UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended ~~June~~September 30, 2014

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

COMMISSION FILE NUMBER: 333-187931

Truven Holding Corp.

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



Delaware	7374	45-5164353
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

Truven Health Analytics Inc.

(Exact name of registrant issuer as specified in its charter)



Delaware	7374	06-1467923
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

777 E. Eisenhower Parkway

Ann Arbor, Michigan 48108

(Address of registrants' principal executive offices)

(734) 913-3000

(Registrant’s telephone number, including area code)

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 þ No ¨

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

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

As of ~~August~~November 83, 2014, there was one outstanding share of each of the registrants.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Interim Condensed Consolidated Balance Sheets - As of June 30, 2014 and December 31, 2013	1
	Unaudited Interim Condensed Consolidated Balance Sheets - As of September 30, 2014 and December 31, 2013	1
	Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss - For the three and six months ended June 30, 2014 and June 30, 2013	2
	Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss - For the three and nine months ended September 30, 2014 and September 30, 2013	2
	Unaudited Interim Condensed Consolidated Statements of Cash Flows - For the six months ended June 30, 2014 and June 30, 2013	3
	Unaudited Interim Condensed Consolidated Statements of Cash Flows - For the nine months ended September 30, 2014 and September 30, 2013	3
	Unaudited Interim Condensed Consolidated Statement of Equity - For the six months ended June 30, 2014	5
	Unaudited Interim Condensed Consolidated Statement of Equity - For the nine months ended September 30, 2014	5
	Notes to Unaudited Interim Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2527
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4142
Item 4.	Controls and Procedures	4243
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	4445
Item 1A.	Risk Factors	4445
Item 5.	Other Information	4445
Item 6.	Exhibits	4546
Signatures		4647

Definition of Terms

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


•	the term “Holdings LLC” refers to VCPH Holdings LLC, a Delaware limited liability company;


•	the terms “the Company”, “Truven Holding”, "we", "us", "our" and "Parent" refer to Truven Holding Corp., a Delaware corporation that is directly owned by Holdings LLC;


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


•	the term “Thomson Reuters Healthcare” refers to TRHI, together with certain other assets and liabilities of the Thomson Reuters Healthcare business prior to and including the date of the closing of the Acquisition on June 6, 2012;

•

the term “Wolverine” refers to Wolverine Healthcare Analytics, Inc., a Delaware corporation and an affiliate of The Veritas Capital Fund IV, L.P., a private equity fund managed by Veritas Capital, which was formed on May 16, 2012 as a direct wholly-owned subsidiary of VCPH Holding Corp. (now known as Truven Holding) and, upon consummation of the Acquisition, merged with and into TRHI, with TRHI surviving the Merger as a direct wholly-owned subsidiary of VCPH Holding Corp. (now known as Truven Holding) and subsequently changing its name to Truven Health Analytics Inc.;


•	the terms “Truven” and the “Issuer” refer to Truven Health Analytics Inc., a Delaware corporation and a direct wholly-owned subsidiary of Truven Holding;

•

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


•	the term “Merger” refers to the merger upon the closing of the Acquisition, whereby Wolverine (which was formed solely for the purpose of completing the Acquisition) merged with and into TRHI, with TRHI surviving the Merger as a direct wholly-owned subsidiary of VCPH Holding Corp. (now known as Truven Holding) and subsequently changing its name to Truven Health Analytics Inc.;


•	the term “Stock Seller” refers to Thomson Reuters U.S. Inc.;


•	the terms “Sponsor” and “Veritas Capital” refers to Veritas Capital Fund Management, L.L.C.;


•	the terms “Thomson Reuters” and the “Predecessor Parent” refers to Thomson Reuters Corporation;


•	the term “Stock and Asset Purchase Agreement” refer to the Stock and Asset Purchase Agreement among VCPH Holding Corp., the Stock Seller and Thomson Reuters Global Resources, dated as of April 23, 2012, which VCPH Holding Corp. assigned to Wolverine on May 24, 2012;


•	the term "Notes" refers to the 10.625% Senior Notes.


•	the term "Senior Credit Facility" refers to the Term Loan Facility and Revolving Credit Facility from syndicate of banks and other financial institutions.


•	the term "Old Notes" refers to the 10.625% Senior Notes, Series A, issued in a private offering under an indenture, dated June 6, 2012.


•	the term "Exchange Notes" refers to the 10.625% Senior Notes, Series B, registered under the United States Securities Act of 1933, as amended.


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

• the term "Simpler Transaction" refers to execution of the Purchase Agreement in April 11, 2014, whereby Truven indirectly acquired all of the outstanding equity of Simpler in exchange for a purchase price of $8081.81 million, including a preliminary working capital adjustment of $01.81 million, and the issuance by Holdings LLC, the direct parent of the Company, of $3.7 million of equity interests to Simpler.

Part I - FINANCIAL INFORMATION

Item 1. Financial Information

Truven Holding Corp.

Unaudited Interim Condensed Consolidated Balance Sheets

~~June~~September 30, 2014 and December 31, 2013

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

	June 30, 2014			December 31, 2013
	September 30, 2014			December 31, 2013
Assets
Current assets
Cash and cash equivalents	$	822,~~665~~484		$	10,255
Trade and other receivables (less allowances of $1,241 and $1,530, respectively)	74,762			97,798
Trade and other receivables (less allowances of $1,249 and $1,530, respectively)	90,238			97,798
Prepaid expenses and other current assets	2930,~~644~~667			24,208
Total current assets	~~113~~143,~~071~~389			132,261
Computer hardware and other property, net	3835,~~489~~456			48,037
Developed technology and content, net	~~138~~133,~~290~~654			148,637
Goodwill	~~483~~485,~~300~~917			457,677
Other identifiable intangible assets, net	~~391~~377,~~531~~071			362,014
Other noncurrent assets	14,~~826~~428			15,977
Deferred tax asset	876,234			—
Total assets	$	1,~~179~~196,~~594~~149		$	1,164,603
Liabilities and Equity
Current liabilities
Accounts payable and accrued expenses	$	6264,~~667~~570		$	53,376
Deferred revenue	~~105~~111,~~562~~967			128,392
Current portion of long-term debt	6,360			5,350
Capital lease obligation	~~647~~656			1,596
Deferred tax liabilities	7,~~294~~483			711
Current taxes payable	~~400~~290			189
Total current liabilities	~~182~~191,~~930~~326			189,614
Deferred revenue	4,~~712~~652			2,096
Capital lease obligation	1,~~711~~544			2,102
Long-term debt	~~931~~945,~~634~~907			866,908
Deferred tax liabilities	—			22,027
Other noncurrent liabilities	3,~~097~~540			2,573
Total liabilities	1,~~124~~146,~~084~~969			1,085,320
Equity
Common stock—$ 0.01 par value; 1,000 shares authorized, 1 share issued and outstanding at June 30, 2014 and December 31, 2013	—			—
Common stock—$ 0.01 par value; 1,000 shares authorized, 1 share issued and outstanding at September 30, 2014 and December 31, 2013	—			—
Additional paid-in capital	~~482~~483,~~918~~234			478,549
Accumulated deficit	(~~427~~433,~~158~~778		)	(399,101		)
Foreign currency translation adjustment	(~~250~~276		)	(165		)
Total equity	5549,~~510~~180			79,283
Total liabilities and equity	$	1,~~179~~196,~~594~~149		$	1,164,603

See the notes to these unaudited condensed consolidated financial statements.

Truven Holding Corp.

Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss

(in thousands of dollars, unless otherwise indicated)

	Three months ended June 30,						Six months ended June 30,
	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014			2013
Revenues, net	$	~~136~~140,~~424~~187		$	~~126~~123,~~997~~594		$	~~254~~394,~~687~~874		$	~~239~~363,~~887~~481
Operating costs and expenses Cost of revenues, excluding depreciation and amortization	(75,~~720~~089		)	(6964,~~114~~293		)	(~~146~~221,~~009~~098		)	(~~136~~200,~~691~~983		)
Selling and marketing, excluding depreciation and amortization	(1513,~~812~~087		)	(1512,~~766~~899		)	(2942,~~536~~623		)	(2942,~~212~~111		)
General and administrative, excluding depreciation and amortization	(1314,~~413~~398		)	(1012,~~373~~387		)	(2439,~~697~~095		)	(1831,~~939~~326		)
Depreciation	(54,~~924~~931		)	(45,~~409~~422		)	(1217,~~517~~448		)	(814,~~989~~411		)
Amortization of developed technology and content	(9,~~673~~820		)	(78,~~726~~228		)	(1828,~~869~~689		)	(1523,~~444~~672		)
Amortization of other identifiable intangible assets	(1211,~~268~~960		)	(8,615		)	(2032,~~883~~843		)	(1725,~~230~~845		)
Other operating expenses	(45,~~846~~826		)	(78,~~635~~278		)	(1117,~~375~~201		)	(2028,~~500~~778		)
Total operating costs and expenses	(~~137~~135,~~656~~111		)	(~~123~~120,~~638~~122		)	(~~263~~398,~~886~~997		)	(~~247~~367,~~005~~126		)
Operating income (loss)	(15,~~232~~076		)	3,~~359~~472			(94,~~199~~123		)	(73,~~118~~645		)
Net interest expense	(17,~~415~~663		)	(2016,~~525~~661		)	(3351,~~689~~352		)	(3854,~~092~~753		)
Other finance costs	(~~260~~81		)	(~~441~~19		)	(~~336~~417		)	(~~453~~472		)
Loss before income taxes	(1812,~~907~~668		)	(1713,~~607~~208		)	(4355,~~224~~892		)	(4558,~~663~~870		)
Benefit from income taxes	106,~~107~~048			64,~~611~~865			1521,~~167~~215			1721,~~037~~902
Net loss	$	(86,~~800~~620	)	$	(108,~~996~~343	)	$	(2834,~~057~~677	)	$	(2836,~~626~~968	)
Other comprehensive loss:
Foreign currency translation adjustments	55(26		)	30(17		)	(85111		)	(219		)
Total comprehensive loss	$	(86,~~745~~646	)	$	(108,~~966~~360	)	$	(2834,~~142~~788	)	$	(2836,~~628~~987	)

See the notes to these unaudited condensed consolidated financial statements.

Truven Holding Corp.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands of dollars, unless otherwise indicated)

	Six months ended June 30,
	Nine months ended September 30,
	2014			2013
Operating activities
Net loss	$	(2834,~~057~~677	)	$	(2836,~~626~~968	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation	1217,~~517~~448			814,~~989~~411
Amortization of developed technology and content	1828,~~869~~689			1523,~~444~~672
Amortization of other identifiable intangible assets	2032,~~883~~843			1725,~~230~~845
Amortization of debt issuance costs	1,~~252~~878			1,~~304~~931
Amortization of debt discount	12,~~558~~421			1,~~202~~922
Amortization of unfavorable leasehold interest	—			(94		)
Loss on extinguishment of debt	—			2,353
Deferred income tax benefit	(1521,~~532~~490		)	(1722,~~409~~383		)
Share-based compensation expense	~~639~~955			~~767~~1,137
Retention bonus in conjunction with the Acquisition	—			1,378
Asset write-off	4,706			—
Changes in operating assets and liabilities, net of business combinations:
Trade and other receivables	3015,~~585~~320			3313,~~604~~328
Prepaid expenses and other current assets	(910,~~717~~739		)	(54,~~550~~453		)
Accounts payable and accrued expenses	814,~~052~~438			(217,~~603~~203		)
Deferred revenue	(2014,~~815~~469		)	(2313,~~330~~415		)
Income taxes	~~212~~101			~~226~~289
Other	~~420~~638			(~~664~~599		)
Net cash provided by (used in) operating activities	25,572			(14,779		)
Net cash provided by operating activities	38,062			1,151
Investing activities
Acquisition of Simpler, net of cash acquired	(7677,~~270~~400		)	—
Capital expenditures	(1324,~~646~~412		)	(2034,~~339~~853		)
Net cash used in investing activities	(89101,~~916~~812		)	(2034,~~339~~853		)
Continued on next page

	Six months ended June 30,
	Nine months ended September 30,
	2014			2013
Financing activities
Additional capital contribution	—			1,950
Proceeds from revolving credit facility	—15,000			15,000
Principal repayment of senior term loan	(24,~~927~~517		)	(23,~~657~~994		)
Repayment of revolving credit facility	(30,000		)	—
Proceeds from senior term loan related to refinancing	100,000			86,105
Principal repayment of senior term loan related to refinancing	—			(74,772		)
Premium payment for refinancing the credit facility	—			(5,760		)
Payment of debt issuance costs	(2,895		)	—
Payment of capital lease obligation	(1,~~340~~498		)	(~~422~~844		)
Net cash provided by financing activities	6276,~~838~~090			1917,~~444~~685
Effect of exchange rate changes in cash and cash equivalents	(84111		)	(219		)
Net decrease in cash and cash equivalents	(1,590		)	(15,676		)
Net increase (decrease) in cash and cash equivalents	12,229			(16,036		)
Cash and cash equivalents
Beginning of period	10,255			23,805
End of period	$	822,~~665~~484		$	87,~~129~~769

Supplemental cash flow disclosures
Interest paid	$	3038,~~726~~182			$	3138,~~761~~100

See the notes to these unaudited condensed consolidated financial statements.

Truven Holding Corp.

Unaudited Interim Condensed Consolidated Statement of Equity

~~Six~~Nine months ended ~~June~~September 30, 2014

(in thousands of dollars, unless otherwise indicated)

	Common stock		Additional paid-in capital		Accumulated deficit			Accumulated other comprehensive loss			Total equity
Balance at December 31, 2013	$	—	$	478,549	$	(399,101	)	$	(165	)	$	79,283
Additional capital contribution	—		3,730		—			—			3,730
Share-based compensation expense	—		~~639~~955		—			—			~~639~~955
Foreign currency translation adjustment	—		—		—			(85111		)	(85111		)
Net loss	—		—		$	(2834,~~057~~677	)	—			(2834,~~057~~677		)
Balance at June 30, 2014	$	—	$	482,918	$	(427,158	)	$	(250	)	$	55,510
Balance at September 30, 2014	$	—	$	483,234	$	(433,778	)	$	(276	)	$	49,180

See the notes to these unaudited condensed consolidated financial statements.

Truven Holding Corp.

Notes to Unaudited Condensed Consolidated 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.,), an affiliate of Veritas Capital, 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, which the Company assigned to 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 TRHI from TRUSI and certain other assets and liabilities of the Thomson Reuters Healthcare business from TRGR and its affiliates. Upon the closing of the Acquisition, Wolverine merged with and into TRHI, with TRHI surviving the Merger as a direct wholly-owned subsidiary of the Company, 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 Company.

Truven provides healthcare data and analytics solutions and services to key constituents in the healthcare system, including employers and health plans, federal government agencies, state government agencies, hospitals, clinicians and pharmaceutical companies. Truven operates and manages its business under two reportable segments: Commercial and Government (see Note 8).

The Company was formed on April 20, 2012 by Veritas Capital for the purpose of consummating the Acquisition and has had no operations from inception other than its investment in Truven.

