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IHS Inc. Announces First Quarter 2006 Results Driven By Eleven Percent Revenue Growth

ENGLEWOOD, Colo., Mar 28, 2006 (BUSINESS WIRE) -- IHS Inc. (NYSE: IHS), one of the leading global providers of critical technical information, decision-support tools and related services, today reported results for the first quarter ended February 28, 2006. Revenue for the first quarter of 2006 totaled $129.9 million, representing an 11 percent increase over first quarter 2005 revenue of $117.0 million. Net income for the first quarter of 2006 increased three percent to $13.5 million, or $0.24 per diluted share, compared to first quarter 2005 net income of $13.1 million, or $0.23 per diluted share.

Adjusted EBITDA totaled $27.7 million for the first quarter of 2006, up 29 percent from $21.4 million in the first quarter of 2005. IHS generated approximately $22.5 million of cash flow from operations for the first quarter of 2006, an increase of $11.4 million over the prior year period. Adjusted EBITDA, a non-GAAP financial measure, is used by management to measure operating performance. See the end of this release for more information about this non-GAAP measure.

"We are excited about our strong first quarter operating results. We accelerated our rate of revenue growth, expanded our operating margins, and delivered higher levels of profit," said Charles Picasso, IHS President and CEO. "Additionally, we closed a strategic acquisition and enjoyed record attendance at CERAWeek, with over 1,800 industry leaders gathering in Houston last month." CERAWeek(R), the energy industry's premier executive gathering, is an annual event sponsored by CERA, an IHS company.

First Quarter 2006 Detail

The company grew its revenue by 12 percent over the prior year, after excluding the effects of acquisitions and foreign exchange (i.e. organic growth). Acquisitions added two percent to revenue growth and foreign exchange had a three percent negative impact. The organic growth was fueled in part by certain items unique to the quarter, such as the conference mentioned above. The Energy segment grew its revenue for the first quarter by 17 percent, to $68.2 million, compared to $58.1 million in the prior year first quarter. That segment's organic revenue growth contributed more than all of its increase, offset by foreign exchange impacts. The Engineering segment grew its first quarter revenue by approximately five percent, to $61.6 million, compared to $58.9 million in the prior year. The Engineering segment's organic revenue growth rate was up five percent compared to the first quarter 2005, while revenue contributions from acquisitions were effectively offset by foreign exchange impacts within this segment.

Adjusted EBITDA for the first quarter of 2006 grew 29 percent over the first quarter of last year and was driven primarily by strong top-line growth, expanded margins, and controlled investment in our SG&A cost structures. Operating income increased 14 percent year-over-year to $21.4 million, from $18.8 million for the first quarter of 2005. Higher stock compensation charges held down the rate of operating income growth when compared to Adjusted EBITDA. Energy operating income was $16.1 million, up 31 percent over the prior year quarter, and Engineering operating income was $8.2 million, up 33 percent from the first quarter of 2005.

Cash Flows

First quarter 2006 cash flow provided by operating activities was $22.5 million, up $11.4 million over the prior-year period, although first quarter 2005 operating cash flow included a $9.9 million payment related to the settlement of a stock option plan. The first quarter year-over-year comparison was also negatively impacted by an incremental $5.2 million in performance-based incentive payments made in the first quarter of 2006.

Balance Sheet

IHS ended the first quarter of 2006 with $151.6 million of cash and cash equivalents and short-term investments, and virtually no debt. Accounts receivable and deferred subscription revenue increased year-over-year primarily as a result of increased sales.

"Our first quarter performance demonstrated the leverage in our business model," stated Michael J. Sullivan, Executive Vice President and CFO. "The results showcase how strong top-line growth and control over the cost structure can translate into stronger margins and higher levels of cash flow."

Outlook (forward-looking statement)

Based upon first quarter performance, IHS is revising its annual guidance upward, and currently anticipates organic revenue growth in the range of eight to ten percent for the full year ending November 30, 2006. The company further expects Adjusted EBITDA to grow twelve to fifteen percent for fiscal 2006. See discussion of Adjusted EBITDA and non-GAAP financial measures at the end of this release.

"We are very pleased with our start to the year," said Mr. Picasso. "We will continue to invest for future growth, engage with customers to address their business challenges, and to execute on our strategic objectives."

As previously announced, IHS will hold a conference call to discuss first quarter results on March 28, 2006, at 3:00 p.m. MST (5:00 p.m. EST). The conference call will be simultaneously webcast on the company's website: www.ihs.com.

