Tableof Contents

 

 

 

**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-Q**

 

| **(Mark One)** | ** ** | ** **                                                                                              |
|----------------|------------|---------------------------------------------------------------------------------------------------------|
|           |       |                                                                                                    |
| **x**          | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
| ** **     | ** ** | ** **                                                                                              |
| ** **     | ** ** | **For the quarterly period ended March 31,  2009**                                                 |
| ** **     | ** ** | ** **                                                                                              |
| **OR**         |
|           |       |                                                                                                    |
| **o**          | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|           |       |                                                                                                    |
| ** **     | ** ** | **For the transition period from       to**                                         |

 

**Commission File Number: 001-14049**

 

 

**IMS Health Incorporated**

(Exact Name of Registrantas Specified in its Charter)

 

| **Delaware**              | ** ** | **06-1506026**                        |
|---------------------------|------------|---------------------------------------|
| (State of  Incorporation) |       | (I.R.S. Employer  Identification No.) |

 

**901 Main Avenue, Norwalk, CT06851**

(Address of principalexecutive offices)(Zip Code)

 

**(203) 845-5200**

(Registrant’s telephonenumber, including area code)

 

**N/A**

(Former name, formeraddress and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant: (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to the filing requirements for the past 90 days.

xYes   oNo

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405of this chapter) during the preceding 12 months (or for such shorter periodthat the registrant was required to submit and post such files).

oYes   oNo

 

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, a non-accelerated filer or asmaller reporting company.  Seedefinitions of “large accelerated filer,” “accelerated filer,” and “smallerreporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

| Large Accelerated Filer x | Accelerated Filer o   |   |
|---------------------------|---------------------------------|--------|
|                      |                            |   |
| Non-Accelerated Filer o   | Smaller Reporting  Company o    |   |

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).  oYes   xNo

 

Indicate the number of shares outstanding of each ofthe issuer’s classes of common stock, as of the latest practicable date.  At March 31, 2009, there were181,763,123 shares of IMS Health Incorporated Common Stock, $0.01 par value,outstanding.

 

 

 

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Table ofContents

 

**IMS HEALTH INCORPORATED**

 

**INDEX TO FORM 10-Q**

 
| ** **                                                                                                                                              | **PAGE(S)**  |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|
| ** **                                                                                                                                              | ** **   |
| **PART I.  FINANCIAL INFORMATION**                                                                                                                 | ** **   |
| ** **                                                                                                                                              | ** **   |
| Item  1. Financial Statements (Unaudited)                                                                                                               | ** **   |
|                                                                                                                                                    | ** **   |
| Condensed Consolidated  Statements of Financial Position As of March 31, 2009 and  December 31, 2008                                          | 3            |
|                                                                                                                                                    |         |
| Condensed Consolidated  Statements of Income Three Months Ended March 31, 2009 and 2008                                                            | 4            |
|                                                                                                                                                    |         |
| Condensed Consolidated  Statements of Cash Flows Three Months Ended March 31, 2009 and 2008                                                        | 5            |
|                                                                                                                                                    |         |
| Condensed  Consolidated Statements of Shareholders’ Deficit Three Months Ended  March 31, 2009 and Twelve Months Ended December 31, 2008 | 6            |
|                                                                                                                                                    |         |
| Notes to Condensed Consolidated Financial Statements                                                                                                    | 7-27         |
|                                                                                                                                                    |         |
| **Item 2. Management’s Discussion and Analysis of  Financial Condition and Results of Operations**                                                 | 28 – 46 |
| ** **                                                                                                                                              |         |
| **Item 3. Quantitative and Qualitative Disclosures About  Market Risk**                                                                                 | 47           |
| ** **                                                                                                                                              |         |
| **Item 4. Controls and Procedures**                                                                                                                     | 47           |
| ** **                                                                                                                                              |         |
| **PART II. OTHER INFORMATION**                                                                                                                     | ** **   |
|                                                                                                                                                    | ** **   |
| **Item  1. Legal Proceedings**                                                                                                                          | 48           |
| ** **                                                                                                                                              | ** **   |
| **Item  1A. Risk Factors**                                                                                                                              | 48 – 49 |
|                                                                                                                                                    |         |
| **Item 2. Unregistered  Sales of Equity Securities and Use of Proceeds**                                                                                | 49           |
|                                                                                                                                                    |         |
| **Item  5. Other Information**                                                                                                                          | 49           |
|                                                                                                                                                    |         |
| **Item 6.  Exhibits**                                                                                                                                   | 50           |
|                                                                                                                                                    |         |
| **SIGNATURES**                                                                                                                                          | 51           |
| ** **                                                                                                                                              | ** **   |
| **EXHIBITS**                                                                                                                                            | 52           |

 

2

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Tableof Contents

 

**PART I. FINANCIAL INFORMATION**

**Item 1. FINANCIAL STATEMENTS (Unaudited)**

 

**IMSHEALTH INCORPORATED**

**CONDENSEDCONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)**

*(Dollars and shares in thousands,except per share data)*

* *
| ** **                                                                                                               | ** ** | **As of March 31,  2009** | ** **    | **As of December 31,  2008** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------|---------------|---------------------------------------------|------------|
| **Assets:**                                                                                                              |       |                                     |          |                                        |       |
| **Current  Assets:**                                                                                                     |       |                                     |          |                                        |       |
| Cash and cash  equivalents                                                                                               | ** ** | **$**                                    | **174,591**   | ** **                                  | $          | 215,682 |   |
| Accounts  receivable, net of allowances of $6,587 and $5,960 in 2009 and 2008, respectively                              | ** ** | **398,358**                              | ** **    | 382,776                                     |       |
| Other current  assets                                                                                                    | ** ** | **174,960**                              | ** **    | 174,099                                     |       |
| **Total  Current Assets**                                                                                                | ** ** | **747,909**                              | ** **    | 772,557                                     |       |
| Securities and  other investments                                                                                        | ** ** | **8,119**                                | ** **    | 7,121                                       |       |
| Property, plant  and equipment, net of accumulated depreciation of $210,922 and $208,340 in  2009 and 2008, respectively | ** ** | **177,403**                              | ** **    | 183,055                                     |       |
| Computer  software                                                                                                       | ** ** | **254,356**                              | ** **    | 253,583                                     |       |
| Goodwill (Note  6)                                                                                                       | ** ** | **656,714**                              | ** **    | 663,532                                     |       |
| Other assets                                                                                                             | ** ** | **182,278**                              | ** **    | 207,289                                     |       |
| **Total  Assets**                                                                                                        | ** ** | **$**                                    | **2,026,779** | ** **                                  | $          | 2,087,137 |   |
| ** **                                                                                                               | ** ** | ** **                               | ** **    |                                        |       |
| **Liabilities,  Redeemable Noncontrolling Interest and Shareholders’ Deficit:**                                     |       |                                     | ** **    |                                        |       |
| **Current  Liabilities:**                                                                                                |       |                                     | ** **    |                                        |       |
| Accounts payable                                                                                                         | ** ** | **$**                                    | **97,478**    | ** **                                  | $          | 119,798 |   |
| Accrued and  other current liabilities                                                                                   | ** ** | **231,578**                              | ** **    | 275,764                                     |       |
| Accrued income  taxes                                                                                                    | ** ** | **5,634**                                | ** **    | 47,735                                      |       |
| Short-term  deferred tax liability                                                                                       | ** ** | **1,835**                                | ** **    | 9,444                                       |       |
| Deferred  revenues                                                                                                       | ** ** | **82,386**                               | ** **    | 88,484                                      |       |
| **Total  Current Liabilities**                                                                                           | ** ** | **418,911**                              | ** **    | 541,225                                     | ** ** |
| Postretirement  and postemployment benefits                                                                              | ** ** | **107,830**                              | ** **    | 109,516                                     |       |
| Long-term debt  (Note 9)                                                                                                 | ** ** | **1,329,209**                            | ** **    | 1,404,199                                   |       |
| Other  liabilities                                                                                                       | ** ** | **165,927**                              | ** **    | 185,677                                     |       |
| **Total  Liabilities**                                                                                                   | ** ** | **$**                                    | **2,021,877** | ** **                                  | $          | 2,240,617 |   |
| ** **                                                                                                               | ** ** | ** **                               | ** **    |                                        |       |
| **Commitments  and Contingencies (Note 7)**                                                                              |       |                                     | ** **    |                                        |       |
|                                                                                                                     |       |                                     | ** **    |                                        |       |
| **Redeemable  Noncontrolling Interest (Note 13)**                                                                        | ** ** | **$**                                    | **100,000**   | ** **                                  | $          | 100,000 |   |
|                                                                                                                     |       |                                     | ** **    |                                        |       |
| **Shareholders’  Deficit:**                                                                                         |       |                                     | ** **    |                                        |       |
| Common Stock,  par value $.01, authorized 800,000 shares; issued 335,045 shares in 2009 and  2008, respectively          | ** ** | **$**                                    | **3,350**     | ** **                                  | $          | 3,350 |   |
| Capital in  excess of par                                                                                                | ** ** | **543,037**                              | ** **    | 546,478                                     |       |
| Retained  earnings                                                                                                       | ** ** | **3,187,950**                            | ** **    | 3,060,345                                   |       |
| Treasury stock,  at cost, 153,282 and 153,564 shares in 2009 and 2008, respectively                                      | ** ** | **(3,569,915**                           | **)**         | (3,576,446                                  | )          |
| Cumulative  translation adjustment                                                                                       | ** ** | **(146,179**                             | **)**         | (171,990                                    | )          |
| Unamortized  postretirement and postemployment balances (SFAS No. 158)                                              | ** ** | **(115,062**                             | **)**         | (117,111                                    | )          |
| **Total  IMS Health Shareholders’ Deficit**                                                                         | ** ** | **$**                                    | **(96,819**   | **)**                                       | $          | (255,374 | ) |
| **Noncontrolling  Interests (Note 13)**                                                                                  | ** ** | **$**                                    | **1,721**     | ** **                                  | $          | 1,894 |   |
| **Total  Shareholders’ Deficit**                                                                                    | ** ** | **$**                                    | **(95,098**   | **)**                                       | $          | (253,480 | ) |
| **Total  Liabilities, Redeemable Noncontrolling Interest and Shareholders’ Deficit**                                | ** ** | **$**                                    | **2,026,779** | ** **                                  | $          | 2,087,137 |   |

## ** **

*Seeaccompanying Notes to the Condensed Consolidated Financial Statements(Unaudited).*

 

3

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## **IMS HEALTH INCORPORATED**

**CONDENSED CONSOLIDATED STATEMENTS OF INCOME(Unaudited)**

*(Dollarsand shares in thousands, except per share data)*

* *
| ** **                                                                                               | ** ** | **Three Months Ended  March 31,** | ** **  |
|----------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|-------------|
| ** **                                                                                               | ** ** | **2009**                                         | ** **  | **2008** | ** ** |
|                                                                                                     |       |                                             |        |   |   |
| Information and  analytics revenue                                                                       | ** ** | **$**                                            | **420,076** | ** ** | $ | 456,187 |   |
| Consulting and  services revenue                                                                         | ** ** | **106,868**                                      | ** **  | 117,993 |   |
| **Operating  Revenue**                                                                                   | ** ** | **526,944**                                      | ** **  | 574,180 |   |
|                                                                                                     |       |                                             | ** **  |   |   |
| Operating costs  of information and analytics                                                            | ** ** | **170,839**                                      | ** **  | 192,766 |   |
| Direct and  incremental costs of consulting and services                                                 | ** ** | **61,145**                                       | ** **  | 68,505 |   |
| External-use  software amortization                                                                      | ** ** | **10,524**                                       | ** **  | 12,714 |   |
| Selling and  administrative expenses                                                                     | ** ** | **160,406**                                      | ** **  | 162,769 |   |
| Depreciation and  other amortization                                                                     | ** ** | **23,165**                                       | ** **  | 21,044 |   |
| **Operating  Income**                                                                                    | ** ** | **100,865**                                      | ** **  | 116,382 |   |
|                                                                                                     |       |                                             | ** **  |   |   |
| Interest income                                                                                          | ** ** | **1,007**                                        | ** **  | 2,592 |   |
| Interest expense                                                                                         | ** ** | **(9,476**                                       | **)**       | (11,263 | ) |
| Other income  (expense), net                                                                             | ** ** | **4,895**                                        | ** **  | (18,622 | ) |
| **Non-Operating  Loss, Net**                                                                             | ** ** | **(3,574**                                       | **)**       | (27,293 | ) |
|                                                                                                     |       |                                             | ** **  |   |   |
| Income before  benefit (provision) for income taxes                                                      | ** ** | **97,291**                                       | ** **  | 89,089 |   |
| Benefit  (provision) for income taxes (Note 11)                                                          | ** ** | **37,165**                                       | ** **  | (28,279 | ) |
| **Net  Income**                                                                                          | ** ** | **134,456**                                      | ** **  | 60,810 |   |
| Less: Net Income  Attributable to noncontrolling interests (Note 13)                                     | ** ** | **1,124**                                        | ** **  | 1,635 |   |
| **Net  Income Attributable to IMS Health**                                                               | ** ** | **$**                                            | **133,332** | ** ** | $ | 59,175 |   |
|                                                                                                     |       |                                             | ** **  |   |   |
| **Basic  Earnings Per Share of Common Stock**                                                            | ** ** | **$**                                            | **0.73**    | ** ** | $ | 0.32 |   |
| **Diluted  Earnings Per Share of Common Stock**                                                          | ** ** | **$**                                            | **0.73**    | ** ** | $ | 0.32 |   |
| ** **                                                                                               | ** ** | ** **                                       | ** **  |   |   |
| Weighted average  number of shares outstanding — Basic                                              | ** ** | **181,843**                                      | ** **  | 185,036 |   |
| Dilutive effect  of shares issuable as of period-end under Stock-based compensation plans and  other     | ** ** | **223**                                          | ** **  | 1,259 |   |
| Adjustment of  shares outstanding applicable to exercised and cancelled stock options during  the period |       | —                                           | ** **  | 9 |   |
| **Weighted  Average Number of Shares Outstanding — Diluted**                                        | ** ** | **182,066**                                      | ** **  | 186,304 |   |

 

*Seeaccompanying Notes to the Condensed Consolidated Financial Statements(Unaudited).*

 

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**IMSHEALTH INCORPORATED**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)**

*(Dollarsin thousands)*

 
| ** **                                                                                        | ** ** | **Three Months Ended March 31,** | ** **  |
|---------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|-------------|
| ** **                                                                                        | ** ** | **2009**                                             | ** **  | **2008** | ** ** |
| **Cash  Flows from Operating Activities:**                                                        |       |                                                 |        |   |   |
| Net income                                                                                        | ** ** | **$**                                                | **134,456** | ** ** | $ | 60,810 |   |
| **Adjustments  to reconcile net income to net cash provided by (used in) operating  activities:** |       |                                                 | ** **  |   |   |
| Depreciation and  amortization                                                                    | ** ** | **33,689**                                           | ** **  | 33,758 |   |
| Bad debt expense                                                                                  | ** ** | **626**                                              | ** **  | 803 |   |
| Deferred income  taxes                                                                            | ** ** | **2,389**                                            | ** **  | 1,304 |   |
| Gains from  investments, net                                                                      | ** ** | **(38**                                              | **)**       | — |   |
| Non-cash  stock-based compensation charges                                                        | ** ** | **6,845**                                            | ** **  | 7,391 |   |
| Net tax  (benefit) expense on stock-based compensation                                            | ** ** | **(1,691**                                           | **)**       | 44 |   |
| Excess tax  benefits from stock-based compensation                                                |       | —                                               | ** **  | (41 | ) |
| Change in assets  and liabilities, excluding effects from acquisitions and dispositions:          |       |                                                 | ** **  |   |   |
| Net increase in  accounts receivable                                                              | ** ** | **(17,238**                                          | **)**       | (76,355 | ) |
| Net decrease  (increase) in work-in-process inventory                                             | ** ** | **4,442**                                            | ** **  | (4,780 | ) |
| Net increase in  prepaid expenses and other current assets                                        | ** ** | **(14,647**                                          | **)**       | (22,544 | ) |
| Net (decrease)  increase in accounts payable                                                      | ** ** | **(23,738**                                          | **)**       | 4,468 |   |
| Net decrease in  accrued and other current liabilities                                            | ** ** | **(30,997**                                          | **)**       | (6,012 | ) |
| Net decrease in  accrued severance, impairment and other charges                                  | ** ** | **(11,260**                                          | **)**       | (13,665 | ) |
| Net decrease in  deferred revenues                                                                | ** ** | **(6,486**                                           | **)**       | (5,362 | ) |
| Net (decrease)  increase in accrued income taxes                                                  | ** ** | **(59,119**                                          | **)**       | 22,305 |   |
| Net decrease in  pension assets (net of liabilities)                                              | ** ** | **67**                                               | ** **  | 1,312 |   |
| Net increase in  other long-term assets (net of long-term liabilities)                            | ** ** | **(836**                                             | **)**       | (4,171 | ) |
| **Net  Cash Provided by (Used in) Operating Activities**                                          | ** ** | **16,464**                                           | ** **  | (735 | ) |
| **Cash  Flows Used in Investing Activities:**                                                     |       |                                                 | ** **  |   |   |
| Capital  expenditures                                                                             | ** ** | **(5,128**                                           | **)**       | (6,414 | ) |
| Additions to  computer software                                                                   | ** ** | **(17,147**                                          | **)**       | (17,132 | ) |
| Proceeds from  sale of assets, net                                                                | ** ** | **38**                                               | ** **  | 1,392 |   |
| Payments for  acquisitions of businesses, net of cash acquired                                    | ** ** | **(2,423**                                           | **)**       | (6,156 | ) |
| Funding of  venture capital investments                                                           | ** ** | **(1,000**                                           | **)**       | (600 | ) |
| Other investing  activities, net                                                                  | ** ** | **162**                                              | ** **  | (1,030 | ) |
| **Net  Cash Used in Investing Activities**                                                        | ** ** | **(25,498**                                          | **)**       | (29,940 | ) |
| **Cash  Flows (Used in) Provided by Financing Activities:**                                       |       |                                                 | ** **  |   |   |
| Net (decrease)  increase revolving credit facility and other                                      | ** ** | **(13,670**                                          | **)**       | 164,117 |   |
| Proceeds from  private placement notes                                                            |       | —                                               | ** **  | 240,000 |   |
| Repayment of  private placement notes                                                             |       | —                                               | ** **  | (150,000 | ) |
| Payments for  purchase of treasury stock                                                          |       | —                                               | ** **  | (229,340 | ) |
| Proceeds from  exercise of stock options                                                          |       | —                                               | ** **  | 1,069 |   |
| Excess tax  benefits from stock-based compensation                                                |       | —                                               | ** **  | 41 |   |
| Dividends paid                                                                                    | ** ** | **(5,727**                                           | **)**       | (5,507 | ) |
| Proceeds from  employee stock purchase plan and other                                             |       | —                                               | ** **  | (25 | ) |
| (Decrease)  increase in cash overdrafts                                                           | ** ** | **(5,059**                                           | **)**       | 1,648 |   |
| Payments to  noncontrolling interests and other financing activities                              | ** ** | **(1,691**                                           | **)**       | (1,690 | ) |
| **Net  Cash (Used in) Provided by Financing Activities**                                          | ** ** | **(26,147**                                          | **)**       | 20,313 |   |
| Effect of  Exchange Rate Changes on Cash and Cash Equivalents                                     | ** ** | **(5,910**                                           | **)**       | 7,908 |   |
| **Decrease  in Cash and Cash Equivalents**                                                        | ** ** | **(41,091**                                          | **)**       | (2,454 | ) |
| **Cash  and Cash Equivalents, Beginning of Period**                                               | ** ** | **215,682**                                          | ** **  | 218,249 |   |
| **Cash  and Cash Equivalents, End of Period**                                                     | ** ** | **$**                                                | **174,591** | ** ** | $ | 215,795 |   |