Basis of Presentation

These unaudited interim condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim reporting and are consistent with the accounting policies and methods used in preparation of the Company's consolidated financial statements as of December 31, 2013. The preparation of interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the interim condensed consolidated 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. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. In the opinion of management, all adjustments (consisting only of normal and recurring adjustments) necessary for a fair statement for the periods presented have been recorded. The results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2014, are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2014. These financial statements should be read in conjunction with, and have been prepared in conformity with, the accounting principles reflected in the Company’s financial statements and the notes thereto for the year ended December 31, 2013 included in the Form10-K as filed with the Securities and Exchange Commission ("SEC") on March 31, 2014.

Reclassification

In order to conform the prior periods with the current period presentation, the Company has reclassified facilities costs previously recorded in the “General and administrative, excluding depreciation and amortization” to “Costs of revenues, excluding depreciation and amortization” and “Selling and marketing, excluding depreciation and amortization” amounting to $2.1 million and $0.2 million, in the three month period ended June 30, 2013, respectively, and $4.3 million and $0.5 million, in the six month period ended June 30, 2013.

2. 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

~~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 ~~impacts~~impact on our financial statements.

In May 2014, as part of its ongoing 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 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

On April 11, 2014, certain wholly-owned subsidiaries of the Company entered into a Purchase Agreement (the "Purchase Agreement") with 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 Purchase Agreement, the Company indirectly acquired all of the outstanding equity of Simpler in exchange for a purchase price of $8081.81 million, including a ~~preliminary~~ working capital adjustment of $01.81 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 $2.7 million. The Company financed the acquisition and related costs and expenses through the $100.0 million increase in the "Tranche B Term Loans" (the "Supplemental Tranche B Term Loans") (see Note 6). The acquisition was consummated concurrently with the execution of the Purchase Agreement. The Company and its affiliates did not assume any indebtedness in connection with the Simpler Transaction.

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

	Preliminary values recognized at acquisition date
	Values recognized at acquisition date
Trade and other receivables	$	7,~~350~~560
Prepaid assets and other current assets	425
Computer hardware and other property	181
Other identifiable intangible assets	5047,~~400~~900
Current liabilities	(2,~~595~~575		)
Deferred revenue	(600		)
Net assets acquired	5552,~~161~~891
Goodwill on acquisition	2528,~~623~~240
Net consideration	$	8081,~~784~~131

Adjustments recorded during the quarter as result of valuation and management review of certain accounts resulted in an increase of goodwill and current asset of $2.6 million and $0.2 million, respectively, and a corresponding decrease in other identifiable intangible asset of $2.5 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.

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 $2021.31 million, with estimated useful lives of 3 to 9 years.

~~Backlogs~~Backlog ~~were~~was determined using an income approach based on projected backlog as of acquisition date. Using this approach, ~~backlogs~~backlog ~~were~~was assigned a value of $1714.63 million, with an estimated useful ~~lives~~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 unaudited revenue and net loss for the three month period ended September 30, 2014 and period from April 12, 2014 to ~~June~~September 30, 2014, amounted to $1012.69 million and $23.5 million, respectively, and $0.4 million and $1.63 million, respectively. Unaudited pro forma financial information has not been presented due to immateriality.


4.	Goodwill

The changes in the carrying amount of goodwill by reportable segment during the three and ~~six~~nine ~~month~~months ~~periods~~ ended ~~June~~September 30, 2014, were as follows:

	Commercial			Government			Total
Balance as of December 31, 2013 and March 31, 2014	$	733,041		$	91,298		$	824,339
Acquisition (see Note 3)	25,623			—			25,623
Balance as of June 30, 2014	758,664			91,298			849,962
Adjustment (see Note 3)	$	2,617		$	—		$	2,617
Balance as of September 30, 2014	$	761,281		$	91,298		$	852,579
Accumulated impairment:
Balance as of December 31, 2013, March 31, 2014 and June 30, 2014	$	(321,064	)	$	(45,598	)	$	(366,662	)
Balance as of December 31, 2013, March 31, 2014, June 30, 2014 and September 30, 2014	$	(321,064	)	$	(45,598	)	$	(366,662	)
Net book value as of December 31, 2013	$	411,977		$	45,700		$	457,677
Net book value as of March 31, 2014	$	411,977		$	45,700		$	457,677
Net book value as of June 30, 2014	$	437,600		$	45,700		$	483,300
Net book value as of September 30, 2014	$	440,217		$	45,700		$	485,917

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 Simpler Transaction (see Note 3) has been allocated to the Company's commercial segment.

5. Other ~~identifiable~~Identifiable ~~intangible~~Intangible ~~assets~~Assets

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

	June 30, 2014
	September 30, 2014
	Average life (years)	Cost		Accumulated amortization			Net
Customer relationships	13.0	$	~~337~~351,~~800~~000	$	(5967,~~468~~707	)	$	~~278~~283,~~332~~293
Trademarks and trade names	11.5	~~106~~94,~~600~~200		(1213,~~395~~595		)	9480,~~205~~605
Others	2.0	2218,~~000~~700		(35,~~006~~527		)	1813,~~994~~173
		$	~~466~~463,~~400~~900	$	(7486,~~869~~829	)	$	~~391~~377,~~531~~071
	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

Amortization expense for each of the next five twelve-month periods beginning ~~July1~~October 1, 2014, is expected to be approximately $5136.42 million for 2015, $4239.28 million for 2016, $3837.7 million for 2017, $37.4 million for 2018, and $37.12 million for 2019.


6.	Long-Term Debt

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

	June 30, 2014		December 31, 2013
	September 30, 2014		December 31, 2013
Senior Credit Facility
Term Loan Facility (net of $15,626 and $14,156 discount, respectively)	$	612,433	$	516,831
Term Loan Facility (net of $14,831 and $14,156 discount, respectively)	$	611,639	$	516,831
Revolving Credit Facility	—15,000		30,000
10.625% Senior Notes ("the Notes") (net of $1,589 and $1,723 discount, respectively)	325,561		325,427
10.625% Senior Notes ("the Notes") (net of $1,522 and $1,723 discount, respectively)	325,628		325,427
	937,994		872,258
	952,267		872,258
Less: current portion of long-term debt	6,360		5,350
Long-term debt	$	~~931~~945,~~634~~907	$	866,908

In connection with the Acquisition, on June 6, 2012, Truven entered into the Senior Credit Facility and issued the 10.625% Senior Notes (the "Notes"). Except as otherwise indicated by the context, the Old Notes and the Exchange Notes are collectively and individually defined as the "Notes".

Senior Credit Facility

~~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. During the period, the Company repaid $30.0 million of principal amount plus interest drawn against the Revolving Credit Facility. As of June 30, 2014, the Company has an available line of credit under the Revolving Credit Facility of $50.0 million.

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. On July 2, 2014, Truven had drawn $15.0 million from its Revolving Credit Facility for working capital requirements and issued a letter of credit in the amount of $7.5 million as surety on government contracts, which while not drawn, reduce the available line of credit under the Revolving Credit Facility to $27.5 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 Credit Agreement 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.

All obligations under the Senior Credit Facility are guaranteed by Truven Holding Corp. and each of Truven’s existing and future wholly-owned domestic subsidiaries. As of June 30, 2014, certain domestic subsidiaries acquired by the Company became a guarantor under the Senior Credit Facility (see Notes 15). 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 in accordance with the debt covenants as long as the commitments under the Revolving Credit Facility remain outstanding (subject to certain limited exceptions). The Senior Credit Facility also contains certain customary representations and warranties, affirmative covenants and events of default. As of ~~June~~September 30, 2014, the Company is in compliance with all of these credit facility covenants.

Refinancing

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

$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 a call premium. Of the $6.7 million, $5.8 million was recorded as part of original issue discount and presented as net of debt.

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 Purchase Agreement, Truven entered into the Third Amendment to our Credit Agreement. The Third Amendment provided for a $100.0 million increase in the Tranche B Term Loans, and increased the total amount available under the Credit Agreement 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 $1,590 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 Credit Agreement.

The Third Amendment also amended the Credit Agreement 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. As of June 30, 2014, certain domestic subsidiaries acquired by the Company under the Simpler Purchase Agreement became a guarantor under the Senior Credit Facility (see Note 15).

10.625% Senior Notes due 2020

The Notes, which were issued under an indenture, dated June 6, 2012 ( 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 referred to below, 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 (commencing on December 1, 2012), 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 Truven Holding Corp. 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 Wethe ~~are~~acquisition inof ~~compliance~~Simpler ~~with~~on ~~all~~April 12, 2014, the wholly owned domestic subsidiaries we acquired became guarantors of the Senior Credit Facility and, as a result, were required to become guarantors of the Notes. However, the supplemental indenture to the Indenture to include these ~~covenants~~subsidiaries as guarantors was only executed on November 3, 2014. Following the execution of ~~June 30~~the third supplemental indenture on November 3, 2014, we are in compliance with all of the covenants under the Indenture.

On June 5, 2013, we entered into 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, we agreed (i) to use commercially reasonable efforts to file with the SEC an exchange offer registration statement pursuant to which we would exchange the Old Notes issued (and related guarantees) for a like aggregate principal amount of Exchange Notes, which are identical in all material respects to the Old Notes, except for certain provisions, among others, relating to additional interest and transfer restrictions (and related guarantees) or (ii) under certain circumstances, to use commercially reasonable efforts to file a shelf registration statement with the SEC with respect to the Old Notes (and related guarantees), in each case by March 3, 2013. We did not file the required registration statement for the Notes by March 3, 2013, and consequently, we were required to pay additional penalty interest of 0.25% per annum for the 90 day period commencing March 4, 2013, and an additional 0.25% with respect to each subsequent 90 day period, in each case until and including the date the exchange offer was completed, up to a maximum increase of 1.00% per annum.

On June 26, 2013, the exchange offer registration statement was declared effective by the SEC. On July 31, 2013, Truven closed its offer to exchange the Old Notes for the Exchange Notes. The interest rate on the new Exchange Notes reverted to 10.625%.

As of ~~June~~September 30, 2014, principal maturities of long-term debt for the next five years and thereafter consist of:

For the period ending June 30,
For the period ending September 30,
2015	$	6,360
2016	6,360
2017	621,360
2018	6,360
2019	~~579~~578,~~044~~317
Thereafter	327,150
	$	~~931~~945,~~634~~907


7.	Other Operating Expenses

The components of other operating expenses include the following:

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

2014

2013

2014

2013

Severance and retention bonuses

~~419~~1,323

~~1,324~~348

~~981~~2,304

23,~~799~~147

Acquisition related costs and other nonrecurring charges

3,~~827~~878

57,~~629~~289

48,~~446~~324

1623,~~394~~683

Asset Write-off (see Note 12)

—

4,706

—

Sponsor fee

~~600~~625

~~682~~641

1,~~242~~867

1,~~307~~948

Total other operating expenses

45,~~846~~826

78,~~635~~278

1117,~~375~~201

2028,~~500~~778

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 Acquisition of TRHI. On March 31, 2012, prior to the Acquisition, the Predecessor Parent entered into a Retention Agreement 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. For the three and nine months ended September 30, 2013, $0 and $1,400 of retention and bonus expense was recorded against Additional Paid In Capital in the Equity section of the condensed consolidated balance sheet. The compensation paid by Predecessor Parent on behalf of Truven was deemed a capital contribution.

12Acquisition related costs and non recurring charges in 2014 included professional fees related to the acquisition of Simpler in April 2014 (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 in 2013 include costs incurred related to technology and other costs in connection with the Company's transition to a standalone business. These costs include nonrecurring expenses associated with data center migration and separating infrastructure from Predecessor Parent, costs related to the transitional service agreement with Thomson Reuters and related to rebranding, consulting and professional fees.

facing opportunities and to simplify our business decision-making process (see Note 8). Severance and retention bonuses in 2013 primarily relate to the Acquisition of TRHI. On March 31, 2012 prior to the Acquisition, the Predecessor Parent entered into a Retention Agreement 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. For the three and six months ended June 30, 2013, $412 and $1,378 of retention and bonus expense was recorded against Additional Paid In Capital in the Equity section of the condensed consolidated balance sheet. The compensation paid by Predecessor Parent on behalf of Truven was deemed a capital contribution.

Acquisition related costs and non recurring charges in 2014 included professional fees related to the acquisition of Simpler in April 2014 (see Note 3) and certain costs related to business improvement processes. Acquisition related costs and non recurring charges in 2013 include costs incurred related to technology and other costs in connection with the Company's transition to a standalone business. These costs include nonrecurring expenses associated with data center migration and separating infrastructure from Predecessor Parent, costs related to the transitional service agreement with Thomson Reuters and related to rebranding, consulting and professional fees.

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 Acquisition (see Note 10).

8. 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. ~~Through~~ ~~the~~The ~~first quarter of 2014, the~~ Company operated and managed its business through three reportable segments: Payer, Hospitals and Clinicians. During the second quarter of 2014, the Company determined its new reportable segments based on the discrete financial information provided to the CODM. As a result, management changed the Company’s segment structure ~~enabling~~enables us to more effectively focus on business and market facing opportunities and to simplify our business decision-making process. The ~~new~~ operating segments have been aligned to the Commercial and Government division structures that are each headed by separate segment managers with corresponding changes in its internal management structure and information provided to the CODM. The Commercial segment includes the former Payer’s Employer/HealthPlan and Pharma channels, the former Hospitals and Clinicians segments, and Simpler's Lean enterprise transformation consulting services business. The Government segment is mainly comprised of the former Payer’s Federal and State Government channels. ~~The~~ ~~change in the structure of the Company's internal organization causes the composition of our reportable segments to be adjusted retrospectively.~~

The Company's ~~new~~ reportable segments are as follows:

Commercial

The Commercial segment provides ~~integrated~~ analytic solutions and ~~consulting~~ 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. In the Commercial segment we deliver analytics solutions and services in population health and cost analysis, hospital performance management, payment integrity and compliance, patient care solutions, research solutions, analytic consulting and research services, and strategic consulting to meet the converging needs of the market.

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. ~~In the Government segment we deliver analytics solutions and services in population heath and cost analysis,~~

payment integrity and compliance, patient care solutions, research solutions, analytic consulting and research services, strategic consulting, and data warehousing.

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.

