ENGLEWOOD, Colo., June 28, 2006 (PRIMEZONE) -- 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, 2006. Revenue for the second quarter of 2006 totaled $132.9 million, representing a 15 percent increase over second quarter 2005 revenue of $115.1 million. Net income for the second quarter of 2006 increased 50 percent to $12.9 million, or $0.23 per diluted share, compared to second quarter 2005 net income of $8.6 million, or $0.15 per diluted share.
Adjusted EBITDA totaled $25.0 million for the second quarter of 2006, up 61 percent from $15.5 million in the second quarter of 2005. IHS generated $42.7 million of cash flow from operations for the second quarter of 2006, an increase of $29.4 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 had a great quarter. We continue to drive growth by maintaining a sharp focus on delivering products and services that our customers need -- every day -- and we are very pleased to see that strategy manifest itself in our results for this quarter," said Charles Picasso, IHS President and CEO. "Additionally, after the close of the quarter, we completed two strategic acquisitions which will help IHS to drive additional sales and to deliver the most comprehensive information and insight to our customers worldwide."
Second Quarter 2006 Details
Organic revenue growth in the second quarter of 2006 was 14 percent over the prior year, contributing nearly all of the 15 percent total increase in the quarter. The company grew 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 19 percent, to $70.4 million, compared to $59.0 million in the prior year's second quarter. Energy's organic revenue growth contributed essentially all of its increase. The Engineering segment grew its second quarter revenue by 11 percent, to $62.5 million, compared to $56.1 million in the prior year. The Engineering segment's organic revenue growth rate was eight percent for the second quarter 2006, with acquisitions adding five percent to the revenue growth rate, and the balance relating to movements in foreign exchange.
Adjusted EBITDA for the second quarter of 2006 grew 61 percent over the second quarter of last year and was driven primarily by top-line growth without a commensurate increase in cost structure. Operating income increased 42 percent year-over-year to $18.6 million, up from $13.0 million for the second quarter of 2005. Energy operating income was $16.4 million, up 39 percent over the prior year quarter, and Engineering operating income was $5.3 million, up from second quarter 2005 operating income of $0.8 million.
Year-to-Date 2006
Revenue for the first half of 2006 totaled $262.7 million, representing a 13 percent increase over first half 2005 revenue of $232.1 million. Organic growth contributed nearly all of the total increase. The Energy segment grew its revenue during the six months ended May 31, 2006 by 18 percent, to $138.6 million, compared to $117.1 million in the prior-year period. The Engineering segment grew its year-to-date 2006 revenue by 8 percent, to $124.1 million, compared to $115.0 million in the prior year.
Adjusted EBITDA for the first half of 2006 totaled $52.7 million, up 43 percent from $36.9 million in the first six months of 2005. Operating income increased 26 percent year-over-year to $40.0 million, up from $31.8 million for the six months ended May 31, 2005. Energy operating income was $32.6 million, up 35 percent over the prior-year period, and Engineering operating income was $13.5 million, up $6.5 million from the same period in 2005.
Net income for the first six months of 2006 increased 21 percent to $26.4 million, or $0.47 per diluted share, compared to the first six months 2005 net income of $21.8 million, or $0.39 per diluted share.
IHS generated $65.2 million of cash flow from operations for the first six months of 2006, an increase of $40.8 million over the prior year period. However, first half 2005 operating cash flow did include a $9.9 million payment related to the settlement of a stock option plan, and there were no similar cash payments associated with stock compensation awards in the first half of 2006.
Balance Sheet
IHS ended the second quarter of 2006 with $189.2 million of cash and cash equivalents and short-term investments, and virtually no debt. Subsequent to the end of the second quarter, IHS completed two acquisitions resulting in the deployment of $47 million of cash.
"We're pleased with the both the magnitude and the broad-based nature of our top-line growth, and the fact that each of our segments is executing well," stated Michael J. Sullivan, IHS Executive Vice President and CFO.
Outlook (forward-looking statement)
Based upon year to date performance, IHS is revising its annual guidance upward, and currently anticipates organic revenue growth in the range of 10 to 12 percent for the full year ending November 30, 2006. The company further expects adjusted EBITDA to grow 21 to 25 percent for fiscal 2006. 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 results on June 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 http://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.