 

*Seeaccompanying Notes to the Condensed Consolidated Financial Statements(Unaudited).*

 

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**IMS HEALTH INCORPORATED**

**CONDENSEDCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT (Unaudited)**

***(Dollars and shares in thousands,except per share data)***

 
| ** **                                   | ** ** | ** **  | ** ** | ** **   | ** ** | ** **  | ** ** | ** **         | ** ** | ** **   | ** ** | ** **     | ** **    | **Accumulated Other Comprehensive Income (Loss)** | ** ** | ** **               | ** ** | ** **          | ** **   | ** **                | ** ** |
|----------------------------------------------|------------|-------------|------------|--------------|------------|-------------|------------|--------------------|------------|--------------|------------|----------------|---------------|-----------------------------------------------------------------------|------------|--------------------------|------------|---------------------|--------------|---------------------------|------------|
| ** **                                   | ** ** | ** **  | ** ** | ** **   | ** ** | ** **  | ** ** | ** **         | ** ** | ** **   | ** ** | ** **     | ** **    | ** **                                                            | ** ** | **Post Retirement** | ** ** | ** **          | ** **   | **Total**                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                   | ** ** | **Shares**  | ** ** | ** **   | ** ** | **Capital** | ** ** | ** **         | ** ** | ** **   | ** ** | **Cumulative** | ** **    | **Post Employ**                                                  | ** ** | **Other**                | ** ** | **IMS Health** | ** **   | ** **                | ** ** | ** ** | ** ** |
| ** **                                   | ** ** | **Common**  | ** ** | **Treasury** | ** ** | **Common**  | ** ** | **in Excess** | ** ** | **Retained** | ** ** | **Treasury**   | ** **    | **Translation**                                                       | ** ** | **Adjust**               | ** ** | **Comprehensive**   | ** **   | **Shareholders’**    | ** ** | **Noncontrolling** | ** ** | **Total** | ** ** |
| ** **                                   | ** ** | **Stock**   | ** ** | **Stock**    | ** ** | **Stock**   | ** ** | **of Par**    | ** ** | **Earnings** | ** ** | **Stock**      | ** **    | **Adjustment**                                                        | ** ** | **SFAS 158**        | ** ** | **Income**          | ** **   | **(Deficit) Equity** | ** ** | **Interest** | ** ** | **(Deficit) Equity** | ** ** |
| **Balance,  December 31, 2007**         | ** ** | **335,045** | ** ** | **143,818**  | ** ** | **$**       | **3,350**  | ** **         | **$**      | **535,500**  | ** ** | **$**          | **2,771,278** | ** **                                                            | **$**      | **(3,355,790**           | **)**      | **$**               | **61,931**   | ** **                | **$**      | **(56,584** | **)** | ** ** | ** ** | **$** | **(40,315** | **)** | **$** | **1,444** | ** ** | **$** | **(38,871** | **)** |
| ** **                                   | ** ** | ** **  | ** ** | ** **   | ** ** | ** **  | ** ** | ** **         | ** ** | ** **   | ** ** | ** **     | ** **    | ** **                                                            | ** ** | ** **               | ** ** | ** **          | ** **   | ** **                | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net Income                                   |       |        |       |         |       |        |       |               |       | 311,250      |       |           |          |                                                                  |       |                     |       | $                   | 311,250      |                      | 311,250    |   | 940 |   | 312,190 |   |
| Cash Dividends  ($0.12 per share)            |       |        |       |         |       |        |       |               |       | (22,183      | )          |           |          |                                                                  |       |                     |       |                |         | (22,183                   | )          |   |   | (22,183 | ) |
| Stock-Based  Compensation Expense            |       |        |       |         |       |        |       | 28,036             |       |         |       |           |          |                                                                  |       |                     |       |                |         | 28,036                    |       |   |   | 28,036 |   |
| Net Tax Benefit  on Stock-Based Compensation |       |        |       |         |       |        |       | (499               | )          |         |       |           |          |                                                                  |       |                     |       |                |         | (499                      | )          |   |   | (499 | ) |
| Treasury Shares  Acquired Under Purchases    |       |        |       | 10,495       |       |        |       |               |       |         |       | (238,046       | )             |                                                                  |       |                     |       |                |         | (238,046                  | )          |   |   | (238,046 | ) |
| Treasury Shares  Reissued Under:             |       |        |       |         |       |        |       |               |       |         |       |           |          |                                                                  |       |                     |       |                |         |                      |       |   |   |   |   |
| Exercise of Stock  Options                   |       |        |       | (277         | )          |        |       | (920               | )          |         |       | 6,441          |          |                                                                  |       |                     |       |                |         | 5,521                     |       |   |   | 5,521 |   |
| Vesting of  Restricted Stock                 |       |        |       | (473         | )          |        |       | (15,642            | )          |         |       | 10,977         |          |                                                                  |       |                     |       |                |         | (4,665                    | )          |   |   | (4,665 | ) |
| Employee Stock  Purchase Plan                |       |        |       | 1            |       |        |       | 3                  |       |         |       | (28            | )             |                                                                  |       |                     |       |                |         | (25                       | )          |   |   | (25 | ) |
| Cumulative  Translation Adjustment           |       |        |       |         |       |        |       |               |       |         |       |           |          | (233,921                                                              | )          |                     |       | (233,921            | )            | (233,921                  | )          | (490 | ) | (234,411 | ) |
| SFAS 158  Adjustments                        |       |        |       |         |       |        |       |               |       |         |       |           |          |                                                                  |       | (60,527                  | )          | (60,527             | )            | (60,527                   | )          |   |   | (60,527 | ) |
| Total  Comprehensive Income                  |       |        |       |         |       |        |       |               |       |         |       |           |          |                                                                  |       |                     |       | $                   | 16,802       |                      |       |   | 450 |   |   |   |
| **Balance,  December 31, 2008**         | ** ** | **335,045** | ** ** | **153,564**  | ** ** | **$**       | **3,350**  | ** **         | **$**      | **546,478**  | ** ** | **$**          | **3,060,345** | ** **                                                            | **$**      | **(3,576,446**           | **)**      | **$**               | **(171,990** | **)**                     | **$**      | **(117,111** | **)** | ** ** | ** ** | **$** | **(255,374** | **)** | **$** | **1,894** | ** ** | **$** | **(253,480** | **)** |
| ** **                                   |       |        |       |         |       |        |       |               |       |         |       |           |          |                                                                  |       |                     |       |                |         |                      |       |   |   |   |   |
| Net Income                                   |       |        |       |         |       |        |       |               |       | 133,332      |       |           |          |                                                                  |       |                     |       | $                   | 133,332      |                      | 133,332    |   | 38 |   | 133,370 |   |
| Cash Dividends  ($0.12 per share)            |       |        |       |         |       |        |       |               |       | (5,727       | )          |           |          |                                                                  |       |                     |       |                |         | (5,727                    | )          |   |   | (5,727 | ) |
| Stock-Based  Compensation Expense            |       |        |       |         |       |        |       | 6,845              |       |         |       |           |          |                                                                  |       |                     |       |                |         | 6,845                     |       |   |   | 6,845 |   |
| Net Tax Benefit  on Stock-Based Compensation |       |        |       |         |       |        |       | (1,691             | )          |         |       |           |          |                                                                  |       |                     |       |                |         | (1,691                    | )          |   |   | (1,691 | ) |
| Treasury Shares  Reissued Under:             |       |        |       |         |       |        |       |               |       |         |       |           |          |                                                                  |       |                     |       |                |         |                      |       |   |   |   |   |
| Vesting of  Restricted Stock                 |       |        |       | (282         | )          |        |       | (8,595             | )          |         |       | 6,531          |          |                                                                  |       |                     |       |                |         | (2,064                    | )          |   |   | (2,064 | ) |
| Cumulative  Translation Adjustment           |       |        |       |         |       |        |       |               |       |         |       |           |          | 25,811                                                                |       |                     |       | 25,811              |         | 25,811                    |       | (211 | ) | 25,600 |   |
| SFAS 158  Adjustments                        |       |        |       |         |       |        |       |               |       |         |       |           |          |                                                                  |       | 2,049                    |       | 2,049               |         | 2,049                     |       |   |   | 2,049 |   |
| Total  Comprehensive Income                  |       |        |       |         |       |        |       |               |       |         |       |           |          |                                                                  |       |                     |       | $                   | 161,192      |                      |       |   | (173 | ) |   |   |
| **Balance,  March 31, 2009**            | ** ** | **335,045** | ** ** | **153,282**  | ** ** | **$**       | **3,350**  | ** **         | **$**      | **543,037**  | ** ** | **$**          | **3,187,950** | ** **                                                            | **$**      | **(3,569,915**           | **)**      | **$**               | **(146,179** | **)**                     | **$**      | **(115,062** | **)** | ** ** | ** ** | **$** | **(96,819** | **)** | **$** | **1,721** | ** ** | **$** | **(95,098** | **)** |

 

***See accompanying Notes to the Condensed Consolidated FinancialStatements (Unaudited).***

 

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**IMSHEALTH INCORPORATED**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

**(Dollarsand shares in thousands, except per share data)**

 

**Note 1.  InterimCondensed Consolidated Financial Statements (Unaudited)**

** **

Theaccompanying Condensed Consolidated Financial Statements (Unaudited) have beenprepared in accordance with accounting principles generally accepted in theUnited States of America for interim financial information and Article 10of Regulation S-X under the Securities and Exchange Act of 1934, asamended.  The Condensed ConsolidatedFinancial Statements (Unaudited) do not include all the information and notesrequired by accounting principles generally accepted in the United States ofAmerica for complete financial statements. In the opinion of management, all adjustments, all of which are of anormal recurring nature, considerednecessary for a fair presentation of the statements of financial position,income and cash flows for the periods presented have been included.  The results of operations for interim periodsare not necessarily indicative of the results expected for the full year.  The December 31, 2008 balance sheet datawas derived from audited financial statements, but does not include alldisclosures required by accounting principles generally accepted in the UnitedStates of America.  The CondensedConsolidated Financial Statements (Unaudited) and related notes should be readin conjunction with the Consolidated Financial Statements and related notes ofIMS Health Incorporated (the “Company” or “IMS”) included in its 2008 AnnualReport on Form 10-K.  Certain prioryear amounts have been reclassified to conform to the 2009 presentation.  Amounts presented in the CondensedConsolidated Financial Statements (Unaudited) may not add due to rounding.

 

**Note 2.  Basisof Presentation**

** **

IMS Health Incorporated is the leading globalprovider of market intelligence to the pharmaceutical and healthcareindustries. The Company offers leading-edge market intelligence products andservices that are integral to its clients’ day-to-day operations, includingproduct and portfolio management capabilities; commercial effectivenessinnovations; managed care and consumer health offerings; and consulting andservices solutions that improve productivity and the delivery of qualityhealthcare worldwide. The Company’s information products are developed to meetclient needs by using data secured from a worldwide network of suppliers inmore than 100 countries. The Company’s business lines are:

 

·                  Commercial Effectiveness to increase clients’productivity across end-to-end sales, marketing, promotional and performancemanagement processes;

 

·                  Product and Portfolio Management to provideclients with insights into market measurement so they can optimize theirproduct portfolio and strategies; and

 

·                  New Business Areas that supportpharmaceutical client business initiatives in managed markets, consumer health,and pricing and market access, and that also serve payer and governmentaudiences.

 

Within these business lines, the Company providesconsulting and services that use in-house capabilities and methodologies toassist clients in analyzing and evaluating market trends, strategies andtactics, and to help in the development and implementation of customizedsoftware applications and data warehouse tools.

 

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**IMSHEALTH INCORPORATED**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

**(Dollarsand shares in thousands, except per share data)**

 

The Company operates in more than 100 countries.

 

The Company is managed on a global business modelwith global leaders for the majority of its critical business processes andaccordingly has one reportable segment (see Note 16).

 

**Note 3.  Summaryof Recent Accounting Pronouncements**

** **

In September 2006, theFinancial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounting Standards (“SFAS”) No. 157, “Fair Value Measurements.” This statement defines fair value,establishes a framework for measuring fair value under generally acceptedaccounting principles, and expands disclosures about fair value measurements. This statement is effective for financialstatements issued for fiscal years beginning after November 15, 2007, andinterim periods within those fiscal years. The adoption of SFAS No. 157, effective January 1, 2008, didnot have a material impact on the Company’s financial position, results of operationsor cash flows.  In February 2008,the FASB issued Staff Positions No. FAS 157-1 and No. FAS 157-2 whichdelayed the effective date of SFAS No. 157 for one year for certainnon-financial assets and liabilities and removed certain leasing transactionsfrom its scope.  The adoption of StaffPositions No. FAS 157-1 and No. 157-2, effective January 1,2009, did not have a material impact on the Company’s financial position,results of operations or cash flows.

 

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy ofGenerally Accepted Accounting Principles.” The statement identifies the sources of accounting principles and theframework for selecting the principles used in the preparation of financialstatements of nongovernmental entities that are presented in conformity withgenerally accepted accounting principles (“GAAP”) in the United States.  This statement was effective 60 daysfollowing the U.S. SEC’s approval of the Public Company Accounting OversightBoard (“PCAOB”) amendments to AU Section 411, “The Meaning of PresentFairly in Conformity With Generally Accepted Accounting Principles.”  The adoption of this statement did not havean impact on the Company’s financial position, results of operations or cashflows.

 

In December 2008, the FASB issued FASB StaffPosition (“FSP”) FAS 132(R)-1, “Employers’ Disclosures about PostretirementBenefit Plan Assets” (“FSP FAS 132(R)-1”), which amends SFAS No. 132(revised 2003), “Employers’ Disclosures about Pensions and Other PostretirementBenefits,” to provide guidance on an employer’s disclosures about plan assetsof a defined benefit pension or other postretirement plan.  FSP FAS 132(R)-1 is effective for fiscal yearsending after December 15, 2009, with earlier application permitted. Uponinitial application, the provisions of FSP FAS 132(R)-1 are not required forearlier periods that are presented for comparative purposes.  The Company is currently evaluating the newdisclosure requirements under FSP FAS 132(R)-1.

 

In April 2009, the FASB issued FSP FAS 157-4, “DeterminingFair Value When the Volume and Level of Activity for the Asset or LiabilityHave Significantly Decreased and Identifying Transactions That Are Not Orderly”(“FSP FAS 157-4”), which provides guidance on determining fair values whenthere is no active market or where the price inputs being used representdistressed sales.  It also reaffirms whatSFAS No. 157 states is the objective of fair value measurement—to reflecthow much an asset would be sold for in an orderly transaction 

 

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**IMSHEALTH INCORPORATED**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

**(Dollarsand shares in thousands, except per share data)**

 

(as opposed to a distressed or forced transaction)at the date of the financial statements under current market conditions.  FSP FAS 157-4 is effective for interim andannual periods ending after June 15, 2009. The adoption of FSP FAS 157-4 is not expected to have a material impacton the Company’s financial position, results of operations or cash flows.

 

**Note 4.  Summaryof Significant Accounting Policies**

** **

*Operating Costs of Information and Analytics*

 

Operating costs of information and analytics (“I&A”)include costs of data, data collection and processing and costs attributable topersonnel involved in production, data management and delivery of the Company’sI&A offerings.

 

One of the Company’s majorexpenditures is the cost for the data it receives from suppliers.  After receipt of the raw data and prior tothe data being available for use in any part of its business, the Company isrequired to transform the raw data into useful information through a series ofcomprehensive processes. These processes involve significant employee costs anddata processing costs.

 

Costs associated with theCompany’s data purchases are deferred within work-in-process inventory and recognizedas expense as the corresponding data product revenue is recognized by theCompany, generally over a thirty to sixty day period.

 

*Direct and Incremental Costs of Consulting and Services*

 

Direct and incremental costsof consulting and services (“C&S”) include the costs of the Company’sconsulting staff directly involved with delivering revenue generatingengagements, related accommodations and the costs of primary market researchdata purchased specifically for certain individual C&S engagements.  Although the Company’s data is used inmultiple customer solutions across different offerings within both I&A andC&S, the Company does not have a meaningful way to allocate the direct costof the data between I&A and C&S revenues.  As such, the direct and incremental costs ofC&S do not reflect the total costs incurred to deliver the Company’sC&S revenues.

 

Costsassociated with the Company’s time and material and fixed-price C&Scontracts are recognized as incurred.

 

**Note 5.  Acquisitions**

** **

The Company makes acquisitions in order to expand itsproducts, services and geographic reach. On January 1, 2009, the Company adopted SFAS No. 141R, “BusinessCombinations” (“SFAS 141R”), which establishes principles and requirements forhow an acquirer recognizes and measures in its financial statements theidentifiable assets acquired, the liabilities assumed, any noncontrolling interestin the acquiree and the goodwill acquired. The impact of the adoption of SFAS 141R on the Company’s financialposition, results of operations and cash flows will be dependent on the termsand conditions of acquisitions consummated on or after the adoption date.

 

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**IMSHEALTH INCORPORATED**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

**(Dollarsand shares in thousands, except per share data)**

 

During the three monthsended March 31, 2009, the Company did not complete any acquisitions.

 

During the three monthsended March 31, 2008, the Company completed one acquisition of Robinsonand James Research Pty Limited (Australia) at a cost of approximately $4,700which was accounted for under the purchase method of accounting. As such, theaggregate purchase price was allocated on a preliminary basis to the assetsacquired based on estimated fair values as of the closing date. The purchaseprice allocations were finalized during 2008. The Condensed Consolidated Financial Statements (Unaudited) include theresults of this acquired company subsequent to the closing of theacquisition.  Had this acquisitionoccurred as of January 1, 2008 or 2007, the impact on the Company’sresults of operations would not have been significant. Goodwill ofapproximately $3,000 was recorded in connection with this acquisition, none ofwhich was deductible for tax purposes.

