Edgar Filing: Emdeon Inc.

Large accelerated filer

Accelerated filer

Non-accelerated filer

x (Do not check if a smaller reporting company)

Smaller reporting company

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

Commission file number 1-34435

EMDEON INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware		20-5799664
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

3055 Lebanon Pike, Suite 1000 Nashville, TN		37214
(Address of Principal Executive Offices)		(Zip Code)

(615) 932-3000

(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 ¨ No x*

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 x 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:


Class		Outstanding as of November 6, 2015
Common Stock, $0.01 par value		100

The registrant is a voluntary filer of certain reports required to be filed by companies under Section 13 or 15(d) of the Securities and Exchange Act of 1934 and has filed all reports that would have been required to have been filed by the registrant during the preceding 12 months had it been subject to such filing requirements during the entirety of such period.

Emdeon Inc.

Table of Contents


Part I. Financial Information

Item 1. Financial Statements			3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			39

Item 3. Quantitative and Qualitative Disclosures About Market Risk			53

Item 4. Controls and Procedures			54

Part II. Other Information

Item 1. Legal Proceedings			54

Item 1A. Risk Factors			54

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			55

Item 3. Defaults Upon Senior Securities			55

Item 4. Mine Safety Disclosures			55

Item 5. Other Information			55

Item 6. Exhibits			55

Signatures			56

Exhibit Index			57

PART I.

FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

Emdeon Inc.

Condensed Consolidated Balance Sheets

(unaudited and amounts in thousands, except share and per share amounts)


	September 30, 2015			December 31, 2014
ASSETS
Current assets:

Cash and cash equivalents	$	84,958		$	82,306
Accounts receivable, net of allowance for doubtful accounts of $4,425 and $6,377 at September 30, 2015 and December 31, 2014, respectively		278,826			233,791
Deferred income tax assets		15,457			18,893
Prepaid expenses and other current assets		34,354			29,246

Total current assets		413,595			364,236
Property and equipment, net		299,035			244,153
Goodwill		2,291,375			1,702,569
Intangible assets, net		1,694,838			1,539,394
Other assets, net		8,041			9,183


Total assets	$	4,706,884		$	3,859,535


LIABILITIES AND EQUITY
Current liabilities:

Accounts payable	$	27,265		$	16,399
Accrued expenses		209,104			175,206
Deferred revenues		12,005			10,518
Current portion of long-term debt		31,265			27,308

Total current liabilities		279,639			229,431
Long-term debt, excluding current portion		2,750,330			2,135,468
Deferred income tax liabilities		448,929			413,227
Tax receivable agreement obligations to related parties		179,237			163,983
Other long-term liabilities		9,044			15,361
Commitments and contingencies
Equity:
Common stock (par value, $.01), 100 shares authorized and outstanding at September 30, 2015 and December 31, 2014, respectively		—			—
Additional paid-in capital		1,318,704			1,149,360
Accumulated other comprehensive income (loss)		(2,931	)		(1,955	)
Accumulated deficit		(276,068	)		(245,340	)

Total equity		1,039,705			902,065


Total liabilities and equity	$	4,706,884		$	3,859,535

See accompanying notes to unaudited condensed consolidated financial statements.

Emdeon Inc.

Condensed Consolidated Statements of Operations

(unaudited and amounts in thousands)


	Three Months Ended September 30, 2015			Three Months Ended September 30, 2014			Nine Months Ended September 30, 2015			Nine Months Ended September 30, 2014
Revenue:
Solutions revenue	$	287,946		$	255,015		$	810,162		$	740,226
Postage revenue		89,839			86,593			268,119			256,747

Total revenue		377,785			341,608			1,078,281			996,973
Costs and expenses:
Cost of operations (exclusive of depreciation and amortization below)		129,385			116,909			371,859			344,741
Development and engineering		11,651			8,117			32,600			24,084
Sales, marketing, general and administrative		56,719			43,873			151,955			147,781
Customer postage		89,839			86,593			268,119			256,747
Depreciation and amortization		85,817			48,448			183,446			141,541
Accretion		6,458			4,452			15,254			9,220
Impairment of long-lived assets		219			3,114			1,180			82,689

