Truven Holding Corp. - FORM 10-K/A

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K/A

(Amendment No. 1)

(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

[ ] 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 E. Eisenhower 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.

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

DOCUMENTS INCORPORATED BY REFERENCE-None

EXPLANATORY NOTE

This Amendment No.1 on Form 10-K/A amends the Annual Report on Form 10-K for the fiscal year ended December 31, 2014 of Truven Holdings Corp. (the “Company”) and Truven Health Analytics Inc., as filed with the Securities and Exchange Commission on March 13, 2015 (the “Form 10-K”). This Amendment No. 1 is being filed to amend Part IV- Exhibit 15 - Exhibits and Financial Statement Schedules of the Form 10-K, page F-3, solely for the purpose of amending the independent registered public accounting firm’s report date ("report date") because the dual date was inadvertently omitted from the predecessor report date in the Form 10-K. No other changes are made to the Form 10-K. This Amendment No. 1 does not reflect events occurring after the filing of the Form 10-K, nor does it modify or update in any way the disclosures contained in the Form 10-K, including the Company’s financial statements and the footnotes thereto. Accordingly, this Amendment should be read in conjunction with the Form 10-K. The information on the facing page is as of the date of the filing of the Form 10-K.

PART IV

ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

a) The following documents are filed as a part of this report:

(1) Financial Statements


•	The financial statements and notes thereto annexed to this report beginning on page F-1.

(2) Financial Statement Schedules


•	Schedule of Valuation and Qualifying Accounts Disclosure

Exhibit Index



EXHIBIT NO.	DESCRIPTION
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) / 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) / 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
101	Interactive Data Files Pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of December 31, 2014 and 2013, (ii) Consolidated and Combined Statements of Comprehensive Income (Loss) for the year ended December 31, 2014, December 31, 2013, period from inception (April 20, 2012) to December 31, 2012, and period from January 1, 2012 to June 6, 2012, (iii) Consolidated and Combined Statements of Cash Flows for the year ended December 31, 2014 and 2013, period from inception (April 20, 2012) to December 31, 2012, and period from January 1, 2012 to June 6, 2012, (iv) Consolidated and Combined Statement of Equity as of December 31, 2014 and 2013, December 31, 2012, and June 6, 2012, and (v) Notes to Consolidated and Combined Financial Statements.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



TRUVEN HOLDING CORP.		TRUVEN HEALTH ANALYTICS INC.
(Registrant)		(Registrant)

By: /s/ MIKE BOSWOOD		By: /s/ MIKE BOSWOOD
Mike Boswood, President and Chief Executive Officer		Mike Boswood, President and Chief Executive Officer
Date: June 23, 2015		Date: June 23, 2015

Truven Holding Corp.

Index to Financial Information



Audited Consolidated and Combined Financial Statements

Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets - As of December 31, 2014 and 2013 (Successor)	F-4

Consolidated and Combined Statements of Comprehensive (Loss) - For the years ended December 31, 2014 (Successor) and December 31, 2013 (Successor), period from inception (April 20, 2012) to December 31, 2012 (Successor), and period from January 1, 2012 to June 6, 2012 (Predecessor)	F-5

Consolidated and Combined Statements of Cash Flows - For the years ended December 31, 2014 (Successor) and December 31, 2013 (Successor), period from inception (April 20, 2012) to December 31, 2012 (Successor), and period from January 1, 2012 to June 6, 2012 (Predecessor)	F-6

Consolidated and Combined Statements of Equity - As of December 31, 2014 (Successor), December 31, 2013 (Successor), December 31, 2012 (Successor), and June 6, 2012 (Predecessor)	F-8

Notes to Consolidated and Combined Financial Statements	F-9

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Truven Holding Corp.

In our opinion, the accompanying consolidated balance sheets as of December 31, 2014 and 2013 and the related consolidated statements of comprehensive loss, of equity, and of cash flows for the years ended December 31, 2014 and 2013, and for the period from April 20, 2012 (date of inception) through December 31, 2012 present fairly, in all material respects, the financial position of Truven Holding Corp. and its subsidiaries (the “Successor”) at December 31, 2014 and 2013, and the results of their operations and their cash flows for the years ended December 31, 2014 and 2013, and for the period from April 20, 2012 (date of inception) through December, 31, 2012 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a) (2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

New York, New York

March 13, 2015

F-2

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Truven Holding Corp.

In our opinion, the accompanying combined statements of comprehensive income loss, of equity, and of cash flows for the period from January 1, 2012 through June 6, 2012 present fairly, in all material respects, the results of operations and cash flows of Thomson Reuters Healthcare (the "Predecessor"), a business of Thomson Reuters Corporation, for the period from January 1, 2012 through June 6, 2012, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a) (2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related combined financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

New York, New York

April 1, 2013 except for the change in the composition of reportable segments discussed in Note 17, to the combined financial statements, as to which the date is October 24, 2014

F-3

Truven Holding Corp.

Consolidated Balance Sheets

(with the exception of common stock, in thousands of dollars, unless otherwise indicated)



	December 31, 2014			December 31, 2013
Assets
Current assets
Cash and cash equivalents	$	12,604		$	10,255
Trade and other receivables (less allowances of $1,244 and $1,530, respectively)	120,214			97,798
Prepaid expenses and other current assets	30,251			24,208
Deferred tax assets	621			—
Total current assets	163,690			132,261
Computer hardware and other property, net	37,435			48,037
Developed technology and content, net	134,078			148,637
Goodwill	498,820			457,677
Other identifiable intangible assets, net	382,879			362,014
Other noncurrent assets	16,187			15,977
Total assets	$	1,233,089		$	1,164,603
Liabilities and Equity
Current liabilities
Accounts payable and accrued expenses	$	67,228		$	53,376
Deferred revenue	129,129			128,392
Current portion of long-term debt	6,360			5,350
Capital lease obligation	664			1,596
Deferred tax liabilities	—			711
Taxes payable	173			189
Total current liabilities	203,554			189,614
Deferred revenue	5,456			2,096
Capital lease obligation	1,374			2,102
Long-term debt	971,362			866,908
Deferred tax liabilities	621			22,027
Other noncurrent liabilities	3,599			2,573
Total liabilities	1,185,966			1,085,320
Equity
Common stock—$ 0.01 par value; 1,000 shares authorized, 1 share issued and outstanding at December 31, 2014 and 2013	—			—
Additional paid-in capital	483,550			478,549
Accumulated deficit	(436,123		)	(399,101		)
Foreign currency translation adjustment	(304		)	(165		)
Total equity	47,123			79,283
Total liabilities and equity	$	1,233,089		$	1,164,603

The accompanying notes are an integral part of these consolidated and combined financial statements.

F-4

Truven Holding Corp.

Consolidated and Combined Statements of Comprehensive Loss

(in thousands of dollars, unless otherwise indicated)



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

Revenues, net	$	544,475		$	492,702		$	241,786		$	208,998
Operating costs and expenses Cost of revenues, excluding depreciation and amortization	(292,999		)	(265,541		)	(141,558		)	(112,050		)
Selling and marketing, excluding depreciation and amortization	(57,413		)	(56,157		)	(30,958		)	(25,917		)
General and administrative, excluding depreciation and amortization	(55,937		)	(41,042		)	(13,042		)	(27,173		)
Allocation of costs from Predecessor Parent and affiliates	—			—			—			(10,003		)
Depreciation	(22,350		)	(21,219		)	(6,700		)	(6,805		)
Amortization of developed technology and content	(38,752		)	(31,894		)	(15,470		)	(12,460		)
Amortization of other identifiable intangible assets	(45,402		)	(34,460		)	(19,527		)	(8,226		)
Goodwill impairment	—			(366,662		)	—			—
Other operating expenses	(20,784		)	(35,038		)	(49,622		)	(18,803		)
Total operating costs and expenses	(533,637		)	(852,013		)	(276,877		)	(221,437		)
Operating Income (loss)	10,838			(359,311		)	(35,091		)	(12,439		)
Interest expense	(69,616		)	(70,581		)	(49,014		)	—
Interest income	—			—			—			3
Other finance costs	(930		)	(24		)	—			—
Loss before income taxes	(59,708		)	(429,916		)	(84,105		)	(12,436		)
Benefit from income taxes	22,686			84,927			29,993			4,803
Net loss	$	(37,022	)	$	(344,989	)	$	(54,112	)	$	(7,633	)

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

The accompanying notes are an integral part of these consolidated and combined financial statements.

F-5

Truven Holding Corp.

Consolidated and Combined Statements of Cash Flows

(in thousands of dollars, unless otherwise indicated)



	Year ended December 31,			Year ended December 31,			From inception (April 20, 2012) to December 31,			January 1, 2012 to June 6,
	2014			2013			2012			2012
	Successor									Predecessor
Operating activities
Net loss	$	(37,022	)	$	(344,989	)	$	(54,112	)	$	(7,633	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation	22,350			21,219			6,700			6,805
Amortization of developed technology and content	38,752			31,894			15,470			12,460
Amortization of other identifiable intangible assets	45,402			34,460			19,527			8,226
Amortization of debt issuance costs	2,535			2,557			1,626			—
Amortization of debt discount	3,266			2,643			1,101			—
Amortization of unfavorable leasehold interest	—			(94		)	(60		)	—
Loss on extinguishment of debt	—			2,353			5,110			—
Goodwill impairment charge	—			366,662			—			—
Asset impairment charge	4,706			—			—			—
Deferred income tax (benefit) provision	(22,864		)	(85,398		)	(30,075		)	543
Share-based compensation expense	1,271			1,457			329			2,519
Retention bonus in conjunction with the Acquisition	—			1,378			8,635			5,800
Changes in operating assets and liabilities:
Trade and other receivables	(5,228		)	7,644			(27,544		)	32,869
Prepaid expenses and other current assets	(9,303		)	(5,690		)	(6,436		)	388
Accounts payable and accrued expenses	2,212			(40,385		)	39,593			(21,582		)
Bank overdrafts	—			—			—			(2,630		)
Deferred revenue	(789		)	2,815			47,433			(19,739		)
Income taxes	(71		)	107			—			(514		)
Other, net	—			2			55			294
Net cash provided by (used in) operating activities	45,217			(1,365		)	27,352			17,806
Investing activities
Acquisitions, net of cash acquired	(109,406		)	—			(1,249,402		)	—
Increase in notes receivable from VCPH Holding LLC	—			(300		)	—			—
Capital expenditures	(32,661		)	(43,485		)	(31,270		)	(10,285		)
Net cash used in investing activities	(142,067		)	(43,785		)	(1,280,672		)	(10,285		)


Continued on next page

F-6





	Year ended December 31,			Year ended December 31,			From inception (April 20, 2012) to December 31,			January 1, 2012 to June 6,
	2014			2013			2012			2012
	Successor									Predecessor
Financing activities
Issuance of common stock	—			—			464,400			—
Additional capital contribution	—			2,350			—			—
Proceeds from senior term loan, net of original issue discount	—			—			517,125			—
Proceeds from senior notes, including premium or net of original issue discount	41,200			—			325,007			—
Proceeds from revolving credit facility	30,000			30,000			—			—
Repayment of revolving credit facility	(60,000		)	—			—			—
Principal repayment of senior term loan	(6,108		)	(5,332		)	(2,638		)	—
Proceeds from senior term loan related to refinancing	100,000			86,105			166,995			—
Principal repayment of senior term loan related to refinancing	—			(74,773		)	(166,995		)	—
Premium payment for refinancing the credit facility	—			(5,760		)	(5,153		)	—
Payment of debt issuance costs	(4,095		)	—			(21,616		)	—
Payment of capital lease obligation	(1,659		)	(825		)	—			—
Decrease in net investment of Predecessor Parent	—			—			—			(16,760		)
Decrease in notes receivable from Predecessor Parent	—			—			—			9,247
Net cash provided by (used in) financing activities	99,338			31,765			1,277,125			(7,513		)
Effect of exchange rate changes in cash	(139		)	(165		)	—			—
Increase (decrease) in cash and cash equivalents	2,349			(13,550		)	23,805			8
Cash and cash equivalents
Beginning of period	10,255			23,805			—			70
End of period	$	12,604		$	10,255		$	23,805		$	78



Supplemental cash flow disclosures
Interest paid	$	63,258	$	62,095	$	36,299	$	—
Income taxes paid	232		420		—		129

The accompanying notes are an integral part of these consolidated and combined financial statements.

F-7

Truven Holding Corp.