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 three months ended ~~June~~September 30, 2014 and 2013 is as follows:

	Three months ended June 30,
	Three months ended September 30,
	2014					2013
	Revenue		Segment operating income			Revenue		Segment operating income
Commercial	$	~~113~~115,~~500~~095	$	3841,~~210~~967		$	9897,~~732~~903	$	3534,~~194~~328
Government	2225,~~924~~092		~~(12~~1,984		)	2825,~~265~~691		25,~~617~~072
Segment totals	~~136~~140,~~424~~187		3843,~~198~~951			~~126~~123,~~997~~594		3739,~~811~~400
Center/Shared Services	—		(6,~~719~~338		)	—		(65,~~067~~385		)
	$	136,424	$	31,479		$	126,997	$	31,744
Segment Operating Income	$	140,187	$	37,613		$	123,594	$	34,015

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

	Three months ended June 30,
	2014			2013
Segment operating income	$	31,479		$	31,744
Depreciation	(5,924		)	(4,409)
Amortization of developed technology and content	(9,673		)	(7,726)
Amortization of other identifiable intangible assets	(12,268		)	(8,615)
Other operating expenses	(4,846		)	(7,635		)
Operating income (loss)	(1,232		)	3,359
Net interest expense	(17,415		)	(20,525		)
Other finance costs	(260		)	(441		)
Loss before income taxes	$	(18,907	)	$	(17,607	)

Segment information for the six months ended June 30, 2014 and June 30, 2013 is as follows:

	Six months ended June 30,
	Three months ended September 30,
	2014			2013			~~2013~~
	Revenue			Segment operating income (loss)			Revenue		Segment operating income
Segment operating income	$	37,613		$	34,015
Commercial	$	209,851		$	68,170		$	191,159	$	63,475
Depreciation	(4,931		)	(5,422)
Government	44,836			(650		)	48,728		3,763
Amortization of developed technology and content	(9,820		)	(8,228)
Segment totals	254,687			67,520			239,887		67,238
Amortization of other identifiable intangible assets	(11,960		)	(8,615)
Center/Shared Services	—			(13,075		)	—		(12,193		)
Other operating expenses	(5,826		)	(8,278		)
	$	254,687		$	54,445		$	239,887	$	55,045
Operating income	5,076			3,472
Net interest expense	(17,663		)	(16,661		)
Other finance costs	(81		)	(19		)
Loss before income taxes	$	(12,668	)	$	(13,208	)

Segment information for the nine months ended September 30, 2014 and September 30, 2013 is as follows:



	Nine months ended September 30,
	2014					2013
	Revenue		Segment operating income			Revenue		Segment operating income
Commercial	$	324,946	$	110,137		$	289,062	$	97,804
Government	69,928		1,334			74,419		8,835
Segment totals	394,874		111,471			363,481		106,639
Center/Shared Services	—		(19,413		)	—		(17,578		)
Segment Operating Income	$	394,874	$	92,058		$	363,481	$	89,061

	Six months ended June 30,
	Nine months ended September 30,
	2014			2013
Segment operating income	$	5492,~~445~~058		$	5589,~~045~~061
Depreciation	(1217,~~517~~448		)	(814,~~989~~411)
Amortization of developed technology and content	(1828,~~869~~689		)	(1523,~~444~~672)
Amortization of other identifiable intangible assets	(2032,~~883~~843		)	(1725,~~230~~845)
Other operating expenses	(1117,~~375~~201		)	(2028,~~500~~778		)
Operating loss	(94,~~199~~123		)	(73,~~118~~645		)
Net interest expense	(3351,~~689~~352		)	(3854,~~092~~753		)
Other finance costs	(~~336~~417		)	(~~453~~472		)
Loss before income taxes	$	(4355,~~224~~892	)	$	(4558,~~663~~870	)

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

9. Share-based Compensation

In October 2012, the Company’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, not to exceed 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 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, 2013	4.6		$	6,374		—	$	—
Granted	—		—			0.9	1,067
Forfeited	(0.2	)	(274		)	—	—
Balance at September 30, 2014	4.4		$	6,100		0.9	$	1,067
Outstanding and vested as of September 30, 2014	1.8		$	2,518		—	$	—

	Class B					Class B-1
	Ownership interest (%)		Fair value at grant date			Ownership interest (%)	Fair value at grant date
Balance at December 31, 2013	4.6		$	6,374		—	$	—
Granted	—		—			0.9	1,067
Forfeited	(0.2	)	(274		)	—	—
Balance at June 30, 2014	4.4		$	6,100		0.9	$	1,067
Outstanding and vested as of June 30, 2014	1.7		$	2,354		—	$	—

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, net of estimated forfeiture rate of 10% against additional paid in capital of $~~399~~316 and $~~366~~371, for the three months ended ~~June~~September 30, 2014 and 2013, respectively, and $~~639~~955 and $~~767~~1,137 for the ~~six~~nine months ended ~~June~~September 30, 2014 and 2013, respectively, which is recorded in General and administrative expense in the Company’s unaudited interim condensed consolidated statements of comprehensive loss.

The total unrecognized compensation cost related to nonvested Membership Interests expected to be recognized over the next 54.08 years is $43,~~249~~934.

As of ~~June~~September 30, 2014, 1.78% of Membership Interests has vested with an estimated fair value of $2,~~004~~146.


10.	Related Party Transactions

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 Acquisition and will continue to pay the Sponsor an annual advisory fee in 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 three and ~~six~~nine months ended ~~June~~ September 30, 2014 the Company recorded an expense for the Sponsor fee of $0.6 million and $1.29 million, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2013, the Company recorded an expense for the Sponsor fee of $0.6 million and $1.39 million, respectively. The Sponsor advisory ~~fee is presented within other operating expenses in the Company's unaudited interim condensed consolidated statements of comprehensive loss.~~

On April 11, 2014, as part of the Simpler Transaction, the Company paid a transaction fee of $1.5 million to the Sponsor. As of June 30, 2014, there was $2.5 million of accounts payable to the Sponsor included in the accounts payable and accrued expenses account.

After the Acquisition on June 6, 2012, 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 three and six months ended June 30, 2013

~~amounted~~fee ~~to $3.8 million and $8.0 million respectively, which~~ is ~~included~~presented inwithin ~~the~~ other operating expenses in the Company's unaudited interim condensed consolidated ~~statement~~statements of comprehensive loss.

~~The~~On ~~Company~~April also entered into a reverse transitional services agreement with TRUSI pursuant to which we provided TRUSI with office space and facilities management services at several locations in the United States. Pursuant to the agreement11, ~~we provided these services for certain pre-determined periods ranging from one year to approximately 22 months~~2014, ~~with~~as ~~all~~part ~~such~~of ~~services~~the toSimpler ~~end by March 31~~Transaction, ~~2015.~~the ~~The~~ Company ispaid ~~entitled~~a totransaction ~~fees~~fee ~~for each~~ of ~~the~~$1.5 ~~services~~million ~~provided~~to ~~for any services requested by~~ the ~~Stock Seller~~Sponsor. As ~~The~~of ~~income recognized for services provided for the three and six months ended June~~September 30, 2014 ~~totaled $0.1 million and $0.2 million~~, ~~respectively. The~~advance ~~income~~payment ~~recognized~~to ~~under~~Sponsor ~~this~~included ~~service~~in ~~agreement for~~ the ~~three~~prepaid and ~~six~~other ~~months~~current ~~ended~~assets ~~June 30,~~account ~~2013~~in ~~totaled~~the ~~$0.2~~balance ~~million~~sheet ~~and~~amounted to $01.47 million~~, respectively~~. ~~These were recorded as a reduction to general and administrative expense in the Company's unaudited interim condensed consolidated statements of comprehensive loss.~~

The Company also entered into a reverse transitional services agreement with TRUSI pursuant to which we provided 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 for services provided for the three and nine months ended September 30, 2014 totaled $0.1 million and $0.3 million, respectively. The income recognized under this service agreement for the three and nine months ended September 30, 2013 totaled $0.1 million and $0.6 million, respectively. These were recorded as a reduction to general and administrative expense in the Company's unaudited interim condensed consolidated statements of comprehensive loss.

During the first quarter of 2013, Truven Holding Corp. received $1,950 of additional capital contribution from Holdings LLC.

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.

On October 11, 2013, the Company received a note receivable of $0.3 million from Holdings LLC, the direct parent company of the Company. 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 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 ~~June~~September 30, 2014.


11.	Income Taxes

Income tax provisions for interim periods are based on estimated annual income tax rates, adjusted to reflect the effects of any significant infrequent or unusual items which are required to be discretely recognized within the current interim period. The Company’s intention is to permanently reinvest its foreign earnings outside of the United States. As a result, the effective tax rates in the periods presented are largely based upon the projected annual pre-tax earnings by jurisdiction and the allocation of certain expenses in various taxing jurisdictions where the Company conducts its business. These taxing jurisdictions apply a broad range of statutory income tax rates.

Income tax benefit for the three and ~~six~~nine months ended ~~June~~ September 30, 2014 had an effective tax rate of 5347.57% and 3538.10%, respectively, and income tax benefit for the three and ~~six~~nine months ended ~~June~~ September 30, 2013 had an effective tax rate of 3736.58% and 37.32%, respectively. Income tax benefit is different from the amount derived by applying the federal statutory tax rate of 35%, mainly due to the impact of certain state income taxes partially offset by the impact ~~of non deductible expenses. The Company and its subsidiaries are subject to U.S. federal income tax as well as income taxes of multiple states and foreign jurisdictions.~~

of non deductible expenses. The Company and its subsidiaries are subject to U.S. federal income tax as well as income taxes of multiple states and foreign jurisdictions.

12. Commitment and Contingencies

Security and Guarantee Agreements

The Company has entered into guarantee and security arrangements in respect of its indebtedness as described in Note 6.

Contractual Commitments

Revenue Sharing Agreement

17Effective 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 $2.0 million, $4.0 million and $6.0 million, for the calendar years 2013, 2014 and 2015, respectively. The guaranteed revenue share is paid in advance by the Company on March 1st of each calendar year and is applied against the revenue share of the supplier earned through March 1st of the following calendar year. The agreement provides a grace period for the Company of up to August 31st of the following calendar year in the event that the supplier's revenue share earned does not reach the prepayment amount. After the grace period, if the revenue share earned does not meet the minimum target then the entire prepayment amount is deemed earned by the supplier. In the first quarter of 2014, $4.7 million of the prepaid balance had been written off as it was determined that the estimated revenue share of the supplier will not be met within the grace period. As of September 30, 2014, there are no prepaid revenue share balances on the Company's balance sheet.

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 1st of each calendar year and is applied against the revenue share of the supplier earned through March 1st of the following calendar year. The agreement provides a grace period for the Company of up to August 31st of the following calendar year in the event that the supplier's revenue share earned does not reach the prepayment amount. After the grace period, if the revenue share earned does not meet the minimum target then the entire prepayment amount is deemed earned by the supplier. In the first quarter of 2014, $4.7 million of prepaid balance had been written off as it was determined that the estimated revenue share of the supplier will not be met by the grace period. As of June 30, 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 over 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.

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 the United States Court of Appeals for the Ninth Circuit which affirmed the District Court's decision. The parties have entered into a tolling agreement pending the outcome of PAMC’s appeals. If a claim is filed against us, we expect to defend it.

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 the United States Court of Appeals for the Ninth Circuit which affirmed the District Court's decision. The parties have entered into a tolling agreement pending the outcome of PAMC’s appeals. If a claim is filed against us, we expect to defend it.

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.

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.

13. 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.

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.

The Company has determined that the fair value of accounts receivable and accounts payable approximates carrying value at ~~June~~September 30, 2014 and December 31, 2013 due to short term maturity dates.

At ~~June~~September 30, 2014, the carrying amounts and fair values of the Senior Credit Facility, revolver and 10.625% Senior Notes were as follows:

			Fair values
	Carrying amounts		Level 1		Level 2		Level 3
Senior Term Loan	$	~~612~~611,~~433~~639	$	—	$	~~620~~615,~~208~~507	$	—
10.625% Senior Notes	325,561		—		359,047		—
Revolver	15,000		—		15,000		—
10.625% Senior Notes	325,628		—		345,143		—

At December 31, 2013, the carrying amounts and fair values of the Senior Credit 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.

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.

14. Subsequent Events

On ~~July~~October 216, 2014, Truven had drawn $15.0 million ~~from~~under its Revolving Credit Facility for ~~working capital requirements and issued a letter of credit in~~ the ~~amount~~acquisition of ~~$7.5~~Joan Wellman ~~million~~and ~~as surety on government contracts~~Associates, ~~which while not drawn, reduce the available line of credit under the Revolving Credit Facility to $27~~Inc.~~5 million~~(JWA).

~~Other~~On October 31, 2014, Truven entered into a Purchase Agreement with JWA, a company that provides Lean healthcare consulting services. Pursuant to the Purchase Agreement, the Company acquired all of the outstanding equity of JWA in exchange for a cash purchase price of $16.0 million, including a $2.0 million holdback payment. The acquisition was consummated concurrently with the execution of the Purchase Agreement. Truven did not assume any indebtedness of JWA in connection with the transaction.

~~There~~The ~~have~~Company ~~been~~has nonot ~~other~~made ~~events~~all ~~subsequent~~of tothe ~~June~~required ~~30,~~disclosures ~~2014~~in accordance with ASC 805-10-50-2, ~~which~~Business ~~would~~Combinations, ~~require~~as ~~accrual~~it oris ~~disclosure~~currently in ~~these~~the ~~unaudited~~process ~~interim~~of ~~condensed~~evaluating ~~consolidated~~the ~~financial~~purchase ~~statements~~accounting implications of the JWA transaction.

On November 3, 2014, we entered into third supplemental indenture to the Indenture to include wholly owned domestic subsidiaries we acquired as guarantors of the Notes.

There have been no other events subsequent to September 30, 2014, which would require any accrual or disclosure in these unaudited interim condensed consolidated financial statements.

15. Unaudited Supplemental Guarantor Financial Information

In connection with the Acquisition, Truven issued the Notes as further described in Note 6. 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 acquisition of Simpler on April 11, 2014, the separate financial statements and the condensed consolidating and combining financial information about the comprehensive income (loss), financial position and cash flows of the Parent, the Issuer, the Guarantors, and the non-Guarantors, and eliminations ~~are~~were not presented due to the following:


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

• The ~~Guarantee~~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 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 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 acquisition of Simpler, certain acquired 100% owned subsidiaries became guarantors ~~under~~of the obligations of Truven under the Senior Credit Facility and the Notes ~~of Truven~~. 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:

(1) Truven Holding Corp., the Parent, ;

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

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

(4) All international 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 isare not presented because management does not believe such information is material.

2022

Truven Holding Corp.