The IHS Inc. logo is available at http://www.primezone.com/newsroom/prs/?pkgid=1505
IHS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per-share amounts)
May 31, November 30,
2006 2005
-------- --------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $169,997 $132,365
Short-term investments 19,179 27,223
Accounts receivable, net 109,515 136,950
Deferred subscription costs 34,604 27,918
Deferred income taxes 11,419 11,351
Other 8,051 10,638
-------- --------
Total current assets 352,765 346,445
Non-current assets:
Property and equipment, net 51,795 46,580
Intangible assets, net 42,399 27,456
Goodwill, net 326,315 296,394
Prepaid pension asset 91,002 88,516
Other 2,894 1,765
-------- --------
Total non-current assets 514,405 460,711
-------- --------
Total assets $867,170 $807,156
======== ========
Liabilities and stockholders' equity
Current liabilities:
Short-term debt $ 602 $ --
Accounts payable 22,203 41,625
Accrued compensation 15,096 20,135
Accrued royalties 22,385 26,139
Other accrued expenses 34,551 34,975
Income tax payable 8,022 7,726
Deferred subscription revenue 189,596 149,552
Risk management liabilities -- 2,705
-------- --------
Total current liabilities 292,455 282,857
Long-term debt 74 262
Accrued pension liability 7,940 6,824
Accrued post-retirement benefits 20,072 20,278
Deferred income taxes 15,291 15,044
Other liabilities 6,966 4,402
Minority interests 272 309
Commitments and contingencies
Stockholders' equity:
Class A common stock, $0.01 par value
per share, 80,000,000 shares
authorized, 44,976,727 and 44,078,231
issued and outstanding at May 31, 2006
and November 30, 2005, respectively 450 441
Class B common stock, $0.01 par value per
share, 13,750,000 shares authorized,
issued andoutstanding at May 31, 2006 and
November 30, 2005 138 138
Additional paid-in capital 153,624 168,196
Retained earnings 370,082 343,684
Accumulated other comprehensive loss (194) (10,486)
Unearned compensation -- (24,793)
-------- --------
Total stockholders' equity 524,100 477,180
-------- --------
Total liabilities and stockholders' equity $867,170 $807,156
======== ========
IHS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per-share amounts)
Three Months Ended Six Months Ended
May 31, May 31,
------------------ ------------------
2006 2005 2006 2005
-------- -------- -------- --------
(Unaudited)
Revenue:
Products $110,483 $ 96,599 $217,065 $193,924
Services 22,372 18,546 45,656 38,204
-------- -------- -------- --------
Total revenue 132,855 115,145 262,721 232,128
Operating expenses:
Cost of revenue:
Products 46,820 44,799 91,440 87,660
Services 15,291 12,372 30,439 24,890
Compensation expense
related to equity awards 1,071 76 2,166 155
-------- -------- -------- --------
Total cost of revenue 63,182 57,247 124,045 112,705
Selling, general and
administrative 44,580 42,514 87,384 83,073
Depreciation and
amortization 3,342 2,859 6,712 5,766
Restructuring and other
charges -- -- 2 --
Compensation expense
related to equity awards 3,288 1,154 5,859 2,349
Gain on sales of assets,
net -- (714) -- (1,331)
Net periodic pension and
post-retirement benefits (1,218) (939) (1,944) (1,870)
Earnings in unconsolidated
subsidiaries (102) (21) (130) (49)
Other expense (income),
net 1,223 7 820 (312)
-------- -------- -------- --------
Total operating
expenses 114,295 102,107 222,748 200,331
-------- -------- -------- --------
Operating income 18,560 13,038 39,973 31,797
Interest income 1,458 934 2,372 1,652
Interest expense (67) (81) (152) (583)
-------- -------- -------- --------
Non-operating expense,
net 1,391 853 2,220 1,069
-------- -------- -------- --------
Income from continuing
operations before income
taxes and minority interests 19,951 13,891 42,193 32,866
Provision for income taxes (6,619) (4,574) (14,092) (9,980)
-------- -------- -------- --------
Income from continuing
operations before minority
interests 13,332 9,317 28,101 22,886
Minority interests (56) 11 (81) 18
-------- -------- -------- --------
Income from continuing
operations 13,276 9,328 28,020 22,904
Discontinued operations:
Loss from discontinued
operations, net (342) (682) (1,622) (1,125)
-------- -------- -------- --------
Net income $ 12,934 $ 8,646 $ 26,398 $ 21,779
======== ======== ======== ========
Income from continuing
operations per share:
Basic (Class A and Class B
common stock) $ 0.24 $ 0.17 $ 0.50 $ 0.42
======== ======== ======== ========
Diluted (Class A and Class
