UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

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

For The Fiscal Year Ended December 31, ~~2014~~2015

[ ] 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: 333-187931

~~777~~100 E.Phoenix ~~Eisenhower~~Drive ~~Parkway~~

Ann Arbor, Michigan 48108

(Address of registrants' principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (734) 913-3000

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

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 ¨ No þ

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

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 ¨ No ¨

The registrants are voluntary filers and have filed all reports that would have been required to have been filed by the registrants during the preceding 12 months had they been subject to such filing requirements

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

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. þ

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated Filer ¨ Non-accelerated filer þ smaller reporting company ¨

(do not check if a smaller reporting company)

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

The aggregate market value of Truven Holding Corporation and Truven Health Analytics Inc. common stock held by non-affiliates were each $0 as of December 31, ~~2014~~2015.

As of December 31, ~~2014~~2015, there was one outstanding share of each of the registrants.

DOCUMENTS INCORPORATED BY REFERENCE-None

TABLE OF CONTENTS

			Page
Part I.
	Item 1	Business	1
	Item 1A	Risk Factors	11
	Item 1B	Unresolved Staff Comments	2829
	Item 2	Properties	2829
	Item 3	Legal Proceedings	2829
	Item 4	Mine Safety Disclosure	2930
Part II.
	Item 5	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	3031
	Item 6	Selected Financial Data	3031
	Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3334
	Item 7A	Quantitative and Qualitative Disclosures About Market Risk	6759
	Item 8	Financial Statements and Supplementary Data	6859
	Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	6860
	Item 9A	Controls and Procedures	6860
	Item 9B	Other Information	7061
Part III.
	Item 10	Directors, Executive Officers and Corporate Governance	7162
	Item 11	Executive Compensation	7566
	Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	7970
	Item 13	Certain Relationships and Related Transactions, and Director Independence	8071
	Item 14	Principal Accountant Fees and Services	8171
Part IV.
	Item 15	Exhibits and Financial Statement Schedules	8373
		Exhibits	8474
		Signatures	8777

NOTE ON FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (the "Annual Report") contains certain “forward-looking statements” (as defined in Section 27A of the U.S. Securities Act of 1933, as amended, or the “Securities Act,” and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, or the “Exchange Act”) that reflect our expectations regarding our future growth, results of operations, performance and business prospects and opportunities. Words such as “anticipates,” “believes,” “plans,” “expects,” “intends,” “aims,” “estimates,” “projects,” “targets,” “can,” “could,” “may,” “should,” “will,” “would,” and similar expressions have been used to identify these forward-looking statements, but are not the exclusive means of identifying these statements. For purposes of this Annual Report , any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. These statements reflect our current beliefs and expectations and are based on information currently available to us. As such, no assurance can be given that our future growth, results of operations, performance and business prospects and opportunities covered by such forward-looking statements will be achieved. We have no intention or obligation to update or revise these forward-looking statements to reflect new events, information or circumstances.

Such forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

A number of important factors could cause our actual results to differ materially from those indicated by such forward-looking statements, including those described under the heading “Risk Factors” in Part I, Item 1A. herein and elsewhere in this Annual Report.

Definition of Terms

Unless otherwise indicated or the context otherwise requires, references in this report to:

• the term ~~“Holdings~~"Additional ~~LLC”~~Notes" refers to ~~VCPH~~the ~~Holdings~~10.625% ~~LLC~~Senior Notes, aSeries ~~Delaware~~A, ~~limited~~that ~~liability~~were ~~company~~issued on November 12, 2014;

• ~~the~~any ~~terms “Company”,~~ "~~we",~~fiscal year"~~us",~~ ~~and~~refers ~~"our"~~to ~~refer~~the totwelve ~~Truven~~months ~~Holding~~ended ~~Corp.~~December ~~and~~31 ~~Truven~~of ~~Health~~the ~~Analytics~~applicable ~~Inc~~year. For example, ~~together~~"fiscal ~~with~~year" ~~their~~2015 ~~subsidiaries;~~refers to the twelve months ended December 31, 2015.

• the ~~terms~~term ~~“Truven Holding” and~~ "~~Parent~~Notes" refers to ~~Truven~~the ~~Holding~~Old ~~Corp.,~~Notes ~~a Delaware corporation that is directly owned by Holdings LLC~~ and ~~that is~~ the ~~direct~~Additional ~~parent of Truven~~Notes;

• the term ~~“TRHI”~~"Old Notes" refers to ~~Thomson~~the ~~Reuters (Healthcare) Inc~~10.,625% aSenior ~~Delaware corporation~~Notes, ~~which,~~Series ~~upon consummation of the Merger~~A, ~~became~~issued in a ~~direct~~private ~~wholly-owned~~offering ~~subsidiary~~under ofan ~~VCPH~~indenture, ~~Holding~~dated ~~Corp.~~June ~~(now~~6, ~~known as Truven Holding) and subsequently changed its name to Truven Health Analytics Inc.~~2012;

• the ~~terms~~term ~~“Thomson Reuters Healthcare” and “~~"Predecessor” ~~refer~~Period" refers to ~~TRHI,~~all ~~together~~periods ~~with certain other assets and liabilities of the Thomson Reuters Healthcare business~~ prior to and including the date of the closing of the Prior Acquisition on June 6, 2012;

• the term ~~“Wolverine”~~"Prior Acquisition" refers to ~~Wolverine~~the ~~Healthcare~~acquisition ~~Analytics,~~by ~~Inc.,~~Wolverine aof ~~Delaware~~100% ~~corporation~~of ~~and~~the anequity ~~affiliate~~interests of ~~The~~TRHI ~~Veritas~~and ~~Capital~~certain ~~Fund~~assets ~~IV,~~and ~~L.P.,~~liabilities aof ~~private~~the ~~equity~~Thomson ~~fund~~Reuters ~~managed~~Healthcare bybusiness, ~~Veritas~~pursuant ~~Capital,~~to ~~which~~the ~~was~~Stock ~~formed~~and onAsset ~~May~~Purchase 16Agreement, ~~2012~~dated as aof ~~direct~~April ~~wholly-owned~~23, ~~subsidiary~~2012, ofwhich VCPH Holding Corp. (now known as Truven Holding) ~~and,~~entered ~~upon consummation of the Prior Acquisition, merged with and~~ into ~~TRHI,~~ with ~~TRHI~~Thomson ~~surviving~~Reuters ~~the~~U.S. ~~Merger~~Inc. asand aThomson ~~direct~~Reuters ~~wholly-owned~~Global ~~subsidiary~~Resources ofand ~~VCPH~~subsequently ~~Holding~~assigned ~~Corp.~~to ~~(now~~Wolverine ~~known~~on asMay ~~Truven~~24, ~~Holding)~~2012, and ~~subsequently~~which ~~changing~~closed ~~its~~on ~~name~~June to6, ~~Truven Health Analytics Inc.~~2012;

• the ~~terms~~term ~~“Truven”~~"Senior ~~and~~Credit Agreement" refers to the ~~“Issuer”~~Credit ~~refer~~Agreement, todated as of June 6, 2012, among Truven Holding, Truven Health Analytics Inc., athe ~~Delaware~~several ~~corporation~~lenders from time to time parties thereto, Morgan Stanley Senior Funding, Inc. and aUBS ~~direct~~Securities ~~wholly~~LLC, as co-~~owned~~documentation ~~subsidiary~~agents, ofMerrill ~~Truven~~Lynch, ~~Holding~~Pierce, Fenner & Smith Incorporated, as syndication agent, and ~~its~~JPMorgan ~~subsidiaries~~Chase Bank, N.A., as administrative agent, as amended from time to time;

• the term ~~“Prior~~"Senior ~~Acquisition”~~Credit Facility" refers to the ~~acquisition~~Term byLoan ~~Wolverine~~Facility ~~of 100% of the equity interests of TRHI~~ and ~~certain~~Revolving ~~assets~~Credit ~~and~~Facility ~~liabilities~~under of the ~~Thomson~~Senior ~~Reuters~~Credit ~~Healthcare business, pursuant to the Stock and Asset Purchase~~ Agreement, dated as of April 23, 2012, which VCPH Holding Corp. (now known as Truven Holding) entered into with the Stock Seller and Thomson Reuters Global Resources and subsequently assigned to Wolverine on May 24, 2012, and which closed on June 6, 2012;

• the term ~~“Merger”~~"Simpler" refers to ~~the~~Simpler ~~merger upon the closing of the Prior Acquisition~~Consulting, ~~whereby~~L.P. ~~Wolverine~~and ~~(which~~certain ~~was formed solely for the purpose~~ of ~~completing~~its ~~the~~affiliated ~~Prior~~entities ~~Acquisition) merged with~~ and ~~into TRHI~~persons, ~~with~~which ~~TRHI~~we ~~surviving~~acquired ~~the~~on ~~Merger~~April as11, ~~a direct wholly-owned subsidiary of VCPH Holding Corp. (now known as Truven Holding) and subsequently changing its name to Truven Health Analytics Inc.~~2014;

• the ~~term~~terms ~~“Stock~~"Sponsor" ~~Seller”~~and ~~refers~~"Veritas Capital" collectively refer to ~~Thomson~~The ~~Reuters~~Veritas UCapital Fund IV, L.SP., ~~Inc~~The Veritas Capital Fund III, L.P. and their affiliate, CIPH Holdings LLC;

• the ~~terms~~term ~~“Sponsor”~~"Successor" ~~and~~refers ~~“Veritas~~to ~~Capital”~~Truven ~~refers~~Holding, toon ~~Veritas~~a ~~Capital~~consolidated ~~Fund~~basis ~~Management,~~with ~~L.L.C.~~its subsidiaries;

• the ~~terms~~term ~~“Thomson~~"Successor ~~Reuters”~~Period" ~~and~~refers ~~the~~to ~~“Predecessor~~all ~~Parent”~~periods ~~refers~~from inception of Truven Holding (April 20, 2012 to ~~Thomson~~December ~~Reuters~~31, ~~Corporation~~2012), which includes all periods after the closing of the Prior Acquisition on June 6, 2012;

• the term ~~“Stock~~"Term ~~and~~Loan ~~Asset~~Facility" ~~Purchase Agreement”~~ refers to the ~~Stock~~term ~~and~~loan ~~Asset~~facility ~~Purchase~~under ~~Agreement among VCPH Holding Corp.,~~ the ~~Stock~~Senior ~~Seller~~Credit ~~and Thomson Reuters Global Resources, dated as of April 23, 2012, which VCPH Holding Corp. assigned to Wolverine on May 24, 2012~~Agreement;

• the ~~term~~terms ~~“Predecessor~~"Thomson ~~Period”~~Reuters" ~~refers~~and to"Predecessor ~~all~~Parent" ~~periods~~refer ~~prior~~ to ~~and~~Thomson ~~including~~Reuters ~~the date of the closing of the Prior Acquisition on June 6, 2012~~Corporation;

• the term ~~“Successor”~~"TRHI" refers to ~~Truven~~Thomson ~~Holding~~Reuters (Healthcare) Inc., ona Delaware corporation, which, upon consummation of the Merger, became a ~~consolidated~~direct ~~basis~~wholly-owned ~~with~~subsidiary of VCPH Holding Corp. (now known as Truven Holding) and subsequently changed its ~~subsidiaries~~name to Truven Health Analytics Inc.;

• the term ~~“Successor~~"Truven" ~~Period”~~ refers to ~~all periods from inception of~~ Truven ~~Holding~~Health ~~(April~~Analytics 20Inc., ~~2012~~a todirect wholly-owned ~~December~~subsidiary ~~31, 2012), which includes all periods after the closing~~ of ~~the~~Truven ~~Prior~~Holding, ~~Acquisition~~together onwith ~~June~~its 6,consolidated ~~2012.~~subsidiaries;

• the term "~~Notes~~Truven Holding" refers to ~~refers~~the toissuer, ~~the~~Truven 10Holding Corp.~~625%~~, ~~Senior~~a ~~Notes~~holding company;

• the term "~~Senior~~Veritas ~~Credit~~Fund ~~Facility~~IV" refers to ~~the~~Veritas ~~Term~~Capital ~~Loan~~Fund ~~Facility~~IV, ~~and Revolving Credit Facility from syndicate of banks and other financial institutions~~L.P.;

• the term "~~Old Notes~~Wolverine" refers to ~~the~~Wolverine ~~10.625%~~Healthcare ~~Senior~~Analytics, ~~Notes~~Inc., ~~Series~~a A,Delaware ~~issued~~corporation inand an affiliate of The Veritas Capital Fund IV, L.P., a private ~~offering~~equity ~~under~~fund anmanaged ~~indenture~~by Veritas Capital, ~~dated~~which ~~June~~was 6formed on May 16, 2012 as a direct wholly-owned subsidiary of VCPH Holding Corp. (now known as Truven Holding) and, upon consummation of the Prior Acquisition, merged with and ~~which~~into ~~were~~TRHI, ~~exchanged~~with ~~for~~TRHI surviving the ~~Exchange~~Merger ~~Notes~~as a direct wholly-owned subsidiary of VCPH Holding Corp. (now known as ~~defined~~Truven ~~below~~Holding) and subsequently changing its name to Truven Health Analytics Inc.; and

• the ~~term~~terms "~~Exchange~~we", ~~Notes~~"our", ~~refers~~or to"us" and the ~~10.625%~~"Company" ~~Senior~~refer ~~Notes,~~to ~~Series~~Truven B,Holding ~~registered~~and ~~under~~its ~~the~~consolidated ~~Securities Act 1933;~~subsidiaries.

• the term "Additional Notes" refers to the 10.625% Senior Notes, [Series A], issued in connection with the JWA Transaction and the HBE Transaction;

• the term "Simpler" refers to Simpler Consulting, LLC. and certain of its affiliated entities and persons, which was acquired by certain wholly-owned subsidiaries of the Company on April 11, 2014;

• the term "Simpler Transaction" refers to the transactions under the Purchase Agreement dated April 11, 2014, whereby Truven acquired all of the outstanding equity of Simpler in exchange for a purchase price of $81.1 million, including a preliminary working capital adjustment of $1.1 million, and the issuance by Holdings LLC, the direct parent of the Company, of $3.7 million of equity interests to Simpler;

• the term "JWA" refers to Joan Wellman and Associates, Inc. which was acquired by the Company on October 31, 2014;

• the term "JWA Transaction" refers to transactions under the Purchase Agreement dated October 31, 2014, whereby Truven indirectly acquired all of the outstanding equity of JWA in exchange for a cash purchase price of $15.3 million, including a $1.2 working capital adjustment and $0.1 million holdback payment;

• the term "HBE" refers to HBE Solutions, LLC which was acquired by certain wholly-owned subsidiaries of the Company on November 12, 2014; and

• the term "HBE Transaction" refers to the November 12, 2014 transactions under the Purchase Agreement dated November 5, 2014, whereby Truven indirectly acquired all of the outstanding equity of HBE in exchange for a cash purchase price of $17.6 million, including a negative working capital adjustment of $2.4 million.

iii

PART I

ITEM 1 - BUSINESS

Overview

We are a leading healthcare analytics ~~company~~solutions ~~focused on improving quality~~ and ~~decreasing~~services ~~costs~~business ~~across~~focused ~~the~~on ~~healthcare~~quality ~~industry.~~improvement ~~Through the better use of analytics~~ and ~~data,~~cost wereduction. We enable our clients to ~~reduce~~formulate ~~costs~~strategy, ~~manage~~improve ~~risk~~operational, ~~improve~~clinical ~~operational~~and financial performance, enhance patient outcomes, manage risk, and increase transparency. WeOur ~~combine~~platform ~~our~~combines ~~analytic~~deep healthcare domain expertise, ~~information~~a ~~assets~~vast collection of healthcare data and cloud‑based technology to create market‑leading analytics solutions and highly specialized services, totransforming ~~offer~~large ~~our~~quantities ~~clients~~of complex data into actionable insights. Our approximately 8,800 clients represent all major constituencies in the healthcare market, including large companies, hospitals and ~~analytical~~health ~~solutions.~~systems, ~~Furthermore~~health plans, wefederal ~~increase~~agencies and state governments in the ~~value~~U.S. ofand ~~our~~increasingly ~~analytical~~globally. ~~solutions~~We ~~with~~have ~~performance~~a ~~improvement~~recurring business model that consists of subscriptions, multi‑year contracts and ~~analytic~~services ~~consulting~~sold ~~expertise~~on a repeat basis.

~~Our~~Based ~~platform~~on ~~delivers~~our aperformance ~~wide~~in ~~range~~2015, ofwe ~~analytics~~impact ~~solutions and services. These solutions and services leverage our extensive experience in~~ the healthcare industry, ~~are responsive to growing market needs and are often embedded~~ in ~~customer~~the ~~operations.~~following Our analytics solutions include population heath and cost analysis, provider performance management, payment integrity, patient care and research solutions. Our services include analytic consulting, research and data management.ways:

~~Positioned~~• atWe ~~the~~inform ~~convergence~~quality ofimprovement, ~~risk~~cost management and ~~care~~program ~~management,~~design ~~Truven~~decisions ison ~~helping~~ the ~~industry~~health ~~transform~~benefits ~~into~~for anone ~~integrated,~~in ~~sustainable~~three ~~healthcare system that is demanded by consumers, business and government~~Americans. ~~In 2014:~~

We• ~~informed~~Our ~~decision‑making~~solutions onhelp ~~the~~improve ~~health~~care ~~benefits~~quality ~~for~~and ~~one~~efficiency in ~~three~~more ~~Americans;~~than 4,000 hospitals in the U.S. and approximately 1,800 healthcare facilities internationally.

~~Our~~• ~~solutions~~We ~~helped~~provide ~~improve~~analytics ~~care~~solutions ~~quality~~that ~~and~~impact ~~efficiency~~approximately in50% ~~more~~of ~~than~~Medicaid ~~4,000 hospitals in the United States and more than 1,800 healthcare facilities internationally;~~beneficiaries.

• We ~~provided~~provide ~~analytics~~payment integrity solutions ~~impacting~~to ~~more~~23 ~~than~~Medicaid ~~50%~~agencies ofto ~~Medicaid~~reduce ~~beneficiaries;~~fraud and abuse.

• We ~~provided~~reach ~~payment~~30 ~~integrity~~million ~~solutions~~consumers tothrough 24our ~~state~~consumer ~~Medicaid~~cost ~~agencies~~transparency solutions, which provide critical information to ~~reduce~~help ~~fraud~~make personal healthcare choices and ~~abuse;~~reduce costs.

• Our ~~consumer~~data ~~cost~~assets ~~transparency~~include ~~solution~~35 ~~reached~~billion ~~approximately~~records ~~28 million~~on ~~consumers,~~over ~~providing~~220 ~~critical~~million ~~information~~de‑identified topatient ~~make personal healthcare choices and reduce costs; and~~lives.

• Our ~~data~~clients ~~assets~~have ~~totaled~~reported 4over $2.54 ~~petabytes~~billion ofin ~~data~~savings ~~including~~over ~~approximately~~the ~~30 billion~~last ~~claims~~five ~~records~~years onby ~~over~~using ~~214 million~~our ~~de‑identified~~Simpler ~~patient~~organizational ~~lives~~transformation services.

We provide ~~our~~a ~~analytic~~broad range of analytics solutions and ~~service~~services ~~offerings~~to ~~across~~our ~~the~~clients. ~~full~~Our ~~spectrum~~analytics ofsolutions ~~healthcare~~allow ~~constituents,~~our ~~including~~clients ~~state~~to ~~and~~reduce ~~federal~~costs, ~~government~~increase ~~agencies~~productivity, ~~hospitals,~~improve ~~health~~quality ~~systems,~~of ~~employers~~care and patient outcomes, ~~health~~stratify ~~plans~~and manage risk, ~~life~~comply ~~sciences~~with ~~companies~~regulatory requirements and ~~consumers.~~evaluate Inperformance ~~2014~~gaps, ~~our~~care ~~customer~~gaps ~~base~~and ~~included~~opportunities. ~~more~~Based ~~than~~upon ~~60%~~our internal analysis of ~~Fortune~~our ~~100~~competitors, ~~companies;~~we ~~over~~believe ~~125~~our ~~health~~analytics ~~plans,~~solutions ~~third‑party~~are ~~administrators~~empowered ~~(“TPAs”)~~by ~~and~~some ~~related~~of ~~organizations;~~the ~~federal~~most ~~government~~comprehensive ~~agencies,~~data ~~such~~assets asin the ~~Centers~~industry. ~~for~~These ~~Medicare &~~solutions ~~Medicaid~~include ~~Services~~population ~~(“CMS”)~~health, ~~the~~provider ~~Department~~performance, ofpayment ~~Veterans~~integrity ~~Affairs~~and ~~(“VA”),~~patient ~~and~~care ~~the~~solutions, ~~Department~~which ofleverage ~~Defense~~our ~~(“DOD”);~~healthcare 31utilization, ~~state~~performance, ~~Medicaid~~clinical, ~~agencies;~~quality ~~over~~and ~~4,000~~cost Udata assets.S. ~~hospitals;~~In ~~and~~addition ~~each~~to ofour ~~the~~analytics ~~top~~solutions, 25we ~~global~~provide ~~life~~advisory ~~sciences~~services, ~~companies~~such ~~based~~as onperformance ~~revenue.~~improvement, Weanalytics ~~believe~~consulting ~~our~~and ~~solutions~~custom ~~are~~research, ~~critical~~that toleverage our ~~clients’~~content ~~decision‑making~~assets asand ~~demonstrated~~expertise byto ~~our~~help ~~long‑term~~clients ~~customer~~meaningfully ~~relationships,~~effect ~~multi‑year~~change ~~contracts~~in ~~and~~their ~~high~~organizations. ~~customer~~We ~~retention.~~believe ~~The~~the ~~average~~complementary ~~length~~nature of our ~~relationship~~analytics ~~with~~and services offerings enhances our ~~top~~value 20proposition to our clients. ~~measured~~Our byservices ~~2014~~are ~~revenue~~typically isdelivered ~~approximately~~to 13 the same clients over multiple years, and are often combined with our analytics solutions.

Through more than 40 years of operating history, we have developed one of the most sophisticated data integration and analytics technology platforms within the healthcare industry. Our platform combines healthcare utilization, performance, clinical quality and cost data with our proprietary analytic methodologies that transform the large, complex quantities of data into actionable insights. We ~~developed~~provide our ~~technology~~solutions and ~~data~~services ~~operations~~ to ~~aggregate~~commercial and ~~integrate~~government ~~disparate data streams, allowing us to build longitudinal views of patient health~~customers. Our platform integrates our client data with our analytics solutions, which helps our clients better understand performance trends, create better programs, engage consumers and improve patient outcomes and financial performance.


•	Our commercial customers include hospitals, health systems, employers, health plans and life sciences companies, and include nearly 60% of Fortune 100 companies, over 130 health plans, third‑party administrators and related organizations, over 4,000 U.S. hospitals and all of the top 25 global life sciences companies based on revenue.

~~The~~• ~~healthcare~~Our ~~industry~~government iscustomers ~~experiencing~~include ~~transformational~~both ~~change~~federal ~~driven by intense cost pressures, a changing regulatory environment, new payment~~ and ~~delivery~~state ~~models~~government ~~and innovation in therapies and treatments. In this new healthcare paradigm~~agencies, wesuch ~~enable~~as ~~our~~the ~~clients to analyze data more effectively~~AHRQ, ~~improve decision making~~CMS, ~~and~~the ~~deliver higher quality~~DOD, ~~more efficient healthcare. We believe that a powerful component of our value proposition is~~ the ~~breadth~~VA and ~~depth~~30 ofstate ~~data~~Medicaid ~~and analytics we provide to help our clients address their fundamental questions in the changing healthcare environment~~agencies.

~~Formerly~~For the ~~healthcare~~year ~~business~~ended ofDecember 31, ~~Thomson Reuters~~2015, weapproximately ~~were~~82% ~~acquired~~of byour ~~Veritas~~revenues ~~Capital~~were onattributable ~~June 6,~~to ~~2012.~~our InCommercial ~~partnership~~segment ~~with~~and ~~Veritas,~~approximately ~~management~~18% ~~has~~of ~~made~~our ~~substantial~~revenues ~~investments~~were inattributable to our ~~business~~Government segment. Our ~~Since~~revenue is primarily earned in the ~~Prior~~United ~~Acquisition~~States, wewith ~~have:~~less than 10% of our total revenues coming from outside of the United States.

~~Completed~~We believe our ~~separation~~solutions ~~from~~are ~~Thomson~~critical ~~Reuters~~to ~~and~~our ~~made~~clients’ andecision‑making ~~incremental~~as ~~investment~~demonstrated ofby ~~more~~our ~~than~~long‑term ~~$30 million~~customer torelationships, ~~establish~~multi‑year ~~our~~contracts ~~standalone~~and ~~data~~high ~~center~~customer ~~operations~~retention. ~~and~~The ~~improve~~average length of our ~~technology~~relationship ~~infrastructure,~~with ~~enabling~~our ~~more~~top ~~flexible~~20 ~~and~~clients ~~efficient~~measured ~~deployment~~by of2015 ~~our~~revenue ~~solutions;~~is approximately 13 years.

~~Reorganized~~Our ~~our~~platform gocombines comprehensive data assets, proprietary analytics algorithms, and analytics consulting services. Our data assets consist of more than four petabytes of secure data, including 30 billion records on over 214 million de‑~~to‑market~~identified ~~strategy~~patient ~~from~~lives. ~~operating~~The inplatform ~~six~~combines ~~channels~~healthcare toutilization, ~~two~~performance, ~~focused~~clinical, ~~segments~~quality, ~~Government~~and cost data with our proprietary analytics methodologies that transform large quantities of complex data into actionable insights. Our technology and ~~Commercial~~data operations aggregate and integrate disparate data streams, allowing us to ~~focus~~build onlongitudinal ~~the~~views ~~unique~~of ~~needs~~patient ofhealth. Our platform integrates our ~~customers~~client indata ~~each~~with our analytics solutions so that our clients can better understand performance trends, risk‑stratify populations, create better programs, engage consumers and improve patient outcomes and operational, clinical and financial performance. In addition, we have implemented and are expanding a data lake to enable faster integration of ~~these~~new ~~two~~data ~~distinct~~sources ~~markets~~and delivery of new analytics insights. Our data lake delivers increased flexibility and ~~organize~~speed‑to‑market for new solutions and analytic services that can be configured to customers’ unique data and technology environments. We continually refresh, grow and transform our ~~internal~~content, ~~resources~~databases and analytics, and believe that our platform would be difficult for others to ~~more~~replicate ~~effectively~~in ~~capture~~breadth, ~~these~~depth ~~opportunities;~~and quality.

~~Enhanced~~Our ~~our~~business ~~market~~model ~~positioning~~provides tosubstantial ~~emphasize~~revenue visibility. The majority of our ~~analytic~~subscriptions ~~power~~by revenue have multi‑year terms and include services such as implementation, ~~our~~training, ~~global~~data ~~perspective~~integration ~~across~~and ~~healthcare~~analytics consulting. The scope of a subscription often grows over time as modules, licenses and ~~our~~services ~~ability~~are added to ~~combine~~meet ~~our~~a ~~solutions~~client’s growing needs. An increasingly broad range of analytics consulting, research, data management and performance improvement services ~~for~~are ~~data~~also sold as projects, which are often multi‑~~driven~~year ~~transformation;~~and can expand, extend and repeat over time.

~~Completed~~Recent the acquisition of Simpler on April 11, 2014, adding complementary provider "Lean" consulting services to our leading analytics capabilities and deepening our relationships with senior leadership across healthcare systems; Developments

~~Completed~~On February 17, 2016, International Business Machines Corporation, a New York corporation (“IBM”), Holdings LLC, The Veritas Capital Fund IV, L.P., The Veritas Capital Fund III, L.P., and CIPH Holdings LLC, entered into a Stock Purchase Agreement, pursuant to which IBM agreed to purchase, for a total consideration of $2.6 billion, the ~~acquisition~~sole outstanding share of ~~JWA~~common stock, ~~which~~par ~~provides~~value ~~"Lean"~~$0.01 ~~healthcare~~per ~~consulting~~share, ~~services~~of onTruven ~~October~~Holding 31(such transaction, ~~2014;~~the “Stock Purchase”). The Stock Purchase Agreement contains various customary representations, warranties and covenants of each party and the Acquired Companies. Each party has agreed to use its respective reasonable best efforts to take all actions to cause the Stock Purchase to be consummated, subject to certain exceptions. The closing of the Stock Purchase is subject to customary closing conditions. The Stock Purchase is not subject to a financing condition.

~~Completed~~At the ~~acquisition~~closing of ~~HBE,~~the aStock ~~leading~~Purchase, ~~provider~~IBM ofwill ~~stakeholder~~pay ~~information~~all ~~that~~indebtedness ~~is essential~~ for ~~life~~money ~~sciences~~borrowed ~~companies~~of tothe ~~gain~~Company ~~drug~~that ~~approval,~~is ~~reimbursement,~~required ~~and~~to ~~adoption,~~be ~~on November 12, 2014; and~~paid.

~~Improved~~On ~~our~~February ~~offshore~~18, ~~capabilities~~2016, ~~nearly~~Truven ~~doubling~~also notified the ~~number~~trustee for the Notes of ~~direct~~Truven's ~~employees~~optional inelection ~~our~~to ~~Indian~~redeem ~~subsidiary~~the $367.2 million aggregate principal amount of the Notes outstanding, which redemption is conditioned on the occurrence of the closing of the Stock Purchase, and instructed the trustee to ~~over~~provide ~~200~~notice ~~since~~of itsuch ~~was~~optional ~~established~~redemption ~~following~~to the ~~Prior~~holders ~~Acquisition~~of the Notes in accordance with the terms of the Indenture.

WeOn ~~believe~~March 15, ~~that~~2016, ~~these~~Truven ~~strategic~~delivered ~~initiatives~~to ~~have~~the ~~enhanced~~trustee ~~our~~of ~~competitive~~the ~~position~~Notes a revised notice of Truven’s optional election to redeem the $367.2 million aggregate principal amount of the Notes outstanding, which superseded the notice of redemption delivered on February 18, 2016, and ~~will~~instructed ~~enable~~the ustrustee to ~~address~~provide athe ~~broader~~revised ~~set~~notice of ~~customer~~such ~~opportunities~~optional redemption to the holders of the Notes in accordance with the terms of the Indenture. Truven’s optional redemption remains conditioned

Our business model provides substantial revenue visibility. The majority of our subscriptions have multi‑year terms and include services such as implementation, training, data integration and analytics consulting. The scope of a subscription often grows over time as modules, licenses and services are added to meet a client’s growing needs. An increasingly broad range of analytic consulting, research, data management and performance improvement services are also sold as projects, which are often multi‑year and can expand, extend and repeat over time.

Through more than 40 years of operating history, we have developed one of the most sophisticated analytics technology platforms within the healthcare industry, combining our data assets, analytic capabilities, proprietary methods and value‑added services. Our 4.5 petabytes of online data represents a collection of some of the most comprehensive data assets in the industry, such as one of the largest collections of commercially insured patient data, one of the largest databases of operational benchmarks and clinical performance data for hospitals and one of the most comprehensive databases of evidence‑based clinical decision support content. We employ proprietary and industry standard analytic methods including classifications, groupers, measures, projections, predictive models and other statistical and big data techniques. Our data assets, coupled with our proprietary methods, form the foundation of our analytics solutions. In addition to our analytics solutions, we provide services such as analytics consulting and research, strategic consulting and advisory services, and data warehousing and management. We believe the complementary nature of our analytics solutions and services offerings enhances our value proposition to our clients.

Weon ~~believe~~the ~~that~~occurrence ~~our~~of ~~platform~~the ~~would~~closing beof ~~difficult~~the ~~for~~Stock ~~others~~Purchase. Truven toexpects ~~replicate~~the insatisfaction ~~breadth, depth~~ and ~~quality.~~discharge ~~Clients~~of ~~continuously~~the ~~contribute~~Notes ~~new information~~ to ~~our~~occur ~~existing~~on ~~databases,~~the ~~allowing~~anticipated usclosing todate ~~refresh~~of ~~and~~the ~~enrich~~Stock ~~our content~~Purchase, ~~databases~~in ~~and~~accordance analytics. Our technology and data operations aggregate and integrate disparate data streams, including financial, administrative and clinical information, allowing us to build more valuable longitudinal views of a patient’s health. We continuously integrate our client’s data with ~~our analytics solutions, which enhances~~ the ~~value~~terms of ~~our insights and leads to self‑ reinforcing customer relationships and increased client tenure. We believe~~ the ~~dynamic~~Stock ~~nature~~Purchase ~~of our processes and customer relationships continues to enhance our competitive position in the markets we serve~~Agreement.

~~Our~~Either ~~growth~~party ~~strategy~~may terminate the Stock Purchase Agreement, subject to certain terms and conditions, if the Stock Purchase is not completed on or before May 17, 2016, unless extended by either party for an additional 30 days in certain circumstances.

~~We believe we are well positioned for continued growth across the markets and customers we serve.~~ Our ~~strategy for achieving growth includes:~~ Offerings

~~Expand~~We ~~our~~market ~~existing~~over ~~client~~100 ~~relationships. We~~industry‑leading ~~have~~healthcare ~~built~~analytics asolutions ~~large~~ and ~~loyal~~services ~~customer~~that ~~base~~address ascritical ~~represented~~market byneeds. ~~the~~Our ~~nearly~~extensive ~~13 year~~data ~~average~~and ~~tenure~~content ofassets ~~our~~combined ~~top~~with ~~20 clients. We believe the length of~~ our ~~key~~healthcare ~~client~~data ~~relationships~~integration ~~highlights~~and ~~the~~analytics ~~value~~capabilities weare ~~provide~~embedded toacross our ~~clients~~offerings. ~~and~~Analytics ~~creates~~solutions atypically ~~platform~~include toimplementation ~~expand~~ and ~~grow~~product ~~our~~support ~~client relationships over time~~services. ~~With~~Many ~~many~~ of our ~~customers,~~analytics asolutions ~~subscription~~are ~~that~~typically ~~begins~~bundled with ~~the~~related ~~successful implementation of a core solution leads to profitable follow~~value‑onadded ~~sales of additional modules~~services, ~~consulting~~such ~~services,~~as data management ~~services~~ and ~~new~~analytics ~~solutions.~~consulting, ~~We believe~~ that ~~there is a significant opportunity for growth through cross‑sales into our current customer base, since many of our clients~~ are ~~currently~~tailored ~~utilizing only a subset of our applicable solutions and services. Also of importance, our clients continually add data~~ to ~~our~~client ~~database, which in turn, makes our data assets even more valuable to existing and potential new customers~~needs. WeOur ~~believe~~principal ~~this~~offerings ~~self‑~~are ~~reinforcing~~grouped ~~aspect~~into ofcategories ~~our~~based ~~client~~on ~~relationships~~the ~~helps~~customer usneeds tothat ~~retain~~they ~~our clients and drive deeper penetration of our solutions across our customer base~~address.

~~Enhance~~Analytics our customized services and solutions. We are implementing a strategy to deliver our capabilities to clients through tailored services that meet their evolving, complex needs. For example, in order to further leverage our significant experience in creating and managing healthcare databases that are embedded in our solutions, we are increasingly engaged in defining, implementing and operating custom data warehouses for several clients. We are also increasingly applying our analytic tools and methods directly to our client’s data as an analytic consulting service to enable client analysis and decision making through their proprietary systems and processes. We have expanded our ability to deliver tailored, client specific solutions, which we believe enhances our relevance to customers and expands our addressable market.Solutions

Increase the scope of our government services. To accelerate growth in federal and state markets, we have invested in additional capabilities, custom development, and staff and support resources. We have been able to build on our strong reputation and expand our business with CMS and with other agencies with which we have long‑standing relationships. We have also expanded our scope into additional state agencies and federal agencies, such as the DOD, National Institutes of Health, Centers for Disease Control and Prevention, Food and Drug Administration, and Social Security Administration. Our network of potential partners to contract with in the Government segment has also expanded which allows us to jointly bid on government business, prime more contracts directly, and leverage partner relationships and contract vehicles. For example, in 2014 we won several IDIQ (Indefinite Delivery/Indefinite Quantity) task orders and won the CMS Research Management Assessment Design and Analysis IDIQ (RMADA), naming us as one of 15 prime contractors able to bid on RMADA task orders with a $7 billion total spending ceiling.



Category	Description	Key Products	Segment(s)
Population health solutions	Solutions that help our clients integrate and analyze healthcare data on utilization, patient characteristics and costs for populations receiving healthcare services, such as a company’s employees and families, a state’s Medicaid enrollees or an ACO’s members. Analytics methods are integrated with clinical and claims data and tools to enable care management, health benefits management, performance measurement, provider quality management, data exchange and integration, treatment cost transparency and personalized consumer engagement.	Advantage Suite^® Consumer Advantage Data Warehouse MarketScan^® Unify^TM	Commercial Government
Provider - performance solutions	Solutions that help care delivery organizations track, measure and improve performance across core functions, including operational, financial, marketing and planning, and clinical and quality domains.	ActionOI^® CareDiscovery^® Market Expert^® 100 Top Hospitals^®	Commercial
Patient care solutions	Clinical and intelligent evidence solutions help providers combine real‑time patient data with reference information to provide point of care decision support. These solutions include the leading evidence‑based reference information for drug, disease, toxicology, patient education and neonatology. Our clinical solutions integrate with providers’ clinical systems, giving immediate access to the evidence‑based information needed, at the point of care.	Micromedex^® Evidence 360 Care Insights CareNotes^®	Commercial Government
Payment integrity and compliance solutions	Payment integrity solutions support clients, including both Medicare and Medicaid as well as health plans and employers, to fight fraud, waste and abuse by way of powerful applications, advanced analytics methods, an extensive algorithm library and data mining capabilities.	DataProbe J‑SURS	Commercial Government

Continuously expand product and data offerings. We further leverage our strong position across the segments we serve by continuously investing in features and functionality to improve solutions and services and enhance opportunities to expand into new markets. For example, we have recently introduced enhanced solution capabilities in physician performance, consumer engagement and interactive reporting, and have added access to oncology EMR data to support outcomes research services.

~~Grow~~Analytics through strategic acquisitions. We expect to continue to increase the value of our business through acquisitions that improve our strategic and market position. In 2014, we completed the acquisition of Simpler, adding "Lean" transformational performance improvement services capabilities that complement our analytics solutions and services, JWA, which provides "Lean" healthcare consulting services, and HBE, a leading provider of stakeholder information that is essential for life sciences companies to gain drug approval, reimbursement and adoption. Our acquisition priorities include: increasing access to the value of analytics through integration, tools and services; expanding usage within customer organizations; enhancing our differentiated service capabilities that leverage our data and analytics in growing areas of need; and extending our core analytic capability with expanded data, content and analytics methods.Services

~~Expand~~Category ~~globally~~Description ~~through~~Segment(s) ~~existing~~Performance ~~international~~improvement ~~infrastructure. We~~and ~~have~~organizational ~~developed~~transformation aconsulting ~~global~~services ~~platform~~Through ~~for~~our ~~the~~“Lean” ~~sale~~consulting, we provide multi‑year coaching and ~~distribution~~enablement ofservices that deliver organizational transformation in both clinical and non‑clinical applications to help our ~~solutions~~customers streamline processes and decrease waste. In addition, experts across our business deliver custom consulting services leveraging advanced analytics in ~~more~~areas ~~than~~such 80as ~~countries~~cost containment, ~~primarily~~budgeting, ~~focused~~new onpayment ~~our~~models, ~~patient~~plan ~~care~~and ~~offerings~~provider profiling and operational and quality improvement. ~~Leveraging~~CommercialGovernment Analytics consulting services Through our ~~distributor~~analytics ~~network~~consulting services, ~~direct~~we ~~sales~~help ~~teams~~our customers gain greater value from our solutions and ~~international~~apply ~~office~~our ~~locations,~~data weand ~~seek~~methods to ~~increase~~specific problems. Our analytics consultants deliver insights that help customers identify and implement the ~~sale~~best course of ~~our~~action ~~analytic~~to ~~solutions~~achieve their objectives. Projects range in size and can address a specific issue, provide an in‑depth analysis of a more complex challenge, or monitor and evaluate results. In specialized areas, such as fraud detection and prevention, our analytics services are provided by a deeply experienced team that ~~meet~~specializes ~~the~~in ~~needs~~fraud analytics. CommercialGovernment Research services Our research staff has deep, cross‑industry knowledge that they leverage to deliver projects that are designed to improve healthcare access, enhance quality and reduce costs. Our staff includes senior researchers with established expertise in a range of specialty areas, including outcomes research, provider quality and efficiency measurement, health and productivity research, research data development and behavioral health and quality research. Many of our ~~international~~researchers ~~clients~~have PhDs and other advanced degrees and are well‑known and highly regarded in their respective fields. CommercialGovernment

Our ~~offerings~~Data - Suppliers and Security

We ~~market~~maintain ~~healthcare~~a ~~analytics~~diverse ~~solutions~~data ~~and~~supplier ~~services~~base ~~that~~in ~~address~~which ~~critical~~the ~~market~~vast ~~needs.~~majority ~~Our~~of ~~extensive~~our data ~~and~~comes ~~content~~from ~~assets~~our ~~combined~~clients. ~~with~~Many of our ~~healthcare~~clients ~~data~~provide ~~integration~~us with raw clinical, operational, financial and/or ~~analytics~~administrative ~~capabilities~~claims ~~are~~data, ~~embedded~~which ~~across~~we process to create our ~~offerings~~analytics databases. ~~Analytics~~We ~~solutions~~provide ~~typically~~this ~~include~~enhanced ~~implementation~~data ~~and~~back ~~product~~to ~~support~~clients ~~services~~through analytics solutions to help benchmark performance. ~~Many~~The value of our ~~analytics~~data ~~solutions~~assets ~~are~~increases ~~also~~as ~~bundled~~an ~~with~~inherent ~~related~~function ~~services~~of ~~such~~the business, as ~~data~~each ~~management~~current ~~and~~client ~~analytic~~refreshes ~~consulting~~data ~~that~~and ~~are~~each ~~tailored~~new to client ~~demands.~~contributes ~~Our~~additional ~~principal~~depth ~~offerings~~and ~~are~~breadth ~~grouped~~of ~~into~~data. ~~categories~~We ~~based~~also onpurchase ~~the~~a ~~customer~~small ~~needs~~amount ~~that~~of ~~they~~data ~~address~~from third‑party sources.

Our process for acquiring and analyzing healthcare data is founded on protecting the information supplied to us, as data security is critical to our business. As a Business Associate to our Covered Entity clients, we are required to maintain administrative, technical and physical data protection standards that comply with HIPAA and other applicable laws. We protect our healthcare data through the following mechanisms:

•

Administrative Safeguards. Our employees and contractors are trained on privacy and security upon hiring, and annually thereafter. They are taught to work safely with data, recognize and report potential problems and immediately escalate any questions or concerns. Our security leadership team, which is supported by local or department level compliance officers, has extensive experience and industry certifications, and at all times has immediate access to top management. Our strict policies are based on National Institute for Standards & Technology guidelines and HIPAA regulations.


•	Physical Safeguards. Our databases are maintained in our two secure, offsite data centers that are managed by a proven industry partner. Our staff members are physically present at both locations to ensure adherence

~~Analytics~~to ~~solutions~~our company security and privacy policies. These data centers receive an annual SSAE‑16 controls review. Our office facilities are also maintained with appropriate levels of security.

Category	Description	Key Products	Division(s)
Population health and cost analysis solutions	Solutions that help our clients integrate and analyze healthcare data on utilization, patient characteristics and costs for populations receiving healthcare services (e.g., a company’s employees and families, a state’s Medicaid enrollees, or an ACO’s members). Analytic methods are integrated with clinical and claims data and tools to enable care management, health benefits management, performance measurement, data exchange and integration, treatment cost transparency and personalized consumer engagement.	Advantage Suite Consumer Advantage Unify	Commercial Government
Provider performance management solutions	Solutions that help care delivery organizations track, measure and improve performance across core functions, including operational, financial, marketing and planning, and clinical and quality domains.	ActionOI CareDiscovery Market Expert	Commercial
Payment integrity and compliance solutions	Payment integrity solutions support government clients, for both Medicare and Medicaid data, as well as health plans and employers, to fight fraud, waste and abuse by way of powerful applications, advanced analytic methods, an extensive algorithm library and data mining capabilities.	DataProbe J‑SURS	Commercial Government
Patient care solutions	Clinical and intelligent evidence solutions help providers combine real‑time patient data with reference information to provide point of care decision support. These solutions include the leading evidence‑based reference information for drug, disease, toxicology, patient education and neonatology. Our clinical solutions integrate with providers’ clinical systems, giving immediate access to the evidence‑based information needed, at the point of care.	Micromedex Evidence 360 Care Insights Patient Connect	Commercial Government
Research solutions	Market analysis, claims management and research solutions provide a broad, up‑to‑date picture of treatment patterns and costs by tracking detailed information about important aspects of care for patients as they travel through the U.S. healthcare system.	MarketScan Treatment Pathways	Commercial Government

•

Technical Safeguards. As required by HIPAA and our clients, we operate under a variety of data protection safeguards. For example, we apply strict data access controls, governed by the “need to know” and “minimum necessary” principles required by law. Depending on the application, we may mask or remove individual identifiers, aggregate data or de‑identify it under the guidance of a top national expert. Data is protected at rest and encrypted in transit using industry‑standard encryption. We monitor our networks and resources around the clock for signs of intrusion or malware. This monitoring uses the latest tools, including the ability to detect traffic from zero‑day malware.

Our Technology

We have designed our cloud‑based technology infrastructure to be secure, scalable and efficient. Our approach to architecture, design, operations, data management and data security and privacy addresses critical industry requirements and supports our growth strategies. We deliver the majority of our analytics solutions by revenue through our HIPAA compliant, secure and private cloud. Our cloud leverages virtualization technologies enabling us to provide highly efficient and flexible client data processing and storage. We also deliver solutions on dedicated infrastructure in our data center and at client sites. Our technology operations are highly scalable, leveraging advanced technologies that support large volumes of customers as well as very large customer engagements.

Our sophisticated data integration and analytics technology platform forms the basis of our analytics solutions. It combines healthcare utilization, performance, clinical, quality and cost data with our proprietary analytics methodologies to transform the large, complex quantities of data into actionable insights. We continuously invest in our platform to add new data types and sources.

