IHS Inc. Reports First Quarter 2013 Results

  IHS Inc. Reports First Quarter 2013 Results

Business Wire

ENGLEWOOD, Colo. -- March 21, 2013

IHS Inc. (NYSE: IHS), the leading global source of information and analytics,
today reported results for the first quarter ended February28, 2013.

  *Revenue of $383 million, up 12 percent from the prior-year period
  *Organic revenue growth rate of five percent overall, including eight
    percent for subscription-based business
  *Adjusted EBITDA of $118 million, or 30.9 percent of revenue
  *Non-GAAP earnings per diluted share (adjusted EPS) of $0.86, up 12 percent
    from the prior-year period
  *Adjusted free cash flow of $112 million, up 47 percent from the prior-year
    period

Adjusted EBITDA, adjusted EPS, and adjusted free cash flow are non-GAAP
financial measures used by management to measure operating performance. These
terms are defined elsewhere in this release. Please see schedules appearing
later in this release for reconciliations of non-GAAP financial measures to
the most directly comparable GAAP measures.

First Quarter 2013 Financial Performance

                             Three Months Ended           Change
  (in thousands, except        February 28,   February 29,
  percentages and per share    2013          2012           $          %
  data)
  Revenue                      $  382,525     $  342,743     $ 39,782    12  %
                                                                         
  Net income                   $  24,671      $  23,475      $ 1,196     5   %
  Adjusted EBITDA              $  118,194     $  103,633     $ 14,561    14  %
                                                                         
  GAAP EPS                     $  0.37        $  0.35        $ 0.02      6   %
  Adjusted EPS                 $  0.86        $  0.77        $ 0.09      12  %
                                                                         
  Cash flow from operations    $  131,686     $  32,983      $ 98,703    299 %
  Adjusted free cash flow      $  112,319     $  76,427      $ 35,892    47  %
                                                                             

“The first quarter was a solid start to 2013 and a continuation of our steady
performance amid a challenging macroeconomic environment,” said Jerre Stead,
IHS chairman and chief executive officer. “We are achieving key milestones
with regard to our infrastructure initiatives while at the same time investing
significantly to capture our full commercial potential. We expect to exit 2013
better positioned than ever to deliver sustainable, profitable long-term
growth.”

First Quarter 2013 Revenue Performance

First quarter 2013 revenue increased 12 percent compared to the first quarter
of 2012. The components of its growth are described below.

                Increase in Total Revenue
                  Organic  Acquisitive  Foreign Currency
  2013 vs. 2012   5%        7%            —
                                          

The subscription-based business continued its growth trend, growing eight
percent organically from the prior-year period, which represents the 11th
consecutive quarter with subscription-based organic revenue growth of seven
percent or higher.

                       Three Months Ended               Absolute  Organic
  (in thousands,         February 28,    February 29,     % change   % change
  except percentages)    2013             2012
  Subscription revenue   $  307,727       $  273,390       13   %     8    %
  Non-subscription       74,798          69,353          8    %     (8   )%
  revenue
  Total revenue          $  382,525      $  342,743      12   %     5    %
                                                                           

First Quarter 2013 Segment Performance

IHS continued to perform well amid difficult economic conditions, as follows:

  *Americas. First quarter revenue for the Americas increased $22 million, or
    11 percent, to $229 million. First quarter adjusted EBITDA for the
    Americas increased $14 million, or 18 percent, to $94 million. First
    quarter operating income for the Americas increased $11 million, or 21
    percent, to $62 million.
  *EMEA. First quarter revenue for EMEA increased $10 million, or 10 percent,
    to $109 million. First quarter adjusted EBITDA for EMEA decreased $1
    million, or four percent, to $24 million. First quarter operating income
    for EMEA decreased $5 million, or 24 percent, to $16 million, due in part
    to a loss on sale of assets.
  *APAC. First quarter revenue for APAC increased $7 million, or 21 percent,
    to $44 million. First quarter adjusted EBITDA for APAC increased $2
    million, or 23 percent, to $10 million. First quarter operating income for
    APAC increased $2 million, or 22 percent, to $10 million.

