10-K 1 a2196431z10-k.htm 10-K

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K


ý

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

OR

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                    to                                   

Commission file number: 001-14049

GRAPHIC

IMS Health Incorporated
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  06-1506026
(I.R.S. Employer Identification No.)

901 Main Avenue, Norwalk, Connecticut
(Address of principal executive offices)

 

06851
(Zip Code)

(203) 845-5200
(Registrant's telephone number, including area code)

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

          Securities registered pursuant to Section 12(b) of the Act:

Title of each class   Name of each exchange on which registered
Common Stock, $.01 par value per share   New York Stock Exchange

          Securities registered pursuant to Section 12(g) of the Act: None

          Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý    No o

          Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o    No ý

          Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

          Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o    No o

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o
(Do not check if a
smaller reporting company)
  Smaller reporting company o

          Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

          As of June 30, 2009, the aggregate market value of the registrant's Common Stock held by non-affiliates of the registrant was approximately $2,316 million based on the closing transaction price on the New York Stock Exchange Composite Tape.

          Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date.

Class   Outstanding at February 12, 2010

Common Stock, $.01 par value per share

  183,222,336 shares


DOCUMENTS INCORPORATED BY REFERENCE

          None.


TABLE OF CONTENTS

Section
   
  Page

Part I

   

Item 1.

 

Business

  3

 

IMS

  3

 

The Merger Agreement

  3

 

Our Products and Services

  5

 

Our Data Suppliers

  9

 

Our Customers

  9

 

Our Competition

  9

 

Our Intellectual Property

  10

 

Our Employees

  10

 

Available Information

  10

Item 1A.

 

Risk Factors

  11

Item 1B.

 

Unresolved Staff Comments

  18

Item 2.

 

Properties

  18

Item 3.

 

Legal Proceedings

  19

Item 4.

 

Submission of Matters to a Vote of Security Holders

  21

EXECUTIVE OFFICERS OF THE REGISTRANT

   


Part II


 

 

Item 5.

 

Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

  22

Item 6.

 

Selected Financial Data

  23

Item 7.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

  24

Item 7A.

 

Quantitative and Qualitative Disclosures about Market Risk

  54

Item 8.

 

Financial Statements and Supplementary Data

  55

Item 9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

  116

Item 9A.

 

Controls and Procedures

  116

Item 9B.

 

Other Information

  116


Part III


 

 

Item 10.

 

Directors, Executive Officers and Corporate Governance

  117

Item 11.

 

Executive Compensation

  122

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

  169

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

  174

Item 14.

 

Principal Accountant Fees and Services

  176


Part IV


 

 

Item 15.

 

Exhibits, Financial Statement Schedules

  178

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

  181

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

  182

INDEX TO EXHIBITS

  183

EXHIBIT 21—IMS HEALTH INCORPORATED ACTIVE SUBSIDIARIES

   

EXHIBIT 23—CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

   

EXHIBIT 31.1—CEO SECTION 302 CERTIFICATION

   

EXHIBIT 31.2—CFO SECTION 302 CERTIFICATION

   

EXHIBIT 32.1—JOINT CEO/CFO CERTIFICATION REQUIRED UNDER SECTION 906
    OF THE SARBANES-OXLEY ACT OF 2002

   

The Index to Exhibits is located on Pages 183 to 195.


Table of Contents


PART I

        Except where the context indicates otherwise, when we use the terms "IMS," "Company," "we," "us" and "our," we mean IMS Health Incorporated and all subsidiaries consolidated in the financial statements contained or incorporated by reference herein. Dollars in thousands, except per share data.

Item 1.    Business

        IMS is the leading global provider of market intelligence to the pharmaceutical and healthcare industries. We offer leading-edge market intelligence products and services that are integral to our clients' day-to-day operations, including product and portfolio management capabilities; commercial effectiveness innovations; managed care and consumer health offerings; and consulting and services solutions that improve productivity and the delivery of quality healthcare worldwide. Our information products are developed to meet client needs by using data secured from a worldwide network of suppliers in more than 100 countries. Our business lines are:

    Commercial Effectiveness to increase clients' productivity across end-to-end sales, marketing, promotional and performance management processes;

    Product and Portfolio Management to provide clients with insights into market measurement so they can optimize their product portfolio and strategies; and

    New Business Areas that support pharmaceutical client business initiatives in managed markets, consumer health, and pricing and market access, and that also serve payer and government audiences.

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

        IMS was incorporated under the laws of the State of Delaware in 1998 and we operate in more than 100 countries.

        Segment financial information, including financial information about domestic and foreign generated revenue, is set forth in Note 18 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

        Additional information regarding changes to and the development of our business is contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Quantitative and Qualitative Disclosures about Market Risk" and in the Notes to the Consolidated Financial Statements in Part II, Items 7, 7A and 8 of this Annual Report on Form 10-K.

IMS

        We provide critical business intelligence, including information, analytics and consulting services to the pharmaceutical and healthcare industries worldwide. Our market intelligence products and services serve our clients' needs which we group into three broad areas: commercial effectiveness, product and portfolio management, and new business areas. We provide information services covering more than 100 countries and maintain offices in 75 countries on six continents, with approximately 63% of our total 2009 revenue generated outside the U.S.

THE MERGER AGREEMENT

        On November 5, 2009, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with Healthcare Technology Holdings, Inc., a Delaware corporation ("Parent"), and Healthcare Technology Acquisition, Inc., a Delaware corporation and wholly owned subsidiary of Parent

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("Merger Sub"), providing for the merger of Merger Sub with and into IMS (the "Merger"), with IMS surviving the Merger as a wholly owned subsidiary of Parent. Parent and Merger Sub are affiliates of TPG Capital, L.P. ("TPG") and Canada Pension Plan Investment Board ("CPPIB").

        On February 8, 2010, a special meeting of our stockholders was held (the "Special Meeting"). At the Special Meeting our stockholders approved the proposal presented at the Special Meeting to adopt the Merger Agreement.

        At the effective time of the Merger, each share of our Common Stock issued and outstanding (except for certain shares held by Parent, us and certain of our subsidiaries, and shares held by stockholders who have properly demanded appraisal rights) will convert into the right to receive the per share Merger consideration of $22.00 in cash, without interest, less any applicable withholding taxes.

        The respective obligations of IMS, Parent and Merger Sub to consummate the Merger are subject to the satisfaction or waiver of certain customary conditions, including without limitation the absence of any law enacted, issued, enforced or entered by any court or governmental entity of competent jurisdiction that restrains, enjoins or otherwise prohibits the consummation of the Merger or otherwise makes consummation of the Merger illegal, the accuracy of representations and warranties (subject to customary materiality qualifiers) made by the parties to the Merger Agreement, and compliance, in all material respects, with the parties' respective covenants and agreements contained in the Merger Agreement at or prior to the date of the closing of the Merger. The consummation of the Merger is subject to certain other conditions which, as of the date of this Annual Report on Form 10-K, have been satisfied. Completion of the Merger is expected to occur by the end of the first quarter of 2010.

        We anticipate that the total funds needed to complete the Merger will be approximately $5,900,000. We expect this amount to be funded through a combination of:

    equity financing of approximately $2,800,000 to be provided or secured by investment funds affiliated with TPG and a wholly owned subsidiary of CPPIB, or other parties to whom they assign a portion of their commitments;

    a $2,000,000 senior secured term loan facility;

    the issuance of $1,000,000 in principal amount of senior unsecured notes (supplemented, if some or all of those notes cannot be sold at closing, by a senior unsecured term loan facility); and

    approximately $100,000 of cash on hand of IMS.

Parent has obtained equity and debt financing commitments. The funding under those commitments is subject to conditions, including conditions that do not relate directly to the Merger Agreement.

        Pursuant to a limited guarantee delivered by TPG Partners V, L.P., TPG Partners VI, L.P. and CPP Investment Board Private Holdings Inc. (collectively, the "Guarantors") in favor of IMS, dated November 5, 2009, the Guarantors have agreed to guarantee, severally but not jointly, the due and punctual performance and discharge of the obligations of Parent and Merger Sub under the Merger Agreement to pay a termination fee of $275,000 to us, as and when due, the direct expenses incurred by Parent or Merger Sub in connection with the arrangement of the financing of the Merger, and certain reimbursement obligations of Parent and Merger Sub with respect to IMS, which direct expenses and reimbursement obligations shall not in the aggregate exceed $6,000.

        The Merger Agreement contains certain termination rights for IMS and Parent. If the Merger Agreement is terminated, under certain specified circumstances in the Merger Agreement, we may be required to pay a termination fee equal to $115,000, in addition to reimbursing Parent for all out-of-pocket fees and expenses incurred by Parent or Merger Sub in connection with the Merger Agreement or the transactions contemplated therein up to $5,000. In the event we terminate the Merger Agreement due to certain actions or inactions by Parent, Parent must pay us a fee of $275,000,

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less the sum of amounts paid by Parent with respect to Parent's liability for certain reimbursement obligations and certain direct expenses incurred by Parent in connection with the financing up to $6,000 in the aggregate.

        For further information regarding the Merger Agreement, please refer to the Merger Agreement and the Definitive Proxy Statement on Schedule 14A filed with the U.S. Securities and Exchange Commission ("SEC") by IMS on December 29, 2009, which are incorporated by reference as exhibits to this Annual Report on Form 10-K.

        Factual disclosures about IMS contained in this Annual Report on Form 10-K or in our other public reports filed with the SEC may supplement, update or modify the factual disclosures about IMS contained in the Merger Agreement and the Definitive Proxy Statement on Schedule 14A filed with the SEC by IMS on December 29, 2009. The representations, warranties and covenants made in the Merger Agreement by IMS, Parent and Merger Sub were qualified and subject to important limitations agreed to by IMS, Parent and Merger Sub in connection with negotiating the terms of the Merger Agreement. In particular, the representations and warranties were negotiated with the principal purposes of establishing the circumstances in which a party to the Merger Agreement may have the right not to close the Merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the Merger Agreement, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC and in some cases were qualified by disclosures that were made by each party to the other, which disclosures were not reflected in the Merger Agreement. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this Annual Report on Form 10-K, may have changed since the date of the Merger Agreement and subsequent developments or new information qualifying a representation or warranty may have been included in this Annual Report on Form 10-K.

OUR PRODUCTS AND SERVICES

        COMMERCIAL EFFECTIVENESS OFFERINGS.    Our Commercial Effectiveness Offerings represented approximately 51% of our worldwide revenue in 2009. Using a total solutions approach, IMS Commercial Effectiveness drives smart business decisions, shapes sales management and marketing strategies, and supports sales processes. Offering actionable insight for markets worldwide, services within the Commercial Effectiveness business area provide in-depth intelligence that supports the planning, development and execution of critical business processes, including segmentation, sales force sizing and deployment, performance assessment and compensation, and territory management.

        Commercial Effectiveness Offerings provide our clients with valuable insight as to which physicians are seeing significant numbers of patients that are likely to benefit from a specific therapy. These innovative solutions facilitate the optimization of market share and revenue potential using sub-national prescription patterns, easy-to-use access tools, and an array of consulting services. These capabilities enable fast and effective communication of vital information that can accelerate meaningful innovation, public safety news alerts in the event of inappropriate prescribing and drug recalls, as well as the appropriate distribution of samples. IMS Commercial Effectiveness informs critical business decisions and optimizes overall performance. Our Commercial Effectiveness Offerings provide the in-depth information, market intelligence and analysis that enhance the efficient allocation of resources in a manner that reduces cost and saves valuable time.

        Our principal Commercial Effectiveness Offerings are as follows:

    Sales Territory Reporting.  Sales territory reporting is the principal sales management service that we offer to our pharmaceutical clients. Sales territory reports can be precisely tailored for each

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      client and measure the sales of a client's own products and those of competitors within specified geographical configurations. These reports are designed to provide marketing and sales managers with a reliable measurement of each salesperson's activity and effectiveness in his or her sales territory. Our sales territory reporting services cover more than 50 countries and are used by our customers for applications such as sales-force compensation, resource allocation, territory alignment, market analyses and distribution management. We make reports available to clients in a variety of frequencies, such as on a weekly, monthly and quarterly basis.

    Prescription Tracking Reporting.  Our prescription tracking reporting services are designed to monitor prescription activity and to track the movement of pharmaceutical products out of retail channels. Prescription tracking services are used by pharmaceutical companies to facilitate product marketing at the prescriber level. In the U.S., our Xponent® service monitors prescription activity from retail pharmacies, long-term care and mail service pharmacies using a patented statistical methodology to project the prescription activity of nearly 1.4 million individual prescribers on a weekly and monthly basis. The European Xponent database is built from prescription data collected from retail pharmacies and coding centers, which are linked to the geographical area in which the prescription was written. Xponent is available in over 10 countries. We also offer Early ViewTM, a sales optimization solution, providing weekly prescriber level activity, highlighting competitive prescribing trends for clients' key prescribers directly to clients' sales representatives electronically.

    Sales & Account Management Consulting and Services.  Our Sales & Account Management practice focuses on helping customers assess the effectiveness of their sales strategies and better design and deploy their sales forces. Using evidence-based research, our offerings in this practice help clients better segment their customer base, determine the optimal size and structure of their sales force based on that segmentation, and design call plans that optimally deploy the various sales resources across channels to better meet their customers' needs and increase their sales force effectiveness. Our Information Management practice helps clients organize, integrate, warehouse and analyze valuable data assets from multiple sources. We also provide Client Services within this business line. Along with product set-up, installation and implementation, Client Services provides customer training and a variety of ongoing, post-sales services.

    Promotional Audits and Promotion Management Consulting.  Our promotional audits contain national estimates of pharmaceutical promotional activities for individual branded products, including sales-force promotion and journal and mail advertising, based on information received from panels of physicians and from monitoring medical journals and direct mail. In the U.S., spending on direct-to-consumer advertising is also measured. IMS currently publishes promotional audit reports covering approximately 10 countries and over 90% of the promoted markets. This evidential information is used by our consulting teams to help clients evaluate and optimize the allocation and effectiveness of their promotional messages, mix and delivery around the globe.

    Launch and Brand Management Offerings.  We combine information, analytical tools and consulting and services to address client needs relevant to the management of each stage of the life cycle of their pharmaceutical brands. The areas covered include: brand planning, which helps clients with market assessment and forecasting, market segmentation and product positioning; promotion management, which helps clients measure, assess effectiveness and optimize promotion investment, channel mix and messaging; and, performance management, which helps clients measure diagnosis and optimization for new product launches and in-line brands.

        PRODUCT AND PORTFOLIO MANAGEMENT OFFERINGS.    Product and Portfolio Management Offerings represented approximately 31% of our worldwide revenue in 2009. IMS Product and Portfolio Management provides customers with the intelligence and tools to identify and optimize

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pharmaceutical product portfolios, including currently marketed products and the new product pipeline. Providing a comprehensive range of offerings, Product and Portfolio Management enables customers to evaluate, assess, understand, and implement strategies and tactics to improve bottom-line performance and set the course for the future. Integrating prescriptions, sales, disease/treatment, and industry intelligence, Product and Portfolio Management services provide a comprehensive picture of the worldwide market. From a national viewpoint down to regional and local level data, customers can complete a thorough market analysis, exploring all options to set the pace for brand leadership. Using in-depth business intelligence, analysis and forecasting, IMS offerings provide customers with the facts, interpretation and guidance to make the best portfolio optimization decisions.

        Our principal Product and Portfolio Management Offerings include the following:

    Pharmaceutical Audits.  These audits measure the sale of pharmaceutical products into pharmacies, supplemented in some countries by data collected from dispensing physicians, retail chains and discount stores. These audits contain data projected to national estimates, showing product sales by therapeutic class broken down by package size and dosage form. We publish pharmaceutical audits covering approximately 80 countries.

    Medical Audits.  These audits are based on information collected from panels of practicing office-based physicians and contain projected national estimates of the number of consultations for each diagnosed disease with details of the therapy prescribed. These audits also analyze the use physicians make of individual drugs by listing the diseases for which they are prescribed, the potential therapeutic action the physician is expecting, other drugs prescribed at the same time, and estimates of the total number of drugs used for each disease. We publish medical audits covering over 40 countries.

    Hospital Audits.  These audits contain data projected to national and regional estimates and show the sale of pharmaceutical products to hospitals by therapeutic class. Related reports provide audits of laboratory diagnostic supplies, hospital supplies and hospital records. We publish hospital audits covering approximately 50 countries.

    Prescription Audits.  These audits contain projected national estimates of the rate at which drugs move out of the pharmacy and into the hands of the consumer. They measure what is actually dispensed at the pharmacy. We publish prescription audits covering over 15 countries.

    MIDAS® Services.  MIDAS is an on-line multinational integrated data analysis tool that harnesses our worldwide databases and is used by the pharmaceutical industry to assess and analyze global pharmaceutical information and trends in multiple markets. Our MIDAS Quantum offering gives clients on-line access to pharmaceutical, medical, promotional and chemical data that we compile. Using MIDAS Quantum, our clients are able to view information from the national databases compiled by us and produce statistical reports in the format required by the client. MIDAS contains information covering more than 70 countries.

    LifeLink Services.  These services provide longitudinal analyses of anonymized prescription and/or medical records. Clients use them to understand detailed treatment patterns, disease progression, therapeutic switching and concomitant disease/treatments. We have LifeLink services in approximately 10 countries.

    Oncology Analyzer and Consulting.  Our Oncology Analyzer audit collects longitudinal patient information regarding the diagnosis and treatment in the critical area of Oncology across the major pharmaceutical markets. This information helps clients understand markets, treatment patterns and patient opportunities and is used by clients and by our consulting teams to help clients plan and execute successful market entry and life cycle management strategies for their Oncology franchises.

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    Forecasting Portfolio.  Our forecasting portfolio includes both syndicated and customizable, single or multi-country forecasts of 'demand' and/or market performance for individual brands or therapy categories. These offerings bring together extensive analytical and methodological expertise from our consulting teams with the rich global information assets of IMS to provide clients with accurate and long-term views of their portfolios.

    Other Product and Portfolio Management Reports.  These include Market Research Publications including the Pharmaceutical World ReviewTM; personal care reports, which estimate the sale of medical surgical device product purchases; and reports on bulk chemical shipments and molecules for research and development. We have developed, in certain countries, disease and treatment information at the patient level (in which information is not identifiable at the individual patient level) that gives participants in the healthcare industry new insights into the treatment of diseases. The availability, scope and frequency of the foregoing reports vary on a country-by-country basis.

    Consulting & Services.  Consultants in our Management Consulting group bring a unique mix to management of complex portfolios with deep expertise in key therapies and all aspects of pharmaceutical strategies. Product and Portfolio Strategy leverages the best cross functional understanding of scientific and commercial trends, deep competencies in decision theory and portfolio analysis, forecasting, competitive intelligence and industry thought leadership to help clients make strategic decisions. We help clients value difficult-to-value assets, gain clarity on a complex mix of decisions with a focused view of strategy, with emphasis on alternatives and risks in the face of uncertainty.

        NEW BUSINESS AREAS.    Offerings in New Business Areas represented approximately 18% of our worldwide revenue in 2009 and support pharmaceutical client business initiatives in managed markets, consumer health, and pricing and market access, and also serve payer and government audiences.

        The principal offerings under the New Business Areas business line include:

    Pricing and Market Access Consulting.  This portfolio of offerings has two main components, both of which provide clients with critical, relevant insights needed to maximize the lifetime value of their brands and leverage the deep and rich information assets of IMS and, in particular, our LifeLink information.

    Health Economics and Outcomes Research Offerings.  Our Health Economics and Outcomes Research Offerings help clients demonstrate the value of their medicines using our suite of evidence-based health economic evaluations and real world outcomes on a globally consistent basis. Clients can access our LifeLink information to support product evaluations and help them maximize market access.

    Pricing and Reimbursement Offerings.  Through our consulting teams, we help clients to achieve optimal reimbursed prices for new products, ensuring the shortest timeframe to market, which contribute to rapid and broad market penetration.

    Managed Markets.  Our Managed Markets Offerings provide an array of information and consulting insights to quantify the effects of managed markets on the pharmaceutical and healthcare industries. Managed Markets Offerings are used by clients to assist in evaluating the impact of managed markets on the pharmaceutical marketplace and in enhancing the performance of their products through better contracting strategies, formulary management and tracking, plan performance tracking and monitoring plan relationships with organizations, such as large medical groups, that may influence prescribing behavior. The types of reports include measurement of prescriptions at the plan level, formulary assessment and tracking, and tracking of prescription payment by type, such as cash, Medicaid or third-party payment. This service is

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      available both in the U.S. and Canada. In addition, to address emerging Medicare needs in the U.S., we make the following services available to our clients: strategic consulting, tactical consulting, rebate validation and performance evaluation. IMS also provides services that assist pharmaceutical clients with drug rebate data validation and adjudication of Managed Care and Medicare Part D contracts.

    Consumer Health.  Our consumer health services provide detailed product movement, market share and pricing information for over-the-counter, personal care, patient care and nutritional products. Consumer Health Offerings assist over-the-counter and pharmaceutical manufacturers in understanding consumer purchasing dynamics and promotional impact, examining and assessing segmentation and sales force management, strategic business planning, market opportunity and performance management. We publish reports on the global consumer health market and provide related services. PharmaTrend is our tracking service for consumer purchases of healthcare products.

    Payer Solutions.  Our Payer Solutions offerings help clients deliver more cost-effective, efficient business processes by helping them understand the actual practice and consumption of healthcare services. Our solution suite provides targeted intelligence in the following areas: Network Intelligence, Pharmacy Management, Medical Management, Members Service and Informatics.

    Government Solutions.  We provide clients—including federal, state, and local government or regulatory agencies in the U.S.—with data, analytics, tools and services that facilitate healthcare operations and strategic decision making.

OUR DATA SUPPLIERS

        Over the past five decades, we generally have developed and maintained strong relationships with our data suppliers in each market in which we operate. We have historical connections with many of the relevant trade associations and professional associations, including for example, in the U.S., where we have been designated as a database licensee by the American Medical Association (referred to in this document as AMA) for use and sublicensing of the AMA's physician database. As the supply of pharmaceutical data is critical to our business, we devote significant human and financial resources to our data collection efforts.

OUR CUSTOMERS

        Sales to traditional pharmaceutical companies accounted for approximately 85% of our revenue in 2009. All major pharmaceutical and biotechnology companies are our customers, and many of these companies subscribe to reports and services in several countries. Our customer base is broad in scope and enables us to avoid dependence on any single customer. None of our customers accounted for more than 7% of our gross revenues in 2009, 2008 or 2007.

OUR COMPETITION

        While no competitor provides the geographical reach or breadth of our services, we generally compete in the countries in which we operate with other information services companies, as well as with the in-house capabilities of our customers. Generally, competition has arisen on a country-by-country basis. In Europe, certain of our services compete with those offered by competitors such as Taylor Nelson and Cegedim in various European countries, in addition to competition from smaller niche competitors in various local markets. In the U.S., certain of our sales management services, including our sales territory and prescription tracking reports, compete with the offerings of various companies, particularly Wolters Kluwer. Also, various companies compete with us in the U.S. with respect to our market research services, including SDI. Our consulting and services businesses compete with various consulting firms around the world. Service, quality, coverage and speed of delivery of information services and products are the principal differentiators in our markets.

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OUR INTELLECTUAL PROPERTY

        We create, own and maintain a wide array of intellectual property assets which, in the aggregate, are of material importance to our business. Our intellectual property assets include patents and patent applications related to our innovations, products and services; trademarks related to our brands, products and services; copyrights in software and databases; trade secrets relating to data processing, statistical methodologies, editing and bridging techniques, business rules and other aspects of the IMS business; and other intellectual property rights and licenses of various kinds. We are licensed to use certain technology and other intellectual property rights owned and controlled by others, and similarly, other companies are licensed to use certain technology and other intellectual property rights owned and controlled by us.

        We seek to protect our intellectual property assets through patent, copyright, trade secret, trademark and other laws of the U.S. and other jurisdictions, and through confidentiality procedures and contractual provisions. A patent generally has a term of twenty years from the time the full patent application is filed. As IMS builds a patent portfolio over time, the terms of individual patents will vary. While patents can help maintain the competitive differentiation of certain products and services and maximize the return on research and development investments, no single patent is in itself essential to the IMS business as a whole or any of our principal business segments. Further, in order to replace expiring patents and licenses or replace obsolete intellectual property, we obtain new intellectual property through a combination of our ongoing research and development activities, acquisitions of other companies and licensing of intellectual property from third parties. We enter into confidentiality and invention assignment agreements with employees and contractors, and non-disclosure agreements with third parties with whom we conduct business, in order to secure ownership rights to, limit access to, and restrict disclosure of our proprietary information.

        The technology and other intellectual property rights owned and licensed by us are of importance to our business, although our management believes that our business, as a whole, is not dependent upon any one intellectual property or group of such properties. We consider the IMS trademark and related names, marks and logos to be of material importance to our business, and we have registered these trademarks in the U.S. and other jurisdictions and aggressively seek to protect them.

        The names of our products and services referred to in this document are trademarks, service marks, registered trademarks or registered service marks owned by or licensed to us.

OUR EMPLOYEES

        We had approximately 7,250 employees worldwide as of December 31, 2009. Almost all of these employees are full-time. None of our U.S. employees are represented by a union. In Belgium, France, Germany, Italy, the Netherlands and Spain, we have Works Councils, which are a legal requirement in those countries. We also have a European Works Council, which is a requirement under European Union laws. Management considers its relations with our employees to be good and to have been maintained in a normal and customary manner.

Available Information

        We make available free of charge on or through our Internet website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 ("Exchange Act"), as well as proxy statements, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Also posted on our website, and available in print upon the request of any shareholder to our Investor Relations Department, are our certificate of incorporation and by-laws, the charters for our Audit Committee, Human Resources Committee and Nominating and Governance Committee, our Corporate Governance Guidelines, our Policy on Business

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Conduct governing our directors, officers and employees, our Code of Ethics for Principal Executive Officer and Senior Financial Officers, our Guidelines for Determining Director Independence and our Policy and Procedures Governing Related-Person Transactions. Within the time period required by the SEC and the New York Stock Exchange ("NYSE"), we will post on our website any amendment to the Policy on Business Conduct or the Code of Ethics for Principal Executive Officer and Senior Financial Officers or any waiver of either such policy applicable to any of our senior financial officers, executive officers or directors. In addition, our website includes information concerning purchases and sales of our equity securities by our executive officers and directors, as well as disclosure relating to certain non-GAAP financial measures (as defined in the SEC's Regulation G) that we make public orally, telephonically, by webcast, by broadcast or similar means. Our Internet address is http://www.IMSHEALTH.com and the information described above can be found in the Company Information and the Investors sections of that website. Our Investor Relations Department can be contacted at IMS Health Incorporated, 901 Main Avenue, Norwalk, Connecticut 06851, Attn: Investor Relations: (203) 845-5200, e-mail: askir@imshealth.com.

