Table of Contents

 

 

 

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**FORM 10-Q**

 

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**(MarkOne)**

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

 

**Commission file number001-32511**

 

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**IHSINC.**

(Exact name of registrant as specified in its charter)

 

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

 

**15Inverness Way East**

**Englewood,CO 80112**

(Address of Principal Executive Offices)

 

**(303)790-0600**

(Registrant’s telephone number, including area code)

 

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Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.    x YES  o NO

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§232.405 of thischapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files). o YES  o NO

 

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

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

 

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

 

As of May 31,2009, there were 63,151,447 shares of our Class ACommon Stock outstanding.

 

 

 

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Table of Contents

 

**TABLE OFCONTENTS**

 
| ** **       | ** **                                                                                  | **Page**   |
|------------------|---------------------------------------------------------------------------------------------|------------|
| **PART I**  | ** **                                                                                  | ** ** |
| Item 1.          | Financial Statements                                                                        | 3          |
| Item 2.          | Management’s  Discussion and Analysis of Financial Condition and Results of Operations | 16         |
| Item 3.          | Quantitative  and Qualitative Disclosures About Market Risk                                 | 23         |
| Item 4.          | Controls and  Procedures                                                                    | 23         |
|             |                                                                                        |       |
| **PART II** | ** **                                                                                  | ** ** |
| Item 1.          | Legal Proceedings                                                                           | 24         |
| Item 1A.         | Risk Factors                                                                                | 24         |
| Item 2.          | Unregistered  Sales of Equity Securities and Use of Proceeds                                | 24         |
| Item 3.          | Defaults  Upon Senior Securities                                                            | 24         |
| Item 4.          | Submission  of Matters to a Vote of Security Holders                                        | 24         |
| Item 5.          | Other Information                                                                           | 24         |
| Item 6.          | Exhibits                                                                                    | 24         |
|             |                                                                                        |       |
| **SIGNATURE**    | 26                                                                                          |

 

2

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Table of Contents

 

**PART I. FINANCIAL INFORMATION**

Item 1.Financial Statements

 

**IHS INC.**

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

** **

**(Inthousands except share data)**

 
| ** **                                                                                                                                                                                                                                            | ** ** | **As of  May 31, 2009** | ** ** | **As of  November 30, 2008** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                                                                                                                                                                                            | ** ** | **(Unaudited)**                   | ** ** | **(Audited)**                               | ** ** |
| **Assets**                                                                                                                                                                                                                                            | ** ** | ** **                        | ** ** | ** **                                  | ** ** |
| Current  assets:                                                                                                                                                                                                                                      |       |                              |       |                                        |       |
| Cash  and cash equivalents                                                                                                                                                                                                                            |       | $                                 | 172,349    |                                        | $          | 31,040 |   |
| Accounts  receivable, net                                                                                                                                                                                                                             |       | 187,409                           |       | 207,815                                     |       |
| Deferred  subscription costs                                                                                                                                                                                                                          |       | 43,255                            |       | 35,948                                      |       |
| Deferred  income taxes                                                                                                                                                                                                                                |       | 26,797                            |       | 28,801                                      |       |
| Other                                                                                                                                                                                                                                                 |       | 15,956                            |       | 14,213                                      |       |
| Total  current assets                                                                                                                                                                                                                                 |       | 445,766                           |       | 317,817                                     |       |
| Non-current  assets:                                                                                                                                                                                                                                  |       |                              |       |                                        |       |
| Property  and equipment, net                                                                                                                                                                                                                          |       | 63,815                            |       | 59,578                                      |       |
| Intangible  assets, net                                                                                                                                                                                                                               |       | 281,058                           |       | 285,902                                     |       |
| Equity  investments in joint venture                                                                                                                                                                                                                  |       | —                            |       | 56,139                                      |       |
| Goodwill,  net                                                                                                                                                                                                                                        |       | 783,133                           |       | 705,077                                     |       |
| Prepaid  pension asset                                                                                                                                                                                                                                |       | 10,624                            |       | 8,768                                       |       |
| Other                                                                                                                                                                                                                                                 |       | 3,482                             |       | 2,899                                       |       |
| Total  non-current assets                                                                                                                                                                                                                             |       | 1,142,112                         |       | 1,118,363                                   |       |
| Total  assets                                                                                                                                                                                                                                         |       | $                                 | 1,587,878  |                                        | $          | 1,436,180 |   |
| **Liabilities and stockholders’ equity**                                                                                                                                                                                                         | ** ** | ** **                        | ** ** | ** **                                  | ** ** |
| Current  liabilities:                                                                                                                                                                                                                                 |       |                              |       |                                        |       |
| Short-term  debt                                                                                                                                                                                                                                      |       | $                                 | 7,137      |                                        | $          | 96,020 |   |
| Accounts  payable                                                                                                                                                                                                                                     |       | 23,020                            |       | 35,084                                      |       |
| Accrued  compensation                                                                                                                                                                                                                                 |       | 28,167                            |       | 39,083                                      |       |
| Accrued  royalties                                                                                                                                                                                                                                    |       | 21,713                            |       | 24,769                                      |       |
| Other  accrued expenses                                                                                                                                                                                                                               |       | 45,856                            |       | 58,831                                      |       |
| Income  tax payable                                                                                                                                                                                                                                   |       | 2,946                             |       | 3,994                                       |       |
| Deferred  subscription revenue                                                                                                                                                                                                                        |       | 333,668                           |       | 288,145                                     |       |
| Total  current liabilities                                                                                                                                                                                                                            |       | 462,507                           |       | 545,926                                     |       |
| Long-term  debt                                                                                                                                                                                                                                       |       | 108,000                           |       | —                                      |       |
| Accrued  pension liability                                                                                                                                                                                                                            |       | 7,102                             |       | 6,778                                       |       |
| Accrued  post-retirement benefits                                                                                                                                                                                                                     |       | 7,331                             |       | 8,852                                       |       |
| Deferred  income taxes                                                                                                                                                                                                                                |       | 68,102                            |       | 65,749                                      |       |
| Other  liabilities                                                                                                                                                                                                                                    |       | 9,955                             |       | 7,820                                       |       |
| Minority  interests                                                                                                                                                                                                                                   |       | 3,287                             |       | —                                      |       |
| Commitments  and contingencies                                                                                                                                                                                                                        |       |                              |       |                                        |       |
| Stockholders’  equity:                                                                                                                                                                                                                           |       |                              |       |                                        |       |
| Class A  common stock, $0.01 par value per share, 80,000,000 shares  authorized, 64,608,527 and 64,090,207 shares issued, 63,151,447 and  62,802,179 shares outstanding at May 31, 2009 and  November 30, 2008, respectively |       | 646                               |       | 641                                         |       |
| Additional  paid-in capital                                                                                                                                                                                                                           |       | 446,831                           |       | 408,007                                     |       |
| Treasury  stock, at cost: 1,457,080 and 1,288,028 shares at May 31, 2009  and November 30, 2008, respectively                                                                                                                          |       | (72,126                           | )          | (64,632                                     | )          |
| Retained  earnings                                                                                                                                                                                                                                    |       | 643,277                           |       | 584,219                                     |       |
| Accumulated  other comprehensive loss                                                                                                                                                                                                                 |       | (97,034                           | )          | (127,180                                    | )          |
| Total  stockholders’ equity                                                                                                                                                                                                                      |       | 921,594                           |       | 801,055                                     |       |
| Total  liabilities and stockholders’ equity                                                                                                                                                                                                      |       | $                                 | 1,587,878  |                                        | $          | 1,436,180 |   |

 

See accompanying notes.

 

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**IHS INC.**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

** **

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

** **
| ** **                                                                                                                                                                                             | ** ** | **Three Months Ended May 31,** | ** ** | **Six Months Ended May 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                                                                                                                             | ** ** | **2009**                                           | ** ** | **2008**                                         | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                                                                                                                                                                                             | ** ** | **(Unaudited)**                                    | ** ** |
| **Revenue:**                                                                                                                                                                                           |       |                                               |       |                                             |       |   |   |   |   |
| Products                                                                                                                                                                                               |       | $                                                  | 205,170    |                                             | $          | 177,103 |   | $ | 405,028 |   | $ | 342,285 |   |
| Services                                                                                                                                                                                               |       | 30,106                                             |       | 30,090                                           |       | 65,659 |   | 63,685 |   |
| Total revenue                                                                                                                                                                                          |       | 235,276                                            |       | 207,193                                          |       | 470,687 |   | 405,970 |   |
| **Operating expenses:**                                                                                                                                                                                |       |                                               |       |                                             |       |   |   |   |   |
| Cost of revenue:                                                                                                                                                                                       |       |                                               |       |                                             |       |   |   |   |   |
| Products                                                                                                                                                                                               |       | 81,621                                             |       | 73,237                                           |       | 164,693 |   | 141,803 |   |
| Services                                                                                                                                                                                               |       | 16,307                                             |       | 19,943                                           |       | 36,138 |   | 40,537 |   |
| Total cost of revenue (includes stock-based compensation expense of $781, $376,  $1,460 and $687 for the three and six months ended May 31, 2009 and  2008, respectively)                         |       | 97,928                                             |       | 93,180                                           |       | 200,831 |   | 182,340 |   |
| Selling, general and administrative (includes stock-based compensation expense of $14,190;  $10,001; $29,981 and $22,391 for the three and six months ended May 31,  2009 and 2008, respectively) |       | 82,598                                             |       | 72,923                                           |       | 169,054 |   | 144,809 |   |
| Depreciation and amortization                                                                                                                                                                          |       | 11,636                                             |       | 9,683                                            |       | 23,260 |   | 18,506 |   |
| Restructuring and other charges                                                                                                                                                                        |       | (61                                                | )          | —                                           |       | (416 | ) | — |   |
| Gain on sales of assets, net                                                                                                                                                                           |       | —                                             |       | —                                           |       | — |   | (119 | ) |
| Net periodic pension and post-retirement benefits                                                                                                                                                      |       | (689                                               | )          | (1,086                                           | )          | (1,378 | ) | (2,179 | ) |
| Other expense (income), net                                                                                                                                                                            |       | 1,605                                              |       | (323                                             | )          | (469 | ) | (1,136 | ) |
| Total operating expenses                                                                                                                                                                               |       | 193,017                                            |       | 174,377                                          |       | 390,882 |   | 342,221 |   |
| **Operating income**                                                                                                                                                                                   |       | 42,259                                             |       | 32,816                                           |       | 79,805 |   | 63,749 |   |
| Interest income                                                                                                                                                                                        |       | 209                                                |       | 697                                              |       | 563 |   | 1,914 |   |
| Interest expense                                                                                                                                                                                       |       | (512                                               | )          | (843                                             | )          | (1,261 | ) | (979 | ) |
| Non-operating (loss) income, net                                                                                                                                                                       |       | (303                                               | )          | (146                                             | )          | (698 | ) | 935 |   |
| Income from continuing operations before income  taxes, equity investments and minority interests                                                                                                      |       | 41,956                                             |       | 32,670                                           |       | 79,107 |   | 64,684 |   |
| Provision for income taxes                                                                                                                                                                             |       | (8,898                                             | )          | (10,425                                          | )          | (17,905 | ) | (21,024 | ) |
| Income from continuing operations before equity  investments and minority interests                                                                                                                    |       | 33,058                                             |       | 22,245                                           |       | 61,202 |   | 43,660 |   |
| Income from equity investment                                                                                                                                                                          |       | —                                             |       | 1,044                                            |       | — |   | 1,044 |   |
| Minority interests                                                                                                                                                                                     |       | (1,104                                             | )          | (31                                              | )          | (2,144 | ) | (15 | ) |
| **Net income**                                                                                                                                                                                         |       | $                                                  | 31,954     |                                             | $          | 23,258 |   | $ | 59,058 |   | $ | 44,689 |   |
| Net  income per share:                                                                                                                                                                                 |       |                                               |       |                                             |       |   |   |   |   |
| Basic  (Class A common stock for 2009; Class A and Class B common  stock for 2008*)                                                                                                     |       | $                                                  | 0.51       |                                             | $          | 0.37 |   | $ | 0.94 |   | $ | 0.72 |   |
| Diluted  (Class A common stock for 2009; Class A and Class B common  stock for 2008*)                                                                                                   |       | $                                                  | 0.50       |                                             | $          | 0.37 |   | $ | 0.93 |   | $ | 0.71 |   |
| Weighted  average shares:                                                                                                                                                                              |       |                                               |       |                                             |       |   |   |   |   |
| Basic  (Class A common stock for 2009; Class A and Class B common  stock for 2008*)                                                                                                     |       | 63,014                                             |       | 62,221                                           |       | 62,916 |   | 62,097 |   |
| Diluted  (Class A common stock for 2009; Class A and Class B common  stock for 2008*)                                                                                                   |       | 63,829                                             |       | 63,086                                           |       | 63,748 |   | 63,045 |   |