Outlook (forward-looking statement)

For the year ending November 30, 2013, IHS reaffirms and expects:

  *All-in revenue in a range of $1.640 billion to $1.710 billion, including
    an overall organic growth rate expected to be between 5-7 percent at the
    midpoint;
  *All-in adjusted EBITDA in a range of $540 million to $582 million; and
  *Adjusted EPS between $4.23 and $4.43 per diluted share.

The above outlook assumes no further currency movements, acquisitions,
divestitures, pension mark-to-market adjustments or unanticipated events. See
discussion of non-GAAP financial measures at the end of this release.

As previously announced, IHS will hold a conference call to discuss first
quarter 2013 results on March21, 2013, 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, excluding 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 excluding 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, insight and analytics in
critical areas that shape today’s business landscape. 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 is committed to sustainable, profitable growth
and employs more than 6,000 people in 31 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.
© 2013 IHS Inc. All rights reserved.

                                                          
IHS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per-share amounts)
                                                             
                                         As of               As of
                                         February 28, 2013   November 30, 2012
                                         (Unaudited)         (Audited)
Assets
Current assets:
Cash and cash equivalents                $   318,697         $   345,008
Accounts receivable, net                 412,974             372,117
Income tax receivable                    15,458              20,464
Deferred subscription costs              52,594              47,065
Deferred income taxes                    46,370              55,084
Other                                    29,979             24,145         
Total current assets                     876,072            863,883        
Non-current assets:
Property and equipment, net              173,867             163,013
Intangible assets, net                   540,646             554,552
Goodwill                                 1,969,289           1,959,223
Other                                    8,075              8,540          
Total non-current assets                 2,691,877          2,685,328      
Total assets                             $   3,567,949      $   3,549,211  
Liabilities and stockholders’ equity
Current liabilities:
Short-term debt                          $   169,511         $   170,102
Accounts payable                         53,167              52,079
Accrued compensation                     34,776              50,497
Accrued royalties                        35,432              33,637
Other accrued expenses                   57,160              55,304
Deferred revenue                         628,411            515,318        
Total current liabilities                978,457             876,937
Long-term debt                           882,723             890,922
Accrued pension and postretirement       21,280              30,027
liability
Deferred income taxes                    118,980             139,235
Other liabilities                        27,602              27,732
Commitments and contingencies
Stockholders’ equity:
Class A common stock, $0.01 par value
per share, 160,000,000 shares
authorized, 67,621,367 shares issued,    676                 676
and 65,732,911 and 65,577,530 shares
outstanding at February 28, 2013 and
November 30, 2012, respectively
Additional paid-in capital               655,296             681,409
Treasury stock, at cost: 1,888,456 and
2,043,837 shares at February 28, 2013    (149,858       )    (139,821       )
and November 30, 2012, respectively
Retained earnings                        1,113,458           1,088,787
Accumulated other comprehensive loss     (80,665        )    (46,693        )
Total stockholders’ equity               1,538,907          1,584,358      
Total liabilities and stockholders’      $   3,567,949      $   3,549,211  
equity
                                                                            

IHS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per-share amounts)
(Unaudited)
                                       
                                         Three Months Ended
                                         February 28, 2013  February 29, 2012
Revenue:
Products                                 $   341,478         $   297,981
Services                                 41,047             44,762        
Total revenue                            382,525             342,743
Operating expenses:
Cost of revenue:
Products                                 140,285             124,822
Services                                 19,790             21,768        
Total cost of revenue (includes
stock-based compensation expense of
$1,682 and $1,317 for the three months   160,075             146,590
ended February 28, 2013 and February
29, 2012, respectively)
Selling, general and administrative
(includes stock-based compensation
expense of $38,080 and $32,603 for the   142,229             125,176
three months ended February 28, 2013
and February 29, 2012, respectively)
Depreciation and amortization            32,479              26,301
Restructuring charges                    4,788               7,485
Acquisition-related costs                1,895               867
Net periodic pension and                 2,240               2,000
postretirement expense
Other expense (income), net              2,419              (736          )
Total operating expenses                 346,125            307,683       
Operating income                         36,400              35,060
Interest income                          344                 172
Interest expense                         (6,120        )     (4,894        )
Non-operating expense, net               (5,776        )     (4,722        )
Income from continuing operations        30,624              30,338
before income taxes
Provision for income taxes               (5,953        )     (6,863        )
Net income                               $   24,671         $   23,475    
                                                             
