**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

----

 

**FORM 10-Q**

----

**(Mark One)**

 

**x**                             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 29, 2008

** **

**OR**

** **

**o**                                TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934For the transition period from                      to

** **

**Commission file number001-32511**

 

----

**IHSINC.**

(Exact name of registrant as specified in its charter)

 

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

 

**15Inverness Way EastEnglewood, CO 80112**

(Address of Principal Executive Offices)

 

**(303)790-0600**

(Registrant’s telephone number, including area code)

----

 

Indicateby check mark whether the registrant (1) has filed all reports required 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

 

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. (Check one):

 

| 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).

 

oYES                x NO

 

As of February 29,2008, there were 48,723,478 shares of our Class ACommon Stock outstanding and 13,750,000 shares of our Class B Common Stockoutstanding.

 

 

 

----

 

**TABLE OFCONTENTS**

 
| ** **       | ** **                                                                                  | **Page**   |
|------------------|---------------------------------------------------------------------------------------------|------------|
| **PART I**  | ** **                                                                                  | ** ** |
| Item 1.          | Financial Statements                                                                        | 3          |
| Item 2.          | Management’s Discussion and Analysis of  Financial Condition and Results of Operations | 18         |
| Item 3.          | Quantitative and Qualitative Disclosures  About Market Risk                                 | 23         |
| Item 4.          | Controls and Procedures                                                                     | 24         |
|             |                                                                                        |       |
| **PART II** | ** **                                                                                  | ** ** |
| Item 1.          | Legal Proceedings                                                                           | 25         |
| Item 1A.         | Risk Factors                                                                                | 25         |
| Item 2.          | Unregistered Sales of Equity Securities and  Use of Proceeds                                | 25         |
| Item 6.          | Exhibits                                                                                    | 25         |
|             |                                                                                        |       |
| **SIGNATURE**    |                                                                                        | 26         |

 

 

----

**PART I. FINANCIALINFORMATION**

Item 1. Financial Statements

 

**IHS INC.CONDENSED CONSOLIDATED BALANCE SHEETS**

** **

**(Inthousands except share data)**

 
| ** **                                                                                                                                                                                                                                      | ** ** | **As of  February 29, 2008** | ** ** | **As of  November 30, 2007** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                                                                                                                                                                                      | ** ** | **(Unaudited)**                   | ** ** | **(Audited)**                               | ** ** |
| **Assets**                                                                                                                                                                                                                                      | ** ** | ** **                        | ** ** | ** **                                  | ** ** |
| Current assets:                                                                                                                                                                                                                                 |       |                              |       |                                        |       |
| Cash and cash equivalents                                                                                                                                                                                                                       |       | $                                 | 139,133    |                                        | $          | 148,484 |   |
| Short-term investments                                                                                                                                                                                                                          |       | —                            |       | 10,518                                      |       |
| Accounts receivable, net                                                                                                                                                                                                                        |       | 192,993                           |       | 175,542                                     |       |
| Deferred subscription  costs                                                                                                                                                                                                                    |       | 41,311                            |       | 35,910                                      |       |
| Deferred income taxes                                                                                                                                                                                                                           |       | 16,369                            |       | 17,681                                      |       |
| Other                                                                                                                                                                                                                                           |       | 16,446                            |       | 14,112                                      |       |
| Total current assets                                                                                                                                                                                                                            |       | 406,252                           |       | 402,247                                     |       |
| Non-current assets:                                                                                                                                                                                                                             |       |                              |       |                                        |       |
| Property and equipment,  net                                                                                                                                                                                                                    |       | 58,401                            |       | 58,756                                      |       |
| Intangible assets, net                                                                                                                                                                                                                          |       | 205,588                           |       | 206,359                                     |       |
| Goodwill, net                                                                                                                                                                                                                                   |       | 585,246                           |       | 564,582                                     |       |
| Prepaid pension asset                                                                                                                                                                                                                           |       | 92,173                            |       | 91,116                                      |       |
| Other                                                                                                                                                                                                                                           |       | 847                               |       | 747                                         |       |
| Total non-current assets                                                                                                                                                                                                                        |       | 942,255                           |       | 921,560                                     |       |
| Total assets                                                                                                                                                                                                                                    |       | $                                 | 1,348,507  |                                        | $          | 1,323,807 |   |
| **Liabilities and stockholders’ equity**                                                                                                                                                                                                   | ** ** | ** **                        | ** ** | ** **                                  | ** ** |
| Current liabilities:                                                                                                                                                                                                                            |       |                              |       |                                        |       |
| Short-term debt                                                                                                                                                                                                                                 |       | $                                 | —     |                                        | $          | 3,062 |   |
| Accounts payable                                                                                                                                                                                                                                |       | 32,446                            |       | 37,550                                      |       |
| Accrued compensation                                                                                                                                                                                                                            |       | 14,169                            |       | 37,014                                      |       |
| Accrued royalties                                                                                                                                                                                                                               |       | 23,537                            |       | 22,684                                      |       |
| Other accrued expenses                                                                                                                                                                                                                          |       | 38,877                            |       | 37,435                                      |       |
| Income tax payable                                                                                                                                                                                                                              |       | 8,049                             |       | 15,255                                      |       |
| Deferred subscription  revenue                                                                                                                                                                                                                  |       | 283,163                           |       | 239,395                                     |       |
| Total current liabilities                                                                                                                                                                                                                       |       | 400,241                           |       | 392,395                                     |       |
| Long-term debt                                                                                                                                                                                                                                  |       | —                            |       | 37                                          |       |
| Accrued pension liability                                                                                                                                                                                                                       |       | 11,641                            |       | 11,965                                      |       |
| Accrued post-retirement benefits                                                                                                                                                                                                                |       | 9,462                             |       | 10,203                                      |       |
| Deferred income taxes                                                                                                                                                                                                                           |       | 58,062                            |       | 60,461                                      |       |
| Other liabilities                                                                                                                                                                                                                               |       | 5,936                             |       | 7,619                                       |       |
| Minority interests                                                                                                                                                                                                                              |       | 222                               |       | 219                                         |       |
| Commitments and contingencies                                                                                                                                                                                                                   |       |                              |       |                                        |       |
| Stockholders’ equity:                                                                                                                                                                                                                      |       |                              |       |                                        |       |
| Class A common stock,  $0.01 par value per share, 80,000,000 shares authorized, 50,070,579 and  49,831,293 shares issued, 48,723,478 and 48,758,518 shares outstanding at  February 29, 2008 and November 30, 2007, respectively |       | 500                               |       | 498                                         |       |
| Class B common stock,  $0.01 par value per share, 13,750,000 shares authorized, issued and  outstanding at February 29, 2008 and November 30, 2007                                                                               |       | 138                               |       | 138                                         |       |
| Additional paid-in capital                                                                                                                                                                                                                      |       | 401,292                           |       | 381,124                                     |       |
| Treasury stock, at cost:  1,347,101 and 1,072,775 shares at February 29, 2008 and  November 30, 2007, respectively                                                                                                                    |       | (62,894                           | )          | (46,045                                     | )          |
| Retained earnings                                                                                                                                                                                                                               |       | 506,657                           |       | 483,804                                     |       |
| Accumulated other  comprehensive income                                                                                                                                                                                                         |       | 17,250                            |       | 21,389                                      |       |
| Total stockholders’ equity                                                                                                                                                                                                                 |       | 862,943                           |       | 840,908                                     |       |
| Total liabilities and  stockholders’ equity                                                                                                                                                                                                |       | $                                 | 1,348,507  |                                        | $          | 1,323,807 |   |

See accompanying notes.