Unaudited Interim Condensed Consolidated Balance Sheets

As of ~~June~~September 30, 2014

	Parent			Issuer			Guarantor subsidiaries			Non-Guarantor subsidiaries			Eliminations			Consolidated
Assets
Cash and cash equivalents	$	—		$	616,~~788~~107		$	~~714~~5,157		$	1,~~163~~220		$	—		$	822,~~665~~484
Trade and other receivables, net of allowances	—			6883,~~224~~819			5,~~857~~407			~~921~~1,012			~~(240~~—		)	7490,~~762~~238
Prepaid expenses and other current assets	—			2829,~~658~~739			~~328~~299			~~658~~723			—(94		)	2930,~~644~~667
Intercompany receivable	—			—16,788			3,~~500~~147			216,~~051~~099			(536,~~551~~034		)	—
Total current assets	—			~~103~~146,~~670~~453			1014,~~399~~010			419,~~793~~054			(536,~~791~~128		)	~~113~~143,~~071~~389
Investment in subsidiaries	5549,~~510~~180			8380,~~913~~716			~~151~~164			—			(~~139~~130,~~574)~~060		)	—
Computer hardware and other property, net	—			3734,~~407~~482			~~134~~103			~~948~~871			—			3835,~~489~~456
Developed technology and content, net	—			~~138~~133,~~290~~654			—			—			—			~~138~~133,~~290~~654
Goodwill	—			457,677			2528,~~623~~240			—			—			~~483~~485,~~300~~917
Other identifiable intangible assets, net	—			~~344~~336,~~784~~169			4640,~~747~~902			—			—			~~391~~377,~~531~~071
Deferred tax asset	—			—			541			—			(454		)	87
Other noncurrent assets	—			14,221			—			207			—			14,428
Other noncurrent assets	—			14,653			—			173			—			14,826
Deferred tax asset	—			5,751			683			—			(200		)	6,234
Total assets	$	5549,~~510~~180		$	1,~~180~~209,~~394~~123		$	8384,~~595~~102		$	520,~~914~~132		$	(~~145~~166,~~819~~388	)	$	1,~~179~~196,~~594~~149
Liabilities and Net Equity
Accounts payable and accrued expenses	$	—		$	5759,~~806~~354		$	3,~~327~~631		$	1,~~774~~585		$	~~(240~~—	)	$	6264,~~667~~570
Deferred revenue	—			~~105~~111,~~381~~719			~~155~~177			2671			—			~~105~~111,~~562~~967
Current portion of long-term debt	—			6,360			—			—			—			6,360
Capital lease obligation	—			~~647~~656			—			—			—			~~647~~656
Deferred tax liability	—			7,~~294~~483			—			—			—			7,~~294~~483
Current taxes payable	—			~~237~~332			(352		)	~~166~~—			—(94		)	~~400~~290
Intercompany payable	—			518,~~551~~396			—241			—17,397			(536,~~551~~034		)	—
Total current liabilities	—			~~183~~204,~~276~~300			34,~~479~~101			119,~~966~~053			(536,~~791~~128		)	~~182~~191,~~930~~326
Deferred revenue	—			4,~~712~~652			—			—			—			4,~~712~~652
Capital lease obligation - noncurrent	—			1,~~711~~544			—			—			—			1,~~711~~544
Long-term debt	—			~~931~~945,~~634~~907			—			—			—			~~931~~945,~~634~~907
Deferred tax liabilities	—			~~454~~—			—			—200			(~~454~~200		)	—
Other noncurrent liabilities	—			3,~~097~~540			—			—			—			3,~~097~~540
Total liabilities	—			1,~~124~~159,~~884~~943			34,~~479~~101			119,~~966~~253			(636,~~245~~328		)	1,~~124~~146,~~084~~969
Equity
Common stock	—			—			—			—			—			—
Additional paid-in capital	~~482~~483,~~918~~234			~~482~~483,~~918~~234			8081,~~937~~258			~~1,988~~135			(~~565~~564,~~843~~627		)	~~482~~483,~~918~~234
Accumulated deficit	(~~427~~433,~~158~~778		)	(~~427~~433,~~158~~778		)	(~~828~~1,257		)	21,~~216~~020			~~425~~434,~~770~~015			(~~427~~433,~~158~~778		)
Foreign currency translation adjustment	(~~250~~276		)	(~~250~~276		)	7—			(~~256~~276		)	~~499~~552			(~~250~~276		)
Total	5549,~~510~~180			5549,~~510~~180			80,~~116~~001			~~3,948~~879			(~~139~~130,~~574~~060		)	5549,~~510~~180
Total liabilities and net equity	$	5549,~~510~~180		$	1,~~180~~209,~~394~~123		$	8384,~~595~~102		$	520,~~914~~132		$	(~~145~~166,~~819~~388	)	$	1,~~179~~196,~~594~~149

2123

Truven Holding Corp.

Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss

For the Three Months Ended ~~June~~September 30, 2014

	Parent			Issuer			Guarantor subsidiaries			Non-Guarantor subsidiaries			Eliminations			Consolidated
Revenues, net	$	—		$	~~125~~127,~~515~~017		$	911,~~399~~228		$	42,~~316~~295		$	(~~2,806~~353	)	$	~~136~~140,~~424~~187
Operating costs and expenses Cost of revenues, excluding depreciation and amortization	—			(7168,~~830~~555		)	(45,~~150~~084		)	(21,~~546~~803		)	~~2,806~~353			(75,~~720~~089		)
Selling and marketing, excluding depreciation and amortization	—			(1411,~~506~~855		)	(~~413~~326		)	(~~893~~906		)	—			(1513,~~812~~087		)
General and administrative, excluding depreciation and amortization	—			(10,~~500~~770		)	(2,~~523~~945		)	(~~390~~683		)	—			(1314,~~413~~398		)
Depreciation	—			(54,~~811~~733		)	(1216		)	(~~101~~182		)	—			(54,~~924~~931		)
Amortization of developed technology and content	—			(9,~~673~~820		)	—			—			—			(9,~~673~~820		)
Amortization of other identifiable intangible assets	—			(8,615		)	(3,~~653~~345		)	—			—			(1211,~~268~~960		)
Other operating expenses	—			(45,~~816~~778		)	(3048		)	—			—			(45,~~846~~826		)
Total operating costs and expenses	—			(~~125~~120,~~751~~126		)	(1011,~~781~~764		)	(3,~~930~~574		)	~~2,806~~353			(~~137~~135,~~656~~111		)
Operating loss (income)	—			~~(236~~6,891		)	(~~1,382~~536		)	~~386~~(1,279		)	—			(15,~~232~~076		)
Net interest expense	—			(17,~~415~~662		)	—			—(1		)	—			(17,~~415~~663		)
Other finance costs	—			(88116		)	—			~~(172~~35		)	—			(~~260~~81		)
Equity in net income (loss) of subsidiaries	(86,~~800~~620		)	(~~672~~1,641		)	1218			—			98,~~460~~243			—
Income (loss) before income taxes	(86,~~800~~620		)	(1812,~~411~~528		)	(~~1,370~~518		)	~~214~~(1,245		)	98,~~460~~243			(1812,~~907~~668		)
Benefit from (provision for) income taxes	—			95,~~611~~908			~~541~~90			~~(45~~50		)	—			106,~~107~~048
Net income (loss)	$	(86,~~800~~620	)	$	(86,~~800~~620	)	$	(~~829~~428	)	$	~~169~~(1,195	)	$	98,~~460~~243		$	(86,~~800~~620	)
Other comprehensive income (loss):
Foreign currency translation adjustments	55(26		)	55(26		)	(7		)	47(20		)	~~(109~~53		)	55(26		)
Total comprehensive income (loss)	$	(86,~~745~~646	)	$	(86,~~745~~646	)	$	(~~822~~435	)	$	~~216~~(1,215	)	$	98,~~351~~296		$	(86,~~745~~646	)

2224

Truven Holding Corp.

Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss

For the ~~Six~~Nine Months Ended ~~June~~September 30, 2014

	Parent			Issuer			Guarantor subsidiaries			Non-Guarantor subsidiaries			Eliminations			Consolidated
Revenues, net	$	—		$	~~243~~370,~~005~~022		$	920,~~399~~627		$	810,~~354~~649		$	(6,~~071~~424	)	$	~~254~~394,~~687~~874
Operating costs and expenses Cost of revenues, excluding depreciation and amortization	—			(~~143~~212,~~770~~325		)	(49,~~150~~234		)	(45,~~160~~963		)	6,~~071~~424			(~~146~~221,~~009~~098		)
Selling and marketing, excluding depreciation and amortization	—			(2739,~~288~~143		)	(~~413~~739		)	(12,~~835~~741		)	—			(2942,~~536~~623		)
General and administrative, excluding depreciation and amortization	—			(2132,~~450~~220		)	(25,~~523~~468		)	(~~724~~1,407		)	—			(2439,~~697~~095		)
Depreciation	—			(1217,~~319~~052		)	(1228		)	(~~186~~368		)	—			(1217,~~517~~448		)
Amortization of developed technology and content	—			(1828,~~869~~689		)	—			—			—			(1828,~~869~~689		)
Amortization of other identifiable intangible assets	—			(1725,~~230~~845		)	(36,~~653~~998		)	—			—			(2032,~~883~~843		)
Other operating expenses	—			(1117,~~345~~123		)	(3078		)	—			—			(1117,~~375~~201		)
Total operating costs and expenses	—			(~~252~~372,~~271~~397		)	(1022,~~781~~545		)	(610,~~905~~479		)	6,~~071~~424			(~~263~~398,~~886~~997		)
Operating loss (income)	—			(92,~~266~~375		)	(1,~~382~~918		)	~~1,449~~170			—			(94,~~199~~123		)
Net interest expense	—			(33,693		)	—			4			—			(33,689		)
Net interest income (expense)	—			(51,355		)	—			3			—			(51,352		)
Other finance costs	—			(~~232~~348		)	—			(~~104~~69		)	—			(~~336~~417		)
Equity in net income (loss) of subsidiaries	(2834,~~057~~677		)	~~431~~(1,210		)	1230			—			2735,~~614~~857			—
Income (loss) before income taxes	(2834,~~057~~677		)	(4255,~~760~~288		)	(1,~~370~~888		)	~~1,349~~104			2735,~~614~~857			(4355,~~224~~892		)
Benefit from (provision for) income taxes	—			1420,~~703~~611			~~541~~631			(7727		)	—			1521,~~167~~215
Net income (loss)	$	(2834,~~057~~677	)	$	(2834,~~057~~677	)	$	(~~829~~1,257	)	$	~~1,272~~77		$	2735,~~614~~857		$	(2834,~~057~~677	)
Other comprehensive income (loss):
Foreign currency translation adjustments	(85111		)	(85111		)	7—			(91111		)	~~169~~222			(85111		)
Total comprehensive income (loss)	$	(2834,~~142~~788	)	$	(2834,~~142~~788	)	$	(~~822~~1,257	)	$	~~1,181~~(34	)	$	2736,~~783~~079		$	(2834,~~142~~788	)

2325

Truven Holding Corp.

Unaudited Condensed Consolidated Statements of Cash Flows

For the ~~Six~~Nine ~~months~~Months Ended ~~June~~ September 30, 2014

	Parent			Issuer			Guarantor subsidiaries			Non-Guarantor subsidiaries			Eliminations			Consolidated
Operating activities
Net income (loss)	$	(2834,~~057~~677	)	$	(2834,~~057~~677	)	$	(~~829~~1,257	)	$	~~1,272~~77		$	2735,~~614~~857		$	(2834,~~057~~677	)
Non-cash adjustments	2834,~~057~~677			4161,~~261~~859			36,~~110~~313			77458			(2735,~~614~~857		)	4467,~~891~~450
Changes in operating assets and liabilities	—			62,~~329~~371			12,~~730~~824			~~679~~94			—			85,~~738~~289
Net cash provided by operating activities	—			1929,~~533~~553			47,~~011~~880			~~2,028~~629			—			2538,~~572~~062
Investing activities
Acquisitions, net of cash acquired	—			(7677,~~270~~400		)	—			—			—			(7677,~~270~~400		)
Capital expenditures	—			(1324,~~463~~222		)	~~(14~~—		)	(~~169~~190		)	—			(1324,~~646~~412		)
Net cash used in investing activities	—			(89101,~~733~~622		)	~~(14~~—		)	(~~169~~190		)	—			(89101,~~916~~812		)
Financing activities
Proceeds from revolving credit facility	—			15,000			—			—			—			15,000
Principal repayment of senior term loan	—			(4,517		)	—			—			—			(4,517		)
Repayment of revolving credit facility	—			(30,000		)	—			—			—			(30,000		)
Proceeds from senior term loan related to refinancing	—			100,000			—			—			—			100,000
Principal repayment of senior term loan	—			(2,927		)	—			—			—			(2,927		)
Intercompany transaction	—			2,513			(2,723		)	210			—			—
Intercompany transaction				4,577			(3,290		)	(1,287		)				—
Payment of debt issuance costs	—			(2,895		)	—			—			—			(2,895		)
Payment of capital lease obligation	—			(1,~~340~~498		)	—			—			—			(1,~~340~~498		)
Net cash (used in) provided by financing activities	—			6778,~~415~~603			(32,~~290~~723		)	~~(1,287~~210		)	—			6276,~~838~~090
Effect of exchange rate changes in cash and cash equivalents	—			—			7—			(91111		)	—			(84111		)
Increase (decrease) in cash and cash equivalents	—			(2,785		)	714			481			—			(1,590		)
Increase in cash and cash equivalents	—			6,534			5,157			538			—			12,229
Cash and cash equivalents
Beginning of period	—			9,573			—			682			—			10,255
End of period	$	—		$	616,~~788~~107		$	~~714~~5,157		$	1,~~163~~220		$	—		$	822,~~665~~484

2426

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations covers the three and ~~six~~nine months ended ~~June~~September 30, 2014 and ~~June~~September 30, 2013. You should read the following discussion and analysis in conjunction with our unaudited interim condensed consolidated financial statements as of ~~June~~September 30, 2014, and the related notes thereto included elsewhere in this quarterly report. The unaudited interim condensed consolidated financial statements for the period ended ~~June~~September 30, 2014 represent the consolidated financial statements of Truven Holding and its subsidiaries.

Note to Forward-Looking Statements

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

In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in Part II, "Item 1A. Risk Factors" and elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2013, and those described from time to time in our future reports filed with the SEC.

Overview

We are a leading provider of healthcare data and analytics solutions and services to key constituents in the U.S. healthcare system, including federal government agencies, state government agencies, employers and health plans, hospitals, clinicians and pharmaceutical companies. Our solutions and services empower our customers to make decisions to improve the cost, performance and quality of healthcare through data and data analytics.

The Acquisition

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

In connection with the offering of the Notes and the Acquisition, Truven Holding Corp. and Wolverine entered into the Senior Credit Facility, which consisted of (i) the $527.6 million Term Loan Facility and (ii) the $50.0 million Revolving

2527

Credit Facility. In connection with the Merger, Truven succeeded to the obligations of Wolverine under (i) the credit agreement that governs our Senior Credit Facility and (ii) the indenture that governs the Notes.

Our segments

The determination of reportable segments was based on the discrete financial information provided to the CODM. The Chief Executive Officer has the authority for resource allocation and assessment of the Company’s performance and is, therefore, the CODM.

Through the first quarter of 2014, the Company operated and managed its business through three reportable segments: Payer, Hospitals and Clinicians. During the second quarter of 2014, the Company determined its new reportable segments based on the discrete financial information provided to the CODM. As a result, management changed the Company’s segment structure enabling us to more effectively focus on business and market facing opportunities and to simplify the business decision-making process. The ~~new~~ operating segments have been aligned to the Commercial and Government division structures that are each headed by separate segment managers with corresponding changes in its internal management structure and information provided to the CODM. The Commercial segment includes the former Payer’s Employer/HealthPlan and Pharma channels, the former Hospitals and Clinicians segments, and Simpler's Lean enterprise transformation consulting services business. The Government segment is mainly comprised of the former Payer’s Federal and State Government channels. The change in the structure of the Company's internal organization causes the composition of our reportable segments to be adjusted retrospectively.

The Company's ~~new~~ operating segments, which primarily operate in the United States, are as follows:

Commercial

The Commercial segment provides ~~integrated~~ 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. In the Commercial segment we deliver analytics solutions and services in population heath and cost analysis, hospital performance management, payment integrity and compliance, patient care solutions, research solutions, analytic consulting and research services, and strategic consulting to meet the converging needs of the market.

