IHS Inc. Reports Fourth Quarter and Full-Year 2006 Results

Business Wire, Jan 11, 2007

Strong Performance Drives 35 Percent Increase in 2006 Net Income

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 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.