Table of Contents

 

 

 

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

----

 

**FORM 10-Q**

 

----

 

**(MarkOne)**

 
| **x** | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|--------------------------------------------------------------------------------------------------------|

 

**For the quarterly period ended August 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 number001-32511**

** **

----

 

**IHSINC.**

(Exact name of registrant as specified in its charter)

 

| **Delaware**                                                    | ** ** | **13-3769440**                      |
|-----------------------------------------------------------------|------------|-------------------------------------|
| (State or Other Jurisdiction of  Incorporation or Organization) |       | (IRS Employer   Identification No.) |

 

**15Inverness Way East**

**Englewood,CO 80112**

(Address of Principal Executive Offices)

 

**(303)790-0600**

(Registrant’s telephone number, including area code)

 

----

 

Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.   x YES  o NO

 

Indicate by check mark whetherthe registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and postedpursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during thepreceding 12 months (or for such shorter period that the registrant wasrequired to submit and post such files).  oYES  o NO

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seedefinitions of “large accelerated filer,” and “accelerated filer,” and smallerreporting company in Rule 12b-2 of the Exchange Act.

 
| Large accelerated filer x                     | Accelerated filer o         |
|-----------------------------------------------|-----------------------------|
|                                          |                        |
| Non-accelerated filer o                       | Smaller Reporting Company o |
| (Do not check if a smaller reporting company) |                        |

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Act).   o YES  x NO

 

As of August 31,2009, there were 63,247,630shares of our Class A Common Stockoutstanding.

 

 

 

----

Table of Contents

 

**TABLE OFCONTENTS**

 
| ** **       | ** **                                                                                  | **Page**   |
|------------------|---------------------------------------------------------------------------------------------|------------|
| **PART I**  | ** **                                                                                  | ** ** |
| Item 1.          | Financial Statements                                                                        | 3          |
| Item 2.          | Management’s  Discussion and Analysis of Financial Condition and Results of Operations | 18         |
| Item 3.          | Quantitative  and Qualitative Disclosures About Market Risk                                 | 25         |
| Item 4.          | Controls and  Procedures                                                                    | 25         |
|             |                                                                                        |       |
| **PART II** | ** **                                                                                  | ** ** |
| Item 1.          | Legal Proceedings                                                                           | 25         |
| Item 1A.         | Risk Factors                                                                                | 26         |
| Item 2.          | Unregistered  Sales of Equity Securities and Use of Proceeds                                | 26         |
| Item 3.          | Defaults Upon  Senior Securities                                                            | 26         |
| Item 4.          | Submission of  Matters to a Vote of Security Holders                                        | 26         |
| Item 5.          | Other Information                                                                           | 26         |
| Item 6.          | Exhibits                                                                                    | 26         |
|             |                                                                                        |       |
| **SIGNATURE**    | 27                                                                                          |

 

2

----

Table of Contents

 

**PART I. FINANCIAL INFORMATION**

Item 1.Financial Statements

 

**IHS INC.**

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

** **

**(Inthousands except share data)**

 
| ** **                                                                                                                                                                                                                                               | ** ** | **As of  August 31, 2009** | ** ** | **As of  November 30, 2008** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                                                                                                                                                                                               | ** ** | **(Unaudited)**                      | ** ** | **(Audited)**                               | ** ** |
| **Assets**                                                                                                                                                                                                                                               | ** ** | ** **                           | ** ** | ** **                                  | ** ** |
| Current  assets:                                                                                                                                                                                                                                         |       |                                 |       |                                        |       |
| Cash  and cash equivalents                                                                                                                                                                                                                               |       | $                                    | 118,471    |                                        | $          | 31,040 |   |
| Accounts  receivable, net                                                                                                                                                                                                                                |       | 167,190                              |       | 207,815                                     |       |
| Deferred  subscription costs                                                                                                                                                                                                                             |       | 35,682                               |       | 35,948                                      |       |
| Deferred  income taxes                                                                                                                                                                                                                                   |       | 28,317                               |       | 28,801                                      |       |
| Other                                                                                                                                                                                                                                                    |       | 15,885                               |       | 14,213                                      |       |
| Total  current assets                                                                                                                                                                                                                                    |       | 365,545                              |       | 317,817                                     |       |
| Non-current  assets:                                                                                                                                                                                                                                     |       |                                 |       |                                        |       |
| Property  and equipment, net                                                                                                                                                                                                                             |       | 68,910                               |       | 59,578                                      |       |
| Equity  investments in joint venture                                                                                                                                                                                                                     |       | —                               |       | 56,139                                      |       |
| Intangible  assets, net                                                                                                                                                                                                                                  |       | 294,761                              |       | 285,902                                     |       |
| Goodwill,  net                                                                                                                                                                                                                                           |       | 828,375                              |       | 705,077                                     |       |
| Prepaid  pension asset                                                                                                                                                                                                                                   |       | 11,533                               |       | 8,768                                       |       |
| Other                                                                                                                                                                                                                                                    |       | 3,082                                |       | 2,899                                       |       |
| Total  non-current assets                                                                                                                                                                                                                                |       | 1,206,661                            |       | 1,118,363                                   |       |
| Total  assets                                                                                                                                                                                                                                            |       | $                                    | 1,572,206  |                                        | $          | 1,436,180 |   |
| **Liabilities and stockholders’ equity**                                                                                                                                                                                                            | ** ** | ** **                           | ** ** | ** **                                  | ** ** |
| Current  liabilities:                                                                                                                                                                                                                                    |       |                                 |       |                                        |       |
| Short-term  debt                                                                                                                                                                                                                                         |       | $                                    | 77,274     |                                        | $          | 96,020 |   |
| Accounts  payable                                                                                                                                                                                                                                        |       | 20,002                               |       | 35,084                                      |       |
| Accrued  compensation                                                                                                                                                                                                                                    |       | 30,500                               |       | 39,083                                      |       |
| Accrued  royalties                                                                                                                                                                                                                                       |       | 13,925                               |       | 24,769                                      |       |
| Other  accrued expenses                                                                                                                                                                                                                                  |       | 42,746                               |       | 58,831                                      |       |
| Income  tax payable                                                                                                                                                                                                                                      |       | 4,200                                |       | 3,994                                       |       |
| Deferred  subscription revenue                                                                                                                                                                                                                           |       | 309,750                              |       | 288,145                                     |       |
| Total  current liabilities                                                                                                                                                                                                                               |       | 498,397                              |       | 545,926                                     |       |
| Accrued  pension liability                                                                                                                                                                                                                               |       | 7,066                                |       | 6,778                                       |       |
| Long-term  debt                                                                                                                                                                                                                                          |       | —                               |       | —                                      |       |
| Accrued  post-retirement benefits                                                                                                                                                                                                                        |       | 6,577                                |       | 8,852                                       |       |
| Deferred  income taxes                                                                                                                                                                                                                                   |       | 76,497                               |       | 65,749                                      |       |
| Other  liabilities                                                                                                                                                                                                                                       |       | 11,714                               |       | 7,820                                       |       |
| Commitments  and contingencies                                                                                                                                                                                                                           |       |                                 |       |                                        |       |
| Stockholders’  equity:                                                                                                                                                                                                                              |       |                                 |       |                                        |       |
| Class A  common stock, $0.01 par value per share, 80,000,000 shares  authorized, 64,745,908 and 64,090,207 shares issued, 63,247,630 and  62,802,179 shares outstanding at August 31, 2009 and  November 30, 2008, respectively |       | 647                                  |       | 641                                         |       |
| Additional  paid-in capital                                                                                                                                                                                                                              |       | 459,821                              |       | 408,007                                     |       |
| Treasury  stock, at cost: 1,498,278 and 1,288,028 shares at August 31, 2009  and November 30, 2008, respectively                                                                                                                          |       | (74,154                              | )          | (64,632                                     | )          |
| Retained  earnings                                                                                                                                                                                                                                       |       | 677,983                              |       | 584,219                                     |       |
| Accumulated  other comprehensive loss                                                                                                                                                                                                                    |       | (92,342                              | )          | (127,180                                    | )          |
| Total  stockholders’ equity                                                                                                                                                                                                                         |       | 971,955                              |       | 801,055                                     |       |
| Total  liabilities and stockholders’ equity                                                                                                                                                                                                         |       | $                                    | 1,572,206  |                                        | $          | 1,436,180 |   |

 

See accompanying notes.

 

3

----

Table of Contents

 

**IHS INC.**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

** **

**(In thousands except per-share amounts)**

** **
| ** **                                                                                                                                                                                                     | ** ** | **Three Months Ended August 31,** | ** ** | **Nine Months Ended August 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                                                                                                                                                                     | ** ** | **2009**                                              | ** ** | **2008**                                             | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                                                                                                                                                                                                     | ** ** | **(Unaudited)**                                       | ** ** |
| **Revenue:**                                                                                                                                                                                                   |       |                                                  |       |                                                 |       |   |   |   |   |
| Products                                                                                                                                                                                                       |       | $                                                     | 213,505    |                                                 | $          | 182,032 |   | $ | 618,533 |   | $ | 524,317 |   |
| Services                                                                                                                                                                                                       |       | 25,980                                                |       | 25,402                                               |       | 91,639 |   | 89,087 |   |
| Total revenue                                                                                                                                                                                                  |       | 239,485                                               |       | 207,434                                              |       | 710,172 |   | 613,404 |   |
| **Operating expenses:**                                                                                                                                                                                        |       |                                                  |       |                                                 |       |   |   |   |   |
| Cost of revenue:                                                                                                                                                                                               |       |                                                  |       |                                                 |       |   |   |   |   |
| Products                                                                                                                                                                                                       |       | 87,078                                                |       | 74,700                                               |       | 251,771 |   | 216,502 |   |
| Services                                                                                                                                                                                                       |       | 14,670                                                |       | 16,641                                               |       | 50,808 |   | 57,179 |   |
| Total cost of revenue (includes stock-based compensation expense of $450,  $391, $1,910 and $1,078 for the three and nine months ended  August 31, 2009 and 2008, respectively)            |       | 101,748                                               |       | 91,341                                               |       | 302,579 |   | 273,681 |   |
| Selling, general and administrative (includes stock-based compensation expense of $12,371;  $9,961; $42,352 and $32,352 for the three and nine months ended  August 31, 2009 and 2008, respectively) |       | 79,369                                                |       | 73,036                                               |       | 248,423 |   | 217,845 |   |
| Depreciation and amortization                                                                                                                                                                                  |       | 12,771                                                |       | 9,675                                                |       | 36,031 |   | 28,181 |   |
| Restructuring charge (credit)                                                                                                                                                                                  |       | —                                                |       | 12,479                                               |       | (416 | ) | 12,479 |   |
| Gain on sales of assets                                                                                                                                                                                        |       | —                                                |       | —                                               |       | — |   | (119 | ) |
| Net periodic pension and post-retirement benefits                                                                                                                                                              |       | (679                                                  | )          | (1,082                                               | )          | (2,057 | ) | (3,261 | ) |
| Other expense (income), net                                                                                                                                                                                    |       | 60                                                    |       | (2,106                                               | )          | (409 | ) | (3,242 | ) |
| Total operating expenses                                                                                                                                                                                       |       | 193,269                                               |       | 183,343                                              |       | 584,151 |   | 525,564 |   |
| **Operating income**                                                                                                                                                                                           |       | 46,216                                                |       | 24,091                                               |       | 126,021 |   | 87,840 |   |
| Interest income                                                                                                                                                                                                |       | 219                                                   |       | 754                                                  |       | 782 |   | 2,668 |   |
| Interest expense                                                                                                                                                                                               |       | (416                                                  | )          | (363                                                 | )          | (1,677 | ) | (1,342 | ) |
| Non-operating (loss) income, net                                                                                                                                                                               |       | (197                                                  | )          | 391                                                  |       | (895 | ) | 1,326 |   |
| Income from continuing operations before income  taxes, equity investments and minority interests                                                                                                         |       | 46,019                                                |       | 24,482                                               |       | 125,126 |   | 89,166 |   |
| Provision for income taxes                                                                                                                                                                                     |       | (11,313                                               | )          | (4,585                                               | )          | (29,218 | ) | (25,609 | ) |
| Income from continuing operations before equity  investments and minority interests                                                                                                                       |       | 34,706                                                |       | 19,897                                               |       | 95,908 |   | 63,557 |   |
| Income from equity investment                                                                                                                                                                                  |       | —                                                |       | 1,169                                                |       | — |   | 2,213 |   |
| Minority interests                                                                                                                                                                                             |       | —                                                |       | (42                                                  | )          | (2,144 | ) | (57 | ) |
| **Net income**                                                                                                                                                                                                 |       | $                                                     | 34,706     |                                                 | $          | 21,024 |   | $ | 93,764 |   | $ | 65,713 |   |
| Net  income per share:                                                                                                                                                                                         |       |                                                  |       |                                                 |       |   |   |   |   |
| Basic  (Class A common stock for 2009; Class A and  Class B common stock for 2008*)                                                                                                        |       | $                                                     | 0.55       |                                                 | $          | 0.34 |   | $ | 1.49 |   | $ | 1.06 |   |
| Diluted  (Class A common stock for 2009; Class A and  Class B common stock for 2008*)                                                                                                      |       | $                                                     | 0.54       |                                                 | $          | 0.33 |   | $ | 1.47 |   | $ | 1.04 |   |
| Weighted  average shares:                                                                                                                                                                                      |       |                                                  |       |                                                 |       |   |   |   |   |
| Basic  (Class A common stock for 2009; Class A and  Class B common stock for 2008*)                                                                                                        |       | 63,160                                                |       | 61,892                                               |       | 62,998 |   | 62,028 |   |
| Diluted  (Class A common stock for 2009; Class A and  Class B common stock for 2008*)                                                                                                      |       | 64,024                                                |       | 62,770                                               |       | 63,837 |   | 62,947 |   |

 

----

*Note that in September 2008,the holder of the Class B common stock elected to convert these sharesone-for-one to Class A common stock, after which no shares of Class Bcommon stock were outstanding.