 

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

 

See accompanying notes.

 

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**IHS INC.**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

** **

**(In thousands)**

 
| ** **                                                                       | ** ** | **Six Months Ended May 31,** | ** ** |
|----------------------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                       | ** ** | **2009**                                    | ** ** | **2008** | ** ** |
| ** **                                                                       | ** ** | **(Unaudited)**                             | ** ** |
| **Operating activities**                                                         | ** ** | ** **                                  | ** ** | ** ** | ** ** |
| Net income                                                                       |       | $                                           | 59,058     |   | $ | 44,689 |   |
| Reconciliation of net income to net cash provided  by operating activities: |       |                                        |       |   |   |
| Depreciation and amortization                                                    |       | 23,260                                      |       | 18,506 |   |
| Stock-based compensation expense                                                 |       | 31,441                                      |       | 23,078 |   |
| Gain on sales of assets, net                                                     |       | —                                      |       | (119 | ) |
| Tax benefit from stock-based compensation                                        |       | (6,231                                      | )          | (454 | ) |
| Distributions from equity-method investment                                      |       | —                                      |       | 378 |   |
| Non-cash net periodic pension and post-retirement  benefits                      |       | (2,002                                      | )          | (3,122 | ) |
| Undistributed earnings of unconsolidated  affiliates, net                        |       | (324                                        | )          | (1,233 | ) |
| Minority interests                                                               |       | 2,144                                       |       | 15 |   |
| Deferred income taxes                                                            |       | 5,849                                       |       | 2,075 |   |
| Change in assets and liabilities:                                                |       |                                        |       |   |   |
| Accounts receivable, net                                                         |       | 29,841                                      |       | 5,800 |   |
| Other current assets                                                             |       | (6,327                                      | )          | (10,078 | ) |
| Accounts payable                                                                 |       | (14,883                                     | )          | (9,956 | ) |
| Accrued expenses                                                                 |       | (31,093                                     | )          | (17,304 | ) |
| Income taxes                                                                     |       | (2,500                                      | )          | (1,413 | ) |
| Deferred subscription revenue                                                    |       | 27,758                                      |       | 44,568 |   |
| Other liabilities                                                                |       | 288                                         |       | (457 | ) |
| **Net cash provided by operating  activities**                                   |       | 116,279                                     |       | 94,973 |   |
| **Investing activities**                                                         | ** ** | ** **                                  | ** ** | ** ** | ** ** |
| Capital expenditures on property and equipment                                   |       | (9,128                                      | )          | (5,351 | ) |
| Change in other assets                                                           |       | 506                                         |       | (2,654 | ) |
| Settlements of forward contracts                                                 |       | 933                                         |       | — |   |
| Sales and maturities of investments                                              |       | —                                      |       | 10,500 |   |
| Cash resulting from consolidation of Lloyd’s  Register-Fairplay             |       | 3,466                                       |       | — |   |
| Acquisitions of businesses, net of cash acquired                                 |       | —                                      |       | (130,878 | ) |
| Proceeds from sales of assets                                                    |       | —                                      |       | 140 |   |
| **Net cash used in investing  activities**                                       |       | (4,223                                      | )          | (128,243 | ) |
| **Financing activities**                                                         | ** ** | ** **                                  | ** ** | ** ** | ** ** |
| Proceeds from borrowings                                                         |       | 82,000                                      |       | 50,000 |   |
| Repayment of borrowings                                                          |       | (63,266                                     | )          | (43,095 | ) |
| Excess tax benefit from stock-based compensation  plans                          |       | 6,231                                       |       | 454 |   |
| Proceeds from the exercise of employee stock  options                            |       | 2,019                                       |       | — |   |
| Repurchases of common stock                                                      |       | (7,494                                      | )          | (18,664 | ) |
| **Net cash provided by (used in)  financing activities**                         |       | 19,490                                      |       | (11,305 | ) |
| Foreign exchange impact on cash balance                                          |       | 9,763                                       |       | 1,462 |   |
| Net increase (decrease) in cash and cash  equivalents                            |       | 141,309                                     |       | (43,113 | ) |
| Cash and cash equivalents at the beginning of the  period                        |       | 31,040                                      |       | 148,484 |   |
| Cash and cash equivalents at the end of the period                               |       | $                                           | 172,349    |   | $ | 105,371 |   |

 

See accompanying notes.

 

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**IHS INC.**

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

 

**(In thousands)**

 
| ** **                                  | ** ** | **Shares of  Class A  Common  Stock** | ** ** | **Class A  Common  Stock** | ** ** | **Additional  Paid-In  Capital** | ** ** | **Treasury  Stock** | ** ** | **Retained  Earnings** | ** ** | **Accumulated  Other  Comprehensive  Loss** | ** ** | **Total**  | ** ** |
|---------------------------------------------|------------|-------------------------------------------------|------------|---------------------------------|------------|----------------------------------|------------|---------------------|------------|------------------------|------------|---------------------------------------------|------------|------------|------------|
| ** **                                  | ** ** | ** **                                      | ** ** | ** **                      | ** ** | ** **                       | ** ** | ** **          | ** ** | ** **             | ** ** | ** **                                  | ** ** | ** ** | ** ** |
| **Balance at  November 30, 2008** |       | 62,802                                          |       | $                               | 641        |                             | $          | 408,007             |       | $                      | (64,632    | )                                           | $          | 584,219    |       | $ | (127,180 | ) | $ | 801,055 |   |
| Stock-based award activity                  |       | 349                                             |       | 5                               |       | 32,746                           |       | (7,494              | )          | —                 |       | —                                      |       | 25,257     |       |
| Excess tax benefit on vested shares    |       | —                                          |       | —                          |       | 6,078                            |       | —              |       | —                 |       | —                                      |       | 6,078      |       |
| Net income                                  |       | —                                          |       | —                          |       | —                           |       | —              |       | 59,058                 |       | —                                      |       | 59,058     |       |
| Other comprehensive income:                 |       |                                            |       |                            |       |                             |       |                |       |                   |       |                                        |       |       |       |
| Foreign currency translation adjustments    |       | —                                          |       | —                          |       | —                           |       | —              |       | —                 |       | 30,146                                      |       | 30,146     |       |
| Comprehensive income, net of tax  |       | —                                          |       | —                          |       | —                           |       | —              |       | —                 |       | —                                      |       | 89,204     |       |
| **Balance at May 31, 2009**            |       | 63,151                                          |       | $                               | 646        |                             | $          | 446,831             |       | $                      | (72,126    | )                                           | $          | 643,277    |       | $ | (97,034 | ) | $ | 921,594 |   |

 

See accompanying notes.

 

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**IHS INC.**

**NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

 

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

** **

***Nature of Operations***

*** ***

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

 

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

 

In addition to structuring our business around the regions, we havetargeted four specific information “domains”—Energy, Product Lifecycle,Security, and Environment. Since these four information domains represent areaswhere our customers have needs for Critical Information and Insight, we usethese domains to set priorities and design our business objectives. Theinformation that our customers need to address their complex business issuescontinues to converge at the intersection of the information domains that weserve.  We have categorized theseproducts and services as “Intersection” and have not allocated them to anyspecific domain.  As we continue todeliver Critical Information and Insight in those four information domains, weprepare our financial reports and analyze our business across our threegeographic reportable segments: **Americas**,**EMEA**, and **APAC**.

 

***Consolidation Policy***

*** ***

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

 

***Unaudited Condensed ConsolidatedFinancial Statements***

*** ***

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

 

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

 

***Results Subject to SeasonalVariations***

*** ***

Historically, our business has had seasonal aspects. However, with thecontinued organic growth in our subscription-based business model relative toother revenue streams combined with several acquisitions in recent years, ourseasonal aspects have diminished, although our fourth quarter revenue andprofit still tends to be slightly higher than other quarters due to the productmix typically sold in the fourth quarter. Our first quarter also benefits fromthe inclusion of the results from IHS CERAWeek, an annual energy executive gathering.

 

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***Use of Estimates***

*** ***

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

 

***Reclassification***

 

***Certain prior-yearbalances have been reclassified to conform to current-year presentation.***

*** ***

***Income Taxes***

*** ***

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

 

Our effective tax rate for the first halfof 2009 was 22.6% compared to 32.5% for the prior year period.  The 2009 rate reflects a full year ofbeneficial impact of the internal legal entity reorganization within EMEAcompleted in the third quarter of 2008 as well as benefits recognized from thesuccessful outcome to a French tax appeal and favorable UK tax ruling.