 

**Note 6.  Goodwill and Intangible Assets**

** **

Goodwill and intangibleassets that have indefinite useful lives are not amortized and are tested atleast annually (or based on any triggering event) for impairment.  Intangible assets that have finite usefullives are amortized. During the three months ended March 31, 2009, theCompany’s goodwill decreased by $6,818 due to foreign currency translationadjustments. During the three months ended March 31, 2008, the Company’sgoodwill increased by $32,399 due to foreign currency translation adjustmentsand the preliminary allocation of purchase price for the acquisition completedduring the three months ended March 31, 2008 (see Note 5).

 

All of the Company’sother acquired intangibles are subject to amortization.  Intangible assetamortization expense was $4,586 and $4,721 during the three months ended March 31,2009 and 2008, respectively.  At March 31, 2009, intangible assetswere primarily composed of customer relationships, databases and trade names(principally included in other assets) and computer software.  The gross carrying amounts and relatedaccumulated amortization of these intangibles were $186,717 and $103,322,respectively, at March 31, 2009 and $189,383 and $98,736, respectively, atDecember 31, 2008.  Theseintangibles are amortized over periods ranging from two to twenty years.  As of March 31, 2009, the weighted averageamortization periods of the acquired intangibles by asset class are listed inthe following table:

 
| **Intangible Asset Type** | ** ** | **Weighted Average  Amortization Period (Years)** | ** ** |
|-------------------------------------|------------|------------------------------------------------------------------|------------|
| Customer  Relationships             |       | 9.9                                                              |       |
| Computer  Software and Algorithms   |       | 7.0                                                              |       |
| Databases                           |       | 4.7                                                              |       |
| Trade Names                         |       | 4.3                                                              |       |
| Other                               |       | 3.8                                                              |       |
| Weighted average                    |       | 8.8                                                              |       |

 

Based on current estimated useful lives, amortizationexpense associated with intangible assets at March 31, 2009 is estimatedto be approximately $4,281 for each of the remaining three quarters in2009.  Thereafter, annual amortizationexpense associated with intangible 

 

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**IMSHEALTH INCORPORATED**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

**(Dollarsand shares in thousands, except per share data)**

 

assets isestimated to be as follows:

 

| **Year Ended  December 31,** | ** ** | **Amortization  Expense** | ** ** |
|----------------------------------------|------------|---------------------------|------------|
| 2010                                   |       | $                         | 13,443     |   |
| 2011                                   |       | 12,107                    |       |
| 2012                                   |       | 10,168                    |       |
| 2013                                   |       | 9,612                     |       |
| 2014                                   |       | 7,911                     |       |
| Thereafter                             |       | $                         | 17,312     |   |

 

**Note 7.**  **Contingencies**

 

The Company and its subsidiaries are involved in legaland tax proceedings, claims and litigation arising in the ordinary course ofbusiness. Management periodically assesses the Company’s liabilities andcontingencies in connection with these matters based upon the latestinformation available. For those matters where management currently believes itis probable that the Company will incur a loss and that the probable loss orrange of loss can be reasonably estimated, the Company has recorded reserves inthe Condensed Consolidated Financial Statements (Unaudited) based on its bestestimates of such loss. In other instances, because of the uncertaintiesrelated to either the probable outcome or the amount or range of loss,management is unable to make a reasonable estimate of a liability, if any.However, even in many instances where the Company has recorded a reserve, theCompany is unable to predict with certainty the final outcome of the matter orwhether resolution of the matter will materially affect the Company’s resultsof operations, financial position or cash flows. As additional informationbecomes available, the Company adjusts its assessment and estimates of such liabilitiesaccordingly.

 

The Company routinely enters into agreements with itssuppliers to acquire data and with its customers to sell data, all in thenormal course of business. In these agreements, the Company sometimes agrees toindemnify and hold harmless the other party for any damages such other partymay suffer as a result of potential intellectual property infringement andother claims related to the use of the data. These indemnities typically haveterms of approximately two years. The Company has not accrued a liability withrespect to these matters, as the exposure is considered remote.

 

In connection with the agreements governing therelationship among the Company and two of its subsidiaries and two third-partyinvestors with respect to IMS Health Licensing Associates, L.L.C. (the “LLCAgreements”), the Company also entered into a guaranty agreement. Under theterms of this guaranty agreement, the Company guarantees in favor of thethird-party investors the performance of the Company’s subsidiaries under theLLC Agreements and agrees to indemnify and hold harmless the third-partyinvestors against damages, including specified delay damages, the third-partyinvestors may suffer as a result of failures to perform under the LLCAgreements by the Company and its subsidiaries.

 

The third-party investors have the right to take stepsthat would result in the liquidation of their LLC interests on June 30,2009.  If the third-party investorsdecide to liquidate their 

 

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**IMSHEALTH INCORPORATED**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

**(Dollarsand shares in thousands, except per share data)**

 

ownershipinterests in the LLC, the Company will attempt to replace the third-partyinvestors, or if unsuccessful, purchase these ownership interests. The Companyhas adequate liquidity and credit capacity to purchase these ownershipinterests.  See Note 13.

 

Based on its review of the latest informationavailable, in the opinion of management, the ultimate liability of the Companyin connection with pending tax and legal proceedings, claims and litigationwill not have a material effect on the Company’s results of operations, cashflows or financial position, with the possible exception of the mattersdescribed below.

 

*D&BLegacy and Related Tax Matters*

 

**Sharing Disputes.**  In 1996, the company then known as The Dun &Bradstreet Corporation (“D&B”) and now known as R.H. Donnelley Corporation(“Donnelley”) separated into three public companies by spinning off ACNielsenCorporation (“ACNielsen”) and the company then known as Cognizant Corporation (“Cognizant”)(the “1996 Spin-Off”).  Cognizant is nowknown as Nielsen Media Research, Inc., a subsidiary of The NielsenCompany, formerly known as VNU N.V. (“NMR”). The agreements effecting the 1996 Spin-Off allocated tax-relatedliability with respect to certain prior business transactions between D&Band Cognizant.  The D&B portion ofsuch liability is now shared among Donnelley and certain of its formeraffiliates (the “Donnelley Parties”), and the Cognizant portion of suchliability is shared between NMR and the Company pursuant to the agreementseffecting Cognizant’s spin-off of the Company in 1998 (the “1998 Spin-Off”).

 

The underlying tax controversies with the InternalRevenue Service (“IRS”) have substantially all been resolved and the Companypaid to the IRS the amounts that it believed were due and owing.  In the first quarter of 2006, Donnelleyindicated that it disputed the amounts contributed by the Company toward theresolution of these matters based on the Donnelley Parties’ interpretation ofthe allocation of liability under the 1996 Spin-Off agreements.  The Donnelley Parties on the one hand, andNMR and the Company, on the other hand, have attempted to resolve thesedisputes through negotiation.  The 1996Spin-Off agreements provide that if the parties cannot reach agreement throughnegotiation they must arbitrate the disputes. The Company intends to vigorously defend itself with respect to any suchdisputes.  As of March 31, 2009, theCompany had a reserve of approximately $18,000 (liability and interest, net oftax benefit) for these matters.

 

In August 2006, the Donnelley Parties commencedarbitration regarding one of these disputes (referred to herein as the “DutchPartnership Dispute”).  The DutchPartnership Dispute was finally resolved during the third quarter of 2008 whenthe parties consented to the entry of a consent award by the arbitrationpanel.  Pursuant to the terms of theconsent award, the Company made a payment of $4,600 ($3,100 net of tax benefit)and an additional interest and cost payment of $2,600 ($1,700 net of taxbenefit) to the Donnelley Parties.

 

**The Partnership (Tax Year 1997).**During the fourth quarter of 2008, the Company entered into a final agreementwith the IRS in which the IRS disallowed certain items of partnership expensefor tax year 1997 with respect to a partnership now substantially owned by theCompany (the “Partnership”).  During1997, the Partnership was substantially owned by Cognizant, but liability forthis matter was allocated to the Company pursuant to the 

 

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**IMSHEALTH INCORPORATED**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

**(Dollarsand shares in thousands, except per share data)**

 

agreements effectingthe 1998 Spin-Off.  As a result of thesettlement, the Company’s liability (tax and interest, net of tax benefit) withrespect to tax year 1997 is estimated to be approximately $20,500, which amountthe Company has reserved in current accrued income taxes payable at March 31,2009.

 

In addition to these matters, the Company and itspredecessors have entered, and the Company continues to enter, into global taxplanning initiatives in the normal course of their businesses.  These activities are subject to review byapplicable tax authorities.  As a resultof the review process, uncertainties exist and it is possible that some ofthese matters could be resolved adversely to the Company.

 

*IMS Health Government Solutions VoluntaryDisclosure Program Participation*

 

The Company’s wholly-owned subsidiary, IMS GovernmentSolutions Inc., is primarily engaged in providing services and products undercontracts with the U.S. government.  U.S.government contracts are subject to extensive legal and regulatory requirementsand, from time to time, agencies of the U.S. government have the ability toinvestigate whether contractors’ operations are being conducted in accordancewith such requirements.  U.S. governmentinvestigations, whether relating to these contracts or conducted for otherreasons, could result in administrative, civil or criminal liabilities,including repayments, fines or penalties being imposed on us, or could lead tosuspension or debarment from future U.S. government contracting.  U.S. government investigations often takeyears to complete and may result in no adverse action against the Company.

 

IMS Government Solutions discovered potentialnoncompliance with various contract clauses and requirements under its GeneralServices Administration Contract which was awarded in 2002 to its predecessorcompany, Synchronous Knowledge Inc. (Synchronous Knowledge Inc. was acquired byIMS in May 2005).  Upon discovery ofthe potential noncompliance, the Company began remediation efforts, promptlydisclosed the potential noncompliance to the U.S. government, and was acceptedinto the Department of Defense Voluntary Disclosure Program.  The Company filed its Voluntary DisclosureProgram Report (“Disclosure Report”) on August 29, 2008.  Based on the Company’s findings as disclosedin the Disclosure Report, the Company recorded a reserve of approximately$3,700 for this matter in the third quarter of 2008.  The Company is currently unable to determinethe outcome of this matter pending the resolution of the Voluntary DisclosureProgram process and its ultimate liability arising from this matter couldexceed its current reserve.

 

*Other Contingencies*

 

**Contingent Consideration.**  Under the terms of certain purchase agreementsrelated to acquisitions consummated in 2008 and prior, the Company may berequired to pay additional amounts as contingent consideration based on theachievement of certain performance related targets during 2009. Theseadditional payments will be recorded as goodwill in accordance with EmergingIssues Task Force (“EITF”) No. 95-8, “Accounting for ContingentConsideration Paid to the Shareholders of an Acquired Enterprise in a PurchaseBusiness Combination.” The Company paid approximately $1,900 under thesecontingencies during the three months ended March 31, 2009. Based oncurrent estimates, the Company expects that 

 

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**IMSHEALTH INCORPORATED**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

**(Dollarsand shares in thousands, except per share data)**

 

additionalcontingent consideration under these agreements may total approximately $3,200.It is expected that these contingencies will be resolved within a specifiedtime period after the end of calendar year 2009.

 

**Note8.  Stock-Based Compensation**

 

The following table summarizes activity ofstock options for the periods indicated:

 
| ** **                                                   | ** ** | ** ** | ** ** | **Weighted**       | ** ** |
|--------------------------------------------------------------|------------|------------|------------|--------------------|------------|
| ** **                                                   | ** ** | ** ** | ** ** | **Average**        | ** ** |
| ** **                                                   | ** ** | ** ** | ** ** | **Exercise**       | ** ** |
| ** **                                                   | ** ** | ** ** | ** ** | **Price Per** | ** ** |
| ** **                                                   | ** ** | **Shares** | ** ** | **Share**          | ** ** |
| Options  Outstanding, December 31, 2006                 |       | 21,396     |       | $                  | 23.43      |   |
| Granted                                                      |       | —     |       | —             |       |
| Exercised                                                    |       | (6,299     | )          | $                  | 22.72      |   |
| Forfeited                                                    |       | (200       | )          | $                  | 24.14      |   |
| Cancelled                                                    |       | (371       | )          | $                  | 27.61      |   |
| Options  Outstanding, December 31, 2007                 |       | 14,526     |       | $                  | 23.62      |   |
| Granted                                                      |       | 1,159      |       | $                  | 22.58      |   |
| Exercised                                                    |       | (277       | )          | $                  | 19.91      |   |
| Forfeited                                                    |       | (88        | )          | $                  | 23.86      |   |
| Cancelled                                                    |       | (2,141     | )          | $                  | 25.51      |   |
| **Options  Outstanding, December 31, 2008**             | ** ** | **13,179** | ** ** | **$**              | **23.29**  | ** ** |
| **Granted**                                                  |       | —     |       | —             |       |
| **Exercised**                                                |       | —     |       | —             |       |
| **Forfeited**                                                | ** ** | **(22**    | **)**      | **$**              | **22.58**  | ** ** |
| **Cancelled**                                                | ** ** | **(2,361** | **)**      | **$**              | **29.65**  | ** ** |
| **Options  Outstanding, March 31, 2009**                | ** ** | **10,796** | ** ** | **$**              | **21.90**  | ** ** |
| **Options  Vested or Expected to Vest, March 31, 2009** | ** ** | **10,700** | ** ** | **$**              | **21.90**  | ** ** |
| **Exercisable,  March 31, 2009**                        | ** ** | **9,690**  | ** ** | **$**              | **21.83**  | ** ** |

 

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**IMSHEALTH INCORPORATED**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

**(Dollarsand shares in thousands, except per share data)**

 

Thefollowing table summarizes activity of restricted stock units (“RSUs”) withservice conditions:

 
| ** **                                           | ** ** | ** ** | ** ** | **Weighted**        | ** ** |
|------------------------------------------------------|------------|------------|------------|---------------------|------------|
| ** **                                           | ** ** | ** ** | ** ** | **Average**         | ** ** |
| ** **                                           | ** ** | ** ** | ** ** | **Grant Date** | ** ** |
| ** **                                           | ** ** | **Shares** | ** ** | **Fair Value** | ** ** |
| Unvested,  December 31, 2006                    |       | 1,558      |       | $                   | 25.04      |   |
| Granted                                              |       | 1,219      |       | $                   | 29.64      |   |
| Vested                                               |       | (296       | )          | $                   | 26.06      |   |
| Forfeited                                            |       | (148       | )          | $                   | 28.09      |   |
| Unvested,  December 31, 2007                    |       | 2,333      |       | $                   | 27.16      |   |
| Granted                                              |       | 1,356      |       | $                   | 22.24      |   |
| Vested                                               |       | (569       | )          | $                   | 27.45      |   |
| Forfeited                                            |       | (348       | )          | $                   | 26.74      |   |
| **Unvested,  December 31, 2008**                | ** ** | **2,772**  | ** ** | **$**               | **24.75**  | ** ** |
| **Granted**                                          | ** ** | **12**     | ** ** | **$**               | **14.64**  | ** ** |
| **Vested**                                           | ** ** | **(168**   | **)**      | **$**               | **25.05**  | ** ** |
| **Forfeited**                                        | ** ** | **(65**    | **)**      | **$**               | **26.39**  | ** ** |
| **Unvested,  March 31, 2009**                   | ** ** | **2,551**  | ** ** | **$**               | **24.64**  | ** ** |
| **Vested  or Expected to Vest, March 31, 2009** | ** ** | **2,316**  | ** ** | **$**               | **24.62**  | ** ** |

 

The following tablesummarizes activity of RSUs with performance conditions:

 
| ** **                                           | ** ** | ** ** | ** ** | **Weighted**        | ** ** |
|------------------------------------------------------|------------|------------|------------|---------------------|------------|
| ** **                                           | ** ** | ** ** | ** ** | **Average**         | ** ** |
| ** **                                           | ** ** | ** ** | ** ** | **Grant Date** | ** ** |
| ** **                                           | ** ** | **Shares** | ** ** | **Fair Value** | ** ** |
| Unvested,  December 31, 2006                    |       | 613        |       | $                   | 24.20      |   |
| Granted                                              |       | 402        |       | $                   | 14.72      |   |
| Vested                                               |       | (84        | )          | $                   | 18.65      |   |
| Forfeited                                            |       | (6         | )          | $                   | 27.00      |   |
| Unvested,  December 31, 2007                    |       | 925        |       | $                   | 20.56      |   |
| Granted                                              |       | 357        |       | $                   | 12.97      |   |
| Vested                                               |       | (109       | )          | $                   | 23.86      |   |
| Forfeited                                            |       | (12        | )          | $                   | 27.26      |   |
| **Unvested,  December 31, 2008**                | ** ** | **1,161**  | ** ** | **$**               | **17.84**  | ** ** |
| **Granted**                                          | ** ** | **164**    | ** ** | **$**               | **12.46**  | ** ** |
| **Vested**                                           | ** ** | **(254**   | **)**      | **$**               | **26.00**  | ** ** |
| **Forfeited**                                        | ** ** | **(2**     | **)**      | **$**               | **24.35**  | ** ** |
| **Unvested,  March 31, 2009**                   | ** ** | **1,069**  | ** ** | **$**               | **15.07**  | ** ** |
| **Vested  or Expected to Vest, March 31, 2009** | ** ** | **1,017**  | ** ** | **$**               | **15.13**  | ** ** |

 

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**IMSHEALTH INCORPORATED**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

**(Dollarsand shares in thousands, except per share data)**

 

The followingtable summarizes activity of non-employee director deferred stock granted inlieu of board meeting fees:

 
| ** **                               | ** ** | ** ** | ** ** | **Weighted**        | ** ** |
|------------------------------------------|------------|------------|------------|---------------------|------------|
| ** **                               | ** ** | ** ** | ** ** | **Average**         | ** ** |
| ** **                               | ** ** | ** ** | ** ** | **Grant Date** | ** ** |
| ** **                               | ** ** | **Shares** | ** ** | **Fair Value** | ** ** |
| Outstanding,  December 31, 2006     |       | 33         |       | $                   | 22.49      |   |
| Granted                                  |       | 5          |       | $                   | 29.50      |   |
| Outstanding,  December 31, 2007     |       | 38         |       | $                   | 23.37      |   |
| Granted                                  |       | 6          |       | $                   | 19.71      |   |
| **Outstanding,  December 31, 2008** | ** ** | **44**     | ** ** | **$**               | **22.81**  | ** ** |
| **Granted**                              | ** ** | **2**      | ** ** | **$**               | **14.54**  | ** ** |
| **Outstanding,  March 31, 2009**    | ** ** | **46**     | ** ** | **$**               | **22.43**  | ** ** |

 

Thefollowing table summarizes the components and classification of stock-basedcompensation expense for the periods indicated:

 
| **For the Three Months Ended March 31,** | ** ** | **2009**   | ** ** | **2008** | ** ** |
|------------------------------------------------------------------------|------------|------------|------------|----------|------------|
| Stock Options                                                          | ** ** | **$**      | **365**    |     | $          | 2,018 |   |
| RSUs                                                                   | ** ** | **6,480**  |       | 5,375    |       |
| Employee Stock  Purchase Plan                                          |       | —     |       | (2       | )          |
| Total  Stock-Based Compensation Expense                                | ** ** | **$**      | **6,845**  |     | $          | 7,391 |   |
|                                                                   |       |       |       |     |       |
| Operating Costs  of I&A                                            | ** ** | **$**      | **488**    |     | $          | 776 |   |
| Direct and  Incremental Costs of C&S                               | ** ** | **919**    |       | 708      |       |
| Selling and  Administrative Expenses                                   | ** ** | **5,438**  |       | 5,907    |       |
| Total  Stock-Based Compensation Expense                                | ** ** | **$**      | **6,845**  |     | $          | 7,391 |   |
|                                                                   | ** ** | ** ** |       |     |       |
| Tax Benefit on  Stock-Based Compensation Expense                       | ** ** | **$**      | **2,235**  |     | $          | 2,400 |   |
|                                                                   | ** ** | ** ** |       |     |       |
| Capitalized  Stock-Based Compensation Expense                          | ** ** | **$**      | **38**     |     | $          | 41 |   |

 

For a completedescription of the Company’s Stock Incentive Plans and its accounting policiesregarding stock-based compensation, refer to Notes 2 and 11 of the Company’s2008 Annual Report on Form 10-K as filed with the SEC.