Item 1A.    Risk Factors

        In addition to the other information included or incorporated by reference into this Annual Report on Form 10-K, including the matters addressed under the caption "Forward-Looking Statements," set forth below are some of the risks and uncertainties that, if they were to occur, could materially adversely affect our business or that could cause our actual results to differ materially from the results contemplated by the forward-looking statements contained in this report and other public statements we make.

Our data suppliers might restrict our use of or refuse to license data, which could lead to our inability to provide certain products or services.

        Our products and services incorporate data that we collect from third parties. These suppliers of data may increase restrictions on our use of such data, fail to adhere to our quality control standards or refuse altogether to license the data to us. For example, in 2002 certain of our data suppliers in Japan began withholding certain data from us. This interruption in data supply led us to discontinue one of our Japanese products and adversely affected our operating results. If the suppliers of a significant amount of data that we use for one or more of our products or services were to impose additional contractual restrictions on our use of or access to data, fail to adhere to our quality control standards, or refuse to provide data, now or in the future, our ability to provide products and services to our clients could be materially adversely impacted, which could result in decreased revenue, net income and earnings per share.

Laws restricting the use of information may restrict our product and service offerings.

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

    With respect to the New Hampshire law, the Federal District Court in Concord, New Hampshire ruled on April 30, 2007 that the law violated the First Amendment and was therefore unconstitutional and enjoined its enforcement. However, that decision was overturned by the U.S. Court of Appeals for the First Circuit, which declared the law constitutional. The appeals court vacated the lower court's injunction and the New Hampshire statute became effective on February 9, 2009. On March 27, 2009, we filed a petition for certiorari to the U.S. Supreme Court asking that the Supreme Court review the appeals court's decision in this matter. On

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      June 29, 2009, the Supreme Court announced that it would not hear the case. We have modified our offerings and believe we are operating in compliance with the New Hampshire law.

    With respect to the Maine law, the Federal District Court in Bangor, Maine issued a preliminary injunction on December 21, 2007, prohibiting enforcement of the Maine law. The Maine Attorney General has appealed the preliminary injunction ruling to the U.S. Court of Appeals for the First Circuit.

    With respect to the Vermont law, the Federal District Court in Brattleboro, Vermont held a full trial ending on August 1, 2008. On April 23, 2009 the court issued its decision upholding the Vermont law. We appealed the district court's decision to the U.S. Court of Appeals for the Second Circuit. The data restrictions in the Vermont law became effective on July 1, 2009. We have modified our offerings and believe we are operating in compliance with the Vermont law.

        These three states collectively represent approximately one percent of prescription activity in the U.S., so the potential financial impact of these laws on our business, financial condition and results of operations is not expected to be material. However, there have been a significant number of state legislative initiatives over the past several years that seek to impose similar restrictions on the commercial use of prescriber-identifiable information. During 2009, these initiatives were introduced in 23 states; all were unsuccessful. As in past years, we expect that these initiatives will be introduced or reintroduced in various states during 2010. We are unable to predict whether, in which states and in what form these initiatives will be introduced or reintroduced or whether the Federal government will seek to enact similar or more restrictive legislation or regulation of such information. In addition, while we will continue to seek to adapt our products and service offerings (including consulting and services offerings) to comply with the requirements of these laws, there can be no assurance that our efforts to adapt our offerings will be successful and provide the same financial contribution to us. There can also be no assurance that these kinds of legislative initiatives will not adversely affect our ability to generate or assemble data or to develop or market current or future offerings, which could, over time, result in a material adverse impact on our revenues, net income and earnings per share.

Data protection and privacy laws may restrict our current and future activities.

        Data protection and privacy laws affect our collection, use, storage and transfer of personally identifiable information both abroad and in the U.S. Compliance with such laws may require investment or may dictate that we not offer certain types of products and services. Failure to comply with such laws may result in, among other things, civil and criminal liability, negative publicity, data being blocked from use and liability under contractual warranties.

        In addition, there is an increasing public concern regarding data protection and privacy issues and the number of jurisdictions with data protection and privacy laws has been increasing. For example, as discussed under "—Laws restricting the use of information may restrict our product and service offerings," laws have been passed in Maine, New Hampshire and Vermont restricting the use of prescriber identifiable data. In addition, there have also been other legislative and regulatory initiatives in the U.S. and abroad in the area of access to medical data. These initiatives tend to seek to place restrictions on the use and disclosure of patient-identifiable information without consent and, in some cases, seek to extend restrictions to non-patient-identifiable information, e.g., prescriber identifiable information, or to the process of anonymizing data. There can be no assurance that these initiatives or future initiatives will not adversely affect our ability to generate or assemble data or to develop or market current or future products or services and therefore our revenues and net income.

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Hardware and software failures, delays in the operation of our computer and communications systems or the failure to implement system enhancements may harm our business.

        Our success depends on the efficient and uninterrupted operation of our computer and communications systems. A failure of our network or data gathering procedures could impede the processing of data, delivery of databases and services, client orders and day-to-day management of our business and could result in the corruption or loss of data. While many of our operations have appropriate disaster recovery plans in place, we currently do not have full backup facilities everywhere in the world to provide redundant network capacity in the event of a system failure. Despite any precautions we may take, damage from fire, floods, hurricanes, power loss, telecommunications failures, computer viruses, break-ins, sabotage, breaches of security, epidemics and similar events at our various computer facilities could result in interruptions in the flow of data to our servers and from our servers to our clients. In addition, any failure by our computer environment to provide our required data communications capacity could result in interruptions in our service. In the event of a delay in the delivery of data, we could be required to transfer our data collection operations to an alternative provider of server hosting services. Such a transfer could result in significant delays in our ability to deliver our products and services to our clients. Additionally, significant delays in the planned delivery of system enhancements, improvements and inadequate performance of the systems once they are completed could damage our reputation and harm our business. Finally, long-term disruptions in the infrastructure caused by events such as natural disasters, the outbreak of war, the escalation of hostilities, epidemics and acts of terrorism (particularly involving cities in which we have offices) could adversely affect our businesses. Although we carry property and business interruption insurance, our coverage may not be adequate to compensate us for all losses that may occur.

Consolidation in the industries in which our clients operate may reduce the volume of products and services purchased by consolidated clients following an acquisition or merger, leading to decreased earnings.

        Consolidation in the pharmaceutical industry could reduce the volume of our information products and services purchased by consolidated clients. When companies consolidate, overlapping products and services they previously purchased separately are usually now purchased only once by the combined entity, leading to contract compression and loss of revenue. While we have experienced success in mitigating the revenue impact of client consolidation, there can be no assurance as to the degree to which we will be able to continue to do so as consolidation continues.

Our business is subject to exchange rate fluctuations and our revenue, net income and financial position may suffer due to currency translations.

        We operate globally, deriving approximately 63% of our 2009 revenue from non-U.S. operations. As a result, fluctuations in the value of foreign currencies relative to the U.S. dollar increase the volatility of U.S. dollar denominated operating results. Emerging markets currencies tend to be considerably less stable than those in established markets, which may further contribute to volatility in our U.S. dollar-denominated operating results.

        As a result of devaluations and fluctuations in currency exchange rates or the imposition of limitations on conversion of foreign currencies into dollars, we are subject to currency translation exposure on the profits and financial position of our operations, in addition to economic exposure.

Our international operations present risks to our current businesses that could impede growth in the future.

        International operations are subject to various risks that could adversely affect our business, including:

    costs of customizing services for foreign clients;

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    reduced protection for intellectual property rights in some countries;

    the burdens of complying with a wide variety of foreign laws;

    exposure to local economic conditions; and

    exposure to local political conditions, including the risks of an outbreak of war, the escalation of hostilities, acts of terrorism and nationalization, expropriation, price controls or other restrictive government actions.

We may be unsuccessful in identifying acquisition candidates or evaluating the material risks involved in any acquisition.

        An important aspect of our business strategy in the past has been growth through acquisitions or joint ventures and we may continue to acquire or make investments in complementary businesses, technologies, services or products. There can be no assurance that we will be able to continue to identify and consummate acquisitions or joint ventures on satisfactory terms. Moreover, every acquisition and joint venture entails some degree of uncertainty and risk. For example, we may be unsuccessful in identifying and evaluating business, legal or financial risks as part of the due diligence process associated with a transaction. In addition, some acquisitions will have contingent consideration components that may require us to pay additional amounts in the future in relation to future performance results of the acquired business. If we do not properly assess these risks, or if we fail to realize the benefits from one or more acquisitions, our business, results of operations and financial condition could be adversely affected.

We may be unsuccessful in integrating any acquired operations with our existing business.

        We may experience difficulties in integrating operations acquired from other companies. These difficulties include the diversion of management's attention from other business concerns and the potential loss of key employees of the acquired operations. Acquisitions also frequently involve significant costs, often related to integrating information technology, accounting and management services and rationalizing personnel levels. If we experience difficulties in integrating one or more acquisitions, our business, results of operations and financial condition could be adversely affected.

Changes in tax laws or their application may adversely affect our reported results.

        We operate in more than 100 countries worldwide and our earnings are subject to taxation in many differing jurisdictions and at differing rates. We seek to organize our affairs in a tax efficient manner, taking account of the jurisdictions in which we operate. Tax laws that apply to our business may be amended by the relevant authorities as a result of changes in fiscal circumstances or priorities. Such amendments, or their application to our business, may adversely affect our reported results.

We are involved in tax related matters that could have a material effect on us.

        We (and our predecessors) have entered, and we continue to enter, into global tax planning initiatives in the normal course of business. These activities are subject to review by applicable tax authorities and courts. As a result of the review process, uncertainties exist and it is possible that some of these matters could be resolved adversely to us, including those tax related matters described in Part I, Item 3 of this Annual Report on Form 10-K. Moreover, there can be no assurance that we will be able to maintain our effective tax rate.

We are, and may become, involved in litigation that could harm the value of our business.

        In the normal course of our business, we are involved in lawsuits, claims, audits and investigations, such as those described in Part I, Item 3 of this Annual Report on Form 10-K. The outcome of these

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matters could have a material adverse effect on our business, results of operation or financial condition. In addition, we may become subject to future lawsuits, claims, audits and investigations that could result in substantial costs and divert our attention and resources.

Significant technological changes could render our products and services obsolete. We may not be able to develop the technology necessary for our business, or to do so efficiently.

        We operate in businesses that require sophisticated data collection and processing systems and software and other technology. Some of the technologies supporting the industries we serve are changing rapidly and we must continue to develop cost-effective technologies for data collection and processing to accommodate such changes. We also must continue to deliver data to our clients in forms that are easy to use while simultaneously providing clear answers to complex questions. There can be no guarantee that we will be able to develop new technologies for data collection, processing and delivery or that we will be able to do so as quickly or cost-effectively as our competition. Significant technological change could render our products and services obsolete.

        Moreover, the introduction of new products and services embodying new technologies and the emergence of new industry standards could render existing products and services obsolete. Our continued success will depend on our ability to adapt to changing technologies, manage and process ever-increasing amounts of data and information and improve the performance, features and reliability of our products and services in response to changing client and industry demands. We may experience difficulties that could delay or prevent the successful design, development, testing, introduction or marketing of our products and services. New products and services, or enhancements to existing products and services, may not adequately meet the requirements of current and prospective clients or achieve any degree of significant market acceptance.

Government imposed price restrictions on pharmaceutical companies could reduce demand for our products and services.

        A number of countries in which we operate have enacted regulations limiting the prices pharmaceutical companies may charge for drugs. We believe that such cost containment measures will cause pharmaceutical companies to seek more effective means of marketing their products (which will benefit us in the medium and long-term). However, such governmental regulation may cause pharmaceutical companies to revise or reduce their marketing programs in the near term, which may in turn reduce the demand for certain of our products and services. This could result in decreased revenue, net income and earnings per share.

The success of our business will largely depend on the performance of the pharmaceutical and healthcare industries.

        The vast majority of our revenues are generated from sales to the pharmaceutical and healthcare industries. To the extent the businesses we serve, especially our clients in the pharmaceutical and healthcare industries, are subject to financial pressures of, for example, price controls, increased costs or reduced demand for their products, the demand for our products and services, or the price our clients are willing to pay for those products and services, may decline.

Our success will depend on our ability to protect our intellectual property rights.

        The success of our businesses will continue to depend, in part, on:

    obtaining patent protection for our technology, products and services;

    defending our patents, copyrights and other intellectual property;

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    preserving our trade secrets and maintaining the security of our know-how; and

    operating without infringing upon patents and proprietary rights held by third parties.

        We rely on a combination of contractual provisions, confidentiality procedures and patent, copyright, trademark, service mark and trade secret laws to protect the proprietary aspects of our products, services, databases and technologies. There can be no assurance that these protections will be adequate, or that we will adequately employ each and every one of these protections at all times, to provide sufficient protection in the future to prevent the use or misappropriation of our data, technology and other products and services. Further, our competitors may develop products, services, databases or technologies that are substantially equivalent or superior to our products, services, databases or technologies. Although we believe that our products, services, databases, technologies and related proprietary rights do not infringe upon the proprietary rights of third parties, there can be no assurance that third parties will not assert infringement claims against us in the future. Litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets and to determine the validity and scope of our proprietary rights. For example, we have been involved in litigation with Insight Health GmbH & Co. KG in Germany in order to protect our proprietary mapping software. In addition, the growing need for global data, along with increased competition and technological advances, puts increasing pressure on us to share our intellectual property for client applications. Any future litigation, regardless of outcome, could result in substantial expense and diversion of resources with no assurance of success and could seriously harm our business, financial condition and operating results.

If we are unable to attract, retain and motivate employees, we will not be able to compete effectively and will not be able to expand our business.

        Our success and ability to grow are dependent, in part, on our ability to hire, retain and motivate sufficient numbers of talented people, with the increasingly diverse skills needed to serve clients and expand our business, in many locations around the world. Competition for highly qualified technical and managerial, and particularly consulting personnel is intense. Recruiting, training and retention costs and benefits place significant demands on our resources. The inability to attract qualified employees in sufficient numbers to meet particular demands or the loss of a significant number of our employees could have a serious negative effect on us, including our ability to obtain and successfully complete important client engagements and thus maintain or increase our revenues.

Our businesses are subject to significant or potential competition that is likely to intensify in the future.

        Our future growth and success will be dependent on our ability to successfully compete with other companies that provide similar services in the same markets, some of which may have financial, marketing, technical and other advantages.

Disruptions in commerce could adversely affect our business.

        Commerce could be disrupted by various political, economic, world health or other conditions. Examples of such disruptions that could adversely affect our business include:

    terrorist activity, the threat of such activity, and responses to and results of such activity and threats, including but not limited to effects, domestically and/or internationally, on us, our personnel and facilities, our customers and suppliers, financial markets and general economic conditions;

    an outbreak of SARS, avian influenza (Bird Flu), the H1N1 virus or other epidemic, the fear of such an epidemic, and responses to and results of such an epidemic or fear thereof, including

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      but not limited to effects, domestically and/or internationally, on us, our personnel and facilities, our customers and suppliers, financial markets and general economic conditions; and

    credit market disruptions, the threat of such disruptions, and responses to and results of such disruptions and threats, including but not limited to effects, domestically and/or internationally, on us, our customers and suppliers, financial markets and general economic conditions.

        If such disruptions result in cancellations of or reductions in customer orders or contribute to a general decrease in economic activity, or directly impact our marketing, collection, production, delivery, financial and logistics functions, our results of operations and financial condition could be materially adversely affected.

The Merger is subject to satisfaction or waiver of certain customary conditions.

        Completion of the Merger is subject to the satisfaction or waiver of certain customary conditions, including without limitation the absence of any law enacted, issued, enforced or entered by any court or governmental entity of competent jurisdiction that restrains, enjoins or otherwise prohibits the consummation of the Merger or otherwise makes consummation of the Merger illegal, the accuracy of representations and warranties (subject to customary materiality qualifiers) made by the parties to the Merger Agreement, and compliance, in all material respects, with the parties' respective covenants and agreements contained in the Merger Agreement at or prior to the date of the closing of the Merger. Completion of the Merger is expected to occur by the end of the first quarter of 2010. However, no assurances can be given that the transaction contemplated by the Merger Agreement will be consummated or, if not consummated, that we will enter into a comparable or superior transaction with another party.

The Merger may not be completed if sufficient financing is not funded.

        Parent has obtained equity and debt financing commitments. The funding under those commitments is subject to conditions, including conditions that do not relate directly to the Merger Agreement. We believe the committed amounts will be sufficient to complete the transaction, but cannot provide any assurance to that effect. Those amounts might be insufficient if, among other things, a substantial change in the dollar-yen exchange rate substantially increases the cost of refinancing our yen denominated debt or we have substantially less cash on hand (net of any applicable repatriation taxes) or substantially less net proceeds from the equity and debt financings than we currently expect.

        Although the debt financing described herein is not subject to due diligence or a typical "market out" provision, which allows lenders not to fund their commitments if certain conditions in the financial markets prevail, there is still a risk that such financing may not be funded when required. As of the date of this Annual Report on Form 10-K, no alternative financing arrangements or alternative financing plans have been made in the event the debt financing described herein is not available as anticipated. Even though obtaining the equity or debt financing is not a condition to the completion of the Merger, the failure of Parent and Merger Sub to obtain sufficient financing is likely to result in the failure of the Merger to be completed. In that case, Parent may be obligated to pay us a fee of $275,000. That obligation is severally guaranteed by the Guarantors.

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Our future business and financial position may be adversely affected if the Merger is not completed.

        If the Merger Agreement is terminated and the Merger is not consummated, we will have incurred substantial expenses without realizing the expected benefits of the Merger. In addition, we may also be subject to additional risks including, without limitation:

    depending on the reasons for termination of the Merger Agreement, the requirement that we pay a termination fee equal to $115,000 in addition to the payment to Parent of all out-of-pocket fees and expenses incurred by Parent or Merger Sub in connection with the Merger Agreement or the transactions contemplated therein up to $5,000;

    substantial costs related to the Merger, such as legal, accounting and financial advisory fees, must be paid regardless of whether the Merger is completed;

    potential disruption to the current plan, operations, businesses and distraction of our workforce and management team; and

    potential difficulties in employee retention as a result of termination of the proposed Merger.

Failure to complete the Merger could adversely affect our stock price.

        If the Merger is not completed for any reason, the price of our Common Stock may decline significantly to the extent that the market price of our Common Stock reflects positive market assumptions that the Merger will be completed.

        For further information regarding the Merger Agreement, please refer to the Merger Agreement and the Definitive Proxy Statement on Schedule 14A filed with the SEC by us on December 29, 2009, which are incorporated by reference as exhibits to this Annual Report on Form 10-K.

Item 1B.    Unresolved Staff Comments

        There are no unresolved written comments that were received from the SEC staff 180 days or more before the end of our 2009 fiscal year.

Item 2.    Properties

        Our executive offices are located at 901 Main Avenue, Norwalk, Connecticut in a leased property (approximately 41,000 square feet).

        Our property is geographically distributed to meet our sales and operating requirements worldwide. Our properties and equipment are generally considered to be both suitable and adequate to meet current operating requirements and virtually all space is being utilized.

        Our owned properties located within the U.S. include two facilities. These properties are located in Plymouth Meeting (approximately 212,000 square feet) and West Norriton, Pennsylvania (approximately 17,000 square feet).

        Our active owned properties located outside the U.S. include: one property in each of Buenos Aires, Argentina (approximately 12,000 square feet); Santiago, Chile (approximately 4,000 square feet); Caracas, Venezuela (two properties totaling approximately 12,000 square feet); and London (approximately 102,000 square feet).

        Our operations are also conducted from 18 leased offices located throughout the U.S. and 98 leased offices in non-U.S. locations.

        We own or lease a variety of computers and other equipment for our operational needs. We continue to upgrade and expand our computers and related equipment in order to increase efficiency, enhance reliability and provide the necessary base for business expansion.

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Item 3.    Legal Proceedings

        We are involved in legal and tax proceedings, claims and litigation arising in the ordinary course of business. We periodically assess our liabilities and contingencies in connection with these matters based upon the latest information available. For those matters where we currently believe it is probable that we will incur a loss and that the probable loss or range of loss can be reasonably estimated, we have recorded reserves in the Consolidated Financial Statements based on our best estimates of such loss. In other instances, because of the uncertainties related to either the probable outcome or the amount or range of loss, we are unable to make a reasonable estimate of a liability, if any. However, even in many instances where we have recorded a reserve, we are unable to predict with certainty the final outcome of the matter or whether resolution of the matter will materially affect our results of operations, financial position or cash flows. As additional information becomes available, we adjust our assessment and estimates of such liabilities accordingly.

        We routinely enter into agreements with our suppliers to acquire data and with our customers to sell data, all in the normal course of business. In these agreements, we sometimes agree to indemnify and hold harmless the other party for any damages such other party may suffer as a result of potential intellectual property infringement and other claims related to the use of the data. These indemnities typically have terms of approximately two years. We have not accrued a liability with respect to these matters, as the exposure is considered remote.

        Based on our review of the latest information available, we believe our ultimate liability in connection with pending tax and legal proceedings, claims and litigation will not have a material effect on our results of operations, cash flows or financial position, with the possible exception of the matters described below.

D&B LEGACY AND RELATED TAX MATTERS

        SHARING DISPUTES.    In 1996, the company then known as The Dun & Bradstreet Corporation ("D&B") and now known as R.H. Donnelley Corporation ("Donnelley") separated into three public companies by spinning off ACNielsen Corporation ("ACNielsen") and the company then known as Cognizant Corporation ("Cognizant") (the "1996 Spin-Off"). Cognizant is now known as Nielsen Media Research, Inc., a subsidiary of The Nielsen Company, formerly known as VNU N.V. ("NMR"). The agreements effecting the 1996 Spin-Off allocated tax-related liability with respect to certain prior business transactions between D&B and Cognizant. The D&B portion of such liability is now shared among Donnelley and certain of its former affiliates (the "Donnelley Parties"), and the Cognizant portion of such liability is shared between NMR and us pursuant to the agreements effecting Cognizant's spin-off of us in 1998 (the "1998 Spin-Off").

        The underlying tax controversies with the Internal Revenue Service ("IRS") have substantially all been resolved and we paid to the IRS the amounts that we believed were due and owing. In the first quarter of 2006, Donnelley indicated that it disputed the amounts contributed by us toward the resolution of these matters based on the Donnelley Parties' interpretation of the allocation of liability under the 1996 Spin-Off agreements. In August 2006, the Donnelley Parties commenced arbitration regarding one of these disputes (referred to herein as the "Dutch Partnership Dispute"). The Dutch Partnership Dispute was resolved during the third quarter of 2008 when the parties consented to the entry of a consent award by the arbitration panel. Pursuant to the terms of the consent award, in the third quarter of 2008, we made a payment of $4,600 ($3,100 net of tax benefit) and an additional interest and cost payment of $2,600 ($1,700 net of tax benefit) to the Donnelley Parties. The remaining disputes were resolved during the second quarter of 2009 by agreement among the parties. Pursuant to the 2009 settlement agreement, we made a payment of $10,750 ($8,000 net of tax benefit) to the Donnelley Parties in full satisfaction of our liability with respect to the remaining disputes.

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        THE PARTNERSHIP (TAX YEAR 1997).    During the fourth quarter of 2008, we entered into a final agreement with the IRS in which the IRS disallowed certain items of partnership expense for tax year 1997 with respect to a partnership now substantially owned by us (the "Partnership"). During 1997, the Partnership was substantially owned by Cognizant, but liability for this matter was allocated to us pursuant to the agreements effecting the 1998 Spin-Off. Pursuant to the settlement, during the second quarter of 2009, we paid $20,400 (tax and interest, net of tax benefit) to the IRS in full satisfaction of our liability with respect to the Partnership for tax year 1997.

        In addition to these matters, we and our predecessors have entered, and we continue to enter, into global tax planning initiatives in the normal course of our businesses. These activities are subject to review by applicable tax authorities. As a result of the review process, uncertainties exist and it is possible that some of these matters could be resolved adversely to us.

LITIGATION RELATING TO THE MERGER

        As previously disclosed in more detail in the Definitive Proxy Statement on Schedule 14A filed with the SEC by us on December 29, 2009, in connection with the Merger, between November 6, 2009 and November 10, 2009 three putative stockholder class action lawsuits were filed in the Delaware Court of Chancery and two in the Superior Court of Connecticut, Judicial District of Stamford-Norwalk. These lawsuits generally alleged breaches of fiduciary duty by our directors in connection with the Merger.

        On December 2, 2009, the three putative shareholder class action lawsuits filed in Delaware were consolidated into a single action, captioned In re IMS Health Inc. Shareholder Litigation, C.A. No. 5057-CC (the "Delaware Action"). On January 14, 2010, the plaintiffs in the Delaware Action filed a Notice and Order of Voluntary Dismissal of all their claims, without prejudice, in which they represented that no compensation in any form has passed directly or indirectly from defendants to plaintiffs or plaintiffs' attorneys and that no promise to give any such compensation has been made. The Court of Chancery granted the dismissal on January 15, 2010.

        One of the two putative shareholder class action lawsuits filed in Connecticut, styled Trust for the Benefit of Sylvia B. Piven v. IMS Health Incorporated, et al., CV09-5013110-S, was filed on November 6, 2009, and the other, styled John Felhaber v. David R. Carlucci, et al., CV09-5013139-S, was filed on November 10, 2009. On December 8, 2009, plaintiff Felhaber filed an amended complaint asserting, among other things, that our directors had breached their duty of disclosure in the Preliminary Proxy Statement on Schedule 14A filed with the SEC by us on November 25, 2009. On December 18, 2009, our director defendants filed motions to dismiss for failure to properly effect service, and on December 21, 2009 we filed motions to strike the Piven complaint and the Felhaber amended complaint filed in the Superior Court of Connecticut. On January 5, 2010, plaintiff Felhaber filed an application for temporary injunction seeking, among other things, disclosure-based relief in advance of the February 8, 2010 Special Meeting of our stockholders, and on January 11, 2010, we and our directors filed an objection to the application. During a January 13, 2010 hearing before the Superior Court of Connecticut, our director defendants withdrew their motions to dismiss.

