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IHS News IHS Inc. Reports Fourth Quarter and Full-Year 2006 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 year ended November 30, 2006. Revenue for fiscal year 2006 totaled $550.8 million, representing a 16 percent increase over prior-year revenue of $476.1 million. Net income for the full year increased 35 percent to $56.3 million, or $0.99 per diluted share, compared to fiscal 2005 net income of $41.8 million, or $0.75 per diluted share.

Adjusted EBITDA for the year ended November 30, 2006 totaled $118.0 million, up 36 percent from $86.7 million in the prior year. IHS generated $115.7 million of cash flow from operations for the 2006 fiscal year, an increase of $67.4 million over the prior year. 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 are pleased to announce the completion of a very successful first year as a public company,” said Jerre Stead, IHS Chairman and CEO. “As we move into our 2007 fiscal year, we continue to see strong customer demand for our products and services in an environment of favorable market conditions.”

Full-Year 2006 Details

Organic revenue growth represented 13 percent of the increase, while acquisitions accounted for the remaining 3 percent of the year-over-year increase. Throughout 2006, 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. Energy segment total revenue grew by 21 percent during the year ended November 30, 2006, to $294.3 million, compared to $242.3 million in the prior-year. Engineering segment grew total 2006 revenue by 10 percent, to $256.5 million, compared to $233.8 million in the prior year.

Adjusted EBITDA for the year ended November 30, 2006 totaled $118.0 million, up 36 percent from $86.7 million in the previous year. Adjusted EBITDA as a percent of revenue grew to 21.4 percent for full year 2006 from 18.2 percent for fiscal year 2005. Operating income increased 30 percent year-over-year to $80.2 million, up from $61.9 million in 2005. Energy operating income was $67.2 million, up 27 percent over the prior-year, and Engineering operating income was $31.1 million, up 73 percent from 2005.

Fourth Quarter 2006 Details

Revenue for the fourth quarter 2006 totaled $148.1 million, representing an 18 percent increase over fourth quarter 2005 revenue of $126.0 million. Organic revenue growth in the fourth quarter of 2006 was 12 percent over the prior year; acquisitions added 4 percent and foreign exchange accounted for the remainder of the revenue increase. Energy segment revenue grew by 26 percent in the fourth quarter, to $79.8 million, compared to $63.4 million in the prior year’s fourth quarter. Engineering segment revenue grew by 9 percent in the fourth quarter, to $68.3 million, compared to $62.6 million in the prior year.

Adjusted EBITDA totaled $36.2 million for the fourth quarter of 2006, up 27 percent from $28.6 million in the fourth quarter of 2005. Operating income decreased $5.7 million year over year to $18.4 million in the fourth quarter of 2006. Energy operating income was $17.7 million, up 25 percent over the prior-year quarter, and Engineering operating income was $9.5 million, down from fourth quarter 2005 operating income of $11.6 million.

Net income for the fourth quarter of 2006 decreased $2.5 million to $13.9 million, or $0.24 per diluted share, compared to fourth quarter 2005 net income of $16.4 million, or $0.29 per diluted share. Fourth quarter 2006 results did, however, include $4.1 million of after-tax cost, consisting of cash and non-cash charges, related to the retirement of our former Chief Executive Officer, and $2.4 million of after-tax costs relating to a restructuring and a secondary offering.

IHS generated $21.6 million of cash flow from operations for the fourth quarter of 2006, an increase of $10.1 million over the prior-year period.

Balance Sheet

IHS ended 2006 with $182.1 million of cash and cash equivalents and short-term investments, and virtually no debt.

“We are pleased with the continuance of our double digit revenue growth, and our ability to drive even higher growth rates within our profitability, particularly since the fourth quarter represents the first full quarter where we lap the savings generated from our 2005 restructuring,” stated Michael J. Sullivan, IHS Executive Vice President and CFO. “Moreover, the $115.7 million of operating cash flow delivered this year showcases the cash generative nature of our business model, and represents a significant improvement over the prior year.”

Share Buyback Program

Last quarter, the company announced a program to reduce the dilutive effects of employee equity grants, by allowing employees to surrender shares back to the company for a value equal to their statutory tax liability. IHS then pays the statutory tax on behalf of the employee.

The IHS Board of Directors has approved an additional program – a stock buyback program – whereby the company will be acquiring up to 1 million shares per year in the open market to more fully offset the dilutive effect of our employee equity programs.

Outlook (forward-looking statement)

IHS anticipates organic revenue growth in the range of 10 to 12 percent for the year ending November 30, 2007. The company further expects adjusted EBITDA to grow 16 to 20 percent for fiscal 2007. 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 fourth quarter results on January 11, 2007, 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.

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 more than 45 years and employs more than 2,500 people around the world.

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. In some cases, you can identify these statements by forward-looking words such as “intend,” “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of these terms, and other comparable terminology; however, be advised that not all forward-looking statements contain these identifying words. These forward-looking statements, which are subject to risks, uncertainties, and assumptions, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance, or achievements to differ materially from the results, level of activity, performance, or achievements expressed or implied by the forward-looking statements. Those factors include, but are not limited to, our ability to obtain content on commercially reasonable terms from third parties (including Standards Development Organizations), changes in demand for our products and services, changes in the energy industry, our ability to develop new products and services, pricing and other competitive pressures, risks associated with the integration of acquisitions, changes in laws and regulations governing our business and certain other risk factors, including those discussed or identified by us from time to time in its public filings (which may be viewed at www.sec.gov or www.ihs.com). Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance, or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Other than as required by applicable law, IHS does not undertake any obligation to update any of these forward-looking statements after the date of this release to conform our prior statements to actual results or revised expectations.

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.