** **

 

3

----

 

**IHS INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

** **

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

 
| ** **                                                                                                                                                                                          | ** ** | **Three Months Ended,**      | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                                                                                                                                                          | ** ** | **February 29,   2008** | ** ** | **February 28,    2007** | ** ** |
| ** **                                                                                                                                                                                          | ** ** | **(Unaudited)**              | ** ** |
| **Revenue:**                                                                                                                                                                                        | ** ** | ** **                   | ** ** | ** ** | ** ** |
| Products                                                                                                                                                                                            |       | $                            | 159,689    |   | $ | 122,979 |   |
| Services                                                                                                                                                                                            |       | 39,088                       |       | 29,642 |   |
| Total revenue                                                                                                                                                                                       |       | 198,777                      |       | 152,621 |   |
| **Operating expenses:**                                                                                                                                                                             | ** ** | ** **                   | ** ** | ** ** | ** ** |
| Cost of revenue:                                                                                                                                                                                    |       |                         |       |   |   |
| Products                                                                                                                                                                                            |       | 63,094                       |       | 48,733 |   |
| Services                                                                                                                                                                                            |       | 26,066                       |       | 17,005 |   |
| Total cost of revenue  (includes stock-based compensation expense of $311 and $351 for the three  months ended February 29, 2008 and February 28, 2007, respectively)                     |       | 89,160                       |       | 65,738 |   |
| Selling, general and  administrative (includes stock-based compensation expense of $12,390 and  $6,985 for the three months ended February 29, 2008 and  February 28, 2007, respectively) |       | 71,886                       |       | 57,891 |   |
| Depreciation and  amortization                                                                                                                                                                      |       | 8,823                        |       | 4,580 |   |
| Restructuring and offering  charges (credits)                                                                                                                                                       |       | —                       |       | (9 | ) |
| Gain on sales of assets,  net                                                                                                                                                                       |       | (119                         | )          | (751 | ) |
| Net periodic pension and  post-retirement benefits                                                                                                                                                  |       | (1,093                       | )          | (268 | ) |
| Earnings in unconsolidated  affiliates                                                                                                                                                              |       | (49                          | )          | (44 | ) |
| Other income, net                                                                                                                                                                                   |       | (764                         | )          | (400 | ) |
| Total operating expenses                                                                                                                                                                            |       | 167,844                      |       | 126,737 |   |
| **Operating income**                                                                                                                                                                                |       | 30,933                       |       | 25,884 |   |
| Interest income                                                                                                                                                                                     |       | 1,217                        |       | 1,654 |   |
| Interest expense                                                                                                                                                                                    |       | (136                         | )          | (133 | ) |
| Non-operating income, net                                                                                                                                                                           |       | 1,081                        |       | 1,521 |   |
| Income from continuing operations before income taxes and  minority interests                                                                                                                       |       | 32,014                       |       | 27,405 |   |
| Provision for income taxes                                                                                                                                                                          |       | (10,599                      | )          | (9,043 | ) |
| Income from continuing operations before minority  interests                                                                                                                                        |       | 21,415                       |       | 18,362 |   |
| Minority interests                                                                                                                                                                                  |       | 16                           |       | 15 |   |
| **Net income**                                                                                                                                                                                      |       | $                            | 21,431     |   | $ | 18,377 |   |
| Net income per share:                                                                                                                                                                               |       |                         |       |   |   |
| Basic (Class A and  Class B common stock)                                                                                                                                                 |       | $                            | 0.35       |   | $ | 0.32 |   |
| Diluted (Class A and  Class B common stock)                                                                                                                                               |       | $                            | 0.34       |   | $ | 0.32 |   |
| Weighted average shares:                                                                                                                                                                            |       |                         |       |   |   |
| Basic (Class A common  stock)                                                                                                                                                                  |       | 48,221                       |       | 43,844 |   |
| Basic (Class B common  stock)                                                                                                                                                                  |       | 13,750                       |       | 13,750 |   |
| Diluted (Class A  common stock)                                                                                                                                                                |       | 62,896                       |       | 57,698 |   |
| Diluted (Class B  common stock)                                                                                                                                                                |       | 13,750                       |       | 13,750 |   |

 

See accompanying notes.

 

4

----

**IHS INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

** **

**(In thousands)**

 
| ** **                                                                       | ** ** | **Three Months Ended,**    | ** ** |
|----------------------------------------------------------------------------------|------------|----------------------------|------------|
| ** **                                                                       | ** ** | **February 29, 2008** | ** ** | **February 28, 2007** | ** ** |
| ** **                                                                       | ** ** | **(Unaudited)**            | ** ** |
| **Operating activities**                                                         | ** ** | ** **                 | ** ** | ** ** | ** ** |
| Net income                                                                       |       | $                          | 21,431     |   | $ | 18,377 |   |
| Reconciliation of net  income to net cash provided by operating activities: |       |                       |       |   |   |
| Depreciation and amortization                                                    |       | 8,823                      |       | 4,580 |   |
| Stock-based compensation expense                                                 |       | 12,701                     |       | 7,336 |   |
| Gain on sales of assets, net                                                     |       | (119                       | )          | (751 | ) |
| Non-cash net periodic pension and post-retirement benefits                       |       | (1,563                     | )          | (980 | ) |
| Undistributed earnings of unconsolidated affiliates, net                         |       | (49                        | )          | (44 | ) |
| Minority interests                                                               |       | (16                        | )          | (206 | ) |
| Deferred income taxes                                                            |       | 2,422                      |       | (447 | ) |
| Change in assets and liabilities:                                                |       |                       |       |   |   |
| Accounts receivable, net                                                         |       | (20,167                    | )          | (10,523 | ) |
| Other current assets                                                             |       | (7,423                     | )          | (4,797 | ) |
| Accounts payable                                                                 |       | (3,239                     | )          | (8,841 | ) |
| Accrued expenses                                                                 |       | (20,928                    | )          | (14,662 | ) |
| Income taxes                                                                     |       | (2,126                     | )          | 1,883 |   |
| Deferred subscription revenue                                                    |       | 42,733                     |       | 32,172 |   |
| **Net cash provided by operating  activities**                                   |       | 32,480                     |       | 23,097 |   |
| **Investing activities**                                                         | ** ** | ** **                 | ** ** | ** ** | ** ** |
| Capital expenditures on  property and equipment                                  |       | (3,073                     | )          | (3,305 | ) |
| Change in other assets                                                           |       | (2,624                     | )          | (1,137 | ) |
| Sales and maturities of  investments                                             |       | 10,500                     |       | 2,008 |   |
| Acquisitions of  businesses, net of cash acquired                                |       | (28,206                    | )          | (8,269 | ) |
| Proceeds from sales of  assets                                                   |       | 140                        |       | 2,461 |   |
| **Net cash used in investing  activities**                                       |       | (23,263                    | )          | (8,242 | ) |
| **Financing activities**                                                         | ** ** | ** **                 | ** ** | ** ** | ** ** |
| Net payments on debt                                                             |       | (3,099                     | )          | (537 | ) |
| Excess tax benefit from  equity compensation plans                               |       | 384                        |       | 104 |   |
| Repurchases of common  stock                                                     |       | (16,849                    | )          | (7,763 | ) |
| **Net cash used in financing  activities**                                       |       | (19,564                    | )          | (8,196 | ) |
| Foreign exchange impact on  cash balance                                         |       | 996                        |       | (479 | ) |
| Net (decrease) increase in  cash and cash equivalents                            |       | (9,351                     | )          | 6,180 |   |
| Cash and cash equivalents  at the beginning of the period                        |       | 148,484                    |       | 180,034 |   |
| Cash and cash equivalents  at the end of the period                              |       | $                          | 139,133    |   | $ | 186,214 |   |

 

See accompanying notes.

 

5

----

 

**IHS INC.**

**CONDENSED CONSOLIDATED STATEMENTOF CHANGES IN STOCKHOLDERS’ EQUITY**

 

**(In thousands)**

 
| ** **                                      | ** ** | **Shares of  Class A  Common  Stock** | ** ** | **Class A  Common  Stock** | ** ** | **Shares of  Class B  Common  Stock** | ** ** | **Class B  Common  Stock** | ** ** | **Additional  Paid-In  Capital** | ** ** | **Treasury Stock** | ** ** | **Retained  Earnings** | ** ** | **Accumulated  Other  Comprehensive  Income (Loss)** | ** ** | **Total** | ** ** |
|-------------------------------------------------|------------|--------------------------------------------|------------|---------------------------------|------------|--------------------------------------------|------------|---------------------------------|------------|----------------------------------|------------|--------------------|------------|------------------------|------------|------------------------------------------------------|------------|-----------|------------|
| ** **                                      | ** ** | **(Unaudited)**                            | ** ** |
| **Balance at November 30,  2007**          |       | 48,759                                     |       | $                               | 498        |                                       | 13,750     |                            | $          | 138                              |       | $                  | 381,124    |                   | $          | (46,045                                              | )          | $         | 483,804    |   | $ | 21,389 |   | $ | 840,908 |   |
| Stock-based  award activity                     |       | 30                                         |       | 2                               |       | —                                     |       | —                          |       | 11,994                           |       | (12,965            | )          | —                 |       | —                                               |       | (969      | )          |
| Excess  tax benefit on vested shares            |       | —                                     |       | —                          |       | —                                     |       | —                          |       | 8,174                            |       | —             |       | —                 |       | —                                               |       | 8,174     |       |
| Repurchase  of common stock                     |       | (66                                        | )          | —                          |       | —                                     |       | —                          |       | —                           |       | (3,884             | )          | —                 |       | —                                               |       | (3,884    | )          |
| Net  income                                     |       | —                                     |       | —                          |       | —                                     |       | —                          |       | —                           |       | —             |       | 21,431                 |       | —                                               |       | 21,431    |       |
| Other  comprehensive income:                    |       |                                       |       |                            |       |                                       |       |                            |       |                             |       |               |       |                   |       |                                                 |       |      |       |
| Foreign currency translation adjustments        |       | —                                     |       | —                          |       | —                                     |       | —                          |       | —                           |       | —             |       | —                 |       | (4,139                                               | )          | (4,139    | )          |
| Comprehensive  income, net of tax          |       | —                                     |       | —                          |       | —                                     |       | —                          |       | —                           |       | —             |       | —                 |       | —                                               |       | 17,292    |       |
| Adoption  of FIN 48 as of December 1, 2007 |       | —                                     |       | —                          |       | —                                     |       | —                          |       | —                           |       | —             |       | 1,422                  |       | —                                               |       | 1,422     |       |
| **Balance at February 29, 2008**      |       | 48,723                                     |       | $                               | 500        |                                       | 13,750     |                            | $          | 138                              |       | $                  | 401,292    |                   | $          | (62,894                                              | )          | $         | 506,657    |   | $ | 17,250 |   | $ | 862,943 |   |
|                                                 |            |                                            |            |                                 |            |                                            |            |                                 |            |                                  |            |                    |            |                        |            |                                                      |            |           |            |  |  |  |  |  |  |  |  |

 

See accompanying notes.