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. In the Government segment we deliver analytics solutions and services in population heath and cost analysis, payment integrity and compliance, patient care solutions, research solutions, analytic consulting and research services, strategic consulting, and data warehousing.

The accounting policies for the reportable segments are the same as those for the consolidated Company.

Acquisition of Simpler

On April 11, 2014, certain wholly-owned subsidiaries of the Company entered into a Purchase Agreement with Simpler. Pursuant to the Purchase Agreement, the Company indirectly acquired all of the outstanding equity of Simpler in exchange for a purchase price of $8081.81 million, including a ~~preliminary~~ working capital adjustment of $01.81 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 $2.7 million. The Company financed the acquisition and related costs and expenses through the $100.0 million increase in the Tranche B Term Loans. The acquisition was consummated concurrently with the execution ~~of the Purchase Agreement. The Company and its affiliates did not assume any indebtedness of Simpler in connection with the Simpler Transaction.~~

In accordance with the acquisition method of accounting, following the date of the acquisition, we, with the assistance of a third-party valuation firm, have estimated the fair values of acquired assets and assumed liabilities based on the actual tangible and identifiable intangible assets and liabilities that existed at the date of the acquisition. These fair values are preliminary and are reflected in our balance sheet on the date of the acquisition. In this process, we applied certain assumptions as inputs to the valuation calculations. These assumptions represent our best estimates based on historic performance of the respective reporting segments, trends within the market place and our consideration of the potential impact of political, economic and social factors that are considered beyond our control. Significant assumptions included within our discounted cash flow valuation include revenue growth rates, operating profit margins, implied rate of return used and terminal growth rates. Our results of operations, financial position and cash flows are impacted by the effects of the acquisition, which were financed primarily through borrowings, including transaction-related costs, debt commitment fees and recurring interest costs.28

~~Recent~~of ~~Developments~~the Purchase Agreement. The Company and its affiliates did not assume any indebtedness of Simpler in connection with the Simpler Transaction.

OnIn ~~July~~accordance 2with the acquisition method of accounting, ~~2014~~following the date of the acquisition, ~~Truven~~we, ~~had~~with ~~drawn~~the ~~$15.0~~assistance ~~million~~of ~~from~~a ~~its~~third-party ~~Revolving~~valuation ~~Credit~~firm, ~~Facility~~have ~~for~~estimated ~~working~~the ~~capital~~fair ~~requirements~~values of acquired assets and ~~issued~~assumed aliabilities ~~letter~~based on the actual tangible and identifiable intangible assets and liabilities that existed at the date of ~~credit~~the inacquisition. These fair values are preliminary and were reflected on our balance sheet on the ~~amount~~date of $7 the acquisition.5 ~~million~~In this process, we applied certain assumptions as ~~surety~~inputs to the valuation calculations. These assumptions represent our best estimates based on ~~government~~historic ~~contracts,~~performance ~~which~~of ~~while~~the ~~not~~respective ~~drawn~~reporting segments, ~~reduce~~trends within the ~~available~~market ~~line~~place ofand ~~credit~~our ~~under~~consideration of the ~~Revolving~~potential ~~Credit~~impact ~~Facility~~of topolitical, ~~$27~~economic and social factors that are considered beyond our control.5 ~~million~~Significant assumptions included within our discounted cash flow valuation include revenue growth rates, operating profit margins, implied rate of return used and terminal growth rates. Our results of operations, financial position and cash flows are impacted by the effects of the acquisition, which were financed primarily through borrowings, including transaction-related costs, debt commitment fees and recurring interest costs.

Deferred Revenue: Fair Value Adjustments

Our revenues are derived from the sale of subscription data and analytics solutions and services. Our revenues from the sale of subscription data and analytics solutions are typically billed annually in advance and recognized on a straight-line basis over the contract term, which is typically one to three years. As a result, cash collections from customers for subscription data and analytic solutions can be greater than the revenue recognized (which only correspond to those revenues associated with services already rendered). In cases of billings in advance or advanced receipt of payments from customers, we record deferred revenue, a liability that is reduced as revenue is recognized. Our revenues from services are invoiced according to the terms of the contract, typically in arrears (after the corresponding services have been rendered), and recognized over the term of the contract. Contracts for services vary in length from a few months to several years. The carrying value of our deferred revenue as of June 6, 2012 totaled $138.7 million. Following the completion of the Acquisition, we determined, with the assistance of a third-party valuation firm, that the fair value of our deferred revenue should be adjusted to $80.2 million. As a result, deferred revenue on certain contracts of $58.5 million was written off, which negatively impacted our revenue in the three and ~~six~~nine months ended ~~June~~September 30, 2014 and ~~June~~September 30, 2013 by $0.7 million, $12.41 million, $2.1.0 million and $67.9 million respectively. The write-off will have a future aggregate negative impact of $4.95 million in future periods with the majority expected to be reflected over the next 1815 months.

Results of Operations

The following section provides a comparative discussion of our Results of Operations for the three and ~~six~~nine months ended ~~June~~September 30, 2014 and 2013, and should be read in conjunction with our unaudited condensed consolidated financial statements for these periods and the related notes thereto, included elsewhere in this quarterly report. Factors that relate primarily to a specific business segment are discussed in more detail within that business segment. For a discussion of critical accounting policies affecting our financial condition and results of operation, see the “Critical Accounting Policies” section herein.

27The following table summarizes our unaudited interim condensed consolidated results of operations for the three months ended September 30, 2014 and 2013:

~~The following table summarizes our unaudited interim condensed consolidated results of operations for the three months ended June 30, 2014 and 2013:~~29

(Dollars in thousands)	Three months ended ~~June~~September 30, 2014			% of revenue		Three months ended ~~June~~September 30, 2013			% of revenue		Change			% change
Revenues, net	$	~~136~~140,~~424~~187		100	%	$	~~126~~123,~~997~~594		100	%	$	916,~~427~~593		713	%
Operating costs and expenses
Cost of revenues, excluding depreciation and amortization(a)	(75,~~720~~089		)	(5654	)%	(6964,~~114~~293		)	(5452	)%	(610,~~606~~796		)	1017	%
Selling and marketing, excluding depreciation and amortization(b)	(1513,~~812~~087		)	(129	)%	(1512,~~766~~899		)	(1210	)%	(46188		)	—1	%
General and administrative, excluding depreciation and amortization(c)	(1314,~~413~~398		)	(10	)%	(1012,~~373~~387		)	(810	)%	(32,~~040~~011		)	2916	%
Depreciation	(54,~~924~~931		)	(4	)%	(45,~~409~~422		)	(34	)%	~~(1,515~~491		)	34(9	)%
Amortization of developed technology and content	(9,~~673~~820		)	(7	)%	(78,~~726~~228		)	(67	)%	(1,~~947~~592		)	2519	%
Amortization of other identifiable intangible assets(d)	(1211,~~268~~960		)	(9	)%	(8,615		)	(7	)%	(3,~~653~~345		)	4239	%
Other operating expenses(e)	(45,~~846~~826		)	(4	)%	(78,~~635~~278		)	(67	)%	2,~~789~~452			(3730	)%
Total operating costs and expenses	(~~137~~135,~~656~~111		)	(~~101~~96	)%	(~~123~~120,~~638~~122		)	(97	)%	(14,~~018~~989		)	1112	%
Operating income (loss)	(1,232		)	(1	)%	3,359			3	%	(4,591		)	(137	)%
Operating income	5,076			4	%	3,472			3	%	1,604			46	%
Net interest expense (f)	(17,~~415~~663		)	(13	)%	(2016,~~525~~661		)	(1613	)%	3(1,~~110~~002		)	~~(15~~6	)%
Other finance costs	(~~260~~81		)	—	%	(~~441~~19		)	—	%	~~181~~(62		)	~~(41~~326	)%
Loss before income taxes	(1812,~~907~~668		)	(149	)%	(1713,~~607~~208		)	(1411	)%	~~(1,300~~540		)	7(4	)%
Benefit from income taxes	106,~~107~~048			74	%	64,~~611~~865			54	%	31,~~496~~183			5324	%
Net loss	$	(86,~~800~~620	)	(65	)%	$	(108,~~996~~343	)	(97	)%	$	21,~~196~~723		(2021	)%


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


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


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


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

(e) In 2014, other operating expenses included legal costs related to the acquisition of Simpler in April 2014, other professional fees incurred related to business process improvement and documentation, costs associated with data migration and losses on discontinued projects, severance costs for certain positions that were eliminated as part of the change in the Company's operating segment structure, asset write-offs, and the Sponsor fee for Veritas Capital. In 2013, other operating expenses represent costs incurred to transition the Company to a standalone business. These costs include nonrecurring expenses associated with data center migration, separating the infrastructure from Predecessor Parent, and the related consulting and professional fees. These costs also include severance and retention bonuses relating to the Acquisition and the Sponsor fee for Veritas Capital. See Note 7 to the condensed consolidated financial statements included elsewhere in this quarterly report.


(f)	Interest earned or paid, net of interest income related to third party transactions.

28Discussion of three months ended September 30, 2014 and 2013

Discussion of three months ended June 30, 2014 and 2013

Revenues, net

Our net revenues were $~~136~~140.42 million for the three months ended ~~June~~September 30, 2014 as compared to $~~127~~123.06 million for the three months ended ~~June~~September 30, 2013, an increase of $916.46 million or 713%. This increase was primarily due to the increase in revenue from our Commercial segment as a result of the acquisition of Simpler, a Lean enterprise transformation consulting services business being integrated in our Commercial segment, which contributed $1017.~~6 million of revenue from April 12, 2014 to June 30, 2014. In addition, revenue increased due to the $0.7 million deferred revenue adjustment in 2014 compared to the $~~2.1 million ~~deferred~~increase ~~revenue adjustment~~ in ~~2013 in connection with the Acquisition. These were offset by a $5.3 million decrease in~~ revenue from our ~~Government~~Commercial segment ~~due~~mainly ~~to lower revenue and implementation services~~ due to ~~timing of government projects. For a detailed explanation of~~ the ~~variations~~acquisition ~~in revenue for each~~ of ~~our segments~~Simpler, ~~see~~a ~~the~~Lean ~~individual segment discussions below.~~

enterprise transformation consulting services business has been integrated in our Commercial segment, which contributed $12.9 million of revenue during the quarter. These were offset by a $0.6 million decrease in revenue from our Government segment due to lower revenue and implementation services due to timing of government projects. For a detailed explanation of the variations in revenue for each of our segments, see the individual segment discussions below.

Cost of revenues, excluding depreciation and amortization

Our cost of revenues, excluding depreciation and amortization, was $75.71 million for the three months ended ~~June~~September 30, 2014 as compared to $6964.13 million for the three months ended ~~June~~September 30, 2013, an increase of $610.68 million, or 1017%. This increase was primarily due to $56.45 million of incremental costs of revenues from Simpler's operations. WeIn ~~also~~addition, ~~had an increase in~~ salaries and wages increased due to the ~~increase~~growth in head count and higher ~~maintenance~~project costs ~~related~~for tofederal ~~the~~and ~~completion~~state ~~of our transition to a standalone company, which were offset by a decrease in bonus expense~~agencies.

Selling and marketing expense, excluding depreciation and amortization

Our selling and marketing expense, excluding depreciation and amortization, was $1513.81 million for the three months ended ~~June~~September 30, 2014 ~~and~~as compared to $12.9 million for the three months ended September 30, 2013, an increase of $0.2 million or 1%, which is ~~relatively~~mainly ~~flat~~due to selling and marketing expenses attributable to Simpler's operations.

General and administrative expense, excluding depreciation and amortization

Our general and administrative expense, excluding depreciation and amortization, was $1314.4 million for the three months ended ~~June~~September 30, 2014 as compared to $1012.4 million for the three months ended ~~June~~September 30, 2013, an increase of $32.0 million, or 2916%. The increase was primarily due to $23.71 million of additional general and ~~and~~ administration expenses attributable to Simpler's operations., ~~Salaries~~partially ~~and~~offset ~~wages expense and professional fees increased~~ by ~~$1.2~~lower ~~million to build the accounting, internal audit, procurement, and human resource departments, as well as the additional hiring of senior executive management in operations. These~~ costs ~~were~~due ~~offset~~to bycertain acost ~~$1.2~~cutting ~~million decrease in bonus expense~~measures.

Depreciation and amortization

Our depreciation and amortization expense was $2726.97 million for the three months ended ~~June~~September 30, 2014 as compared to $2022.83 million for the three months ended ~~June~~September 30, 2013, an increase of $74.14 million or 3420%. This increase was primarily due to the overall impact of ~~new computer hardware and other property, and~~ developed technology and content related to the new data center and new information system infrastructure that were placed in service in late 2013 and the additional amortization of intangible assets from the acquisition of Simpler. Incremental depreciation and amortization from the acquisition of ~~the~~ Simpler amounted to $3.74 million.

Other operating expenses

Our other operating expense was $45.8 million for the three months ended ~~June~~September 30, 2014 as compared to $78.63 million for the three months ended ~~June~~September 30, 2013, a decrease of $2.85 million or 3730%. InThe ~~2014,~~decrease ~~other~~was ~~operating~~mainly ~~expenses~~due ~~include~~to the $3.84 million decrease ofin acquisition related ~~costs~~and nonrecurring expenses, due to the ~~acquisition~~completion of ~~Simpler~~separating onour ~~April~~IT ~~11,~~infrastructure ~~2014,~~from ~~and~~Predecessor ~~other~~Parent ~~professional~~initiated ~~fees~~in ~~incurred~~2013, ~~related~~partially tooffset ~~business~~by ~~improvement~~a ~~processes,~~ $01.40 million ofincrease in severance ~~expense~~expenses ~~which primarily relates to compensation~~ for ~~certain~~ positions that were eliminated as part of ~~management's~~the ~~plan~~change ~~that~~in ~~changed~~our ~~the Company’s~~ operating segment structure ~~during the period, and $0~~.~~6 million of Sponsor advisory fees. In 2013, other operating~~

29Operating income

~~expenses~~Our ~~included~~operating income was $5.61 million offor ~~Acquisition~~the ~~related~~three ~~costs~~months ~~consisting~~ended ofSeptember 30, ~~expenses~~2014 ~~incurred~~as ~~mainly~~compared ~~related~~ to ~~separating~~an ~~our~~operating ITincome ~~infrastructure~~of ~~from~~$3.5 ~~Predecessor~~million ~~Parent~~for the three months ended September 30, 2013, an increase in operating income of $1.36 million, ofor ~~severance~~46%, ~~and~~from ~~retention~~2013. The ~~bonuses~~increase ~~and~~in operating income was primarily due to a $016.76 million ofincrease ~~Sponsor~~in ~~advisory~~revenue ~~fees~~while total operating expenses increased by $15.0 million, as discussed above.

~~Operating income (loss)~~31

Our operating loss was $1.2 million for the three months ended June 30, 2014 as compared to an operating income of $3.4 million for the three months ended June 30, 2013, a decrease in operating income of $4.6 million, or 137%, from 2013. The decrease in operating income was primarily due to a $9.4 million increase in revenue while total operating expenses increased by $14.0 million as discussed above.