Consolidated and Combined Statements of Equity

(in thousands of dollars, unless otherwise indicated)



Predecessor											Net investment of Predecessor Parent
Balance at December 31, 2011											$	354,299
Decrease in net investment of Predecessor Parent											(8,440		)
Net loss											(7,633		)
Balance at June 6, 2012											$	338,226

Successor	Common stock		Additional paid-in capital		Accumulated deficit			Accumulated other comprehensive loss			Total equity
Successor, April 20, 2012 to December 31, 2012
Capital contribution	$	—	$	464,400	$	—		$	—		$	464,400
Retention bonus in conjunction with the Prior Acquisition	—		8,635		—			—			8,635
Share-based compensation expense	—		329		—			—			329
Net loss	—		—		(54,112		)	—			(54,112		)
Balance at December 31, 2012	$	—	$	473,364	$	(54,112	)	$	—		$	419,252
Additional capital contribution	—		2,350		—			—			2,350
Retention bonus in conjunction with the Acquisition	—		1,378		—			—			1,378
Share-based compensation expense	—		1,457		—			—			1,457
Foreign currency translation adjustment	—		—		—			(165		)	(165		)
Net loss	—		—		(344,989		)	—			(344,989		)
Balance at December 31, 2013	$	—	$	478,549	$	(399,101	)	$	(165	)	$	79,283
Additional capital contribution	—		3,730		—			—			3,730
Share-based compensation expense	—		1,271		—			—			1,271
Foreign currency translation adjustment	—		—		—			(139		)	(139		)
Net loss	—		—		(37,022		)	—			(37,022		)
Balance at December 31, 2014	$	—	$	483,550	$	(436,123	)	$	(304	)	$	47,123

The accompanying notes are an integral part of these consolidated and combined financial statements.

F-8

Truven Holding Corp.

Notes to Consolidated and Combined

Financial Statements

(in thousands of dollars, unless otherwise indicated)


1.	Description of Business and Basis of Presentation

Description of the Business

On April 23, 2012, VCPH Holding Corp. (now known as Truven Holding Corp., ("Truven Holding")), an affiliate of Veritas Capital Fund Management, L.L.C. (“Veritas Capital” or the “Sponsor”), entered into the Stock and Asset Purchase Agreement with Thomson Reuters U.S. Inc. (“TRUSI”) and Thomson Reuters Global Resources (“TRGR”), both affiliates of the Thomson Reuters Corporation (“the Stock and Asset Purchase Agreement”), which the Truven Holding assigned to Wolverine Healthcare Analytics, Inc. (“Wolverine”) on May 24, 2012. Wolverine is an affiliate of The Veritas Fund IV, L.P., a fund managed by Veritas Capital. Pursuant to the Stock and Asset Purchase Agreement, on June 6, 2012, Wolverine acquired 100% of the equity interests of Thomson Reuters (Healthcare) Inc. (“TRHI”) from TRUSI and certain other assets and liabilities of the Thomson Reuters Healthcare business from TRGR and its affiliates (the “Prior Acquisition”). Upon the closing of the Prior Acquisition, Wolverine merged with and into TRHI, with TRHI surviving the merger (the “Merger”) as a direct wholly-owned subsidiary of the Truven Holding, and subsequently changed its name to Truven Health Analytics Inc. (“Truven”). Following the Merger, the assets acquired and liabilities assumed are owned by Truven, which remains a direct wholly-owned owned subsidiary of the Truven Holding.

Truven provides analytic solutions and service offerings across the full spectrum of healthcare constituents, including state and federal government agencies, hospitals, health systems, employers, health plans, life sciences companies and consumers. Truven operates and manages its business under two reportable segments: Commercial and Government.

Truven Holding was formed on April 20, 2012 by Veritas Capital for the purpose of consummating the Prior Acquisition and has had no operations from inception other than its investment in Truven and its subsidiaries (collectively referred to as the "Company").

Basis of Presentation

The consolidated and combined financial statements of Successor and combined financial statements of our Predecessor have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”). All significant intercompany balances and transactions have been eliminated in the consolidated and combined financial statements.

Successor-The consolidated financial statements as of December 31, 2014 and 2013, and for the years ended December 31, 2014 and 2013, and for the periods from April 20, 2012 through December 31, 2012 include the accounts of the Company 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-The accompanying combined financial statements of the Thomson Reuters Healthcare business (our “Predecessor”) prior to the Prior Acquisition, include the combined financial statements of TRHI and certain assets owned by subsidiaries of Thomson Reuters Corporation (“Thomson Reuters” or the “Predecessor Parent”).

Before the Prior Acquisition, our Predecessor operated as a business unit of Thomson Reuters and not as a standalone company. TRHI was a wholly-owned indirect subsidiary of Thomson Reuters, and certain of the company's assets were owned by subsidiaries of Thomson Reuters. During the Predecessor Period, TRHI engaged in extensive intercompany transactions with Thomson Reuters and its subsidiaries related to certain support services, and Thomson Reuters allocated the cost of these services as “Allocation of costs from Predecessor Parent and affiliates” in the combined statement of comprehensive loss (see Note 18). For the Predecessor Period, the accompanying combined financial statements reflect the assets, liabilities, revenues and expenses directly attributed to the Thomson Reuters Healthcare

F-9

business as well as certain allocations by the Predecessor Parent. All significant transactions in the Predecessor Period between TRHI and other Thomson Reuters entities were included in our Predecessor's combined financial statements. The expense and cost allocations were determined on bases that were deemed reasonable by management in order to reflect the utilization of services provided or the benefit received by TRHI during the periods presented. The combined financial information included herein does not necessarily reflect the results of operations, financial position, changes in equity and cash flows of the Company in the future or what would have been reflected had we operated as a separate, standalone entity during the periods presented. The income tax benefits and provisions, related tax payments and deferred tax balances were prepared as if the Predecessor had operated as a standalone taxpayer for the Predecessor Periods presented.

“Notes receivable from Predecessor Parent” relates to a specific agreement between TRHI and the Predecessor Parent. All other intercompany activity with the Predecessor Parent or affiliates, which was not subject to written loan agreements, was included in “Net investment of Predecessor Parent”. All transactions recorded through the “Net investment of Predecessor Parent,” are reflected as financing activities in the accompanying combined statements of cash flows.

Truven Holding is a wholly-owned subsidiary of VCPH Holdings LLC (“Holdings LLC”) and has no operations other than its investment in Truven and its subsidiaries. Therefore, the consolidated and combined financial statements of the Company reflect the financial position and results of operations of Truven.

2. Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions that the Company may undertake in the future, actual results could differ from those estimates. These estimates include, but are not limited to, allowance for doubtful accounts, realization of deferred tax assets, the determination of fair values used in the assessment of the realizability of long lived assets, goodwill and identifiable intangible assets, purchase accounting and the allocation of certain expenses to TRHI by TRUSI with respect to the Predecessor combined financial statements.

Acquisitions

Acquisitions are accounted for using the acquisition method in accordance with the Financial Accounting Standards Board (“FASB”) ASC Topic 805, Business Combinations, which requires that the total cost of an acquisition be allocated to the tangible and intangible assets acquired and liabilities assumed based upon their respective fair values at the date of acquisition. The excess of the cost of an acquired entity over the amounts assigned to assets acquired and liabilities assumed in a business combination is recognized as goodwill. The results of acquired businesses are included in the consolidated and combined financial statements from the dates of acquisition.

Transaction costs that the Company incurs in connection with an acquisition are expensed as incurred. During the measurement period the Company reports provisional information for a business combination if by the end of the reporting period in which the combination occurs the accounting is incomplete. The measurement period, however, ends at the earlier of when the acquirer has received all of the necessary information to determine the fair values or one year from the date of the acquisition. The finalization of the valuations may result in the refinement of assumptions that impact not only the recognized value of such assets, but also amortization and depreciation expense. In accordance with ASC 805 and the Company’s policy, any adjustments on finalization of the preliminary purchase accounting are recognized retrospectively from the date of acquisition.

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Revenue recognition

The Company recognizes revenue when all of the following four criteria are met:

•persuasive evidence of an arrangement exists;

•delivery has occurred or services have been rendered;

•the fee is fixed or determinable; and

•collectability is reasonably assured.

Subscription based products

Subscription 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.

Advertising costs

Costs incurred for producing and communicating advertising are expensed when incurred. Advertising expenses were $3,707 for the Successor Period ended December 31, 2014, $2,753 for the year ended December 31, 2013, $2,153 for the period from April 20, 2012 (inception) to December 31, 2012, and $1,018 for the Predecessor Period from January 1, 2012 to June 6, 2012.

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Research and development costs

Research and development (“R&D”) costs are expensed as incurred. The R&D costs expensed were $1,024 for the year ended December 31, 2014, $1,704 for the year ended December 31, 2013, $534 for the period from April 20, 2012 (inception) to December 31, 2012, and $1,586 for the Predecessor Period from January 1, 2012 to June 6, 2012.

Cash and cash equivalents

Cash and cash equivalents are comprised of cash on deposit in banks. Cash equivalents have original maturities of less than 90 days. During the Predecessor Period, TRHI and the Predecessor Parent had an agreement whereby the Predecessor Parent periodically swept TRHI’s cash receipts and funded TRHI’s cash disbursements. With the exception of activity associated with “Notes receivable from Predecessor Parent,” described below, such activity is included in “Net investment of Predecessor Parent” on the combined balance sheet.

Trade receivables and concentration of credit risk

Trade receivables are classified as current assets and are reported net of an allowance for doubtful accounts. The Company assesses the allowance for doubtful accounts periodically, evaluating general factors such as the length of time individual receivables are past due, historical collection experience, and the economic and competitive environment. Management believes that the allowances at December 31, 2014 and 2013 are adequate to cover potential credit loss.

No single customer or group of related customers accounted for more than 10% of the Company’s trade receivables as of December 31, 2014 and 2013. There was no revenue from a single customer or group of related customers that accounted for 10% or more of the Company’s revenues in the years ended December 31, 2014 and 2013, period from April 20, 2012 to December 31, 2012 and the period from January 1, 2012 to June 6, 2012.

Computer hardware and other property

Computer Hardware and Other Property are stated at cost less accumulated depreciation. Depreciation is computed on a straight line basis over the following estimated useful lives:



Computer hardware	3-5 years
Furniture, fixtures and equipment	5-7 years
Leasehold improvements	Lesser of lease term or estimated useful life

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 sheets.

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

Goodwill is tested for impairment annually on November 1 of each year, or more frequently if indications of potential impairment exist. When applicable, the Company performs a qualitative assessment (Step zero analysis) by identifying relevant events and circumstances such as industry specific trends, performance against forecasts and other indicators on a reporting unit level to determine whether it is necessary to perform the two step goodwill impairment test. For purposes of the goodwill impairment test, the reporting units of the Company, represent the components in our Commercial and Government segments that constitutes a business for which discrete financial information is available

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and segment management regularly reviews the operating results of that component. Under the two step approach, the first step is to determine the fair value of the reporting unit. Fair value is determined considering the income approach (discounted cash flow) and market approach. If the fair value of a reporting unit is less than its carrying value, this is an indicator that the goodwill assigned to that reporting unit may be impaired. In this case, the second step is to allocate the fair value of the reporting unit to the assets and liabilities of the reporting unit, as if they had just been acquired in a business combination for the fair value of the reporting unit. The excess of the fair value of the reporting unit over the amounts allocated to its assets and liabilities is referred to as the implied fair value of goodwill. The implied fair value of the reporting unit’s goodwill is then compared to the actual carrying value of goodwill. If the implied fair value is less than the carrying value, an impairment loss is recognized for that excess.

Identifiable intangible assets with finite lives are amortized over their estimated useful lives. The carrying values of identifiable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The estimated useful lives for these identifiable intangible assets are as follows:



Trade names	3-15 years
Customer relationships	3-12 years
Backlog	1- 2 years
Non-compete agreements	2-3 years

Impairment of long lived assets

Management evaluates the impairment of long-lived assets whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. The initial test for impairment compares the carrying amounts with the sum of undiscounted cash flows related to the asset. If the carrying value is greater than the undiscounted cash flows of the asset, the asset is written down to its estimated fair value.

Deferred Financing Costs

Deferred financing costs are incurred to obtain long-term financing and are amortized over the terms of the related debt. The amortization of deferred financing costs is classified as interest expense in the statement of comprehensive income ( loss) and totaled $2,535 for the year ended December 31, 2014, $2,557 for the year ended December 31, 2013 and $1,626 for the period from April 20, 2012 to December 31, 2012. The unamortized portion of deferred financing costs amounted to $13,648 and $13,902 as of December 31, 2014 and December 31, 2013, respectively.

Debt and Original Issue Discounts

On initial recognition, debts are measured at face value less original issue discount. Subsequent to initial recognition, interest bearing debts are measured at amortized cost. Original issue discount is amortized based on an effective interest rate method over the term of the debt. Original issue discount is presented net of debt in the Company’s consolidated balance sheet.

Fair Value Measurement

Fair value is defined under the Fair Value Measurements and Disclosures Topic of the Codification, ASC 820, as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard established a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:

Level 1-Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.