 

 

6

----

 

**IHS INC.**

**NOTES TO UNAUDITED CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

 

**1.             Basisof Presentation and Significant 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 and growing global market. Ourcustomers rely on our products and services to facilitate crucialdecision-making, support key processes, and improve productivity. At the heartof our products and services is data obtained from public sources, thirdparties, and our own proprietary databases. We transform that data intoCritical Information and Insight that is both useful to our customers andavailable where and when they make critical business decisions. The databecomes Critical Information when we combine it with our proprietary andthird-party technology to create graphical user interfaces, search andnavigation tools, and online delivery systems. We further transform thatinformation into Insight products and services with analysis and interpretationfrom our teams of experts.

 

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 businessobjectives. As we continue to deliver Critical Information and Insight in thosefour information domains, we prepare and analyze our financial reports toinclude each of the four domains in our two reportable segments. Today, ourEnergy segment includes the Energy information domain while our Engineeringsegment includes the Product Lifecycle, Security, and Environment informationdomains.

 

***Consolidation Policy***

*** ***

The consolidated financialstatements include the accounts of all wholly owned and majority-ownedsubsidiaries. All significant intercompany accounts and transactions have beeneliminated.

 

***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 30,2007.  The results of operations for thethree months ended February 29, 2008, 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, 2007, balancesheet.

 

***Results Subject to SeasonalVariations***

*** ***

Historically, our businesshas had seasonal aspects.  However, withthe continued organic growth in our subscription-based business model combinedwith several acquisitions in recent years, our seasonal aspects havediminished. Our first quarter does benefit from the inclusion of the resultsfrom CERAWeek, an annual energy executive gathering.  Subscriptionsare generally paid in full within one to two months after the subscriptionperiod commences. As a result, the timing of our cash flows generally precedesthe recognition of revenue and income.

 

***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 

 

 

7

----

 

**IHS INC.**

**NOTES TO UNAUDITED CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS (Continued)**

 

reportedand disclosed in the financial statements and the accompanying notes.Significant estimates have been made in areas that include revenue recognition,useful lives of fixed and intangible assets, allocation of purchase price toacquired assets and liabilities, the recoverability of intangible assets andgoodwill, income and other taxes, pension and post-retirement benefits, 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 firstquarter of 2008 was 33.1% compared to 33.0% for the prior year period.  The 2007 rate reflects the benefit from therelease of a portion of the valuation allowance carried on capital losses.  The 2008 rate reflects the impact from thedecline in tax exempt interest income resulting from a forecasted reduction inthe balance of the investment in tax exempt securities which resulted in a higherprojected tax rate.

 

On December 1, 2007, the Companyadopted Financial AccountingStandards Board Interpretation Number 48, *Accounting for Uncertaintyin Income Taxes — an interpretation of FASB Statement No. 109* (FIN48), which provides clarification related to the process associated withaccounting for uncertain tax positions recognized in consolidated financial statements.  FIN 48 prescribes a more-likely-than-notthreshold for financial statement recognition and measurement of a tax positiontaken, or expected to be taken, in a tax return.  FIN 48 also provides guidance onde-recognition of income tax assets and liabilities, classification of currentand deferred income tax assets and liabilities, accounting for interest andpenalties associated with tax positions, and income tax disclosures.

 

Adopting FIN 48 had the following impacton our financial statements: current taxes payable decreased by $3.0 million,other current liabilities increased by $0.3 million, long-term liabilitiesincreased by $0.1 million, net non-current deferred tax liabilities increasedby $1.2 million, and retained earnings increased by $1.4 million. As of December 1,2007, we had $1.7 million of unrecognized tax benefits, of which $0.1 millionrelated to accruals for interest.  Ifrecognized, essentially all of the unrecognized tax benefits would affect oureffective tax rate.

 

Priorto adoption, the Company recognized interest and penalties related to unrecognizedtax benefits in interest expense and penalties within operating expenses,respectively.  With the adoption of FIN 48, we will berecognizing interest and penalties related to unrecognized tax benefitswithin the provision for income taxes.

 

Asof February 29, 2008, the total amount of unrecognized tax benefits was$1.5 million, of which $0.1 million related to interest. The $0.2 millionreduction in unrecognized tax benefits was attributable to adjustments made tothe reserves during the first quarter of fiscal 2008, principally as a resultof the filing of certain amended non-U.S. tax returns.

 

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, effectively all years prior to2004 are 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.

 

8

----

**IHS INC.**

**NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (Continued)**

 

***New Accounting Pronouncements***

 

In September 2006,the FASB issued SFAS No. 157, *Fair Value Measurements*(SFAS No. 157). Among other requirements, SFAS No. 157 defines fairvalue and establishes a framework for measuring fair value and also expandsdisclosure about the use of fair value to measure assets and liabilities.Subsequently, the FASB deferred the application of this pronouncement fornon-financial assets and liabilities to fiscal years beginning after November 15,2008.  SFAS No. 157 is effective forfinancial assets and liabilities beginning the first fiscal year that beginsafter November 15, 2007. We adopted SFAS No. 157 for financial assetsand liabilities on December 1, 2007, with no material impact to ourconsolidated financial statements.

 

In February 2007,the FASB issued SFAS No. 159, *The Fair Value Option forFinancial Assets and Financial Liabilities* (SFAS No. 159). SFASNo. 159 expands the use of fair value measurement by permitting entitiesto choose to measure many financial instruments and certain other items at fairvalue that are not currently required to be measured at fair value. SFAS No. 159was effective beginning the first fiscal year that begins after November 15,2007. We have opted not to electively adopt the provisions of SFAS No. 159in the accompanying consolidated financial statements.

 

In December 2007,the FASB issued SFAS No. 141(R), *BusinessCombinations*and SFAS No. 160, *Accountingand Reporting of Noncontrolling Interest in Consolidated Financial Statements,an amendment of ARB No. 51*. These new standards will significantly change the accounting for andreporting of business combination transactions and noncontrolling (minority)interests in consolidated financial statements.  SFAS Nos. 141(R) and160 are required to be adopted simultaneously and are effective for the firstannual reporting period beginning on or after December 15, 2008.  Thus, we are required to adopt these standardson December 1, 2009, the first day of our 2010 fiscal year. Earlieradoption is prohibited.  We are currentlyevaluating the impact of adopting SFAS Nos. 141(R) and 160 on ourconsolidated financial statements.

 

In March 2008,the FASB issued SFAS No. 161, *Disclosures aboutDerivative Instruments and Hedging Activities*.  SFAS 161 requires additional disclosuresrelated to the use of derivative instruments, the accounting for derivativesand how derivatives impact financial statements.  SFAS No. 161 is effective for fiscalyears and interim periods beginning after November 15, 2008.  Thus, we are required to adopt this standardon December 1, 2008, the first day of our 2009 fiscal year.  We are currently evaluating the impact ofadopting SFAS No. 161 on our consolidated financial statements.

 

**2.             Business Combinations (Continued)**

 

In December 2007, we acquiredMcCloskey Group Limited (McCloskey), the leading provider of news, criticalinformation and insight on the international coal markets located near London,England.  We acquired McCloskey for £13.9million, or approximately $28.2 million using cash on hand.

 

Thisacquisition was accounted for using the purchase method of accounting. Ourconsolidated financial statements include all the assets and liabilitiesacquired and the results of operations from the respective date of acquisition.Pro forma results of the acquired business have not been presented as it didnot have a material impact on our results of operations.