Our technology platform consists of three main enabling elements:

Data integration. Our platform leverages industry standard ETL technologies (a process in database usage called Extract, Transform and Load that extracts data in a proper format for analytical purposes) such as Informatica, as well as our proprietary integration technologies to integrate numerous types of healthcare data from over 5,000 sources, including claims, lab results, clinical records and demographic data. Many of the data variables are standardized, unifying the format and the terminology across disparate sources and records. Data is further enhanced with the derivation of useful classification variables such as diagnosis and procedure group, patient risk classification and health plan type. These techniques provide significant value by enabling insights that can only be discerned when the data is consistent and enhanced. For example, clinical encounters are coded in various records using tens‑of‑thousands of ICD (which is the International Classification of Diseases, the standard diagnostic tool for health management purposes), CPT (which is the Current Procedural Terminology, the widely used medical nomenclature to report medical procedures and services under public and private health insurance programs) and SNOMED (which is the Systematized Nomenclature of Medicine, which serves as a systematic, computer‑processable collection of medical terms) codes. Effective analysis requires that codes be grouped into a manageable number (for example, hundreds) of meaningful and valid values for reporting and advanced analytics such as regressions and variance analyses. In addition, we resolve the relationships between data records in order to create analytic insights that span multiple systems and organizations.

Analytics construction. We enhance the integrated data with descriptive and predictive analytics insights that are continuously updated and embedded across our solutions and services as follows:

•

Our proprietary Medical Episode Grouper^® aggregates all medical and pharmacy claim records related to treatment for each patient’s clinical conditions and creates a single summary record for each episode of care. Episode records are analyzed to evaluate treatment patterns, costs and variations, and can be linked through deterministic and probabilistic matching algorithms to medical records data to add clinical data elements. This episode construct enables the analyst to monitor the progression of a patient’s illness and the impact of treatment over time, compare performance to benchmarks, risk stratify a population and predict important clinical outcomes.

~~Analytics~~• ~~services~~With proprietary predictive models such as our risk‑adjusted mortality index (RAMI) and expected complications rate index (ECRI), we create risk‑adjusted quality, cost and productivity measures enabling providers to accurately assess their current performance relative to their peers.

~~Category~~• ~~Description~~We ~~Analytics consulting services Through our analytic consulting services, we help our customers gain greater value from our solutions and~~ apply our data and solutions to specific problems. Our analytic consultants deliver insights that help customers identify and implement the best course of action to achieve their objectives. Projects range in size and can address a ~~specific~~variety ~~issue, provide an in‑depth analysis~~ of atraditional ~~more complex challenge, or monitor~~ and ~~evaluate~~proprietary ~~results.~~forecasting ~~In specialized areas, such as fraud detection~~ and ~~prevention,~~regression our analytics services are provided by a deeply experienced team that specializes in fraud analytics. Strategic consulting and advisory services Experts across our business deliver custom consulting services leveraging advanced analytics in areas such as cost containment, budgeting, new payment models, plan and provider profiling, program integrity and operational and quality improvement. As a result of the acquisition of Simpler and JWA, we provide multi‑year coaching and enablement services that use both clinical and non‑clinical applications of "Lean" principles to ~~help~~create ~~our~~demand ~~customers~~projections ~~streamline processes~~ and ~~decrease~~regional ~~waste.~~benchmark And, with the acquisition of Heartbeat Experts, we offer a comprehensive range of analytics, data management, stakeholder engagement, strategic consulting, and health economics and outcomes research services to life sciences companiesprices. Research services Our research staff has deep, cross‑industry knowledge that they leverage to deliver projects that are designed to improve healthcare access, enhance quality and reduce costs. Our staff includes senior researchers with established expertise in a range of specialty areas, including outcomes research, provider quality and efficiency measurement, health and productivity research, research data development and behavioral health and quality research. Many of our researchers have PhD and other advanced degrees and are well‑known and highly regarded in their respective fields. Data Management and Systems Integration We partner with clients to support their initial and ongoing data management and data warehousing needs, freeing up their resources to focus on other opportunities and mission‑critical issues. We leverage our relationships with thousands of data suppliers, as well as the proven experience and in‑depth knowledge of our on‑staff experts, to meet the information management goals of our clients. We also provide program and implementation management services.

~~Our~~• ~~data~~We ~~suppliers~~use a composite ranking algorithm (based on the diminishing probability of an extreme composite ranking with multiple performances measures) in the 100 Top Hospitals program.

We• maintain a diverse data supplier base in which the vast majority of our data comes from our clients. Many of our clients provide us with raw clinical, operational, financial and/or administrative claims data that we process to create our analytic databases. We ~~return~~also ~~this~~incorporate ~~enhanced~~rules‑based ~~data~~logic to ~~clients~~reveal ~~through~~gaps ~~analytic~~in ~~solutions~~care ~~to help benchmark performance. The value of our data assets increases as an inherent function of the business, as each current client refreshes data~~ and ~~each~~to ~~new~~identify ~~client~~patients ~~contributes~~potentially ~~additional~~at ~~depth~~high‑risk ~~and~~for ~~breadth~~a ofspecific ~~data~~outcome.

Applications and services. Our ~~technology~~analytics are deployed through our wide array of solutions, including offerings in the areas of population health, provider performance, patient care and payment integrity. We integrate and leverage technologies that put the power of analytics in the hands of end‑users, optimizing the number of clicks to insights and answers. In addition, our analytics are deployed as portable analytics and as part of our services engagements.

WeOur ~~have~~most ~~designed~~recent ~~our~~ technology ~~infrastructure~~platform toinnovation beinvolves ~~secure,~~the ~~scalable~~creation ~~and~~of ~~efficient~~a data lake. ~~Our~~The ~~approach~~data tolake ~~technology~~enables ~~architecture~~us ~~and~~to ~~design,~~create ~~platform~~more ~~development,~~insights ~~infrastructure~~based ~~and~~on ~~operations~~combined, ~~data~~larger ~~management~~ and ~~data~~more ~~security~~diverse ~~and~~data ~~privacy~~sets, ~~addresses~~more ~~industry~~quickly ~~requirements~~than ~~and~~ever isbefore. ~~flexible~~This ~~and~~technology ~~adaptable~~is designed to ~~support~~enable ~~our~~us ~~growth~~to ~~strategies.~~capitalize Weon ~~deliver~~ the ~~majority~~explosion of ~~our~~healthcare ~~analytics~~data ~~solutions (determined~~ by ~~revenue)~~elegantly ~~through~~combining ~~our~~standard ~~HIPAA~~big ~~compliant,~~data ~~secure,~~technology ~~private~~with ~~cloud.~~our ~~Our~~extensive ~~cloud~~data ~~leverages~~assets ~~virtualization~~and ~~technologies~~domain ~~enabling~~expertise us to provide ~~highly~~high ~~efficient~~value, ~~and~~actionable ~~flexible~~insights ~~client~~at ~~data~~massive ~~processing~~scale. ~~and~~In ~~integration,~~order ~~capacity~~to ~~planning,~~leverage ~~resource~~the ~~and~~knowledge ~~operations management,~~ and ~~maintenance.~~experience ~~We deliver the remainder~~ of ~~our~~other ~~analytics~~industries, ~~solutions~~the ~~on dedicated infrastructure hosted in our~~ data ~~center~~lake oris ~~located~~constructed atatop ~~client~~industry ~~sites.~~standard ~~Our~~big ~~technology~~data ~~operations~~technologies ~~deliver~~and ~~secure~~data ~~computing~~libraries, ~~storage,~~including ~~network~~Hadoop, ~~database~~Avro/HDFS and ~~data~~Hive, ~~center~~providing ~~capacity~~important tobenefits ~~meet~~such ~~and exceed contractual customer service levels and support customized infrastructure and data center solutions for large customer engagements.~~as:


•	Increased capacity both in size and performance to operate on massively large data sets.


•	Growth and evolution of the standard internal data representation as data sources are added without affecting existing applications.


•	Development of new analytics insights in a faster, more agile way.


•	Utilization of application‑specific data representation to quickly and seamlessly integrate our insights into existing operational systems.

The data lake not only speeds the creation of valuable analytic insights but also accelerates the speed at which those insights can be deployed to optimize operational processes. This is accomplished through a computer programming design technique known as “late binding.” In the case of the data lake, the decision about how data and insights will be surfaced to applications and users is delayed to the last possible moment. This delay creates two major benefits. First, the data integration and analytics construction processing need be done only once and is then available for any number of applications to use. This optimizes the processing, reducing the time window for applications to take advantage of valuable insights. Second, the application specific interfaces are very flexible and lightweight. This enables us to surface our data assets and analytic insights seamlessly in our standard products and custom solutions very efficiently. In this way, late binding enables us to deploy our analytics insights more flexibly through whatever vehicle the customer requires, such as, integrated into a partner’s solution, through a new application or directly into an existing workflow.

We expect that in the future, the data lake will underlie more solutions as well as be the data and analytics source for custom analytics applications and services developed in collaboration with our customers and partners.

Our ~~clients~~Clients

~~For~~Since ~~over~~the foundation of our business dating back more than 40 years ago, we have provided high quality healthcare data and analytics solutions toacross ~~our~~the ~~clients~~healthcare spectrum. Over that time, we have successfully built a leading position and have reached a scale that we believe is noteworthy in the industry, covering a significant portion of key constituents in the U.S. healthcare market. AtIn ~~the~~2015, ~~end of 2014~~ our clients included:

~~Over~~• Nearly 60% of Fortune 100 ~~companies~~ and almost 30% of Fortune 500 companies;.

• Over ~~125~~130 health plans;.

• Over 4,000 hospitals in the U.S. and ~~more~~approximately ~~than~~ 1,800 healthcare facilities internationally;.

• Medicaid agencies in 3130 states covering ~~over~~approximately 50% of Medicaid beneficiaries;.

• A diverse set of federal government agencies, ~~including~~ (CMS, ~~Agency for Healthcare Research and Quality~~AHRQ, ~~and the~~ VA~~; and~~).

~~Each~~• All of the top 25 global life sciences companies based on revenue.

Our revenue is ~~well~~ distributed among a large, diversified and loyal customer base of blue‑chip customers. The average tenure of our top 20 clients measured by 2015 revenue is approximately 13 years. Other than the federal government, no customer represented more than 2% of our 2015 revenue.

Our segments

We ~~currently~~deliver ~~operate~~our ~~and~~analytics ~~manage~~solutions ~~our~~and ~~business~~services ~~under~~through two segments:

Commercial Segment: The Commercial segment provides analytics solutions and services to improve the cost, quality and effectiveness of healthcare for commercial organizations across the healthcare industry including, for example, providers, integrated delivery networks, insurers, professional services organizations, healthcare exchanges, corporations and life sciences companies.

~~The~~ ~~Commercial~~No ~~segment~~single ~~provides~~customer ~~analytic~~or ~~solutions~~group ~~and~~of ~~services~~related tocustomers ~~improve~~in the ~~cost,~~Commercial ~~quality,~~segment ~~and~~accounted ~~effectiveness of healthcare~~ for ~~commercial~~more ~~organizations~~than ~~across~~10% ~~the~~of ~~healthcare~~our ~~industry~~revenues ~~including~~in ~~providers,~~the ~~integrated~~Commercial ~~delivery networks, insurers, professional services organizations, healthcare exchanges, manufacturers, and corporations~~segment.

Government Segment: The Government segment provides integrated analytics solutions and services to improve the cost, quality and effectiveness of healthcare for federal and state government organizations, including, for example, the Centers for Medicare and Medicaid ("CMS") and state Medicaid agencies and federally owned and operated healthcare facilities. Our sales and client services are tailored to meet the specific procurement, sales and support requirements of the government market.

~~The~~Our ~~Government~~contracts ~~segment~~with ~~provides~~the ~~integrated~~U.S. ~~analytic~~government ~~solutions~~or ~~and~~the ~~services~~U.S. togovernment’s ~~improve~~prime contractor (to the ~~cost,~~extent ~~quality~~that we are a subcontractor) generally contain standard, ~~and~~unilateral ~~effectiveness~~provisions ofunder ~~healthcare~~which the customer may terminate for ~~federal~~convenience ~~and~~or ~~state~~as ~~Government~~a ~~channels~~result (eof a default by us.g Our U. ~~Centers~~S. ~~for~~government ~~Medicare &~~contracts ~~Medicaid~~generally ~~Services~~also ~~and~~contain ~~state~~provisions ~~Medicaid~~that ~~agencies)~~allow ~~and~~the ~~federally~~U.S. ~~owned~~government ~~and~~to ~~operated~~unilaterally ~~healthcare~~suspend ~~facilities.~~us ~~Our~~from ~~sales~~obtaining ~~and~~new ~~client~~contracts ~~services~~pending ~~are~~resolution ~~tailored~~of toalleged ~~meet~~violations of procurement laws or regulations, reduce the ~~specific~~value ~~procurement~~of existing contracts, ~~sales~~issue modifications to a contract and ~~support~~control ~~requirements~~and ofpotentially prohibit the ~~government~~export ~~market~~of our services and associated materials.

~~Our~~The ~~competition~~Government segment generates revenue from various projects directly contracted and funded by the federal government, which collectively represent 25% of our revenues in the Government segment.

We compete with a diverse set of businesses, including large companies that compete in a variety of our markets, small companies that compete in some of our markets, and new entrants that compete with us in specific end markets or solution areas. Competition in healthcare analytics solutions and services is largely based on analytical capabilities and healthcare industry expertise, the size and quality of the underlying datasets and benchmarks, ease of use, reputation and customer service.

We are singularly focused on increasing the value of analytics solutions and services for our customers across the healthcare industry, unlike some of our largest competitors which are part of large health insurance companies or group purchasing organizations, or largely based in one particular end market. We believe that many of our customers value our independence and objectivity, and prefer to have access to more robust benchmarks based on data sourced across a diverse set of organizations. As the growth in healthcare spending and changes in government regulation draw increasing attention to healthcare analytics and data, new competitors, such as consultants, technology companies and start‑ ups, are participating in the sector.

~~Commercial~~Our ~~competition~~Competition

~~Across~~We ~~the Commercial Division, we~~ compete ~~against organizations~~ with ~~broad~~a ~~offerings~~diverse ~~such~~set asof ~~The Advisory Board Company~~businesses, ~~Deloitte,~~including ~~Evidera,~~large ~~Healthagen~~companies ~~(Aetna),~~that ~~IBM,~~compete ~~IMS,~~in ~~McKesson,~~a ~~Optum~~variety ~~(United~~of ~~Health~~our ~~Group)~~markets, ~~Premier,~~smaller ~~Reed~~companies ~~Elsevier,~~that ~~Verisk~~compete ~~and~~in ~~Wolters~~some ~~Kluwer~~of asour ~~well as with smaller~~markets, ~~more~~and ~~narrowly~~new ~~focused~~entrants ~~solution~~that ~~providers~~compete with ~~emphasis~~us onin a specific ~~type~~end ofmarkets or solution ~~such as Benefitfocus, Castlight, and RTI Health Solutions~~areas.

~~Government~~As ~~competition~~the growth in healthcare spending and changes in government regulation draw increasing attention to healthcare analytics and data, other competitors, such as consultants, technology companies and start‑ups, are also increasingly participating in the sector. Competition in healthcare analytics solutions and services is largely based on analytical capabilities and healthcare industry expertise, the size and quality of the underlying datasets and benchmarks, ease of use, reputation and customer service. We are focused on increasing the value of analytics solutions and services for our customers across the healthcare industry, unlike some of our largest competitors who are part of large health insurance companies or group purchasing organizations, or largely based in one particular end market.

~~Many~~Commercial ofCompetition: Across the ~~industry players noted in the~~ Commercial segment ~~are also our competitors in the Government segment. Additionally~~, ~~large~~we ~~and specialized system integrators~~ compete ~~for~~against ~~government~~firms ~~contracts.~~with ~~Sometimes~~broad weofferings ~~bid~~such ~~against~~as ~~these~~Advisory ~~companies~~Board, ~~and~~Deloitte, ~~sometimes~~Emdeon, ~~they~~IBM, ~~seek~~IMS, usInovalon, ~~out~~McKesson, asMedAssets, aOptum ~~sub‑contractor~~(United orHealth ~~partner~~Group), ~~given~~Premier, ~~our~~Verisk ~~specialized~~ and ~~domain~~Wolters ~~expertise.~~Kluwer ~~Certain~~as ~~companies~~well ~~with~~as amore ~~large~~narrowly ~~government~~focused ~~focus~~solution providers such as ~~Accenture,~~Evidera ~~HMS Holdings, General Dynamics, Lockheed Martin~~ and ~~Northrop Grumman have established material positions in the industry~~Castlight.

~~Research~~Government Competition: Some of the industry players noted in the Commercial segment are also competitors in the Government customer channel. Additionally, large and ~~development~~specialized system integrators compete for government contracts. We periodically bid against these companies, while they also seek us out as a sub‑contractor or partner given our specialized and domain expertise. Certain companies with a large government focus such as Accenture, General Dynamics, HMS Holdings, Lockheed Martin and Northrop Grumman have established material positions in the industry. We also compete with specialized research firms such as Mathematica and RTI International.

WeResearch ~~have focused our product research~~ and development ("R&D") on a number of interrelated areas to expand our analytics market position, address emerging industry needs, and provide additional flexibility and usability. Specific examples of recent and ongoing development include:Development

~~new~~We ~~predictive~~have ~~analytic~~focused ~~methods~~on a number of interrelated areas to ~~measure~~expand ~~risk~~our analytics market position, address emerging industry needs and ~~apply~~provide ~~results~~additional toflexibility ~~real‑time~~and ~~decision~~usability. ~~making;~~Specific examples of recent and ongoing development include:

~~improving~~• ~~data~~Establishing ~~management~~new ~~processes~~predictive ~~and~~analytics ~~increasing~~methods ~~the~~to ~~integration~~measure ~~into~~risk ~~patient~~ and ~~provider~~apply ~~workflows;~~results to real‑time decision making.

~~improving~~• ~~reporting,~~Improving ~~including~~data amanagement ~~new~~processes ~~interface~~and increasing data integration into patient and ~~reporting~~provider ~~engine;~~workflows.

~~new~~• ~~advanced~~Improving ~~search~~reporting, ~~and~~including ~~user~~through ~~interface~~the ~~that~~establishment ~~enables~~of ~~users~~new tointerfaces ~~better leverage~~ and ~~access~~a ~~evidence~~dashboard/reporting ~~data, as well as mobile applications for point‑ of‑care; and~~engine.

~~investments~~• inEstablishing ~~the~~a ~~collection~~new ofadvanced ~~additional~~search ~~data~~and ~~types~~user ~~related~~interface that enables users to ~~certain~~better ~~health~~leverage ~~reform~~and ~~provisions~~access information.

~~R&D~~• ~~costs~~Investing ~~mainly~~in ~~related to labor costs and services bought and are expensed as incurred. The R&D costs expensed were $1.0 million for~~ the ~~year~~collection ~~ended~~of ~~December 31,~~additional ~~2014, $1~~data.7 million for the year ended December 31, 2013, $0.5 million for the period from April 20, 2012 (inception) to December 31, 2012, and $1.6 million for the Predecessor Period from January 1, 2012 to June 6, 2012.

~~Our~~R&D ~~employees~~costs mainly related to labor costs and services bought and are expensed as incurred. The R&D costs expensed were $1.3 million, $1.0 million and $1.7 million for the years ended December 31, 2015, 2014 and 2013, respectively.

AsFacilities ofand ~~December 31, 2014, we had approximately 2,500 employees. None of our employees are represented by a labor union. We consider our relationship with our employees to be good.~~Infrastructure

We have invested significantly in our facilities, infrastructure and technology. We have state‑of‑the‑art, redundant data centers in Dallas, Texas, and Sterling, Virginia. We provide hosting services for our customers and manage all of our software services, hardware and networking systems, and customer data, in partnership with CenturyLink Technology Solutions (formerly, Savvis), which provides our data center facility services. CenturyLink Technology Solutions, part of CenturyLink, Inc., is a services organization that supports approximately 2,500 clients, including

~~Regulation~~more than 30 Fortune 100 companies. Both data center facilities are designed to meet the stringent demands of large‑scale clients, with dedicated access to the Savvis Tier 1 IP backbone, one of the largest peer networks within the global Internet, delivering high bandwidth, low‑latency Internet access and ~~legislation~~purpose‑built facilities for power management, heating/ventilation/air conditioning, fire suppression, seismic engineering and physical security.

~~Introduction~~Our Intellectual Property

~~The~~We ~~healthcare~~rely ~~industry~~upon isa ~~highly~~combination ~~regulated~~of ~~and~~trade ~~subject to changing political~~secret, ~~legislative,~~copyright ~~regulatory~~ and ~~other~~trademark ~~influences.~~laws, ~~The~~license ~~Patient Protection and Affordable Care Act (“PPACA”) is changing how healthcare services are covered~~agreements, ~~delivered~~confidentiality ~~and reimbursed through expanded coverage of uninsured individuals~~procedures, ~~reduced~~nondisclosure ~~Medicare~~agreements ~~program spending~~ and ~~substantial~~technical ~~insurance~~measures ~~market~~to ~~reforms.~~protect ~~PPACA~~the ~~also~~intellectual ~~imposes~~property ~~significant~~used ~~Medicare~~across ~~Advantage~~our ~~funding~~segments ~~cuts~~ and ~~material~~customer ~~reductions~~channels. toWe ~~Medicare~~generally ~~and~~enter ~~Medicaid~~into ~~program~~confidentiality ~~spending.~~agreements ~~PPACA~~with ~~provides~~our ~~additional~~employees, ~~resources to combat healthcare fraud~~consultants, ~~waste~~vendors and ~~abuse~~customers. ~~and~~We also ~~requires~~seek ~~HHS~~ to ~~adopt~~control ~~standards~~access ~~for electronic transactions, in addition~~ to ~~those required under HIPAA~~, and tothe ~~establish~~distribution ~~operating~~of, ~~rules~~our totechnology, ~~promote~~documentation ~~uniformity~~and inother ~~the~~proprietary ~~implementation of each standardized electronic transaction~~information.

~~While~~We ~~many~~use ofnumerous ~~the~~trademarks, ~~provisions~~trade ofnames ~~PPACA~~and ~~will~~service ~~not~~marks befor ~~directly~~our ~~applicable~~solutions toacross ~~us,~~our ~~PPACA,~~segments asand ~~enacted,~~customer ~~affects~~channels. ~~the~~We ~~businesses~~also ofrely ~~our~~on ~~customers.~~a ~~PPACA’s~~variety ~~complexity,~~of ~~lack~~intellectual ofproperty ~~implementing~~rights ~~regulations~~that orwe ~~interpretive~~license ~~guidance,~~from ~~former~~third ~~court~~parties. ~~challenges~~Although ~~and~~we ~~political~~believe ~~debate~~that ~~makes~~alternative ittechnologies ~~difficult~~are generally available to ~~predict~~replace ~~the~~such ~~ways~~licensed inintellectual ~~which~~property, ~~PPACA~~these ~~will~~third‑party ~~impact~~technologies may not continue to be available to us oron ~~the~~commercially ~~business~~reasonable ofterms ~~our~~or ~~customers~~at all.

In addition to PPACA, the healthcare industry is faced with other challenges. The Health Information Technology for Economic and Clinical Health Act ("HITECH") offers incentives for certain healthcare providers to adopt "meaningful use" health information technology and provides penalties in later years if they are unable to do so. The October 1, 2015 mandated adoption of a new medical classification system, also known as ICD‑10 is impacting both payers and providers. The healthcare industry is also required to comply with extensive and complex laws and regulations at the federal and state levels.

Although many regulatory and governmental requirements do not directly apply to our operations, our customers are required to comply with a variety of laws and we may be impacted by these laws as a result of our contractual obligations. We have attempted to structure our operations to comply with applicable legal requirements, but there can be no assurance that our operations will not be challenged or adversely impacted by enforcement initiatives. See “Risk factors-Risks related to our business-Government regulation creates risks and challenges with respect to our compliance efforts and our business strategies.”

Requirements regarding the confidentiality, privacy and security of personal information

HIPAA Privacy Standards and Security Standards. HIPAA Privacy Standards and HIPAA Security Standards apply directly to us when we are functioning as a Business Associate of our Covered Entity customers. As a result, stricter limitations have been placed on certain types of uses and disclosures. The HIPAA Privacy Standards extensively regulate the use and disclosure of individually identifiable health information by Covered Entities and their Business Associates. The HIPAA Security Standards require Covered Entities and their Business Associates to implement and maintain administrative, physical and technical safeguards to protect the security of individually identifiable health information that is electronically transmitted or electronically stored. See "Risk factors-Risks related to our business-Government regulation creates risks and challenges with respect to our compliance efforts and our business strategies."

Data breaches. In recent years, there have been a number of well publicized data breaches involving the improper dissemination of personal information of individuals both within and outside of the healthcare industry. Many states, as well as the federal Government through HIPAA, have responded to these incidents by enacting laws requiring holders of personal information to maintain safeguards and to take certain actions in response to a data breach, such as providing prompt notification of the breach to affected individuals. We have implemented and maintain physical, technical and administrative safeguards intended to protect all personal data and have processes in place to assist us in complying with all applicable laws and regulations regarding the protection of this data and properly responding to any security breaches or incidents. See "Risk factors-Risks related to our business-Government regulation creates risks and challenges with respect to our compliance efforts and our business strategies."

Other requirements. In addition to HIPAA, numerous other international, state and federal laws govern the collection, dissemination, use, access to and confidentiality of individually identifiable health information and healthcare provider information. Some states also are considering new laws and regulations that further protect the confidentiality, privacy and security of medical records or other types of medical information.

False claims laws and other fraud, waste and abuse restrictions

We provide solutions to health plan sponsors and other customers that relate to the reimbursement of health services covered by Medicare, Medicaid, other federal healthcare programs and private payers. As a result of these aspects of our business, we may be subject to, or contractually required to comply with, state and federal laws that govern various aspects of the submission of healthcare claims for reimbursement and the receipt of payments for healthcare items or services. These laws generally prohibit an individual or entity from knowingly presenting or causing to be presented claims for payment to Medicare, Medicaid or other third party payers that are false or fraudulent. False or fraudulent claims include, but are not limited to, billing for services not rendered, failing to refund known overpayments, misrepresenting actual services rendered in order to obtain higher reimbursement and improper coding and billing for medically unnecessary goods and services. Further, providers may not contract with individuals or entities excluded from participation in any federal healthcare program. Like the federal Anti‑Kickback Statute, these provisions are very broad. See “Risk factors-Risks related to our business-Government regulation creates risks and challenges with respect to our compliance efforts and our business strategies.”

Some of these laws, including restrictions contained in amendments to the Social Security Act, commonly known as the federal civil monetary penalty laws ("CMPL"), require a lower burden of proof than other fraud, waste and abuse laws. Federal and state governments increasingly use the federal CMPL, especially where they believe they cannot meet the higher burden of proof requirements under the various criminal healthcare fraud provisions. Many of these laws provide significant civil and criminal penalties for noncompliance and can be enforced by private individuals through "whistleblower" or qui tam actions. For example, the federal CMPL provides for penalties ranging from $10,000 to $50,000 per prohibited act and assessments of up to three times the amount claimed or received. Further, violations of the federal False Claims Act ("FCA") are punishable by treble damages and penalties of up to $11,000 per false claim, and whistleblowers may receive a share of amounts recovered. Under PPACA, civil penalties also may now be imposed for the failure to report and return an overpayment made by the federal Government within 60 days of identifying the overpayment and may also result in liability under the FCA. Whistleblowers, the federal Government and some courts have taken the position that entities that have violated other statutes, such as the federal Anti‑Kickback Statute, have thereby submitted false claims under the FCA. PPACA clarifies this issue with respect to the federal Anti‑Kickback Statute by providing that submission of a claim for an item or service generated in violation of the federal Anti‑Kickback Statute constitutes a false or fraudulent claim under the FCA.

Our intellectual property

We rely upon a combination of trade secret, copyright and trademark laws, license agreements, confidentiality procedures, nondisclosure agreements and technical measures to protect the intellectual property used across our segments and customer channels. We generally enter into confidentiality agreements with our employees, consultants, vendors and customers. We also seek to control access to, and distribution of, our technology, documentation and other proprietary information.

We use numerous trademarks, trade names and service marks for our solutions across our segments and customer channels. We also rely on a variety of intellectual property rights that we license from third parties. Although we believe that alternatives are generally available to replace such licensed intellectual property, these third party properties may not continue to be available to us on commercially reasonable terms or at all.

We also have several patents and patent applications covering solutions we provide, including software applications. Due to the nature of our applications, we believe that patent protection is a less significant factor than our ability to further develop, enhance and modify our current solutions in order to remain competitive.

Our Employees

As of December 31, 2015, we had approximately 2,650 employees. None of our employees are represented by a labor union. We consider our relationship with our employees to be good.

Regulation and Legislation

The healthcare industry is highly regulated and subject to changing political, legislative, regulatory and other influences. The Patient Protection and Affordable Care Act of 2010 ("PPACA") is changing how healthcare services are covered, delivered and reimbursed through expanded coverage of uninsured individuals, reduced Medicare program spending and substantial insurance market reforms. The PPACA also imposes significant Medicare Advantage funding cuts and material reductions to Medicare and Medicaid program spending. The PPACA provides additional resources to combat healthcare fraud, waste and abuse and also requires the Department of Health and Human Services ("HHS") to adopt standards for electronic transactions, in addition to those required under HIPAA, and to establish operating rules to promote uniformity in the implementation of each standardized electronic transaction.

While many of the provisions of the PPACA will not be directly applicable to us, the PPACA, as enacted, affects the businesses of our customers. The PPACA’s complexity, lack of implementing regulations or interpretive guidance, former court challenges and political debate makes it difficult to predict the ways in which the PPACA would impact us or the business of our customers.

In addition to the PPACA, the healthcare industry is faced with other challenges. HITECH offers incentives for certain healthcare providers to adopt “meaningful use” health information technology and provides penalties in later years if they are unable to do so. The October 1, 2014 mandated adoption of a new medical classification system, also known as ICD‑10 is impacting both payers and providers. The healthcare industry is also required to comply with extensive and complex laws and regulations at the federal and state levels. Although many regulatory and governmental requirements do not directly apply to our operations, our customers are required to comply with a variety of laws and we may be impacted by these laws as a result of our contractual obligations. We have attempted to structure our operations to comply with applicable legal requirements, but there can be no assurance that our operations will not be challenged or adversely impacted by enforcement initiatives.

See “Risk Factors - Risks Related to Our Business - Government regulation in the healthcare industry creates risks and challenges with respect to our compliance efforts and customer relationships, which could adversely affect our operating results.”

Requirements regarding the confidentiality, privacy and security of personal information

HIPAA Privacy Standards and Security Standards. The HIPAA Privacy Standards and HIPAA Security Standards apply directly to us when we are functioning as a Business Associate of our Covered Entity customers. As a result, stricter limitations have been placed on certain types of data uses and disclosures. The HIPAA Privacy Standards extensively regulate the use and disclosure of individually identifiable health information by Covered Entities and their Business Associates. The HIPAA Security Standards require Covered Entities and their Business Associates to implement and maintain administrative, physical and technical safeguards to protect the security of individually identifiable health information that is electronically transmitted or electronically stored. See “Risk factors - Risks Related to Our Business - Government regulation in the healthcare industry creates risks and challenges with respect to our compliance efforts and customer relationships, which could adversely affect our operating results.”

Data breaches. In recent years, there have been a number of well publicized data breaches involving the improper dissemination of personal information of individuals both within and outside of the healthcare industry. Many states, as well as the federal government through HIPAA, have responded to these incidents by enacting laws requiring holders of personal information to maintain safeguards and to take certain actions in response to a data breach, such as providing prompt notification of the breach to affected individuals. We have implemented and maintain physical, technical and administrative safeguards intended to protect all personal data and have processes in place to assist us in complying with all applicable laws and regulations regarding the protection of this data and properly responding to any security breaches or incidents. See “Risk Factors - Risks Related to Our Business - If our security measures are breached, or if the systems our customers use to gain access to our solutions are compromised, we could suffer a material loss of business, substantial legal liability or significant harm to our reputation.”

Other requirements. In addition to HIPAA, numerous other state and federal laws govern the collection, dissemination, use, access to and confidentiality of individually identifiable health information and healthcare provider information. Some states also are considering new laws and regulations that further protect the confidentiality, privacy and security of medical records or other types of medical information. In addition, numerous other bodies of privacy laws exist which include the federal rules that govern the use and disclosure of alcohol and drug abuse records, such as the European Union’s Data Protection Directive, Canada’s Personal Information Protection and Electronic Documents Act and other data protection, privacy and similar national, state/provincial and local laws.

False claims laws and other fraud, waste and abuse restrictions.

We provide solutions to health plan sponsors and other customers that relate to the reimbursement of health services covered by Medicare, Medicaid, other federal healthcare programs such as federal grants and private payers. As a result of these aspects of our business, we may be subject to, or contractually required to comply with, state and federal laws that govern various aspects of the submission of healthcare claims for reimbursement and the receipt of payments for healthcare items or services. These laws generally prohibit an individual or entity from knowingly presenting or causing to be presented claims for payment to Medicare, Medicaid or other third‑party payers that are false or fraudulent. False or fraudulent claims include, but are not limited to, billing for services not rendered, failing to refund known overpayments, misrepresenting actual services rendered in order to obtain higher reimbursement and improper coding and billing for medically unnecessary goods and services. Further, providers may not contract with individuals or entities excluded from participation in any federal healthcare program. Like the federal Anti‑Kickback Statute, which prohibits any person or entity from offering, paying, soliciting or receiving, directly or indirectly, anything of value with the intent of generating referrals of patients covered by Medicare, Medicaid or other federal healthcare programs (for example, federal grants), these provisions are very broad. Many states also have similar anti‑kickback laws that are not necessarily limited to items or services for which payment is made by a federal healthcare program. Moreover, both federal and state laws forbid bribery and similar behavior.

~~The~~For ~~steps~~a wediscussion ~~have~~of ~~taken~~the torisks ~~protect~~associated ~~our~~with ~~copyrights,~~government ~~trademarks~~regulation, ~~service~~see ~~marks~~“Risk ~~and~~Factors - ~~other~~Risks ~~intellectual~~Related ~~property~~to ~~may~~Our ~~not~~Business - beGovernment ~~adequate,~~regulation ~~and~~in ~~third~~the ~~parties~~healthcare ~~could~~industry ~~infringe,~~creates ~~misappropriate~~risks orand ~~misuse~~challenges ~~our~~with ~~intellectual~~respect ~~property.~~to Ifour ~~this~~compliance ~~were~~efforts toand ~~occur~~customer relationships, itwhich could ~~harm our reputation and~~ adversely affect our ~~competitive~~operating ~~position or~~ results ~~of operations~~.”

ITEM 1A - RISK FACTORS

You should carefully consider the risks described below and all of the information contained in this Annual Report. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of those risks actually occurs, our business, financial condition and results of operations could suffer. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed or implied in these forward-looking statements. See “Forward-Looking Statements” in this Annual Report.

Risks related to our business

We ~~are~~may ~~highly~~be ~~dependent~~unable onto ~~customers~~satisfy ~~and,~~the inconditions ~~many cases, their insurance carriers, as well as third-party vendors,~~ to ~~supply us with data necessary for~~ the ~~delivery~~completion of ~~our~~the ~~solutions~~Stock ~~and~~Purchase ~~services~~with ~~and any deterioration in our key sources of data would adversely affect our business~~IBM.

~~Our~~The ~~solutions~~closing ~~and~~of ~~services~~the ~~incorporate~~Stock ~~data~~Purchase ~~that~~is wesubject ~~obtain from our customers and, with respect~~ to ~~our employer customers,~~ the ~~insurance~~satisfaction ~~carriers~~or ~~that~~waiver ~~service~~of ~~them, as well as data that we purchase from third-party vendors. These data suppliers provide us with~~ a ~~majority~~number of ~~the~~customary ~~data~~closing ~~that~~conditions,many weof ~~use~~which ~~for~~are beyond our ~~products~~control ~~and services. Some~~ of ~~our~~and ~~customers~~some ~~have~~beyond ~~expressed concern about~~ the ~~commercial~~control ~~uses~~ of ~~the~~both ~~data that they contribute to~~ us ~~and~~or ~~insurance carriers are concerned that certain data they supply could be used in ways that disadvantage them~~IBM. ~~Health~~If ~~insurance~~the ~~carriers~~Stock ~~generally~~Purchase ~~view~~is ~~certain~~not ~~health~~completed, ~~plan~~we ~~data as proprietary information and are increasingly asserting control over how the data~~ may bebear ~~used~~significant ~~and~~transaction tocosts. In ~~whom it may be provided~~addition, ~~even if authorized by~~ the ~~health~~current ~~plan~~price ~~sponsor. The imposition~~ of ~~restrictions or limitations on~~ our ~~use~~Notes ofmay orreflect ~~access~~an toassumption ~~customer~~that ~~and~~the ~~health~~Stock ~~plan~~Purchase ~~data~~will ~~could adversely affect our solutions and service offerings~~occur, ~~including product functionality, our ability to provide data~~ and ~~corresponding~~failure ~~products and services~~ to ~~commercial~~complete ~~customers,~~the ~~our~~Stock ~~ability~~Purchase tocould ~~develop~~result ~~new~~in ~~product~~a ~~and~~decline ~~service~~in ~~offerings~~the ~~and~~price our reputation and brand equity resulting from diminished data access. In addition, we may be unable to find alternative, up to date data sources from third-party vendors on commercially reasonable terms or at all. Third party vendors of ~~data may increase restrictions on~~ our ~~use of data, increase pricing to purchase or license data or refuse altogether to provide us with data~~Notes. The ~~Any~~failure ~~significant~~of ~~impairment to~~ the ~~access~~Stock toPurchase ~~data that we currently enjoy, due~~ to ~~increased~~be ~~pricing,~~completed ~~the~~may ~~imposition~~also ofresult ~~restrictions~~in ~~and~~negative ~~limitations~~publicity ~~that we consider onerous~~ and/or ~~the~~a ~~withdrawal~~negative ofimpression ~~the provision~~ of ~~data to~~ us ~~from~~in ~~key~~the ~~sources,~~investment ~~could~~community ~~have~~and amay ~~material~~affect ~~adverse impact on~~ our ~~business,~~relationship ~~results~~with ofcustomers ~~operations~~and orother ~~financial condition~~partners.

We ~~receive,~~are ~~process,~~highly ~~store,~~dependent ~~use~~on customers and, ~~transmit~~in ~~individually~~many ~~identifiable~~cases, ~~health~~their ~~information~~insurance ~~and~~carriers, ~~other~~as ~~sensitive~~well ~~data~~as third‑party vendors, ~~which~~to ~~subjects~~supply us towith ~~governmental~~data ~~regulation~~necessary ~~and~~for ~~other~~the ~~legal~~delivery ~~obligations~~of ~~related~~our tosolutions ~~privacy~~ and ~~security,~~services and any ~~actual~~deterioration orin ~~perceived~~our ~~failure~~key tosources ~~comply~~of ~~with~~data ~~such~~would ~~obligations~~adversely ~~could~~affect ~~harm~~ our business.

WeOur ~~receive,~~solutions ~~process,~~and ~~store,~~services ~~use~~incorporate ~~and~~data ~~transmit~~that ~~individually~~we ~~identifiable~~obtain ~~health~~from ~~information~~our customers and, ~~other~~with ~~sensitive~~respect to our employer customers, the insurance carriers that service them, as well as data. ~~There~~that ~~are~~we ~~numerous~~purchase ~~federal~~from ~~and~~third‑party ~~state~~vendors. ~~laws~~These ~~regarding~~data ~~privacy~~suppliers ~~and~~provide us with a majority of the ~~storing,~~data ~~sharing,~~that we use, ~~processing,~~for ~~disclosure~~our products and ~~protection~~services. Some of ~~individually~~our ~~identifiable~~customers ~~health~~have ~~information~~expressed ~~and~~concern ~~other~~about ~~personal~~the ~~information,~~commercial uses of the ~~scope~~data ofthat ~~which~~they iscontribute ~~changing~~to us and ~~subject~~insurance tocarriers ~~differing~~are ~~interpretations.~~concerned Wethat ~~strive~~certain todata ~~comply~~they ~~with~~supply ~~applicable~~could ~~laws,~~be ~~policies,~~used ~~legal~~in ~~obligations~~ways ~~and~~that ~~industry~~disadvantage ~~codes~~them. ofHealth ~~conduct~~insurance ~~relating~~carriers togenerally ~~privacy~~view ~~and~~certain health plan data ~~protection~~as toproprietary ~~the~~information ~~extent~~and ~~feasible.~~are ~~However,~~increasingly itasserting iscontrol ~~possible~~over ~~that~~how ~~these~~the ~~obligations~~data may be ~~interpreted~~used and ~~applied~~to inwhom ait ~~manner~~may ~~that~~be isprovided, ~~inconsistent~~even ~~from~~if ~~one~~authorized ~~jurisdiction~~by tothe ~~another~~health ~~and~~plan ~~may~~sponsor. ~~conflict~~The ~~with~~imposition ~~other~~of ~~rules~~restrictions or ~~our~~limitations ~~practices.~~on ~~Any~~our ~~failure~~use of or ~~perceived~~access ~~failure~~to bycustomer usand tohealth ~~comply~~plan ~~with~~data could adversely affect our ~~privacy~~solutions ~~policies~~and service offerings, ~~our~~including ~~privacy-related~~product ~~obligations~~functionality, our ability to ~~customers~~provide ordata ~~third~~and ~~parties~~corresponding orproducts ~~our~~and ~~privacy-related~~services ~~legal~~to ~~obligations~~commercial customers, orour ~~any~~ability ~~compromise~~to ofdevelop ~~security~~new ~~that~~solution ~~results~~and inservice ~~the~~offerings ~~unauthorized~~and ~~release~~our orreputation ~~transfer~~and ofbrand ~~individually~~equity ~~identifiable~~resulting ~~health~~from ~~information~~diminished ordata ~~other~~access. ~~sensitive~~In ~~data~~addition, we may ~~result~~be inunable ~~governmental~~to ~~enforcement~~find ~~actions~~alternative, ~~litigation~~up‑to‑date ordata ~~public~~sources ~~statements~~from ~~against~~third‑party usvendors byon ~~consumer~~commercially ~~advocacy~~reasonable ~~groups~~terms or ~~others~~at ~~and~~all. ~~could~~Third‑party ~~cause~~vendors ~~our~~of ~~customers~~data tomay ~~lose~~increase ~~trust~~restrictions inon ~~us,~~our ~~which~~use ~~could~~of ~~have~~data, aincrease ~~material~~pricing ~~adverse~~to ~~effect~~purchase onor ~~our~~license ~~business,~~data ~~financial~~or ~~condition~~refuse ~~and~~altogether ~~results~~to ofprovide ~~operations~~us with data. InAny ~~addition,~~significant weimpairment ~~cannot~~to ~~provide~~our ~~assurances~~current ~~with~~access ~~regard~~to data, due to ~~how~~increased ~~governmental~~pricing, ~~regulation~~the imposition of restrictions and ~~other~~limitations ~~legal~~or ~~obligations~~our ~~related~~inability to ~~privacy~~obtain ~~and~~data, ~~security~~including ~~will~~from bekey ~~interpreted~~sources, ~~enforced~~could orhave ~~applied~~a tomaterial adverse impact on our business, results of operations and financial condition.

IfWe ~~our~~receive, ~~security~~process, ~~measures~~store, ~~are~~use ~~breached,~~and ortransmit ifindividually ~~the~~identifiable ~~systems~~health ~~our~~information ~~customers~~and ~~use~~other tosensitive ~~gain~~data, ~~access~~which subjects us to ~~our~~governmental ~~solutions~~regulation ~~are~~and ~~compromised,~~other welegal ~~could~~obligations ~~lose~~related ~~sales~~to privacy and ~~customers~~security, and any actual or perceived failure to comply with such obligations could harm our business.

~~Our~~We ~~business~~receive, ~~involves~~process, ~~the storage~~store, use and ~~transmission~~transmit of individually identifiable health information and other ~~highly~~sensitive ~~confidential~~ data. ~~Therefore,~~There are numerous federal and state laws regarding privacy and the ~~security~~storing, ~~features~~sharing, ofuse, ~~our~~processing, ~~offerings~~disclosure ~~are~~and ~~extremely~~protection ~~important. A~~of ~~security~~individually ~~breach~~identifiable orhealth ~~failure~~information ~~could~~and ~~result~~other ~~from~~personal ainformation, ~~variety~~the scope of ~~circumstances~~which is changing and ~~events,~~subject ~~including~~to ~~third-party~~differing ~~actions~~interpretations. ~~such~~We asstrive ~~computer~~to ~~hacker~~comply ~~attacks~~with orapplicable ~~phishing~~laws, ~~employee~~policies, ~~malfeasance~~legal orobligations ~~error,~~and ~~computer~~industry ~~viruses~~codes of conduct relating to privacy and ~~malware,~~data ~~software~~protection ~~bugs~~to orthe ~~other~~extent ~~technical~~feasible. ~~malfunctions~~However, ~~power~~it ~~outages,~~is ~~hardware~~possible orthat ~~telecommunications~~these ~~failures,~~obligations ~~and~~may ~~catastrophic~~be ~~events.~~interpreted Ifand ~~our~~applied ~~security~~in ~~measures~~a ~~are~~manner ~~breached~~that oris ~~fail,~~inconsistent orfrom ifone ~~our~~jurisdiction ~~computer~~to ~~systems,~~another orand ~~those~~may ofconflict ~~our~~with ~~customers,~~other rules or our ~~third~~practices. ~~party~~Any ~~providers~~failure ~~are~~or ~~compromised,~~perceived ~~unauthorized~~failure ~~data~~by ~~access~~us ~~may~~to ~~occur.~~comply ~~Any~~with ofour ~~these~~privacy ~~circumstances~~policies, ~~could~~our ~~lead~~privacy‑related obligations to ~~interruptions,~~customers ~~delays~~or third parties or ~~shutdowns~~our privacy‑related legal obligations, ~~causing~~or ~~loss~~any compromise of ~~critical~~security ~~data~~that orresults in the unauthorized ~~disclosure~~release or ~~use~~transfer of ~~personally~~individually identifiable health information or other ~~confidential~~sensitive ~~information.~~data, ~~Security~~may ~~breaches~~result orin ~~compromises~~governmental ofenforcement ~~computer~~actions, ~~systems~~litigation or ~~security~~public ~~measures~~statements ~~may~~against beus ~~difficult~~by toconsumer ~~prevent,~~advocacy ~~detect~~groups ~~and~~or ~~resolve.~~others ~~Because~~and ~~the~~could ~~techniques~~cause ~~used~~our customers to ~~obtain~~lose ~~unauthorized~~trust ~~access~~in us, ~~disable~~which ~~service~~could orhave ~~sabotage~~a ~~systems~~material ~~change~~adverse ~~frequently,~~effect ~~may~~on ~~originate~~our ~~from~~business, ~~less~~financial ~~regulated~~condition and ~~remote~~results ~~areas~~of ~~around~~operations. ~~the~~In ~~world~~addition, ~~and~~we ~~generally~~cannot ~~are~~provide ~~not~~assurances ~~recognized~~with ~~until~~regard ~~launched~~to ~~against~~how ~~us,~~governmental weregulation ~~may~~and beother ~~unable~~legal obligations related to ~~proactively~~privacy ~~address~~and ~~these~~security ~~techniques~~will orbe tointerpreted, ~~implement~~enforced ~~adequate~~or ~~preventative~~applied ~~measures.~~to our operations.