Operating income (loss)		(2,303	)		30,102			53,868			(9,830	)
Interest expense, net		45,541			36,635			121,685			109,741
Contingent consideration		(4,660	)		1,976			(4,825	)		3,646
Other		—			—			—			(3,968	)

Income (loss) before income tax provision (benefit)		(43,184	)		(8,509	)		(62,992	)		(119,249	)
Income tax provision (benefit)		(10,278	)		4,493			(32,264	)		(43,733	)

Net income (loss)	$	(32,906	)	$	(13,002	)	$	(30,728	)	$	(75,516	)

See accompanying notes to unaudited condensed consolidated financial statements.

Emdeon Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(unaudited and amounts in thousands)


	Three Months Ended September 30, 2015			Three Months Ended September 30, 2014			Nine Months Ended September 30, 2015			Nine Months Ended September 30, 2014
Net income (loss)	$	(32,906	)	$	(13,002	)	$	(30,728	)	$	(75,516	)
Other comprehensive income (loss):
Changes in fair value of interest rate swap, net of taxes		6			732			(445	)		(127	)
Foreign currency translation adjustment		(347	)		(127	)		(531	)		(100	)

Other comprehensive income (loss)		(341	)		605			(976	)		(227	)

Total comprehensive income (loss)	$	(33,247	)	$	(12,397	)	$	(31,704	)	$	(75,743	)

See accompanying notes to unaudited condensed consolidated financial statements.

Emdeon Inc.

Condensed Consolidated Statements of Equity

(unaudited and amounts in thousands, except share amounts)


	Common Stock				Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Equity
	Common Stock
	Shares		Amount
Balance at January 1, 2014		100	$	—	$	1,139,375		$	(169,486	)	$	(1,343	)	$	968,546
Equity compensation expense		—		—		5,914			—			—			5,914
Issuance of shares in connection with equity compensation plans, net of taxes		—		—		1,257			—			—			1,257
Repurchase of Parent common stock		—		—		(960	)		—			—			(960	)
Capital contribution from Parent		—		—		2,000			—			—			2,000
Net income (loss)		—		—		—			(75,516	)		—			(75,516	)
Foreign currency translation adjustment		—		—		—			—			(100	)		(100	)
Change in fair value of interest rate swap, net of taxes		—		—		—			—			(127	)		(127	)

Balance at September 30, 2014		100	$	—	$	1,147,586		$	(245,002	)	$	(1,570	)	$	901,014

Balance at January 1, 2015		100	$	—	$	1,149,360		$	(245,340	)	$	(1,955	)	$	902,065
Equity compensation expense		—		—		6,814			—			—			6,814
Issuance of shares in connection with equity compensation plans, net of taxes		—		—		305			—			—			305
Capital contribution from Parent		—		—		166,576			—			—			166,576
Repurchase of Parent common stock		—		—		(4,351	)		—			—			(4,351	)
Net income (loss)		—		—		—			(30,728	)		—			(30,728	)
Foreign currency translation adjustment		—		—		—			—			(531	)		(531	)
Change in fair value of interest rate swap, net of taxes		—		—		—			—			(445	)		(445	)

Balance at September 30, 2015		100	$	—	$	1,318,704		$	(276,068	)	$	(2,931	)	$	1,039,705

See accompanying notes to unaudited condensed consolidated financial statements.