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Level 2-Inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. These are typically obtained from readily-available pricing sources for comparable instruments.

Level 3-Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own assumptions of the data that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.

Under the Financial Instruments Topic of the Codification, ASC 825, entities are permitted to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value measurement option under ASC 825 for any of its financial assets or liabilities.

Share-based compensation plans

The Predecessor Parent administered all share-based compensation plans on behalf of TRHI and applied the fair value recognition provisions of ASC 718, Compensation-Stock Compensation (“ASC 718”), to calculate the effect of such compensation on our Predecessor’s comprehensive loss in the Predecessor Period.

Following the Prior Acquisition, the Company’s immediate parent, Holdings LLC, established a compensation award in accordance with the Amended and Restated Limited Liability Company Operating Agreement of Holdings LLC (the “Operating Agreement”) to provide Class B Membership Interests in Holdings LLC to certain executive officers of the Company. The equity awards are accounted for by applying the fair value recognition provisions of ASC 718, to calculate the effect of such compensation on the Company’s comprehensive income (loss) in the Successor Periods.

Income taxes

The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”).

For the Predecessor Period, income taxes are presented as if the Company operated as a separate standalone taxpaying entity (separate return basis). Income taxes payable by subsidiaries that file separate returns are included in “Income taxes payable” on the combined balance sheet. The Predecessor Parent files individual and combined tax returns that include TRHI as required within each jurisdiction.

In the consolidated Successor financial statements, the Company utilizes the asset and liability method of accounting for income taxes, which requires that deferred tax assets and liabilities be recorded to reflect the future tax consequences of temporary differences between the book and tax basis of various assets and liabilities. A valuation allowance is established to offset any deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

ASC 740 also provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. ASC 740 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax position is “more likely than not” to be sustained by the applicable tax authority. Interest and penalties arising from an uncertain income tax position is included in our provision for income taxes. The Company did not have any material uncertain tax positions.

Recent accounting pronouncements

In March 2013, the Financial Accounting Standards Board (“FASB”) issued guidance on a parent’s accounting for the cumulative translation adjustment upon derecognition of a subsidiary or group of assets within a foreign entity. This new guidance requires that the parent release any related cumulative translation adjustment into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. The new guidance became effective for us beginning July 1, 2014 and had no impact on our financial statements.

In May 2014, as part of its efforts to assist in the convergence of U.S. GAAP and International Financial Reporting Standards, the FASB issued a new standard related to revenue recognition. Under the new standard, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure

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of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard will be effective for us beginning January 1, 2017 and early adoption is not permitted. We are currently evaluating the impact this standard will have on our financial statements.


3.	Acquisitions

Prior Acquisition

On June 6, 2012, as fully described in Note 1, the Company completed the Prior Acquisition of the Thomson Reuters Healthcare business (subsequently renamed Truven Health Analytics Inc. (“Truven”)) from subsidiaries of the Thomson Reuters Corporation for net cash consideration of $1,249,402. The direct costs associated with the Prior Acquisition amounted to $26,734 and were recorded as period costs.

There were no pre-closing or post-closing purchase price adjustments. The Company financed the Prior Acquisition and paid related costs and expenses associated with the Prior Acquisition and the financing as follows: (i) approximately $464,400 in common equity was contributed by entities affiliated with the Sponsor and certain co-investors; (ii) $527,625 principal amount was borrowed under the Term Loan Facility; and (iii) $327,150 aggregated principal amount of Notes (as defined below) were issued.

On June 6, 2013, the Company finalized the acquisition date fair values of acquired assets and liabilities, including the valuations of identifiable intangible assets, computer hardware and other equipment, and developed technology and content. The determination of fair value of acquired assets involves a variety of assumptions, including estimates associated with useful lives. The finalization of these valuations and completion of management review of certain accounts resulted in the refinement of certain assets and liabilities and that resulted in a reduction of $533 to goodwill and a corresponding increase in current asset, noncurrent asset and noncurrent deferred tax liabilities of $458, $120 and $45, respectively, from the previously reported amounts as of December 31, 2012 and March 31, 2013. In accordance with the Company's accounting policy described in Note 2, the adjustments on finalization of the purchase accounting were recognized retrospectively to the date of acquisition.

The following is a summary of the final allocation of the final purchase price of the Prior Acquisition to the estimated fair values of assets acquired and liabilities assumed in the Prior Acquisition. The final allocation of the purchase price is based on management's judgment after evaluating several factors, including a valuation assessment prepared by a third party valuation firm:



	Final values recognized at acquisition date
Trade and other receivables	$	77,598
Prepaid assets and other current assets	11,973
Computer hardware and other property	24,693
Developed technology and content	159,622
Other identifiable intangible assets	416,000
Other noncurrent assets	106
Current deferred tax assets	11,262
Current liabilities	(46,588		)
Deferred revenue	(80,239		)
Noncurrent deferred tax liabilities	(149,364		)
Net assets acquired	425,063
Goodwill on acquisition	824,339
Net consideration paid in cash	$	1,249,402

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The fair values of computer hardware and other property, developed technology and contents, other identifiable assets, deferred revenues and its related deferred income tax effect were adjusted following the preliminary valuations by third party valuation firms. Current liabilities were adjusted based on management’s review of underlying reconciliation and supporting data in respect of certain account balances.

Accounts receivable, accounts payable, and other current assets and liabilities were stated at historical carrying values, given their short-term nature. Other noncurrent assets and liabilities outstanding as of the effective date of the Prior Acquisition have been attributed based on management’s judgments and estimates.

The Company engaged a third party valuation firm to assist in determining the fair values of computer hardware and other property, developed technology and content, and other identifiable intangible assets acquired, including trademarks and trade names, customer relationships and deferred revenue.

Computer hardware and other property have been valued using a cost approach based on current replacement and/or reproduction cost of the asset as new, less depreciation attributable to physical, functional, and economic factors.

Developed technology and content have been valued using the relief from royalty method under the income approach to determine the estimated reasonable royalty rates for each reporting unit based on the comparable royalty agreements. The royalty rates, net of tax, were applied to projected revenues to determine the after-tax royalty cash savings discounted to present value.

Trademarks and trade names have been 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. Using this approach, trademarks and trade names were valued at $86.2 million, with the estimated useful lives to be 15 years each.

Customer relationships were determined 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. Using this approach, customer relationships were assigned a value of $329.8 million, with the estimated useful lives to be 11 to 12 years each.

Deferred revenue has been valued using a cost build-up approach and is calculated as the cost to fulfill the legal performance obligation plus a reasonable profit margin.

Deferred income tax assets and liabilities as of the Prior Acquisition date represent the expected future tax consequences of temporary differences between the fair values of the assets acquired and liabilities assumed and their tax bases.

The goodwill recognized upon closing of the Prior Acquisition is attributable mainly to the skill of the acquired work force and Truven’s position as a provider of healthcare data and analytics solutions and services to key constituents of the U.S. healthcare system. The total non tax deductible goodwill relating to the Prior Acquisition is $465.6 million. The total tax deductible goodwill relating to the Prior Acquisition is $358.7 million, which comprises $129.9 million related to the asset purchase and $228.8 million attributable to the historical basis of Thomson Reuters Healthcare.

The following unaudited pro forma financial data summarizes the Company’s results of operations for the year ended December 31, 2012 had the Prior Acquisition occurred as of the beginning of the comparable prior year:



	Year ended December 31, 2012
	(Unaudited)
Revenues, net	$	490,625
Net loss	(11,173		)

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Simpler Acquisition

On April 11, 2014, we acquired Simpler Consulting, L.P. and certain of its affiliated entities and persons ("Simpler"). Simpler provides "Lean" enterprise transformation consulting services. This strategic acquisition combines the Company’s market-leading cost and quality analytics in the commercial segment with Simpler’s performance management consulting capabilities to deliver performance improvement solutions to healthcare and commercial customers. Pursuant to the Simpler Purchase Agreement, the Company indirectly 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 related acquisition costs amounted to $3.6 million. The Company financed the acquisition and related costs and expenses through an increase in the Tranche B Term Loans (the "Supplemental Tranche B Term Loans") (see Note 11). The Company and its affiliates did not assume any indebtedness in connection with the Simpler Transaction.

The following is a summary of the allocation of the purchase price of the Simpler Transaction to the estimated fair values of assets acquired and liabilities assumed in the Simpler Transaction. The allocation of the purchase price is based on management's judgment after evaluating several factors, including a valuation assessment prepared by a third party valuation firm:



	Values recognized at acquisition date
Trade and other receivables	$	7,560
Prepaid assets and other current assets	425
Computer hardware and other property	181
Other identifiable intangible assets	47,500
Current liabilities	(2,575		)
Deferred revenue	(600		)
Net assets acquired	52,491
Goodwill on acquisition	28,571
Net consideration	$	81,062

Adjustments recorded since the date of acquisition as result of valuation and management review of certain accounts resulted in an increase of goodwill and current asset of $2.9 million and $0.2 million, respectively, and a corresponding decrease in other identifiable intangible asset of $2.9 million.

Accounts receivable, accounts payable, and liabilities were stated at historical carrying values, given their short-term nature.

The Company engaged a third party valuation firm to assist in determining the fair values of other identifiable assets and liabilities acquired, including trademarks and trade names, customer relationships, backlogs, non-compete agreements, and deferred revenue.

Computer hardware and other property have been valued at historical carrying values as management estimated that its replacement costs would not significantly differ from its carrying values.

Trademarks and trade names have been 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. Using this approach, trademarks and trade names were valued at $8.0 million, with estimated useful lives of 13 years.

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net intangible assets. Using this approach, customer relationships were assigned a value of $21.4 million, with estimated useful lives of 3 to 9 years.

Backlog was determined using an income approach based on projected backlog as of the acquisition date. Using this approach, backlog was assigned a value of $13.7 million, with an estimated useful life of 1 to 2 years.

Non-compete agreements were determined using an income approach based on projected lost revenue. Using this approach, non-compete agreements were assigned a value of $4.4 million, with estimated useful lives of 2 to 3 years.

Deferred revenue has been valued using a cost build-up approach and is calculated as the cost to fulfill the legal performance obligation plus a reasonable profit margin.

The goodwill recognized upon closing of the acquisition is attributable mainly to the skill of the acquired work force and Simpler’s position as a provider of services to key constituents of the U.S. market. The total goodwill relating to the Simpler Transaction is tax deductible.

Simpler's revenue and net loss from April 12, 2014 to December 31, 2014, amounted to $35.5 million and $2.4 million, respectively.

The following unaudited pro forma financial data summarizes the Simpler’s results of operations for the years ended December 31, 2014 and 2013 had the acquisition of Simpler occurred as of the beginning of the comparable prior year:



	Year ended December 31, 2014			Year ended December 31, 2013
	(Unaudited)
Revenues, net	$	50,476		$	48,264
Net loss	(5,983		)	(4,468		)

The unaudited pro forma financial data included management fee charges in 2014 and 2013 amounting to $5.7 million and $3.1 million, respectively.

Joan Wellman and Associates, Inc. (JWA) Acquisition

On October 31, 2014, we acquired JWA (the "JWA Transaction"), a company that provides "Lean" healthcare consulting services. Pursuant to the JWA purchase agreement, the Company 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 (JWA Transaction). Truven also agreed to pay $1.9 million in three annual payments as compensation 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 $0.5 million. The Company and its affiliates did not assume any indebtedness in connection with the JWA Transaction. We financed the acquisition and related costs and expenses through the issuance of the Additional Notes.

The table below is a summary of the preliminary allocation of the purchase price of the JWA Transaction to the estimated fair values of assets acquired and liabilities assumed based on management's judgment after evaluating several factors, including a preliminary valuation assessment prepared by a third party valuation firm. The assets and liabilities and certain estimates and assumptions are subject to change as we obtain additional information during the measurement period, which may be up to one year from the acquisition date. The assets and liabilities pending finalization include the valuation of acquired intangible assets and the assumed deferred revenue, however, management expects that the differences between the preliminary and final valuation would not have a material impact on our future results of operations and financial position.

The preliminary allocation of the purchase price is based on management's judgment after evaluating several factors, including a valuation assessment prepared by a third party valuation firm:

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	Preliminary Values recognized at acquisition date
Trade and other receivables	$	1,462
Prepaid assets and other current assets	41
Computer hardware and other property	17
Other identifiable intangible assets	7,489
Current liabilities	(607		)
Deferred revenue	(126		)
Net assets acquired	8,276
Goodwill on acquisition	7,020
Net consideration	$	15,296

Accounts receivable, accounts payable, liabilities and deferred revenue were stated at historical carrying values, given their short-term nature.

Computer hardware and other property have been valued at historical carrying values as management estimated that its replacement costs would not significantly differ from its carrying values.

