IHS Inc. Reports Third Quarter 2006 Results; Strong Performance Led by 19 Percent Revenue Growth

Business Wire, Sept 21, 2006

ENGLEWOOD, Colo. -- 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 third quarter ended August 31, 2006. Revenue for the third quarter of 2006 totaled $139.9 million, representing a 19 percent increase over third quarter 2005 revenue of $118.0 million. Net income for the third quarter of 2006 increased $12.4 million to $16.1 million, or $0.28 per diluted share, compared to third quarter 2005 net income of $3.7 million, or $0.07 per diluted share.

Adjusted EBITDA totaled $29.1 million for the third quarter of 2006, up 37 percent from $21.2 million in the third quarter of 2005. IHS generated $29.0 million of cash flow from operations for the third quarter of 2006, an increase of $16.5 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 are very pleased with the quarter's results. We executed on our business plan, benefited from favorable market conditions, and enjoyed another solid quarter," said Charles Picasso, retiring President and CEO. "In addition, as announced at the beginning of the quarter, we closed on two important acquisitions. The company looks forward to continuing to deliver excellent value to our customers worldwide during the fourth quarter and beyond."

Third Quarter 2006 Details

Organic revenue growth in the third quarter of 2006 was 13 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 third quarter by 23 percent, to $75.8 million, compared to $61.8 million in the prior year's third quarter. Energy's organic revenue growth contributed 18 percent; acquisitions added four percent with the balance relating to movements in foreign exchange. The Engineering segment grew its third quarter revenue by 14 percent, to $64.1 million, compared to $56.2 million in the prior year. The Engineering segment's organic revenue growth rate was eight percent for the third quarter 2006, with acquisitions adding four percent to the revenue growth rate, and the remainder from movements in foreign exchange.

Adjusted EBITDA for the third quarter of 2006 grew 37 percent over the third quarter of last year and was driven primarily by top-line growth accompanied by margin expansion. Operating income increased $15.9 million year-over-year to $21.8 million, up from $5.9 million for the third quarter of 2005. Last year's third quarter results included $12.4 million of restructuring and offering charges; no similar items occurred in the third quarter of 2006. Energy operating income was $16.9 million, up 15 percent over the prior-year quarter, and Engineering operating income was $8.1 million, up from the third quarter 2005 operating loss of $0.7 million.

Year-to-Date 2006

Revenue for the nine months of 2006 totaled $402.6 million, representing a 15 percent increase over the prior-period revenue of $350.1 million. Organic growth contributed the majority of the total increase. The Energy segment grew its revenue during the nine months ended August 31, 2006 by 20 percent, to $214.5 million, compared to $178.9 million in the prior-year period. The Engineering segment grew its year-to-date 2006 revenue by ten percent, to $188.2 million, compared to $171.2 million in the prior year.

Adjusted EBITDA for the first nine months of 2006 totaled $81.8 million, up 41 percent from $58.1 million in the first nine months of 2005. Operating income increased 64 percent year-over-year to $61.8 million, up from $37.7 million for the nine months ended August 31, 2005. Energy operating income was $49.4 million, up 27 percent over the prior-year period, and Engineering operating income was $21.6 million, up $15.2 million from the same period in 2005.

Net income for the first nine months of 2006 increased 67 percent to $42.5 million, or $0.75 per diluted share, compared to the first nine months 2005 net income of $25.4 million, or $0.46 per diluted share.

IHS generated $94.2 million of cash flow from operations for the first nine months of 2006, an increase of $57.3 million over the prior-year period. However, first nine month 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 nine months of 2006.

Balance Sheet

IHS ended the third quarter of 2006 with $168.1 million of cash and cash equivalents and short-term investments, and virtually no debt.

"Our cash flow from operating activities remains strong. Despite investing over $84 million in acquisitions year to date, our cash and short-term investments remain almost unchanged since the end of fiscal year 2005," stated Michael J. Sullivan, IHS Executive Vice President and CFO.