Net interest expense

Our net interest expense was $17.47 million for the three months ended ~~June~~September 30, 2014, as compared to $2016.57 million for the three months ended ~~June~~September 30, 2013, aan ~~decrease~~increase of $3.1.0 million, or 156%. The ~~decrease~~increase was primarily due to a $~~3.3~~100 million ~~loss on early extinguishment of debt as a result of refinancing the Term Loan Facility in April 2013 that effectively reduced the interest rate by 1.25% on the Term Loan Facility, offset by an~~ increase in ~~interest expense due to~~ the ~~increase in the~~ term loan related to the acquisition of Simpler.

Benefit from income taxes

Our income tax benefit was $106.10 million for the three months ended ~~June~~September 30, 2014 as compared to a benefit of $64.69 million for the three months ended ~~June~~September 30, 2013, an increase of $31.52 million or 5324%. Income tax benefit for the three months ended ~~June~~September 30, 2014 and three months ended ~~June~~September 30, 2013, at an effective tax rate of 5347.57% and 3736.58%, respectively, are different from the amount derived by applying the federal statutory tax rate of 35%, mainly due to the impact of certain state income taxes ~~and an increase in the projected annual pre-tax loss from the first quarter to the second quarter in each year~~, partially offset by non deductible expenses.

Segment Discussion

The following table summarizes our unaudited interim condensed consolidated segment information and discussion of the results of our operations for the three months ended ~~June~~September 30, 2014 and ~~June~~September 30, 2013, under the new reportable segment structure:

(Dollars in thousands)	Three months ended ~~June~~September 30, 2014			% of revenue		Three months ended ~~June~~September 30, 2013		% of revenue		Change			% change
Commercial
Revenues	$	~~113~~115,~~500~~095		100	%	$	9897,~~732~~903	100	%	$	1417,~~768~~192		1518	%
Segment operating income	3841,~~210~~967			3436	%	3534,~~194~~328		3635	%	37,~~016~~639			922	%
Government
Revenues	2225,~~924~~092			100	%	2825,~~265~~691		100	%	(~~5,341~~599		)	(192	)%
Segment operating income (loss)	(12		)	—	%	2,617		9	%	(2,629		)	(100	)%
Segment operating income	1,984			8	%	5,072		20	%	(3,088		)	(61	)%

Commercial segment

Revenues

Our Commercial revenue was $~~113~~115.51 million for the three months ended ~~June~~September 30, 2014 as compared to $9897.79 million for the three months ended ~~June~~September 30, 2013, an increase of $1417.82 million ~~or 15.0~~or18%. The increase was primarily due to the $1012.69 million of revenue from Simpler's operations ~~from April 12, 2014 to June 30, 2014~~. Additionally, revenue increased by $34.73 million due to new sales, and incremental fees from ~~subscription~~subscriptions ~~renewals,~~primarily ~~and the launch of Truven's Edge services. Further, revenue increased due to the impact~~ from ~~the~~MarketScan $0solutions.2 ~~million deferred revenue adjustment in 2014~~

compared to the $1.7 million deferred revenue adjustment in 2013 in connection with the Acquisition. This was offset by a $1.0 million decrease in revenue from our Planning and Marketing services.

Operating income

Our Commercial operating income was $3842.20 million for the three months ended ~~June~~September 30, 2014 as compared to $3534.23 million for the three months ended ~~June~~September 30, 2013, an increase of $37.06 million or ~~8.6~~22% . This was primarily due to the $2.19 million of incremental operating income from Simpler's operations~~. The~~, ~~remaining~~as ~~increase~~well inas ~~operating income was mainly due to an~~ increase in revenue, offset by higher maintenance costs of developed technology and content, telecommunications costs and other revenue related costs upon completion of our transition to a standalone company, as well as the increase in administrative costs to maintain our international branches established in mid-2013.

Government segment

Revenues

Our Government revenue was $2225.91 million for the three months ended ~~June~~September 30, 2014 as compared to $2825.37 million for the three months ended ~~June~~September 30, 2013, a decrease of $50.36 million or ~~18.9~~2%. This was primarily due to the timing of a large implementation project on enterprise data warehouse and migration in the second quarter of 2013 amounting to $9.1 million, partially offset by new implementation projects and new sales in various government projects.

lower implementation revenue on enterprise data warehouse projects and migration and timing of other government projects.

Operating income

Our Government operating income was $2.0 ~~almost~~million ~~break-even~~ for the three months ended ~~June~~September 30, 2014 as compared to $25.61 million for the three months ended ~~June~~September 30, 2013~~, a decrease of $2~~.~~6 million or 100%.~~ The decrease mostly relates to the ~~$5.3~~decline ~~million decrease~~ in revenue as discussed above, and higher costs mainly due to the Company's initiatives to improve sales in the federal and state agencies, such as Centers for Medicare & Medicaid Services, state Medicaid agencies, as well as federally owned and operated healthcare facilities.

The following table summarizes our unaudited interim condensed consolidated results of operations for the ~~six~~nine months ended ~~June~~September 30, 2014 and ~~June~~September 30, 2013:



(Dollars in thousands)	Nine months ended September 30, 2014			% of revenue		Nine months ended September 30, 2013			% of revenue		Change			% change

Revenues, net	$	394,874		100	%	$	363,481		100	%	$	31,393		9	%
Operating costs and expenses
Cost of revenues, excluding depreciation and amortization(a)	(221,098		)	(56	)%	(200,983		)	(55	)%	(20,115		)	10	%
Selling and marketing, excluding depreciation and amortization(b)	(42,623		)	(11	)%	(42,111		)	(12	)%	(512		)	1	%
General and administrative, excluding depreciation and amortization(c)	(39,095		)	(10	)%	(31,326		)	(9	)%	(7,769		)	25	%
Depreciation	(17,448		)	(4	)%	(14,411		)	(4	)%	(3,037		)	21	%
Amortization of developed technology and content	(28,689		)	(7	)%	(23,672		)	(7	)%	(5,017		)	21	%
Amortization of other identifiable intangible assets(d)	(32,843		)	(8	)%	(25,845		)	(7	)%	(6,998		)	27	%
Other operating expenses(e)	(17,201		)	(4	)%	(28,778		)	(8	)%	11,577			(40	)%
Total operating costs and expenses	(398,997		)	(101	)%	(367,126		)	(101	)%	(31,871		)	9	%
Operating loss	(4,123		)	(1	)%	(3,645		)	(1	)%	(478		)	13	%
Net interest expense (f)	(51,352		)	(13	)%	(54,753		)	(15	)%	3,401			(6	)%
Other finance costs	(417		)	—	%	(472		)	—	%	55			(12	)%
Loss before income taxes	(55,892		)	(14	)%	(58,870		)	(16	)%	2,978			(5	)%
Benefit from income taxes	21,215			5	%	21,902			6	%	(687		)	(3	)%
Net loss	$	(34,677	)	(9	)%	$	(36,968	)	(10	)%	$	2,291		(6	)%

(Dollars in thousands)	Six months ended June 30, 2014			% of revenue		Six months ended June 30, 2013			% of revenue		Change			% change
Revenues, net	$	254,687		100	%	$	239,887		100	%	$	14,800		6	%
Operating costs and expenses
Cost of revenues, excluding depreciation and amortization(a)	(146,009		)	(57	)%	(136,691		)	(57	)%	(9,318		)	7	%
Selling and marketing, excluding depreciation and amortization(b)	(29,536		)	(12	)%	(29,212		)	(12	)%	(324		)	1	%
General and administrative, excluding depreciation and amortization(c)	(24,697		)	(10	)%	(18,939		)	(8	)%	(5,758		)	30	%
Depreciation	(12,517		)	(5	)%	(8,989		)	(4	)%	(3,528		)	39	%
Amortization of developed technology and content	(18,869		)	(7	)%	(15,444		)	(6	)%	(3,425		)	22	%
Amortization of other identifiable intangible assets(d)	(20,883		)	(8	)%	(17,230		)	(7	)%	(3,653		)	21	%
Other operating expenses(e)	(11,375		)	(4	)%	(20,500		)	(9	)%	9,125			(45	)%
Total operating costs and expenses	(263,886		)	(104	)%	(247,005		)	(103	)%	(16,881		)	7	%
Operating loss	(9,199		)	(4	)%	(7,118		)	(3	)%	(2,081		)	29	%
Net interest expense (f)	(33,689		)	(13	)%	(38,092		)	(16	)%	4,403			(12	)%
Other finance costs	(336		)	—	%	(453		)	—	%	117			(26	)%
Loss before income taxes	(43,224		)	(17	)%	(45,663		)	(19	)%	2,439			(5	)%
Benefit from income taxes	15,167			6	%	17,037			7	%	(1,870		)	(11	)%
Net loss	$	(28,057	)	(11	)%	$	(28,626	)	(12	)%	$	569		(2	)%


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


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


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


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

(e) In 2014, other operating expenses included legal costs related to the acquisition of Simpler in April 2014, other professional fees incurred related to business process improvement and documentation, costs associated with data migration and ~~improvements~~losses on discontinued projects, severance costs for certain positions that were eliminated as part of the change in the Company's operating segment structure, asset write-offs, and the Sponsor fee for Veritas Capital. In 2013, other operating expenses represent costs incurred to transition the Company to a standalone business. These costs include nonrecurring expenses associated with data center migration, separating the infrastructure from Predecessor Parent, and the related consulting and professional fees. These costs also include severance and retention bonuses relating to the Acquisition and the Sponsor fee for Veritas Capital. See Note 7 to the condensed consolidated financial statements included elsewhere in this quarterly report.

associated with data center migration, separating the infrastructure from Predecessor Parent, and the related consulting and professional fees. These costs also include severance and retention bonuses relating to the Acquisition and the Sponsor fee for Veritas Capital. See Note 7 to the condensed consolidated financial statements included elsewhere in this quarterly report.


(f)	Interest earned or paid, net of interest income related to third party transactions.

Discussion of ~~six~~nine months ended ~~June~~September 30, 2014 and 2013

Revenues, net

Our net revenues were $~~254~~394.79 million for the ~~six~~nine months ended ~~June~~September 30, 2014 as compared to $~~239~~363.95 million for the ~~six~~nine months ended ~~June~~September 30, 2013, an increase of $1431.84 million or 69%. This increase was primarily due to the $35.9 million increase in revenue from our commercial segment, aswhich aincludes ~~result~~$23.5 million of ~~the~~revenue ~~acquisition~~from Simpler's Operations from April 12, 2014 to September 30, 2014, impact of ~~Simpler~~the $2.1 million deferred revenue adjustment in 2014 compared to the $7.9 million deferred revenue adjustment in 2013 in connection with the Acquisition, aand ~~Lean~~incremental ~~enterprise~~fees ~~transformation~~from ~~consulting~~subscriptions ~~services~~primarily ~~business~~from ~~being~~MarketScan ~~integrated~~solutions. These ~~into~~were offset by a $4.5 million decrease in revenue from our ~~Commercial~~Government segment ~~which~~due ~~contributed~~to ~~$10~~lower revenue and implementation services due to timing of government projects.6 For ~~million~~a detailed explanation of the variations in revenue for each of our segments, see the individual segment discussions below.

from April 12, 2014 to June 30, 2014. In addition, revenue increased due to the $1.3 million deferred revenue adjustment in 2014 compared to the $6.9 million deferred revenue adjustment in 2013 in connection with the Acquisition. These were offset by a $5.3 million decrease in revenue from our Government segment due to lower revenue and implementation services due to timing of government projects. For a detailed explanation of the variations in revenue for each of our segments, see the individual segment discussions below.

Cost of revenues, excluding depreciation and amortization

Our cost of revenues, excluding depreciation and amortization, was $~~146~~221.01 million for the ~~six~~nine months ended ~~June~~September 30, 2014 as compared to $~~136~~201.70 million for the ~~six~~nine months ended ~~June~~September 30, 2013, an increase of $920.31 million, or 710%. This increase was primarily due to $511.49 million of incremental costs of revenues from Simpler's operations. We also had an increase in salaries and wages due to the increase in head count and higher maintenance costs of developed technology and content, ~~telecommunications costs~~ and ~~other~~higher ~~revenue related~~ costs ~~upon~~on ~~completion~~projects ofon ~~our~~federal ~~transition~~and tostate ~~a standalone company~~agencies. ~~This~~ ~~increase was partially offset by a decrease in bonus expense.~~

Selling and marketing expense, excluding depreciation and amortization

Our selling and marketing expense, excluding depreciation and amortization, was $2942.56 million for the ~~six~~nine months ended ~~June~~September 30, 2014 as compared to $2942.21 million for the ~~six~~nine months ended ~~June~~September 30, 2013, an increase of $0.35 million, or 1.1%, which is mainly due to selling and marketing expenses attributable to Simpler's operations.

General and administrative expense, excluding depreciation and amortization

Our general and administrative expense, excluding depreciation and amortization, was $2439.71 million for the ~~six~~nine months ended ~~June~~September 30, 2014 as compared to $1831.93 million for the ~~six~~nine months ended ~~June~~September 30, 2013, an increase of $57.8 million, or ~~30.4~~25%. The increase was primarily due to $25.7 million of additional general and and ~~administration~~administrative expenses attributable to Simpler's operations. ~~Salaries~~In addition, salaries and wages expense and consulting fees increased ~~by $2.3 million~~ to build the accounting, internal audit, procurement, and human resource departments, as well as from the additional hiring of senior executive management in operations. These costs were offset by a $1.0 million decrease in bonus expense. In addition, administrative costs in maintaining our international branches that were set up in the first half of 2013 are higher due to payroll, tax and statutory compliance services.

Depreciation and amortization

Our depreciation and amortization expense was $5279.30 million for the ~~six~~nine months ended ~~June~~September 30, 2014 as compared to $4163.79 million for the ~~six~~nine months ended ~~June~~September 30, 2013, an increase of $1015.61 million or ~~25.5~~24%. This increase was primarily due to the overall impact of new computer hardware and other property, and developed technology and content related to the new data center and new information system infrastructure that were placed in service in late 2013 and the additional amortization of Intangible assets from the acquisition of Simpler. Incremental depreciation and amortization from the acquisition of Simpler amounted to $3.7.0 million.

Other operating expenses

Our other operating expense was $1117.42 million for the ~~six~~nine months ended ~~June~~September 30, 2014 as compared to $2028.58 million for the ~~six~~nine months ended ~~June~~September 30, 2013, a decrease of $911.16 million or ~~44.5~~40%. In The ~~2014,~~decrease ~~other~~was ~~operating~~mainly ~~expenses~~due ~~include~~to the $415.4 million ofdecrease in acquisition related ~~costs~~and nonrecurring expenses due to the ~~acquisition~~completion of ~~Simpler~~separating ~~Consulting,~~our ~~L.P.~~IT oninfrastructure ~~April~~from ~~11,~~Predecessor ~~2014~~Parent ~~and~~initiated ~~other~~in ~~professional~~2013 ~~fees~~and ~~incurred~~due ~~related~~ to ~~business~~the ~~improvement processes,~~ $1.0 million of severance expense which primarily relates to compensation for certain positions that were eliminated as part of management's plan that changed the Company’s operating segment structure during the period, $4.7 million of ~~asset~~retention ~~write-off~~bonus ~~and~~recorded ~~$1.2~~in ~~million of Sponsor advisory fees. In~~ 2013, ~~other~~entered ~~operating~~into ~~expenses~~by ~~include~~the ~~$16.4~~Predecessor ~~million~~Parent ofwith ~~Acquisition~~key ~~related~~TRHI ~~costs,~~employees ~~$2.8~~in ~~million~~conjunction ofwith ~~severance~~the ~~and~~disposal ~~retention bonuses and $1.3 million~~ of ~~Sponsor~~the ~~advisory fees~~business.