B common stock) $ 0.24 $ 0.16 $ 0.50 $ 0.41
======== ======== ======== ========
Loss from discontinued
operations per share:
Basic (Class A and Class B
common stock) $ (0.01) $ (0.01) $ (0.03) $ (0.02)
======== ======== ======== ========
Diluted (Class A and Class
B common stock) $ (0.01) $ (0.01) $ (0.03) $ (0.02)
======== ======== ======== ========
Net income per share:
Basic (Class A and Class B
common stock) $ 0.23 $ 0.16 $ 0.47 $ 0.40
======== ======== ======== ========
Diluted (Class A and Class
B common stock) $ 0.23 $ 0.15 $ 0.47 $ 0.39
======== ======== ======== ========
Weighted average shares:
Basic (Class A common stock) 42,271 41,341 42,199 41,299
======== ======== ======== ========
Basic (Class B common stock) 13,750 13,750 13,750 13,750
======== ======== ======== ========
Diluted (Class A common
stock) 56,130 56,020 56,071 55,813
======== ======== ======== ========
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,
--------------------
2006 2005
-------- --------
(Unaudited)
Operating activities
Net income $ 26,398 $ 21,779
Reconciliation of net income to net cash
provided by operating activities:
Depreciation and amortization 6,712 5,885
Compensation expense related to equity
awards (non-cash portion) 8,025 2,504
Gain on sales of assets, net -- (1,331)
Impairment of assets of discontinued
operations 1,012 --
Net periodic pension and post-retirement
benefits (1,944) (1,870)
Minority interests (66) (18)
Deferred income taxes 213 2,305
Change in assets and liabilities:
Accounts receivable, net 30,781 15,238
Other current assets (2,715) (8,258)
Accounts payable (20,557) (12,334)
Accrued expenses (11,586) (23,082)
Income taxes (247) (713)
Deferred subscription revenue 29,136 24,112
Other liabilities -- 112
-------- --------
Net cash provided by operating activities 65,162 24,329
Investing activities
Capital expenditures on property and
equipment (5,763) (2,801)
Intangible assets acquired (3,300) --
Change in other assets 1,272 (596)
Purchase of investments (5,365) --
Sales and maturities of investments 14,302 --
Acquisitions of businesses, net of cash
acquired (32,976) (2,972)
Proceeds from sales of assets and
investment in affiliate -- 1,334
-------- --------
Net cash used in investing activities (31,830) (5,035)
Financing activities
Net payments on debt (91) (270)
Tax benefit from equity compensation plans 2,194 --
-------- --------
Net cash provided by (used in) financing
activities 2,103 (270)
-------- --------
Foreign exchange impact on cash balance 2,197 (1,803)
-------- --------
Net increase in cash and cash equivalents 37,632 17,221
Cash and cash equivalents at the beginning
of the year 132,365 124,452
-------- --------
Cash and cash equivalents at the end of the
year $169,997 $141,673
======== ========
IHS INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASUREMENTS TO
MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS
(In thousands)
Three Months Ended
-------------------------
May 31,
2006 2005
----------- ------------
(Unaudited)
----------- ------------
Energy operating income $ 16,410 $ 11,779
Engineering operating income 5,291 833
Total segment operating income 21,701 12,612
Adjustments:
Corporate-level restructuring and other
charges -- --
Compensation expense related to equity
awards (4,359) (1,230)
Gain on sales of corporate assets, net -- 717
Net periodic pension and post-retirement
benefits 1,218 939
----------- ------------
Operating income $ 18,560 $ 13,038
=========== ============
Three Months Ended May 31, 2006
Energy Engineering Adjustments Consolidated
----------- ----------- ----------- ------------
(Unaudited)
Operating income $ 16,410 $ 5,291 $ (3,141) $ 18,560
Adjustments:
Allocation of
corporate costs 3,524 3,524 (7,048) --
Depreciation and
amortization 1,805 1,266 271 3,342
Restructuring and
other charges -- -- -- --
Compensation expense
related to equity
awards -- -- 4,359 4,359
Gains (losses) on
sales of assets,
net -- -- -- --
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
=========== =========== =========== ============
Three Months Ended May 31, 2005
Energy Engineering Adjustments Consolidated
----------- ----------- ----------- ------------
(Unaudited)
Operating income $ 11,779 $ 833 $ 426 $ 13,038
Adjustments:
Allocation of
corporate costs 2,271 2,271 (4,542) --
Depreciation and
amortization 1,638 1,024 197 2,859
Restructuring and
other charges -- -- -- --
Compensation expense