 

Asof May 31, 2009, the total amount of unrecognized tax benefits was $1.7million, of which less than $0.1 million related to interest. The $0.3 millionincrease in unrecognized tax benefits during the first six months of 2009 wasattributable to adjustments made to the reserves during the second quarter offiscal 2009, principally as a result of recording a reserve related to anuncertain UK tax return position.

 

We are subject to taxation and fileincome tax returns in the U.S. and in many foreign jurisdictions. For U.S.federal, Canadian and Swiss income tax purposes, all years prior to 2004 areeffectively closed. For United Kingdom income tax purposes, all years prior to2005 are effectively closed.

 

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

 

***New Accounting Pronouncements***

 

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

 

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

 

In March 2008, the FASB issued SFAS No. 161,*Disclosures about Derivative Instruments andHedging Activities*. (SFAS No. 161)  SFAS No. 161 requires additionaldisclosures related to the use of derivative instruments, the accounting forderivatives and how derivatives impact financial statements.  SFAS No. 161 is effective for fiscalyears and interim periods beginning after November 15,

 

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2008.  Thus, weadopted this standard on December 1, 2008, the first day of our 2009fiscal year, with no material impact to our consolidated financial statements.

 

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

 

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

 

**2.    Business Combination**

 

**Through our ownership of PrimePublications Limited (Prime), during the first quarter of 2009 we obtained acontrolling interest in the Lloyd’s Register-Fairplay Limited (LRF) jointventure, a leading source of global maritime information.  LRF is the leading brand name in the maritimeinformation industry providing comprehensive details of the current world merchantfleet (tankers, cargo, carrier and passenger ships) and a complete range ofproducts and services to assist the world’s maritime community.  The investment in LRF is the primary asset ofPrime.  Since our acquisition of Prime onMarch 3, 2008 and through the year-ended November 30, 2008, we hadaccounted for LRF under the equity method of accounting.  As of December 1, 2008, we obtained  controlling interest and began consolidatingLRF within our results**. On June 17, 2009, we acquired theremaining 49.9% of Lloyd’s Register-Fairplay from Lloyd’s Register giving us100% ownership of LRF.  The 49.9%interest was acquired for approximately £37 million, net of cash acquired.

** **

The impact of consolidating our controlling interestin LRF as of December 1, 2008 was as follows (previously these individualassets were classified within the equity investment balance):

 
| ** **                  | ** ** | **(In thousands)** | ** ** |
|-----------------------------|------------|-------------------------|------------|
| Assets:                     |       |                    |       |
| Current assets              |       | $                       | 5,597      |   |
| Property and equipment      |       | 553                     |       |
| Intangible assets           |       | 11,407                  |       |
| Goodwill                    |       | 53,267                  |       |
| Total assets                |       | 70,824                  |       |
| Liabilities:                |       |                    |       |
| Current liabilities         |       | 10,487                  |       |
| Deferred taxes              |       | 1,872                   |       |
| Other long-term liabilities |       | 2,253                   |       |
| Total liabilities           |       | 14,612                  |       |
| Net                         |       | $                       | 56,212     |   |

 

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

 

We are aparty to various legal proceedings that arise in the ordinary course ofbusiness.  In the opinion of management,none of these actions, either individually or in the aggregate, is expected tohave a material adverse affect on our financial condition, liquidity or resultsof operations.

 

**4.**          **OtherComprehensive Income**

 

**Ourcomprehensive income for the three and six months ended May 31, 2009 and2008 was as follows:**

 
| ** **                              | ** ** | **Three Months Ended May 31,** | ** ** | **Six Months Ended May 31,** | ** ** |
|-----------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                              | ** ** | **2009**                                           | ** ** | **2008**                                         | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                              | ** ** | **(In thousands)**                            | ** ** |
| Net income                              |       | $                                                  | 31,954     |                                             | $          | 23,258 |   | $ | 59,058 |   | $ | 44,689 |   |
| Other comprehensive income (loss):      |       |                                               |       |                                             |       |   |   |   |   |
| Foreign currency translation adjustment |       | 48,497                                             |       | (1,571                                           | )          | 30,146 |   | (5,710 | ) |
| Total comprehensive income              |       | $                                                  | 80,451     |                                             | $          | 21,687 |   | $ | 89,204 |   | $ | 38,979 |   |

 

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

 

*2008 Restructuring*

 

During the third quarter of 2008, we executed a restructuringinitiative which primarily affected the Americas and EMEA segments. One-time,involuntary benefit arrangements and other exit costs are accounted for underthe provisions of SFAS No. 146, *Accountingfor Costs Associated with Exit or Disposal Activities*. Costs arisingunder our defined benefit pension plans from providing enhanced benefits areaccounted for under the provisions of SFAS No. 88, *Employers’ Accounting for Settlements andCurtailments of Defined Benefit Pension Plans and for Termination Benefits*.Restructuring and related expenses consisted of direct and incremental costsassociated with restructuring and related activities, including severance,outplacement and other employee related benefits; facility closure includingnon-cash expenses related to fixed asset and leasehold improvement write-offs;and legal expenses associated with employee terminations which were incurredduring the third quarter of 2008.

 

This initiative was undertaken to further the realignment of ourresources around our regional organizational structure and to further transformour knowledge-based data accumulation operations to ensure continuousimprovement in the quality of the Critical Information and Insight we deliverto our customers. During the course of the restructuring, we reduced ouraggregate workforce by approximately 7%, eliminated certain contractorpositions and closed certain offices.

 

The restructuring charge was incurred in its entirety during the thirdquarter of 2008. Approximately $5.8 million of the charge related to ourAmericas segment, $6.3 million pertained to our EMEA segment and$0.4 million related to shared services. The majority of the liability was paid during 2008 and the remainingliability at November 30, 2008 was $1.0 million.  This remaining balance was substantially paidas of May 31, 2009.  An over-accrualof $0.4 million was reversed during the first half of 2009.

 

*Global Insight Restructuring*

 

Related to the acquisition of Global Insight in October 2008, weestablished a $13.0 million liability for restructuring costs in the openingbalance sheet.  Of this total, $8.2 million is employee severance andother termination benefits and $4.8 million relates to facility closure costs. Through May 31, 2009, we have paid $3.6 million of the employeeseverance and other termination benefits and $0.2 million of the facilityclosure costs resulting in a liability balance of $9.2 million as of May 31,2009.

 

**6.**              Stock-based Compensation

** **

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

 

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

 

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

 

| ** **                          | ** ** | **Three Months Ended May 31,** | ** ** | **Six Months Ended May 31,** | ** ** |
|-------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                          | ** ** | **2009**                                           | ** ** | **2008**                                         | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                          | ** ** | **(In thousands)**                            | ** ** |
| Cost of revenue                     |       | $                                                  | 781        |                                             | $          | 376 |   | $ | 1,460 |   | $ | 687 |   |
| Selling, general and administrative |       | 14,190                                             |       | 10,001                                           |       | 29,981 |   | 22,391 |   |
| Stock-based compensation expense    |       | $                                                  | 14,971     |                                             | $          | 10,377 |   | $ | 31,441 |   | $ | 23,078 |   |

 

Total income tax benefit recognized in the statementof operations for share-based compensation arrangements was as follows:

 

| ** **         | ** ** | **Three Months Ended May 31,** | ** ** | **Six Months Ended May 31,** | ** ** |
|--------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **         | ** ** | **2009**                                           | ** ** | **2008**                                         | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **         | ** ** | **(In thousands)**                            | ** ** |
| Income tax benefit |       | $                                                  | 5,539      |                                             | $          | 3,840 |   | $ | 11,633 |   | $ | 8,539 |   |
|                    |            |                                                    |            |                                                  |            |  |  |  |  |  |  |  |  |

 

Nocompensation cost was capitalized during the three and six months ended May 31,2009 and May 31, 2008.

 

*Nonvested Stock.*  Share awards vest from six months to fouryears. Share awards are generally subject to either cliff vesting or gradedvesting. The fair value of nonvested stock is based on the fair value of ourcommon stock on the date of grant. We amortize the value of share awards to expenseover the vesting period on a straight-line basis. Approximately half of ouroutstanding awards are 

 

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performancebased. For those awards, an evaluation is made each quarter as to thelikelihood of the performance criteria being met. Compensation expense is thenadjusted to reflect the number of shares expected to vest and the cumulativevesting period met to date. Additionally, we estimate forfeitures at the grantdate and recognize compensation cost based on the number of awards expected tovest. There may be adjustments in future periods if the likelihood of meetingperformance criteria changes or if actual forfeitures differ from ourestimates. Our forfeiture rate is based upon historical experience as well asanticipated employee turnover considering certain qualitative factors.

 

Totalcompensation expense related to nonvested awards, both share awards and stockoptions, not yet recognized was $64.0 million as of May 31, 2009,with a weighted-average recognition period of approximately 1.5 years.

 

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

 
| ** **                       | ** ** | **Shares**              | ** ** | **Weighted-  Average Grant  Date Fair Value** | ** ** |
|----------------------------------|------------|-------------------------|------------|--------------------------------------------------------------|------------|
| ** **                       | ** ** | **(in thousands)** | ** ** | ** **                                                   | ** ** |
| Balances, November 30, 2008 |       | 2,176                   |       | $                                                            | 41.81      |   |
| Granted                          |       | 1,025                   |       | $                                                            | 42.89      |   |
| Vested                           |       | (523                    | )          | $                                                            | 40.57      |   |
| Forfeited                        |       | (115                    | )          | $                                                            | 43.37      |   |
| Balances, May 31, 2009      |       | 2,563                   |       | $                                                            | 44.81      |   |

 

Thetotal fair value of nonvested stock that vested during the six months ended May 31,2009, was $22.9 million based on the weighted-average fair value on thevesting date and $21.2 million based on the weighted-average fair value onthe date of grant.

 

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

 

Thefollowing table summarizes changes in outstanding stock options during the sixmonths ended May 31, 2009, as well as options that are vested and expectedto vest and stock options exercisable at May 31, 2009:

 
| ** **                                       | ** ** | **Shares**              | ** ** | **Weighted-  Average  Exercise  Price** | ** ** | **Weighted-  Average  Remaining  Contractual  Term (years)** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
|--------------------------------------------------|------------|-------------------------|------------|-----------------------------------------|------------|-------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                       | ** ** | **(in thousands)** | ** ** | ** **                              | ** ** | ** **                                                        | ** ** | **(in thousands)**         | ** ** |
| Outstanding at November 30, 2008            |       | 275                     |       | $                                       | 35.18      |                                                              | 5.5        |                            | $          | 543 |   |
| Granted                                          |       | —                  |       | —                                  |       |                                                              |       |                            |       |
| Exercised                                        |       | (63                     | )          | 32.24                                   |       |                                                              |       |                            |       |
| Forfeited                                        |       | (7                      | )          | 37.65                                   |       |                                                              |       |                            |       |
| Outstanding at May 31, 2009                 |       | 205                     |       | $                                       | 36.00      |                                                              | 5.6        |                            | $          | 2,465 |   |
| Vested and expected to vest at May 31, 2009 |       | 205                     |       | $                                       | 36.00      |                                                              | 5.6        |                            | $          | 2,465 |   |
| Exercisable at May 31, 2009                 |       | 101                     |       | $                                       | 37.65      |                                                              | —     |                            | $          | 1,048 |   |

 

Theaggregate intrinsic value amounts in the table above represent the differencebetween the closing price of our common stock on May 31, 2009, which was$48.00, 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, 2009. In future periods, this amount will changedepending on fluctuations in our stock price. The total intrinsic value ofstock options exercised during the six months ended May 31, 2009 was $0.6million.