        On January 27, 2010, we entered into a memorandum of understanding with the plaintiffs regarding the settlement of the two putative stockholder class action lawsuits filed in the Superior Court of Connecticut, Judicial District of Stamford-Norwalk. We believe that no further supplemental disclosure is required under applicable laws; however, to avoid the risk of the putative stockholder class actions delaying or adversely affecting the Merger and to minimize the expense of defending such actions, we have agreed, pursuant to the terms of the proposed settlement, to make certain supplemental disclosures related to the proposed Merger. Subject to completion of certain confirmatory discovery by counsel to the plaintiffs, the memorandum of understanding contemplates that the parties will enter into a stipulation of settlement. The stipulation of settlement will be subject to customary

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conditions, including court approval following notice to our stockholders. In the event that the parties enter into a stipulation of settlement, a hearing will be scheduled at which the Superior Court will consider the fairness, reasonableness, and adequacy of the settlement. If the settlement is finally approved by the court, it will resolve and release all claims in all actions that were or could have been brought challenging any aspect of the proposed Merger, the Merger Agreement, and any disclosure made in connection therewith (but excluding claims for appraisal under Section 262 of the Delaware General Corporation Law), pursuant to terms that will be disclosed to stockholders prior to final approval of the settlement. In addition, in connection with the settlement, the parties contemplate that plaintiffs' counsel will file a petition in the Superior Court for an award of attorneys' fees and expenses to be paid by us or our successor, which the defendants may oppose. We or our successor shall pay or cause to be paid those attorneys' fees and expenses awarded by the Court. There can be no assurance that the parties will ultimately enter into a stipulation of settlement or that the Superior Court will approve the settlement even if the parties were to enter into such stipulation. In such event, the proposed settlement as contemplated by the memorandum of understanding may be terminated.

IMS HEALTH GOVERNMENT SOLUTIONS VOLUNTARY DISCLOSURE PROGRAM PARTICIPATION

        Our wholly-owned subsidiary, IMS Government Solutions Inc., is primarily engaged in providing services and products under contracts with the U.S. government. U.S. government contracts are subject to extensive legal and regulatory requirements and, from time to time, agencies of the U.S. government have the ability to investigate whether contractors' operations are being conducted in accordance with such requirements. U.S. government investigations, whether relating to these contracts or conducted for other reasons, could result in administrative, civil or criminal liabilities, including repayments, fines or penalties being imposed on us, or could lead to suspension or debarment from future U.S. government contracting. U.S. government investigations often take years to complete and may result in no adverse action against us.

        IMS Government Solutions discovered potential noncompliance with various contract clauses and requirements under its General Services Administration Contract which was awarded in 2002 to its predecessor company, Synchronous Knowledge Inc. (Synchronous Knowledge Inc. was acquired by IMS in May 2005). Upon discovery of the potential noncompliance, we began remediation efforts, promptly disclosed the potential noncompliance to the U.S. government, and were accepted into the Department of Defense Voluntary Disclosure Program. We filed our Voluntary Disclosure Program Report ("Disclosure Report") on August 29, 2008. Based on our findings as disclosed in the Disclosure Report, we recorded a reserve of approximately $3,748 for this matter in the third quarter of 2008. We are currently unable to determine the outcome of this matter pending the resolution of the Voluntary Disclosure Program process and our ultimate liability arising from this matter could exceed our current reserve.

Item 4.    Submission of Matters to a Vote of Security Holders

        There were no matters submitted to a vote of security holders during the fourth quarter of our fiscal year ended December 31, 2009.

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PART II

Item 5.    Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

        The principal market on which our Common Stock is traded is the NYSE. Information relating to the high and low sales prices per share of our Common Stock for each full quarterly period during 2009 and 2008 is set forth under the heading "IMS Health Common Stock Information" in Part II, Item 7 of this Annual Report on Form 10-K. As of February 12, 2010, there were 3,424 holders of record of our Common Stock.

        Information relating to our payment of dividends during 2009 and 2008 is set forth under the heading "Dividends" in Part II, Item 7 of this Annual Report on Form 10-K.

        The following table provides information about our purchases during the quarter ended December 31, 2009 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act.

Period
  Total Number
of Shares
Purchased
  Average Price
Paid per Share
  Total Number of
Shares Purchased
Under Publicly
Announced
Programs
  Maximum
Number of Shares
that May Yet Be
Purchased Under
the Programs(1)
 

October 1 – 31, 2009

                9,505,300  

November 1 – 30, 2009

                9,505,300  

December 1 – 31, 2009

                9,505,300  
                   

Total

                9,505,300  
                   

(1)
In December 2007, the Board of Directors authorized a stock repurchase program to buy up to 20,000,000 shares. As of December 31, 2009, 9,505,300 shares remained available for repurchase under the December 2007 program. Unless terminated earlier by resolution of our Board of Directors, this program will expire when we have repurchased all shares authorized for repurchase thereunder.

        Information relating to compensation plans under which our equity securities are authorized for issuance is set forth in Part III, Item 12 of this Annual Report on Form 10-K.

        The following graph is a comparison of the five-year cumulative return of our common stock, the Standard & Poor's 500 Index (the "S&P 500 Index"), and the Standard & Poor's Pharmaceuticals Index (the "S&P Pharmaceuticals Index"), a peer group index. The graph assumes that $100 was invested on December 31, 2004 in our common stock, the S&P Index and the S&P 500 Pharmaceutical Index and that all dividends were reinvested without the payment of any commissions. There can be no assurance that the performance of our common stock will continue in line with the same or similar trends depicted in the graph below.

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PERFORMANCE GRAPH

GRAPHIC

 
  12/31/2004   12/30/2005   12/29/2006   12/31/2007   12/31/2008   12/31/2009   Compound
Annual
Return Rate
 

IMS HEALTH INCORPORATED

  $ 100.00   $ 107.74   $ 119.38   $ 100.61   $ 66.67   $ 93.40     (1.4 )%

S&P 500 Pharmaceutical

    100.00     96.65     112.00     117.18     95.93     113.83     2.6 %

S&P 500

    100.00     104.92     121.53     128.16     80.86     102.26     0.4 %

        The cumulative total shareholder return graph and accompanying information set forth above is being furnished and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of such section. The cumulative total shareholder return graph and accompanying information set forth above shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.

Item 6.    Selected Financial Data

        The Selected Financial Data table is set forth in Part II, Item 8 of this Annual Report on Form 10-K.

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

    Dollars and shares in thousands, except per share data.

        This discussion and analysis should be read in conjunction with the accompanying Consolidated Financial Statements and related notes.

Executive Summary

OUR BUSINESS

        IMS Health Incorporated ("IMS," "we," "us" or "our") is the leading global provider of market intelligence to the pharmaceutical and healthcare industries. We offer leading-edge market intelligence products and services that are integral to our clients' day-to-day operations, including product and portfolio management capabilities; commercial effectiveness innovations; managed care and consumer health offerings; and consulting and services solutions that improve productivity and the delivery of quality healthcare worldwide. Our information products are developed to meet client needs by using data secured from a worldwide network of suppliers in more than 100 countries. Our business lines are:

    Commercial Effectiveness to increase clients' productivity across end-to-end sales, marketing, promotional and performance management processes;

    Product and Portfolio Management to provide clients with insights into market measurement so they can optimize their product portfolio and strategies; and

    New Business Areas that support pharmaceutical client business initiatives in managed markets, consumer health, and pricing and market access, and that also serve payer and government audiences.

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

        We operate in more than 100 countries.

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

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

THE MERGER AGREEMENT

        On November 5, 2009, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with Healthcare Technology Holdings, Inc., a Delaware corporation ("Parent"), and Healthcare Technology Acquisition, Inc., a Delaware corporation and wholly owned subsidiary of Parent ("Merger Sub"), providing for the merger of Merger Sub with and into IMS (the "Merger"), with IMS surviving the Merger as a wholly owned subsidiary of Parent. Parent and Merger Sub are affiliates of TPG Capital, L.P. ("TPG") and Canada Pension Plan Investment Board ("CPPIB").

        On February 8, 2010, a special meeting of our stockholders was held (the "Special Meeting"). At the Special Meeting our stockholders approved the proposal presented at the Special Meeting to adopt the Merger Agreement.

        At the effective time of the Merger, each share of our Common Stock issued and outstanding (except for certain shares held by Parent, us and certain of our subsidiaries, and shares held by stockholders who have properly demanded appraisal rights) will convert into the right to receive the per share Merger consideration of $22.00 in cash, without interest, less any applicable withholding taxes.

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        The respective obligations of IMS, Parent and Merger Sub to consummate the Merger are subject to the satisfaction or waiver of certain customary conditions, including without limitation the absence of any law enacted, issued, enforced or entered by any court or governmental entity of competent jurisdiction that restrains, enjoins or otherwise prohibits the consummation of the Merger or otherwise makes consummation of the Merger illegal, the accuracy of representations and warranties (subject to customary materiality qualifiers) made by the parties to the Merger Agreement, and compliance, in all material respects, with the parties' respective covenants and agreements contained in the Merger Agreement at or prior to the date of the closing of the Merger. The consummation of the Merger is subject to certain other conditions which, as of the date of this Annual Report on Form 10-K, have been satisfied. Completion of the Merger is expected to occur by the end of the first quarter of 2010.

        We anticipate that the total funds needed to complete the Merger will be approximately $5,900,000. We expect this amount to be funded through a combination of:

    equity financing of approximately $2,800,000 to be provided or secured by investment funds affiliated with TPG and a wholly owned subsidiary of CPPIB, or other parties to whom they assign a portion of their commitments;

    a $2,000,000 senior secured term loan facility;

    the issuance of $1,000,000 in principal amount of senior unsecured notes (supplemented, if some or all of those notes cannot be sold at closing, by a senior unsecured term loan facility); and

    approximately $100,000 of cash on hand of IMS.

Parent has obtained equity and debt financing commitments. The funding under those commitments is subject to conditions, including conditions that do not relate directly to the Merger Agreement.

        Pursuant to a limited guarantee delivered by TPG Partners V, L.P., TPG Partners VI, L.P. and CPP Investment Board Private Holdings Inc. (collectively, the "Guarantors") in favor of IMS, dated November 5, 2009, the Guarantors have agreed to guarantee, severally but not jointly, the due and punctual performance and discharge of the obligations of Parent and Merger Sub under the Merger Agreement to pay a termination fee of $275,000 to us, as and when due, the direct expenses incurred by Parent or Merger Sub in connection with the arrangement of the financing of the Merger, and certain reimbursement obligations of Parent and Merger Sub with respect to IMS, which direct expenses and reimbursement obligations shall not in the aggregate exceed $6,000.

        The Merger Agreement contains certain termination rights for IMS and Parent. If the Merger Agreement is terminated, under certain specified circumstances in the Merger Agreement, we may be required to pay a termination fee equal to $115,000, in addition to reimbursing Parent for all out-of-pocket fees and expenses incurred by Parent or Merger Sub in connection with the Merger Agreement or the transactions contemplated therein up to $5,000. In the event we terminate the Merger Agreement due to certain actions or inactions by Parent, Parent must pay us a fee of $275,000, less the sum of amounts paid by Parent with respect to Parent's liability for certain reimbursement obligations and certain direct expenses incurred by Parent in connection with the financing up to $6,000 in the aggregate.

        For further information regarding the Merger Agreement, please refer to the Merger Agreement and the Definitive Proxy Statement on Schedule 14A filed with the SEC by IMS on December 29, 2009, which are incorporated by reference as exhibits to this Annual Report on Form 10-K.

PERFORMANCE OVERVIEW

        Operating revenue declined 6.0% to $2,189,745 in 2009 compared to $2,329,528 in 2008. The decrease in our operating revenue resulted from revenue declines in all three of our business lines. Our operating income decreased 45.6% to $270,888 in 2009 compared to $498,305 in 2008. The decrease in

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operating income was a result of decreased operating revenue, an increase of $134,877 in severance, impairment and other charges and a related $4,190 non-cash charge for accelerated depreciation and $11,000 of merger costs, partially offset by decreases in our operating costs, as discussed below. Our net income attributable to IMS was $258,455 in 2009, a decrease of $52,795 as compared to $311,250 in 2008, due to the decrease in operating income, partially offset by a decrease in the Non-Operating Loss, net items discussed below and certain tax items as discussed in Note 12 of the Consolidated Financial Statements. Our diluted earnings per share of Common Stock decreased to $1.42 for 2009 as compared to $1.70 for 2008.

Results of Operations

        RECLASSIFICATIONS.    Certain prior-year amounts have been reclassified to conform to the 2009 presentation.

        REFERENCES TO CONSTANT DOLLAR RESULTS AND RESULTS EXCLUDING THE EFFECT OF FOREIGN CURRENCY TRANSLATIONS.    We report results in U.S. dollars, but we do business on a global basis. Exchange rate fluctuations affect the rate at which we translate foreign revenues and expenses into U.S. dollars and may have significant effects on our results. In order to illustrate these effects, the discussion of our business in this report sometimes describes the magnitude of changes in constant dollar terms or results excluding the effect of foreign currency translations. We believe this information facilitates a comparative view of our business. See "How Exchange Rates Affect Our Results" and the discussion of "Market Risk" in the Management's Discussion and Analysis of Financial Condition and Results of Operations section below for a more complete discussion regarding the impact of foreign currency translation on our business.

        REFERENCES TO SELLING AND ADMINISTRATIVE EXPENSES, OPERATING INCOME AND OPERATING MARGIN EXCLUDING SEVERANCE, IMPAIRMENT AND OTHER CHARGES, NON-CASH CHARGES FOR ACCELERATED DEPRECIATION AND AMORTIZATION, MERGER COSTS AND THE GOVERNMENT SOLUTIONS CHARGE.    We discuss below what our selling and administrative expenses, operating income and operating margin for the years ended December 31, 2009, 2008 and 2007 would have been had we not recorded severance, impairment and other charges, non-cash charges for accelerated depreciation and amortization, merger costs and the Government Solutions charge. Because we did not record similar charges in the prior periods, we believe providing these non-GAAP measures is useful to investors as it facilitates comparisons across the periods presented and more clearly indicates trends. Management uses these non-GAAP measures in its global decision-making,

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including developing budgets and managing expenditures. See "Reconciliation of U.S. GAAP Measures to Non-GAAP Measures" at the end of this Item 7.

 
   
   
   
  % Variance  
 
  Years ended December 31,  
 
  2009
vs. 2008
  2008
vs. 2007
 
 
  2009   2008   2007  

Information and analytics revenue (I&A)

  $ 1,706,744   $ 1,787,487   $ 1,700,244     (4.5 )%   5.1 %

Consulting and services revenue (C&S)

    483,001     542,041     492,327     (10.9 )   10.1  
                       

Operating Revenue

    2,189,745     2,329,528     2,192,571     (6.0 )   6.2  
                       

Operating costs of I&A

    715,766     756,987     713,168     5.4     (6.1 )

Direct and incremental costs of C&S

    250,411     275,246     244,289     9.0     (12.7 )

External-use software amortization

    40,361     49,728     48,609     18.8     (2.3 )

Selling and administrative expenses

    661,510     650,218     626,888     (1.7 )   (3.7 )

Depreciation and other amortization

    95,524     89,636     77,648     (6.6 )   (15.4 )

Severance, impairment and other charges

    144,285     9,408     88,690          

Merger costs

    11,000                  
                       

Operating Income

  $ 270,888   $ 498,305   $ 393,279     (45.6 )%   26.7 %
                       

OPERATING INCOME

        Our operating income for 2009 declined $227,417 to $270,888 from $498,305 in 2008. This was due to the decrease in our operating revenue, an increase of $134,877 in severance, impairment and other charges and a related $4,190 non-cash charge for accelerated depreciation and amortization (see Note 6 to our Consolidated Financial Statements), an increase in our selling and administrative expenses and $11,000 of merger costs related to the proposed acquisition of IMS by Healthcare Technology Holdings, Inc., an entity created by certain affiliates of TPG Capital, L.P. and the Canada Pension Plan Investment Board (see Note 16 to our Consolidated Financial Statements), partially offset by decreases in our operating costs driven by decreased cost of data and tight controls on hiring. Our operating income decreased $249,301 or 54.4% in constant dollar terms. Absent the impact of severance, impairment and other charges in 2009 and 2008 and the related non-cash charge for accelerated depreciation and amortization in 2009, the merger costs in 2009 and the 2008 Government Solutions charge of $3,748 (see Note 15 to our Consolidated Financial Statements), non-GAAP operating income would have decreased 15.9% at reported rates and 22.6% in constant dollar terms from 2008 (see "Reconciliation of U.S. GAAP Measures to Non-GAAP Measures" at the end of this Item 7).

        Our operating income for 2008 grew 26.7% to $498,305 from $393,279 in 2007. This was due to the increase in our operating revenue and decreases in severance, impairment and other charges, offset by increases in operating costs and selling and administrative expenses driven by increased cost of data, investments in consulting and services ("C&S") capabilities and expense associated with a charge related to our Government Solutions business (see Note 15 to our Consolidated Financial Statements). Our 2008 operating income increased 18.3% in constant dollar terms from 2007. Absent the impact of 2008 impairment charges associated with the write-off of certain capitalized software assets resulting from the discontinuation of certain products (See Note 6 to our Consolidated Financial Statements), the Government Solutions charge and 2007 severance, impairment and other charges, non-GAAP operating income would have increased by 6.1% at reported exchange rates and remained flat in constant dollar terms (see "Reconciliation of U.S. GAAP Measures to Non-GAAP Measures" at the end of this Item 7).

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OPERATING REVENUE

        Our operating revenue for 2009 declined 6.0% to $2,189,745 from $2,329,528 in 2008 and grew 6.2% in 2008 to $2,329,528 from $2,192,571 in 2007. On a constant dollar basis our operating revenue declined 4.1% in 2009 and grew 3.1% in 2008. On a constant dollar basis, acquisitions completed in 2008 contributed approximately 0.5 percentage points of revenue growth during 2009, partially offsetting our operating revenue decline. On a constant dollar basis, acquisitions completed in 2008 and 2007 contributed approximately 2.0 percentage points of our operating revenue growth during 2008. The decrease in our operating revenue for 2009 resulted from revenue declines in all three of our business lines, together with the effect of approximately $49,000 of currency translation for 2009 as compared to 2008. The increase in our operating revenue for 2008 resulted from growth in revenue due to higher purchases of products and C&S offerings from existing customers in all three of our business lines, together with the effect of approximately $70,000 of currency translation for 2008 as compared to 2007.

SUMMARY OF OPERATING REVENUE

 
   
   
   
  % Variance
2009 vs. 2008
  % Variance
2008 vs. 2007
 
 
  Years ended December 31,  
 
   
  Constant
Dollar
   
  Constant
Dollar
 
 
  2009   2008   2007   Reported   Reported  

Commercial Effectiveness

  $ 1,103,896   $ 1,153,501   $ 1,112,995     (4.3 )%   (3.1 )%   3.6 %   0.2 %

Product & Portfolio Management

    683,854     721,357     704,898     (5.2 )   (3.0 )   2.3     (0.5 )

New Business Areas

    401,995     454,670     374,678     (11.6 )   (8.3 )   21.3     18.8  
                               

Operating Revenue

  $ 2,189,745   $ 2,329,528   $ 2,192,571     (6.0 )%   (4.1 )%   6.2 %   3.1 %
                               
    Commercial Effectiveness:  EMEA contributed more than one-half and the Americas contributed more than one-third to the constant dollar revenue decline in 2009. The Americas and Asia Pacific each contributed approximately one-half to the constant dollar revenue growth in 2008.

    Product & Portfolio Management:  EMEA contributed more than one-half and the Americas contributed more than one-third to the constant dollar revenue decline in 2009. Asia Pacific was the primary contributor to the constant dollar revenue growth in 2008 offset by the revenue decline in EMEA.

    New Business Areas:  EMEA and the Americas each contributed approximately one-half toward the constant dollar revenue decline in 2009. The Americas and EMEA each contributed approximately one-half to the constant dollar revenue growth in 2008.

        C&S revenue, as included in the business lines above, was $483,001 in 2009, down 10.9% from $542,041 in 2008 (down 8.7% on a constant dollar basis). C&S revenue was $542,041 in 2008, up 10.1% from $492,327 in 2007 (up 7.7% on a constant dollar basis).

OPERATING COSTS OF INFORMATION AND ANALYTICS

        Operating costs of information and analytics ("I&A") include costs of data, data processing and collection and costs attributable to personnel involved in production, data management and delivery of our I&A offerings.

        Our operating costs of I&A declined 5.4% to $715,766 in 2009 from $756,987 in 2008. In 2008, our operating costs of I&A grew 6.1% to $756,987 from $713,168 in 2007.

    Foreign Currency Translation:  The effect of foreign currency translation decreased our operating costs of I&A by approximately $25,000 in 2009 as compared to 2008 and increased our operating costs of I&A by approximately $22,000 for 2008 as compared to 2007.

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        Excluding the effect of foreign currency translation, our operating costs of I&A declined 2.2% in 2009 as compared to 2008 and grew 3.2% in 2008 compared to 2007.

    Data:  Data costs decreased by approximately $16,000 in 2009 as compared to 2008 and increased by approximately $26,000 in 2008 as compared to 2007.

    Production, Client Services and Other:  Production, client services and other costs remained relatively constant in 2009 compared to 2008 and decreased by approximately $3,000 in 2008 compared to 2007.

DIRECT AND INCREMENTAL COSTS OF CONSULTING AND SERVICES

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

        Our direct and incremental costs of C&S declined 9.0% to $250,411 in 2009 from $275,246 in 2008. Our direct and incremental costs of C&S grew 12.7% to $275,246 in 2008 from $244,289 in 2007.

    Foreign Currency Translation:  The effect of foreign currency translation decreased our direct and incremental costs of C&S by approximately $13,000 in 2009 as compared to 2008 and increased our direct and incremental costs of C&S by approximately $6,000 in 2008 as compared to 2007.

        Excluding the effect of foreign currency translation, our direct and incremental costs of C&S declined 4.5% in 2009 compared to 2008 and grew 10.3% in 2008 as compared to 2007.

    C&S costs decreased by approximately $12,000 in 2009 as compared to 2008 due to decreased labor cost. C&S costs increased by approximately $24,000 in 2008 as compared to 2007 due to increased labor, accommodations and primary market research data expense, all directly related to C&S revenue growth.

EXTERNAL-USE SOFTWARE AMORTIZATION

        Our external-use software amortization charges represent the amortization associated with capitalized software to be sold, leased, or otherwise marketed. Our external-use software amortization charges declined 18.8% to $40,361 in 2009 from $49,728 in 2008 due to decreased software amortization associated with assets that were fully amortized or written-down to their net realizable values. Our external-use software amortization charges grew 2.3% to $49,728 in 2008 from $48,609 in 2007 due to increased software amortization associated with new products.

SELLING AND ADMINISTRATIVE EXPENSES

        Our selling and administrative expenses consist primarily of the expenses attributable to sales, marketing and administration, including human resources, legal, management and finance. Our selling and administrative expenses grew 1.7% in 2009, to $661,510 from $650,218 in 2008. Absent the 2008 Government Solutions charge (see Note 15 to our Consolidated Financial Statements), our non-GAAP selling and administrative expenses would have grown 2.3% in 2009 compared to 2008 (see "Reconciliation of U.S. GAAP Measures to Non-GAAP Measures" at the end of this Item 7). Our selling and administrative expenses grew 3.7% in 2008, to $650,218 from $626,888 in 2007. Absent the 2008 Government Solutions charge, our non-GAAP selling and administrative expenses would have

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grown 3.1% in 2008 compared to 2007 (see "Reconciliation of U.S. GAAP Measures to Non-GAAP Measures" at the end of this Item 7).

    Foreign Currency Translation:  The effect of foreign currency translation decreased our selling and administrative expenses by approximately $32,000 for 2009 as compared to 2008 and increased our selling and administrative expenses by approximately $9,000 in 2008 as compared to 2007.

        Excluding the effect of foreign currency translation and the Government Solutions charge, our selling and administrative expenses grew 7.5% in 2009 compared to 2008. Excluding the effect of foreign currency translation and the Government Solutions charge, our selling and administrative expenses grew 1.6% in 2008 compared to 2007.

    Sales and Marketing:  Sales and marketing expense decreased by approximately $8,000 in 2009 as compared to 2008 and decreased by approximately $5,000 in 2008 as compared to 2007.

    Consulting and Services:  C&S expenses increased by approximately $15,000 in 2009 as compared to 2008. Absent the Government Solutions charge, C&S expenses would have increased by approximately $19,000 in 2009 as compared to 2008. C&S expenses increased by approximately $2,000 in 2008 as compared to 2007. Absent the Government Solutions charge, C&S expenses would have decreased by approximately $2,000 in 2008 as compared to 2007.

    Administrative and Other:  Administrative and other expenses increased by approximately $37,000 in 2009 as compared to 2008 and increased by approximately $18,000 in 2008 as compared to 2007.

DEPRECIATION AND OTHER AMORTIZATION

        Our depreciation and other amortization charges increased 6.6% to $95,524 in 2009 from $89,636 in 2008 primarily due to $4,190 of accelerated depreciation and amortization recorded in 2009 related to exited facilities as part of the streamlining program noted below. Our depreciation and other amortization charges increased 15.4% to $89,636 in 2008 from $77,648 in 2007 due to increased depreciation related to new facilities and technology to upgrade our financial systems and increased amortization related to internal-use software.

SEVERANCE, IMPAIRMENT AND OTHER CHARGES

        During the third and fourth quarters of 2009, we recorded $105,573 in charges as a component of operating income for employee termination benefits and facility exit costs related to the streamlining program announced by us in July 2009 in response to accelerating healthcare marketplace dynamics compounded by a sustained economic downturn. Additionally, during the second and fourth quarters of 2009, we recorded $38,712 in charges as a component of operating income, of which $28,480 related to non-cash impairment charges for the write-down of certain assets in all regions to their net realizable values, $8,218 related to supplier contract-related charges for which we will not realize any future economic benefit, $2,904 related to capital contributed by selling shareholders of a previously acquired business and $890 of reversals related to our 2007 restructuring plan. During the fourth quarter of 2008, we recorded a $9,408 non-cash charge in severance, impairment and other charges related to the write-off of certain capitalized software assets resulting from the discontinuation of certain of our products in our EMEA region and Japan at the end of 2008. During the fourth quarter of 2007, we recorded $88,690 in charges as a component of operating income related to a plan to streamline the business. The charge consisted of termination benefits, asset impairment charges and related contract payments to be incurred with no future economic benefit based on our decision to abandon certain products in our EMEA region. See Note 6 to our Consolidated Financial Statements.

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MERGER COSTS

        In the fourth quarter of 2009, we recorded $11,000 of expense primarily for professional services consisting of investment banker, legal and accounting fees related to the proposed acquisition of IMS. See Note 16 to our Consolidated Financial Statements.