 

See accompanying notes.

 

4

----

Table of Contents

 

**IHS INC.**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

** **

**(In thousands)**

 
| ** **                                                                       | ** ** | **Nine Months Ended August 31,** | ** ** |
|----------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                                       | ** ** | **2009**                                        | ** ** | **2008** | ** ** |
| ** **                                                                       | ** ** | **(Unaudited)**                                 | ** ** |
| **Operating activities**                                                         | ** ** | ** **                                      | ** ** | ** ** | ** ** |
| Net income                                                                       |       | $                                               | 93,764     |   | $ | 65,713 |   |
| Reconciliation of net income to net cash provided  by operating activities: |       |                                            |       |   |   |
| Depreciation and amortization                                                    |       | 36,031                                          |       | 28,181 |   |
| Stock-based compensation expense                                                 |       | 44,262                                          |       | 33,430 |   |
| Gain on sales of assets, net                                                     |       | —                                          |       | (119 | ) |
| Impairment of assets                                                             |       | —                                          |       | 323 |   |
| Excess tax benefit from stock-based compensation                                 |       | (9,796                                          | )          | (1,509 | ) |
| Distributions from equity-method investment                                      |       | —                                          |       | 2,603 |   |
| Non-cash net periodic pension and post-retirement  benefits                      |       | (3,004                                          | )          | (4,685 | ) |
| Undistributed earnings of equity-method  investments, net                        |       | —                                          |       | (2,213 | ) |
| Minority interests                                                               |       | 497                                             |       | 57 |   |
| Deferred income taxes                                                            |       | 11,380                                          |       | 2,082 |   |
| Change in assets and liabilities:                                                |       |                                            |       |   |   |
| Accounts receivable, net                                                         |       | 50,793                                          |       | 24,555 |   |
| Other current assets                                                             |       | 1,541                                           |       | (2,881 | ) |
| Accounts payable                                                                 |       | (18,196                                         | )          | (15,437 | ) |
| Accrued expenses                                                                 |       | (36,036                                         | )          | (16,503 | ) |
| Income taxes                                                                     |       | (1,308                                          | )          | (2,615 | ) |
| Deferred subscription revenue                                                    |       | 2,038                                           |       | 26,501 |   |
| Other liabilities                                                                |       | 733                                             |       | 617 |   |
| **Net cash provided by operating activities**                                    |       | 172,699                                         |       | 138,100 |   |
| **Investing activities**                                                         | ** ** | ** **                                      | ** ** | ** ** | ** ** |
| Capital expenditures on property and equipment                                   |       | (17,872                                         | )          | (8,155 | ) |
| Acquisitions/consolidation of businesses, net of  cash acquired                  |       | (62,985                                         | )          | (130,878 | ) |
| Intangible assets acquired                                                       |       | —                                          |       | (4,000 | ) |
| Change in other assets                                                           |       | 818                                             |       | (5,721 | ) |
| Settlements of forward contracts                                                 |       | 952                                             |       | — |   |
| Sales and maturities of investments                                              |       | —                                          |       | 10,500 |   |
| Proceeds from sales of assets                                                    |       | —                                          |       | 140 |   |
| **Net cash used in investing  activities**                                       |       | (79,087                                         | )          | (138,114 | ) |
| **Financing activities**                                                         | ** ** | ** **                                      | ** ** | ** ** | ** ** |
| Proceeds from borrowings                                                         |       | 94,000                                          |       | 50,000 |   |
| Repayment of borrowings                                                          |       | (113,266                                        | )          | (53,099 | ) |
| Excess tax benefit from stock-based compensation                                 |       | 9,796                                           |       | 1,509 |   |
| Proceeds from the exercise of employee stock  options                            |       | 2,044                                           |       | — |   |
| Repurchases of common stock                                                      |       | (9,522                                          | )          | (56,886 | ) |
| **Net cash used in financing  activities**                                       |       | (16,948                                         | )          | (58,476 | ) |
| Foreign exchange impact on cash balance                                          |       | 10,767                                          |       | (2,515 | ) |
| Net increase (decrease) in cash and cash  equivalents                            |       | 87,431                                          |       | (61,005 | ) |
| Cash and cash equivalents at the beginning of the  period                        |       | 31,040                                          |       | 148,484 |   |
| Cash and cash equivalents at the end of the period                               |       | $                                               | 118,471    |   | $ | 87,479 |   |

 

See accompanying notes.

 

5

----

Table of Contents

 

**IHS INC.**

**CONDENSED CONSOLIDATED STATEMENT OF CHANGES INSTOCKHOLDERS’ EQUITY**

 

**(In thousands)**

 
| ** **                                  | ** ** | **Shares of  Class A  Common  Stock** | ** ** | **Class A  Common  Stock** | ** ** | **Additional  Paid-In  Capital** | ** ** | **Treasury  Stock** | ** ** | **Retained  Earnings** | ** ** | **Accumulated  Other  Comprehensive  Loss** | ** ** | **Total**  | ** ** |
|---------------------------------------------|------------|-------------------------------------------------|------------|---------------------------------|------------|----------------------------------|------------|---------------------|------------|------------------------|------------|---------------------------------------------|------------|------------|------------|
| ** **                                  | ** ** | ** **                                      | ** ** | ** **                      | ** ** | ** **                       | ** ** | ** **          | ** ** | ** **             | ** ** | ** **                                  | ** ** | ** ** | ** ** |
| **Balance at  November 30, 2008** |       | 62,802                                          |       | $                               | 641        |                             | $          | 408,007             |       | $                      | (64,632    | )                                           | $          | 584,219    |       | $ | (127,180 | ) | $ | 801,055 |   |
| Stock-based award activity                  |       | 446                                             |       | 6                               |       | 45,197                           |       | (9,522              | )          | —                 |       | —                                      |       | 35,681     |       |
| Excess tax benefit on vested shares         |       | —                                          |       | —                          |       | 6,617                            |       | —              |       | —                 |       | —                                      |       | 6,617      |       |
| Net income                                  |       | —                                          |       | —                          |       | —                           |       | —              |       | 93,764                 |       | —                                      |       | 93,764     |       |
| Other comprehensive income:                 |       |                                            |       |                            |       |                             |       |                |       |                   |       |                                        |       |       |       |
| Foreign currency translation adjustments    |       | —                                          |       | —                          |       | —                           |       | —              |       | —                 |       | 34,838                                      |       | 34,838     |       |
| Comprehensive income, net of tax       |       | —                                          |       | —                          |       | —                           |       | —              |       | —                 |       | —                                      |       | 128,602    |       |
| **Balance at August 31, 2009**         |       | 63,248                                          |       | $                               | 647        |                             | $          | 459,821             |       | $                      | (74,154    | )                                           | $          | 677,983    |       | $ | (92,342 | ) | $ | 971,955 |   |

 

See accompanying notes.

 

6

----

Table of Contents

 

**IHS INC.**

**NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

 

**1.**     Basisof Presentation and Significant Accounting Policies

 

***Nature ofOperations***

 

IHS Inc.(IHS, the Company, we, our, or us) is a publicly traded Delaware corporation.IHS is a leading provider and comprehensive source of Critical Information andInsight in a sizable global market. Our customers rely on our products andservices to facilitate crucial decision-making, support key processes, andimprove productivity. At the heart of our products and services is dataobtained from public sources, third parties, and our own proprietary databases.We transform that data into Critical Information and Insight that is bothuseful to our customers and available where and when they make criticalbusiness decisions. The data becomes Critical Information when we combine itwith our proprietary and third-party technology to create graphical userinterfaces, search and navigation tools, and online delivery systems or wedeliver as individual documents. We further transform that information intoInsight products and services with analysis and interpretation from our teamsof experts.

 

Weserve some of the world’s largest corporations across multiple industries, aswell as governments and other organizations, in more than 100 countries. Ourprimary operations outside the United States are in the United Kingdom, Canada,Switzerland and China. We have structured our business around our customers andthe geographies in which they reside: **Americas**(which includes the United States, Canada, and Latin America); **EMEA** (Europe, the Middle East, and Africa,with India also included in the region), and **APAC**(the Asia Pacific region, which includes many countries such as China, Japan,South Korea, Malaysia, and Australia). This allows us to tailor and expand thesolutions we offer to meet the unique needs of our customers both globally andin local markets.

 

Inaddition to structuring our business around the regions, we have targeted fourspecific information “domains”—Energy, Product Lifecycle, Security, andEnvironment. Since these four information domains represent areas where ourcustomers have needs for Critical Information and Insight, we use these domainsto set priorities and design our business objectives. The information that ourcustomers need to address their complex business issues continues to convergeat the intersection of the information domains that we serve.  We have categorized these products andservices as “Intersection” and have not allocated them to any specificdomain.  As we continue to deliverCritical Information and Insight in those four information domains, we prepareour financial reports and analyze our business across our three geographicreportable segments: **Americas**, **EMEA**, and **APAC**.

 

***ConsolidationPolicy***

*** ***

The consolidated financialstatements include the accounts of all wholly-owned and majority-ownedsubsidiaries. All significant intercompany accounts and transactions have beeneliminated.Investments in unconsolidated affiliated companies are accounted for under theequity method and are included in “Equity Investments in Joint Venture” in theaccompanying Condensed Consolidated Balance Sheets. We generally utilize theequity method of accounting when we have a non-controlling ownership interestof between 20% and 50% in an entity, provided we are able to exercisesignificant influence over the investee’s operations.  See Note 2 for discussion related to theconsolidation of Lloyd’s Register-Fairplay joint venture that was effective December 1,2008 and the subsequent acquisition of the remaining interest in the jointventure effective June 17, 2009.

 

***UnauditedCondensed Consolidated Financial Statements***

*** ***

The accompanying unauditedcondensed consolidated financial statements reflect all adjustments, consistingof normal recurring accruals, which are necessary for a fair presentation ofthe financial position, results of operations and cash flows for the periodspresented. The accompanying condensed consolidated financial statements includeour accounts and the accounts of our majority-owned domestic and foreignsubsidiaries.  All significantintercompany transactions and balances have been eliminated in consolidation.These condensed consolidated financial statements should be read in conjunctionwith the consolidated financial statements for the year ended November 30,2008.  The results of operations for thethree and nine months ended August 31, 2009, are not necessarilyindicative of the results that may be achieved for the full fiscal year andcannot be used to indicate financial performance for the entire year.

 

The year-end condensed consolidatedbalance sheet data was derived from the audited November 30, 2008, balancesheet.

 

***ResultsSubject to Seasonal Variations***

*** ***

Historically,our business has had seasonal aspects. However, with the continued organicgrowth in our subscription-based business model relative to other revenuestreams combined with several acquisitions in recent years, our seasonalaspects have diminished. Our first quarter has historically benefited from theinclusion of the results from CERAWeek, an annual energy executivegathering.  CERAWeek is scheduled for oursecond quarter in 2010.

 

7

----

Table of Contents

 

***Use ofEstimates***

 

The preparation of interimcondensed consolidated financial statements in conformity with accountingprinciples generally accepted in the United States requires us to makeestimates and assumptions that affect the amounts reported and disclosed in thefinancial statements and the accompanying notes. Significant estimates have beenmade in areas that include revenue recognition, useful lives of fixed andintangible assets, allocation of purchase price to acquired assets andliabilities, the recoverability of intangible assets and goodwill, income andother taxes, pension and post-retirement benefits, contingent liabilities andstock-based compensation. Actual results could differ from those estimates.

 

***Reclassification***

 

***Certain prior-year balances have been reclassified toconform to current-year presentation.***

 

***IncomeTaxes***

 

Our effective quarterly rate is estimatedbased upon the effective tax rate expected to be applicable for the full fiscalyear.

 

Our effective tax rate for the firstthree quarters of 2009 was 23.4% compared to 28.7% for the prior yearperiod.  The 2009 rate reflects a fullyear of beneficial impact of the internal legal entity reorganization withinEMEA completed in the third quarter of 2008 as well as benefits recognized fromthe successful outcome of tax rulings in certain jurisdictions.

 

Asof August 31, 2009, the total amount of unrecognized tax benefits was $1.5million, of which less than $0.1 million related to interest. The $0.2 milliondecrease in unrecognized tax benefits during the first nine months of 2009 wasprimarily attributable to the release of reserves during the third quarter of2009 due to the expiration of audit statutes.

 

We are subject to taxation and fileincome tax returns in the U.S. and in many foreign jurisdictions. For U.S.federal and Swiss income tax purposes, all years prior to 2006 are effectivelyclosed. For United Kingdom income tax purposes, all years prior to 2006 areeffectively closed.  For Canadian incometax purposes, years prior to 2005 are closed.

 

The open tax years contain matters thatcould be subject to differing interpretations of applicable tax laws andregulations as it relates to the amount and/or timing of income, deductions andtax credits. Although the outcome of tax audits is always uncertain, we believethat adequate amounts of tax and interest have been provided for anyadjustments that are expected to result from an audit of the open taxyears.  Although timing of the resolutionand/or closure of audits is highly uncertain, we do not believe it isreasonably possible that our unrecognized tax benefits will materially changein the next 12 months.