Trademarks and trade names have been 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. Using this approach, trademarks and trade names were valued at $0.3 million, with estimated useful lives of 3 to 5 years.

Customer relationships were determined 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. Using this approach, customer relationships were assigned a value of $6.1 million, with estimated useful lives of 10 to 11 years.

Backlog was determined using an income approach based on projected backlog as of acquisition date. Using this approach, backlog was assigned a value of $1.0 million, with an estimated useful life of 1 year.

The goodwill recognized upon closing of the acquisition is attributable mainly to the skill of the acquired work force and JWA’s position as a provider of services to key constituents of the U.S. market. The total goodwill relating to the JWA Transaction is tax deductible.

JWA's revenue from November 1, 2014 to December 31, 2014, amounted to $1.6 million. JWA net results of operations from November 1, 2014 to December 31, 2014 was break-even.

The following unaudited pro forma financial data summarizes the JWA's results of operations for the years ended December 31, 2014 and 2013 had the acquisition of JWA occurred as of the beginning of the comparable prior year:



	Year ended December 31, 2014		Year ended December 31, 2013
	(Unaudited)
Revenues, net	$	12,014	$	11,436
Net Income	1,007		528

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HBE Solutions, LLC ("HBE") Acquisition

On November 12, 2014, Truven consummated the acquisition of 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 $17.6 million, including negative working capital adjustment of $2.4 million (the "HBE Transaction"). The related acquisition costs amounted to $1.0 million.

The Company financed the acquisition and related costs and expenses through the issuance of the Additional Notes (see Note 11). The Company and its affiliates did not assume any indebtedness in connection with the HBE Transaction.

The table below is a summary of the preliminary allocation of the purchase price of the HBE Transaction to the estimated fair values of assets acquired and liabilities assumed based on management's judgment after evaluating several factors, including a preliminary valuation assessment prepared by a third party valuation firm. The assets and liabilities and certain estimates and assumptions are subject to change as we obtain additional information during the measurement period, which may be up to one year from the acquisition date. The assets and liabilities pending finalization include the valuation of accounts receivables, acquired intangible assets and the assumed deferred revenue. Differences between the preliminary and final valuation could have a material impact on our future results of operations and financial position.



	Preliminary Values recognized at acquisition date
Trade and other receivables	$	7,966
Prepaid assets and other current assets	797
Computer hardware and other property	140
Developed technology and content	4,621
Other identifiable intangible assets	11,278
Other noncurrent assets	67
Current liabilities	(8,625		)
Deferred revenue	(4,159		)
Net assets acquired	12,085
Goodwill on acquisition	5,552
Net consideration	$	17,637

Accounts receivable, accounts payable, and liabilities were stated at historical carrying values, given their short-term nature.

Computer hardware and other property have been valued at historical carrying values as management estimated that its replacement costs would not significantly differ from its carrying values.

Trademarks and trade names have been 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. Using this approach, trademarks and trade names were valued at $2.5 million, with estimated useful lives of 12 to 14 years.

Customer relationships were determined 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. Using this approach, customer relationships were assigned a value of $8.8 million, with estimated useful lives of 9 to 11 years.

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Deferred revenue has been valued using a cost build-up approach and is calculated as the cost to fulfill the legal performance obligation plus a reasonable profit margin.

The goodwill recognized upon closing of the acquisition is attributable mainly to the skill of the acquired work force and HBE’s position as a provider of services to key constituents of the U.S. market. The total goodwill relating to the HBE Transaction is tax deductible.

HBE's revenue and net loss from November 12, 2014 to December 31, 2014, amounted to $1.2 million and $1.1 million.

The following unaudited pro forma financial data summarizes the HBE’s results of operations for the years ended December 31, 2014 and 2013 had the acquisition of HBE occurred as of the beginning of the comparable prior year:



	Year ended December 31, 2014		Year ended December 31, 2013
	(Unaudited)
Revenues, net	$	24,600	$	18,013
Net Income (loss)	1,757		(1,150		)


4.	Trade and other receivables

Trade and other receivables consisted of the following:



	December 31, 2014			December 31, 2013
Trade receivables, gross	$	120,983		$	99,011
Less: Allowance for doubtful accounts	(1,244		)	(1,530		)
Trade receivables, net	119,739			97,481
Other receivables	475			317
Trade and other receivables, net	$	120,214		$	97,798

Other receivables includes notes receivable from Holdings LLC, the direct parent company of Truven Holding. The notes receivable bear interest at a rate per annum of 1.9%. Interest is payable in arrears on each October 15, commencing on October 15, 2014. In lieu of paying in cash for the interest payments, any accrued but unpaid interest shall be capitalized and added as of such interest payment date to the principal amount of the note receivable. At any time, Holdings LLC may redeem all or any part of the note receivable at a redemption price equal to 100% of the principal amount redeemed plus all interest accrued and unpaid through the redemption date.

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5.	Prepaid and other current assets

Prepaid expenses and other current assets consisted of the following:



	December 31, 2014		December 31, 2013
Royalties	$	4,094	$	3,502
Commissions and distribution fees	12,758		9,046
Services, licenses and maintenance	12,404		10,720
Prepaid taxes	182		—
Others	813		940
Prepaid expenses and other current assets	$	30,251	$	24,208


6.	Computer hardware and other property

Computer hardware and other property, net, consisted of the following:



	December 31, 2014
	Computer hardware			Building and leasehold improvements			Furniture, fixtures and equipment			Total
Computer hardware and other property, gross	$	78,502		$	5,770		$	3,542		$	87,814
Accumulated depreciation	(46,089		)	(1,910		)	(2,380		)	(50,379		)
Computer hardware and other property, net	$	32,413		$	3,860		$	1,162		$	37,435



	December 31, 2013
	Computer hardware			Building and leasehold improvements			Furniture, fixtures and equipment			Total
Computer hardware and other property, gross	$	67,285		$	5,166		$	2,861		$	75,312
Accumulated depreciation	(24,762		)	(1,124		)	(1,389		)	(27,275		)
Computer hardware and other property, net	$	42,523		$	4,042		$	1,472		$	48,037


7.	Developed technology and content

Developed technology and content, net, consisted of the following:



	December 31, 2014			December 31, 2013
Developed technology and content, gross	$	220,153		$	195,961
Accumulated amortization	(86,075		)	(47,324		)
Developed technology and content, net	$	134,078		$	148,637


8.	Goodwill

Balances and changes in the carrying amount of goodwill for the year December 31, 2014 and December 31, 2013 were as follows:

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	Commercial			Government			Total
Balance as of December 31, 2012	$	733,041		$	91,298		$	824,339
Impairment charge	(321,064		)	(45,598		)	(366,662		)
Balance as of December 31, 2013	411,977			45,700			457,677
Acquisitions (see Note 3)	41,143			—			41,143
Balance as of December 31, 2014	$	453,120		$	45,700		$	498,820

Goodwill is not amortized. Instead, goodwill is tested for impairment annually as well as whenever there is an indication that the carrying amount may not be recoverable. The goodwill arising from the Prior Acquisition (see Note 3) has been allocated to the Company's reporting units.

The Company performed its annual goodwill impairment test on November 1, 2014. The fair value of the Company’s reporting units was estimated primarily using a combination of the income approach and the market approach. The Company used discount rates ranging from 12.8% to 15.8% in determining the discounted cash flows for each of our reporting units under the income approach, corresponding to our cost of capital, adjusted for risk where appropriate. In determining estimated future cash flows, current and future levels of income were considered that reflected business trends and market conditions. 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 reporting unit 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 iii) that management has the most insight into the future direction of the Government business.

The first step of the Company’s impairment test indicated that the fair value of all the reporting units exceeded its carrying value, therefore no impairment exists as of November 1, 2014.

In 2013, the Company recorded an aggregate non-cash goodwill impairment charge of $366.7 million, due to lower-than-expected growth in revenue and cash flow 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.


9.	Other identifiable intangible assets

Other identifiable intangible assets, net, consisted of the following:

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	December 31, 2014
	Average life (years)	Cost		Accumulated amortization			Net
Customer relationships	11.0	$	366,085	$	(75,756	)	$	290,329
Trademarks and trade names	15.0	97,024		(15,224		)	81,800
Backlog	1.0	14,732		(7,160		)	7,572
Non-compete agreements	3.0	4,426		(1,248		)	3,178
		$	482,267	$	(99,388	)	$	382,879


	December 31, 2013
	Average life (years)	Cost		Accumulated amortization			Net
Customer relationships	11.5	$	329,800	$	(44,983	)	$	284,817
Trademarks and trade names	15.0	86,200		(9,003		)	77,197
		$	416,000	$	(53,986	)	$	362,014

Customer relationships represent corporate customer contracts and customer relationships arising from such contracts with the majority of revenues recurring year over year.

Trade names include Advantage Suite, Care Discovery, Micromedex, Simpler, JWA and Heartbeat Experts among many of the Company’s product names and brand logos recognized in the U.S. market.

At December 31, 2014, estimated future amortization expense for the next five years is $48.8 million for 2015, $40.8 million for 2016, $39.4 million for 2017, $39.1 million for 2018 and $38.9 million for 2019.


10.	Accounts payable and accrued expenses

Accounts payable and accrued expenses consisted of the following:



	December 31, 2014		December 31, 2013
Accounts payable - trade	$	33,450	$	26,259
Accrued employee compensation	19,921		13,529
Accrued royalties	3,627		3,773
Accrued professional fees	3,756		4,409
Accrued interest	3,330		2,966
Customer deposits	180		618
Other accrued expenses	2,964		1,822
Accounts payable and accrued expenses	$	67,228	$	53,376

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11.	Long-Term Debt

The Company's long-term debt consists of the following:



	December 31, 2014		December 31, 2013
Senior Credit Facility
Term Loan Facility (net of $14,035 and $14,156 discount, respectively)	$	610,845	$	516,831
Revolving Credit Facility	—		30,000

10.625% Senior Notes ("the Notes") (net of $1,455 and $1,723 discount, respectively)	325,695		325,427
10.625% Additional Senior Notes (the Additional Notes) (including $1,182 premium)	41,182		—
	977,722		872,258
Less: current portion of long-term debt	6,360		5,350
Long-term debt	$	971,362	$	866,908

In connection with the Prior Acquisition, on June 6, 2012, Truven entered into the Senior Credit Facility and issued the 10.625% Senior Notes ("Notes") on November 12, 2012, and, in connection with the JWA Transaction and the HBE Transaction, Truven issued $40 million aggregate principal amount of additional notes (the "Additional Notes"). Truven financed the Simpler Transaction and related costs and expenses through a $100 million increase in the Tranche B Term Loans under the Senior Credit Facility. Except as otherwise indicated by the context, the 10.625% Senior Notes, Series A, issued in a private offering under an indenture, dated June 6, 2012 (the "Old Notes"), the 10.625% Senior Notes, Series B (the "Exchange Notes") and the Additional Notes are collectively and individually defined as the "Notes".

Senior Credit Facility due 2019

The Senior Credit Facility, as amended on April 11, 2014, 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 of five years and the $50.0 million Revolving Credit Facility with a maturity of five years. As of December 31, 2014, the Company has no outstanding revolving loan and has outstanding letters of credit amounting to $7.5 million, which, while not drawn, reduce the available line of credit under the Revolving Credit Facility to $42.5 million .

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. Following the Third Amendment (the "Third Amendment") to the Senior Credit Facility to increase the "Tranche B Term Loans" by $100 million as discussed below, 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.

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All obligations under the Senior Credit Facility are guaranteed by Truven Holding and each of Truven's existing and future wholly-owned domestic subsidiaries. During 2014, all domestic subsidiaries acquired by the Company became guarantors under the Senior Credit Facility (see Notes 21). 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 comply with a quarterly maximum consolidated senior secured leverage ratio provided for in the Senior Credit Facility 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, the Company was in compliance with all of these credit facility covenants.

Refinancing

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%. The loans with certain lenders had been determined to be extinguished under FASB ASC Topics 470-50, Modifications and Extinguishments. As a result, the Company recorded a loss on early extinguishment on certain debt amounting to $6.7 million in 2012, representing unamortized debt discount, unamortized debt issue costs and certain costs related to the extinguished debt. The loss on early extinguishment of debt is included in interest expense in the consolidated comprehensive income (loss). In addition, Truven incurred lenders fees of $6.7 million, mainly consisting of call or premium fees in connection with this transaction, of which $1.5 million was related to the debt extinguished has been expensed as part of interest expense in the consolidated comprehensive income (loss) and was presented under cash flows from operating activities in the Company’s consolidated statement of cash flows.

