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Press release from Business Wire

IHS Inc. Reports Third Quarter 2013 Results

Thursday, September 19, 2013

IHS Inc. Reports Third Quarter 2013 Results

06:00 EDT Thursday, September 19, 2013

ENGLEWOOD, Colo. (Business Wire) -- IHS Inc. (NYSE: IHS), the leading global source of information and analytics, today reported results for the third quarter ended August 31, 2013.

  • Revenue of $480 million, up 25 percent from the prior-year period
  • Organic revenue growth rate of five percent overall
  • Adjusted EBITDA of $144 million, up 19% from the prior-year period
  • Adjusted earnings per diluted share (adjusted EPS) of $1.27, up six percent from the prior-year period
  • Free cash flow of $279 million year-to-date, up 42 percent from the prior-year period

Adjusted EBITDA, adjusted EPS, and 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.

Third Quarter and Year-to-Date 2013 Financial Performance

               
Three months ended August 31, Change Nine months ended August 31, Change
(in thousands, except percentages and per share data) 2013     2012 $     % 2013     2012 $     %
Revenue $ 480,288 $ 385,609 $ 94,679 25 % $ 1,280,956 $ 1,115,511 $ 165,445 15 %
 
Net income $ 23,362 $ 44,082 $ (20,720 ) (47 )% $ 90,923 $ 111,748 $ (20,825 ) (19 )%
Adjusted EBITDA $ 143,853 $ 121,259 $ 22,594 19 % $ 392,203 $ 344,978 $ 47,225 14 %
 
GAAP EPS $ 0.35 $ 0.66 $ (0.31 ) (47 )% $ 1.36 $ 1.68 $ (0.32 ) (19 )%
Adjusted EPS $ 1.27 $ 1.20 $ 0.07 6 % $ 3.61 $ 3.32 $ 0.29 9 %
 
Cash flow from operations $ 83,203 $ 68,082 $ 15,121 22 % $ 344,369 $ 246,256 $ 98,113 40 %
Free cash flow $ 60,228 $ 50,057 $ 10,171 20 % $ 278,958 $ 196,557 $ 82,401 42 %
 

“Positive third-quarter results were highlighted by our best overall organic revenue growth rate yet this year and very strong initial results from our recent R.L. Polk acquisition,” said Scott Key, IHS president and chief executive officer. “Additionally, we completed a series of strategic product releases during the quarter that have us on track in our strategy of converging IHS information, workflow tools, insight, research and analytics capabilities onto integrated platforms. The development and rollout of these integrated platforms represents the largest commercial deployment in our company's history and are a key element in our delivery of long-term profitable growth.”

Third Quarter and Year-to-Date 2013 Revenue Performance

Third quarter 2013 revenue increased 25 percent compared to the third quarter of 2012, and year-to-date 2013 revenue increased 15 percent compared to the same period of 2012. The components of revenue growth for these periods are described below by segment and in total.

   
Increase in revenue  
Third quarter 2013 vs. third quarter 2012       Year-to-date 2013 vs. year-to-date 2012  
(All amounts represent percentage points) Organic     Acquisitive     Foreign

Currency

Organic     Acquisitive     Foreign

Currency

Americas 4 % 28 % % 3 % 16 % %
EMEA 6 % 8 % (1 )% 3 % 5 % (1 )%
APAC 8 % 7 % (2 )% 11 % 5 % (1 )%
Total 5 % 21 % (1 )% 4 % 11 % (1 )%
 

The subscription-based business grew five percent organically in the current quarter compared to the third quarter of 2012, as described in the following table.

Three months ended August 31,   Percent change     Nine months ended August 31,   Percent change  
(in thousands, except percentages) 2013   2012 Total   Organic 2013   2012 Total   Organic
Subscription revenue $ 365,025 $ 294,516 24 % 5 % $ 986,675 $ 855,160 15 % 6 %
Non-subscription revenue 115,263   91,093   27 % 5 % 294,281   260,351   13 % (3 )%
Total revenue $ 480,288   $ 385,609   25 % 5 % $ 1,280,956   $ 1,115,511   15 % 4 %

Third Quarter and Year-to-Date 2013 Segment Performance

On a consolidated basis, IHS continued to deliver solid organic revenue growth across all regions. Segment results were as follows:

  • Americas. Third quarter revenue for the Americas increased $75 million, or 32 percent, to $307 million. Third quarter adjusted EBITDA for the Americas increased $26 million, or 28 percent, to $122 million. Third quarter operating income for the Americas increased $1 million, or two percent, to $71 million.

Year-to-date revenue for the Americas increased $124 million, or 19 percent, to $794 million. Year-to-date adjusted EBITDA for the Americas increased $56 million, or 21 percent, to $325 million. Year-to-date operating income for the Americas increased $23 million, or 12 percent, to $213 million.

  • EMEA. Third quarter revenue for EMEA increased $14 million, or 13 percent, to $122 million. Third quarter adjusted EBITDA for EMEA decreased $5 million, or 16 percent, to $26 million. Third quarter operating income for EMEA was down $5 million, or 20 percent, to $20 million. EMEA profit was impacted by product mix in a lower-growth environment, increased selling costs and adverse foreign currency movements.

Year-to-date revenue for EMEA increased $23 million, or seven percent, to $345 million. Year-to-date adjusted EBITDA for EMEA decreased $11 million, or 12 percent, to $77 million. Year-to-date operating income for EMEA decreased $13 million, or 19 percent, to $56 million.

  • APAC. Third quarter revenue for APAC increased $6 million, or 13 percent, to $51 million. Third quarter adjusted EBITDA for APAC decreased $0.5 million, or four percent, to $10 million. Third quarter operating income for APAC decreased $1 million, or 10 percent, to $9 million.

Year-to-date revenue for APAC increased $18 million, or 14 percent, to $142 million. Year-to-date adjusted EBITDA for APAC increased $0.5 million, or two percent, to $31 million. Year-to-date operating income for APAC decreased $0.5 million, or two percent, to $29 million.

Outlook (forward-looking statement)

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

  • Revenue in a range of $1.80 billion to $1.82 billion;
  • Adjusted EBITDA in a range of $540 million to $560 million; and
  • Adjusted EPS in a range of $4.75 to $5.00 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 third quarter 2013 results on September 19, 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 our financial statements based on U.S. generally accepted accounting principles (GAAP). Non-GAAP financial information is provided to enhance the reader's understanding of our financial performance, but none of these non-GAAP financial measures are recognized terms under GAAP and non-GAAP measures should not 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, adjusted net income, adjusted EPS, and free cash flow are provided within the schedules attached to this release.

We use non-GAAP measures in our operational and financial decision-making, believing that it is useful to eliminate certain items in order to focus on what we deem 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, adjusted net income, adjusted EPS, and free cash flow metrics. We also believe 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.

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 we believe the measures provide users with valuable insight into key components of GAAP financial disclosures.

IHS Forward-Looking Statements:

This release contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “predict,” “estimate,” “expect,” “continue,” “strategy,” “future,” “likely,” “may,” “might,” “should,” “will,” the negative of these terms and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding guidance relating to net income, net income per share, and expected operating results, such as revenue growth and earnings.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: economic and financial conditions, including volatility in interest and exchange rates, our ability to successfully manage risks associated with changes in demand for our products and services as well as changes in our targeted industries, our ability to develop new products and services, pricing, and other competitive pressures, and changes in laws and regulations governing our business, the extent to which we are successful in gaining new long term relationships with customers or retaining existing ones and the level of service failures that could lead customers to use competitors' services, our ability to successfully integrate acquisitions into our existing businesses and manage risks associated therewith, and the other factors described under the caption “Risk Factors” in our most recent annual report on Form 10-K and subsequent Forms 10-Q, along with our other filings with the U.S. Securities and Exchange Commission.

Any forward-looking statement made by us in this release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise. Please consult our public filings at www.sec.gov or www.ihs.com.

About IHS Inc. (www.ihs.com)

IHS Inc. (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 6,700 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
August 31, 2013 November 30, 2012
(Unaudited) (Audited)
Assets
Current assets:
Cash and cash equivalents $ 270,995 $ 345,008
Accounts receivable, net 395,584 372,117
Income tax receivable 14,667 20,464
Deferred subscription costs 43,236 47,065
Deferred income taxes 61,308 55,084
Other 42,424   24,145  
Total current assets 828,214   863,883  
Non-current assets:
Property and equipment, net 233,294 163,013
Intangible assets, net 1,188,415 554,552
Goodwill 3,047,303 1,959,223
Other 25,142   8,540  
Total non-current assets 4,494,154   2,685,328  
Total assets $ 5,322,368   $ 3,549,211  
Liabilities and stockholders' equity
Current liabilities:
Short-term debt $ 394,248 $ 170,102
Accounts payable 56,194 52,079
Accrued compensation 56,513 50,497
Accrued royalties 23,261 33,637
Other accrued expenses 86,856 55,304
Deferred revenue 561,137   515,318  
Total current liabilities 1,178,209 876,937
Long-term debt 1,913,124 890,922
Accrued pension and postretirement liability 24,149 30,027
Deferred income taxes 362,634 139,235
Other liabilities 41,879 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, and 67,187,567 and 65,577,530 shares outstanding at August 31, 2013 and November 30, 2012, respectively 676 676
Additional paid-in capital 736,890 681,409
Treasury stock, at cost: 433,800 and 2,043,837 shares at August 31, 2013 and November 30, 2012, respectively (36,293 ) (139,821 )
Retained earnings 1,179,710 1,088,787
Accumulated other comprehensive loss (78,610 ) (46,693 )
Total stockholders' equity 1,802,373   1,584,358  
Total liabilities and stockholders' equity $ 5,322,368   $ 3,549,211  
 
       

IHS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for per-share amounts)

(Unaudited)

 
Three months ended August 31, Nine months ended August 31,
2013     2012 2013     2012
Revenue:
Products $ 423,482 $ 339,946 $ 1,120,887 $ 964,444
Services 56,806   45,663   160,069   151,067  
Total revenue 480,288 385,609 1,280,956 1,115,511
Operating expenses:
Cost of revenue:
Products 172,853 132,577 456,770 392,931
Services 25,426   21,169   74,008   72,676  
Total cost of revenue (includes stock-based compensation expense of $2,649; $1,488; $5,625 and $4,467 for the three and nine months ended August 31, 2013 and 2012, respectively) 198,279 153,746 530,778 465,607
Selling, general and administrative (includes stock-based compensation expense of $41,584; $29,050; $109,169 and $86,465 for the three and nine months ended August 31, 2013 and 2012, respectively) 179,344 138,519 465,182 390,540
Depreciation and amortization 42,431 31,390 107,787 86,683
Restructuring charges 3,264 967 11,283 12,080
Acquisition-related costs 14,499 2,104 18,059 3,472
Net periodic pension and postretirement expense 2,242 2,001 6,724 5,998
Other expense (income), net 803   622   3,733   (680 )
Total operating expenses 440,862   329,349   1,143,546   963,700  
Operating income 39,426 56,260 137,410 151,811
Interest income 232 255 879 674
Interest expense (16,072 ) (5,057 ) (28,356 ) (14,837 )
Non-operating expense, net (15,840 ) (4,802 ) (27,477 ) (14,163 )
Income from continuing operations before income taxes 23,586 51,458 109,933 137,648
Provision for income taxes (116 ) (7,384 ) (18,909 ) (25,908 )
Income from continuing operations 23,470 44,074 91,024 111,740
Income (loss) from discontinued operations, net (108 ) 8   (101 ) 8  
Net income $ 23,362   $ 44,082   $ 90,923   $ 111,748  
 
Basic earnings per share
Income from continuing operations $ 0.35 $ 0.67 $ 1.38 $ 1.70
Income (loss) from discontinued operations, net $   $   $   $  
Net income $ 0.35   $ 0.67   $ 1.38   $ 1.70  
Weighted average shares used in computing basic earnings per share 66,650   65,992   66,112   65,795  
 
Diluted earnings per share
Income from continuing operations $ 0.35 $ 0.66 $ 1.36 $ 1.68
Income (loss) from discontinued operations, net $   $   $   $  
Net income $ 0.35   $ 0.66   $ 1.36   $ 1.68  
Weighted average shares used in computing diluted earnings per share 67,326   66,808   66,843   66,602  
 
   

IHS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 
Nine months ended August 31,
2013     2012
Operating activities:
Net income $ 90,923 $ 111,748
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization 107,787 86,683
Stock-based compensation expense 114,794 90,932
Impairment of assets 1,629
Excess tax benefit from stock-based compensation (12,405 ) (13,181 )
Net periodic pension and postretirement expense 6,724 5,998
Pension and postretirement contributions (12,601 ) (67,023 )
Deferred income taxes (37,756 ) (7,082 )
Change in assets and liabilities:
Accounts receivable, net 43,662 46,177
Other current assets 3,319 (4,435 )
Accounts payable (14,442 ) 7,806
Accrued expenses (371 ) (30,678 )
Income tax payable 32,700 16,742
Deferred revenue 21,567 2,505
Other liabilities (1,161 ) 64  
Net cash provided by operating activities 344,369   246,256  
Investing activities:
Capital expenditures on property and equipment (65,411 ) (49,699 )
Acquisitions of businesses, net of cash acquired (1,481,288 ) (306,268 )
Intangible assets acquired (3,700 )
Change in other assets (5,590 ) 1,658
Settlements of forward contracts 2,853   (3,058 )
Net cash used in investing activities (1,549,436 ) (361,067 )
Financing activities:
Proceeds from borrowings 1,375,000 680,001
Repayment of borrowings (128,648 ) (476,399 )
Payment of debt issuance costs (17,360 ) (740 )
Excess tax benefit from stock-based compensation 12,405 13,181
Proceeds from the exercise of employee stock options 549 2,938
Repurchases of common stock (87,512 ) (35,358 )
Net cash provided by financing activities 1,154,434   183,623  
Foreign exchange impact on cash balance (23,380 ) (5,064 )
Net increase (decrease) in cash and cash equivalents (74,013 ) 63,748
Cash and cash equivalents at the beginning of the period 345,008   234,685  
Cash and cash equivalents at the end of the period $ 270,995   $ 298,433  
 
               

IHS INC.

SUPPLEMENTAL REVENUE DISCLOSURE

(In thousands)

(Unaudited)

 
Three months ended August 31, Percent change Nine months ended August 31, Percent change
2013     2012 Total     Organic 2013     2012 Total     Organic
Revenue by segment:
Americas revenue $ 307,281 $ 232,369 32 % 4 % $ 794,072 $ 669,757 19 % 3 %
EMEA revenue 122,247 108,505 13 % 6 % 344,662 321,438 7 % 3 %
APAC revenue 50,760   44,735   13 % 8 % 142,222   124,316   14 % 11 %
Total revenue $ 480,288   $ 385,609   25 % 5 % $ 1,280,956   $ 1,115,511   15 % 4 %
 
Revenue by transaction type:
Subscription revenue $ 365,025 $ 294,516 24 % 5 % $ 986,675 $ 855,160 15 % 6 %
Non-subscription revenue 115,263   91,093   27 % 5 % 294,281   260,351   13 % (3 )%
Total revenue $ 480,288   $ 385,609   25 % 5 % $ 1,280,956   $ 1,115,511   15 % 4 %
 
Revenue by information domain:
Energy revenue $ 203,080 $ 180,072 $ 581,872 $ 520,958
Product Lifecycle (PLC) revenue 200,593 129,475 474,676 364,295
Security revenue 29,231 30,280 84,851 87,524
Environment revenue 25,885 24,738 74,953 71,878
Macroeconomic Forecasting and Intersection revenue 21,499   21,044   64,604   70,856  
Total revenue $ 480,288   $ 385,609   $ 1,280,956   $ 1,115,511  
 
       

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 August 31, Nine months ended August 31,
2013     2012 2013     2012
Net income $ 23,362 $ 44,082 $ 90,923 $ 111,748
Interest income (232 ) (255 ) (879 ) (674 )
Interest expense 16,072 5,057 28,356 14,837
Provision for income taxes 116 7,384 18,909 25,908
Depreciation 12,964 9,723 33,695 25,842
Amortization related to acquired intangible assets 29,467   21,667   74,092   60,841  
EBITDA (1)(6) $ 81,749 $ 87,658 $ 245,096 $ 238,502
Stock-based compensation expense 44,233 30,538 114,794 90,932
Restructuring charges 3,264 967 11,283 12,080
Acquisition-related costs 14,499 2,104 18,059 3,472
Impairment of assets 1,629
Loss on sale of assets 1,241
(Income) loss from discontinued operations, net 108   (8 ) 101   (8 )
Adjusted EBITDA (2)(6) $ 143,853   $ 121,259   $ 392,203   $ 344,978  
 
 
 
Three months ended August 31, Nine months ended August 31,
2013 2012 2013 2012
Net income $ 23,362 $ 44,082 $ 90,923 $ 111,748
Stock-based compensation expense 44,233 30,538 114,794 90,932
Amortization related to acquired intangible assets 29,467 21,667 74,092 60,841
Restructuring charges 3,264 967 11,283 12,080
Acquisition-related costs 14,499 2,104 18,059 3,472
Impairment of assets 1,629
Loss on sale of assets 1,241
(Income) loss from discontinued operations, net 108 (8 ) 101 (8 )
Income tax effect on adjusting items (29,428 ) (18,942 ) (71,067 ) (57,629 )
Adjusted net income (3) $ 85,505   $ 80,408   $ 241,055   $ 221,436  
Adjusted earnings per diluted share (4)(6) $ 1.27   $ 1.20   $ 3.61   $ 3.32  
Weighted average shares used in computing adjusted earnings per diluted share 67,326   66,808   66,843   66,602  
 
 
 
Three months ended August 31, Nine months ended August 31,
2013 2012 2013   2012
Net cash provided by operating activities $ 83,203 $ 68,082 $ 344,369 $ 246,256
Capital expenditures on property and equipment (22,975 ) (18,025 ) (65,411 ) (49,699 )
Free cash flow (5)(6) $ 60,228   $ 50,057   $ 278,958   $ 196,557  
 
   

IHS INC.

RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASUREMENTS TO

MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS

(In thousands)

(Unaudited)

 
Three months ended August 31, 2013
Americas     EMEA     APAC     Shared Services     Total
Operating income $ 71,366 $ 19,788 $ 8,967 $ (60,695 ) $ 39,426
Adjustments:
Stock-based compensation expense 44,233 44,233
Depreciation and amortization 34,368 5,666 558 1,839 42,431
Restructuring charges 2,255 590 419 3,264
Acquisition-related costs 14,369   130       14,499
Adjusted EBITDA $ 122,358   $ 26,174   $ 9,944   $ (14,623 ) $ 143,853
 
Three months ended August 31, 2012
Americas EMEA APAC Shared Services Total
Operating income $ 70,086 $ 24,590 $ 10,001 $ (48,417 ) $ 56,260
Adjustments:
Stock-based compensation expense 30,538 30,538
Depreciation and amortization 23,281 5,988 390 1,731 31,390
Restructuring charges 520 436 11 967
Acquisition-related costs 2,002   102       2,104
Adjusted EBITDA $ 95,889   $ 31,116   $ 10,402   $ (16,148 ) $ 121,259
 
Nine months ended August 31, 2013
Americas EMEA APAC Shared Services Total
Operating income $ 213,014 $ 56,259 $ 28,964 $ (160,827 ) $ 137,410
Adjustments:
Stock-based compensation expense 114,794 114,794
Depreciation and amortization 83,833 17,057 1,495 5,402 107,787
Restructuring charges 8,316 2,527 440 11,283
Acquisition-related costs 17,767 292 18,059
Impairment of assets 1,629 1,629
Loss on sale of assets   1,241       1,241
Adjusted EBITDA $ 324,559   $ 77,376   $ 30,899   $ (40,631 ) $ 392,203
 
Nine months ended August 31, 2012
Americas EMEA APAC Shared Services Total
Operating income $ 190,071 $ 69,553 $ 29,489 $ (137,302 ) $ 151,811
Adjustments:
Stock-based compensation expense 90,932 90,932
Depreciation and amortization 65,039 16,169 711 4,764 86,683
Restructuring charges 9,897 1,941 242 12,080
Acquisition-related costs 3,254   218       3,472
Adjusted EBITDA $ 268,261   $ 87,881   $ 30,442   $ (41,606 ) $ 344,978
 
 

(1)

EBITDA is defined as net income plus or minus net interest, plus provision for income taxes, depreciation and amortization.

(2)

Adjusted EBITDA further excludes primarily non-cash items and other items that we do not consider to be useful in assessing our operating performance (e.g., stock-based compensation expense, acquisition-related costs, restructuring charges, income or loss from discontinued operations, pension settlement and mark-to-market adjustments, and gain or loss on sale of assets). All of the items included in the reconciliation from net income to adjusted EBITDA are either non-cash items or items that we do not consider to be useful in assessing our operating performance. In the case of the non-cash items, we believe 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, we believe 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.

(3)

Adjusted net income is defined as net income plus primarily non-cash items and other items that management does not consider to be useful in assessing our operating performance (e.g., stock-based compensation expense, amortization related to acquired intangible assets, restructuring charges, acquisition-related costs, pension settlement and mark-to-market adjustments, impairment of assets, gain or loss on sale of assets, and income or loss from discontinued operations).

(4)

Adjusted earnings per diluted share is defined as adjusted net income (as defined above) divided by diluted weighted average shares.

(5)

Free cash flow is defined as net cash provided by operating activities less capital expenditures.

(6)

EBITDA, adjusted EBITDA, adjusted EPS, and free cash flow are 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.

IHS Inc.
News Media Contact:
Dan Wilinsky, +1 303-397-2468
dan.wilinsky@ihs.com
or
Investor Relations Contact:
Andy Schulz, +1 303-397-2969
andy.schulz@ihs.com

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