 

**7.**          **Debt**

 

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

 

The interest rates for borrowing under the Revolver are based upon ourLeverage Ratio, which is the ratio of Consolidated Funded Indebtedness torolling four quarter Consolidated Earnings Before Interest Expense, Taxes, Depreciationand Amortization 

 

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(EBITDA),as defined in the Revolver. The rate ranges from the applicable LIBOR plus 50basis points to 125 basis points or the agent bank’s base rate. A commitmentfee is payable periodically and ranges from 10 to 25 basis points based uponour Leverage Ratio. The Revolver contains certain financial and othercovenants, including limitations on capital lease obligations and maximumLeverage and Interest Coverage Ratios, as defined in the Revolver.

 

As of May 31, 2009, we were in compliance with all of thecovenants in the agreement and had $108.0 million of outstandingborrowings with an annual interest rate of 0.94%.  This debt is classified as long-term debt asof May 31, 2009 as we have the ability and intent to maintain this balancebeyond twelve months.  In addition, wehad outstanding letters of credit totaling approximately $1.3 million asof May 31, 2009.

 

As of May 31, 2009, we also had $7.1 million of non-interestbearing notes that were issued to the sellers of Prime. These notes are dueupon demand and are therefore recorded in “Short-term Debt” in the accompanyingCondensed Consolidated Balance Sheets.

 

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

 

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

 

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

 
| ** **                                      | ** ** | **Three Months Ended May 31, 2009** | ** ** | **Three Months Ended May 31, 2008** | ** ** |
|-------------------------------------------------|------------|--------------------------------------------------------------|------------|--------------------------------------------------------------|------------|
| ** **                                      | ** ** | **U.S.  RIP**                                                | ** ** | **U.K.  RIP**                                                | ** ** | **SIP** | ** ** | **Total** | ** ** | **U.S.  RIP** | ** ** | **U.K.  RIP** | ** ** | **SIP** | ** ** | **Total** | ** ** |
| ** **                                      | ** ** | **(In thousands)**                                      | ** ** |
| Service costs incurred                          |       | $                                                            | 1,728      |                                                         | $          | 125 |   | $ | 58 |   | $ | 1,911 |   | $ | 1,572 |   | $ | 238 |   | $ | 72 |   | $ | 1,882 |   |
| Interest costs on projected benefit obligation  |       | 3,230                                                        |       | 376                                                          |       | 123 |   | 3,729 |   | 2,999 |   | 539 |   | 114 |   | 3,652 |   |
| Expected return on plan assets                  |       | (5,227                                                       | )          | (413                                                         | )          | — |   | (5,640 | ) | (5,361 | ) | (562 | ) | — |   | (5,923 | ) |
| Amortization of prior service cost              |       | (118                                                         | )          | —                                                       |       | 11 |   | (107 | ) | (118 | ) | — |   | 11 |   | (107 | ) |
| Amortization of actuarial loss                  |       | —                                                       |       | —                                                       |       | 21 |   | 21 |   | — |   | — |   | 47 |   | 47 |   |
| Amortization of transitional obligation/(asset) |       | (57                                                          | )          | —                                                       |       | 13 |   | (44 | ) | (142 | ) | — |   | 10 |   | (132 | ) |
| Net periodic pension benefit (income) expense   |       | $                                                            | (444       | )                                                            | $          | 88 |   | $ | 226 |   | $ | (130 | ) | $ | (1,050 | ) | $ | 215 |   | $ | 254 |   | $ | (581 | ) |

 
| ** **                                      | ** ** | **Six Months Ended May 31, 2009** | ** ** | **Six Months Ended May 31, 2008** | ** ** |
|-------------------------------------------------|------------|------------------------------------------------------------|------------|------------------------------------------------------------|------------|
| ** **                                      | ** ** | **U.S.  RIP**                                              | ** ** | **U.K.  RIP**                                              | ** ** | **SIP** | ** ** | **Total** | ** ** | **U.S.  RIP** | ** ** | **U.K.  RIP** | ** ** | **SIP** | ** ** | **Total** | ** ** |
| ** **                                      | ** ** | **(In thousands)**                                    | ** ** |
| Service costs incurred                          |       | $                                                          | 3,456      |                                                       | $          | 248 |   | $ | 116 |   | $ | 3,820 |   | $ | 3,144 |   | $ | 476 |   | $ | 144 |   | $ | 3,764 |   |
| Interest costs on projected benefit obligation  |       | 6,460                                                      |       | 747                                                        |       | 246 |   | 7,453 |   | 5,998 |   | 1,078 |   | 228 |   | 7,304 |   |
| Expected return on plan assets                  |       | (10,454                                                    | )          | (819                                                       | )          | — |   | (11,273 | ) | (10,729 | ) | (1,124 | ) | — |   | (11,853 | ) |
| Amortization of prior service cost              |       | (236                                                       | )          | —                                                     |       | 22 |   | (214 | ) | (236 | ) | — |   | 22 |   | (214 | ) |
| Amortization of actuarial loss                  |       | —                                                     |       | —                                                     |       | 42 |   | 42 |   | — |   | — |   | 94 |   | 94 |   |
| Amortization of transitional obligation/(asset) |       | (114                                                       | )          | —                                                     |       | 26 |   | (88 | ) | (284 | ) | — |   | 20 |   | (264 | ) |
| Net periodic pension benefit (income) expense   |       | $                                                          | (888       | )                                                          | $          | 176 |   | $ | 452 |   | $ | (260 | ) | $ | (2,107 | ) | $ | 430 |   | $ | 508 |   | $ | (1,169 | ) |

 

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Ournet periodic post-retirement income was comprised of the following for thethree and six months ended May 31:

 
| ** **                                  | ** ** | **Three Months Ended May 31,** | ** ** | **Six Months Ended May 31,** | ** ** |
|---------------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                  | ** ** | **2009**                                           | ** ** | **2008**                                         | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                                  | ** ** | **(In thousands)**                            | ** ** |
| Service costs incurred                      |       | $                                                  | 14         |                                             | $          | 25 |   | $ | 28 |   | $ | 50 |   |
| Interest costs                              |       | 158                                                |       | 158                                              |       | 316 |   | 316 |   |
| Amortization of prior service amounts       |       | (807                                               | )          | (806                                             | )          | (1,614 | ) | (1,612 | ) |
| Amortization of net actuarial loss          |       | 76                                                 |       | 118                                              |       | 152 |   | 236 |   |
| Net periodic post-retirement benefit income |       | $                                                  | (559       | )                                                | $          | (505 | ) | $ | (1,118 | ) | $ | (1,010 | ) |

** **

**9.**              Earnings per Share

** **

Earnings per common share (EPS) arecomputed in accordance with SFAS No. 128, *Earnings perShare*. Basic EPS is computed by dividing net income by the weightedaverage number of common shares outstanding during the period. Diluted EPSreflects the potential dilution that could occur if securities or othercontracts to issue common stock were exercised or converted into common shares.

 

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

 

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

 

| ** **                                   | ** ** | **Three Months Ended May 31,** | ** ** |
|----------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                   | ** ** | **2009**                                      | ** ** | **2008** | ** ** |
| ** **                                   | ** ** | **Class A**                              | ** ** | **Class A and  Class B** | ** ** |
| ** **                                   | ** ** | **(In thousands)**                       | ** ** |
| Weighted average common shares outstanding:  |       |                                          |       |   |   |
| Shares used in basic per-share calculation   |       | 63,014                                        |       | 62,221 |   |
| Effect of dilutive securities:               |       |                                          |       |   |   |
| Deferred stock units                         |       | 52                                            |       | 42 |   |
| Restricted shares                            |       | 733                                           |       | 752 |   |
| Options                                      |       | 30                                            |       | 71 |   |
| Shares used in diluted per-share calculation |       | 63,829                                        |       | 63,086 |   |

 

| ** **                                   | ** ** | **Six Months Ended May 31,** | ** ** |
|----------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                   | ** ** | **2009**                                    | ** ** | **2008** | ** ** |
| ** **                                   | ** ** | **Class A**                            | ** ** | **Class A and  Class B** | ** ** |
| ** **                                   | ** ** | **(In thousands)**                     | ** ** |
| Weighted average common shares outstanding:  |       |                                        |       |   |   |
| Shares used in basic per-share calculation   |       | 62,916                                      |       | 62,097 |   |
| Effect of dilutive securities:               |       |                                        |       |   |   |
| Deferred stock units                         |       | 51                                          |       | 40 |   |
| Restricted shares                            |       | 748                                         |       | 839 |   |
| Options                                      |       | 33                                          |       | 69 |   |
| Shares used in diluted per-share calculation |       | 63,748                                      |       | 63,045 |   |

 

*Share Repurchase Program*

 

During2006, our board of directors approved a program to reduce the dilutive effectsof employee equity grants, by allowing employees to surrender shares back tothe Company for a value equal to their statutory tax liability.  IHS then pays the statutory tax on behalf ofthe employee.  Additionally, our board ofdirectors periodically approves additional buyback programs whereby IHSacquires shares in the open market to more fully offset the dilutive effect ofour employee equity programs. During the three months ended May 31, 2009,we repurchased 37,577 shares under the tax withholding program forapproximately $1.7 million, or $45.78 per share.  In the first half of 2009, we repurchased169,052 shares under the tax withholding program for approximately $7.5million, or $44.34 per share.  No shareswere repurchased in the first half of 2009 pursuant to a share buybackprogram.  Since the inception of theseprograms, we have withheld for tax 868,446 shares of our Class A commonstock for approximately $43.2 million, or $49.72 per share and we haverepurchased 1,889,557 shares for approximately $94.7 million or $50.13 pershare pursuant to the stock buyback program.