Emdeon Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited and amounts in thousands)


	Nine Months Ended September 30, 2015			Nine Months Ended September 30, 2014
Operating activities
Net income (loss)	$	(30,728	)	$	(75,516	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		183,446			141,541
Accretion		15,254			9,220
Equity compensation		6,814			5,914
Deferred income tax expense (benefit)		(28,837	)		(44,886	)
Amortization of debt discount and issuance costs		7,441			5,804
Contingent consideration		(4,825	)		3,646
Impairment of long-lived assets		1,180			82,689
Other		(1,474	)		(3,125	)
Changes in operating assets and liabilities:
Accounts receivable		6,147			(12,656	)
Prepaid expenses and other		(11,674	)		(4,490	)
Accounts payable		10,517			644
Accrued expenses, deferred revenue and other liabilities		(918	)		(375	)

Net cash provided by (used in) operating activities		152,343			108,410

Investing activities
Purchases of property and equipment		(39,175	)		(37,673	)
Payments for acquisitions, net of cash acquired		(717,669	)		(87,909	)
Other		(3,676	)		(97	)

Net cash provided by (used in) investing activities		(760,520	)		(125,679	)

Financing activities
Proceeds from Term Loan Facility		385,411			—
Proceeds from Senior Notes		243,453			—
Proceeds from Revolving Facility		60,000			65,000
Payments on Revolving Facility		(60,000	)		(65,000	)
Payments on Term Loan Facility		(11,870	)		(9,659	)
Payment of debt assumed from acquisition		(154,469	)		(23,262	)
Deferred financing obligation payments		(6,173	)		(4,717	)
Repurchase of Parent common stock		(4,351	)		(960	)
Capital contribution from Parent		166,881			3,256
Payment of Contingent Consideration		(5,553	)		—
Other		(2,500	)		—

Net cash provided by (used in) financing activities		610,829			(35,342	)

Net increase (decrease) in cash and cash equivalents		2,652			(52,611	)
Cash and cash equivalents at beginning of period		82,306			76,538

Cash and cash equivalents at end of period	$	84,958		$	23,927

See accompanying notes to unaudited condensed consolidated financial statements.

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

1. Nature of Business and Organization

Nature of Business

Emdeon Inc. (the “Company”), through its subsidiaries, is a provider of software and analytics, network solutions and technology-enabled services that optimize communications, payments and actionable insights by leveraging its intelligent healthcare platform, which includes the single largest financial and administrative network in the United States healthcare system. The Company’s platform and solutions integrate and automate key functions of its payer, provider and pharmacy customers throughout the patient encounter, from consumer engagement and pre-care eligibility and enrollment through payment.

Organization

The Company was formed as a Delaware limited liability company in September 2006 and converted into a Delaware corporation in September 2008 in anticipation of the Company’s August 2009 initial public offering (the “IPO”).

On November 2, 2011, pursuant to an Agreement and Plan of Merger among the Company, Beagle Parent Corp. (“Parent”) and Beagle Acquisition Corp. (“Merger Sub”), Merger Sub merged with and into the Company with the Company surviving the merger (the “Merger”). Subsequent to the Merger, the Company became an indirect wholly-owned subsidiary of Parent, which is controlled by affiliates of The Blackstone Group L.P. (“Blackstone”).

2. Basis of Presentation

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (“SEC”) Guidelines, Rules and Regulations (“Regulation S-X”) and, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of results for the unaudited interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The results of operations for the interim period are not necessarily indicative of the results to be obtained for the full fiscal year. All material intercompany accounts and transactions have been eliminated in the unaudited condensed consolidated financial statements.

Reclassifications

Certain reclassifications have been made to the prior period financial statements to conform to the current period presentation.

Effective January 1, 2015, the Company completed an internal reorganization of its reporting structure which resulted in a change in the composition of its reportable segments to software and analytics, network solutions and technology-enabled services. Prior period segment information has been restated to reflect the current organizational structure.

Effective January 1, 2015, in order to clarify the nature of its customer related postage activities, the Company also created separate captions on the statement of operations within revenue and costs and expenses, respectively. Previously, such amounts were included within revenue and costs of operations. To conform to the current period presentation, costs of operations were reduced by $86,593 and $256,747 and reclassified as customer postage for the three and nine months ended September 30, 2014, respectively.

