IHS Inc. Reports Strong Second Quarter 2007 Results |
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EPS of $0.32 and Adjusted EPS of $0.37; Up 39 percent and 37 percent, respectively
ENGLEWOOD, Colo., – June 19, 2007 – 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 second quarter ended May 31, 2007. Revenue for the second quarter of 2007 totaled $154.9 million, representing a 17 percent increase over second quarter 2006 revenue of $132.9 million. Net income for the second quarter of 2007 increased $5.6 million to $18.6 million, or $0.32 per diluted share, compared to second quarter 2006 net income of $12.9 million, or $0.23 per diluted share.
Adjusted EBITDA totaled $35.8 million for the second quarter of 2007, up 43 percent from $25.0 million in the second quarter of 2006. Adjusted earnings per diluted share was $0.37 for the second quarter of 2007, an increase of 37 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. See the end of this release for more information about this non-GAAP measure.
“After announcing the acquisition of Jane’s last week, we are pleased to announce another quarter of great operational and financial results,” said Jerre Stead, Chairman and CEO, IHS. “As we continue to look for acquisitions that provide additional value to our customers, we are also making terrific progress on several special initiatives that will help IHS to be more efficient, more nimble and to provide ever-increasing levels of customer service.”
Second Quarter 2007 Details
Organic revenue growth in the second quarter of 2007 was ten percent over the prior year; acquisitions added four percent and foreign exchange accounted for the remainder of the revenue increase. The company continued to grow its business in both operating segments, domestically and internationally, and across its three product categories—critical information, decision support tools, and operational and advisory services. The Energy segment grew its revenue for the second quarter by 26 percent, to $88.8 million, compared to $70.4 million in the prior year’s second quarter. The Engineering segment grew its second quarter revenue by six percent, to $66.1 million, compared to $62.5 million in the prior year.
Adjusted EBITDA for the second quarter of 2007 grew 43 percent over the second quarter of last year and was driven primarily by top-line growth accompanied by margin expansion. Operating income increased $7.3 million year-over-year to $25.9 million, up from $18.6 million for the second quarter of 2006. Energy operating income was $28.9 million, up 45 percent over the prior-year quarter, and Engineering operating income was $11.8 million, up 34 percent over last year.
Year-to-Date 2007
Revenue for the six months of 2007 totaled $307.5 million, representing a 17 percent increase over the prior-period revenue of $262.7 million. Organic growth contributed 11 percent of the increase. Acquisitions added three percent and foreign exchange movements added the remainder. The Energy segment grew its revenue during the first six months of fiscal year 2007 by 27 percent, to $175.6 million, compared to $138.6 million in the prior-year period. The Engineering segment grew its year-to-date 2007 revenue by six percent, to $131.9 million, compared to $124.1 million in the prior year.
Adjusted EBITDA for the first six months of 2007 totaled $71.9 million, up 36 percent from $52.7 million in the first six months of 2006. Operating income increased 30 percent year-over-year to $51.8 million, up from $40.0 million for the six months ended May 31, 2006. Energy operating income was $55.9 million, up 43 percent over the prior-year period, and Engineering operating income was $24.8 million, up 24 percent over last year.
Net income for the first six months of 2007 increased 40 percent to $37.0 million, or $0.63 per diluted share, compared to the first six months 2006 net income of $26.4 million, or $0.47 per diluted share.
Cash Flows
IHS generated approximately $65.8 million of cash flow from operations during the six months ended May 31, 2007, as compared to last year’s $65.2 million.
Balance Sheet
IHS ended the second quarter of 2007 with $212.3 million of cash and cash equivalents and short-term investments, and virtually no debt.
“While the business continues to generate very strong cash flows, we also continue to see many opportunities to deploy that cash for acquisitions,” stated Michael J. Sullivan, IHS Executive Vice President and CFO. “As we communicated last week, we did use equity for the Jane’s Information Group acquisition because it allowed IHS to differentiate itself from private equity buyers in this intensely competitive mergers-and-acquisitions environment.”