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 in June 30, 2013 and (v) extend the 1% repricing call protection from June 6, 2013 to October 26, 2013. There were no other changes in the terms and conditions. The loans with certain lenders in the bank syndicate had been determined to be extinguished under FASB ASC Topics 470-50, Modifications and Extinguishments. As a result, the Company recorded a loss on early extinguishment on certain debt amounting to $3.3 million during the period, representing unamortized debt discount, unamortized debt issue costs and certain costs related to the extinguished debt. The loss on early extinguishment of debt is included in interest expense in the consolidated comprehensive loss.

In connection with the April 2013 Refinancing, the Company incurred lenders' fees of $6.7 million, representing call premium. Of the $6.7 million, $5.8 million was recorded as part of original issue discount and presented as net of debt in the consolidated balance sheet as of December 31, 2013. Other third party costs of $0.1 million, representing legal costs, were recorded as an expense for the period ended December 31, 2013.

The remaining lenders' fees of $0.9 million related to the debt extinguished has been expensed as part of interest expense in the condensed consolidated statement of comprehensive loss for the year ended December 31, 2013 and is presented

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under cash flows from operating activities in the Company’s consolidated statement of cash flows for year ended December 31, 2013.

On April 11, 2014, certain wholly-owned subsidiaries of the Company entered into the Purchase Agreement with Simpler (see Note 3).In connection with the Simpler purchase agreement, Truven entered into the Third Amendment to our Senior Credit Facility. The Third Amendment provided 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).

On April 11, 2014, 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.

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 (see Note 20).

10.625% Senior Notes due 2020

Old or Exchange Notes

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), 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 Notes are general unsecured senior obligations of Truven, fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the Company 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 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

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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.

On June 5, 2013, we entered into the second supplemental indenture (the “Second Supplemental Indenture”), whereby the guarantee release provision in Section 10.2(d)(1)(B) of 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.

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 the Company, 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.

Pursuant to the Registration Rights Agreement on the Additional Notes, the Company 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 notes having terms substantially identical to the Additional Notes in exchange for outstanding Additional Notes. In certain circumstances, the Company and the Guarantors may be required to use commercially reasonable efforts to file a shelf registration statement to cover resales of the Additional Notes. The Company 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.

As of December 31, 2014, principal maturities of long-term debt for the next five years and thereafter consist of:



2015	$	6,360
2016	6,360
2017	6,360
2018	6,360
2019	585,405
Thereafter	366,877
	$	977,722


12.	Employee benefit plans

Predecessor

Prior to the Prior Acquisition, TRHI’s employees participated in various employee benefit plans under the Predecessor Parent as follows:

Defined contribution plan

Certain employees of TRHI participated in a defined contribution savings plan administered by the Predecessor Parent under Section 401(k) of the Internal Revenue Code. The plan covered substantially all employees based in the United States who met minimum age and service requirements and allowed participants to defer a portion of their annual compensation on a pre-tax basis. TRHI matched a certain portion of employee contributions, which vested based upon

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an employee’s years of service and become fully vested after four years of service. Matching contribution expense directly attributable to TRHI’s employees was $3,091 for the Predecessor Period ended June 6, 2012.

Predecessor Defined benefit pension plan

Certain employees of TRHI participated in a defined benefit pension plan sponsored and administered by the Predecessor Parent. The pension plan required benefits to be paid to eligible employees at retirement, based primarily upon years of service and compensation rates near retirement. The expense for TRHI employees who participated in this plan was $159 for the Predecessor Period ended June 6, 2012.

All of the TRHI employees benefit plans’ assets and liabilities are accounted for in the Predecessor Parent’s financial statements. No assets or liabilities are reflected on the Company’s consolidated balance sheets, and pension and other postretirement expenses for the Company have been determined on a multi-employer plan basis. The Predecessor’s combined financial statements for the Predecessor Period ended June 6, 2012 included the employee benefit expense allocated to it by the Predecessor Parent for TRHI employees who participated in the benefit plans. The expenses are included in the “Allocation of costs from Predecessor Parent and affiliates” in the combined statements of comprehensive income (loss). Further detail is included in Note 18. Upon consummation of the Prior Acquisition, TRHI employees ceased to participate in the Predecessor Parent’s benefit plans. These employees are still entitled to the benefits that have vested under the plans; however, any subsequent costs or liability of these plans will be borne by the Predecessor Parent.

Successor

Following the closing of the Prior Acquisition on June 6, 2012, Truven's employees became eligible to participate in new 401(K) defined contribution plan sponsored by Truven. Under the plan, employees may contribute a percentage of compensation and Truven will match a portion of the employees’ contribution. Truven’s contribution to the plan for the year ended December 31, 2014 and 2013 and the period from April 20, 2012 to December 31, 2012 amounted to $6,946, $6,975 and $3,294, respectively. Truven does not offer any defined benefit plan, post-retirement healthcare benefit plan or deferred compensation plan.

13. Share-based Compensation

Under its stock incentive plan, the Predecessor Parent may grant stock options, Time-Based Restricted Share Units (“TRSUs”), Performance Restricted Share Units (“PRSUs”) and other awards to certain employees up to a maximum of 50,000,000 common shares.

Apart from allocated share-based expenses as discussed in Note 18, TRHI recognized share-based compensation expense on its stock incentive plan of $2,519 for the Predecessor Period ended June 6, 2012. The total associated tax benefits recognized were $972 for the Predecessor Period ended June 6, 2012.

In connection with the Prior Acquisition, any unvested share-based payments held by TRHI employees became fully vested or had vested on a pro-rata basis in proportion to the performance period that ended at the date of the Prior Acquisition. TRHI employees were given six months from the date of the closing of the Prior Acquisition during which to exercise the options. The compensation expense of $2,519 for the Predecessor Period ended June 6, 2012 includes $1,464 to accelerate vesting. Therefore, as of June 6, 2012, all outstanding options held by TRHI employees were exercisable.

For all share-based payment awards, the expense recognized was adjusted for estimated forfeitures where the service was not expected to be provided. Estimated forfeiture rates were developed based on the analysis of historical forfeiture data. The estimated forfeitures are adjusted to income when the share-based payment awards are fully vested.

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The following table summarizes the valuation methods used to measure fair value for each type of award and the related vesting period over which compensation expense is recognized:



Type of award	Vesting period	Fair value measure	Compensation expense based on
Stock options	Up to four years	Black-Scholes option pricing model	Fair value on business day prior to grant date
TRSUs	Up to seven years	Closing Common share price	Fair value on business day prior to grant date
PRSUs	Three year performance period	Closing Common share price	Fair value on business day prior to grant date

Stock options

The maximum term of an option is 10 years from the date of grant. Under the plan, options were granted by reference to the Predecessor Parent’s common share price on the NYSE or TSX, respectively.

The weighted average fair value of options granted and principal assumptions used in applying the Black-Scholes option pricing model were as follows:



	January 1, 2012 to June 6, 2012
Weighted average grant date fair value	5.21
Weighted average of key assumptions:
Exercise price	28.42
Risk-free interest rate	1.2%
Dividend yield	3.4%
Volatility factor	28%
Expected life (in years)	6

The Black-Scholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions. The model requires the use of subjective assumptions, including expected stock price volatility; historical data has been considered in setting the assumptions.

During the Predecessor Period ended June 6, 2012, no options were exercised. The total fair value of options vested was approximately $2,725 as of June 6, 2012.

Transactions related to the Predecessor Parent’s stock options in the Predecessor Period ended June 6, 2012 are summarized as follows:



	Shares	Weighted average exercise price		Weighted average remaining term (in years)	Aggregate intrinsic value (in thousands)

Outstanding at December 31, 2011	270,753	$	34.16	7.38	$	182
Granted	90,520	28.42		—	—

Outstanding and exercisable at June 6, 2012	361,273	$	32.71	0	$	280

Time-based restricted share units

TRSUs gave the holder the right to receive one common share of the Predecessor Parent’s stock for each unit that vested on the vesting date. The holders of TRSUs had no voting rights, but accumulate additional units based on notional

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dividends paid by the Predecessor Parent on its common shares at each dividend payment date, which were reinvested as additional TRSUs. The total fair value of TRSUs vested was approximately $1,061 as of June 6, 2012.

In connection with the Prior Acquisition, TRSUs held by TRHI employees became vested.

Performance restricted share units

PRSUs gave the holder the right to receive one common share of the Predecessor Parent’s stock for each unit that vested on the vesting date. The holders of PRSUs had no voting rights, but accumulated additional units based on notional dividends paid by the Predecessor Parent on its common shares at each dividend payment date, which were reinvested as additional PRSUs. The percentage of PRSUs initially granted that vested depended upon the Predecessor Parent’s performance over a three-year performance period as measured against pre-established performance goals. Between 0% and 200% of the initial amounts may have vested for grants made from 2009 through 2011. The total fair value of PRSUs vested was approximately $3,220 as of June 6, 2012.

In connection with the Prior Acquisition, PRSUs held by TRHI employees became vested in proportion to the performance period that ended.

Transactions related to TRSUs and PRSUs for the period from January 1, 2012 to June 6, 2012 are summarized as follows:



	TRSU				PRSU
	Shares		Weighted average grant-date fair value		Shares		Weighted average grant-date fair value

Outstanding at December 31, 2011	28,748		$	36.75	148,949		$	31.77

Dividends accrued	110		—		1,138		—
Granted	—		—		67,740		28.42
Vested	(24,829	)	36.48		(41,016	)	23.46
Vested (accelerated)	(4,029	)	38.55		(63,834	)	35.37
Forfeited or expired	—		—		(112,977	)	31.13
Outstanding at June 6, 2012	—		$	—	—		$	—

Employee stock purchase plan (“ESPP”)

The Predecessor Parent maintained an employee stock purchase plan whereby eligible employees could purchase common shares of the Predecessor Parent at a 15% discount up to a specified limit utilizing after-tax payroll deductions. The discount was expensed as incurred was $139, for the Predecessor Period ended June 6, 2012.

Following the closing of the Prior Acquisition on June 6, 2012, Truven has no share-based payment plan related to the plans administered by our Predecessor.

Successor

In October 2012, Truven Holding’s immediate parent, Holdings LLC, established a compensation award in accordance with the Operating Agreement to provide Class B Membership Interests in Holdings LLC to certain executive officers of the Company, up to 6.25% in the aggregate. On April 11, 2014, Holdings LLC amended the Operating Agreement to provide Class B-1 Membership Interests in Holdings LLC to Simpler executives. Class B and B-1 membership interests ("Membership Interests") will both vest 20% on each of the first five anniversaries, subject to certain conditions. In addition, 100% of Membership Interests may vest in certain circumstances in connection with a change in control as defined in the Operating Agreement. Each Membership Interest has the right to receive a percentage of the distribution

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made by Holdings LLC when the distribution is actually made if such distributions exceed specified internal rates of return thresholds.

There are transfer restrictions on the Membership Interests and the executive officers would forfeit the unvested interest upon termination of employment. A summary of the Membership Interests is as follows:



	Class B					Class B-1
	Ownership interest (%)		Fair value at grant date			Ownership interest (%)	Fair value at grant date
Balance at December 31, 2012	4.1		$	5,714		—	$	—
Granted	0.9		1,162			—	—
Forfeited	(0.4	)	(502		)	—	—
Balance at December 31, 2013	4.6		6,374			—	—
Granted	—		—			0.9	1,067
Forfeited	(0.2	)	(274		)	—	—
Balance at December 31, 2014	4.4		$	6,100		0.9	$	1,067
Outstanding and vested as of December 31, 2014	1.8		$	2,518		—	$	—

The fair value at the date of grant was based upon the value of the Membership Interests of Holdings LLC less a marketability discount since there is no active market to trade Membership Interests. The marketability discount was determined using a geometric average rate put option model and a Black-Scholes put option model using the expected term, risk-free rate, and volatility for liquidity terms. The value was determined as of the grant date based upon a number of factors, including the amount of investment made in exchange for Membership Interests of Holdings LLC by Veritas Capital and certain members of management of the Company.

The Company recognized compensation expense against additional paid in capital of $1,271, $1,457 and $329, net of an estimated forfeiture rate of 10%, for the years ended December 31, 2014 and 2013, and for the period from April 20, 2012 (inception) to December 31, 2012, respectively, which is recorded in General and administrative expense in the Company’s consolidated statements of comprehensive loss.

The total unrecognized compensation cost related to nonvested Membership Interests expected to be recognized over the next 4.5 years is $3,617.

As of December 31, 2014, 1.8% of Membership Interests had vested with an estimated fair value of $2,146.