USE OF NON-GAAP FINANCIAL MEASURES

EBITDA is defined as net income plus net interest, taxes, depreciation and amortization. Adjusted EBITDA excludes non-cash items, gains and losses on sales of assets and investments and other items that management does not utilize in assessing operating performance (as further described in the attached financial schedules). Management believes that it is useful to eliminate these items in order to focus on what it deems to be a more reliable indicator of ongoing operating performance. Management believes that investors may find adjusted EBITDA useful for the same reasons, although investors are cautioned that non-GAAP financial measures, such as adjusted EBITDA, are not a substitute for GAAP disclosures.

Non-GAAP results are presented only as a supplement to the financial statements based on U.S. generally accepted accounting principles (GAAP). Reconciliations of comparable GAAP measurements to non-GAAP measurements, such as EBITDA and adjusted EBITDA, are provided within the schedules attached to this release.

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 one of the leading global providers of critical technical information, decision-support tools and related services to customers in a number of industries including energy, defense, aerospace, construction, electronics, and automotive through two operating segments, Engineering and Energy. Our Engineering and Energy segments each represent approximately one-half of IHS' total revenues. We serve customers ranging from governments and large multinational corporations to smaller companies and technical professionals in more than 100 countries. Our customers rely on our offerings to facilitate decision making, support key processes and improve productivity. We have been in business for more than 45 years and employ more than 2,300 people 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 (C) 2006 IHS Inc. All rights reserved.

                               IHS INC.
                      CONSOLIDATED BALANCE SHEETS
          (In thousands, except share and per-share amounts)

                                          February 28,   November 30,
                                              2006           2005
                                          -------------  -------------
                                           (Unaudited)
Assets
Current assets:
 Cash and cash equivalents                    $125,729       $132,365
 Short-term investments                         25,853         27,223
 Accounts receivable, net                      146,268        136,950
 Deferred subscription costs                    31,022         27,918
 Deferred income taxes                           9,547         11,351
 Other                                           9,149         10,638
                                          -------------  -------------
Total current assets                           347,568        346,445
Non-current assets:
 Property and equipment, net                    48,462         46,580
 Intangible assets, net                         42,514         27,456
 Goodwill, net                                 320,120        296,394
 Prepaid pension asset                          89,899         88,516
 Other                                           1,770          1,765
                                          -------------  -------------
Total non-current assets                       502,765        460,711
                                          -------------  -------------
Total assets                                  $850,333       $807,156
                                          =============  =============
Liabilities and stockholders' equity
Current liabilities:
 Short-term debt                                  $500            $--
 Accounts payable                               42,487         41,625
 Accrued compensation                           13,712         20,135
 Accrued royalties                              24,218         26,139
 Other accrued expenses                         28,521         34,975
 Income tax payable                              7,144          7,726
 Deferred subscription revenue                 183,443        149,552
 Risk management liabilities                        --          2,705
                                          -------------  -------------
Total current liabilities                      300,025        282,857
Long-term debt                                     249            262
Accrued pension liability                        7,303          6,824
Accrued post-retirement benefits                20,563         20,278
Deferred income taxes                           14,066         15,044
Other liabilities                                7,890          4,402
Minority interests                                 337            309
Commitments and contingencies
Stockholders' equity:
 Class A common stock, $0.01 par value per
  share, 80,000,000 shares authorized,
  44,794,672 and 44,078,231 issued and
  outstanding at February 28, 2006 and
  November 30, 2005, respectively                  448            441
 Class B common stock, $0.01 par value per
  share, 13,750,000 shares authorized,
  issued and outstanding at February 28,
  2006 and November 30, 2005                       138            138
 Additional paid-in capital                    171,668        168,196
 Retained earnings                             357,148        343,684
 Accumulated other comprehensive loss           (7,119)       (10,486)
 Unearned compensation                         (22,383)       (24,793)
                                          -------------  -------------
    Total stockholders' equity                 499,900        477,180
                                          -------------  -------------
Total liabilities and stockholders' equity    $850,333       $807,156
                                          =============  =============

                               IHS INC.
                 CONSOLIDATED STATEMENTS OF OPERATIONS
               (In thousands, except per-share amounts)