Accounting Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company bases its estimates on historical experience, current business factors and various other assumptions that the Company believes are necessary to consider in order to form a basis for making judgments about the carrying values of assets and liabilities, the recorded amounts of revenue and expenses and disclosure of contingent assets and liabilities. The Company is subject to uncertainties such as the impact of future events, economic, environmental and political factors and changes in the Company’s business environment; therefore, actual results could differ materially from these estimates. Accordingly, the

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

accounting estimates used in the preparation of the Company’s financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. Changes in estimates are made when circumstances warrant. Such changes in estimates and refinements in estimation methodologies are reflected in the reported results of operations; and if material, the effects of changes in estimates are disclosed in the notes to the consolidated financial statements. Estimates and assumptions by management affect: the allowance for doubtful accounts; the fair value assigned to assets acquired and liabilities assumed in business combinations; tax receivable agreement obligations; the fair value of interest rate swap obligations; contingent consideration; loss accruals; the carrying value of long-lived assets (including goodwill and intangible assets); the amortization period of long-lived assets (excluding goodwill); the carrying value, capitalization and amortization of software development costs; the provision and benefit for income taxes and related deferred tax accounts; certain accrued expenses; revenue recognition; contingencies; and the value attributed to equity awards.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, which replaces most prior general and industry specific revenue recognition guidance with a principles-based comprehensive revenue recognition framework. Under this revised framework, a company will recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. This update is effective for fiscal years and interim periods beginning in those years after December 15, 2017. Early adoption is permitted in years beginning after December 15, 2016. Upon adoption, a company may elect to either retrospectively restate each prior reporting period or reflect the cumulative effect of initially applying the update with an adjustment to retained earnings. The Company is currently assessing the potential effects this update may have on its consolidated financial statements.

In June 2014, the FASB issued ASU No. 2014-12, which clarifies, in the context of share-based payment awards, that a performance target that affects vesting and could be achieved after the requisite service period has been rendered should be treated as a performance condition. Prior to this update, because there was no explicit guidance, there was diversity in practice among companies. This update is effective for fiscal years and interim periods within those years beginning after December 15, 2015, with early adoption permitted. The Company does not expect the adoption of this update to have a material effect on its consolidated financial statements.

In January 2015, the Company adopted FASB ASU No. 2014-08, which changes the requirements for reporting discontinued operations. Following adoption of this update, discontinued operations generally will be reported for the disposal by sale or otherwise of a component or a group of components that represents a strategic shift that has or will have a major effect on an entity’s operations and financial results. Upon adoption, this update had no effect on the Company’s consolidated financial statements

In July 2015, the Company adopted ASU No. 2015-03, which generally requires that debt issue costs related to a debt liability be presented on the balance sheet as a direct deduction from the carrying amount of that debt liability. As a result of the adoption of this update, the Company retrospectively adjusted its consolidated balance sheet as of December 31, 2014 to reduce other assets and long-term debt, excluding current portion, by $11,128.

In July 2015, the Company adopted ASU No. 2015-05, which provides guidance to customers about whether a cloud computing arrangement includes a software license and requires that all software licenses utilized in internal use software arrangements be accounted for consistent with other licenses of intangible assets. As a result of the adoption of this update, the Company will recognize new or materially modified software licenses within intangible assets on its consolidated balance sheet and will recognize the related amortization of these intangible assets within amortization expense. The Company does not expect the adoption of this update to have a material effect on its consolidated financial statements.

In September 2015, the FASB issued ASU No. 2015-16, which simplifies the accounting for measurement period adjustments in connection with business combinations. Following the adoption of this update, the Company will recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. This update is effective for fiscal years and interim periods beginning in those years after December 15, 2015. The Company does not expect the adoption of this update to have a material effect on its consolidated financial statements.

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

3. Concentration of Credit Risk

The Company’s revenue is primarily generated in the United States. Changes in economic conditions, government regulations or demographic trends, among other matters, in the United States could adversely affect the Company’s revenue and results of operations.

The Company maintains its cash and cash equivalent balances in either insured depository accounts or money market mutual funds. The money market mutual funds are limited to investments in low-risk securities such as United States or government agency obligations, or repurchase agreements secured by such securities.