related to equity
awards -- -- 1,230 1,230
Gains (losses) on
sales of assets,
net -- 3 (717) (714)
Net periodic
pension and post-
retirement benefits -- -- (939) (939)
Minority interest -- 11 -- 11
----------- ----------- ----------- ------------
Adjusted EBITDA $ 15,688 $ 4,142 $ (4,345) $ 15,485
=========== =========== =========== ============
IHS INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASUREMENT TO MOST
DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENT
(In thousands)
Six Months Ended May 31,
-----------------------
2006 2005
--------- ---------
(Unaudited)
Energy operating income $ 32,559 $ 24,063
Engineering operating income 13,515 7,034
--------- ---------
Total segment operating income 46,074 31,097
Adjustments:
Corporate-level restructuring
and other charges (20) --
Compensation expense related
to equity awards (8,025) (2,504)
Gain on sales of corporate
assets, net -- 1,334
Net periodic pension and
post-retirement benefits 1,944 1,870
--------- ---------
Operating income $ 39,973 $ 31,797
========= =========
Six Months Ended May 31, 2006
-----------------------------------------------
Energy Engineering Adjustments Consolidated
------- ----------- ----------- ------------
(Unaudited)
Operating income $ 32,559 $ 13,515 $ (6,101) $ 39,973
Adjustments:
Allocation of
corporate costs 6,569 6,569 (13,138) --
Depreciation and
amortization 3,507 2,726 479 6,712
Restructuring and
other charges -- (18) 20 2
Compensation
expense related
to equity
awards -- -- 8,025 8,025
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
======== ======== ======== ========
Six Months Ended May 31, 2005
-----------------------------------------------
Energy Engineering Adjustments Consolidated
------- ----------- ----------- ------------
(Unaudited)
Operating income $ 24,063 $ 7,034 $ 700 $ 31,797
Adjustments:
Allocation of
corporate costs 4,670 4,670 (9,340) --
Depreciation and
amortization 3,310 2,064 392 5,766
Compensation
expense related
to equity
awards -- -- 2,504 2,504
Gain on sale
of assets -- 3 (1,334) (1,331)
Net periodic
pension and
post-
retirement
benefits -- -- (1,870) (1,870)
Minority
interest -- 18 -- 18
-------- -------- -------- --------
Adjusted EBITDA $ 32,043 $ 13,789 $ (8,948) $ 36,884
======== ======== ======== ========
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,
2006 2005 2006 2005
-------- -------- -------- --------
(Unaudited)
Net income $ 12,934 $ 8,646 $ 26,398 $ 21,779
Interest income (1,458) (934) (2,372) (1,652)
Interest expense 67 81 152 583
Provision for income
taxes 6,619 4,574 14,092 9,980
Depreciation and
amortization 3,342 2,859 6,712 5,766
-------- -------- -------- --------
EBITDA 21,504 15,226 44,982 36,456
Compensation expense
related to equity
awards 4,359 1,230 8,025 2,504
Restructuring and other
charges -- -- 2 --
Gain on sales of assets,
net -- (714) -- (1,331)
Net periodic pension and
post-retirement
benefits (1,218) (939) (1,944) (1,870)
Loss from discontinued
operations, net 342 682 1,622 1,125
-------- -------- -------- --------
Adjusted EBITDA $ 24,987 $ 15,485 $ 52,687 $ 36,884
======== ======== ======== ========
Three Months Ended Six Months Ended
May 31, May 31,
2006 2005 2006 2005
-------- -------- -------- --------
(Unaudited)
Net cash provided by
operating activities $ 42,654 $ 13,208 $ 65,162 $ 24,329
Capital expenditures
on property and
equipment (3,395) (1,871) (5,763) (2,801)
-------- -------- -------- --------
Free cash flow $ 39,259 $ 11,337 $ 59,399 $ 21,528
IHS INC.
SUPPLEMENTAL INFORMATION
(In thousands, except per-share amounts)
Three Months Ended May 31,
---------------------------------
2006 2005
--------------- ---------------
After Per After Per
tax share tax share
------ ------ ------ ------
(Unaudited)
Compensation expense
related to equity awards $(2,747) $ (0.04) $ (775) $ (0.02)
Gain on sales of assets, net -- -- 445 0.01
Net periodic pension and
post-retirement benefits 726 0.01 545 0.01
Loss from discontinued
operations, net (342) (0.01) (682) (0.01)
Six Months Ended May 31,
---------------------------------
After Per After Per
tax share tax share
------ ------ ------ ------
(Unaudited)
Compensation expense
related to equity awards $(5,055) $ (0.09) $(1,578) $ (0.03)
Gain on sales of
assets, net -- -- 825 0.02
Net periodic pension and
post-retirement benefits 1,146 0.02 1,085 0.02
Loss from discontinued
operations, net (1,622) (0.03) (1,125) (0.02)