We outsource to third parties certain important aspects of the storage and transmission of the information provided to us by our customers and other sources. These outsourced functions include services such as co-location data centers, software development, software engineering, database consulting, system administration, network security and firewall services. We attempt to address the associated risks by requiring our subcontractors with data access to sign agreements, including Business Associate agreements where necessary, obligating them to take security measures to protect such data. In addition, certain of our third party subcontractors are subject to security audits. However, we cannot assure you that these contractual measures and other safeguards will provide adequate protection against the risks associated with the storage and transmission of the data in our care.

In the event of a security breach or compromise that results in performance or availability problems with respect to our solutions, data assets or services, or the loss or unauthorized disclosure of individually identifiable health or other confidential information, our reputation could be severely damaged and the costs to our business could increase substantially. Our existing customers may lose trust and confidence in us and our solutions and services, causing them to decrease or stop the use of our solutions and services. We may experience difficulty in attracting new customers. We could be subject to lawsuits, government enforcement action and other claims that could result in third party liability, penalties, and fines, and we could be required to expend significant resources to remediate the damage and protect against future security breaches. These consequences could diminish our competitive position and have a material adverse effect on our business, results of operations and financial condition.

Failure of our customers to obtain proper permissions or provide us with accurate data may result in claims against us or may limit or prevent our use of data, which could harm our business.

We require our customers to obtain necessary permissions for the use and disclosure of the information that we receive. If they fail to obtain necessary permissions, then our use and disclosure of information that we receive from them or on their behalf may be limited or prohibited by state or federal privacy or other laws. Also, we rely on our customers to provide us with accurate and correct data. In addition, such failures by our customers could interfere with or prevent creation or use of rules, analyses or other data-driven activities that benefit us. Accordingly, we may be subject to claims or liability for use or disclosure of information by reason of lack of valid permissions or due to data inaccuracy. These claims or liabilities could damage our reputation, subject us to unexpected costs and adversely affect our financial condition and operating results.

Certain of our activities present the potential for identity theft or similar illegal behavior by our employees or contractors with respect to third parties.

Our services involve the use and disclosure of personal information that, in some cases, could be used to impersonate third parties or otherwise improperly gain access to their data or funds. If any of our employees or contractors takes, converts or misuses such information, or we experience a data breach creating a risk of identity theft, we could be liable for damages, and our business reputation could be damaged or destroyed. In addition, we could be perceived to have facilitated or participated in illegal misappropriation of documents or data and, therefore, be subject to civil or criminal liability. Federal and state regulators may take the position that a data breach or misdirection of data constitutes an unfair or deceptive act or trade practice. We also may be required to notify individuals affected by any data breaches. Further, a data breach or similar incident could impact the ability of our customers that are creditors to comply with the federal “red flags” rules, which require the implementation of identity theft prevention programs to detect, prevent and mitigate identity theft in connection with customer accounts.

If our security measures are breached, or if the systems our customers use to gain access to our solutions are compromised, we could suffer a material loss of business, substantial legal liability or significant harm to our reputation.

Our business involves the storage, use and transmission of individually identifiable health information and other highly confidential data. Therefore, the security features of our offerings are extremely important. A security breach or failure could result from a variety of circumstances and events, including third‑party actions such as computer‑hacking attacks or phishing, employee malfeasance or error, computer viruses and malware, software bugs or other technical malfunctions, power outages, hardware or telecommunications failures and catastrophic events. If our security measures are breached or fail, or if our computer systems or those of our customers, or our third‑party providers are compromised, unauthorized data access may occur. Any of these circumstances could lead to interruptions, delays or shutdowns, causing loss of critical data or the unauthorized disclosure or use of personally identifiable or other confidential information. Security breaches or compromises of computer systems or security measures may be difficult to prevent, detect and resolve. Because the techniques used to obtain unauthorized access, disable service or sabotage systems change frequently, may originate from less‑regulated and remote areas around the world and generally are not recognized until launched against us, we may be unable to proactively address these techniques or to implement adequate preventative measures.

~~for~~services. ~~damages,~~We ~~and~~attempt ~~our~~to ~~business~~address ~~reputation~~the ~~could~~associated berisks ~~damaged~~by orrequiring ~~destroyed.~~our Insubcontractors ~~addition,~~with wedata ~~could~~access ~~be perceived~~ to ~~have~~sign ~~facilitated~~agreements, orincluding ~~participated~~Business inAssociate ~~illegal~~agreements ~~misappropriation~~where ~~of documents or data and~~necessary, ~~therefore,~~obligating bethem ~~subject~~ to ~~civil or criminal liability. Federal and state regulators may~~ take ~~the~~security ~~position~~measures ~~that~~to aprotect such data. ~~breach~~In oraddition, ~~misdirection~~certain of ~~data~~our ~~constitutes~~third‑party ansubcontractors ~~unfair~~are orsubject ~~deceptive act or trade practice. We also may be required~~ to ~~notify~~security ~~individuals affected by any data breaches~~audits. ~~Further~~However, awe ~~data~~cannot ~~breach~~assure oryou ~~similar~~that ~~incident~~these ~~could~~contractual ~~impact~~measures ~~the~~and ~~ability~~other ofsafeguards ~~our~~will ~~customers~~provide ~~that~~adequate ~~are~~protection ~~creditors~~against ~~to comply with~~ the ~~federal~~risks ~~“red~~associated ~~flags”~~with ~~rules, which require~~ the ~~implementation~~storage ~~of identity theft prevention programs to detect, prevent~~ and ~~mitigate~~transmission ~~identity~~of ~~theft~~the data in ~~connection~~our ~~with customer accounts~~care.

~~Government~~In ~~regulation~~the ~~creates~~event ~~risks~~of ~~and~~a ~~challenges~~security breach or compromise that results in performance or availability problems with respect to our ~~compliance~~solutions, ~~efforts~~data assets or services, or the loss or unauthorized disclosure of individually identifiable health or other confidential information, our reputation could be severely damaged and the costs to our business ~~strategies~~could increase substantially. Our existing customers may lose trust and confidence in us and our solutions and services, causing them to decrease or stop the use of our solutions and services. We may experience difficulty in attracting new customers. We could be subject to lawsuits, government enforcement action and other claims that could result in third‑party liability, penalties and fines, and we could be required to expend significant resources to remediate the damage and protect against future security breaches. These consequences could diminish our competitive position and have a material adverse effect on our business, results of operations and financial condition.

~~The~~Failure ~~healthcare~~of ~~industry~~our iscustomers ~~highly regulated and subject~~ to ~~changing~~obtain ~~political,~~proper ~~legislative,~~permissions ~~regulatory~~or ~~and~~provide ~~other~~us ~~influences.~~with ~~Healthcare~~accurate ~~laws,~~data ~~including~~may ~~HIPAA,~~result ~~are~~in ~~complex~~claims ~~and~~against ~~their~~us ~~application~~or ~~to specific services and relationships~~ may ~~not~~limit beor ~~clear.~~prevent Weour ~~may~~use ~~also~~of bedata, ~~impacted~~which bycould ~~non-healthcare~~harm ~~laws as a result of some of~~ our ~~solution platforms~~business.

~~Given~~We ~~the~~require ~~evolving~~our ~~legal~~customers ~~and regulatory environment, we are unable~~ to ~~predict~~obtain ~~what~~necessary ~~changes~~permissions tofor ~~laws~~the oruse ~~regulations~~and ~~might~~disclosure beof ~~made~~the orinformation ~~how~~that ~~those~~we ~~changes could affect our business or costs of compliance~~receive. WeIf ~~have~~they ~~attempted~~fail to ~~structure~~obtain ~~our~~necessary ~~operations~~permissions, tothen ~~comply~~our ~~with~~use ~~legal requirements directly applicable to us~~ and todisclosure ~~our~~of ~~customers,~~information ~~but~~that ~~there~~we ~~can~~receive befrom nothem ~~assurance~~or ~~that~~on ~~our~~their ~~operations~~behalf ~~will~~may ~~not~~ be ~~challenged~~limited or ~~adversely~~prohibited ~~impacted~~ by ~~enforcement~~state ~~initiatives. Any determination by a court~~ or ~~agency~~federal ~~that~~privacy ~~our solutions violate,~~ or ~~cause~~other ~~our~~laws. ~~customers to violate~~Also, ~~applicable~~we ~~laws~~rely oron ~~regulations could subject us or~~ our customers to ~~civil~~provide ~~or criminal penalties. Such a determination could also require~~ us towith ~~change~~accurate orand ~~terminate~~unadulterated ~~portions~~data. ofIn ~~our business~~addition, ~~disqualify~~such usfailures ~~from~~by ~~serving~~our customers ~~who~~could ~~are~~interfere ~~or do business~~ with ~~government entities,~~ or ~~cause~~prevent uscreation ~~to refund some~~ or ~~all~~use of ~~our~~rules, ~~service~~analyses ~~fees~~ or ~~otherwise~~other ~~compensate~~data‑driven ~~our~~activities ~~customers.~~that Inbenefit ~~addition~~us. Accordingly, ~~failure~~we tomay ~~satisfy~~be ~~laws~~subject orto ~~regulations~~claims ~~could~~or ~~adversely~~liability ~~affect demand~~ for ~~our~~use ~~solutions~~or ~~and~~disclosure ~~could~~of ~~force~~information usby toreason ~~expend~~of ~~significant~~lack ~~capital,~~of ~~research~~valid ~~and~~permissions ~~development~~or ~~and~~due ~~other resources~~ to ~~address~~data ~~the failure~~inaccuracy. ~~Even~~These anclaims ~~unsuccessful challenge by regulatory authorities~~ or ~~private~~liabilities ~~whistleblowers~~ could ~~result~~damage inour ~~loss of business~~reputation, ~~exposure~~subject tous ~~adverse publicity and injury~~ to ~~our~~unexpected ~~reputation~~costs and ~~could~~ adversely affect our ~~ability~~financial tocondition ~~retain~~ and ~~attract~~operating ~~customers~~results. ~~Laws and regulations impacting our operations include the following:~~

~~HIPAA~~Regulation ~~and~~affecting ~~other privacy and security requirements. There are numerous federal and state laws and regulations related to~~ the ~~privacy~~healthcare ~~and~~industry ~~security~~is ~~of personal health information. In particular~~broad, ~~regulations~~complex ~~promulgated~~and ~~pursuant~~subject to ~~HIPAA~~changes ~~established national privacy and security standards~~ that ~~limit~~could ~~the~~adversely ~~use~~affect ~~and~~our disclosure of individually identifiable health information and require the implementation of administrative, physical and technological safeguards to ensure the confidentiality, integrity and availability of individually identifiable health information in electronic formbusiness. ~~In addition to regulating privacy of individual health information, HIPAA includes several anti-fraud and abuse laws and extends criminal penalties to private healthcare benefit programs.~~

~~Many~~The ofhealthcare ~~our~~industry ~~customers~~is ~~are~~highly ~~directly~~regulated ~~subject~~by tofederal, ~~the~~state soand ~~called~~local ~~HIPAA Privacy Standards~~authorities, and ~~HIPAA~~is ~~Security~~subject ~~Standards. As~~to ~~such,~~a ~~they~~variety ~~are~~of ~~required~~changing tointernal ~~enter~~and ~~into~~external ~~written~~influences. ~~agreements~~Healthcare ~~with~~laws ~~us,~~are ~~known~~complicated asand ~~Business~~depend ~~Associate~~on ~~agreements,~~government ~~which~~agencies ~~obligate~~to usinterpret toand ~~safeguard~~enforce ~~individually~~them. ~~identifiable~~These ~~health~~laws ~~information~~continue to evolve and ~~restrict~~their ~~how~~application weto ~~may~~our ~~use~~business and ~~disclose~~our ~~that~~clients ~~information.~~is ~~HITECH~~not ~~addresses~~always ~~the~~clear. ~~privacy~~The ~~and~~Health ~~security~~Insurance ~~concerns~~Portability ~~associated~~and ~~with~~Accountability ~~the~~Act ~~electronic transmission~~ of ~~health~~1996 ~~information,~~and inits ~~part~~implementing regulations, ~~through~~as ~~several~~amended ~~provisions~~(“HIPAA”), ~~that~~and ~~strengthen~~ the ~~civil~~PPACA, ~~and~~are ~~criminal~~two ~~enforcement~~examples of ~~HIPAA,~~legislation ~~which~~that directly ~~affects~~affect our business and ~~increases penalties for noncompliance. Prior to HITECH,~~ the ~~HIPAA~~businesses ~~Privacy Standards and HIPAA Security Standards applied to us indirectly as a result~~ of our ~~contractual obligation to our~~ customers. ~~Effective~~For ~~February 2010~~example, the ~~American~~PPACA’s ~~Recovery~~complexity, ~~and~~lack ~~Reinvestment Act~~ of ~~2009~~implementing ~~("ARRA")~~regulations ~~extended~~or ~~the~~interpretive ~~direct~~guidance, ~~application~~former ofcourt ~~certain~~challenges ~~provisions~~and ofpolitical ~~the~~debate ~~HIPAA~~make ~~Privacy~~it ~~Standards~~difficult ~~and~~to ~~HIPAA~~predict ~~Security~~the ~~Standards~~ways toin uswhich ~~when~~the wePPACA ~~are~~would ~~functioning~~impact asus aor ~~Business~~the ~~Associate~~businesses of our customers ~~that are "Covered Entities" under HIPAA~~. ~~ARRA~~Other ~~required~~legislative ~~the~~changes ~~Department~~have ofalso ~~Health~~been proposed and ~~Human~~adopted ~~Services~~in ~~("HHS")~~the ~~to issue regulations implementing HITECH~~U.S. ~~The~~since ~~Final Rule aligning~~ the ~~HIPAA~~PPACA ~~Privacy~~has ~~Standards,~~been ~~HIPAA Security Standards and enforcement rules with HITECH's statutory changes was released at the end of January 2013~~enacted. ~~Along~~These ~~with~~ changes ininclude ~~breach~~spending ~~notification~~reductions ~~standards, which are expected~~ to ~~lead~~several togovernment aprograms, ~~higher~~such ~~proportion of data security incident being classified~~ as ~~reportable breaches,~~ the ~~rule~~reduction ~~extends~~of ~~Business~~Medicare ~~Associate~~payments ~~status~~ to ~~subcontractors~~healthcare ~~of Business Associates, making us a Business Associate in some contexts where we previously had only contractual liability~~providers.

Given the evolving legal and regulatory environment, we are unable to predict what further legal or regulatory changes might be made or how those changes could affect our business. Additional state and federal healthcare reform measures are likely be adopted in the future, any of which could limit the amounts that federal and state governments will pay for our healthcare products and services. Such reforms may generate new or enhanced requirements which may render some of our services and solutions obsolete or prevent us from performing certain services or providing certain solutions. We may be required to change or adapt our services and solutions in order to comply with these regulations. For example, the adoption of regulations could limit our access to certain data and related use rights, requiring us to change or adapt our offerings and imposing additional costs on us. As a result, our existing services and solutions could be less profitable, and introducing new services or solutions might be more expensive or time‑consuming than we anticipate, which could materially and adversely affect our business, results of operations and growth prospects.

IfFor weadditional ~~are~~information ~~unable~~on togovernment ~~properly~~regulation ~~protect the privacy and security of health information entrusted~~ to ~~us,~~which we ~~could~~are besubject ~~found~~ to ~~have breached our contracts with our customers. Further~~, ~~HIPAA~~see ~~includes~~“Business-Regulation ~~civil~~ and ~~criminal penalties for Covered Entities and Business Associates that violate the HIPAA Privacy Standards or the HIPAA Security Standards~~Legislation. ARRA significantly increased the amount of the civil penalties, with penalties of up to $50,000 per violation for a maximum civil penalty of $1.5 million in a calendar year for violations of the same requirement.”

WeGovernment ~~have~~regulation ~~implemented and maintain policies and processes to assist us~~ in ~~complying with~~ the ~~HIPAA~~healthcare ~~Privacy~~industry ~~Standards,~~creates ~~the~~risks ~~HIPAA Security Standards~~ and ~~our~~challenges ~~contractual~~with ~~obligations.~~respect Weto ~~cannot~~our ~~provide~~compliance ~~assurance~~efforts ~~regarding~~and ~~how~~customer ~~these standards will be interpreted~~relationships, ~~enforced~~which orcould ~~applied~~adversely toaffect our ~~operations~~operating results.

~~Data~~We ~~breach laws. In recent years, there~~ have ~~been~~attempted ato ~~number~~structure ofour ~~well~~operations ~~publicized~~to ~~data~~comply ~~breaches~~with ~~involving~~legal ~~the~~requirements ~~improper~~that ~~dissemination~~directly ofapply ~~personal~~to ~~information~~us ~~of individuals both within~~ and ~~outside~~to ofour ~~the~~customers, ~~healthcare~~but ~~industry.~~there ~~Many~~can ~~states,~~be asno ~~well~~assurance asthat ~~the~~our ~~federal~~operations ~~Government~~will ~~through~~not ~~HIPAA,~~be ~~have~~challenged ~~responded~~or toadversely ~~these~~impacted ~~incidents~~ by ~~enacting~~changes ~~laws requiring holders of personal information~~ to ~~maintain~~government ~~safeguards~~regulation ~~and take certain actions~~ in ~~response~~the tohealthcare aindustry ~~data~~or ~~breach,~~regulatory ~~such~~enforcement ~~as providing prompt notification of the breach to affected individuals~~initiatives. In ~~many~~addition ~~cases,~~to ~~these~~HIPAA ~~laws~~and ~~are~~the ~~limited to electronic data~~PPACA, ~~but~~we ~~states are increasingly enacting~~ or ~~considering~~our ~~stricter~~clients ~~and~~are ~~broader~~subject ~~requirements. HIPAA Covered Entities must report breaches of unsecured individually identifiable health information~~ to ~~affected~~numerous ~~individuals~~other ~~without~~federal ~~unreasonable~~and ~~delay~~state ~~but~~regulations ~~not~~such toas ~~exceed~~the ~~60 days~~False ofClaims ~~discovery~~Act, ofwhich ~~the~~allows ~~breach by~~ a ~~Covered~~public ~~Entity~~and orprivate ~~its~~right ~~agents.~~of ~~Notification~~action ~~must~~against ~~also~~fraudulent bemedical ~~made~~claims, ~~to HHS~~ and, inthe ~~certain~~federal ~~circumstances~~Anti‑Kickback ~~involving large breaches~~Statute, towhich ~~the~~governs ~~media.~~patient ~~Business~~referrals, ~~Associates~~financial ~~must~~relationships ~~report~~with ~~breaches~~physicians ofand ~~unsecured~~other ~~individually~~referral ~~identifiable~~sources ~~health~~and ~~information~~inducements to ~~Covered~~providers ~~Entities~~and ~~within~~patients. ~~60 days~~Any ofdetermination ~~discovery of the breach~~ by ~~the~~a ~~Business~~court ~~Associate~~ or ~~its~~agency ~~agents.~~that Inour ~~addition~~offerings violate, ~~the~~or ~~Federal~~cause ~~Trade~~our ~~Commission~~customers ~~has~~to ~~prosecuted~~violate, ~~some~~such ~~data~~laws ~~breach~~or ~~cases~~regulations, ascould ~~unfair~~subject ~~and~~us ~~deceptive acts~~ or ~~practices~~our ~~under~~customers ~~the~~to ~~Federal~~civil ~~Trade~~or ~~Commission~~criminal ~~Act~~penalties. WeSuch ~~have~~a ~~implemented~~determination ~~and~~could ~~maintain~~also ~~physical,~~require ~~technical~~us ~~and administrative safeguards intended~~ to ~~protect~~change ~~all~~or ~~personal~~terminate ~~data~~portions ~~and~~of ~~have~~our ~~processes~~business, indisqualify ~~place to assist~~ us infrom ~~complying~~serving ~~with~~customers ~~applicable~~who ~~laws~~are ~~and~~or ~~regulations~~do ~~regarding~~business ~~the~~with ~~protection~~government ofentities, ~~this data and properly responding to any security breaches~~ or ~~incidents.~~cause ~~However, data breaches could subject~~ us to ~~certain~~refund ~~liabilities~~some ~~and~~or ~~could~~all ~~result in a loss~~ of ~~business, exposure to adverse publicity and injury to~~ our ~~reputation,~~service ~~any~~fees ofor ~~which~~otherwise ~~could~~compensate ~~adversely affect~~ our ~~ability to retain and attract~~ customers.

~~Other requirements.~~ In addition ~~to HIPAA~~, ~~numerous~~failure ~~other~~to ~~state~~satisfy ~~and~~such ~~federal~~ laws ~~govern~~or ~~the~~regulations ~~collection,~~could ~~dissemination,~~adversely ~~use,~~affect ~~access~~demand tofor ~~and~~our ~~confidentiality~~offerings ~~of individually identifiable health information~~ and ~~healthcare~~could ~~provider~~force ~~information.~~us ~~Some~~to ~~states~~expend ~~also~~significant ~~are~~capital, ~~considering~~research ~~new laws~~ and ~~regulations~~development ~~that~~efforts ~~further protect the confidentiality, privacy~~ and ~~security of medical records or~~ other ~~types~~resources ofto ~~medical~~address ~~information~~such failure. InEven ~~many~~an ~~cases,~~unsuccessful ~~these~~challenge ~~state~~by ~~laws~~regulatory ~~are~~authorities ~~not~~or ~~preempted~~private bywhistleblowers ~~the~~could ~~HIPAA~~result ~~Privacy~~in ~~Standards~~loss ~~and~~of ~~may~~business, beexposure ~~subject~~ to ~~interpretation~~adverse bypublicity ~~various courts~~ and ~~other~~injury ~~governmental~~to ~~authorities.~~our ~~Further,~~reputation ~~the U.S. Congress~~ and acould ~~number~~adversely ofaffect ~~states~~our ~~have~~ability ~~considered or are considering prohibitions or limitations on the disclosure of medical or other information~~ to ~~individuals~~retain orand ~~entities~~attract ~~located outside of the United States~~customers.

~~False~~If orwe ~~fraudulent~~fail ~~claim laws. There are numerous federal and state laws that prohibit false or fraudulent claims. False or fraudulent claims include, but are not limited~~ to, ~~billing~~comply ~~for~~with ~~services~~current ~~not rendered, failing to refund known overpayments, misrepresenting actual services rendered and improper coding and billing for medically unnecessary items~~ or ~~services.~~future ~~The~~data ~~False~~security ~~Claims Act ("FCA")~~ and ~~some~~privacy ~~state false claims~~ laws ~~contain~~or ~~whistleblower~~regulations ~~provisions~~governing ~~that allow private individuals to bring qui tam actions, which are actions on behalf of~~ the ~~government alleging that the defendant has defrauded the government. Whistleblowers~~collection, ~~the federal Government and some courts have taken the position that entities that have violated other statutes~~dissemination, ~~such~~use ~~as the federal Anti-Kickback Statute prohibiting any person from knowingly~~ and ~~willfully~~confidentiality ~~soliciting, receiving or paying any remuneration to induce another person to refer, recommend or arrange the purchase, lease or order~~ of ~~goods~~personally oridentifiable ~~services that are in any way paid for by a federal healthcare program such as Medicare or Medicaid~~information, ~~have~~including ~~been~~patient ~~found~~health ~~to violate the FCA. We rely on our customers to provide us with accurate and complete~~ information., ~~Errors and the unintended consequences of data manipulations by us or~~ our ~~systems~~business ~~with~~could ~~respect to entry, formatting, preparation or transmission of claim information may~~ be ~~determined or alleged to be in violation of these laws and regulations or could~~ adversely ~~impact the compliance of our customers~~impacted.

~~Anti-Kickback~~The privacy and ~~Anti-Bribery~~security ~~Laws~~of personally identifiable information, also known as personal data, that is collected, stored, maintained, received or transmitted electronically, is a major issue impacting the healthcare industry. AIn ~~number~~particular, ofthere are numerous federal and state laws ~~govern~~and ~~patient~~regulations ~~referrals~~related to the privacy and security of personal health information. For example, ~~financial~~regulations ~~relationships~~promulgated ~~with~~pursuant ~~physicians~~to HIPAA establish national privacy and ~~other~~security ~~referral~~standards ~~sources~~that limit the use and ~~inducements~~disclosure toof ~~providers~~individually identifiable health information and ~~patients~~require the implementation of administrative, ~~including~~physical ~~restrictions~~and ~~contained~~technological safeguards to ensure the confidentiality, integrity and availability of individually identifiable health information in ~~amendments~~electronic form. In addition to ~~the~~regulating ~~Social~~privacy ~~Security~~of ~~Act~~personal health information, ~~commonly~~HIPAA ~~known~~includes asseveral ~~the~~anti‑fraud ~~“federal~~and ~~Anti-Kickback~~abuse ~~Statute.”~~laws ~~The~~and ~~federal~~extends ~~Anti-~~criminal penalties to private healthcare benefit programs.

Many of our customers are directly subject to two rules that were promulgated pursuant to HIPAA: (i) the Standards for Privacy of Individually Identifiable Health Information (the “Privacy Standards”) and (ii) the Security Standards for the Protection of Electronic Protected Health Information (the “Security Standards”). As such, our customers are required to enter into written agreements with us, known as Business Associate agreements, which obligate us to safeguard individually identifiable health information and restrict how we may use and disclose that information. The Health Information Technology for Economic and Clinical Health Act, as amended (“HITECH”) addresses the privacy and security concerns associated with the electronic transmission of health information, in part through several provisions that strengthen the civil and criminal enforcement of HIPAA, which directly affects our business and increases penalties for noncompliance. Along with changes in breach notification standards, which are expected to lead to a higher proportion of data security incidents being classified as reportable breaches, the rule extends Business Associate status to subcontractors of Business Associates, making us a Business Associate in some contexts where we previously had only contractual liability.

If we are unable to properly protect the privacy and security of health information entrusted to us, we could be found to have breached our contracts with our customers and could be subject to criminal and civil penalties under HIPAA, with penalties of up to $50,000 per violation for a maximum civil penalties of $1.5 million in a calendar year for violations of the same requirement.

~~Kickback~~In ~~Statute~~addition ~~prohibits~~to ~~any~~HIPAA, ~~person~~numerous orother ~~entity~~bodies ~~from~~of ~~offering,~~privacy ~~paying~~laws exist, ~~soliciting or receiving~~including, ~~directly~~but ornot ~~indirectly~~limited to, ~~anything~~the offederal ~~value~~rules ~~with~~that govern the ~~intent~~use ofand ~~generating~~disclosure ~~referrals~~ of ~~patients~~alcohol ~~covered~~and bydrug ~~Medicare~~abuse records, ~~Medicaid~~the orEuropean ~~other~~Union’s ~~federal~~Data ~~healthcare~~Protection ~~programs.~~Directive, ~~Many~~Canada’s ~~states~~Personal ~~also~~Information ~~have~~Protection ~~similar~~and ~~anti-kickback~~Electronic ~~laws~~Documents ~~that~~Act ~~are~~and ~~not~~other ~~necessarily~~data ~~limited~~protection, toprivacy ~~items~~and orsimilar ~~services~~national, ~~for~~state/provincial ~~which~~and ~~payment~~local islaws. ~~made~~We byhave aestablished ~~federal~~frameworks, ~~healthcare program. Moreover~~models, ~~both~~processes ~~federal~~ and ~~state~~technologies ~~laws~~to ~~forbid~~manage ~~bribery~~privacy ~~and~~for ~~similar~~many ~~behavior.~~data ~~While unlikely~~types, ~~any~~from ~~determination by~~ a ~~state~~variety orof ~~federal~~sources, ~~regulatory~~and ~~agency~~under ~~that~~a ~~any~~myriad of ~~our~~privacy ~~activities~~and ordata ~~those~~protection oflaws. ~~our~~Because ~~customers or vendors violate any of~~ these laws ~~could~~are ~~subject~~complex, usthere tois ~~civil~~no orassurance ~~criminal~~that ~~penalties~~the orsafeguards ~~could~~and ~~require~~controls usemployed toby ~~change~~us orwill ~~terminate~~be ~~some~~sufficient ~~portions of our business, could require us~~ to ~~refund~~prevent a ~~portion~~violation of ~~our~~these ~~service~~laws. ~~fees,~~Failure ~~could disqualify us from providing services~~ to ~~customers~~comply ~~who~~with ~~are~~such orlaws domay ~~business~~result ~~with government programs~~in, ~~any~~among ~~one~~other ofthings, ~~which~~civil ~~could~~and ~~have~~criminal anliability, ~~adverse~~negative ~~effect~~publicity, ondamage ~~our~~to ~~business. Even an unsuccessful challenge by regulatory authorities of~~ our ~~activities~~reputation ~~could result in adverse publicity~~ and ~~could~~liability ~~require~~under acontractual ~~costly response from us~~provisions.

Although we strive to protect the data in our care by complying with all applicable privacy and security laws and regulations, as well as the related obligations contained in our contracts with customers, such laws, regulations and related obligations continue to evolve and any failure or perceived failure to comply with applicable laws, regulations and obligations may result in threatened or actual proceedings, actions and public statements against us by government entities, private parties, consumer advocacy groups or others, or could cause us to lose customers, which could have a material adverse effect on our business, financial condition and results of operations.

Data breaches could materially and adversely harm our business.

In recent years, there have been a number of well publicized data breaches involving the improper dissemination of personal information of individuals both within and outside of the healthcare industry. Many states, as well as the federal government through HIPAA, have responded to these incidents by enacting laws requiring holders of personal information to maintain safeguards and take certain actions in response to a data breach, such as providing prompt notification of the breach to affected individuals. In many cases, these laws are limited to electronic data, but states are increasingly enacting or considering stricter and broader requirements. HIPAA covered entities must report breaches of unsecured individually identifiable health information to affected individuals without unreasonable delay but not to exceed 60 days of discovery of the breach by a covered entity or its agents. Notification must also be made to the HHS and, in certain circumstances involving large breaches, to the media. Business Associates must report breaches of unsecured individually identifiable health information to covered entities within 60 days of discovery of the breach by the Business Associate or its agents. In addition, the Federal Trade Commission has prosecuted some data breach incidents as unfair and deceptive acts or practices under the Federal Trade Commission Act.

Although we have implemented and maintain physical, technical and administrative safeguards intended to protect all personal data and have processes in place to assist us in complying with applicable laws and regulations regarding the protection of this data and properly responding to any security breaches or incidents, we may still be subject to security breaches or incidents or be unable to respond effectively to such breaches or incidents. Data breaches could subject us to significant liabilities and could result in a loss of business, exposure to adverse publicity and injury to our reputation, increase our costs, any of which could adversely affect our operating results and ability to retain and attract customers.

Customer contracts with governmental agencies, or which are funded by government programs, impose strict compliance burdens on us, may give rise to conflicts with some of our other important businesses and are subject to termination and delays in funding.

AApproximately ~~significant~~18% ~~portion~~ of our consolidated revenues comes from customers that are governmental agencies or are funded by government programs. Our contracts and subcontracts with these customers may be, and in certain instances, have in the past been, subject to some or all of the following:


•	termination when appropriated funding for the current fiscal year is exhausted;


•	termination for the governmental customer’s convenience, subject to a negotiated settlement for costs incurred and profit on work completed, along with the right to place contracts out for bid before the full contract term, and the right to make unilateral changes in contract requirements, subject to negotiated price adjustments;


•	compliance and reporting requirements related to, among other things, agency specific policies and regulations, cost principles and accounting systems, equal employment opportunity, affirmative action for veterans and workers with disabilities and accessibility for the disabled;


•	broad audit rights;

• specialized remedies for breach and default, including set ‑off rights, retroactive price adjustments and civil or criminal fraud penalties, as well as mandatory administrative dispute resolution procedures instead of state contract law remedies; and


•	potential delays or terminations of, or failures to renew, existing U.S. government contracts and subcontracts, as well as the potential delay or reduction in the rate of creation of new contracts, as a result of budget cuts relating to the Budget Control Act of 2011 and the related automatic sequestration process that followed.

In addition, certain violations of federal and state law may subject us to having our contracts terminated and, under certain circumstances, suspension and/or debarment from future government contracts. We are also subject to organizational conflict of interest rules that may affect our eligibility for some government contracts, including rules applicable to all U.S. government contracts, as well as rules applicable to the specific agencies with which we have contracts or with which we may seek to enter into contracts. For example, there has been an increasing focus on payment integrity issues with respect to government programs, and solutions and services that we provide to hospitals may constitute an organizational conflict of interest under our payment integrity contracts. If an organizational conflict of interest cannot be mitigated, then we may be disqualified from certain government contracts.

We may not be able to accurately predict or anticipate any delays or terminations of, or failures to renew, U.S. government contracts and subcontracts, or the impact that any such delays, terminations or failures to renew may have on our business and results of operations.

Inaccuracies in the solutions and services that we deliver to our customers could have an adverse effect on our reputation and business and expose us to liability.

The information solutions and services that we deliver to our customers are becoming increasingly sophisticated. Errors in these solutions and services could cause serious problems for our customers. Some of these risks are heightened as we seek to expand our solutions and service offerings, including various patient safety solutions utilized by clinicians. If problems like these occur, our customers may seek compensation from us or may seek to terminate their agreements with us, withhold payments due to us, seek refunds from us of part or all of the fees charged under our agreements, a loan or advancement of funds or initiate litigation or other dispute resolution procedures. In addition, we may be subject to claims against us by others affected by any such problems.

Failures, delays, or interruptions 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 and other aspects of our information technology infrastructure. We must meet our customers’ service level expectations and our contractual obligations with respect to the delivery of our information products and services. Failure to do so could subject us to liability, as well as cause us to lose customers. In addition, because of the large amount of data we collect and manage, it is possible that hardware failures and errors in our systems would result in data loss or corruption or cause the information that we collect to be incomplete or contain inaccuracies that our customers regard as significant. If problems like these occur, our customers may seek full or partial refunds or credits from us or may seek to terminate their agreements with us, withhold payments due to us, or initiate litigation or other dispute resolution procedures. Also, our business could be harmed if our customers and potential customers believe our service is unreliable.

We depend on data centers that are not owned or operated by us. While we control and have access to our servers and the components of our network that are located in our external data centers, we do not own or control the operation of ~~these facilities. The agreement that governs our use of the data centers is for a specified term, and we have no assurance that it can be renewed on commercially reasonable terms or at all.~~

Damage or failure of systems and technology environment. A failure at our data centers or of our network or data gathering and dissemination processes 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 we have disaster recovery plans for our main data center and our other operations that we believe are appropriate, we currently do not have full backup facilities for all of our operations to provide redundant network capacity in the event of a data center or system failure. Despite any precautions we may take, damage from fire, floods, hurricanes, power loss, telecommunications failures, computer viruses, malware, 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 and from our servers.

In addition, any failure by our computer information technology environment to provide our required data communications capacity could result in interruptions in our service. If at any time our data facility providers are unable to satisfy our requirements, we could be required to transfer our operations to an alternative provider of server hosting services. Such a transfer, whether planned or unplanned, 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.

Long term business disruption. Finally, long term disruptions in the infrastructure caused by events such as natural disasters, the outbreak of war, the escalation of hostilities, epidemics or acts of terrorism (particularly involving cities in which we have offices or maintain our data) could adversely affect our businesses. Although we carry property casualty and business interruption insurance, our coverage may not be adequate to compensate us for all losses that may occur. The occurrence of any of these events could disrupt our business and operations or harm our brand and reputation, either of which could materially adversely affect our business, results of operations and financial condition.

If we are unable to retain our existing customers, our business, financial condition and results of operations could suffer.

Our success depends substantially upon the retention of our customers, particularly due to our recurring revenue model. Historically, a significant percentage of our revenue has come from ongoing customer relationships. We may not be able to maintain similarly high renewal and/or retention rates in the future. Our success in securing renewals depends in part upon our clients’ budgetary environment, our reputation and performance and our competitors. Our subscription-based revenues depend in part upon maintaining our customer renewal and retention rates. If we are unable to retain customers at an acceptable rate, our business, results of operations and financial condition could be materially adversely impacted.

General economic, political and market forces and dislocations beyond our control could reduce demand for our solutions and harm our business.

~~The~~these ~~demand~~facilities. ~~for~~The ~~our~~agreement ~~solutions may be impacted by domestic and international factors~~ that ~~are~~governs ~~beyond~~ our ~~control,~~use ~~including macroeconomic, political and market conditions, the availability~~ of ~~short-term and long-term funding and capital,~~ the ~~level~~data ~~and~~centers ~~volatility~~is offor interest rates, currency exchange rates and inflation. The United States economy recently experienced periods of contraction and both the future domestic and global economic environments may continue to be less favorable than those of prior years. Any one or more of these factors may contribute to reduced activity and prices in the securities markets generally and could result in a ~~reduction~~specified ~~in demand for our solutions~~term, ~~which~~and ~~could~~we have anno ~~adverse~~assurance ~~effect~~that onit ~~our~~can ~~results~~be ofrenewed ~~operations and financial condition. A significant additional decline in the value of assets for which risk is transferred in market transactions could have an adverse impact~~ on ~~the~~commercially ~~demand~~reasonable ~~for~~terms ~~our~~or ~~solutions.~~at ~~In addition, the decline of the credit markets has reduced the number of mortgage originators, and therefore, the immediate demand for our related analytics solutions~~all.

Damage or failure of systems and technology environment. A failure at our data centers or of our network or data gathering and dissemination processes 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 we have disaster recovery plans for our main data center and our other operations that we believe are appropriate, we currently do not have full backup facilities for all of our operations to provide redundant network capacity in the event of a data center or system failure. Despite any precautions we may take, damage from fire, natural disasters, floods, hurricanes, power loss, telecommunications failures, computer viruses, malware, break‑ins, sabotage, breaches of security, cyber‑attacks, epidemics and similar events at our various computer facilities could result in interruptions in the flow of data to and from our servers.

Long‑term business disruption. Finally, long‑term disruptions in the infrastructure caused by events such as natural disasters, the outbreak of war, the escalation of hostilities, epidemics or acts of terrorism (particularly involving cities in which we have offices or maintain our data) could adversely affect our businesses. Although we carry property casualty and business interruption insurance, our coverage may not be adequate to compensate us for all losses that may occur. The occurrence of any of these events could disrupt our business and operations or harm our brand and reputation, either of which could materially adversely affect our business, results of operations and financial condition.

If we are unable to retain our existing customers or attract new customers, our business, financial condition and results of operations could suffer.

Our success depends substantially upon the retention of our customers, particularly due to our recurring revenue model. Historically, a significant percentage of our revenue has come from ongoing customer relationships. We may not be able to maintain similarly high retention rates in the future or be able to replace existing customers with new customers. Our success in retaining business depends in part upon our clients’ budgetary environment and ability to build and implement their own in‑house data and analytics capabilities, our reputation and performance and our competitors. Our subscription‑based revenues depend in part upon maintaining our contract renewal and customer retention rates. If we are unable to retain customers at an acceptable rate, renew contracts with existing customers on the same or better terms or attract new customers to replace or add to existing customers, our business, results of operations and financial condition could be materially adversely impacted.

Content innovation and technological developments could render our solutions and services obsolete or uncompetitive and we may not be able to develop new content innovations and technology necessary for our business to remain competitive.

To remain competitive, we must consistently deliver comprehensive and effective data solutions and services to our clients in forms that are easy to use while simultaneously providing clear answers to complex questions, some of which require us to focus on content innovation. In addition, the technologies supporting the industries we serve and our platforms for delivering our solutions and services to our customers are susceptible to rapid changes and in order to be competitive we must consistently develop cost effective technologies for secure and reliable data collection and analysis. We may not be able to develop new content innovations or technologies, or enhancements to, updates of or new versions of our technologies, as necessary for our business or we may not do so as quickly or cost effectively as our competition.

Further, the introduction of new solutions and services embodying new technologies and the emergence of new industry standards could render existing solutions and services obsolete. Our continued success will depend on our ability to adapt to changing technologies, manage and process ever increasing types and amounts of data and improve the performance, features and reliability of our data solutions 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 solutions and services. New solutions and services, or enhancements or updates to existing solutions and services, may not adequately meet the requirements of current and prospective customers or achieve any degree of significant market acceptance.

Our business is subject to significant or potentially significant competition that is likely to intensify.

Our future growth and success depend 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. Some of our existing customers, including some for which we act as a subcontractor, compete with us or may plan to do so or belong to alliances that compete with us or plan to do so, either with respect to the same products and services we provide to them or with respect to some of our other lines of business. The ability of customers or other competitors to replicate our solutions and services may adversely affect the terms and conditions we are able to negotiate in our agreements and our transaction volume with them, which directly impacts our revenues. We are competing with other vendors to be the first to deliver real time and prospective analytics and the integration of financial and clinical data, and any vendor that exhibits an advantage in any of these areas will be at a distinct competitive advantage. In addition, some of our solutions and services allow health care sponsors and carriers to outsource business processes that have been or could be performed internally and, in order for us to be able to compete, use of our solutions and services must be more efficient for them than use of internal resources. We are also often required to respond to requests for proposals (“RFPs”) to compete for a contract. This requires that we accurately estimate our cost structure for servicing a proposed contract, the time required to establish operations and likely terms of the proposals submitted by competitors. We cannot assure you that we will continue to obtain contracts in response to RFPs or that our proposals will result in profitable contracts. In addition, competitors may protest contracts awarded to us through the RFP process which may cause the award to be delayed or overturned or may require the client to reinitiate the RFP process.

~~Our~~Further, ~~business~~the introduction of new solutions and services embodying new technologies and the emergence of new industry standards could berender ~~harmed~~existing ifsolutions weand ~~are~~services noobsolete. ~~longer~~Our ~~able~~continued tosuccess ~~license~~will ordepend ~~integrate~~on ~~third~~our ~~party~~ability to adapt to changing technologies, ormanage toand ~~the~~process ~~extent~~ever ~~any~~increasing ~~problems~~types ~~arise~~and ~~with~~amounts of data and improve the ~~functionality~~performance, features and reliability of our data solutions and services in response to changing client and industry demands. We may experience difficulties that could delay or prevent the successful ~~integration~~design, development, testing, introduction or marketing of ~~any~~our ~~software~~solutions and services. New solutions and services, or ~~other~~enhancements ~~technologies~~or ~~licensed~~updates to usexisting bysolutions ~~third~~and ~~party~~services, ~~vendors.~~may not adequately meet the requirements of current and prospective customers or achieve any degree of significant market acceptance.

WeOur ~~depend upon licenses from third party vendors for some of the technology used in our~~ business ~~intelligence~~is ~~and~~subject ~~software tools and the technology platforms upon which these tools operate. We also use third party software~~ to ~~maintain~~significant ~~and~~competition ~~enhance,~~that ~~among~~is ~~other~~likely ~~things, content generation and delivery, and~~ to ~~support our technology infrastructure~~intensify. These technologies might not continue to be available to us on commercially reasonable terms or at all. Most of these licenses can be renewed only by mutual agreement and may be terminated if we breach the terms of the license and fail to cure the breach within a specified period of time. Our inability to obtain and maintain any of these licenses could delay our ability to provide services until alternative technology can be identified, licensed and integrated, which may harm our financial condition and results of operations. Some of our third party licenses are non-exclusive and our competitors may obtain the right to use any of the technology covered by these licenses to compete directly with us.

Our ~~use~~future ofgrowth ~~third~~and ~~party~~success ~~technologies~~depend ~~exposes~~on usour ability to ~~risks~~successfully ~~associated~~compete with ~~the~~other ~~integration~~companies ofthat ~~new~~provide ~~technology~~similar ~~into~~services ~~our~~in ~~solutions,~~ the ~~diversion~~same ofmarkets, ~~our~~some ~~resources from development~~ of ~~our~~which ~~own~~may ~~proprietary~~have ~~technology~~financial, ~~and~~marketing, ~~the~~technical ~~generation of revenue from licensed technology sufficient to offset associated procurement~~ and ~~maintenance~~other ~~costs~~advantages. ~~Because~~Some ~~some~~ of our ~~products~~existing ~~and~~customers, ~~services~~including ~~incorporate~~some ~~software~~for ~~developed~~which ~~and maintained by third parties,~~ we ~~are,~~act toas a ~~certain extent~~subcontractor, ~~dependent~~compete ~~upon~~with ~~such~~us ~~third~~or ~~parties’~~may ~~ability~~plan to ~~maintain~~do so or ~~enhance~~belong ~~their current products and services,~~ to ~~ensure~~alliances that ~~their~~compete ~~products~~with ~~are~~us ~~free~~or ofplan ~~defects~~to ordo ~~security vulnerabilities~~so, either with respect to ~~develop~~the ~~new~~same products and services onwe aprovide ~~timely~~to ~~and~~them ~~cost-effective~~or ~~basis~~with ~~and~~respect to ~~respond~~some toof ~~emerging~~our ~~industry standards and~~ other ~~technological~~lines ~~changes~~of business. ToThe ~~the~~ability ~~extent any problems arise with the proper functioning or successful integration~~ of ~~any~~customers ~~software~~ or other ~~technologies~~competitors ~~licensed~~ to usreplicate ~~by third party vendors, this could prevent~~ our ~~products~~solutions and services ~~from~~may ~~operating~~adversely asaffect ~~our~~the ~~customers~~terms ~~expect~~and ~~them~~conditions ~~to,~~we ~~thereby~~are ~~harming~~able ~~our~~to ~~relationships~~negotiate ~~with~~in our ~~customers.~~agreements Ifand ~~problems like these occur,~~ our ~~customers~~transaction ~~may~~volume ~~seek compensation from us or may seek to terminate their agreements~~ with usthem, ~~withhold~~which ~~payments~~directly ~~due~~impacts ~~to us, seek refunds from us of part or all of the fees charged under~~ our ~~agreements, or file a lawsuit~~revenues. ~~Further,~~We wecompete ~~may~~with beother ~~subject~~vendors to ~~claims~~be ~~against~~the usfirst byto ~~others~~deliver ~~affected~~real bytime ~~any~~and ~~such~~prospective ~~problems.~~analytics Asand athe ~~result,~~integration ~~our~~of ~~business,~~ financial ~~condition~~ and ~~results~~clinical ~~of operations could suffer. In addition~~data, ifand ~~our~~any ~~vendors~~vendor ~~choose~~that toexhibits ~~discontinue~~an ~~support~~advantage ~~of the licensed technology~~ in ~~the~~any ~~future,~~of wethese ~~might~~areas ~~not~~will be ~~able~~at toa ~~modify~~distinct orcompetitive ~~adapt our own solutions~~advantage.

