Message #16 From:
NewsBot Date: March 21, 2007 01:10:00 PM
IHS News IHS Inc. Announces First Quarter 2007 Results
ENGLEWOOD, Colo.--(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, 2007. Revenue for the first quarter of 2007 totaled $152.6 million, representing an 18 percent increase over first-quarter 2006 revenue of $129.9 million. Net income for the first quarter of 2007 increased 36 percent to $18.4 million, or $0.32 per diluted share, compared to first-quarter 2006 net income of $13.5 million, or $0.24 per diluted share.
Adjusted EBITDA totaled $36.1 million for the first quarter of 2007, up 30 percent from $27.7 million in the first quarter of 2006. Adjusted earnings per diluted share was $0.38 for the first quarter of 2007, an increase of 27 percent over the prior-year amount of $0.30 per diluted share. 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 these non-GAAP measures.
“I am very proud of the results delivered this quarter by IHS colleagues worldwide,” said Jerre Stead, IHS Chairman and CEO. “We believe our investments and transformational initiatives are beginning to deliver value.”
First Quarter 2007 Detail
The company grew its revenue organically by 13 percent over the prior year. Acquisitions added three percent to revenue growth, and foreign-exchange movements increased revenue by two percent. The organic growth was again broad-based in nature, as IHS grew its revenue across all of its offerings – critical information, decision support tools, and services – and both domestically and internationally. The quarter’s revenue strength was also driven by certain items unique to the quarter, such as CERAWeek, an annual energy conference. The Energy segment grew its revenue for the first quarter by 27 percent, to $86.7 million, compared to $68.2 million in the prior-year first quarter. The Engineering segment grew its first quarter revenue by approximately seven percent, to $65.9 million, compared to $61.6 million in the prior year.
Adjusted EBITDA for the first quarter of 2007 grew 30 percent over the first quarter of last year and was driven primarily by increased revenue and margin improvement. Operating income increased 21 percent year over year to $25.9 million, from $21.4 million for the first quarter of 2006. Energy operating income was $27.0 million, up 41 percent over the prior-year quarter, and Engineering operating income was $13.0 million, up 15 percent from the first quarter of 2006.
“We continue to deliver profit growth in excess of our top-line growth, which keeps us on track to achieve our goal of a 150-basis-point improvement in year-over-year adjusted EBITDA margins,” stated Michael Sullivan, Executive Vice President and CFO.
Cash Flows
IHS generated approximately $23.1 million of cash flow from operations during the first quarter of 2007, comparable to last year’s $22.5 million. First quarter 2007 cash flow did include bonus payments that were $7 million higher than last year’s first quarter. Bonus payments are accrued throughout the year and paid primarily in the first quarter of the following year.
Balance Sheet
IHS ended the first quarter of 2007 with $186.2 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.
Share Repurchase Program
As announced last quarter, the company instituted a stock buyback program – whereby the company can acquire up to one million shares per year in the open market to help offset the dilutive effect of our employee equity programs. The company repurchased 200,000 shares during the first quarter of 2007 for approximately $7.6 million.
Outlook (forward-looking statement)
IHS revises guidance upwards to revenue growth in the range of 11 to 13 percent and adjusted EBITDA growth in the range of 18 to 22 percent for the full year ending November 30, 2007. See discussion of adjusted EBITDA and non-GAAP financial measures at the end of this release.
“We are very pleased with the strong start to the year,” said Mr. Stead. “We will continue to invest for future growth, engage with customers to address their business challenges, and create opportunities for IHS colleague success, all of which will help us to successfully execute on our strategic objectives.”
As previously announced, IHS will hold a conference call to discuss first quarter results on March 21, 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 operating performance (as further described in the attached financial schedules). Adjusted earnings per diluted share exclude similar non-cash items as adjusted EBITDA.
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. Management believes that investors may find adjusted EBITDA and adjusted earnings per diluted share useful for the same reasons, although investors are cautioned that non-GAAP financial measures, such as adjusted EBITDA and adjusted earnings per diluted share, are not a substitute for GAAP disclosures.
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.
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 2,500 people around the world.