 

**Note 9. Financial Instruments**

** **

On January 1, 2009, the Company adopted SFAS No. 161,“Disclosures about Derivative Instruments and Hedging Activities—an amendmentof FASB Statement No. 133” (“SFAS 161”), which requires enhanceddisclosures about an entity’s derivative and hedging activities as providedbelow.  As this statement requires onlyadditional disclosures, the adoption of SFAS 161 did not have an impact on theCompany’s financial position, results of operations or cash flows.

** **

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** **

**IMSHEALTH INCORPORATED**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

**(Dollarsand shares in thousands, except per share data)**

** **

***Foreign Exchange Risk Management***

** **

The Company transacts business in more than 100countries and is subject to risks associated with changing foreign exchangerates. The Company’s objective is to reduce earnings and cash flow volatilityassociated with foreign exchange rate changes. Accordingly, the Company entersinto foreign currency forward contracts to minimize the impact of foreignexchange movements on net income, non-U.S. Dollar anticipated royalties, and onthe value of non-functional currency assets and liabilities.

 

It is the Company’s policy to enter into foreigncurrency transactions only to the extent necessary to meet its objectives asstated above. The Company does not enter into foreign currency transactions forinvestment or speculative purposes. The principal currencies hedged are theEuro, the Japanese Yen, the British Pound, the Swiss Franc and the CanadianDollar.

 

The impact of foreign exchange riskmanagement activities on pre-tax income for the three months ended March 31,2009 and 2008 was a net gain of $4,884 and net loss of $18,598 respectively.

 

At March 31, 2009, the Company had assets ofapproximately $663,168 and liabilities of approximately $657,459 in foreignexchange forward contracts outstanding with various expiration dates through February 2010relating to non-U.S. Dollar anticipated royalties and non-functional currencyassets and liabilities (see below). Foreign exchange forward contracts arerecorded at estimated fair value. The estimated fair values of the forwardcontracts are based on quoted market prices.

 

Unrealized and realized gains and losses on thecontracts hedging net income and non-functional currency assets and liabilitiesdo not qualify for hedge accounting, and therefore are not deferred and areincluded in the Consolidated Statements of Income in Other income (expense),net.

 

Unrealized gains and losses on the contracts hedgingnon-U.S. Dollar anticipated royalties qualify for hedge accounting, and aretherefore deferred and included in OCI “Other Comprehensive Income.”

 
| ** **                                                            | ** ** | **Fair Value of Derivative Instruments (****1)** | ** **  |
|-----------------------------------------------------------------------|------------|---------------------------------------------------------------------------|-------------|
| ** **                                                            | ** ** | **Asset Derivatives**                                                | ** **  | **Liability Derivatives** | ** ** |
| ** **                                                            | ** ** | **As of March 31,  2009**                                  | ** **  | **As of December 31,  2008** | ** ** | **As of March 31,  2009** | ** ** | **As of December 31,  2008** | ** ** |
| **Derivatives  designated as hedging instruments under SFAS 133**     |       |                                                                      |        |   |   |   |   |   |   |
| Foreign Exchange  Contracts                                           | ** ** | **$**                                                                     | **173,106** |   | $ | 172,113 | ** ** | **$** | **170,252** |   | $ | 179,110 |   |
| **Derivatives  not designated as hedging instruments under SFAS 133** |       |                                                                      |        |   |   |   |   |   |   |
| Foreign Exchange  Contracts                                           | ** ** | **490,062**                                                               |        | 236,977 | ** ** | **487,207** |   | 238,023 |   |
| Total  Derivatives                                                    | ** ** | **$**                                                                     | **663,168** |   | $ | 409,090 | ** ** | **$** | **657,459** |   | $ | 417,133 |   |

 

----

*(1) The net amounts of thesederivatives are included in Current Assets and Current Liabilities in theCondensed Consolidated Statements of Financial Position (Unaudited).*

 

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**IMSHEALTH INCORPORATED**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

**(Dollarsand shares in thousands, except per share data)**

 
| **Effect of Derivatives on Financial Performance for the Three Months Ended March 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| **Derivatives in SFAS 133  Cash Flow Hedging  Relationships**                                                              | ** ** | **Amount of  Gain/(Loss)  Recognized in OCI  on Derivatives** | ** ** | **Location of Gain/(Loss)  Reclassified from OCI  into Income** | ** ** | **Amount of  Gain/(Loss) from  OCI into Income** | ** ** |
| ** **                                                                                                                                          | ** ** | **2009** | ** ** | **2008** | ** ** | ** ** | ** ** | **2009** | ** ** | **2008** | ** ** |
| Foreign Exchange  Contracts                                                                                                                         | ** ** | **$** | **9,100** |   | $ | (13,400 | ) | Other Income (Expense), Net | ** ** | **$** | **(800** | **)** | $ | (2,200 | ) |
|                                                                                                                                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

*Fair Value Disclosures*

 

At March 31, 2009, the Company’s financialinstruments included cash, cash equivalents, and receivables, accounts payableand long-term debt. At March 31, 2009, the fair values of cash, cashequivalents, receivables and accounts payable approximated carrying values dueto the short-term nature of these instruments. At March 31, 2009, the fairvalue of long-term debt approximated carrying value.

 

Effective January 1, 2008, the Company adoptedSFAS No. 157, “Fair Value Measurements,” (see Note 3).  SFAS No. 157 establishes a three-levelhierarchy for disclosure of fair value measurements as follows:

 
| Level 1 — | Quoted prices in active markets for identical assets  or liabilities.                                                                                                                                                                         |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Level 2 — | Quoted prices for similar assets or liabilities in  active markets or quoted prices for identical assets or liabilities in  inactive markets; and model-derived valuations in which all significant  inputs are observable in active markets. |
| Level 3 — | Unobservable inputs reflecting management’s own  assumptions about the inputs used in pricing the asset or liability.                                                                                                                    |

 

The following table summarizes assets and liabilitiesmeasured at fair value on a recurring basis at March 31, 2009:

 
| ** **      | ** ** | **Basis of Fair Value Measurements** |
|-----------------|------------|----------------------------------------------------------|
| ** **      | ** ** | **Level 1**                                         | ** ** | **Level 2** | ** ** | **Level 3** | ** ** | **Total** | ** ** |
| **Assets**      |       |                                                     |   |   |   |   |   |   |   |
| Derivatives (1) |       | —                                                   |   | $ | 663,168 |   | — |   | $ | 663,168 |   |
|            |       |                                                     |   |   |   |   |   |   |   |
| **Liabilities** |       |                                                     |   |   |   |   |   |   |   |
| Derivatives (1) |       | —                                                   |   | $ | 657,459 |   | — |   | $ | 657,459 |   |

 

----

*(1)  Derivatives consist offoreign exchange contracts based on observable market inputs of spot andforward rates.*

 

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**IMSHEALTH INCORPORATED**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

**(Dollarsand shares in thousands, except per share data)**

 

*Credit Concentrations*

 

The Company continuallymonitors its positions with, and the credit quality of, the financialinstitutions which are counterparties to its financial instruments and does notanticipate non-performance by the counterparties. The Company would not realizea material loss as of March 31, 2009 in the event of non-performance byany one counterparty.  In general, theCompany enters into transactions only with financial institution counterpartiesthat have a credit rating of A or better. In addition, the Company limits theamount of credit exposure with any one institution.

 

The Company maintains accounts receivable balances ($398,358 and$382,776, net of allowances, at March 31, 2009 and December 31, 2008,respectively), principally from customers in the pharmaceutical industry. TheCompany’s trade receivables do not represent significant concentrations ofcredit risk at March 31, 2009 due to the credit worthiness of itscustomers and their dispersion across many geographic areas.

 

*Lines of Credit*

 

The following table summarizes the Company’s long-termdebt at March 31, 2009 and December 31, 2008:

 
| ** **                                                                                                        | ** ** | **2009**    | ** **    | **2008** | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|-------------|---------------|----------|------------|
| 5.58% Private  Placement Notes, principal payment of $105,000 due January 2015                               | ** ** | **$**       | **105,000**   |     | $          | 105,000 |   |
| 5.99% Private  Placement Notes, principal payment of $135,000 due January 2018                               | ** ** | **135,000** |          | 135,000  |       |
| 5.55% Private  Placement Notes, principal payment of $150,000 due April 2016                                 | ** ** | **150,000** |          | 150,000  |       |
| 1.70% Private  Placement Notes, principal payment of 34,395,000 Japanese Yen due  January 2013               | ** ** | **349,921** |          | 381,304  |       |
| Revolving Credit  Facility:                                                                                       |       |        |          |     |       |
| Japanese Yen  denominated borrowings at average floating rates of approximately 1.09%                             | ** ** | **333,788** |          | 435,895  |       |
| U.S. Dollar  denominated borrowings at average floating rates of approximately 0.99%                              | ** ** | **205,500** |          | 147,000  |       |
| Bank Term Loan,  principal payment of $50,000 due June 2010 at average floating rate of  approximately 0.82% | ** ** | **50,000**  |          | 50,000   |       |
| Total Long-Term  Debt                                                                                             | ** ** | **$**       | **1,329,209** |     | $          | 1,404,199 |   |

 

In February 2008, the Company closed a private placementtransaction pursuant to which it issued $105,000 of seven-year debt at a fixedrate of 5.58%, and $135,000 of ten-year debt at a fixed rate of 5.99% toseveral highly rated insurance companies. The Company used the proceeds for share repurchases (see Note 12) and torefinance existing debt.

 

In July 2006, the Company entered into a $1,000,000 revolving creditfacility with a syndicate of 12 banks (“Revolving Credit Facility”) replacingits existing $700,000 facility.  Theterms of the Revolving Credit Facility extended the maturity of the facility inits entirety to a term of five years, maturing July 2011, reduced theborrowing margins, and increased subsidiary borrowing limits.  Total borrowings under the Revolving CreditFacility were $539,288 and $582,895 at March 31, 2009 and December 31,2008, respectively, all of which were classified as long-term.  The Company defines long-term lines as thosewhere the lines are non-cancellable for more than 365 days from the balancesheet date by the financial institutions except for specified, objectivelymeasurable violations of the provisions of the agreement.  In general, rates 

 

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**IMSHEALTH INCORPORATED**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

**(Dollarsand shares in thousands, except per share data)**

 

forborrowing under the Revolving Credit Facility are LIBOR plus 40 basis pointsand can vary based on the Company’s Debt to EBITDA ratio.  The weighted average interest rates for theCompany’s lines were 1.05% and 1.36% at March 31, 2009 and December 31,2008, respectively.  In addition, theCompany is required to pay a commitment fee on any unused portion of thefacilities of 0.01%.  At March 31,2009, the Company had approximately $460,712 available under existing bankcredit facilities.

 

InJune 2006, the Company closed a $50,000 three-year term loan with abank.  The term loan allows the Companyto borrow at a floating rate with a lower borrowing margin than the Company’srevolving credit facility.  The term loanalso provides the Company with two one-year options to extend the term at theCompany’s discretion.  In August 2008,the Company exercised the first one-year option to extend the term through June 2010.The Company used the proceeds to refinance existing debt borrowed under therevolving credit facility.

 

InApril 2006, the Company closed a private placement transaction pursuant towhich it issued $150,000 of ten-year notes to two highly rated insurancecompanies at a fixed rate of 5.55%.  The Companyused the proceeds to refinance existing debt of $150,000 drawn under a shortterm credit agreement with a bank in January 2006.

 

InJanuary 2006, the Company closed a private placement transaction pursuantto which its Japanese subsidiary issued 34,395,000 Japanese Yen seven-year debt(equal to $300,000 at date of issuance) to several highly rated insurancecompanies at a fixed rate of 1.70%. The Company used the proceeds to refinanceexisting debt in Japan.

 

TheCompany’s financing arrangements provide for certain covenants and events ofdefault customary for similar instruments, including in the case of its mainbank arrangements, the private placement transactions, and the term loan,covenants to maintain specific ratios of consolidated total indebtedness toEBITDA and of EBITDA to certain fixed charges. At March 31, 2009, the Company was in compliance with thesefinancial debt covenants.

 

**Note10.  Pension and Postretirement Benefits**

** **

The following table provides the Company’s expenseassociated with pension benefits that are accounted for under SFAS No. 87,“Employers’ Accounting for Pensions,” and postretirement benefits that areaccounted for under SFAS No. 106, “Employers’ Accounting forPostretirement Benefits Other Than Pensions.” For a complete description of the Company’s pension and postretirementbenefits, refer to Note 10 of the Company’s 2008 Annual Report on Form 10-Kas filed with the SEC.

 

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**IMSHEALTH INCORPORATED**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

**(Dollarsand shares in thousands, except per share data)**

 
| **Components of Net Periodic Benefit Cost for the** | ** ** | **Pension Benefits** | ** ** | **Other Benefits** | ** ** |
|----------------------------------------------------------------------------------------|------------|---------------------------|------------|-------------------------|------------|
| **Three Months Ended March 31,**                                   | ** ** | **2009**                  | ** ** | **2008**                | ** ** | **2009** | ** ** | **2008** | ** ** |
| Service cost                                                                      | ** ** | **$**                     | **3,351**  | ** **              | $          | 4,305 | ** ** | **$** | **—** | ** ** | $ | — | ** ** |
| Interest cost                                                                          | ** ** | **4,649**                 |       | 5,100                   | ** ** | **180** |   | 192 |   |
| Expected return  on plan assets                                                        | ** ** | **(5,869**                | **)**      | (7,932                  | )          | — |   | — |   |
| Amortization of  prior service cost (credit)                                           | ** ** | **(30**                   | **)**      | 6                       | ** ** | **(41** | **)** | (3 | ) |
| Amortization of  transition obligation (asset)                                         | ** ** | **—**                |       | 1                       |       | — |   | — |   |
| Amortization of  net loss                                                              | ** ** | **2,351**                 |       | 632                     | ** ** | **143** |   | 145 |   |
| Net periodic  benefit cost                                                             | ** ** | **$**                     | **4,452**  |                    | $          | 2,112 | ** ** | **$** | **282** |   | $ | 334 |   |

** **

**Note 11.  Income Taxes**

** **

The Company operates in more than 100 countries aroundthe world and its earnings are taxed at the applicable income tax rate in eachof these countries.

 

For the three months ended March 31, 2009, theCompany’s effective tax rate was reduced primarily as a result of thereorganization of certain subsidiaries which resulted in a foreign exchangeloss recognized for tax purposes (tax benefit of approximately $63,200), therepayment of a certain intercompany loan which resulted in a foreign exchangeloss recognized for tax purposes (tax benefit of approximately $6,100) and theexpiration of certain statutes of limitation (tax benefits of approximately$4,000).  For the three months ended March 31,2008, the Company’s effective tax rate was reduced primarily as a result of thefiling of an advance pricing agreement (“APA”) between two taxing jurisdictions(tax benefit of approximately $4,900). The APA ensures conformity between the jurisdictions’ taxing authoritiesregarding the treatment of certain intercompany transactions, thereby allowingthe Company to record a corresponding tax benefit.

 

For the three months ended March 31, 2009, theCompany recorded approximately $3,800 of tax expense related to unrecognizedtax benefits that if recognized, would favorably affect the effective taxrate.  Included in this amount isapproximately $1,700 of interest and penalties. For the three months ended March 31,2008, the Company recorded approximately $4,800 of tax expense related tounrecognized tax benefits including approximately $2,700 of interest andpenalties.

 

The Company files numerous consolidated and separateincome tax returns in U.S. (federal and state) and non-U.S. jurisdictions.  The Company is no longer subject to U.S. federal income tax examinationby tax authorities for years before 2004. The Company is no longer subject tostate and local income tax examination by tax authorities for years before1997.  Further, with few exceptions, theCompany is no longer subject to examination by tax authorities in its materialnon-U.S. jurisdictions prior to 2004.  Itis reasonably possible that within the next twelve months the Company couldrealize approximately $28,300 of unrecognized tax benefits as a result of theexpiration of certain statutes of limitation.

 

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**IMSHEALTH INCORPORATED**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

**(Dollarsand shares in thousands, except per share data)**

 

**Note 12.  IMSHealth Capital Stock**

** **

The Company’s share repurchase program hasbeen developed to buy opportunistically, when the Company believes that itsshare price provides it with an attractive use of its cash flow and debt capacity.

 

On December 18, 2007, the Board ofDirectors authorized a stock repurchase program to buy up to 20,000 shares. Asof March 31, 2009, 9,505 shares remained available for repurchase underthe December 2007 program.

 

During the three months ended March 31,2009, the Company did not repurchase any shares of outstanding Common Stockunder this program.

 

During the three months ended March 31,2008, the Company repurchased 10,000 shares of outstanding Common Stock underthis program at a total cost of $229,336.

 

These share repurchases positively impactedthe Company’s diluted earnings per share by less than $0.01 for the threemonths ended March 31, 2008.

 

Shares acquired through the Company’srepurchase programs described above are open-market purchases or privatelynegotiated transactions in compliance with SEC Rule 10b-18.

 

Under the Company’s Restated Certificate ofIncorporation as amended, the Company has authority to issue 820,000 shareswith a par value of $.01 per share of which 800,000 represent shares of CommonStock, 10,000 represent shares of preferred stock and 10,000 represent sharesof Series Common Stock.  Thepreferred stock and Series Common Stock can be issued with varying terms,as determined by the Board of Directors.