 

***Evaluation of Subsequent Events***

 

We have evaluated subsequent eventsthrough September 24, 2009, the date the financial statements were issued.

 

***New Accounting Pronouncements***

 

In December 2007,the Financial Accounting Standards Board (FASB) issued Statement of FinancialAccounting Standards (SFAS) No. 141(R), *BusinessCombinations* (SFAS No. 141(R)) and SFAS No. 160, *Accounting and Reporting of Noncontrolling Interestin Consolidated Financial Statements, an amendment of ARB No. 51*  (SFAS No. 160). These new standards willsignificantly change the accounting for and reporting of business combinationtransactions and noncontrolling (minority) interests in consolidated financialstatements. SFAS Nos. 141(R) and 160 are required to be adoptedsimultaneously and are effective for the first annual reporting periodbeginning on or after December 15, 2008. Thus, we are required to adoptthese standards on December 1, 2009, the first day of our 2010 fiscalyear. Earlier adoption is prohibited. We will adopt SFAS No. 141(R) andSFAS No. 160 in the first quarter of fiscal 2010 and we do not expect theadoption will have a material effect on our consolidated financial position orresults of operations.

 

In April 2009,the FASB issued FASB Staff Position (FSP) SFAS No. 141(R)-1, *Accounting for Assets Acquired and LiabilitiesAssumed in a Business Combination That Arise from Contingencies*(FSP 141(R)-1), to amend and clarify the initial recognition andmeasurement, subsequent measurement and accounting, and related disclosuresarising from contingencies in a business combination under SFAS 141(R). Underthe new guidance, assets acquired and liabilities assumed in a businesscombination that arise from contingencies should be recognized at fair value onthe acquisition date if fair value can be determined during the measurementperiod. If fair value can not be determined, companies should typically accountfor the acquired contingencies using existing guidance. We will adopt FSP141(R)-1 along with SFAS 141(R) in the first quarter of fiscal 2010 and wedo not expect the adoption will have a material effect on our consolidatedfinancial position or results of operations.

 

In May 2009,the FASB issued FASB Statement No. 165, *SubsequentEvents**(*SFAS 165).SFAS 165 establishes general standards of accounting for and disclosure ofevents that occur after the balance sheet date but before financial statementsare issued or are available to be issued. Specifically, SFAS 165 provides:

 

8

----

Table of Contents

 

·      The period after the balance sheet date during whichmanagement of a reporting entity should evaluate events or transactions thatmay occur for potential recognition or disclosure in the financial statements;

 

·      The circumstances under which an entity shouldrecognize events or transactions occurring after the balance sheet date in itsfinancial statements; and

 

·      The disclosures that an entity should make aboutevents or transactions that occurred after the balance sheet date.

 

SFAS 165 is effective forinterim or annual financial periods ending after June 15, 2009, and shallbe applied prospectively. We prospectively adopted SFAS 165 as of September 1,2009. We are deemed a public entity under SFAS 165; hence, the companyevaluates subsequent events through the date the financial statements areissued.

 

In June 2009,the FASB issued SFAS No. 166, *Accountingfor Transfers of Financial Assets, an amendment of FASB Statement No. 140*(SFASNo. 166), which results in the removal of the concept of aqualifying special-purpose entity.  SFAS No. 166is effective as of the beginning of each reporting entity’s first annualreporting period that begins after November 15, 2009.  We do not expect the adoption will have a materialeffect on our consolidated financial position or results of operations.

 

In June 2009,the FASB issued SFAS No. 167, *Amendmentsto FASB Interpretation No. 46(R),*which addresses the effectsof eliminating the qualifying special-purpose entity. SFAS No. 167 iseffective as of the beginning of each reporting entity’s first annual reportingperiod that begins after November 15, 2009,  We do not expect the adoption will have amaterial effect on our consolidated financial position or results ofoperations.

 

In June 2009,the FASB issued SFAS Statement No. 168, *TheFASB Accounting Standards Codification**TM** and the Hierarchy of Generally AcceptedAccounting Principles — a replacement of FASB Statement No. 162 (*SFAS 168)*.*SFAS 168 establishes the *FASB AccountingStandards Codification**TM** *(Codification) as the single source of authoritativeU.S. GAAP recognized by the FASB to be applied by nongovernmental entities inthe preparation of financial statements in conformity with U.S. GAAP. Rules andinterpretive releases of the SEC under authority of federal securities laws arealso sources of authoritative U.S. GAAP for SEC registrants. SFAS 168 and theCodification are effective for financial statements issued for interim andannual periods ending after September 15, 2009. The Codificationsupersedes all existing non-SEC accounting and reporting standards. All othernon-grandfathered non-SEC accounting literature not included in theCodification is deemed non-authoritative. Following SFAS 168, the FASB will notissue new standards in the form of Statements, FASB Staff Positions, orEmerging Issues Task Force Abstracts. Instead, the FASB will issue AccountingStandards Updates, which will serve only to: (a) update the Codification; (b) providebackground information about the guidance; and (c) provide the bases forconclusions on the change(s) in the Codification. Amendments to theCodification are made by issuing a “FASB Accounting Standards Update” that willdisplay an issue date expressed as the year with number sequence. The adoptionof this standard and the codification is not expected to have a material effecton our consolidated financial position or results of operations.

 

**2.****    ****Business Combination**

 

On March 3, 2008, we acquired Prime PublicationsLimited (Prime), which owned a 50% interest in the Lloyd’s Register-FairplayLimited (LRF) joint venture, a leading source of global maritimeinformation.  LRF is the pre-eminentbrand name in the maritime information industry and the only organization thatprovides comprehensive details of the current world merchant fleet (tankers,cargo, carrier and passenger ships) and a complete range of products andservices to assist the world’s maritime community.  The investment in LRF was the primary assetof Prime.  IHS accounted for the jointventure under the equity method of accounting from March 2008 through November 30,2008.  As of December 1, 2008, weobtained an additional 0.1%, bringing us to a 50.1% controlling interest in thejoint venture and accordingly began consolidating LRF within our results.  On June 17, 2009, we acquired theremaining 49.9% of LRF from Lloyd’s Register giving us 100% ownership ofLRF.  The remaining 49.9% interest wasacquired for approximately $64.0 million.

 

9

----

Table of Contents

 

The impact ofconsolidating our controlling interest in LRF as of December 1, 2008 andthe subsequent acquisition of the remaining interest in the joint ventureeffective June 17, 2009 was as follows (previously the December 1,2008 individual assets net of liabilities were classified within the equitymethod investment balance):

 
| ** **                  | ** ** | **December 1, 2008** | ** ** | **June 17, 2009** | ** ** |
|-----------------------------|------------|---------------------------|------------|------------------------|------------|
| ** **                  | ** ** | **(In thousands)**   | ** ** |
| Assets:                     |       |                      |       |                   |       |
| Current assets              |       | $                         | 5,597      |                   | $          | — |   |
| Property and equipment      |       | 553                       |       | —                 |       |
| Intangible assets           |       | 11,407                    |       | 18,218                 |       |
| Goodwill                    |       | 53,267                    |       | 50,908                 |       |
| Total assets                |       | 70,824                    |       | 69,126                 |       |
| Liabilities:                |       |                      |       |                   |       |
| Current liabilities         |       | 10,487                    |       | —                 |       |
| Deferred taxes              |       | 1,872                     |       | 5,101                  |       |
| Other long-term liabilities |       | 2,253                     |       | —                 |       |
| Total liabilities           |       | 14,612                    |       | 5,101                  |       |
| Net                         |       | $                         | 56,212     |                   | $          | 64,025 |   |

 

**3.**     **Commitments and Contingencies**

 

We are a party to various legalproceedings that arise in the ordinary course of business.  In the opinion of management, none of theseactions, either individually or in the aggregate, is expected to have amaterial adverse affect on our financial condition, liquidity or results ofoperations.

 

**4.**     **Other Comprehensive Income**

 

**Ourcomprehensive income for the three and nine months ended August 31, 2009and 2008 was as follows:**

 
| ** **                              | ** ** | **Three Months Ended August 31,** | ** ** | **Nine Months Ended August 31,** | ** ** |
|-----------------------------------------|------------|-------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                              | ** ** | **2009**                                              | ** ** | **2008**                                             | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                              | ** ** | **(In thousands)**                               | ** ** |
| Net income                              |       | $                                                     | 34,706     |                                                 | $          | 21,024 |   | $ | 93,764 |   | $ | 65,713 |   |
| Other comprehensive income (loss):      |       |                                                  |       |                                                 |       |   |   |   |   |
| Foreign currency translation adjustment |       | 4,692                                                 |       | (32,042                                              | )          | 34,838 |   | (37,752 | ) |
| Total comprehensive income              |       | $                                                     | 39,398     |                                                 | $          | (11,018 | ) | $ | 128,602 |   | $ | 27,961 |   |

 

**5.**     **Restructuring****Charges (Credits)**

 

*2008 Restructuring*

 

Duringthe third quarter of 2008, we executed a restructuring initiative whichprimarily affected the Americas and EMEA segments. One-time, involuntarybenefit arrangements and other exit costs are accounted for under the provisionsof SFAS No. 146, *Accounting for CostsAssociated with Exit or Disposal Activities*. Costs arising under ourdefined benefit pension plans from providing enhanced benefits are accountedfor under the provisions of SFAS No. 88, *Employers’Accounting for Settlements and Curtailments of Defined Benefit Pension Plansand for Termination Benefits*. Restructuring and related expensesconsisted of direct and incremental costs associated with restructuring andrelated activities, including severance, outplacement and other employeerelated benefits; facility closure including non-cash expenses related to fixedasset and leasehold improvement write-offs; and legal expenses associated withemployee terminations which were incurred during the third quarter of 2008.

 

Thisinitiative was undertaken to further the realignment of our resources aroundour regional organizational structure and to further transform ourknowledge-based data accumulation operations to ensure continuous improvementin the quality of the Critical Information and Insight we deliver to ourcustomers. During the course of the restructuring, we reduced our aggregateworkforce by approximately 7%, eliminated certain contractor positions andclosed certain offices.

 

10

----

Table of Contents

 

Therestructuring charge was incurred in its entirety during the third quarter of2008. Approximately $5.8 million of the charge related to our Americassegment, $6.3 million pertained to our EMEA segment and $0.4 millionrelated to shared services.  The majorityof the liability was paid during 2008 and the remaining liability at November 30,2008 was $1.0 million.  This remainingbalance was substantially paid as of August 31, 2009.  An over-accrual of $0.4 million was reversedduring the first nine months of 2009.

 

*Global Insight Restructuring*

 

Relatedto the acquisition of Global Insight in October 2008, we established aplan to streamline the operations of Global Insight and eliminate redundanciesas a result of this acquisition. This plan contemplated certain reductions inpersonnel as well as certain facility consolidations related to thisacquisition.  We initially established a$13.0 million liability for restructuring costs in the opening balance sheet. Of this initial amount, $8.2 million was for employee severance and othertermination benefits and $4.8 million related to facility closure costs. During 2009, management refined its restructuring plan which resulted ina revised estimated liability of $10.5 million, consisting of $6.7 million foremployee severance and $3.8 million for facility closures.  The $2.5 million reduction of the liabilitywas recorded against goodwill.  Through August 31,2009, we paid $4.2 million of the employee severance and other terminationbenefits and $0.1 million of the facility closure costs resulting in aremaining liability balance of $6.2 million as of August 31, 2009.

 

**6.**     Stock-based Compensation

 

On August 31,2009, we had one share-based compensation plan: the Amended and Restated IHSInc. 2004 Long-Term Incentive Plan (LTIP). The LTIP provides for the grant ofnon-qualified stock options, incentive stock options, stock appreciationrights, restricted stock, restricted stock units, performance units andperformance shares, cash-based awards, other stock based awards and coveredemployee annual incentive awards. The 2004 Directors Stock Plan, a sub-planunder the LTIP, provides for the grant of restricted stock and restricted stockunits to non-employee directors as defined in that plan. We believe that suchawards better align the interests of our employees and non-employee directorswith those of our shareholders.

 

Wehave authorized a maximum of 11.25 million shares, less the number of sharesrelating to any award granted and outstanding.

 

Stock-basedcompensation expense that has been charged against income for the plan was asfollows:

 
| ** **                          | ** ** | **Three Months Ended August 31,** | ** ** | **Nine Months Ended August 31,** | ** ** |
|-------------------------------------|------------|-------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                          | ** ** | **2009**                                              | ** ** | **2008**                                             | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                          | ** ** | **(In thousands)**                               | ** ** |
| Cost of revenue                     |       | $                                                     | 450        |                                                 | $          | 391 |   | $ | 1,910 |   | $ | 1,078 |   |
| Selling, general and administrative |       | 12,371                                                |       | 9,961                                                |       | 42,352 |   | 32,352 |   |
| Stock-based compensation expense    |       | $                                                     | 12,821     |                                                 | $          | 10,352 |   | $ | 44,262 |   | $ | 33,430 |   |

 

Totalincome tax benefit recognized in the statement of operations for share-basedcompensation arrangements was as follows:

 
| ** **         | ** ** | **Three Months Ended August 31,** | ** ** | **Nine Months Ended August 31,** | ** ** |
|--------------------|------------|-------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **         | ** ** | **2009**                                              | ** ** | **2008**                                             | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **         | ** ** | **(In thousands)**                               | ** ** |
| Income tax benefit |       | $                                                     | 4,742      |                                                 | $          | 3,830 |   | $ | 16,375 |   | $ | 12,369 |   |
|                    |            |                                                       |            |                                                      |            |  |  |  |  |  |  |  |  |

 

Nocompensation cost was capitalized during the three and nine months ended August 31,2009 and August 31, 2008.