 

 

9

----

**IHS INC.**

**NOTES TO UNAUDITED CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS (Continued)**

 

The purchaseprices for this acquisition, excluding acquired cash and includingacquisition-related costs, was initially allocated as follows (in thousands):

 
| ** **             | ** ** | **Total** | ** ** |
|------------------------|------------|-----------|------------|
| Assets:                |       |      |       |
| Current assets         |       | $         | 774        |   |
| Property and equipment |       | 114       |       |
| Intangible assets      |       | 8,180     |       |
| Goodwill               |       | 24,136    |       |
| Total assets           |       | 33,204    |       |
| Liabilities:           |       |      |       |
| Current liabilities    |       | 2,700     |       |
| Deferred taxes         |       | 2,298     |       |
| Total liabilities      |       | 4,998     |       |
| Purchase price         |       | $         | 28,206     |   |

 

**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

** **

Our comprehensive income was as follows:

 
| ** **                                   | ** ** | **Three Months Ended,**      | ** ** |
|----------------------------------------------|------------|------------------------------|------------|
| ** **                                   | ** ** | **February 29,   2008** | ** ** | **February 28,   2007** | ** ** |
| Net income                                   |       | $                            | 21,431     |   | $ | 18,377 |   |
| Other comprehensive income  (loss):          |       |                         |       |   |   |
| Foreign currency  translation adjustment     |       | (4,139                       | )          | (2,569 | ) |
| Total other comprehensive income, net of tax |       | $                            | 17,292     |   | $ | 15,808 |   |

 

**5.**              Stock-basedCompensation

** **

On February 29, 2008, we had one share basedcompensation plan: the Amended and Restated IHS Inc. 2004 Long-Term IncentivePlan (LTIP).The LTIP provides forthe grant of non-qualified stock options, incentive stock options, stockappreciation rights, restricted stock, restricted stock units, performanceunits and performance shares, cash-based awards, other stock based awards andcovered employee annual incentive awards. The 2004 Directors Stock Plan, asub-plan under the LTIP, provides for the grant of restricted stock andrestricted stock units to non-employee directors as defined in that plan. Webelieve that such awards better align the interests of our employees andnon-employee directors with those of our shareholders.

 

Wehave authorized a maximum of 7 million shares, less the number of sharesrelating to any award granted and outstanding. In our 2007 proxy statement, we have requested shareholder approval foran additional authorization of 4,250,000 shares.

 

10

----

**IHS INC.**

**NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (Continued)**

 

Stock-based compensation expense that has been chargedagainst income for the plan was as follows:

 
| ** **                           | ** ** | **Three Months Ended,**      | ** ** |
|--------------------------------------|------------|------------------------------|------------|
| ** **                           | ** ** | **February 29,   2008** | ** ** | **February 28,   2007** | ** ** |
| ** **                           | ** ** | **(In thousands)**           | ** ** |
| Cost of revenue                      |       | $                            | 311        |   | $ | 351 |   |
| Selling, general and  administrative |       | 12,390                       |       | 6,985 |   |
| Stock-based compensation  expense    |       | $                            | 12,701     |   | $ | 7,336 |   |

 

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

 
| ** **         | ** ** | **February 29, 2008** | ** ** | **February 28, 2007** | ** ** |
|--------------------|------------|----------------------------|------------|----------------------------|------------|
| ** **         | ** ** | **(In thousands)**         | ** ** |
| Income tax benefit |       | $                          | 4,699      |                       | $          | 2,714 |   |
|                    |            |                            |            |                            |            |  |  |

 

Nocompensation cost was capitalized during the three months ended February 29,2008 and February 28, 2007.

 

*Nonvested Stock.*  Share awards generally vest fromone to four years. Share awards are generally subject to graded vesting but wedo have a limited number of share awards subject to cliff vesting. The fairvalue of nonvested stock is based on the fair value of our common stock on thedate of grant. We amortize the value of share awards to expense over thevesting period on a straight-line basis. For awards with performanceconditions, an evaluation is made each quarter as to the likelihood of theperformance criteria being met. Compensation expense is then adjusted toreflect the number of shares expected to vest and the cumulative vesting periodmet to date.  Additionally, we estimateforfeitures at the grant date and recognize compensation cost based on thenumber of awards expected to vest. There may be adjustments in future periodsif the likelihood of meeting performance criteria changes or if actualforfeitures differ from our estimates. Our forfeiture rate is based uponhistorical experience as well as anticipated employee turnover consideringcertain qualitative factors.

 

Total compensation expense related to nonvested awards,both share awards and stock options, not yet recognized was $85.9 millionas of February 29, 2008, with a weighted-average recognition period ofapproximately 2 years.

 

A summary of the status of our nonvested shares as of February 29,2008, and changes during the three months ended February 29, 2008, was asfollows:

 
| ** **                        | ** ** | **Shares**         | ** ** | **Weighted-  Average Grant  Date Fair Value** | ** ** |
|-----------------------------------|------------|--------------------|------------|-----------------------------------------------|------------|
| ** **                        | ** ** | **(in thousands)** | ** ** | ** **                                    | ** ** |
| Balances,  November 30, 2007 |       | 2,429              |       | $                                             | 32.16      |   |
| Granted                           |       | 733                |       | $                                             | 61.88      |   |
| Vested                            |       | (585               | )          | $                                             | 25.48      |   |
| Forfeited                         |       | (27                | )          | $                                             | 39.16      |   |
| Balances,  February 29, 2008 |       | 2,550              |       | $                                             | 42.16      |   |

 

The total fair value of nonvested stock that vestedduring the three months ended February 29, 2008, was $36.5 millionbased on the weighted-average fair value on the vesting date and$14.9 million based on the weighted-average fair value on the date ofgrant.

 

*Stock Options.*  Option awards are granted withan exercise price equal to the fair market value of our stock at the date ofgrant. Options outstanding as of February 29, 2008, vest in various waysover a period of 3-to-4 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 plans).

 

11

----

**IHS INC.**

**NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (Continued)**

 

The following table summarized changes in outstandingstock options during the three months ended February 29, 2008, as well asoptions that are vested and expected to vest and stock options exercisable at February 29,2008:

 
| ** **                                             | ** ** | **Shares**         | ** ** | **Weighted-  Average  Exercise  Price** | ** ** | **Weighted-  Average  Remaining  Contractual  Term** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
|--------------------------------------------------------|------------|--------------------|------------|-----------------------------------------|------------|------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                             | ** ** | **(in thousands)** | ** ** | ** **                              | ** ** | ** **                                           | ** ** | **(in thousands)**              | ** ** |
| Outstanding at  November 30, 2007                 |       | 287                |       | $                                       | 35.31      |                                                 | 2.4        |                            | $          | 10,009 |   |
| Granted                                                |       | —             |       | —                                  |       |                                                 |       |                            |       |
| Exercised                                              |       | (1                 | )          | 37.65                                   |       |                                                 |       |                            |       |
| Forfeited                                              |       | —             |       | —                                  |       |                                                 |       |                            |       |
| Outstanding at  February 29, 2008                 |       | 286                |       | $                                       | 35.28      |                                                 | 2.0        |                            | $          | 7,539 |   |
| Vested and expected to  vest at February 29, 2008 |       | 280                |       | $                                       | 35.28      |                                                 | 2.0        |                            | $          | 7,384 |   |
| Exercisable at  February 29, 2008                 |       | 61                 |       | $                                       | 37.65      |                                                 | —     |                            | $          | 1,474 |   |

 

Theaggregate intrinsic value amounts in the table above represent the differencebetween the closing price of our common stock on February 29, 2008, whichwas $61.65, and the exercise price, multiplied by the number of in-the-moneystock options as of the same date. This represents the amount that would havebeen received by the stock option holders if they had all exercised their stockoptions on February 29, 2008. In future periods, this amount will changedepending on fluctuations in our stock price. The total intrinsic value ofstock options exercised during the three months ended February 29, 2008was less than $0.1 million.