Share Repurchase Program
During the second quarter of 2007, IHS repurchased 200,000 shares of its common stock for approximately $7.8 million, or $39.15 per share. During the first six months of 2007, IHS repurchased 400,000 shares of its common stock for approximately $15.4 million, or $38.52 per share.
Outlook (forward-looking statement)
Based upon year-to-date performance, IHS is revising its annual guidance upward, and currently anticipates all-in revenue growth in the range of 20 to 22 percent for the full year ending November 30, 2007. The company further expects adjusted EBITDA to grow 30 to 32 percent for fiscal 2007. See discussion of adjusted EBITDA and non-GAAP financial measures at the end of this release.
“I’d like to thank all of our hard-working colleagues for their efforts during this exciting time,” said Mr. Stead. “We have made good progress and we have the opportunity to build much more value.”
As previously announced, IHS will hold a conference call to discuss second quarter results on June 19, 2007, 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 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 our operating performance (as further described in the attached financial schedules). Adjusted earnings per diluted share exclude similar non-cash 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 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 credit facility.
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, amortization and impairment of investment in affiliate) or (ii) items that management does not consider to be useful in assessing our operating performance (e.g., income taxes and gain 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 provider of critical technical information, decision-support tools and related services to customers around the world. Our data and services are used primarily by the energy, defense, aerospace, construction, electronics, and automotive industries. IHS translates the value of our global information, expertise and knowledge to enable customer success and create customer delight on a daily basis. Ranging from governments and large multinational corporations to smaller companies and technical professionals in more than 100 countries, customers rely on our offerings to facilitate decision making, support key processes and improve productivity. IHS has been in business for nearly 50 years and employs more than 2,900 people in 35 locations around the world.
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IHS is a registered trademark of IHS Inc. All other company and product names may be trademarks of their respective owners. Copyright © 2007 IHS Inc. All rights reserved.
Investor Relations Contact:
Jane Okun
IHS Inc.
+1 303 397 2747
jane.okun@ihs.com
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IHS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per-share amounts)
May 31, November 30,
2007 2006
------------ ------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $212,286 $180,034
Short-term investments 23 2,076
Accounts receivable, net 126,549 151,300
Deferred subscription costs 37,372 33,293
Deferred income taxes 11,641 7,758
Other 9,801 6,461
------------ ------------
Total current assets 397,672 380,922
Non-current assets:
Property and equipment, net 52,103 53,096
Intangible assets, net 67,858 65,962
Goodwill, net 365,214 350,896
Prepaid pension asset 93,835 92,488
Other 972 937
------------ ------------
Total non-current assets 579,982 563,379
------------ ------------
Total assets $977,654 $944,301
============ ============
Liabilities and stockholders' equity
Current liabilities:
Short-term debt $-- $500
Accounts payable 20,458 45,622
Accrued compensation 19,308 30,788
Accrued royalties 20,368 22,801
Other accrued expenses 34,503 36,047
Income tax payable 16,590 11,484
Deferred subscription revenue 219,815 191,229
------------ ------------
Total current liabilities 331,042 338,471
Long-term debt 1,510 74
Accrued pension liability 12,733 12,309
Accrued post-retirement benefits 16,731 18,200
Deferred income taxes 5,654 2,788