 

*Nonvested Stock.*  Share awards vest from nine months to fouryears. Share awards are generally subject to either cliff vesting or gradedvesting. The fair value of nonvested stock is based on the fair value of ourcommon stock on the date of grant. We amortize the value of share awards toexpense over the vesting period on a straight-line basis. Approximately half ofour outstanding awards are performance based. For those awards, an evaluationis made each quarter as to the likelihood of the performance criteria beingmet. Compensation expense is then adjusted to reflect the number of sharesexpected to vest and the cumulative vesting period met to date. Additionally,we estimate forfeitures at the grant date and recognize compensation cost basedon the number of awards expected to vest. There may be adjustments in futureperiods if the likelihood of meeting performance criteria changes or if actualforfeitures differ from our estimates. Our forfeiture rate is based uponhistorical experience as well as anticipated employee turnover consideringcertain qualitative factors.

 

Totalcompensation expense related to nonvested awards, both share awards and stockoptions, not yet recognized was $54.4 million as of August 31, 2009, witha weighted-average recognition period of approximately 1.5 years.

 

11

----

Table of Contents

 

Asummary of the status of our nonvested shares as of August 31, 2009, andchanges during the nine months ended August 31, 2009, was as follows:

 
| ** **                       | ** ** | **Shares**              | ** ** | **Weighted-  Average Grant  Date Fair Value** | ** ** |
|----------------------------------|------------|-------------------------|------------|--------------------------------------------------------------|------------|
| ** **                       | ** ** | **(In thousands)** | ** ** | ** **                                                   | ** ** |
| Balances, November 30, 2008 |       | 2,176                   |       | $                                                            | 41.81      |   |
| Granted                          |       | 1,088                   |       | $                                                            | 43.19      |   |
| Vested                           |       | (659                    | )          | $                                                            | 39.24      |   |
| Forfeited                        |       | (93                     | )          | $                                                            | 46.27      |   |
| Balances, August 31, 2009   |       | 2,512                   |       | $                                                            | 45.42      |   |

 

Thetotal fair value of nonvested stock that vested during the nine months ended August 31,2009, was $29.7 million based on the weighted-average fair value on thevesting date and $25.9 million based on the weighted-average fair value onthe date of grant.

 

*Stock Options.*  Option awards are generally granted with anexercise price equal to the fair market value of our stock at the date ofgrant.  Options outstanding as of August 31,2009 either cliff vest after 4 years of continuous service or vest in agraded fashion over three years of continuous service and have 8-yearcontractual terms. Certain option and share awards provide for acceleratedvesting if there is a change in control (as defined in the plan).

 

Thefollowing table summarizes changes in outstanding stock options during the ninemonths ended August 31, 2009, as well as options that are vested andexpected to vest and stock options exercisable at August 31, 2009:

 
| ** **                                           | ** ** | **Shares**              | ** ** | **Weighted-  Average  Exercise  Price** | ** ** | **Weighted-  Average  Remaining  Contractual  Term (years)** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
|------------------------------------------------------|------------|-------------------------|------------|-----------------------------------------|------------|-------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                           | ** ** | **(In thousands)** | ** ** | ** **                              | ** ** | ** **                                                        | ** ** | **(In thousands)**         | ** ** |
| Outstanding at November 30, 2008                |       | 275                     |       | $                                       | 35.18      |                                                              | 5.5        |                            | $          | 543 |   |
| Granted                                              |       | —                  |       | —                                  |       |                                                              |       |                            |       |
| Exercised                                            |       | (63                     | )          | 32.30                                   |       |                                                              |       |                            |       |
| Forfeited                                            |       | (7                      | )          | 37.65                                   |       |                                                              |       |                            |       |
| Outstanding at August 31, 2009                  |       | 205                     |       | $                                       | 35.99      |                                                              | 5.3        |                            | $          | 2,540 |   |
| Vested and expected to vest at August 31,  2009 |       | 205                     |       | $                                       | 35.99      |                                                              | 5.3        |                            | $          | 2,540 |   |
| Exercisable at August 31, 2009                  |       | 101                     |       | $                                       | 37.65      |                                                              | —     |                            | $          | 1,082 |   |

 

Theaggregate intrinsic value amounts in the table above represent the differencebetween the closing price of our common stock on August 31, 2009, whichwas $48.40, and the exercise price, multiplied by the number of in-the-moneystock options as of the same date. This represents the benefit that would havebeen received by the stock option holders if they had exercised all their stockoptions on August 31, 2009. In future periods, this amount will changedepending on fluctuations in our stock price. The total intrinsic value ofstock options exercised during the nine months ended August 31, 2009 was$0.6 million.

 

**7.**     **Debt**

 

OnSeptember 7, 2007, we entered into an amended and restated creditagreement (the Revolver). The $385 million unsecured revolving creditagreement allows us, under certain conditions, to increase the facility to amaximum of $500 million. The agreement expires in September 2012.

 

Theinterest rates for borrowing under the Revolver are based upon our LeverageRatio, which is the ratio of Consolidated Funded Indebtedness to rolling fourquarter Consolidated Earnings Before Interest Expense, Taxes, Depreciation andAmortization (EBITDA), as defined in the Revolver. The rate ranges from theapplicable LIBOR plus 50 basis points to 125 basis points or the agent bank’sbase rate. A commitment fee is payable periodically and ranges from 10 to 25basis points based upon our Leverage Ratio. The Revolver contains certainfinancial and other covenants, including limitations on capital leaseobligations and maximum Leverage and Interest Coverage Ratios, as defined inthe Revolver.

 

Asof August 31, 2009, we were in compliance with all of the covenants in theagreement and had $70.0 million of outstanding borrowings with an annualinterest rate of 0.81%.  In addition, wehad outstanding letters of credit totaling approximately $1.3 million asof August 31, 2009.

 

12

----

Table ofContents

 

As of August 31, 2009, we also had $7.3 million of non-interest bearingnotes that were issued to the sellers of Prime. These notes are due upon demandand are therefore recorded in “Short-term Debt” in the accompanying CondensedConsolidated Balance Sheets.

 

**8.**                 **Pensions and Postretirement Benefits**

 

Wehave defined-benefit plans and defined-contribution plans. Our defined-benefitplans consist of a non-contributory retirement plan for all of our U.S.employees with at least one year of service (U.S. RIP), a pension plan thatcovers certain employees of one of our United Kingdom-based subsidiaries (U.K.RIP), and a supplemental income plan (SIP) for certain Company executives.

 

Our net periodic pension (income) expense wascomprised of the following:

 
| ** **                                      | ** ** | **Three Months Ended August 31, 2009** | ** ** | **Three Months Ended August 31, 2008** | ** ** |
|-------------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| ** **                                      | ** ** | **U.S.  RIP**                          | ** ** | **U.K.  RIP**                          | ** ** | **SIP** | ** ** | **Total** | ** ** | **U.S.  RIP** | ** ** | **U.K.  RIP** | ** ** | **SIP** | ** ** | **Total** | ** ** |
| ** **                                      | ** ** | **(In thousands)**                     | ** ** |
| Service costs incurred                          |       | $                                      | 1,728      |                                   | $          | 139 |   | $ | 58 |   | $ | 1,925 |   | $ | 1,572 |   | $ | 238 |   | $ | 72 |   | $ | 1,882 |   |
| Interest costs on projected benefit obligation  |       | 3,230                                  |       | 419                                    |       | 123 |   | 3,772 |   | 2,999 |   | 539 |   | 130 |   | 3,668 |   |
| Expected return on plan assets                  |       | (5,227                                 | )          | (459                                   | )          | — |   | (5,686 | ) | (5,368 | ) | (566 | ) | — |   | (5,934 | ) |
| Amortization of prior service cost              |       | (118                                   | )          | —                                 |       | 11 |   | (107 | ) | (118 | ) | — |   | 11 |   | (107 | ) |
| Amortization of actuarial loss                  |       | —                                 |       | —                                 |       | 21 |   | 21 |   | — |   | — |   | 47 |   | 47 |   |
| Amortization of transitional obligation/(asset) |       | (57                                    | )          | —                                 |       | 12 |   | (45 | ) | (142 | ) | — |   | 10 |   | (132 | ) |
| Net periodic pension benefit (income) expense   |       | $                                      | (444       | )                                      | $          | 99 |   | $ | 225 |   | $ | (120 | ) | $ | (1,057 | ) | $ | 211 |   | $ | 270 |   | $ | (576 | ) |

 
| ** **                                      | ** ** | **Nine Months Ended August 31, 2009** | ** ** | **Nine Months Ended August 31, 2008** | ** ** |
|-------------------------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|
| ** **                                      | ** ** | **U.S.  RIP**                         | ** ** | **U.K.  RIP**                         | ** ** | **SIP** | ** ** | **Total** | ** ** | **U.S.  RIP** | ** ** | **U.K.  RIP** | ** ** | **SIP** | ** ** | **Total** | ** ** |
| ** **                                      | ** ** | **(In thousands)**                    | ** ** |
| Service costs incurred                          |       | $                                     | 5,184      |                                  | $          | 387 |   | $ | 174 |   | $ | 5,745 |   | $ | 4,716 |   | $ | 714 |   | $ | 216 |   | $ | 5,646 |   |
| Interest costs on projected benefit obligation  |       | 9,690                                 |       | 1,166                                 |       | 369 |   | 11,225 |   | 8,997 |   | 1,617 |   | 358 |   | 10,972 |   |
| Expected return on plan assets                  |       | (15,681                               | )          | (1,278                                | )          | — |   | (16,959 | ) | (16,097 | ) | (1,690 | ) | — |   | (17,787 | ) |
| Amortization of prior service cost              |       | (354                                  | )          | —                                |       | 33 |   | (321 | ) | (354 | ) | — |   | 33 |   | (321 | ) |
| Amortization of actuarial loss                  |       | —                                |       | —                                |       | 63 |   | 63 |   | — |   | — |   | 141 |   | 141 |   |
| Amortization of transitional obligation/(asset) |       | (171                                  | )          | —                                |       | 38 |   | (133 | ) | (426 | ) | — |   | 30 |   | (396 | ) |
| Net periodic pension benefit (income) expense   |       | $                                     | (1,332     | )                                     | $          | 275 |   | $ | 677 |   | $ | (380 | ) | $ | (3,164 | ) | $ | 641 |   | $ | 778 |   | $ | (1,745 | ) |

 

13

----

Tableof Contents

 

Our net periodic post-retirement income was comprisedof the following for the three and nine months ended August 31:

 
| ** **                                  | ** ** | **Three Months Ended August 31,** | ** ** | **Nine Months Ended August 31,** | ** ** |
|---------------------------------------------|------------|-----------------------------------|------------|----------------------------------|------------|
| ** **                                  | ** ** | **2009**                          | ** ** | **2008**                         | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                                  | ** ** | **(In thousands)**                | ** ** |
| Service costs incurred                      |       | $                                 | 14         |                             | $          | 25 |   | $ | 42 |   | $ | 75 |   |
| Interest costs                              |       | 158                               |       | 158                              |       | 474 |   | 474 |   |
| Amortization of prior service amounts       |       | (807                              | )          | (807                             | )          | (2,421 | ) | (2,419 | ) |
| Amortization of net actuarial loss          |       | 76                                |       | 118                              |       | 228 |   | 354 |   |
| Net periodic post-retirement benefit income |       | $                                 | (559       | )                                | $          | (506 | ) | $ | (1,677 | ) | $ | (1,516 | ) |

** **

**9.**              Earningsper Share

** **

Earnings per common share (EPS) arecomputed in accordance with SFAS No. 128, *Earnings per Share*.Basic EPS is computed by dividing net income by the weighted average number ofcommon shares outstanding during the period. Diluted EPS reflects the potentialdilution that could occur if securities or other contracts to issue commonstock were exercised or converted into common shares.

 

Our authorized capital stockconsists of 80,000,000 shares of Class A common stock.