 

**Note13.  Noncontrolling Interests**

** **

OnJanuary 1, 2009, the Company adopted SFAS No. 160, “NoncontrollingInterests in Consolidated Financial Statements-an Amendment of ARB No. 51”(“SFAS 160”), which established accounting and reporting standards pertainingto ownership interests in subsidiaries held by parties other than the parent,the amount of net income attributable to the parent and to the noncontrollinginterests, changes in a parent’s ownership interests, and the valuation of anyretained noncontrolling equity investment when a subsidiary isdeconsolidated.  This statement alsoestablished disclosure requirements that identify and distinguish between theinterests of the parent and the interests of the noncontrolling owners.  The adoption of SFAS 160 resulted in thereclassification of amounts previously referred to as minority interests andcurrently referred to as noncontrolling interests, from mezzanine equity(between Total Liabilities and Shareholders’ Deficit) to a separate componentof Shareholders’ Deficit in the Company’s Condensed Consolidated Statements ofFinancial Position (Unaudited). Additionally, net income attributable to noncontrolling interests, whichpreviously was included in Other expense, net on a pretax basis, is shownseparately from net income attributable to the Company in the Company’sCondensed Consolidated Statements of Income (Unaudited).  The 

 

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**IMSHEALTH INCORPORATED**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

**(Dollarsand shares in thousands, except per share data)**

 

adoption of SFAS 160 did not have a materialimpact on the Company’s financial position, results of operations or cashflows.

 

The following tablereconciles noncontrolling interests included as a separate component ofShareholders’ Deficit.  Prior yearamounts have been reclassified to conform to the current year presentation asrequired by SFAS 160.

 
| ** **                                                        | ** ** | **Three Months Ended  March 31,** | ** ** |
|-------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                        | ** ** | **2009**                                         | ** ** | **2008** | ** ** |
| Noncontrolling  interests, January 1                         | ** ** | **$**                                            | **1,894**  |   | $ | 1,444 |   |
| Net income  attributable to noncontrolling interests              | ** ** | **38**                                           |       | 536 |   |
| Translation  adjustments attributable to noncontrolling interests | ** ** | **(211**                                         | **)**      | 360 |   |
| Noncontrolling  interests, March 31                          | ** ** | **$**                                            | **1,721**  |   | $ | 2,340 |   |

 

In July 2006, the Company, together with two ofits wholly-owned subsidiaries, entered into an Amended and Restated Agreementof Limited Liability Company of IMS Health Licensing Associates, L.L.C. (the “AmendedLLC Agreement”).  The Amended LLCAgreement governs the relationship between the Company, its subsidiaries andtwo third-party investors with respect to their interests in IMS HealthLicensing Associates, L.L.C. (the “LLC”). The Company is the sole managing member of the LLC.  Since 1997, the Company and/or itssubsidiaries, or their predecessors, have contributed assets to, and have helda controlling (currently approximately 93%) interest in, the LLC, and the third-partyinvestors have contributed $100,000 to, and have held a noncontrolling(currently approximately 7%) interest in, the LLC.  The LLC is a separate and distinct legalentity that is in the business of licensing database assets and computersoftware.  Under the terms of the AmendedLLC Agreement, the third-party investors have the right to take steps thatwould result in the liquidation of their membership interest in the LLC on June 30,2009.  This right may be accelerated ifcertain events occur as set forth in the Amended LLC Agreement.  If the third-party investors decide toliquidate their ownership interests in the LLC, the Company will attempt toreplace the third-party investors, or if unsuccessful, purchase these ownershipinterests. The Company has adequate liquidity and credit capacity to purchasethese ownership interests.   Under therevisions to EITF Topic No. D-98, “Classification and Measurement ofRedeemable Securities” (“D-98”), these third-party investor contributionsqualify as redeemable noncontrolling interests as their redemption is notsolely within the control of the Company. As such, these redeemable noncontrolling interests are presented inmezzanine equity in theCompany’s Condensed Consolidated Statements of Financial Position (Unaudited).  Net income related to these redeemablenoncontrolling interests amounted to $1,086 and $1,099 for the three monthsended March 31, 2009 and 2008, respectively, and is included in net income attributable to noncontrollinginterests in the Company’s Condensed Consolidated Statements of Income(Unaudited).

 

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**IMSHEALTH INCORPORATED**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

**(Dollarsand shares in thousands, except per share data)**

 

**Note 14. Comprehensive Income**

** **

The following table sets forth the componentsof comprehensive income:

 
| ** **                                               | ** ** | **Three Months Ended  March 31,** | ** **  |
|----------------------------------------------------------|------------|--------------------------------------------------|-------------|
| ** **                                               | ** ** | **2009**                                         | ** **  | **2008** | ** ** |
|                                                     | ** ** | ** **                                       |        |   |   |
| Net income                                               | ** ** | **$**                                            | **134,456** |   | $ | 60,810 |   |
|                                                     |       |                                             |        |   |   |
| Other  comprehensive income, net of tax:                 |       |                                             |        |   |   |
| Foreign currency  translation                            | ** ** | **25,600**                                       |        | (55,844 | ) |
| Amortization of  SFAS 158 service cost                   | ** ** | **2,049**                                        |        | 530 |   |
| Total other  comprehensive income, net of tax            | ** ** | **27,649**                                       |        | (55,314 | ) |
|                                                     |       |                                             |        |   |   |
| Comprehensive  income                                    | ** ** | **162,105**                                      |        | 5,496 |   |
| Less  Comprehensive income attributable to:              |       |                                             |        |   |   |
| Noncontrolling  interests in permanent equity            | ** ** | **(173**                                         | **)**       | 896 |   |
| Redeemable  noncontrolling interests in mezzanine equity | ** ** | **1,086**                                        |        | 1,099 |   |
| Comprehensive  income attributable to IMS Health         | ** ** | **$**                                            | **161,192** |   | $ | 3,501 |   |

 

**Note 15. Severance, Impairment and Other Charges**

** **

Duringthe fourth quarter of 2008, the Company recorded $9,408 of non-cash impairmentcharges as a component of operating income related to the write-off of certaincapitalized software assets in its EMEA and Asia Pacific regions.  This was the result of the discontinuationof certain IMS products at the end of 2008.

 

Inresponse to healthcare marketplace dynamics, during the fourth quarter of 2007,the Company committed to a restructuring plan designed to eliminateapproximately 1,070 positions worldwide in production and development, sales,marketing, consulting and services and administration.  The plan also included the write-down of twoimpaired computer software assets and related contract payments to be incurredwith no future economic benefit based on the Company’s decision to abandoncertain products in its EMEA region.  Asa result, the Company recorded $88,690 of Severance, impairment and othercharges as a component of operating income in the fourth quarter of 2007.  The severance benefits were calculatedpursuant to the terms of established employee protection plans, in accordancewith local statutory minimum requirements or individual employee contracts, asapplicable.

 

Thesecharges were designed to strengthen client-facing operations worldwide,increase the Company’s operating efficiencies and streamline its coststructure.  Some of the initiativesincluded in this plan are designed to better align the Company’s resources tohelp clients manage for change in a challenging climate.

 

Theseverance and contract payments portion of the fourth quarter 2007 charge wasapproximately $75,043 and will all be settled in cash. Termination actionsunder the plan were substantially completed by the end of March 31, 2009.

 

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**IMSHEALTH INCORPORATED**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

**(Dollarsand shares in thousands, except per share data)**

 
| ** **                        | ** ** | **Severance** | ** ** | **Contract** | ** ** | **Asset**  | ** ** | **Currency**    | ** ** | ** ** | ** ** |
|-----------------------------------|------------|---------------|------------|--------------|------------|------------|------------|-----------------|------------|------------|------------|
| ** **                        | ** ** | **related**   | ** ** | **related**  | ** ** | **write-** | ** ** | **Translation** | ** ** | ** ** | ** ** |
| ** **                        | ** ** | **reserves**  | ** ** | **reserves** | ** ** | **downs**  | ** ** | **adjustments** | ** ** | **Total**  | ** ** |
| Charge at  December 31, 2007 |       | $             | 71,583     |         | $          | 3,460      |       | $               | 13,647     |       | $          | — |   | $ | 88,690 |   |
| 2007 utilization                  |       | —        |       | —       |       | (13,647    | )          | —          |       | (13,647    | )          |
| 2008 utilization                  |       | (48,645       | )          | (2,150       | )          | —     |       | —          |       | (50,795    | )          |
| 2009 utilization                  |       | (10,943       | )          | (251         | )          | —     |       | —          |       | (11,194    | )          |
| Currency  translation adjustments |       | —        |       | —       |       | —     |       | (2,242          | )          | (2,242     | )          |
| Balance at  March 31, 2009   |       | $             | 11,995     |         | $          | 1,059      |       | $               | —     |       | $          | (2,242 | ) | $ | 10,812 |   |

 

The Company currently expects that cash outlays will be applied againstthe $10,812 balance remaining in the 2007 fourth quarter charge at March 31,2009 as follows:

 
| **Year Ended December 31,** | ** ** | **Outlays** | ** ** |
|--------------------------------------------|------------|-------------|------------|
| 2009                                       |       | $           | 9,627      |   |
| 2010                                       |       | 1,008       |       |
| 2011                                       |       | 177         |       |
| Total                                      |       | $           | 10,812     |   |

 

Duringthe fourth quarter of 2001, the Company completed the assessment of itsCompetitive Fitness Program. This program was designed to streamlineoperations, increase productivity and improve client service. In connectionwith this program, the Company recorded $94,616 of Severance, impairment andother charges during the fourth quarter of 2001 as a component of operatingincome.  As of March 31, 2009,approximately $1,039 remains to be utilized from 2009 to 2013 related toseverance payments.

 

Inthe first quarter of 2007, the Company reversed $640 of contract-relatedreserves from the fourth quarter 2001 charge due primarily to the terminationand settlement of exit related costs for an impaired lease. These amounts werereversed against Selling and administrative expenses in the CondensedConsolidated Statements of Income (Unaudited).

 
| ** **                        | ** ** | **Severance** | ** ** | **Contract** | ** ** | **Asset**  | ** ** | ** ** | ** ** |
|-----------------------------------|------------|---------------|------------|--------------|------------|------------|------------|------------|------------|
| ** **                        | ** ** | **Related**   | ** ** | **Related**  | ** ** | **write-** | ** ** | ** ** | ** ** |
| ** **                        | ** ** | **Reserves**  | ** ** | **Reserves** | ** ** | **downs**  | ** ** | **Total**  | ** ** |
| Charge at  December 31, 2001 |       | $             | 39,652     |         | $          | 26,324     |       | $          | 28,640     |   | $ | 94,616 |   |
| 2001 – 2006  utilization     |       | (37,334       | )          | (24,202      | )          | (29,602    | )          | (91,138    | )          |
| 2007 utilization                  |       | (263          | )          | (1,208       | )          | —     |       | (1,471     | )          |
| 2007 reversals                    |       | —        |       | (640         | )          | —     |       | (640       | )          |
| 2008 utilization                  |       | (262          | )          | —       |       | —     |       | (262       | )          |
| 2009 utilization                  |       | (66           | )          | —       |       | —     |       | (66        | )          |
| Adjustments                       |       | (688          | )          | (274         | )          | 962        |       | —     |       |
| Balance at  March 31, 2009   |       | $             | 1,039      |         | $          | —     |       | $          | —     |   | $ | 1,039 |   |

 

The Company currently expects that the $1,039 balance remaining in the2001 fourth quarter charge will be utilized as follows:

 

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**IMSHEALTH INCORPORATED**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

**(Dollarsand shares in thousands, except per share data)**

 
| **Year Ended December 31,** | ** ** | **Outlays** | ** ** |
|--------------------------------------------|------------|-------------|------------|
| 2009                                       |       | $           | 196        |   |
| 2010                                       |       | 262         |       |
| 2011                                       |       | 262         |       |
| 2012                                       |       | 262         |       |
| 2013                                       |       | 57          |       |
| Total                                      |       | $           | 1,039      |   |

** **

**Note 16. Operations by Business Segment**

** **

Operating segments are defined as components of anenterprise about which financial information is available that is evaluated ona regular basis by the chief operating decision-maker, or decision-makinggroups, in deciding how to allocate resources to an individual segment and inassessing performance of the segment. The Company operates a globally consistentbusiness model, offering pharmaceutical business information and relatedservices to its customers in more than 100 countries.  See Note 2.

 

The Company maintains regional geographic managementto facilitate local execution of its global strategies.  However, the Company maintains global leadersfor the majority of its critical business processes; and the most significantperformance evaluations and resource allocations made by the Company’s chiefoperating decision makers are made on a global basis.  As such, the Company has concluded that itmaintains one operating and reportable segment.

** **

**Geographic Financial Information:**

** **

The following represents selected geographicinformation for the regions in which the Company operates as of and for thethree months ended March 31, 2009 and 2008.

 
| ** **                                   | ** ** | **Americas (1)** | ** **  | **EMEA (2)** | ** ** | **Asia Pacific (3)** | ** ** | **Corporate &  Other** | ** ** | **Total**  | ** ** |
|----------------------------------------------|------------|-----------------------|-------------|-------------------|------------|--------------------------------|------------|---------------------------------|------------|------------|------------|
| **Three  months ended March 31, 2009:** |       |                  |        |              |       |                           |       |                            |       |       |       |
| Operating Revenue (4)                        | ** ** | **$**                 | **236,593** | ** **        | **$**      | **206,256**                    | ** ** | **$**                           | **84,095** | ** ** | **—** | ** ** | **$** | **526,944** | ** ** |
| Operating Income  (Loss) (5)                 | ** ** | **$**                 | **67,842**  | ** **        | **$**      | **20,495**                     | ** ** | **$**                           | **31,288** | ** ** | **$**      | **(18,760** | **)** | **$** | **100,865** | ** ** |
|                                         | ** ** | ** **            | ** **  | ** **        | ** ** | ** **                     | ** ** | ** **                      | ** ** | ** ** | ** ** |
| **Three  months ended March 31, 2008:** |       |                  |        |              |       |                           |       |                            |       |       |       |
| Operating Revenue (4)                        |       | $                     | 252,431     |              | $          | 240,870                        |       | $                               | 80,879     |       | —     |   | $ | 574,180 |   |
| Operating Income  (Loss) (5)                 |       | $                     | 79,255      |              | $          | 17,222                         |       | $                               | 30,563     |       | $          | (10,658 | ) | $ | 116,382 |   |

 

----

**Notes to Geographic Financial Information:**

** **
| *(1)* | *Americas includes the United States, Canada and  Latin America.*                                                                                                                                                                                                                                                                                                                  |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *(2)* | *EMEA includes countries in Europe, the Middle  East and Africa.*                                                                                                                                                                                                                                                                                                                  |
| *(3)* | *Asia Pacific includes Japan, Australia and other  countries in the Asia Pacific region.*                                                                                                                                                                                                                                                                                          |
| *(4)* | *Operating Revenue relates to external customers  and is primarily based on the location of the customer. The Operating Revenue  for the geographic regions includes the impact of foreign exchange in  converting results into U.S. dollars.*                                                                                                                                     |
| *(5)* | *Operating Income for the three  geographic regions does not reflect the allocation of certain expenses that  are maintained in Corporate and Other and as such, is not a true measure of  the respective regions’ profitability. The Operating Income amounts for the  geographic segments include the impact of foreign exchange in converting  results into U.S. dollars.* |

 

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**IMSHEALTH INCORPORATED**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

**(Dollarsand shares in thousands, except per share data)**

 

A summary of the Company’s operating revenue byproduct line for the three months ended March 31, 2009 and 2008 ispresented below:

 
| ** **                               | ** ** | **Three Months Ended  March 31,** | ** **  |
|------------------------------------------|------------|--------------------------------------------------|-------------|
| ** **                               | ** ** | **2009**                                         | ** **  | **2008** | ** ** |
| Commercial  Effectiveness                | ** ** | **$**                                            | **259,640** |   | $ | 286,048 |   |
| Product &  Portfolio Management | ** ** | **171,689**                                      |        | 183,091 |   |
| New Business  Areas                      | ** ** | **95,615**                                       |        | 105,041 |   |
| Operating  Revenue                       | ** ** | **$**                                            | **526,944** |   | $ | 574,180 |   |

 

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**Item 2.Management’s Discussion and Analysis of Financial Condition and Results ofOperations**

** **

**(Dollars and shares in thousands, except per sharedata)**

* *

*This discussion and analysis shouldbe read in conjunction with the accompanying Condensed Consolidated FinancialStatements (Unaudited) and related notes.*

*** ***

***ExecutiveSummary***

*** ***

***OurBusiness***

*** ***

IMS Health Incorporated (“IMS,” “we,” “us” or “our”)is the leading global provider of market intelligence to the pharmaceutical andhealthcare industries. We offer leading-edge market intelligence products andservices that are integral to our clients’ day-to-day operations, includingproduct and portfolio management capabilities; commercial effectivenessinnovations; managed care and consumer health offerings; and consulting andservices solutions that improve productivity and the delivery of qualityhealthcare worldwide. Our  informationproducts are developed to meet client needs by using data secured from aworldwide network of suppliers in more than 100 countries. Our business linesare:

 

·                  Commercial Effectiveness to increase clients’productivity across end-to-end sales, marketing, promotional and performancemanagement processes;

 

·                  Product and Portfolio Management to provideclients with insights into market measurement so they can optimize theirproduct portfolio and strategies; and

 

·                  New Business Areas that supportpharmaceutical client business initiatives in managed markets, consumer health,and pricing and market access, and that also serve payer and governmentaudiences.

 

Within these business lines,we provide consulting and services that use in-house capabilities andmethodologies to assist clients in analyzing and evaluating market trends,strategies and tactics, and to help in the development and implementation ofcustomized software applications and data warehouse tools.

 

We operate in more than 100countries.

 

We manage on a globalbusiness model with global leaders for the majority of our critical businessprocesses and accordingly have one reportable segment.

 

We believe that importantmeasures of our financial condition and results of operations include operatingrevenue, constant dollar revenue growth, operating income, constant dollaroperating income growth, operating margin and cash flows.

 

**PerformanceOverview**

** **

Our operating revenuedeclined 8.2% to $526,944 in the first quarter of 2009 as compared to $574,180in the first quarter of 2008.  Theoperating revenue decrease was a result of a decline in all three of ourbusiness lines.  Our operating incomedeclined 13.3% to $100,865 in the first quarter of 2009 as compared to $116,382in the first quarter of 2008.  Theoperating income decline was a result of decreased operating revenues,partially offset by decreases in operating

 

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costs and selling andadministrative expenses, as discussed below. Our net income attributable to IMSwas $133,332 for the first quarter of 2009, an increase of $74,157 as comparedto $59,175 for the first quarter of 2008, due to the Non-Operating Loss, netitems discussed below and certain tax items as discussed in Note 11 of theCondensed Consolidated Financial Statements (Unaudited).  Our diluted earnings per share of CommonStock increased to $0.73 for the first quarter of 2009 as compared to $0.32 forthe first quarter of 2008.

 

**Results of Operations**

** **

*Reclassifications.*Certain prior-year amounts have beenreclassified to conform to the 2009 presentation.