 

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**10.   Goodwill and Intangible Assets**

 

The following table presents details of our intangibleassets, other than goodwill, as of May 31, 2009:

 
| ** **                                     | ** ** | **Useful Life** | ** ** | **Gross**               | ** ** | **Accumulated  Amortization** | ** ** | **Net** | ** ** |
|------------------------------------------------|------------|----------------------|------------|-------------------------|------------|-------------------------------|------------|---------|------------|
| ** **                                     | ** ** | **(Years)**          | ** ** | **(In thousands)** | ** ** |
| Intangible assets subject to amortization:     |       |                 |       |                    |       |                          |       |    |       |
| Information databases                          |       | 5 - 15     |       | $                       | 185,890    |                          | $          | (40,021 | )          | $ | 145,869 |   |
| Customer relationships                         |       | 2 - 15     |       | 73,482                  |       | (16,069                       | )          | 57,413  |       |
| Non-compete agreements                         |       | 5                    |       | 5,855                   |       | (4,702                        | )          | 1,153   |       |
| Developed computer software                    |       | 5                    |       | 21,800                  |       | (6,215                        | )          | 15,585  |       |
| Other                                          |       | 3 - 11     |       | 5,899                   |       | (4,048                        | )          | 1,851   |       |
| Total                                          |       |                 |       | 292,926                 |       | (71,055                       | )          | 221,871 |       |
| Intangible assets not subject to amortization: |       |                 |       |                    |       |                          |       |    |       |
| Trademarks                                     |       |                 |       | 57,976                  |       | —                        |       | 57,976  |       |
| Perpetual licenses                             |       |                 |       | 1,211                   |       | —                        |       | 1,211   |       |
| Total intangible assets                        |       |                 |       | $                       | 352,113    |                          | $          | (71,055 | )          | $ | 281,058 |   |

 

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

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

 

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

 

| **Year**       | ** ** | **Amount**              | ** ** |
|----------------|------------|-------------------------|------------|
| ** **     | ** ** | **(In thousands)** | ** ** |
| Remainder 2009 |       | $                       | 15,577     |   |
| 2010           |       | 29,880                  |       |
| 2011           |       | 28,170                  |       |
| 2012           |       | 26,590                  |       |
| 2013           |       | 25,163                  |       |
|                |            |                         |            |  |

 

Amortizationexpense of intangible assets was $8.0 million and $6.3 million for the threemonths ended May 31, 2009 and May 31, 2008, respectively.  Amortization expense of intangible assets was$15.8 million and $12.0 million for the six months ended May 31, 2009 and May 31,2008, respectively

 

Changesin our goodwill and intangible assets from November 30, 2008 to May 31,2009 were primarily the result of the consolidation of LRF in the first quarterof 2009 due to the obtaining of control of the joint venture and to a lesserextent by the impact of foreign currency rates.

 

**11.**          Segment Information

** **

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

 

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Weare also able to manage our activities according to the best practices of each.This structure provides a solid foundation for growth in each market for all ofour capabilities. It allows us an efficient method of bringing new products andservices to customers, and supports growth in existing accounts and with newcustomers and markets.

 

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

 

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

 

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

 
| ** **                                | ** ** | **Americas**            | ** ** | **EMEA** | ** ** | **APAC** | ** ** | **Segment  Totals** | ** ** | **Shared  Services** | ** ** | **Consolidated  Total** | ** ** |
|-------------------------------------------|------------|-------------------------|------------|----------|------------|----------|------------|---------------------|------------|----------------------|------------|-------------------------|------------|
| ** **                                | ** ** | **(In thousands)** | ** ** |
| **Three months ended May 31,  2009** |       |                    |       |     |       |     |       |                |       |                 |       |                    |       |
| Revenue                                   |       | $                       | 148,631    |     | $          | 67,660   |       | $                   | 18,985     |                 | $          | 235,276                 |       | $ | — |   | $ | 235,276 |   |
| Operating income                          |       | 48,047                  |       | 12,746   |       | 6,518    |       | 67,311              |       | (25,052              | )          | 42,259                  |       |
| Depreciation and amortization             |       | 7,727                   |       | 3,346    |       | 25       |       | 11,098              |       | 538                  |       | 11,636                  |       |
| **Three months ended May 31,  2008** |       |                    |       |     |       |     |       |                |       |                 |       |                    |       |
| Revenue                                   |       | $                       | 126,193    |     | $          | 66,726   |       | $                   | 14,274     |                 | $          | 207,193                 |       | $ | — |   | $ | 207,193 |   |
| Operating income                          |       | 39,449                  |       | 11,801   |       | 3,789    |       | 55,039              |       | (22,223              | )          | 32,816                  |       |
| Depreciation and amortization             |       | 5,372                   |       | 3,444    |       | 37       |       | 8,853               |       | 830                  |       | 9,683                   |       |

 
| ** **                              | ** ** | **Americas**            | ** ** | **EMEA** | ** ** | **APAC** | ** ** | **Segment  Totals** | ** ** | **Shared  Services** | ** ** | **Consolidated  Total** | ** ** |
|-----------------------------------------|------------|-------------------------|------------|----------|------------|----------|------------|---------------------|------------|----------------------|------------|-------------------------|------------|
| ** **                              | ** ** | **(In thousands)** | ** ** |
| **Six months ended May 31,  2009** |       |                    |       |     |       |     |       |                |       |                 |       |                    |       |
| Revenue                                 |       | $                       | 296,986    |     | $          | 136,450  |       | $                   | 37,251     |                 | $          | 470,687                 |       | $ | — |   | $ | 470,687 |   |
| Operating income                        |       | 91,684                  |       | 26,557   |       | 11,510   |       | 129,751             |       | (49,946              | )          | 79,805                  |       |
| Depreciation and amortization           |       | 15,406                  |       | 6,495    |       | 51       |       | 21,952              |       | 1,308                |       | 23,260                  |       |
| **Six months ended May 31,  2008** |       |                    |       |     |       |     |       |                |       |                 |       |                    |       |
| Revenue                                 |       | $                       | 247,392    |     | $          | 130,357  |       | $                   | 28,221     |                 | $          | 405,970                 |       | $ | — |   | $ | 405,970 |   |
| Operating income                        |       | 78,004                  |       | 22,404   |       | 7,760    |       | 108,168             |       | (44,419              | )          | 63,749                  |       |
| Depreciation and amortization           |       | 10,278                  |       | 6,687    |       | 72       |       | 17,037              |       | 1,469                |       | 18,506                  |       |

 

**Revenueby information domain was as follows:**

 
| ** **                | ** ** | **Three Months Ended May 31,** | ** ** | **Six Months Ended May 31,** | ** ** |
|---------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                | ** ** | **2009**                                           | ** ** | **2008**                                         | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                | ** ** | **(In thousands)**                            | ** ** |
| Energy revenue            |       | $                                                  | 110,310    |                                             | $          | 109,646 |   | $ | 226,410 |   | $ | 219,942 |   |
| Product Lifecycle revenue |       | 73,291                                             |       | 72,812                                           |       | 143,606 |   | 141,843 |   |
| Security revenue          |       | 24,831                                             |       | 18,893                                           |       | 48,155 |   | 35,765 |   |
| Environment revenue       |       | 7,353                                              |       | 5,842                                            |       | 14,449 |   | 8,420 |   |
| Intersection revenue      |       | 19,491                                             |       | —                                           |       | 38,067 |   | — |   |
| Total revenue             |       | $                                                  | 235,276    |                                             | $          | 207,193 |   | $ | 470,687 |   | $ | 405,970 |   |

** **

**Revenueby product category was as follows:**

 
| ** **                            | ** ** | **Three Months Ended May 31,** | ** ** | **Six Months Ended May 31,** | ** ** |
|---------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                            | ** ** | **2009**                                           | ** ** | **2008**                                         | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                            | ** ** | **(In thousands)**                            | ** ** |
| Critical Information Products revenue |       | $                                                  | 137,251    |                                             | $          | 139,248 |   | $ | 271,394 |   | $ | 269,670 |   |
| Critical Information Services revenue |       | 13,537                                             |       | 13,765                                           |       | 26,688 |   | 25,444 |   |
| Insight Products revenue              |       | 67,919                                             |       | 37,855                                           |       | 133,634 |   | 72,615 |   |
| Insight Services revenue              |       | 16,569                                             |       | 16,325                                           |       | 38,971 |   | 38,241 |   |
| Total revenue                         |       | $                                                  | 235,276    |                                             | $          | 207,193 |   | $ | 470,687 |   | $ | 405,970 |   |

 

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**12.**          Subsequent Event

** **

**On June 17, 2009, we acquiredthe remaining 49.9% of Lloyd’s Register-Fairplay from Lloyd’s Register givingus 100% ownership of LRF.  The 49.9%interest was acquired for approximately £37 million, net of cash acquired.**

** **

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

 

**Forward-Looking Statements**

 

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

 

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

 

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

 

**Overview**

 

**Resultsof Operations**

 

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

 

We sell our offerings primarily through subscriptions. As a result ofour subscription-based business model and historically high renewal rates, wegenerate recurring revenue and cash flow. We generally recognize revenue fromsubscriptions (which are usually for one-year periods) ratably over the term ofthe subscription. Subscriptions are generally paid in full within one to twomonths after the subscription period commences. As a result, the timing of ourcash flows generally precedes the recognition of revenue and income.Historically, our business has had seasonal aspects. However, with thecontinued organic growth in our subscription-based business model combined withseveral acquisitions in recent years, our seasonal aspects have diminishedalthough our fourth quarter revenue and profit tends to be slightly higher thanother quarters due to the product mix typically sold in the fourth quarter. Ourfirst quarter also benefits from the inclusion of the results from IHSCERAWeek, an annual energy executive gathering.

 

We serve some of the world’s largest corporations across multipleindustries, as well as governments and other organizations, in more than 100countries. Our primary operations outside the United States are in the UnitedKingdom, Canada, Switzerland and China. We have structured our business aroundour customers and the geographies in which they reside: **Americas** (which includes the United States,Canada, and Latin America); **EMEA**(Europe, the Middle East, and Africa, with India also included in the region), 

 

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and**APAC** (the Asia Pacific region,which includes many countries such as China, Japan, South Korea, Malaysia, andAustralia). This allows us to tailor and expand the solutions we offer to meetthe unique needs of our customers both globally and in local markets.

 

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

 

We have targeted four specific information “domains”—Energy, ProductLifecycle, Security, and Environment. Since these four information domainsrepresent areas where our customers have needs for Critical Information andInsight, we use these domains to set priorities and design our businessstrategies. In addition, we have certain product lines that intersect multipledomains. We have categorized these products and services as Intersection andhave not allocated them to any specific domain.

