IHS Inc. Reports Third Quarter 2011 Results

IHS Inc. (NYSE:IHS), the leading global source of critical information and insight, today reported results for the third quarter ended August 31, 2011. Revenue for the third quarter of 2011 totaled $340 million, a 25 percent increase over third quarter 2010 revenue of $272 million. Net income for the third quarter of 2011 was $39.6 million, or $0.60 per diluted share, compared to third quarter 2010 net income of $34.6 million, or $0.53 per diluted share.

Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) totaled $100.3 million for the third quarter of 2011, up 22 percent from $82.2 million in the third quarter of 2010. Adjusted earnings per diluted share were $0.88 for the third quarter of 2011, an increase of 16 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 delivered another quarter of strong profitable growth in this time of ever greater economic uncertainty,” said Jerre Stead, IHS chairman and chief executive officer. “With the closing of our largest acquisition in our company's history, SMT, and the successful first release of our Vanguard initiative, we continue to make important investments in scalable platforms which will help us deliver strong profitable growth for years to come.”

Third Quarter 2011 Details

Revenue for the third quarter of 2011 totaled $340 million, a 25 percent increase over third-quarter 2010 revenue of $272 million. Organic growth in the third quarter of 2011 was six percent after adjusting for the triennial release of a certain engineering standard in the third quarter of 2010 (three percent unadjusted). Acquisitions added 19 percent and foreign currency movements added three percent. The subscription-based business grew eight percent organically and represented 78 percent of total revenue.

Non-subscription revenue

76,551 62,539 22 % (1 )% 212,113 167,654 27 % 4 % Total revenue $ 340,466 $ 271,612 25 % 6 % $ 960,020 $ 777,570 23 % 7 %

* Excludes approximately $7 million of non-subscription revenue associated with the triennial release of a certain engineering standard in the third quarter of 2010.

The company continued to grow its business overall in all three regions. The Americas segment increased its revenue during the third quarter by $37.1 million, or 22 percent, to $207.5 million. The EMEA segment grew its third quarter revenue by $19.9 million, or 26 percent, to $95.9 million. The APAC segment's revenue was up $11.8 million, or 47 percent, to $37.0 million.

Adjusted EBITDA for the third quarter of 2011 was $100.3 million, up $18.1 million, or 22 percent, over the prior-year period. Operating income increased $4.8 million, or 11 percent, to $49.9 million. Americas' operating income increased $16.5 million, or 35 percent, to $63.3 million. EMEA's operating income was up $3.4 million, or 22 percent, to $18.8 million. APAC's operating income grew $2.1 million, or 23 percent, to $10.9 million.

Year-to-Date 2011

Revenue for the nine months ended August 31, 2011, increased $182.5 million, or 23 percent, to $960 million. Organic revenue growth was seven percent overall (six percent unadjusted) and eight percent for the subscription-based portion of the business. Acquisitions added 15 percent, and foreign currency movements increased revenue by two percent during the first nine months of 2011. The Americas segment grew its revenue during the nine months ended August 31, 2011, by $94.8 million, or 19 percent, to $585 million. The EMEA segment increased its year-to-date 2011 revenue by $57.2 million, or 26 percent, to $275 million. The APAC segment increased its revenue by $30.4 million, or 44 percent, to $99 million, during the first nine months of 2011.

Adjusted EBITDA for year-to-date 2011 increased $47.9 million, or 20 percent, to $282 million. Operating income increased $10.6 million, or eight percent, year-over-year to $141 million. Americas’ operating income was $167.4 million, up $19.5 million, or 13 percent, over the prior-year period. EMEA grew its year-to-date 2011 operating income to $55.1 million, up $10.1 million, or 22 percent, over the same period of 2010. APAC’s operating income was $29.0 million, an increase of $6.0 million, or 26 percent, over last year.

Net income for the nine months ended August 31, 2011 increased $9.2 million, or nine percent, to $109.0 million, or $1.66 per diluted share.

Cash Flows

IHS generated $253 million of cash flow from operations during the nine months ended August 31, 2011, representing a 14 percent increase over last year's $221 million.

Balance Sheet

IHS ended third quarter 2011 with $203 million of cash and cash equivalents and $811 million of debt.

“We delivered more than $100 million of quarterly adjusted EBITDA for the first time in our company's history,” said Rich Walker, IHS executive vice president and chief financial officer. “Our free cash flow generation remains strong, and we continue to consider opportunities to secure access to capital so we can continue to grow."

Outlook (forward-looking statement)

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

All-in revenue in a range of $1.307 to $1.337 billion; and
All-in Adjusted EBITDA in a range of $399 to $407 million.