 

**6.****                ****Pensionsand 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.

 

 

12

----

**IHS INC.**

**NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (Continued)**

 

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

 
| ** **                                       | ** ** | **Three Months Ended February 29, 2008** | ** ** | **Three Months Ended February 28, 2007** | ** ** |
|--------------------------------------------------|------------|-----------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                       | ** ** | **U.S.  RIP**                                 | ** ** | **U.K.  RIP**                                 | ** ** | **SIP** | ** ** | **Total** | ** ** | **U.S.  RIP** | ** ** | **U.K.  RIP** | ** ** | **SIP** | ** ** | **Total** | ** ** |
| ** **                                       | ** ** | **(In thousands)**                            | ** ** |
| Service costs incurred                           |       | $                                             | 1,572      |                                          | $          | 238 |   | $ | 72 |   | $ | 1,882 |   | $ | 1,569 |   | $ | 286 |   | $ | 48 |   | $ | 1,903 |   |
| Interest costs on  projected benefit obligation  |       | 2,999                                         |       | 539                                           |       | 114 |   | 3,652 |   | 2,720 |   | 540 |   | 104 |   | 3,364 |   |
| Expected return on plan  assets                  |       | (5,368                                        | )          | (562                                          | )          | — |   | (5,930 | ) | (5,078 | ) | (447 | ) | — |   | (5,525 | ) |
| Amortization of prior  service cost              |       | (118                                          | )          | —                                        |       | 11 |   | (107 | ) | (118 | ) | — |   | 22 |   | (96 | ) |
| Amortization of actuarial  loss                  |       | —                                        |       | —                                        |       | 47 |   | 47 |   | 375 |   | 300 |   | 30 |   | 705 |   |
| Amortization of  transitional obligation/(asset) |       | (142                                          | )          | —                                        |       | 10 |   | (132 | ) | (142 | ) | — |   | 10 |   | (132 | ) |
| Net periodic pension benefit (income) expense    |       | $                                             | (1,057     | )                                             | $          | 215 |   | $ | 254 |   | $ | (588 | ) | $ | (674 | ) | $ | 679 |   | $ | 214 |   | $ | 219 |   |

** **

Our net periodic post-retirement benefit income wascomprised of the following:

 
| ** **                                   | ** ** | **Three months ended,**     | ** ** |
|----------------------------------------------|------------|-----------------------------|------------|
| ** **                                   | ** ** | **February 29,  2008** | ** ** | **February 28,   2007** | ** ** |
| ** **                                   | ** ** | **(In thousands)**          | ** ** |
| Service costs incurred                       |       | $                           | 25         |   | $ | 34 |   |
| Interest costs                               |       | 158                         |       | 148 |   |
| Amortization of prior  service amounts       |       | (806                        | )          | (807 | ) |
| Amortization of net  actuarial loss          |       | 118                         |       | 138 |   |
| Net periodic  post-retirement benefit income |       | $                           | (505       | ) | $ | (487 | ) |

 

**7.**              Earningsper 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 and 13,750,000shares of Class B common stock. These classes have equal dividend rights and liquidation rights.However, the holders of our Class A common stock are entitled to one voteper share and holders of our Class B common stock are entitled to tenvotes per share on all matters to be voted upon by the stockholders. Each shareof Class B common stock is convertible at any time at the option of theholder into one share of Class A common stock and will automaticallyconvert, without any action by the holder, upon the earlier of the occurrenceof specified events or November 16, 2009.

 

13

----

**IHS INC.**

**NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (Continued)**

 

We use thetwo-class method for computing basic and diluted EPS amounts. We calculatedundistributed earnings as follows:

 

 
| ** **             | ** ** | **Three Months Ended,**      | ** ** |
|------------------------|------------|------------------------------|------------|
| ** **             | ** ** | **February 29,   2008** | ** ** | **February 28,   2007** | ** ** |
| ** **             | ** ** | **(In thousands)**           | ** ** |
| Net income             |       | $                            | 21,431     |   | $ | 18,377 |   |
| Less: dividends        |       | —                       |       | — |   |
| Undistributed earnings |       | $                            | 21,431     |   | $ | 18,377 |   |

 

Weightedaverage common shares outstanding are calculated as follows:

 
| ** **                                    | ** ** | **Three Months Ended,**    | ** ** |
|-----------------------------------------------|------------|----------------------------|------------|
| ** **                                    | ** ** | **February 29, 2008** | ** ** | **February 28, 2007** | ** ** |
| ** **                                    | ** ** | **Class A**           | ** ** | **Class B** | ** ** | **Class A** | ** ** | **Class B** | ** ** |
| ** **                                    | ** ** | **(In thousands)**         | ** ** |
| Weighted average common  shares outstanding:  |       |                       |       |   |   |   |   |   |   |
| Shares used in basic  per-share calculation   |       | 48,221                     |       | 13,750 |   | 43,844 |   | 13,750 |   |
| Effect of dilutive  securities:               |       |                       |       |   |   |   |   |   |   |
| Deferred stock units                          |       | 38                         |       | — |   | 9 |   | — |   |
| Restricted shares                             |       | 821                        |       | — |   | 95 |   | — |   |
| Options                                       |       | 66                         |       | — |   | — |   | — |   |
| Assumed conversion of  Class B shares    |       | 13,750                     |       | — |   | 13,750 |   | — |   |
| Shares used in diluted  per-share calculation |       | 62,896                     |       | 13,750 |   | 57,698 |   | 13,750 |   |

 

Undistributedearnings and calculated basic and diluted EPS amounts are calculated asfollows:

 
| ** **                                                                             | ** ** | **Three Months Ended,**    | ** ** |
|----------------------------------------------------------------------------------------|------------|----------------------------|------------|
| ** **                                                                             | ** ** | **February 29, 2008** | ** ** | **February 28, 2007** | ** ** |
| ** **                                                                             | ** ** | **Class A**           | ** ** | **Class B** | ** ** | **Class A** | ** ** | **Class B** | ** ** |
| ** **                                                                             | ** ** | **(In thousands)**         | ** ** |
| **Basic**                                                                              | ** ** | ** **                 | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Weighted average shares  outstanding                                                   |       | 48,221                     |       | 13,750 |   | 43,844 |   | 13,750 |   |
| Divided by: Total weighted average shares outstanding (Class A  and Class B) |       | 61,971                     |       | 61,971 |   | 57,594 |   | 57,594 |   |
| Multiplied by:  Undistributed earnings                                                 |       | $                          | 21,431     |   | $ | 21,431 |   | $ | 18,377 |   | $ | 18,377 |   |
| Subtotal                                                                               |       | $                          | 16,676     |   | $ | 4,755 |   | $ | 13,990 |   | $ | 4,387 |   |
| Divided by: Weighted  average shares outstanding                                       |       | 48,221                     |       | 13,750 |   | 43,844 |   | 13,750 |   |
| Earnings per share                                                                     |       | $                          | 0.35       |   | $ | 0.35 |   | $ | 0.32 |   | $ | 0.32 |   |
|                                                                                   |       |                       |       |   |   |   |   |   |   |
| **Diluted**                                                                            | ** ** | ** **                 | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Weighted average shares  outstanding                                                   |       | 62,896                     |       | 13,750 |   | 57,698 |   | 13,750 |   |
| Divided by: Total weighted average shares outstanding (Class A  and Class B) |       | 62,896                     |       | 62,896 |   | 57,698 |   | 57,698 |   |
| Multiplied by:  Undistributed earnings                                                 |       | $                          | 21,431     |   | $ | 21,431 |   | $ | 18,377 |   | $ | 18,377 |   |
| Subtotal                                                                               |       | $                          | 21,431     |   | $ | 4,685 |   | $ | 18,377 |   | $ | 4,379 |   |
| Divided by: Weighted  average shares outstanding                                       |       | 62,896                     |       | 13,750 |   | 57,698 |   | 13,750 |   |
| Earnings per share                                                                     |       | $                          | 0.34       |   | $ | 0.34 |   | $ | 0.32 |   | $ | 0.32 |   |

** **

14

----

**IHS INC.**

**NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (Continued)**

 

***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.  Later in 2006, our boardof directors approved an additional program—a stock buyback program—whereby IHSacquires up to one million shares per year in the open market to more fullyoffset the dilutive effect of our employee equity programs. This program wasrenewed by the board of directors in late 2007 for fiscal year 2008.  During the first quarter of 2008, werepurchased 66,500 shares of our Class A common stock for approximately$3.9 million, or $58.41 per share, pursuant to the stock buyback program.  Additionally, we withheld 207,826 shares ofstock in treasury to cover employees’ statutory tax liability as discussedabove, for approximately $13.0 million, or $62.38 per share.  Since the inception of these programs, we haverepurchased 756,462 shares of our Class A common stock for approximately$33.1 million, or $43.71 per share, pursuant to the stock buyback program andwithheld for tax 590,639 shares for approximately $29.8 million, or $50.51 pershare.

