**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

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**FORM 10-Q**

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**(Mark One)**
| **x**      | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                   |
|------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                     |
| ** ** | ** ** | **For the quarterly period ended May 31, 2007**                                                                                                                                                                                                                                                                |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                     |
| **OR**     |
| ** ** |
| **o**      | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                  |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                     |
| ** ** | ** ** | **For the transition period from                        to                      ** |

 

**Commissionfile number 001-32511**

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**IHS INC.**

(Exact name of registrant as specified in its charter)

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

 

**15 Inverness Way East**

**Englewood, CO 80112**

(Address of Principal ExecutiveOffices)

 

**(303) 790-0600**

(Registrant’stelephone number, including area code)

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Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.

x YES                o NO

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large acceleratedfiler o                    Accelerated filer x                                                                         Non-acceleratedfiler o

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theAct).

o YES                x NO

As of May 31, 2007, therewere 44,615,676 shares of our Class A Common Stock outstanding and 13,750,000shares of our Class B Common Stock outstanding.

 

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**TABLE OFCONTENTS**
| **PART I**    |   |                                                                                        |   |   |
|---------------|--------|---------------------------------------------------------------------------------------------|--------|--------|
| Item 1.       |   | Financial Statements                                                                        |   |   |
| Item 2.       |   | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |   |   |
| Item 3.       |   | Quantitative  and Qualitative Disclosures About Market Risk                                 |   |   |
| Item 4.       |   | Controls and  Procedures                                                                    |   |   |
|          |   |                                                                                        |   |   |
| **PART II**   |   |                                                                                        |   |   |
| Item 1.       |   | Legal Proceedings                                                                           |   |   |
| Item 1A.      |   | Risk  Factors                                                                               |   |   |
| Item 2.       |   | Unregistered  Sales of Equity Securities and Use of Proceeds                                |   |   |
| Item 6.       |   | Exhibits                                                                                    |   |   |
|          |   |                                                                                        |   |   |
| **SIGNATURE** |   |                                                                                        |   |   |

 

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**PART I. FINANCIAL INFORMATION**

Item 1. Financial Statements

**IHS INC.**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

**(Inthousands except share data)**
| ** **                                                                                                                                                                                                                  | ** ** | **As of  May 31, 2007** | ** ** | **As of  November 30, 2006** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                                                                                                                                                                  | ** ** | **(Unaudited)**                        | ** ** | ** **                                  | ** ** |
| **Assets**                                                                                                                                                                                                                  |       |                                   |       |                                        |       |
| Current assets:                                                                                                                                                                                                             |       |                                   |       |                                        |       |
| Cash and cash equivalents                                                                                                                                                                                                   |       | $                                      | 212,286    |                                        | $          | 180,034 |   |
| Short-term investments                                                                                                                                                                                                      |       | 23                                     |       | 2,076                                       |       |
| Accounts receivable, net                                                                                                                                                                                                    |       | 126,549                                |       | 151,300                                     |       |
| Deferred subscription costs                                                                                                                                                                                                 |       | 37,372                                 |       | 33,293                                      |       |
| Deferred income taxes                                                                                                                                                                                                       |       | 11,641                                 |       | 7,758                                       |       |
| Other                                                                                                                                                                                                                       |       | 9,801                                  |       | 6,461                                       |       |
| Total current assets                                                                                                                                                                                                        |       | 397,672                                |       | 380,922                                     |       |
| Non-current assets:                                                                                                                                                                                                         |       |                                   |       |                                        |       |
| Property and equipment, net                                                                                                                                                                                                 |       | 52,103                                 |       | 53,096                                      |       |
| Intangible assets, net                                                                                                                                                                                                      |       | 67,858                                 |       | 65,962                                      |       |
| Goodwill, net                                                                                                                                                                                                               |       | 365,214                                |       | 350,896                                     |       |
| Prepaid pension asset                                                                                                                                                                                                       |       | 93,835                                 |       | 92,488                                      |       |
| Other                                                                                                                                                                                                                       |       | 972                                    |       | 937                                         |       |
| Total non-current assets                                                                                                                                                                                                    |       | 579,982                                |       | 563,379                                     |       |
| Total assets                                                                                                                                                                                                                |       | $                                      | 977,654    |                                        | $          | 944,301 |   |
| **Liabilities and stockholders’ equity**                                                                                                                                                                               |       |                                   |       |                                        |       |
| Current liabilities:                                                                                                                                                                                                        |       |                                   |       |                                        |       |
| Short-term debt                                                                                                                                                                                                             |       | $                                      | —     |                                        | $          | 500 |   |
| Accounts payable                                                                                                                                                                                                            |       | 20,458                                 |       | 45,622                                      |       |
| Accrued compensation                                                                                                                                                                                                        |       | 19,308                                 |       | 30,788                                      |       |
| Accrued royalties                                                                                                                                                                                                           |       | 20,368                                 |       | 22,801                                      |       |
| Other accrued expenses                                                                                                                                                                                                      |       | 34,503                                 |       | 36,047                                      |       |
| Income tax payable                                                                                                                                                                                                          |       | 16,590                                 |       | 11,484                                      |       |
| Deferred subscription revenue                                                                                                                                                                                               |       | 219,815                                |       | 191,229                                     |       |
| Total current liabilities                                                                                                                                                                                                   |       | 331,042                                |       | 338,471                                     |       |
| Long-term debt                                                                                                                                                                                                              |       | 1,510                                  |       | 74                                          |       |
| Accrued pension liability                                                                                                                                                                                                   |       | 12,733                                 |       | 12,309                                      |       |
| Accrued post-retirement benefits                                                                                                                                                                                            |       | 16,731                                 |       | 18,200                                      |       |
| Deferred income taxes                                                                                                                                                                                                       |       | 5,654                                  |       | 2,788                                       |       |
| Other liabilities                                                                                                                                                                                                           |       | 5,930                                  |       | 6,891                                       |       |
| Minority interests                                                                                                                                                                                                          |       | 138                                    |       | 377                                         |       |
| Commitments and contingencies                                                                                                                                                                                               |       |                                   |       |                                        |       |
| Stockholders’ equity:                                                                                                                                                                                                  |       |                                   |       |                                        |       |
| Class A common stock, $0.01 par value per share, 80,000,000  shares authorized, 45,245,782 and 45,265,794 shares issued, 44,615,676 and  45,042,232 shares outstanding at May 31, 2007 and November 30, 2006,  respectively |       | 452                                    |       | 453                                         |       |
| Class B common stock, $0.01 par value per share,  13,750,000 shares authorized, issued and outstanding at May 31, 2007 and  November 30, 2006                                                                               |       | 138                                    |       | 138                                         |       |
| Additional paid in capital                                                                                                                                                                                                  |       | 188,678                                |       | 175,027                                     |       |
| Treasury stock, at cost: 630,106 and 223,562 shares at  May 31, 2007 and November 30, 2006, respectively                                                                                                                    |       | (23,214                                | )          | (7,551                                      | )          |
| Retained earnings                                                                                                                                                                                                           |       | 436,988                                |       | 400,029                                     |       |
| Accumulated other comprehensive loss                                                                                                                                                                                        |       | 874                                    |       | (2,905                                      | )          |
| Total stockholders’ equity                                                                                                                                                                                             |       | 603,916                                |       | 565,191                                     |       |
| Total liabilities and stockholders’ equity                                                                                                                                                                             |       | $                                      | 977,654    |                                        | $          | 944,301 |   |

 

See accompanying notes.

3

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**IHS INC.**

**CONDENSED CONSOLIDATED STATEMENTS OFOPERATIONS**

**(In thousandsexcept per-share amounts)**
| ** **                                                                                                                                                                                       | ** ** | **Three Months Ended May 31,** | ** ** | **Six Months Ended May 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                                                                                                                       | ** ** | **2007**                                           | ** ** | **2006**                                         | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                                                                                                                                                                                       | ** ** | **(Unaudited)**                                    | ** ** |
| **Revenue:**                                                                                                                                                                                     |       |                                               |       |                                             |       |   |   |   |   |
| Products                                                                                                                                                                                         |       | $                                                  | 129,136    |                                             | $          | 110,483 |   | $ | 252,115 |   | $ | 217,065 |   |
| Services                                                                                                                                                                                         |       | 25,764                                             |       | 22,372                                           |       | 55,406 |   | 45,656 |   |
| Total revenue                                                                                                                                                                                    |       | 154,900                                            |       | 132,855                                          |       | 307,521 |   | 262,721 |   |
| **Operating  expenses:**                                                                                                                                                                         |       |                                               |       |                                             |       |   |   |   |   |
| Cost of revenue:                                                                                                                                                                                 |       |                                               |       |                                             |       |   |   |   |   |
| Products                                                                                                                                                                                         |       | 50,274                                             |       | 47,851                                           |       | 99,007 |   | 93,524 |   |
| Services                                                                                                                                                                                         |       | 17,479                                             |       | 15,331                                           |       | 34,484 |   | 30,521 |   |
| Total cost of revenue (includes stock-based  compensation expense of $105, $1,071, $456 and $2,166 for the three and six  months ended May 31, 2007 and 2006, respectively)                      |       | 67,753                                             |       | 63,182                                           |       | 133,491 |   | 124,045 |   |
| Selling, general and  administrative (includes  stock-based compensation expense of $5,940 ; $3,288; $12,925 and $5,859 for  the three and six months ended May 31, 2007 and 2006, respectively) |       | 56,607                                             |       | 47,679                                           |       | 114,498 |   | 92,844 |   |
| Depreciation and amortization                                                                                                                                                                    |       | 4,921                                              |       | 3,342                                            |       | 9,501 |   | 6,712 |   |
| Restructuring and other charges                                                                                                                                                                  |       | 9                                                  |       | —                                           |       | — |   | 2 |   |
| Gain on sales of assets, net                                                                                                                                                                     |       | (5                                                 | )          | —                                           |       | (756 | ) | — |   |
| Net periodic pension and post-retirement  benefits                                                                                                                                               |       | (354                                               | )          | (1,029                                           | )          | (622 | ) | (1,545 | ) |
| Earnings in unconsolidated subsidiaries                                                                                                                                                          |       | (120                                               | )          | (102                                             | )          | (164 | ) | (130 | ) |
| Other expense (income), net                                                                                                                                                                      |       | 204                                                |       | 1,223                                            |       | (196 | ) | 820 |   |
| Total operating expenses                                                                                                                                                                         |       | 129,015                                            |       | 114,295                                          |       | 255,752 |   | 222,748 |   |
| **Operating  income**                                                                                                                                                                            |       | 25,885                                             |       | 18,560                                           |       | 51,769 |   | 39,973 |   |
| Interest income                                                                                                                                                                                  |       | 1,694                                              |       | 1,458                                            |       | 3,348 |   | 2,372 |   |
| Interest expense                                                                                                                                                                                 |       | (76                                                | )          | (67                                              | )          | (209 | ) | (152 | ) |
| Non-operating income, net                                                                                                                                                                        |       | 1,618                                              |       | 1,391                                            |       | 3,139 |   | 2,220 |   |
| Income from continuing  operations before income taxes and minority interests                                                                                                                    |       | 27,503                                             |       | 19,951                                           |       | 54,908 |   | 42,193 |   |
| Provision for  income taxes                                                                                                                                                                      |       | (8,909                                             | )          | (6,619                                           | )          | (17,952 | ) | (14,092 | ) |
| Income from  continuing operations before minority interests                                                                                                                                     |       | 18,594                                             |       | 13,332                                           |       | 36,956 |   | 28,101 |   |
| Minority  interests                                                                                                                                                                              |       | (12                                                | )          | (56                                              | )          | 3 |   | (81 | ) |
| Income from  continuing operations                                                                                                                                                               |       | 18,582                                             |       | 13,276                                           |       | 36,959 |   | 28,020 |   |
| Discontinued  operations:                                                                                                                                                                        |       |                                               |       |                                             |       |   |   |   |   |
| Loss from discontinued operations, net                                                                                                                                                           |       | —                                             |       | (342                                             | )          | — |   | (1,622 | ) |
| **Net  income**                                                                                                                                                                                  |       | $                                                  | 18,582     |                                             | $          | 12,934 |   | $ | 36,959 |   | $ | 26,398 |   |
| Income from  continuing operations per share:                                                                                                                                                    |       |                                               |       |                                             |       |   |   |   |   |
| Basic (Class A and Class B common stock)                                                                                                                                               |       | $                                                  | 0.32       |                                             | $          | 0.24 |   | $ | 0.64 |   | $ | 0.50 |   |
| Diluted (Class A and Class B common stock)                                                                                                                                             |       | $                                                  | 0.32       |                                             | $          | 0.24 |   | $ | 0.63 |   | $ | 0.50 |   |
| Loss from  discontinued operations per share:                                                                                                                                                    |       |                                               |       |                                             |       |   |   |   |   |
| Basic (Class A and Class B common stock)                                                                                                                                               |       | $                                                  | —     |                                             | $          | (0.01 | ) | $ | — |   | $ | (0.03 | ) |
| Diluted (Class A and Class B common stock)                                                                                                                                             |       | $                                                  | —     |                                             | $          | (0.01 | ) | $ | — |   | $ | (0.03 | ) |
| Net income per  share:                                                                                                                                                                           |       |                                               |       |                                             |       |   |   |   |   |
| Basic (Class A and Class B common stock)                                                                                                                                               |       | $                                                  | 0.32       |                                             | $          | 0.23 |   | $ | 0.64 |   | $ | 0.47 |   |
| Diluted (Class A and Class B common stock)                                                                                                                                             |       | $                                                  | 0.32       |                                             | $          | 0.23 |   | $ | 0.63 |   | $ | 0.47 |   |
| Weighted average  shares:                                                                                                                                                                        |       |                                               |       |                                             |       |   |   |   |   |
| Basic (Class A common stock)                                                                                                                                                                |       | 43,626                                             |       | 42,271                                           |       | 43,733 |   | 42,199 |   |
| Basic (Class B common stock)                                                                                                                                                                |       | 13,750                                             |       | 13,750                                           |       | 13,750 |   | 13,750 |   |
| Diluted (Class A common stock)                                                                                                                                                              |       | 58,281                                             |       | 56,130                                           |       | 58,328 |   | 56,071 |   |
| Diluted  (Class B common stock)                                                                                                                                                             |       | 13,750                                             |       | 13,750                                           |       | 13,750 |   | 13,750 |   |