 

For the period ended August 31, 2008, we used the two-class method forcomputing basic and diluted EPS amounts. For the period ended August 31, 2009,there was a single class of stock for the purposes of calculating EPS. Weightedaverage common shares outstanding were calculated as follows:

 
| ** **                                   | ** ** | **Three Months Ended August 31,** | ** ** |
|----------------------------------------------|------------|-----------------------------------|------------|
| ** **                                   | ** ** | **2009**                          | ** ** | **2008** | ** ** |
| ** **                                   | ** ** | **Class A**                       | ** ** | **Class A and  Class B** | ** ** |
| ** **                                   | ** ** | **(In thousands)**                | ** ** |
| Weighted average common shares outstanding:  |       |                              |       |   |   |
| Shares used in basic per-share calculation   |       | 63,160                            |       | 61,892 |   |
| Effect of dilutive securities:               |       |                              |       |   |   |
| Deferred stock units                         |       | 56                                |       | 39 |   |
| Restricted shares                            |       | 770                               |       | 762 |   |
| Options                                      |       | 38                                |       | 77 |   |
| Shares used in diluted per-share calculation |       | 64,024                            |       | 62,770 |   |

 
| ** **                                   | ** ** | **Nine Months Ended August 31,** | ** ** |
|----------------------------------------------|------------|----------------------------------|------------|
| ** **                                   | ** ** | **2009**                         | ** ** | **2008** | ** ** |
| ** **                                   | ** ** | **Class A**                      | ** ** | **Class A and  Class B** | ** ** |
| ** **                                   | ** ** | **(In thousands)**               | ** ** |
| Weighted average common shares outstanding:  |       |                             |       |   |   |
| Shares used in basic per-share calculation   |       | 62,998                           |       | 62,028 |   |
| Effect of dilutive securities:               |       |                             |       |   |   |
| Deferred stock units                         |       | 55                               |       | 39 |   |
| Restricted shares                            |       | 750                              |       | 808 |   |
| Options                                      |       | 34                               |       | 72 |   |
| Shares used in diluted per-share calculation |       | 63,837                           |       | 62,947 |   |

 

*Share Repurchase Program*

 

During2006, our board of directors approved a program to reduce the dilutive effectsof employee equity grants, by allowing employees to surrender shares back tothe Company for a value equal to their statutory tax liability.  IHS then pays the statutory tax on behalf ofthe employee.  Additionally, our board ofdirectors periodically approves additional buyback programs whereby IHSacquires shares in the open market to more fully offset the dilutive effect ofour employee equity programs. During the three months ended August 31, 2009, weaccepted 41,198 shares surrendered by employees under the tax withholdingprogram for approximately $2.0 million, or $49.20 per share.  In the first nine months of 2009, we accepted210,250 shares surrendered by employees under the tax withholding program forapproximately $9.5 million, or $45.29 per share.  No shares were repurchased in the first ninemonths of 2009 pursuant to a share buyback program.  Since the inception of these programs, wehave withheld for tax 909,644 shares of our Class A common stock forapproximately $45.2 million, or $49.70 per share and we have repurchased1,889,557 shares for approximately $94.7 million or $50.13 per share pursuantto the stock buyback program.

 

14

----

Tableof Contents

 

**10.   Goodwilland Intangible Assets**

 

The followingtable presents details of our intangible assets, other than goodwill, as of August31, 2009:

 
| ** **                                     | ** ** | **Useful  Life** | ** ** | **Gross**  | ** ** | **Accumulated  Amortization** | ** ** | **Net**    | ** ** |
|------------------------------------------------|------------|------------------|------------|------------|------------|-------------------------------|------------|------------|------------|
| ** **                                     | ** ** | **(Years)**      | ** ** | ** ** | ** ** | **(In thousands)**            | ** ** | ** ** | ** ** |
| Intangible assets subject to amortization:     |       |             |       |       |       |                          |       |       |       |
| Information databases                          |       | 5 - 15           |       | $          | 193,490    |                          | $          | (45,591    | )          | $ | 147,899 |   |
| Customer relationships                         |       | 2 - 15           |       | 75,056     |       | (17,982                       | )          | 57,074     |       |
| Non-compete agreements                         |       | 5                |       | 5,854      |       | (5,003                        | )          | 851        |       |
| Developed computer software                    |       | 5                |       | 24,992     |       | (7,148                        | )          | 17,844     |       |
| Other                                          |       | 3 - 11           |       | 5,923      |       | (4,503                        | )          | 1,420      |       |
| Total                                          |       |             |       | 305,315    |       | (80,227                       | )          | 225,088    |       |
| Intangible assets not subject to amortization: |       |             |       |       |       |                          |       |       |       |
| Trademarks                                     |       |             |       | 68,455     |       | —                        |       | 68,455     |       |
| Perpetual licenses                             |       |             |       | 1,218      |       | —                        |       | 1,218      |       |
| Total intangible assets                        |       |             |       | $          | 374,988    |                          | $          | (80,227    | )          | $ | 294,761 |   |

 

The following table presents details of our intangible assets, otherthan goodwill, as of November 30, 2008:

 
| ** **                                     | ** ** | **Useful Life** | ** ** | **Gross**  | ** ** | **Accumulated  Amortization** | ** ** | **Net**    | ** ** |
|------------------------------------------------|------------|-----------------|------------|------------|------------|-------------------------------|------------|------------|------------|
| ** **                                     | ** ** | **(Years)**     | ** ** | ** ** | ** ** | **(In thousands)**            | ** ** | ** ** | ** ** |
| Intangible assets subject to amortization:     |       |            |       |       |       |                          |       |       |       |
| Information databases                          |       | 5 - 15          |       | $          | 176,637    |                          | $          | (27,770    | )          | $ | 148,867 |   |
| Customer relationships                         |       | 2 - 15          |       | 72,596     |       | (12,346                       | )          | 60,250     |       |
| Non-compete agreements                         |       | 5               |       | 5,851      |       | (4,098                        | )          | 1,753      |       |
| Developed computer software                    |       | 5               |       | 18,700     |       | (4,344                        | )          | 14,356     |       |
| Other                                          |       | 3 - 11          |       | 5,872      |       | (3,190                        | )          | 2,682      |       |
| Total                                          |       |            |       | 279,656    |       | (51,748                       | )          | 227,908    |       |
| Intangible assets not subject to amortization: |       |            |       |       |       |                          |       |       |       |
| Trademarks                                     |       |            |       | 56,844     |       | —                        |       | 56,844     |       |
| Perpetual licenses                             |       |            |       | 1,150      |       | —                        |       | 1,150      |       |
| Total intangible assets                        |       |            |       | $          | 337,650    |                          | $          | (51,748    | )          | $ | 285,902 |   |

 

The estimated amortization expense of intangibleassets for business combinations completed as of August 31, 2009 for each ofthe next five years is as follows:

 

| **Year**       | ** ** | **Amount**         | ** ** |
|----------------|------------|--------------------|------------|
| ** **     | ** ** | **(In thousands)** | ** ** |
| Remainder 2009 |       | $                  | 8,107      |   |
| 2010           |       | 31,589             |       |
| 2011           |       | 29,986             |       |
| 2012           |       | 28,296             |       |
| 2013           |       | 25,616             |       |
|                |            |                    |            |  |

 

Amortizationexpense of intangible assets was $9.1 million and $6.2 million for the threemonths ended August 31, 2009 and August 31, 2008, respectively.  Amortization expense of intangible assets was$24.9 million and $18.2 million for the nine months ended August 31, 2009 and August31, 2008, respectively

 

Changesin our goodwill and intangible assets from November 30, 2008 to August 31, 2009were primarily the result of the consolidation of LRF in the first quarter of2009, the subsequent acquisition of the remaining interest of the joint venturein the third quarter of 2009 and to a lesser extent the impact of foreigncurrency rates.

 

**11.**          Segment Information

** **

We prepare our financial reports and analyze our business resultswithin our three reportable geographic segments: Americas, EMEA and APAC.  This integrated global organization allowsour customers to do business with us by providing a more cohesive, consistent,and effective sales and marketing approach in each region. By structuring ourbusiness around our geographic segments, we are able to tailor and expand thesolutions we offer to meet the unique needs of our customers both globally andin local markets.

 

15

----

Table ofContents

 

Weare also able to manage our activities according to the best practices of eachregional segment. This structure provides a solid foundation for growth in eachmarket for all of our capabilities. It allows us an efficient method ofbringing new products and services to customers, and supports growth inexisting accounts and with new customers and markets.

 

Information as to the operations of our three segments is set forthbelow. Our Chairman and Chief Executive Officer represents our chief operatingdecision maker, and he evaluates segment performance based primarily on revenueand operating profit of these three segments. In addition, he also reviewsrevenue for the domains and Critical Information and Insight offerings. Theaccounting policies of our segments are the same as those described in thesummary of significant accounting policies (contained in the notes to ourconsolidated financial statements included in our 2008 Form 10-K).

 

No single customer accounted for 10% or more of our total revenue forthe period ended August 31, 2009. There are no material inter-segment revenuesfor any period presented.

 

As shown below, certain corporate transactions are not allocated to thereportable segments. Amounts not allocated include, but are not limited to,such items as, stock-based compensation expense, net periodic pension andpost-retirement benefits income, corporate-level impairments, and gain (loss)on sales of corporate assets.

 
| ** **                              | ** ** | **Americas**       | ** ** | **EMEA** | ** ** | **APAC** | ** ** | **Segment  Totals** | ** ** | **Shared  Services** | ** ** | **Consolidated  Total** | ** ** |
|-----------------------------------------|------------|--------------------|------------|----------|------------|----------|------------|---------------------|------------|----------------------|------------|-------------------------|------------|
| ** **                              | ** ** | **(In thousands)** | ** ** |
| **Three months ended August 31,  2009** |       |               |       |     |       |     |       |                |       |                 |       |                    |       |
| Revenue                                 |       | $                  | 147,682    |     | $          | 72,606   |       | $                   | 19,197     |                 | $          | 239,485                 |       | $ | — |   | $ | 239,485 |   |
| Operating income                        |       | 48,539             |       | 14,352   |       | 6,261    |       | 69,146              |       | (22,936              | )          | 46,216                  |       |
| Depreciation and amortization           |       | 7,755              |       | 4,461    |       | 27       |       | 12,243              |       | 528                  |       | 12,771                  |       |
| **Three months ended August 31,  2008** |       |               |       |     |       |     |       |                |       |                 |       |                    |       |
| Revenue                                 |       | $                  | 128,936    |     | $          | 64,665   |       | $                   | 13,833     |                 | $          | 207,434                 |       | $ | — |   | $ | 207,434 |   |
| Operating income                        |       | 37,160             |       | 6,301    |       | 4,167    |       | 47,628              |       | (23,537              | )          | 24,091                  |       |
| Depreciation and amortization           |       | 5,502              |       | 3,321    |       | 29       |       | 8,852               |       | 823                  |       | 9,675                   |       |

 
| ** **                             | ** ** | **Americas**       | ** ** | **EMEA** | ** ** | **APAC** | ** ** | **Segment  Totals** | ** ** | **Shared  Services** | ** ** | **Consolidated  Total** | ** ** |
|----------------------------------------|------------|--------------------|------------|----------|------------|----------|------------|---------------------|------------|----------------------|------------|-------------------------|------------|
| ** **                             | ** ** | **(In thousands)** | ** ** |
| **Nine months ended August 31,  2009** |       |               |       |     |       |     |       |                |       |                 |       |                    |       |
| Revenue                                |       | $                  | 444,668    |     | $          | 209,056  |       | $                   | 56,448     |                 | $          | 710,172                 |       | $ | — |   | $ | 710,172 |   |
| Operating income                       |       | 140,223            |       | 40,909   |       | 17,771   |       | 198,897             |       | (72,882              | )          | 126,021                 |       |
| Depreciation and amortization          |       | 23,161             |       | 10,956   |       | 78       |       | 34,195              |       | 1,836                |       | 36,031                  |       |
| **Nine months ended August 31,  2008** |       |               |       |     |       |     |       |                |       |                 |       |                    |       |
| Revenue                                |       | $                  | 376,328    |     | $          | 195,022  |       | $                   | 42,054     |                 | $          | 613,404                 |       | $ | — |   | $ | 613,404 |   |
| Operating income                       |       | 115,164            |       | 28,705   |       | 11,927   |       | 155,796             |       | (67,956              | )          | 87,840                  |       |
| Depreciation and amortization          |       | 15,780             |       | 10,008   |       | 101      |       | 25,889              |       | 2,292                |       | 28,181                  |       |

 

**Revenueby information domain was as follows:**

 
| ** **                | ** ** | **Three Months Ended August 31,** | ** ** | **Nine Months Ended August 31,** | ** ** |
|---------------------------|------------|-----------------------------------|------------|----------------------------------|------------|
| ** **                | ** ** | **2009**                          | ** ** | **2008**                         | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                | ** ** | **(In thousands)**                | ** ** |
| Energy revenue            |       | $                                 | 109,188    |                             | $          | 107,613 |   | $ | 335,598 |   | $ | 327,555 |   |
| Product Lifecycle revenue |       | 76,510                            |       | 72,512                           |       | 220,116 |   | 214,355 |   |
| Security revenue          |       | 27,526                            |       | 20,347                           |       | 75,681 |   | 56,112 |   |
| Environment revenue       |       | 6,319                             |       | 6,962                            |       | 20,768 |   | 15,382 |   |
| Intersection revenue      |       | 19,942                            |       | —                           |       | 58,009 |   | — |   |
| Total revenue             |       | $                                 | 239,485    |                             | $          | 207,434 |   | $ | 710,172 |   | $ | 613,404 |   |

** **

**Revenueby product category was as follows:**

 
| ** **                            | ** ** | **Three Months Ended August 31,** | ** ** | **Nine Months Ended August 31,** | ** ** |
|---------------------------------------|------------|-----------------------------------|------------|----------------------------------|------------|
| ** **                            | ** ** | **2009**                          | ** ** | **2008**                         | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                            | ** ** | **(In thousands)**                | ** ** |
| Critical Information Products revenue |       | $                                 | 140,890    |                             | $          | 141,331 |   | $ | 412,284 |   | $ | 411,001 |   |
| Critical Information Services revenue |       | 13,541                            |       | 14,501                           |       | 40,229 |   | 39,945 |   |
| Insight Products revenue              |       | 72,615                            |       | 40,701                           |       | 206,249 |   | 113,316 |   |
| Insight Services revenue              |       | 12,439                            |       | 10,901                           |       | 51,410 |   | 49,142 |   |
| Total revenue                         |       | $                                 | 239,485    |                             | $          | 207,434 |   | $ | 710,172 |   | $ | 613,404 |   |

 

16

----

**Tableof Contents**

 

**12.**          Subsequent Event

** **

**On September 17, 2009, we acquiredEnvironmental Solution Services, (ESS) for approximately $59.0 million in cash,net of cash acquired.  ESS providessoftware that enables organizations to address environmental, health, safetyand crisis management challenges more efficiently, at lower cost, whileimproving the quality and accuracy of internal and external reporting.**

 

17

----

**Table of Contents**

 

**Item 2.**    Management’sDiscussion and Analysis of Financial Condition and Results of Operations

** **

**Forward-Looking Statements**

 

We have made statements under the captions “Risk Factors,” “Management’sDiscussion and Analysis of Financial Condition and Results of Operations,” and “Businessand Properties” and in other sections of this Form 10-Q that areforward-looking statements. In some cases, you can identify these statements byforward-looking words such as “may,” “might,” “will,” “should,” “expect,” “plan,”“anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” thenegative of these terms, and other comparable terminology. Theseforward-looking statements, which are subject to risks, uncertainties, andassumptions, may include projections of our future financial performance basedon our growth strategies and anticipated trends in our business. Thesestatements are only predictions based on our current expectations andprojections about future events. There are important factors that could causeour actual results, level of activity, performance, or achievements to differmaterially from the results, level of activity, performance, or achievements expressedor implied by the forward-looking statements. In particular, you shouldconsider the risks outlined under “Risk Factors” in the 2008 Form 10-K.