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14.	Other Operating Expenses

The components of other operating expenses include the following:



	Year ended December 31,		Year ended December 31,		From inception (April 20, 2012) to December 31,		January 1, 2012 to June 6,
	2014		2013		2012		2012
	Successor						Predecessor
Acquisition related costs and other nonrecurring charges	$	10,662	$	27,007	$	37,980	$	—
Severance and retention bonuses	2,541		3,808		10,184		7,741
Disposal related costs	$	—	$	—	$	—	$	9,818
Asset write-offs (see Note 16)	4,706		1,294		—		1,244
Other	2,875		2,929		1,458		—
Total other operating expenses	$	20,784	$	35,038	$	49,622	$	18,803

Predecessor

Disposal related costs in the Predecessor Period are primarily comprised of audit services, accounting and consulting services and legal fees related to TRUSI's disposal of the Thomson Reuters Healthcare business. Severance and retention bonuses in the Predecessor Period include severances of employees in connection with the planned disposal of TRHI.

Prior to the Prior Acquisition, on March 31, 2012, the Predecessor Parent entered into a retention agreement (the “Retention Agreement”) with key TRHI employees in conjunction with the disposal of the business. Pursuant to the Retention Agreements, the Predecessor Parent agreed to provide for retention and bonus payment to certain employees based on a percentage of salary and targeted transaction price, respectively. The payment was contingent upon the employees continuing services to the buyer after the Prior Acquisition for periods ranging from 90 days to one year. Although the Predecessor Parent retained the legal and contractual obligation to pay the employees, the compensation expense was recorded in the period when the service was performed and was allocated in proportion to the days of service in both Predecessor and Successor Periods. As a result, for the period from April 1, 2012 to June 6, 2012, (Predecessor) TRHI recorded $5.8 million of retention and bonuses expense against Net Investment of Predecessor Parent. The compensation which was paid by Predecessor Parent was deemed an investment contribution. Asset write-offs amounting to $1.2 million relates to the write-off from discontinued product solutions.

Successor

Acquisition related costs and other non-recurring charges in 2014 included $9.1 million of direct costs related to business acquisitions (see Note 3), certain costs related to business improvement processes, and certain costs associated with data migration and losses on discontinued projects.

Acquisition related costs and non-recurring charges included direct costs on acquisitions, costs incurred related to technology and other costs in connection with the Company's transition into a standalone business. For the year ended December 31, 2014, acquisition related costs and non-recurring charges primarily included $5.2 million of professional fees directly related to the various acquisition (see Note 3), $2.1 million of costs related to business improvement processes, $1.2 million of losses on discontinued projects, $0.7 million of costs associated with data migration and $1.5 million of various nonrecurring professional fees and consulting fees in expanding our business and operations. For the year ended December 31, 2013, acquisition related costs included $12.9 million of expenses incurred mainly as a result of separating our IT infrastructure from Predecessor Parent, $9.2 million of costs related to the transitional services agreement with Thomson Reuters, and $4.9 million related to rebranding, consulting and other professional fees. For the period from April 20, 2012 (inception) to December 31, 2012, acquisition related costs consisted of $12.0 million

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of transaction fees to the Sponsor, and $26.0 million of direct acquisition costs consisting of legal, finance, consulting and professional fees.

Severance expense in 2014 primarily relates to compensation for certain positions that were eliminated as part of the change in the Company's operating segment structure to enable us to more effectively focus on business and market facing opportunities and to simplify our business decision-making process. Severance and retention bonuses in 2013 primarily relate to the Prior Acquisition of TRHI. As discussed above, prior to the Acquisition, on March 31, 2012, the Predecessor Parent entered into Retention Agreements with key TRHI employees in conjunction with the disposal of the business. The compensation expense was recorded in the period when the service was performed and was allocated in proportion to the days of service in both Predecessor and Successor Periods. For the year ended December 31, 2013 andthe period from April 20, 2012 (inception) to December 31, 2012, Truven recorded $1.4 million and $8.6 million of retention and bonus expense, respectively, against Additional Paid In Capital in the Equity section of the consolidated balance sheet. The compensation paid by Predecessor Parent on behalf of Truven was deemed a capital contribution.

The Sponsor advisory fees are included in other expenses and represent fees paid to the Sponsor under the advisory agreement the Company entered into with the Sponsor in connection with the Prior Acquisition (see Note 18).


15.	Income Taxes

For income tax purposes, the Predecessor’s income or loss was included in the Predecessor Parent’s individual and combined tax returns that include the Thomson Reuters Healthcare business as required within each jurisdiction. For the period subsequent to the Prior Acquisition, the Company files a consolidated federal tax return. The provision for income taxes in the consolidated and combined statements of comprehensive income (loss) reflects income taxes as if the businesses were standalone entities and filed separate income tax returns.

The components of income tax expense are as follows:



	Successor									Predecessor
	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
Current
Federal	$	—		$	—		$	—		$	(4,807	)
State	(54		)	235			82			(539		)
Foreign	232			236			—			—
	178			471			82			(5,346		)

Deferred
Federal	(17,992		)	(75,817		)	(26,189		)	477
State	(4,745		)	(9,472		)	(3,886		)	66
Foreign	(127		)	(109		)	—			—
	(22,864		)	(85,398		)	(30,075		)	543
Total benefit from income taxes	$	(22,686	)	$	(84,927	)	$	(29,993	)	$	(4,803	)

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The tax effects of the significant components of temporary differences giving rise to the Company’s deferred income tax assets and liabilities are as follows:



	December 31, 2014			December 31, 2013
Allowance for doubtful accounts and other reserves	$	478		$	597
Net operating loss and tax credit carry-forwards	84,597			74,616
Prepaid expenses	315			1,094
Accrued expenses	703			—
Goodwill	29,314			42,726
Deferred rent	1,665			1,121
Other	3,313			1,197

Total deferred tax assets	120,385			121,351

Other identifiable intangible assets	(109,310		)	(125,652		)
Trade and other receivables	(1,209		)	(2,224		)
Debt exchange	(4,484		)	(5,585		)
Other long-lived assets	(4,108		)	(10,406		)
Other	—			(222		)
Total deferred tax liabilities	(119,111		)	(144,089		)
Net deferred tax assets (liabilities)	1,274			(22,738		)
Valuation allowance	(1,274		)	—
	$	—		$	(22,738	)

The deferred tax assets and liabilities are classified in the consolidated and combined balance sheets based on the balance sheet classification of the related assets and liabilities. Deferred tax assets and liabilities are shown net of one another if they are in the same jurisdiction. The components of the net deferred tax liabilities as reported on the consolidated balance sheets are as follows:



	December 31, 2014			December 31, 2013
Current deferred tax asset	$	621		$	—
Current deferred tax liabilities	—			(711		)
Noncurrent deferred tax liabilities	(621		)	(22,027		)
Net deferred tax asset (liabilities)	$	—		$	(22,738	)

Pursuant to the Stock and Asset Purchase Agreement, the Predecessor Parent has provided an indemnity for all tax liabilities that relate to periods prior to June 7, 2012, including any taxes assessed that are directly attributable to cash received by the Predecessor Parent, but only if and to the extent such taxes result in an increase in cash taxes actually paid by Truven in any Successor tax period.

The Company assesses the realization of its deferred tax assets and the need for a valuation allowance on a standalone basis. The assessment requires judgment on the part of management with respect to benefits that could be realized from future taxable income, as well as other positive and negative factors influencing the realization of deferred tax assets. As of December 31, 2014, the Company determined that it is not more likely than not that it will realize its net deferred tax asset and has recorded a valuation allowance on the year end balance. Federal and state net operating loss (“NOL”) carry forwards at December 31, 2014 were $212.9 million and $178.4 million, respectively. The federal NOL carry forward starts to expire in 2032. The state NOL carry forwards started to expire in 2014. Certain state NOL will expire

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at various times between 2015 and 2034. Certain state NOL’s are subject to the limitation rule in accordance with Section 382 of the Internal Revenue Code.

A reconciliation of the statutory U.S. federal income tax rate to the Company’s effective tax rate is as follows:



	Successor			Predecessor
	Years ended December 31, 2014	Years ended December 31, 2013	From inception (April 20, 2012) to December 31, 2012	January 1, 2012 to June 6, 2012
Income taxes at federal statutory rate	35.0%	35.0%	35.0%	35.0%
State and local tax	2.7	2.1	3.0	3.2
Foreign rate differential	0.2	0.1	—	—
State rate changes	2.3	(0.7)	—	—
Non-deductible expenses	(0.9)	—	(2)	—
Goodwill impairment charge	—	(17.0)	—	—
Research and foreign tax credit	1.2	0.2	—	—
Others	(0.3)	—	(0.3)	0.4
Valuation allowance	(2.1)	—	—	—
Effective rate	38.0%	19.7%	35.7%	38.6%

16. Commitment and Contingencies

Leases

Operating Leases

The Company occupies certain facilities and uses operating equipment under noncancelable operating lease arrangements expiring at various dates through 2021. Future minimum lease payments under these operating leases are as follows:



For the period ending December 31,
2015	$	10,412
2016	9,631
2017	7,315
2018	6,135
2019	6,204
Thereafter	19,897
	$	59,594

Rent expense was $11.0 million, $11.1 million, $4.2 million and $5.9 million for the years ended December 31, 2014 and December 31, 2013, the period from January 1, 2012 to June 6, 2012, and the period from April 20, 2012 to December 31, 2012, respectively.

Capital Leases

During 2013, the Company entered into certain computer hardware lease arrangements that are classified as capital leases. The net book value of the computer hardware classified as capital leases included in the computer hardware and other property account in the balance sheet amounted to $2.8 million, net of accumulated depreciation of $1.7 million.

Future minimum lease payments under these capital leases are as follows:

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For the period ending December 31,
2015	$	696
2016	758
2017	758
Total future minimum lease payments	2,212
Less imputed interest	174
Present value of future minimum lease payments	$	2,038

Security and Guarantee Agreements

The Company has entered into guarantee and security arrangements in respect of its indebtedness as described in Note 11.

Contractual Commitments

Revenue Sharing Agreement

Effective 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 million, $4 million and $6 million, for the calendar years 2013, 2014 and 2015, respectively. The guaranteed revenue share is paid in advance by the Company on March 1^st of each calendar year and is applied against the revenue share of the supplier earned through March 1^st of the following calendar year. The agreement provides a grace period for the Company of up to August 31^st of the following calendar year in the event that the supplier's revenue share earned does not reach the prepayment amount. After the grace period, if the revenue share earned does not meet the minimum target then the entire prepayment amount is deemed earned by the supplier. During 2014, $4.7 million of the prepaid balance was 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.

Litigation and Legal Proceedings

Truven has 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 rest of which were 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 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.

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

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

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On December 15, 2011, Midwest Health Initiative, a client of our research business, requested arbitration of a dispute relating to our performance under a client services agreement. The arbitration proceedings were initiated in St. Louis and were settled by both parties during the fourth quarter of 2013. The settlement amount was immaterial.

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 parties have entered into a tolling agreement. If a claim is filed against us, we expect to defend it.

Truven filed U.S. trademark applications for the trademarks Truven Health Analytics and Truven Health Unify. In May, 2013 and March, 2014, respectively, Truveris, Inc. (“Truveris”) filed notices of opposition against these applications in the Trademark Trial and Appeal Board of the United States Patent and Trademark Office alleging that the Truven Health Analytics and Truven Health Unify applications create a likelihood of confusion with Truveris’s alleged common law trademark Truveris as well as its registered trademarks Trubid, Truguard, Trubuy, Trureport and Trurxpay. Truveris has also alleged that Truven’s use of the Truven alleged mark is likely to cause confusion with Truveris’s alleged trademark. We plan to vigorously defend these claims.

The Company is involved in other litigation proceedings arising from the normal course of its operations. Related reserves are recorded when it is probable that liabilities exist and where reasonable estimates of such liabilities can be made.

While it is not possible to predict the outcome of any of these proceedings, the 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 Company's financial position, results of operations and cash flows.

17. Segment Information

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 follows:

Commercial

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

Government

The Government segment provides integrated analytic solutions and services to improve the cost, quality, and effectiveness of healthcare for federal and state agencies (e.g. Centers for Medicare & 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.

The CODM evaluated the performance of our segments based on segment operating income (loss), which is calculated internally as net sales, less cost of operations (including allocation of technology costs), selling and marketing, and general and administrative expenses, excluding depreciation and amortization.

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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 Company’s consolidated loss before income taxes.

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

Segment information for the years ended December 31, 2014, December 31, 2013, and the period from April 20, 2012 (inception) to December 31, 2012, and for the Predecessor Period January 1, 2012 to June 6, 2012, is as follows:



	Year ended December 31, 2014						Year ended December 31, 2013
	Successor						Successor
	Revenue			Segment operating income			Revenue		Segment operating income
Commercial	$	446,500		$	156,900		$	394,896	$	140,173
Government	98,282			7,043			97,806		11,053
Segment totals	544,782			163,943			492,702		151,226
Center/Shared Services	(307		)	(25,817		)	—		(21,264		)
Total	$	544,475		$	138,126		$	492,702	$	129,962



	From inception (April 20, 2012) to December 31, 2012					January 1 to June 6, 2012
	Successor					Predecessor
	Revenue		Segment operating income			Revenue		Segment operating income
Commercial	$	195,470	$	55,206		$	172,235	$	42,036
Government	46,316		10,654			36,763		(228		)
Segment totals	241,786		65,860			208,998		41,808
Center/Shared Services	—		(9,632		)	—		(7,953		)
Total	$	241,786	$	56,228		$	208,998	$	33,855

The following table reconciles segment operating income per the reportable segment information to loss before income taxes per the consolidated and combined statements of comprehensive loss.