 

See accompanying notes.

4

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**IHS INC.**

**CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS**

**(In thousands)**
| ** **                                                                       | ** ** | **Six Months Ended May 31,** | ** ** |
|----------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                       | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| ** **                                                                       | ** ** | **(Unaudited)**                                  | ** ** |
| **Operating  activities**                                                        |       |                                             |       |   |   |
| Net income                                                                       |       | $                                                | 36,959     |   | $ | 26,398 |   |
| Reconciliation  of net income to net cash provided by operating activities: |       |                                             |       |   |   |
| Depreciation and amortization                                                    |       | 9,501                                            |       | 6,712 |   |
| Stock-based compensation expense                                                 |       | 13,381                                           |       | 8,025 |   |
| Gain on sales of assets, net                                                     |       | (756                                             | )          | — |   |
| Impairment of assets of discontinued operations                                  |       | —                                           |       | 1,012 |   |
| Non-cash net periodic pension and post-retirement  benefits                      |       | (1,997                                           | )          | (1,944 | ) |
| Undistributed earnings of unconsolidated  subsidiaries, net                      |       | 140                                              |       | — |   |
| Minority interests                                                               |       | (234                                             | )          | (66 | ) |
| Deferred income taxes                                                            |       | (1,015                                           | )          | 213 |   |
| Change in assets and liabilities:                                                |       |                                             |       |   |   |
| Accounts receivable, net                                                         |       | 24,825                                           |       | 30,781 |   |
| Other current assets                                                             |       | (5,565                                           | )          | (2,715 | ) |
| Accounts payable                                                                 |       | (25,388                                          | )          | (20,557 | ) |
| Accrued expenses                                                                 |       | (15,492                                          | )          | (11,586 | ) |
| Income taxes                                                                     |       | 5,311                                            |       | (247 | ) |
| Deferred subscription revenue                                                    |       | 26,092                                           |       | 29,136 |   |
| **Net  cash provided by operating activities**                                   |       | 65,762                                           |       | 65,162 |   |
| **Investing  activities**                                                        |       |                                             |       |   |   |
| Capital  expenditures on property and equipment                                  |       | (3,645                                           | )          | (5,763 | ) |
| Intangible  assets acquired                                                      |       | —                                           |       | (3,300 | ) |
| Change in other  assets                                                          |       | (3,496                                           | )          | 1,272 |   |
| Purchase of  investments                                                         |       | —                                           |       | (5,365 | ) |
| Sales and  maturities of investments                                             |       | 2,008                                            |       | 14,302 |   |
| Acquisitions of  businesses, net of cash acquired                                |       | (14,607                                          | )          | (32,976 | ) |
| Proceeds from  sales of assets                                                   |       | 2,461                                            |       | — |   |
| **Net  cash used in investing activities**                                       |       | (17,279                                          | )          | (31,830 | ) |
| **Financing  activities**                                                        |       |                                             |       |   |   |
| Net payments on  debt                                                            |       | (500                                             | )          | (91 | ) |
| Excess tax  benefit from equity compensation plans                               |       | 121                                              |       | 2,194 |   |
| Repurchases of  common stock                                                     |       | (15,663                                          | )          | — |   |
| **Net  cash provided by (used in) financing activities**                         |       | (16,042                                          | )          | 2,103 |   |
| Foreign exchange  impact on cash balance                                         |       | (189                                             | )          | 2,197 |   |
| Net increase in  cash and cash equivalents                                       |       | 32,252                                           |       | 37,632 |   |
| Cash and cash  equivalents at the beginning of the period                        |       | 180,034                                          |       | 132,365 |   |
| Cash and cash  equivalents at the end of the period                              |       | $                                                | 212,286    |   | $ | 169,997 |   |

 

See accompanying notes.

5

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**IHS INC.**

**CONSOLIDATED STATEMENT OF CHANGESIN STOCKHOLDERS’ EQUITY**

**(In thousands)**
| ** **                                | ** ** | **Shares of  Class A  Common  Stock** | ** ** | **Class A  Common  Stock** | ** ** | **Shares of  Class B  Common  Stock** | ** ** | **Class B  Common  Stock** | ** ** | **Additional  Paid-In  Capital** | ** ** | **Treasury  Stock** | ** ** | **Retained  Earnings** | ** ** | **Accumulated  Other  Comprehensive  Income (Loss)** | ** ** | **Total** | ** ** |
|-------------------------------------------|------------|-------------------------------------------------|------------|---------------------------------|------------|-------------------------------------------------|------------|---------------------------------|------------|----------------------------------|------------|---------------------|------------|------------------------|------------|-----------------------------------------------------------|------------|-----------|------------|
| ** **                                | ** ** | **(Unaudited)**                                 | ** ** |
| **Balance at November 30, 2006**     |       | 45,042                                          |       | $                               | 453        |                                            | 13,750     |                            | $          | 138                              |       | $                   | 175,027    |                   | $          | (7,551                                                    | )          | $         | 400,029    |   | $ | (2,905 | ) | $ | 565,191 |   |
| Stock-based award activity                |       | (26                                             | )          | (1                              | )          | —                                          |       | —                          |       | 13,530                           |       | (253                | )          | —                 |       | —                                                    |       | 13,276    |       |
| Excess tax benefit on vested shares       |       | —                                          |       | —                          |       | —                                          |       | —                          |       | 121                              |       | —              |       | —                 |       | —                                                    |       | 121       |       |
| Repurchases of common stock               |       | (400                                            | )          | —                          |       | —                                          |       | —                          |       | —                           |       | (15,410             | )          | —                 |       | —                                                    |       | (15,410   | )          |
| Net income                                |       | —                                          |       | —                          |       | —                                          |       | —                          |       | —                           |       | —              |       | 36,959                 |       | —                                                    |       | 36,959    |       |
| Other comprehensive income:               |       |                                            |       |                            |       |                                            |       |                            |       |                             |       |                |       |                   |       |                                                      |       |      |       |
| Foreign currency  translation adjustments |       | —                                          |       | —                          |       | —                                          |       | —                          |       | —                           |       | —              |       | —                 |       | 3,779                                                     |       | 3,779     |       |
| Comprehensive income, net of tax     |       |                                            |       |                            |       |                                            |       |                            |       |                             |       |                |       |                   |       |                                                      |       | 40,738    |       |
| **Balance  at May 31, 2007**         |       | 44,616                                          |       | $                               | 452        |                                            | 13,750     |                            | $          | 138                              |       | $                   | 188,678    |                   | $          | (23,214                                                   | )          | $         | 436,988    |   | $ | 874 |   | $ | 603,916 |   |

 

See accompanying notes.

6

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**IHS INC.**

**NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**1.**              Basis of Presentation andSignificant Accounting Policies

***Nature of Operations***

IHS Inc. (IHS, the Company, we, our, or us) is a publiclytraded Delaware corporation. We are one of the leading global providers ofcritical technical information, decision-support tools and services tocustomers in the energy, defense, aerospace, construction, electronics, andautomotive industries.

***Consolidation Policy***

The consolidated financial statements include the accountsof all wholly owned and majority-owned subsidiaries. All significantintercompany accounts and transactions have been eliminated.

***Unaudited Condensed Consolidated Financial Statements***

The accompanying unaudited condensed consolidated financialstatements reflect all adjustments, consisting of normal recurring accruals,which are necessary for a fair presentation of the financial position, resultsof operations and cash flows for the periods presented. The accompanyingcondensed consolidated financial statements include our accounts and theaccounts of our majority-owned domestic and foreign subsidiaries.  All significant intercompany transactions andbalances have been eliminated in consolidation. These condensed consolidatedfinancial statements should be read in conjunction with the consolidatedfinancial statements for the year ended November 30, 2006.  The results of operations for the three andsix months ended May 31, 2007, are not necessarily indicative of the resultsthat may be achieved for the full fiscal year and cannot be used to indicatefinancial performance for the entire year.