 

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

 

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

 

**Business Combination**

 

**Through our ownership of PrimePublications Limited (Prime), during the first quarter of 2009 we obtained acontrolling interest in the Lloyd’s Register-Fairplay Limited (LRF) jointventure, a leading source of global maritime information.  LRF is the leading brand name in the maritimeinformation industry providing comprehensive details of the current worldmerchant fleet (tankers, cargo, carrier and passenger ships) and a completerange of products and services to assist the world’s maritime community.  The investment in LRF is the primary asset ofPrime.  Since our acquisition of Prime onMarch 3, 2008 and through the year-ended November 30, 2008, we hadaccounted for LRF under the equity method of accounting.  With the obtaining of the controllinginterest, LRF is now consolidated within our results as of December 1,2008.**On June 17, 2009,we acquired the remaining 49.9% of Lloyd’s Register-Fairplay from Lloyd’sRegister giving us 100% ownership of LRF. The 49.9% interest was acquired for approximately £37 million, net ofcash acquired.

** **

**SegmentInformation**

 
| ** **                                | ** ** | **Americas**            | ** ** | **EMEA** | ** ** | **APAC** | ** ** | **Segment  Totals** | ** ** | **Shared  Services** | ** ** | **Consolidated  Total** | ** ** |
|-------------------------------------------|------------|-------------------------|------------|----------|------------|----------|------------|---------------------|------------|----------------------|------------|-------------------------|------------|
| ** **                                | ** ** | **(In thousands)** | ** ** |
| **Three months ended May 31,  2009** |       |                    |       |     |       |     |       |                |       |                 |       |                    |       |
| Revenue                                   |       | $                       | 148,631    |     | $          | 67,660   |       | $                   | 18,985     |                 | $          | 235,276                 |       | $ | — |   | $ | 235,276 |   |
| Operating income                          |       | 48,047                  |       | 12,746   |       | 6,518    |       | 67,311              |       | (25,052              | )          | 42,259                  |       |
| Depreciation and amortization             |       | 7,727                   |       | 3,346    |       | 25       |       | 11,098              |       | 538                  |       | 11,636                  |       |
| **Three months ended May 31,  2008** |       |                    |       |     |       |     |       |                |       |                 |       |                    |       |
| Revenue                                   |       | $                       | 126,193    |     | $          | 66,726   |       | $                   | 14,274     |                 | $          | 207,193                 |       | $ | — |   | $ | 207,193 |   |
| Operating income                          |       | 39,449                  |       | 11,801   |       | 3,789    |       | 55,039              |       | (22,223              | )          | 32,816                  |       |
| Depreciation and amortization             |       | 5,372                   |       | 3,444    |       | 37       |       | 8,853               |       | 830                  |       | 9,683                   |       |

 

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| ** **                              | ** ** | **Americas**            | ** ** | **EMEA** | ** ** | **APAC** | ** ** | **Segment  Totals** | ** ** | **Shared  Services** | ** ** | **Consolidated  Total** | ** ** |
|-----------------------------------------|------------|-------------------------|------------|----------|------------|----------|------------|---------------------|------------|----------------------|------------|-------------------------|------------|
| ** **                              | ** ** | **(In thousands)** | ** ** |
| **Six months ended May 31,  2009** |       |                    |       |     |       |     |       |                |       |                 |       |                    |       |
| Revenue                                 |       | $                       | 296,986    |     | $          | 136,450  |       | $                   | 37,251     |                 | $          | 470,687                 |       | $ | — |   | $ | 470,687 |   |
| Operating income                        |       | 91,684                  |       | 26,557   |       | 11,510   |       | 129,751             |       | (49,946              | )          | 79,805                  |       |
| Depreciation and amortization           |       | 15,406                  |       | 6,495    |       | 51       |       | 21,952              |       | 1,308                |       | 23,260                  |       |
| **Six months ended May 31,  2008** |       |                    |       |     |       |     |       |                |       |                 |       |                    |       |
| Revenue                                 |       | $                       | 247,392    |     | $          | 130,357  |       | $                   | 28,221     |                 | $          | 405,970                 |       | $ | — |   | $ | 405,970 |   |
| Operating income                        |       | 78,004                  |       | 22,404   |       | 7,760    |       | 108,168             |       | (44,419              | )          | 63,749                  |       |
| Depreciation and amortization           |       | 10,278                  |       | 6,687    |       | 72       |       | 17,037              |       | 1,469                |       | 18,506                  |       |

 

**Revenueby information domain was as follows:**

 
| ** **                | ** ** | **Three Months Ended May 31,** | ** ** | **Six Months Ended May 31,** | ** ** |
|---------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                | ** ** | **2009**                                           | ** ** | **2008**                                         | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                | ** ** | **(In thousands)**                            | ** ** |
| Energy revenue            |       | $                                                  | 110,310    |                                             | $          | 109,646 |   | $ | 226,410 |   | $ | 219,942 |   |
| Product Lifecycle revenue |       | 73,291                                             |       | 72,812                                           |       | 143,606 |   | 141,843 |   |
| Security revenue          |       | 24,831                                             |       | 18,893                                           |       | 48,155 |   | 35,765 |   |
| Environment revenue       |       | 7,353                                              |       | 5,842                                            |       | 14,449 |   | 8,420 |   |
| Intersection revenue      |       | 19,491                                             |       | —                                           |       | 38,067 |   | — |   |
| Total revenue             |       | $                                                  | 235,276    |                                             | $          | 207,193 |   | $ | 470,687 |   | $ | 405,970 |   |

** **

**Revenueby product category was as follows:**

 
| ** **                            | ** ** | **Three Months Ended May 31,** | ** ** | **Six Months Ended May 31,** | ** ** |
|---------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                            | ** ** | **2009**                                           | ** ** | **2008**                                         | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                            | ** ** | **(In thousands)**                            | ** ** |
| Critical Information Products revenue |       | $                                                  | 137,251    |                                             | $          | 139,248 |   | $ | 271,394 |   | $ | 269,670 |   |
| Critical Information Services revenue |       | 13,537                                             |       | 13,765                                           |       | 26,688 |   | 25,444 |   |
| Insight Products revenue              |       | 67,919                                             |       | 37,855                                           |       | 133,634 |   | 72,615 |   |
| Insight Services revenue              |       | 16,569                                             |       | 16,325                                           |       | 38,971 |   | 38,241 |   |
| Total revenue                         |       | $                                                  | 235,276    |                                             | $          | 207,193 |   | $ | 470,687 |   | $ | 405,970 |   |

 

**ThreeMonths Ended May 31, 2009 Compared to the Three Months Ended May 31,2008**

 

**Revenue.**  Revenue was$235.3 million for the quarter ended May 31, 2009, compared to $207.2million for the quarter ended May 31, 2008, an increase of$28.1 million or 14%. This increase was driven in part by acquisitionswhich contributed $35.9 million, or 17%, and organic growth which contributed$6.9 million, or 3%.   Unfavorableforeign currency rates had an adverse translation impact of $14.8 million, or7% due to the strengthening U.S. dollar. Moreover, the growth that we attribute to acquisitions was alsonegatively impacted by foreign currency translation.  When taking this into consideration, foreignexchange negatively impacted our overall revenue growth by approximately 10% inthe quarter ended May 31, 2009 in comparison to the quarter ended May 31,2008.  Lastly, the stronger U.S. dollarnegatively impacted organic growth related to pricing pressures on U.S. dollardenominated revenue streams sold into non-dollar based countries.  The amount of this impact is not included inour 10% estimate as it is not possible to compute precisely.

 

Our subscription-based revenue accounted for 78% of our revenue in thequarter and, while growth in this area of the business is slowing, itmaintained a growth rate of 10.1% over the second quarter of 2008.  This growth rate was approximately 1.5% lowersequentially from the quarter ended February 28, 2009.  Our other revenue types (consulting,transaction and other revenue) have been more greatly impacted by the currentdifficult economic environment. Consulting and transaction revenue were down organically by 34% and 18%,respectively.  Revenue from other revenuetypes also decreased by 2% organically due to slower software sales.  Year-to-date cash-based sales of subscriptionproducts have grown over the same period prior year, however at a lower growthrate than the 10.1%.  As a result, weexpect the subscription based revenue growth rates to decline moderately in thesecond half of 2009.  Conversely, ourconsulting and transaction revenue comparisons to prior year will ease in thesecond half of 2009 as we experienced lower revenue levels in these areas inthe second half of 2008.

 

Revenue for our Americas segment was $148.6 million for thequarter ended May 31, 2009, compared to $126.2 million for thequarter ended May 31, 2008, an increase of $22.4 million or 18%. Thisincrease was driven primarily by acquisitions which added $20.6 millionand organic growth which contributed $5.9 million, or 5% which was in linewith overall company growth and was driven by growth in certain subscriptionproducts. Unfavorable foreign currency rates impacted revenue by $4.0 million.

 

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Revenue for our EMEA segment was $67.7 million for the quarterended May 31, 2009, compared to $66.7 million for the quarter ended May 31,2008, an increase of $1.0 million or 1%. This increase was drivenprimarily by acquisitions which contributed $11.9 million and partiallyoffset by unfavorable foreign currency rates adversely impacted revenue by $9.7million.  Organic revenue decreased by$1.2 million.  The organic decrease wasdue primarily the fact that the EMEA region contains a higher percentage ofconsulting revenue which experienced lower growth rates.

 

Revenue for our APAC segment was $19.0 million for the quarterended May 31, 2009, compared to $14.3 million for quarter ended May 31,2008, an increase of $4.7 million or 33%. This increase was driven in partby acquisitions which contributed $3.4 million, or 24% and organic growthwhich contributed $2.3 million, or 16%. The organic increase was due primarily to the fact that the APAC regioncontains a higher percentage of subscription revenue which experienced higher growth rates.  Unfavorable foreign currency rates adverselyimpacted revenue by $1.0 million.

 

Revenue for the Energy domain was $110.3 million for the quarterended May 31, 2009, an increase of $0.7 million, or 1% over thequarter ended May 31, 2008. This growth was primarily due to an increasein the subscription-based sales which was partially offset by the impact ofunfavorable foreign currency rates and a decrease in consulting revenue.  Product Lifecycle domain revenue was$73.3 million for the quarter ended May 31, 2009, an increase of$0.5 million, or 1% over the quarter ended May 31, 2008 which wasprimarily due to acquisitions, partially offset by the impact of unfavorableforeign currency rates.  Revenue for theSecurity domain was $24.8 million for the quarter ended May 31, 2009,an increase of $5.9 million, or 31% over the quarter ended May 31,2008 primarily the result of acquisitions. Environment domain revenue was$7.4 million for the quarter ended May 31, 2009, an increase of $1.5million, or 26% due to increases in subscription-based products. Intersectionrevenue, which includes offerings that intersect multiple domains, was $19.5 millionin the second quarter of 2009 and was entirely attributable to acquisitions.