 

**8.     Goodwill and Intangible Assets**

** **

The following table presents details of our intangibleassets, other than goodwill, as of February 29, 2008:

 
| ** **                                      | ** ** | **Useful Life** | ** ** | **Gross**  | ** ** | **Accumulated  Amortization** | ** ** | **Net**    | ** ** |
|-------------------------------------------------|------------|-----------------|------------|------------|------------|-------------------------------|------------|------------|------------|
| ** **                                      | ** ** | **(Years)**     | ** ** | ** ** | ** ** | **(In thousands)**            | ** ** | ** ** | ** ** |
| Intangible assets subject  to amortization:     |       |            |       |       |       |                          |       |       |       |
| Information databases                           |       | 5-15            |       | $          | 139,669    |                          | $          | (19,217    | )          | $ | 120,452 |   |
| Customer relationships                          |       | 2-15            |       | 46,775     |       | (9,014                        | )          | 37,761     |       |
| Non-compete agreements                          |       | 5               |       | 5,621      |       | (3,209                        | )          | 2,412      |       |
| Developed computer software                     |       | 5               |       | 15,386     |       | (2,984                        | )          | 12,402     |       |
| Other                                           |       | 3-11            |       | 1,339      |       | (1,182                        | )          | 157        |       |
| Total                                           |       |            |       | 208,790    |       | (35,606                       | )          | 173,184    |       |
| Intangible assets not  subject to amortization: |       |            |       |       |       |                          |       |       |       |
| Trademarks                                      |       |            |       | 31,056     |       |                          |       | 31,056     |       |
| Perpetual licenses                              |       |            |       | 1,348      |       | —                        |       | 1,348      |       |
| Total                                           |       |            |       | 32,404     |       | —                        |       | 32,404     |       |
| Total intangible assets                         |       |            |       | $          | 241,194    |                          | $          | (35,606    | )          | $ | 205,588 |   |

 

 

15

----

**IHS INC.**

**NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (Continued)**

 

The followingtable presents details of our intangible assets, other than goodwill, as of November 30,2007:

 
| ** **                                      | ** ** | **Useful Life** | ** ** | **Gross**  | ** ** | **Accumulated  Amortization** | ** ** | **Net**    | ** ** |
|-------------------------------------------------|------------|-----------------|------------|------------|------------|-------------------------------|------------|------------|------------|
| ** **                                      | ** ** | **(Years)**     | ** ** | ** ** | ** ** | **(In thousands)**            | ** ** | ** ** | ** ** |
| Intangible assets subject  to amortization:     |       |            |       |       |       |                          |       |       |       |
| Information databases                           |       | 5-15            |       | $          | 137,317    |                          | $          | (14,926    | )          | $ | 122,391 |   |
| Customer relationships                          |       | 2-15            |       | 45,650     |       | (7,981                        | )          | 37,669     |       |
| Non-compete agreements                          |       | 5               |       | 5,514      |       | (2,889                        | )          | 2,625      |       |
| Developed computer software                     |       | 5               |       | 15,036     |       | (2,527                        | )          | 12,509     |       |
| Other                                           |       | 3-11            |       | 1,009      |       | (984                          | )          | 25         |       |
| Total                                           |       |            |       | 204,526    |       | (29,307                       | )          | 175,219    |       |
| Intangible assets not  subject to amortization: |       |            |       |       |       |                          |       |       |       |
| Trademarks                                      |       |            |       | 29,602     |       | —                        |       | 29,602     |       |
| Perpetual licenses                              |       |            |       | 1,538      |       | —                        |       | 1,538      |       |
| Total                                           |       |            |       | 31,140     |       | —                        |       | 31,140     |       |
| Total intangible assets                         |       |            |       | $          | 235,666    |                          | $          | (29,307    | )          | $ | 206,359 |   |

 

The estimated amortization expense of intangibleassets for business combinations completed as of February 29, 2008 foreach of the next five years is as follows:

 
| **Year**       | ** ** | **Amount**         | ** ** |
|----------------|------------|--------------------|------------|
| ** **     | ** ** | **(In thousands)** | ** ** |
| Remainder 2008 |       | $                  | 16,211     |   |
| 2009           |       | 19,829             |       |
| 2010           |       | 17,503             |       |
| 2011           |       | 16,349             |       |
| 2012           |       | 14,960             |       |
|                |            |                    |            |  |

 

Amortizationexpense of intangible assets was $5.8 million and $2.6 million for the threemonths ended February 29, 2008 and February 28, 2007, respectively.

 

Changesin our goodwill from November 30, 2007 to February 29, 2008 wereprimarily the result of the McCloskey acquisition (see Note 2) andforeign-currency exchange-rate fluctuations.

 

**9.**                 SegmentInformation

** **

We have two reportable segments: Energy and Engineering. Our Energysegment serves the Energy information domain where it develops and deliverscritical oil and gas industry data on exploration, development, production, andtransportation activities to major global energy producers and national andindependent oil companies. Our Energy segment also provides operational,research, and strategic advisory services to these customers, as well as toutilities and transportation, petrochemical, coal, and power companies. OurEngineering segment is focused primarily on the Product Lifecycle, Security,and Environment information domains where it provides solutions incorporatingtechnical specifications and standards, regulations, parts data, design guides,security, environmental, and other information to customers in its targetedindustries. Both segments primarily derive their revenue from subscriptions.

 

Information as to the operations of our two segments is set forth belowbased on the nature of the offerings. Our Chairman and Chief Executive Officerand his direct reports represent our chief operating decision maker, and theyevaluate segment performance based primarily on revenue and operating profit.The accounting policies of our segments are the same as those described in thesummary of significant accounting policies (see Note 2 to our consolidatedfinancial statements included in our 2007 Form 10-K).

 

 

16

----

 

**IHS INC.**

**NOTES TOUNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

 

No single customer accounted for 10% or more of our total revenue forthe three months ended February 29, 2008 or February 28, 2007. Thereare no material inter-segment revenues for any period presented.

 

We continue in the process of consolidating back-office functions andmoving additional functions to a shared-services model. Consequently, we arechanging our internal structure causing the composition of our internal segmentsto change.  Additionally, as theinformation that our customers need to address their complex business issuescontinues to converge at the intersection of the information domains that weserve, we are evolving our management structure to a geographic focus, thepoint of contact with our customers.  Asa result, our defined operating segments will change during the second quarterof 2008.  

 

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

 
| ** **                                     | ** ** | **Energy**         | ** ** | **Engineering** | ** ** | **Shared  Services** | ** ** | **Consolidated  Total** | ** ** |
|------------------------------------------------|------------|--------------------|------------|-----------------|------------|----------------------|------------|-------------------------|------------|
| ** **                                     | ** ** | **(In thousands)** | ** ** |
| **Three Months Ended  February 29, 2008** | ** ** | ** **         | ** ** | ** **      | ** ** | ** **           | ** ** | ** **              | ** ** |
| Revenue                                        |       | $                  | 110,299    |            | $          | 88,478               |       | $                       | —     |   | $ | 198,777 |   |
| Segment operating income                       |       | 39,152             |       | 14,992          |       | (23,211              | )          | 30,933                  |       |
| Depreciation and  amortization                 |       | 4,058              |       | 4,126           |       | 639                  |       | 8,823                   |       |
| **Three Months Ended  February 28, 2007** | ** ** | ** **         | ** ** | ** **      | ** ** | ** **           | ** ** | ** **              | ** ** |
| Revenue                                        |       | $                  | 86,746     |            | $          | 65,875               |       | $                       | —     |   | $ | 152,621 |   |
| Segment operating income                       |       | 27,045             |       | 12,985          |       | (14,146              | )          | 25,884                  |       |
| Depreciation and  amortization                 |       | 2,678              |       | 1,405           |       | 497                  |       | 4,580                   |       |

 

**10.  Subsequent Event**

 

On March 3, 2008, weacquired Prime Publications Limited (Prime), which owned a 50 percent interestin the Lloyd’s Register-Fairplay Limited joint venture, a leading source ofglobal maritime information.  IHS acquired100 percent of the stock of Prime for approximately £38.0 million, orapproximately $75.5 million, which included $21.3 million in non-interest bearing seller notesand the remainder was paid in cash.

 

Also on March 3,2008, we acquired Dolphin Software, Inc. (Dolphin) for approximately $23.5million in cash. Dolphin is a leader in developing and using chemical datainformation and software used by companies to record and track chemicals storedand used in their facilities.

 

On March 13, 2008,we acquired Environmental Software Providers (ESP), a provider of enterpriseinformation solutions used by companies to assist in managing theirenvironmental sustainability programs for approximately $20.0 million in cash.

 

Cash used for theseacquisitions came from cash on hand and a draw down of $50.0 million on our$385 million unsecured line of credit.