The year-end condensed consolidated balance sheet data wasderived from the audited November 30, 2006, balance sheet.

***Results Subject to Seasonal Variations***

Although our business model is broadly subscription basedresulting in recurring revenue and cash flow, our business does have seasonalaspects.  For example, certain sales ofnon-deferred subscriptions have occurred most frequently in our first andfourth quarters.  Consequently, wegenerally have recognized a greater percentage of our revenue and income inthose quarters.  Also, our first quarterbenefits from the inclusion of the results from CERAWeek, an annual energyexecutive gathering.

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. Due to thehistorical timing and alignment of our sales to correspond to certain of ourcustomers’ budget and funding cycles, our cash flow provided by operatingactivities tends to be higher in our first fiscal quarter as we receivesubscription payments.

***Use of Estimates***

The preparation of interim condensed consolidatedfinancial statements in conformity with accounting principles generallyaccepted in the United States requires us to make estimates and assumptionsthat affect the amounts reported and disclosed in the financial statements andthe accompanying notes. Actual results could differ materially from theseestimates. On an ongoing basis, we evaluate our estimates, including thoserelated to the allowances for doubtful accounts, fair value of marketablesecurities and investments, fair value of acquired intangible assets andgoodwill, useful lives of intangible assets and property and equipment, andincome taxes. We base our estimates on historical experience and on variousother assumptions that we believe to be reasonable, the results of which formthe basis for making judgments about the carrying values of assets andliabilities.

7

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***Reclassification***

***Certainprior-year balances have been reclassified to conform to current-yearpresentation.***

***Income Taxes***

Our effective quarterly tax rate is estimated based uponthe effective tax rate expected to be applicable for the full fiscal year.

Our effective tax rate for the second quarter of 2007 was32.4% compared to 33.2% for the prior-year period. Our effective tax rate forthe six months ended May 31, 2007, was 32.7% compared to 33.4% for the sixmonths ended May 31, 2006.  The lower2007 rate was principally due to a higher mix of earnings in lower-rate taxjurisdictions than the United States.

***New Accounting Pronouncements***

In July 2006, theFinancial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, *Accounting for Uncertainty in Income Taxes—an interpretation of FASBStatement No. 109* (FIN 48), which provides clarification related tothe process associated with accounting for uncertain tax positions recognizedin consolidated financial statements. FIN 48 prescribes a more-likely-than-notthreshold for financial statement recognition and measurement of a tax positiontaken, or expected to be taken, in a tax return. FIN 48 also provides guidancerelated to, among other things, classification, accounting for interest andpenalties associated with tax positions, and disclosure requirements. We arerequired to adopt FIN 48 on December 1, 2007, the first day of our 2008 fiscalyear, although early adoption is permitted. We are currently evaluating theimpact of adopting FIN 48 on our financial position and results of operations.

In September 2006, theFASB issued SFAS No. 157, *Fair Value Measurements*(SFAS No. 157). Among other requirements, SFAS No. 157 defines fair value andestablishes a framework for measuring fair value and also expands disclosureabout the use of fair value to measure assets and liabilities. SFAS No. 157 iseffective beginning the first fiscal year that begins after November 15, 2007.We are required to adopt SFAS No. 157 on December 1, 2007, although earlieradoption is permitted.  We are currentlyevaluating the impact of SFAS No. 157 on our financial position and results ofoperations.

In September 2006, FASBissued SFAS No. 158, *Employer’s Accounting forDefined Benefit Pension and Other Postretirement Plans - an Amendment of FASBStatements No. 87, 88, 106 and 132(R)* (SFAS No. 158). SFAS No. 158requires an employer that is a business entity and sponsors one or more single employerbenefit plans to (1) recognize the funded status of the benefit in itsstatement of financial position, (2) recognize as a component of othercomprehensive income, net of tax, the gains or losses and prior service costsor credits that arise during the period but are not recognized as components ofnet periodic benefit cost, (3) measure defined benefit plan assets andobligations as of the date of the employer’s fiscal year end statement offinancial position and (4) disclose in the notes to financial statementsadditional information about certain effects on net periodic benefit cost forthe next fiscal year that arise from delayed recognition of the gains orlosses, prior service costs on credits, and transition asset or obligations. Weplan to adopt SFAS No. 158 effective at the end of our fiscal year endingNovember 30, 2007. If SFAS No. 158 had been effective as of November 30, 2006,total assets would have been approximately $22 million lower, total liabilitieswould have been approximately $5 million lower and shareholders’ equity wouldhave been approximately $17 million lower. Because our net pension liabilitiesare dependent upon future events and circumstances, the impact at the time ofadoption of SFAS No. 158 may differ from these amounts. Adoption of SFAS No.158 is not expected to have any effect on our compliance with our debtcovenants.

In February 2007, theFASB issued SFAS No. 159, *The Fair Value Option forFinancial Assets and Financial Liabilities* (SFAS No. 159). SFAS No.159 expands the use of fair value measurement by permitting entities to chooseto measure many financial instruments and certain other items at fair valuethat are not currently required to be measured at fair value. SFAS No. 159 iseffective beginning the first fiscal year that begins after November 15,

8

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2007. We are required toadopt SFAS No. 159 on December 1, 2007, although earlier adoption ispermitted.  We are currently evaluatingthe impact of SFAS No. 159 on our financial position and results of operations.

**2.**              Restructuring and OfferingCharges

During the fourth quarterof 2006, we executed a restructuring initiative principally affecting ourEngineering segment. This initiative was undertaken to facilitate continuedgrowth through the focus on a narrower group of products and services, exitnon-core legacy applications and improve our operational effectiveness. Duringthe course of the restructuring, we reduced our aggregate workforce byapproximately 40 employees.

The restructuring chargewas incurred in its entirety during the fourth quarter of 2006. Approximately$1.9 million of the charge related to our Engineering segment, $0.4 millionpertained to our Energy segment, and $0.1 million related to Shared Services.The restructuring charge was comprised entirely of employee severance and othertermination benefits costs.

A reconciliationof the related accrued restructuring liability as of May 31, 2007 was asfollows:
| ** **                                              | ** ** | **Employee  Severance and  Other  Termination  Benefits** | ** ** |
|---------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                                              | ** ** | **(In thousands)**                                        | ** ** |
| Balance at  November 30, 2006                           |       | $                                                              | 2,046      |   |
| Less: Amount  paid during the period ended May 31, 2007 |       | (1,630                                                         | )          |
| Balance at May 31, 2007                                 |       | $                                                              | 416        |   |

 

**3.**              Discontinued Operations

During the third quarter of 2005, a business in ourEnergy segment was classified as being held for sale. We continually evaluateopportunities to align our business activities within core operations. Thebusiness held for sale was a manufacturing operation, which is not a part ofour core operations.

Duringthe first quarter of 2006, we revised our estimate and wrote down the value ofthe assets of the discontinued operation $1.0 million based on what we hadexperienced to date in the sales process. During the third quarter of 2006, wesold the business to an unrelated third party for approximately $0.3 millionand recognized a loss of less than $0.1 million on the sale of thebusiness.

For all of the periods presented, the related results ofoperations are shown as a discontinued operation, net of tax, in our condensedconsolidated statements of operations and cash flows.

Operating results of the discontinued operations for thethree and six months ended May 31, 2007 and 2006 were as follows:
| ** **                              | ** ** | **Three Months Ended May 31,** | ** ** | **Six Months Ended May 31,** | ** ** |
|-----------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                              | ** ** | **2007**                                           | ** ** | **2006**                                         | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                              | ** ** | **(In thousands)**                            | ** ** |
| Revenue                                 |       | $                                                  | —     |                                             | $          | 215 |   | $ | — |   | $ | 394 |   |
| Loss from  discontinued operations      |       | $                                                  | —     |                                             | $          | (552 | ) | $ | — |   | $ | (2,457 | ) |
| Tax benefit                             |       | —                                             |       | 210                                              |       | — |   | 835 |   |
| Loss from discontinued  operations, net |       | $                                                  | —     |                                             | $          | (342 | ) | $ | — |   | $ | (1,622 | ) |

 

9

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**4.****          ****Commitments and Contingencies**

We are a party to various legal proceedings that arise inthe ordinary course of business.  In theopinion of management, none of these actions, either individually or in theaggregate, is expected to have a material adverse affect on our financial condition,liquidity or results of operations.

**5.**              Other Comprehensive Income (Loss)

Our comprehensiveincome (loss) for the three and six months ended May 31, 2007 and 2006 was asfollows:
| ** **                                               | ** ** | **Three Months Ended May 31,** | ** ** | **Six Months Ended May 31,** | ** ** |
|----------------------------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                               | ** ** | **2007**                                           | ** ** | **2006**                                         | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                                               | ** ** | **(In thousands)**                            | ** ** |
| Net income                                               |       | $                                                  | 18,582     |                                             | $          | 12,934 |   | $ | 36,959 |   | $ | 26,398 |   |
| Other  comprehensive income (loss):                      |       |                                               |       |                                             |       |   |   |   |   |
| Foreign currency translation adjustment                  |       | 6,346                                              |       | 6,143                                            |       | 3,779 |   | 8,807 |   |
| Minimum pension liability adjustment                     |       | —                                             |       | (254                                             | )          | — |   | (323 | ) |
| Unrealized gains on foreign currency hedges, net of  tax |       | —                                             |       | 1,027                                            |       | — |   | 1,788 |   |
| Unrealized gains on short-term investments, net of  tax  |       | —                                             |       | 9                                                |       | — |   | 20 |   |
| Total other  comprehensive income, net of tax            |       | $                                                  | 24,928     |                                             | $          | 19,859 |   | $ | 40,738 |   | $ | 36,690 |   |

 

**6.**              Stock-based Compensation

OnMay 31, 2007, we had one share-based compensation plan: the Amended andRestated IHS Inc. 2004 Long-Term Incentive Plan (LTIP).The LTIP provides for the grant of non-qualified stock options,incentive stock options, stock appreciation rights, restricted stock,restricted stock units, performance units and performance shares, cash-basedawards, other stock based awards and covered employee annual incentive awards.The 2004 Directors Stock Plan, a sub-plan under the LTIP, provides for thegrant of restricted stock and restricted stock units to non-employee directorsas defined in that plan. We believe that such awards better align the interestsof our employees and non-employee directors with those of our shareholders.