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

Depreciation and amortization expense to be approximately $89 million;
Net interest expense of approximately $11 million;
Adjusted EPS between $3.33 and $3.43;
Stock-based compensation expense to be approximately $86 million;
Net pension expense to be approximately $11 million;
An adjusted tax rate of approximately 25-26%; and
Fully diluted shares to be approximately 66 million.

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 third quarter 2011 results on September 21, 2011, at 8:00 a.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 adjusted 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 in more than 165 countries 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 August 31, 2011 November 30, 2010 (Unaudited) (Audited) Assets Current assets: Cash and cash equivalents $ 202,872 $ 200,735 Accounts receivable, net 248,864 256,552 Income tax receivable 557 — Deferred subscription costs 40,734 41,449 Deferred income taxes 47,066 33,532 Other 30,762 20,466 Total current assets 570,855 552,734 Non-current assets: Property and equipment, net 125,496 93,193 Intangible assets, net 592,943 384,568 Goodwill, net 1,683,641 1,120,830 Other 7,147 4,377 Total non-current assets 2,409,227 1,602,968 Total assets $ 2,980,082 $ 2,155,702 Liabilities and stockholders’ equity Current liabilities: Short-term debt $ 287,078 $ 19,054 Accounts payable 30,541 35,854 Accrued compensation 39,861 51,233 Accrued royalties 17,334 24,338 Other accrued expenses 55,604 51,307 Income tax payable — 4,350 Deferred revenue 473,803 392,132 Total current liabilities 904,221 578,268 Long-term debt 523,803 275,095 Accrued pension liability 30,968 25,104 Accrued post-retirement benefits 10,203 10,056 Deferred income taxes 136,372 73,586 Other liabilities 20,758 17,512 Commitments and contingencies Stockholders’ equity: Class A common stock, $0.01 par value per share, 160,000,000 shares authorized, 67,365,244 and 66,250,283 shares issued, and 65,010,669 and 64,248,547 shares outstanding at August 31, 2011 and November 30, 2010, respectively 674 662 Additional paid-in capital 613,836 541,108 Treasury stock, at cost: 2,354,575 and 2,001,736 shares at August 31, 2011 and November 30, 2010, respectively (129,586 ) (101,554 ) Retained earnings 969,527 860,497 Accumulated other comprehensive loss (100,694 ) (124,632 ) Total stockholders’ equity 1,353,757 1,176,081 Total liabilities and stockholders’ equity $ 2,980,082 $ 2,155,702

IHS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for per-share amounts)

(Unaudited)

Three Months Ended August 31, Nine Months Ended August 31, 2011 2010 2011 2010 Revenue: Products $ 295,328 $ 239,580 $ 832,006 $ 676,445 Services 45,138 32,032 128,014 101,125 Total revenue 340,466 271,612 960,020 777,570 Operating expenses: Cost of revenue: Products 121,866 98,037 347,288 277,878 Services 23,376 17,345 68,448 54,836 Total cost of revenue (includes stock-based compensation expense of $854; $446; $2,638 and $3,203 for the three and nine months ended August 31, 2011 and 2010, respectively) 145,242 115,382 415,736 332,714 Selling, general and administrative (includes stock-based compensation expense of $21,570; $12,336; $61,175 and $46,521 for the three and nine months ended August 31, 2011 and 2010, respectively) 117,353 86,203 324,793 259,914 Depreciation and amortization 23,496 14,406 62,411 42,505 Restructuring charges 356 9,104 1,058 9,022 Acquisition-related costs 1,540 — 6,089 — Net periodic pension and post-retirement expense 2,792 1,191 8,257 3,579 Other expense (income), net (197 ) 262 416 (852 ) Total operating expenses 290,582 226,548 818,760 646,882 Operating income 49,884 45,064 141,260 130,688 Interest income 163 188 654 386 Interest expense (2,967 ) (413 ) (6,774 ) (1,073 ) Non-operating expense, net (2,804 ) (225 ) (6,120 ) (687 ) Income from continuing operations before income taxes 47,080 44,839 135,140 130,001 Provision for income taxes (7,505 ) (10,303 ) (26,050 ) (30,362 ) Income from continuing operations 39,575 34,536 109,090 99,639 Income (loss) from discontinued operations, net 17 23 (60 ) 221 Net income $ 39,592 $ 34,559 $ 109,030 $ 99,860 Basic earnings per share: Income from continuing operations $ 0.61 $ 0.54 $ 1.68 $ 1.56 Income (loss) from discontinued operations, net $ — $ — $ — $ — Net income $ 0.61 $ 0.54 $ 1.68 $ 1.56 Weighted average shares used in computing basic earnings per share 65,022 64,122 64,864 63,881 Diluted earnings per share: Income from continuing operations $ 0.60 $ 0.53 $ 1.66 $ 1.54 Income (loss) from discontinued operations, net $ — $ — $ — $ — Net income $ 0.60 $ 0.53 $ 1.66 $ 1.55 Weighted average shares used in computing diluted earnings per share 65,677 64,720 65,555 64,574