 

 

17

----

** **

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

** **

**Forward-Looking Statements**

 

Thisdiscussion contains statements that relate to IHS’s future plans, objectives,expectations, performance, events and the like that may constitute “forward-lookingstatements” within the “safe harbor” provisions of the Private Securities LitigationReform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21Eof the Securities Exchange Act of 1934. Words such as “may,” “could,” “should,”“would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “seeks,” “plan,”“project,” “continue,” “predict” and other words or expressions of similarmeaning are intended to identify forward-looking statements, although not allforward-looking statements contain these identifying words. These statementsare based on our current expectations about future events or results andinformation that is currently available to us, involve assumptions, risks anduncertainties, and speak only as of the date on which such statements are made.Our actual results may differ materially from those expressed or implied inthese forward-looking statements. Those factors include, but are not limitedto, our ability to obtain content from third parties (including StandardsDevelopment Organizations) on commercially reasonable terms, changes in demandfor IHS’s products and services, changes in the energy industry, our ability todevelop new products and services, pricing and other competitive pressures,risks associated with the integration of acquisitions, changes in laws andregulations governing our business and certain other factors discussed underthe caption “Risk Factors” in the MD&A section of our 2007 Form 10-K,and in our other filings with the SEC. IHS undertakes no duty to update,whether as a result of new information, future events or otherwise, unlessrequired by law.

 

**Overview**

 

**Resultsof Operations**

 

IHS Inc. is a publicly traded Delaware corporation. IHS is aleading provider and comprehensive source of Critical Information and Insightin a sizable and growing global market. Our customers rely on our products andservices to facilitate crucial decision-making, support key processes, andimprove productivity. At the heart of our products and services is dataobtained from public sources, third parties, and our own proprietary databases.We transform that data into Critical Information and Insight that is bothuseful to our customers and available where and when they make criticalbusiness decisions. The data becomes Critical Information when we combine itwith our proprietary and third-party technology to create graphical userinterfaces, search and navigation tools, and online delivery systems. Wefurther transform that information into Insight products and services withanalysis and interpretation from our teams of experts.

 

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 businessobjectives. As we continue to deliver Critical Information and Insight in thosefour information domains, we prepare and analyze our financial reports toinclude each of the four domains in our two reportable segments. Today, ourEnergy segment includes the Energy information domain while our Engineeringsegment includes the Product Lifecycle, Security, and Environment informationdomains.

 

We continue in the process of consolidating back-office functions andmoving additional functions to a shared-services model. Consequently, we arechanging our internal structure causing the composition of our internalsegments to change.  Additionally, as theinformation that our customers need to address their complex business issuescontinues to converge at the intersection of the information domains that weserve, we are evolving our management structure to a geographic focus, thepoint of contact with our customers.  Asa result, our defined operating segments will change during the second quarterof 2008.

 

18

----

 

Wesell our offerings primarily through subscriptions. As a result of oursubscription-based business model and historically high renewal rates, wegenerate recurring revenue and cash flow. We generally recognize revenue fromsubscriptions (which are usually for one-year periods) ratably over the term ofthe subscription. Historically,our business has had seasonal aspects. However, with the continued organic growth in our subscription-basedbusiness model combined with several acquisitions in recent years, our seasonalaspects have diminished.  Our firstquarter does benefit from the inclusion of the results from CERAWeek, an annualenergy executive gathering. Subscriptions are generally paid in fullwithin one to two months after the subscription period commences. As a result,the timing of our cash flows generally precedes the recognition of revenue andincome.

 

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

 

**BusinessCombinations**

 

In December 2007, we acquiredMcCloskey Group Limited (McCloskey), the leading provider of news, criticalinformation and insight on the international coal markets located near London,England.  We acquired McCloskey for £13.9million, or approximately $28.2 million using cash on hand.

 

On March 3, 2008, we acquiredPrime Publications Limited (Prime), which owned a 50 percent interest in theLloyd’s Register-Fairplay Limited joint venture, a leading source of globalmaritime information.  IHS acquired 100percent of the stock of Prime for approximately £38.0 million, or approximately$75.5 million, which included $21.3 million in non-interest bearing sellernotes and the remainder was paid in cash. 

 

Alsoon March3, 2008, we acquired Dolphin Software, Inc. (Dolphin) for approximately $23.5million in cash. Dolphin is a leader in developing and using chemical datainformation and software used by companies to record and track chemicals storedand used in their facilities.  

 

OnMarch 13, 2008, we acquired Environmental Software Providers (ESP), a providerof enterprise information solutions used by companies to assist in managingtheir environmental sustainability programs for approximately $20.0 million incash.  

 

**SegmentInformation**

 
| ** **          | ** ** | **Three Months  Ended**       | ** ** |
|---------------------|------------|-------------------------------|------------|
| ** **          | ** ** | **February 29,    2008** | ** ** | **February 28,    2007** | ** ** |
| ** **          | ** ** | **(In thousands)**            | ** ** |
| Energy revenue      |       | $                             | 110,299    |   | $ | 86,746 |   |
| Engineering revenue |       | 88,478                        |       | 65,875 |   |
| Total revenue       |       | $                             | 198,777    |   | $ | 152,621 |   |
| Energy              |       | $                             | 39,152     |   | $ | 27,045 |   |
| Engineering         |       | 14,992                        |       | 12,985 |   |
| Shared services     |       | (23,211                       | )          | (14,146 | ) |
| Operating income    |       | $                             | 30,933     |   | $ | 25,884 |   |

 

**ThreeMonths Ended February 29, 2008 Compared to the Three Months Ended February 28,2007**

 

**Revenue.**  Revenue was $198.8 million for the threemonths ended February 29, 2008, compared to $152.6 million for the threemonths ended February 28, 2007, an increase of $46.2 million or 30%.Revenue increased due to organic growth which contributed $14.0 million,acquisitions which contributed $28.4 million and foreign currency which added$3.8 million.

 

Revenue for our Energy segment was$110.3 million for the three months ended February 29, 2008, compared to$86.7 million for the three months ended February 28, 2007, an increase of$23.6 million or 27%. The increase was principally due to organic growth, whichcontributed $12.9 million.  Additionally,acquisitions added $8.3 million and favorable foreign currency movements grewrevenue by $2.3 million. Organic growth during the first quarter of 2008 wasprimarily driven by price increases, growth in certain critical informationsubscription products and stronger results from CERAWeek.

 

Revenue for our Engineering segmentwas $88.5 million for the three months ended February 29, 2008, comparedto $65.9 million for the three months ended February 28, 2007, an increaseof $22.6 million or 34%. Growth attributed to acquisitions accounted for $20.1million.  Organic growth contributed $1.1million and foreign currency movements added $1.4 million.  Organic growth was driven by increased salesin our specifications-and-standards and parts-management offerings which was partiallyoffset by the transition out of a non-strategic agency business where we were asales agent for products outside of our traditional standards products.

 

19

----

 

**Cost of Revenue**.  Cost of revenue was $89.2 million for thethree months ended February 29, 2008, compared to $65.7 million for thethree months ended February 28, 2007, an increase of $23.5 million or 36%.As a percentage of revenue, cost of revenue increased to 44.9% from 43.1%.  Margins within our Energy segment remainedflat as data related margin expansion was substantially offset by decreases inservice margins.  The decrease in Energyservice margins was principally due to the organizational re-alignmentof certain resources that previously were part of Sales, General andAdministrative functions.  Margins within our Engineering segmentdecreased principally due to the modification of certain agencyrelationships.  The transition of theserelationships is substantially complete and therefore should not have amaterial impact on the comparability of the Engineering segment gross marginsgoing forward.

 

**Selling, General and Administrative Expenses**.  Selling, general and administrative expenses(SG&A) were $71.9 million for the three months ended February 29,2008, compared to $57.9 million for the three months ended February 28,2007, an increase of $14.0 million or 24%. SG&A growth attributed to acquisitions was $7.3 million.  Organic SG&A increased $5.9 million dueprincipally to a $5.4 million increase in stock-based compensationexpense.   Foreign-currency movementsincreased SG&A by $0.8 million. As a percentage of revenue and excludingstock-based compensation expense, SG&A was 29.9% for the three months endedFebruary 29, 2008, down from 33.4% for the three months ended February 28,2007.

 

**Depreciation and Amortization Expenses**.  Depreciation and amortization expenses were$8.8 million for the three months ended February 29, 2008, compared to$4.6 million for the three months ended February 28, 2007, an increase of$4.2 million or 93%. The increase was primarily due to amortization ofintangible assets related to acquisitions.

 

**Operating Income**.  Operating income was $30.9 million for thethree months ended February 29, 2008, compared to $25.9 million for thethree months ended February 28, 2007, an increase of $5.0 million or 20%.As a percentage of revenue, operating income decreased to 15.6% for the threemonths ended February 29, 2008 from 17.0% for the three months ended February 28,2007.

 

Operating income for our Energysegment was $39.2 million for the three months ended February 29, 2008,compared to $27.0 million for the three months ended February 28, 2007, anincrease of $12.2 million or 45%. The increase was primarily attributable toincreased revenue discussed above coupled with contained operatingexpenses.  As a percentage of revenue,operating income increased to 35.5% for the three months ended February 29,2008 from 31.2% for the three months ended February 28, 2007.