We have authorized amaximum of 7 million shares, minus the number of shares relating to any awardgranted and outstanding as of, or subsequent to, the effective date under anyother of our equity compensation plans, unless shares used to satisfy suchaward are shares repurchased from the open market.
|  | Stock-based  compensation expense that has been charged against income for those plans was  as follows: |
|--|---------------------------------------------------------------------------------------------------------|

 
|                                      | ** ** | **Three Months Ended May 31,** | ** ** | **Six Months Ended May 31,** | ** ** |
|--------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                           | ** ** | **2007**                                           | ** ** | **2006**                                         | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                           | ** ** | **(In thousands)**                            | ** ** |
| Cost of revenue                      |       | $                                                  | 105        |                                             | $          | 1,071 |   | $ | 456 |   | $ | 2,166 |   |
| Selling, general  and administrative |       | 5,940                                              |       | 3,288                                            |       | 12,925 |   | 5,859 |   |
| Stock-based  compensation expense    |       | $                                                  | 6,045      |                                             | $          | 4,359 |   | $ | 13,381 |   | $ | 8,025 |   |

 

Total income taxbenefit recognized in the income statement for share-based compensationarrangements for the three and six months ended May 31 was as follows:
|                     | ** ** | **Three Months Ended May 31,** | ** ** | **Six Months Ended May 31,** | ** ** |
|---------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **          | ** ** | **2007**                                           | ** ** | **2006**                                         | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **          | ** ** | **(In thousands)**                            | ** ** |
| Income tax  benefit |       | $                                                  | 2,237      |                                             | $          | 1,613 |   | $ | 4,951 |   | $ | 2,969 |   |
|                     |            |                                                    |            |                                                  |            |  |  |  |  |  |  |  |  |

 

10

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No compensation cost wascapitalized during the three and six months ended May 31, 2007 and 2006.

SFAS 123(R) requires forfeitures to be estimated atthe grant date. Accordingly, compensation cost is recognized based on the numberof awards expected to vest. There may be adjustments in future periods ifactual forfeitures differ from our estimates. Our forfeiture rate is based uponhistorical experience as well as anticipated employee turnover consideringcertain qualitative factors.

Total compensation expense related to nonvested awards,both share awards and stock options, not yet recognized was $51.6 millionas of May 31, 2007, with a weighted-average recognition period ofapproximately 11⁄2 years.

*Nonvested Stock.*  Shareawards generally vest from one to four years. Share awards are generallysubject to graded vesting but we do have a limited number of share awardssubject to cliff vesting. The fair value of nonvested stock is based on thefair value of our common stock on the date of grant. We amortize the value ofshare awards to expense over the vesting period on a straight-line basis. Forawards with performance conditions, an evaluation is made each quarter as tothe likelihood of the performance criteria being met. Compensation expense isthen adjusted to reflect the number of shares expected to vest and thecumulative vesting period met to date.

A summary of the status of our nonvested shares as of May31, 2007, and changes during the six months ended May 31, 2007, was as follows:
| ** **                        | ** ** | **Shares**              | ** ** | **Weighted-  Average Grant  Date Fair Value** | ** ** |
|-----------------------------------|------------|-------------------------|------------|--------------------------------------------------------------|------------|
| ** **                        | ** ** | **(in thousands)** | ** ** | ** **                                                   | ** ** |
| Balances,  November 30, 2006 |       | 1,721                   |       | $                                                            | 18.57      |   |
| Granted                           |       | 1,029                   |       | $                                                            | 37.65      |   |
| Vested                            |       | (87                     | )          | $                                                            | 13.51      |   |
| Forfeited                         |       | (57                     | )          | $                                                            | 26.07      |   |
| Balances, May 31, 2007            |       | 2,606                   |       | $                                                            | 26.11      |   |

 

The total fair value of nonvested stock that vestedduring the three months ended May 31, 2007, was $3.3 million based on theweighted-average fair value on the vesting date and $1.2 million based onthe weighted-average fair value on the date of grant.

*Stock Options.*  Optionawards are granted with an exercise price equal to the fair market value of ourstock at the date of grant. Options outstanding as of May 31, 2007, vest invarious ways over a period of 3-to-4 years of continuous service and have8-year contractual terms. Certain option and share awards provide foraccelerated vesting if there is a change in control (as defined in the plans).

The fair value of each optionaward was estimated on the date of grant using the Black-Scholes pricingmodel that used the assumptions noted in the following table:
|                                                       | ** ** | **Six Months  Ended  May 31, 2007** | ** ** |
|-------------------------------------------------------|------------|----------------------------------------------------|------------|
| Dividend yield                                        |       | 0.0                                                | %          |
| Expected  volatility                                  |       | 30.66                                              | %          |
| Risk-free  interest rate                              |       | 4.92                                               | %          |
| Expected term  (in years)                             |       | 5.0                                                |       |
| Weighted average fair  value of stock options granted |       | $                                                  | 13.57      |   |
|                                                       |            |                                                    |            |  |

 

We had no options outstanding during the three and sixmonths ended May 31, 2006. Our dividend yield is 0.0% since we have no historyof paying dividends and currently have no plan to do so. Our expectedvolatility is determined

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periodically using a basket of peer company historical volatility ratesuntil such time our stock history is equal to our contractual terms. Ourrisk-free interest rate is the treasury-bill rate for the period equal to theexpected term based on the Treasury note strip principal rates as reported inwell-known and widely used financial sources. Our expected term is the averageof the contractual term of the option and the vesting period (i.e., the “shortcutmethod”, which is an acceptable method under Staff Accounting Bulletin 107).

The following table summarized changes in outstandingstock options during the six months ended May 31, 2007, as well as options thatare vested and expected to vest and stock options exercisable at May 31, 2007:
| ** **                                   | ** ** | **Shares**              | ** ** | **Weighted-  Average  Exercise  Price** | ** ** | **Weighted-  Average  Remaining  Contractual  Term** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
|----------------------------------------------|------------|-------------------------|------------|-----------------------------------------|------------|------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                   | ** ** | **(in thousands)** | ** ** | ** **                              | ** ** | **(in years)**                                  | ** ** | **(in thousands)**         | ** ** |
| Outstanding at  November 30, 2006       |       | 99                      |       | $                                       | 30.80      |                                                 |       |                            |       |   |
| Granted                                      |       | 193                     |       | $                                       | 37.65      |                                                 |       |                            |       |   |
| Exercised                                    |       | —                  |       | —                                  |       |                                                 |       |                            |       |
| Forfeited                                    |       | (3                      | )          | $                                       | 37.65      |                                                 |       |                            |       |   |
| Outstanding at  May 31, 2007                 |       | 289                     |       | $                                       | 35.31      |                                                 | 2.75       |                            | $          | 1,413 |   |
| Vested and  expected to vest at May 31, 2007 |       | 285                     |       | $                                       | 35.31      |                                                 | 2.75       |                            | $          | 1,413 |   |
| Exercisable at May 31,  2007                 |       | —                  |       | —                                  |       | —                                               |       | $                               | —     |   |

 

Theaggregate intrinsic value amounts in the table above represent the differencebetween the closing price of our common stock on May 31, 2007, which was$40.19, and the exercise price, multiplied by the number of in-the-money stockoptions as of the same date. This represents the amount that would have beenreceived by the stock option holders if they had all exercised their stockoptions on May 31, 2007. In future periods, this amount will change dependingon fluctuations in our stock price. The total intrinsic value of stock optionsexercised during the three and six months ended May 31, 2007 was $0.

**7.****              Pensions andPostretirement 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.

12

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Our net periodicpension (income) expense was comprised of the following:
| ** **                                       | ** ** | **Three Months Ended May 31, 2007** | ** ** | **Three Months Ended May 31, 2006** | ** ** |
|--------------------------------------------------|------------|--------------------------------------------------------------|------------|--------------------------------------------------------------|------------|
| ** **                                       | ** ** | **U.S.  RIP**                                                | ** ** | **U.K.  RIP**                                                | ** ** | **SIP** | ** ** | **Total** | ** ** | **U.S.  RIP** | ** ** | **U.K.  RIP** | ** ** | **SIP** | ** ** | **Total** | ** ** |
| ** **                                       | ** ** | **(In thousands)**                                      | ** ** |
| Service costs  incurred                          |       | $                                                            | 1,569      |                                                         | $          | 288 |   | $ | 48 |   | $ | 1,905 |   | $ | 1,303 |   | $ | 215 |   | $ | 26 |   | $ | 1,544 |   |
| Interest costs  on projected benefit obligation  |       | 2,720                                                        |       | 499                                                          |       | 82 |   | 3,301 |   | 2,653 |   | 376 |   | 100 |   | 3,129 |   |
| Expected return  on plan assets                  |       | (5,078                                                       | )          | (451                                                         | )          | — |   | (5,529 | ) | (5,050 | ) | (359 | ) | — |   | (5,409 | ) |
| Amortization of  prior service cost              |       | (119                                                         | )          | —                                                       |       | — |   | (119 | ) | (111 | ) | — |   | 28 |   | (83 | ) |
| Amortization of  actuarial loss                  |       | 375                                                          |       | 302                                                          |       | 30 |   | 707 |   | 244 |   | 144 |   | 25 |   | 413 |   |
| Amortization of  transitional obligation/(asset) |       | (142                                                         | )          | —                                                       |       | 10 |   | (132 | ) | (142 | ) | — |   | 10 |   | (132 | ) |
| Net periodic pension  benefit (income) expense   |       | $                                                            | (675       | )                                                            | $          | 638 |   | $ | 170 |   | $ | 133 |   | $ | (1,103 | ) | $ | 376 |   | $ | 189 |   | $ | (538 | ) |

 
| ** **                                        | ** ** | **Six Months Ended May 31, 2007** | ** ** | **Six Months Ended May 31, 2006** | ** ** |
|---------------------------------------------------|------------|------------------------------------------------------------|------------|------------------------------------------------------------|------------|
| ** **                                        | ** ** | **U.S.  RIP**                                              | ** ** | **U.K.  RIP**                                              | ** ** | **SIP** | ** ** | **Total** | ** ** | **U.S.  RIP** | ** ** | **U.K.  RIP** | ** ** | **SIP** | ** ** | **Total** | ** ** |
| ** **                                        | ** ** | **(In thousands)**                                    | ** ** |
| Service costs  incurred                           |       | $                                                          | 3,138      |                                                       | $          | 574 |   | $ | 96 |   | $ | 3,808 |   | $ | 2,214 |   | $ | 427 |   | $ | 73 |   | $ | 2,714 |   |
| Interest costs  on projected benefit obligation   |       | 5,440                                                      |       | 1,039                                                      |       | 186 |   | 6,665 |   | 5,362 |   | 745 |   | 198 |   | 6,305 |   |
| Expected return  on plan assets                   |       | (10,156                                                    | )          | (898                                                       | )          | — |   | (11,054 | ) | (10,110 | ) | (711 | ) | — |   | (10,821 | ) |
| Amortization of  prior service cost               |       | (237                                                       | )          | —                                                     |       | 22 |   | (215 | ) | (144 | ) | — |   | 59 |   | (85 | ) |
| Amortization of  actuarial loss                   |       | 750                                                        |       | 602                                                        |       | 60 |   | 1,412 |   | 475 |   | 285 |   | 49 |   | 809 |   |
| Amortization of  transitional  obligation/(asset) |       | (284                                                       | )          | —                                                     |       | 20 |   | (264 | ) | (284 | ) | — |   | 20 |   | (264 | ) |
| Net periodic pension  benefit (income) expense    |       | $                                                          | (1,349     | )                                                          | $          | 1,317 |   | $ | 384 |   | $ | 352 |   | $ | (2,487 | ) | $ | 746 |   | $ | 399 |   | $ | (1,342 | ) |

 

Our net periodicpost-retirement benefit (income) expense was comprised of the following for thethree and six months ended May 31:
| ** **                                             | ** ** | **Three Months Ended May 31,** | ** ** | **Six Months Ended May 31,** | ** ** |
|--------------------------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                             | ** ** | **2007**                                           | ** ** | **2006**                                         | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                                             | ** ** | **(In thousands)**                            | ** ** |
| Service costs  incurred                                |       | $                                                  | 34         |                                             | $          | 38 |   | $ | 68 |   | $ | 215 |   |
| Interest costs                                         |       | 148                                                |       | 145                                              |       | 296 |   | 439 |   |
| Amortization of  prior service amounts                 |       | (807                                               | )          | (807                                             | )          | (1,614 | ) | (1,076 | ) |
| Amortization of  net actuarial loss                    |       | 138                                                |       | 133                                              |       | 276 |   | 219 |   |
| Net periodic post-retirement  benefit (income) expense |       | $                                                  | (487       | )                                                | $          | (491 | ) | $ | (974 | ) | $ | (203 | ) |

 

**8.**              Earnings per Share

Earnings per common share (EPS) are computed in accordancewith 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.