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	Year ended December 31,			Year ended December 31,			From inception (April 20, 2012) to December 31,			January 1 to June 6,
	2014			2013			2012			2012
				(Successor)						(Predecessor)
Segment operating income	$	138,126		$	129,962		$	56,228		$	33,855
Depreciation	(22,350		)	(21,219		)	(6,700		)	(6,805		)
Amortization of other identifiable intangible assets	(45,402		)	(34,460		)	(19,527		)	(8,226		)
Amortization of developed technology and content	(38,752		)	(31,894		)	(15,470		)	(12,460		)
Goodwill impairment	—			(366,662		)	—			—
Other operating expenses	(20,784		)	(35,038		)	(49,622		)	(18,803		)
Operating income (loss)	10,838			(359,311		)	(35,091		)	(12,439		)
Interest expense to Predecessor Parent	—			—			—			—
Interest income	—			—			—			3
Interest expense	(69,616		)	(70,581		)	(49,014		)	—
Other finance costs	(930		)	(24		)	—			—
Loss before income taxes	$	(59,708	)	$	(429,916	)	$	(84,105	)	$	(12,436	)

Reportable segment asset information is not disclosed because it is not reviewed by the CODM for purposes of evaluating performance and allocating resources.


18.	Related Party Transactions

Predecessor

Our Predecessor utilized various wholly-owned affiliates of Thomson Reuters to provide administrative services and to finance its operations. In accordance with SEC Staff Accounting Bulletin 1-B, “Allocation of Expenses and Related Disclosure in Financial Statements of Subsidiaries, Divisions or Lesser Business Components of Another Entity,” the condensed consolidated and combined financial statements include an allocation of the Predecessor Parent's corporate expenses to our Predecessor, which principally consisted of personnel costs, including salaries, employee benefits and share-based compensation expenses. These costs relate to the corporate executive offices, audit fees, legal services, treasury, communications, human resources, tax services, risk management, technology support, rent and other costs incurred by the Predecessor Parent and its subsidiaries on behalf of our Predecessor. Costs were allocated to the Company based primarily on the proportional revenue. The amounts allocated to the Company for the Predecessor Period from January 1, 2012 to June 6, 2012 are presented in the combined statement of comprehensive income (loss) as follows:



	January 1, 2012 to June 6, 2012
Cost of revenues, excluding depreciation and amortization	$	4,868
Allocation of costs from Predecessor Parent and affiliates	10,003
	$	14,871

The allocations included within “Cost of revenues, excluding depreciation and amortization” comprised technology support administered by the Predecessor Parent related to customer data. Allocations were generally computed based on usage metrics.

The Company believes the assumptions and methodologies underlying the allocations of general corporate overhead from Predecessor Parent were reasonable. However, such 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

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information herein may not necessarily reflect the combined financial position, 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, it is possible that the terms and conditions of these related party transactions, and the resulting amounts recorded, would have been different from those presented in these consolidated and combined financial statements.

Immediately prior to the Prior Acquisition, a related legal entity, Thomson Reuters Applications, Inc. ("TR Apps"), legally transferred certain fixed assets to TRHI for consideration of $15,975, which was settled via our net intercompany position. Pursuant to the applicable tax law, while TRHI and TR Apps are part of the same consolidated tax return, no gain/loss or step-up in tax basis was recognized at the time of transfer. At the close of the Prior Acquisition on June 6, 2012, TRHI ceased to be part of the consolidated tax return group, which resulted in a step up in tax basis for the TR Apps assets.

Successor

The Company entered into an advisory agreement with the Sponsor, under which the Sponsor provided certain advisory services to the Company. As compensation for the services, the Company paid a transaction fee at the closing of the Prior Acquisition and will continue to pay the Sponsor an annual advisory fee which will be equal to an aggregate amount equal to the greater of (i) $2.5 million and (ii) 2.0% of consolidated EBITDA (as defined in the credit agreement governing our Senior Credit Facility), as well as transaction fees on future acquisitions, divestitures, financings and liquidity events, which will be determined based upon aggregate equity investments at the time of such future events or on the value of the transaction. For the years ended December 31, 2014 and December 31, 2013, and the period from April 20, 2012 to December 31, 2012, the Company recorded an expense of $2.9 million, $2.9 million and $1.5 million, respectively, which represented the Sponsor advisory fee and is presented within other operating expenses in the Company's consolidated statements of comprehensive income (loss). As of December 31, 2014, the Company has a prepaid sponsor fee of $0.6 million included in the prepaid account and other current assets account in the balance sheet.

After the Prior Acquisition, the Company continued to receive certain administrative services (including facilities management, human resource management, finance and accounting operations, treasury, sourcing and procurement and IT services, among other services necessary for the conduct of the business) from Thomson Reuters under the terms of the Transitional Services Agreement. Such services are reflected as third-party activity in the financial statements. In the fourth quarter of 2013, we completed our administrative infrastructure, and most of these functions have been assumed by us or by third parties on our behalf including the hosting services of certain technology infrastructure. The expense incurred under this service agreement for the year ended December 31, 2013, and period from April 20, 2012 to December 31, 2012, totaled $10.5 million and $12.3 million, respectively, which is included in the other operating expenses in the consolidated statements of comprehensive income (loss).

The Company also entered into a reverse transitional services agreement with TRUSI pursuant to which we provide TRUSI with office space and facilities management services at several locations in the United States. Pursuant to the agreement, we provided these services for certain pre-determined periods ranging from one year to approximately 22 months, with all such services to end by March 31, 2015. The Company is entitled to fees for each of the services provided for any services requested by the Stock Seller. The income recognized under this service agreement for the years ended December 31, 2014 and, December 31, 2013, and the period from April 20, 2012 to December 31, 2012, totaled $0.4 million, $0.7 million and $0.5 million, respectively, which is recorded as a reduction to general and administrative expense in the Company's consolidated statement of comprehensive loss.

During 2013, the Company received $2,350 of additional capital contribution from Holdings LLC, its direct parent company.

On October 11, 2013, the Company received a note receivable of $0.3 million from Holdings LLC, the direct parent of Truven Holding. The note receivable bears interest at a rate per annum of 1.9%. Interest is payable in arrears on each October 15, commencing on October 15, 2014. In lieu of paying in cash for the interest payments, any accrued

F-41

but unpaid interest shall be capitalized and added as of such interest payment date to the principal amount of the note receivable. At any time, Holdings LLC may redeem all or any part of the note receivable at a redemption price equal to 100% of the principal amount redeemed plus all interest accrued and unpaid through the redemption date. The note receivable is included in trade and other receivables account in the balance sheet as of December 31, 2014.

On April 11, 2014, as part of the Simpler Transaction, the Company paid a transaction fee of $1.5 million to the Sponsor. As part of the Simpler Transaction (see Note 3), the issuance by Holdings LLC of $3,730 of equity interests to Simpler has been accounted for as additional capital contribution. In addition, the company recorded a transaction fee expense of $0.5 million related to the HBE and JWA transactions in November, 2014.

19. Fair Value Measurement

Fair value is defined under the Fair Value Measurements and Disclosures Topic of the Codification, FASB ASC 820, as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under FASB ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard established a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:

• Level 1—Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.

• Level 2—Inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. These are typically obtained from readily-available pricing sources for comparable instruments.

• Level 3—Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own assumptions of the data that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.

For purposes of financial reporting, the Company has determined that the fair value of financial instruments including accounts receivable and accounts payable approximates carrying value at December 31, 2014 and December 31, 2013.

At December 31, 2014, the carrying amounts and fair values of the Senior Credit Facility, Revolving Credit Facility and 10.625% Senior Notes were as follows:



			Fair values
	Carrying amounts		Level 1		Level 2	Level 3
Senior Term Loan	$	610,845	$	—	603,009	$	—
10.625% Senior Notes	366,877		—		357,971	—

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At December 31, 2013, the carrying amounts and fair values of the Senior Term Loan and 10.625% Senior Notes were as follows:



			Fair values
	Carrying amounts		Level 1		Level 2		Level 3
Senior Term Loan	$	516,831	$	—	$	531,625	$	—
Revolver	30,000		—		30,000		—
10.625% Senior Notes	325,427		—		369,876		—

Our level 2 inputs are determined based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the liabilities. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves.

As discussed in Note 8, the company recorded an aggregate impairment charge of $366.7 million in the fourth quarter of 2013, to reflect the amount by which the carrying value of each reporting unit's goodwill exceeded the estimated fair value. The impairment charge did not impact the Company’s cash flows or liquidity. The fair value of goodwill was measured using Level 3 inputs such as discounted cash flows, market multiple analysis, replacement costs and sales comparison methodologies.

20. Supplemental Guarantor Financial Information

Truven has issued the Notes as further described in Note 11. The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by Truven Holding Corp. and each of Truven’s existing and future 100% 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. All obligations under the Senior Credit Facility are also guaranteed by Truven Holding Corp. and each of Truven’s 100% owned domestic subsidiaries. All obligations under the Senior Credit Facility and the guarantees of those obligations are secured by first priority security interests in substantially all of Truven’s assets, as well as those of each guarantor (subject to certain limited exceptions).

Prior to the series of acquisitions during 2014, the separate financial statements and the condensed consolidating and combining financial information about the comprehensive loss, financial position and cash flows of the Parent, the Issuer, the Guarantors, the non-Guarantors, and eliminations were not presented due to the following:


•	Truven (the Issuer) is 100% owned by Truven Holding Corp. (the parent company guarantor).


•	The guarantee by Truven Holding Corp. is full and unconditional and there were no subsidiary guarantors.


•	Truven Holding Corp. has no independent assets or operations.


•	The transaction costs related to the Prior Acquisition of $26,734 were incurred and paid for by Wolverine, which was merged with and into TRHI, with TRHI surviving the Merger upon closing of the Prior Acquisition as a 100% owned direct subsidiary of Truven Holding Corp. and subsequently changing its name to Truven Health Analytics Inc.


•	The subsidiaries of Truven Holding Corp. other than Truven were minor (as defined in Section 3-10(h)(6) of Regulation S-X of the Securities Act), having total assets, stockholders’ equity, revenues, operating income (before income taxes) and cash flows from operating activities of less than 3% of the Company’s corresponding consolidated amounts.

After the series of acquisitions, certain acquired 100% owned domestic subsidiaries became guarantors of the obligations of Truven under the Senior Credit Facility and the Notes. In accordance with Section 3-10 of Regulation S-X of the Securities Act, the following condensed consolidating financial statements are provided prospectively to present the statement of comprehensive income (loss), financial position and cash flows of:

F-43

(1) Truven Holding Corp., the Parent;

(2) Truven Health Analytics, Inc., the Subsidiary Issuer;

(3) Simpler North America LLC, Simpler Consulting LLC, JWA, and HBE, the Guarantor subsidiaries;

(4) All foreign Non-Guarantor subsidiaries; and

(5) eliminations to arrive at the information for Truven Holding Corp. on a consolidated basis.

Separate financial statements and other disclosures concerning the Guarantors are not presented because management does not believe such information is material.

F-44

Truven Holding Corp.