Other liabilities 5,930 6,891
Minority interests 138 377
Commitments and contingencies
Stockholders' equity:
Class A common stock, $0.01 par value per
share, 80,000,000 shares authorized,
45,245,782 and 45,265,794 shares issued
and 44,615,676 and 45,042,232 shares
outstanding at May 31, 2007 and November
30, 2006, respectively 452 453
Class B common stock, $0.01 par value per
share, 13,750,000 shares authorized,
issued and outstanding at May 31, 2007
and November 30, 2006 138 138
Additional paid-in capital 188,678 175,027
Treasury stock, at cost; 630,106 and
223,562 shares at May 31, 2007 and
November 30, 2006, respectively (23,214) (7,551)
Retained earnings 436,988 400,029
Accumulated other comprehensive income
(loss) 874 (2,905)
------------ ------------
Total stockholders' equity 603,916 565,191
------------ ------------
Total liabilities and stockholders' equity $977,654 $944,301
============ ============
IHS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per-share amounts)
Three Months Ended Six Months Ended
May 31, May 31,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
(Unaudited)
Revenue:
Products $129,136 $110,483 $252,115 $217,065
Services 25,764 22,372 55,406 45,656
--------- --------- --------- ---------
Total revenue 154,900 132,855 307,521 262,721
Operating expenses:
Cost of revenue:
Products 50,274 47,851 99,007 93,524
Services 17,479 15,331 34,484 30,521
--------- --------- --------- ---------
Total cost of revenue
(includes stock-based
compensation expense of
$105, $1,071, $456 and
$2,166 for the three
and six months ended
May 31, 2007 and 2006,
respectively) 67,753 63,182 133,491 124,045
Selling, general and
administrative (includes
stock-based compensation
expense of $5,940 ;
$3,288; $12,925 and
$5,859 for the three and
six months ended May 31,
2007 and 2006,
respectively) 56,607 47,679 114,498 92,844
Depreciation and
amortization 4,921 3,342 9,501 6,712
Restructuring and other
charges 9 -- -- 2
Gain on sales of assets,
net (5) -- (756) --
Net periodic pension and
post-retirement benefits (354) (1,029) (622) (1,545)
Earnings in unconsolidated
subsidiaries (120) (102) (164) (130)
Other expense (income),
net 204 1,223 (196) 820
--------- --------- --------- ---------
Total operating expenses 129,015 114,295 255,752 222,748
--------- --------- --------- ---------
Operating income 25,885 18,560 51,769 39,973
Interest income 1,694 1,458 3,348 2,372
Interest expense (76) (67) (209) (152)
--------- --------- --------- ---------
Non-operating income, net 1,618 1,391 3,139 2,220
--------- --------- --------- ---------
Income from continuing
operations before income
taxes and minority interests 27,503 19,951 54,908 42,193
Provision for income taxes (8,909) (6,619) (17,952) (14,092)
--------- --------- --------- ---------
Income from continuing
operations before minority
interests 18,594 13,332 36,956 28,101
Minority interests (12) (56) 3 (81)
--------- --------- --------- ---------
Income from continuing
operations 18,582 13,276 36,959 28,020
Discontinued operations:
Loss from discontinued
operations, net -- (342) -- (1,622)
--------- --------- --------- ---------
Net income $18,582 $12,934 $36,959 $26,398
========= ========= ========= =========
Income from continuing
operations per share:
Basic (Class A and Class B
common stock) $0.32 $0.24 $0.64 $0.50
========= ========= ========= =========
Diluted (Class A and Class B
common stock) $0.32 $0.24 $0.63 $0.50
========= ========= ========= =========
Loss from discontinued
operations per share:
Basic (Class A and Class B
common stock) $-- $(0.01) $-- $(0.03)
========= ========= ========= =========
Diluted (Class A and Class B
common stock) $-- $(0.01) $-- $(0.03)
========= ========= ========= =========
Net income per share:
Basic (Class A and Class B
common stock) $0.32 $0.23 $0.64 $0.47
========= ========= ========= =========
Diluted (Class A and Class B
common stock) $0.32 $0.23 $0.63 $0.47
========= ========= ========= =========
Weighted average shares:
Basic (Class A common stock) 43,626 42,271 43,733 42,199
========= ========= ========= =========