 

Although we believe the expectations reflected in the forward-lookingstatements are reasonable, we cannot guarantee future results, level ofactivity, performance, or achievements. Moreover, neither we nor any otherperson assumes responsibility for the accuracy or completeness of any of theseforward-looking statements. You should not rely upon forward-looking statementsas predictions of future events.

 

We are under no duty to update any of these forward-looking statementsafter the date of this Form 10-Q to conform our prior statements to actualresults or revised expectations.

 

**Overview**

 

**Resultsof Operations**

 

IHS is a leading provider and comprehensive source of CriticalInformation and Insight in a sizable global market. Our customers rely on ourproducts and services to facilitate crucial decision-making, support keyprocesses, and improve productivity. At the heart of our products and servicesis data obtained from public sources, third parties, and our own proprietarydatabases. We transform that data into Critical Information and Insight that isboth useful to our customers and available where and when they make criticalbusiness decisions. The data is transformed into Critical Information when wecombine it with our proprietary and third-party technology to create graphicaluser interfaces, search and navigation tools, and online delivery systems or wedeliver as individual documents. We further transform that information intoInsight products and services with analysis and interpretation from our teamsof experts.

 

We sell our offerings primarily throughsubscriptions, which typically represents greater than 75% or our reportedrevenue.  As a result of oursubscription-based business model and historically high renewal rates, wegenerate recurring revenue and cash flow. We generally recognize revenue fromsubscriptions (which are usually for one-year periods) ratably over the term ofthe subscription. Subscriptions are generally paid in full within one to twomonths after the subscription period commences. As a result, the timing of ourcash flows generally precedes the recognition of revenue and income.Historically, our business has had seasonal aspects. However, with thecontinued organic growth in our subscription-based business model combined withseveral acquisitions in recent years, our seasonal aspects have diminished. Ourfirst quarter has historically benefited from the inclusion of the results fromCERAWeek, an annual energy executive gathering. CERAWeek is scheduled for the second quarter in 2010.

 

We serve some of the world’s largest corporations across multipleindustries, as well as governments and other organizations, in more than 100countries. Our primary operations outside the United States are in the UnitedKingdom, Canada, Switzerland and China. We have structured our business aroundour customers and the geographies in which they reside: **Americas** (which includes the United States,Canada, and Latin America); **EMEA**(Europe, the Middle East, and Africa, with India also included in the region),and **APAC** (the Asia Pacific region,which includes many countries such as China, Japan, South Korea, Malaysia, andAustralia). This allows us to tailor and expand the solutions we offer to meetthe unique needs of our customers both globally and in local markets.

 

Our consolidatedfinancial statements are expressed in U.S. dollars, but a portion of ourbusiness is conducted in currencies other than U.S. dollars.  Approximately 50% of our revenue istransacted outside of the United States, however, only approximately 30% of ourrevenue is transacted in a currency other than U.S. dollars.  As a result, a strengthening U.S. dollar hasa negative impact on our revenue while the impact on operating income ismitigated due to certain operating expenses denominated in currencies otherthan the U.S. dollar.

 

We have targeted four specific information “domains”—Energy, ProductLifecycle, Security, and Environment. Since these four information domainsrepresent areas where our customers have needs for Critical Information andInsight, we use these domains to set 

 

18

----

Table ofContents

 

prioritiesand design our business strategies. In addition, we have certain product linesthat intersect multiple domains. We have categorized these products andservices as Intersection and have not allocated them to any specific domain.

 

As we continue to deliver Critical Information and Insight in thesefour information domains, we prepare our financial reports and analyze ourbusiness across our three reportable geographic segments. As the informationthat our customers need to address their complex business issues continues toconverge at the intersection of the information domains that we serve, we haveorganized our management structure to a geographic focus, the point of contactwith our customers. This integrated global organization allows for ourcustomers to do business with us by providing a cohesive, consistent, andeffective sales and marketing approach in each region. By structuring our businessaround customers and the geographies in which they reside, we are able totailor and expand the solutions we offer to meet the unique needs of ourcustomers both globally and in local markets. We are also able to manage ourCritical Information and Insight activities according to the best practices ofeach. This structure provides a solid foundation for growth in each market forall of our capabilities. It allows us an efficient method of bringing newproducts and services to customers, and supports growth in existing accountsand with new customers and markets.

 

Inherent in all of our strategies is a firm commitment to put ourcustomers first in everything that we do. We believe that maintaining a disciplined “outside-in” approach willallow us to better serve our customers and our shareholders. Our primarystrategy is to achieve and strengthen a leading position in—and at theintersection of—our targeted information domains. We also intend to continuedriving margin and quality improvement through operational transformation.

 

**Business Combination**

 

**OnMarch 3, 2008, we acquired Prime Publications Limited (Prime), which owneda 50% interest in the Lloyd’s Register-Fairplay Limited (LRF) joint venture, aleading source of global maritime information. LRF is the pre-eminent brand name in the maritime information industryand the only organization that provides comprehensive details of the currentworld merchant fleet (tankers, cargo, carrier and passenger ships) and acomplete range of products and services to assist the world’s maritimecommunity.  The investment in LRF was theprimary asset of Prime.  IHS accountedfor the joint venture under the equity method of accounting from March 2008through November 30, 2008.  As of December 1,2008, we obtained an additional 0.1%, bringing us to a 50.1% controllinginterest in the joint venture and accordingly began consolidating LRF withinour results.**  On June 17, 2009, we acquiredthe remaining 49.9% of LRF from Lloyd’s Register giving us 100% ownership ofLRF.  The remaining 49.9% interest wasacquired for approximately $64.0 million.

** **

**SegmentInformation**

 
| ** **                                   | ** ** | **Americas**            | ** ** | **EMEA** | ** ** | **APAC** | ** ** | **Segment  Totals** | ** ** | **Shared  Services** | ** ** | **Consolidated  Total** | ** ** |
|----------------------------------------------|------------|-------------------------|------------|----------|------------|----------|------------|---------------------|------------|----------------------|------------|-------------------------|------------|
| ** **                                   | ** ** | **(In thousands)** | ** ** |
| **Three months ended  August 31, 2009** |       |                    |       |     |       |     |       |                |       |                 |       |                    |       |
| Revenue                                      |       | $                       | 147,682    |     | $          | 72,606   |       | $                   | 19,197     |                 | $          | 239,485                 |       | $ | — |   | $ | 239,485 |   |
| Operating income                             |       | 48,539                  |       | 14,352   |       | 6,261    |       | 69,146              |       | (22,936              | )          | 46,216                  |       |
| Depreciation and amortization                |       | 7,755                   |       | 4,461    |       | 27       |       | 12,243              |       | 528                  |       | 12,771                  |       |
| **Three months ended  August 31, 2008** |       |                    |       |     |       |     |       |                |       |                 |       |                    |       |
| Revenue                                      |       | $                       | 128,936    |     | $          | 64,665   |       | $                   | 13,833     |                 | $          | 207,434                 |       | $ | — |   | $ | 207,434 |   |
| Operating income                             |       | 37,160                  |       | 6,301    |       | 4,167    |       | 47,628              |       | (23,537              | )          | 24,091                  |       |
| Depreciation and amortization                |       | 5,502                   |       | 3,321    |       | 29       |       | 8,852               |       | 823                  |       | 9,675                   |       |
|                                         |       |                    |       |     |       |     |       |                |       |                 |       |                    |       |
| ** **                                   | ** ** | **Americas**            | ** ** | **EMEA** | ** ** | **APAC** | ** ** | **Segment  Totals** | ** ** | **Shared  Services** | ** ** | **Consolidated  Total** | ** ** |
| ** **                                   | ** ** | **(In  thousands)**     | ** ** |
| **Nine months ended  August 31, 2009**  |       |                    |       |     |       |     |       |                |       |                 |       |                    |       |
| Revenue                                      |       | $                       | 444,668    |     | $          | 209,056  |       | $                   | 56,448     |                 | $          | 710,172                 |       | $ | — |   | $ | 710,172 |   |
| Operating income                             |       | 140,223                 |       | 40,909   |       | 17,771   |       | 198,897             |       | (72,882              | )          | 126,021                 |       |
| Depreciation and amortization                |       | 23,161                  |       | 10,956   |       | 78       |       | 34,195              |       | 1,836                |       | 36,031                  |       |
| **Nine months ended  August 31, 2008**  |       |                    |       |     |       |     |       |                |       |                 |       |                    |       |
| Revenue                                      |       | $                       | 376,328    |     | $          | 195,022  |       | $                   | 42,054     |                 | $          | 613,404                 |       | $ | — |   | $ | 613,404 |   |
| Operating income                             |       | 115,164                 |       | 28,705   |       | 11,927   |       | 155,796             |       | (67,956              | )          | 87,840                  |       |
| Depreciation and amortization                |       | 15,780                  |       | 10,008   |       | 101      |       | 25,889              |       | 2,292                |       | 28,181                  |       |

 

**Revenueby information domain was as follows:**

 

19

----

Table ofContents

 
| ** **                | ** ** | **Three Months Ended August 31,** | ** ** | **Nine Months Ended August 31,** | ** ** |
|---------------------------|------------|-------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                | ** ** | **2009**                                              | ** ** | **2008**                                             | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                | ** ** | **(In thousands)**                               | ** ** |
| Energy revenue            |       | $                                                     | 109,188    |                                                 | $          | 107,613 |   | $ | 335,598 |   | $ | 327,555 |   |
| Product Lifecycle revenue |       | 76,510                                                |       | 72,512                                               |       | 220,116 |   | 214,355 |   |
| Security revenue          |       | 27,526                                                |       | 20,347                                               |       | 75,681 |   | 56,112 |   |
| Environment revenue       |       | 6,319                                                 |       | 6,962                                                |       | 20,768 |   | 15,382 |   |
| Intersection revenue      |       | 19,942                                                |       | —                                               |       | 58,009 |   | — |   |
| Total revenue             |       | $                                                     | 239,485    |                                                 | $          | 207,434 |   | $ | 710,172 |   | $ | 613,404 |   |

** **

**Revenueby product category was as follows:**

 
| ** **                            | ** ** | **Three Months Ended August 31,** | ** ** | **Nine Months Ended August 31,** | ** ** |
|---------------------------------------|------------|-------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                            | ** ** | **2009**                                              | ** ** | **2008**                                             | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                            | ** ** | **(In thousands)**                               | ** ** |
| Critical Information Products revenue |       | $                                                     | 140,890    |                                                 | $          | 141,331 |   | $ | 412,284 |   | $ | 411,001 |   |
| Critical Information Services revenue |       | 13,541                                                |       | 14,501                                               |       | 40,229 |   | 39,945 |   |
| Insight Products revenue              |       | 72,615                                                |       | 40,701                                               |       | 206,249 |   | 113,316 |   |
| Insight Services revenue              |       | 12,439                                                |       | 10,901                                               |       | 51,410 |   | 49,142 |   |
| Total revenue                         |       | $                                                     | 239,485    |                                                 | $          | 207,434 |   | $ | 710,172 |   | $ | 613,404 |   |

 

**Three Months Ended August 31, 2009 Comparedto the Three Months Ended August 31, 2008**

 

**Revenue.**  Revenue was$239 million for the quarter ended August 31, 2009, an increase of15% over the prior year. This increase was driven in part by acquisitions whichcontributed 17% and organic growth which contributed 2%.  Foreign currency rates had an adverse impactof 4%.

 

Revenue for our Americas segment was $148 million for the quarterended August 31, 2009, an increase of 15% over the prior year. Thisincrease was driven by acquisitions which added 16%.  Organic revenue was flat with organic subscriptionrevenue growing by 5%, offset by decreases in consulting, transaction and otherrevenue.  Foreign currency rates heldrevenue down by approximately 1%.

 

Revenue for our EMEA segment was $72.6 million for the quarterended August 31, 2009, compared to $64.7 million for the quarterended August 31, 2008, an increase of 12%. This increase was drivenprimarily by acquisitions which contributed 19% and organic revenue whichincreased by 3%.  The organicsubscription revenue grew 14% which was partially offset by decreases inconsulting, transaction and other revenue. Foreign currency movements adversely impacted revenue by 9%.