4. Business Combinations

In July 2014, the Company acquired all of the equity interests of Capario, Inc. (“Capario”), a technology-enabled provider of revenue cycle management solutions.

In November 2014, the Company acquired all of the equity interests of Change Healthcare Corporation (“Change”), a technology-enabled provider of healthcare consumer engagement and transparency solutions.

In December 2014, the Company acquired all of the equity interests of Adminisource Communications, Inc. (“Adminisource”), a technology-enabled provider of payment and communication solutions.

In August 2015, the Company acquired all of the equity interests of Altegra Health, Inc. (“Altegra”), a technology-enabled provider that assists payers and risk bearing providers with analytics and reporting capabilities for risk adjustment, member engagement and quality analysis to achieve actionable insights and improved management for value-based healthcare.

The following table summarizes certain information related to these acquisitions. The preliminary values of the consideration transferred, assets acquired and liabilities assumed in the Altegra acquisition, including the related tax effects, are subject to receipt of a final valuation and working capital settlement.

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)


	Altegra			Adminisource			Change			Capario
Total Consideration Fair Value at Acquisition Date:
Cash paid at closing	$	735,669		$	34,825		$	138,329		$	89,423
Contingent consideration		—			—			4,730			—
Parent options fair value		—			—			650			—
Other		(203	)		(925	)		80			(219	)

	$	735,466		$	33,900		$	143,789		$	89,204

Allocation of the Consideration Transferred:
Cash	$	17,176		$	—		$	8,053		$	2,292
Accounts receivable		52,014			6,474			335			4,839
Deferred income tax assets		1,625			3,797			9,170			275
Prepaid expenses and other current assets		4,730			466			397			1,113
Property and equipment		86,901			874			7,953			9,580
Identifiable intangible assets:
Tradename		11,535			108			5,300			900
Noncompetition agreements		5,041			—			2,840			2,740
Customer relationships		251,099			21,230			4,430			38,510
Other		633			—			—			—
Goodwill		593,552			3,223			109,994			76,279
Accounts payable		(837	)		(279	)		(174	)		(2,270	)
Accrued expenses		(52,147	)		(1,993	)		(2,203	)		(8,818	)
Deferred revenues		(5,100	)					(306	)		(2	)
Current maturities of long-term debt		—			—			—			(2,600	)
Deferred income tax liabilities		(76,287	)		—			—			(14,642	)
Long-term debt		(154,469	)		—			(2,000	)		(18,785	)
Other long-term liabilities		—			—			—			(207	)

Total consideration transferred	$	735,466		$	33,900		$	143,789		$	89,204

Acquisition costs in sales, marketing, general and administrative expense:
For the three months ended September 30, 2015	$	2,936		$	—		$	—		$	—
For the three months ended September 30, 2014	$	—		$	—		$	—		$	234
For the nine months ended September 30, 2015	$	4,599		$	—		$	—		$	—
For the nine months ended September 30, 2014	$	—		$	—		$	—		$	862

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Altegra

Adminisource

Change

Capario

Other Information:

Gross contractual accounts receivable

53,108

7,521

335

5,112

Amount not expected to be collected

1,094

1,047

—

273

Goodwill expected to be deductible for tax purposes

—

Contingent Consideration Information:

Contingent consideration range

N/A

$0-$50,000

N/A

Measurement period

N/A

January 1, 2015 to
December 31, 2017

N/A

Basis of measurement

N/A

Revenue
performance

N/A

Type of measurement

N/A

Level 3

N/A

Key assumptions at the acquisition date:

Range of annual revenue performance

N/A

$5,516-$51,376

N/A

Expected payment date(s)

N/A

2016-2018

N/A

Discount rate(s)

N/A

10.5% to 11.3%

N/A

Increase (decrease) to net loss:

For the three months ended September 30, 2015

N/A

$(4,660)

N/A

For the nine months ended September 30, 2015

N/A

$(4,730)

N/A

The Company generally recognizes goodwill attributable to the assembled workforce and expected synergies among the operations of the acquired entities and the Company’s existing operations. In the case of the Company’s acquisitions of operating companies, synergies generally have resulted from the elimination of duplicative facilities and personnel costs and cross selling opportunities among the Company’s existing customer base. Goodwill is generally deductible for federal income tax purposes when a business combination is treated as an asset purchase. Goodwill is generally not deductible for federal income tax purposes when the business combination is treated as a stock purchase.