Basic earnings per share                 0.37               $   0.36      
Weighted average shares used in          65,790             65,515        
computing basic earnings per share
                                                             
Diluted earnings per share               $   0.37           $   0.35      
Weighted average shares used in          66,701             66,451        
computing diluted earnings per share
                                                                           

IHS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
                                       
                                         Three Months Ended
                                         February 28, 2013  February 29, 2012
Operating activities:
Net income                               $   24,671          $   23,475
Reconciliation of net income to net
cash provided by operating activities:
Depreciation and amortization            32,479              26,301
Stock-based compensation expense         39,762              33,920
Impairment of assets                     1,629               —
Excess tax benefit from stock-based      (11,345       )     (9,934        )
compensation
Net periodic pension and                 2,240               2,000
postretirement expense
Pension and postretirement               (10,933       )     (65,883       )
contributions
Deferred income taxes                    (15,534       )     8,566
Change in assets and liabilities:
Accounts receivable, net                 (33,696       )     (30,220       )
Other current assets                     (12,978       )     (13,214       )
Accounts payable                         (6,485        )     4,290
Accrued expenses                         (8,930        )     (22,279       )
Income tax payable                       16,063              (6,024        )
Deferred revenue                         116,157             81,672
Other liabilities                        (1,414        )     313           
Net cash provided by operating           131,686            32,983        
activities
Investing activities:
Capital expenditures on property and     (19,367       )     (13,556       )
equipment
Acquisitions of businesses, net of       (38,448       )     —
cash acquired
Change in other assets                   (846          )     (242          )
Settlements of forward contracts         (776          )     (2,207        )
Net cash used in investing activities    (59,437       )     (16,005       )
Financing activities:
Proceeds from borrowings                 45,000              85,000
Repayment of borrowings                  (53,786       )     (20,447       )
Excess tax benefit from stock-based      11,345              9,934
compensation
Repurchases of common stock              (81,900       )     (28,436       )
Net cash provided by (used in)           (79,341       )     46,051        
financing activities
Foreign exchange impact on cash          (19,219       )     (1,128        )
balance
Net increase (decrease) in cash and      (26,311       )     61,901
cash equivalents
Cash and cash equivalents at the         345,008            234,685       
beginning of the period
Cash and cash equivalents at the end     $   318,697        $   296,586   
of the period
                                                                           

IHS INC.
SUPPLEMENTAL REVENUE DISCLOSURE
(In thousands, except for percentages)
(Unaudited)
                                                                  
                         Three Months Ended                Absolute   Organic
                         February 28,    February 29,     % change   % change
                         2013             2012
Revenue by segment:
Americas revenue         $  229,166       $  206,920       11   %     3    %
EMEA revenue             109,471          99,409           10   %     4    %
APAC revenue             43,888          36,414          21   %     15   %
Total revenue            $  382,525      $  342,743      12   %     5    %
                                                                      
Revenue by transaction
type:
Subscription revenue     $  307,727       $  273,390       13   %     8    %
Non-subscription         74,798          69,353          8    %     (8   )%
revenue
Total revenue            $  382,525      $  342,743      12   %     5    %
                                                                      
Revenue by information
domain:
Energy revenue           $  175,471       $  159,054
Product Lifecycle        132,714          110,729
(PLC) revenue
Security revenue         28,019           27,221
Environment revenue      25,281           22,139
Macroeconomic
Forecasting and          21,040          23,600      
Intersection revenue
Total revenue            $  382,525      $  342,743  
                                                                      