Operating loss

Our operating loss was $94.21 million for the ~~six~~nine months ended ~~June~~September 30, 2014 as compared to $73.16 million for the ~~six~~nine months ended ~~June~~September 30, 2013, an increase of $20.15 million, ~~or 29.2%,~~ from 2013. The increase in operating loss was primarily due to a $1431.84 million increase in revenue while total operating expenses increased by $1631.9 million as discussed above.

Net interest expense

Our net interest expense was $3351.74 million for the ~~six~~nine months ended ~~June~~September 30, 2014, as compared to $3854.18 million for the ~~six~~nine months ended ~~June~~September 30, 2013, a decrease of $43.4 million, or ~~11.~~6%. The decrease was primarily due to a $3.3 million loss on early extinguishment of debt as a result of refinancing the Term Loan Facility in April 2013 that effectively reduced the interest rate by 1.25% on the Term Loan Facility, offset by an increase in interest expense due to the increase of $100 million in the term loan related to the acquisition of Simpler in April 2014.

Benefit from income taxes

Our income tax benefit was $1521.2 million for the ~~six~~nine months ended ~~June~~September 30, 2014 as compared to a benefit of $1721.09 million for the ~~six~~nine months ended ~~June~~September 30, 2013, a decrease of $10.87 million or 113%. Income tax benefit for the ~~six~~nine months ended ~~June~~September 30, 2014 and nine months ended September 30, 2013, at an effective tax rate of 3538.10% and 37.32%, respectively, are different from the amount derived by applying the federal statutory tax rate of 35%, mainly due to the impact of certain state income taxes, partially offset by nondeductible expenses.

Segment Discussion

The following table summarizes our unaudited interim condensed consolidated segment information and discussion of the results of our operations for the ~~six~~nine months ended ~~June~~September 30, 2014 and ~~June~~September 30, 2013, under the new reportable segment structure:

(Dollars in thousands)	~~Six~~Nine months ended ~~June~~September 30, 2014			% of revenue		~~Six~~Nine months ended ~~June~~September 30, 2013		% of revenue		Change			% change
Commercial
Revenues	$	~~209~~324,~~851~~946		100	%	$	~~191~~289,~~159~~062	100	%	$	1835,~~692~~884		1012	%
Segment operating income	68110,~~170~~137			3234	%	6397,~~475~~804		3334	%	412,~~695~~333			713	%
Government
Revenues	4469,~~836~~928			100	%	4874,~~728~~419		100	%	(34,~~892~~491		)	(86	)%
Segment operating income (loss)	(650		)	(1	)%	3,763		8	%	(4,413		)	(117	)%
Segment operating income	1,334			2	%	8,835		12	%	(7,501		)	(85	)%

Commercial segment

Revenues

Our Commercial revenue was $~~209~~324.9 million for the ~~six~~nine months ended ~~June~~September 30, 2014 as compared to $~~191~~289.21 million for the ~~six~~nine months ended ~~June~~September 30, 2013, an increase of 18$35.79 million or ~~9.8~~12%. The increase was primarily due to the $1023.65 million of revenue from Simpler's operations from April 12, 2014 to ~~June~~September 30, 2014~~. Additionally,~~ ~~revenue increased by $4.5 million due to new sales, incremental fees from subscription renewals,~~ and ~~the launch of Truven's Edge services. Further, revenue increased~~ due to the impact from the $0.48 million deferred revenue adjustment in 2014 compared to the $6.17 million deferred revenue adjustment in 2013 in connection with the Acquisition. ~~This~~The remaining increase in revenue was due to new sales, incremental fees from subscriptions mainly from MarketScan solutions, partially offset by a ~~$2.3~~decline ~~million decrease~~ in revenue from ~~Planning~~planning and ~~Marketing~~marketing services.

Operating income

34Our Commercial operating income was $110.1 million for the nine months ended September 30, 2014 as compared to $97.8 million for the nine months ended September 30, 2013, an increase of $12.3 million or 13%. This was partially due to the $5.1 million of incremental operating income from Simpler's operations. The remaining increase in operating income was mainly due to an increase in revenue and a decrease in the deferred revenue adjustment in connection with the Acquisition as discussed above, partially offset by higher maintenance costs of developed technology and content, telecommunications costs and other revenue related costs upon completion of our transition to a standalone company, as well as the increase in administrative costs to maintain our international branches established in mid-2013.

Our Commercial operating income was $68.2 million for the six months ended June 30, 2014 as compared to $63.5 million for the six months ended June 30, 2013, an increase of $4.7 million or 8.0%. This was primarily due to the $2.1 million of incremental operating income from Simpler's operations. The remaining increase in operating income was mainly due to an increase in revenue and a decrease in deferred revenue adjustment in connection with the Acquisition discussed above, offset by higher maintenance costs of developed technology and content, telecommunications costs and other revenue related costs upon completion of our transition to a standalone company, as well as the increase in administrative costs to maintain our international branches established in mid-2013.

Government segment

Revenues

Our Government revenue was $4469.89 million for the ~~six~~nine months ended ~~June~~September 30, 2014 as compared to $4874.74 million for the ~~six~~nine months ended ~~June~~September 30, 2013, a decrease of $34.95 million or ~~8.0~~6%. This was primarily due to ~~the~~lower ~~timing of a large~~ implementation ~~project~~revenue on enterprise data warehouse projects and migration inand ~~the~~timing ~~second quarter~~ of ~~2013~~other ~~amounting to $9.1 million, partially offset by new implementation projects and new sales in various~~ government projects. ~~The deferred revenue adjustment for the six months ended June 30, 2014 and 2013 was $0.9 million and $0.8 million, respectively.~~

Operating income ~~(loss)~~

Our Government operating ~~loss~~income was $01.73 million for the ~~six~~nine months ended ~~June~~September 30, 2014 as compared to operating income of $38.8 million for the ~~six~~nine months ended ~~June~~September 30, 2013, a decrease in operating income of $47.45 million or 85% . The decrease was due to a $34.95 million decrease in revenue as discussed above, and higher costs mainly due to the Company's initiatives to improve sales in the federal and state agencies, such as Centers for Medicare & Medicaid Services, state Medicaid agencies, as well as federally owned and operated healthcare facilities.

Non-GAAP Measures

Adjusted EBITDA Calculation

EBITDA is defined as net income before net interest (expense) income, provision for income taxes, and depreciation and amortization, and is used by management to measure the overall operating performance of the business at a consolidated level. ~~We also use EBITDA and~~ Adjusted EBITDA ~~as a measure to calculate certain financial covenants related to the Senior Credit Facility and as a factor in our tangible and intangible asset impairment testing. Adjusted EBITDA~~ is defined as EBITDA, adjusted to exclude certain items of a significant or unusual nature, including but not limited to acquisition and related costs, acquisition related non-cash adjustments (e.g. deferred revenue fair value adjustments), non-cash compensation expense, restructuring costs, Veritas sponsor fees, gains or losses on the sale of non-strategic assets, asset impairments and write-downs. We also use EBITDA and Adjusted EBITDA as a measure to calculate certain financial covenants related to the Senior Credit Facility and as a factor in our tangible and intangible asset impairment testing.

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

EBITDA and the ratios using EBITDA and Adjusted EBITDA included in this quarterly report provide useful information to investors regarding our results of operations because they assist in analyzing and benchmarking the performance and value of our business.

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


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


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


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


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


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


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


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

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

The following table is a reconciliation of our net loss to EBITDA and Adjusted EBITDA for the three and ~~six~~nine months ended ~~June~~September 30, 2014 and ~~June~~September 30, 2013 presented:

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

(Dollars in thousands)

2014

2013

2014

2013

Net loss

(86,~~800~~620

)

(108,~~996~~343

)

(2834,~~057~~677

)

(2836,~~626~~968

)

Benefit from income tax

(106,~~107~~048

)

(64,~~611~~865

)

(1521,~~167~~215

)

(1721,~~037~~902

)

Net interest expense

17,~~415~~663

2016,~~525~~661

3351,~~689~~352

3854,~~092~~753

Depreciation

54,~~924~~931

45,~~409~~422

1217,~~517~~448

814,~~989~~411

Amortization of developed technology and content

9,~~673~~820

78,~~726~~228

1828,~~869~~689

1523,~~444~~672

Amortization of other identifiable intangible assets

1211,~~268~~960

8,615

2032,~~883~~843

1725,~~230~~845

EBITDA

2631,~~373~~706

2325,~~668~~718

4274,~~734~~440

3459,~~092~~811

Acquisition related and other nonrecurring charges(1)

45,~~245~~201

67,~~953~~637

510,~~427~~628

1926,~~193~~830

Non-cash stock compensation expense

~~399~~316

~~366~~370

~~639~~955

~~767~~1,137

Deferred revenue adjustments(2)

~~745~~726

21,~~066~~007

12,~~417~~143

67,~~900~~907

Asset write-off (3)

—

4,706

—

Other(4)

~~600~~625

~~1,123~~660

1,~~241~~867

12,~~760~~420

Adjusted EBITDA

3238,~~362~~574

3435,~~176~~392

5694,~~164~~739

6298,~~712~~105

(1) Acquisition related and other nonrecurring charges in 2014 included legal costs and other professional fees related to the acquisition of Simpler in April 2014, ~~other~~various professional fees incurred related to business process documentation and improvements and severance costs for certain positions that were eliminated as part of the change in the Company's operating segment structure initiated in the second quarter of 2014. Acquisition related and other nonrecurring charges in 2013 included retention incentives to key employees related to the Acquisition and nonrecurring costs as we transitioned to a standalone company. See Note 7 to the unaudited condensed consolidated financial statements, included elsewhere in this quarterly report.


(2)	Amount of the reduction in deferred revenue as a result of the Acquisition that negatively impacted our revenue. We wrote down the value of our deferred revenue based on valuation analysis completed as a result of the Acquisition.


(3)	Represents write-off of advanced revenue share with a supplier. See Note 12 to the unaudited condensed consolidated financial statements, included elsewhere in this quarterly report.


(4)	Represents Sponsor advisory fees and non-cash vacation accrual true up charges in connection with the Acquisition in 2013.

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Liquidity and Capital Resources

Cash flows

The following table summarizes our cash activities:

(In thousands)	~~Six~~Nine months ended ~~June~~September 30,
	2014			2013
Net cash provided by (used in) operating activities	$	25,572		$	(14,779	)
Net cash provided by operating activities	$	38,062		$	1,151
Net cash used in investing activities	(89101,~~916~~812		)	(2034,~~339~~853		)
Net cash provided by financing activities	6276,~~838~~090			1917,~~444~~685

Operating activities

Cash provided by operating activities for the ~~six~~nine months ended ~~June~~September 30, 2014 was $2538.61 million as compared to ~~cash used in operating activities of~~ $141.82 million for the ~~six~~nine months ended ~~June~~September 30, 2013, an increase of $4036.49 million. The increase was mainly due to $31.6 million in higher payments to various suppliers in 2013 mainly due to timing of cash payments related to disentanglement costs in 2013, a $45.74 million increase in cash receipts from customers due to improved efforts in collection, and a $1.0.1 million decrease in interest payments due to a lower interest rate as a result of the April 2013 Refinancing ~~and a $34~~.6 ~~million decrease in payments to various suppliers mainly due to timing of cash payments and disentanglement costs in 2013.~~

Investing activities

Cash used in investing activities for the ~~six~~nine months ended ~~June~~September 30, 2014 was $89101.98 million, as compared to $2034.39 million for the ~~six~~nine months ended ~~June~~September 30, 2013. The increase was mainly due to the acquisition of Simpler on April 11, 2014 for a net cash paid of $7677.34 million, offset by lower capital expenditures on computer hardware as a result of the completion of the data center in late 2013 and the timing of cash payments of capital expenditures.

Financing activities

Cash provided by financing activities for the ~~six~~nine months ended ~~June~~September 30, 2014 was $6276.81 million. This amount consisted of $100.0 million of incremental loan to finance the Simpler Transaction, aoffset by $3015.0 million net repayment of Revolving Credit Facility, $2.9 million debt issuance costs, $24.95 million principal repayment of the Senior Term Loan Facility and $1.35 million principal payment of capital lease obligation.

Cash provided by financing activities for the ~~six~~nine months ended ~~June~~September 30, 2013 was $1917.47 million. This amount consisted of a $15.0 million Revolving Credit Facility loan drawn for working capital requirements, $2.0 million of additional capital contribution from Holdings LLC, and net proceeds of $11.3 million from the April 2013 refinancing, partially offset by $24.70 million of principal repayment of senior term loan, $5.8 million of premium payment to lenders for the April 2013 refinancing and $0.48 million principal payment of capital lease obligation.

Liquidity and Capital Resources

Our principal liquidity needs are expected to be to fund capital expenditures, provide working capital, meet debt service requirements and finance our strategic plans, including possible acquisitions. For ongoing liquidity purposes, we intend to utilize our existing cash and cash equivalents, cash generated from operations and borrowings under our Revolving Credit Facility. However, we may require supplemental sources of capital to finance acquisitions.

Our cash position is impacted by our billings from on-going services and subscription contracts. Typically, a significant amount of consideration on the contract is paid upfront and most contracts are renewed during the latter part of the fourth quarter. Many renewals are billed in December and January, which are normally collected in the first quarter of the following year. As such, we have historically experienced a low level of cash every third quarter of a calendar

3738

year, but that may vary depending on any new significant contracts driven by state government projects, concurrent with the start of the state government’s fiscal year.

We believe that our cash flows from operations and our existing available cash, together with our other available external financing sources, will be adequate to meet our future liquidity needs for at least the next year. We expect to spend approximately $2613 million on capital expenditures for the remainder of 2014 (excluding acquisitions and related costs); however, actual capital expenditures may differ. As of ~~June~~September 30, 2014, the available credit under the Revolving Credit Facility iswas $5027.5 million, after giving effect to $15.0 million of Revolving Credit Facility for working capital requirements and letter of credit in the amount of $7.5 million as surety on government contracts.

Indebtedness

As of ~~June~~September 30, 2014, ~~our~~the aggregate principal amount of our outstanding indebtedness was $~~955~~968.26 million, consisting of $~~628~~626.15 million under the Term Loan Facility and $327.2 million ~~under~~of ~~the~~ Notes.

A discussion of our outstanding indebtedness as of ~~June~~September 30, 2014 is below:

Senior Credit Facility

The Senior Credit Facility is with a syndicate of banks and other financial institutions and provides financing of up to $679.7 million, consisting of a $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 ~~June~~September 30, 2014, the Company ~~has~~had an available line of credit under the Revolving Credit Facility of $5027.5 million, after giving effect to $15.0 million of Revolving Credit Facility for working capital requirements and letter of credit in the amount of $7.5 million as surety on government contracts.