~~Client~~In ~~procurement~~addition, ~~strategies~~some of our solutions and services allow healthcare sponsors and carriers to outsource business processes that have been or could ~~put~~be ~~additional~~performed ~~pressure~~internally onand, in order for us to be able to compete, use of our solutions and services must be more efficient for them than use of internal resources. To the ~~pricing~~extent such customers choose to use internal resources instead of our ~~information~~solutions and services, ~~thereby~~our ~~leading~~business, tofinancial ~~decreased~~condition ~~earnings.~~and results of operation may be adversely affected.

~~Certain~~We ofare ~~our~~also ~~clients~~often ~~may~~required ~~continue~~ to ~~seek~~respond ~~further~~to ~~price~~a ~~concessions~~request ~~from~~for ~~us.~~a ~~This~~proposal ~~puts~~(“RFP”) ~~pressure~~to oncompete ~~the~~for ~~pricing~~a ofcontract. ~~our~~This ~~information~~requires ~~services,~~that ~~which could limit the amounts~~ we ~~earn.~~accurately Ifestimate our ~~competitors~~cost ~~offer~~structure ~~deep~~for ~~discounts~~servicing ona ~~certain~~proposed ~~products~~contract, inthe antime ~~effort~~required to ~~recapture~~establish oroperations ~~gain~~and ~~market~~likely ~~share~~terms orof tothe ~~sell~~proposals ~~other~~submitted ~~products,~~by wecompetitors. ~~may~~We ~~then~~cannot ~~need~~assure toyou ~~lower~~that ~~prices~~we orwill ~~offer~~continue ~~other~~to ~~favorable~~obtain ~~terms~~contracts in ~~order~~response to ~~compete~~RFPs ~~successfully.~~or ~~Any~~that ~~such~~our ~~changes~~proposals ~~would~~will beresult ~~likely~~in toprofitable ~~reduce margins and could adversely affect operating results~~contracts. IfIn weaddition, ~~cannot~~competitors ~~offset~~may ~~price~~protest ~~reductions~~contracts ~~with~~awarded ato ~~corresponding~~us ~~increase~~through inthe ~~sales~~RFP orprocess ~~with~~which ~~lower~~may ~~spending,~~cause ~~then~~ the ~~reduced~~award ~~software~~to ~~revenues~~be ~~resulting~~delayed ~~from~~or ~~lower~~overturned ~~prices~~or ~~would~~may ~~adversely~~require ~~affect~~the ~~our~~client ~~results. In some areas of our Commercial segment, we see pricing pressure as healthcare reform drives clients~~ to ~~manage~~reinitiate ~~healthcare information technology spending in~~ the ~~context~~RFP ~~of other technology investments they are implementing concurrently~~process.

AsOur isbusiness ~~common~~could inbe ~~high~~harmed ~~technology~~if ~~industries~~we ~~with~~are ~~rapid~~no ~~technological~~longer ~~change,~~able ~~our customers may also require us~~ to ~~continue~~license toor ~~add~~integrate ~~functionality~~third‑party totechnologies, ~~our~~or ~~products in order~~ to ~~maintain price. Additionally, changes in~~ the ~~pricing~~extent ~~model~~any ~~for~~problems ~~our~~arise ~~products~~with ~~and~~the ~~solutions~~functionality ~~could~~or ~~require~~successful usintegration to implement a new pricing model in order to remain competitive. A change in pricing model could require significant resources in order to transition successfully and could reduce our revenue during such a transition. While we attempt to mitigate the revenue impact of any ~~pricing~~software ~~pressure~~or ~~through~~other ~~effective~~technologies ~~negotiations~~licensed ~~and by providing services~~ to ~~individual~~us ~~businesses~~by ~~within~~third‑party ~~particular groups, there can be no assurance as to the degree to which we will be able to do so, which could materially adversely affect our business, results of operations and financial condition~~vendors.

~~The~~We ~~protection~~depend upon licenses from third‑party vendors for some of the technology used in our ~~intellectual~~business ~~property~~intelligence and software tools and the technology platforms upon which these tools operate. We also use third‑party software to maintain and enhance, among other things, content generation and delivery, and to support our technology infrastructure. These technologies might not continue to be available to us on commercially reasonable terms or at all. Most of these licenses can be renewed only by mutual agreement and may ~~require~~be ~~substantial~~terminated ~~resources~~if we breach the terms of the license and fail to cure the breach within a specified period of time. Our inability to obtain and maintain any of these licenses could delay our ability to provide services until alternative technology can be identified, licensed and integrated, which may harm our financial condition and results of operations. Some of our third‑party licenses are non‑exclusive and our competitors may obtain the right to use any of the technology covered by these licenses to compete directly with us.

~~The~~Our ~~steps~~use weof ~~have~~third‑party ~~taken~~technologies exposes us to ~~protect~~risks ~~and~~associated ~~enforce~~with the integration of new technology into our solutions, the diversion of our resources from development of our own proprietary ~~rights~~technology and ~~intellectual~~the ~~property~~generation ~~may~~of ~~not~~revenue befrom ~~adequate~~licensed technology sufficient to offset associated procurement and maintenance costs. ~~For~~Because ~~instance,~~some weof ~~may~~our ~~not~~products beand ~~able~~services toincorporate ~~secure~~software ~~trademark~~developed orand ~~service~~maintained ~~mark~~by ~~registrations~~third ~~for~~parties, ~~marks~~we inare, ~~the~~to ~~United~~a ~~States~~certain orextent, independent ~~foreign~~upon ~~countries~~such third parties’ ability to maintain or ~~take~~enhance ~~similar~~their ~~steps~~current products and services, to ~~secure~~ensure ~~patents~~that ~~for~~their ~~our~~products ~~proprietary~~are ~~applications.~~free ~~Further,~~of ~~despite~~defects ~~our~~or ~~efforts~~security vulnerabilities, itto develop new products and services on a timely and

~~may~~cost‑effective bebasis ~~possible~~and ~~for~~to ~~third~~respond ~~parties~~ to ~~reverse~~emerging ~~engineer~~industry orstandards ~~otherwise~~and ~~obtain,~~other ~~copy~~technological ~~and~~changes. ~~use~~To ~~information~~the ~~that~~extent weany ~~regard~~problems asarise ~~proprietary.~~with ~~Third~~the ~~parties~~proper ~~may~~functioning ~~infringe~~or ~~upon~~successful orintegration ~~misappropriate~~of ~~our~~any ~~copyrights,~~software ~~trademarks,~~or ~~service~~other ~~marks~~technologies ~~and~~licensed ~~other~~to ~~intellectual~~us ~~property~~by ~~rights~~third‑party vendors, ~~which~~this could ~~have~~prevent aour ~~material~~products and ~~adverse~~services ~~effect~~from onoperating as our ~~business~~customers expect them to, ~~financial~~thereby ~~condition~~harming ~~and~~our ~~results~~relationships ofwith ~~operations~~our customers. If weproblems ~~believe~~like athese ~~third~~occur, ~~party~~our ~~has~~customers ~~misappropriated~~may ~~our~~seek ~~intellectual~~compensation ~~property,~~from ~~litigation~~us or may beseek ~~necessary~~ to ~~enforce~~terminate ~~and~~their ~~protect~~agreements ~~those~~with ~~rights~~us, ~~which~~withhold ~~would~~payments ~~divert~~due ~~management~~to ~~resources~~us, ~~would~~seek berefunds ~~expensive~~from ~~and~~us ~~may~~of ~~not~~part ~~effectively~~or ~~protect~~all of the fees charged under our ~~intellectual~~agreements, ~~property~~or file a lawsuit. IfFurther, we ~~expand~~may ~~our~~be ~~overseas~~subject ~~offerings,~~to ~~the~~claims ~~laws~~against ofus ~~some~~by ~~countries~~others doaffected ~~not~~by ~~protect~~any ~~and~~such ~~enforce~~problems. ~~proprietary~~As ~~rights~~a toresult, ~~the~~our ~~same~~business, ~~extent~~financial ascondition ~~the~~and ~~laws~~results of ~~the~~operations ~~United~~could ~~States~~suffer. AsIn ~~a result~~addition, if ~~anyone misappropriates~~ our ~~intellectual~~vendors ~~property,~~choose itto ~~may~~discontinue ~~have~~support aof ~~material~~the ~~adverse~~licensed ~~effect~~technology onin ~~our~~the ~~business~~future, ~~results~~we ofmight ~~operations~~not ~~and~~be ~~financial~~able ~~condition.~~to modify or adapt our own solutions.

Client procurement strategies could put additional pressure on the pricing of our information services and lead to decreased revenues and lower margins.

Client procurement strategies have become increasingly more focused, and as a result, clients have sought lower pricing on information services. Certain of our clients may continue to seek further price concessions from us. This puts pressure on the pricing of our information services, which could decrease our revenues and lower our margins. If our competitors offer deep discounts on certain products in an effort to recapture or gain market share or to sell other products, we may need to lower prices or offer other favorable terms in order to compete successfully. Any such changes would be likely to reduce margins and could adversely affect operating results. If we cannot offset price reductions with a corresponding increase in sales or with lower spending, then the reduced software revenues resulting from lower prices would adversely affect our results. In certain areas of our Commercial segment, we have seen and continue to see pricing pressure as healthcare reform drives clients to manage healthcare information technology spending in the context of other technology investments they are implementing concurrently.

As is common in high technology industries with rapid technological change, our customers may also require us to continue to add functionality to our products in order to maintain price. Additionally, changes in the pricing model for our products and solutions could require us to implement a new pricing model in order to remain competitive. A change in pricing model could require significant resources in order to transition successfully and could reduce our revenue during such a transition. While we attempt to mitigate the revenue impact of any pricing pressure through effective negotiations, there can be no assurance as to the degree to do so, and such pricing pressure could materially adversely affect our business, results of operations and financial condition.

We expect to incur costs and expenses in connection with our internal business transformation initiatives, and failure to achieve our objectives under such internal business transformation initiatives could adversely impact our competitiveness and harm our operating results.

We are pursuing internal business transformation initiatives that seek to improve our productivity, flexibility, quality, functionality, technology and cost savings. We have incurred and expect to continue to incur costs and expenses in connection with such initiatives. We also expect to continue to look at opportunities to further refine our operations through internal business transformation initiatives, which may result in the incurrence of additional costs and expense in the future. These various initiatives may not yield their intended gains and we may not be able to fully realize the benefits that we expect to achieve from such initiatives within the anticipated timeframes, or at all, which may impact our competitiveness and our ability to meet our growth objectives and, as a result, have a material adverse effect on our business, results of operations and financial condition.

The protection of our intellectual property may require substantial resources and an inability to protect our intellectual property could reduce the value of our services and solutions.

The steps we have taken to protect and enforce our proprietary rights and intellectual property may not be adequate. For instance, we may not be able to secure trademark or service mark registrations for marks in the United States or in foreign countries or take similar steps to secure patents for our proprietary applications. Further, despite our efforts, it may be possible for third parties to reverse engineer or otherwise obtain, copy and use information that we regard as proprietary. Third parties may infringe upon or misappropriate our copyrights, trademarks, service marks and other intellectual property rights, which could have a material and adverse effect on our business, financial condition and

results of operations. If we believe a third‑party has misappropriated our intellectual property, litigation may be necessary to enforce and protect those rights, which would divert management resources, would be expensive and may not effectively protect our intellectual property. Additionally, our existing confidentiality agreements with employees, contractors and others who participate in development activities could be breached, or we may not enter into sufficient and adequate agreements with such individuals in the first instance, in either case potentially resulting in the unauthorized use or disclosure of our trade secrets and other intellectual property rights. In addition, the laws of some countries do not protect and enforce proprietary rights to the same extent as the laws of the United States, and effective intellectual property protection and mechanisms for the enforcement of such rights may not be available in those jurisdictions. As a result, if anyone misappropriates our intellectual property, it may have a material adverse effect on our business, results of operations and financial condition.

Third parties may claim that we are infringing their intellectual property, and we could suffer significant litigation or licensing expenses or be prevented from selling certain solutions.

We could be subject to claims that we are misappropriating or infringing intellectual property or other proprietary rights of others. These claims, even if not meritorious, could be expensive to defend and could divert management’s attention from our operations. If we become liable to third parties for infringing these rights, we could be required to pay a substantial damage award and to develop non-‑infringing technology, obtain a license or cease selling the products or services that use or contain the infringing intellectual property. We may be unable to develop non-‑infringing solutions or obtain a license on commercially reasonable terms, or at all. We may also be required to indemnify our customers if they become subject to third ‑party claims relating to intellectual property that we license or otherwise provide to them, which could be costly.

We are, and may become, involved in litigation that could harm ~~the~~our ~~value~~business, results of ~~our~~operations ~~business.~~and financial condition.

In the normal course of our business, we are involved in lawsuits, claims, audits and investigations. The outcome of these matters could have a material adverse effect on our business, results of operation orand 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. For example, we have, and may in the future, become subject to claims relating to unfavorable patient outcomes based on information that we ~~may~~make ~~have made~~ available to clinicians or pharmaceutical customers. There can be no assurances that the outcome of any such litigation ~~if successful~~ will not have a material adverse effect on our business., results of operations and financial condition.

Our success depends in part on our ability to identify, recruit and retain skilled management, including our executive officers, and technical personnel. If we fail to recruit and retain suitable candidates or if our relationship with our employees changes or deteriorates, there could be an adverse effect on our business.

Our ~~future~~ success depends upon our ~~continuing~~ ability to identify, attract, hire and retain highly qualified personnel, including skilled executive, technical, management, product and technology, regulatory and compliance and sales and marketing personnel, all of whom are in high demand and are often subject to competing offers. In particular, our executive officers and other key employees are critical to the management of our business. The loss of any of our executive officers or key employees could impair our ability to execute our business plan and growth strategy, reduce revenues, cause us to lose customers or lead to employee morale problems and~~/or~~ the loss of other key employees. Competition for qualified personnel in the healthcare information technology and services industry is intense, and we may not be able to hire or retain a sufficient number of qualified personnel to meet our requirements, or at salary, benefit and other compensation costs that are acceptable to us. A loss of a substantial number of qualified employees, or an inability to attract, retain and motivate additional highly skilled employees required for expansion of our business, could have an adverse effect on our business.

Failure to successfully complete or integrate acquisitions into our existing operations could have an adverse impact on our business, financial condition and results of operations.

We regularly evaluate opportunities for strategic growth through acquisitions. Recently, we completed the acquisitions of Simpler, JWA and HBE. ~~Potential~~Risks ~~issues~~ associated with acquisitions could include, among other things;, our ~~ability~~inability to realize the full extent of the benefits or cost savings that we expect to realize as a result of the completion of the acquisition within the anticipated time frame, or at all;, ~~receipt~~failure ofto receive necessary consents, clearances and approvals in connection with the acquisition;, and diversion of management'’s attention from ~~base~~our business strategies and objectives. ~~Further, we may be unsuccessful in our effort to combine our businesses with the business of the acquired company in a manner~~

19Further, we may be unsuccessful in our effort to combine our businesses with the business of the acquired company in a manner that permits cost savings to be realized, including with respect to sales and administrative support activities and information technology systems, motivating, recruiting and retaining executives and key employees, conforming standards, controls, procedures and policies, business cultures and compensation structures, consolidating and streamlining corporate and administrative infrastructures, consolidating sales and marketing operations, retaining existing customers and attracting new customers, identifying and eliminating redundant and underperforming operations and assets, coordinating geographically dispersed organizations and managing tax costs or inefficiencies associated with integrating our operations following completion of the acquisitions. The process of integrating acquired companies and operations may result in unforeseen operating difficulties or exposure to unknown liabilities and may require significant financial resources and management’s time and attention that would otherwise be available for the ongoing development or expansion of our existing operations. In addition, acquisitions outside of the United States increase our exposure to risks associated with foreign operations, including fluctuations in foreign exchange rates and compliance with U.S. and foreign laws and regulations. See “- Our foreign operations expose us to political, economic, regulatory and other risks, which could adversely impact our business, operations and financial results.” For example, a significant portion of the operations and personnel of HBE, which we acquired in November of 2014, are outside the United States.

that permits cost savings to be realized, including sales and administrative support activities and information technology systems, motivating, recruiting and retaining executives and key employees, conforming standards, controls, procedures and policies, business cultures and compensation structures, consolidating and streamlining corporate and administrative infrastructures, consolidating sales and marketing operations, retaining existing customers and attracting new customers, identifying and eliminating redundant and underperforming operations and assets, coordinating geographically dispersed organizations, and managing tax costs or inefficiencies associated with integrating our operations following completion of the acquisitions. The process of integrating acquired companies and operations may result in unforeseen operating difficulties and may require significant financial resources and management's time and attention that would otherwise be available for the ongoing development or expansion of our existing operations. In addition, acquisitions outside of the United States increase our exposure to risks associated with foreign operations, including fluctuations in foreign exchange rates and compliance with foreign laws and regulations. [A significant portion of the operations and personnel of HBE, which we acquired in November, are outside of the United States.] If an acquisition is not successfully completed or integrated into our existing operations, our business, results of operations and financial condition could be materially adversely impacted.

To the extent the availability of free or relatively inexpensive information increases, the demand for some of our solutions may decrease.

Public sources of free or relatively inexpensive information have become increasingly available recently, particularly through the Internet, and this trend is expected to continue. Governmental agencies in particular have increased the amount of information to which they provide free public access. Public sources of free or relatively inexpensive information may enable third parties to create value added, analytically enhanced or authoritative content that may compete with and reduce demand for our solutions. To the extent that customers choose not to obtain solutions from us and instead rely on these alternative new sources, our business and results of operations may be adversely affected.

~~Our~~Mergers ~~foreign~~or ~~operations~~consolidations ~~expose~~among uscompanies toin ~~political,~~the ~~economic,~~healthcare ~~regulatory~~industry ~~and~~could ~~other~~in ~~risks,~~the ~~which~~future ~~could~~reduce ~~adversely~~the ~~impact~~use of our ~~financial results~~services.

WeMergers ~~conduct~~or aconsolidations ~~portion~~among ofcompanies in the healthcare industry, including among companies who are our ~~operations~~customers, could in the ~~United~~future ~~Kingdom~~reduce ~~and~~the ~~India,~~number ~~[Canada,~~of ~~Brazil,~~our ~~Belgium~~clients and ~~Japan]~~potential clients. When companies consolidate, ~~including~~overlapping ~~some~~services ~~sales~~previously ~~functions~~purchased ~~and~~separately ~~some~~are ~~data~~usually ~~service~~purchased ~~functions~~only once by the combined entity, leading to loss of revenue. ~~Operating~~Other insolutions ~~overseas~~or ~~environments~~services ~~carries~~that ~~risks~~were ~~for~~previously purchased by one of the merged or consolidated entities may be deemed unnecessary or canceled. If our ~~business,~~customers ~~including~~merge ~~currency~~with ~~exposures,~~or ~~unexpected~~are ~~changes~~acquired inby ~~local~~other ~~government~~entities ~~laws~~that ~~and~~are ~~regulations~~not our customers, ~~including~~or ~~those~~that ~~relating~~use tofewer ~~intellectual~~of ~~property,~~our ~~data~~solutions ~~management~~or services, ~~labor~~they ~~and~~may ~~cross-border~~discontinue ~~trade,~~or ~~volatility~~reduce their use of anour ~~emerging~~offerings. ~~economy~~For example, ~~corruption~~the ~~and~~pharmaceutical ~~fraudulent~~industry ~~business~~has ~~practices,~~recently ~~recruiting~~experienced and ~~retention~~continues ofto ~~skilled~~experience ~~personnel,~~consolidation. ~~tax~~There ~~law~~can ~~changes,~~be ~~and~~no ~~other~~assurance ~~exposures~~as ~~inherent~~to inthe degree to which we may be able to address the revenue impact of such consolidation. Any of these developments could harm our operating inresults ~~foreign~~and ~~jurisdictions~~financial condition.

Our foreign operations expose us to political, economic, regulatory and other risks, which could adversely impact our business, operations and financial results.

We conduct a portion of our operations in foreign locations such as Brazil, United Kingdom, China and India, including some sales and data service functions. Operating in overseas environments carries risks for our business related to unexpected changes in local government laws and regulations, including those relating to tax laws, intellectual property,

data management and labor and cross‑border trade. Our international operations also carry risks associated with currency exposure, volatility of emerging economies, fraudulent business practices, the recruitment and retention of skilled personnel, economic sanctions and export controls, money laundering and other exposures inherent in operating in foreign jurisdictions. In addition, we are exposed to bribery and corruption risk in our global business operations, and in particular, risks associated with enforcement of the U.S. Foreign Corrupt Practices Act (“FCPA”). The majority of our international sales are conducted through distributors, and while we have policies to address corruption risk raised by these distributors, improper payments by these distributors, other business partners or our own employees may create liability for us under the FCPA or other anti‑bribery laws. As we expand our business outside of the United States, all of these risks associated with our international business may increase.

If the Company fails to maintain an effective system of disclosure and internal controls, it may not be able to accurately report its financial results and may incur additional costs related to remediation of its internal controls

In connection with the audit of our financial statements for the 2014 period, we have identified control deficiencies in our internal control over financial reporting that constituted a material weakness with respect to sufficient complement of personnel with an appropriate level of accounting knowledge, experience and training in the application of GAAP. As a result, we have taken corrective actions and have since remediated the material weakness. If the Company were to determine that its previous material weakness were not properly rectified or fails to maintain the effectiveness of its internal controls, its operating results could be harmed and could result in material misstatement in its financial statements.

We may not be able to fully realize the value of our net operating loss carryforwards.

As of December 31, 2015, we had unused federal net operating loss carryforwards (“NOLs”) of approximately $258.1 million. Such losses expire in various amounts at varying times beginning in 2032. Unless they expire, these NOLs may be used to offset future taxable income and thereby reduce our income taxes otherwise payable. As we have incurred losses since our inception and do not currently expect to turn a profit in the near future, we are unable to realize value from our net operating loss carryforwards unless we find a way to become profitable, either through the acquisition of a profitable company or otherwise to increase revenues and generate new income.

Section 382 (“Section 382”) of the Internal Revenue Code of 1986, as amended (the “Code”) imposes an annual limit on the ability of a corporation that undergoes an “ownership change” to use its NOLs to reduce its tax liability. An “ownership change” is generally defined as any change in ownership of more than 50% of a corporation’s “stock” by its “5‑percent shareholders” (as defined in Section 382) over a rolling three‑year period based upon each of those shareholder’s lowest percentage of stock owned during such period. It is possible future transactions, not all of which would be within our control, could cause us to undergo an ownership change as defined in Section 382. In that event, we would not be able to use our pre‑ownership‑change NOLs in excess of the limitation imposed by Section 382. At this time, we do not believe these limitations will affect our ability to use any NOLs before they expire. However, no such assurances can be provided. If our ability to utilize our NOLs to offset taxable income generated in the future is subject to this limitation, it could have an adverse effect on our business, prospects, results of operations and financial condition.

We have a history of net losses and may not achieve or sustain profitability in the future.

We incurred a net loss of $75.5 million for the year ended December 31, 2015, $37.0 million for the year ended December 31, 2014 and $345.0 million for the year ended December 31, 2013. We cannot assure you that our revenues will grow or that we will achieve or maintain profitability in the future. Even if we do achieve profitability, we may not sustain or increase profitability on a quarterly or annual basis in the future. Our ability to achieve profitability will be affected by the other risks and uncertainties described in this section and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Our overall business, financial condition or operating results may be materially and adversely impacted by an economic downturn.

Our business could be significantly affected by general economic conditions. The U.S. and global economies have recovered from a significant prolonged downturn but prospects for sustained economic recovery remain uncertain. Certain economic metrics have not recovered to pre‑2008 levels when the U.S. economy was significantly weakened by a financial crisis. Additionally, in October 2013, the U.S. federal government shutdown caused uncertainty in the federal government’s ability to meet its debt payments. A future U.S. government shutdown may occur and any resulting failure of the United States to meet its debt obligations, or the perceived risk of such a failure, could have a material adverse effect on the financial markets and economic conditions in the United States and throughout the world. To the extent that economic conditions remain uncertain, our business, financial condition and operating results could be significantly and adversely affected. For example, clients may delay or decrease spending with us or may not pay us.

We are controlled by the Sponsor, whose interest as equity holder may conflict with yours as a holder of Notes.

We are controlled by the Sponsor, through its affiliated private equity funds. The Sponsor controls the election of our directors and thereby has the power to control our affairs and policies, including the appointment of management, the issuance of additional equity and the declaration and payment of dividends if allowed under the terms of the credit agreement governing our Senior Credit Facility, the terms of the indenture governing the Notes and the terms of our other indebtedness outstanding at the time. The Sponsor does not have any liability for any obligations under or relating to the Notes and their interests may be in conflict with yours. For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the Sponsor may pursue strategies that favor equity investors over debt investors. In addition, the Sponsor, through its affiliated private equity funds, may have an interest in pursuing acquisitions, divestitures, financing or other transactions that, in its judgment, could enhance their equity investments, even though such transactions may involve risk to you as a holder of the Notes. Additionally, the Sponsor, through its affiliated private equity funds, may make investments in businesses that directly or indirectly compete with us, or may pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us. For information concerning our arrangements with the Sponsor, see "Management" and "Certain relationships and related party transactions."

If we do not remediate material weakness in our internal control over financial reporting or are unable to implement and maintain effective internal control over financial reporting in the future, the accuracy and timeliness of our financial reporting may be adversely affected.

In connection with the audit of our financial statements for the 2014 period, we have identified control deficiencies in our internal control over financial reporting that constituted a material weakness. A material weakness is defined under the standards issued by the Public Company Accounting Oversight Board as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected and corrected on a timely basis. Specifically, it was determined that we do not maintain a sufficient complement of personnel with an appropriate level of accounting knowledge, experience and training in the application of GAAP. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of December 31, 2014 because of the material weaknesses discussed above. We are currently in the process of remediating this weakness. During the course of the remediation effort, we may identify additional control deficiencies, which could give rise to other material weaknesses, in addition to the material weakness described above. In connection with the audit of our financial statements for 2013 and 2012, we identified other control deficiencies that constituted material weakness, which we have remediated following discussion of these material weaknesses. See "Controls and Procedures-Identification of Material Weaknesses". If we are unable to successfully remediate this material weakness, it could harm our operating results, cause us to fail to meet our U.S. Securities and Exchange Commission (the "SEC") reporting obligations or result in inaccurate financial reporting or material misstatements in our annual or interim consolidated and combined financial statements that would not be prevented or detected in a timely basis. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the material weakness described above or avoid potential future material weaknesses.

Further, our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal controls over financial reporting.

We were unable to file our Quarterly Report on Form 10‑Q for the fiscal quarter ended March 31, 2014 by the prescribed time due to an unexpected delay in completing the notes to our financial statements for that period.

As an "emerging growth company" under the JOBS Act, we rely on exemptions from some disclosure requirements.

As an "emerging growth company" under the JOBS Act, we rely on exemptions from some disclosure requirements. We are an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1 billion or more; (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement under the Securities Act; (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt or (iv) the date on which we are deemed to be a "large accelerated filer" as defined under the federal securities laws. For so long as we remain an emerging growth company, we will not be required to, among other things:


•	have an auditor attestation report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; and


•	include detailed compensation discussion and analysis in our filings under the Exchange Act, and instead may provide a reduced level of disclosure concerning executive compensation.

To the extent we take advantage of these reduced burdens, the information that we provide you in our public filings may be different than that of other public companies in which you hold securities.

Risks related to the Notes

Our substantial indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations under the Notes.

As of December 31, ~~2014~~2015, our total principal indebtedness was $~~992~~990.07 million and we have undrawn availability under the Revolving Credit Facility of $4237.5 million (after giving effect to ~~approximately~~a $5.0 million outstanding revolving loan and a $7.5 million of outstanding letters of credit, which, while not drawn, reduce the available balance under the Revolving Credit Facility). Of this total amount, $623.5 million is secured indebtedness under our Senior Credit Facility (excluding $7.5 million represented by letters of credit under the Revolving Credit Facility), to which the Notes are effectively subordinated to the extent of the value of the assets securing such indebtedness. We may also request incremental increases in commitments under the Senior Credit Facility in an aggregate principal amount up to (x) $75.0 million plus (y) up to an additional $75.0 million if the consolidated senior secured leverage ratio is less than or equal to 4.0:1.0, subject to certain conditions.

amount, $624.9 million is secured indebtedness under our Senior Credit Facility (excluding $7.5 million represented by letters of credit under the Revolving Credit Facility), to which the Notes are effectively subordinated to the extent of the value of the assets securing such indebtedness. We may also request incremental increases in commitments under the Senior Credit Facility in an aggregate principal amount up to (x) $75.0 million plus (y) up to an additional $75.0 million if the consolidated senior secured leverage ratio is less than or equal to 4.0:1.0, subject to certain conditions.

Subject to the limits contained in the credit agreement that governs our Senior Credit Facility, the indenture that governs the Notes and our other debt instruments, we may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks related to our high level of debt could intensify. Specifically, our high level of debt could have important consequences to the holders of the Notes, including the following:


•	making it more difficult for us to satisfy our obligations with respect to the Notes and our other debt;


•	limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;


•	requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;


•	increasing our vulnerability to general adverse economic and industry conditions;


•	exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under our Senior Credit Facility, are at variable rates of interest;


•	limiting our flexibility in planning for and reacting to changes in the industry in which we compete;


•	placing us at a disadvantage compared to other, less leveraged competitors; and


•	increasing our cost of borrowing.

In addition, the indenture that governs the Notes and the credit agreement that governs our Senior Credit Facility contain restrictive covenants that limit our ability to engage in activities that may be in our long term best interest. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all our debt.

WeDespite ~~may~~our ~~not~~current belevel ~~able to generate sufficient cash to service all~~ of ~~our~~ indebtedness, ~~including~~we ~~the~~and ~~Notes,~~our ~~and~~subsidiaries may still be ~~forced~~able to ~~take~~incur ~~other~~substantially ~~actions~~more todebt, ~~satisfy~~which ~~our~~could ~~obligations~~further ~~under~~exacerbate ~~our~~the ~~indebtedness,~~risks ~~which~~to ~~may~~us ~~not~~as bea ~~successful.~~result of our significant indebtedness.

~~Our~~We ~~ability~~and our subsidiaries may be able to ~~make~~incur ~~scheduled~~significant ~~payments~~additional onindebtedness. orAlthough ~~refinance~~the ~~our~~indenture ~~debt~~dated ~~obligations~~June 6, ~~including~~2012 (as supplemented from time to time, the “Indenture”) that governs the Notes, ~~depends~~and onthe Senior Credit Agreement that governs our ~~financial~~Senior ~~condition~~Credit ~~and~~Facility ~~operating~~contain ~~performance~~restrictions on the incurrence of additional indebtedness, ~~which~~these restrictions are subject to ~~prevailing~~a ~~economic~~number ~~and~~of ~~competitive~~qualifications ~~conditions~~and exceptions, and any additional indebtedness incurred in compliance with these restrictions could be substantial. If we incur any additional indebtedness, the holders of that debt will be entitled to ~~certain~~share ~~financial~~ratably with our other existing indebtedness in any proceeds distributed in connection with any insolvency, ~~business~~liquidation, ~~legislative~~reorganization, ~~regulatory~~dissolution ~~and~~or other ~~factors~~winding ~~beyond~~up of our ~~control~~company. WeUpon ~~may~~any besuch ~~unable~~insolvency, toliquidation, ~~maintain~~reorganization, adissolution ~~level~~or ofother ~~cash~~winding ~~flows~~up, ~~from~~the ~~operating~~holders ~~activities~~of ~~sufficient~~our todebt ~~permit~~would usonly tobe ~~pay~~entitled to the ~~principal,~~distribution ~~premium~~of assets, if any, ~~and~~remaining ~~interest~~after onpayment to our ~~indebtedness,~~creditors ~~including~~and ~~the~~subject ~~Notes.~~to ~~See~~prior ~~“Management’s~~distribution ~~discussion~~rights ~~and~~of ~~analysis~~any shares of ~~financial~~preferred ~~condition~~stock ~~and~~that ~~results~~we ofmay ~~operations-Liquidity~~issue ~~and~~in ~~capital~~the ~~resources~~future.” The restrictions contained in the Indenture that governs the Notes and the Senior

If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness, including the Notes. We may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. Our credit agreement that governs our Senior Credit Facility and the indenture that governs the Notes restricts our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due. 24

AsCredit ofAgreement ~~the date of this Annual Report, we have nine foreign subsidiaries,~~ that dogoverns ~~not guarantee~~ our ~~obligations under our~~ Senior Credit Facility oralso ~~the~~will ~~Notes.~~not ~~These~~prevent ~~foreign~~us ~~subsidiaries~~from ~~are~~incurring ~~insignificant~~obligations ~~and~~that ~~account~~do ~~for~~not ~~less~~constitute ~~than 3% of our consolidated revenues, operating income and total assets, As of the date of this Annual Report, Truven Holding and~~ indebtedness.

22We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

~~our~~Our ~~domestic~~ability ~~subsidiaries~~to ~~guarantee~~make ~~the~~scheduled ~~debt.~~payments Inon, ~~the~~or ~~future~~refinance, weour ~~may~~debt ~~choose~~obligations, toand ~~acquire~~meet orfinancial ~~form~~covenants ~~additional subsidiaries~~ in ~~connection with~~ the ~~operation of our business that will be restricted subsidiaries. Any such future direct or indirect subsidiary that is a borrower under or that guarantees obligations under our~~ Senior Credit ~~Facility~~Agreement orand ~~that guarantees our other indebtedness or indebtedness of any future subsidiary guarantors will guarantee~~ the ~~Notes. We may also have future subsidiaries that may not be guarantors of the Notes or our other indebtedness. Accordingly~~Indenture, ~~repayment~~depends ~~of our indebtedness, including the Notes, may be dependent in part~~ on ~~the generation of cash flow by~~ our ~~current~~financial ~~and~~condition ~~future subsidiaries,~~ and ~~their~~operating ~~ability to make such cash available to us by dividend~~performance, ~~debt~~which ~~repayment or otherwise. Unless they~~ are ~~guarantors~~subject ~~of the Notes or our other indebtedness, our subsidiaries will not have any obligation~~ to ~~pay~~prevailing ~~amounts~~economic ~~due~~and oncompetitive ~~the~~conditions ~~Notes~~and ~~or our other indebtedness or~~ to ~~make~~certain ~~funds~~financial, ~~available for that purpose. Our subsidiaries may not be able to~~business, ~~or may not be permitted to~~legislative, ~~make~~regulatory ~~distributions~~and toother ~~enable~~factors usbeyond ~~to make payments in respect of~~ our ~~indebtedness, including the Notes~~control. ~~Each~~We ~~such~~may ~~subsidiary will~~ be aunable ~~distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability~~ to ~~obtain~~maintain ~~cash~~a ~~from~~level ~~subsidiaries. While the indenture that governs the Notes, our credit agreement that governs our Senior Credit Facility and certain~~ of ~~our~~cash ~~other~~flows ~~existing~~from ~~indebtedness~~operating ~~will~~activities ~~limit~~sufficient ~~the ability of any subsidiary~~ to ~~incur~~permit ~~consensual~~us ~~restrictions on its ability~~ to pay ~~dividends~~the orprincipal, ~~make other intercompany payments to us~~premium, ~~these~~if ~~limitations are subject to qualifications and exceptions. In the event that we do not receive distributions from our subsidiaries~~any, ~~we may be unable to make required principal~~ and interest ~~payments~~ on our indebtedness~~, including the Notes~~.

~~Our~~If ~~inability~~our tocash ~~generate~~flows ~~sufficient~~and ~~cash~~capital ~~flows~~resources are insufficient to ~~satisfy~~fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, ~~would~~even ~~materially~~if ~~and~~successful, ~~adversely~~those ~~affect~~alternative ~~our~~actions ~~financial~~may ~~position~~not ~~and~~allow ~~results~~us ofto ~~operations~~meet our scheduled debt service obligations and ~~our~~may ~~ability~~result toin ~~satisfy~~substantial ~~our~~dilution ~~obligations~~to ~~under~~our ~~the~~existing ~~Notes~~stockholders.

IfIn weaddition, ~~cannot~~the ~~make~~Senior ~~scheduled~~Credit ~~payments~~Agreement onthat governs our ~~debt,~~Senior weCredit ~~will~~Facility beand inthe ~~default~~Indenture ~~and~~that ~~holders~~governs of the Notes ~~could~~restricts ~~declare~~our ~~all~~ability ~~outstanding~~to ~~principal~~dispose of assets and ~~interest~~use tothe beproceeds ~~due~~from ~~and~~those ~~payable,~~dispositions ~~the~~and ~~lenders~~may ~~under~~also restrict our ~~Senior~~ability ~~Credit~~to ~~Facility~~raise ~~could~~debt ~~terminate~~or ~~their~~equity ~~commitments~~capital to ~~loan~~be ~~money~~used ~~and~~to ~~foreclose~~repay ~~against~~other ~~the~~indebtedness ~~assets~~when ~~securing~~it ~~the~~becomes ~~Senior~~due. ~~Credit~~We ~~Facility~~may ~~and~~not webe ~~could~~able beto ~~forced~~consummate ~~into~~those ~~bankruptcy~~dispositions or ~~liquidation.~~to ~~All~~obtain ofproceeds ~~these~~in ~~events~~an ~~could~~amount ~~result~~sufficient into ~~your~~meet ~~losing~~any ~~your~~debt ~~investment~~service obligations then due, which could result in the ~~Notes.~~acceleration of our indebtedness.

Certain of our assets collateralize our Senior Credit Facility and any such assets may not be available to pay our other indebtedness.

Our Senior Credit Facility is collateralized by a security interest in substantially all of our tangible and intangible assets, including the stock and the assets of Truven and certain of our wholly-owned U.S. subsidiaries and a portion of the stock of certain of our non-U.S. subsidiaries. The furnishing of security interests with respect to such assets may materially and adversely affect our financial flexibility, including the costs of or ability to raise additional financing.

Despite our current level of indebtedness, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks to our financial condition described above.

We and our subsidiaries may be able to incur significant additional indebtedness in the future. Although the indenture that governs the Notes and our credit agreement that governs our Senior Credit Facility contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. If we incur any additional indebtedness that ranks equally with the Notes, subject to collateral arrangements, the holders of that debt will be entitled to share ratably with you in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of our company. This may have the effect of reducing the amount of proceeds paid to you. These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness. In addition, as of December 31, 2014, our Revolving Credit Facility had unused commitments of approximately $42.5 million (after giving effect to approximately $7.5 million of outstanding letters of credit, which, while not drawn, reduce the available balance under the Revolving Credit Facility). Further, we may request incremental increases in commitments under the Senior Credit Facility in an aggregate principal amount up to (x) $75.0 million plus (y) up to an additional $75.0 million if the consolidated senior secured leverage ratio is less than or equal to 4.0:1.0, subject to certain conditions. All of the borrowings under our Senior Credit Facility are and will be secured indebtedness and, therefore, effectively senior to the Notes and the guarantees of the Notes to the extent of the value of the assets securing such debt. If new debt is added to our current debt levels, the related risks that we and the guarantors face could intensify.

The terms of the credit agreement that governs our Senior Credit Facility and the indenture that governs the Notes will restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.

The indenture that governs the Notes and the credit agreement that governs our Senior Credit Facility contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long term best interest, including, among other things, restrictions on our ability to:


•	incur additional indebtedness and guarantee indebtedness;


•	pay dividends or make other distributions in respect of, or repurchase or redeem, capital stock;


•	prepay, redeem or repurchase certain debt;


•	make loans, investments and acquisitions;


•	sell or otherwise dispose of assets;


•	incur liens;


•	enter into transactions with affiliates;


•	alter the businesses we conduct;


•	enter into sale-leaseback transactions;


•	enter into certain swap agreements;


•	change our fiscal year;


•	enter into agreements restricting our subsidiaries’ ability to pay dividends and incur liens; and


•	consolidate, merge or sell all or substantially all of our assets.

~~The~~In ~~covenants~~addition, in the ~~indenture~~Indenture that governs the Notes, ~~are subject to important exceptions~~ and ~~qualifications.~~the ~~Certain~~Senior ofCredit ~~these~~Agreement ~~covenants~~that ~~will~~governs ~~cease~~our toSenior ~~apply~~Credit toFacility, ~~the~~contain ~~Notes~~covenants ~~when~~that ~~the~~require ~~Notes~~us ~~have~~to ~~investment~~maintain ~~grade~~specified ~~ratings~~financial ~~from~~ratios ~~both Moody’s Investors Service, Inc. (“Moody’s”)~~ and ~~Standard &~~satisfy ~~Poor’s~~other ~~Ratings~~financial ~~Group~~condition ~~(“Standard & Poor’s”).~~

In addition, the restrictive covenants in the credit agreement that governs our Senior Credit Facility require us to maintain specified financial ratios and satisfy other financial condition tests. Our ability to meet those financial ratios and tests can be affected by events beyond our control, and we may be unable to meet them.25

Atests ~~breach~~and ofrestrictive ~~the~~ covenants orlimit ~~restrictions~~our ~~under~~ability ~~the~~to ~~indenture~~engage ~~that~~in ~~governs~~activities ~~the~~that ~~Notes~~may orbe ~~under~~in the ~~credit~~long ~~agreement~~term ~~that~~best ~~governs~~interest of our ~~Senior~~shareholders. ~~Credit~~Our ~~Facility~~ability ~~could~~to ~~result~~meet insuch anfinancial ~~event~~ratios ofand ~~default~~satisfy ~~under~~such ~~the~~financial ~~applicable~~condition ~~indebtedness.~~tests ~~Such~~can abe ~~default~~affected ~~may~~by ~~allow~~events ~~the~~beyond ~~creditors~~our tocontrol, ~~accelerate~~and ~~the~~we ~~related~~may ~~debt~~be ~~and~~unable ~~may~~to ~~result~~meet insuch ~~the~~financial ~~acceleration~~ratios ofor ~~any~~satisfy ~~other~~such ~~debt~~financial tocondition ~~which~~tests. aOur ~~cross~~failure ~~acceleration~~to orcomply ~~cross~~with ~~default~~those ~~provision~~financial ~~applies.~~and Inrestrictive ~~addition,~~covenants could result in an event of default ~~under~~which, ~~the~~if ~~credit~~not ~~agreement~~cured ~~that~~or ~~governs~~waived, ~~our~~could ~~Senior~~result ~~Credit~~in ~~Facility would permit~~ the ~~lenders~~acceleration ~~under~~of our ~~Senior~~indebtedness ~~Credit~~under ~~Facility~~the toIndenture ~~terminate~~and ~~all~~the ~~commitments~~Senior toCredit ~~extend further credit under that facility. Furthermore~~Agreement, ifas wewell ~~were~~as ~~unable~~an toacceleration ~~repay~~of ~~the~~or ~~amounts~~default ~~due and payable~~ under our ~~Senior~~other ~~Credit~~indebtedness ~~Facility,~~to ~~those~~which ~~lenders~~a ~~could~~cross‑acceleration ~~proceed~~or ~~against~~cross‑default ~~the~~provision ~~collateral granted to them to secure that indebtedness~~applies. In the event ~~our~~of ~~lenders~~an oracceleration ~~noteholders accelerate the repayment~~ of our ~~borrowings~~indebtedness, we ~~and~~could ~~our~~be ~~subsidiaries~~forced ~~may~~to ~~not~~dispose ~~have~~of ~~sufficient~~material assets toor ~~repay~~operations ~~that~~or ~~indebtedness.~~issue Asadditional aequity ~~result~~securities, ofresulting ~~these~~in ~~restrictions,~~dilution weto ~~may~~our ~~be:~~existing stockholders.

• limited in how we conduct our business;

• unable to raise additional debt or equity financing to operate during general economic or business downturns; or

• unable to compete effectively or to take advantage of new business opportunities.

These restrictions may affect our ability to grow in accordance with our strategy. In addition, our financial results, our substantial indebtedness and our credit ratings could adversely affect the availability and terms of our financing.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Borrowings under our Senior Credit Facility are at variable rates of interest with an established LIBOR floor rate of 1.25% and may expose us to interest rate risk. If interest rates were to increase above the floor rate, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, would correspondingly decrease. Assuming $50.0 million of the Revolving Credit Facility is drawn, a one percent change in interest rates in excess of the floor established by the Senior Credit Facility would result in a $0.50 million change in annual interest expense on our indebtedness under our Senior Credit Facility. In the future, we may enter into interest rate swaps that involve the exchange of floating for fixed rate interest payments in order to reduce interest rate volatility. However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk.

The Notes are effectively subordinated to our subsidiary guarantors’ indebtedness under our Senior Credit Facility and any other secured indebtedness of our company to the extent of the value of the property securing that indebtedness.