 

Revenue for our APAC segment was $19.2 million for the quarterended August 31, 2009, an increase of 39% over the prior year. Thisincrease was driven by acquisitions which contributed 23% and organic growthwhich contributed 19%.  The organicincrease was due primarily to growth in subscription revenue.  Foreign currency movements held revenue downby 4%.

 

Our subscription-based revenue accounted for 80% of our revenue in thequarter and, while growth in this area of the business is slowing, itexperienced an organic growth rate of 9% over the third quarter of 2008.  This growth rate was approximately 1.5% lowersequentially from the quarter ended May 31, 2009.  Our other revenue types (consulting,transaction and other revenue) have been more greatly impacted by the currentdifficult economic environment. Consulting and transaction revenue were down organically by 32% and 12%,respectively.  Revenue from other revenuetypes also decreased by 15% organically due to slower software and advertisingsales.  Cash-based sales representscompleted contracts with customers, however the revenue is deferred over thesubscription period.   This measure is aleading indicator of current sales performance.   Year-to-date “cash-based” sales, or invoicedsales of subscription products have grown over the same period prior year,however at a lower growth rate than the 9% earned revenue growth.  As a result, we expect the subscription basedrevenue growth rates to continue to decline through the fourth quarter of 2009.

 

Revenue for the Energy domain was $109 million for the quarterended August 31, 2009, an increase of 1% over the quarter ended August 31,2008. This growth was primarily due to an increase in the subscription-basedsales which was partially offset by the impact of foreign currency movementsand a decrease in consulting revenue. Product Lifecycle domain revenue was $76.5 million for the quarterended August 31, 2009, an increase of 6% over the quarter ended August 31,2008 which was primarily due to increased subscription-based revenue andpartially offset by the impact of foreign currency movements.  Revenue for the Security domain was $27.5 millionfor the quarter ended August 31, 2009, an increase of 35% over the quarterended August 31, 2008, primarily the result of the consolidation ofLRF.  Environment domain revenue was$6.3 million for the quarter ended August 31, 2009, a decrease of 9%due to a decrease in services revenue. Intersection revenue, which includesofferings that intersect multiple domains, was $19.9 million in the thirdquarter of 2009 and was entirely attributable to acquisitions.

 

20

----

Table ofContents

 

**Cost of Revenue.**  Cost of revenue was $102 million for thequarter ended August 31, 2009, an increase of 11%.  In general, our subscription-based revenuegenerates higher margins as it has a relatively fixed-based cost structurewhereas consulting and transaction revenue have comparatively lower margins dueto the variable direct costs associated with these revenue streams.   We define sales margins as revenue net ofcosts of sales, as a percentage of sales. Total sales margins improved to 57.5%from 56.0%.  Sales margins within ourAmericas segment decreased to 58.7% from 59.6% resulting primarily from the impactof the Global Insight acquisition which has a higher concentration of lowermargin consulting revenue.  Sales marginswithin our EMEA segment improved to 55.1% from 50.2% due to increased sales ofour subscription-based products which was partially offset by the impact of thelower margin Global Insight revenue.  Inaddition, the restructuring in the third quarter of 2008 resulted in reducedcosts of revenue in the Americas and EMEA segments in 2009.  Sales margins within our APAC segmentimproved to 62.5% from 58.6%.  Thisimprovement was principally due to an increase in higher marginsubscription-based products combined with a decrease in lower margin servicesand the impact of foreign currency fluctuations which have a more dramaticimpact on revenue than they do cost of revenue, resulting in marginimprovement.

 

**Selling, General and Administrative Expenses.**  Selling, general and administrative(SG&A) expenses were $79.4 million for the quarter ended August 31,2009, an increase of 9%. Stock-based compensation expense included in SG&Aincreased $2.4 million to $12.4 million. Excluding stock-basedcompensation, organic SG&A decreased by $4.1 million as we continue tocarefully control operating costs which was partially offset by increasedspending related to our quote-to-cash system implementation and otherinitiatives. Acquisitions contributed $10.7 million of the increase.Foreign currency movements decreased SG&A by $2.6 million. As apercentage of revenue and excluding stock-based compensation expense, SG&Adecreased from 30.4% for the third quarter of 2008 to 28.0% for the thirdquarter of 2009.

 

**Restructuring Charge**.  During the third quarter of 2008, we executeda restructuring initiative which primarily affected the Americas and EMEAsegments.  This initiative was undertaken to further the realignment ofour resources around our regional organizational structure and to furthertransform our knowledge-based data accumulation operations to ensure continuousimprovement in the quality of the critical information and insight we deliverto our customers.  During the course of the restructuring, we reduced ouraggregate workforce by approximately 7%, we eliminated certain contractorpositions and we closed certain offices. The restructuring charge of $12.5million was incurred in its entirety during the third quarter of 2008 and wascomprised primarily of employee severance and termination benefits. Approximately $5.8 million of the charge related to our Americas segment,$6.3 million pertained to our EMEA segment and $0.4 million relatedto corporate costs.

 

**Depreciation and Amortization Expenses.**  Depreciation and amortization expenses were$12.8 million for the quarter ended August 31, 2009, compared to$9.7 million for the quarter ended August 31, 2008, an increaseof  32% over the prior year. The increasewas primarily due to addition of depreciable and amortizable assets fromacquisitions made within the last year.

 

**Operating Income.**  Operating income was $46.2 million forthe quarter ended August 31, 2009, an increase of 92%. As a percentage ofrevenue, operating income increased to 19.3% for the quarter ended August 31,2009 from 11.6% for the quarter ended August 31, 2008.  The third quarter of 2008 was impacted by arestructuring charge of $12.5 million. Without this charge, the operating income as a percentage of revenue forthe third quarter of 2008 would have been 17.6%.

 

Operating income for our Americas segment was $48.5 million forthe quarter ended August 31, 2009, an increase of 31%. The increase wasprincipally due to the fact that the third quarter of 2008 included arestructuring charge of $5.8 million.  Inaddition, 2009 had higher sales margins.  As a percentage of revenue, Americas operating income increased to 32.9%from 28.8% in the third quarter of 2008. Without the restructuring charge, the operating income as a percentageof revenue would have been 33.3% in the third quarter of 2008.  The normalized decrease is due primarily to higherdepreciation and amortization costs related to acquisitions.

 

Operating income for our EMEA segment was $14.4 million for thequarter ended August 31, 2009, an increase of 128%. The increase wasprimarily due to the third quarter of 2008 including a restructuring charge of$6.3 million.  In addition, 2009 hadhigher sales margins.  As a percentage ofrevenue, EMEA operating income increased to 19.8% for the quarter ended August 31,2009 compared to 9.7% for the quarter ended August 31, 2008.  Without the restructuring charge, theoperating income as a percentage of revenue would have been 19.5% in the thirdquarter of 2008.

 

Operating income for our APAC segment was $6.3 million for thequarter ended August 31, 2009, an increase of 50%. Operating incomeincreased due to the increase in sales. As a percentage of revenue, APACoperating income improved to 32.6% for the quarter ended August 31, 2009from 30.1% for the quarter ended August 31, 2008.  This increase was due to the mix of productssold with higher growth of higher margin subscription-based products in thethird quarter of 2009.

 

Operating expenses for our shared services were $22.9 million forthe quarter ended August 31, 2009, a decrease of 3%. As a percentage ofrevenue, operating expenses for our shared services was 9.6% for the quarterended August 31, 2009 compared to 11.3% 

 

21

----

Table ofContents

 

forthe quarter ended August 31, 2008. The decrease was primarily due to reduced travel and other cost containmentinitiatives during 2009.

 

**Provision for Income Taxes.**  Our effective tax rate for the period ended August 31,2009 was 24.6%, compared to 18.7% for the period ended August 31,2008.  The 2008 rate reflects theyear-to-date impact of our internal legal entity reorganization within EMEAthat occurred in the third quarter of 2008 and is reflected ratably in eachquarter of 2009.

 

**NineMonths Ended August 31, 2009 Compared to the Nine Months Ended August 31,2008**

 

**Revenue.**  Revenue was$710 million for the nine months ended August 31, 2009, an increaseof 16% over the prior year. This increase was driven in part by acquisitionswhich contributed 18%, and organic growth which contributed 4%.  Foreign currency movements had an adverseimpact of 6%.  Moreover, the growth thatwe attribute to acquisitions was also negatively impacted by foreigncurrency.  When taking this intoconsideration, foreign exchange negatively impacted our overall revenue growthby approximately 8% in the first three quarters of 2009 in comparison to thefirst three quarters of 2008.

 

Revenue for our Americas segment was $445 million for the ninemonths ended August 31, 2009, an increase of 18% over the prior year. Thisincrease was driven primarily by acquisitions which contributed 17%.  Organic growth contributed 4% which was inline with overall company growth and was driven by growth in subscriptionproducts which grew 7% organically. This was partially offset by lower organicconsulting and transaction revenue. Additionally, foreign currency held down revenue by 3%.

 

Revenue for our EMEA segment was $209 million for the nine monthsended August 31, 2009, an increase of 7% over the prior year. Thisincrease was driven primarily by acquisitions which contributed 20%.  Organic revenue was flat with organicsubscription revenue growing 13%  whichwas offset by lower organic consulting and transaction revenue.  Additionally foreign currency movementsadversely impacted revenue by 13%.

 

Revenue for our APAC segment was $56.4 million for the nine monthsended August 31, 2009, an increase of 34%. This increase was driven byacquisitions which contributed 23% and organic growth which contributed 17%.The organic increase was due to growth in subscription products.   Foreign currency movements held down revenueby 6%.

 

Our subscription based revenue accounted for 78% of our revenue in thefirst three quarters of 2009, while growth in this area of the business isslowing, it experienced a 10% organic growth rate compared to the first ninemonths of 2008.   Our other revenue types(consulting, transaction and other revenue) have been more greatly impacted bythe current difficult economic environment. Transaction and consulting revenue were down organically by 17% and 33%,respectively.  In addition, other revenuedecreased 3% organically.  Cash-basedsales represents completed contracts with customers, however the revenue isdeferred over the subscription period.  This measure is a leading indicator of current sales performance.   Year-to-date “cash-based” sales, or invoicedsales of subscription products have grown over the same period prior year,however at a lower growth rate than the 10% earned revenue growth.  As a result, we expect the subscription basedrevenue growth rates to continue to decline through the fourth quarter of 2009.

 

Revenue for the Energy domain was $336 million for the nine monthsended August 31, 2009, an increase of 2% over the same period in 2008.This growth was primarily due to an increase in the subscription-based saleswhich was partially offset by unfavorable foreign currency movements and adecrease in consulting revenue.  ProductLifecycle domain revenue was $220 million for the nine months ended August 31,2009, an increase of 3% over the nine months ended August 31, 2008 whichwas primarily due to increased subscription revenue and partially offset by theimpact of foreign currency movements. Revenue for the Security domain was$75.7 million for the first three quarters of 2009, an increase of$19.6 million over the same period in 2008, which was primarily due to theconsolidation of LRF and partially offset by the impact of foreign currencymovements. Environment domain revenue was $20.8 million for the ninemonths ended August 31, 2009 compared to $15.4 million for the nine monthsended August 31, 2008.  The increasewas primarily from acquisitions. Intersection revenue, which includes productlines that intersect multiple domains, was $58.0 million in the first ninemonths of 2009 and was entirely attributable to acquisitions.

 

**Cost of Revenue.**  Cost of revenue was $303 million for thenine months ended August 31, 2009, an increase of 11%.   In general, our subscription-based revenuegenerates higher margins as it has a relatively fixed-based cost structurewhereas consulting and transaction revenue have comparatively lower margins dueto the variable direct costs associated with these revenue streams.   We define sales margins as revenue net ofcosts of sales, as a percentage of sales. Total sales margins improved to 57.4% from 55.4%. Sales margins withinour Americas segment improved to 58.8% from 58.0% resulting from increasedsales in our subscription based products and partially offset by the impact ofthe Global Insight acquisition which has a higher concentration of lower marginconsulting revenue. Sales margins within our EMEA segment improved to 54.8%from 51.5% due to increased sales of our subscription-based products andpartially offset by the impact of Global Insight acquisition.  Sales margins within our APAC segmentimproved to 62.3% from 57.7%.  Thisincrease was principally due to an increase in the higher margin subscriptionbased products combined with a decrease in lower margin services and the impactof foreign currency fluctuations which have a more dramatic 

 

22

----

Table ofContents

 

impacton revenue than they do cost of revenue.  In addition, the restructuring in the third quarter of 2008 resulted inreduced costs of revenue in the Americas and EMEA segments in 2009.

 

**Selling, General and Administrative Expenses.**  Selling, general and administrative(SG&A) expenses were $248 million for the first nine months of 2009,an increase of 14%. Stock-based compensation expense included in SG&Aincreased $10.0 million to $42.3 million. Excluding stock-basedcompensation, organic SG&A decreased $1.3 million as we continue tocarefully control operating costs. Acquisitions contributed $35.8 millionof the increase. Foreign currency movements decreased SG&A by$13.9 million.  As a percentage ofrevenue and excluding stock-based compensation expense, SG&A decreased to29.0% for the first nine months of 2009 compared to 30.2% for the first ninemonths of 2008.