Basic (Class B common stock) 13,750 13,750 13,750 13,750
========= ========= ========= =========
Diluted (Class A common
stock) 58,281 56,130 58,328 56,071
========= ========= ========= =========
Diluted (Class B common
stock) 13,750 13,750 13,750 13,750
========= ========= ========= =========
IHS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended
May 31,
---------------------
2007 2006
---------- ----------
(Unaudited)
Operating activities
Net income $36,959 $26,398
Reconciliation of net income to net cash
provided by operating activities:
Depreciation and amortization 9,501 6,712
Stock-based compensation expense 13,381 8,025
Gain on sales of assets, net (756) --
Impairment of assets of discontinued
operations -- 1,012
Non-cash net periodic pension and post-
retirement benefits (1,997) (1,944)
Undistributed earnings of unconsolidated
subsidiaries, net 140 --
Minority interests (234) (66)
Deferred income taxes (1,015) 213
Change in assets and liabilities:
Accounts receivable, net 24,825 30,781
Other current assets (5,565) (2,715)
Accounts payable (25,388) (20,557)
Accrued expenses (15,492) (11,586)
Income taxes 5,311 (247)
Deferred subscription revenue 26,092 29,136
---------- ----------
Net cash provided by operating activities 65,762 65,162
Investing activities
Capital expenditures on property and equipment (3,645) (5,763)
Intangible assets acquired -- (3,300)
Change in other assets (3,496) 1,272
Purchase of investments -- (5,365)
Sales and maturities of investments 2,008 14,302
Acquisitions of businesses, net of cash acquired (14,607) (32,976)
Proceeds from sales of assets 2,461 --
---------- ----------
Net cash used in investing activities (17,279) (31,830)
Financing activities
Net payments on debt (500) (91)
Tax benefit from equity compensation plans 121 2,194
Repurchases of common stock (15,663) --
---------- ----------
Net cash provided by (used in) financing
activities (16,042) 2,103
---------- ----------
Foreign exchange impact on cash balance (189) 2,197
---------- ----------
Net increase in cash and cash equivalents 32,252 37,632
Cash and cash equivalents at the beginning of
the period 180,034 132,365
---------- ----------
Cash and cash equivalents at the end of the
period $212,286 $169,997
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IHS INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASUREMENTS TO
MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS
(In thousands)
Three Months Ended
May 31,
---------------------
2007 2006
---------- ----------
(Unaudited)
Energy $88,828 $70,375
Engineering 66,072 62,480
Shared Services -- --
---------- ----------
Revenue $154,900 $132,855
========== ==========
Energy $28,873 $19,934
Engineering 11,825 8,815
Shared Services (14,813) (10,189)
---------- ----------
Operating income $25,885 $18,560
========== ==========
Three Months Ended May 31, 2007
---------------------------------------------------
Shared
Energy Engineering Services Consolidated
------------ ------------ ------------ ------------
(Unaudited)
Operating income $28,873 $11,825 $(14,813) $25,885
Adjustments:
Stock-based
compensation
expense -- -- 6,045 6,045
Depreciation and
amortization 2,917 1,407 597 4,921
Restructuring
and offering
charges (1) 10 -- 9
(Gain) loss on
sales of
assets, net 1 (6) -- (5)
Non-cash net
periodic
pension and
post-retirement
benefits -- -- (1,017) (1,017)
Minority
interest -- (12) -- (12)
------------ ------------ ------------ ------------
Adjusted EBITDA $31,790 $13,224 $(9,188) $35,826
============ ============ ============ ============
Three Months Ended May 31, 2006
---------------------------------------------------
Shared
Energy Engineering Services Consolidated
------------ ------------ ------------ ------------
(Unaudited)
Operating income $19,934 $8,815 $(10,189) $18,560
Adjustments:
Stock-based
compensation
expense -- -- 4,359 4,359
Depreciation and
amortization 1,805 1,266 271 3,342
Non-cash net
periodic
pension and
post-retirement
benefits -- -- (1,218) (1,218)
Minority
interest -- (56) -- (56)
------------ ------------ ------------ ------------