The Notes are not secured by any of our or our subsidiary guarantors’ assets. As a result, the Notes and the guarantees are effectively subordinated to our and the guarantors’ indebtedness under our Senior Credit Facility to the extent of the value of the assets that secure that indebtedness. As of December 31, ~~2014~~2015, we had approximately $~~624~~623.95 million of principal indebtedness outstanding under our Term Loan Facility, all of which is effectively senior to the Notes, and we had approximately $7.5 million in letters of credit outstanding under our Revolving Credit Facility, resulting in total unused availability of approximately $4237.5 million under our Revolving Credit Facility. In addition, we may request incremental increases in commitments under the Senior Credit Facility in an aggregate principal amount up to (x) $75.0 million plus (y) up to an additional $75.0 million if the consolidated senior secured leverage ratio is less than or equal to 4.0:1.0, subject to certain conditions. Further, we may incur additional secured debt in the future under the indenture governing the Notes and under the credit agreement that governs our Senior Credit Facility if certain specified conditions are satisfied. The effect of this subordination is that upon a default in payment on, or the acceleration of, any of our secured indebtedness, or in the event of bankruptcy, insolvency, liquidation, dissolution or reorganization of our company or any subsidiary guarantor, the proceeds from the sale of assets securing our secured indebtedness will be available to pay obligations on the Notes only after all indebtedness under our Senior Credit Facility and such other secured debt has been paid in full. As a result, the holders of the Notes may receive less ratably than the holders of secured debt in the event of our or any of our subsidiary guarantors’ bankruptcy, insolvency, liquidation, dissolution or reorganization.

The Notes are structurally subordinated to all obligations of subsidiaries that do not become guarantors of the Notes.

The Notes are guaranteed by Truven Holding and by each of our subsidiaries that guarantee our Senior Credit Facility or that, in the future, guarantee our other indebtedness or indebtedness of any subsidiary guarantor. Except for such subsidiary guarantors of the Notes, our subsidiaries, including our foreign subsidiaries (none of which is a guarantor of the Notes or under the Senior Credit Facility), will have no obligation, contingent or otherwise, to pay amounts due under the Notes or to make any funds available to pay those amounts, whether by dividend, distribution, loan or other payment. The Notes and guarantees are structurally subordinated to all indebtedness and other obligations of any non-guarantor subsidiary such that in the event of insolvency, liquidation, reorganization, dissolution or other winding up of any such subsidiary that is not a guarantor, all of that subsidiary's creditors (including trade creditors) would be entitled to payment in full out of that subsidiary's assets before we would be entitled to any payment.

of any such subsidiary that is not a guarantor, all of that subsidiary's creditors (including trade creditors) would be entitled to payment in full out of that subsidiary's assets before we would be entitled to any payment.

In addition, the indenture that governs the Notes, subject to some limitations, permits any non-guarantor subsidiaries to incur additional indebtedness and did not contain any limitation on the amount of other liabilities, such as trade payables, that may be incurred by such subsidiaries.

As of the date of this Annual Report, we have foreign subsidiaries that do not guarantee our obligations under our Senior Credit Facility or the Notes. Moreover, in the future, we may choose to acquire or form one or more subsidiaries in connection with the operation of our business that will be a restricted subsidiary. If any such future direct or indirect subsidiary is not a borrower under our Senior Credit Facility and does not guarantee obligations under our Senior Credit Facility or guarantee our other indebtedness or indebtedness of any future subsidiary guarantors, it will be a non- guarantor subsidiary.

Facility or guarantee our other indebtedness or indebtedness of any future subsidiary guarantors, it will be a non- guarantor subsidiary.

In addition, any subsidiary guarantors will be automatically released from their guarantees upon the occurrence of certain events, including the following:


•	the designation of any subsidiary guarantor as an unrestricted subsidiary;


•	the release or discharge of any guarantee or indebtedness that resulted in the creation of the guarantee of the Notes by such subsidiary guarantor; or


•	the sale or other disposition, including the sale of substantially all the assets, of that subsidiary guarantor.

If any guarantee is released, no holder of the Notes will have a claim as a creditor against that subsidiary guarantor, and the indebtedness and other liabilities, including trade payables and preferred stock, if any, whether secured or unsecured, of that subsidiary guarantor will be effectively senior to the claim of any holders of the Notes.

We may not be able to repurchase the Notes upon a change of control.

Upon the occurrence of certain kinds of change of control events, we will be required to offer to repurchase all outstanding Notes at 101% of their principal amount, together with accrued and unpaid interest to the purchase date. Additionally, under our Senior Credit Facility, a change of control (as defined in the credit agreement governing our Senior Credit Facility) constitutes an event of default that permits the lenders to accelerate the maturity of borrowings under our credit agreement and the commitments to lend would terminate, and any of our future debt agreements may contain similar provisions. The source of funds for any purchase of the Notes and repayment of borrowings under our Senior Credit Facility would be our available cash or cash generated from our subsidiaries’ operations or other sources, including borrowings, sales of assets or sales of equity. We may not be able to repurchase the Notes upon a change of control because we may not have sufficient financial resources to purchase all of the debt securities that are tendered upon a change of control and repay our other indebtedness that will become due. If we fail to repurchase the Notes in that circumstance, we will be in default under the indenture that governs the Notes. We may require additional financing from third parties to fund any such purchases, and we may be unable to obtain financing on satisfactory terms or at all. Further, our ability to repurchase the Notes may be limited by law. In order to avoid the obligations to repurchase the Notes and events of default and potential breaches of our credit agreement that governs our Senior Credit Facility, we may have to avoid certain change of control transactions that would otherwise be beneficial to us.

In addition, certain important corporate events, such as leveraged recapitalizations, may not, under the indenture that governs the Notes, constitute a “change of control” that would require us to repurchase the Notes, even though those corporate events could increase the level of our indebtedness or otherwise adversely affect our capital structure, credit ratings or the value of the Notes.

The exercise by the holders of Notes of their right to require us to repurchase the Notes pursuant to a change of control offer could cause a default under the agreements governing our other indebtedness, including future agreements, even if the change of control itself does not, due to the financial effect of such repurchases on us. In the event a change of control offer is required to be made at a time when we are prohibited from purchasing Notes, we could attempt to refinance the borrowings that contain such prohibitions. If we do not obtain a consent or repay those borrowings, we will remain prohibited from purchasing Notes. In that case, our failure to purchase tendered Notes would constitute an event of default under the indenture that governs the Notes, which could, in turn, constitute a default under our other ~~indebtedness. Finally, our ability to pay cash to the holders of Notes upon a repurchase may be limited by our then existing financial resources.~~

indebtedness. Finally, our ability to pay cash to the holders of Notes upon a repurchase may be limited by our then existing financial resources.

Holders of the Notes may not be able to determine when a change of control giving rise to their right to have the Notes repurchased has occurred following a sale of “substantially all” of our assets.

One of the circumstances under which a change of control may occur is upon the sale or disposition of “all or substantially all” of our assets. There is no precise established definition of the phrase “substantially all” under applicable law and the interpretation of that phrase will likely depend upon particular facts and circumstances. Accordingly, the ability of a holder of Notes to require us to repurchase its Notes as a result of a sale of less than all our assets to another person may be uncertain.

Federal and state fraudulent transfer laws may permit a court to void the Notes and/or the guarantees thereof, and if that occurs, you may not receive any payments on the Notes.

Federal and state fraudulent transfer and conveyance statutes may apply to the issuance of the Notes and the incurrence of the guarantees of the Notes. Under federal bankruptcy law and comparable provisions of state fraudulent transfer or conveyance laws, which may vary from state to state, the Notes or the guarantees thereof could be voided as a fraudulent transfer or conveyance if we or any of the guarantors, as applicable, (a) issued the Notes or incurred the guarantees with the intent of hindering, delaying or defrauding creditors or (b) received less than reasonably equivalent value or fair consideration in return for either issuing the Notes or incurring the guarantees and, in the case of (b) only, one of the following is also true at the time thereof:


•	we or any of the guarantors, as applicable, were insolvent or rendered insolvent by reason of the issuance of the Notes or the incurrence of the guarantees;


•	the issuance of the Notes or the incurrence of the guarantees left us or any of the guarantors, as applicable, with an unreasonably small amount of capital or assets to carry on the business;


•	we or any of the guarantors intended to, or believed that we or such guarantor would, incur debts beyond our or such guarantor’s ability to pay as they mature; or


•	we or any of the guarantors were a defendant in an action for money damages, or had a judgment for money damages docketed against us or the guarantor if, in either case, the judgment is unsatisfied after final judgment.

As a general matter, value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or a valid antecedent debt is secured or satisfied. A court would likely find that a guarantor did not receive reasonably equivalent value or fair consideration for its guarantee to the extent the guarantor did not obtain a reasonably equivalent benefit directly or indirectly from the issuance of the Notes.

We cannot be certain as to the standards a court would use to determine whether or not we or the guarantors were insolvent at the relevant time or, regardless of the standard that a court uses, whether the Notes or the guarantees would be subordinated to our or any of our guarantors’ other debt. In general, however, a court would deem an entity insolvent if:


•	the sum of its debts, including contingent and unliquidated liabilities, was greater than the fair saleable value of all of its assets;


•	the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or


•	it could not pay its debts as they became due.

If a court were to find that the issuance of the Notes or the incurrence of a guarantee was a fraudulent transfer or conveyance, the court could void the payment obligations under the Notes or that guarantee, could subordinate the Notes or that guarantee to presently existing and future indebtedness of ours or of the related guarantor or could require the holders of the Notes to repay any amounts received with respect to that guarantee. In the event of a finding that a fraudulent transfer or conveyance occurred, you may not receive any repayment on the Notes. Sufficient funds to repay the Notes may not be available from other sources, including remaining guarantors, if any. Further, the avoidance of ~~the Notes could result in an event of default with respect to our and the guarantors’ other debt that could result in acceleration of that debt.~~

the Notes could result in an event of default with respect to our and the guarantors’ other debt that could result in acceleration of that debt.

Finally, as a court of equity, the bankruptcy court may subordinate the claims in respect of the Notes to other claims against us under the principle of equitable subordination if the court determines that (1) the holder of Notes engaged in some type of inequitable conduct, (2) the inequitable conduct resulted in injury to our other creditors or conferred an unfair advantage upon the holders of Notes and (3) equitable subordination is not inconsistent with the provisions of the bankruptcy code.

A lowering or withdrawal of the ratings assigned to our debt securities by rating agencies may increase our future borrowing costs and reduce our access to capital.

Our debt has a non-investment grade rating, and any rating assigned could be lowered or withdrawn entirely by a rating agency if in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes in our business, so warrant. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of the Notes. Credit ratings are not recommendations to purchase, hold or sell the Notes. Additionally, credit ratings may not reflect the potential effect of risks relating to the structure or marketing of the Notes. Any downgrade by either Moody’s or Standard & Poor’s could increase the interest rate on our Senior Credit Facility or decrease earnings and would likely make it more difficult or more expensive for us to obtain additional debt financing. If any credit rating initially assigned to the Notes is subsequently lowered or withdrawn for any reason, you may not be able to resell your Notes at a favorable price or at all.

Many of the covenants in the indenture that governs the Notes will not apply during any period in which the Notes are rated investment grade by both Moody’s and Standard & Poor’s.

Many of the covenants in the indenture that governs the Notes will not apply to us during any period in which the Notes are rated investment grade by both Moody’s and Standard & Poor’s, provided at such time no default or event of default has occurred and is continuing. These covenants will restrict, among other things, our ability to pay distributions, incur indebtedness and enter into certain other transactions. There can be no assurance that the Notes will ever be rated investment grade or, if they are rated investment grade, that the Notes will maintain these ratings. However, suspension of these covenants would allow us to engage in certain transactions that would not be permitted while these covenants were in force. To the extent the covenants are subsequently reinstated, any such actions taken while the covenants were suspended would not result in an event of default under the indenture that governs the Notes.

ITEM 1B - UNRESOLVED STAFF COMMENTS

None.

ITEM 2 - PROPERTIES

We do not own any real estate property as we lease all of our existing facilities. Our ~~registered~~ principal office is located in a leased office space in Ann Arbor, Michigan. Our operating facilities accommodate product development, marketing and sales, information technology, administration, training, graphic services and operations personnel. AsOur ~~of December 31, 2014, our~~ three main facilities are as follows:

Facility Address	~~Square Feet~~SquareFeet	Purpose	~~Purpose~~LeaseStart Date	~~Lease Start Date~~LeaseExpirationDate	~~LeaseExpiration Date~~
777 East Eisenhower Parkway, Ann Arbor, MI 48108	172,004		Corporate headquarters/Operating facilities	6/1/2012	2/28/2017
100 Phoenix Drive Suite 201, Ann Arbor, MI 48108	134,927	Corporate headquarters/Operating facilities	9/1/2015	12/31/2026
1 North Dearborn Street, Suite 1400, Chicago, IL 60602	4048,~~695~~724	Operating facilities	~~Operating facilities~~6/1/2012	611/130/~~2012~~2020	~~11/1/2020~~
6200 S. Syracuse Way, #300, Greenwood Village, CO 80111	~~102~~107,~~631~~955	Operating facilities	~~Operating facilities~~8/31/2013	87/31/~~2013~~2021	~~7/31/2021~~

We lease additional facilities in 16 other locations worldwide.

ITEM 3 - LEGAL PROCEEDINGS

From time to time, we become involved in legal proceedings arising in the ordinary course of our business. The following matters are the significant pending legal proceedings against us.

28We have been named as a defendant in 225 separate pharmaceutical tort lawsuits relating to the use of Reglan or its generic version, the first of which was filed in 2010 and the rest of which were filed by 2012. All of these actions are pending in the Court of Common Pleas in Philadelphia County, Pennsylvania. In these matters, the plaintiffs allege that they sustained various injuries (including neurological disorders) as a result of their ingestion of Reglan. While a host of drug manufacturers and pharmacies are named as defendants in each of the suits, claims have also been asserted against so‑called Patient Education Monograph (“PEM”) defendants, including us. It is generally alleged in all of the actions that certain PEM defendants provided Reglan patient drug information to pharmacies which, in turn, provided that drug information to the pharmacies’ customers, the plaintiffs in these actions. Plaintiffs further allege that the PEM defendants’ patient drug information did not provide adequate warning information about the use of Reglan. Other PEM defendants have also been named in these and other similar actions. In general, the lawsuits have been procedurally consolidated in Philadelphia as mass tort actions. To date, none of the actions against Truven specifically identifies Truven as the author of a PEM that was supplied to a plaintiff. Instead, plaintiffs in these cases allege only that they read an unnamed PEM and, in effect, that it must have been published by at least one of the PEM defendants named in the action.

We have been named as a defendant in approximately 200 separate pharmaceutical tort lawsuits relating to the use of Reglan or its generic version, the first of which was filed by June 2010 and the most recent of which was filed in March 2012. All of these actions are pending in the Court of Common Pleas in Philadelphia County, Pennsylvania. In these matters, the plaintiffs complain that they sustained various injuries (including neurological disorders) as a result of their ingestion of Reglan. While a host of drug manufacturers and pharmacies are named as defendants in each of the suits, claims have also been asserted against so-called "Patient Education Monograph" ("PEM") defendants, including us. It is generally alleged in all of the actions that certain PEM defendants provided Reglan "patient drug information" to pharmacies which, in turn, provided that drug information to the pharmacies' customers, the plaintiffs in these actions. Plaintiffs further allege that the PEM defendants' patient drug information did not provide adequate warning information about the use of Reglan. Other PEM defendants have also been named in these and other similar actions. In general, the lawsuits have been procedurally consolidated in Philadelphia as mass tort actions. To date none of the actions against us specifically identifies us as the author of a PEM that was supplied to a plaintiff. Instead, plaintiffs in these cases allege only that they read an unnamed PEM and, in effect, that it must have been published by at least one of the PEM defendants named in the action.29

Along with other PEM defendants, we made one dispositive motion to dismiss all the actions. While that motion to dismiss has been denied, it was without prejudice, permitting us to renew at a later stage in the litigation.

~~Pending~~Appeals ~~the resolution of appeals~~ by the co-‑defendant generic drug company defendants, ~~the~~have ~~resolution~~been ofexhausted ~~which~~as ~~will not affect the continuation~~ of ~~the~~May 18, ~~actions against us~~2015, and there has been no active discovery involving ~~Truven~~us to date. At this time, we believe that we have meritorious defenses to the claims in each of these actions.

OnTruven ~~December 15,~~filed ~~2011,~~U.S. ~~Midwest~~trademark applications for the trademarks Truven Health ~~Initiative~~Analytics and Truven Health Unify. In May 2013 and March 2014, arespectively, ~~client~~Truveris, Inc. (“Truveris”) filed notices of ~~our~~opposition ~~research~~against ~~business,~~these ~~requested~~applications ~~arbitration~~in the Trademark Trial and Appeal Board of athe ~~dispute~~United ~~relating~~States toPatent ~~our~~and ~~performance~~Trademark ~~under~~Office alleging that the Truven Health Analytics and Truven Health Unify applications create a ~~client~~likelihood ~~services~~of ~~agreement.~~confusion ~~The~~with ~~arbitration~~Truveris’ ~~proceedings~~alleged ~~were~~common ~~initiated~~law intrademark ~~St. Louis~~Truveris as well as its registered trademarks Trubid, Truguard, Trubuy, Trureport and ~~were~~Trurxpay. ~~settled~~Truveris byhas ~~both~~also ~~parties~~alleged ~~during~~that Truven’s use of the ~~fourth~~Truven ~~quarter~~alleged ofmark ~~2013~~is likely to cause confusion with Truveris’ alleged trademark. The ~~settlement~~parties ~~amount~~settled ~~was~~this ~~immaterial~~dispute in January, 2016.

Pacific Alliance Medical Center ("“PAMC"”) claimed in 2007 that we failed to properly submit some of PAMC'’s data, resulting in denial of Medicare reimbursement to PAMC in the approximate amount of $600,000. PAMC was denied relief by administrative agencies and appealed to the U.S. District Court in the Central District of California for judicial review, which was denied. PAMC later appealed to and was denied relief by the United States Court of Appeals for the Ninth Circuit. ~~The~~Following ~~parties~~the ~~have~~exhaustion ~~entered~~of ~~into~~its aappeals, ~~tolling~~PAMC ~~agreement.~~filed If a ~~claim~~multi-count iscomplaint ~~filed~~ against usTruven in November, 2015 which we expect to ~~defend~~vigorously itdefend.

We ~~filed~~are ~~U.S.~~involved ~~trademark~~in ~~applications~~other ~~for~~litigation ~~the~~proceedings ~~trademarks~~arising ~~Truven~~from ~~Health~~the ~~Analytics~~normal ~~and~~course ~~Truven~~of ~~Health~~our ~~Unify~~operations. In ~~May,~~As ~~2013~~of ~~and~~December ~~March~~31, ~~2014~~2015, ~~respectively,~~other ~~Truveris,~~than ~~Inc.~~the (“Truveris”) ~~filed~~case ~~notices~~discussed ofabove, ~~opposition~~no ~~against~~reserves ~~these~~were ~~applications~~recorded inbased ~~the~~on ~~Trademark Trial and Appeal Board of~~ the ~~United~~determination ~~States~~by ~~Patent~~management and ~~Trademark~~our ~~Office~~legal ~~alleging~~advisors that ~~the~~liability ~~Truven~~arising ~~Health~~out ~~Analytics~~of ~~and~~such ~~Truven~~proceedings ~~Health~~is ~~Unify~~not ~~applications~~probable ~~create~~and athe ~~likelihood~~amount of ~~confusion with Truveris’s alleged common law trademark Truveris as well as its registered trademarks Trubid~~loss, ~~Truguard,~~if ~~Trubuy~~any, ~~Trureport~~cannot ~~and~~be ~~Trurxpay. Truveris~~reasonably ~~has also alleged that Truven’s use of the Truven alleged mark is likely to cause confusion with Truveris’s alleged trademark~~estimated. ~~We plan to vigorously defend these claims.~~

~~We are involved in various other litigation and administrative proceedings that arise in the ordinary course of business.~~ While it is not possible to predict the outcome of any of these proceedings, ~~the~~our ~~Company's~~ management, in conjunction with its legal advisors, based on its assessment of the facts and circumstances now known, does not believe that any of these proceedings, individually or in the aggregate, will have a material adverse effect on ~~the~~our ~~Company's~~ financial position, results of operations and cash flows.

ITEM 4 - MINE SAFETY DISCLOSURE

Not applicable.

2930

PART II

ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

There is no established public trading market for the registrants' common stock. Truven Health Analytics Inc. is 100% owned by Truven Holding Corp, which is also 100% owned by VCPH Holding LLC.

The registrant has not paid any cash dividends in the past. We anticipate that any earnings will be retained for development of our business and we do not anticipate paying any cash dividends in the foreseeable future. Our credit facility, senior subordinated notes and senior secured notes all restrict our ability to issue cash dividends. Any future dividends declared would be at the discretion of our board of directors and would depend on our financial condition, results of operations, contractual obligations, the terms of our financing agreements at the time a dividend is considered, and other relevant factors.

ITEM 6 - SELECTED FINANCIAL DATA

The following table sets forth our selected historical financial and other data for the periods and at the dates indicated:

The term Predecessor Period refers to all periods related to the Thomson Reuters Healthcare business (the Predecessor) prior to and including the date of the closing of the Prior Acquisition on June 6, 2012. We have derived the statement of comprehensive income (loss) and cash flow data for the period from January 1 to June 6, 2012, ~~years~~and year ended December 31, 2011 ~~and 2010~~ from our Predecessor’s audited combined financial statements.

The term Successor Period refers to all periods from inception of Truven Holding (April 20, 2012 onwards), which includes all periods of Truven after the closing of the Prior Acquisition on June 6, 2012. Following the Prior Acquisition and the related Merger, Truven (formerly TRHI) owns certain other assets and liabilities of the Thomson Reuters Healthcare business and is a direct wholly-owned subsidiary Truven Holding (the Successor). We have derived the balance sheet data as of December 31, 2015, 2014 , 2013 and 2012, and the statement of comprehensive loss and cash flow data for the years ended December 31, 2015, 2014, 2013, and April 20, 2012 to December 31, 2012 from Successor’s audited consolidated financial statements included elsewhere in this Annual Report, which represent the consolidated financial position of Truven Holding and its subsidiaries.

The selected historical financial and other data included below and elsewhere in this Annual Report are not necessarily indicative of future results. The selected financial data presented below has been derived from financial statements that have been prepared in accordance with GAAP and should be read with the information included under the headings “Risk Factors”, “Management’s discussion and analysis of financial condition and results of operations” and with our audited consolidated financial statements and the related notes thereto, included elsewhere in this Annual Report.

	Year ended December 31,			Year ended December 31,			From inception (April 20, 2012) to December 31,			January 1, 2012 to June 6,			Year ended December 31,			Year ended December 31,
	2014			2013			2012			2012			2011			2010
	Successor						Predecessor
Revenues, net (a)	$	544,475		$	492,702		$	241,786		$	208,998		$	483,207		$	450,008
Operating costs and expenses Cost of revenues, excluding depreciation and amortization (b)	(292,999		)	(265,541		)	(141,558		)	(112,050		)	(245,609		)	(233,430		)
Selling and marketing, excluding depreciation and amortization (c)	(57,413		)	(56,157		)	(30,958		)	(25,917		)	(54,814		)	(55,975		)
General and administrative, excluding depreciation and amortization (d)	(55,937		)	(41,042		)	(13,042		)	(27,173		)	(44,867		)	(32,634		)
Allocation of costs from Predecessor Parent and affiliates (e)	—			—			—			(10,003		)	(34,496		)	(33,358		)
Depreciation (f)	(22,350		)	(21,219		)	(6,700		)	(6,805		)	(14,851		)	(13,418		)
Amortization of developed technology and content (g)	(38,752		)	(31,894		)	(15,470		)	(12,460		)	(24,208		)	(23,660		)
Amortization of other identifiable intangible assets (h)	(45,402		)	(34,460		)	(19,527		)	(8,226		)	(19,691		)	(20,112		)
Goodwill impairment (i)	—			(366,662		)	—			—			—			—
Other operating expenses (j)	(20,784		)	(35,038		)	(49,622		)	(18,803		)	(20,002		)	(1,995		)
Total operating costs and expenses	(533,637		)	(852,013		)	(276,877		)	(221,437		)	(458,538		)	(414,582		)
Operating income (loss)	10,838			(359,311		)	(35,091		)	(12,439		)	24,669			35,426
Net interest income from Predecessor Parent (k)	—			—			—			—			134			156
Interest expense (l)	(69,616		)	(70,581		)	(49,014		)	—			(63		)	—
Interest income	—			—			—			3			—			60
Other finance costs	(930		)	(24		)	—			—			—			—
Income (Loss) before income taxes	(59,708		)	(429,916		)	(84,105		)	(12,436		)	24,740			35,642
Benefit from (Provision for) income taxes	22,686			84,927			29,993			4,803			(9,859		)	(13,989		)
Net income (loss)	$	(37,022	)	$	(344,989	)	$	(54,112	)	$	(7,633	)	$	14,881		$	21,653
Other comprehensive income (loss):
Foreign currency translation adjustments	(139		)	(165		)	—			—			—			—
Total comprehensive income (loss)	$	(37,161	)	$	(345,154	)	$	(54,112	)	$	(7,633	)	$	14,881		$	21,653
Cash flow data:
Net cash provided by (used in) operating activities	$	45,217		$	(1,365	)	$	27,352		$	17,806		$	85,017		$	97,684
Net cash used in investing activities (m)	(142,067		)	(43,785		)	(1,280,672		)	(10,285		)	(40,521		)	(43,925		)
Net cash provided by (used in) financing activities	99,338			31,765			1,277,125			(7,513		)	(44,659		)	(55,227		)
Balance sheet data:
Cash and cash equivalents	$	12,604		$	10,255		$	23,805		n.a.			$	70		$	233
Working capital deficit (n)	(45,892		)	(59,762		)	(80,628		)	n.a.			(75,481		)	(75,444		)
Total assets	1,233,089			1,164,603			1,597,127			n.a.			590,875			800,611
Long-term debt, net of original issue discount (o)	977,722			872,258			837,972			n.a.			—			—
Total equity	47,123			79,283			419,252			n.a.			354,299			568,089



	Year ended December 31,			Year ended December 31,			Year ended December 31,			From inception (April 20, 2012) to December 31,			January 1, 2012 to June 6,			Year ended December 31,
	2015			2014			2013			2012			2012			2011
	Successor												Predecessor

Revenues, net (a)	$	610,715		$	544,475		$	492,702		$	241,786		$	208,998		$	483,207
Operating costs and expenses Cost of revenues, excluding depreciation and amortization (b)	(329,250		)	(292,999		)	(265,541		)	(141,558		)	(112,050		)	(245,609		)
Selling and marketing, excluding depreciation and amortization (c)	(70,205		)	(57,413		)	(56,157		)	(30,958		)	(25,917		)	(54,814		)
General and administrative, excluding depreciation and amortization (d)	(65,155		)	(55,937		)	(41,042		)	(13,042		)	(27,173		)	(44,867		)
Allocation of costs from Predecessor Parent and affiliates (e)	—			—			—			—			(10,003		)	(34,496		)
Depreciation (f)	(21,197		)	(22,350		)	(21,219		)	(6,700		)	(6,805		)	(14,851		)
Amortization of developed technology and content (g)	(43,821		)	(38,752		)	(31,894		)	(15,470		)	(12,460		)	(24,208		)
Amortization of other identifiable intangible assets (h)	(48,769		)	(45,402		)	(34,460		)	(19,527		)	(8,226		)	(19,691		)
Goodwill impairment (i)	—			—			(366,662		)	—			—			—
Other operating expenses (j)	(30,874		)	(20,784		)	(35,038		)	(49,622		)	(18,803		)	(20,002		)
Total operating costs and expenses	(609,271		)	(533,637		)	(852,013		)	(276,877		)	(221,437		)	(458,538		)
Operating income (loss)	1,444			10,838			(359,311		)	(35,091		)	(12,439		)	24,669
Net interest income from Predecessor Parent (k)	—			—			—			—			—			134
Interest expense (l)	(74,219		)	(69,616		)	(70,581		)	(49,014		)	—			(63		)
Interest income	—			—			—			—			3			—
Other finance costs	(1,805		)	(930		)	(24		)	—			—			—
Income (Loss) before income taxes	(74,580		)	(59,708		)	(429,916		)	(84,105		)	(12,436		)	24,740
Benefit from (Provision for) income taxes	(886		)	22,686			84,927			29,993			4,803			(9,859		)
Net income (loss)	$	(75,466	)	$	(37,022	)	$	(344,989	)	$	(54,112	)	$	(7,633	)	$	14,881

Other comprehensive income (loss):
Foreign currency translation adjustments	(107		)	(139		)	(165		)	—			—			—
Total comprehensive income (loss)	$	(75,573	)	$	(37,161	)	$	(345,154	)	$	(54,112	)	$	(7,633	)	$	14,881

Cash flow data:
Net cash provided by (used in) operating activities	$	53,524		$	45,217		$	(1,365	)	$	27,352		$	17,806		$	85,017
Net cash used in investing activities (m)	(49,109		)	(142,067		)	(43,785		)	(1,280,672		)	(10,285		)	(40,521		)
Net cash provided by (used in) financing activities	(2,587		)	99,338			31,765			1,277,125			(7,513		)	(44,659		)

	As of December 31,
	2015			2014			2013			2012			2011
	Successor												Predecessor
Balance sheet data:
Cash and cash equivalents	$	14,325		$	12,604		$	10,255		$	23,805		$	70
Working capital deficit (n)	(58,297		)	(45,892		)	(59,762		)	(80,628		)	(75,481		)
Total assets	1,186,567			1,233,089			1,164,603			1,597,127			590,875
Long-term debt, net of original issue discount (o)	979,594			977,722			872,258			837,972			—
Total equity	(27,636		)	47,123			79,283			419,252			354,299

Includes (i) subscription revenues from sales of products and services that are delivered under a contract over a period of time, which are recognized on a straight line basis over the term of the subscription, (ii) revenues from implementation and hosting arrangement that comprised: (1) the design, production, testing and installation of the customer's database (implementation phase); and (2) the provision of ongoing data management and support services in conjunction with the licensed data and subscription of software data or application (on-going service phase, hosting or subscription).


b.	Includes all personnel and other costs of revenue, including but not limited to, client support, client operations, product management, royalties, allocation of technology support costs administered by our Predecessor relating to market data and professional service costs.


c.	Includes all personnel and other costs related to sales and marketing, including but not limited to, sales and marketing staff, commissions and marketing events.


d.	Includes all personnel and other costs related to general administration as well as costs shared across the organization, including but not limited to technology, finance and strategy.

e. AsOur ~~described~~Predecessor inutilized ~~Note~~various 18wholly-owned affiliates of Thomson Reuters to provide administrative services and to finance its operations. These costs relate to the ~~financial~~corporate ~~statements~~executive offices, ~~included~~audit ~~elsewhere~~fees, inlegal ~~this~~services, ~~Annual~~treasury, ~~Report~~communications, ~~our~~human resources, tax services, risk management, technology support, rent and other costs incurred by the Predecessor ~~historically~~Parent ~~engaged~~and inits ~~related~~subsidiaries ~~party~~on ~~transactions~~behalf ~~with~~of ~~Thomson~~our ~~Reuters~~Predecessor. ~~relative~~Costs were allocated to ~~certain~~the ~~support~~Company ~~services,~~based ~~including~~primarily ~~among~~on ~~others,~~the ~~finance,~~proportional ~~accounting,~~revenue. ~~treasury,~~The ~~tax~~Company believes the assumptions and methodologies underlying the allocations of general corporate overhead from Predecessor Parent were reasonable. However, ~~transaction~~such ~~processing~~expenses may not be indicative of the actual expenses that would have been or will be incurred by TRHI or Truven operating as an independent company. As a result, the financial information ~~technology~~herein may not necessarily reflect the combined financial position, ~~legal~~results of operations and cash flows of the Company in the future or what it would have been if TRHI or Truven had been an independent company during the periods presented. If TRHI or Truven had operated independently of the Predecessor Parent, ~~human~~it ~~resources~~is possible that the terms and conditions of these related party transactions, ~~payroll~~and the resulting amounts recorded, ~~insurance~~would have been different from those presented in these consolidated and ~~real~~combined ~~estate~~financial ~~management~~statements.


f.	Includes depreciation of computer hardware, furniture, fixture and equipments, and leasehold improvements.


g.	Includes amortization of developed technology and contents used internally and capitalized once a project has progressed beyond a conceptual, preliminary stage to that of application development stage. Costs that qualify for capitalization include both internal and external costs, but are limited to those that are directly related to a specific project.

h. Includes amortization of definite-lived trade names, acquired customer relationships, backlog and ~~noncompete~~non-compete agreements.

On November 1, 2013, we performed our annual goodwill impairment test and determined that the carrying value of all our reporting units exceeded our fair value due to lower-than-expected growth in revenue and cash flow in fiscal year 2013 resulting from certain selling cycle delays, particularly in the government sector, uncertainty in the healthcare sector related to the Patient Protection and Affordable Care Act, higher-than-expected costs due to significant investments in technology infrastructure, as well as an increase in the discount rate used in the discounted cash flow analysis as compared to the rate used in the prior year’s analysis. As a result, we recorded an aggregate non-cash goodwill impairment charge of $366.7 million in the fourth quarter of 2013.

j. Other operating expenses in the Predecessor ~~period~~Period includes related disposal costs incurred as part of the Prior Acquisition process (comprised of audit services, accounting and consulting services and legal fees), severance and retention bonuses relating to the Prior Acquisition, and costs relating to other acquisition activities of our Predecessor Parent. Other operating expenses in 2012 and 2013 (in the Successor ~~periods)~~Period ~~includes~~include direct costs related to the Prior Acquisition in 2012 as well as costs incurred related to technology and other costs in connection with our transition to a standalone business. These costs include nonrecurring expenses associated with data center migration and separating infrastructure from Thomson Reuters, costs related to the transitional service agreement with Thomson Reuters and related to rebranding, consulting, professional fees and Sponsor fees. Other operating expenses in 2014 includes professional fees related to the acquisition of Simpler, HBE and JWA in 2014, certain costs related to business improvement processes, and certain costs associated with data migration, asset write‑offs, losses on discontinued projects and Sponsor fees. Refer to Note 14 to the consolidated financial statements, included elsewhere in this Annual Report.

32separating infrastructure from Thomson Reuters, costs related to the transitional service agreement with Thomson Reuters and related to rebranding, consulting, professional fees and Sponsor fees. Other operating expenses in 2014 includes professional fees related to the acquisition of Simpler, HBE and JWA in 2014, certain costs related to business improvement processes, and certain costs associated with data migration, asset write‑offs, losses on discontinued projects and Sponsor fees. Other operating expenses in 2015 includes various professional fees related to business integration and process improvements related to sales force, order to cash and various infrastructure and system process enhancements, asset write-offs, lease termination expense and Sponsor fees. See Notes 3 and 14 to the consolidated financial statements, included elsewhere in this Annual Report.

k. Prior to the Prior Acquisition, certain of our Predecessor’s cash management transactions with Thomson Reuters were subject to written loan agreements specifying repayment terms and interest payments, under which Thomson Reuters was required to pay interest to our Predecessor equal to the average monthly rate earned by Thomson Reuters on its cash investments held with its primary U.S. banker. Interest on these notes is reflected in ‘‘Interest income from Predecessor Parent’’ in our Predecessor’s combined statement of operations. These loan agreements were satisfied upon completion of the Prior Acquisition.


l.	Interest earned or incurred related to third-party transactions.


m.	Includes purchase price of Prior Acquisition in 2012 and acquisition of Simpler, HBE and JWA in 2014. Capital expenditures includes purchases of hardware, software and costs of developed technology and contents.


n.	Working capital is defined as current assets excluding cash and cash equivalents and deferred tax assets minus current liabilities excluding debt, capital lease obligations and tax related liabilities.

o. Total debt includes current and non-current portion, net of original issue discount of $1411.31 million, $1514.93 million and $1415.29 million as of December 31, ~~2014~~2015, December 31, ~~2013~~2014 and December 31, ~~2012~~2013, respectively.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion ~~and analysis~~ of our financial condition and results of operations ~~covers~~should ~~periods~~be ~~prior~~read toin ~~and~~conjunction ~~including~~with ~~the~~this ~~closing~~entire ofAnnual ~~the~~Report ~~Prior Acquisition~~ on ~~June 6~~Form 10-K, ~~2012~~including (the ~~Predecessor~~“Risk ~~Period)~~Factors” section and ~~periods~~our ~~from~~consolidated ~~the~~financial ~~inception~~statements ofand ~~Truven~~the ~~Holding~~notes ~~(April~~to ~~20,~~those ~~2012)~~financial ~~through~~statements ~~December 31,~~appearing ~~2014,~~elsewhere ~~which~~in ~~was~~this ~~after the closing of the Prior Acquisition (the Successor Period)~~report. The ~~following~~ discussion and analysis ~~should~~below beincludes ~~read~~certain inforward-looking ~~conjunction~~statements ~~with~~that ~~our~~are ~~consolidated~~subject ~~financial~~to ~~statements~~risks, uncertainties and ~~the~~other ~~related~~factors ~~notes~~described ~~thereto included elsewhere~~ in ~~this~~“Risk ~~Annual~~Factors” ~~Report. This discussion~~ and ~~analysis~~elsewhere ~~contains~~in ~~forward-looking~~this ~~statements~~report that ~~are~~could ~~based~~cause onour ~~management's~~actual ~~current~~future ~~expectations~~growth, ~~estimates~~results ~~and~~of ~~projections~~operations, ~~about~~performance ~~our~~and business prospects and ~~operations. Our~~opportunities ~~actual~~to ~~results may~~ differ materially from those ~~currently~~expressed ~~anticipated~~in, ~~and~~or ~~expressed~~implied inby, such forward-looking statements. asSee a“Note ~~result~~On ofForward-Looking ~~various~~Statements” ~~factors~~herein.

Overview

We are a leading healthcare analytics ~~company~~solutions ~~focused on improving quality~~ and ~~decreasing~~services ~~costs~~business ~~across~~focused ~~the~~on ~~healthcare~~quality ~~industry.~~improvement ~~Through the better use of analytics~~ and ~~data,~~cost wereduction. We enable our clients to ~~reduce~~formulate ~~costs~~strategy, ~~manage risk,~~ improve operational clinical and financial performance, enhance patient outcomes, manage risk, and increase transparency. We ~~combine~~Our ~~our~~platform ~~analytic~~combines deep healthcare domain expertise, ~~information~~a ~~assets~~vast collection of healthcare data and cloud‑based technology to create market‑leading analytics solutions and highly specialized services, totransforming ~~offer~~large ~~our~~quantities ~~clients~~of complex data into actionable insights. We ~~and~~provide ~~analytical~~our analytics solutions. ~~Furthermore,~~and weservice ~~increase~~offerings across the ~~value~~full spectrum of ~~our~~healthcare ~~analytical~~constituents, ~~solutions~~including ~~with~~state ~~performance~~and ~~improvement~~federal ~~and~~government ~~analytic~~agencies, ~~consulting~~hospitals, ~~expertise~~health systems, employers, health plans, life sciences companies and consumers.

~~The~~Recent ~~Prior Acquisition~~Developments

On ~~April 23~~February 17, ~~2012~~2016, ~~VCPH~~International ~~Holding~~Business ~~Corp.~~Machines ~~(now~~Corporation ~~known as Truven Holding~~(IBM), ana ~~affiliate~~New ofYork ~~Veritas~~corporation, Holdings ~~entered into the Stock and Asset Purchase Agreement with TRUSI and Thomson Reuters Global Resources~~LLC, ~~both~~The ~~affiliates~~Veritas ofCapital ~~the~~Fund ~~Thomson Reuters~~IV, ~~which VCPH Holding Corp~~L.P., The ~~assigned~~Veritas toCapital ~~Wolverine~~Fund ~~on May 24~~III, ~~2012~~L. ~~Pursuant to the Stock and Asset Purchase Agreement~~P., ~~on June 6, 2012, Wolverine acquired 100% of the equity interests of TRHI~~ and ~~certain~~CIPH ~~other~~Holdings ~~assets and liabilities of the Thomson Reuters Healthcare business. Upon the closing of the Prior Acquisition~~LLC, ~~Wolverine~~entered ~~merged with and~~ into ~~TRHI, with TRHI surviving the Merger as~~ a ~~direct~~Stock ~~wholly‑owned~~Purchase ~~subsidiary of VCPH Holding Corp. (now known as Truven Holding)~~Agreement, ~~and~~pursuant ~~subsequently~~to ~~changed~~which ~~its~~IBM ~~name~~agreed to ~~Truven Health Analytics Inc. Following the Merger~~purchase, ~~the~~for ~~assets and liabilities acquired are now held by Truven (formerly TRHI), which remains~~ a ~~direct~~total ~~wholly‑owned~~consideration ~~subsidiary~~ of ~~Truven Holding~~$2.6 ~~Truven Holding was formed on April 20~~billion, ~~2012~~the ~~for~~sole ~~the~~outstanding ~~purpose~~share of ~~consummating~~common ~~the~~stock, ~~Prior~~par ~~Acquisition.~~value ~~We financed the Prior Acquisition and paid related costs and expenses associated with the Prior Acquisition and the financing as follows: (i) approximately~~ $~~464~~0.~~4 million~~01 inper ~~common~~share, ~~equity~~of ~~was~~Truven ~~contributed~~Holding ~~by entities affiliated with~~ (the ~~Sponsor~~"Stock ~~and certain co‑investors; (ii~~Purchase") ~~$527~~.~~6 million~~ The ~~principal~~Stock ~~amount~~Purchase ~~was~~Agreement ~~borrowed~~contains ~~under~~various ~~the~~customary ~~Term~~representations, ~~Loan~~warranties ~~Facility;~~ and ~~(iii) $327.1 million~~covenants ~~principal amount~~ of ~~Old~~each ~~Notes~~party ~~were~~and ~~issued.~~the

In connection with the offering of the existing notes and the Prior Acquisition, VCPH Holding Corp. (now known as Truven Holding) and Wolverine entered into the Senior Credit Facility, which consisted of (i) the $527.6 million Term Loan Facility and (ii) the $50.0 million Revolving Credit Facility. In connection with the Merger, Truven succeeded to the obligations of Wolverine under (i) the credit agreement that governs our Senior Credit Facility and (ii) the indenture that governs the Old Notes.

In accordance with the acquisition method of accounting, following the Prior Acquisition on June 6, 2012, we, with the assistance of a third‑party valuation firm, estimated the fair values of acquired assets and assumed liabilities based on the actual tangible and identifiable intangible assets and liabilities that existed as of June 6, 2012. These fair values were finalized and are reflected in our balance sheet on the date of the Prior Acquisition. In this process, we applied certain assumptions as inputs to the valuation calculations. These assumptions represent our best estimates based on historic performance of the respective reporting segments, trends within the market place and our consideration of the potential impact of political, economic and social factors that are considered beyond our control. Significant assumptions included within our discounted cash flow valuation include revenue growth rates, operating profit margins, implied rate of return used and terminal growth rates. The impact of this acquisition accounting results in certain differences between Predecessor and Successor financial statements discussed herein, and thereby affects comparability between such statements.

Predecessor and successor periods

Successor Period. The consolidated financial statements for the year ended December 31, 2014 and 2013, and for the periods from April 20, 2012 (inception) through December 31, 2012 include the accounts of Truven Holding from inception and its subsidiaries subsequent to the closing of the Prior Acquisition on June 6, 2012. The consolidated financial statements of the Successor reflect the Prior Acquisition under the acquisition method of accounting, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations.

Predecessor Period. The accompanying combined financial statements of the Thomson Reuters Healthcare business prior to the Prior Acquisition, include the combined financial statements of TRHI and certain assets owned by subsidiaries of Thomson Reuters.

The combined financial statements of our Predecessor and the consolidated financial statements of the Successor included in this report have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”). The combined financial statements of our Predecessor have been derived from the accounting records of Thomson Reuters using historical results of operations and the historical bases of assets and liabilities, adjusted as necessary to conform to GAAP. All significant transactions between our Predecessor and other Thomson Reuters entities are included in our Predecessor’s combined financial statements. Management believes the assumptions underlying our Predecessor’s combined financial statements are reasonable. However, the combined financial statements may not necessarily reflect what our Predecessor’s results of operations, financial position and cash flows would have been had it operated as a standalone company without the shared resources of Thomson Reuters for the periods presented.

Acquired Companies. Each party has agreed to use its respective reasonable best efforts to take all actions to cause the Stock Purchase to be consummated, subject to certain exceptions. The closing of the Stock Purchase is subject to customary closing conditions. The Stock Purchase is not subject to a financing condition.

At the closing of the Stock Purchase, IBM will pay all indebtedness for money borrowed of the Company that is required to be paid.

On February 18, 2016, Truven also notified the trustee for the Notes of Truven's optional election to redeem the $367.2 million aggregate principal amount of the Notes outstanding, which redemption is conditioned on the occurrence of the closing of the Stock Purchase, and instructed the trustee to provide notice of such optional redemption to the holders of the Notes in accordance with the terms of the Indenture.

On March 15, 2016, Truven delivered to the trustee of the Notes a revised notice of Truven’s optional election to redeem the $367.2 million aggregate principal amount of the Notes outstanding, which superseded the notice of redemption delivered on February 18, 2016, and instructed the trustee to provide the revised notice of such optional redemption to the holders of the Notes in accordance with the terms of the Indenture. Truven’s optional redemption remains conditioned on the occurrence of the closing of the Stock Purchase. Truven expects the satisfaction and discharge of the Notes to occur on the anticipated closing date of the Stock Purchase, in accordance with the terms of the Stock Purchase Agreement.

Either party may terminate the Stock Purchase Agreement, subject to certain terms and conditions, if the Stock Purchase is not completed on or before May 17, 2016, unless extended by either party for an additional 30 days in certain circumstances.