 

**Restructuring Charge**.  During the third quarter of 2008, we executeda restructuring initiative which primarily affected the Americas and EMEAsegments.  This initiative was undertaken to further the realignment ofour resources around our regional organizational structure and to furthertransform our knowledge-based data accumulation operations to ensure continuousimprovement in the quality of the critical information and insight we deliverto our customers.  During the course of the restructuring, we reduced ouraggregate workforce by approximately 7%, we eliminated certain contractorpositions and we closed certain offices. The restructuring charge of $12.5million was incurred in its entirety during the third quarter of 2008 and was comprisedprimarily of employee severance and termination benefits.  Approximately$5.8 million of the charge related to our Americas segment,$6.3 million pertained to our EMEA segment and $0.4 million relatedto corporate costs.

 

**Depreciation and Amortization Expenses.**  Depreciation and amortization expenses were$36.0 million for the nine months ended August 31, 2009, an increaseof 28% over the prior year. The increase was primarily due to addition ofdepreciable and amortizable assets from acquisitions made within the last year.

 

**Operating Income.**  Operating income was $126 million for thenine months ended August 31, 2009, an increase of 44% over the prior year.As a percentage of revenue, operating income increased to 17.8% for the firstnine months of 2009 from 14.3% for the same period of 2008.  The 2008 operating income was impacted by arestructuring charge of $12.5 million. Without this charge, the operating income as a percentage of revenuewould have been 16.4% in 2008.

 

Operating income for our Americas segment was $140 million for thenine months ended August 31, 2009, an increase of 22% over the prior year.The increase was principally due to the additional revenue discussed abovecoupled with our ability to leverage a relatively fixed-cost structure with oursubscriptions-based products.  The 2008period also included a restructuring charge of $5.8 million.  As a percentage of revenue, Americasoperating income increased to 31.5% from 30.6% in the first nine months of 2008primarily due to the restructuring charge which was partially offset by anincrease in amortization. Without the restructuring charge, the operatingincome as a percentage of revenue would have been 32.2% through the thirdquarter of 2008.  The normalized decreaseof operating margins in 2009 is primarily due to the higher depreciation andamortization expense in 2009.

 

Operating income for our EMEA segment was $40.9 million for thenine months ended August 31, 2009, an increase of 43% over the prior year.This increase is primarily due to the higher growth in higher marginsubscription products in 2009 and decreases in lower margin service offeringsalong with and the $6.3 million 2008 restructuring charge.  As a percentage of revenue, EMEA operatingincome increased to 19.6% for the nine months ended August 31, 2009compared to 14.7% for the nine months ended August 31, 2008.  Without the restructuring charge, theoperating income as a percentage of revenue would have been 18.0% through thethird quarter of 2008.

 

Operating income for our APAC segment was $17.8 million for thefirst nine months of 2009, an increase of 49%. Operating income increased dueto the increase in sales. As a percentage of revenue, APAC operating incomeincreased to 31.5% for the nine months ended August 31, 2009 from 28.4%for the nine months ended August 31, 2008. This increase was due to the mix of products sold with higher growth ofhigher margin subscription-based products in 2009.

 

Operating expenses for our shared services were $72.9 million for thenine months ended August 31, 2009, an increase of 7%. This increaserelated primarily to the additional expenses associated with our acquisitions,our quote-to-cash system implementation and other initiatives.  As a percentage of revenue, operating expensesfor our shared services was 10.3% for the first nine months of 2009 compared to11.1% for the first nine months of 2008.

 

**Provision for Income Taxes.**  Our effective tax rate for the nine monthsended August 31, 2009 was 23.4%, compared to 28.7% for the nine monthsended August 31, 2008.  The 2009rate reflects discrete period tax benefits recognized from the successfuloutcome of a French tax appeal and a favorable UK tax ruling in the secondquarter of 2009.

 

**FinancialCondition**

 

**AccountsReceivable**.  Accounts receivable has decreased by $40.6million, or 20%, to $167 million compared to$208 million as of November 30, 2008.  The decreaseis attributable primarily to the seasonalityof billings.

 

23

----

Tableof Contents

 

**Accrued Compensation.**  Accrued compensation was $30.5 million as of August 31,2009, compared to $39.1 million as of November 30, 2008, a decrease of22%. The decrease was primarily attributable to disbursement of annualincentive bonuses during the first quarter partially offset by the accrualsmade for the 2009 bonus plan through August 31, 2009.

 

**Deferred Revenue.**Deferredrevenue was $310 million as of August 31, 2009, compared to $288 millionas of November 30, 2008, an increase of 8%. The increase was primarilyattributable to the timing of annual billings as well as both organic andacquisition related growth. Year-over-year growth was 17%, of which organic deferred revenueincreased 5%.

 

**Liquidity andCapital Resources**

 

As of August 31, 2009, we hadcash and cash equivalents of $118 million and $77.3 million of debt. We havegenerated strong cash flows from operations over the last few years. As aresult of these factors, as well as the remaining availability of funds underour $385.0 million credit facility, we believe we will have sufficient cash tomeet our working capital and capital expenditure needs.

 

Our future capital requirementswill depend on many factors, including the timing and extent of spending tosupport product development efforts, future acquisitions, the expansion ofsales and marketing activities, the timing of introductions of new products,changing technology, investments in our internal business applications and thecontinued market acceptance of our offerings. We could be required, or couldelect, to seek additional funding through public or private equity or debtfinancing for any possible future acquisitions. Additional funds may not be availableon terms acceptable to us or at all. We expect our capital expenditures,excluding potential acquisitions, to be approximately $23 million for 2009.

 

*Share Repurchase Program*

 

During2006, our board of directors approved a program to reduce the dilutive effectsof employee equity grants, by allowing employees to surrender shares back tothe Company for a value equal to their statutory tax liability.  IHS then pays the statutory tax on behalf ofthe employee.  Additionally, our board ofdirectors periodically approves additional buyback programs whereby IHSacquires shares in the open market to more fully offset the dilutive effect ofour employee equity programs. During the three months ended August 31,2009, we accepted 41,198 shares surrendered by employees under the taxwithholding program for approximately $2.0 million, or $49.20 per share.  In the first nine months of 2009, we accepted210,250 shares surrendered by employees under the tax withholding program forapproximately $9.5 million, or $45.29 per share.  No shares were repurchased in the first ninemonths of 2009 pursuant to a share buyback program.  Since the inception of these programs, wehave withheld for tax 909,644 shares of our Class A common stock forapproximately $45.2 million, or $49.70 per share and we have repurchased1,889,557 shares for approximately $94.7 million or $50.13 per share pursuantto the stock buyback program.

 

*Cash Flows*

* *

Net cash provided by operating activities was$173 million for thenine months ended August 31, 2009, an increase of 25%. The increasewas principally due to our business growing profitably year over year.   Additionally, bonus payments were slightlyless in the first quarter of 2009 compared to the same period in 2008 and wemade lower tax payments in 2009. Our subscription-based business modeltypically generates a high rate of cash flow and is aided by the following:

 
|   | · | positive  working capital characteristics that do not generally require substantial  working capital increases to support our growth; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                  |
|   | · | a  cash-for-tax rate that continues to trend lower than our effective tax rate;  and                                                  |
|   |   |                                                                                                                                  |
|   | · | our  well-capitalized balance sheet.                                                                                                  |

 

Thepositive cash flow impact of our growing business in the first nine months of2009 was partially offset by the outflow of cash related to our rationalizationefforts that occurred at IHS Global Insight.

 

Net cash used in investingactivities was approximately $79.1 million for the nine months ended August 31,2009, compared to $138 million for the nine months ended August 31, 2008.The change is driven primarily by the amount of acquisitions in the first ninemonths of 2008 in comparison to 2009 and new office space build-outs.

 

Net cash used in financingactivities was $16.9 million for the nine months ended August 31, 2009compared to $58.5 million for the nine months ended August 31, 2008.   Repurchases of common stock were $9.5million in the first nine months of 2009 compared to $56.9 million in the firstnine months of 2008. Net repayments on the credit facility were $10.0 millionin the first nine months of 2009 in addition to the net repayment of a portionof the notes due to the sellers of Prime of $9.3 million.

 

24

----

Table of Contents

 

*Credit Facility and Other Debt*

* *

On September 7, 2007, we entered into an amended and restatedcredit agreement (the Revolver). The $385 million unsecured revolvingcredit agreement allows us, under certain conditions, to increase the facilityto a maximum of $500 million. The agreement expires in September 2012.

 

The interest rates for borrowing under the Revolver are based upon ourLeverage Ratio, which is the ratio of Consolidated Funded Indebtedness to rollingfour quarter Consolidated Earnings Before Interest Expense, Taxes, Depreciationand Amortization (EBITDA), as defined in the Revolver. The rate ranges from theapplicable LIBOR plus 50 basis points to 125 basis points or the agent bank’sbase rate. A commitment fee is payable periodically and ranges from 10 to 25basis points based upon our Leverage Ratio. The Revolver contains certainfinancial and other covenants, including limitations on capital leaseobligations and maximum Leverage and Interest Coverage Ratios, as defined inthe Revolver.

 

As of August 31, 2009, we were in compliance with all of thecovenants in the agreement and had $70.0 million of outstanding borrowingswith an annual interest rate of 0.81%. In addition, we had outstanding letters of credit totaling approximately$1.3 million as of August 31, 2009.

 

As of August 31, 2009, we also had $7.3 million ofnon-interest bearing notes that were issued to the sellers of Prime. Thesenotes are due upon demand and are therefore recorded in “Short-term Debt” inthe accompanying Condensed Consolidated Balance Sheets.

 

**Off-Balance Sheet Transactions**

** **

We have no off-balance sheettransactions.

 

**Critical Accounting Policies**

 

Ourmanagement makes a number of significant estimates, assumptions and judgmentsin the preparation of our financial statements. See “Management’s Discussionand Analysis and Results of Operations—Critical Accounting Policies andEstimates” in our 2008 Form 10-K for a discussion of the estimates andjudgments necessary in our accounting for revenue recognition, valuation oflong-lived and intangible assets and goodwill, income taxes, pension andpost-retirement benefits, and stock-based compensation.

 

**Item 3.    Quantitativeand Qualitative Disclosure About Market Risk**

** **

Forinformation regarding our exposure to certain market risk, see Item 7A, “Quantitativeand Qualitative Disclosures About Market Risk,” in our 2008 Form 10-K.There were no material changes to our market risk exposure during the firstnine months of fiscal 2009.

 

**Item 4.    Controlsand Procedures**

** **

*(a) Evaluationof disclosure controls and procedures.*

 

Underthe supervision and with the participation of the Company’s management,including the Chief Executive Officer and Chief Financial Officer, the Companyhas evaluated the effectiveness of its disclosure controls and procedurespursuant to Rules 13a-15(e) and 15d-15(e) under the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”) as of the end of theperiod covered by this report.  Based on that evaluation, the ChiefExecutive Officer and Chief Financial Officer concluded that the Company’sdisclosure controls and procedures as defined in Rules 13a-15(e) and15d-15(e) under the Exchange Act, as amended, are effective to ensure thatinformation required to be disclosed in the reports required to be filed orsubmitted under the Exchange Act is (i) recorded, processed, summarized,and reported within the time periods specified in the Securities and ExchangeCommission’s rules and forms, and (ii) accumulated and communicatedto our management, including our Chief Executive Officer and Chief FinancialOfficer, to allow timely decisions regarding required disclosure.

 

*(b) Changesin internal control over financial reporting.*

 

Therewere no changes in our internal control over financial reporting that occurredduring the period covered by this Form 10-Q that have materially affected,or are reasonably likely to materially affect, our internal control overfinancial reporting.

 

**PART II. OTHER INFORMATION**

** **

**Item1.  Legal Proceedings**

** **

Fromtime to time, we are involved in litigation, most of which is incidental to ourbusiness. In our opinion, no litigation to which we currently are a party islikely to have a material adverse effect on our results of operations or financialcondition.

 

25

----

**Table of Contents**

 

**Item 1A.  Risk Factors**

** **

Therehave been no material changes to the risk factors associated with the businesspreviously disclosed in Part I, Item 1A of our 2008 Annual Report on Form 10-K.

 

**Item 2.  Unregistered Sales of EquitySecurities and Use of Proceeds**

** **

None.

 

**Item 3.  Defaults Upon Senior Securities**

 

None.

 

**Item 4.  Submission of Matters to a Vote ofSecurity Holders**

** **

None.

 

**Item 5.  Other Information.**

** **

None.

 

**Item 6.  Exhibits**

** **

(a)  Indexof Exhibits

 

The following exhibitsare filed as part of this report:

 
| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                 |
|---------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1*               |       | Certification  of the Chief Executive Officer Pursuant to Rules 13a-14(a) and  15d-14(a) of the Securities Exchange Act.                                                         |
| 31.2*               |       | Certification  of the Chief Financial Officer Pursuant to Rules 13a-14(a) and  15d-14(a) of the Securities Exchange Act.                                                         |
| 32.1*               |       | Certification  of the Chief Executive Officer and Chief Financial Officer Pursuant to 18  U.S.C. Section 1350, as adopted Pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002. |

 

----

*                 Filed electronically herewith.

 

26

----

**Table of Contents**

 

**SIGNATURE**

** **

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the Registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized, on September 24,2009.

 
|   | IHS INC. |
|--------|----------|
|   |     |
|   | By:      | /s/ Heather  Matzke-Hamlin |
|   |     | Name: | Heather Matzke-Hamlin |
|   |     | Title: | Senior Vice President  and Chief Accounting Officer |

 

27

----