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

All obligations under the Senior Credit Facility are guaranteed by Truven Holding and each of Truven's existing and future wholly-owned domestic subsidiaries. As of June 30, 2014, certain domestic subsidiaries acquired by the Company became a guarantor under the Senior Credit Facility. All obligations under the Senior Credit Facility and the guarantees of those obligations are collateralized by first priority 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, beginning with the fiscal quarter ended June 30, 2012, to maintain a quarterly maximum consolidated senior secured leverage ratio in accordance with the debt covenants as long as the commitments under the Revolving Credit Facility remain outstanding (subject to certain limited exceptions). The Senior 39

38In addition, the Senior Credit Facility requires Truven, beginning with the fiscal quarter ended June 30, 2012, to maintain a quarterly maximum consolidated senior secured leverage ratio in accordance with the debt covenants as long as the commitments under the Revolving Credit Facility remain outstanding (subject to certain limited exceptions). The Senior Credit Facility also contains certain customary representations and warranties, affirmative covenants and events of default. We are in compliance with all of these credit facility covenants as of September 30, 2014.

Credit Facility also contains certain customary representations and warranties, affirmative covenants and events of default. We are in compliance with all of these credit facility covenants as of June 30, 2014.

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

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

On April 11, 2014, in connection with the acquisition of Simpler, we entered into the Third Amendment to our Credit Agreement. The Third Amendment provided for a $100.0 million increase in the Supplemental Tranche B Term Loans, and increased the total amount available under the Credit Agreement to $679.7 million, consisting of a $629.7 million term loan facility and a $50.0 million revolving credit facility (which remains unchanged).

On April 11, 2014, we borrowed the entire $100.0 million principal amount of the 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, we 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 $1,590 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 Credit Agreement.

The Third Amendment also amended the Credit Agreement to make certain adjustments to the Consolidated Senior Secured Leverage Ratio applicable to us by increasing the maximum permitted ratios for certain periods from 2014 to 2016.

10.625% Senior Notes due 2020

The Notes, which were issued under an indenture, dated June 6, 2012 (the “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 (commencing on December 1, 2012), and have a maturity date of June 1, 2020. On the same day, we entered into the first supplemental indenture (the “First Supplemental Indenture”), whereby Truven became a party to the Indenture as successor in interest to Wolverine. The Notes are general unsecured senior obligations of Truven, fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by Truven Holding and each of Truven's existing and future wholly-owned domestic restricted subsidiaries that is a borrower under or that guarantees the obligations under the Senior Credit Facility or any other indebtedness of Truven or any other guarantor. ~~As of June 30, 2014, certain domestic subsidiaries acquired by the Company became a guarantor under the Senior Credit Facility.~~

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

3940

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 Truven Holding's business and operations. Following Wethe ~~are~~acquisition inof ~~compliance~~Simpler ~~with~~on ~~these~~April ~~covenants~~12, 2014, the wholly owned domestic subsidiaries we acquired became guarantors of the Senior Credit Facility and, as a result, were required to become guarantors of ~~June 30~~the Notes. However, ~~2014~~the ~~and~~supplemental ~~expect~~indenture to bethe Indenture to include these subsidiaries as guarantors was only executed on November 3, 2014. Following the execution of the third supplemental indenture on November 3, 2014, we are in compliance ~~over~~with all of the ~~next~~covenants ~~twelve~~under ~~months.~~the Indenture.

Summary disclosures about contractual obligations and commercial commitments

The following table sets forth our contractual obligations and other commitments as of ~~June~~September 30, 2014:

	Payments by period
(in thousands)	Total		Less than 1 year		1-3 years		3-5 years		After 5 years
Notes(1)	$	327,150	$	—	$	—	$	—	$	327,150
Other long-term obligations(2)	~~628~~641,~~060~~470		6,360		12,720		~~608~~622,~~980~~390		—
Interest on indebtedness(3)	~~347~~341,~~647~~846		63,~~307~~763		~~125~~126,~~820~~566		~~123~~116,~~760~~757		34,760
Operating lease obligations(4)	4542,~~290~~481		1110,~~001~~708		1716,~~885~~551		8,~~765~~673		76,~~639~~549
Capital lease obligations(5)	2,~~656~~466		759		1,518		~~379~~189		—
Total contractual obligation	$	1,~~350~~355,~~803~~413	$	81,~~427~~590	$	157,~~943~~355	$	~~741~~748,~~884~~009	$	~~369~~368,~~549~~459


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


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

(3) Total interest payments consist of fixed and floating rate interest obligations and the cash flows associated with the Senior Credit Facility and Notes. The interest rate on the floating rate Senior Credit Facility and fixed rate Notes has been assumed to be the same as the applicable rates during the month of ~~March~~September 2014. The one month LIBOR rate on the Senior Credit Facility during the month of ~~June~~September 2014 was below the floor rates established in accordance with the respective agreements. Interest on the Senior Credit Facility was based on the assumed rate of 4.5%. Interest on Exchange Notes was 10.625%.


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


(5)	Represents the principal amount of capital lease obligations, including interest.

Off-balance sheet arrangements

4041

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 1st of each calendar year and is applied against the revenue share of the supplier earned through March 1st of the following calendar year. The agreement provides a grace period for the Company of up to August 31st of the following calendar year in the event that the supplier's revenue share earned does not reach the prepayment amount. After the grace period, if the revenue share earned does not meet the minimum target then the entire prepayment amount is deemed earned by the supplier. During the three months ended March 31, 2014, $4.7 million of the prepaid balance had been written off as it was determined that the estimated revenue share of the supplier will not be met by the grace period. As of ~~June~~ September 30, 2014, there are no prepaid revenue share balances on the Company's balance sheet.

As of ~~June~~September 30, 2014, other than operating leases in the normal course of business and the guaranteed revenue share arrangement discussed above, we had no other off-balance sheet arrangements or obligations.

Emerging Growth Company Status

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”), and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.”

Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

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

Critical Accounting Policies

The discussion and analysis of the Company’s financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of its financial statements. Actual results may differ from these estimates under different assumptions or conditions. Critical accounting estimates are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. ~~see~~See Note 2 to the audited financial statements and "Management’s Discussion and Analysis - Critical Accounting Policies", for the year ended December 31, 2013, included in our Form 10-K, for further discussion of the Company’s critical accounting estimates and policies.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

We have been subject to interest rate risk in connection with our Term Loan Facility and our Revolving Credit Facility. As of ~~June~~September 30, 2014, we have $~~628~~641.15 million of outstanding principal under our Term Loan Facility and Revolving Credit Facility, bearing interest at variable rates with an established LIBOR floor of 1.25% per annum. We currently do not hedge this interest rate exposure. The underlying one month LIBOR rate as of ~~June~~September 30, 2014 was 0.15%. Based on a one-year time frame and all other variables remaining constant, a 1% increase or decrease in interest rates ~~would have no impact on the interest expense because the LIBOR floor under our Senior Credit Facility is higher than the prevailing interest rates.~~

In the future, in order to manage our interest rate risk, we may refinance our existing debt, enter into interest rate swaps, modify our existing interest rate swaps or make changes that may impact our ability to treat our interest rate swaps as a cash flow hedge. However, we do not intend or expect to enter into derivative or interest rate swap transactions for 42

41would have no impact on the interest expense because the LIBOR floor under our Senior Credit Facility is higher than the prevailing interest rates.

Foreign Currency Exchange Risk

We have foreign subsidiaries in the United Kingdom and India whose functional currency is the British Pound Sterling (GBP) and Indian Rupee (INR), respectively. These subsidiaries are start-up entities and have no significant impact on our operations. We do not believe that changes in the GBP and INR relative to the U.S. dollar will have a significant impact on our financial condition, results of operations or cash flows. As we continue to grow our operations, we may obtain certain contracts and increase the amount of our sales to foreign clients. Although we do not expect foreign currency exchange risk to have a significant impact on our future operations, we will assess the risk on a case-specific basis. Currently, we do not hedge our exposure to translation gains or losses in respect of our non-dollar functional currency assets or liabilities.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 15d -15(b) of the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of ~~the~~September ~~end~~30, ~~of the period covered by this Annual Report~~2014. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of ~~June~~ September 30, 2014 because of the material weaknesses discussed below.

Management's Report on Internal Control over Financial Reporting

We are currently not required to comply with items (a) and (b) of Regulation S-K 308 (the SEC’s rule implementing Section 404 of the Sarbanes Oxley Act of 2002) and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Further, our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal controls over financial reporting.

Identification of Material Weaknesses

In connection with the audits of our financial statements for the years ended December 31, 2013 and 2012, we identified control deficiencies in our internal control over financial reporting that constituted material weaknesses. As defined in Exchange Act Rule 12b-2 and Rule 1-02 of Regulation S-X, a material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the registrant's annual or financial statements will not be prevented or detected on a timely basis. Specifically, it was determined that material weaknesses exist as follows: (1) the Company does not maintain effective controls over reconciliation of certain financial statement accounts; (2) the Company does not maintain effective controls over the accounting for business combinations; (3) the Company does not maintain effective controls over the accounting for taxes; and (4) the Company does not maintain a sufficient complement of personnel with an appropriate level of accounting knowledge, experience and training in the application of GAAP.

These material weaknesses resulted in audit adjustments to our accounts and disclosures. Each of the material weaknesses described above could result in a misstatement of our accounts or disclosures that would result in a material misstatement of our annual or interim consolidated financial statements that would not be prevented or detected.

Remediation of Material Weaknesses in Process

The Company is in the process of remediation efforts on the above listed material weaknesses. The Company is currently implementing the requirements of Section 404 and, while undergoing this implementation, is addressing the processes and controls surrounding the above mentioned material weaknesses. As a part of this implementation, the Company had documented its significant financial reporting processes and controls, including the processes around account reconciliations, accounting for taxes and accounting for business combinations. Key controls have been identified, documented, and will be tested in 2014. Remediation efforts, where applicable, will be identified, tracked and monitored to ensure effectiveness of control design and operation. While undergoing this process, the Company will continue to assess current staffing levels and skills and has committed to supplement staffing and training as appropriate.

The following actions, under the supervision of the Company's management, have been implemented during the year:


•	The Company has augmented its quarterly and annual financial procedures to allow for more substantive review of financial results before the release of quarterly earnings and the filing of the quarterly reports of Form 10-Q and Annual Report on Form 10-K.


•	The Company has documented all financially significant processes, identified related key controls and, control design gaps, and devised a plan for remediation to enhance the controls, particularly in the area of account reconciliations.


•	The Company has added resources to support the additional review procedures and to support remediation activities.

Management is committed to finalizing remediation plans and implementing the necessary enhancements to remediate the material weaknesses over the course of the next ~~six~~three months. The material weaknesses will not be considered remediated until: (1) the new processes are designed, appropriately controlled and implemented for a sufficient period of time; and (2) we have sufficient evidence that the new processes and related controls are operating effectively.

Changes in Internal Control over Financial Reporting

As described above under “Management’s Report on Internal Controls over Financial Reporting” and “Remediation of Material Weaknesses in Process”, the Company is not required to make a formal assessment of the effectiveness of our internal control over financial reporting until December 31, 2014. However, during the quarter, the Company continued implementing various requirements of Section 404 of the Sarbanes-Oxley Act. During this process, management has identified opportunities to enhance the design and effectiveness of such internal controls and has been implementing those improvements during the quarter.

4344

Part II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we become involved in legal proceedings arising in the ordinary course of our business. We believe that the outcome of these proceedings will not have a material effect on our financial condition, results of operations or cash flows. The legal proceedings described in Note 12 to Part I of this quarterly report are incorporated herein by reference.

Item 1A. Risk Factors

There have been no material changes in the risk factors as disclosed in our Annual Report on Form 10-K filed on March 31, 2014.

Item 5. Other Information

None.

4445

Item 6. Exhibits

Exhibit Number	Exhibit Description
10.1	Third Amendment to the Credit Agreement, dated as of April 11, 2014, among Truven HoldingCorp., Truven Health Analytics Inc., the Lenders Party Thereto, JPMorgan Chase Bank, N.A.,as Administrative Agent, and J.P. Morgan Securities LLC, as Sole Lead Arranger and SoleBookrunner, filed as Exhibit 10.1 to the Company's current report on Form 8-K, filed on April14, 2014, file number 333-187931, is incorporated herein by reference.
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) Unaudited Interim Condensed Consolidated Balance Sheets as of ~~June~~September 30, 2014 and December 31, 2013, (ii) Unaudited Interim Condensed Consolidated Statements of Comprehensive Income (Loss) for the ~~six~~three and nine months ended ~~June~~September 30, 2014 and ~~June~~September 30, 2013, (iii) Unaudited Interim Condensed Consolidated Statements of Cash Flows for the ~~six~~nine month period ended ~~June~~September 30, 2014 and ~~June~~September 30, 2013, (iv) Unaudited Interim Condensed Consolidated Statement of Equity as of ~~June~~September 30, 2014 and (v) Notes to Interim Unaudited Condensed Consolidated Financial Statements.

* Filed herewith.

4546

SIGNATURES

Pursuant to the requirements 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.

Date: ~~August~~November 83, 2014



		TRUVEN HEALTH ANALYTICS INC.
		(Registrant)

		By: /s/ MIKE BOSWOOD
		Mike Boswood, President and Chief Executive Officer

		By: /s/ PHILIP BUCKINGHAM
		Philip Buckingham, Executive Vice President and Chief Financial Officer

4647

SIGNATURES

Pursuant to the requirements 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.

Date: ~~August~~November 83, 2014



		TRUVEN HOLDING CORP.
		(Registrant)

		By: /s/ MIKE BOSWOOD
		Mike Boswood, President and Chief Executive Officer

		By: /s/ PHILIP BUCKINGHAM
		Philip Buckingham, Executive Vice President and Chief Financial Officer

4748

EXHIBIT INDEX

Exhibits

Exhibit Number	Exhibit Description
10.1	Third Amendment to the Credit Agreement, dated as of April 11, 2014, among Truven HoldingCorp., Truven Health Analytics Inc., the Lenders Party Thereto, JPMorgan Chase Bank, N.A.,as Administrative Agent, and J.P. Morgan Securities LLC, as Sole Lead Arranger and SoleBookrunner, filed as Exhibit 10.1 to the Company's current report on Form 8-K, filed on April14, 2014, file number 333-187931, is incorporated herein by reference.
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) Unaudited Interim Condensed Consolidated Balance Sheets as of ~~June~~September 30, 2014 and December 31, 2013, (ii) Unaudited Interim Condensed Consolidated Statements of Comprehensive Income (Loss) for the ~~six~~nine months ended ~~June~~September 30, 2014 and ~~June~~September 30, 2013, (iii) Unaudited Interim Condensed Consolidated Statements of Cash Flows for the ~~six~~nine month ~~period~~periods ended ~~June~~September 30, 2014 and ~~June~~September 30, 2013, (iv) Unaudited Interim Condensed Consolidated Statement of Equity as of ~~June~~September 30, 2014 and (v) Notes to Interim Unaudited Condensed Consolidated Financial Statements.

* Filed herewith.

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