The Prior Acquisition

On April 23, 2012, Truven Holding, entered into the Stock and Asset Purchase Agreement with TRUSI and Thomson Reuters Global Resources, both affiliates of Thomson Reuters, which VCPH Holding Corp. assigned to Wolverine on May 24, 2012. Pursuant to the Stock and Asset Purchase Agreement, on June 6, 2012, Wolverine acquired 100% of the equity interests of TRHI and certain other assets and liabilities of the Thomson Reuters Healthcare business. Upon the closing of the Prior Acquisition, Wolverine merged with and into TRHI, with TRHI surviving the Merger as a direct wholly owned subsidiary of VCPH Holding Corp., and subsequently changed its name to Truven Health Analytics Inc. Following the Merger, the assets and liabilities acquired are now held by Truven (formerly TRHI), which remains a direct wholly owned subsidiary of Truven Holding. Truven Holding was formed on April 20, 2012 for the purpose of consummating the Prior Acquisition. We financed the Prior Acquisition and paid related costs and expenses associated with the Prior Acquisition and the financing as follows: (i) approximately $464.4 million in common equity was contributed by entities affiliated with the Sponsor and certain co-investors, (ii) $527.6 million principal amount was borrowed under the Term Loan Facility and (iii) $327.1 million principal amount of 10.625% Senior Notes, Series A (‘‘the Old Notes’’) were issued in a private offering under the Indenture.

Our segments

The determination of reportable segments was based on the discrete financial information provided to the Chief Operating Decision Maker (the "CODM"). The Chief Executive Officer has the authority for resource allocation and assessment of the Company’s performance and is, therefore, the CODM. The Company’s segment structure enables us to more effectively focus on business and market facing opportunities and to simplify our business decision-making process. The Company's reportable segments are as indicated below:

Commercial

~~The~~Our Commercial segment provides ~~analytic~~analytics solutions and services to improve the cost, quality, and effectiveness of healthcare for commercial organizations across the healthcare industry including, for example, providers, integrated delivery networks, insurers, professional services organizations, healthcare exchanges, ~~manufacturers,~~corporations and ~~corporations~~life sciences companies.

Government

~~The~~Our Government segment provides integrated ~~analytic~~analytics solutions and services to improve the cost, quality, and effectiveness of healthcare for federal and state ~~Government~~government channels ~~(e.g.~~ ~~Centers~~including, for ~~Medicare~~example, &CMS ~~Medicaid Services~~ and state Medicaid agencies) and federally owned and operated healthcare facilities. Our sales and client services are tailored to meet the specific procurement, sales and support requirements of the government market.

Center/shared services consist of items that are not directly attributable to reportable segments, such as corporate administrative costs and elimination of intercompany transactions. Additionally, corporate expenses may include other non-‑recurring or non-‑operational activity that the CODM excludes in assessing operating segment performance. These expenses, along with depreciation and amortization, other operating income/expense and other non-‑operating activity such as interest expense/income, are not considered in the measure of the segments’ operating performance, but are shown herein as reconciling items to ~~the~~our ~~Company’s~~ consolidated loss before income taxes.

The accounting policies for the reportable segments are the same as those for the consolidated Company. ~~The~~Our ~~Company’s~~ operations and customers are based primarily in the United States.

2014 Acquisitions

Simpler Acquisition

On April 11, 2014, we acquired Simpler. Simpler provides "Lean" enterprise transformation consulting services. This strategic acquisition combines the Company's market-leading cost and quality analytics in the ~~commercial~~Commercial segment with Simpler's performance management consulting capabilities to deliver performance improvement solutions to healthcare and commercial customers. We acquired all of the outstanding equity of Simpler for a purchase price of $81.1 million, including a working capital adjustment of $1.1 million, and the issuance of equity interests by Holdings LLC, the direct parent of the Company, of $3.7 million to Simpler (the "Simpler Transaction"). The related acquisition costs amounted to $3.6 million. We financed the ~~acquisition~~Simpler Transaction and related costs and expenses through an increase in the Tranche B Term Loans under the Senior Credit Facility (the “Tranche B Term Loans”). We did not assume any indebtedness in connection with the Simpler Transaction.

JWA Acquisition

On October 31, 2014, we acquired JWA, a company that provides "Lean" healthcare consulting services. We acquired all of the outstanding equity of JWA for a cash purchase price of $15.3 million, including a $1.2 million working capital adjustment and $0.1 million holdback payment (the "JWA Transaction"). Truven also agreed to pay $1.9 million in three annual payments to a former major shareholder of JWA who became Truven's employee, as long as the former major shareholder remained with Truven for the next three years. The related acquisition costs amounted to $0.56 million. We did not assume any indebtedness in connection with the JWA Transaction. We financed the ~~acquisition~~JWA Transaction and related costs and expenses ~~through~~using proceeds from the issuance of ~~the~~our ~~Additional~~ Notes.

HBE Acquisition

On November 12, 2014, we acquired HBE, a leading provider of stakeholder information that is essential for life sciences companies to gain drug approval, reimbursement, and adoption, for a cash purchase price of $17.62 million, including negative working capital adjustment of $2.48 million. The related acquisition costs amounted to $1.02 million. We financed the acquisition and related costs and expenses through the issuance of the Additional Notes. We did not assume any indebtedness in connection with the HBE ~~Transaction~~acquisition.

In accordance with the acquisition method of accounting, following the date of each of the foregoing acquisitions, we, with the assistance of a third‑party valuation firm, have estimated the fair values of acquired assets and assumed liabilities based on the actual tangible and identifiable intangible assets and liabilities that existed at the date of the acquisitions. These fair values are preliminary and were reflected on our balance sheet on the date of the acquisitions. In this process, we applied certain assumptions as inputs to the valuation calculations. These assumptions represent our best estimates based on historic performance of the respective reporting segments, trends within the market place and our consideration of the potential impact of political, economic and social factors that are considered beyond our control. Significant assumptions included within our discounted cash flow valuation include revenue growth rates, operating profit margins, implied rate of return used and terminal growth rates. Our results of operations, financial position and cash flows are impacted by the effects of the acquisitions, which were financed primarily through borrowings, including transaction‑related costs, debt commitment fees and recurring interest costs.

actual tangible and identifiable intangible assets and liabilities that existed at the date of the acquisitions. These fair values are preliminary and were reflected on our balance sheet on the date of the acquisitions. In this process, we applied certain assumptions as inputs to the valuation calculations. These assumptions represent our best estimates based on historic performance of the respective reporting segments, trends within the market place and our consideration of the potential impact of political, economic and social factors that are considered beyond our control. Significant assumptions included within our discounted cash flow valuation include revenue growth rates, operating profit margins, implied rate of return used and terminal growth rates. Our results of operations, financial position and cash flows are impacted by the effects of the acquisitions, which were financed primarily through borrowings, including transaction‑related costs, debt commitment fees and recurring interest costs.

Deferred Revenue; Fair Value Adjustments

Our revenues are derived from the sale of subscription data, and analytics solutions and services. Our revenues from the sale of subscription data and analytics solutions are typically billed annually in advance and recognized on a straight‑line basis over the contract term, which is typically one to three years. As a result, cash collections from customers for subscription data and analytic solutions can be greater than the revenue recognized (which only correspond to those revenues associated with services already rendered). In cases of billings in advance or advanced receipt of payments from customers, we record deferred revenue, a liability that is reduced as revenue is recognized. Our revenues from services are invoiced according to the terms of the contract, typically in arrears (after the corresponding services have been rendered), and recognized over the term of the contract. Contracts for services vary in length from a few months to several years. The carrying value of our deferred revenue as of June 6, 2012 totaled $138.7 million. Following the completion of the Prior Acquisition, we determined, with the assistance of a third‑party valuation firm, that the fair value of our deferred revenue should be adjusted to $80.2 million. As a result, deferred revenue on certain contracts of $58.5 million was written off, which negatively impacted our revenue for the year ended December 31, 2014, 2013 and period from April 20, 2012 (inception) to December 31, 2012 by $3.2 million, $8.8 million and $43.5 million, respectively.

Following the acquisitions of Simpler, HBE and JWA during 2014, the carrying values of deferred revenues from acquired companies totaled $11.7 million and with the assistance of a third-party valuation firm, it was determined that the fair value of the deferred revenue should be adjusted to $4.8 million. As a result, deferred revenue on certain contracts of $6.9 million was written off, which negatively impacted our revenue for the period ended December 31, 2014 by $2.9 million.

The write‑offs will have a future aggregate negative impact of $7.0 million in future periods with the majority expected to be reflected over the next 12 months.

Unaudited Pro Forma Financial Information

The following unaudited pro forma combined financial information is based on the audited combined statement of operations of our Predecessor's (for the period from January 1, 2012 to June 6, 2012) and Successor's (for the period April 20, 2012 to December 31, 2012) audited consolidated statement of operations, which represent the combined results of operations of Truven Holding and its subsidiaries for the year ended December 31, 2012, included elsewhere in this Annual Report, and has been prepared to give effect to the Prior Acquisition, assuming that the Prior Acquisition occurred on January 1, 2012. The pro forma adjustments and certain assumptions underlying these adjustments, using the acquisition method of accounting, are described in the accompanying notes and should be read in conjunction with these unaudited pro forma combined financial statements. The pro forma adjustments are based on valuation estimates, available information and assumptions that we believe are reasonable as of the date of preparation. Our unaudited pro forma combined financial information is not necessarily indicative of what our actual results of operations would have been had the Prior Acquisition occurred as of the date or for the periods indicated, nor does it purport to represent our future results of operations.

The pro forma adjustments contained in the unaudited pro forma combined statement of operations for the year ended December 31, 2012 give effect to the Prior Acquisition as if it was consummated on January 1, 2012. The unaudited pro forma combined financial information gives effect to events that are (1) directly attributable to the Prior Acquisition, (2) factually supportable and (3) expected to have a continuing impact on us. The unaudited pro forma combined statement of comprehensive income (loss) for the year ended December 31, 2012, does not include the effects of any future restructuring activities, including severance or other employee related costs that pertain to the combined operations, or other operating efficiencies or inefficiencies, which may result from the Prior Acquisition but are either non-recurring or at this point not factually supportable. Furthermore, the unaudited pro forma combined financial statements do not include certain non-recurring expenses, such as: (i) for accelerated vesting of employee awards; (ii) other employee benefits costs; and (iii) certain transition costs that we expect to incur in the next 12 months as we transition to be a standalone entity.

Management believes that the assumptions used to derive the pro forma statement of operations are reasonable given the information available. The pro forma combined statement of operations has been provided for informational purposes only and

isDeferred ~~not~~Revenue; ~~necessarily~~Fair ~~indicative~~Value ofAdjustments ~~the results of future operations or the actual results that would have been achieved had the Prior Acquisition occurred on the date indicated.~~

~~Truven~~Our ~~Holding~~revenues ~~Corp~~are derived from the sale of subscription data, and analytics solutions and services. Our revenues from the sale of subscription data and analytics solutions are typically billed annually in advance and recognized on a straight‑line basis over the contract term, which is typically one to three years. As a result, cash collections from customers for subscription data and analytic solutions can be greater than the revenue recognized (which only correspond to those revenues associated with services already rendered). In cases of billings in advance or advanced receipt of payments from customers, we record deferred revenue, a liability that is reduced as revenue is recognized. Our revenues from services are invoiced according to the terms of the contract, typically in arrears (after the corresponding services have been rendered), and recognized over the term of the contract. Contracts for services vary in length from a few months to several years. The carrying value of our deferred revenue as of June 6, 2012 totaled $138.7 million. Following the completion of the Prior Acquisition, we determined, with the assistance of a third‑party valuation firm, that the fair value of our deferred revenue should be adjusted to $80.2 million. As a result, deferred revenue on certain contracts of $58.5 million was written off, which negatively impacted our revenue for the years ended December 31, 2015, 2014 and 2013 by $1.3 million, $3.2 million and $8.8 million, respectively.

~~Unaudited~~Following ~~Pro~~the ~~Forma~~acquisitions ~~Statement~~of Simpler, HBE and JWA during 2014, the carrying values of ~~Operations~~deferred revenues from acquired companies totaled $11.7 million and with the assistance of a third-party valuation firm, it was determined that the fair value of the deferred revenue should be adjusted to $4.8 million. As a result, deferred revenue on certain contracts of $6.9 million was written off, which negatively impacted our revenue for the periods ended December 31, 2015 and 2014 by $4.0 million and $2.9 million, respectively.

~~For~~The ~~the~~write‑offs ~~year~~will ~~ended~~have ~~December~~a ~~31,~~future ~~2012~~aggregate negative impact of $1.8 million in future periods.

(Dollars in thousands)	From inception (April 20, 2012) to December 31, 2012				January 1, 2012 to June 6, 2012			Acquisition related adjustments				Pro forma
	(Successor)			(Predecessor)
Revenues, net	$	241,786			$	208,998		$	(5,553	)	(a)	$	445,231
Operating costs and expenses
Cost of revenues, excluding depreciation and amortization	(141,558		)		(112,050		)	—				(253,608		)
Selling and marketing, excluding depreciation and amortization	(30,958		)		(25,917		)	—				(56,875		)
General and administrative, excluding depreciation and amortization	(13,042		)		(27,173		)	—				(40,215		)
Allocation of costs from Predecessor Parent and affiliates	—				(10,003		)	—				(10,003		)
Depreciation	(6,700		)		(6,805		)	3,392			(b)	(10,113		)
Amortization of developed technology and content	(15,470		)		(12,460		)	2,228			(b)	(25,702		)
Amortization of other identifiable intangible assets	(19,527		)		(8,226		)	(6,118		)	(b)	(33,871		)
Goodwill impairment	—				—			—				—
Other operating expenses	(49,622		)		(18,803		)	55,452			(c)	(12,973		)
Total operating costs and expenses	(276,877		)		(221,437		)	54,954				(443,360		)
Operating income (loss)	(35,091		)		(12,439		)	49,401				1,871
Net interest income (expense)	(49,014		)		3			(27,770		)	(d)	(76,781		)
Other finance costs	—				—							—
Income (Loss) before income taxes	(84,105		)		(12,436		)	21,631				(74,910		)
Benefit from income taxes	29,993				4,803			(8,436		)	(e)	26,360
Net loss	$	(54,112	)		$	(7,633	)	$	13,195			$	(48,550	)

Segment discussion

(Dollars in thousands)	From inception (April 20, 2012) to December 31, 2012		January 1, 2012 to June 6, 2012	Acquisition related adjustments (a)		Pro forma
	(Successor)		(Precessor)
Commercial
Revenues	172,235		195,470	(4,902	)	362,803
Segment operating income	42,036		55,206	(4,902	)	92,340
Government
Revenues	36,763		46,316	(651	)	82,428
Segment operating income (loss)	(228	)	10,654	(651	)	9,775

The following adjustments were made in the preparation of the unaudited pro forma combined statement of operations:

(a) This adjustment reflects the full year impact of adjustment on deferred revenue that negatively impacted our revenue in 2012. As part of the purchase accounting adjustment, our deferred revenues of $138.7 million from various contracts have been adjusted to their fair value of $80.2 million at the date of the Prior Acquisition. As a result, the deferred revenue on certain contracts has been written off by $58.5 million and had a negative impact on our revenue in the current period and will continue to impact our revenue in the next four years. Had the acquisition happened at January 1, 2012, our revenue in 2012 would have been reduced by $49.0 million. The historical results of the Successor Period include a reduction in revenue of $43.5 million as a result of the decline in value of deferred revenue. The pro forma adjustment of $5.5 million reflects the incremental negative impact on revenue had the Prior Acquisition occurred on January 1, 2012.

(b) Reflects the incremental change in depreciation and amortization resulting from new fair values established for computer hardware and other property, developed technology and content, and other identifiable intangible assets with finite lives. As part of the purchase price accounting for the Prior Acquisition, management, including the assistance of a third party valuation specialist, has identified the following assessed fair values and estimated useful lives:

(In thousands)	Fair value at acquisition date		Estimateduseful lives
Computer hardware and other property	$	24,573		3-7 years
Developed technology and content	159,622			3-10 years
	$	184,195
Other identifiable intangible assets:
Trade names	$	86,200		15 years
Customers relationships	329,800			11-12 years
	$	416,000

To recognize the impact of the Prior Acquisition as if they had been completed as of January 1, 2012, depreciation and amortization expense would differ in the unaudited pro forma combined statement of operations for the year ended December 31, 2012, primarily due to incremental depreciation and amortization that should have been recognized during the Predecessor Period as follows:

(In thousands)	Developed technology and content			Other identifiable intangible assets		Computer hardware and other propoerty
Pro forma depreciation and/or amortization (Predecessor Period)	$	10,232		$	14,344	$	3,413
Historical depreciation and/or amortization (Predecessor Period)	12,460			8,226		6,805
Increase (decrease) in depreciation and amortization	$	(2,228	)	$	6,118	$	(3,392	)

(c) This adjustment eliminates non-recurring costs directly related to the Prior Acquisition, including certain non-recurring audit services, accounting and consulting services and legal fees related to the Predecessor Parent’s disposal of our Predecessor, and severance and retention bonuses to management employees the Prior Acquisition. The adjustment also

includes the portion of the Sponsor's annual fee that would have been incurred had the Prior Acquisition occurred on January 1, 2012. The Sponsor's fee adjustment reflects the full year impact of $2.5 million of the Sponsor's management fee. Approximately $1.5 million is already reflected in the historical results of the Successor Period.

(In thousands)	Year ended December 31, 2012
Direct acquisition costs, including nonrecurring audit, accounting and consulting fees	$	38,569
Severance and retention bonuses	17,925
Sponsor’s fee	(1,042		)
Net decrease in expenses	$	55,452

(d) This adjustment reflects (1) the interest expense of the Exchange Notes and the variable rate Term Loan Facility, as calculated below, together with commitment fees on the unused portion of the Revolving Credit Facility and (2) the amortization of capitalized debt issuance costs associated with the issued debt as follows:

(In thousands)	Year endedDecember 31, 2012
Pro forma interest expense:
Term Loan Facility (i)	$	30,338
Exchange Notes (ii)	34,760
Revolving Credit Facility Commitment fees (iii)	250
Amortization of original issue discount (i/iv)	2,143
Amortization of debt issuance costs (i/v)	2,673
Pro forma interest expense	70,164
Historical interest expense	(42,394		)
Adjustment to interest expense	$	27,770

(i) The variable interest rate of the Term Loan Facility was assumed at 5.75%, representing the LIBOR floor rate of 1.25% plus an applicable margin of 4.5% in accordance with the amended credit agreement governing our Senior Credit Facility. On October 3, 2012, we entered into a first amendment to the credit agreement governing our Senior Credit Facility, pursuant to which this applicable margin for all loans was reduced by 1%. As of the time of the amendment, the loans with certain lenders were determined to be extinguished under ASC 470-50, Modification or Extinguishment of debt. We incurred lenders' fees of $6.7 million in connection with the amendment. The unaudited pro forma combined statement of operations includes adjustments to reflect the reduction in applicable margin starting on January 1, 2012. In addition, the pro forma amortization of the original issue discount and debt issuance costs have been adjusted to reflect the impact of certain original issue discount and debt issuance costs associated with the debt from certain lenders that were determined to have been extinguished and were written off. The related loss on early extinguishment of debt amounting to $6.7 million and included as part of interest expense is reflected in the Successor historical financial statements and no pro forma adjustment has been included herein.

(ii) The fixed interest rate of 10.625% was used for the Exchange Notes.

(iii) The commitment fee on the Revolving Credit Facility was based on the applicable fee of 0.5% of the unused balance.

(iv) The original issue costs discount on Senior Term loan and Exchange Notes is amortized using the effective interest rate method.

(v) The deferred debt issuance costs are amortized over the term of the related debt.

The underlying one-month LIBOR rate as of December 31, 2012 was 0.21%. Based on a one-year time frame and all other variables remaining constant, a one-eighth of one percent (12.5 basis points) change in the interest rate would have no impact on the interest expense on our Term Loan Facility, as the LIBOR floor of 1.25% applicable to the Term Loan Facility is significantly higher than the prevailing LIBOR rates.

(e) This adjustment is for income tax expense provided at an estimated statutory rate of 39% in effect during period for which pro forma income statement are presented. Because the tax rate used for these pro forma financial statements is an estimate, it may vary from the actual effective tax rate in periods subsequent to the Prior Acquisition.

Results of Operations

The following section provides a comparative discussion of our results of operations for the ~~year~~years ended December 31, ~~2014~~2015 and ~~2013,~~ 2014 and ~~a comparative discussion of our results of operations~~ for the year ended December 31, ~~2013~~2014 and ~~periods in 2012 on both an "as reported" and a "pro forma" basis~~2013. The reported results are not necessarily representative of our ongoing operations as "Combined" amounts merely combine pre- and post-acquisition periods without reflecting all relevant pro forma adjustments to give effect to the acquisition. Therefore, to facilitate an understanding of our trends and on-going performance, we have presented pro forma results in addition to the reported results. The unaudited pro forma combined statements of operations were prepared in accordance with the requirements of Article 11- Pro forma Financial Information, of Regulation S-X. See "Unaudited Pro Forma Financial Information" under Management's Discussion and Analysis of Financial Condition and Results of Operations.

The results of operations should be read in conjunction with our consolidated and combined financial statements and the related notes thereto, included elsewhere in this Annual Report. Factors that relate primarily to a specific business segment are discussed in more detail within that business segment.

Year ended December 31, ~~2014~~2015 compared to Year ended December 31, ~~2013~~2014

The following table summarizes our consolidated ~~and combined~~ results of operations for the periods indicated:

(Dollars in thousands)	Year ended December 31, 2014			% of revenue		Year ended December 31, 2013			% of revenue		Change			% change
Revenues, net(a)	$	544,475		100	%	$	492,702		100	%	$	51,773		11	%
Operating costs and expenses
Cost of revenues, excluding depreciation and amortization(b)	(292,999		)	(54	)%	(265,541		)	(54	)%	(27,458		)	10	%
Selling and marketing, excluding depreciation and amortization(c)	(57,413		)	(11	)%	(56,157		)	(11	)%	(1,256		)	2	%
General and administrative, excluding depreciation and amortization(d)	(55,937		)	(10	)%	(41,042		)	(8	)%	(14,895		)	36	%
Depreciation (e)	(22,350		)	(4	)%	(21,219		)	(4	)%	(1,131		)	5	%
Amortization of developed technology and content (f)	(38,752		)	(7	)%	(31,894		)	(6	)%	(6,858		)	22	%
Amortization of other identifiable intangible assets (g)	(45,402		)	(8	)%	(34,460		)	(7	)%	(10,942		)	32	%
Goodwill impairment (h)	—			—	%	(366,662		)	(74	)%	366,662			(100	)%
Other operating expenses (i)	(20,784		)	(4	)%	(35,038		)	(7	)%	14,254			(41	)%
Total operating costs and expenses	(533,637		)	(98	)%	(852,013		)	(173	)%	318,376			(37	)%
Operating income (loss)	10,838			2	%	(359,311		)	(73	)%	370,149			(103	)%
Net interest expense (j)	(69,616		)	(13	)%	(70,581		)	(14	)%	965			(1	)%
Other finance costs	(930		)	—	%	(24		)	—	%	(906		)	3,775	%
Income (Loss) before income taxes	(59,708		)	(11	)%	(429,916		)	(87	)%	370,208			(86	)%
Benefit from (provision for) income taxes	22,686			4	%	84,927			17	%	(62,241		)	(73	)%
Net income (loss)	$	(37,022	)	(7	)%	$	(344,989	)	(70	)%	$	307,967		(89	)%



(Dollars in thousands)	Year ended December 31, 2015			% of revenue		Year ended December 31, 2014			% of revenue		Change			% change

Revenues, net(a)	$	610,715		100	%	$	544,475		100	%	$	66,240		12	%
Operating costs and expenses
Cost of revenues, excluding depreciation and amortization(b)	(329,250		)	(54	)%	(292,999		)	(54	)%	(36,251		)	12	%
Selling and marketing, excluding depreciation and amortization(c)	(70,205		)	(11	)%	(57,413		)	(11	)%	(12,792		)	22	%
General and administrative, excluding depreciation and amortization(d)	(65,155		)	(11	)%	(55,937		)	(10	)%	(9,218		)	16	%
Depreciation (e)	(21,197		)	(3	)%	(22,350		)	(4	)%	1,153			(5	)%
Amortization of developed technology and content (f)	(43,821		)	(7	)%	(38,752		)	(7	)%	(5,069		)	13	%
Amortization of other identifiable intangible assets (g)	(48,769		)	(8	)%	(45,402		)	(8	)%	(3,367		)	7	%
Other operating expenses (h)	(30,874		)	(5	)%	(20,784		)	(4	)%	(10,090		)	49	%
Total operating costs and expenses	(609,271		)	(100	)%	(533,637		)	(98	)%	(75,634		)	14	%
Operating income	1,444			—	%	10,838			2	%	(9,394		)	(87	)%
Net interest expense (i)	(74,219		)	(12	)%	(69,616		)	(13	)%	(4,603		)	7	%
Other finance costs	(1,805		)	—	%	(930		)	—	%	(875		)	94	%
Loss before income taxes	(74,580		)	(12	)%	(59,708		)	(11	)%	(14,872		)	25	%
Benefit from (provision for) income taxes	(886		)	—	%	22,686			4	%	(23,572		)	(104	)%
Net loss	$	(75,466	)	(12	)%	$	(37,022	)	(7	)%	$	(38,444	)	104	%

(a)


(b)	Includes all personnel and other costs attributable to a revenue stream, including but not limited to, client support, client operations, product management, royalties, allocation of technology support costs relating to market data and professional service costs.


(c)	Includes all personnel and other costs related to sales and marketing, including but not limited to, sales and marketing staff, commissions and marketing events.


(d)	Includes all personnel and other costs related to general administration as well as costs shared across the organization, including but not limited to technology, finance and strategy.


(e)	Includes depreciation of computer hardware, furniture, fixture and equipments, and leasehold improvements


(f)	Includes amortization of developed technology and contents used internally and capitalized once a project has progressed beyond a conceptual, preliminary stage to that of application development stage. Costs that qualify for capitalization include both internal and external costs, but are limited to those that are directly related to a specific project.


(g)	Includes amortization of definite‑lived trade names and acquired customer relationship assets.

(h) OnOther ~~November~~operating 1,expenses ~~2013,~~in we2015 ~~performed~~includes ~~our~~various ~~annual~~professional ~~goodwill~~fees ~~impairment~~related ~~test~~to ~~and~~business ~~determined~~integration ~~that~~and ~~the~~process ~~carrying~~improvements ~~value~~related ofto ~~all~~sales ~~our~~force, ~~reporting~~order ~~units exceeded our fair value due~~ to ~~lower‑than‑expected~~cash ~~growth~~and invarious ~~revenue~~infrastructure and ~~cash~~system ~~flow~~process inenhancements, ~~fiscal~~asset ~~year~~write-offs, ~~2013~~accrual ~~resulting~~for ~~from~~legal ~~certain~~settlements, ~~selling~~lease ~~cycle~~termination ~~delays,~~expense ~~particularly~~and inSponsor ~~the~~fees. ~~government~~Other ~~sector,~~operating ~~uncertainty~~expenses in ~~the~~2014 ~~healthcare~~includes ~~sector~~professional fees related to the ~~Patient~~acquisition ~~Protection~~of Simpler, HBE and ~~Affordable~~JWA ~~Care~~in ~~Act~~2014, ~~higher‑than‑expected~~certain costs ~~due~~related to ~~significant~~business ~~investments~~improvement ~~in technology infrastructure~~processes, asand ~~well~~certain ascosts anassociated ~~increase~~with indata ~~the~~migration, ~~discount~~asset ~~rate~~write‑offs, ~~used~~losses inon ~~the~~discontinued ~~discounted~~projects ~~cash~~and ~~flow~~Sponsor ~~analysis~~fees. asSee ~~compared~~Note 14 to the ~~rate~~consolidated ~~used~~financial ~~in the prior year’s analysis. As a result~~statements, weincluded ~~recorded~~elsewhere ~~an aggregate non‑cash goodwill impairment charge of $366.7 million~~ in ~~the~~this ~~fourth~~Annual ~~quarter of 2013~~Report.

(i) ~~Other~~Interest ~~operating~~earned ~~expenses~~or inpaid ~~2013 includes direct costs~~ related to ~~the~~third ~~Prior~~party ~~Acquisition in 2012 as well as costs incurred related to technology and other costs in connection with our transition to a standalone business~~transactions. These costs include nonrecurring expenses associated with data center migration and separating infrastructure from Thomson Reuters, costs related to the transitional service agreement with Thomson Reuters and related to rebranding, consulting, professional fees and Sponsor fees. Other operating expenses in 2014 includes professional fees related to the acquisitions of Simpler, HBE and JWA , certain costs related to business improvement processes, and certain costs associated with data migration, asset write‑offs, losses on discontinued projects and Sponsor fees. Refer to Note 14 to the consolidated financial statements, included elsewhere in this Annual Report.

~~(j) Interest earned or paid related to third party transactions.~~38

Discussion of Year ended December 31, ~~2014~~2015 compared to Year ended December 31, ~~2013~~2014

Revenues, net

Our net revenues were $~~544~~610.57 million for the year ended December 31, ~~2014~~2015 as compared to $~~492~~544.75 million for the year ended December 31, ~~2013~~2014, an increase of $5166.82 million or 1112%. The increase was primarily due to the $5152.65 million increase in revenue from our Commercial segment and $015.50 million increase in revenue from our Government segment. The increase in ~~revenue from~~ our Commercial segment was primarily due to ~~revenues~~the ~~from~~$51.9 ~~our~~million ~~acquired~~of ~~businesses~~incremental inrevenue ~~2014~~due ofto ~~$38.3~~the ~~million,~~full ~~$8.7~~year ~~million~~of ~~increase~~operations in ~~revenue~~2015 ~~due~~of tothe ~~new~~businesses ~~sales~~acquired ~~from~~in ~~customers~~2014 and ~~incremental~~a ~~fees~~$4.5 million increase from our ~~employer~~analytic ~~and~~solution ~~healthplan,~~services for life ~~sciences~~science ~~and~~customers ~~provider~~due ~~solutions~~to ~~services~~higher demand in outcome research and strategic consulting, offset by a $43.69 million ~~decrease~~decline in ~~deferred~~demand ~~revenue~~in ~~adjustment~~our inplanning ~~connection~~solutions ~~with~~for ~~the~~hospitals ~~Prior~~and ~~Acquisition~~employer and health plans. The ~~slight~~ increase in our Government segment was primarily due to ~~the~~new ~~increase~~contract inrevenue ~~work~~from inour ~~federal~~Federal ~~government~~and ~~projects~~State ~~despite~~channels ~~lower~~of ~~implementation~~$5.9 ~~project~~million and $7.7 million, respectively. The Federal revenue ~~from~~increase ~~state~~mostly ~~government~~relates ~~projects~~to the expansion of existing contracts while State revenue increase was mainly due to ~~timing~~new contracts.

The total impact of deferred revenue adjustment for both our Commercial and Government segments in connection with the Prior Acquisition and acquisitions ~~during~~of ~~the~~businesses in 2014 amounted to $4.5.3 million in ~~2014~~2015 compared to $84.85 million in ~~2013~~2014.

For a more detailed explanation of the variations in revenue for each of our segments, see the individual segment discussions below.

Cost of revenues, excluding depreciation and amortization

Our cost of revenues, excluding depreciation and amortization, was $~~293~~329.03 million for the year ended December 31, ~~2014~~2015 as compared to $~~265~~293.50 million for the year ended December 31, ~~2013~~2014, an increase of $2736.53 million, or 1012%. The increase was mainly due to ~~cost of revenues from the operations of our acquired businesses in 2014 of~~ $1825.9 million~~. We~~ ~~also~~incremental ~~had~~cost ~~an increase~~ of ~~$6.1~~revenues ~~million~~from inthe ~~employee~~full ~~cost~~year ~~related~~of tooperations ~~increase~~ in ~~headcount~~2015 ~~and reduction~~ of ~~certain~~the ~~benefits~~businesses acquired in ~~2013~~2014. ~~and~~The remaining increase iswas ~~due~~a tofunction ~~the~~of higher ~~maintenance~~overall ~~costs~~cost of ~~developed~~revenue ~~technology~~corresponding ~~and content upon completion of our transition~~ to athe ~~standalone~~higher ~~business~~revenue ~~and~~derived ~~higher~~mainly ~~costs~~from in our Government segment ~~due to initiatives to improve revenue in the federal and state agencies~~.

Selling and marketing expense, excluding depreciation and amortization

Our selling and marketing expense, excluding depreciation and amortization, was $5770.42 million for the year ended December 31, ~~2014~~2015 as compared to $5657.24 million for the year ended December 31, ~~2013~~2014, an increase of $112.38 million, or 222%,. ~~which~~The ~~are~~increase ~~mainly~~was primarily due to $9.4 million of incremental selling and marketing expenses ~~attributable~~due to ~~our~~the ~~acquired~~full year of operations in 2015 of the businesses acquired in 2014. The remaining increase was due to sales commission and other marketing expenses due to the increase in new sales and various initiatives to increase sales.

General and administrative expense, excluding depreciation and amortization

Our general and administrative expense, excluding depreciation and amortization, was $5565.92 million for the year ended December 31, ~~2014~~2015 as compared to $4155.09 million for the year ended December 31, ~~2013~~2014, an increase of $~~14.~~9.2 million, or 3616%. The increase was primarily due to $127.02 million of ~~additional~~incremental general and ~~and~~ administrative expenses ~~attributable~~due to ~~our~~the ~~acquired~~full year of operations in 2015 of the businesses acquired in 2014. The remaining increase relates mainly to incremental salaries and wages expense ~~and~~which ~~consulting~~increased ~~fees~~as ~~increased~~a toresult ~~build~~of the further growth of the Company’s accounting, internal audit, procurement, and human resource departments, as well as from the additional hiring of senior executive management in operations.

Depreciation and amortization

Our depreciation and amortization expense was $~~106~~113.58 million for the year ended December 31, ~~2014~~2015 as compared to $87106.65 million for the year ended December 31, ~~2013~~2014, an increase of $187.93 million or 227%. This increase was primarily due to ~~the~~a ~~overall~~$5.1 ~~impact~~million ofincrease ~~new~~in ~~computer~~amortization ~~hardware~~due ~~and~~to ~~other~~the ~~property,~~certain ~~and~~new developed technology and content ~~related to the new data center and new information system infrastructure~~ that were placed ~~in service in late 2013 and the $10.9 million incremental amortization of intangible assets from the acquired businesses in 2014.~~

in service during the year and a $3.4 million increase in amortization of other intangible assets mainly from acquired businesses in 2014. These were offset in part by a decrease in depreciation of other properties due to certain assets which became fully depreciated.

Other operating expenses

Our other operating expense was $2030.89 million for the year ended December 31, ~~2014~~2015 as compared to $3520.08 million for the year ended December 31, ~~2013~~2014, aan ~~decrease~~increase of $1410.31 million or 4149%. ~~This~~The ~~decrease~~increase was ~~primarily~~mainly due to ~~higher~~a ~~acquisition related expenses incurred in 2013. In 2014, other operating expenses include~~ $105.74 million ofincrease ~~Acquisition~~in acquisition-related ~~costs~~cost and ~~nonrecurring~~ expenses, ~~consisting~~incurred ~~of professional fees directly related~~ to integrate the ~~acquisitions~~acquired ofbusinesses ~~Simpler, HBE~~ and ~~JWA~~process improvements, ~~business~~$2.5 ~~integration~~million ~~and~~lease ~~improvement~~termination ~~processes,~~expense ~~loss~~which onrepresents ~~discontinued~~the ~~projects,~~estimated ~~and~~liability for costs ~~associated~~that ~~with~~we ~~data~~will ~~migration,~~continue ~~$2.5~~to ~~million~~incur ofunder ~~severance,~~a ~~$4.7~~non-cancelable ~~million~~lease ofcontract ~~asset~~that ~~write~~was ~~offs~~terminated ~~and~~on ~~$2.9~~December ~~million~~ of ~~Sponsor advisory fees. In 2013~~2015, ~~other operating expenses included~~ $271.04 million of ~~acquisition~~accruals ~~related~~to ~~costs,~~a ~~consisting~~settlement of ~~expenses~~a ~~incurred~~legal ~~mainly~~case ~~related~~in ~~to data migration and~~ the ~~separation~~normal course of ~~our~~business, IT$1.3 ~~infrastructure~~million ~~from~~increase ~~our~~in ~~Predecessor~~write-off ~~Parent~~of ~~and~~a ~~costs~~prepaid ~~related~~revenue toshare ~~the~~arrangement ~~Transitional Services Agreement~~ with ~~Thomson~~a ~~Reuters,~~supplier ~~$3.8~~that ~~million~~will ofnot ~~severance~~be ~~and retention bonuses, $1~~recovered.3 ~~million~~These ofincreases ~~asset~~were ~~write-offs~~offset ~~and~~by a $20.95 million ofdecrease ~~Sponsor~~in ~~advisory~~severance ~~fees~~expense.

~~Goodwill~~Operating ~~impairment~~income

~~The~~Our ~~Company~~operating ~~performed~~income ~~its~~was ~~annual~~$1.4 ~~goodwill~~million ~~impairment~~for ~~test during~~ the ~~fourth~~year ~~quarter~~ended ofDecember 31, ~~2013~~2015 ~~and~~as ~~concluded~~compared ~~that~~to ~~the~~an ~~Company's~~operating ~~goodwill~~income ~~on each~~ of ~~its~~$10.8 ~~three~~million ~~reporting~~for ~~units is impaired because~~ the ~~carrying value of all the reporting units exceeded its fair values due to lower-than-expected growth in revenue and cash flow in fiscal~~ year ~~2013~~ended ~~resulting~~December 31, ~~from~~2014, ~~certain~~a ~~selling~~decrease ~~cycle~~of ~~delays,~~$9.4 ~~particularly~~million inor ~~the Government sector~~87%, ~~uncertainty~~from in2014. ~~the~~The ~~healthcare~~decrease ~~sector~~was ~~related~~primarily ~~to the PPACA, higher-than-expected costs~~ due to ~~significant~~a ~~investments~~$66.2 inmillion ~~technology infrastructure, as well as an~~ increase in ~~the~~revenue ~~discount~~while ~~rate~~total ~~used~~operating inexpense ~~the~~increased ~~discounted~~by ~~cash~~$75.6 ~~flow~~million, ~~analysis~~each as ~~compared~~discussed ~~to the rate used in the prior year’s analysis~~above.

Accordingly, the Company recorded a total of $366.7 million of non-cash goodwill impairment charge in the fourth quarter of 2013.

Operating income (loss)

Our operating income was $10.8 million for the year ended December 31, 2014 as compared to an operating loss of $359.3 million for the year ended December 31, 2013, an increase of $370.1 million or 103%, from 2013. The increase was primarily due to the goodwill impairment in 2013. As discussed above, revenue increased by $51.8 million while total operating expenses decreased by $318.4 million.

Net interest expense

Our net interest expense was $6974.62 million for the year ended December 31, ~~2014~~2015, as compared to $7069.6 million for the year ended December 31, ~~2013~~2014, an increase of $14.06 million, or 17%. The ~~slight~~increase ~~decrease~~ was ~~mainly~~primarily due to a ~~$3.3 million loss on early extinguishment of debt as a result of refinancing~~ the ~~Term~~incurrence ~~Loan Facility in April 2013 that effectively reduced the interest rate on the Term Loan Facility by 1.25%, offset by an increase in interest expense due to the increase~~ of $~~100~~140.0 million ~~in the term loan partly to finance the acquisition~~ of ~~Simpler~~additional indebt ~~April~~used ~~2014 and an increase of $40 million in Additional Notes~~ to finance the acquisitions ofin ~~HBE and JWA~~2014.

Other finance costs

~~Other~~Increase in other finance costs ~~mainly~~was ~~represents~~due ~~foreign~~to ~~exchange~~the ~~gains/losses~~increase ~~from~~in ~~our~~ international operations. ~~Also~~mainly ~~included~~from the acquired businesses in ~~other~~2014. Other finance costs ~~are~~also included other bank charges and fees.

Benefit from ( Provision for) income taxes

Our income tax ~~benefit~~provision was $220.79 million for the year ended December 31, ~~2014~~2015 as compared to aincome tax benefit of $8422.97 million for the year ended December 31, ~~2013~~2014, a decrease in income tax benefit of $6223.26 million or 73104%. Income tax ~~benefit~~provision for the year ended December 31, ~~2014~~2015 at an effective tax rate of 38(1.02%) is different from the amount derived by applying the federal statutory tax rate of 35%, mainly due to the impact of certain state taxes and tax credits partially offset by non -deductible expenses and a valuation allowance recorded against the Company's net deferred tax asset as it is not more likely than not that the net deferred tax asset will be realized. Income tax benefit for the year ended December 31, ~~2013,~~2014 at an effective tax rate of 1938.70% ~~respectively,~~ is different from the amount derived by applying the federal statutory tax rate of 35%, mainly due to the impact of certain state taxes, ~~non~~and ~~deductible~~tax ~~goodwill~~credits ~~impairment~~partially ~~charge~~offset ~~and~~by ~~foreign~~non-deductible ~~rate differential~~expenses.

Segment discussion

The following table summarizes our segment information for the ~~year~~years ended December 31, ~~2014~~2015 and ~~2013~~2014:

(Dollars in thousands)	Year ended December 31, 2014		% of revenue		Year ended December 31, 2013		% of revenue		Change			% change
Commercial
Revenues	$	446,500	100	%	$	394,896	100	%	$	51,604		13	%
Segment operating income	156,900		35	%	140,173		35	%	16,727			12	%
Government
Revenues	98,282		100	%	97,806		100	%	476			—	%
Segment operating income (loss)	$	7,043	7	%	$	11,053	11	%	$	(4,010	)	(36	)%



(Dollars in thousands)	Year ended December 31, 2015		% of revenue		Year ended December 31, 2014		% of revenue		Change		% change

Commercial
Revenues	$	499,041	100	%	$	446,500	100	%	$	52,541	12	%
Segment operating income	166,140		33	%	156,900		35	%	9,240		6	%
Government
Revenues	113,247		100	%	98,282		100	%	14,965		15	%
Segment operating income	$	8,519	8	%	$	7,043	7	%	$	1,476	21	%

Commercial segment

Revenues

Our Commercial segment revenue was $~~446~~499.50 million for ~~2014~~2015 as compared to $~~394~~446.95 million for ~~2013~~2014, an increase of $5152.65 million or 1312%. The increase was primarily due to the $3851.39 million of incremental revenue ~~from~~due to the full year of operations in 2015 of ~~newly~~the businesses acquired ~~businesses~~in 2014 and a $4.65 million ~~decrease~~increase infrom ~~deferred~~our ~~revenue~~analytic ~~adjustment~~solution inservices ~~connection~~for ~~with~~life ~~the~~science ~~Prior~~customers ~~Acquisition. The~~due ~~$8.7~~to ~~million~~higher ~~increase~~demand in ~~revenue~~outcome ~~was~~research ~~due~~and tostrategic ~~new~~consulting. ~~sales~~These ~~from~~increases ~~customers~~were ~~and~~offset ~~the~~by ~~remaining~~a is$3.9 ~~due~~million todecline ~~the~~in ~~incremental~~demand ~~fees~~in ~~from~~ our ~~employer~~planning ~~and~~solutions ~~healthplan,~~for ~~life~~hospitals ~~sciences~~ and ~~provider~~employer ~~solutions~~and ~~services~~health plans.

Operating income

Our Commercial segment operating income was $~~156~~166.91 million for ~~2014~~2015 as compared to $~~140~~156.29 million for ~~2013~~2014, an increase of $169.72 million or 126%. ~~The~~This increase was ~~mainly~~partially due to the ~~increase~~$9.4 inmillion ~~revenue discussed above and decrease in the deferred revenue adjustment which was partially offset by higher maintenance costs~~ of ~~developed~~incremental ~~technology~~operating and content, telecommunications costs and other revenue related costs upon completion of our transition to a standalone company, as well as the increase in administrative costs to maintain our international branches established in mid-2013. Operating income from ~~operations~~the ~~of newly~~ acquired ~~businesses~~business ~~amounted~~as todiscussed $5above.~~8 million.~~

Government segment

Revenues

Our Government segment revenue was $98113.32 million for ~~2014~~2015 as compared to $9798.83 million for ~~2013~~2014, an increase of $015.50 million or 15%. The increase was primarily due to ~~the~~new ~~increase~~contract ofrevenue ~~work~~from inour ~~certain~~Federal ~~projects~~and inState ~~the~~channels ~~federal~~of ~~government~~$5.9 ~~channel,~~million ~~partially~~and ~~offset~~$7.7 bymillion, ~~lower~~respectively. ~~implementation~~The ~~project~~Federal revenue ~~from~~increase mostly relates to the ~~state~~expansion ~~government~~of ~~channel~~existing ~~due~~contracts while toState ~~the~~revenue ~~timing~~increase ofwas ~~projects~~mainly due to new contracts.

Operating income

Our Government segment operating income was $78.05 million for ~~2014~~2015 as compared to $117.10 million for ~~2013~~2014, aan ~~decrease~~increase in operating income of $41.05 million or 3621%. The ~~decrease~~increase ~~was~~in ~~mainly~~operating ~~due~~income tomostly ~~the~~relates ~~higher costs of operations upon completion of our transition~~ to ~~a standalone company and due to higher costs of~~ the ~~Company's~~revenue ~~initiatives~~related to ~~improve~~a ~~sales~~new inlarge ~~the~~contract ~~federal~~ and ~~state~~expansion ~~government~~of ~~channels,~~existing ~~such~~contracts asdiscussed ~~Centers for Medicare & Medicaid Services and state Medicaid agencies, as well as federally owned and operated healthcare facilities~~above.

