412 4,674 Proceeds from the exercise of employee stock options 2,144 223 Repurchases of common stock (22,250 ) (22,461 ) Net cash provided by (used in) financing activities (17,621 ) 14,158 Foreign exchange impact on cash balance 6,767 (12,534 ) Net increase (decrease) in cash and cash equivalents (53,621 ) 78,621 Cash and cash equivalents at the beginning of the period 200,735 124,201 Cash and cash equivalents at the end of the period $ 147,114 $ 202,822

IHS INC.

SUPPLEMENTAL REVENUE DISCLOSURE

(In thousands)

(Unaudited)

Three Months Ended May 31, Absolute Organic Six Months Ended May 31, Absolute Organic 2011 2010 % change % change 2011 2010 % change % change Revenue by segment: Americas revenue $ 196,559 $ 168,054 17% 6% $ 377,750 $ 320,022 18% 7% EMEA revenue 95,628 75,248 27% 5% 180,066 143,444 26% 7% APAC revenue 32,930 23,178 42% 19% 62,303 43,749 42% 17% Total revenue $ 325,117 $ 266,480 22% 7% $ 620,119 $ 507,215 22% 8% Revenue by transaction type: Subscription revenue $ 250,541 $ 205,722 22% 8% $ 484,313 $ 401,208 21% 8% Consulting revenue 18,953 15,085 26% (5)% 35,469 26,970 32% 3% Transaction revenue 14,327 12,235 17% 7% 27,665 23,625 17% 7% Other revenue 41,296 33,438 24% 5% 72,672 55,412 31% 7% Total revenue $ 325,117 $ 266,480 22% 7% $ 620,119 $ 507,215 22% 8% Revenue by information domain: Energy revenue $ 139,445 $ 123,114 $ 261,096 $ 233,049 Product Lifecycle (PLC) revenue 108,493 83,175 210,273 157,909 Security revenue 30,111 26,953 56,931 52,352 Environment revenue 22,568 13,391 43,543 24,598

MacroeconomicForecasting andIntersection revenue

24,500 19,847 48,276 39,307 Total revenue $ 325,117 $ 266,480 $ 620,119 $ 507,215

IHS INC.

RECONCILIATION OF CONSOLIDATED NON-GAAP FINANCIAL MEASUREMENTS TO

MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS

(In thousands, except for per-share amounts)

(Unaudited)

Three Months Ended May 31, Six Months Ended May 31, 2011 2010 2011 2010 Net income $ 38,722 $ 38,478 $ 69,438 $ 65,301 Interest income (306 ) (94 ) (491 ) (198 ) Interest expense 2,145 295 3,807 660 Provision for income taxes 10,401 10,652 18,517 20,180 Depreciation and amortization 20,714 14,269 38,915 28,099 EBITDA $ 71,676 $ 63,600 $ 130,186 $ 114,042 Stock-based compensation expense 19,291 17,640 41,389 36,942 Restructuring charges (credits) 702 (82 ) 702 (82 ) Acquisition-related costs 1,243 — 4,549 — Non-cash net periodic pension and post-retirement expense 2,604 853 5,207 1,704 Loss from discontinued operations, net 8 — 1 126 Adjusted EBITDA $ 95,524 $ 82,011 $ 182,034 $ 152,732 Three Months Ended May 31, Six Months Ended May 31, 2011 2010 2011 2010 Earnings per diluted share $ 0.59 $ 0.60 $ 1.06 $ 1.01 Stock-based compensation expense 0.19 0.17 0.41 0.36 Restructuring charges (credits) 0.01 — 0.01 — Acquisition-related costs 0.02 — 0.05 — Non-cash net periodic pension and post-retirement expense 0.02 0.01 0.05 0.02 Loss from discontinued operations, net — — — — Adjusted earnings per diluted share $ 0.83 $ 0.78 $ 1.58 $ 1.39 Note: Amounts may not sum due to rounding Three Months Ended May 31, Six Months Ended May 31, 2011 2010 2011 2010 Net cash provided by operating activities 121,713 123,744 200,981 179,156 Capital expenditures on property and equipment (16,990 ) (9,167 ) (32,531 ) (16,339 ) Free cash flow $ 104,723 $ 114,577 $ 168,450 $ 162,817

IHS INC.

RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASUREMENTS TO

MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS

(In thousands)

(Unaudited)

Three Months Ended May 31, 2011 Americas EMEA APAC Shared Services Total Operating income $ 54,786 $ 19,614 $ 9,865 $ (33,295 ) $ 50,970 Adjustments: Stock-based compensation expense — — — 19,291 19,291 Depreciation and amortization 15,319 4,798 47 550 20,714 Restructuring charges (credits) 875 364 — (537 ) 702 Acquisition-related costs 913 330 — — 1,243

Non-cash net periodic pensionand post-retirement expense

— — — 2,604 2,604 Adjusted EBITDA $ 71,893 $ 25,106 $ 9,912 $ (11,387 ) $ 95,524 Three Months Ended May 31, 2010 Americas EMEA APAC Shared Services Total Operating income $ 54,430 $ 17,312 $ 7,875 $ (30,286 ) $ 49,331 Adjustments: Stock-based compensation expense — — — 17,640 17,640 Depreciation and amortization 9,955 3,758 25 531 14,269 Restructuring charges (credits) (82 ) — — — (82 )

Non-cash net periodic pensionand post-retirement expense

— — — 853 853 Adjusted EBITDA $ 64,303 $ 21,070 $ 7,900 $ (11,262 ) $ 82,011 Six Months Ended May 31, 2011 Americas EMEA APAC Shared Services Total Operating income $ 104,105 $ 36,111 $ 18,126 $ (67,070 ) $ 91,272 Adjustments: Stock-based compensation expense — — — 41,389 41,389 Depreciation and amortization 29,428 8,290 86 1,111 38,915 Restructuring charges (credits) 875 364 — (537 ) 702 Acquisition-related costs 4,147 402 — — 4,549

Non-cash net periodic pensionand post-retirement expense

— — — 5,207 5,207 Adjusted EBITDA $ 138,555 $ 45,167 $ 18,212 $ (19,900 ) $ 182,034 Six Months Ended May 31, 2010 Americas EMEA APAC Shared Services Total Operating income $ 101,098 $ 29,993 $ 14,176 $ (59,198 ) $ 86,069 Adjustments: Stock-based compensation expense — — — 36,942 36,942 Depreciation and amortization 19,171 7,818 50 1,060 28,099 Restructuring charges (credits) (82 ) — — — (82 )

Non-cash net periodic pensionand post-retirement expense

— — — 1,704 1,704 Adjusted EBITDA $ 120,187 $ 37,811 $ 14,226 $ (19,492 ) $ 152,732

IHS INC.

SUPPLEMENTAL INFORMATION

(In thousands)

(Unaudited)

Three Months Ended May 31, 2011 Three Months Ended May 31, 2010 Pre-tax After tax Pre-tax After tax Stock-based compensation expense $ 19,291 $ 12,476 $ 17,640 $ 11,113 Restructuring charges (credits) $ 702 $ 452 $ (82 ) $ (51 ) Acquisition-related costs $ 1,243 $ 1,255 $ — $ — Non-cash net periodic pension and post-retirement expense $ 2,604 $ 1,616 $ 853 $ 529 Loss from discontinued operations, net $ 12 $ 8 $ — $ — Six Months Ended May 31, 2011 Six Months Ended May 31, 2010 Pre-tax After tax Pre-tax After tax Stock-based compensation expense $ 41,389 $ 26,787 $ 36,942 $ 23,273 Restructuring charges (credits) $ 702 $ 452 $ (82 ) $ (51 ) Acquisition-related costs $ 4,549 $ 3,477 $ — $ — Non-cash net periodic pension and post-retirement expense $ 5,207 $ 3,229 $ 1,704 $ 1,056 Loss from discontinued operations, net $ 1 $ 1 $ 159 $ 126

IHS (NYSE:IHS)
Historical Stock Chart
From Jun 2024 to Jul 2024