 

*References to constant dollar results and resultsexcluding the effect of foreign currency translations. *We report results in U.S.dollars, but we do business on a global basis. Exchange rate fluctuations affect the rate at which we translate foreignrevenues and expenses into U.S. dollars and may have significant effects on ourresults.  In order to illustrate theseeffects, the discussion of our business in this report sometimes describes themagnitude of changes in constant dollar terms or results excluding the effectof foreign currency translations.  Webelieve this information facilitates a comparative view of our business.  In the first three months of 2009, the U.S.dollar was generally stronger against other currencies as compared to the firstthree months of 2008.  The revenue declineat actual currency rates was greater than the decline at constant dollarexchange rates.  See “How Exchange RatesAffect Our Results” below and the discussion of “Market Risk” in the Management’sDiscussion and Analysis of Financial Condition and Results of Operationssection of our annual report on Form 10-K for the year ended December 31,2008 for a more complete discussion regarding the impact of foreign currencytranslation on our business.

 

**Summary ofOperating Results**

 
| ** **                                   | ** ** | ** **                                           | ** **  | **% Variance** | ** ** |
|----------------------------------------------|------------|------------------------------------------------------|-------------|---------------------|------------|
| ** **                                   | ** ** | **Three Months Ended March 31,** | ** **  | **2009**            | ** ** |
| ** **                                   | ** ** | **2009**                                             | ** **  | **2008**            | ** ** | **vs 2008** | ** ** |
| Information and  analytics revenue (I&A) | ** ** | **$**                                                | **420,076** |                | $          | 456,187 |   | (7.9 | )% |
| Consulting and  services revenue (C&S)   | ** ** | **106,868**                                          |        | 117,993             |       | (9.4 | )% |
| Operating  Revenue                           | ** ** | **526,944**                                          |        | 574,180             |       | (8.2 | )% |
|                                         | ** ** | ** **                                           |        |                |       |   |   |
| Operating costs  of I&A                  | ** ** | **170,839**                                          |        | 192,766             |       | 11.4 | % |
| Direct and  incremental costs of C&S     | ** ** | **61,145**                                           |        | 68,505              |       | 10.7 | % |
| External-use  software amortization          | ** ** | **10,524**                                           |        | 12,714              |       | 17.2 | % |
| Selling and  administrative expenses         | ** ** | **160,406**                                          |        | 162,769             |       | 1.5 | % |
| Depreciation and  other amortization         | ** ** | **23,165**                                           |        | 21,044              |       | (10.1 | )% |
| Operating Income                             | ** ** | **$**                                                | **100,865** |                | $          | 116,382 |   | (13.3 | )% |

*** ***

***Operating Income***

 

Our operating income forthe first quarter of 2009 declined 13.3% to $100,865 from $116,382 in the firstquarter of 2008.  This was due to thedecrease in our operating revenue, partially offset by decreases in ouroperating costs and selling and administrative expenses driven 

 

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by decreased cost of data and tight controls onhiring.  Our operating income decreased20.5% in constant dollar terms.

 

***OperatingRevenue***

*** ***

Our operating revenue forthe first quarter of 2009 declined 8.2% to $526,944 from $574,180 in the firstquarter of 2008. On a constant dollar basis, operating revenue declined2.8%.  On a constant dollar basis,acquisitions completed within the prior twelve months contributed approximately1 percentage point revenue growth, partially offsetting our operating revenuedecline for the first quarter of 2009. The decrease in our operating revenue resulted from revenue declines inall three of our business lines, together with the effect of approximately $32,000of currency translation for the first quarter of 2009 as compared to the firstquarter of 2008.

 

**Summary of OperatingRevenue**

 
| ** **                               | ** ** | ** **                                           | ** **  | ** **                 | ** ** | **% Variance** | ** ** |
|------------------------------------------|------------|------------------------------------------------------|-------------|----------------------------|------------|---------------------|------------|
| ** **                               | ** ** | ** **                                           | ** **  | **2009 vs 2008** | ** ** |
| ** **                               | ** ** | **Three Months Ended March 31,** | ** **  | **Reported**               | ** ** | **Constant**        | ** ** |
| ** **                               | ** ** | **2009**                                             | ** **  | **2008**                   | ** ** | **Rates**           | ** ** | **Dollar** | ** ** |
| Commercial  Effectiveness                | ** ** | **$**                                                | **259,640** |                       | $          | 286,048             |       | (9.2 | )% | (4.4 | )% |
| Product &  Portfolio Management | ** ** | **171,689**                                          |        | 183,091                    |       | (6.2                | )%         | (0.8 | )% |
| New Business  Areas                      | ** ** | **95,615**                                           |        | 105,041                    |       | (9.0                | )%         | (1.9 | )% |
| Operating  Revenue                       | ** ** | **$**                                                | **526,944** |                       | $          | 574,180             |       | (8.2 | )% | (2.8 | )% |
|                                          |            |                                                      |             |                            |            |                     |            |  |  |  |  |  |

** **

·                  *Commercial Effectiveness:* EMEA contributed approximatelythree-quarters and the Americas contributed more than one-quarter to theconstant dollar revenue decline for the first quarter of 2009, partially offsetby revenue growth in Asia Pacific.

 

·                  *Product & Portfolio Management:* The Americas wasthe primary contributor to the constant dollar revenue decline for the firstquarter of 2009, partially offset by revenue growth in EMEA and Asia Pacific.

 

·                  *New Business Areas:* The Americas was the primary contributorto the constant dollar revenue decline for the first quarter of 2009, partiallyoffset by revenue growth in EMEA and Asia Pacific.

 

Consulting and services (“C&S”)revenue, as included in the business lines above, was $106,868 in the firstquarter of 2009, down 9.4% from $117,993 in the first quarter of 2008 (down3.5% on a constant dollar basis).

 

***OperatingCosts of Information and Analytics***

 

Operating costs ofinformation and analytics (“I&A”) include costs of data, data processingand collection and costs attributable to personnel involved in production, datamanagement and delivery of the Company’s I&A offerings.

 

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Our operating costs ofI&A declined 11.4% to $170,839 in the first quarter of 2009 from $192,766in the first quarter of 2008.

 

·                  *Foreign Currency Translation*: The effect of foreign currencytranslation decreased our operating costs of I&A by approximately $14,000for the first quarter of 2009 as compared to the first quarter of 2008.

 

Excluding theeffect of foreign currency translation, our operating costs of I&A declined4.1% in the first quarter of 2009 as compared to the first quarter of 2008.

 

·                  *Data*: Data costs decreased by approximately $6,000 in thefirst quarter of 2009 as compared to the first quarter of 2008.

* *

·                  *Production, Client Services and Other*: Production, clientservices and other costs decreased by approximately $1,000 in the first quarterof 2009 as compared to the first quarter of 2008.

 

***Directand Incremental Costs of Consulting and Services***

*** ***

Direct and incrementalcosts of C&S include the costs of consulting staff directly involved withdelivering revenue-generating engagements, related accommodations and the costsof primary market research data purchased specifically for certain individualC&S engagements.  Direct andincremental costs of C&S do not include an allocation of direct costs ofdata that are included within I&A.

 

Our direct andincremental costs of C&S declined 10.7% to $61,145 in the first quarter of2009 from $68,505 in the first quarter of 2008.

 

·                  *Foreign Currency Translation*: The effect of foreign currencytranslation decreased our direct and incremental costs of C&S byapproximately $5,000 for the first quarter of 2009 as compared to the firstquarter of 2008.

 

Excluding the effect of foreign currency translation,our direct and incremental costs of C&S declined 2.9% in the first quarterof 2009 as compared to the first quarter of 2008.

 

·                  C&S costsdecreased by approximately $2,000 in the first quarter of 2009 as compared tothe first quarter of 2008, due to decreased labor and primary market researchdata expense, all directly related to the C&S revenue decline.

 

***External-UseSoftware Amortization***

*** ***

Our external-use software amortizationcharges represent the amortization associated with software we capitalizedunder the provisions of Statementof Financial Accounting Standards (“SFAS”) No. 86, “Accounting for the Costs of Computer Software tobe Sold, Leased, or Otherwise Marketed.” Our external-use software amortizationcharges declined 17.2% to $10,524 in the first quarter of 2009 from $12,714 inthe first quarter of 2008. This was due to decreased software amortizationassociated with assets that were fully amortized prior to Q1 2009.

 

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***Sellingand Administrative Expenses***

*** ***

Our selling andadministrative expenses consist primarily of the expenses attributable tosales, marketing, and administration, including human resources, legal,management and finance.  Our selling andadministrative expenses declined 1.5% to $160,406 in the first quarter of 2009from $162,769 in the first quarter of 2008.

 

·                  *Foreign Currency Translation*: The effect of foreign currencytranslation decreased our selling and administrative expenses by approximately$17,000 for the first quarter of 2009 as compared to the first quarter of 2008.

 

Excluding the effect offoreign currency translation, our selling and administrative expenses grew 9.8%in the first quarter of 2009 as compared to the first quarter of 2008.

 

·                  *Sales and Marketing*: Sales and marketing expenses decreasedby approximately $3,000 in the first quarter of 2009 as compared to the firstquarter of 2008.

 

·                  *Consulting and Services*: C&S expenses increased by approximately $5,000 in the first quarterof 2009 as compared to the first quarter of 2008.

 

·                  *Administrative and Other*: Other expenses increased by approximately $13,000 in the first quarterof 2009 as compared to the first quarter of 2008.

 

***Depreciationand Other Amortization***

*** ***

Our depreciation andother amortization charges increased 10.1% to $23,165 in the first quarter of2009 from $21,044 in the first quarter of 2008 due to increased depreciationrelated to new facilities and technology to upgrade our financial systems andincreased amortization related to internal-use software additions.

*** ***

***Trendsin our Operations***

*** ***

Our operating margin forthe first quarter of 2009 was 19.1% as compared to 20.3% in the first quarterof 2008.  Margins in the first quarter of2009 were negatively impacted by revenue declines partially offset by decreasedcosts of panel and decreased sales and marketing costs.

 

We have several offerings in the U.S. that utilizeprescriber-identifiable information. Over the past several years, there have been a number of state legislativeinitiatives seeking to impose restrictions on the commercial use of suchinformation.  To date, three states, NewHampshire, Vermont and Maine, have passed laws placing certain restrictions onthe license, use or transfer of prescriber-identifiable information forcommercial purposes.  Collectively, thesethree states represent approximately one percent of prescription activity inthe U.S. and therefore the impact of these laws on our business, financialcondition and results of operations is not expected to be material.  However, as of April 24, 2009, sixteenstates were considering similar legislation. For additional information regarding the status of the laws passed inthe three states noted above and related developments in these other states,see Part II. Item 1A. Risk Factors.

 

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***Non-OperatingLoss, net***

*** ***

Our non-operating loss,net, decreased to a loss of $3,574 in the first quarter of 2009 from a loss of$27,293 in the first quarter of 2008. This was due to the following factors:

 

·                  *Interest Expense, net*: Net interest expense was $8,469 forthe first quarter of 2009 as compared to $8,671 for the first quarter of2008.  This improvement was due to lowerdebt levels in the first quarter of 2009 as compared to the first quarter of2008.

 

·                  *Other Income (Expense), net*:***Other income(expense), net, grew by $23,517 in the first quarter of 2009 as compared to thefirst quarter of 2008.  This was a resultof net foreign exchange gains of $4,884 in the first quarter of 2009 ascompared to net foreign exchange losses of $18,598 in the first quarter of2008.*

* *

***Taxes***

*** ***

We operate in more than 100 countries around the worldand our earnings are taxed at the applicable income tax rate in each of thesecountries.

 

For the three months ended March 31, 2009, oureffective tax rate was reduced primarily as a result of the reorganization ofcertain subsidiaries which resulted in a foreign exchange loss recognized fortax purposes (tax benefit of approximately $63,200), the repayment of a certainintercompany loan which resulted in a foreign exchange loss recognized for taxpurposes (tax benefit of approximately $6,100) and the expiration of certainstatutes of limitation (tax benefits of approximately $4,000).  For the three months ended March 31,2008, our effective tax rate was reduced primarily as a result of the filing ofan advance pricing agreement (“APA”) between two taxing jurisdictions (taxbenefit of approximately $4,900).  TheAPA ensures conformity between the jurisdictions’ taxing authorities regardingthe treatment of certain intercompany transactions, thereby allowing us torecord a corresponding tax benefit.

 

For the three months ended March 31, 2009, we recordedapproximately $3,800 of tax expense related to unrecognized tax benefits thatif recognized, would favorably affect the effective tax rate.  Included in this amount is approximately$1,700 of interest and penalties. For the three months ended March 31,2008, we recorded approximately $4,800 of tax expense related to unrecognizedtax benefits including approximately $2,700 of interest and penalties.

 

We file numerous consolidated and separate income taxreturns in U.S. (federal and state) and non-U.S. jurisdictions.  We are no longer subject to U.S. federalincome tax examinations by tax authorities for years before 2004. We are no longer subject to state and local income taxexamination by tax authorities for years before 1997.  Further, with few exceptions, we are nolonger subject to examination by tax authorities in our material non-U.S.jurisdictions prior to 2004.  It isreasonably possible that within the next twelve months we could realizeapproximately $28,300 of unrecognized tax benefits as a result of theexpiration of certain statutes of limitation.

 

While we intend to continue to seek global taxplanning initiatives, there can be no assurance that we will be able tosuccessfully identify and implement such initiatives to reduce or maintain ouroverall tax rate and therefore rates may go up in the future.

 

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***NetIncome Attributable to Noncontrolling Interests***

 

On January 1, 2009, we adopted SFAS No. 160,“Noncontrolling Interests in Consolidated Financial Statements-an Amendment ofARB No. 51” (“SFAS 160”), which established accounting and reportingstandards pertaining to ownership interests in subsidiaries held by partiesother than the parent, the amount of net income attributable to the parent andto the noncontrolling interests, changes in a parent’s ownership interests, andthe valuation of any retained noncontrolling equity investment when asubsidiary is deconsolidated.  As aresult of the adoption of SFAS 160, net income attributable to noncontrollinginterests, which previously was included in Other expense, net on a pretaxbasis, is shown separately from net income attributable to the Company in ourCondensed Consolidated Statements of Income (Unaudited).  Net Income Attributable toNoncontrolling Interests decreased to $1,124 in the first quarter of 2009 from$1,635 in the first quarter of 2008.  SeeNote 13 to our Condensed Consolidated Financials Statements (Unaudited).

 

## **OperatingResults by Geographic Region**

## ** **

The following represents selected geographic informationfor the regions in which we operate for the three months ended March 31,2009 and 2008:

 
| ** **                                  | ** ** | **Americas  (1)** | ** **  | **EMEA  (2)** | ** ** | **Asia Pacific   (3)** | ** ** | **Corporate &  Other** | ** ** | **Total  IMS** | ** ** |
|---------------------------------------------|------------|-------------------|-------------|---------------|------------|----------------------------------|------------|---------------------------------|------------|----------------|------------|
| **Three months ended March 31, 2009:** |       |              |        |          |       |                             |       |                            |       |           |       |
| Operating Revenue (4)                       | ** ** | **$**             | **236,593** | ** **    | **$**      | **206,256**                      | ** ** | **$**                           | **84,095** | ** **     | **—** | ** ** | **$** | **526,944** | ** ** |
| Operating  Income (Loss) (5)                | ** ** | **$**             | **67,842**  | ** **    | **$**      | **20,495**                       | ** ** | **$**                           | **31,288** | ** **     | **$**      | **(18,760** | **)** | **$** | **100,865** | ** ** |
|                                        | ** ** | ** **        | ** **  | ** **    | ** ** | ** **                       | ** ** | ** **                      | ** ** | ** **     | ** ** |
| **Three months ended March 31, 2008:** |       |              |        |          |       |                             |       |                            |       |           |       |
| Operating Revenue (4)                       |       | $                 | 252,431     |          | $          | 240,870                          |       | $                               | 80,879     |           | **—** |   | $ | 574,180 |   |
| Operating  Income (Loss) (5)                |       | $                 | 79,255      |          | $          | 17,222                           |       | $                               | 30,563     |           | $          | (10,658 | ) | $ | 116,382 |   |

 

----

**Notes to Geographic FinancialInformation:**

 

*(1)**                               Americasincludes the United States, Canada and Latin America.*

*(2)**                               EMEAincludes countries in Europe, the Middle East and Africa.*

*(3)**                               AsiaPacific includes Japan, Australia and other countries in the Asia Pacificregion.*

*(4)**                               OperatingRevenue relates to external customers and is primarily based on the location ofthe customer. The Operating Revenue for the geographic regions includes theimpact of foreign exchange in converting results into U.S. dollars.*

*(5)**                               OperatingIncome for the three geographic regions does not reflect the allocation ofcertain expenses that are maintained in Corporate and Other and as such, is nota true measure of the respective regions’ profitability. The Operating Incomeamounts for the geographic segments include the impact of foreign exchange inconverting results into U.S. dollars.*

 

***Americas Region***

 

Operating revenuedeclined 6.3% in the Americas region in the first quarter of 2009 as comparedto the first quarter of 2008.  Excludingthe effect of foreign currency translations, operating revenue declined 3.7% inthe first quarter of 2009 as compared to the first quarter of 2008.  This was driven equally by all of ourbusiness lines due to a decline in demand for our I&A and C&Sofferings.

 

Operating income in theAmericas region declined 14.4% in the first quarter of 2009 as 

 

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compared to the firstquarter of 2008.  The operating incomedecline reflected revenue declines in the regions which were partially offsetby decreases in operating expenses of $4,000 in the first quarter of 2009.  Excluding the effect of foreign currencytranslations, operating income decreased 12.3% in the first quarter of 2009 ascompared to the first quarter of 2008.

 

***EMEARegion***

 

Operating revenuedecreased in the EMEA region by 14.4% in the first quarter of 2009 as comparedto the first quarter of 2008.  Excludingthe effect of foreign currency translations, operating revenue declined 3.2% inthe first quarter of 2009 as compared to the first quarter of 2008.  The revenue decline in the first quarter of2009 was driven by Commercial Effectiveness, partially offset by revenue growthin Product & Portfolio Management and New Business Areas businesslines.

 

Operating income in theEMEA region grew 19.0% in the first quarter of 2009 as compared to the firstquarter of 2008.  The operating incomegrowth reflected revenue declines in the region more than offset by decreasesin operating expenses of $38,000 in the first quarter of 2009.  Excluding the effect of foreign currencytranslations, operating income decreased 20.1% in the first quarter of 2009 ascompared to the first quarter of 2008.

 

***Asia Pacific Region***

 

Operatingrevenue in the Asia Pacific region increased 4.0% in the first quarter of 2009as compared to the first quarter of 2008. Excluding the effect of foreign currency translations, operating revenuegrew 1.8% in the first quarter of 2009 as compared to the first quarterof 2008. The revenue growth in the first quarter of 2009 was driven morethan one-half by Commercial Effectiveness and one-third by the Product &Portfolio Management business line.

 

Operatingincome in the Asia Pacific region increased by 2.4% in the first quarter of2009 as compared to the first quarter of 2008. The operating income growth reflected revenue growth in theregion offset by increases in operating expenses of $2,000 in the first quarterof 2009, respectively.  Excluding theeffect of foreign currency translations, operating income decreased by 2.1% inthe first quarter of 2009 as compared to the first quarter of 2008.