                                                  Three Months Ended
                                                     February 28,
                                                 ---------------------
                                                   2006        2005
                                                 ---------   ---------
                                                      (Unaudited)
Revenue:
 Products                                        $106,582     $97,325
 Services                                          23,284      19,658
                                                 ---------   ---------
  Total revenue                                   129,866     116,983
Operating expenses:
 Cost of revenue:
  Products                                         44,620      42,861
  Services                                         15,148      12,518
  Compensation expense related to equity awards     1,095          79
                                                 ---------   ---------
    Total cost of revenue                          60,863      55,458
  Selling, general and administrative              42,804      40,559
  Depreciation and amortization                     3,370       2,907
  Restructuring and other charges                       2          --
  Compensation expense related to equity awards     2,571       1,195
  Gain on sales of assets, net                         --        (617)
  Net periodic pension and post-retirement
   benefits                                          (726)       (931)
  Earnings in unconsolidated subsidiaries             (28)        (28)
  Other income, net                                  (403)       (319)
                                                 ---------   ---------
    Total operating expenses                      108,453      98,224
                                                 ---------   ---------
Operating income                                   21,413      18,759
 Interest income                                      914         718
 Interest expense                                     (85)       (502)
                                                 ---------   ---------
  Non-operating income, net                           829         216
                                                 ---------   ---------
Income from continuing operations before income
 taxes and minority interests                      22,242      18,975
Provision for income taxes                         (7,473)     (5,406)
                                                 ---------   ---------
Income from continuing operations before minority
 interests                                         14,769      13,569
Minority interests                                    (25)          7
                                                 ---------   ---------
Income from continuing operations                  14,744      13,576
Discontinued operations:
 Loss from discontinued operations, net            (1,280)       (443)
                                                 ---------   ---------
Net income                                        $13,464     $13,133
                                                 =========   =========
Income from continuing operations per share:
 Basic (Class A and Class B common stock)           $0.26       $0.25
                                                 =========   =========
 Diluted (Class A and Class B common stock)         $0.26       $0.24
                                                 =========   =========
Loss from discontinued operations per share:
 Basic (Class A and Class B common stock)          $(0.02)     $(0.01)
                                                 =========   =========
 Diluted (Class A and Class B common stock)        $(0.02)     $(0.01)
                                                 =========   =========
Net income per share:
 Basic (Class A and Class B common stock)           $0.24       $0.24
                                                 =========   =========
 Diluted (Class A and Class B common stock)         $0.24       $0.23
                                                 =========   =========
Weighted average shares:
 Basic (Class A common stock)                      42,125      41,256
                                                 =========   =========
 Basic (Class B common stock)                      13,750      13,750
                                                 =========   =========
 Diluted (Class A common stock)                    56,062      56,151
                                                 =========   =========
 Diluted (Class B common stock)                    13,750      13,750
                                                 =========   =========

                               IHS INC.
                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (In thousands)

                                                   Three Months Ended
                                                       February 28,
                                                   -------------------
                                                     2006      2005
                                                   --------- ---------
                                                       (Unaudited)
Operating activities
Net income                                          $13,464   $13,133
Reconciliation of net income to net cash provided
 by operating activities:
 Depreciation and amortization                        3,370     2,967
 Compensation expense related to equity awards
  (non-cash portion)                                  3,920     1,274
 Gain on sales of assets, net                            --      (617)
 Impairment of assets of discontinued operations      1,012        --
 Net periodic pension and post-retirement benefits
  income                                               (726)     (931)
 Minority interests                                      25        (7)
 Deferred income taxes                                  702       (30)
 Change in assets and liabilities:
  Accounts receivable, net                          (10,183)   (8,402)
  Other current assets                               (1,658)   (2,063)
  Accounts payable                                      387    (2,051)
  Accrued expenses                                  (15,629)  (15,927)
  Income taxes                                         (601)      492
  Deferred subscription revenue                      28,425    23,283
                                                   --------- ---------
Net cash provided by operating activities            22,508    11,121
Investing activities
Capital expenditures on property and equipment       (2,368)     (930)
Change in other assets                                1,991      (949)
Purchase of investments                              (5,113)       --
Sales and maturities of investments                   6,458        --
Acquisitions of businesses, net of cash acquired    (32,976)     (875)
                                                   --------- ---------
Net cash used in investing activities               (32,008)   (2,754)
Financing activities
Net payments on debt                                    (16)      (17)
Tax benefit from equity compensation plans            1,969        --
                                                   --------- ---------
Net cash provided by (used in) financing activities   1,953       (17)
                                                   --------- ---------
Foreign exchange impact on cash balance                 911       (87)
                                                   --------- ---------
Net increase (decrease) in cash and cash
 equivalents                                         (6,636)    8,263
Cash and cash equivalents at the beginning of the
 year                                               132,365   124,452
                                                   --------- ---------
Cash and cash equivalents at the end of the year   $125,729  $132,715
                                                   ========= =========

                               IHS INC.
         RECONCILIATIONS OF NON-GAAP FINANCIAL MEASUREMENTS TO
         MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS
                            (In thousands)