(In thousands, except share and per-share amounts)
February 28,
November 30,
2007
2006
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$ 186,214
$ 180,034
Short-term investments
21
2,076
Accounts receivable, net
160,882
151,300
Deferred subscription costs
37,123
33,293
Deferred income taxes
10,001
7,758
Other
7,394
6,461
Total current assets
401,635
380,922
Non-current assets:
Property and equipment, net
52,281
53,096
Intangible assets, net
66,527
65,962
Goodwill, net
353,870
350,896
Prepaid pension asset
93,161
92,488
Other
976
937
Total non-current assets
566,815
563,379
Total assets
$ 968,450
$ 944,301
Liabilities and stockholders’ equity
Current liabilities:
Short-term debt
$ —
$ 500
Accounts payable
36,611
45,622
Accrued compensation
15,222
30,788
Accrued royalties
22,516
22,801
Other accrued expenses
36,848
36,047
Income tax payable
13,183
11,484
Deferred subscription revenue
221,961
191,229
Total current liabilities
346,341
338,471
Long-term debt
37
74
Accrued pension liability
12,737
12,309
Accrued post-retirement benefits
17,468
18,200
Deferred income taxes
4,587
2,788
Other liabilities
6,252
6,891
Minority interests
167
377
Commitments and contingencies
Stockholders’ equity:
Class A common stock, $0.01 par value per share, 80,000,000 shares authorized, 45,254,550 and 45,265,794 shares issued and 44,826,213 and 45,042,232 shares outstanding at February 28, 2007 and November 30, 2006, respectively
453
453
Class B common stock, $0.01 par value per share, 13,750,000 shares authorized, issued and outstanding at February 28, 2007 and November 30, 2006
138
138
Additional paid-in capital
182,652
175,027
Treasury stock, at cost; 428,337 and 223,562 shares at February 28, 2007 and November 30, 2006, respectively
(15,314)
(7,551)
Retained earnings
418,406
400,029
Accumulated other comprehensive loss
(5,474)
(2,905)
Total stockholders’ equity
580,861
565,191
Total liabilities and stockholders’ equity
$ 968,450
$ 944,301
IHS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per-share amounts)
Three Months Ended
February 28,
2007
2006
(Unaudited)
Revenue:
Products
$ 122,979
$ 106,582
Services
29,642
23,284
Total revenue
152,621
129,866
Operating expenses:
Cost of revenue:
Products
48,733
45,673
Services
17,005
15,190
Total cost of revenue (includes stock-based compensation expense of $351 and $1,095 for the three months ended February 28, 2007 and 2006)
65,738
60,863
Selling, general and administrative (includes stock-based compensation expense of $6,985 and $2,571 for the three months ended February 28, 2007 and 2006)
57,891
45,165
Depreciation and amortization
4,580
3,370
Restructuring and other charges
(9)
2
Gain on sales of assets, net
(751)
—
Net periodic pension and post-retirement benefits
(268)
(516)
Earnings in unconsolidated subsidiaries
(44)
(28)
Other income, net
(400)
(403)
Total operating expenses
126,737
108,453
Operating income
25,884
21,413
Interest income
1,654
914
Interest expense
(133)
(85)
Non-operating income, net
1,521
829
Income from continuing operations before income taxes and minority interests
27,405
22,242
Provision for income taxes
(9,043)
(7,473)
Income from continuing operations before minority interests
18,362
14,769
Minority interests
15
(25)
Income from continuing operations
18,377
14,744
Discontinued operations:
Loss from discontinued operations, net
—
(1,280)
Net income
$ 18,377
$ 13,464
Income from continuing operations per share:
Basic (Class A and Class B common stock)
$ 0.32
$ 0.26
Diluted (Class A and Class B common stock)
$ 0.32
$ 0.26
Loss from discontinued operations per share:
Basic (Class A and Class B common stock)
$ —
$ (0.02)
Diluted (Class A and Class B common stock)
$ —
$ (0.02)
Net income per share:
Basic (Class A and Class B common stock)
$ 0.32
$ 0.24
Diluted (Class A and Class B common stock)
$ 0.32
$ 0.24
Weighted average shares:
Basic (Class A common stock)
43,844
42,125
Basic (Class B common stock)
13,750
13,750
Diluted (Class A common stock)
57,698
56,062
Diluted (Class B common stock)
13,750
13,750
IHS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended February 28,
2007
2006
(Unaudited)
Operating activities
Net income
$ 18,377
$ 13,464
Reconciliation of net income to net cash provided by operating activities:
