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Form 8-K IHS Inc. For: Sep 29

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September 29, 2015 6:05 AM EDT




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________

FORM 8-K
________________________


CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): September 29, 2015

Commission file number 001-32511
______________________

IHS INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
 
13‑3769440
(I.R.S. Employer
Identification Number)

15 Inverness Way East
Englewood, CO 80112
(Address of principal executive offices)
(303) 790‑0600
(Registrant's telephone number, including area code)

Former name or former address, if changed since last report: Not Applicable
______________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
 
On September 29, 2015, IHS Inc., a Delaware corporation ("IHS" or "we" or "us" or "our"), issued a media release announcing earnings for the third quarter ended August 31, 2015. The media release has been furnished with this Form 8-K as an exhibit and posted on our website (www.ihs.com). In addition, the media release has been distributed through a newswire release.

This information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.





ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits

99.1 Media release dated September 29, 2015.






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
IHS INC.
 
 
 
Date: September 29, 2015
By:
/s/ Todd S. Hyatt
 
 
Todd S. Hyatt
 
 
Executive Vice President and Chief Financial Officer







Exhibit 99.1
News Release


FOR IMMEDIATE RELEASE                                 

News Media Contact:
 
Investor Relations Contact:
 
Dan Wilinsky
 
Eric Boyer
 
+1 303 397 2468
 
+1 303 397 2969
 
 
 

IHS Inc. Reports Third Quarter 2015 Results

ENGLEWOOD, Colo. (September 29, 2015) - IHS Inc. (NYSE: IHS), the leading global source of information and analytics, today reported results for the third quarter ended August 31, 2015.

•
Revenue of $588 million, up 6 percent from the prior-year period

•
Total organic revenue growth of 3 percent, with 5 percent subscription organic revenue growth

•
Adjusted EBITDA of $190 million, up 9 percent from the prior-year period

•
Adjusted earnings per diluted share (Adjusted EPS) of $1.56, up 5 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.

1

Third Quarter and Year-to-Date 2015 Financial Performance

 
Three months ended August 31,
 
Change
 
Nine months ended August 31,
 
Change
(in thousands, except percentages and per share data)
2015
 
2014
 
$
 
%
 
2015
 
2014
 
$
 
%
Revenue
$
587,945

 
$
556,011

 
$
31,934

 
6
 %
 
$
1,725,613

 
$
1,648,477

 
$
77,136

 
5
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
59,244

 
$
46,517

 
$
12,727

 
27
 %
 
$
149,716

 
$
134,431

 
$
15,285

 
11
 %
Adjusted EBITDA
$
189,996

 
$
174,441

 
$
15,555

 
9
 %
 
$
544,387

 
$
503,349

 
$
41,038

 
8
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP EPS
$
0.86

 
$
0.68

 
$
0.18

 
26
 %
 
$
2.16

 
$
1.95

 
$
0.21

 
11
 %
Adjusted EPS
$
1.56

 
$
1.49

 
$
0.07

 
5
 %
 
$
4.41

 
$
4.23

 
$
0.18

 
4
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flow from operations
$
162,377

 
$
167,476

 
$
(5,099
)
 
(3
)%
 
$
496,661

 
$
542,450

 
$
(45,789
)
 
(8
)%
Free cash flow
$
133,727

 
$
135,198

 
$
(1,471
)
 
(1
)%
 
$
398,973

 
$
459,136

 
$
(60,163
)
 
(13
)%

“My first full quarter back in the CEO role at IHS has been very productive,” said Jerre Stead, IHS chairman and chief executive officer. “IHS and shareholders will benefit as the company executes on its long-term strategy and captures the full potential of prior investments and the operational initiatives we are implementing.”

“We continue to be pleased with the strength of our Industrials revenue growth, while our Resources revenue continues to be negatively impacted by market pressures,” said Todd Hyatt, IHS chief financial officer. “We continue to deliver solid profit and margin expansion, with Adjusted EBITDA of $190 million for the quarter, up 9 percent versus a year ago.”

Third Quarter and Year-to-Date 2015 Revenue Performance

Third quarter 2015 revenue increased 6 percent compared to the third quarter of 2014, and year-to-date 2015 revenue increased 5 percent compared to the same period in 2014. The components of revenue growth are described below by segment and in total.
 
Change in revenue
 
Third quarter 2015 vs. third quarter 2014
 
Year-to-date 2015 vs. year-to-date 2014
(All amounts represent percentage points)
Organic
 
Acquisitive
 
Foreign
Currency
 
Organic
 
Acquisitive
 
Foreign
Currency
Americas
5
 %
 
6
%
 
(1
)%
 
3
 %
 
5
%
 
(1
)%
EMEA
(2
)%
 
4
%
 
(4
)%
 
—
 %
 
3
%
 
(4
)%
APAC
—
 %
 
6
%
 
(3
)%
 
1
 %
 
6
%
 
(2
)%
Total
3
 %
 
5
%
 
(2
)%
 
2
 %
 
5
%
 
(2
)%


The subscription-based business grew 5 percent organically in the third quarter of 2015 compared to the same period of 2014, as described in the following table.
 
Three months ended August 31,
 
Percent change
 
Nine months ended August 31,
 
Percent change
(in thousands, except percentages)
2015
 
2014
 
Total
 
Organic
 
2015
 
2014
 
Total
 
Organic
Subscription revenue
$
466,600

 
$
432,128

 
8
 %
 
5
 %
 
$
1,374,088

 
$
1,275,848

 
8
 %
 
5
 %
Non-subscription revenue
121,345

 
123,883

 
(2
)%
 
(4
)%
 
351,525

 
372,629

 
(6
)%
 
(10
)%
Total revenue
$
587,945

 
$
556,011

 
6
 %
 
3
 %
 
$
1,725,613

 
$
1,648,477

 
5
 %
 
2
 %


2

Third Quarter and Year-to-Date 2015 Segment Performance

Segment results were as follows:

•
Americas. Third quarter revenue for Americas increased $34 million, or 9 percent, to $397 million, and included 6 percent organic growth for the subscription-based business. Third quarter Adjusted EBITDA for Americas increased $12 million, or 9 percent, to $145 million. Third quarter operating income for Americas increased $3 million, or 3 percent, to $93 million.

Year-to-date revenue for Americas increased $74 million, or 7 percent, to $1,165 million. Year-to-date Adjusted EBITDA for Americas increased $24 million, or 6 percent, to $417 million. Year-to-date operating income for Americas decreased $9 million, or 3 percent, to $252 million.

•
EMEA. Third quarter revenue for EMEA decreased $4 million, or 3 percent, to $135 million, and included 1 percent organic growth for the subscription-based business. Third quarter Adjusted EBITDA for EMEA increased $4 million, or 9 percent, to $45 million. Third quarter operating income for EMEA increased $3 million, or 9 percent, to $38 million.

Year-to-date revenue for EMEA decreased $6 million, or 1 percent, to $398 million. Year-to-date Adjusted EBITDA for EMEA increased $6 million, or 6 percent, to $120 million. Year-to-date operating income for EMEA increased $1 million, or 1 percent, to $95 million.

•
APAC. Third quarter revenue for APAC increased $2 million, or 4 percent, to $56 million, and included 6 percent organic growth for the subscription-based business. Third quarter Adjusted EBITDA for APAC increased $3 million, or 25 percent, to $16 million. Third quarter operating income for APAC increased $5 million, or 43 percent, to $15 million.

Year-to-date revenue for APAC increased $8 million, or 6 percent, to $162 million. Year-to-date Adjusted EBITDA for APAC increased $7 million, or 20 percent, to $45 million. Year-to-date operating income for APAC increased $6 million, or 18 percent, to $40 million.

Outlook (forward-looking statement)

For the year ending November 30, 2015, IHS expects:

•
Revenue at the mid-point of the range of $2.30 billion to $2.34 billion, including the low end of 5-6 percent subscription organic growth, negative non-subscription organic growth, and total organic growth of 1-2 percent;

•
Adjusted EBITDA toward the high end of the range of $725 million to $740 million; and

•
Adjusted EPS toward the high end of the range of $5.80 to $6.00 per diluted share.

Additionally, for the year ending November 30, 2015, IHS expects:

•
Depreciation expense to be approximately $85-90 million;

•
Amortization expense related to acquired intangible assets to be approximately $145-150 million;

•
Net interest expense to be approximately $73-77 million; and

•
Stock-based compensation expense to be approximately $135-145 million.
 

3

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 2015 results on September 29, 2015, 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 EBITDA, 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 exclude 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,” “aim,” “strive,” “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 manage system failures, capacity constraints, and cyber risks; our ability to successfully manage risks associated with changes in demand for our products and services as well as changes in our targeted

4

industries; our ability to develop new platforms to deliver our 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 identify and integrate acquisitions into our existing businesses and manage risks associated therewith; our ability to satisfy our debt obligations and our other ongoing business obligations; and the other factors described under the caption “Risk Factors” in our most recent annual report on Form 10-K, 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 150 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 about 8,800 people in 32 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.
© 2015 IHS Inc. All rights reserved.



5


IHS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per-share amounts)

 
As of
 
As of
 
August 31, 2015
 
November 30, 2014
 
(Unaudited)
 
(Audited)
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
263,605

 
$
153,156

Accounts receivable, net
330,673

 
421,374

Income tax receivable
—

 
2,283

Deferred subscription costs
53,156

 
51,021

Deferred income taxes
78,027

 
81,780

Other
64,787

 
60,973

Total current assets
790,248

 
770,587

Non-current assets:

 

Property and equipment, net
322,802

 
301,419

Intangible assets, net
1,111,796

 
1,091,109

Goodwill
3,400,639

 
3,157,324

Other
24,114

 
27,991

Total non-current assets
4,859,351

 
4,577,843

Total assets
$
5,649,599

 
$
5,348,430

Liabilities and stockholders’ equity
 
 
 
Current liabilities:
 
 
 
Short-term debt
$
36,014

 
$
36,257

Accounts payable
57,713

 
52,245

Accrued compensation
88,978

 
101,875

Accrued royalties
23,984

 
37,346

Other accrued expenses
117,175

 
131,147

Income tax payable
31,733

 
—

Deferred revenue
607,073

 
596,187

Total current liabilities
962,670

 
955,057

Long-term debt
2,049,083

 
1,806,098

Accrued pension and postretirement liability
27,611

 
29,139

Deferred income taxes
355,932

 
347,419

Other liabilities
63,321

 
51,171

Commitments and contingencies
 
 
 
Stockholders’ equity:
 
 
 
Class A common stock, $0.01 par value per share, 160,000,000 shares authorized, 70,099,469 and 69,391,577 shares issued, and 68,178,524 and 68,372,176 shares outstanding at August 31, 2015 and November 30, 2014, respectively
701

 
694

Additional paid-in capital
1,014,093

 
956,381

Treasury stock, at cost: 1,920,945 and 1,019,401 shares at August 31, 2015 and November 30, 2014, respectively
(216,749
)
 
(105,873
)
Retained earnings
1,564,785

 
1,415,069

Accumulated other comprehensive loss
(171,848
)
 
(106,725
)
Total stockholders’ equity
2,190,982

 
2,159,546

Total liabilities and stockholders’ equity
$
5,649,599

 
$
5,348,430


6


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,
 
2015
 
2014
 
2015
 
2014
Revenue
$
587,945

 
$
556,011

 
$
1,725,613

 
$
1,648,477

Operating expenses:
 
 
 
 
 
 
 
Cost of revenue (includes stock-based compensation expense of $2,114; $2,906; $4,972; and $6,277 for the three and nine months ended August 31, 2015 and 2014, respectively)
222,811

 
219,208

 
666,660

 
657,078

Selling, general and administrative (includes stock-based compensation expense of $31,221; $44,821; $96,197; and $121,446 for the three and nine months ended August 31, 2015 and 2014, respectively)
207,744

 
211,285

 
614,162

 
612,645

Depreciation and amortization
59,928

 
50,568

 
174,757

 
149,347

Restructuring charges
1,890

 
2,368

 
23,543

 
6,403

Acquisition-related costs
116

 
—

 
593

 
1,017

Net periodic pension and postretirement expense (income)
495

 
(1,328
)
 
1,488

 
4,342

Other expense, net
234

 
132

 
1,328

 
1,440

Total operating expenses
493,218

 
482,233

 
1,482,531

 
1,432,272

Operating income
94,727

 
73,778

 
243,082

 
216,205

Interest income
274

 
251

 
614

 
737

Interest expense
(18,125
)
 
(12,295
)
 
(52,573
)
 
(42,150
)
Non-operating expense, net
(17,851
)
 
(12,044
)
 
(51,959
)
 
(41,413
)
Income from continuing operations before income taxes
76,876

 
61,734

 
191,123

 
174,792

Provision for income taxes
(17,632
)
 
(15,217
)
 
(41,407
)
 
(40,361
)
Net income
$
59,244

 
$
46,517

 
$
149,716

 
$
134,431


 
 
 
 
 
 
 
Basic earnings per share
$
0.87

 
$
0.68

 
$
2.18

 
$
1.97

Weighted average shares used in computing basic earnings per share
68,355

 
68,269

 
68,619

 
68,100


 
 
 
 
 
 
 
Diluted earnings per share
$
0.86

 
$
0.68

 
$
2.16

 
$
1.95

Weighted average shares used in computing diluted earnings per share
68,820

 
68,911

 
69,170

 
68,810


7


IHS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
Nine months ended August 31,
 
2015
 
2014
Operating activities:
 
 
 
Net income
$
149,716

 
$
134,431

Reconciliation of net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
174,757

 
149,347

Stock-based compensation expense
101,169

 
127,723

Impairment of assets
1,243

 
—

Excess tax benefit from stock-based compensation
(5,880
)
 
(11,609
)
Net periodic pension and postretirement expense
1,488

 
4,342

Pension and postretirement contributions
(3,018
)
 
(2,080
)
Deferred income taxes
(21,264
)
 
8,337

Change in assets and liabilities:
 
 
 
Accounts receivable, net
101,289

 
93,234

Other current assets
(20,392
)
 
(11,490
)
Accounts payable
1,997

 
(9,682
)
Accrued expenses
(32,029
)
 
(2,878
)
Income tax
45,766

 
16,281

Deferred revenue
(1,344
)
 
43,465

Other liabilities
3,163

 
3,029

Net cash provided by operating activities
496,661

 
542,450

Investing activities:
 
 
 
Capital expenditures on property and equipment
(97,688
)
 
(83,314
)
Acquisitions of businesses, net of cash acquired
(369,908
)
 
(133,938
)
Intangible assets acquired
—

 
(714
)
Change in other assets
3,262

 
3,846

Settlements of forward contracts
838

 
1,345

Net cash used in investing activities
(463,496
)
 
(212,775
)
Financing activities:
 
 
 
Proceeds from borrowings
465,000

 
165,000

Repayment of borrowings
(222,258
)
 
(439,317
)
Excess tax benefit from stock-based compensation
5,880

 
11,609

Repurchases of common stock
(148,600
)
 
(51,282
)
Net cash provided by (used in) financing activities
100,022

 
(313,990
)
Foreign exchange impact on cash balance
(22,738
)
 
(12,239
)
Net increase in cash and cash equivalents
110,449

 
3,446

Cash and cash equivalents at the beginning of the period
153,156

 
258,367

Cash and cash equivalents at the end of the period
$
263,605

 
$
261,813


8


IHS INC.
SUPPLEMENTAL REVENUE DISCLOSURE
(In thousands)
(Unaudited)


 
Three months ended August 31,
 
Percent change
 
Nine months ended August 31,
 
Percent change
 
2015
 
2014
 
Total
 
Organic
 
2015
 
2014
 
Total
 
Organic
Revenue by segment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Americas
$
396,969

 
$
363,449

 
9
 %
 
5
 %
 
$
1,164,931

 
$
1,090,656

 
7
 %
 
3
 %
EMEA
134,526

 
138,120

 
(3
)%
 
(2
)%
 
398,203

 
403,828

 
(1
)%
 
—
 %
APAC
56,450

 
54,442

 
4
 %
 
—
 %
 
162,479

 
153,993

 
6
 %
 
1
 %
Total revenue
$
587,945

 
$
556,011

 
6
 %
 
3
 %
 
$
1,725,613

 
$
1,648,477

 
5
 %
 
2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue by transaction type:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Subscription
$
466,600

 
$
432,128

 
8
 %
 
5
 %
 
$
1,374,088

 
$
1,275,848

 
8
 %
 
5
 %
Non-subscription
121,345

 
123,883

 
(2
)%
 
(4
)%
 
351,525

 
372,629

 
(6
)%
 
(10
)%
Total revenue
$
587,945

 
$
556,011

 
6
 %
 
3
 %
 
$
1,725,613

 
$
1,648,477

 
5
 %
 
2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue by product category:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Resources
$
217,713

 
$
229,107

 
(5
)%
 
(4
)%
 
$
669,955

 
$
690,477

 
(3
)%
 
(3
)%
Industrials
228,227

 
185,267

 
23
 %
 
11
 %
 
645,353

 
538,336

 
20
 %
 
8
 %
Horizontal products
142,005

 
141,637

 
—
 %
 
4
 %
 
410,305

 
419,664

 
(2
)%
 
1
 %
Total revenue
$
587,945

 
$
556,011

 
6
 %
 
3
 %
 
$
1,725,613

 
$
1,648,477

 
5
 %
 
2
 %



9


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,
 
2015
 
2014
 
2015
 
2014
Net income
$
59,244

 
$
46,517

 
$
149,716

 
$
134,431

Interest income
(274
)
 
(251
)
 
(614
)
 
(737
)
Interest expense
18,125

 
12,295

 
52,573

 
42,150

Provision for income taxes
17,632

 
15,217

 
41,407

 
40,361

Depreciation
22,186

 
17,361

 
65,358

 
49,241

Amortization related to acquired intangible assets
37,742

 
33,207

 
109,399

 
100,106

EBITDA (1)(6)
$
154,655

 
$
124,346

 
$
417,839

 
$
365,552

Stock-based compensation expense
33,335

 
47,727

 
101,169

 
127,723

Restructuring charges
1,890

 
2,368

 
23,543

 
6,403

Acquisition-related costs
116

 
—

 
593

 
1,017

Impairment of assets
—

 
—

 
1,243

 
—

Loss on sale of assets
—

 
—

 
—

 
2,654

Adjusted EBITDA (2)(6)
$
189,996

 
$
174,441

 
$
544,387

 
$
503,349

 
 
 
 
 
 
 
 
 
Three months ended August 31,
 
Nine months ended August 31,
 
2015
 
2014
 
2015
 
2014
Net income
$
59,244

 
$
46,517

 
$
149,716

 
$
134,431

Stock-based compensation expense
33,335

 
47,727

 
101,169

 
127,723

Amortization related to acquired intangible assets
37,742

 
33,207

 
109,399

 
100,106

Restructuring charges
1,890

 
2,368

 
23,543

 
6,403

Acquisition-related costs
116

 
—

 
593

 
1,017

Impairment of assets
—

 
—

 
1,243

 
—

Loss on sale of assets
—

 
—

 
—

 
2,654

Income tax effect on adjusting items
(24,976
)
 
(27,220
)
 
(80,626
)
 
(80,953
)
Adjusted net income (3)
$
107,351

 
$
102,599

 
$
305,037

 
$
291,381

Adjusted EPS (4)(6)
$
1.56

 
$
1.49

 
$
4.41

 
$
4.23

Weighted average shares used in computing Adjusted EPS
68,820

 
68,911

 
69,170

 
68,810

 
 
 
 
 
 
 
 
 
Three months ended August 31,
 
Nine months ended August 31,
 
2015
 
2014
 
2015
 
2014
Net cash provided by operating activities
$
162,377

 
$
167,476

 
$
496,661

 
$
542,450

Capital expenditures on property and equipment
(28,650
)
 