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

5. Goodwill and Intangible Assets

The following table presents the changes in the carrying amount of goodwill for the indicated periods.


	Software and Analytics			Network Solutions		Technology-enabled Services			Total
Balance at December 31, 2014	$	581,533		$	620,805	$	500,231		$	1,702,569
Acquisitions		593,552			—		—			593,552
Other		(3,944	)		—		(802	)		(4,746	)

Balance at September 30, 2015	$	1,171,141		$	620,805	$	499,429		$	2,291,375

Intangible assets subject to amortization as of September 30, 2015 consisted of the following:


	Weighted Average Remaining Life		Gross Carrying Amount		Accumulated Amortization			Net
Customer relationships		13.8	$	1,878,991	$	(322,949	)	$	1,556,042
Tradenames		0.3		174,381		(63,106	)		111,275
Non-compete agreements		1.7		25,021		(13,836	)		11,185
Data sublicense agreement		2.0		31,000		(20,512	)		10,488
Other		2.0		6,960		(1,112	)		5,848

Total			$	2,116,353	$	(421,515	)	$	1,694,838

Amortization expense was $115,970 and $75,286 for the nine months ended September 30, 2015 and 2014, respectively. The Company recently announced its plan to rebrand as Change Healthcare^TM beginning in the fourth quarter of 2015. As a result of this plan, the Company revised the remaining useful life of its existing tradename asset. During the three months ended September 30, 2015, the Company recognized amortization expense of $31,525 related to its existing tradename asset.

Aggregate future amortization expense for intangible assets is estimated to be:


Remainder of 2015	$	127,495
2016		129,950
2017		123,895
2018		117,843
2019		113,954
Thereafter		1,081,701

	$	1,694,838

6. Long-Term Debt

The Company’s long-term indebtedness is comprised of a senior secured term loan facility (as amended, the “Term Loan Facility”), a revolving credit facility (the “Revolving Facility”; together with the Term Loan Facility, the “Senior Credit Facilities”), 11% senior notes due 2019 (the “2019 Notes”), 11.25% senior notes due 2020 (the “2020 Notes”) and 6% senior notes due 2021 (the “2021 Notes”; together with the 2019 Notes and 2020 Notes, the “Senior Notes”).

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Long-term debt as of September 30, 2015 and December 31, 2014, consisted of the following:


	September 30, 2015			December 31, 2014
Senior Credit Facilities
$1,696 million Senior Secured Term Loan facility, due November 2, 2018, net of unamortized discount of $25,499 and $20,016 at September 30, 2015 and December 31, 2014, respectively (effective interest rate of 4.29%)	$	1,624,223		$	1,245,376
$160 million Senior Secured Term Loan facility, due November 2, 2018, net of unamortized discount of $3,615 and $4,438 at September 30, 2015 and December 31, 2014, respectively (effective interest rate of 4.54%)		154,785			155,162
$125 million Senior Secured Revolving Credit facility, expiring on November 2, 2016 and bearing interest at a variable base rate plus a spread rate		—			—
Senior Notes
$375 million 11% Senior Notes due December 31, 2019, net of unamortized discount of $6,605 and $7,477 at September 30, 2015 and December 31, 2014, respectively (effective interest rate of 11.53%)		368,395			367,523
$375 million 11.25% Senior Notes due December 31, 2020, net of unamortized discount of $8,778 and $9,651 at September 30, 2015 and December 31, 2014, respectively (effective interest rate of 11.85%)		366,222			365,349
$250 million 6% Senior Notes due February 15, 2021, net of unamortized discount of $6,412 and $0 at September 30, 2015 and December 31, 2014, respectively (effective interest rate of 6.57%)		243,588			—
Obligation under data sublicense agreement		17,237			17,237
Other		7,145			12,129
Less current portion		(31,265	)		(27,308	)