IHS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Nine Months Ended August 31, 2011 2010 Operating activities: Net income $ 109,030 $ 99,860 Reconciliation of net income to net cash provided by operating activities: Depreciation and amortization 62,411 42,505 Stock-based compensation expense 63,813 49,724 Excess tax benefit from stock-based compensation (9,182 ) (5,024 ) Non-cash net periodic pension and post-retirement expense 7,809 2,555 Deferred income taxes 8,898 347 Change in assets and liabilities: Accounts receivable, net 35,737 14,591 Other current assets (3,471 ) (1,098 ) Accounts payable (7,838 ) 2,221 Accrued expenses (26,439 ) (17,363 ) Income tax payable (13,874 ) 2,825 Deferred revenue 25,831 30,770 Other liabilities 517 (598 ) Net cash provided by operating activities 253,242 221,315 Investing activities: Capital expenditures on property and equipment (45,373 ) (23,187 ) Acquisitions of businesses, net of cash acquired (699,992 ) (83,567 ) Intangible assets acquired (2,985 ) — Change in other assets (1,203 ) (889 ) Settlements of forward contracts (2,849 ) (71 ) Net cash used in investing activities (752,402 ) (107,714 ) Financing activities: Proceeds from borrowings 870,000 95,000 Repayment of borrowings (353,368 ) (43,270 ) Payment of debt issuance costs (6,326 ) — Excess tax benefit from stock-based compensation 9,182 5,024 Proceeds from the exercise of employee stock options 2,144 618 Repurchases of common stock (28,032 ) (25,485 ) Net cash provided by financing activities 493,600 31,887 Foreign exchange impact on cash balance 7,697 (12,538 ) Net increase in cash and cash equivalents 2,137 132,950 Cash and cash equivalents at the beginning of the period 200,735 124,201 Cash and cash equivalents at the end of the period $ 202,872 $ 257,151

IHS INC.

SUPPLEMENTAL REVENUE DISCLOSURE

(In thousands)

(Unaudited)

Three Months Ended August 31, Absolute Organic Nine Months Ended August 31, Absolute Organic 2011 2010 % change % change * 2011 2010 % change % change * Revenue by segment: Americas revenue $ 207,477 $ 170,359 22 % 7 % $ 585,227 $ 490,381 19 % 7 % EMEA revenue 95,945 76,011 26 % 2 % 275,446 218,198 26 % 5 % APAC revenue 37,044 25,242 47 % 16 % 99,347 68,991 44 % 17 % Total revenue $ 340,466 $ 271,612 25 % 6 % $ 960,020 $ 777,570 23 % 7 % Revenue by transaction type: Subscription revenue $ 263,915 $ 209,073 26 % 8 % $ 747,907 $ 609,916 23 % 8 % Consulting revenue 24,353 16,330 49 % — % 59,822 43,300 38 % 2 % Transaction revenue 16,697 21,070 (21 )% 8 % 44,335 44,585 (1 )% 8 % Other revenue 35,501 25,139 41 % (7 )% 107,956 79,769 35 % 3 % Total revenue $ 340,466 $ 271,612 25 % 6 % $ 960,020 $ 777,570 23 % 7 % Revenue by information domain: Energy revenue $ 142,607 $ 117,391 $ 403,703 $ 350,440 Product Lifecycle (PLC) revenue 115,889 90,750 326,162 248,659 Security revenue 32,204 28,444 88,570 79,539 Environment revenue 25,235 13,315 68,778 37,913 Macroeconomic Forecasting and Intersection revenue 24,531 21,712 72,807 61,019 Total revenue $ 340,466 $ 271,612 $ 960,020 $ 777,570

* Excludes approximately $7 million of revenue associated with the triennial release of a certain engineering standard in the third quarter of 2010.