4441

Year ended December 31, ~~2013~~2014 compared to ~~Predecessor~~Year ~~fiscal~~ended ~~Period from January 1, 2012 to June 6, 2012 and Successor fiscal Period from April 20, 2012 to~~ December 31, ~~2012~~ 2013

(Dollars in thousands)	Year ended December 31, 2013			% of revenue		From inception (April 20, 2012) to December 31, 2012			% of revenue			January 1, 2012 to June 6, 2012			% of revenue
	(Successor)					(Successor)					(Predecessor)
Revenues, net(a)	$	492,702		100	%	$	241,786		100	%		$	208,998		100	%
Operating costs and expenses
Cost of revenues, excluding depreciation and amortization(b)	(265,541		)	(54	)%	(141,558		)	(59	)%		(112,050		)	(54	)%
Selling and marketing, excluding depreciation and amortization(c)	(56,157		)	(11	)%	(30,958		)	(13	)%		(25,917		)	(12	)%
General and administrative, excluding depreciation and amortization(d)	(41,042		)	(8	)%	(13,042		)	(5	)%		(27,173		)	(13	)%
Allocation of costs from Predecessor Parent and affiliates(e)	—			—	%	—			—	%		(10,003		)	(5	)%
Depreciation(f)	(21,219		)	(4	)%	(6,700		)	(3	)%		(6,805		)	(3	)%
Amortization of developed technology and content(g)	(31,894		)	(6	)%	(15,470		)	(6	)%		(12,460		)	(6	)%
Amortization of other identifiable intangible assets(h)	(34,460		)	(7	)%	(19,527		)	(8	)%		(8,226		)	(4	)%
Goodwill impairment(i)	(366,662		)	(74	)%	—			—	%		—			—	%
Other operating expenses(j)	(35,038		)	(7	)%	(49,622		)	(21	)%		(18,803		)	(9	)%
Total operating costs and expenses	(852,013		)	(173	)%	(276,877		)	(115	)%		(221,437		)	(106	)%
Operating income (loss)	(359,311		)	(73	)%	(35,091		)	(15	)%		(12,439		)	(6	)%
Net interest expense(k)	(70,581		)	(14	)%	(49,014		)	(20	)%		3			—	%
Other finance costs	(24		)	—	%	—			—	%		—			—	%
Income (Loss) before income taxes	(429,916		)	(87	)%	(84,105		)	(35	)%		(12,436		)	(6	)%
Benefit from (provision for) income taxes	84,927			17	%	29,993			12	%		4,803			2	%
Net income (loss)	$	(344,989	)	(70	)%	$	(54,112	)	(22	)%		$	(7,633	)	(4	)%

The following table summarizes our consolidated results of operations for the periods indicated:



(Dollars in thousands)	Year ended December 31, 2014			% of revenue		Year ended December 31, 2013			% of revenue		Change			% change

Revenues, net(a)	$	544,475		100	%	$	492,702		100	%	$	51,773		11	%
Operating costs and expenses
Cost of revenues, excluding depreciation and amortization(b)	(292,999		)	(54	)%	(265,541		)	(54	)%	(27,458		)	10	%
Selling and marketing, excluding depreciation and amortization(c)	(57,413		)	(11	)%	(56,157		)	(11	)%	(1,256		)	2	%
General and administrative, excluding depreciation and amortization(d)	(55,937		)	(10	)%	(41,042		)	(8	)%	(14,895		)	36	%
Depreciation (e)	(22,350		)	(4	)%	(21,219		)	(4	)%	(1,131		)	5	%
Amortization of developed technology and content (f)	(38,752		)	(7	)%	(31,894		)	(6	)%	(6,858		)	22	%
Amortization of other identifiable intangible assets (g)	(45,402		)	(8	)%	(34,460		)	(7	)%	(10,942		)	32	%
Goodwill impairment (h)	—			—	%	(366,662		)	(74	)%	366,662			(100	)%
Other operating expenses (i)	(20,784		)	(4	)%	(35,038		)	(7	)%	14,254			(41	)%
Total operating costs and expenses	(533,637		)	(98	)%	(852,013		)	(173	)%	318,376			(37	)%
Operating income (loss)	10,838			2	%	(359,311		)	(73	)%	370,149			(103	)%
Net interest expense (j)	(69,616		)	(13	)%	(70,581		)	(14	)%	965			(1	)%
Other finance costs	(930		)	—	%	(24		)	—	%	(906		)	n.m.
Loss before income taxes	(59,708		)	(11	)%	(429,916		)	(87	)%	370,208			(86	)%
Benefit from (provision for) income taxes	22,686			4	%	84,927			17	%	(62,241		)	(73	)%
Net loss	$	(37,022	)	(7	)%	$	(344,989	)	(70	)%	$	307,967		(89	)%

(a)


(b)	Includes all personnel and other costs attributable to a revenue stream, including but not limited to, client support, client operations, product management, royalties, allocation of technology support costs relating to market data and professional service costs.


(c)	Includes all personnel and other costs related to sales and marketing, including but not limited to, sales and marketing staff, commissions and marketing events.


(d)	Includes all personnel and other costs related to general administration as well as costs shared across the organization, including but not limited to technology, finance and strategy.

(e) AsIncludes ~~described~~depreciation inof ~~Note~~computer ~~18 to the financial statements~~hardware, ~~included elsewhere in this Annual Report~~furniture, ~~our~~fixture ~~Predecessor~~and ~~historically engaged in related party transactions with Thomson Reuters relative to certain support services~~equipments, ~~including among others, finance, accounting, treasury, tax, transaction processing, information technology, legal, human resources, payroll, insurance~~ and ~~real~~leasehold ~~estate management.~~improvements

45(f) Includes amortization of developed technology and contents used internally and capitalized once a project has progressed beyond a conceptual, preliminary stage to that of application development stage. Costs that qualify for capitalization include both internal and external costs, but are limited to those that are directly related to a specific project.

(fg) Includes ~~depreciation~~amortization of ~~computer~~definite‑lived ~~hardware,~~trade ~~furniture,~~names ~~fixture~~ and ~~equipments,~~acquired ~~and~~customer ~~leasehold~~relationship ~~improvements~~assets.

(g) Includes amortization of developed technology and contents used internally and capitalized once a project has progressed beyond a conceptual, preliminary stage to that of application development stage. Costs that qualify for capitalization include both internal and external costs, but are limited to those that are directly related to a specific project.42

(h) ~~Includes~~On ~~amortization~~November 1, 2013, we performed our annual goodwill impairment test and determined that the carrying value of ~~definite~~all our reporting units exceeded our fair value due to lower‑~~lived~~than‑expected ~~trade~~growth ~~names~~in revenue and ~~acquired~~cash ~~customer~~flow ~~relationship~~in ~~assets~~fiscal year 2013 resulting from certain selling cycle delays, particularly in the government sector, uncertainty in the healthcare sector related to the PPACA, higher‑than‑expected costs due to significant investments in technology infrastructure, as well as an increase in the discount rate used in the discounted cash flow analysis as compared to the rate used in the prior year’s analysis. As a result, we recorded an aggregate non‑cash goodwill impairment charge of $366.7 million in the fourth quarter of 2013.

(i) OnOther ~~November~~operating 1,expenses ~~2013,~~in we2014 ~~performed~~includes ~~our~~professional ~~annual~~fees ~~goodwill~~related ~~impairment~~to ~~test and determined that~~ the ~~carrying~~acquisitions ~~value~~ of ~~all~~Simpler, ~~our~~HBE ~~reporting~~and ~~units~~JWA ~~exceeded~~, ~~our~~certain ~~fair~~costs ~~value~~related ~~due~~ to ~~lower‑than‑expected~~business ~~growth~~improvement inprocesses, ~~revenue~~ and ~~cash~~certain ~~flow~~costs inassociated ~~fiscal~~with ~~year~~data ~~2013~~migration, ~~resulting~~asset ~~from~~write‑offs, ~~certain~~losses ~~selling~~on ~~cycle~~discontinued ~~delays,~~projects ~~particularly~~and inSponsor ~~the~~fees. ~~government~~Other ~~sector,~~operating ~~uncertainty~~expenses in ~~the~~2013 ~~healthcare~~includes ~~sector~~direct costs related to the ~~Patient~~Prior ~~Protection~~Acquisition ~~and~~in ~~Affordable~~2012 ~~Care~~as ~~Act,~~well ~~higher‑than‑expected~~as costs ~~due~~incurred related to ~~significant~~technology ~~investments~~and other costs in ~~technology~~connection ~~infrastructure,~~with asour ~~well~~transition asto ana ~~increase~~standalone inbusiness. ~~the~~These ~~discount~~costs ~~rate~~include ~~used~~nonrecurring inexpenses ~~the~~associated ~~discounted~~with ~~cash~~data ~~flow~~center ~~analysis~~migration asand ~~compared~~separating toinfrastructure ~~the~~from ~~rate~~Thomson ~~used~~Reuters, incosts related to the ~~prior~~transitional ~~year’s~~service ~~analysis.~~agreement Aswith aThomson ~~result,~~Reuters weand ~~recorded~~related anto ~~aggregate~~rebranding, ~~non‑cash~~consulting, ~~goodwill~~professional ~~impairment~~fees ~~charge~~and ofSponsor ~~$366~~fees.7 ~~million~~Refer into Note 14 to the ~~fourth~~consolidated ~~quarter~~financial ofstatements, ~~2013~~included elsewhere in this Annual Report.

(j) ~~Other~~Interest ~~operating~~earned ~~expenses~~or inpaid ~~the PredecessorPeriod includes~~ related ~~disposal costs incurred as part of the Prior Acquisition process (comprised of audit services, accounting and consulting services and legal fees), severance and retention bonuses relating~~ to ~~the~~third ~~Prior~~party ~~Acquisition, and costs relating to other acquisition activities of our Predecessor~~transactions. Other operating expenses in 2012 and 2013 (Successor Periods) includes direct costs related to the Prior Acquisition in 2012 as well as costs incurred related to technology and other costs in connection with our transition to a standalone business. These costs include nonrecurring expenses associated with data center migration and separating infrastructure from Thomson Reuters, costs related to the transitional service agreement with Thomson Reuters and related to rebranding, consulting, professional fees and Sponsor fees. Refer to Note 14 to the consolidated financial statements included in this Annual Report.

~~(k)~~Discussion ~~Interest~~of ~~earned~~Year orended ~~paid~~December ~~related~~31, 2014 compared to ~~third~~Year ~~party~~ended ~~transactions.~~December 31, 2013

Discussion of year ended December 31, 2013 (Successor) compared to Successor fiscal Period from April 20, 2012 to December 31, 2012 and Predecessor fiscal Period from January 1, 2012 to June 6, 2012

Revenues, net

Our net revenues were $~~492~~544.75 million for the year ended December 31, ~~2013~~2014 as compared to $~~241~~492.87 million infor the ~~period~~year ~~from~~ended ~~April~~December 31, 202013, ~~2012~~an ~~(inception)~~increase toof ~~December~~$51.8 ~~31,~~million ~~2012~~or 11%. ~~and~~The increase was primarily due to the $~~209~~51.06 million in ~~the~~increase ~~Predecessor~~in ~~Period~~revenue from ~~January~~our 1,Commercial ~~2012~~segment toand ~~June~~$0.5 6,million ~~2012~~increase in revenue from our Government segment. The ~~total~~ increase in revenue from our Commercial segment was primarily due to ~~the~~revenues ~~impact~~ from ~~the~~our acquired businesses in 2014 of $838.83 million, ~~deferred~~$8.7 ~~revenue~~million ~~adjustment~~increase in ~~2013~~revenue ~~compared~~due to ~~the~~new ~~$43.5~~sales ~~million~~from ~~deferred~~customers ~~revenue~~and ~~adjustment~~incremental infees ~~the~~from ~~2012~~our ~~Successor~~employer ~~Period~~and health plan, inlife ~~connection~~sciences ~~with~~and ~~the~~provider ~~Prior~~solutions ~~Acquisition~~services and ~~due~~$4.6 tomillion ~~implementation~~decrease ~~and~~in ~~migration~~deferred revenue ~~from~~adjustment ~~large~~in ~~contracts~~connection inwith ~~state~~the ~~government~~Prior Acquisition. ~~For~~ aThe ~~more~~slight ~~detailed~~increase ~~explanation~~in ofGovernment was due to the ~~variations~~increase in ~~revenue~~work ~~for~~in ~~each~~federal ofgovernment ~~our~~projects ~~segments,~~despite ~~see~~lower ~~the~~implementation ~~individual~~project ~~segment~~revenue ~~discussions~~from ~~below.~~state government projects due to timing.

The total impact of deferred revenue adjustment for both our Commercial and Government segments in connection with the Prior Acquisition and acquisitions during 2014 amounted to $4.5 million in 2014 compared to $8.8 million in 2013.

For a more detailed explanation of the variations in revenues for each of our segments, see the individual segment discussions below.

Cost of revenues, excluding depreciation and amortization

Our cost of revenues, excluding depreciation and amortization, was $~~265~~293.50 million for the year ended December 31, ~~2013~~ 2014 as compared to $~~141~~265.65 million for the ~~period~~year ~~from~~ended ~~April~~December 31, 202013, ~~2012~~an ~~(inception)~~increase toof ~~December~~$27.5 31million, ~~2012~~or ~~and $112~~10%.1 ~~million~~The inincrease ~~the~~was ~~Predecessor~~mainly ~~Period~~due to cost of revenues from ~~January~~the 1,operations ~~2012~~of toour ~~June~~acquired 6,businesses ~~2012~~in 2014 of $18.9 million. ~~The~~We ~~total~~also had an increase ~~was~~of ~~primarily~~$6.1 ~~due~~million toin ~~higher~~employee ~~implementation~~cost ~~and~~related ~~data~~to ~~migration~~increase ~~costs~~in ~~related~~headcount toand ~~new~~reduction ~~projects,~~of ~~particularly~~certain onbenefits ~~several~~in ~~large~~2013 ~~state~~and ~~government~~remaining ~~contracts. In~~increase ~~addition,~~is wedue ~~incurred~~to the higher maintenance costs of developed technology and content, ~~royalties~~upon tocompletion ~~Population~~of ~~Health~~our ~~content~~transition ~~providers,~~to ~~telecommunications~~a ~~costs~~standalone business and ~~other~~higher ~~revenue~~costs ~~related~~in ~~costs~~our asGovernment wesegment ~~transitioned~~due to ainitiatives ~~standalone~~to ~~company,~~improve ~~partially~~revenue ~~offset~~in bythe afederal ~~lower~~and ~~bonus~~state ~~accrual in 2013~~agencies.

Selling and marketing expense, excluding depreciation and amortization

Our selling and marketing expense, excluding depreciation and amortization, was $5657.24 million for the year ended December 31, ~~2013~~2014 as compared to $3156.02 million infor the ~~period~~year ~~from~~ended ~~April 20, 2012 (inception) to~~ December 31, ~~2012~~2013, ~~and~~an increase of $251.93 million, inor ~~the~~2%, ~~Predecessor~~which ~~Period~~are ~~from~~mainly ~~January~~due ~~1, 2012~~ to ~~June~~selling 6,and ~~2012,~~marketing ~~primarily~~expenses ~~due~~attributable to aour ~~lower~~acquired ~~bonus~~businesses ~~accrual~~ in ~~2013~~2014.

4643

General and administrative expense, excluding depreciation and amortization

Our general and administrative expense, excluding depreciation and amortization, was $4155.09 million for the year ended December 31, ~~2013~~2014 as compared to $1341.0 million in for the ~~period~~year ~~from~~ended ~~April~~December 31, 202013, ~~2012~~an ~~(inception)~~increase toof ~~December~~$14.9 31million, ~~2012~~or ~~and~~36%. The increase was primarily due to $2712.20 million inof ~~the~~additional ~~Predecessor~~general ~~Period~~and ~~from~~administrative ~~January~~expenses 1,attributable ~~2012~~ to ~~June~~our 6,acquired ~~2012~~businesses in 2014. The ~~total~~remaining increase ~~was~~relates ~~primarily due~~ to anincremental ~~increase~~salaries inand ~~facilities~~wages ~~related~~ expense, ~~telecommunications~~and ~~costs,~~consulting ~~salaries~~fees ~~and~~increased ~~related~~to ~~costs~~build ~~for~~the ~~additional~~accounting, ~~new~~internal ~~hires~~audit, asprocurement, weand ~~transitioned~~human toresource adepartments, ~~standalone~~as ~~company,~~well ~~partially~~as ~~offset~~from bythe aadditional ~~lower~~hiring ~~bonus~~of ~~accrual~~senior executive management in ~~2013~~operations.

Depreciation and amortization

Our depreciation and amortization expense was $87106.65 million for the year ended December 31, ~~2013~~2014 as compared to $4187.76 million in for the ~~period~~year ~~from~~ended ~~April 20, 2012 (inception) to~~ December 31, ~~2012~~2013, ~~and~~an increase of $2718.59 million inor ~~the Predecessor Period from January 1, 2012 to June 6, 2012~~22%. ~~The~~This ~~total~~ increase was primarily due to the overall impact of new computer hardware and other property, and developed technology and content related to the new data center and new information system infrastructure that were placed in service in late 2013 ~~related~~and to the ~~completion~~$10.9 million incremental amortization of ~~new~~intangible ~~data~~assets ~~center~~from ~~and~~the ~~information~~acquired ~~system~~businesses ~~infrastructure~~in 2014.

Other operating expenses

Our other operating expense was $3520.08 million for the year ended December 31, ~~2013~~2014 as compared to $4935.60 million for in the ~~period~~year ~~from~~ended ~~April 20, 2012 (inception) to~~ December 31, ~~2012~~2013, ~~and~~a decrease of $1814.83 million inor ~~the Predecessor Period from January 1, 2012 to June 6, 2012~~41%. ~~The~~This ~~total~~ decrease was primarily due to ~~lower~~higher ~~Acquisition-~~acquisition related expenses incurred in 2013. In ~~2013~~2014, other operating expenses ~~included~~include $2710.07 million of Acquisition related costs and nonrecurring expenses, consisting of ~~expenses~~professional ~~incurred~~fees ~~mainly~~directly related to ~~data migration and~~ the ~~separation~~acquisitions of ~~our~~Simpler, ITHBE ~~infrastructure~~and ~~from~~JWA, ~~our~~business ~~Predecessor~~integration ~~Parent~~ and ~~costs~~improvement ~~related~~processes, toloss ~~the~~on ~~Transitional~~discontinued ~~Services~~projects, ~~Agreement~~and costs associated with ~~Thomson~~data ~~Reuters~~migration, $32.85 million of severance ~~and retention bonuses~~, $14.37 million of asset write- offs and $2.9 million of Sponsor advisory fees. In ~~the Successor Period of 2012~~2013, other operating expenses included $3827.0 million of ~~Prior~~ ~~Acquisition~~acquisition related costs, ~~(mainly~~ consisting of ~~$12.0~~expenses ~~million~~incurred ofmainly ~~transaction~~related ~~fees paid~~ to ~~Veritas~~data ~~Capital~~migration and the ~~remainder~~separation ~~related to direct acquisition costs consisting~~ of ~~legal,~~our ~~finance,~~IT ~~consulting~~infrastructure ~~and~~from ~~professional~~our ~~fees),~~Predecessor ~~$10.2~~Parent ~~million of severances~~ and ~~retention~~costs ~~bonuses~~related ~~and~~to ~~$1.5~~the ~~million~~Transitional ofServices ~~Sponsor~~Agreement ~~advisory~~with ~~fees.~~Thomson ~~In the Predecessor Period of 2012~~Reuters, ~~other~~ ~~operating expenses included~~ $93.8 million of ~~disposal~~severance ~~related~~and ~~costs~~retention ~~of our Predecessor~~bonuses, $71.73 million of ~~severances~~asset ~~and~~write-offs ~~retention bonuses~~ and $1.2.9 million of ~~costs~~Sponsor ~~related~~advisory ~~to discontinued services~~fees.

Goodwill impairment

WeThe Company performed ~~our~~its annual goodwill impairment test during the fourth quarter of 2013 and concluded that ~~our~~the Company's goodwill on ~~all~~each ~~our~~of its three reporting units is impaired because ~~each~~the carrying value of all the reporting ~~unit's~~units ~~carrying value~~ exceeded its fair ~~value~~values due to lower-than-expected growth in revenue and cash flow in fiscal year 2013 resulting from certain selling cycle delays, particularly in the Government sector, uncertainty in the healthcare sector related to the PPACA , higher-than-expected costs due to significant investments in technology infrastructure, as well as an increase in the discount rate used in the discounted cash flow analysis as compared to the rate used in the prior year’s analysis. Accordingly, wethe Company recorded a total of $366.7 million of non-cash goodwill impairment charge in the fourth quarter of 2013.

Operating income (loss)

Our operating ~~loss~~income was $~~359~~10.38 million for the year ended December 31, ~~2013~~2014 as compared to an operating loss of $35359.13 million infor the ~~period~~year ~~from~~ended ~~April 20, 2012 (inception) to~~ December 31, ~~2012~~2013, ~~and~~an increase of $12370.41 million inor ~~the~~103%, ~~Predecessor Period~~ from ~~January 1, 2012 to June 6, 2012~~2013. The ~~total~~increase ~~decrease~~ was primarily due to the goodwill impairment, asin 2013. As discussed above, revenue increased by $51.8 million while total operating expenses decreased by $318.4 million.

Net interest expense

Our net interest expense was $7069.6 million for the year ended December 31, ~~2013~~2014, as compared to $4970.06 million for in the ~~period~~year ~~from~~ended ~~April~~December 31, 202013, ~~2012~~an ~~(inception)~~increase toof ~~December~~$1.0 31million, ~~2012~~or 1%. The ~~increase~~slight decrease was mainly due to a ~~twelve months of interest expense in 2013 compared to approximately seven months in 2012, offset by the interest rate being lower by 2~~$3.~~25%~~3 as

4744

million loss on early extinguishment of debt as a result of refinancing of the Term Loan Facility in ~~October 2012 and~~ April 2013. Inthat ~~addition,~~effectively ~~there~~reduced ~~was~~the ~~additional~~ interest rate on ~~incremental borrowings under~~ the Term Loan Facility ~~and~~by ~~Revolving~~1.25%, ~~Credit~~offset ~~Facility~~by ofan ~~$11.3~~increase ~~million~~in ~~and~~interest ~~$30.0~~expense ~~million,~~due ~~respectively.~~to ~~Also,~~the ~~included~~increase of $100 million in the ~~2013~~term ~~interest~~loan ~~expense~~partly ~~was~~to ~~$3.3~~finance ~~million~~the acquisition of ~~loss~~Simpler onin ~~early~~April ~~extinguishment~~2014 and an increase of ~~debt~~$40 asmillion ain ~~result~~Additional ofNotes to finance the ~~April~~acquisitions ~~2013~~of ~~refinancing.~~HBE and JWA.

Other finance costs

Other finance costs mainly represents foreign exchange gains/losses ~~as a result~~ from our international operations. Also included in other finance costs are bank charges and fees.

Benefit from income taxes

Our income tax benefit was $8422.97 million for the year ended December 31, ~~2013~~2014 as compared to a benefit of $3084.09 million in for the ~~period~~year ~~from~~ended ~~April~~December 31, 202013, ~~2012~~a ~~(inception)~~decrease toof ~~December~~$62.2 million or 73%. Income tax benefit for the year ended December 31, ~~2012~~2014 ~~and~~at $4an effective tax rate of 38.80% ~~million~~is indifferent from the ~~Predecessor~~amount ~~Period~~derived ~~from~~by ~~January~~applying 1the federal statutory tax rate of 35%, ~~2012~~mainly due to ~~June~~the 6,impact ~~2012. Income~~of certain state taxes and tax ~~benefit~~credits ~~for~~partially offset by non-deductible expenses and a valuation allowance recorded against the ~~year~~Company's ~~ended~~net ~~December 31,~~deferred ~~2013,~~tax ~~Successor~~asset ~~Period~~as ~~from~~it ~~April~~is ~~20,~~not ~~2012~~more tolikely ~~December~~than ~~31,~~not ~~2012~~that ~~and~~the ~~Predecessor~~net ~~Period~~deferred ~~from~~tax ~~January~~asset 1,will ~~2012~~be torealized. Income ~~June~~tax 6benefit for the year ended December 31, ~~2012~~2013, at an effective tax rate of 19.~~8%, 35.~~7% ~~and 38.6%,~~ respectively, ~~are~~is different from the amount derived by applying the federal statutory tax rate of 35%, mainly due to the impact of certain state taxes, non -deductible goodwill impairment charge, and foreign rate differential.

Segment discussion

The following table summarizes our segment information for the ~~years~~year ended December 31, ~~2013,~~2014 ~~the period from April 20, 2012 (inception) to December 31, 2012~~ and ~~the Predecessor Period from January 1, 2012 to June 6, 2012~~2013:

(Dollars in thousands)	Year ended December 31, ~~2013~~2014		% of revenue		Year ended December 31, 2013	~~From inception (April 20, 2012) to December 31, 2012~~			% of revenue		Change	~~January 1, 2012 to June 6, 2012~~		% change	~~% of revenue~~
Commercial
Revenues	$	~~394~~446,~~896~~500	100	%	$	$394,896	~~172,235~~		100	%	$	$51,604	~~195,470~~	13	~~100~~%	%
Segment operating income	~~140~~156,~~173~~900		35	%	140,173	~~42,036~~			2435	%	16,727	~~55,206~~		12	28%	%
Government
Revenues	9798,~~806~~282		100	%	97,806	~~36,763~~			100	%	476	~~46,316~~		—	~~100~~%	%
Segment operating income (loss)	11,053		11	%		(228		)	(1	)%		10,654			23	%
Segment operating income	$	7,043	7	%	$	11,053			11	%	$	(4,010	)	(36	)%

Commercial segment

Revenues

Our Commercial segment revenue was $~~394~~446.95 million for ~~2013~~2014 as compared to $~~172~~394.29 million for in2013, ~~the~~an ~~period~~increase ~~from~~of $51.6 ~~April~~million ~~20,~~or ~~2012~~13%. ~~(inception)~~The ~~to December~~increase ~~31,~~was ~~2012~~primarily ~~and~~due to the $~~195~~38.5 3 million inof ~~the~~revenue ~~Predecessor~~from ~~Period~~operations ~~from~~of ~~January~~newly 1,acquired ~~2012~~businesses to(net ~~June~~of 6deferred revenue adjustment of $2.9 million), ~~2012~~a $5. ~~The~~8 million ~~total~~decrease ~~increase~~in ~~was~~deferred ~~primarily~~revenue ~~due~~adjustment toin connection with the ~~lower~~Prior ~~impact~~Acquisition ~~from~~($1.4 million ~~the~~in ~~deferred~~2014 ~~revenue~~compared ~~adjustment~~to ($7.2 million in 2013), ~~compared~~a to $389.4 million inincrease ~~the~~from ~~Successor~~new ~~Period~~sales from customers, and $2.2 million of ~~2012)~~higher inrenewal ~~connection~~and ~~with~~incremental ~~the~~fees ~~Prior~~on ~~Acquisition~~certain ~~and~~contracts compared to prior year. These revenues were partially offset by lower revenues due to ~~some~~certain ~~cancellations~~delays ~~and~~in ~~price~~a ~~competition~~customer’s indecision ~~care~~making ~~management~~on ~~solutions~~benefits strategy affected by the PPACA.

Operating income

48Our Commercial segment operating income was $156.9 million for 2014 as compared to $140.2 million for 2013, an increase of $16.7 million or 12%. The increase was mainly due to the increase in revenue discussed above and decrease

Our Commercial segment operating income was $140.2 million for 2013 compared to $42.0 million in the period from April 20, 2012 (inception) to December 31, 2012 and $55.2 million in the Predecessor Period from January 1, 2012 to June 6, 2012. The total increase was mainly due to the increase in revenue discussed above and higher costs of operations in 2012 as we transitioned to a standalone company.45

in the deferred revenue adjustment which was partially offset by higher maintenance costs of developed technology and content, telecommunications costs and other revenue related costs upon completion of our transition to a standalone company, as well as the increase in administrative costs to maintain our international branches established in mid-2013. Operating income from operations of newly acquired businesses amounted to $5.8 million.

Government segment

Revenues

Our Government segment revenue was $9798.83 million for ~~2013~~2014 as compared to $3697.8 million for in2013, ~~the~~an ~~period~~increase ~~from~~of ~~April~~$0.5 ~~20,~~million. ~~2012~~The ~~(inception)~~increase was due to ~~December~~ ~~31,~~an ~~2012~~increase ~~and~~of ~~$46.3~~work ~~million~~in certain projects in ~~the~~our ~~Predecessor~~federal ~~Period~~government ~~from~~channel ~~January~~of $5.1 million, ~~2012~~partially tooffset ~~June~~by ~~6, 2012~~$4. ~~The~~3 million ~~total~~of ~~increase~~lower ~~was~~implementation ~~primarily~~project ~~due~~revenues tofrom ~~implementation~~the ~~and~~state ~~migration~~government ~~revenue~~channel ~~from~~due ~~large~~to ~~state~~the ~~government~~timing ~~contracts~~of ~~and~~the projects. In addition, the ~~lower~~revenue ~~impact~~was ~~from~~further decreased by the deferred revenue adjustment ($1.6 9 million in ~~2013~~2014 compared to $5.1 .6 million in ~~the 2012 Successor Period~~2013) in connection with the Prior Acquisition.

Operating income

Our Government segment operating income was $117.10 million for ~~2013~~2014 as compared to ~~an operating loss of~~ $011.21 million infor ~~the period from April 20~~2013, ~~2012~~a ~~(inception)~~decrease ~~to December~~in ~~31, 2012 and~~ operating income of $104.70 million inor ~~the~~36%. The ~~Predecessor~~decrease ~~Period~~was ~~from~~mainly ~~January~~due 1,to ~~2012~~the tohigher ~~June~~costs 6,of ~~2012. The~~operations ~~total~~upon ~~increase~~completion ~~was~~of ~~mainly~~our ~~due~~transition to ~~the~~a ~~increase~~standalone incompany ~~revenue~~and ~~discussed~~due ~~above,~~to ~~offset by~~ higher costs ~~mainly~~of ~~due~~the toCompany's initiatives to improve sales ~~from~~in the federal and state government channels, such as Centers for Medicare & Medicaid Services, ~~State~~and state Medicaid agencies, as well as federally owned and operated healthcare facilities.

Year ended December 31, 2013 compared to Pro forma year ended December 31, 2012

(Dollars in thousands)	Year ended December 31, 2013			% of revenue		Combined Year ended December 31, 2012			% of revenue		Change			% change
	(Successor)					(Pro forma) (a)
Revenues, net	$	492,702		100	%	$	445,231		100	%	$	47,471		11	%
Operating costs and expenses
Cost of revenues, excluding depreciation and amortization	(265,541		)	(54	)%	(253,608		)	(57	)%	(11,933		)	5	%
Selling and marketing, excluding depreciation and amortization	(56,157		)	(11	)%	(56,875		)	(13	)%	718			(1	)%
General and administrative, excluding depreciation and amortization	(41,042		)	(8	)%	(40,215		)	(9	)%	(827		)	2	%
Allocation of costs from Predecessor Parent and affiliates	—			—	%	(10,003		)	(2	)%	10,003			(100	)%
Depreciation	(21,219		)	(4	)%	(10,113		)	(2	)%	(11,106		)	110	%
Amortization of developed technology and content	(31,894		)	(6	)%	(25,702		)	(6	)%	(6,192		)	24	%
Amortization of other identifiable intangible assets	(34,460		)	(7	)%	(33,871		)	(8	)%	(589		)	2	%
Goodwill impairment	(366,662		)	(74	)%	—			—	%	(366,662		)	nm
Other operating expenses	(35,038		)	(7	)%	(12,973		)	(3	)%	(22,065		)	170	%
Total operating costs and expenses	(852,013		)	(173	)%	(443,360		)	(100	)%	(408,653		)	92	%
Operating income (loss)	(359,311		)	(73	)%	1,871			—	%	(361,182		)	nm
Net interest income (expense)	(70,581		)	(14	)%	(76,781		)	(17	)%	6,200			(8	)%
Other finance costs	(24		)	—	%	—			—	%	(24		)	nm
Income (loss) before income taxes	(429,916		)	(87	)%	(74,910		)	(17	)%	(355,006		)	474	%
Benefit from income taxes	84,927			17	%	26,360			6	%	58,567			222	%
Net loss	$	(344,989	)	(70	)%	$	(48,550	)	(11	)%	$	(296,439	)	611	%

(a) Pro Forma year ended December 31, 2012 information gives effect to the Prior Acquisition as if it had occurred on January 1, 2012. See “Unaudited Pro Forma Financial Information.”

Discussion of year ended December 31, 2013 (Successor) compared to Pro forma year ended December 31, 2012

Revenues, net

Our net revenues were $492.7 million for the year ended December 31, 2013 as compared to $445.2 million for the pro forma year ended December 31, 2012, an increase of $47.5 million or 11%. This increase was primarily due to the impact from the $8.8 million deferred revenue adjustment in 2013 compared to the $49.1 million deferred revenue adjustment in the pro forma 2012 period, in connection with the Prior Acquisition and due to implementation and migration revenue from large state government contracts in 2013. For a detailed explanation of the variations in revenue for each of our segments, see the individual segment discussions below.

Cost of revenues, excluding depreciation and amortization

Our cost of revenues, excluding depreciation and amortization, was $265.5 million for the year ended December 31, 2013 as compared to $253.6 million for the pro forma year ended December 31, 2012, an increase of $11.9 million, or 5%. This increase was primarily due to higher implementation and data migration costs related to new projects, particularly on several large state government contracts. In addition, we incurred higher maintenance costs of developed

technology and content, royalties to Population Health content providers, telecommunications costs and other revenue related costs as we transitioned to a standalone company, partially offset by a lower bonus accrual in 2013.

Selling and marketing expense, excluding depreciation and amortization

Our selling and marketing expense, excluding depreciation and amortization, was $56.2 million for the year ended December 31, 2013 as compared to $56.9 million for the pro forma year ended December 31, 2012, a decrease of $0.7 million, or 1%, primarily due to a lower bonus accrual in 2013.

General and administrative expense, excluding depreciation and amortization

Our general and administrative expense, excluding depreciation and amortization, was $41.0 million for the year ended December 31, 2013 as compared to $40.2 million for the pro forma year ended December 31, 2012, an increase of $0.8 million, or 2%. The increase was primarily due to an increase in facilities related expense, telecommunications costs, salaries and related costs for additional new hires as we transitioned to a standalone company, partially offset by a lower bonus accrual in 2013.

Depreciation and amortization

Our depreciation and amortization expense was $87.6 million for the year ended December 31, 2013 as compared to $69.7 million for the pro forma year ended December 31, 2012, an increase of $17.9 million or 26%. This increase was primarily due to the overall impact of new computer hardware and other property, and developed technology and content that were placed in service in 2013 related to the completion of the new data center and information system infrastructure.

Other operating expenses

Our other operating expense was $35.0 million for the year ended December 31, 2013 as compared to $13.0 million for the pro forma year ended December 31, 2012, an increase of $22.1 million. This decrease was primarily due to higher expenses incurred mainly related to data migration and the separation of our IT infrastructure that started in the second half of 2012.

Goodwill impairment

We performed our annual goodwill impairment test during the fourth quarter of 2013 and concluded that our goodwill on all our reporting units is impaired because each of the reporting unit's carrying value exceeded its fair value due to lower-than-expected growth in revenue and cash flow in fiscal year 2013 resulting from certain selling cycle delays, particularly in the government sector, uncertainty in the healthcare sector related to the Patient Protection and Affordable Care Act, higher-than-expected costs due to significant investments in technology infrastructure, as well as an increase in the discount rate used in the discounted cash flow analysis as compared to the rate used in the prior year’s analysis. Accordingly, we recorded a total of $366.7 million of non-cash goodwill impairment charge in the fourth quarter of 2013.

Operating income (loss)

Our operating loss was $359.3 million for the year ended December 31, 2013 as compared to an operating income of $1.9 million for the pro forma year ended December 31, 2012, a decrease of $361.2 million. The decrease was primarily due to the goodwill impairment, as discussed above.

Net interest expense

Our net interest expense was $70.6 million for the year ended December 31, 2013, as compared to $76.8 million for the pro forma year ended December 31, 2012, a decrease of $6.2 million or 8%. The decrease was mainly due to a 2.25% lower interest rate and decrease by $3.4 million of loss on extinguishment of debt as a result of refinancing of

the Term Loan Facility in October 2012 and April 2013. In addition, there was additional interest on incremental borrowings under the Term Loan Facility and Revolving Credit Facility of $11.3 million and $30.0 million, respectively.

Other finance costs

Other finance costs mainly represents foreign exchange gains/losses as a result from our international operations. Also included in other finance costs are bank charges and fees.

Benefit from income taxes

Our income tax benefit was $84.9 million for the year ended December 31, 2013 as compared to a benefit of $26.4 million for the pro forma year ended December 31, 2012, an increase of $58.6 million or 222%. Income tax benefit for the year ended December 31, 2013 and pro forma year ended December 31, 2012, at an effective tax rate of 19.8%, and 35.2%, respectively, are different from the amount derived by applying the federal statutory tax rate of 35%, mainly due to the impact of certain state income taxes, non deductible goodwill impairment charge, and foreign rate differential.

Segment discussion

The following table summarizes our segment information for the years ended December 31, 2013 and pro forma year end December 31, 2012:

(Dollars in thousands)	Year ended December 31, 2013		% of revenue		Year ended December 31, 2012		% of revenue		Change		% change
	(Successor)				(Pro forma)(a)
Commercial
Revenues	$	394,896	100	%	$	362,803	100	%	$	32,093	9	%
Segment operating income	140,173		35	%	92,340		25	%	47,833		52	%
Government
Revenues	97,806		100	%	82,428		100	%	15,378		19	%
Segment operating income (loss)	11,053		11	%	9,775		12	%	1,278		13	%

(a) Pro Forma year ended December 31, 2012 gives effect to the Prior Acquisition as if it had occurred on January 1, 2012. See “Unaudited Pro Forma Financial Information.”

Commercial segment

Revenues

Our Commercial revenue was $394.9 million for the year ended December 31, 2013 as compared to $362.8 million for the pro forma year ended December 31, 2012, an increase of $32.1 million or 9%. The total increase was primarily due to the lower impact from the deferred revenue adjustment ($7.2 million in 2013 compared to $43.3 million in the pro forma 2012 period) in connection with the Prior Acquisition and offset due to some cancellations and price competition in care management solutions.

Operating income

Our Commercial operating income was $140.2 million for the year ended December 31, 2013 as compared to $92.3 million for the pro forma year ended December 31, 2012 an increase of $47.8 million or 52%. The increase was mainly due to the increase in revenue discussed above and higher costs of operations in 2012 as we transitioned to a standalone company.

Government segment

Revenues

Our Government revenue was $97.8 million for the year ended December 31, 2013 compared to $82.4 million for the pro forma year ended December 31, 2012, an increase of $15.4 million or 19%. The increase was primarily due to implementation and migration revenue from large contracts in state government and the lower impact from the deferred revenue adjustment ($1.6 million in 2013 compared to $5.8 million in the pro forma 2012 period) in connection with the Prior Acquisition.

Operating income

Our Government operating income was $11.1 million for the year ended December 31, 2013 compared to $9.8 million for the pro forma year ended December 31, 2012, an increase in operating income of $1.3 million or 13%. The increase was mainly due to the increase in revenue discussed above, offset by higher costs mainly due to initiatives to improve sales in the federal and state agencies, such as Centers for Medicare & Medicaid Services, state Medicaid agencies, as well as federally owned and operated healthcare facilities.

Non-GAAP Measures

Adjusted EBITDA Calculation

EBITDA is defined as net income before net interest (expense) income, provision for income taxes, and depreciation and amortization, and is used by management to measure the overall operating performance of the business at a consolidated and combined level. We also use EBITDA and Adjusted EBITDA as a measure to calculate certain financial covenants related to the Senior Credit Facility and as a factor in our tangible and intangible asset impairment testing. Adjusted EBITDA is calculated by adding to or subtracting from EBITDA items of expense and income as described below.

EBITDA and Adjusted EBITDA are supplemental measures of our overall performance and our ability to service debt that are not required by, or presented in accordance with, GAAP. EBITDA and Adjusted EBITDA are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income or other performance measures derived in accordance with GAAP, or as alternatives to cash flow from operating activities as measures of our liquidity. In addition, our measurements of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Management believes that the presentation of EBITDA and Adjusted EBITDA and the ratios using EBITDA and Adjusted EBITDA included in this report provide useful information to investors regarding our results of operations because they assist in analyzing and benchmarking the performance and value of our business.

EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider such measures either in isolation or as substitutes for analyzing our results as reported under GAAP. Some of these limitations are:


•	EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;


•	EBITDA and Adjusted EBITDA do not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;


•	EBITDA and Adjusted EBITDA do not reflect our tax expense or the cash requirements to pay our taxes;


•	EBITDA and Adjusted EBITDA do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;


•	EBITDA and Adjusted EBITDA do not reflect pension and post-retirement obligations;


•	Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; and


•	Other companies in our industry may calculate EBITDA and Adjusted EBITDA differently, limiting their usefulness as comparative measures.

Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as discretionary cash available to us to reinvest in the growth of our business or as a measure of cash that will be available to us to meet our obligations.

The following table is a reconciliation of our net loss to EBITDA and Adjusted EBITDA for the ~~year~~years ended December 31, ~~2014 and 2013~~2015, ~~the~~2014 ~~combined year ended December 31, 2012, the Successor Period from inception (April 20, 2012) to December 31, 2012~~ and ~~Predecessor Period from January 1, 2012 to June 6, 2012~~2013:

	Year ended December 31,			Year ended December 31,			~~Combined~~Year ~~year~~ ended December 31,			~~From inception (April 20, 2012) to December 31,~~			~~January 1, 2012 to June 6,~~
(Dollar in thousands)	~~2014~~2015			~~2013~~2014			~~2012~~2013			~~2012~~			~~2012~~
	(Successor)												(Predecessor)
Net loss	$	(75,466	)	$	(37,022	)	$	(344,989	)
Net loss	$	(37,022	)	$	(344,989	)	$	(61,745	)	$	(54,112	)	$	(7,633	)
Provision for (benefit from) income tax	886			(22,686		)	(84,927		)
Benefit from income tax	(22,686		)	(84,927		)	(34,796		)	(29,993		)	(4,803		)
Net interest expense	74,219			69,616			70,581
Net interest expense (income)	69,616			70,581			49,011			49,014			(3		)
Depreciation	21,197			22,350			21,219
Depreciation	22,350			21,219			13,505			6,700			6,805
Amortization of developed technology and content	43,821			38,752			31,894
Amortization of developed technology and content	38,752			31,894			27,930			15,470			12,460
Amortization of other identifiable intangible assets	48,769			45,402			34,460
Amortization of other identifiable intangible assets	45,402			34,460			27,753			19,527			8,226
EBITDA	113,426			116,412			(271,762		)
EBITDA	116,412			(271,762		)	21,658			6,606			15,052
Acquisition related and other transition related costs(1)	22,018			13,203			30,815
Acquisition related and transition costs and other nonrecurring expenses(1)	13,203			30,815			70,449			48,164			22,285
Non-cash stock compensation expense	814			1,271			1,457
Allocation of costs from Predecessor Parent and Affiliates(2)	—			—			14,871			—			14,871
Deferred revenue adjustments(2)	5,373			6,028			8,758
Estimated standalone costs(3)	—			—			(10,306		)	—			(10,306		)
Goodwill impairment(3)	—			—			366,662
Non-cash stock compensation expense	1,271			1,457			1,384			329			1,055
Asset write-offs(4)	6,000			4,706			1,856
Deferred revenue adjustments(4)	6,028			8,758			43,484			43,484			—
Other(5)	2,856			2,875			2,929
Shared asset depreciation(5)	—			—			558			—			558
Adjusted EBITDA	$	150,487		$	144,495		$	140,715
Goodwill impairment(6)	—			366,662			—			—			—
Asset write-offs/retirements(7)	4,706			1,856			—			—			—
Other(8)	2,875			2,929			1,719			(4,129		)	5,848
Adjusted EBITDA	$	144,495		$	140,715		$	143,817		$	94,454		$	49,363

(1) ~~The~~Acquisition-related ~~Successor~~costs ~~Periods~~and ~~included~~other ~~retention~~transaction ~~incentives~~related tocosts ~~key~~in ~~employees~~2015 mainly represent costs including professional fees related to ~~the~~business ~~Prior~~integration ~~Acquisition~~ and ~~costs~~process asimprovements werelated ~~transition~~to sales force, order to acash ~~standalone~~and ~~company.~~various ~~The~~infrastructure ~~Predecessor~~and ~~Periods~~system ~~included~~process ~~disposal~~enhancements. Acquisition-related costs and ~~severances~~other transaction related in 2014 and ~~bonuses~~2013 includes acquisition costs of businesses acquired in ~~connection~~2014 ~~with~~and of the ~~disposal~~Prior Acquisition, retention incentives to key employees related to the Prior Acquisition and costs incurred upon completion of our transition to a standalone company including integration costs from our acquired businesses. See ~~Note~~Notes 3 and 14 to the consolidated ~~and combined~~ financial statements, included elsewhere in this Annual Report.

(2) ~~Includes~~Amount ~~allocation~~ of ~~costs~~the ~~from~~reduction ~~Predecessor~~in ~~Parent~~deferred ~~and~~revenue ~~affiliates~~as ~~and~~a ~~cost~~result of ~~revenues~~the Prior Acquisition and ~~allocation~~acquisitions of ~~technology~~businesses ~~support~~in ~~administered~~2014 bythat ~~the~~negatively ~~Predecessor~~impacted ~~Parent~~our ~~relating~~revenue. toWe ~~customer~~wrote ~~data.~~down ~~These~~the ~~allocations~~value ~~ceased~~of ~~following~~our ~~the~~deferred ~~completion~~revenue ofat ~~the~~acquisition ~~Prior~~dates ~~Acquisition~~based on ~~June~~a 6,valuation ~~2012~~analysis.

(3) Goodwill ~~Company~~impairment ~~standalone~~loss ~~estimates~~on ~~for~~all ~~shared~~reporting ~~services~~units. See ~~costs~~Note 8 to the consolidated financial statements, included elsewhere in this Annual Report.

(4) ~~Amount~~Represents of the ~~reduction~~write-off inof ~~deferred revenue as~~ a ~~result~~prepaid ofrevenue ~~the~~share ~~Prior~~with ~~Acquisition~~a ~~and acquisitions in 2014 that negatively impacted our revenue~~supplier. WeSee ~~wrote~~Note ~~down~~14 to the ~~value~~consolidated offinancial ~~our~~statements, ~~deferred~~included ~~revenue~~elsewhere ~~based~~in onthis ~~valuation~~Annual ~~analysis completed as a result of the acquisitions~~Report.

(5) ~~Portion~~Represents ofSponsor ~~allocated~~advisory ~~costs~~fees in ~~cost~~connection ofwith ~~revenues~~the ~~that~~Prior ~~represent depreciation~~Acquisition.

~~(6) Goodwill impairment loss on all reporting units. See Note 8 to the financial statements, included elsewhere in this Annual Report.~~ 47

(7) In 2014, includes $4,706 of asset write-off of advanced revenue share with a supplier. In 2013, includes $562 of write-offs and retirements of certain computer hardware and other assets, and $1,294 write-off of advanced revenue share with a supplier. See Note 16 to the consolidated and combined financial statements, included elsewhere in this Annual Report.