 

### **How Exchange Rates Affect Our Results**

### ** **

Weoperate globally, deriving a significant portion of our operating income fromnon-U.S. operations.  As a result,fluctuations in the value of foreign currencies relative to the U.S. dollar mayincrease the volatility of U.S. dollar operating results.  We enter into foreign currency forwardcontracts to partially offset the effect of currency fluctuations. Foreigncurrency translation increased the U.S. dollar revenue decline by approximately5.4 percentage points while the impact on the operating income decline was anapproximate decrease of 7.2 percentage points in the first quarter of 2009. In the first quarter of 2008, foreigncurrency translation increased U.S. dollar revenue growth by approximately 6.8percentage points, while the impact on operating income growth was anapproximate increase of 7.7 percentage points.

 

Non-U.S. monetary assetsare maintained in currencies other than the U.S. dollar, 

 

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principally theEuro, the Japanese Yen and the Swiss Franc. Where monetary assets are held in the functional currency of the localentity, changes in the value of these currencies relative to the U.S. dollarare reflected in Cumulative translation adjustment in the CondensedConsolidated Statements of Financial Position (Unaudited).  The effect of exchange rate changes duringthe first three months of 2009 decreased the U.S. dollar amount of Cash andcash equivalents by $5,910. The effect of exchange rate changes during thefirst three months of 2008 increased the US dollar amount of cash and cashequivalents by $7,908.

 

***Liquidityand Capital Resources***

*** ***

Our cash and cashequivalents decreased $41,091 during the first quarter of 2009 to $174,591 at March 31,2009 compared to $215,682 at December 31, 2008.  The decrease reflects cash used in investingand financing activities of $25,498 and $26,147, respectively, and a decreaseof $5,910 due to the effect of exchange rate changes, partially offset by cashprovided by operating activities of $16,464.

 

We currently expect that we will use our Cash and cash equivalentsprimarily to fund:

 
| · |   | development  of software to be used in our new products and capital expenditures to expand  and upgrade our information technology capabilities and to build or acquire  facilities to house our business (we currently expect to spend approximately  $110,000 to $135,000 during 2009 for software development and capital  expenditures);         |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| · |   | acquisitions  (see Note 5 to our Condensed Consolidated Financial Statements (Unaudited));                                                                                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| · |   | dividends  to our shareholders (we expect 2009 dividends will be $0.12 per share or  approximately $22,000);                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| · |   | payments  of approximately $10,800 related to our fourth quarter 2007 restructuring  charge (see Note 15 to our Condensed Consolidated Financial Statements  (Unaudited));                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| · |   | payments  for tax-related matters, including the D&B Legacy Tax Matters discussed  further in Note 7 to our Condensed Consolidated Financial Statements  (Unaudited). Payments for certain of the D&B Legacy Tax Matters could be  up to approximately $35,800 in 2009;                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| · |   | pension  and other postretirement benefit plan contributions (we currently expect  contributions to U.S. and non-U.S. pension and other postretirement benefit  plans to total approximately $8,700 in 2009) (see Note 10 to our Condensed  Consolidated Financial Statements (Unaudited) for pension and postretirement  benefit plan expense); and |
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| · |   | share  repurchases (see Note 12 to our Condensed Consolidated Financial Statements  (Unaudited)).                                                                                                                                                                                                                                                    |

 

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Net cash providedby operating activities amounted to $16,464 for the three months ended March 31,2009, which represented an increase of $17,199 compared to cash used inoperating activities during the comparable period in 2008.  The increase relates to higher net income andlower accounts receivable balances, partially offset by the higher funding ofaccounts payable and accrued expenses and other current liabilities during thethree months ended March 31, 2009. The decrease in accounts receivable was driven by a decrease in DSO(days sales outstanding), which was nine days lower in the three months ended March 31,2009 as compared to the prior year comparable quarter, as a result of improvedcollections and receivables management.

 

Net cash used ininvesting activities amounted to $25,498 for the three months ended March 31,2009, a decrease in cash used of $4,442 over the comparable period in2008.  The decrease relates to lowerpayments for acquisitions and lower capital expenditures, partially offset bylower proceeds from the sale of capital assets during the three months ended March 31,2009 as compared to the prior year comparable quarter.

 

Net cash used infinancing activities amounted to $26,147 for the three months ended March 31,2009, an increase of $46,460 compared to cash provided by financing activitiesduring the comparable period in 2008. This increase was due to lower net borrowings of debt and a decrease incash overdrafts, partially offset by lower purchases of treasury stock duringthe three months ended March 31, 2009 as compared to the prior yearcomparable quarter.

 

Our financingactivities include cash dividends we paid of $0.03 per share quarterly, whichamounted to $5,727 and $5,507 during the three months ended March 31, 2009and 2008, respectively.  The payments andlevel of cash dividends made by us are subject to the discretion of our Boardof Directors.  Any future dividends,other than the $0.03 per share dividend for the second quarter of 2009, whichwas declared by our Board of Directors in April 2009, will be based on,and affected by, a number of factors, including our operating results andfinancial requirements.

 

IMS, together withtwo of our wholly-owned subsidiaries and two third-party investors, enteredinto an agreement (the ‘‘LLC Agreement’’) whereby such third-party investorshave contributed $100,000 to, and have held a noncontrolling interest in, IMSHealth Licensing Associates, L.L.C. (‘‘the LLC’’).  Under the terms of the LLC Agreement, thethird-party investors have the right to take steps that would result in theliquidation of their membership interests in the LLC on June 30,2009.  This right may be accelerated ifcertain events occur as set forth in the LLC Agreement.  If the third-party investors decide toliquidate their ownership interests in the LLC, we will attempt to replace thethird-party investors, or if unsuccessful, purchase these ownership interests.We have adequate liquidity and credit capacity to purchase these ownershipinterests. See Note 13 to our Condensed Consolidated Financial Statements(Unaudited).

 

**Capital and Credit Markets**

 

As the capital andcredit markets have worsened, we have performed additional assessments todetermine the impact, if any, on our financial statements of recent marketdevelopments, including the bankruptcy, restructuring or merging of certainfinancial 

 

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companies. Ouradditional assessments included a review of access to liquidity in the capitaland credit markets and financial institution counterpartycreditworthiness.  Based on ourassessment, we currently believe we have sufficient liquidity and access tocredit despite the current disruption of the capital and credit markets.  However, the recent unprecedented volatilityin capital and credit markets may create additional risks in the upcomingyears.

 

*Liquidityin the Capital and Credit Markets*

 

We believe we havesufficient liquidity despite the current disruption of the capital and creditmarkets. We fund our liquidity needs for capital investment, working capital,and other financial commitments through cash flow from continuing operationsand our diversified credit facility ($460,712 in aggregate commitment availableas of March 31, 2009). While not significant to us to date, disruptions incapital and credit markets may result in increased borrowing costs in thefuture.

 

*Credit Concentrations*

 

We continuallymonitor our positions with, and the credit quality of, the financialinstitutions which are counterparties to our financial instruments and do notanticipate non-performance by the counterparties.  We would not have realized a material lossduring the quarter ended March 31, 2009 in the event of non-performance byany one counterparty.  In general, weenter into transactions only with financial institution counterparties thathave a credit rating of A or better.  Inaddition, we limit the amount of credit exposure with any one institution.  Particularly in light of the current credit environment,management will continue to monitor the status of these counterparties and willtake action, as appropriate, to further manage its counterparty credit risk.

 

We maintainaccounts receivable balances ($398,358 and $382,776, net of allowances, at March 31,2009 and December 31, 2008, respectively), principally from customers inthe pharmaceutical industry.  Our tradereceivables do not represent significant concentrations of credit risk at March 31,2009 due to the credit worthiness of our customers and their dispersion acrossmany geographic areas.

 

**Taxand Other Contingencies**

 

We are exposed to certain known tax and other contingencies that arematerial to our investors.  The facts and circumstances surrounding thesecontingencies and a discussion of their effect on us are included in Notes 7and 11 to our Condensed Consolidated Financial Statements (Unaudited) for theperiod ended March 31, 2009.

 

These contingencies may have a material effect onour liquidity, capital resources or results of operations.  Althoughwe have established reserves for D&B Legacy Tax Matters in accordance withSFAS No. 5, “Accounting for Contingencies,” the actual liability mayexceed the amount of the reserve.  Inaddition, even where our reserves are adequate, the incurrence of any of theseliabilities may have a material effect on our liquidity and the amount of cashavailable to us for other purposes.

 

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Management believes that we have made appropriate arrangements inrespect of the future effect on us of these known tax and othercontingencies.  Management also believes that the amount of cash availableto us from our operations, together with cash from financing, will besufficient for us to pay any known tax and other contingencies as they becomedue without materially affecting our ability to conduct our operationsand invest in the growth of our business.

 

**Stock Repurchase Programs**

 

Our share repurchase program has beendeveloped to buy opportunistically, when we believe that our share priceprovides us with an attractive use of our cash flow and debt capacity.

 

On December 18, 2007, the Board ofDirectors authorized a stock repurchase program to buy up to 20,000 shares. Asof March 31, 2009, 9,505 shares remained available for repurchase underthe December 2007 program.

 

During the three months ended March 31,2009, we did not repurchase any shares of outstanding Common Stock under thisprogram.

 

During the three months ended March 31,2008, the Company repurchased 10,000 shares of outstanding Common Stock underthis program at a total cost of $229,336.

 

These share repurchases positively impactedour diluted earnings per share by less than $0.01 for the three months ended March 31,2008.

 

Shares acquired through our repurchaseprograms described above are open-market purchases or privately negotiatedtransactions in compliance with SEC Rule 10b-18.

 

Under our Restated Certificate of Incorporation asamended, we have the authority to issue 820,000 shares with a par value of $.01per share of which 800,000 represent shares of Common Stock, 10,000 representshares of preferred stock and 10,000 represent shares of Series CommonStock.  The preferred stock and Series CommonStock can be issued with varying terms, as determined by the Board ofDirectors.

 

**Borrowings**

 

In recent years, we haveincreased debt levels to balance appropriately the objective of generating anattractive cost of capital with providing us a reasonable amount of financialflexibility.  At March 31, 2009, ourdebt totaled $1,329,209, and management does not believe that this level ofdebt poses a material risk to us due to the following factors:

 

·                  ineach of the last three years, we have generated strong net cash provided byoperating activities in excess of $350,000;

 

·                  atMarch 31, 2009, we had $174,591 in worldwide cash and cash equivalents;

 

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·                  atMarch 31, 2009, we had $460,712 of unused debt capacity under our existingbank credit facilities; and

 

·                  webelieve that we have the ability to obtain additional debt capacity outside ofour existing debt arrangements.

 

The followingtable summarizes our long-term debt at March 31, 2009 and December 31,2008:

 
| ** **                                                                                                        | ** ** | **2009**    | ** **    | **2008** | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|-------------|---------------|----------|------------|
| 5.58% Private  Placement Notes, principal payment of $105,000 due January 2015                               | ** ** | **$**       | **105,000**   |     | $          | 105,000 |   |
| 5.99% Private  Placement Notes, principal payment of $135,000 due January 2018                               | ** ** | **135,000** |          | 135,000  |       |
| 5.55% Private  Placement Notes, principal payment of $150,000 due April 2016                                 | ** ** | **150,000** |          | 150,000  |       |
| 1.70% Private  Placement Note, principal payment of 34,395,000 Japanese Yen due  January 2013                | ** ** | **349,921** |          | 381,304  |       |
| Revolving Credit  Facility:                                                                                       |       |        |          |     |       |
| Japanese Yen  denominated borrowings at average floating rates of approximately 1.09%                             | ** ** | **333,788** |          | 435,895  |       |
| U.S. Dollar  denominated borrowings at average floating rates of approximately 0.99%                              | ** ** | **205,500** |          | 147,000  |       |
| Bank Term Loan,  principal payment of $50,000 due June 2010 at average floating rate of  approximately 0.82% | ** ** | **50,000**  |          | 50,000   |       |
| Total Long-Term  Debt                                                                                             | ** ** | **$**       | **1,329,209** |     | $          | 1,404,199 |   |

 

In February 2008, we closed a private placement transactionpursuant to which we issued $105,000 of seven-year debt at a fixed rate of5.58%, and $135,000 of ten-year debt at a fixed rate of 5.99% to several highlyrated insurance companies. We used the proceeds for share repurchases (see Note12 to our Condensed Consolidated Financial Statements (Unaudited)) and torefinance existing debt.

 

In July 2006, we entered into a $1,000,000 revolving creditfacility with a syndicate of 12 banks (“Revolving Credit Facility”) replacingour existing $700,000 facility.  Theterms of the Revolving Credit Facility extended the maturity of the facility inits entirety to a term of five years, maturing July 2011, reduced theborrowing margins, and increased subsidiary borrowing limits.  Total borrowings under the Revolving CreditFacility were $539,288 and $582,895 at March 31, 2009 and December 31,2008, respectively, all of which were classified as long-term.  We define long-term lines as those where thelines are non-cancellable for more than 365 days from the balance sheet date bythe financial institutions except for specified, objectively measurableviolations of the provisions of the agreement. In general, rates for borrowing under the Revolving Credit Facility areLIBOR plus 40 basis points and can vary based on the our Debt to EBITDA ratio.The weighted average interest rates for the Company’s lines were 1.05% and1.36% at March 31, 2009 and December 31, 2008, respectively.  In addition, we are required to pay acommitment fee on any unused portion of the facilities of 0.01%.  At March 31, 2009, we had approximately$460,712 available under existing bank credit facilities.

 

In June 2006, we closed a $50,000 three-year term loan with abank.  The term loan allows us to borrowat a floating rate with a lower borrowing margin than our revolving creditfacility.  The term loan also provides uswith two one-year options to extend the term at our discretion.  In 

 

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August 2008, we exercised the firstone-year option to extend the term through June 2010. We used the proceedsto refinance existing debt borrowed under the revolving credit facility.

 

In April 2006, we closed a private placement transaction pursuantto which we issued $150,000 of ten-year notes to two highly rated insurancecompanies at a fixed rate of 5.55%.  Weused the proceeds to refinance existing debt of $150,000 drawn under a shortterm credit agreement with a bank in January 2006.

 

In January 2006, we closed a private placement transactionpursuant to which our Japanese subsidiary issued 34,395,000 Japanese Yenseven-year debt (equal to $300,000 at date of issuance) to several highly ratedinsurance companies at a fixed rate of 1.70%. We used the proceeds to refinance existing debt in Japan.

 

Our financing arrangements provide for certain covenants and events ofdefault customary for similar instruments, including in the case of our mainbank arrangements, the private placement transactions, and the term loan,covenants to maintain specific ratios of consolidated total indebtedness toEBITDA and of EBITDA to certain fixed charges. At March 31, 2009, we were in compliance with these financial debtcovenants.

 

**Severance, Impairment and Other Charges**

 

During the fourth quarter of 2008, we recorded $9,408 of non-cashimpairment charges as a component of operating income related to the write-offof certain capitalized software assets in our EMEA and Asia Pacificregions.  This was the result of thediscontinuation of certain IMS products at the end of 2008.

 

In response to healthcare marketplace dynamics, during the fourthquarter of 2007, we committed to a restructuring plan designed to eliminateapproximately 1,070 positions worldwide in production and development, sales,marketing, consulting and services and administration.  The plan also included the write-down of twoimpaired computer software assets and related contract payments to be incurredwith no future economic benefit based on our decision to abandon certainproducts in our EMEA region.  As aresult, we recorded $88,690 of Severance, impairment and other charges as acomponent of operating income in the fourth quarter of 2007.  The severance benefits were calculatedpursuant to the terms of established employee protection plans, in accordancewith local statutory minimum requirements or individual employee contracts, asapplicable.

 

These charges were designed to strengthen client-facing operationsworldwide, increase our operating efficiencies and streamline our coststructure.  Some of the initiativesincluded in this plan are designed to better align our resources to helpclients manage for change in a challenging climate.

 

The severance and contract payments portion of the charge wasapproximately $75,043 and will all be settled in cash. Termination actionsunder the plan were substantially completed by March 31, 2009.

 

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| ** **                        | ** ** | **Severance** | ** ** | **Contract** | ** ** | **Asset**  | ** ** | **Currency**    | ** ** | ** ** | ** ** |
|-----------------------------------|------------|---------------|------------|--------------|------------|------------|------------|-----------------|------------|------------|------------|
| ** **                        | ** ** | **related**   | ** ** | **Related**  | ** ** | **write-** | ** ** | **translation** | ** ** | ** ** | ** ** |
| ** **                        | ** ** | **reserves**  | ** ** | **Reserves** | ** ** | **Downs**  | ** ** | **adjustments** | ** ** | **Total**  | ** ** |
| Charge at  December 31, 2007 |       | $             | 71,583     |         | $          | 3,460      |       | $               | 13,647     |       | $          | — |   | $ | 88,690 |   |
| 2007 utilization                  |       | —        |       | —       |       | (13,647    | )          | —          |       | (13,647    | )          |
| 2008 utilization                  |       | (48,645       | )          | (2,150       | )          | —     |       | —          |       | (50,795    | )          |
| 2009 utilization                  |       | (10,943       | )          | (251         | )          | —     |       | —          |       | (11,194    | )          |
| Currency  translation adjustments |       | —        |       | —       |       | —     |       | (2,242          | )          | (2,242     | )          |
| Balance at  March 31, 2009   |       | $             | 11,995     |         | $          | 1,059      |       | $               | —     |       | $          | (2,242 | ) | $ | 10,812 |   |

 

 Wecurrently expect that cash outlays will be applied against the $10,812 balanceremaining in the 2007 fourth quarter charge at March 31, 2009 as follows:

 
| **Year Ended December 31,** | ** ** | **Outlays** | ** ** |
|--------------------------------------------|------------|-------------|------------|
| 2009                                       |       | $           | 9,627      |   |
| 2010                                       |       | 1,008       |       |
| 2011                                       |       | 177         |       |
| Total                                      |       | $           | 10,812     |   |

 

During the fourth quarter of 2001, we completed the assessment of ourCompetitive Fitness Program. This program was designed to streamlineoperations, increase productivity and improve client service. In connectionwith this program, we recorded $94,616 of Severance, impairment and othercharges during the fourth quarter of 2001 as a component of operatingincome.  As of March 31, 2009,approximately $1,039 remains to be utilized from 2009 to 2013 related toseverance payments.

 

In the first quarter of 2007, we reversed $640 of contract-relatedreserves from the fourth quarter 2001 charge due primarily to the terminationand settlement of exit related costs for an impaired lease.  These amounts were reversed against Sellingand administrative expenses in the Condensed Consolidated Statements of Income(Unaudited).