Adjusted EBITDA $21,739 $10,025 $(6,777) $24,987
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IHS INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASUREMENT TO MOST
DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENT
(In thousands)
Six Months Ended
May 31,
---------------------
2007 2006
---------- ----------
(Unaudited)
Energy $175,574 $138,613
Engineering 131,947 124,108
Shared Services -- --
---------- ----------
Revenue $307,521 $262,721
========== ==========
Energy $55,918 $39,128
Engineering 24,810 20,084
Shared Services (28,959) (19,239)
---------- ----------
Operating income $51,769 $39,973
========== ==========
Six Months Ended May 31, 2007
---------------------------------------------------
Shared
Energy Engineering Services Consolidated
------------ ------------ ------------ ------------
(Unaudited)
Operating income $55,918 $24,810 $(28,959) $51,769
Adjustments:
Stock-based
compensation
expense -- -- 13,381 13,381
Depreciation and
amortization 5,595 2,812 1,094 9,501
Gain on sales of
assets, net -- -- (756) (756)
Non-cash net
periodic
pension and
post-retirement
benefits -- -- (1,997) (1,997)
Minority interest -- 3 -- 3
------------ ------------ ------------ ------------
Adjusted EBITDA $61,513 $27,625 $(17,237) $71,901
============ ============ ============ ============
Six Months Ended May 31, 2006
---------------------------------------------------
Shared
Energy Engineering Services Consolidated
------------ ------------ ------------ ------------
(Unaudited)
Operating income $39,128 $20,084 $(19,239) $39,973
Adjustments:
Stock-based
compensation
expense -- -- 8,025 8,025
Depreciation and
amortization 3,507 2,726 479 6,712
Restructuring
and offering
charges -- (18) 20 2
Non-cash net
periodic
pension and
post-retirement
benefits -- -- (1,944) (1,944)
Minority
interest -- (81) -- (81)
------------ ------------ ------------ ------------
Adjusted EBITDA $42,635 $22,711 $(12,659) $52,687
============ ============ ============ ============
IHS INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASUREMENT TO MOST
DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENT
(In thousands)
Three Months Ended Six Months Ended
May 31, May 31,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
(Unaudited)
Net income $18,582 $12,934 $36,959 $26,398
Interest income (1,694) (1,458) (3,348) (2,372)
Interest expense 76 67 209 152
Provision for income taxes 8,909 6,619 17,952 14,092
Depreciation and
amortization 4,921 3,342 9,501 6,712
--------- --------- --------- ---------
EBITDA 30,794 21,504 61,273 44,982
Stock-based compensation
expense 6,045 4,359 13,381 8,025
Restructuring and offering
charges 9 -- -- 2
Gain on sales of assets, net (5) -- (756) --
Non-cash net periodic
pension and post-retirement
benefits (1,017) (1,218) (1,997) (1,944)
Loss from discontinued
operations, net -- 342 -- 1,622
--------- --------- --------- ---------
Adjusted EBITDA $35,826 $24,987 $71,901 $52,687
========= ========= ========= =========
Three Months Ended Six Months Ended
May 31, May 31,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
(Unaudited)
Net cash provided by operating
activities $42,665 $42,654 $65,762 $65,162
Capital expenditures on
property and equipment (340) (3,395) (3,645) (5,763)
--------- --------- --------- ---------
Free cash flow $42,325 $39,259 $62,117 $59,399
========= ========= ========= =========
IHS INC.
SUPPLEMENTAL INFORMATION
(In thousands, except per-share amounts)
Three Months Ended Six Months Ended
February 28, February 28,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
(Unaudited)
Earnings per diluted share $0.32 $0.23 $0.63 $0.47
Stock-based compensation
expense 0.07 0.05 0.14 0.09
Gain on sales of assets, net -- -- (0.01) --
Non-cash net periodic
pension and post-retirement
benefits (0.01) (0.01) (0.02) (0.02)
Loss from discontinued
operations, net -- 0.01 -- 0.03
--------- --------- --------- ---------
Adjusted earnings per diluted
share $0.37 $0.27 $0.75 $0.57
========= ========= ========= =========
Note: amounts may not sum due
to rounding.