TRENDS IN OUR OPERATING MARGINS

        Our operating margin for 2009 was 12.4%, as compared to 21.4% in 2008. Margins were negatively impacted by revenue declines, the severance, impairment and other charges and related accelerated depreciation and amortization and merger costs, partially offset by decreased costs of data and decreased sales and marketing costs. Excluding the severance, impairment and other charges and related accelerated depreciation and amortization, the 2009 merger costs and the 2008 charge related to our Government Solution business, our non-GAAP operating margin decreased from 22.0% in 2008 to 19.7% in 2009 (see "Reconciliation of U.S. GAAP Measures to Non-GAAP Measures" at the end of this Item 7).

        Our operating margin for 2008 was 21.4%, as compared to 17.9% in 2007. In 2008 and 2007 we incurred severance, impairment and other charges of $9,408 and $88,690, respectively, as discussed above. In addition, in 2008 we incurred a $3,748 charge related to our Government Solution business. Excluding these charges, our non-GAAP operating margin remained constant at 22.0% in 2008 compared to 2007 (see "Reconciliation of U.S. GAAP Measures to Non-GAAP Measures" at the end of this Item 7). In addition, our 2008 margins were negatively impacted by increased cost of data and our continuing investments in new products and C&S capabilities.

        We have several offerings in the U.S. that utilize prescriber-identifiable information. Over the past several years, there have been a number of state legislative initiatives seeking to impose restrictions on the commercial use of such information. To date, three states, New Hampshire, Vermont and Maine, have passed laws placing certain restrictions on the license, use or transfer of prescriber-identifiable information for commercial purposes. Collectively, these three states represent approximately one percent of prescription activity in the U.S. and therefore the impact of these laws on our business, financial condition and results of operations is not expected to be material. For additional information regarding the status of the laws passed in the three states noted above and related legislative developments in other jurisdictions, see Part II. Item 1A. Risk Factors.

NON-OPERATING LOSS, NET

        Our non-operating loss, net decreased to $34,274 in 2009 from $75,513 in 2008. Our non-operating loss, net increased to $75,513 in 2008 from $35,888 in 2007. The annual changes were due to the following factors:

        Interest Expense, net:    Net interest expense was $33,009 in 2009, compared with $34,451 in 2008 due to lower debt levels and lower borrowing costs. Net interest expense was $34,451 in 2008, compared with $29,746 in 2007 due to higher debt levels.

        Gains from Investments, net:    Gains from investments, net, totaled $41 in 2009, compared to $379 in 2008 and $2,317 in 2007. The net gains in 2009 and 2008 were the result of the sale of marketable securities. The net gain in 2007 was the result of the final distribution from our Enterprise portfolio, offset by related management fees, and the sale of marketable securities and venture capital investments.

        Other Expense, net:    Other expense, net, decreased by $40,135 in 2009 to $1,306 from $41,441 in 2008. This decrease was a result of net foreign exchange losses of $3,400, partially offset by $2,342 of gains on the sale of assets in 2009 as compared to net foreign exchange losses of $29,260, partially

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offset by $4,041 of gains on the sale of assets in 2008. In addition, this decrease was the result of a foreign exchange loss of $16,071 in 2008 related to the liquidation of non-functional currency Venezuela Bolívars held at our Swiss operating subsidiary (see Note 9 to our Consolidated Financial Statements). Other expense, net, increased by $32,982 in 2008 to $41,441 from $8,459 in 2007. This increase was the result of net foreign exchange losses of $29,260 in 2008 compared with net foreign exchange losses of $9,565 in 2007 and the foreign exchange loss of $16,071 related to the liquidation of non-functional currency Venezuela Bolívars held at our Swiss operating subsidiary, partially offset by gains on the sale of assets (see Note 4 to our Consolidated Financial Statements) in 2008.

TAXES

        Our effective tax rate was (10.2%) in 2009, compared with 25.1% in 2008 and 33.0% in 2007. Our effective tax rate for 2009 was favorably impacted by $12,200 as a result of reorganizations of certain non-U.S. subsidiaries, $69,300 due to foreign exchange losses recognized for tax purposes, $21,900 as a result of the expiration of certain statutes of limitation and $16,300 from the settlement of a certain state tax matter. For the twelve months ended December 31, 2009, we recorded $18,500 of tax expense related to unrecognized tax benefits that if recognized, would favorably affect the effective tax rate. Included in this amount is $3,800 of interest and penalties. As of December 31, 2009, we had $10,700 recorded for interest and penalties.

        The effective tax rate for 2008 was favorably impacted by $20,700 as a result of a non-U.S. reorganization involving several IMS subsidiaries, $11,000 due to audit settlements with taxing authorities, $9,700 as a result of the termination of a non-U.S. agreement, $9,700 in connection with the resolution of certain legacy tax matters (see Note 15 to our Consolidated Financial Statements) and $4,400 due to the expiration of certain statutes of limitation. For the twelve months ended December 31, 2008, we recorded $18,800 of tax expense related to unrecognized tax benefits that if recognized, would favorably affect the effective tax rate. Included in this amount is $9,200 of interest and penalties. As of December 31, 2008, we had $19,600 recorded for interest and penalties.

        The effective tax rate for 2007 was impacted by a tax reduction of $16,500 arising from a favorable non-U.S. audit settlement for tax years 1998 through 2002, a tax charge of $7,500 to revalue net deferred tax assets arising from the reduction of the German federal tax rate from 25% to 15% and a tax reduction of $12,440 arising from a reorganization of certain non-U.S. subsidiaries.

        On January 1, 2007, we adopted authoritative guidance related to accounting for uncertainty in income taxes. As a result of this adoption, we recognized an increase in liabilities for uncertain tax positions of $51,800 and a corresponding reduction to the January 1, 2007 retained earnings balance. As of the adoption date, we had $117,200 of gross unrecognized tax benefits and interest and penalties of $13,500. For the twelve months ended December 31, 2007, we recorded $21,100 of tax expense related to uncertain tax positions that if recognized, would favorably affect the effective tax rate. Included in this amount is $12,600 of interest and penalties. We recognize interest expense and penalties related to unrecognized tax benefits in income tax expense.

        We file numerous consolidated and separate income tax returns in the U.S. (federal and state) and non-U.S. jurisdictions. We are no longer subject to U.S. federal income tax examination by tax authorities for years before 2006. We are no longer subject to state and local income tax examination by tax authorities for years before 1997. Further, with few exceptions, we are no longer subject to examination by tax authorities in our material non-U.S. jurisdictions prior to 2004. It is reasonably possible that within the next twelve months we could realize $32,400 of unrecognized tax benefits as a result of the expiration of certain statutes of limitation.

        For all periods presented, our effective tax rate was reduced as a result of global tax planning initiatives. While we intend to continue to seek global tax planning initiatives, there can be no assurance that we will be able to successfully identify and implement such initiatives to reduce or maintain our overall tax rate.

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OPERATING RESULTS BY GEOGRAPHIC REGION

        The following represents selected geographic information for the regions in which we operate as of and for the years ended December 31, 2009, 2008 and 2007.

 
  Americas(1)   EMEA(2)   Asia
Pacific(3)
  Corporate
& Other
  Total IMS  

Year Ended December 31, 2009:

                               

Operating Revenue(4)

  $ 966,314   $ 880,887   $ 342,544       $ 2,189,745  

Operating Income (Loss)(5)

  $ 279,422   $ 113,890   $ 120,533   $ (242,957 ) $ 270,888  

Total Assets

  $ 714,477   $ 962,279   $ 241,554   $ 304,405   $ 2,222,715  
                       

Year Ended December 31, 2008:

                               

Operating Revenue(4)

  $ 1,017,424   $ 984,385   $ 327,719       $ 2,329,528  

Operating Income (Loss)(5)

  $ 314,005   $ 125,364   $ 121,475   $ (62,539 ) $ 498,305  

Total Assets

  $ 779,437   $ 848,014   $ 225,556   $ 234,130   $ 2,087,137  
                       

Year Ended December 31, 2007:

                               

Operating Revenue(4)

  $ 975,754   $ 925,405   $ 291,412       $ 2,192,571  

Operating Income (Loss)(5)

  $ 326,283   $ 117,610   $ 111,119   $ (161,733 ) $ 393,279  

Total Assets

  $ 773,857   $ 982,998   $ 216,021   $ 271,328   $ 2,244,204  
                       

Notes to Geographical Financial Information:


(1)
Americas includes the U.S., Canada and Latin America. Operating Revenue in the U.S. was $801,661, $842,004 and $801,017 in 2009, 2008 and 2007, respectively, and Total Assets were $563,782, $644,786 and $613,146 in 2009, 2008 and 2007, respectively.

(2)
EMEA includes countries in Europe, the Middle East and Africa.

(3)
Asia Pacific includes Japan, Australia and other countries in the Asia Pacific region.

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

(5)
Operating Income for the three geographic regions does not reflect the allocation of certain expenses that are maintained in Corporate and Other and as such, is not a true measure of the respective regions' profitability. The Operating Income amounts for the geographic segments include the impact of foreign exchange in converting results into U.S. dollars. For the year ended December 31, 2009, Severance, impairment and other charges of $20,946, $109,033 and $2,613 for the Americas, EMEA and Asia Pacific, respectively, are presented in Corporate and Other. For the year ended December 31, 2008, Severance, impairment and other charges of $4,684 and $4,724 for EMEA and Asia Pacific, respectively, are presented in Corporate & Other. For the year ended December 31, 2007, Severance, impairment and other charges of $16,217, $62,849 and $4,386 for the Americas, EMEA and Asia Pacific, respectively, are presented in Corporate and Other.

AMERICAS REGION

        Operating revenue in the Americas region declined 5.0% in 2009 compared to 2008 and grew 4.3% in 2008 versus 2007. Excluding the effect of foreign currency translations, operating revenue declined 4.0% in 2009 compared to 2008 and grew 4.1% in 2008 compared to 2007. The revenue decline in 2009 was driven more than one-third by each of Commercial Effectiveness and New Business Areas. The revenue growth in 2008 was driven more than three-quarters by New Business Areas.

        Operating income in the Americas region declined 11.0% in 2009 compared to 2008 and 3.8% in 2008 compared to 2007. The operating income decline in 2009 compared to 2008 reflects revenue

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decline in the region partially offset by decreases in operating expenses of $17,000. Excluding the effect of foreign currency translations and the Government Solutions charge in 2008 (see Note 15 to our Consolidated Financial Statements), operating income declined by 11.4% in 2009 as compared to 2008.

EMEA REGION

        Operating revenue in the EMEA region declined 10.5% in 2009 compared to 2008 and grew 6.4% in 2008 versus 2007. Excluding the effect of foreign currency translations, operating revenue declined 5.7% in 2009 compared to 2008 and grew 1.5% in 2008 compared to 2007. The revenue decline in 2009 was driven more than one-third by each of Commercial Effectiveness and New Business Areas and approximately one-quarter by Product & Portfolio Management. The growth in 2008 was driven by New Business Areas.

        Operating income in the EMEA region declined 9.2% in 2009 compared to 2008 and grew 6.6% in 2008 compared to 2007. The operating income decline reflects revenue declines in the region offset by decreases in operating expenses of $92,000. Excluding the effect of foreign currency translations, operating income declined by 29.4% in 2009 as compared to 2008.

ASIA PACIFIC REGION

        Operating revenue in the Asia Pacific region grew by 4.5% in 2009 compared to 2008 and 12.5% in 2008 compared to 2007. Excluding the effect of foreign currency translations, operating revenue grew 0.3% in 2009 compared to 2008 and 5.0% in 2008 compared to 2007. The constant dollar revenue growth in 2009 was driven by Commercial Effectiveness, partially offset by revenue decline in Product & Portfolio Management and New Business Areas. The revenue growth in 2008 was driven approximately one-half by each the Commercial Effectiveness and Product & Portfolio Management business lines.

        Operating income in the Asia Pacific region decreased by 0.8% in 2009 compared to 2008 and increased 9.3% in 2008 compared to 2007. The decline in operating income reflects revenue growth in the region offset by increases in operating expenses of $16,000. Excluding the effect of foreign currency translations, operating income declined by 6.5% in 2009 compared to 2008.

How Exchange Rates Affect Our Results

        We operate globally, deriving a significant portion of our operating income from non-U.S. operations. As a result, fluctuations in the value of foreign currencies relative to the U.S. dollar may increase the volatility of U.S. dollar operating results. We enter into foreign currency forward contracts to partially offset the effect of currency fluctuations. In 2009, foreign currency translation increased U.S. dollar revenue decline by approximately 1.9 percentage points, while the impact on operating income decline was an approximate decrease of 8.8 percentage points. In 2008, foreign currency translation increased U.S. dollar revenue growth by approximately 3.1 percentage points, while the impact on operating income growth was an approximate increase of 8.4 percentage points.

        Non-U.S. monetary assets are maintained in currencies other than the U.S. dollar, principally the Euro, the Japanese Yen and the Swiss Franc. Where monetary assets are held in the functional currency of the local entity, changes in the value of these currencies relative to the U.S. dollar are charged or credited to Cumulative translation adjustment in the Consolidated Statements of Shareholders' Equity (Deficit). The effect of exchange rate changes during 2009 increased the U.S. dollar amount of Cash and cash equivalents by $16,788. The effect of exchange rate changes during 2008 decreased the U.S. dollar amount of Cash and cash equivalents by $14,529. The effect of exchange rate changes during 2007 increased the U.S. dollar amount of Cash and cash equivalents by $17,442.

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Liquidity and Capital Resources

        Cash and cash equivalents increased $164,661 to $380,343 at December 31, 2009 compared to $215,682 at December 31, 2008. The increase reflects cash provided by operating activities of $542,588 and an increase of $16,788 due to the effect of exchange rate changes, partially offset by cash used in investing and financing activities of $119,757 and $274,958, respectively.

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

    development of software to be used in our new products and capital expenditures to expand and upgrade our information technology capabilities and to build or acquire facilities to house our business (we currently expect to spend approximately $95,000 to $115,000 over the next twelve months for software development and capital expenditures);

    payments of approximately $107,000 related to our restructuring plans and our second quarter 2009 supplier contract-related charge, of which approximately $79,000 is expected to be paid over the next twelve months (see Note 6 to our Consolidated Financial Statements);

    dividends to our shareholders (we expect that dividends will be $0.12 per share or approximately $22,000 over the next twelve months);

    pension and other postretirement benefit plan contributions (we currently expect contributions to U.S. and non-U.S. pension and other postretirement benefit plans to total approximately $13,700 in 2010) (see Note 10 to our Consolidated Financial Statements for information regarding our pension and postretirement benefit plan expense);

    acquisitions (see Note 4 to our Consolidated Financial Statements); and

    share repurchases (see Note 14 to our Consolidated Financial Statements).

        Net cash provided by operating activities amounted to $542,588 for the year ended December 31, 2009, which represented an increase of $121,934 compared to cash provided by operating activities during the comparable period in 2008. The increase relates to higher accrued severance, impairment and other charges (see Note 6 to our Consolidated Financial Statements), higher deferred revenue balances, lower funding of accrued expenses and other current liabilities, lower accounts receivable balances and lower funding of prepaid expenses and other current assets, partially offset by lower accrued taxes, lower net income and higher funding of accounts payable during the year ended December 31, 2009. The decrease in accounts receivable was driven by a decrease in DSO (days sales outstanding), which was six days lower in 2009 as compared to 2008. The decrease in DSO was the result of stronger collections, improved receivables management and lower revenue.

        Net cash used in investing activities amounted to $119,757 for the year ended December 31, 2009, a decrease in cash used of $58,357 over the comparable period in 2008. The decrease relates to lower payments for acquisitions and lower capital expenditures, partially offset by higher additions to computer software and an increase in restricted cash (see Note 2 to our Consolidated Financial Statements) during the year ended December 31, 2009 as compared to the comparable period in 2008.

        Net cash used in financing activities amounted to $274,958 for the year ended December 31, 2009, an increase of $44,380 compared to cash used in financing activities during the comparable period in 2008. This increase was due to lower net borrowings of debt, the purchase of third-party ownership interests in IMS Health Licensing Associates, L.L.C. (see Note 7 to our Consolidated Financial Statements), a decrease in cash overdrafts and lower proceeds from the exercise of stock options, partially offset by the absence of purchases of treasury stock during the year ended December 31, 2009 as compared to the prior year comparable period.

        Our financing activities include cash dividends we paid of $0.03 per share quarterly, which amounted to $21,762 and $22,183 during the year ended December 31, 2009 and 2008, respectively.

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The payments and level of cash dividends made by us are subject to the discretion of our Board of Directors. Any future dividends will be based on, and affected by, a number of factors, including our operating results and financial requirements.

Capital and Credit Markets

        As the capital and credit markets have contracted, we have performed additional assessments to determine the impact, if any, on our financial statements of recent market developments, including the restructuring or merging of certain financial institutions. Our additional assessments included a review of access to liquidity in the capital and credit markets and financial institution counterparty creditworthiness. Based on our assessment, we currently believe we have sufficient liquidity and access to credit despite the current condition of the capital and credit markets.

Liquidity in the Capital and Credit Markets

        We fund our liquidity needs for capital investment, working capital, and other financial commitments through cash flow from continuing operations and our diversified credit facility ($571,089 in aggregate commitment available as of December 31, 2009). While not significant to us to date, contraction in capital and credit markets may result in increased borrowing costs in the future.

Credit Concentrations

        We continually monitor our positions with, and the credit quality of, the financial institutions which are counterparties to our financial instruments and do not anticipate non-performance by the counterparties. We would not have realized a material loss during the year ended December 31, 2009 in the event of non-performance by any one counterparty. In general, we enter into transactions only with financial institution counterparties that have a credit rating of A or better. In addition, we limit the amount of credit exposure with any one institution. Particularly in light of the current credit environment, management will continue to monitor the status of these counterparties and will take action, as appropriate, to further manage its counterparty credit risk.

        We maintain accounts receivable balances ($322,569 and $382,776, net of allowances, at December 31, 2009 and December 31, 2008, respectively), principally from customers in the pharmaceutical industry. Our trade receivables do not represent significant concentrations of credit risk at December 31, 2009 due to the credit worthiness of our customers and their dispersion across many geographic areas.

Tax and Other Contingencies

        We are exposed to certain known tax and other contingencies that are material to our investors. The facts and circumstances surrounding these contingencies and a discussion of their effect on us are included in Notes 12 and 15 to our Consolidated Financial Statements.

        These contingencies may have a material effect on our liquidity, capital resources or results of operations. In addition, even where our reserves are adequate, the incurrence of any of these liabilities may have a material effect on our liquidity and the amount of cash available to us for other purposes.

        Management believes that we have made appropriate arrangements in respect of the future effect on us of these known tax and other contingencies. Management also believes that the amount of cash available to us from our operations, together with cash from financing, will be sufficient for us to pay any known tax and other contingencies as they become due without materially affecting our ability to conduct our operations and invest in the growth of our business.

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Stock Repurchase Programs

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

        On December 18, 2007, the Board of Directors authorized a stock repurchase program to buy up to 20,000 shares. As of December 31, 2009, 9,505 shares remained available for repurchase under the December 2007 program.

        During 2009, we did not repurchase any shares of outstanding Common Stock under this program.

        During 2008, we repurchased 10,495 shares of outstanding Common Stock under this program at a total cost of $238,046.

        These shares repurchases positively impacted our diluted earnings per share by $0.06 for the year ended December 31, 2008.

        Shares acquired through our repurchase programs described above are open-market purchases or privately negotiated transactions in compliance with SEC Rule 10b-18.

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

Debt

        In recent years, we have increased debt levels to balance appropriately the objective of generating an attractive cost of capital with providing us with a reasonable amount of financial flexibility. At December 31, 2009, our debt totaled $1,244,653, and management does not believe that this level of debt poses a material risk to us due to the following factors:

    in each of the last three years, we have generated strong net cash provided by operating activities in excess of $400,000;

    at December 31, 2009, we had $380,343 in worldwide cash and cash equivalents;

    at December 31, 2009, we had $571,089 of unused debt capacity under our existing bank credit facilities; and

    we believe that we have the ability to obtain additional debt capacity outside of our existing debt arrangements.

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        The following table summarizes our long-term debt at December 31, 2009 and December 31, 2008:

 
  2009   2008  

5.58% Private Placement Notes, principal payment of $105,000 due January 2015

  $ 105,000   $ 105,000  

5.99% Private Placement Notes, principal payment of $135,000 due January 2018

    135,000     135,000  

5.55% Private Placement Notes, principal payment of $150,000 due April 2016

    150,000     150,000  

1.70% Private Placement Notes, principal payment of 34,395,000 Japanese Yen due January 2013

    375,742     381,304  

Revolving Credit Facility:

             
 

Japanese Yen denominated borrowings at average floating rates of approximately 0.78%

    359,511     435,895  
 

U.S. Dollar denominated borrowings at average floating rates of approximately 1.22%

    69,400     147,000  

Bank Term Loan, principal payment of $50,000 due June 2011 at average floating rate of approximately 0.54%

    50,000     50,000  
           

Total Long-Term Debt

  $ 1,244,653   $ 1,404,199  
           

        In February 2008, we closed a private placement transaction pursuant to which we issued $105,000 of seven-year debt at a fixed rate of 5.58%, and $135,000 of ten-year debt at a fixed rate of 5.99% to several highly rated insurance companies. We used the proceeds for share repurchases (see Note 14 to our Consolidated Financial Statements) and to refinance existing debt.

        In July 2006, we entered into a $1,000,000 revolving credit facility with a syndicate of 12 banks ("Revolving Credit Facility") replacing our existing $700,000 facility. The terms of the Revolving Credit Facility extended the maturity of the facility in its entirety to a term of five years, maturing July 2011, reduced the borrowing margins, and increased subsidiary borrowing limits. Total borrowings under the Revolving Credit Facility were $428,911 and $582,895 at December 31, 2009 and December 31, 2008, respectively, all of which were classified as long-term. We define long-term lines as those where the lines are non-cancellable for more than 365 days from the balance sheet date by the financial institutions except for specified, objectively measurable violations of the provisions of the agreement. In general, rates for borrowing under the Revolving Credit Facility are LIBOR plus 55 basis points and can vary based on our Debt to EBITDA ratio. The weighted average interest rates for our lines were 0.85% and 1.36% at December 31, 2009 and December 31, 2008, respectively. In addition, we are required to pay a commitment fee on any unused portion of the facilities of 0.01%. At December 31, 2009, we had approximately $571,089 available under our existing bank credit facilities.

        In June 2006, we closed a $50,000 three-year term loan with a bank. The term loan allows us to borrow at a floating rate with a lower borrowing margin than our revolving credit facility. The term loan also provides us with two one-year options to extend the term at our discretion. In August 2008, we exercised the first one-year option to extend the term through June 2010, and in June 2009 we exercised the second one-year option to extend the term through June 2011. We used the proceeds to refinance existing debt borrowed under the revolving credit facility.

        In April 2006, we closed a private placement transaction pursuant to which we issued $150,000 of ten-year notes to two highly rated insurance companies at a fixed rate of 5.55%. We used the proceeds to refinance existing debt of $150,000 drawn under a short-term credit agreement with a bank in January 2006.

        In January 2006, we closed a private placement transaction pursuant to which our Japanese subsidiary issued 34,395,000 Japanese Yen seven-year debt (equal to $300,000 at date of issuance) to

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several highly rated insurance companies at a fixed rate of 1.70%. We used the proceeds to refinance existing debt in Japan.

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

Severance, Impairment and Other Charges

        In response to accelerating healthcare marketplace dynamics compounded by a sustained economic downturn, during the third quarter of 2009, we committed to a streamlining program (the "Plan") designed to eliminate approximately 850 positions in all areas of our business and in all regions in which we operate; however, the majority of actions are planned for our EMEA region. As a result of our Plan to reduce and consolidate the number of operating units, the Plan further includes charges for certain real estate lease impairments along with related accelerated depreciation.

        The actions under the Plan were intended to: 1) streamline our EMEA region organization, including right-sizing the headquarters function, reducing and consolidating the number of operating units across the region, and improving the productivity of production and development activities; 2) leverage the foundational investments in process improvements we have made to reduce costs and improve productivity in our Sales, Finance, Human Resources and Customer Delivery and Development organizations; 3) reduce capacity and align the size of the Sales and Management Consulting teams in areas of reduced client demand; and 4) continue to build and invest in high-value, strategic growth areas, which include extending our capabilities in specialty and patient-centered insights, in serving payers and governments, and in emerging markets for pharmaceuticals.

        During the third quarter of 2009 we recorded $104,301 in Severance, impairment and other charges for employee termination benefits and facility exit costs and $2,024 in accelerated Depreciation and other amortization related to the facility exits. During the fourth quarter of 2009, we recorded an additional $1,272 in Severance, impairment and other charges for facility exit costs and $2,166 in accelerated Depreciation and other amortization related to the facility exits.

        The severance benefits were calculated pursuant to the terms of established employee protection plans, in accordance with local statutory minimum requirements or individual employee contracts, as applicable. Employee termination actions under the Plan are expected to be completed by the end of the third quarter of 2010.

 
  Severance
Related
Reserves
  Facility
Exit
Charges
  Non-Cash
Compensation
Charges
  Currency
Translation
Adjustments
  Total  

Charge at August 31, 2009

  $ 100,653   $ 2,610   $ 1,038   $   $ 104,301  

Charge at December 31, 2009

        1,272             1,272  

2009 utilization

    (9,709 )   (154 )   (1,038 )       (10,901 )

Currency translation adjustments

                760     760  
                       

Balance at December 31, 2009

  $ 90,944   $ 3,728   $   $ 760   $ 95,432  
                       

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        We currently expect that cash outlays will be applied against the remaining balance in the 2009 charge at December 31, 2009 as follows:

Year Ended December 31,
  Outlays  

2010

  $ 76,315  

2011

    15,603  

2012

    931  

2013

    343  

2014

    341  

Thereafter

    1,899  
       

Total

  $ 95,432  
       

        During the second quarter of 2009, we recorded $25,428 in charges as a component of operating income. Of this amount, $17,210 related to non-cash impairment charges for the write-down of certain capitalized software assets to their net realizable values in our Americas and EMEA regions. The write-downs were the result of the regular review of our capitalized software assets. The remaining $8,218 was for supplier contract-related charges for which we will not realize any future economic benefit.

        During the fourth quarter of 2009, we recorded $11,270 in charges as a component of operating income related to non-cash impairment charges for the write-down of certain capitalized software and prepaid assets to their net realizable values in our EMEA and Asia Pacific regions. The write-downs were the result of the regular review of our assets. Additionally, we recorded $2,904 in charges as a component of operating income related to capital contributed by selling shareholders of a previously acquired business.