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Our authorized capital stock consists of 80,000,000 sharesof Class A common stock and 13,750,000 shares of Class B common stock.  These classes have equal dividend rights andliquidation rights. However, the holders of our Class A common stock are entitledto one vote per share and holders of our Class B common stock are entitled toten votes per share on all matters to be voted upon by the stockholders. Eachshare of Class B common stock is convertible at any time at the option of theholder into one share of Class A common stock and will automatically convert,without any action by the holder, upon the earlier of the occurrence ofspecified events or November 16, 2009.

We use the two-class method for computing basic and dilutedEPS amounts. We calculated undistributed earnings as follows:
| ** **             | ** ** | **Three Months Ended May 31,** | ** ** | **Six Months Ended May 31,** | ** ** |
|------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **             | ** ** | **2007**                                           | ** ** | **2006**                                         | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **             | ** ** | **(In thousands)**                            | ** ** |
| Net income             |       | $                                                  | 18,582     |                                             | $          | 12,934 |   | $ | 36,959 |   | $ | 26,398 |   |
| Less: dividends        |       | —                                             |       | —                                           |       | — |   | — |   |
| Undistributed earnings |       | $                                                  | 18,582     |                                             | $          | 12,934 |   | $ | 36,959 |   | $ | 26,398 |   |

 

Weighted average common shares outstanding are calculatedas follows:
| ** **                                    | ** ** | **Three Months Ended May 31,** | ** ** |
|-----------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                    | ** ** | **2007**                                           | ** ** | **2006** | ** ** |
| ** **                                    | ** ** | **Class A**                                   | ** ** | **Class B** | ** ** | **Class A** | ** ** | **Class B** | ** ** |
| ** **                                    | ** ** | **(In thousands)**                            | ** ** |
| Weighted average  common shares outstanding:  |       |                                               |       |   |   |   |   |   |   |
| Shares used in  basic per-share calculation   |       | 43,626                                             |       | 13,750 |   | 42,271 |   | 13,750 |   |
| Effect of  dilutive securities:               |       |                                               |       |   |   |   |   |   |   |
| Deferred stock  units                         |       | 18                                                 |       | — |   | 52 |   | — |   |
| Restricted  shares                            |       | 876                                                |       | — |   | 57 |   | — |   |
| Options                                       |       | 11                                                 |       | — |   | — |   | — |   |
| Assumed  conversion of Class B shares    |       | 13,750                                             |       | — |   | 13,750 |   | — |   |
| Shares used in diluted  per-share calculation |       | 58,281                                             |       | 13,750 |   | 56,130 |   | 13,750 |   |

 
| ** **                                    | ** ** | **Six Months Ended May 31,** | ** ** |
|-----------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                    | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| ** **                                    | ** ** | **Class A**                                 | ** ** | **Class B** | ** ** | **Class A** | ** ** | **Class B** | ** ** |
| ** **                                    | ** ** | **(In thousands)**                          | ** ** |
| Weighted average  common shares outstanding:  |       |                                             |       |   |   |   |   |   |   |
| Shares used in  basic per-share calculation   |       | 43,733                                           |       | 13,750 |   | 42,199 |   | 13,750 |   |
| Effect of  dilutive securities:               |       |                                             |       |   |   |   |   |   |   |
| Deferred stock  units                         |       | 18                                               |       | — |   | 73 |   | — |   |
| Restricted  shares                            |       | 826                                              |       | — |   | 49 |   | — |   |
| Options                                       |       | 1                                                |       | — |   | — |   | — |   |
| Assumed  conversion of Class B shares    |       | 13,750                                           |       | — |   | 13,750 |   | — |   |
| Shares used in diluted  per-share calculation |       | 58,328                                           |       | 13,750 |   | 56,071 |   | 13,750 |   |

 

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Undistributed earnings and calculated basic and diluted EPSamounts are calculated as follows:
| ** **                                                                             | ** ** | **Three Months Ended May 31,** | ** ** |
|----------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                                             | ** ** | **2007**                                           | ** ** | **2006** | ** ** |
| ** **                                                                             | ** ** | **Class A**                                   | ** ** | **Class B** | ** ** | **Class A** | ** ** | **Class B** | ** ** |
| ** **                                                                             | ** ** | **(In thousands)**                            | ** ** |
| **Basic**                                                                              | ** ** | ** **                                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Weighted average  shares outstanding                                                   |       | 43,626                                             |       | 13,750 |   | 42,271 |   | 13,750 |   |
| Divided by:  Total weighted average shares outstanding (Class A and Class B) |       | 57,376                                             |       | 57,376 |   | 56,021 |   | 56,021 |   |
| Multiplied by:  Undistributed earnings                                                 |       | $                                                  | 18,582     |   | $ | 18,582 |   | $ | 12,934 |   | $ | 12,934 |   |
| Subtotal                                                                               |       | $                                                  | 14,129     |   | $ | 4,453 |   | $ | 9,759 |   | $ | 3,175 |   |
| Divided by:  Weighted average shares outstanding                                       |       | 43,626                                             |       | 13,750 |   | 42,271 |   | 13,750 |   |
| Earnings per  share                                                                    |       | $                                                  | 0.32       |   | $ | 0.32 |   | $ | 0.23 |   | $ | 0.23 |   |
|                                                                                   |       |                                               |       |   |   |   |   |   |   |
| **Diluted**                                                                            | ** ** | ** **                                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Weighted average  shares outstanding                                                   |       | 58,281                                             |       | 13,750 |   | 56,130 |   | 13,750 |   |
| Divided by:  Total weighted average shares outstanding (Class A and Class B) |       | 58,281                                             |       | 58,281 |   | 56,130 |   | 56,130 |   |
| Multiplied by:  Undistributed earnings                                                 |       | $                                                  | 18,582     |   | $ | 18,582 |   | $ | 12,934 |   | $ | 12,934 |   |
| Subtotal                                                                               |       | $                                                  | 18,582     |   | $ | 4,384 |   | $ | 12,934 |   | $ | 3,168 |   |
| Divided by:  Weighted average shares outstanding                                       |       | 58,281                                             |       | 13,750 |   | 56,130 |   | 13,750 |   |
| Earnings per share                                                                     |       | $                                                  | 0.32       |   | $ | 0.32 |   | $ | 0.23 |   | $ | 0.23 |   |

 
| ** **                                                                             | ** ** | **Six Months Ended May 31,** | ** ** |
|----------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                             | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| ** **                                                                             | ** ** | **Class A**                                 | ** ** | **Class B** | ** ** | **Class A** | ** ** | **Class B** | ** ** |
| ** **                                                                             | ** ** | **(In thousands)**                          | ** ** |
| **Basic**                                                                              | ** ** | ** **                                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Weighted average  shares outstanding                                                   |       | 43,733                                           |       | 13,750 |   | 42,199 |   | 13,750 |   |
| Divided by:  Total weighted average shares outstanding (Class A and Class B) |       | 57,483                                           |       | 57,483 |   | 55,949 |   | 55,949 |   |
| Multiplied by:  Undistributed earnings                                                 |       | $                                                | 36,959     |   | $ | 36,959 |   | $ | 26,398 |   | $ | 26,398 |   |
| Subtotal                                                                               |       | $                                                | 28,118     |   | $ | 8,841 |   | $ | 19,910 |   | $ | 6,488 |   |
| Divided by:  Weighted average shares outstanding                                       |       | 43,733                                           |       | 13,750 |   | 42,199 |   | 13,750 |   |
| Earnings per  share                                                                    |       | $                                                | 0.64       |   | $ | 0.64 |   | $ | 0.47 |   | $ | 0.47 |   |
|                                                                                   |       |                                             |       |   |   |   |   |   |   |
| **Diluted**                                                                            | ** ** | ** **                                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Weighted average  shares outstanding                                                   |       | 58,328                                           |       | 13,750 |   | 56,071 |   | 13,750 |   |
| Divided by:  Total weighted average shares outstanding (Class A and Class B) |       | 58,328                                           |       | 58,328 |   | 56,071 |   | 56,071 |   |
| Multiplied by:  Undistributed earnings                                                 |       | $                                                | 36,959     |   | $ | 36,959 |   | $ | 26,398 |   | $ | 26,398 |   |
| Subtotal                                                                               |       | $                                                | 36,959     |   | $ | 8,712 |   | $ | 26,398 |   | $ | 6,473 |   |
| Divided by:  Weighted average shares outstanding                                       |       | 58,365                                           |       | 13,750 |   | 56,071 |   | 13,750 |   |
| Earnings per share                                                                     |       | $                                                | 0.63       |   | $ | 0.63 |   | $ | 0.47 |   | $ | 0.47 |   |

 

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**9.**              Segment Information

We have two reportablesegments: Energy and Engineering. Our Energy segment develops and deliverscritical oil and gas industry data on exploration, development, production, andtransportation activities to major global energy producers and national andindependent oil companies. Our Energy segment also provides operational,research, and strategic advisory services to these customers, as well as toutilities and transportation, petrochemical, coal, and power companies. OurEngineering segment provides solutions incorporating technical specificationsand standards, regulations, parts data, design guides, and other information tocustomers in its targeted industries. Both segments primarily derive theirrevenue from subscriptions.

Information as to theoperations of our two segments is set forth below based on the nature of theofferings. Our Chairman and Chief Executive Officer and his direct reportsrepresent our chief operating decision maker as defined by SFAS No. 131, *Disclosures about Segments of an Enterprise and Related Information*,and they evaluate segment performance based primarily on revenue and operatingprofit. The accounting policies of our segments are the same as those describedin the summary of significant accounting policies (see Note 2 to our consolidatedfinancial statements included in our 2006 Form 10-K).

No single customeraccounted for 10% or more of our total revenue for the three and six monthsended May 31, 2007 or 2006. There are no material inter-segment revenues forany period presented.