(8) Other mainly includes recurring management fees paid to the Sponsor in the successor periods and non-cash vacation accrual true-up charges in the period from April 20, 2012 to December 31, 2012, in connection with the Prior Acquisition.

Liquidity and Capital Resources

Cash flows

The following table summarizes our cash activities:

(In thousands)

Year ended December 31, 2014

Year ended December 31, 2013

From inception (April 20, 2012) to December 31, 2012

January 1, 2012 to June 6, 2012

Years ended December 31,

(Successor)

(Predecessor)

(In thousands)

2015

2014

2013

Net cash provided by (used in) operating activities

4553,~~217~~524

(145,~~365~~217

)

27(1,~~352~~365

)

~~17,806~~

Net cash used in investing activities

(~~142~~49,~~067~~109

)

(43142,~~785~~067

)

(143,~~280,672~~785

)

~~(10,285~~

)

Net cash provided by (used in) financing activities

99(2,~~338~~587

)

3199,~~765~~338

131,~~277,125~~765

~~(7,513~~

)

Operating activities

~~Cash~~Net cash provided by operating activities was $53.5 million for the year ended December 31, ~~2014~~2015,which was ~~$45.2~~primarily ~~million~~due ~~compared~~ to ~~cash~~a ~~used~~net inloss ~~operating activities~~ of $175.45 million ~~for~~adjusted ~~the~~by ~~year~~non‑cash ~~ended~~items ~~December 31, 2013, an increase~~ of $46126.68 million. ~~The~~ ~~increase~~This was ~~mainly~~impacted due to $58.4 million in higher payments to various suppliers in 2013 resulting from timing of cash payments related to various costs we incurred upon completion of our transition to a standalone company in 2013, offset in part by a ~~$10.6~~net ~~million decrease in~~ cash ~~receipts~~increase from ~~customers~~working ~~and~~capital aby $12.2 million, ~~increase~~primarily infrom ~~interest~~timing ~~payments due to an aggregate increase~~ of ~~$140.0 million in~~ the ~~borrowings~~vendor ~~under the the Senior Credit Facility and Additional Notes~~payments.

~~Cash~~Net ~~used~~cash inprovided by operating activities was $45.2 million for the year ended December 31, ~~2013~~2014, which was ~~$1.4~~primarily ~~million~~due ~~compared~~ to ~~cash~~a ~~provided~~net byloss ~~operating activities~~ of $2737.4 0 million in ~~the~~adjusted ~~period~~by ~~from April 20, 2012 (inception) to December 31, 2012 and~~ non‑cash ~~provided~~items ~~by operating activities~~ of $1795.8 4 million. inThis ~~the~~was ~~Predecessor~~offset ~~Period~~by ~~from~~net ~~January~~cash 1,used ~~2012~~from toworking ~~June~~capital 6,by ~~2012. The total decrease was mainly due to a~~ $2513.8 2 million, ~~increase~~primarily ~~in interest payments~~ related to ~~our debt during the 2013 period and~~ a $~~50.~~9 .3 million increase in ~~payments~~prepayments toon various ~~suppliers~~maintenance ~~mainly~~contracts ~~related~~and totiming ~~disentanglement~~of ~~costs~~customer inand ~~2013. This~~vendor ~~was partially offset by a $30~~payments.~~2 million increase in cash receipts from customers due to improved efforts in collection.~~

Net cash used from operating activities was $1.4 million for the year ended December 31, 2013, which was primarily due to a net loss of $345.0 million adjusted by non‑cash items of $379.1 million. This was offset by net cash used from working capital by $35.5 million, primarily related to a $40.4 million decrease in accounts payable due to the timing of payments from various vendors as a result of disentanglement costs in 2013; and a $5.7 million increase in prepayments mainly due to various maintenance contracts as we transition to a standalone company. These were offset by the timing of customer receipts due to improved efforts in collection.

Investing activities

Cash used in investing activities for the year ended December 31, ~~2014~~2015 of $~~142~~49.1 million consisted of $~~109~~0.4 million of cash used in to2015 ~~pay~~related to the ~~purchase~~net ~~price~~final ofworking ~~the~~capital ~~Simpler,~~adjustments ~~HBE~~relating ~~and~~to ~~JWA~~the 2014 acquisitions and $3248.7 million of capital expenditures related to computer hardware and ~~and~~ developed technology and content in the normal course of business.

Cash used in investing activities for the year ended December 31, ~~2013~~2014 of $43142.8 1 million ~~was~~consisted ~~mainly~~of ~~due to~~ $43109.5 4 million ~~in capital expenditures related to a new data center, IT infrastructure and developed technology and content and $0.3 million~~ of ~~notes~~cash ~~receivable from VCPH Holding LLC. Cash~~ used ~~in investing activities for the period from April 20, 2012 (inception)~~ to ~~December~~pay ~~31, 2012, mainly relates to~~ the ~~$1,249.4 million of~~ purchase price of the ~~Prior~~Simpler, ~~Acquisition~~HBE and JWA acquisitions and $3132.3 7 million inof capital expenditures related to ITcomputer ~~infrastructure~~hardware and developed technology and content~~. Cash~~ ~~used~~ in ~~investing activities for~~ the ~~Predecessor~~normal ~~Period~~course ~~from January 1, 2012 to June 6, 2012, mainly relates to $10.3 million~~ of ~~capital expenditures related to computer hardware and other property and equipment, and developed technology and content~~business.

Cash used in investing activities for the year ended December 31, 2013 of $43.8 million primarily consisted of $43.5 million in capital expenditures related to a new data center, IT infrastructure and developed technology and content and $0.3 million of notes receivable from Holdings LLC.

Financing activities

Cash ~~provided~~used by financing activities for the year ended December 31, ~~2014~~2015 was $992.36 million. This amount consisted of $~~141~~5.20 million of ~~aggregate~~net ~~proceeds from~~ borrowing under the ~~Senior~~Revolving ~~Term~~Credit ~~Loan~~ Facility, ~~and~~a ~~Additional~~$6.4 ~~Note~~million ~~used~~principal torepayment ~~partly~~of ~~finance~~ the ~~business~~Senior ~~acquisitions~~Term ~~during~~Loan ~~the year~~Facility, ~~offset~~$0.5 inmillion ~~part~~of bydebt issuance costs and a $~~30.~~0.7 million ~~net~~principal payment onof ~~the~~capital ~~Revolving~~lease obligation.

56Cash provided by financing activities for the year ended December 31, 2014 was $99.3 million. This amount consisted of $141.2 million of aggregate proceeds from borrowing under the Senior Term Loan Facility and the issuance of

~~Credit Facility loan, a $6.1 million principal repayment of the Senior Term Loan Facility, $4.1 million of debt issuance costs and a $1.7 million principal payment of capital lease obligation.~~48

~~Cash~~Additional ~~provided~~Note byused ~~financing~~to ~~activities~~partly ~~for~~finance the ~~year~~business ~~ended~~acquisitions ~~December~~during 312014, ~~2013~~offset ~~was~~in ~~$31.8~~part ~~million~~by ~~. This amount consisted of~~ a $30.0 million ~~Revolving Credit Facility loan drawn for working capital requirements, $2.4 million of additional capital contribution from the Parent, and~~ net ~~proceeds~~payment ~~of $11.3~~on ~~million from~~ the ~~April~~Revolving ~~2013~~Credit ~~refinancing~~Facility loan, ~~partially~~a ~~offset by~~ $56.3 1 million of principal repayment of the Senior Term Loan Facility, $54.8 1 million of ~~premium~~debt ~~payment~~issuance tocosts ~~lenders for the April 2013 Refinancing~~ and a $01.8 7 million principal payment of a capital lease obligation.

Cash provided by financing activities for the ~~combined~~ year ended December 31, ~~2012~~2013 was $~~1,269~~31.6 8 million. ~~During~~This ~~2012,~~amount ~~cash~~consisted ~~provided~~of bya ~~financing~~$30.0 million ~~activities~~Revolving ~~included~~Credit ~~$464.4~~Facility ~~million~~loan indrawn ~~cash~~for ~~from~~working ~~equity~~capital ~~contributions~~requirements, $~~842~~2.1 4 million ~~from~~of ~~the~~additional ~~issuance~~capital ofcontribution ~~debt~~from ~~(Term~~the ~~Loan~~Parent ~~Facility~~ and ~~Notes)~~net ~~that~~proceeds ~~was~~of ~~used~~$11.3 million tofrom ~~pay~~ the ~~purchase~~April ~~price~~2013 ~~of the Prior Acquisition~~refinancing, ~~which was~~ partially offset by $25.6 3 million of principal ~~payment~~repayment onof the Senior Term Loan Facility, $~~21.6 million of debt issuance costs and $~~5.2 8 million of premium payment to lenders for the ~~October~~April ~~2012~~2013 Refinancing~~. In~~ ~~addition,~~and ~~there was an increase of~~ $160.8 million inprincipal ~~the~~payment ~~net investment~~ of ~~the Predecessor Parent in our Predecessor and~~ a ~~$9.2~~capital ~~million~~lease ~~decrease in notes receivable from the Predecessor Parent~~obligation.

Notes receivable from the Predecessor Parent refers to certain of our Predecessor's cash transactions with the Predecessor Parent, which were subject to written loan agreements specifying repayment terms and interest payments. The term of the agreement was one year and was automatically renewed from year to year unless one of the parties notified the other in writing of termination. These notes receivable satisfied on completion of the Prior Acquisition.

Liquidity and Capital Resources

We believe that our cash flows from operations and our existing available cash, together with our other available external financing sources, will be adequate to meet our future liquidity needs for the next year. Our principal liquidity needs will be to fund capital expenditures, provide working capital, meet debt service requirements and finance our strategic plans, including possible acquisitions. We expect to spend approximately $3351 million on capital expenditures in ~~2015~~2016 (excluding acquisitions and related costs); however, actual capital expenditures may differ. For ongoing liquidity purposes, we ~~primary~~primarily intend to utilize our existing cash and cash equivalents, cash generated from operations and borrowings under our Revolving Credit Facility.

Our cash position is impacted by our billings from on-going services and subscription contracts. Typically, a significant portion of the contract revenue is paid upfront and most contracts are renewed during the latter part of the fourth quarter. Many renewals are billed in December and January, which are normally collected in the first quarter of the following year. As such, we have historically experienced a low level of cash every third quarter of a calendar year, but that may vary depending on any new significant contracts driven by state government projects, concurrent with the start of the state government’s fiscal year.

As of December 31, ~~2014~~2015, we had outstanding revolver of $5.0 million and letters of credit of 7.5 million, which reduced the available line of credit to $4237.5 million.

Indebtedness

As of December 31, ~~2014~~2015, our ~~principal~~ outstanding principal indebtedness was $~~992~~990.07 million, consisting of ~~624~~623.95 million from under the Term Loan Facility, $367.2 million under the Notes.

A discussion of our outstanding indebtedness as of December 31, ~~2014~~2015 is below:

Senior Credit Facility

The Senior Credit Facility, as amended on ~~April~~August 1121, ~~2014,~~2015 is with a syndicate of banks and other financial institutions and provides financing of up to $679.7 million, consisting of the $629.7 million Term Loan Facility, with a maturity date of ~~five~~June ~~years~~6, 2019, and the $50.0 million Revolving Credit Facility with a maturity date of ~~five~~June ~~years~~6, 2017. As of December 31, ~~2014~~2015, the Company had an outstanding revolver of $5.0 million and letters of credit of $7.5 million, which, while not drawn, reduce the available line of credit under the Revolving Credit Facility to $4237.5 million.

57Borrowings under the Senior Credit Facility, other than swing line loans, bear interest at a rate per annum equal to an applicable margin plus, at Truven's option, either (a) a base rate determined by reference to the highest of (1) the prime rate of JPMorgan Chase Bank, N.A., (2) the federal funds effective rate plus 0.50% and (3) the one month Eurodollar rate plus 1.00%; provided, that the base rate for the Term Loan Facility at any time shall not be less than 2.25%, or (b) a Eurodollar rate adjusted for statutory reserve requirements for a one, two, three or six month period (or a nine or twelve month interest period if agreed to by all applicable lenders); provided that the Eurodollar base rate used to calculate the Eurodollar rate for the Term Loan Facility at any time shall not be less than 1.25%. Swing line loans will bear interest at the interest rate applicable to base rate loans, plus an applicable margin. In addition to paying interest on outstanding principal under the Senior Credit Facility, we are required to pay a commitment fee to the lenders under the Revolving Credit Facility in respect of the unutilized commitments thereunder at a rate equal to 0.50% (subject to

Borrowings under the Senior Credit Facility, other than swing line loans, bear interest at a rate per annum equal to an applicable margin plus, at Truven's option, either (a) a base rate determined by reference to the highest of (1) the prime rate of JPMorgan Chase Bank, N.A., (2) the federal funds effective rate plus 0.50% and (3) the one month Eurodollar rate plus 1.00%; provided, that the base rate for the Term Loan Facility at any time shall not be less than 2.25%, or (b) a Eurodollar rate adjusted for statutory reserve requirements for a one, two, three or six month period (or a nine or twelve month interest period if agreed to by all applicable lenders); provided that the Eurodollar base rate used to calculate the Eurodollar rate for the Term Loan Facility at any time shall not be less than 1.25%. Swing line loans will bear interest at the interest rate applicable to base rate loans, plus an applicable margin. In addition to paying interest on outstanding principal under the Senior Credit Facility, we are required to pay a commitment fee to the lenders under the Revolving Credit Facility in respect of the unutilized commitments thereunder at a rate equal to 0.50% (subject to reduction upon attainment of certain leverage ratios). We will also pay customary letter of credit fees and certain other agency fees. Truven may voluntarily repay outstanding loans under the Senior Credit Facility at any time without premium or penalty, other than customary “breakage” costs with respect to adjusted LIBOR loans. We are required to repay $1.6 million of the Term Loan Facility quarterly, through March 31, 2019, with any remaining balance due June 6, 2019. 49

reduction upon attainment of certain leverage ratios). We will also pay customary letter of credit fees and certain other agency fees. Truven may voluntarily repay outstanding loans under the Senior Credit Facility at any time without premium or penalty, other than customary “breakage” costs with respect to adjusted LIBOR loans. We are required to repay $1.6 million of the Term Loan Facility quarterly, through March 31, 2019, with any remaining balance due June 6, 2019.

All obligations under the Senior Credit Facility are guaranteed by Truven Holding and each of Truven's existing and future wholly-owned domestic subsidiaries. All obligations under the Senior Credit Facility and the guarantees of those obligations are collateralized by first priority security interests in substantially all of Truven's assets as well as those of each guarantor (subject to certain limited exceptions).

The Senior Credit Facility contains a number of covenants that, among other things, restrict, subject to certain exceptions, Truven's ability, and the ability of each of any restricted subsidiaries, to: sell assets; incur additional indebtedness; prepay other indebtedness (including the Notes); pay dividends and distributions or repurchase its capital stock; create liens on assets; make investments; make certain acquisitions; engage in mergers or consolidations; engage in certain transactions with affiliates; amend certain charter documents and material agreements governing subordinated indebtedness; change the business conducted by it and its subsidiaries; and enter into agreements that restrict dividends from subsidiaries.

In addition, the Senior Credit Facility requires Truven to maintain a quarterly maximum consolidated senior secured leverage ratio in accordance with the debt covenants as long as the commitments under the Revolving Credit Facility remain outstanding (subject to certain limited exceptions). The Senior Credit Facility also contains certain customary representations and warranties, affirmative covenants and events of default. As of December 31, ~~2014~~2015, the Consolidated Senior Secured Leverage Ratio and the maximum ratio at December 31, ~~2014~~2015 were 34.70 and 4.525, respectively, and we were in compliance with all the Senior Credit Facility covenants. The consolidated senior secured leverage ratio is the ratio of (i) consolidated senior secured term loan minus Unrestricted Cash to (ii) consolidated Adjusted EBITDA, as terms are defined in the Senior Credit Facility.

On October 3, 2012, we entered into the First Amendment to the Senior Credit Facility with a syndicate of banks and other financial institutions with no changes in the terms and conditions other than the reduction of the applicable margin by 1.00%.

On April 26, 2013, we entered into the Second Amendment to the Senior Credit Facility (referred to as the "April 2013 Refinancing") with a syndicate of banks and other financial institutions to (i) increase the aggregate principal amount of the Term Loan Facility from $523.7 million to $535.0 million, (ii) reduce the applicable margin by 1.25%, (iii) with respect to the Term Loan Facility, determine the applicable margin in accordance with a pricing grid based on our consolidated total leverage ratio following delivery of financial statements at the end of each fiscal year or quarter, as applicable, after the second quarter of fiscal year 2013, (iv) revise the quarterly principal payments from $1,319.0 to $1,337.5 starting on June 30, 2013 and (v) extend the 1% repricing call protection from June 6, 2013 to October 26, 2013. There were no other changes to the terms and conditions.

On April 11, 2014, we entered into the Third Amendment (the "Third Amendment") to our Senior Credit Facility (the "Senior Credit Facility") for a $100.0 million increase in the Tranche B Term Loans, and increased the total amount available under the Senior Credit Facility to $679.7 million, consisting of a $629.7 million Term Loan Facility and a $50.0 million Revolving Credit Facility (which remained unchanged). The Company borrowed the entire $100.0 million principal amount of the Supplemental Tranche B Term Loans to finance the acquisition of Simpler, repay outstanding loans of $15.0 million in aggregate principal amount under its Revolving Credit Facility and pay fees and expenses relating to the acquisition of Simpler. Under the terms of the Third Amendment, the Company must repay the principal amount of the Tranche B Term Loans in twenty consecutive quarterly installments beginning on June 30, 2014 and continuing through March 31, 2019 in the amount of $1.6 million each, and a final installment on June 6, 2019 in the amount of $597.8 million. The terms and conditions that apply to the Supplemental Tranche B Term Loans under the Third Amendment are substantially the same as the terms and conditions that apply to the existing Tranche B Term Loans under the Senior Credit Facility.

5850

relating to the acquisition of Simpler. Under the terms of the Third Amendment, the Company must repay the principal amount of the Tranche B Term Loans in twenty consecutive quarterly installments beginning on June 30, 2014 and continuing through March 31, 2019 in the amount of $1.6 million each, and a final installment on June 6, 2019 in the amount of $597.8 million. The terms and conditions that apply to the Supplemental Tranche B Term Loans under the Third Amendment are substantially the same as the terms and conditions that apply to the existing Tranche B Term Loans under the Senior Credit Facility.

The Third Amendment also amended the Senior Credit Facility to make certain adjustments to the Consolidated Senior Secured Leverage Ratio applicable to the Company by increasing the maximum permitted ratios for certain periods from 2014 to 2016. During 2014, all domestic subsidiaries acquired by the Company became guarantors under the Senior Credit Facility.

On August 21, 2015, the Company entered into a Fourth Amendment that increased the applicable maximum Consolidated Senior Secured Leverage Ratio starting from the third quarter of 2015 through the maturity of the Credit Agreement. All the other terms under the Credit Agreement remained unchanged.

10.625% Senior Notes due 2020

Old orNotes ~~Exchanged~~and Additional Notes

The Old Notes were issued on June 6, 2012, under an indenture (the "Indenture", as supplemented by the First Supplemental Indenture, whereby Truven became a party to the Indenture as successor in interest to Wolverine, and the Second Supplemental Indenture, defined below), with The Bank of New York Mellon Trust Company, N.A. as trustee, bear interest at a rate of 10.625% per annum, payable on June 1 and December 1 of each year, and have a maturity date of June 1, 2020. The Additional Notes were issued pursuant to the Indenture, as supplemented by the Fifth Supplemental Indenture, dated as of November 12, 2014 (the "Fifth Supplemental Indenture") by and among Truven, the Guarantors and the Trustee. The Additional Notes form a single series with the Old Notes and have the same terms as the Old Notes and rank equal in right of payments with the Old Notes.

The Notes are general unsecured senior obligations of Truven, fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by Truven Holding and each of Truven’s existing and future wholly-owned domestic restricted subsidiaries that is a borrower under or that guarantees the obligations under the Senior Credit Facility or any other indebtedness of Truven or any other guarantor.

Truven may redeem some or all of the Notes at any time prior to June 1, 2016 at 100% of the principal amount thereof, plus the applicable premium pursuant to the Indenture as of the applicable redemption date, plus accrued and unpaid interest and any additional interest to, but excluding, the applicable redemption date. Truven may redeem some or all of the Notes at any time on or after June 1, 2016 at 105.313% of the principal amount thereof, declining ratably to 100% of the principal amount thereof on or after June 1, 2018, plus, in each case, accrued and unpaid interest and any additional interest to, but excluding, the applicable redemption date. In addition, at any time prior to June 1, 2015, Truven (subject to certain conditions) may redeem up to 35% of the aggregate principal amount of the Notes using net cash proceeds from certain equity offerings at 110.625% of the aggregate principal amount of the Notes plus accrued and unpaid interest and any additional interest, to, but excluding, the applicable redemption date. If Truven experiences a change of control (as defined in the Indenture), it will be required to make an offer to repurchase the Notes at a price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest, and any additional interest, to, but excluding, the date of purchase.

The Indenture contains covenants limiting Truven and its wholly-owned restricted subsidiaries with respect to other indebtedness, investments, liens, dividends, purchases or redemptions of stock, transactions with affiliates and mergers and sales of assets. The Indenture also contains covenants limiting the ability of wholly-owned restricted subsidiaries to guarantee payment of any indebtedness of Truven or any subsidiary guarantor and limiting the Company's business and operations. Following our series of acquisitions in 2014, all the domestic subsidiaries we acquired became guarantors of the Notes as a result of the guarantees of the Senior Credit Facility provided by such subsidiaries. The guarantees were entered into pursuant to the Third, Fourth and Sixth Supplemental Indentures. We were in compliance with all of these covenants as of December 31, ~~2014~~2015.

On June 5, 2013, we entered into the second supplemental indenture (the “Second Supplemental Indenture”), whereby the guarantee release provision in the Indenture, which allows guarantors to be released from their obligations under the Indenture upon the release or discharge of such guarantor’s guarantee of the Senior Credit Facility or the guarantee which resulted in the creation of the guarantee under the Indenture (subject to certain limitations), was amended to apply only to subsidiary guarantors and not to Truven Holding.

5951

Pursuant to a registration rights agreement dated June 6, 2012 (the "Registration Rights Agreement"), we exchanged the Old Notes (and related guarantees) for the Exchange Notes.

Additional Notes

The Additional Notes were issued pursuant to the Indenture dated June 6, 2012 governing the Old Notes and, together with the Additional Notes, the "Notes"), as supplemented by the Fifth Supplemental Indenture, dated as of November 12, 2014 (the "Fifth Supplemental Indenture") by and among Truven, the Guarantors and the Trustee. The Additional Notes form a single series with the Notes and have the same terms as the Notes and rank equal in right of payments.

Pursuant to the Registration Rights Agreement entered into with respect to the Additional Notes, Truven and the guarantors agreed to use their commercially reasonable efforts to file with the SEC and cause to become effective by May 11, 2015, a registration statement relating to an offer to issue new registered notes having terms substantially identical to the Additional Notes in exchange for the outstanding Additional Notes. In certain circumstances, the Truven and the guarantors may be required to use commercially reasonable efforts to file a shelf registration statement to cover resales of the Additional Notes. Truven may be required to pay additional interest to holders of the Additional Notes under certain circumstances in connection with its obligations under the Registration Rights Agreement.

Contractual Obligations and Commercial Commitments

The following table sets forth our contractual obligations and other commitments as of December 31, ~~2014~~2015:

Payments by period

(in thousands)

Total

Less than 1 year

1-3 years

3-5 years

After 5 years

Notes(1)

367,150

—

—367,150

~~367,150~~—

Other long-term obligations(2)

~~624~~623,~~880~~520

6,360

12,720

~~605~~604,~~800~~440

—

Interest on indebtedness(3)

~~339~~272,~~214~~668

67,~~410~~394

~~134~~133,~~027~~760

~~118~~71,~~272~~514

~~19,505~~—

Operating lease obligations(4)

5952,~~594~~170

107,~~412~~119

1615,~~946~~955

1214,~~339~~355

1914,~~897~~741

Capital lease obligations(5)

21,~~212~~455

696

~~758~~759

~~758~~—

—

Total contractual obligation

1,~~393~~316,~~050~~963

8481,~~878~~569

~~164~~163,~~451~~194

~~737~~1,~~169~~057,459

~~406~~14,~~552~~741


(1)	Represents the principal amount of indebtedness on the Notes.


(2)	Represents the principal amount of indebtedness under our Senior Credit Facility.

(3) Total interest payments consist of fixed and floating rate interest obligations and the cash flows associated with the Senior Credit Facility and the Notes. The interest rate on the floating rate Senior Credit Facility has been assumed to be 4.5%, the applicable rate during the month of December ~~2014~~2015. Interest on the Notes was 10.625%.

(4) Represents amounts due under existing contractual operating leases related to our offices and other facilities.

(5) Represents capital lease payments including interest ~~of $0~~.~~2 million.~~

Off-balance sheet arrangements

~~Effective~~As ~~January 1, 2013, the Company modified its agreement with a supplier under which it markets and licenses to its customers a private label version~~ of the supplier's platform solution in conjunction with the Company's health information applications. The agreement contains a revenue share arrangement based on net revenue targets. The supplier's revenue share percentage is guaranteed by the Company in the minimum amounts of $2 millionDecember 31, ~~$4 million and $6 million, for the calendar years 2013, 2014 and~~ 2015, ~~respectively. The~~other ~~guaranteed~~than ~~revenue~~the ~~share~~operating isleases ~~paid~~ in ~~advance by~~ the ~~Company~~normal oncourse ~~March 1st~~ of each calendar year and is applied against the revenue share of the supplier earned through March 1st of the following calendar year. The agreement provides a grace period for the Company of up to August 31st of the following calendar year in the event that the supplier's revenue share earned does not reach the prepayment amount. After the grace periodbusiness, ifwe ~~the~~had ~~revenue~~no ~~share~~other ~~earned~~off-balance ~~does~~sheet ~~not~~arrangements ~~meet~~or ~~the minimum target then the entire prepayment amount is deemed earned by the supplier~~obligations. ~~During 2014, $4.7 million of the prepaid balance was~~

6052

written off as it was determined that the estimated revenue share of the supplier will not be met within the grace period. As of December 31, 2014, there are no prepaid revenue share balances on the Company's balance sheet.

As of December 31, 2014, other than the operating leases in the normal course of business and the guaranteed revenue share arrangement discussed above, we had no other off-balance sheet arrangements or obligations.

Emerging Growth Company Status

We are an “emerging growth company” as defined in the ~~Jumpstart Our Business Startups Act (“~~JOBS Act”), and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” See “Risk Factors-: Risks ~~related~~Related to ~~our~~Our ~~business-~~Business. As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from some disclosure requirements.”

Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably chosen to forego this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards must continue for as long as we remain an emerging growth company.

We will remain an “emerging growth company” until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1 .0 billion or more; (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement; (iii) the date on which we have, during the previous three-‑year period, issued more than $1.0 billion in non-‑convertible debt; or (iv) the date on which we are deemed a “large accelerated issuer” as defined under the federal securities laws.

Critical Accounting Policies

Our critical accounting policies are those that we believe are most important to the presentation of our financial position and results and that require the most difficult, subjective or complex judgments. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP with no need for the application of judgment. For more information, see Note 2 to the audited consolidated financial statements included in this Annual Report. In certain circumstances, the preparation of our consolidated ~~and combined~~ financial statements in conformity with GAAP requires us to use our judgment to make certain estimates and assumptions. These estimates affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We believe the assumptions and other considerations used to estimate amounts reflected in our ~~Predecessor's combined financial statements and Successor's~~ consolidated financial statements are appropriate. However, if actual experience differs from the assumptions and other considerations used in estimating amounts reflected in the financial statements, the resulting changes could have a material adverse effect on our consolidated ~~and combined~~ results of operations and financial condition. We believe the policies described below are our most critical accounting policies.

Accounting for Business Combinations

We account for business combinations, where the business is acquired from an unrelated third party, under the acquisition method of accounting in accordance with FASB ASC 805, Business Combinations, which requires the acquired assets, including separately identifiable intangible assets, and assumed liabilities to be recorded as of the acquisition date at their respective fair values. Any excess of the purchase price over the fair value of assets, including separately identifiable intangible assets and liabilities acquired, is allocated to goodwill. Goodwill is allocated to the appropriate segments which benefited from the business combination when the goodwill arose.

The allocation of the purchase price to the fair value of acquired assets and liabilities involves assessments of the expected future cash flows associated with individual assets and liabilities and appropriate discount rates as of the date of the acquisition. Where appropriate, we consult with external advisors to assist with the determination of fair value. For non-observable market values, fair value has been determined using accepted valuation principles (e.g., relief from royalty method). Subsequent changes in our assessments may trigger an impairment loss that would be recognized in the condensed statement of comprehensive income (loss).

We believe that the key areas of subjectivity in relation to the allocation of purchase consideration involve determining the acquisition date fair value of identifiable intangible assets, computer hardware and other property and developed technology and content, and the measurement of deferred revenue. We detremine separately identifiable intangible assets in existence as at the date of acquisition. Using market participant assumptions and recognized valuation 53

62We believe that the key areas of subjectivity in relation to the allocation of purchase consideration involve determining the acquisition date fair value of identifiable intangible assets, computer hardware and other property and developed technology and content, and the measurement of deferred revenue. We determine separately identifiable intangible assets in existence as at the date of acquisition. Using market participant assumptions and recognized valuation techniques, values are determined for these intangible assets. These valuation techniques require various assumptions including future levels of profitability; assumed royalty rates for relief from royalty valuations; and appropriate discount rates to present value the estimated cash flows. An assessment of useful lives is also required to establish future amortization expense. All of these assumptions and the resulting valuations are reviewed and approved by management.

techniques, values are determined for these intangible assets. These valuation techniques require various assumptions including future levels of profitability; assumed royalty rates for relief from royalty valuations; and appropriate discount rates to present value the estimated cash flows. An assessment of useful lives is also required to establish future amortization expense. All of these assumptions and the resulting valuations are reviewed and approved by management.

Revenue Recognition

We recognize revenue when the (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured.

Subscription-Based Products

Subscription-based revenues from sales of products and services that are delivered under a contract over a period of time are recognized on a straight line basis over the term of the subscription. Where applicable, usage fees above a base period fee are recognized as services are delivered. Subscription revenue received or receivable in advance of the delivery of services or publications is included in deferred revenue.

Multiple element arrangements

The Company’s hosting arrangements are typically comprised of two deliverables: (1) the design, production, testing and installation of the customer's database (implementation phase); and (2) the provision of ongoing data management and support services in conjunction with the licensed data and subscription of software data or application (on-going service phase, hosting or subscription). Such deliverables are accounted for as separate units of accounting. Revenue is allocated to deliverables based upon relative best estimate of selling price (“ESP”). The objective of ESP is to determine the price at which the Company would offer each unit of accounting to customers if each unit were sold regularly on a standalone basis. The Company uses a cost plus a reasonable margin approach to determine ESP for each deliverable. Revenue related to implementation phase is recognized using a proportional performance model, with reference to labor hours. Revenue related to ongoing services, hosting or subscription is recognized on a straight line basis over the applicable service period, provided that all other relevant criteria are met.

Software-related products and services

Certain arrangements include implementation services as well as term licenses to software and other software related elements, such as post contract customer support (PCS). Revenues from implementation services associated with installed software model arrangements are accounted for separately using the proportional performance model, with reference to labor hours as discussed above. However, the software data installed and related PCS deliverable have no separate standalone value to the customers; therefore, revenue cannot be allocated to the individual elements, and as such are deferred until either (a) all elements within the arrangement have been delivered or (b) the undelivered elements within the arrangement qualify under one of the exceptions listed in FASB ASC paragraph 985-605-25-10. Once the initial database or software has been provided to customer and is ready to use, the recognition of revenue for the arrangement depends upon whether (and when) the ongoing data management services are considered to be delivered (thus permitting revenue to be recognized ratably over the remainder of the PCS period). The data management services and PCS are both considered to be delivered consistently throughout the contract term (i.e. the data management services and PCS are delivered simultaneously and over an identical period of time), and thus a ratable recognition pattern best approximates the rendering of both services.

If the implementation services do not qualify for separate accounting, they are recognized together with the related software and subscription revenues on a straight line basis over the term of service.

Developed Technology and Content

Certain costs incurred in connection with software and data content to be used internally are capitalized once a project has progressed beyond a conceptual, preliminary stage to that of application development stage. Costs that qualify for capitalization include both internal and external costs, but are limited to those that are directly related to a specific ~~project. The capitalized amounts, net of accumulated amortization, are included in "Developed technology and content, net" on the balance sheet.~~

project. The capitalized amounts, net of accumulated amortization, are included in "Developed technology and content, net" on the balance sheet.

Developed technology and content is stated at cost less accumulated amortization. Amortization is computed based on the expected useful life of three to ten years.

Goodwill and Other Identifiable Intangible Assets

In accordance with the accounting standards for business combinations, we record the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. Identifiable intangible assets are recognized as assets apart from goodwill if they arise from contractual or other legal rights, or if they are capable of being separated from the acquired business and sold, transferred, licensed, rented or exchanged. The largest intangible assets from our businesses is the value of goodwill which include assembled workforce since the success of our business largely depend on the management, marketing and business development, contracting, and technical skills and knowledge of our employees. Goodwill equals the amount of the purchase price of the business acquired in excess of the sum of the fair value of identifiable acquired assets, both tangible and intangible, less the fair value of liabilities assumed. As of December 31, ~~2014~~2015, goodwill and other identifiable intangible assets amounted to $498.8 million and $~~382~~334.91 million, respectively.

The most significant identifiable intangible assets for our business acquisitions is customer relationships and trademarks and trade names. The fair value for these identifiable intangible assets were determined, as of the date of acquisition. Customer relationships were valued using an income approach, taking into account the expected revenue growth and attrition rates of the customers and the estimated capital charges for the use of other net tangible and identifiable net intangible assets. Trademarks and trade names were valued using the relief from royalty method under the income approach to estimate the cost savings that accrue to the Company which would otherwise have gone to pay royalties or license fees on revenues earned through the use of the asset.

All identifiable intangible assets are amortized over their estimated useful lives as the economic benefits are consumed. We review identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable in accordance with the accounting standards for long-lived assets. In addition, we make assumptions about the useful lives of our intangible assets. Intangible assets (including our developed technology and content) are amortized over their useful lives, which have been derived based on an assessment of such factors as attrition, expected volume and economic benefit. We evaluate the useful lives of our intangible assets on an annual basis. Any changes to our estimated useful lives could cause depreciation and amortization to increase or decrease.

Carrying value of goodwill in each reporting unit is formally reviewed every November 1st of each year or whenever events or circumstances occur for possible impairment. A reporting unit is an operating segment, as defined by the segment reporting accounting standards, or a component of an operating segment. A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available and is reviewed by operating segment management. The Company had 5 reporting units at December 31, ~~2014~~2015 (and at November 1, ~~2014~~2015 when our annual goodwill impairment assessment was completed) ~~compared to 3 reporting units at December 31, 2013 (and at November 1, 2013)~~. The ~~increase in the number of our reporting units was due to a realignment of the~~ Company’'s ~~business under 2 business segments (Commercial and Government) during the second quarter of 2014, certain acquisitions during the year, and due to the changes in management~~ reporting ~~structure and how segment managers monitor and reviews the discrete financial information of components within the operating segments. The reporting~~ units that were determined during the realignment in second quarter had fair values in excess of their carrying values and the related goodwill for each was reallocated and reassigned in the current reporting unit based on relative fair value approach. Currently, the Company's reporting unites are (1) Payer solutions (2) Life Science (3) Provider Solutions (4) Consulting Services (Simpler) and (5) Government.

We consider the following to be important factors that could trigger an impairment review and may result in an impairment charge: (a) significant and sustained underperformance relative to historical or projected future operating results; (b) identification of other impaired assets within a reporting unit; (c) significant and sustained adverse changes in business climate or regulations; (d) significant negative changes in senior management; (e) significant changes in the manner of use of the acquired assets or the strategy for the Company's overall business; and (f) significant negative industry or economic trends.

We did not utilize a qualitative assessment approach for the November 1, ~~2014~~2015 goodwill impairment test, as we chose instead to complete the quantitative two-step testing process for each reporting unit. The first step is a comparison of each reporting unit’s fair value to its carrying value. If the carrying value of the reporting unit is greater than its fair value, there is an indication that impairment may exist and the second step must be performed to measure the amount of impairment loss, if any. The impairment review process contains uncertainties because it requires us to make market participant assumptions and to apply judgment to estimate industry economic factors and the profitability and growth

6455

~~each reporting unit’s fair value to its carrying value. If the carrying value~~ of the reporting unit is greater than its fair value, there is an indication that impairment may exist and the second step must be performed to measure the amount of impairment loss, if any. The impairment review process contains uncertainties because it requires us to make market participant assumptions and to apply judgment to estimate industry economic factors and the profitability and growth of future business strategies to determine estimated future cash flows and an appropriate discount rate. Since quoted market prices for our reporting units are not available, we estimate the fair value of the reporting unit or asset group using the income approach and the market approach. The income approach uses cash flow projections. Inherent in our development of cash flow projections are assumptions and estimates derived from a review of our operating results, approved business plans, expected growth rates, capital expenditures and cost of capital, similar to those a market participant would use to assess fair value. We also make certain assumptions about future economic conditions and other data. Many of the factors used in assessing fair value are outside the control of management, and these assumptions and estimates may change in future periods. The use of different assumptions would increase or decrease the estimated value of future cash flows and would have increased or decreased any impairment charge taken. Future outcomes may also differ. If we fail to achieve estimated volume and pricing targets, experience unfavorable market conditions or achieve results that differ from our estimates, then revenue and cost forecasts may not be achieved and we may be required to recognize additional impairment charges. The following are key assumptions we use in making cash flow projections:

•

Business projections - we make assumptions about the demand for our products solution and platforms. These assumptions drive our planning assumptions for pricing, retention and renewal rates and expected revenue from new projects. We also make assumptions about our cost levels. These projections are derived using our internal business plans that are updated at least annually and reviewed by our Board of Directors.

•

Discount rate - when measuring possible impairment, future cash flows are discounted at a rate that is consistent with a weighted-average cost of capital that we anticipate a potential market participant would use. The determination of the discount rates for each reporting unit includes factors such as the risk-free rate of return and the return an outside investor would expect to earn based on the overall level of inherent risk. The determination of expected returns includes consideration of the beta (a measure of volatility) of traded securities of comparable companies and risk premiums of reporting units based on international cost of capital methods. Discount rate assumptions for these reporting units take into account our assessment of the risks inherent in the future cash flows of the respective reporting unit and our weighted-average cost of capital. We also review marketplace data to assess the reasonableness of our computation of our overall weighted average cost of capital and, when available, the discount rates utilized for each of these reporting units.


•	Economic projections - Assumptions regarding general economic conditions are included in and affect our assumptions regarding industry revenues and pricing estimates. These macro-economic assumptions include, but are not limited to, industry sales volumes and interest rates.


•	Long-term growth rate - A growth rate is used to calculate the terminal value of the business, and is added to the present value of the debt-free cash flows. The growth rate is the expected rate at which a business unit’s earnings stream is projected to grow beyond the planning period.

•

Market comparables - We select comparable companies in which our reporting units operate based on similarity of type of business, relative size, financial profile, and other characteristics of those companies compared to our reporting units. Trailing and forward revenue and earnings multiples derived from these comparable companies are applied to financial metrics of these reporting units to determine their estimated fair values, adjusted for an estimated control premium.

Under the market approach, the Company estimated the fair value of the reporting units based on peer company multiples of earnings before interest, taxes, depreciation and amortization (EBITDA). The Company also considered the multiples at which businesses similar to the reporting units have been sold or offered for sale. The combined income approach and market approach to determine the fair value of each reporting unit received a weighted percentage of 70% and 30%, respectively, except for the Government which received a weighting of 100.0% ~~percent~~ under income approach given the early stage nature of the reporting unit, its earnings are not yet normalized, and that management has the most insight into the future direction of the Government business.

65As of November 1, 2015, the fair value of each reporting unit using the combination of the income approach and the market approach exceeded its carrying value.

~~As of November 1, 2014, the fair value of each reporting unit using the combination of the income approach and the market approach exceeded its carrying value.~~ 56

We evaluated the sensitivity of the discounted cash flow fair value estimates for each reporting unit, which were used for our goodwill impairment assessment, by separately assessing the impact on the estimated fair value of each reporting unit by: (1) increasing the risk adjusted discount rate (WACC) by 100 basis points, or (2) reducing the Terminal Growth Rate by 100 basis points, compared to those used in our estimated fair value calculations, while holding all other assumptions unchanged. All of our reporting units would have had a fair value in excess of their carrying value under both scenarios~~, except for the Government reporting unit~~. In ~~each of the two scenarios, the fair value of the Government reporting unit would have been less than its carrying value and step two of the impairment assessment would have been required. In~~ addition, we applied hypothetical decreases to the estimated fair values of each of our reporting units. We determined that a decrease in the excess of fair value over carrying value of more than 35% would be required before any reporting unit, with the exception of Government and Consulting services reporting units, would have a carrying value in excess of its fair value.

The table below presents the: (1) discount rates, (2) Long-term growth rates, (3) ~~2015~~2016 cash flows (4) five-year average cash flow growth rate, (5) goodwill balance as of November 1, ~~2014~~2015, (6) Fair values, (7) carrying values as of November 1, ~~2014~~2015, and (8) excess fair value percentage and dollar amount, for each of these ~~four~~five reporting units.

	Assumptions				Estimated cash flows										Excess of FV over CV
	Discount rates		Long-term growth rates		~~2015~~2016		Average Growth rate (~~2015~~2016-~~2019~~2020)		Goodwill balance		Fair values (FV)		Carrying values (CV)		Amount		%
Payer Solution	13.3	%	3.0	%	$	29.5	9.0	%	$	121.7	$	370.9	$	253.0	$	117.9	47	%
Payer Solutions	12.9	%	3.0	%	$	25.1	6.1	%	$	121.7	$	338.7	$	241.1	$	97.6	40	%
Provider Solution	12.8	%	3.0	%	55.3		6.0	%	250.6		720.3		434.3		286.0		66	%
Provider Solutions	12.4	%	3.0	%	40.5		5.4	%	250.6		547.5		413.5		134.0		32	%
Life Science	1312.39	%	3.0	%	7.63		118.04	%	3945.72		~~103~~107.97		7797.26		2610.71		3510	%
Consulting services	15.86	%	3.0	%	69.53		1620.09	%	2835.6		77110.35		7068.68		641.7		961	%
Government (a)	12.89	%	3.0	%	27.83		3776.09	%	45.7		~~115~~174.48		~~111~~110.36		464.12		458	%

(a) the expected increase in cash flows on government reporting unit was due to several large long-term contracts won on federal and state channels which include data integration, warehousing and decision support systems.

As discussed previously, in addition to the annual goodwill impairment assessment, we review goodwill for impairment whenever events or changes in circumstances indicate that the carrying amount of a reporting unit’s goodwill may not be recoverable. As such, depending on the circumstances and outcomes of the operations of our reporting units, we may be required to review goodwill for impairment for one or more of our reporting units prior to the next annual assessment (November 1, ~~2015~~2016), if the expected annual revenues from our government and consulting services reporting unit will be ~~were~~ significantly unfavorable due to unanticipated changes, reductions or cancellation of anticipated contracts; and depending on the outcome of the ability of the other reporting units to achieve: (a) ~~2015~~2016 projected revenues, operating income and cash flow, and (b) the win-loss experience on ~~2015~~2016 contract re-competitions and new business pursuits.

Impairment of Long Lived Assets

We periodically re-evaluate carrying values and estimated useful lives of long lived assets whenever events or changes in circumstances indicate that the carrying amount of the related asset may not be recoverable. We use estimates of undiscounted cash flows from long lived assets to determine whether the book value of such assets is recoverable over the assets' remaining useful lives. If an asset is determined to be impaired, the impairment is measured by the amount by which the carrying value of the asset exceeds its fair value. An impairment charge would have a negative impact on net income. As of December 31, ~~2014~~2015, the Company concluded that there ~~were~~was no impairment on long lived assets.

Income Taxes

We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities for each of our ~~out~~ entities in each tax jurisdiction. We regularly review our deferred tax assets for recoverability and establish a valuation allowance, if necessary, based on historical taxable income, projected future taxable income and the expected timing of the reversals of existing temporary differences to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized. While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event we were to determine that we would not be able to realize all or part of our deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made.

considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event we were to determine that we would not be able to realize all or part of our deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made.

We recognize liabilities for uncertain tax positions based on the two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. This measurement step is inherently difficult and requires subjective estimations of such amounts to determine the probability of various possible outcomes. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. Our policy is to include interest and penalties in our provision for income taxes.

As of December 31, 2015 and December 31, 2014, we determined that it is not more likely than not that we will realize the net deferred tax asset of $29.1 million and $1.3 million, respectively, and recorded a full valuation allowance on the year -end balance.

Other

We have made certain other estimates that, while not involving the same degree of judgment as the estimates described above, are important to understanding our financial statements. These estimates are in the areas of measuring our obligations related to our allowance for doubtful accounts, litigation accruals in the normal course of business, customers' discounts, severance and other employee benefit accruals.

Recent Accounting Pronouncements

In ~~March~~May ~~2013~~2014, as part of its ongoing efforts to assist in the convergence of GAAP and International Financial ~~Accounting~~Reporting Standards, ~~Board~~the (“FASB”) issued ~~guidance~~a onnew astandard ~~parent’s~~related ~~accounting~~to ~~for~~revenue ~~the~~recognition. ~~cumulative~~Under ~~translation~~the ~~adjustment~~new ~~upon~~standard, ~~derecognition~~recognition of revenue occurs when a ~~subsidiary~~customer orobtains ~~group~~control of ~~assets~~promised ~~within~~goods aor ~~foreign~~services in an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services. ~~This~~In ~~new~~addition, ~~guidance~~the standard requires ~~that~~disclosure of the ~~parent~~nature,

Truven Holding Corp.

Truven Health Analytics Inc.

(Exact name of registrant parent guarantor as specified in its charter)

(Exact name of registrant parent guarantor as specified in its charter)

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

Filing Compare · Truven Holding Corp.