 

**Cost of Revenue.**  Cost of revenue was $97.9 million forthe quarter ended May 31, 2009, compared to $93.2 million for thequarter ended May 31, 2008, an increase of $4.7 million or 5%. As apercentage of revenue, cost of revenue improved to 41.6% from 45.0%. Cost ofrevenue as a percentage of revenue within our Americas segment improved to40.1% from 42.8% resulting from increased sales of our subscription productswhich have a relatively fixed-cost base. This was partially offset by higherInsight service revenues which have lower margins.  Cost of revenue as a percentage of revenuewithin our EMEA segment improved to 44.5% from 47.5%.  Cost of revenue as a percentage of revenuewithin our APAC segment improved to 36.2% from 44.0%.  These improvements were principally due to anincrease in higher margin Insight products combined with a decrease in lowermargin services and the impact of foreign currency fluctuations which have amore dramatic impact on revenue than they do cost of revenue resulting inmargin improvement.  In addition, therestructuring in the third quarter of 2008 reduced costs of revenue in theAmericas and EMEA segments.

 

**Selling, General and Administrative Expenses.**  Selling, general and administrative(SG&A) expenses were $82.6 million for the quarter ended May 31,2009, compared to $72.9 million for the quarter ended May 31, 2008,an increase of $9.7 million or 13%. Stock-based compensation expense includedin SG&A increased $4.2 million to $14.2 million. Excludingstock-based compensation, organic SG&A decreased by $1.9 million as wecontinue to carefully control operating costs which was partially offset byincreased spending related to our quote-to-cash system implementation and otherinitiatives. Acquisitions contributed $11.9 million of the increase.Foreign currency movements decreased SG&A by $4.6 million. As apercentage of revenue and excluding stock-based compensation expense, SG&Adecreased from 30.4% for the second quarter of 2008 to 29.1% for the secondquarter of 2009.

 

**Depreciation and Amortization Expenses.**  Depreciation and amortization expenses were$11.6 million for the quarter ended May 31, 2009, compared to$9.7 million for the quarter ended May 31, 2008, an increase of$1.9 million or 20%. The increase was primarily due to acquisitions madewithin the last year.

 

**Operating Income.**  Operating income was $42.3 million forthe quarter ended May 31, 2009, compared to $32.8 million for thequarter ended May 31, 2008, an increase of $9.5 million or 29%. As apercentage of revenue, operating income increased to 18.0% for the quarterended May 31, 2009 from 15.8% for the quarter ended May 31, 2008.

 

Operating income for our Americas segment was $48.0 million forthe quarter ended May 31, 2009, compared to $39.4 million for thequarter ended May 31, 2008, an increase of $8.6 million or 22%. Theincrease was principally due to the additional revenue discussed above coupledwith our ability to leverage a relatively fixed-cost structure with oursubscriptions-based products.  As apercentage of revenue, Americas operating income increased to 32.3% from 31.3%in the second quarter of 2008.

 

Operating income for our EMEA segment was $12.7 million for thequarter ended May 31, 2009, compared to $11.8 million for the quarterended May 31, 2008, an increase of $0.9 million or 8%. As apercentage of revenue, EMEA operating income increased to 18.8% for the quarterended May 31, 2009 compared to 17.7% for the quarter ended May 31,2008.  These increases are primarily due 

 

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tothe higher growth in higher margin subscription products in 2009 and decreasesin lower margin service offerings along with the impact of foreign currencyrates at the Operating Income level.

 

Operating income for our APAC segment was $6.5 million for thequarter ended May 31, 2009, compared to $3.8 million for the quarterended May 31, 2008, an increase of $2.7 million or 72%. Operatingincome increased due to the increase in sales. As a percentage of revenue, APACoperating income improved to 34.3% for the quarter ended May 31, 2009 from26.5% for the quarter ended May 31, 2008. This increase was due to the mix of products sold with higher growth ofhigher margin Insight products in the second quarter of 2009.

 

Operating expenses for our shared services were $25.1 million forthe quarter ended May 31, 2009, compared to $22.2 million for thequarter ended May 31, 2008, an increase of $2.9 million or 13%. As apercentage of revenue, operating expenses for our shared services was 10.6% forthe quarter ended May 31, 2009 compared to 10.7% for the quarter ended May 31,2008.

 

**Provision for Income Taxes.**  Our effective tax rate for the period ended May 31,2009 was 21.2%, compared to 31.9% for the period ended May 31, 2008.  The 2009 rate reflects the impact of ourinternal legal entity reorganization within EMEA that occurred in the thirdquarter of 2008 as well as discrete period tax benefits recognized from thesuccessful outcome of a French tax appeal and a favorable UK tax ruling in thesecond quarter of 2009.

 

**SixMonths Ended May 31, 2009 Compared to the Six Months Ended May 31,2008**

 

**Revenue.**  Revenue was$470.7 million for the six months ended May 31, 2009, compared to$406.0 million for the six months ended May 31, 2008, an increase of$64.7 million or 16%. This increase was driven in part by acquisitionswhich contributed $75.5 million, or 19%, and organic growth which contributed$18.4 million, or 4.5%.  Unfavorableforeign currency rates had an adverse translation impact of $29.2 million, or 7%due to the strengthening U.S. dollar. Moreover, the growth that we attribute to acquisitions was alsonegatively impacted by foreign currency translation.  When taking this into consideration, foreignexchange negatively impacted our overall revenue growth by approximately 10% inthe first two quarters of 2009 in comparison to the first two quarters of2008.  Lastly, the stronger U.S. dollarnegatively impacted organic growth related to pricing pressures on U.S. dollardenominated revenue streams sold into non-dollar based countries.  The amount of this impact is not included inour 10% estimate as it is not possible to compute precisely.

 

Our subscription based revenue accounted for 77% of our revenue in thequarter and, while growth in this area of the business is slowing, itmaintained a 10.8% growth rate over the first half of 2008.   Our other revenue types (consulting,transaction and other revenue) have been more greatly impacted by the currenteconomic environment.  Transaction andconsulting revenue were down organically by 19% and 33%, respectively.  These decreases were partially offset byorganic growth in other revenue of 3%. Year-to-date cash-based sales of subscription products have grown overthe same period prior year, however at a lower growth rate than the 10.8%.  As a result, we expect the subscription basedrevenue growth rates to decline moderately in the second half of 2009.  Conversely, our consulting and transactionrevenue comparisons to prior year will ease in the second half of 2009 as weexperienced lower revenue levels in these areas in the second half of 2008.

 

Revenue for our Americas segment was $297.0 million for the sixmonths ended May 31, 2009, compared to $247.4 million for the sameperiod of 2008, an increase of $49.6 million or 20%. This increase wasdriven primarily by acquisitions which added $42.5 million and organicgrowth which contributed $15.1 million or 6% which was in line withoverall company growth and was driven by growth in certain subscriptionproducts. Unfavorable foreign currency rates impacted revenue by$8.0 million.

 

Revenue for our EMEA segment was $136.5 million for the six monthsended May 31, 2009, compared to $130.4 million for the six monthsended May 31, 2008, an increase of $6.1 million or 5%. This increasewas driven primarily by acquisitions which contributed $26.7 million.  Organic revenue decreased by $1.2 million dueto slowing consulting revenue. Unfavorable foreign currency rates impactedrevenue by $19.4 million

 

Revenue for our APAC segment was $37.3 million for the six monthsended May 31, 2009, compared to $28.2 million for the six monthsended May 31, 2008, an increase of $9.1 million or 32%. This increasewas driven in part by acquisitions which contributed $6.4 million andorganic growth which contributed $4.4 million. The organic increase wasdue primarily to a the fact that the APAC region contains a higher percentageof subscription revenue which experienced higher growth rates.   Unfavorable foreign currency rates adverselyimpacted revenue by $1.8 million.

 

Revenue for the Energy domain was $226.4 million for the sixmonths ended May 31, 2009, an increase of $6.5 million, or 3% overthe same period in 2008. This growth was primarily due to an increase in thesubscription-based sales which was partially offset by unfavorable foreigncurrency rates and a decrease in consulting revenue.  Product Lifecycle domain revenue was$143.6 million for the six months ended May 31, 2009, an increase of$1.8 million, or 1% over the six months ended May 31, 2008. Revenuefor the 

 

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Securitydomain was $48.2 million for the first two quarters of  2009, an increase of $12.4 million overthe same period in 2008. Environment domain revenue was $14.4 million forthe six months ended May 31, 2009 compared to $8.4 million for the sixmonths ended May 31, 2008.  Theincrease was primarily from acquisitions. Intersection revenue, which includesproduct lines that intersect multiple domains, was $38.1 million in thefirst half of 2009 and was entirely attributable to acquisitions.

 

**Cost of Revenue.**  Cost of revenue was $200.8 million forthe six months ended May 31, 2009, compared to $182.3 million for thesix months ended May 31, 2008, an increase of $18.5 million or 10%.As a percentage of revenue, cost of revenue improved to 42.7% from 44.9%. Costof revenue as a percentage of revenue within our Americas segment improved to41.2% from 42.8% resulting from increased sales in our subscription basedproducts which have a relatively fixed-cost base. Cost of revenue as apercentage of revenue within our EMEA segment improved to 45.4% from47.9%.  Cost of revenue as a percentageof revenue within our APAC segment improved to 37.9% from 42.7%.  These decreases were principally due to anincrease in higher margin subscription based products combined with a decreasein lower margin services and the impact of foreign currency fluctuations whichhave a more dramatic impact on revenue than they do cost of revenue.

 

**Selling, General and Administrative Expenses.**  Selling, general and administrative(SG&A) expenses were $169.1 million for the first half of 2009,compared to $144.8 million for the first half of 2008, an increase of$24.3 million or 17%. Stock-based compensation expense included inSG&A increased $7.6 million to $30.0 million. Excludingstock-based compensation, organic SG&A growth was $1.0 million as weincurred costs related to our quote-to-cash system implementation and otherinitiatives. Acquisitions contributed $25.2 million of the increase.Foreign currency movements decreased SG&A by $9.5 million. As apercentage of revenue and excluding stock-based compensation expense, SG&Adecreased to 29.5% for the first half of 2009 compared to 30.2% for the firsthalf of 2008.

 

**Depreciation and Amortization Expenses.**  Depreciation and amortization expenses were$23.3 million for the six months ended May 31, 2009, compared to$18.5 million for the six months ended May 31, 2008, an increase of$4.8 million or 26%. The increase was primarily due to acquisitions madewithin the last year.

 

**Operating Income.**  Operating income was $79.8 million forthe six months ended May 31, 2009, compared to $63.7 million for thesix months ended May 31, 2008, an increase of $16.1 million or 25%.As a percentage of revenue, operating income increased to 17.0% for the firsthalf of 2009 from 15.7% for the same period of 2008.