We are in the process ofconsolidating back-office functions and moving to a shared-services model.Consequently, we are changing our internal structure causing the composition ofour internal segments to change. Previously, we allocated certain shared costs,such as general and administrative expenses and depreciation and amortizationexpense, to our two segments.  Startingin the first quarter of 2007, we no longer allocate shared costs to our twosegments.  Accordingly, the followingprior-year amounts have been reclassified to conform to the current-yearpresentation.
| ** **                           | ** ** | **Energy**              | ** ** | **Engineering** | ** ** | **Shared  Services** | ** ** | **Consolidated  Total** | ** ** |
|--------------------------------------|------------|-------------------------|------------|-----------------|------------|----------------------|------------|-------------------------|------------|
| ** **                           | ** ** | **(In thousands)** | ** ** |
| **Three  Months Ended May 31, 2007** | ** ** | ** **              | ** ** | ** **      | ** ** | ** **           | ** ** | ** **              | ** ** |
| Revenue                              |       | $                       | 88,828     |            | $          | 66,072               |       | $                       | —     |   | $ | 154,900 |   |
| Segment  operating income            |       | 28,873                  |       | 11,825          |       | (14,813              | )          | 25,885                  |       |
| Depreciation and  amortization       |       | 2,917                   |       | 1,407           |       | 597                  |       | 4,921                   |       |
| **Three  Months Ended May 31, 2006** | ** ** | ** **              | ** ** | ** **      | ** ** | ** **           | ** ** | ** **              | ** ** |
| Revenue                              |       | $                       | 70,375     |            | $          | 62,480               |       | $                       | —     |   | $ | 132,855 |   |
| Segment  operating income            |       | 19,934                  |       | 8,815           |       | (10,189              | )          | 18,560                  |       |
| Depreciation and  amortization       |       | 1,805                   |       | 1,266           |       | 271                  |       | 3,342                   |       |

 
| ** **                         | ** ** | **Energy**              | ** ** | **Engineering** | ** ** | **Shared  Services** | ** ** | **Consolidated  Total** | ** ** |
|------------------------------------|------------|-------------------------|------------|-----------------|------------|----------------------|------------|-------------------------|------------|
| ** **                         | ** ** | **(In thousands)** | ** ** |
| **Six  Months Ended May 31, 2007** | ** ** | ** **              | ** ** | ** **      | ** ** | ** **           | ** ** | ** **              | ** ** |
| Revenue                            |       | $                       | 175,574    |            | $          | 131,947              |       | $                       | —     |   | $ | 307,521 |   |
| Segment  operating income          |       | 55,918                  |       | 24,810          |       | (28,959              | )          | 51,769                  |       |
| Depreciation and  amortization     |       | 5,595                   |       | 2,812           |       | 1,094                |       | 9,501                   |       |
| **Six  Months Ended May 31, 2006** | ** ** | ** **              | ** ** | ** **      | ** ** | ** **           | ** ** | ** **              | ** ** |
| Revenue                            |       | $                       | 138,613    |            | $          | 124,108              |       | $                       | —     |   | $ | 262,721 |   |
| Segment  operating income          |       | 39,128                  |       | 20,084          |       | (19,239              | )          | 39,973                  |       |
| Depreciation and  amortization     |       | 3,507                   |       | 2,726           |       | 479                  |       | 6,712                   |       |

 

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**10.**                               SubsequentEvent

On June 12, 2007, weexecuted an agreement with Woodbridge International Holdings S.A. (Woodbridge)for the purchase of Jane’s Information Group (Jane’s).  The partiescompleted the transaction on the same date.  Terms of the transactionincluded delivery of 4,399,000 shares of our Class A Common Stock and less than$0.1 million in cash in exchange for all of the outstanding equity and debt ofJane’s.  Woodbridge has agreed to athree-year lock-up agreement that restricts its ability to sell any IHS shares.We have not yet determined the final value to be assigned to the restrictedshares issued to Woodbridge.

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**Item 2.**           Management’s Discussion and Analysis ofFinancial Condition and Results of Operations

**Forward-Looking Statements**

This discussioncontains statements that relate to IHS’s future plans, objectives,expectations, performance, events and the like that may constitute “forward-lookingstatements” within the “safe harbor” provisions of the Private SecuritiesLitigation Reform Act of 1995, Section 27A of the Securities Act of 1933,and Section 21E of the Securities Exchange Act of 1934. Words such as “may,”“could,” “should,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,”“seeks,” “plan,” “project,” “continue,” “predict” and other words orexpressions of similar meaning are intended to identify forward-lookingstatements, although not all forward-looking statements contain theseidentifying words. These statements are based on our current expectations aboutfuture events or results and information that is currently available to us,involve assumptions, risks and uncertainties, and speak only as of the date onwhich such statements are made. Our actual results may differ materially fromthose expressed or implied in these forward-looking statements. Those factorsinclude, but are not limited to, our ability to obtain content from thirdparties (including Standards Development Organizations) on commerciallyreasonable terms, changes in demand for IHS’s products and services, changes inthe energy industry, our ability to develop new products and services, pricingand other competitive pressures, risks associated with the integration ofacquisitions, changes in laws and regulations governing our business andcertain other factors discussed under the caption “Risk Factors” in theMD&A section of our 2006 Form 10-K, and in our other filings with theSEC. IHS undertakes no duty to update, whether as a result of new information,future events or otherwise, unless required by law.

**Overview**

**Resultsof Operations**

IHS is one of the leading global providers of criticaltechnical information, decision-support tools, and related services tocustomers in the energy, defense, aerospace, construction, electronics, andautomotive industries. We have developed a comprehensive collection oftechnical information that is highly relevant to the industries we serve. Ourdecision-support tools enable our customers to quickly and easily searchand analyze this information and integrate it into their work flows. Ouroperational, research, and strategic advisory services combine this informationand these tools with our extensive industry expertise to meet the needs of ourcustomers. Our customers rely on these offerings to facilitate decision making,support key processes, and improve productivity. Our customers range fromgovernments and large multinational corporations to smaller companies andtechnical professionals in more than 100 countries. We manage our businessthrough our Energy and Engineering operating segments.

Our Energy segment develops and delivers critical oil andgas industry data on exploration, development, production, and transportationactivities to major global energy producers and oil companies. We also providedecision-support tools and operational, research, and strategic advisoryservices to these customers, as well as to utilities and transportation,petrochemical, coal, and power companies. For example, major global oilcompanies use our offerings to support a broad range of decision-makingprocesses that identify attractive exploration investments, assess thelikelihood of successful oil production projects, and develop detailed planningscenarios.

Our Engineering segment provides offerings in two broadcategories of products: technical standards and parts information. Theseproducts include a broad range of technical specifications and standards,regulations, parts data, design guides, and other information for customers inour targeted industries. We also have expertise in developing decision-supporttools that enhance the accessibility and usability of this information. Weoffer targeted advisory services that are designed to maximize the utilizationand integration of our information within our customers’ business processes. Weserve some of the largest engineering-intensive companies around theworld in the defense, aerospace, construction, electronics, and automotiveindustries. For example, we provide some of the largest aerospace companieswith desktop access to industry specifications and standards; parts, logistics,and procurement data; engineering methods; and related analytical tools.

We sell our offerings primarily through subscriptions. Asa result of our subscription-based business model and historically high renewalrates, we generate recurring revenue and cash flow. We generally recognizerevenue from subscriptions (which are usually for one-year periods) ratablyover the term of the subscription. However, our business

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does have seasonal aspects. For example, certain sales of non-deferredsubscriptions have occurred most frequently in our first and fourth quarters.Consequently, we generally have recognized a greater percentage of our revenueand income in those quarters. Also, our first quarter benefits from theinclusion of the results from CERAWeek, an annual energy executive gathering.

Subscriptions are generally paid in full within one totwo months after the subscription period commences. As a result, the timing ofour cash flows generally precedes the recognition of revenue and income. Due tothe historical timing and alignment of our sales to correspond to certain ofour customers’ budget and funding cycles, our cash flow provided by operatingactivities tends to be higher in the first quarter of our fiscal year as wereceive subscription payments.

We serve some of the world’s largest corporations acrossmultiple industries, as well as governments and other organizations, in morethan 100 countries. We generate approximately half of our total revenue fromoutside the United States. Our primary operations outside the United States arein the United Kingdom, Canada, and Switzerland. Our operating profit outsidethe United States has historically exceeded our domestic operating profit.

**Jane’sInformation Group Acquisition**

OnJune 12, 2007, we executed an agreement with Woodbridge International HoldingsS.A. (Woodbridge) for the purchase of Jane’s Information Group (Jane’s). The parties completed the transaction on the same date.  Terms of thetransaction included delivery of 4,399,000 shares of our Class A Common Stockand less than $0.1 million in cash in exchange for all of the outstandingequity and debt of Jane’s.  Woodbridgehas agreed to a three-year lock-up agreement that restricts its ability to sellany IHS shares.

**SegmentInformation**
| ** **                    | ** ** | **Three Months Ended May 31,** | ** ** | **Six Months Ended May 31,** | ** ** |
|-------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                    | ** ** | **2007**                                           | ** ** | **2006**                                         | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                    | ** ** | **(In thousands)**                            | ** ** |
| Energy revenue                |       | $                                                  | 88,828     |                                             | $          | 70,375 |   | $ | 175,574 |   | $ | 138,613 |   |
| Engineering revenue           |       | 66,072                                             |       | 62,480                                           |       | 131,947 |   | 124,108 |   |
| Total  consolidated revenue   |       | $                                                  | 154,900    |                                             | $          | 132,855 |   | $ | 307,521 |   | $ | 262,721 |   |
| Energy operating income       |       | $                                                  | 28,873     |                                             | $          | 19,934 |   | $ | 55,918 |   | $ | 39,128 |   |
| Engineering operating income  |       | 11,825                                             |       | 8,815                                            |       | 24,810 |   | 20,084 |   |
| Shared services expenses      |       | (14,813                                            | )          | (10,189                                          | )          | (28,959 | ) | (19,239 | ) |
| Consolidated operating income |       | $                                                  | 25,885     |                                             | $          | 18,560 |   | $ | 51,769 |   | $ | 39,973 |   |

 

**ThreeMonths Ended May 31, 2007 Compared to the Three Months Ended May 31, 2006**

**Revenue.**  Revenue was $154.9 million for the threemonths ended May 31, 2007, compared to $132.9 million for the three monthsended May 31, 2006, an increase of $22.0 million or 17%. Revenue increasedprimarily due to organic growth, which contributed $13.6 million.  Acquisitions grew revenue by $5.5 million andthe impact of foreign currency added $3.0 million.

Revenue for our Energy segment was $88.8 million for thethree months ended May 31, 2007, compared to $70.4 million for the three monthsended May 31, 2006, an increase of $18.5 million or 26%. The increase wasprincipally due to organic growth, which contributed $12.3 million.  Additionally, acquisitions added $5.0million. Favorable foreign currency rates contributed $1.2 million of revenuegrowth. Organic growth during the second quarter of 2007 was primarily drivenby price increases, growth in certain critical information subscriptionproducts, and higher demand for services.

Revenue for our Engineering segment was $66.1 million forthe three months ended May 31, 2007, compared to $62.5 million for the threemonths ended May 31, 2006, an increase of $3.6 million or 6%. Organic growthcontributed $1.3 million, acquisitions added $0.5 million, and foreign currencymovements added $1.9 million.