 

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| ** **                        | ** ** | **Severance** | ** ** | **Contract** | ** ** | **Asset**  | ** ** | ** ** | ** ** |
|-----------------------------------|------------|---------------|------------|--------------|------------|------------|------------|------------|------------|
| ** **                        | ** ** | **related**   | ** ** | **related**  | ** ** | **write-** | ** ** | ** ** | ** ** |
| ** **                        | ** ** | **reserves**  | ** ** | **reserves** | ** ** | **downs**  | ** ** | **Total**  | ** ** |
| Charge at  December 31, 2001 |       | $             | 39,652     |         | $          | 26,324     |       | $          | 28,640     |   | $ | 94,616 |   |
| 2001 — 2006  utilization     |       | (37,334       | )          | (24,202      | )          | (29,602    | )          | (91,138    | )          |
| 2007 utilization                  |       | (263          | )          | (1,208       | )          | —     |       | (1,471     | )          |
| 2007 reversals                    |       | —        |       | (640         | )          | —     |       | (640       | )          |
| 2008 utilization                  |       | (262          | )          | —       |       | —     |       | (262       | )          |
| 2009 utilization                  |       | (66           | )          | —       |       | —     |       | (66        | )          |
| Adjustments                       |       | (688          | )          | (274         | )          | 962        |       | —     |       |
| Balance at March 31,  2009   |       | $             | 1,039      |         | $          | —     |       | $          | —     |   | $ | 1,039 |   |

 

We currently expect that the $1,039 balanceremaining in the 2001 fourth quarter charge will be utilized as follows:

 
| **Year Ended December 31,** | ** ** | **Outlays** | ** ** |
|--------------------------------------------|------------|-------------|------------|
| 2009                                       |       | 196         |       |
| 2010                                       |       | 262         |       |
| 2011                                       |       | 262         |       |
| 2012                                       |       | 262         |       |
| 2013                                       |       | 57          |       |
| Total                                      |       | $           | 1,039      |   |
|                                            |            |             |            |  |

 

**Recently Issued AccountingStandards**

 

InSeptember 2006, the Financial Accounting Standards Board (“FASB”) issuedSFAS No. 157, “Fair Value Measurements.” This statement defines fair value,establishes a framework for measuring fair value under generally acceptedaccounting principles, and expands disclosures about fair value measurements. This statement is effective for financialstatements issued for fiscal years beginning after November 15, 2007, andinterim periods within those fiscal years. The adoption of SFAS No. 157, effective January 1, 2008, didnot have a material impact on our financial position, results of operations orcash flows.  In February 2008, theFASB issued Staff Positions No. FAS 157-1 and No. FAS 157-2 whichdelayed the effective date of SFAS No. 157 for one year for certainnon-financial assets and liabilities and removed certain leasing transactionsfrom its scope.  The adoption of StaffPositions No. FAS 157-1 and No. 157-2, effective January 1,2009, did not have a material impact on our financial position, results ofoperations or cash flows.

 

InMay 2008, the FASB issued SFAS No. 162, “The Hierarchy of GenerallyAccepted Accounting Principles.”  Thestatement identifies the sources of accounting principles and the framework forselecting the principles used in the preparation of financial statements ofnongovernmental entities that are presented in conformity with generally acceptedaccounting principles (“GAAP”) in the United States.  This statement was effective 60 daysfollowing the U.S. SEC’s approval of the Public Company Accounting OversightBoard (“PCAOB”) 

 

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amendmentsto AU Section 411, “The Meaning of Present Fairly in Conformity WithGenerally Accepted Accounting Principles.” The adoption of this statement did not have an impact on our financialposition, results of operations or cash flows.

 

In December 2008, theFASB issued FASB Staff Position (“FSP”) FAS 132(R)-1, “Employers’ Disclosuresabout Postretirement Benefit Plan Assets” (“FSP FAS 132(R)-1”), which amendsSFAS No. 132 (revised 2003), “Employers’ Disclosures about Pensions andOther Postretirement Benefits,” to provide guidance on an employer’sdisclosures about plan assets of a defined benefit pension or otherpostretirement plan.  FSP FAS 132(R)-1 iseffective for fiscal years ending after December 15, 2009, with earlierapplication permitted. Upon initial application, the provisions of FSP FAS132(R)-1 are not required for earlier periods that are presented forcomparative purposes.  We are currentlyevaluating the new disclosure requirements under FSP FAS 132(R)-1.

 

InApril 2009, the FASB issued FSP FAS 157-4, “Determining Fair Value Whenthe Volume and Level of Activity for the Asset or Liability Have SignificantlyDecreased and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4”),which provides guidance on determining fair values when there is no activemarket or where the price inputs being used represent distressed sales.  It also reaffirms what SFAS No. 157states is the objective of fair value measurement—to reflect how much an assetwould be sold for in an orderly transaction (as opposed to a distressed orforced transaction) at the date of the financial statements under currentmarket conditions.  FSP FAS 157-4 iseffective for interim and annual periods ending after June 15, 2009.  The adoption of FSP FAS 157-4 is not expectedto have a material impact on our financial position, results of operations orcash flows.

 

***Forward-Looking Statements and Risk Factors***

*** ***

This Quarterly Report on Form 10-Q,as well as information included in oral statements or other written statementsmade or to be made by us, contain statements that, in our opinion, mayconstitute “forward-looking statements” within the meaning of the PrivateSecurities Litigation Reform Act of 1995. The words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,”“likely,” “project,” “estimate,” “will,” “may,” “should,” “future,” “predicts,”“potential,” “continue” and similar expressions identify these forward-lookingstatements, which appear in a number of places in this Quarterly Report on Form 10-Qand include, but are not limited to, all statements relating to plans forfuture growth and other business development activities as well as capitalexpenditures, financing sources, dividends and the effects of regulation andcompetition, foreign currency conversion and all other statements regarding ourintent, plans, beliefs or expectations or those of our directors orofficers.  Investors are cautioned thatsuch forward-looking statements are not assurances for future performance orevents and involve risks and uncertainties that could cause actual results anddevelopments to differ materially from those covered in such forward-lookingstatements.  These risks anduncertainties include, but are not limited to:

 

·                          risksassociated with operating on a global basis, including fluctuations in thevalue of foreign currencies relative to the U.S. dollar, and the ability tosuccessfully hedge such risks—we derived approximately 64% of our operatingrevenue in 2008 from non-U.S. operations;

 

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·                          deteriorationin economic conditions, particularly in the pharmaceutical, healthcare or otherindustries in which our customers operate;

 

·                          regulatory,legislative and enforcement initiatives to which we are or may become subjectrelating particularly to tax and to medical privacy and the collection anddissemination of data and, specifically, non-patient identifiable information,e.g., prescriber identifiable information, or to the process of anonymizingdata;

 

·                          theimposition of additional restrictions on our use of or access to data, or therefusal by data suppliers to provide data to us;

 

·                          conditionsin the securities markets that may affect the value or liquidity of portfolioinvestments; and management’s estimates of lives of assets, recoverability ofassets, fair market value, estimates of liabilities and accrued income taxbenefits and liabilities;

 

·                          to theextent unforeseen cash needs arise, the ability to obtain financing onfavorable terms, or at all during adverse credit market conditions;

 

·                          to theextent we seek growth through acquisitions, alliances or joint ventures, theability to identify, consummate and integrate acquisitions, alliances and jointventures on satisfactory terms;

 

·                          ourability to develop new or advanced technologies, including sophisticatedinformation systems, software and other technology used to deliver our productsand services and to do so on a timely and cost-effective basis, and theexposure to the risk of obsolescence or incompatibility of these technologieswith those of our customers or suppliers; our ability to maintain effectivesecurity measures for our computer and communications systems; and failures ordelays in the operation of our computer or communications systems;

 

·                          consolidationin the pharmaceutical industry and the other industries in which our customersoperate;

 

·                          ourability to successfully maintain historic effective tax rates;

 

·                          ourability to maintain and defend our intellectual property rights in jurisdictionsaround the world;

 

·                          competition,particularly in the markets for pharmaceutical information and consulting andservices;

 

·                          regulatory,legislative and enforcement initiatives to which our customers in thepharmaceutical industry are or may become subject restricting the prices thatmay be charged for prescription or other pharmaceutical products or the mannerin which such products may be marketed or sold; and

 

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·                          terroristactivity, epidemics, credit market disruptions or other conditions that coulddisrupt commerce, the threat of any such conditions, and responses to andresults of such conditions and threats, including but not limited to effects,domestically and/or internationally, on us, our personnel and facilities, ourcustomers and suppliers, financial markets and general economic conditions.

 

Consequently, all of theforward-looking statements we make in this document are qualified by theinformation contained herein, including, but not limited to, the informationcontained under this heading, “Risk Factors” and our Condensed ConsolidatedFinancial Statements (Unaudited) and notes thereto for the three months ended March 31,2009 and by the material set forth under the headings “Business” and “RiskFactors” in our Annual Report on Form 10-K for the year ended December 31,2008.  We are under no obligation topublicly release any revision to any forward-looking statement contained orincorporated herein to reflect any future events or occurrences.

 

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**Item 3. Quantitative and Qualitative Disclosures About Market Risk**

 

There has been nosignificant change in our exposure to market risk during the three months endedMarch 31, 2009. For a discussion of our exposure to market risk, refer toItem 7A, Quantitative and Qualitative Disclosures About Market Risk, inour 2008 Annual Report on Form 10-K.

 

**Item 4.Controls and Procedures**

 

(a)          Evaluation of Disclosure Controls and Procedures

 

The Company maintainsdisclosure controls and procedures that are designed to ensure that informationrequired to be disclosed in the reports that the Company files or submits tothe SEC under the Securities Exchange Act of 1934, as amended (the “ExchangeAct”), is recorded, processed, summarized and reported within the time periodsspecified in the SEC’s rules and forms, and that such information isaccumulated and communicated to the Company’s management, including itsprincipal executive and principal financial officers, or persons performingsimilar functions, as appropriate, to allow timely decisions regarding requireddisclosure.

 

The Company’s ChiefExecutive Officer and Chief Financial Officer have evaluated the effectivenessof the Company’s disclosure controls and procedures (as such term is defined inRules 13a-14c and 15d-14c under the Exchange Act) as of March 31,2009 (the “Evaluation Date”). Based on such evaluation, such officers haveconcluded that, as of the Evaluation Date, the Company’s disclosure controlsand procedures are effective to ensure that information required to bedisclosed by the Company in the reports that the Company files or submits underthe Exchange Act is recorded, processed, summarized and reported within thetime periods specified in the SEC’s rules and forms and to ensure thatinformation required to be disclosed by the Company in the reports that theCompany files or submits under the Exchange Act is accumulated and communicatedto the Company’s management, including its principal executive and principalfinancial officers, or persons performing similar functions, as appropriate toallow timely decisions regarding required disclosure.

 

(b)         Changes in Internal Controlover Financial Reporting

 

Therehave been no changes in the Company’s internal control over financial reportingthat occurred during the period covered by this report that have materiallyaffected, or are reasonably likely to materially affect, the Company’s internalcontrol over financial reporting.

 

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**PART II. OTHER INFORMATION**

 

**Item 1. Legal Proceedings**

 

Information in response to this Item is incorporated by reference tothe information set forth in “Note 7. Contingencies” in the Notes to theCondensed Consolidated Financial Statements (Unaudited) included in Part I,Item 1 of this Quarterly Report on Form 10-Q.

 

**Item1A. Risk Factors**

 

There have been no materialchanges to the risk factors disclosed in Part I, Item 1A of our AnnualReport on Form 10-K for the fiscal year ended December 31, 2008,except as follows:

 

**Law restricting the use ofinformation may restrict our product and service offerings.**

 

Weprovide several product and service offerings to clients in the U.S. thatinvolve the license, use and transfer of prescriber-identifiable informationfor commercial purposes.  New Hampshire,Vermont and Maine have passed laws placing certain restrictions on the license,use or transfer of such information for commercial purposes.  We have challenged all three laws in Federalcourt, asking the courts to declare these laws unconstitutional.

 

·                  With respect to the New Hampshire law, theFederal District Court in Concord, New Hampshire ruled on April 30, 2007that the law violated the First Amendment and was therefore unconstitutionaland enjoined its enforcement.  However,that decision was recently overturned by the U.S. Court of Appeals for theFirst Circuit, which declared the law constitutional.  The appeals court vacated the lower court’sinjunction and the New Hampshire statute became effective on February 9,2009.  On March 27, 2009, we filed apetition for certiorari to the U.S. Supreme Court asking that the Supreme Courtreview the appeals court’s decision in this matter.  We are currently awaiting the Supreme Court’sdecision on whether to hear the case.  Wehave modified our offerings and believe we are operating in compliance with theNew Hampshire law.

 

·                  With respect to the Maine law, the FederalDistrict Court in Bangor, Maine issued a preliminary injunction on December 21,2007, prohibiting enforcement of the Maine law. The Maine Attorney General appealed the preliminary injunction ruling tothe U.S. Court of Appeals for the First Circuit, but then agreed to stay thedistrict court proceedings and the appeal pending the outcome of the NewHampshire case.

 

·                  With respect to the Vermont law, the FederalDistrict Court in Brattleboro, Vermont held a full trial ending on August 1,2008. On April 23, 2009 the court issued its decision upholding theVermont law. The data restrictions in the Vermont law are scheduled to becomeeffective on July 1, 2009.

 

Thesethree states collectively represent approximately one percent of prescriptionactivity in the United States, so the potential financial impact of these lawson our business, financial condition and results of operations is not expectedto be material.  However, there have beena significant number of state legislative initiatives over the past severalyears that seek to impose similar restrictions on the commercial use ofprescriber-identifiable information (including sixteen states currentlyconsidering such legislation as of April 24, 2009).  We are unable to predict whether and in whatform these initiatives will 

 

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continueor whether additional states or the Federal government will seek to enactsimilar or more restrictive legislation or regulation of such information.  In addition, while we will continue to seekto adapt our products and service offerings (including consulting and servicesofferings) to comply with the requirements of these laws, there can be noassurance that our efforts to adapt our offerings will be successful andprovide the same financial contribution to us. There can also be no assurance that these kinds of legislativeinitiatives will not adversely affect our ability to generate or assemble dataor to develop or market current or future offerings, which could, over time,result in a material adverse impact on our revenues, net income and earningsper share.

 

**Item 2.  Unregistered Sales of Equity Securities andUse of Proceeds**

 
| **Period**                | ** ** | **Total  Number of  Shares  Purchased** | ** ** | **Average  Price  Paid per  Share** | ** ** | **Total Number of  Shares Purchased  Under Publicly  Announced Programs** | ** ** | **Maximum Number of  Shares that May Yet  Be Purchased Under  the Programs (1)** | ** ** |
|---------------------------|------------|----------------------------------------------|------------|------------------------------------------|------------|----------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------|------------|
|                      |       |                                         |       |                                     |       |                                                                                               |       |                                                                                                                          |       |
| January 1-31,  2009  |       | —                                       |       | —                                   |       | —                                                                                             |       | 9,505,300                                                                                                                     |       |
| February 1-28,  2009 |       | —                                       |       | —                                   |       | —                                                                                             |       | 9,505,300                                                                                                                     |       |
| March 1-31,  2009    |       | —                                       |       | —                                   |       | —                                                                                             |       | 9,505,300                                                                                                                     |       |
|                      |       |                                         |       |                                     |       |                                                                                               |       |                                                                                                                          |       |
| **Total**                 |       | —                                       |       | —                                   |       | —                                                                                             |       | 9,505,300                                                                                                                     |       |

 

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| (1) | In  December 2007, the Board of Directors authorized a stock repurchase  program to buy up to 20,000,000 shares. As of March 31, 2009, 9,505,300  shares remained available for repurchase under the December 2007 program.  Unless terminated earlier by resolution of our Board of Directors, this  program will expire when we have repurchased all shares authorized for  repurchase thereunder. See Note 12 of our Notes to Condensed Consolidated  Financial Statements (Unaudited) for further details. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

**Item5.  Other Information**

 

On April 28,2009, the Human Resources Committee of the Board of Directors approved acontinuation of certain benefits to Gilles Pajot, our Executive Vice Presidentand Chief Operating Officer, relating to his work assignment in the UnitedStates.  Under his employment agreement, certain expatriate benefitsexpire on May 7, 2009.  We provide these benefits to this executive,a citizen of France, as an inducement to him to work in the UnitedStates.  The expatriate benefits approved for continuation through May 31,2010 are (i) an annual commercial flight home plus commercial flightsnecessitated by family emergencies; (ii) tax preparation for U.S. taxes; (iii) theexecutive’s monthly allowance for housing; (iv) continuedautomobile lease until July 2009; and (v) a tax “gross-up”payment for the expatriate benefits.   Certain expiring benefits,including tax equalization payments, will not continue after May 7, 2009.

 

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**Item 6. Exhibits**

** **

(a)           Exhibits

 
| **Exhibit  Number** | ** ** | **Description of Exhibits**                                                                            |
|---------------------|------------|--------------------------------------------------------------------------------------------------------|
| 10.1                |       | IMS Health Incorporated  Long-Term Incentive Program (as amended and restated February 10, 2009). |
|                |       |                                                                                                   |
| 31.1                |       | CEO 302 Certification  pursuant to Rule 13a-14(a)/15d-14(a).                                      |
|                |       |                                                                                                   |
| 31.2                |       | CFO 302 Certification  pursuant to Rule 13a-14(a)/15d-14(a).                                      |
|                |       |                                                                                                   |
| 32.1                |       | Joint CEO/CFO  Certification Required Under Section 906 of the Sarbanes-Oxley Act of  2002.       |

 

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**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
|                   |   | IMS Health Incorporated                            |
|------------------------|--------|----------------------------------------------------|
|                   |   |                                               |
|                   |   |                                               |
|                   | By:    | /s/ Leslye G. Katz                                 |
| Date: May 1, 2009 |   | Leslye G. Katz                                     |
|                   |   | Senior Vice President  and Chief Financial Officer |
|                   |   | (principal financial  officer)                     |
|                   |   |                                               |
|                   |   |                                               |
|                   |   | /s/ Harshan Bhangdia                               |
| Date: May 1, 2009 |   | Harshan Bhangdia                                   |
|                   |   | Vice President,  Controller                        |
|                   |   | (principal accounting  officer)                    |

 

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# **EXHIBIT INDEX**

 
| **Exhibit   Number** | ** ** | **Description of Exhibits**                                                                            |
|---------------------------|------------|--------------------------------------------------------------------------------------------------------|
| 10.1                      |       | IMS Health Incorporated  Long-Term Incentive Program (as amended and restated February 10, 2009). |
|                      |       |                                                                                                   |
| 31.1                      |       | CEO 302 Certification  pursuant to Rule 13a-14(a)/15d-14(a).                                      |
|                      |       |                                                                                                   |
| 31.2                      |       | CFO 302 Certification  pursuant to Rule 13a-14(a)/15d-14(a).                                      |
|                      |       |                                                                                                   |
| 32.1                      |       | Joint CEO/CFO  Certification Required Under Section 906 of the Sarbanes-Oxley Act of  2002.       |

 

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