 

 Operating income for our Engineering segmentwas $15.0 million for the three months ended February 29, 2008, comparedto $13.0 million for the three months ended February 28, 2007, an increaseof $2.0 million or 16%. Operating income increased due to higher sales in ourspecifications-and-standards business and improved results in ourparts-management offerings.  As apercentage of revenue, operating income decreased to 16.9% for the three monthsended February 29, 2008 from 19.7% for the three months ended February 28,2007 which was primarily due to the modification of certain agencyrelationships as discussed above.

 

Operating loss for our sharedservices was $23.2 million for the three months ended February 29, 2008,compared to $14.1 million for the three months ended February 28, 2007, anincrease of $9.1 million or 64%. Increased stock-based compensation expense contributed $5.4 million.Annual merit salary increases, additional headcount and costs associated withour ongoing transformational initiatives also contributed to the increase.

 

**Provision for Income Taxes**.  Our effective tax rate for the three monthsended February 29, 2008 was 33.1%, compared to 33.0% for the three monthsended February 28, 2007.

 

 

20

----

 

**FinancialCondition**

 

**AccountsReceivable**.  Accountsreceivable  has increased by $17.5million, or 9.9%, to $193.0 million comparedto $175.5 million as of November 30, 2007.  The increase is attributable to both the organic and acquisition relatedgrowth.

 

**Accrued Compensation.**  Accrued compensation was $14.2 million as of February 29,2008, compared to $37.0 million as of November 30, 2007, a decrease of$22.8 million or 61.7%. The decrease was primarily attributable to disbursementof annual incentive bonuses during the first quarter.

 

**Deferred Revenue.**Deferred revenue was $283.2million as of February 29, 2008, compared to $239.4 million as of November 30,2007, an increase of $43.8 million or 18.3%. The increase was primarilyattributable to both theorganic and acquisition related growth.

 

**Liquidity andCapital Resources**

 

As of February 29, 2008, wehad cash and cash equivalents of $139.1 million, and virtually no debt. We havegenerated strong cash flows from operations over the last few years. As aresult of these factors, as well as the availability of funds under our $385.0million credit facility, we believe we will have sufficient cash to meet ourworking 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 less than $15 million for2008.

 

*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.  Later in 2006, our boardof directors approved an additional program—a stock buyback program—whereby IHSacquires up to one million shares per year in the open market to more fullyoffset the dilutive effect of our employee equity programs. This program wasrenewed by the board of directors in late 2007 for fiscal year 2008.  During the first quarter of 2008, werepurchased 66,500 shares of our Class A common stock for approximately$3.9 million, or $58.41 per share, pursuant to the stock buyback program.  Additionally, we withheld 207,826 shares ofstock in treasury to cover employees’ statutory tax liability as discussedabove, for approximately $13.0 million, or $62.38 per share.  Since the inception of these programs, wehave repurchased 756,462 shares of our Class A common stock for approximately$33.1 million, or $43.71 per share, pursuant to the stock buyback program andwithheld for tax 590,639 shares for approximately $29.8 million, or $50.51 pershare.

 

*Cash Flows*

* *

Net cash provided by operating activities was $32.5 million for the three months ended February 29, 2008, comparedto $23.1 million for the three months ended February 28, 2007, an increaseof $9.4 million. The increase was principally due to our businessgrowing profitably year over year, primarily due to increased pricing, anexpanding subscription base, increased sales and the positive impact of ouracquisitions. Our subscription-based business model typically generates a highrate of cash flow and is aided by the following:

 

·                  Relatively lowlevels of required capital expenditures;

 

·                  Positive workingcapital characteristics that do not generally require substantial workingcapital increases to support our growth;

 

21

----

 

·                  A cash-for-taxrate that continues to trend lower than our effective tax rate; and

 

·                  Ourwell-capitalized balance sheet.

 

The positive cash flow impact of our growing business in the firstquarter of  2008 was partially offset bythe annual bonus payments, which are substantially paid in the first quartereach year and were approximately $6.4 million higher in 2008 than in2007.  In addition, the first quarter of2008 had one additional US payroll cycle.

 

Net cash used in investingactivities was approximately $23.3 million for the three months ended February 29,2008, compared to $8.2 million for the three months ended February 28,2007. The change is driven primarily by the McCloskey acquisition in December 2007.  In the first quarter of 2007, we disbursed$8.0 million for the purchase of the assets of an oil-and-gas-data company.

 

Net cash used in financingactivities was $19.6 million for the three months ended February 29,2008.  Net cash used in financingactivities was $8.2 million during the three months ended February 28,2007.  We repurchased a total ofapproximately 275,000 shares for approximately $16.9 million for the threemonths ended February 29, 2008 compared to approximately 200,000 sharesfor $7.8 million for the comparable period of 2007.

 

*Credit Facility*

* *

On September 7, 2007, we entered into an amended and restatedcredit agreement (Revolver). The $385 million unsecured Revolver allowsus, under certain conditions, to increase the facility to 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.

 

Asof February 29, 2008, we were in compliance with all of the covenants inthe agreement and had no outstanding borrowings. However, we had letters ofcredit totaling approximately $1.0 million as of February 29, 2008.  On March 3, 2008, we borrowed $50.0million under the Revolver at an annual rate of 3.6% to fund acquisitions whichwere closed during the first two weeks of our second fiscal quarter.  The use of the Revolver allows us to maintaincash levels to fund the ongoing operational needs of the business and has taxbenefits as we did not have to repatriate cash from foreign locations to fundthe acquisitions.

 

**Off-Balance Sheet Transactions**

** **

We have no off-balance sheettransactions.

 

**Critical Accounting Policies**

 

Ourmanagement makes a number of significant estimates, assumptions and judgments inthe preparation of our financial statements. See “Management’s Discussion andAnalysis and Results of Operations—Critical Accounting Policies and Estimates”in our 2007 Form 10-K for a discussion of the estimates and judgmentsnecessary in our accounting for revenue recognition, valuation of long-livedand intangible assets and goodwill, income taxes,  pension and post-retirement benefits, andstock-based compensation.

 

 

22

----

 

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

** **

Forinformation regarding our exposure to certain market risk, see Item 7A, “Quantitativeand Qualitative Disclosures About Market Risk,” in our 2007 Form 10-K.There were no material changes to our market risk exposure during the firstthree months of 2008.

 

 

23

----

 

**Item 4.    Controls andProcedures**

** **

*(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) Changes in internal control overfinancial 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.

 

** **

 

24

----

 

**PART II. OTHER INFORMATION**

** **

**Item 1.    LegalProceedings**

** **

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.

 

**Item 1A.**    **Risk Factors**

 

Therehave been no material changes to the risk factors associated with the businesspreviously disclosed in Part I, Item 1A of our 2007 Annual Report on Form 10-K.

 

**Item 2.    UnregisteredSales of Equity Securities and Use of Proceeds**

** **

Items 2(a) and (b) areinapplicable.

 
| (c) |   | The following table  provides a month-to-month summary of the share repurchase activity under the  current stock repurchase program during the three months ended  February 29, 2008: |
|-----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
| **Period**                                     | ** ** | **Total Number    of Shares   Purchased** | ** ** | **Average Fair    Market Value   per Share** | ** ** | **Total Number**

**of Shares   Purchased as   Part of Publicly Announced   Plans or   Programs** | ** ** | **Maximum   Number of   Shares That   May Yet Be   Purchased   Under the   Plans or   Programs** | ** ** |
|------------------------------------------------|------------|-------------------------------------------|------------|----------------------------------------------|------------|--------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------|------------|
| December 1 —  December 31, 2007 |       | —                                    |       | $                                            | —     |                                                                                                   | —     |                                                                                                  | 310,038    |   |
| January 1 — January 31, 2008    |       | 66,300                                    |       | $                                            | 58.41      |                                                                                                   | 66,300     |                                                                                                  | 243,738    |   |
| February 1 — February 29, 2008  |       | 200                                       |       | $                                            | 60.02      |                                                                                                   | 200        |                                                                                                  | 243,538    |   |
| Total                                          |       | 66,500                                    |       | $                                            | 58.41      |                                                                                                   | 66,500     | (1)                                                                                                   | 243,538    | (1) |

----

(1)          During 2006, our board ofdirectors authorized the repurchase of up to one million IHS shares of Class Acommon stock to more fully offset the dilutive effect of our employee equityprograms. Repurchases will be made from time to time in the open market. Thistable does not include the surrender of common shares by employees to thecompany to cover taxes due by employees upon the vesting of employee-equityawards.

 

**Item 6.    Exhibits**

** **

 (a)  Indexof Exhibits

 

The following exhibitsare filed as part of this report:

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

----

*                 Filedelectronically herewith.

** **

 

25

----

 

**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 March 28, 2008.

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

 

 

26

----