 

Operating income for our Americas segment was $91.7 million for thesix months ended May 31, 2009, compared to $78.0 million for the sixmonths ended May 31, 2008, an increase of $13.7 million or 18%. Theincrease was principally due to the additional revenue discussed above coupledwith our ability to leverage a relatively fixed-cost structure with oursubscriptions-based products.  As apercentage of revenue, Americas operating income decreased to 30.9% from 31.5%in the first half of 2008 primarily due to an increase in amortization.

 

Operating income for our EMEA segment was $26.6 million for thesix months ended May 31, 2009, compared to $22.4 million for the sixmonths ended May 31, 2008, an increase of $4.2 million or 19%. As apercentage of revenue, EMEA operating income increased to 19.5% for the sixmonths ended May 31, 2009 compared to 17.2% for the six months ended May 31,2008.  These increases are primarily dueto the higher growth in higher margin subscription products in 2009 anddecreases in lower margin service offerings along with the impact of foreign currencyrates at the Operating Income level.

 

Operating income for our APAC segment was $11.5 million for thefirst half of 2009, compared to $7.8 million for the same period of 2008,an increase of $3.7 million or 48%. Operating income increased due to theincrease in sales. As a percentage of revenue, APAC operating income increasedto 30.9% for the six months ended May 31, 2009 from 27.5% for the sixmonths ended May 31, 2008.  Thisincrease was due to the mix of products sold with higher growth of highermargin Critical Information products in 2009.

 

Operating expenses for our shared services were $49.9 million for thesix months ended May 31, 2009, compared to $44.4 million for the sixmonths ended May 31, 2008, an increase of $5.5 million or 12%. As a percentageof revenue, operating expenses for our shared services was 10.6% for the firstsix months of 2009 compared to 10.9% for the first six months of 2008.

 

**Provision for Income Taxes.**  Our effective tax rate for the six monthsended May 31, 2009 was 22.6%, compared to 32.5% for the six months ended May 31,2008.  The 2009 rate reflects the impactof our internal legal entity reorganization within EMEA that occurred in thethird quarter of 2008 as well as discrete period tax benefits recognized fromthe successful outcome of a French tax appeal and a favorable UK tax ruling inthe second quarter of 2009.

 

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**FinancialCondition**

 

**AccountsReceivable**.  Accountsreceivable has decreased by $20.4 million, or 10%, to $187.4 million compared to $207.8 millionas of November 30, 2008.  Thedecrease is attributable primarily to the seasonality of billings which was partially offset by aslight deterioration in our accounts receivable aging.

 

**Accrued Compensation.**  Accrued compensation was $28.2 million as of May 31,2009, compared to $39.1 million as of November 30, 2008, a decrease of$10.9 million or 28%. The decrease was primarily attributable to disbursementof annual incentive bonuses during the first quarter partially offset by theaccruals made for the 2009 bonus plan through May 31, 2009.

 

**Deferred Revenue.**Deferred revenue was $333.7million as of May 31, 2009, compared to $288.1 million as of November 30,2008, an increase of $45.6 million or 16%. The increase was primarilyattributable to the timing of annual billings as well as both organic andacquisition related growth.  Organicdeferred revenue increased 7% as of May 31, 2009 compared to May 31,2008.

 

**Liquidity andCapital Resources**

 

As of May 31, 2009, we hadcash and cash equivalents of $172.3 million and $115.1 million of debt. We havegenerated strong cash flows from operations over the last few years. As aresult of these factors, as well as the remaining availability of funds underour $385.0 million credit facility, we believe we will have sufficient cash tomeet our working capital and capital expenditure needs.

 

Our future capital requirementswill depend on many factors, including the timing and extent of spending tosupport product development efforts, future acquisitions, the expansion ofsales and marketing activities, the timing of introductions of new products,changing technology, investments in our internal business applications and thecontinued market acceptance of our offerings. We could be required, or couldelect, to seek additional funding through public or private equity or debtfinancing for any possible future acquisitions. Additional funds may not beavailable on terms acceptable to us or at all. We expect our capitalexpenditures, excluding potential acquisitions, to be approximately $20 millionfor 2009.

 

*Share Repurchase Program*

 

During2006, our board of directors approved a program to reduce the dilutive effectsof employee equity grants, by allowing employees to surrender shares back tothe company for a value equal to their statutory tax liability.  IHS then pays the statutory tax on behalf ofthe employee.  Additionally, our board ofdirectors periodically approves additional buyback programs whereby IHSacquires shares in the open market to more fully offset the dilutive effect ofour employee equity programs. During the three months ended May 31, 2009,we repurchased 37,577 shares under the tax withholding program forapproximately $1.7 million, or $45.78 per share.  In the first half of 2009, we repurchased169,052 shares under the tax withholding program for approximately $7.5million, or $44.34 per share.  No shareswere repurchased in the first half of 2009 pursuant to a share buybackprogram.  Since the inception of theseprograms, we have withheld for tax 868,446 shares of our Class A commonstock for approximately $43.2 million, or $49.72 per share and we haverepurchased 1,889,557 shares for approximately $94.7 million or $50.13 pershare pursuant to the stock buyback program.

 

*Cash Flows*

 

Net cash provided by operating activities was $116.3 million for the six months ended May 31, 2009, compared to$95.0 million for the six months ended May 31, 2008, an increase of $21.3million. The increase was principally due to our business growing profitablyyear over year.   Additionally, bonuspayments were slightly less in the first quarter of 2009 compared to the sameperiod in 2008 and we made lower tax payments in 2009. Our subscription-basedbusiness model typically generates a high rate of cash flow and is aided by thefollowing:

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

 

The positive cash flow impact of our growingbusiness in the first half of 2009 was partially offset by an increase incapital expenditures related to new office space build out in our Canadafacility and the outflow of cash related to our rationalization efforts thatoccurred at IHS Global Insight.

 

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Net cash used in investingactivities was approximately $4.2 million for the six months ended May 31,2009, compared to $128.2 million for the six months ended May 31, 2008.The change is driven primarily by acquisitions in the first half of 2008.

 

Net cash provided by financingactivities was $19.5 million for the six months ended May 31, 2009compared to a use of $11.3 million for the six months ended May 31,2008.  Net borrowings from the creditfacility were $28.0 million in the first half of 2009 which were partiallyoffset by the net repayment of a portion of the notes due to the sellers ofPrime of $9.3 million.

 

*CreditFacility and Other Debt*

* *

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

 

The interest rates for borrowing under the Revolver are based upon ourLeverage Ratio, which is the ratio of Consolidated Funded Indebtedness torolling four quarter Consolidated Earnings Before Interest Expense, Taxes,Depreciation and Amortization (EBITDA), as defined in the Revolver. The rateranges from the applicable LIBOR plus 50 basis points to 125 basis points orthe agent bank’s base rate. A commitment fee is payable periodically and rangesfrom 10 to 25 basis points based upon our Leverage Ratio. The Revolver containscertain financial and other covenants, including limitations on capital leaseobligations and maximum Leverage and Interest Coverage Ratios, as defined inthe Revolver.

 

As of May 31, 2009, we were in compliance with all of thecovenants in the agreement and had $108.0 million of outstandingborrowings with an annual interest rate of 0.94%.  This debt is classified as long-term debt asof May 31, 2009 as we have the ability and intent to maintain this balancebeyond twelve months.  In addition, wehad outstanding letters of credit totaling approximately $1.3 million asof May 31, 2009.

 

As of May 31, 2009, we also had $7.1 million of non-interestbearing notes that were issued to the sellers of Prime. These notes are dueupon demand and are therefore recorded in “Short-term Debt” in the accompanyingCondensed Consolidated Balance Sheets.

 

**Off-Balance Sheet Transactions**

** **

We have no off-balance sheettransactions.

 

**Critical Accounting Policies**

 

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

 

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

** **

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

 

**Item 4.    Controls and Procedures**

** **

*(a) Evaluationof disclosure controls and procedures.*

 

Underthe supervision and with the participation of the Company’s management,including the Chief Executive Officer and Chief Financial Officer, the Companyhas evaluated the effectiveness of its disclosure controls and procedurespursuant to Rules 13a-15(e) and 15d-15(e) under the SecuritiesExchange Act of 1934, as of the end of the period covered by this report. Basedon that evaluation, the Chief Executive Officer and Chief Financial Officerconcluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended, areeffective in ensuring that all material information required to be filed inthis quarterly report has been made known to them in a timely fashion.

 

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

 

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

 

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**PART II. OTHER INFORMATION**

 

**Item 1.    Legal Proceedings**

 

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

 

**Item1A.      Risk Factors**

 

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

 

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

 

None.

 

**Item 3. Defaults Upon Senior Securities**

 

None.

 

**Item 4.  Submission of Matters to a Vote of SecurityHolders**

 

The Annual Meeting ofStockholders of IHS Inc. was held on May 14, 2009.

 

* Election of Directors.*The shareholders of IHS elected each ofthe director nominees proposed by our Board of Directors to serve until the2012 Annual Meeting of Shareholders or until his successor is duly elected andqualified.  The following is a breakdownof the voting results:

 
| **DIRECTOR**          | ** ** | **VOTES  FOR** | ** ** | **VOTES  WITHHELD** | ** ** |
|-----------------------|------------|----------------|------------|---------------------|------------|
| Ruann  F. Ernst       |       | 57,942,614     |       | 144,412             |       |
| Christoph  v. Grolman |       | 57,913,004     |       | 174,022             |       |
| Richard  W. Roedel    |       | 56,670,763     |       | 1,416,263           |       |

 

*Appointmentof Ernst & Young LLP as Independent Auditor. *The shareholders of  IHS ratified the appointment of Ernst & Young LLP as the Corporation’sindependent auditor.  The following is abreakdown of the voting results:

 
| **VOTES FOR** | ** ** | **VOTES  AGAINST** | ** ** | **ABSTAIN** | ** ** | **NON  VOTES** | ** ** |
|---------------|------------|--------------------|------------|-------------|------------|----------------|------------|
| 56,506,364    |       | 1,560,596          |       | 20,066      |       | 0              |       |

 

*Tabulationof Voting Results. *The voting results include all shares of Class ACommon Stock eligible to vote as of the record date.  As previously disclosed, during 2008, allshares of Class B Common Stock were converted to Class A common stockand there is no longer any Class B Common Stock outstanding.

 

**Item 5.  Other Information.**

** **

None.

 

**Item 6.    Exhibits**

** **

(a)   Index of Exhibits

 

The following exhibitsare filed as part of this report:

 
| **Exhibit  Number** | ** ** | **Description**                                                                                                                         |
|---------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------|
| 3.1*                |       | Amended  and Restated Certificate of Incorporation                                                                                      |
| 3.2*                |       | Amended  and Restated By-L-laws                                                                                                         |
| 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. |

 

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| 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**

** **

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

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

 

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