Consolidated Balance Sheets

As of December 31, 2014



	Parent			Issuer			Guarantor subsidiaries			Non-Guarantor subsidiaries			Eliminations			Consolidated
Assets
Cash and cash equivalents	$	—		$	8,243		$	3,264		$	1,097		$	—		$	12,604
Trade and other receivables, net of allowances	—			106,181			12,765			1,268			—			120,214
Prepaid expenses and other current assets	—			28,574			817			860			—			30,251
Deferred tax asset	—			621			—			—			—			621
Intercompany receivable	—			23,297			39,194			46,799			(109,290		)	—
Total current assets	—			166,916			56,040			50,024			(109,290		)	163,690
Investment in subsidiaries	47,123			109,851			(192		)	—			(156,782		)	—
Computer hardware and other property, net	—			36,459			207			769			—			37,435
Developed technology and content, net	—			128,917			5,161			—			—			134,078
Goodwill	—			457,677			41,143			—			—			498,820
Other identifiable intangible assets, net	—			327,554			55,325			—			—			382,879
Other noncurrent assets	—			15,951			—			236			—			16,187
Total assets	$	47,123		$	1,243,325		$	157,684		$	51,029		$	(266,072	)	$	1,233,089
Liabilities and Net Equity
Accounts payable and accrued expenses	$	—		$	58,777		$	5,931		$	2,520		$	—		$	67,228
Deferred revenue	—			121,903			6,802			424			—			129,129
Current portion of long-term debt	—			6,360			—			—			—			6,360
Capital lease obligation	—			664			—			—			—			664
Deferred tax liability	—			—			—			—			—			—
Current taxes payable	—			—			—			173			—			173
Intercompany payable	—			26,086			35,784			47,420			(109,290		)	—
Total current liabilities	—			213,790			48,517			50,537			(109,290		)	203,554
Deferred revenue	—			5,456			—			—			—			5,456
Capital lease obligation - noncurrent	—			1,374			—			—			—			1,374
Long-term debt	—			971,362			—			—			—			971,362
Deferred tax liabilities	—			621			—			—			—			621
Other noncurrent liabilities	—			3,599			—			—			—			3,599
Total liabilities	—			1,196,202			48,517			50,537			(109,290		)	1,185,966
Equity
Common stock	—			—			—			—			—			—
Additional paid-in capital	483,550			483,550			114,483			(125		)	(597,908		)	483,550
Accumulated deficit	(436,123		)	(436,123		)	(5,275		)	1,130			440,268			(436,123		)
Foreign currency translation adjustment	(304		)	(304		)	(41		)	(513		)	858			(304		)
Total	47,123			47,123			109,167			492			(156,782		)	47,123
Total liabilities and net equity	$	47,123		$	1,243,325		$	157,684		$	51,029		$	(266,072	)	$	1,233,089

F-45

Truven Holding Corp.

Consolidated Statements of Comprehensive Income (Loss)

For the Year Ended December 31, 2014



	Parent			Issuer			Guarantor subsidiaries			Non-Guarantor subsidiaries			Eliminations			Consolidated
Revenues, net	$	—		$	504,894		$	32,880		$	15,882		$	(9,181	)	$	544,475
Operating costs and expenses Cost of revenues, excluding depreciation and amortization	—			(278,976		)	(16,683		)	(6,214		)	8,874			(292,999		)
Selling and marketing, excluding depreciation and amortization	—			(51,952		)	(1,120		)	(4,341		)	—			(57,413		)
General and administrative, excluding depreciation and amortization	—			(42,259		)	(9,129		)	(4,549		)	—			(55,937		)
Depreciation	—			(21,874		)	(58		)	(418		)	—			(22,350		)
Amortization of developed technology and content	—			(38,642		)	(110		)	—			—			(38,752		)
Amortization of other identifiable intangible assets	—			(34,460		)	(10,942		)	—			—			(45,402		)
Other operating expenses	—			(20,948		)	(143		)	—			307			(20,784		)
Total operating costs and expenses	—			(489,111		)	(38,185		)	(15,522		)	9,181			(533,637		)
Operating loss (income)	—			15,783			(5,305		)	360			—			10,838
Net interest income (expense)	—			(69,622		)	2			4			—			(69,616		)
Other finance costs	—			(712		)	(146		)	(72		)	—			(930		)
Equity in net income (loss) of subsidiaries	(37,022		)	(5,272		)	183			—			42,111			—
Income (loss) before income taxes	(37,022		)	(59,823		)	(5,266		)	292			42,111			(59,708		)
Benefit from (provision for) income taxes	—			22,801			(9		)	(106		)	—			22,686
Net income (loss)	$	(37,022	)	$	(37,022	)	$	(5,275	)	$	186		$	42,111		$	(37,022	)

Other comprehensive income (loss):
Foreign currency translation adjustments	(139		)	(139		)	124			(348		)	363			(139		)
Total comprehensive income (loss)	$	(37,161	)	$	(37,161	)	$	(5,151	)	$	(162	)	$	42,474		$	(37,161	)

F-46

Truven Holding Corp.

Consolidated Statements of Cash Flows

For the year Ended December 31, 2014



	Parent			Issuer			Guarantor subsidiaries			Non-Guarantor subsidiaries			Eliminations			Consolidated
Operating activities
Net income (loss)	$	(37,022	)	$	(37,022	)	$	(5,275	)	$	186		$	42,111		$	(37,022	)
Non-cash adjustments	37,022			89,399			10,927			181			(42,111		)	95,418
Changes in operating assets and liabilities	—			(15,158		)	2,249			(270		)	—			(13,179		)
Net cash provided by operating activities	—			37,219			7,901			97			—			45,217
Investing activities
Acquisitions, net of cash acquired				(109,406		)	—			—						(109,406		)
Capital expenditures				(31,814		)	(634		)	(213		)				(32,661		)
Net cash used in investing activities	—			(141,220		)	(634		)	(213		)	—			(142,067		)
Financing activities
Proceeds from additional senior notes, including premium				41,200			—			—						41,200
Repayment of revolving credit facility				(60,000		)	—			—						(60,000		)
Principal repayment of senior term loan				(6,108		)	—			—						(6,108		)
Proceeds from revolving credit facility				30,000			—			—						30,000
Proceeds from senior term loan related to refinancing/acquisition				100,000			—			—						100,000
Intercompany transactions				3,333			(4,211		)	878						—
Payment of debt issuance costs				(4,095		)	—			—						(4,095		)
Payment of capital lease obligation				(1,659		)	—			—						(1,659		)
Net cash (used in) provided by financing activities	—			102,671			(4,211		)	878			—			99,338
Effect of exchange rate changes in cash and cash equivalents				—			208			(347		)				(139		)
Increase (decrease) in cash and cash equivalents	—			(1,330		)	3,264			415			—			2,349
Cash and cash equivalents
Beginning of period	—			9,573			—			682			—			10,255
End of period	$	—		$	8,243		$	3,264		$	1,097		$	—		$	12,604

F-47

21. Supplemental condensed financial information of the Parent Company

Truven Holding Corp.

SCHEDULE I—Condensed Financial Information of Parent Company

Parent Company Condensed Balance Sheet

(in thousands of dollars, unless otherwise indicated)



	As of December 31,
	2014			2013
Asset
Investments in Truven Health Analytics Inc.	$	47,123		$	79,283
Total assets	47,123			79,283

Liabilities and Equity
Total liabilities	—			—
Equity
Common stock—$0.01 par value; 1,000 shares authorized, 1 share issued and outstanding at December 31, 2014 and 2013	—			—
Additional paid in capital	483,550			478,549
Accumulated deficit	(436,123		)	(399,101		)
Foreign Currency translation adjustment	(304		)	(165		)
Total liabilities and stockholders’ equity	$	47,123		$	79,283

The accompanying notes are an integral part of these condensed financial statements.

F-48

Truven Holding Corp.

Parent Company Condensed Statement of Comprehensive Loss

(in thousands of dollars, unless otherwise indicated)



	For the year ended December 31, 2014			For the year ended December 31, 2013			From inception (April 20, 2012) to December 31, 2012
Revenues, net	$	—		$	—		$	—
Operating costs and expenses	—			—			—
(Loss) income before income taxes	—			—			—
Benefit from (provision for) income taxes	—			—			—
Income before share in net loss from subsidiaries	—			—			—
Share of net loss from subsidiaries	(37,022		)	(344,989		)	(54,112		)
Net loss	$	(37,022	)	$	(344,989	)	$	(54,112	)

Other comprehensive loss:
Foreign currency translation adjustments	(139		)	(165		)	—
Total comprehensive loss	$	(37,161	)	$	(345,154	)	$	(54,112	)

The accompanying notes are an integral part of these condensed financial statements.

F-49

Truven Holding Corp.

Parent Company Condensed Statement of Cash Flows

(in thousands of dollars, unless otherwise indicated)



	For the year ended December 31, 2014		For the year ended December 31, 2013			From inception (April 20, 2012) to December 31, 2012

Net cash provided by operating activities	$	—	$	—		$	—
Cash flows from investing activities:
Investment in Truven Health Analytics, Inc.	—		(2,350		)	(464,400		)
Net cash used in investing activities	—		(2,350		)	(464,400		)
Cash flows from financing activities:
Issuance of common stock	—		—			—
Additional capital contribution	—		2,350			464,400
Net cash provided by financing activities	—		2,350			464,400
Change in cash and cash equivalents	—		—			—
Cash and cash equivalents at the beginning of the period	—		—			—
Cash and cash equivalents at the end of the period	$	—	$	—		$	—

The accompanying notes are an integral part of these condensed financial statements.

F-50

Truven Holding Corp.

Notes to Parent Company Condensed Financial Statements

(in thousands of dollars, unless otherwise indicated)

Basis of Presentation

The financial statements for Truven Holding Corp. (the “Parent Company”) summarize the results of operations and cash flows of the Parent Company for the years ended December 31, 2014 and 2013 and from inception (April 20, 2012) to December 31, 2012 and its financial position as of December 31, 2014 and 2013.

The separate condensed financial statements of the Parent Company as presented have been prepared in accordance with SEC Regulation S-X Rule 5-04 and Rule 12-04 and present the Parent Company’s investment in its subsidiaries under the equity method of accounting. Such investment is presented on a separate condensed balance sheet of the Parent Company as “Investment in Truven Health Analytics Inc.” and the Parent Company’s shares of profit or loss of subsidiaries are presented as “Share of net loss from subsidiaries” in the condensed statement of comprehensive loss.

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 Truven and its subsidiaries, and enter into agreements that restrict dividends from subsidiaries. These restrictions have resulted in restricted net assets (as defined in Rule 4-08(e)(3) of Regulation S-X) of Truven and its subsidiaries totaling $47,123 and $79,283 as of December 31, 2014 and 2013, respectively, which exceeded 25% of the consolidated net assets of the Parent Company, and its subsidiaries.

Capital Contribution

The Parent Company was formed on April 20, 2012 for the purpose of consummating the Prior Acquisition and has had no operations from inception. The Parent Company has 1,000 shares authorized, and issued 1 share with $0.01 par value for $464,400.

Prior to the Prior Acquisition, Thomson Reuters Corporation (the Predecessor Parent) entered into a Retention Agreement with key employees of TRHI in conjunction with the disposal of the business. Pursuant to the Retention Agreements, the Predecessor Parent provided for retention and bonus payment to certain employees based on a percentage of salary and targeted transaction price, respectively. The payment was contingent upon the employees continuing services to the buyer after the Prior Acquisition for periods ranging from 90 days to one year. After the Prior Acquisition, Truven determined that the retention and bonus for the duration of the performance period of certain employees subject to the Retention Agreement amounted to $15,813. Although the Predecessor Parent retained the legal and contractual obligation to pay the employees, the compensation expense was recorded by Truven in the period when the service was performed and was allocated in proportion to the days of service in both Predecessor and Successor Periods. As a result, for the Predecessor Period ended June 6, 2012, TRHI recorded $5,800 of retention and bonus expense against Net Investment of Predecessor Parent and Truven recorded $8,635 and $1,378 of retention and bonus expenses against Additional Paid in capital in the period from April 20, 2012 to December 31, 2012 and year ended December 31, 2013. The retention and bonus expense, which was paid by Predecessor Parent, was deemed an investment/capital contribution.

During 2013, Truven Holding Corp. received $2,350 of additional capital contribution from VCPH Holdings LLC, its direct parent company.

Contingencies

As of December 31, 2014, there were no material contingencies, significant provisions for long-term debt obligations, or guarantees of the Parent Company, except for those, if any, which have been separately disclosed in the consolidated and combined financial statements.

F-51

22. Subsequent Events

There have been no other events subsequent to December 31, 2014 which would require accrual or disclosure in these consolidated and combined financial statements.

F-52

ITEM 15 (a) (2)

Valuation and Qualifying Accounts

We maintain an allowance for doubtful accounts that is recorded as a contra asset to our accounts receivable balance. The following table sets forth the change in this reserve for the years ended December 31, 2014 (Successor) and December 31, 2013 (Successor), from inception (April 20, 2012) to December 1, 2012 (Successor), and for the period January 1, 2012 to June 6, 2012 (Predecessor):

Valuation and Qualifying Accounts



Allowance for Doubtful Accounts	Balance at Beginning of Year	Charge to (Recovery from) Bad Debt (1)		Write-offs Net of Recoveries (2)		Balance at End of Year
Year ended December 31, 2014	1,530	1,042		1,328		1,244
Year ended December 31, 2013 (Successor)	1,865	(144	)	191		1,530
From inception (April 20, 2012) to December 31, 2012 (Successor)	—	517		(1,348	)	1,865
For the period January 1, 2012 to June 6, 2012 (Predecessor)	1,319	—		1,319		—

(1) Additions to the allowance account through the normal course of business are charged to expense.
(2) Write-offs reduce the balance of accounts receivable and the related allowance for doubtful accounts indicating management’s belief that specific balances are not recoverable.

F-53

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.)