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Organic growth was driven primarily by increased sales inour specifications-and-standards offerings, partially offset by lower servicesrevenue, which decreased due to our fourth-quarter-2006 restructuring, andlower sales of retail products.

**Cost of Revenue**.  Cost of revenuewas $67.8 million for the three months ended May 31, 2007, compared to $63.2million for the three months ended May 31, 2006, an increase of $4.6 million or7%. As a percentage of revenue, cost of revenue decreased to 43.7% from 47.6%.Margins within our Energy segment increased principally due to the additionalrevenue discussed above coupled with our ability to leverage a relativelyfixed-cost structure. Similarly, margins within our Engineering segmentimproved slightly, principally due to increased revenue, discussed above, andrelatively flat expenses.

**Selling, General and Administrative Expenses**.  Selling, general and administrative expenses(SG&A) were $56.6 million for the three months ended May 31, 2007, comparedto $47.7 million for the three months ended May 31, 2006, an increase of $8.9million or 19%. Stock-based compensation expense included in SG&A increased$2.7 million. As a percentage of revenue and excluding stock-based compensationexpense, SG&A was 32.7% for the three months ended May 31, 2007, down from33.4% for the three months ended May 31, 2006. SG&A increased due toseveral reasons, including increased selling expense because of higher salesand a revised commission structure, costs associated with our human resourcesinformation system implementation and our ongoing transformational initiatives,and merit increases.  Acquisitionscontributed $0.6 million of the increase. Foreign-currency movements alsoincreased SG&A by $1.0 million.

**Depreciation and Amortization Expenses**.  Depreciation and amortization expenses were$4.9 million for the three months ended May 31, 2007, compared to $3.3 millionfor the three months ended May 31, 2006, an increase of $1.6 million or 48%.The increase was primarily due to acquisitions.

**Operating Income**.  Operating incomewas $25.9 million for the three months ended May 31, 2007, compared to $18.6million for the three months ended May 31, 2006, an increase of $7.3 million or39%. As a percentage of revenue, operating income increased to 16.7% for thethree months ended May 31, 2007 from 14.0% for the three months ended May 31,2006.

Operating income for our Energy segment was $28.9 millionfor the three months ended May 31, 2007, compared to $19.9 million for thethree months ended May 31, 2006, an increase of $9.0 million or 45%. Theincrease was principally due to the additional revenue discussed above coupledwith our ability to leverage a relatively fixed-cost structure.  Acquisitions contributed $2.6 million.

Operating income for our Engineering segment was $11.8million for the three months ended May 31, 2007, compared to $8.8 million forthe three months ended May 31, 2006, an increase of $3.0 million or 34%.Operating income increased due to increased sales in our subscriptions-basedbusinesses, partially offset by lower services revenue, which decreased due toour fourth-quarter-2006 restructuring, and lower sales of retail products.Costs were relatively flat as reduced headcount and cost savings from ourfourth-quarter-2006 restructuring offset merit increases.

Operating expenses for our shared services were $14.8 millionfor the three months ended May 31, 2007, compared to $10.2 million for thethree months ended May 31, 2006, an increase of $4.6 million or 45%.  Increased stock-based compensation expensecontributed $1.7 million. Costs associated with our human resources informationsystem implementation and our ongoing transformational initiatives andmerit-based salary increases contributed to the increase.

**Provision for Income Taxes**.  Our effective taxrate for the three months ended May 31, 2007 was 32.4%, compared to 33.2% forthe three months ended May 31, 2006. The lower 2007 rate was principally due to a higher mix of earnings inlower-rate tax jurisdictionsthan the United States.

**SixMonths Ended May 31, 2007 Compared to the Six Months Ended May 31, 2006**

**Revenue.**  Revenue was $307.5 million for the six monthsended May 31, 2007, compared to $262.7 million for the six months ended May 31,2006, an increase of $44.8 million or 17%. Revenue increased primarily due to

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organic growth, which contributed $29.9million.  Acquisitions grew revenue by$8.9 million and the impact of foreign currency added $6.0 million.

Revenue for our Energy segment was $175.6 million for thesix months ended May 31, 2007, compared to $138.6 million for the six monthsended May 31, 2006, an increase of $37.0 million or 27%. The increase wasprincipally due to organic growth, which contributed $26.4 million.  Additionally, acquisitions added $8.4million. Favorable foreign currency movements grew revenue by $2.2 million.Organic growth during the first half of 2007 was primarily driven by priceincreases, growth in certain critical information subscription products,stronger results from CERAWeek, and higher demand for services.

Revenue for our Engineering segment was $131.9 million for thesix months ended May 31, 2007, compared to $124.1 million for the six monthsended May 31, 2006, an increase of $7.8 million or 6%. Organic growthcontributed $3.5 million. Also, acquisitions added $0.5 million and foreigncurrency movements grew revenue $3.8 million. Organic growth was driven byincreased sales in our specifications-and-standards and parts-managementofferings partially offset by lower services revenue, which decreased due toour fourth-quarter-2006 restructuring, and lower retail product sales.

**Cost of Revenue**.  Cost of revenuewas $133.5 million for the six months ended May 31, 2007, compared to $124.0million for the six months ended May 31, 2006, an increase of $9.5 million or8%. As a percentage of revenue, cost of revenue decreased to 43.4% from 47.2%.Margins within our Energy segment increased principally due to the additionalrevenue discussed above coupled with our ability to leverage a relativelyfixed-cost structure. Similarly, margins within our Engineering segment improvedslightly, principally due to increased revenue, discussed above, and relativelyflat expenses.

**Selling, General and Administrative Expenses**.  Selling, general and administrative expenses(SG&A) were $114.5 million for the six months ended May 31, 2007, comparedto $92.8 million for the six months ended May 31, 2006, an increase of $21.7million or 23%. Stock-based compensation expense increased $7.1 million. As apercentage of revenue and excluding stock-based compensation expense, SG&Awas 33.0% for the six months ended May 31, 2007, down slightly from 33.1% forthe six months ended May 31, 2006. SG&A increased due to several reasons,including increased selling expense because of higher sales and a revisedcommission structure, costs associated with our human resources informationsystem implementation and our ongoing transformational initiatives, andmerit-based salary increases. Acquisitions contributed $1.1 million of the increase. Foreign-currencymovements also increased SG&A by $2.1 million.

**Depreciation and Amortization Expenses**.  Depreciation and amortization expenses were$9.5 million for the six months ended May 31, 2007, compared to $6.7 millionfor the six months ended May 31, 2006, an increase of $2.8 million or 42%. Theincrease was primarily due to acquisitions.

**Operating Income**.  Operating incomewas $51.8 million for the six months ended May 31, 2007, compared to $40.0million for the six months ended May 31, 2006, an increase of $11.8 million or30%. As a percentage of revenue, operating income increased to 16.8% for thesix months ended May 31, 2007 from 15.2% for the six months ended May 31, 2006.

Operating income for our Energy segment was $55.9 millionfor the six months ended May 31, 2007, compared to $39.1 million for the sixmonths ended May 31, 2006, an increase of $16.8 million or 43%. The increasewas primarily attributable to increased revenue discussed above coupled withour ability to leverage a relatively fixed-cost structure.  Acquisitions contributed $4.0 million.

Operating income for our Engineering segment was $24.8million for the six months ended May 31, 2007, compared to $20.1 million forthe six months ended May 31, 2006, an increase of $4.7 million or 23%.Operating income increased due to increased sales in our subscriptions-basedbusinesses, partially offset by lower services revenue, due to ourfourth-quarter-2006 restructuring, and lower retail sales. Costs wererelatively flat as reduced headcount and cost savings from ourfourth-quarter-2006 restructuring offset merit-based salary increases.

Operating expenses for our shared services were $29.0million for the six months ended May 31, 2007, compared to $19.2 million forthe six months ended May 31, 2006, an increase of $9.8 million or 51%.  Increased

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stock-based compensation expense contributed $5.4 million.Costs associated with our human resources information system implementation andour ongoing transformational initiatives and merit-based salary increases alsocontributed to the increase.

**Provision for Income Taxes**.  Our effective taxrate for the six months ended May 31, 2007 was 32.7%, compared to 33.4% for thesix months ended May 31, 2006. Thelower 2007 rate was principally due to a higher mix of earnings in lower-ratetax jurisdictions than the United States.

**Liquidity and Capital Resources**

As of May 31, 2007, we had cash and cash equivalents of$212.3 million, short-term investments of less than $0.1 million, and virtuallyno debt. We have generated strong cash flows from operations over the last fewyears. As a result of these factors, as well as the availability of funds underour credit facility, we believe we will have sufficient cash to meet ourworking capital and capital expenditure needs.

Our future capital requirements will depend on manyfactors, including the timing and extent of spending to support productdevelopment efforts, the expansion of sales and marketing activities, thetiming of introductions of new products, increased administrative costs ofbeing a public company, changing technology, and the continued marketacceptance of our offerings. We could be required, or could elect, to seekadditional funding through public or private equity or debt financing for anypossible future acquisitions. Additional funds may not be available on terms acceptableto us or at all. We expect our capital expenditures, excluding potentialacquisitions, to be less than $11 million for 2007.

*Share Repurchase Program*

As announced lastyear, our board of directors approved a plan allowing us to acquire up to one millionof our Class A common shares per year in the open market to help offset thedilutive effect of our employee equity programs.  We purchased 400,000 shares during the firstsix months of 2007 for approximately $15.4 million, or an average price of $38.52per share.

*Cash Flows*

Net cash provided by operating activities was approximately$65.8 million for the six months ended May 31, 2007, compared to $65.2 millionfor the six months ended May 31, 2006, an increase of $0.6 million. Theincrease was primarily generated by higher sales combined with increasingmargins, partially offset by the following:

·                  Annual bonus payments, whichare paid in the first quarter each year, were approximately $7 million higherin 2007 than in 2006;

·                  Receivable collections wererobust at the end of 2006, enhancing 2006 cash flow at the expense of 2007;

·                  The effective rate of ourcash paid for tax has increased slightly in 2007, to about 29% on ayear-to-date basis.

Net cash used in investing activities was approximately $17.3million for the six months ended May 31, 2007, compared to $31.8 million forthe six months ended May 31, 2006. The change is driven primarily byacquisitions.  In 2007, we disbursed$14.6 million for the purchase of the assets of two businesses. In 2006, wedisbursed approximately $33 million for the purchase of acontent-and-data-services business for our Engineering segment.

Net cash used in financing activities was $16.0 million forthe six months ended May 31, 2007.  Netcash provided by financing activities was $2.1 million during the six monthsended May 31, 2006.  Beginning firstquarter 2007, we started purchasing our own common stock in the open market. Werepurchased approximately 400,000 shares for approximately $15.4 million.

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*Credit Facility*

We are a party to a $125 million unsecured revolvingcredit agreement (the Revolver), which allows us, under certain conditions, toincrease the facility to a maximum of $250 million. The agreement expiresin January 2010.