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

        During the fourth quarter of 2007, we committed to a restructuring plan designed to eliminate approximately 1,070 positions worldwide in production and development, sales, marketing, consulting and services and administration. The plan also included the write-down of two impaired computer software assets and related contract payments to be incurred with no future economic benefit based on our decision to abandon certain products in our EMEA region. As a result, we recorded $88,690 of Severance, impairment and other charges as a component of operating income in the fourth quarter of 2007. The severance benefits were calculated pursuant to the terms of established employee protection plans, in accordance with local statutory minimum requirements or individual employee contracts, as applicable.

        These charges were designed to strengthen client-facing operations worldwide, increase our operating efficiencies and streamline our cost structure. Some of the initiatives included in this plan are designed to better align our resources to help clients manage for change in a challenging climate.

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        The severance and contract payments portion of the charge was approximately $75,043 and will all be settled in cash. Termination actions under the plan have been completed.

 
  Severance
Related
Reserves
  Contract
Related
Reserves
  Asset
Write-Downs
  Currency
Translation
Adjustments
  Total  

Charge at December 31, 2007

  $ 71,583   $ 3,460   $ 13,647   $   $ 88,690  

2007 utilization

            (13,647 )       (13,647 )

2008 utilization

    (48,645 )   (2,150 )           (50,795 )

2009 utilization

    (17,189 )   (817 )           (18,006 )

2009 reversals

    (397 )   (493 )           (890 )

Currency translation adjustments

                (1,825 )   (1,825 )
                       

Balance at December 31, 2009

  $ 5,352   $   $   $ (1,825 ) $ 3,527  
                       

        We currently expect that cash outlays will be applied against the remaining balance in the 2007 charge at December 31, 2009 as follows:

Year Ended December 31,
  Outlays  

2010

  $ 2,675  

2011

    717  

2012

    135  
       

Total

  $ 3,527  
       

Contractual Obligations

        Our contractual obligations include facility leases, agreements to purchase data and telecommunications services, leases of certain computer and other equipment and projected pension and other postretirement benefit plan contributions. At December 31, 2009, the minimum annual payment under these agreements and other contracts that have initial or remaining non-cancelable terms in excess of one year are as listed in the following table:

 
  Year  
 
  2010   2011   2012   2013   2014   Thereafter   Total  

Operating Leases(1)

  $ 38,467   $ 35,784   $ 28,930   $ 19,246   $ 14,492   $ 42,987   $ 179,906  

Data Acquisition and Telecommunication Services(2)

    178,337     125,229     81,730     43,755     23,959     1,703     454,713  

Computer and Other Equipment Leases(3)

    22,766     16,017     7,773     4,661     2,055     631     53,903  

Projected Pension and Other Postretirement Benefit Plan Contributions(4)

    13,700                         13,700  

Long-term Debt(5)

    29,431     506,358     25,464     398,279     22,271     423,312     1,405,115  

Other Long-term Liabilities(6)

    95,909     30,054     15,748     16,040     17,301     108,156     283,208  
                               

Total

  $ 378,610   $ 713,442   $ 159,645   $ 481,981   $ 80,078   $ 576,789   $ 2,390,545  
                               

(1)
Rental expense under real estate operating leases for the years 2009, 2008 and 2007 was $35,195, $35,028 and $35,646, respectively.

(2)
Expense under data and telecommunications contracts for the years 2009, 2008 and 2007 was $211,530, $182,819 and $165,230, respectively.

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(3)
Rental expense under computer and other equipment leases for the years 2009, 2008 and 2007 was $21,077, $20,723 and $24,299, respectively. These leases are frequently renegotiated or otherwise changed as advancements in computer technology produce opportunities to lower costs and improve performance.

(4)
Our contributions to pension and other postretirement benefit plans for the years 2009, 2008 and 2007 were $10,231, $12,120 and $9,473, respectively. The estimated contribution amount shown for 2010 includes both required and discretionary contributions to funded plans as well as benefit payments from unfunded plans. The majority of the expected contribution shown for 2010 is required.

(5)
Amounts represent the principal balance plus estimated interest expense based on current interest rates under our long-term debt (see Note 9 to our Consolidated Financial Statements).

(6)
Includes estimated future funding requirements related to pension and postretirement benefits (see Note 10 to our Consolidated Financial Statements) and the long-term portions of the 2009 and 2007 severance, impairment and other charges (see Note 6 to our Consolidated Financial Statements). As the timing of future cash outflows is uncertain, the following long-term liabilities (and related balances) are excluded from the above table: deferred taxes ($70,549) and uncertain tax benefits reserve ($69,041).

        Under the terms of certain purchase agreements related to acquisitions consummated in 2008 and prior, we may be required to pay additional amounts as contingent consideration based on the achievement of certain performance related targets during 2009. These additional payments will be recorded as compensation expense. We paid approximately $2,400 under such contingencies during 2009. Based on current estimates, we expect that additional contingent consideration under these agreements may total approximately $1,800. It is expected that these contingencies will be resolved during the first half of 2010.

Off-Balance Sheet Obligations

        As of December 31, 2009, we did not have any off-balance sheet arrangements (as defined in Item 303(a)(4)(ii) of SEC Regulation S-K) that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Market Risk

        Our primary market risks are the impact of foreign exchange fluctuations on non-dollar-denominated revenue and the impact of interest rate fluctuations on interest expense.

        We transact business in more than 100 countries and are subject to risks associated with changing foreign exchange rates. Our objective is to reduce earnings and cash flow volatility associated with foreign exchange rate changes. Accordingly, we enter into foreign currency forward contracts to minimize the impact of foreign exchange movements on net income, non-U.S. dollar anticipated royalties, and on the value of non-functional currency assets and liabilities.

        It is our policy to enter into foreign currency transactions only to the extent necessary to meet our objectives as stated above. We do not enter into foreign currency transactions for investment or speculative purposes. The principal currencies hedged are the Euro, the Japanese Yen, the British Pound, the Swiss Franc and the Canadian Dollar. See Note 9 to our Consolidated Financial Statements.

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        The contractual value of our hedging instruments was approximately $433,096 at December 31, 2009. The fair value of these hedging instruments is subject to change as a result of potential changes in foreign exchange rates. We assess our market risk based on changes in foreign exchange rates utilizing a sensitivity analysis. The sensitivity analysis measures the potential loss in fair values based on a hypothetical 10% change in currency rates. The potential loss in fair value for foreign exchange rate-sensitive instruments, all of which were foreign currency forward contracts, based on a hypothetical 10% decrease in the value of the U.S. dollar or, in the case of non-dollar-related instruments, the currency being purchased, was $18,880 at December 31, 2009. However, the change in the fair value of foreign exchange rate-sensitive instruments would likely be offset by a change in the fair value of the asset or liability being hedged. The estimated fair values of the foreign exchange risk management contracts were determined based on quoted market prices.

        We also borrow funds and since the interest rate associated with those borrowings changes over time, we are subject to interest rate risk. We have not hedged all of this exposure. We assess our market risk based on changes in interest rates utilizing a sensitivity analysis. The sensitivity analysis measures the increase in annual interest expense based on a hypothetical 1% increase in interest rates. This would have amounted to approximately $4,168 at December 31, 2009.

        In January 2010, the Venezuelan government announced the devaluation of its currency and established a two-tier foreign exchange structure. The official exchange rate for essential goods was adjusted from 2.15 Venezuelan Bolívars ("Bolívars") to each U.S. Dollar to 2.60 and the official exchange rate for non-essential goods was adjusted from 2.15 Bolívars to each U.S. Dollar to 4.30. We expect that our products will be classified as non-essential. Our Swiss operating subsidiary, IMS AG, maintains certain account balances in Bolívars (mainly Cash and cash equivalents). As these balances are held in a non-functional currency of IMS AG, it is required that we mark-to-market these balances at each reporting date and reflect these movements as gains or losses in income. Separately, Venezuela has been designated hyper-inflationary effective January 1, 2010, and as such, all future foreign currency fluctuations will also be recorded in income for certain account balances at our local Venezuelan operating subsidiary. While we continue to evaluate the impact of these actions by the Venezuelan government, we expect to record a pre-tax charge of approximately $10,000 to Other expense, net in the first quarter of 2010 related to the remeasurement of the IMS AG Bolívar account balances and the remeasurement of certain local Venezuelan account balances under the assumption that the 4.30 rate will apply. In addition to the January 2010 devaluation, Venezuela had imposed currency exchange restrictions in February 2003, and subsequently adjusted its official exchange rates in February 2004 and once again in March 2005, and as a result, we have recognized exchange losses in the past. It is not possible for us to predict the extent to which we may be affected by future changes in exchange rates and exchange controls imposed by the Venezuelan government.

Forward-Looking Statements and Risk Factors

        This Annual Report on Form 10-K and documents to which we refer you in this Annual Report, as well as information included in oral statements or other written statements made or to be made by us, contain statements that, in our opinion, may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The words such as "believe," "expect," "anticipate," "intend," "plan," "foresee," "likely," "project," "estimate," "will," "may," "should," "future," "predicts," "potential," "continue" and similar expressions identify these forward-looking statements, which appear in a number of places in this Annual Report on Form 10-K (and documents to which we refer you in this Annual Report) and include, but are not limited to, all statements relating directly or indirectly to, the timing or likelihood of completing the Merger, plans for future growth and other business development activities as well as capital expenditures, financing sources, dividends and the effects of regulation and competition, foreign currency conversion and all other statements regarding our intent, plans, beliefs or expectations or those of our directors or

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officers. Investors are cautioned that such forward-looking statements are not assurances for future performance or events and involve risks and uncertainties that could cause actual results and developments to differ materially from those covered in such forward-looking statements. These risks and uncertainties include, but are not limited to the factors or matters contained or incorporated by reference in this document, and the following factors:

    risks associated with operating on a global basis, including fluctuations in the value of foreign currencies relative to the U.S. dollar, and the ability to successfully hedge such risks—we derived approximately 63% of our operating revenue in 2009 from non-U.S. operations;

    deterioration in economic conditions, particularly in the pharmaceutical, healthcare or other industries in which our customers operate;

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

    the imposition of additional restrictions on our use of or access to data, or the refusal by data suppliers to provide data to us;

    uncertainties associated with completion of our restructuring plans discussed in Note 6 to our Consolidated Financial Statements and under "Severance, Impairment and Other Charges" in Part I. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, and the impact of the restructuring activities on our business and financial results, including the timing of the activities and the associated costs and the ability to achieve projected cost savings;

    conditions in the securities markets that may affect the value or liquidity of portfolio investments; and management's estimates of lives of assets, recoverability of assets, fair market value, estimates of liabilities and accrued income tax benefits and liabilities;

    to the extent unforeseen cash needs arise, the ability to obtain financing on favorable terms, or at all during adverse credit market conditions;

    to the extent we seek growth through acquisitions, alliances or joint ventures, the ability to identify, consummate and integrate acquisitions, alliances and joint ventures on satisfactory terms;

    our ability to develop new or advanced technologies, including sophisticated information systems, software and other technology used to deliver our products and services and to do so on a timely and cost-effective basis, and the exposure to the risk of obsolescence or incompatibility of these technologies with those of our customers or suppliers; our ability to maintain effective security measures for our computer and communications systems; and failures or delays in the operation of our computer or communications systems;

    consolidation in the pharmaceutical industry and the other industries in which our customers operate;

    our ability to successfully maintain historic effective tax rates;

    our ability to maintain and defend our intellectual property rights in jurisdictions around the world;

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

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

    terrorist activity, epidemics, credit market disruptions or other conditions that could disrupt commerce, the threat of any such conditions, and responses to and results of such conditions and threats, including but not limited to effects, domestically and/or internationally, on us, our personnel and facilities, our customers and suppliers, financial markets and general economic conditions;

    the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement, including a termination under circumstances that could require us to pay a termination fee;

    the failure to obtain the necessary equity and debt financing set forth in commitment letters received in connection with the Merger or the failure of that financing to be sufficient to complete the Merger and the transactions contemplated thereby;

    the inability to complete the Merger due to the failure to satisfy the conditions to completion of the Merger;

    the failure of the Merger to close for any other reason;

    risks that the proposed transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the proposed Merger;

    the outcome of any legal proceedings that have been or may be instituted against us and/or others relating to the Merger Agreement;

    diversion of management's attention from ongoing business concerns;

    the effect of the announcement of the Merger on our business relationships, operating results and business generally; and

    the amount of the costs, fees, expenses and charges related to the Merger.

        Consequently, all of the forward-looking statements we make in this document are qualified by the information contained herein, including, but not limited to, the information contained under this heading and our Consolidated Financial Statements and notes thereto and by the material set forth under the headings "Business" and "Risk Factors" in Part I, Items 1 and 1A, respectively, of this Annual Report on Form 10-K. We are under no obligation to publicly release any revision to any forward-looking statement contained or incorporated herein to reflect any future events of occurrences. You should carefully consider the cautionary statements contained or referred to in this section in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf.

Critical Accounting Policies

        Note 2 to the Consolidated Financial Statements includes a summary of the significant accounting policies and methods used in the preparation of our Consolidated Financial Statements. Following is a brief discussion of the more significant accounting policies and methods used by us.

        Management's discussion and analysis of its financial condition and results of operations are based upon its Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the U.S.

        The preparation of financial statements and related disclosures in accordance with generally accepted accounting principles in the U.S. require management to make estimates and assumptions that

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affect the reported amounts of assets and liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates. The most significant estimates relate to allowances, valuation of work-in-process inventories, investments, depreciation of fixed assets including salvage values, carrying value of goodwill and intangible assets, provision for income taxes and tax assets and liabilities, reserves for severance, pensions, employee benefits, stock-based compensation, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The accounting estimates used in the preparation of our Consolidated Financial Statements will change as new events occur, as more experience is acquired, as additional information is obtained and as our operating environment changes. Actual results could vary from the estimates and assumptions used in the preparation of the accompanying Consolidated Financial Statements.

        We believe the following critical policies affect our more significant judgments and estimates used in the preparation of our Consolidated Financial Statements.

        REVENUE RECOGNITION.    We recognize revenue when the following criteria have been met: 1) persuasive evidence of an arrangement exists; 2) delivery has occurred or services have been rendered; 3) the seller's price to the buyer is fixed or determinable; and 4) collectibility is reasonably assured.

        We offer various I&A products developed to meet our customers' needs by using data secured from a worldwide network of suppliers. Our revenue arrangements may include multiple elements. A typical I&A arrangement (primarily under fixed-price contracts) may include an ongoing subscription-based deliverable for which revenue is recognized ratably as earned over the contract period, and/or a one-time delivery of historical data ("backdata") for which revenue is recognized upon delivery, assuming all other criteria are met. These deliverables qualify as separate units of accounting as each has value on a standalone basis to the customer, objective and reliable evidence of fair value for any undelivered item(s) exists, and where the arrangement includes a general right of return relative to the delivered item(s), delivery of the undelivered item(s) is probable and within our control. We allocate revenue to each element within our arrangements based upon their respective relative fair values. Fair values for these elements are based upon the normal pricing practices for ongoing subscriptions and backdata when sold separately. We defer revenue for any undelivered elements, and recognize revenue when the product is delivered or over the period in which the service is performed, in accordance with our revenue recognition policy for such element as noted above. If we cannot objectively determine the fair value of any undelivered element, revenue is deferred until all elements are delivered and services have been performed, or until fair value can objectively be determined for any remaining undelivered elements.

        We also offer evidenced-based solutions that allow our clients to make informed business decisions. These C&S offerings provide assistance with the analysis of our I&A products. Revenues for certain of these arrangements are recognized on a straight-line basis over the term of the arrangement. Revenues for time and material contracts are recognized as the services are provided. Revenues for fixed price contracts are recognized either over the contract term based on the ratio of the number of hours incurred for services provided during the period compared to the total estimated hours to be incurred over the entire arrangement (efforts based), or upon delivery.

        We enter into barter transactions in the normal course in which we exchange data for data, or data for other services such as advertising, software licenses and panel recruitment. We recognize revenue from barter transactions as our products are delivered or services are performed. The related barter expense is recognized as the products or services are utilized by us, the majority of which is in the same accounting period as the related barter revenue. Barter transactions are valued based on either the fair

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value of the products or services received by us or the fair value of the information or services delivered to customers, whichever is more clearly evident. Our barter revenues have accounted for approximately 3% to 4% of total consolidated revenues in each of the three years ended December 31, 2009.

        We present our revenues net of taxes assessed by government authorities.

        Payment terms vary by customer, but are typically stipulated in the contract and are generally net 30 days from date of invoice. We generally do not offer extended payment terms. Advance payments from customers are credited to Deferred revenues and reflected in Operating Revenue as earned over the contract term. Included in Accounts receivable, net in the Consolidated Statements of Financial Position are unbilled receivables, which represent revenues for products delivered or services performed that have not yet been invoiced to the customer. Unbilled receivables are generally invoiced within the following month.

        For further discussion of our products and services please refer to the "Our Products and Services" disclosure contained in Part I, Item 1. Business section of this Annual Report on Form 10-K.

        OPERATING COSTS OF INFORMATION AND ANALYTICS.    Operating costs of I&A include costs of data, data collection and processing and costs attributable to personnel involved in production, data management and delivery of our I&A offerings.

        One of our major expenditures is the cost for the data we receive from suppliers. After receipt of the raw data and prior to the data being available for use in any part of our business, we are required to transform the raw data into useful information through a series of comprehensive processes. These processes involve significant employee costs and data processing costs.

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

        DIRECT AND INCREMENTAL COSTS OF CONSULTING AND SERVICES.    Direct and incremental costs of C&S include the costs of our consulting staff directly involved with delivering revenue generating engagements, related accommodations and the costs of primary market research data purchased specifically for certain individual C&S engagements. Although our data is used in multiple customer solutions across different offerings within both I&A and C&S, we do not have a meaningful way to allocate the direct cost of the data between I&A and C&S revenues. As such, the direct and incremental costs of C&S do not reflect the total costs incurred to deliver our C&S revenues.

        Costs associated with our time and material and fixed-price C&S contracts are recognized as incurred.

        PENSIONS AND OTHER POSTRETIREMENT BENEFITS.    We provide a number of retirement benefits to our employees, including defined benefit pension plans and postretirement medical plans. The determination of benefit obligations and expense is based on actuarial models. In order to measure benefit costs and obligations using these models, critical assumptions are made with regard to the discount rate, expected return on plan assets, cash balance crediting rate, lump sum conversion rate and the assumed rate of compensation increases. In addition, retiree medical care cost trend rates are a key assumption used exclusively in determining costs for our post retirement health care and life insurance benefits plan. Management reviews these critical assumptions at least annually. Other assumptions involve demographic factors such as the turnover, retirement and mortality rates. Management reviews these assumptions periodically and updates them when our experience deems it appropriate to do so.

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        The discount rate is the rate at which the benefit obligations could be effectively settled and is determined annually by management. For U.S. plans, the discount rate is based on results of a modeling process in which the plans' expected cash flow (determined on a projected benefit obligation basis) is matched with spot rates developed from a yield curve comprised of high-grade (Moody's Aa and above, or Standard and Poor's AA and above) non-callable corporate bonds to develop the present value of the expected cash flow, and then determining the single rate (discount rate) which when applied to the expected cash flow derives that same present value. In the U.K. specifically, the discount rate is set based on the yields available on a universe of approximately of 150 high quality (Aa rated) corporate bonds denominated in UK sterling, appropriate to the duration of the plan liabilities. For the other non-U.S. plans, the discount rate is based on the current yield of an index of high quality corporate bonds. At December 31, 2009, the discount rate was 6.0%, unchanged from December 31, 2008 for our U.S. pension plans and postretirement benefit plan. Similarly, the discount rate for our U.K. pension plan was unchanged at 6.0%. The U.S. and U.K. plans represent 97% of the consolidated benefit obligation as of December 31, 2009. The discount rate in other non-U.S. countries decreased, where the range of applicable discount rates at December 31, 2009 was 2.2%—10.4%. These smaller non-U.S. plans constitute only 3% of the consolidated benefit obligation at December 31, 2009. As a sensitivity measure, a 25 basis point increase in the discount rate for our U.S. plan, absent any offsetting changes in other assumptions would result in a decrease of pension expense of approximately $95 within the Consolidated Statements of Income. For our U.K. plan, a 25 basis point increase in the discount rate, absent any offsetting changes in other assumptions, would result in a decrease in pension expense of approximately $668 within the Consolidated Statements of Income.

        Under the U.S. qualified retirement plan, participants have a notional retirement account that increases with pay and investment credits. The rate used to determine the investment credit (cash balance crediting rate) varies monthly and is equal to 1/12th of the yield on 30-year U.S. Government Treasury Bonds, with a minimum of 0.25%. At retirement, the account is converted to a monthly retirement benefit.

        In selecting an expected return on plan asset assumption, we consider the returns being earned by each plan investment category in the fund, the rates of return expected to be available for reinvestment and long-term economic forecasts for the type of investments held by the plan. At January 1, 2010, the expected return on plan assets for the U.S. pension plans is 8.5%, which is unchanged versus January 1, 2009. Outside the U.S. the range of applicable expected rates of return is 1.5%—7.25% as of January 1, 2010 versus a range of 1.5%—7.5% as of January 1, 2009. The actual return on plan assets will vary from year to year versus this assumption. We believe it is appropriate to use long-term expected forecasts in selecting the expected return on plan assets. As such, there can be no assurance that our actual return on plan assets will approximate the long-term expected forecasts. The expected return on assets ("EROA") was $24,104 and $31,454 and the actual return on assets was $54,930 and ($90,414), respectively, for the years ended December 31, 2009 and 2008. As a sensitivity measure, a 25 basis point change in the EROA assumption for our U.S. plan, absent any offsetting changes in other assumptions, would result in approximately $397 of an increase or decrease in pension expense within the Consolidated Statements of Income. For our U.K. plan, a 25 basis point change in the EROA assumption, absent any offsetting changes in other assumptions, would result in approximately $374 of an increase or decrease in pension expense within the Consolidated Statements of Income. While we believe that the assumptions used are reasonable, differences in actual experience or changes in assumptions may materially affect our pension and postretirement obligations and future expense.

        We utilize a corridor approach to amortizing unrecognized gains and losses in the pension and postretirement plans. Amortization occurs when the accumulated unrecognized net gain or loss balance exceeds the criterion of 10% of the larger of the beginning balances of the projected benefit obligation or the market-related value of the plan assets. The excess unrecognized gain or loss balance is then amortized using the straight-line method over the average remaining service-life of active employees

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expected to receive benefits. At December 31, 2009, the weighted-average remaining service-life of active employees was 10.67 years.

        During fiscal 2009, we contributed $10,231 to our pension and postretirement benefit plans which included voluntary contributions above the minimum requirements for the pension plans. We currently expect to contribute $13,473 in required contributions and $274 in discretionary contributions to our pension and postretirement benefit plans during fiscal 2010. We may make additional contributions into our pension plans in fiscal 2010 depending on, among other factors, how the funded status of those plans changes and in order to meet minimum funding requirements as set forth in employee benefit and tax laws, plus additional amounts we may deem to be appropriate.

        At December 31, 2009, the projected benefit obligation exceeded the fair value of assets in our pension plans by $30,353.

        As of January 1, 2008, we utilize a fiscal year end measurement date for all plans.

        Additional information on pension and other postretirement benefit plans is contained in Note 10 to the Consolidated Financial Statements.

        COMPUTER SOFTWARE.    Direct costs incurred in the development of our external-use computer software to be sold, leased or otherwise marketed are capitalized. Research and development costs incurred to establish technological feasibility of a computer software product are expensed in the periods in which they are incurred. Capitalization ceases and amortization starts when the product is available for general release to customers. External-use computer software costs are amortized on a product by product basis generally over three to seven years. Annual amortization is the greater of the amount computed using (a) the ratio of current gross revenues for a product to the total of current and anticipated future gross revenues for that product, or (b) the straight-line method over the remaining estimated economic life of the product. We periodically review the unamortized capitalized costs of our computer software based on a comparison of the carrying value of the software with its estimated net realizable value. We recognize immediately any impairment losses on external-use software as a result of our review, or upon our decision to discontinue a product. See Note 5 to our Consolidated Financial Statements.

        Capitalized internal-use software costs are amortized on a straight-line basis generally over three to five years.

        GOODWILL.    Goodwill represents the excess purchase price over the fair value of identifiable net assets of businesses acquired, and is not amortized. We review the recoverability of goodwill annually (or based on any triggering event) by comparing the estimated fair values (based on discounted cash flow analysis) of reporting units with their respective net book values. If the carrying amount of the reporting unit exceeds its fair value, the goodwill impairment loss is measured as the excess of the carrying value of goodwill over its fair value. We completed our annual impairment tests as of September 30, 2009, 2008 and 2007 and were not required to recognize any goodwill impairment charges. Due to market conditions during the fourth quarter of 2008, at December 31, 2008 we reviewed our goodwill impairment analysis and determined that no trigger event had occurred subsequent to September 30, 2008 requiring us to update our goodwill impairment test. See Note 5 of our Consolidated Financial Statements.

        OTHER LONG-LIVED ASSETS.    We review the recoverability of our long-lived assets and finite-lived identifiable intangibles held and used whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In general, the assessment of possible impairment is based on our ability to recover the carrying value of the asset from the undiscounted expected future cash flows of the asset. If the future cash flows are less than the carrying value of such

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asset, an impairment charge is recognized for the difference between the estimated fair value and the carrying value.

        INCOME TAXES.    We operate in more than 100 countries around the world and our earnings are taxed at the applicable income tax rate in each of those countries. We provide for income taxes utilizing the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each balance sheet date, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. If it is determined that it is more likely than not that future tax benefits associated with a deferred tax asset will not be realized, a valuation allowance is provided. In the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of our net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made. The effect on deferred tax assets and liabilities of a change in the tax rates is recognized in income in the period that includes the enactment date. While we intend to continue to seek global tax planning initiatives, there can be no assurance that we will be able to successfully identify and implement such initiatives to reduce or maintain our overall tax rate.

        FOREIGN CURRENCY TRANSLATION.    We have significant investments in non-U.S. countries. Therefore, changes in the value of foreign currencies affect our Consolidated Financial Statements when translated into U.S. dollars. For all operations outside the U.S. where we have designated the local currency as the functional currency, assets and liabilities are translated using end-of-period exchange rates; revenues, expenses and cash flows are translated using average rates of exchange. For these countries, currency translation adjustments are accumulated in a separate component of Shareholders' Equity (Deficit), whereas transaction gains and losses are recognized in Other expense, net. For operations in countries that are considered to be highly inflationary or where the U.S. dollar is designated as the functional currency, monetary assets and liabilities are remeasured using end-of-period exchange rates, whereas non-monetary accounts are remeasured using historical exchange rates, and all remeasurement and transaction adjustments are recognized in Other expense, net.

