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.

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 is a registered trademark of IHS Inc. All other company and product names may be trademarks of their respective owners. Copyright © 2011 IHS Inc. All rights reserved.