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 August 31, Nine Months Ended August 31, 2011 2010 2011 2010 Net income $ 39,592 $ 34,559 $ 109,030 $ 99,860 Interest income (163 ) (188 ) (654 ) (386 ) Interest expense 2,967 413 6,774 1,073 Provision for income taxes 7,505 10,303 26,050 30,362 Depreciation and amortization 23,496 14,406 62,411 42,505 EBITDA $ 73,397 $ 59,493 $ 203,611 $ 173,414 Stock-based compensation expense 22,424 12,782 63,813 49,724 Restructuring charges 356 9,104 1,058 9,022 Acquisition-related costs 1,540 — 6,089 — Non-cash net periodic pension and post-retirement expense 2,602 851 7,809 2,555 (Income) loss from discontinued operations, net (17 ) (23 ) 60 (221 ) Adjusted EBITDA $ 100,302 $ 82,207 $ 282,440 $ 234,494 Three Months Ended August 31, Nine Months Ended August 31, 2011 2010 2011 2010 Earnings per diluted share $ 0.60 $ 0.53 $ 1.66 $ 1.55 Stock-based compensation expense 0.22 0.13 0.63 0.49 Restructuring charges (credits) — 0.09 0.01 0.09 Acquisition-related costs 0.02 — 0.08 — Non-cash net periodic pension and post-retirement expense 0.02 0.01 0.07 0.02 (Income) loss from discontinued operations, net — — — — Adjusted earnings per diluted share $ 0.88 $ 0.76 $ 2.46 $ 2.14 Note: Amounts may not sum due to rounding Three Months Ended August 31, Nine Months Ended August 31, 2011 2010 2011 2010 Net cash provided by operating activities 52,261 42,159 253,242 221,315 Capital expenditures on property and equipment (12,842 ) (6,848 ) (45,373 ) (23,187 ) Free cash flow $ 39,419 $ 35,311 $ 207,869 $ 198,128

IHS INC.

RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASUREMENTS TO

MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS

(In thousands)

(Unaudited)

Three Months Ended August 31, 2011 Americas EMEA APAC Shared Services Total Operating income $ 63,272 $ 18,842 $ 10,911 $ (43,141 ) $ 49,884 Adjustments: Stock-based compensation expense — — 22,424 22,424 Depreciation and amortization 18,082 4,772 48 594 23,496 Restructuring charges — — — 356 356 Acquisition-related costs 1,540 — — — 1,540 Non-cash net periodic pension and post-retirement expense — — — 2,602 2,602 Adjusted EBITDA $ 82,894 $ 23,614 $ 10,959 $ (17,165 ) $ 100,302 Three Months Ended August 31, 2010 Americas EMEA APAC Shared Services Total Operating income $ 46,812 $ 15,439 $ 8,857 $ (26,044 ) $ 45,064 Adjustments: Stock-based compensation expense — — — 12,782 12,782 Depreciation and amortization 10,042 3,796 24 544 14,406 Restructuring charges 7,716 1,338 50 — 9,104 Non-cash net periodic pension and post-retirement expense — — — 851 851 Adjusted EBITDA $ 64,570 $ 20,573 $ 8,931 $ (11,867 ) $ 82,207 Nine Months Ended August 31, 2011 Americas EMEA APAC Shared Services Total Operating income $ 167,377 $ 55,057 $ 29,037 $ (110,211 ) $ 141,260 Adjustments: Stock-based compensation expense — — — 63,813 63,813 Depreciation and amortization 47,510 13,062 134 1,705 62,411 Restructuring charges 875 364 — (181 ) 1,058 Acquisition-related costs 5,687 402 — — 6,089 Non-cash net periodic pension and post-retirement expense — — — 7,809 7,809 Adjusted EBITDA $ 221,449 $ 68,885 $ 29,171 $ (37,065 ) $ 282,440 Nine Months Ended August 31, 2010 Americas EMEA APAC Shared Services Total Operating income $ 147,910 $ 44,987 $ 23,033 $ (85,242 ) $ 130,688 Adjustments: Stock-based compensation expense — — — 49,724 49,724 Depreciation and amortization 29,213 11,614 74 1,604 42,505 Restructuring charges 7,634 1,338 50 — 9,022 Non-cash net periodic pension and post-retirement expense — — — 2,555 2,555 Adjusted EBITDA $ 184,757 $ 57,939 $ 23,157 $ (31,359 ) $ 234,494

IHS INC.

SUPPLEMENTAL INFORMATION

(In thousands)

(Unaudited)

Three Months Ended August 31, 2011 Three Months Ended August 31, 2010 Pre-tax After tax Pre-tax After tax Stock-based compensation expense $ 22,424 $ 14,582 $ 12,782 $ 8,338 Restructuring charges $ 356 $ 221 $ 9,104 $ 5,645 Acquisition-related costs $ 1,540 $ 1,540 $ — $ — Non-cash net periodic pension and post-retirement expense $ 2,602 $ 1,612 $ 851 $ 529 (Income) loss from discontinued operations, net $ (23 ) $ (17 ) $ (32 ) $ (23 ) Nine Months Ended August 31, 2011 Nine Months Ended August 31, 2010 Pre-tax After tax Pre-tax After tax Stock-based compensation expense $ 63,813 $ 41,369 $ 49,724 $ 31,611 Restructuring charges $ 1,058 $ 673 $ 9,022 $ 5,594 Acquisition-related costs $ 6,089 $ 5,017 $ — $ — Non-cash net periodic pension and post-retirement expense $ 7,809 $ 4,841 $ 2,555 $ 1,585 (Income) loss from discontinued operations, net $ 82 $ 60 $ (318 ) $ (221 )

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