        STOCK-BASED COMPENSATION.    We maintain stock incentive plans, which provide for the grant of stock options, stock appreciation rights, restricted stock and restricted stock units to eligible employees and Non-Employee Directors. We are required to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service period of the award in our Consolidated Statements of Income. As the stock-based compensation is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. We are required to estimate the forfeitures at the time of grant and revise, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Prior to 2006, we accounted for stock-based awards to employees and directors using the intrinsic value method. Under the intrinsic value method, stock-based compensation expense had been recognized in our Consolidated Statements of Income only for stock option modifications and restricted stock units because the exercise price of stock options granted to employees and directors equaled the fair market value of the underlying stock at the date of grant. See Note 11 to our Consolidated Financial Statements for additional information.

        COMPUTATION OF NET INCOME PER SHARE.    Basic net income per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of common shares and dilutive

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potential common shares outstanding during the period. Dilutive potential common shares primarily consist of employee stock options and restricted stock units.

        Employee equity share options, restricted stock units and similar equity instruments granted by us are treated as potential common shares outstanding in computing diluted earnings per share. Diluted shares outstanding include restricted stock units and the dilutive effect of in-the-money options which is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising stock options, the amount of compensation cost for future service that we have not yet recognized, and the amount of benefits that would be recorded in additional paid-in capital when the award becomes deductible for tax purposes are assumed to be used to repurchase shares.

        LEGAL COSTS.    Legal costs in connection with loss contingencies are expensed as incurred.

Recently Issued Accounting Standards

        In June 2009, the Financial Accounting Standards Board ("FASB") issued authoritative guidance codifying generally accepted accounting principles in the U.S. ("GAAP"). This guidance was effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of this authoritative guidance did not have a material impact on our financial results.

        In September 2006, the FASB issued authoritative guidance defining fair value, establishing a framework for measuring fair value under GAAP, and expanding disclosures about fair value measurements. This guidance was effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The adoption of this authoritative guidance did not have a material impact on our financial results. In February 2008, the FASB issued authoritative guidance which delayed the effective date of its previously issued fair value guidance for one year for certain non-financial assets and liabilities and removed certain leasing transactions from its scope. The adoption of this authoritative guidance did not have a material impact on our financial results.

        In December 2008, the FASB issued authoritative guidance on an employer's disclosures about plan assets of a defined benefit pension or other postretirement plan. This guidance was effective for fiscal years ending after December 15, 2009, with earlier application permitted. Upon initial application, the provisions of this guidance are not required for earlier periods presented for comparative purposes. As this guidance requires only additional disclosures, its adoption did not have a material impact on our financial results.

        In April 2009, the FASB issued authoritative guidance on determining fair values when there is no active market or where the price inputs being used represent distressed sales. It also reaffirmed what previous guidance had stated is the objective of fair value measurement—to reflect how much an asset would be sold for in an orderly transaction (as opposed to a distressed or forced transaction) at the date of the financial statements under current market conditions. This guidance was effective for interim and annual periods ending after September 15, 2009. The adoption of this authoritative guidance did not have a material impact on our financial results.

        In April 2009, the FASB issued authoritative guidance which required disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This standard also required those disclosures in summarized financial information at interim reporting periods. This guidance was effective for interim reporting periods ending after September 15, 2009. The adoption of this authoritative guidance did not have a material impact on our financial results.

        In May 2009, the FASB issued authoritative guidance establishing general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are

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issued or are available to be issued. This guidance was effective for interim or annual financial periods ending after September, 15, 2009. The adoption of this authoritative guidance did not have a material impact on our financial results.

        In June 2009, the FASB issued authoritative guidance eliminating the concept of qualifying special-purpose entities ("QSPEs"), changing the requirements for derecognizing financial assets and requiring additional disclosures about transfers of financial assets, including securitization transactions, and an entity's continuing involvement in and exposure to the risks related to transferred financial assets. This guidance must be applied as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. The adoption of this authoritative guidance is not expected to have a material impact on our financial results.

        In June 2009, the FASB issued authoritative guidance eliminating the exemption for QSPEs, requiring a new approach for determining who should consolidate variable-interest entities ("VIEs"), and changing when it is necessary to reassess who should consolidate VIEs. This guidance shall be effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. The adoption of this authoritative guidance is not expected to have a material impact on our financial results.

        In October 2009, the FASB issued authoritative guidance revising the current accounting treatment to specifically address how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting. This guidance is applicable to revenue arrangements entered into or materially modified during the company's first fiscal year that begins after June 15, 2010. The guidance may be applied either prospectively from the beginning of the fiscal year for new or materially modified arrangements or retrospectively. We are currently evaluating this authoritative guidance to determine any potential impact that it may have on our financial results.

        In October 2009, the FASB issued authoritative guidance changing the accounting model for revenue arrangements that include both tangible products and software elements. Tangible products containing software components and non-software components that function together to deliver the tangible product's essential functionality, are no longer within the scope of the software revenue guidance. This guidance is applicable to revenue arrangements entered into or materially modified during the company's first fiscal year that begins after June 15, 2010. The guidance may be applied either prospectively from the beginning of the fiscal year for new or materially modified arrangements or retrospectively. We are currently evaluating this authoritative guidance to determine any potential impact that it may have on our financial results.

IMS Health Common Stock Information

        IMS's Common Stock is listed on the New York Stock Exchange (symbol "RX"). The number of shareholders of record on December 31, 2009 and 2008 were approximately 3,389 and 3,800, respectively. Total shares outstanding on December 31, 2009 and 2008, were approximately 182,658 and 181,482, respectively. Approximately 99.0% of IMS's shares are held by institutions. The following table shows the high and low sales prices for our Common Stock during the four quarters of 2009 and 2008:

 
  Price Per Share
($) 2009
  Price Per Share
($) 2008
 
 
  High   Low   High   Low  

First Quarter

    16.42     11.12     24.88     20.01  

Second Quarter

    14.11     11.80     25.46     21.09  

Third Quarter

    15.81     11.50     23.74     17.73  

Fourth Quarter

    21.68     14.51     19.63     9.63  
                   

Year

    21.68     11.12     25.46     9.63  
                   

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Dividends

        The payments and level of cash dividends by IMS are subject to the discretion of the Board of Directors of IMS. For the years ended December 31, 2009 and 2008, IMS declared quarterly dividends of $0.03 per share or $0.12 per share on an annual basis. Any future dividends declared by the Board of Directors of IMS will be based on, and affected by, a number of factors, including the operating results and financial requirements of IMS.

Reconciliation of U.S. GAAP Measures to Non-GAAP Measures(a)

 
  2009   2008   2007  

Selling and administrative expenses

  $ 661,510   $ 650,218   $ 626,888  
 

Non-GAAP adjustment

        (3,748 )(e)    
               

Non-GAAP Selling and administrative expenses

  $ 661,510   $ 646,470   $ 626,888  
               

Operating Income

 
$

270,888
 
$

498,305
 
$

393,279
 
 

Non-GAAP adjustment

    11,000 (b)   3,748 (e)   88,690 (g)
 

Non-GAAP adjustment

    105,573 (c)   9,408 (f)    
 

Non-GAAP adjustment

    4,190 (c)        
 

Non-GAAP adjustment

    38,712 (d)        
               

Non-GAAP Operating Income

  $ 430,363   $ 511,461   $ 481,969  
               

(a)
"Non-GAAP" measures differ from "U.S. GAAP" measures for each year presented by amounts that are detailed above. Non-GAAP measures are used by management for the purposes of global business decision-making, including developing budgets and managing expenditures. Non-GAAP measures exclude certain U.S. GAAP measures to the extent that management believes exclusion will facilitate comparisons across periods and more clearly indicate trends. Although we disclose Non-GAAP measures in order to give investors a view of our business as seen by management, these Non-GAAP measures are not prepared specifically for investors, are not prepared under a comprehensive set of accounting rules, and are not a replacement for the more comprehensive information for investors included in our U.S. GAAP financial statements. Our Non-GAAP measures differ in significant respects from U.S. GAAP and are likely to differ from the Non-GAAP measures used by other companies.

(b)
Represents $11,000 of expense for professional services consisting of investment banker, legal and accounting fees related to the proposed acquisition of IMS by Healthcare Technology Holdings, Inc., an entity created by certain affiliates of TPG Capital, L.P. and the Canada Pension Plan Investment Board (see Note 16 to our Consolidated Financial Statements).

(c)
Represents $105,573 of severance, impairment and other charges recorded in the second half of 2009 for employee termination benefits and facility exit costs as a result of the streamlining program we announced in July 2009 in response to accelerating healthcare marketplace dynamics compounded by a sustained economic downturn. Additionally, we recorded $4,190 of accelerated depreciation and amortization charges related to exited facilities which are included in Depreciation and other amortization. See Note 6 to our Consolidated Financial Statements. Severance, impairment and other charges were also recorded in 2000, 2001, 2003, 2004 and 2007 and there can be no assurances that such charges will not be recorded in the future.

(d)
Represents $38,712 of impairment and other charges recorded in the second and fourth quarters of 2009 for the write-down of certain capitalized software and prepaid assets to their net realizable values, supplier contract-related charges to be incurred with no future economic benefit, capital

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    contributed by selling shareholders of a previously acquired business, partially offset by reversals related to our 2007 restructuring plan (see Note 6 to our Consolidated Financial Statements).

(e)
Represents expense incurred of $3,748 recorded in 2008 related to our Government Solutions subsidiary (see Note 15 to our Consolidated Financial Statements). This subsidiary had discovered potential noncompliance with various contract clauses and requirements under its General Services Administration Contract which was awarded in 2002 to its predecessor company, Synchronous Knowledge Inc. (Synchronous Knowledge Inc. was acquired by IMS in May 2005). Upon discovery of the potential noncompliance, we began remediation efforts, promptly disclosed the potential noncompliance to the U.S. government, and were accepted into the Department of Defense Voluntary Disclosure Program. We filed our Voluntary Disclosure Program Report ("Disclosure Report") on August 29, 2008. Based on our findings as disclosed in the Disclosure Report, we recorded a reserve of approximately $3,748 for this matter in the third quarter of 2008. We are currently unable to determine the outcome of this matter pending the resolution of the Voluntary Disclosure Program process and our ultimate liability arising from this matter could exceed our current reserve. For geographical reporting purposes, this subsidiary is included in our Americas region.

(f)
Represents $9,408 of impairment charges in 2008 for the write-off of certain capitalized software assets in our EMEA and Asia Pacific regions resulting from the discontinuation of certain IMS products at the end of 2008 (see Note 6 to our Consolidated Financial Statements).

(g)
Represents $88,690 of severance, impairment and other charges in 2007, including severance for approximately 1,070 employees and write-downs of two impaired assets and related contract payments to be incurred with no future economic benefit based on our decision to abandon certain products in our EMEA region (see Note 6 to our Consolidated Financial Statements).

Item 7A.    Quantitative and Qualitative Disclosures about Market Risk

        Quantitative and qualitative disclosures about market risk are set forth under "Market Risk" in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of this Annual Report on Form 10-K, and in "Note 9. Financial Instruments" of Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

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Item 8.    Financial Statements and Supplementary Data

Index to Consolidated Financial Statements and Financial Statement Schedule

 
  Page

Statement of Management's Responsibility for Financial Statements

  56

Management's Report on Internal Control Over Financial Reporting

  57

Report of Independent Registered Public Accounting Firm

  58

FINANCIAL STATEMENTS:

   

As of December 31, 2009 and 2008:

   
 

Consolidated Statements of Financial Position

  59

For the years ended December 31, 2009, 2008 and 2007:

   
 

Consolidated Statements of Income

  60
 

Consolidated Statements of Cash Flows

  61
 

Consolidated Statements of Shareholders' Equity (Deficit)

  63

Notes to Consolidated Financial Statements

  66

OTHER FINANCIAL INFORMATION:

   

Quarterly Financial Data (Unaudited) for the years ended December 31, 2009 and 2008

  114

Five-Year Selected Financial Data (Unaudited)

  115

FINANCIAL STATEMENT SCHEDULE:

   

Schedule II—Valuation and Qualifying Accounts for the years ended December 31, 2009, 2008 and 2007

  182

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Statement of Management's Responsibility for Financial Statements

To the Shareholders of IMS Health Incorporated:

        Management is responsible for the preparation of the consolidated financial statements and related information that are presented in this report. The consolidated financial statements, which include amounts based on management's estimates and judgments, have been prepared in conformity with accounting principles generally accepted in the United States of America. Other financial information in the report to shareholders is consistent with that in the consolidated financial statements.

        The Company maintains accounting and internal control systems to provide reasonable assurance at reasonable cost that assets are safeguarded against loss from unauthorized use or disposition, and that the financial records are reliable for preparing financial statements and maintaining accountability for assets. These systems are augmented by written policies, an organizational structure providing division of responsibilities, careful selection and training of qualified personnel and a program of internal audits.

        The Company, through its Audit Committee consisting solely of independent directors of the Company, engaged PricewaterhouseCoopers LLP, independent auditors, to audit and render an opinion on the consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). These standards include consideration of the internal control structure and tests of transactions to the extent considered necessary by them to support their opinion.

        The Board of Directors, through its Audit Committee consisting solely of independent directors of the Company, meets periodically with management, internal auditors and our independent auditors to ensure that each is meeting its responsibilities and to discuss matters concerning internal controls and financial reporting. PricewaterhouseCoopers LLP and the internal auditors each have full and free access to the Audit Committee.

David R. Carlucci
Chairman, Chief Executive Officer and President

Leslye G. Katz
Senior Vice President and Chief Financial Officer

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Management's Report on Internal Control Over Financial Reporting

        Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment using the criteria in Internal Control—Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). The Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        Based on its assessment, management has concluded that the Company maintained effective internal control over financial reporting as of December 31, 2009, based on criteria in Internal Control—Integrated Framework issued by the COSO. The effectiveness of the Company's internal control over financial reporting as of December 31, 2009, has been audited by PricewaterhouseCoopers LLP, the Company's independent registered public accounting firm, as stated in their report included herein.

David R. Carlucci
Chairman, Chief Executive Officer and President

Leslye G. Katz
Senior Vice President and Chief Financial Officer

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of IMS Health Incorporated:

        In our opinion, the accompanying consolidated statements of financial position and the related consolidated statements of income, cash flows and shareholders' equity present fairly, in all material respects, the financial position of IMS Health Incorporated and its subsidiaries at December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 8. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

        As discussed in Note 12 to the Consolidated Financial Statements, the Company adopted the Uncertainty in Income Taxes standard on January 1, 2007. As discussed in Note 7 to the Consolidated Financial Statements, the Company changed the manner in which it accounts for noncontrolling interests effective January 1, 2009.

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PricewaterhouseCoopers LLP
New York, New York
February 17, 2010

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IMS Health Incorporated

Consolidated Statements of Financial Position

 
  As of December 31,  
(Dollars and shares in thousands, except per share data)
  2009   2008  

Assets:

             

Current Assets:

             

Cash and cash equivalents

  $ 380,343   $ 215,682  

Restricted cash

    4,319      

Accounts receivable, net of allowances of $7,709 and $5,960 in 2009 and 2008 respectively

    322,569     382,776  

Other current assets (Note 17)

    190,445     174,099  
           

Total Current Assets

  $ 897,676   $ 772,557  
           

Securities and other investments (Note 8)

    8,324     7,121  

Property, plant and equipment, net of accumulated depreciation of $214,859 and $208,340 in 2009 and 2008, respectively

    181,680     183,055  

Computer software

    254,921     253,583  

Goodwill (Note 5)

    700,250     663,532  

Other assets (Note 17)

    179,864     207,289  
           

Total Assets

  $ 2,222,715   $ 2,087,137  
           

Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity (Deficit):

             

Current Liabilities:

             

Accounts payable

  $ 105,432   $ 119,798  

Accrued and other current liabilities

    392,139     275,764  

Accrued income taxes

    12,934     47,735  

Short-term deferred tax liability

    9,510     9,444  

Deferred revenues

    123,395     88,484  
           

Total Current Liabilities

  $ 643,410   $ 541,225  
           

Postretirement and postemployment benefits

    112,230     109,516  

Long-term debt (Note 9)

    1,244,653     1,404,199  

Other liabilities (Note 17)

    148,757     185,677  
           

Total Liabilities

  $ 2,149,050   $ 2,240,617  
           

Commitments and Contingencies (Notes 13 and 15)

             

Redeemable Noncontrolling Interests (Note 7)

  $   $ 100,000  
           

Shareholders' Equity (Deficit):

             

Common Stock, par value $.01, authorized 800,000 shares; issued 335,045 shares in 2009 and 2008, respectively

  $ 3,350   $ 3,350  

Capital in excess of par

    547,723     546,478  

Retained earnings

    3,297,038     3,060,345  

Treasury stock, at cost, 152,388 shares and 153,564 shares in 2009 and 2008, respectively

    (3,549,146 )   (3,576,446 )

Cumulative translation adjustment

    (130,693 )   (171,990 )

Unamortized postretirement and postemployment balances

    (96,447 )   (117,111 )
           

Total IMS Health Shareholders' Equity (Deficit)

  $ 71,825   $ (255,374 )
           

Noncontrolling Interests (Note 7)

    1,840     1,894  
           

Total Equity (Deficit)

  $ 73,665   $ (253,480 )
           

Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity (Deficit)

  $ 2,222,715   $ 2,087,137  
           

The accompanying notes are an integral part of the Consolidated Financial Statements.

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IMS Health Incorporated

Consolidated Statements of Income

 
  Years Ended December 31,  
(Dollars and shares in thousands, except per share data)
  2009   2008   2007  

Information and analytics revenue

  $ 1,706,744   $ 1,787,487   $ 1,700,244  

Consulting and services revenue

    483,001     542,041     492,327  
               

Operating Revenue

  $ 2,189,745   $ 2,329,528   $ 2,192,571  
               

Operating costs of information and analytics

    715,766     756,987     713,168  

Direct and incremental costs of consulting and services

    250,411     275,246     244,289  

External-use software amortization

    40,361     49,728     48,609  

Selling and administrative expenses

    661,510     650,218     626,888  

Depreciation and other amortization

    95,524     89,636     77,648  

Severance, impairment and other charges (Note 6)

    144,285     9,408     88,690  

Merger costs (Note 16)

    11,000          
               

Operating Income

  $ 270,888   $ 498,305   $ 393,279  
               

Interest income

    3,505     12,737     8,121  

Interest expense

    (36,514 )   (47,188 )   (37,867 )

Gains from investments, net

    41     379     2,317  

Other expense, net

    (1,306 )   (41,441 )   (8,459 )
               

Non-Operating Loss, net

  $ (34,274 ) $ (75,513 ) $ (35,888 )
               

Income before benefit from (provision) for income taxes

    236,614     422,792     357,391  

Benefit from (provision) for income taxes (Note 12)

    24,005     (106,206 )   (117,922 )
               

Net Income

  $ 260,619   $ 316,586   $ 239,469  
               

Less: Net income attributable to noncontrolling interests (Note 7)

    2,164     5,336     5,429  
               

Net Income Attributable to IMS Health

  $ 258,455   $ 311,250   $ 234,040  
               

Basic Earnings Per Share of Common Stock

  $ 1.42   $ 1.70   $ 1.20  
               

Diluted Earnings Per Share of Common Stock

  $ 1.42   $ 1.70   $ 1.18  
               

Weighted average number of shares outstanding—basic

   
182,358
   
182,790
   
195,092
 

Dilutive effect of shares issuable as of period-end under stock option plans and other

    142     792     2,770  

Adjustment of shares outstanding applicable to exercised and cancelled stock options during the period

    99     28     810  
               

Weighted Average Number of Shares Outstanding—Diluted

    182,599     183,610     198,672  
               

The accompanying notes are an integral part of the Consolidated Financial Statements.

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IMS Health Incorporated

Consolidated Statements of Cash Flows

 
  Years Ended December 31,  
(Dollars in thousands)
  2009   2008   2007  

Cash Flows from Operating Activities:

                   
 

Net income

  $ 260,619   $ 316,586   $ 239,469  

Adjustments to reconcile net income to net cash provided by operating activities:

                   
 

Depreciation and amortization

    135,885     139,364     126,257  
 

Bad debt expense

    2,894     2,267     3,092  
 

Deferred income taxes

    (44,861 )   (11,931 )   (19,743 )
 

Gains from investments, net

    (41 )   (379 )   (2,317 )
 

Gain on sale of assets, net

    (2,342 )   (4,041 )   (1,278 )
 

Non-cash stock-based compensation charges

    32,542     28,036     35,592  
 

Non-cash portion of severance, impairment and other charges

    32,422     9,408     13,647  
 

Net tax (expense) benefit on stock-based compensation

    (4,572 )   (499 )   12,304  
 

Excess tax benefits from stock-based compensation

    (54 )   (94 )   (5,103 )

Change in assets and liabilities, excluding effects from acquisitions and dispositions:

                   
 

Net decrease (increase) in accounts receivable

    52,291     31,931     (48,822 )
 

Net decrease (increase) in work-in-process inventory

    1,893     (1,654 )   (5,606 )
 

Net decrease (increase) in prepaid expenses and other current assets

    8,760     (240 )   (5,734 )
 

Net (decrease) increase in accounts payable

    (15,625 )   1,580     28,035  
 

Net increase (decrease) in accrued and other current liabilities

    30,165     (12,550 )   5,634  
 

Net increase (decrease) in accrued severance, impairment and other charges

    83,730     (51,057 )   72,951  
 

Net increase (decrease) in deferred revenue

    31,852     (27,694 )   (9,975 )
 

Net decrease in accrued income taxes

    (76,920 )   (16,698 )   23,439  
 

Net decrease in pension assets (net of liabilities)

    10,009     8,352     6,444  
 

Net decrease (increase) in other long-term assets (net of long-term liabilities)

    3,941     9,967     (1,398 )
               
 

Net Cash Provided by Operating Activities

  $ 542,588   $ 420,654   $ 466,888  
               

The accompanying notes are an integral part of the Consolidated Financial Statements.

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IMS Health Incorporated

Consolidated Statements of Cash Flows (Continued)

 
  Years Ended December 31,  
(Dollars in thousands)
  2009   2008   2007  

Cash Flows Used in Investing Activities:

                   
 

Capital expenditures

  $ (31,604 ) $ (36,352 ) $ (61,182 )
 

Additions to computer software

    (85,787 )   (77,642 )   (103,954 )
 

Proceeds from sale of assets

    5,494     5,272      
 

Net increase in restricted cash

    (4,319 )        
 

Payments for acquisitions of businesses, net of cash acquired

    (3,419 )   (63,044 )   (102,939 )
 

Funding of venture capital investments

    (1,400 )   (1,700 )   (1,600 )
 

Other investing activities, net

    1,278     (4,648 )   (2,533 )
               

Net Cash Used in Investing Activities

    (119,757 )   (178,114 )   (272,208 )
               

Cash Flows Used in Financing Activities:

                   
 

Net (decrease) increase in revolving credit facility and other

    (148,662 )   (62,554 )   194,581  
 

Proceeds from private placement notes, short-term credit agreement and bank term loan

        240,000      
 

Repayment of private placement notes and short-term credit agreement

        (150,000 )    
 

Payments for purchase of treasury stock

        (238,046 )   (466,479 )
 

Proceeds from exercise of stock options

    3,240     5,521     143,128  
 

Excess tax benefits from stock-based compensation

    54     94     5,103  
 

Dividends paid

    (21,762 )   (22,183 )   (23,886 )
 

Proceeds from employee stock purchase plan and other

        (25 )   5,719  
 

(Decrease) increase in cash overdrafts

    (3,953 )   3,378     (2,624 )
 

Payments to noncontrolling interests

    (103,875 )   (6,763 )   (6,761 )
               

Net Cash Used in Financing Activities

    (274,958 )   (230,578 )   (151,219 )
               

Effect of Exchange Rate Changes on Cash and Cash Equivalents

    16,788     (14,529 )   17,442  
               

Increase (Decrease) in Cash and Cash Equivalents

    164,661     (2,567 )   60,903  

Cash and Cash Equivalents, Beginning of Period

    215,682     218,249     157,346  
               

Cash and Cash Equivalents, End of Period

  $ 380,343   $ 215,682   $ 218,249  
               

Supplemental Disclosure of Cash Flow Information:

                   

Cash paid during the period for interest

  $ 34,642   $ 43,435   $ 36,021  

Cash paid during the period for income taxes

  $ 104,995   $ 130,191   $ 100,617  

Cash received from income tax refunds

  $ 10,121   $ 11,997   $ 4,982  

The accompanying notes are an integral part of the Consolidated Financial Statements.

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IMS Health Incorporated
Consolidated Statements of Shareholders' Equity (Deficit)

 
   
   
   
   
   
   
  Accumulated Other Comprehensive Income (Loss)    
   
   
 
 
  Shares    
   
   
   
   
   
   
 
 
   
   
   
   
   
  Post
Retirement
Post Employ
Adjust
  Other
Compre-
hensive
Income
  Total
IMS Health
Shareholders'
Equity (Deficit)
   
   
 
(Dollars and shares in thousands, except per share data)
  Common
Stock
  Treasury
Stock
  Common
Stock
  Capital
in Excess
of Par
  Retained
Earnings
  Treasury
Stock
  Cumulative
Translation
Adjustment & Other
  Non
Controlling
Interest
  Total  

Balance, December 31, 2006

    335,045     134,367   $ 3,350   $ 497,955   $ 2,612,939   $ (3,044,996 ) $ 28,925   $ (64,264 )       $ 33,909   $ 410   $ 34,319  
                                                   

Net Income Attributable to IMS Health

                            234,040                     $ 234,040     234,040     1,034     235,074  

Cash Dividends ($0.12 per share)

                            (23,886 )                           (23,886 )         (23,886 )

Stock-Based Compensation Expense

                      35,592                                   35,592           35,592  

Net Tax Benefit on Stock-Based Compensation

                      12,304                                   12,304           12,304  

Treasury Shares Acquired Under Purchases

          16,241           1,306           (467,785 )                     (466,479 )         (466,479 )

Treasury Shares Reissued Under:

                                                                         
 

Exercise of Stock Options

          (6,299 )         (2,498 )         145,626                       143,128           143,128  
 

Vesting of Restricted Stock

          (259 )         (9,504 )         5,991                       (3,513 )         (3,513 )
 

Employee Stock Purchase Plan

          (232 )         345           5,374                       5,719           5,719  

Adoption of accounting for uncertainty in income taxes authoritative guidance

                            (51,815 )                           (51,815 )         (51,815 )

Cumulative Translation Adjustment

                                        33,138           33,138     33,138           33,138  

Postretirement and Postemployment Adjustments

                                              7,680     7,680     7,680           7,680  

Unrealized Gains on Other Investments, net

                                        (132 )         (132 )   (132 )         (132 )
                                                                       

Total Comprehensive Income

                                                  $ 274,726           1,034        
                                                   

Balance, December 31, 2007

    335,045     143,818   $ 3,350   $ 535,500   $ 2,771,278   $ (3,355,790 ) $ 61,931   $ (56,584 )       $ (40,315 ) $ 1,444   $ (38,871 )
                                                   

The accompanying notes are an integral part of the Consolidated Financial Statements.