The interest rates for borrowing under the Revolver arebased upon our Leverage Ratio, which is the ratio of Consolidated FundedIndebtedness to rolling four quarter Consolidated Earnings Before InterestExpense, Taxes, Depreciation and Amortization (EBITDA), as defined in theRevolver. The rate ranges from the applicable LIBOR plus 75 basis points to 160basis points or the agent bank’s base rate. The facility fee is payableperiodically and is 15 or 25 basis points based upon our Leverage Ratio. TheRevolver contains certain financial and other covenants, including limitationson capital lease obligations, maximum Leverage Ratio, and maintenance of aFixed Charge Coverage Ratio, as defined in the Revolver.

As of May 31,2007, we were in compliance with all of the covenants in the agreement and hadno outstanding borrowings. However, we had letters of credit totalingapproximately $1.8 million as of May 31, 2007, which serve to reduce the amountavailable for borrowing.

**Off-Balance Sheet Transactions**

We have no off-balance sheet transactions.

**Critical Accounting Policies**

Our management makes a number of significantestimates, assumptions and judgments in the preparation of our financialstatements. See “Management’s Discussion and Analysis and Results ofOperations—Critical Accounting Policies and Estimates” in our 2006Form 10-K for a discussion of the estimates and judgments necessary in ouraccounting for revenue recognition, valuation of long-lived and intangibleassets and goodwill, income taxes, pension and post-retirement benefits, and stock-based compensation.

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**Item 3.**           Quantitative and Qualitative DisclosureAbout Market Risk

For information regarding our exposure to certainmarket risk, see Item 7A, “Quantitative and Qualitative Disclosures AboutMarket Risk,” in our 2006 Form 10-K. There were no material changes to ourmarket risk exposure during the first six months of 2007.

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**Item 4.**           Controls and Procedures

*(a) Evaluation of disclosurecontrols and procedures.*

Under the supervision and with the participation ofthe Company’s management, including the Chief Executive Officer and ChiefFinancial Officer, the Company has evaluated the effectiveness of itsdisclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e)under the Securities Exchange Act of 1934, as of the end of the period coveredby this report. Based on that evaluation, the Chief Executive Officer and ChiefFinancial Officer concluded that the Company’s disclosure controls andprocedures as defined in Rules 13a-15(e) and 15d-15(e) under the SecuritiesExchange Act of 1934, as amended, are effective in ensuring that all materialinformation required to be filed in this quarterly report has been made knownto them in a timely fashion.

*(b) Changes in internal controlover financial reporting.*

There were no changes inour internal control over financial reporting that occurred during the periodcovered by this Form 10-Q that have materially affected, or are reasonablylikely to materially affect, our internal control over financial reporting.

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**PARTII. OTHER INFORMATION**

**Item 1.**           Legal Proceedings

From time to time, we areinvolved in litigation, most of which is incidental to our business. In ouropinion, no litigation to which we currently are a party is likely to have amaterial adverse effect on our results of operations or financial condition.

**Item 1A.  RiskFactors**

The following riskfactors have been updated to include the impact of our recent acquisition ofJane’s Information as well as the restructuring of TBG holdings among variousfamily trusts.  Other than the riskfactors set forth below, there have been no material changes from risk factorsas previously disclosed in our most recent Form 10-K filed on January 24, 2007.

**We arecontrolled by an entity whose interests may differ from yours.**

Our Class B commonstock is entitled to ten votes per share, and our Class A common stock isentitled to one vote per share.  As ofJune 12, 2007, our principal stockholder, Urvanos Investments Limited, awholly-owned subsidiary of TBG, owned 100% of our Class B common stock and lessthan two percent of our outstanding Class A common stock.  In the aggregate, this ownership representsapproximately 74% of the voting power of our outstanding capital stock(compared to approximately 23% of the overall economic interest).  The Class B common stock may be convertedinto Class A common stock at any time and will automatically be converted intoClass A common stock upon the earlier of the occurrence of specified events orNovember 16, 2009.

Voting and investment decisions with respect to ourcommon stock that is owned by Urvanos have historically been made by TBG.  As a result, TBG controls all mattersrequiring stockholder approval, including amendments to our certificate ofincorporation, the election of directors, and significant corporatetransactions, such as transactions involving a change of control of IHS.  TBG is indirectly wholly-owned by TBContinuity II Trust, of which Georg Heinrich Thyssen-Bornemisza is the soleprimary beneficiary.  Georg HeinrichThyssen-Bornemisza is the chairman of the board of directors of TBG.  Christoph Grolman, co-chief executive officer            of TBG, is a member ofour board of directors.  Jerre L.Stead, our chief executive officer and the chairman of our board of directors,is a member of the board of directors of TBG. In addition, prior to our initial public offering, C. MichaelArmstrong, Roger Holtback, and Michael Klein, all members of our board ofdirectors, were members of the board of directors and an advisory committee ofTBG.  TBG or its shareholder may haveinterests that conflict with yours and actions may be taken that you do notview as beneficial.

Under Delaware law, the directors of a corporation owefiduciary duties to all stockholders of the corporation, not just to thecontrolling stockholders.  In addition, amajority of our board of directors is “independent” of management, as definedby the New York Stock Exchange rules and regulations.  However, in light of the significant controlthat TBG has over all matters requiring stockholder approval (including theelection of directors), no assurances can be provided that these protectionswill prevent actions that may be viewed as adverse to the Class Astockholders.

**Shareseligible for future sale could depress the price of our shares.**

Sales ofsubstantial amounts of the Class A common stock in the public market, or theperception that such sales could occur, could adversely affect the market priceof the shares.  As of June 12, 2007,there were 49,640,314 shares of Class A common stock and 13,750,000 shares ofClass B common stock outstanding.  TBGindirectly owned an aggregate of 958,859 shares of Class A common stock and all13,750,000 shares of Class B common stock. In addition, investment entities affiliated with General Atlantic LLCowned 4,687,500 shares of Class A common stock.   Following our acquisition of Jane’sInformation, Woodbridge International Holdings S.A. owned 4,399,000 shares ofClass A common stock.

In addition, as ofJune 12, 2007, Tak Tent (F) Limited owned 2,000,000 shares of Class A commonstock and Augustus Limited owned 3,500,000 shares of Class A common stock.  Each of Tak Tent (F) Limited (and its

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permitted transferees)and Augustus Limited (and its permitted transferees) have registered 1,500,000shares of Class A common stock pursuant to a post-effective amendment to aregistration statement dated May 21, 2007, subject to certain contractuallimitations on the timing and amount of securities that may be sold.  The shares of Class A common stock owned byTak Tent (F) Limited and Augustus Limited, respectively, that are not eligiblefor sale under the registration statement may be eligible for sale into thepublic market under Rule 144 under the Securities Act of 1933, as amended.

Urvanos, Woodbridge, and entities affiliated withGeneral Atlantic LLC are entitled to require us to register their shares underthe Securities Act under certain conditions. For rights and conditions applicable to Urvanos and the General Atlanticentities, see “Selling Stockholders—Registration Rights Agreements” under ourpost-effective amendment to a registration statement dated May 21, 2007.  For rights and conditions applicable toWoodbridge, see the Jane’s Information Group Stock Purchase Agreement includedas an exhibit to this report on Form 10-Q. The sale by us or any of these stockholders of shares of common stock inthe public market, or the perception that such sales might occur, could have amaterial adverse effect on the price of our shares.

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

Items 2(a) and (b) are inapplicable.
| (c) | The following table provides a month-to-month  summary of the share repurchase activity under the current stock repurchase  program during the six months ended May 31, 2007: |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
| **Period**                           | ** ** | **Total Number  of Shares  Purchased** | ** ** | **Average Fair  Market Value  per Share** | ** ** | **Total Number  of Shares  Purchased as  Part of Publicly  Announced  Plans or  Programs** | ** ** | **Maximum  Number of   Shares That  May Yet Be  Purchased  Under the  Plans or  Programs** | ** ** |
|--------------------------------------|------------|--------------------------------------------------|------------|----------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------|------------|
| December 1 –  December 31, 2006 |       | —                                           |       | $                                                        | —     |                                                                                                                     | —     |                                                                                                                          | 1,000,000  |   |
| January 1 – January 31, 2007    |       | 54,000                                           |       | $                                                        | 37.59      |                                                                                                                     | 54,000     |                                                                                                                          | 946,000    |   |
| February 1 – February 28, 2007  |       | 146,000                                          |       | $                                                        | 38.01      |                                                                                                                     | 146,000    |                                                                                                                          | 800,000    |   |
| March 1 – March 31, 2007        |       | 96,762                                           |       | $                                                        | 37.56      |                                                                                                                     | 96,762     |                                                                                                                          | 703,238    |   |
| April 1 – April 30, 2007        |       | 103,238                                          |       | $                                                        | 40.64      |                                                                                                                     | 103,238    |                                                                                                                          | 600,000    |   |
| May 1 – May 31, 2007            |       | —                                           |       | $                                                        | —     |                                                                                                                     | —     |                                                                                                                          | 600,000    |   |
| Total                                |       | 400,000                                          |       | $                                                        | 38.52      |                                                                                                                     | 400,000    | (1)                                                                                                                           | 600,000    | (1) |

 

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(1)          During 2006, our board of directors authorized therepurchase of up to one million IHS shares of Class A common stock to morefully offset the dilutive effect of our employee equity programs. Repurchaseswill be made from time to time in the open market. This table does not includethe surrender of common shares by employees to the company to cover taxes dueby employees upon the vesting of employee-equity awards.

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**Item 6.**           Exhibits

(a)          Indexof Exhibits

Thefollowing exhibits are filed as part of this report:
| Exhibit  Number | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1*            |       | Agreement for  the Sale and Purchase of the Share Capital of Jane’s Information Group  (Holdings) Limited, by and among Woodbridge International Holdings S.A. and  the Company, dated June 12, 2007. Pursuant to Item 601(b)(2) of Regulation  S-K, schedules to this agreement have been omitted. The Company hereby  undertakes to supplementally provide to the Securities and Exchange  Commission copies of the schedules upon request. |
| 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.                                                                                                                                                                                                                                                              |

 

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*                 Filedelectronically herewith.

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**SIGNATURE**

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, theRegistrant has duly caused this report to be signed on its behalf by theundersigned, thereunto duly authorized, on June 27, 2007.
|        | IHS INC. |
|--------|----------|
|   |
|   |
|   | By:      | /s/ Heather  Matzke-Hamlin |
|   |     | Name: | Heather  Matzke-Hamlin |
|   |     | Title: | Senior Vice  President and Chief Accounting Officer |

 

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**EXHIBIT INDEX**
| Exhibit  Number | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1*            |       | Agreement for  the Sale and Purchase of the Share Capital of Jane’s Information Group  (Holdings) Limited, by and among Woodbridge International Holdings S.A. and  the Company, dated June 12, 2007. Pursuant to Item 601(b)(2) of Regulation  S-K, schedules to this agreement have been omitted. The Company hereby  undertakes to supplementally provide to the Securities and Exchange  Commission copies of the schedules upon request. |
| 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.                                                                                                                                                                                                                                                              |

 

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*                 Filedelectronically herewith.

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