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
                                         February 28, 2013  February 29, 2012
Net income                               $   24,671          $   23,475
Interest income                          (344          )     (172          )
Interest expense                         6,120               4,894
Income tax provision                     5,953               6,863
Depreciation                             9,880               8,132
Amortization                             22,599             18,169        
EBITDA                                   $   68,879          $   61,361
Stock-based compensation expense         39,762              33,920
Restructuring charges                    4,788               7,485
Acquisition-related costs                1,895               867
Impairment of assets                     1,629               —
Loss on sale of assets                   1,241              —             
Adjusted EBITDA                          $   118,194        $   103,633   
                                                             
                                         Three Months Ended
                                         February 28, 2013   February 29, 2012
Earnings per diluted share               $   0.37            $   0.35
Stock-based compensation expense         0.39                0.33
Restructuring charges                    0.05                0.07
Acquisition-related costs                0.02                0.01
Impairment of assets                     0.02                —
Loss on sale of assets                   0.01               —             
Adjusted earnings per diluted share      $   0.86           $   0.77      
Note: Amounts may not sum due to
rounding
                                                             
                                                             
                                         Three Months Ended
                                         February 28, 2013   February 29, 2012
Net cash provided by operating           $   131,686         $   32,983
activities
Capital expenditures on property and     (19,367       )     (13,556       )
equipment
Free cash flow                           $   112,319         $   19,427
Pension deficit funding                  —                  57,000        
Adjusted free cash flow                  $   112,319        $   76,427    
                                                                           

IHS INC.
RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASUREMENTS TO
MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS
(In thousands)
(Unaudited)
                    
                      Three months ended February 28, 2013
                      Americas    EMEA        APAC        Shared       Total
                                                             Services
Operating income      $ 62,133     $ 15,986     $ 9,749      $ (51,468 )   $ 36,400
Adjustments:
Stock-based
compensation          —            —            —            39,762        39,762
expense
Depreciation and      24,284       5,917        461          1,817         32,479
amortization
Restructuring         3,896        947          (55      )   —             4,788
charges
Acquisition-related   1,895        —            —            —             1,895
costs
Impairment of         1,629        —            —            —             1,629
assets
Loss on sale of       —           1,241       —           —            1,241
assets
Adjusted EBITDA       $ 93,837    $ 24,091    $ 10,155    $ (9,889  )   $ 118,194
                                                                           
                      Three months ended February 29, 2012
                      Americas     EMEA         APAC         Shared        Total
                                                             Services
Operating income      $ 51,304     $ 20,897     $ 7,995      $ (45,136 )   $ 35,060
Adjustments:
Stock-based
compensation          —            —            —            33,920        33,920
expense
Depreciation and      20,537       3,834        51           1,879         26,301
amortization
Restructuring         6,999        255          231          —             7,485
charges
Acquisition-related   867         —           —           —            867
costs
Adjusted EBITDA       $ 79,707    $ 24,986    $ 8,277     $ (9,337  )   $ 103,633
                                                                             

IHS INC.
SUPPLEMENTAL INFORMATION
(In thousands)
(Unaudited)
                                                    
                         Three months ended February   Three months ended
                         28, 2013                      February 29, 2012
                         Pre-tax        After tax     Pre-tax       After
                                                                      tax
Stock-based              $   39,762      $  26,044     $  33,920      $ 21,838
compensation expense
Restructuring charges    $   4,788       $  3,149      $  7,485       $ 4,808
Acquisition-related      $   1,895       $  1,528      $  867         $ 867
costs
Impairment of assets     $   1,629       $  1,010      $  —           $ —
Loss on sale of assets   $   1,241       $  827        $  —           $ —
                                                                        

Contact:

IHS Inc.
News Media Contact:
Ed Mattix, +1 303-397-2467
ed.mattix@ihs.com
or
Investor Relations Contact:
Andy Schulz, +1 303-397-2969
andy.schulz@ihs.com
 
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