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IMS Health Incorporated

Consolidated Statements of Shareholders' Equity (Deficit) (Continued)

 
   
   
   
   
   
   
  Accumulated Other Comprehensive
Income (Loss)
   
   
   
 
 
  Shares    
   
   
   
   
   
   
 
 
   
   
   
   
   
  Post
Retirement
Post Employ
Adjust
   
  Total
IMS Health
Shareholders'
Equity (Deficit)
   
   
 
(Dollars and shares in thousands, except per share data)
  Common
Stock
  Treasury
Stock
  Common
Stock
  Capital
in Excess
of Par
  Retained
Earnings
  Treasury
Stock
  Cumulative
Translation
Adjustment
  Other
Comprehensive
Income
  Non
Controlling
Interest
  Total  

Balance, December 31, 2007

    335,045     143,818   $ 3,350   $ 535,500   $ 2,771,278   $ (3,355,790 ) $ 61,931   $ (56,584 )       $ (40,315 ) $ 1,444   $ (38,871 )
                                                   

Net Income Attributable to IMS Health

                            311,250                     $ 311,250     311,250     940     312,190  

Cash Dividends ($0.12 per share)

                            (22,183 )                           (22,183 )         (22,183 )

Stock-Based Compensation Expense

                      28,036                                   28,036           28,036  

Net Tax Benefit on Stock-Based Compensation

                      (499 )                                 (499 )         (499 )

Treasury Shares Acquired Under Purchases

          10,495                       (238,046 )                     (238,046 )         (238,046 )

Treasury Shares Reissued Under:

                                                                         
 

Exercise of Stock Options

          (277 )         (920 )         6,441                       5,521           5,521  
 

Vesting of Restricted Stock

          (473 )         (15,642 )         10,977                       (4,665 )         (4,665 )
 

Employee Stock Purchase Plan

          1           3           (28 )                     (25 )         (25 )

Cumulative Translation Adjustment

                                        (233,921 )         (233,921 )   (233,921 )   (490 )   (234,411 )

Postretirement and Postemployment Adjustments

                                              (60,527 )   (60,527 )   (60,527 )         (60,527 )
                                                                       

Total Comprehensive Income

                                                  $ 16,802           450        
                                                   

Balance, December 31, 2008

    335,045     153,564   $ 3,350   $ 546,478   $ 3,060,345   $ (3,576,446 ) $ (171,990 ) $ (117,111 )       $ (255,374 ) $ 1,894   $ (253,480 )
                                                   

The accompanying notes are an integral part of the Consolidated Financial Statements.

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IMS Health Incorporated

Consolidated Statements of Shareholders' Equity (Deficit) (Continued)

 
  Shares    
   
   
   
  Accumulated Other Comprehensive
Income (Loss)
   
   
   
 
(Dollars and shares in thousands,
except per share data)

  Common
Stock
  Treasury
Stock
  Common
Stock
  Capital in
Excess
of Par
  Retained
Earnings
  Treasury
Stock
  Cumulative
Translation
Adjustment
  Post
Retirement
Post Employ Adjust
  Other
Comprehensive
Income
  Total IMS Health
Shareholders'
Equity (Deficit)
  Non
Controlling
Interest
  Total  

Balance, December 31, 2008

    335,045     153,564   $ 3,350   $ 546,478   $ 3,060,345   $ (3,576,446 ) $ (171,990 ) $ (117,111 )       $ (255,374 ) $ 1,894   $ (253,480 )
                                                   

Net Income Attributable to IMS Health

                            258,455                     $ 258,455     258,455     276     258,731  

Cash Dividends ($0.12 per share)

                            (21,762 )                           (21,762 )         (21,762 )

Stock-Based Compensation Expense

                      33,580                                   33,580           33,580  

Net Tax Benefit on Stock-Based Compensation

                      (4,572 )                                 (4,572 )         (4,572 )

Capital Contributed by Selling Shareholders of Acquired Business

                      2,904                                   2,904           2,904  

Treasury Shares Reissued Under:

                                                                         
 

Exercise of Stock Options

          (193 )         (1,234 )         4,474                       3,240           3,240  
 

Vesting of Restricted Stock

          (983 )         (29,433 )         22,826                       (6,607 )         (6,607 )

Cumulative Translation Adjustment

                                        41,297           41,297     41,297     (330 )   40,967  

Postretirement and Postemployment Adjustments

                                              20,664     20,664     20,664           20,664  
                                                                       

Total Comprehensive Income

                                                  $ 320,416           (54 )      
                                                   

Balance, December 31, 2009

    335,045     152,388   $ 3,350   $ 547,723   $ 3,297,038   $ (3,549,146 ) $ (130,693 ) $ (96,447 )       $ 71,825   $ 1,840   $ 73,665  
                                                   

The accompanying notes are an integral part of the Consolidated Financial Statements.

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Notes to Consolidated Financial Statements

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

Note 1. Basis of Presentation

        IMS Health Incorporated ("IMS," or the "Company") is the leading global provider of market intelligence to the pharmaceutical and healthcare industries. The Company offers leading-edge market intelligence products and services that are integral to its clients' day-to-day operations, including product and portfolio management capabilities; commercial effectiveness innovations; managed care and consumer health offerings; and consulting and services solutions that improve productivity and the delivery of quality healthcare worldwide. The Company's information products are developed to meet client needs by using data secured from a worldwide network of suppliers in more than 100 countries. The Company's business lines are:

    Commercial Effectiveness to increase clients' productivity across end-to-end sales, marketing, promotional and performance management processes;

    Product and Portfolio Management to provide clients with insights into market measurement so they can optimize their product portfolio and strategies; and

    New Business Areas that support pharmaceutical client business initiatives in managed markets, consumer health, and pricing and market access, and that also serve payer and government audiences.

        Within these business lines, the Company provides consulting and services that use in-house capabilities and methodologies to assist clients in analyzing and evaluating market trends, strategies and tactics, and to help in the development and implementation of customized software applications and data warehouse tools.

        The Company operates in more than 100 countries.

        The Company is managed on a global business model with global leaders for the majority of its critical business processes and accordingly has one reportable segment (see Note 18).

        On November 5, 2009, the Company entered into a merger agreement providing for the acquisition of the Company by Healthcare Technology Holdings, Inc., an entity created by certain affiliates of TPG Capital, L.P. ("TPG") and the Canada Pension Plan Investment Board ("CPPIB"). See Note 16 for further details.

Note 2. Summary of Significant Accounting Policies

        CONSOLIDATION.    The Consolidated Financial Statements of the Company include the accounts of the Company, its subsidiaries and investments in which the Company has control. Intercompany accounts and transactions are eliminated in consolidation. Investments in companies over which the Company has significant influence but not a controlling interest are accounted for under the equity method of accounting. The Company recognizes in the income statement any gains or losses related to the issuance of stock by a consolidated subsidiary or an investment accounted for under the equity method.

        CASH AND CASH EQUIVALENTS AND RESTRICTED CASH.    Cash and cash equivalents include primarily time and demand deposits in the Company's operating bank accounts. The Company considers all highly liquid investments with a maturity of 90 days or less at the time of purchase to be cash equivalents. Restricted cash consists of amounts not immediately available.

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Notes to Consolidated Financial Statements (Continued)

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

Note 2. Summary of Significant Accounting Policies (Continued)

        SECURITIES AND OTHER INVESTMENTS.    The Company holds investments in partnership interests in venture capital partnerships. The partnership interests are recorded in the financial statements at cost. On a quarterly basis the Company makes estimates of the market value of these investments and reduces the carrying value of the investments if there is an other-than-temporary decline in the fair value below cost. No investments had an estimated fair value less than the carrying value of the investment as of December 31, 2009 and 2008.

        PROPERTY, PLANT AND EQUIPMENT.    Buildings, machinery and equipment are recorded at cost and depreciated over their estimated useful lives to their salvage values using the straight-line method. Leasehold improvements are recorded at cost and amortized on a straight-line basis over the shorter of the term of the lease or the estimated useful life of the improvement. See Note 17.

        COMPUTER SOFTWARE.    Direct costs incurred in the development of the Company's external-use computer software to be sold, leased, or otherwise marketed are capitalized. Research and development costs incurred to establish technological feasibility of a computer software product are expensed in the periods in which they are incurred. Capitalization ceases and amortization starts when the product is available for general release to customers. External-use computer software costs are amortized on a product by product basis generally over three to seven years. Annual amortization is the greater of the amount computed using (a) the ratio of current gross revenues for a product to the total of current and anticipated future gross revenues for that product, or (b) the straight-line method over the remaining estimated economic life of the product. The Company periodically reviews the unamortized capitalized costs of its computer software based on a comparison of the carrying value of the external-use software with its estimated net realizable value. The Company recognizes immediately any impairment losses on software as a result of its review, or upon the Company's decision to discontinue a product. See Note 5.

        Capitalized internal-use software costs are amortized on a straight-line basis generally over three to five years.

        GOODWILL.    Goodwill represents the excess purchase price over the fair value of identifiable net assets of businesses acquired, and is not amortized. The Company reviews the recoverability of goodwill annually (or based on any triggering event) by comparing the estimated fair values (based on discounted cash flow analysis) of reporting units with their respective net book values. If the carrying amount of the reporting unit exceeds its fair value, the goodwill impairment loss is measured as the excess of the carrying value of goodwill over its fair value. See Note 5.

        OTHER LONG-LIVED ASSETS.    The Company reviews the recoverability of its long-lived assets and finite-lived identifiable intangibles held and used whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In general, the assessment of possible impairment is based on the Company's ability to recover the carrying value of the asset from the undiscounted expected future cash flows of the asset. If the future cash flows are less than the carrying value of such asset, an impairment charge is recognized for the difference between the estimated fair value and the carrying value.

        REVENUE RECOGNITION.    The Company recognizes revenue when the following criteria have been met: 1) persuasive evidence of an arrangement exists; 2) delivery has occurred or services have

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Notes to Consolidated Financial Statements (Continued)

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

Note 2. Summary of Significant Accounting Policies (Continued)


been rendered; 3) the seller's price to the buyer is fixed or determinable; and 4) collectibility is reasonably assured.

        The Company offers various information and analytics ("I&A") products developed to meet its customers' needs by using data secured from a worldwide network of suppliers. The Company's revenue arrangements may include multiple elements. A typical I&A arrangement (primarily under fixed-price contracts) may include an ongoing subscription-based deliverable for which revenue is recognized ratably as earned over the contract period, and/or a one-time delivery of historical data ("backdata") for which revenue is recognized upon delivery, assuming all other criteria are met. These deliverables qualify as separate units of accounting as each has value on a standalone basis to the customer, objective and reliable evidence of fair value for any undelivered item(s) exists, and where the arrangement includes a general right of return relative to the delivered item(s), delivery of the undelivered item(s) is probable and within the Company's control. The Company allocates revenue to each element within its arrangements based upon their respective relative fair values. Fair values for these elements are based upon the normal pricing practices for ongoing subscriptions and backdata when sold separately. The Company defers revenue for any undelivered elements, and recognizes revenue when the product is delivered or over the period in which the service is performed, in accordance with its revenue recognition policy for such element as noted above. If the Company cannot objectively determine the fair value of any undelivered element, revenue is deferred until all elements are delivered and services have been performed, or until fair value can objectively be determined for any remaining undelivered elements.

        The Company also offers evidenced-based solutions that allow its clients to make informed business decisions. These consulting and services ("C&S") offerings provide assistance with the analysis of the Company's I&A products. Revenues for certain of these arrangements are recognized on a straight-line basis over the term of the arrangement. Revenues for time and material contracts are recognized as the services are provided. Revenues for fixed price contracts are recognized either over the contract term based on the ratio of the number of hours incurred for services provided during the period compared to the total estimated hours to be incurred over the entire arrangement (efforts based), or upon delivery.

        The Company enters into barter transactions in the normal course in which it exchanges data for data, or data for other services such as advertising, software licenses and panel recruitment. The Company recognizes revenue from barter transactions as its products are delivered or services are performed. The related barter expense is recognized as the products or services are utilized by the Company, the majority of which is in the same accounting period as the related barter revenue. Barter transactions are valued based on either the fair value of the products or services received by the Company or the fair value of the information or services delivered to customers, whichever is more clearly evident. The Company's barter revenues have accounted for approximately 3% to 4% of total consolidated revenues in each of the three years ended December 31, 2009.

        The company presents its revenues net of taxes assessed by government authorities.

        Payment terms vary by customer, but are typically stipulated in the contract and are generally net 30 days from date of invoice. The Company generally does not offer extended payment terms. Advance payments from customers are credited to Deferred revenues and reflected in Operating Revenue as earned over the contract term. Included in Accounts receivable, net in the Consolidated Statements of Financial Position are unbilled receivables, which represent revenues for products delivered or services

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Notes to Consolidated Financial Statements (Continued)

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

Note 2. Summary of Significant Accounting Policies (Continued)


performed that have not yet been invoiced to the customer. Unbilled receivables are generally invoiced within the following month.

        OPERATING COSTS OF INFORMATION AND ANALYTICS.    Operating costs of I&A include costs of data, data collection and processing and costs attributable to personnel involved in production, data management and delivery of the Company's I&A offerings.

        One of the Company's major expenditures is the cost for the data it receives from suppliers. After receipt of the raw data and prior to the data being available for use in any part of its business, the Company is required to transform the raw data into useful information through a series of comprehensive processes. These processes involve significant employee costs and data processing costs.

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

        DIRECT AND INCREMENTAL COSTS OF CONSULTING AND SERVICES.    Direct and incremental costs of C&S include the costs of the Company's consulting staff directly involved with delivering revenue generating engagements, related accommodations and the costs of primary market research data purchased specifically for certain individual C&S engagements. Although the Company's data is used in multiple customer solutions across different offerings within both I&A and C&S, the Company does not have a meaningful way to allocate the direct cost of the data between I&A and C&S revenues. As such, the direct and incremental costs of C&S do not reflect the total costs incurred to deliver the Company's C&S revenues.

        Costs associated with the Company's time and material and fixed-price C&S contracts are recognized as incurred.

        PENSIONS AND OTHER POSTRETIREMENT BENEFITS.    The Company provides a number of retirement benefits to its employees, including defined benefit pension plans and postretirement medical plans. The determination of benefit obligations and expense is based on actuarial models. In order to measure benefit costs and obligations using these models, critical assumptions are made with regard to the discount rate, expected return on plan assets, cash balance crediting rate, lump sum conversion rate and the assumed rate of compensation increases. In addition, retiree medical care cost trend rates are a key assumption used exclusively in determining costs for the Company's postretirement health care and life insurance benefit plans. Management reviews these critical assumptions at least annually. Other assumptions involve demographic factors such as the turnover, retirement and mortality rates. Management reviews these assumptions periodically and updates them when its experience deems it appropriate to do so.

        The discount rate is the rate at which the benefit obligations could be effectively settled and is determined annually by management. For U.S. plans, the discount rate is based on results of a modeling process in which the plans' expected cash flow (determined on a projected benefit obligation basis) is matched with spot rates developed from a yield curve comprised of high-grade (Moody's Aa and above, or Standard and Poor's AA and above) non-callable corporate bonds to develop the present value of the expected cash flow, and then determining the single rate (discount rate) which when applied to the expected cash flow derives that same present value. In the U.K. specifically, the discount rate is set based on the yields on a universe of approximately 150 high quality (Aa rated) corporate

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

Note 2. Summary of Significant Accounting Policies (Continued)


bonds denominated in UK Sterling, appropriate to the duration of Plan liabilities. For the other non-U.S. plans, the discount rate is based on the current yield of an index of high quality corporate bonds. At December 31, 2009, the discount rate was 6.0%, unchanged from December 31, 2008 for its U.S. pension plans and postretirement benefit plan. Similarly, the discount rate for its U.K. pension plan was unchanged at 6.0%. The U.S. and U.K. plans represent 97% of the consolidated benefit obligation as of December 31, 2009. The discount rate in other non-U.S. countries decreased, where the range of applicable discount rates at December 31, 2009 was 2.2% – 10.4%. These smaller non-U.S. plans constitute only 3% of the consolidated benefit obligation at December 31, 2009. As a sensitivity measure, a 25 basis point increase in the discount rate for the Company's U.S. plan, absent any offsetting changes in other assumptions, would result in a decrease in pension expense of approximately $95 within the Consolidated Statement of Income. For the Company's U.K. plan, a 25 basis point increase in the discount rate, absent any offsetting changes in other assumptions, would result in a decrease in pension expense of approximately $668 within the Consolidated Statements of Income.

        Under the U.S. qualified retirement plan, participants have a notional retirement account that increases with pay and investment credits. The rate used to determine the investment credit (cash balance crediting rate) varies monthly and is equal to 1/12th of the yield on 30-year U.S. Government Treasury Bonds, with a minimum of 0.25%. At retirement, the account is converted to a monthly retirement benefit.

        In selecting an expected return on plan asset assumption, the Company considers the returns being earned by each plan investment category in the fund, the rates of return expected to be available for reinvestment and long-term economic forecasts for the type of investments held by the plan. At January 1, 2010, the expected return on plan assets for the U.S. pension plans is 8.5%, which is unchanged versus January 1, 2009. Outside the U.S. the range of applicable expected rates of return is 1.5% – 7.25% as of January 1, 2010 versus a range of 1.5% – 7.5% as of January 1, 2009. The actual return on plan assets will vary from year to year versus this assumption. The Company believes it is appropriate to use long-term expected forecasts in selecting the expected return on plan assets. As such, there can be no assurance that the Company's actual return on plan assets will approximate the long-term expected forecasts. The expected return on assets ("EROA") was $24,104 and $31,454 and the actual return on assets was $54,930 and ($90,414), respectively, for the years ended December 31, 2009 and 2008. As a sensitivity measure, a 25 basis point change in the EROA assumption for the Company's U.S. plan, absent any offsetting changes in other assumptions, would result in approximately $397 of an increase or decrease in pension expense within the Consolidated Statements of Income. For the Company's U.K. plan, a 25 basis point change in the EROA assumption, absent any offsetting changes in other assumptions, would result in approximately $374 of an increase or decrease in pension expense within the Consolidated Statements of Income. While the Company believes that the assumptions used are reasonable, differences in actual experience or changes in assumptions may materially affect its pension and postretirement obligations and future expense.

        The Company utilizes a corridor approach to amortizing unrecognized gains and losses in the pension and postretirement plans. Amortization occurs when the accumulated unrecognized net gain or loss balance exceeds the criterion of 10% of the larger of the beginning balances of the projected benefit obligation or the market-related value of the plan assets. The excess unrecognized gain or loss balance is then amortized using the straight-line method over the average remaining service-life of active employees expected to receive benefits. At December 31, 2009, the weighted-average remaining service-life of active employees was 10.67 years.

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

Note 2. Summary of Significant Accounting Policies (Continued)

        During fiscal 2009, the Company contributed $10,231 to its pension and postretirement benefit plans which included voluntary contributions above the minimum requirements for the pension plans. The Company currently expects to contribute $13,473 in required contributions and $274 in discretionary contributions to its pension and postretirement benefit plans during fiscal 2010. The Company may make additional contributions into its pension plans in fiscal 2010 depending on, among other factors, how the funded status of those plans changes and in order to meet minimum funding requirements as set forth in employee benefit and tax laws, plus additional amounts the Company may deem to be appropriate.

        At December 31, 2009, the projected benefit obligation exceeded the fair value of assets in the Company's pension plans by $30,353.

        As of January 1, 2008, the Company utilizes a fiscal year end measurement date for all plans.

        Additional information on pension and other postretirement benefit plans is contained in Note 10.

        FOREIGN CURRENCY TRANSLATION.    The Company has significant investments in non-U.S. countries. Therefore, changes in the value of foreign currencies affect the Company's Consolidated Financial Statements when translated into U.S. dollars. For all operations outside the U.S. where the Company has designated the local currency as the functional currency, assets and liabilities are translated using end-of-period exchange rates; revenues, expenses and cash flows are translated using average rates of exchange. For these countries, currency translation adjustments are accumulated in a separate component of Shareholders' Equity (Deficit), whereas transaction gains and losses are recognized in Other expense, net. For operations in countries that are considered to be highly inflationary or where the U.S. dollar is designated as the functional currency, monetary assets and liabilities are remeasured using end-of-period exchange rates, whereas non-monetary accounts are remeasured using historical exchange rates, and all remeasurement and transaction adjustments are recognized in Other expense, net.

        INCOME TAXES.    The Company operates in more than 100 countries around the world and its earnings are taxed at the applicable income tax rate in each of those countries. The Company provides for income taxes utilizing the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each balance sheet date, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. If it is determined that it is more likely than not that future tax benefits associated with a deferred tax asset will not be realized, a valuation allowance is provided. In the event the Company was to determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. Likewise, should the Company determine that it would not be able to realize all or part of its net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made. The effect on deferred tax assets and liabilities of a change in the tax rates is recognized in income in the period that includes the enactment date. While the Company intends to continue to seek global tax planning initiatives, there can be no assurance that it will be able to successfully identify and implement such initiatives to reduce or maintain its overall tax rate.

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

Note 2. Summary of Significant Accounting Policies (Continued)

        STOCK-BASED COMPENSATION.    The Company maintains stock incentive plans, which provide for the grant of stock options, stock appreciation rights, restricted stock and restricted stock units to eligible employees and Non-Employee Directors. The Company is required to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service period of the award in the Company's Consolidated Statements of Income. As the stock-based compensation is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. The Company is required to estimate the forfeitures at the time of grant and revise, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Prior to 2006, the Company accounted for stock-based awards to employees and directors using the intrinsic value method. Under the intrinsic value method, stock-based compensation expense had been recognized in the Company's Consolidated Statements of Income only for stock option modifications and restricted stock units because the exercise price of stock options granted to employees and directors equaled the fair market value of the underlying stock at the date of grant. See Note 11 for additional information.

        COMPUTATION OF NET INCOME PER SHARE.    Basic net income per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares primarily consist of employee stock options and restricted stock units.

        Employee equity share options, restricted stock units and similar equity instruments granted by the Company are treated as potential common shares outstanding in computing diluted earnings per share. Diluted shares outstanding include restricted stock units and the dilutive effect of in-the-money options which is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising stock options, the amount of compensation cost for future service that the Company has not yet recognized, and the amount of benefits that would be recorded in additional paid-in capital when the award becomes deductible for tax purposes are assumed to be used to repurchase shares.

        LEGAL COSTS.    Legal costs in connection with loss contingencies are expensed as incurred.

        USE OF ESTIMATES.    The preparation of financial statements and related disclosures in accordance with generally accepted accounting principles in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates. The most significant estimates relate to allowances, valuation of work-in-process inventories, investments, depreciation of fixed assets including salvage values, carrying value of goodwill and intangible assets, provision for income taxes and tax assets and liabilities, reserves for severance, pensions and reserves for employee benefits, stock-based compensation, contingencies and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The accounting estimates used in the preparation of the Company's Consolidated Financial Statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company's operating environment changes. Actual results

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

Note 2. Summary of Significant Accounting Policies (Continued)

could vary from the estimates and assumptions used in the preparation of the Consolidated Financial Statements.

        RECLASSIFICATIONS.    Certain prior-year amounts have been reclassified to conform to the 2009 presentation.

        SUBSEQUENT EVENTS.    The Company has evaluated for disclosure subsequent events that have occurred up to February 17, 2010, the date of issuance of these financial statements. See Note 19.

Note 3. Summary of Recent Accounting Pronouncements

        In June 2009, the Financial Accounting Standards Board ("FASB") issued authoritative guidance codifying generally accepted accounting principles in the U.S. ("GAAP"). This guidance was effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of this authoritative guidance did not have a material impact on the financial results of the Company.

        In September 2006, the FASB issued authoritative guidance defining fair value, establishing a framework for measuring fair value under GAAP, and expanding disclosures about fair value measurements. This guidance was effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The adoption of this authoritative guidance did not have a material impact on the financial results of the Company. In February 2008, the FASB issued authoritative guidance which delayed the effective date of its previously issued fair value guidance for one year for certain non-financial assets and liabilities and removed certain leasing transactions from its scope. The adoption of this authoritative guidance did not have a material impact on the financial results of the Company.

        In December 2008, the FASB issued authoritative guidance on an employer's disclosures about plan assets of a defined benefit pension or other postretirement plan. This guidance was effective for fiscal years ending after December 15, 2009, with earlier application permitted. Upon initial application, the provisions of this guidance are not required for earlier periods presented for comparative purposes. As this guidance requires only additional disclosures, its adoption did not have a material impact on the financial results of the Company.

        In April 2009, the FASB issued authoritative guidance on determining fair values when there is no active market or where the price inputs being used represent distressed sales. It also reaffirmed what previous guidance had stated is the objective of fair value measurement—to reflect how much an asset would be sold for in an orderly transaction (as opposed to a distressed or forced transaction) at the date of the financial statements under current market conditions. This guidance was effective for interim and annual periods ending after September 15, 2009. The adoption of this authoritative guidance did not have a material impact on the financial results of the Company.

        In April 2009, the FASB issued authoritative guidance which required disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This standard also required those disclosures in summarized financial information at interim reporting periods. This guidance was effective for interim reporting periods ending after September 15, 2009. The adoption of this authoritative guidance did not have a material impact on the financial results of the Company.

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Notes to Consolidated Financial Statements (Continued)

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

Note 3. Summary of Recent Accounting Pronouncements (Continued)

        In May 2009, the FASB issued authoritative guidance establishing general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This guidance was effective for interim or annual financial periods ending after September, 15, 2009. The adoption of this authoritative guidance did not have a material impact on the financial results of the Company.

        In June 2009, the FASB issued authoritative guidance eliminating the concept of qualifying special-purpose entities ("QSPEs"), changing the requirements for derecognizing financial assets and requiring additional disclosures about transfers of financial assets, including securitization transactions, and an entity's continuing involvement in and exposure to the risks related to transferred financial assets. This guidance must be applied as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. The adoption of this authoritative guidance is not expected to have a material impact on the financial results of the Company.

        In June 2009, the FASB issued authoritative guidance eliminating the exemption for QSPEs, requiring a new approach for determining who should consolidate variable-interest entities ("VIEs"), and changing when it is necessary to reassess who should consolidate VIEs. This guidance shall be effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. The adoption of this authoritative guidance is not expected to have a material impact on the financial results of the Company.