                                                    Three Months Ended
                                                       February 28,
                                                    ------------------
                                                     2006      2005
                                                    --------  --------
                                                       (Unaudited)

Energy operating income                             $16,148   $12,283
Engineering operating income                          8,225     6,202
                                                    --------  --------
 Total segment operating income                      24,373    18,485
Adjustments:
 Corporate-level restructuring and other charges        (20)       --
 Compensation expense related to equity awards       (3,666)   (1,274)
 Gain on sales of corporate assets, net                  --       617
 Net periodic pension and post-retirement benefits      726       931
                                                    --------  --------
Operating income                                    $21,413   $18,759
                                                    ========  ========

                             Three Months Ended February 28, 2006
                         ---------------------------------------------
                          Energy  Engineering Adjustments Consolidated
                         -------- ----------- ----------- ------------
                                          (Unaudited)

Operating income         $16,148      $8,225     $(2,960)     $21,413
Adjustments:
 Allocation of corporate
  costs                    3,045       3,045      (6,090)          --
 Depreciation and
  amortization             1,701       1,460         209        3,370
 Restructuring and other
  charges                     --         (18)         20            2
 Compensation expense
  related to equity
  awards                      --          --       3,666        3,666
 Net periodic pension and
  post-retirement
  benefits                    --          --        (726)        (726)
 Minority interest            --         (25)         --          (25)
                         -------- ----------- ----------- ------------
Adjusted EBITDA          $20,894     $12,687     $(5,881)     $27,700
                         ======== =========== =========== ============

                             Three Months Ended February 28, 2005
                         ---------------------------------------------
                          Energy  Engineering Adjustments Consolidated
                         -------- ----------- ----------- ------------
                                          (Unaudited)

Operating income         $12,283      $6,202        $274      $18,759
Adjustments:
 Allocation of corporate
  costs                    2,399       2,399      (4,798)          --
 Depreciation and
  amortization             1,672       1,040         195        2,907
 Compensation expense
  related to equity
  awards                      --          --       1,274        1,274
 Gain on sale of assets       --          --        (617)        (617)
 Net periodic pension and
  post-retirement
  benefits                    --          --        (931)        (931)
 Minority interest            --           7          --            7
                         -------- ----------- ----------- ------------
Adjusted EBITDA          $16,354      $9,648     $(4,603)     $21,399
                         ======== =========== =========== ============

                               IHS INC.
         RECONCILIATIONS OF NON-GAAP FINANCIAL MEASUREMENTS TO
         MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS
                            (In thousands)

                                                   Three Months Ended
                                                       February 28,
                                                   -------------------
                                                     2006      2005
                                                   --------- ---------
                                                       (Unaudited)

Net income                                          $13,464   $13,133
 Interest income                                       (914)     (718)
 Interest expense                                        85       502
 Provision for income taxes                           7,473     5,406
 Depreciation and amortization                        3,370     2,907
                                                   --------- ---------
EBITDA                                               23,478    21,230
 Compensation expense related to equity awards        3,666     1,274
 Restructuring and other charges                          2        --
 Gain on sales of assets, net                            --      (617)
 Net periodic pension and post-retirement benefits
  income                                               (726)     (931)
 Loss from discontinued operations, net               1,280       443
                                                   --------- ---------
Adjusted EBITDA                                     $27,700   $21,399
                                                   ========= =========

                                                   Three Months Ended
                                                       February 28,
                                                   -------------------
                                                     2006      2005
                                                   --------- ---------
                                                       (Unaudited)

Net cash provided by operating activities           $22,508   $11,121
 Capital expenditures on property and equipment      (2,368)     (930)
                                                   --------- ---------
Free cash flow                                      $20,140   $10,191
                                                   ========= =========

                               IHS INC.
                       SUPPLEMENTAL INFORMATION
               (In thousands, except per-share amounts)

                                 Three Months Ended February 28,
                            ------------------------------------------
                                   2006                  2005
                            --------------------  --------------------
                            After-tax  Per share  After-tax  Per share
                            ---------- ---------  ---------- ---------
                                           (Unaudited)

Compensation expense related
 to equity awards             $(2,309)   $(0.04)      $(803)   $(0.02)
Gain on sales of assets, net       --        --         383      0.01
Net periodic pension and
 post-retirement benefits         420      0.01         543      0.01
Loss from discontinued
 operations, net               (1,280)    (0.03)       (443)    (0.01)

SOURCE: IHS Inc.

IHS Inc.
Jane Okun, 303-397-2747
jane.okun@ihs.com