(32,278
)
 
(97,688
)
 
(83,314
)
Free cash flow (5)(6)
$
133,727

 
$
135,198

 
$
398,973

 
$
459,136




10


IHS INC.
RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASUREMENTS TO
MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS
(In thousands)
(Unaudited)
 
Three months ended August 31, 2015
 
Americas
 
EMEA
 
APAC
 
Shared Services
 
Total
Operating income
$
92,703

 
$
38,170

 
$
15,153

 
$
(51,299
)
 
$
94,727

Adjustments:
 
 
 
 
 
 
 
 
 
Stock-based compensation expense
—

 
—

 
—

 
33,335

 
33,335

Depreciation and amortization
50,879

 
5,971

 
1,038

 
2,040

 
59,928

Restructuring charges
1,451

 
383

 
56

 
—

 
1,890

Acquisition-related costs
121

 
(5
)
 
—

 
—

 
116

Adjusted EBITDA
$
145,154

 
$
44,519

 
$
16,247

 
$
(15,924
)
 
$
189,996

 
 
 
 
 
 
 
 
 
 
 
Three months ended August 31, 2014
 
Americas
 
EMEA
 
APAC
 
Shared Services
 
Total
Operating income
$
90,178

 
$
35,166

 
$
10,587

 
$
(62,153
)
 
$
73,778

Adjustments:
 
 
 
 
 
 
 
 
 
Stock-based compensation expense
—

 
—

 
—

 
47,727

 
47,727

Depreciation and amortization
41,846

 
5,057

 
2,317

 
1,348

 
50,568

Restructuring charges
1,563

 
734

 
71

 
—

 
2,368

Adjusted EBITDA
$
133,587

 
$
40,957

 
$
12,975

 
$
(13,078
)
 
$
174,441

 
 
 
 
 
 
 
 
 
 
 
Nine months ended August 31, 2015
 
Americas
 
EMEA
 
APAC
 
Shared Services
 
Total
Operating income
$
252,244

 
$
95,118

 
$
39,750

 
$
(144,030
)
 
$
243,082

Adjustments:
 
 
 
 
 
 
 
 
 
Stock-based compensation expense
—

 
—

 
—

 
101,169

 
101,169

Depreciation and amortization
146,381

 
18,505

 
3,951

 
5,920

 
174,757

Restructuring charges
17,507

 
4,869

 
1,167

 
—

 
23,543

Acquisition-related costs
515

 
78

 
—

 
—

 
593

Impairment of assets
—

 
1,243

 
—

 
—

 
1,243

Adjusted EBITDA
$
416,647

 
$
119,813

 
$
44,868

 
$
(36,941
)
 
$
544,387

 
 
 
 
 
 
 
 
 
 
 
Nine months ended August 31, 2014
 
Americas
 
EMEA
 
APAC
 
Shared Services
 
Total
Operating income
$
261,375

 
$
94,226

 
$
33,587

 
$
(172,983
)
 
$
216,205

Adjustments:
 
 
 
 
 
 
 
 
 
Stock-based compensation expense
—

 
—

 
—

 
127,723

 
127,723

Depreciation and amortization
124,414

 
16,162

 
3,405

 
5,366

 
149,347

Restructuring charges
3,335

 
2,675

 
393

 
—

 
6,403

Acquisition-related costs
696

 
321

 
—

 
—

 
1,017

Loss on sale of assets
2,654

 
—

 
—

 
—

 
2,654

Adjusted EBITDA
$
392,474

 
$
113,384

 
$
37,385

 
$
(39,894
)
 
$
503,349


11



(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, restructuring charges, acquisition-related costs, asset impairment charges, gain or loss on sale of assets, gain or loss on debt extinguishment, pension mark-to-market and settlement expense, and income or loss from discontinued operations). 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, asset impairment charges, gain or loss on sale of assets, gain or loss on debt extinguishment, pension mark-to-market and settlement expense, and income or loss from discontinued operations, all net of the related tax effects).
(4)
Adjusted EPS 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 agreements.

12

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