        In October 2009, the FASB issued authoritative guidance revising the current accounting treatment to specifically address how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting. This guidance is applicable to revenue arrangements entered into or materially modified during the company's first fiscal year that begins after June 15, 2010. The guidance may be applied either prospectively from the beginning of the fiscal year for new or materially modified arrangements or retrospectively. The Company is currently evaluating this authoritative guidance to determine any potential impact that it may have on the financial results of the Company.

        In October 2009, the FASB issued authoritative guidance changing the accounting model for revenue arrangements that include both tangible products and software elements. Tangible products containing software components and non-software components that function together to deliver the tangible product's essential functionality, are no longer within the scope of the software revenue guidance. This guidance is applicable to revenue arrangements entered into or materially modified during the company's first fiscal year that begins after June 15, 2010. The guidance may be applied either prospectively from the beginning of the fiscal year for new or materially modified arrangements or retrospectively. The Company is currently evaluating this authoritative guidance to determine any potential impact that it may have on the financial results of the Company.

Note 4. Acquisitions and Dispositions

ACQUISITIONS

        The Company makes acquisitions in order to expand its products, services and geographic reach. On January 1, 2009, the Company adopted authoritative guidance which established principles and

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

Note 4. Acquisitions and Dispositions (Continued)


requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. The impact of the adoption of this authoritative guidance on the Company's financial results will be dependent on the terms and conditions of acquisitions consummated on or after the adoption date.

        During the year ended December 31, 2009, the Company did not complete any acquisitions.

        During the year ended December 31, 2008, the Company completed five acquisitions at an aggregate cost of approximately $42,000. These acquisitions were Robinson and James Research Pty Limited (Australia), Fourth Hurdle Consulting Limited (U.K.), Health Benchmarks, Inc. (U.S.), RMBC Pharma Limited (Russia), and the services practice group of Skura Corporation, Inc. (Canada, U.S. and U.K.) and were accounted for under the purchase method of accounting. As such, the aggregate purchase price was allocated on a preliminary basis to the assets acquired based on estimated fair values as of the closing date. The purchase price allocations were finalized during 2008 and 2009. The Consolidated Financial Statements include the results of these acquired companies subsequent to the closing of the acquisitions. Had these acquisitions occurred as of January 1, 2008 or 2007, the impact on the Company's results of operations would not have been significant. Goodwill of approximately $32,000 was recorded in connection with these acquisitions, of which approximately $10,000 is deductible for tax purposes.

DISPOSITIONS

        During the year ended December 31, 2009, the Company sold a building at its Belgium subsidiary in its EMEA region and realized a net pre-tax gain of $2,282. This transaction resulted in cash proceeds of $4,656 in 2009.

        During the year ended December 31, 2008, the Company sold certain assets in its Latin America region and realized a net pre-tax gain of $4,041. This transaction resulted in cash proceeds of $838 in 2009 and $3,880 in 2008.

Note 5. Goodwill and Intangible Assets

        Goodwill and intangible assets that have indefinite useful lives are not amortized and are tested at least annually (or based on any triggering event) for impairment. Intangible assets that have finite useful lives are amortized. The Company's goodwill increased by $36,718 to $700,250 at December 31, 2009, from $663,532 at December 31, 2008 mainly due to foreign currency translation adjustments. The Company completed its annual impairment tests as of September 30, 2009, 2008 and 2007 and was not required to recognize any goodwill impairment charges. Due to market conditions during the fourth quarter of 2008, at December 31, 2008 the Company reviewed its goodwill impairment analysis and determined that no trigger event had occurred subsequent to September 30, 2008 requiring the Company to update its goodwill impairment test.

        All of the Company's other acquired intangibles are subject to amortization. Intangible asset amortization expense was $17,298, $19,055 and $17,750 during the years ended December 31, 2009, 2008 and 2007, respectively. At December 31, 2009 and 2008, intangible assets were primarily composed of customer relationships, databases and trade names (principally included in Other assets) and computer software. The gross carrying amounts and related accumulated amortization of these

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

Note 5. Goodwill and Intangible Assets (Continued)


intangibles were $187,889 and $115,924, respectively, at December 31, 2009 and $189,383 and $98,736, respectively, at December 31, 2008.

        These intangibles are amortized over periods ranging from two to twenty years. As of December 31, 2009, the weighted average amortization periods of the acquired intangibles by asset class are listed in the following table:

Intangible Asset Type
  Weighted
Average
Amortization
Period
(years)
 

Customer Relationships

    10.1  

Computer Software and Algorithms

    7.0  

Databases

    4.7  

Trade Names

    4.3  

Other

    4.0  

Weighted Average

    8.8  

        Customer relationships accounted for the largest portion of the Company's acquired intangibles at December 31, 2009. When determining the value of customer relationships for purposes of allocating the purchase price of an acquisition, the Company looks at existing customer contracts of the acquired business to determine if they represent a reliable future source of income and hence, a valuable intangible asset for the Company. The Company determines the fair value of the customer relationships based on the estimated future benefits the Company expects from the acquired customer contracts. In performing its evaluation and estimation of the useful life of customer relationships, the Company looks to the historical growth rate of revenue of the acquired company's existing customers as well as the historical attrition rates.

        Based on current estimated useful lives, annual amortization expense associated with intangible assets at December 31, 2009 is estimated to be as follows:

Year Ended December 31,
  Amortization
Expense
 

2010

  $ 13,298  

2011

    11,962  

2012

    10,201  

2013

    9,925  

2014

    8,187  

Thereafter

  $ 18,391  

Note 6. Severance, Impairment and Other Charges

        In response to accelerating healthcare marketplace dynamics compounded by a sustained economic downturn, during the third quarter of 2009, the Company committed to a streamlining program (the "Plan") designed to eliminate approximately 850 positions in all areas of the Company's business and in all regions in which the Company operates; however, the majority of actions are planned for the Company's EMEA region. As a result of the Company's Plan to reduce and consolidate the number of operating units, the Plan further includes charges for certain real estate lease impairments along with related accelerated depreciation.

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

Note 6. Severance, Impairment and Other Charges (Continued)

        The actions under the Plan were intended to: 1) streamline the Company's EMEA region organization, including right-sizing the headquarters function, reducing and consolidating the number of operating units across the region, and improving the productivity of production and development activities; 2) leverage the foundational investments in process improvements the Company has made to reduce costs and improve productivity in its Sales, Finance, Human Resources and Customer Delivery and Development organizations; 3) reduce capacity and align the size of the Sales and Management Consulting teams in areas of reduced client demand; and 4) continue to build and invest in high-value, strategic growth areas, which include extending the Company's capabilities in specialty and patient-centered insights, in serving payers and governments, and in emerging markets for pharmaceuticals.

        During the third quarter of 2009 the Company recorded $104,301 in Severance, impairment and other charges for employee termination benefits and facility exit costs and $2,024 in accelerated Depreciation and other amortization related to the facility exits. During the fourth quarter of 2009, the Company recorded an additional $1,272 in Severance, impairment and other charges for facility exit costs and $2,166 in accelerated Depreciation and other amortization related to the facility exits.

        The severance benefits were calculated pursuant to the terms of established employee protection plans, in accordance with local statutory minimum requirements or individual employee contracts, as applicable. Employee termination actions under the Plan are expected to be completed by the end of the third quarter of 2010.

 
  Severance
Related
Reserves
  Facility
Exit
Charges
  Non-Cash
Compensation
Charges
  Currency
Translation
Adjustments
  Total  

Charge at August 31, 2009

  $ 100,653   $ 2,610   $ 1,038   $   $ 104,301  

Charge at December 31, 2009

        1,272             1,272  

2009 utilization

    (9,709 )   (154 )   (1,038 )       (10,901 )

Currency translation adjustments

                760     760  
                       

Balance at December 31, 2009

  $ 90,944   $ 3,728   $   $ 760   $ 95,432  
                       

        The Company currently expects that cash outlays will be applied against the remaining balance in the 2009 charge at December 31, 2009 as follows:

Year Ended December 31,
  Outlays  

2010

  $ 76,315  

2011

    15,603  

2012

    931  

2013

    343  

2014

    341  

Thereafter

    1,899  
       

Total

  $ 95,432  
       

        During the second quarter of 2009, the Company recorded $25,428 in charges as a component of operating income. Of this amount, $17,210 related to non-cash impairment charges for the write-down of certain capitalized software assets to their net realizable values in the Company's Americas and EMEA regions. The write-downs were the result of the regular review of the Company's capitalized

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

Note 6. Severance, Impairment and Other Charges (Continued)


software assets. The remaining $8,218 was for supplier contract-related charges for which the Company will not realize any future economic benefit.

        During the fourth quarter of 2009, the Company recorded $11,270 in charges as a component of operating income related to non-cash impairment charges for the write-down of certain capitalized software and prepaid assets to their net realizable values in its EMEA and Asia Pacific regions. The write-downs were the result of the regular review of the Company's assets. Additionally, the Company recorded $2,904 in charges as a component of operating income related to capital contributed by selling shareholders of a previously acquired business.

        During the fourth quarter of 2008, the Company recorded $9,408 of non-cash impairment charges as a component of operating income related to the write-off of certain capitalized software assets in the Company's EMEA and Asia Pacific regions. This was the result of the discontinuation of certain IMS products at the end of 2008.

        During the fourth quarter of 2007, the Company committed to a restructuring plan designed to eliminate approximately 1,070 positions worldwide in production and development, sales, marketing, consulting and services and administration. The plan also included the write-down of two impaired computer software assets and related contract payments to be incurred with no future economic benefit based on the Company's decision to abandon certain products in the Company's EMEA region. As a result, the Company recorded $88,690 of Severance, impairment and other charges as a component of operating income in the fourth quarter of 2007. The severance benefits were calculated pursuant to the terms of established employee protection plans, in accordance with local statutory minimum requirements or individual employee contracts, as applicable.

        These charges were designed to strengthen client-facing operations worldwide, increase the Company's operating efficiencies and streamline the Company's cost structure. Some of the initiatives included in this plan are designed to better align the Company's resources to help clients manage for change in a challenging climate.

        The severance and contract payments portion of the charge was approximately $75,043 and will all be settled in cash. Termination actions under the plan have been completed.

 
  Severance
Related
Reserves
  Contract
Related
Reserves
  Asset
Write-
Downs
  Currency
Translation
Adjustments
  Total  

Charge at December 31, 2007

  $ 71,583   $ 3,460   $ 13,647   $   $ 88,690  

2007 utilization

            (13,647 )       (13,647 )

2008 utilization

    (48,645 )   (2,150 )           (50,795 )

2009 utilization

    (17,189 )   (817 )           (18,006 )

2009 reversals

    (397 )   (493 )           (890 )

Currency translation adjustments

                (1,825 )   (1,825 )
                       

Balance at December 31, 2009

  $ 5,352   $   $   $ (1,825 ) $ 3,527  
                       

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Notes to Consolidated Financial Statements (Continued)

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

Note 6. Severance, Impairment and Other Charges (Continued)

        The Company currently expects that cash outlays will be applied against the remaining balance in the 2007 charge at December 31, 2009 as follows:

Year Ended December 31,
  Outlays  

2010

  $ 2,675  

2011

    717  

2012

    135  
       

Total

  $ 3,527  
       

Note 7. Noncontrolling Interests

        On January 1, 2009, the Company adopted authoritative guidance which established accounting and reporting standards pertaining to ownership interests in subsidiaries held by parties other than the parent, the amount of net income attributable to the parent and to the noncontrolling interests, changes in a parent's ownership interests, and the valuation of any retained noncontrolling equity investment when a subsidiary is deconsolidated. This guidance also established disclosure requirements that identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. The adoption of this authoritative guidance resulted in the reclassification of amounts previously referred to as minority interests and currently referred to as noncontrolling interests, from mezzanine equity (between Total Liabilities and Shareholders' Equity (Deficit)) to a separate component of Shareholders' Equity (Deficit) in the Company's Consolidated Statements of Financial Position. Additionally, net income attributable to noncontrolling interests, which previously was included in other expense, net on a pretax basis, is shown separately from net income attributable to the Company in the Company's Consolidated Statements of Income. The adoption of this authoritative guidance did not have a material impact on the Company's financial results.

        The following table reconciles noncontrolling interests included as a separate component of Shareholders' Equity (Deficit). Prior year amounts have been reclassified to conform to the current year presentation.

 
  As of December 31,  
 
  2009   2008  

Noncontrolling interests, beginning of period

  $ 1,894   $ 1,444  

Income attributable to noncontrolling interests

    276     940  

Translation adjustments attributable to noncontrolling interests

    (330 )   (490 )
           

Noncontrolling interests, end of period

  $ 1,840   $ 1,894  
           

        In July 2006, the Company, together with two of its wholly-owned subsidiaries, entered into an Amended and Restated Agreement of Limited Liability Company of IMS Health Licensing Associates, L.L.C. (the "Amended LLC Agreement"). The Amended LLC Agreement governed the relationship between the Company, its subsidiaries and two third-party investors with respect to their interests in IMS Health Licensing Associates, L.L.C. (the "LLC"). The LLC is a separate and distinct legal entity that is in the business of licensing database assets and computer software. The Company is the sole managing member of the LLC. From 1997 until June 30, 2009, the Company and/or its subsidiaries, or

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Notes to Consolidated Financial Statements (Continued)

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

Note 7. Noncontrolling Interests (Continued)

their predecessors, had contributed assets to, and held a controlling interest (approximately 93% at June 30, 2009) in the LLC, and the third-party investors had contributed $100,000 to, and held a noncontrolling interest (approximately 7% at June 30, 2009) in the LLC. Pursuant to the terms of the Amended LLC Agreement, on May 6, 2009, the third-party investors elected to have their noncontrolling interests in the LLC liquidated or purchased by the Company or its designee. On June 30, 2009, a wholly-owned subsidiary of the Company purchased the third-party investors' noncontrolling interests in the LLC at a cost of $100,970, which the Company financed through a combination of cash on-hand and borrowings under its revolving credit facility. Following the purchase of the noncontrolling interests, the Company, together with its wholly-owned subsidiaries, hold 100% of the membership interest in the LLC. These third-party investor contributions qualified as redeemable noncontrolling interests as their redemption was not solely within the control of the Company. As such, these redeemable noncontrolling interests were presented in mezzanine equity in the Company's Consolidated Statements of Financial Position. Net income related to these redeemable noncontrolling interests amounted to $1,888 and $4,396 for the years ended December 31, 2009 and 2008, respectively, and is included in net income attributable to noncontrolling interests in the Company's Consolidated Statements of Income.

Note 8. Securities

        Securities and other investments include the Company's investments in limited partner interests in venture capital partnerships. The limited partner interests are carried in the financial statements at cost, which was $8,324 at December 31, 2009 and $7,121 at December 31, 2008. On a quarterly basis, the Company monitors the realizable value of these investments and makes appropriate reductions in their carrying values when a decline in value is deemed to be other-than-temporary. The Company concluded that no reductions to carrying values were necessary during 2009 and 2008.

Note 9. Financial Instruments

FOREIGN EXCHANGE RISK MANAGEMENT

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

        It is the Company's policy to enter into foreign currency transactions only to the extent necessary to meet its objectives as stated above. The Company does not enter into foreign currency transactions for investment or speculative purposes. The principal currencies hedged are the Euro, the Japanese Yen, the British Pound, the Swiss Franc and the Canadian Dollar.

        The impact of foreign exchange risk management activities as described above on pre-tax income resulted in net losses of $3,400, $29,260 and $9,565 in 2009, 2008 and 2007, respectively. In addition, during the fourth quarter of 2008, the Company recorded a $16,071 foreign exchange loss related to the liquidation of non-functional currency Venezuelan Bolívars held at the Company's Swiss operating subsidiary. These foreign exchange losses are included in Other expense, net, in the Consolidated Statements of Income.

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Notes to Consolidated Financial Statements (Continued)

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

Note 9. Financial Instruments (Continued)

        At December 31, 2009, the Company had assets of approximately $433,096 and liabilities of approximately $438,347 in foreign exchange forward contracts outstanding with various expiration dates through November 2010 relating to non-U.S. Dollar anticipated royalties and non-functional currency assets and liabilities. Foreign exchange forward contracts are recorded at estimated fair value. The estimated fair values of the forward contracts are based on quoted market prices.

        Unrealized and realized gains and losses on the contracts hedging net income and non-functional currency assets and liabilities do not qualify for hedge accounting, and therefore are not deferred and are included in the Consolidated Statements of Income in Other expense, net.

        Unrealized gains and losses on the contracts hedging non-U.S. Dollar anticipated royalties qualify for hedge accounting, and are therefore deferred and included in OCI ("Other Comprehensive Income").

 
  Fair Value of Derivative Instruments(1)  
 
  Asset Derivatives   Liability Derivatives  
 
  As of
December 31,
2009
  As of
December 31,
2008
  As of
December 31,
2009
  As of
December 31,
2008
 

Derivatives designated as hedging instruments
                         

Foreign Exchange Contracts

  $ 170,669   $ 172,113   $ 175,545   $ 179,110  

Derivatives not designated as hedging instruments
                         

Foreign Exchange Contracts

    262,427     236,977     262,802     238,023  
                   

Total Derivatives

  $ 433,096   $ 409,090   $ 438,347   $ 417,133  
                   

(1)
The net amounts of these derivatives are included in Current Assets and Current Liabilities in the Consolidated Statements of Financial Position.

Effect of Derivatives on Financial Performance for the year Ended December 31,  
Derivatives in Cash Flow
Hedging Relationships
  Amount of Gain/
(Loss) Recognized
in OCI on Derivatives
 
Location of Gain/(Loss)
Reclassified from OCI into Income
  Amount of Gain/
(Loss) from
OCI into Income
 
 
  2009   2008    
  2009   2008  

Foreign Exchange Contracts

  $ (1,200 ) $ (14,300 )

Other Income (Expense), Net

  $ (3,300 ) $ (12,300 )

FAIR VALUE OF FINANCIAL INSTRUMENTS

        At December 31, 2009, the Company's financial instruments included cash, cash equivalents, receivables, accounts payable and long-term debt. At December 31, 2009, the fair values of cash, cash equivalents, receivables and accounts payable approximated carrying values due to the short-term nature of these instruments. At December 31, 2009, the fair value of long-term debt approximated carrying value.

        Effective January 1, 2008, the Company adopted authoritative guidance which established a three-level hierarchy for disclosure of fair value measurements as follows:

Level 1 —   Quoted prices in active markets for identical assets or liabilities.

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Notes to Consolidated Financial Statements (Continued)

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

Note 9. Financial Instruments (Continued)

Level 2 —   Quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets; and model-derived valuations in which all significant inputs are observable in active markets.

Level 3 —

 

Unobservable inputs reflecting management's own assumptions about the inputs used in pricing the asset or liability.

        The following table summarizes assets and liabilities measured at fair value on a recurring basis at December 31, 2009:

 
  Basis of Fair Value Measurements  
 
  Level 1   Level 2   Level 3   Total  

Assets

                         
 

Derivatives(1)

      $ 433,096       $ 433,096  

Liabilities

                         
 

Derivatives(1)

      $ 438,347       $ 438,347  

(1)
Derivatives consist of foreign exchange forward contracts based on observable market inputs of spot and forward rates.

CREDIT CONCENTRATIONS

        The Company continually monitors its positions with, and the credit quality of, the financial institutions which are counterparties to its financial instruments and does not anticipate non-performance by the counterparties. The Company would not have realized a material loss during the year ended of December 31, 2009 in the event of non-performance by any one counterparty. In general, the Company enters into transactions only with financial institution counterparties that have a credit rating of A or better. In addition, the Company limits the amount of credit exposure with any one institution.

        The Company maintains accounts receivable balances ($322,569 and $382,776, net of allowances, at December 31, 2009 and 2008, respectively), principally from customers in the pharmaceutical industry. The Company's trade receivables do not represent significant concentrations of credit risk at December 31, 2009 due to the credit worthiness of its customers and their dispersion across many geographic areas.

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Notes to Consolidated Financial Statements (Continued)

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

Note 9. Financial Instruments (Continued)

DEBT

        The following table summarizes the Company's long-term debt at December 31, 2009 and December 31, 2008:

 
  2009   2008  

5.58% Private Placement Notes, principal payment of $105,000 due January 2015

  $ 105,000   $ 105,000  

5.99% Private Placement Notes, principal payment of $135,000 due January 2018

    135,000     135,000  

5.55% Private Placement Notes, principal payment of $150,000 due April 2016

    150,000     150,000  

1.70% Private Placement Notes, principal payment of 34,395,000 Japanese Yen due January 2013

    375,742     381,304  

Revolving Credit Facility:

             
 

Japanese Yen denominated borrowings at average floating rates of approximately 0.78%

    359,511     435,895  
 

U.S. Dollar denominated borrowings at average floating rates of approximately 1.22%

    69,400     147,000  

Bank Term Loan, principal payment of $50,000 due June 2011 at average floating rate of approximately 0.54%

    50,000     50,000  
           

Total Long-Term Debt

  $ 1,244,653   $ 1,404,199  
           

        In February 2008, the Company closed a private placement transaction pursuant to which it issued $105,000 of seven-year debt at a fixed rate of 5.58%, and $135,000 of ten-year debt at a fixed rate of 5.99% to several highly rated insurance companies. The Company used the proceeds for share repurchases (see Note 14) and to refinance existing debt.

        In July 2006, the Company entered into a $1,000,000 revolving credit facility with a syndicate of 12 banks ("Revolving Credit Facility") replacing its existing $700,000 facility. The terms of the Revolving Credit Facility extended the maturity of the facility in its entirety to a term of five years, maturing July 2011, reduced the borrowing margins, and increased subsidiary borrowing limits. Total borrowings under the Revolving Credit Facility were $428,911 and $582,895 at December 31, 2009 and December 31, 2008, respectively, all of which were classified as long-term. The Company defines long-term lines as those where the lines are non-cancellable for more than 365 days from the balance sheet date by the financial institutions except for specified, objectively measurable violations of the provisions of the agreement. In general, rates for borrowing under the Revolving Credit Facility are LIBOR plus 55 basis points and can vary based on the Company's Debt to EBITDA ratio. The weighted average interest rates for the Company's lines were 0.85% and 1.36% at December 31, 2009 and December 31, 2008, respectively. In addition, the Company is required to pay a commitment fee on any unused portion of the facilities of 0.01%. At December 31, 2009, the Company had approximately $571,089 available under its existing bank credit facilities.

        In June 2006, the Company closed a $50,000 three-year term loan with a bank. The term loan allows the Company to borrow at a floating rate with a lower borrowing margin than the Company's revolving credit facility. The term loan also provides the Company with two one-year options to extend

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Notes to Consolidated Financial Statements (Continued)

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

Note 9. Financial Instruments (Continued)

the term at the Company's discretion. In August 2008, the Company exercised the first one-year option to extend the term through June 2010, and in June 2009 the Company exercised the second one-year option to extend the term through June 2011. The Company used the proceeds to refinance existing debt borrowed under the revolving credit facility.

        In April 2006, the Company closed a private placement transaction pursuant to which it issued $150,000 of ten-year notes to two highly rated insurance companies at a fixed rate of 5.55%. The Company used the proceeds to refinance existing debt of $150,000 drawn under a short-term credit agreement with a bank in January 2006.

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

        The Company's financing arrangements provide for certain covenants and events of default customary for similar instruments, including in the case of its main bank arrangements, the private placement transactions, and the term loan, covenants to maintain specific ratios of consolidated total indebtedness to EBITDA and of EBITDA to certain fixed charges. At December 31, 2009, the Company was in compliance with these financial debt covenants.

Note 10. Pension and Postretirement Benefits

        The Company sponsors both funded and unfunded defined benefit pension plans. These plans provide benefits based on various criteria, including, but not limited to, years of service and salary. The Company also sponsors an unfunded postretirement benefit plan in the U.S. that provides health and prescription drug benefits to retirees who meet the eligibility requirements. The Company uses a December 31 measurement date for all pension and postretirement benefit plans. The Company aggregates the disclosures of its U.S. and non-U.S. plans because the material assumptions used for such plans are similar.

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Notes to Consolidated Financial Statements (Continued)

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

Note 10. Pension and Postretirement Benefits (Continued)

        The following tables summarize changes in the benefit obligation, the plan assets and the funded status of the Company's pension and postretirement benefit plans as well as the components of net periodic benefit costs, including key assumptions.

 
  Pension Benefits   Other Benefits  
Obligations and Funded Status at December 31,
  2009   2008   2009   2008  

Change in benefit obligation

                         

Benefit obligation at beginning of year

  $ 316,864   $ 350,672   $ 12,391   $ 12,629  

Service cost

    14,153     15,429          

Interest cost

    19,017     20,711     721     766  

Foreign currency exchange adjustment

    12,732     (44,437 )        

Amendments

    1,276             (798 )

Plan participants' contributions

    6     8     595     627  

Actuarial loss (gain)

    8,233     (10,115 )   (523 )   426  

Benefits paid (net of Medicare subsidy of $80 in 2009)

    (11,037 )   (14,166 )   (1,382 )   (1,604 )

Impact of elimination of early measurement date

                     246          

Curtailments

                345  

Settlements

    (2,453 )   (1,604 )        

Acquisitions

        121          
                   

Benefit obligation at end of year

  $ 358,791   $ 316,865   $ 11,802   $ 12,391  
                   

Change in plan assets

                         

Fair value of plan assets at beginning of year

  $ 264,628   $ 393,866   $   $  

Actual return on assets

    54,930     (90,414 )        

Foreign currency exchange adjustment

    10,464     (36,079 )        

Employer contributions

    9,447     11,413     787     978  

Plan participants' contributions

    6     8     595     626  

Benefits paid (net of Medicare subsidy of $80 in 2009)

    (11,037 )   (14,166 )   (1,382 )   (1,604 )
                   

Fair value of plan assets at end of year

  $ 328,438   $ 264,628   $   $  
                   

Funded status

  $ (30,353 ) $ (52,237 ) $ (11,802 ) $ (12,391 )
                   

Amounts recognized in the Consolidated Statements of Financial Position consist of:

                         

Other assets

  $ 50,275   $ 26,525   $   $  

Accrued and other current liabilities

    (5,654 )   (3,649 )   (745 )   (749 )

Postretirement and postemployment benefits liability

    (74,974 )   (75,113 )   (11,057 )   (11,642 )
                   

Net amount recognized

  $ (30,353 ) $ (52,237 ) $ (11,802 ) $ (12,391 )
                   

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Notes to Consolidated Financial Statements (Continued)

(Dollars and shares in thousands, except per share d