Long-term debt	$	2,750,330		$	2,135,468

Senior Credit Facilities

The credit agreement governing the Senior Credit Facilities (the “Senior Credit Agreement”) provides that, subject to certain conditions, the Company may request additional tranches of term loans, increase commitments under the Revolving Facility or the Term Loan Facility or add one or more incremental revolving credit facility tranches (provided that the revolving credit commitments outstanding at any time have no more than three different maturity dates) in an aggregate amount not to exceed (a) $300,000 plus (b) an unlimited amount at any time, subject to compliance on a pro forma basis with a first lien net leverage ratio of no greater than 4.00 to 1.00. Availability of such additional tranches of term loans or revolving credit facilities and/or increased commitments is subject to, among other conditions, the absence of any default under the Senior Credit Agreement and the receipt of commitments by existing or additional financial institutions. Proceeds of the Revolving Facility, including up to $30,000 in the form of borrowings on same-day notice, referred to as swingline loans, and up to $50,000 in the form of letters of credits, are available to provide financing for working capital and general corporate purposes.

Borrowings under the Senior Credit Facilities bear interest at an annual rate equal to an applicable margin plus, at the Company’s option, either (a) a base rate determined by reference to the highest of (i) the applicable prime rate, (ii) the federal funds rate plus 0.50% and (iii) a LIBOR rate determined by reference to the costs of funds for United States dollar deposits for an interest period of one month, adjusted for certain additional costs, plus 1.00%, which base rate, in the case of the Term Loan Facility only, shall be no less than 2.25%, or (b) a LIBOR rate determined by reference to the costs of funds for United States dollar deposits for the interest period relevant to such borrowing, adjusted for certain additional costs, which, in the case of the Term Loan Facility only, shall be no less than 1.25%.

In April 2012, the Company amended the Senior Credit Agreement to reprice the Senior Credit Facilities and borrow $80,000 of additional term loans. In April 2013, the Company again amended the Senior Credit Agreement to further reprice, and also to modify certain financial covenants under the Senior Credit Facilities. Following the April 2013 amendment, the interest rate on both the Term Loan Facility and Revolving Facility is LIBOR plus 2.50%. The Term Loan Facility remains subject to a LIBOR floor of 1.25%, and there continues to be no LIBOR floor on the Revolving Facility. In connection with

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

the April 2013 repricing, the Senior Credit Agreement also was amended to, among other things, eliminate the financial covenant related to the consolidated cash interest coverage ratio and modify the financial covenant related to the net leverage test by maintaining the required first lien net leverage ratio at 5.35 to 1.00 for the remaining term of the Senior Credit Facilities.

In December 2014 and August 2015, through further amendments to the Senior Credit Agreement, the Company borrowed an additional $160,000 and $395,000, respectively, under incremental term loan facilities on identical terms and having the same rights and obligations as the existing term loans under the Senior Credit Agreement.

In addition to paying interest on outstanding principal under the Senior Credit Facilities, the Company is required to pay customary agency fees, letter of credit fees and a 0.50% commitment fee in respect of the unutilized commitments under the Revolving Facility.

The Senior Credit Agreement requires that the Company prepay outstanding loans under the Term Loan Facility, subject to certain exceptions, with (a) 100% of the net cash proceeds of any incurrence of debt other than debt permitted under the Senior Credit Agreement, (b) 50% (which percentage will be reduced to 25% and 0% based on the Company’s first lien net leverage ratio) of the Company’s annual excess cash flow and (c) 100% of the net cash proceeds of certain asset sales and casualty and condemnation events, subject to reinvestment rights and certain other exceptions.

The Company generally may voluntarily prepay outstanding loans under the Senior Credit Facilities at any time without premium or penalty other than breakage costs with respect to LIBOR loans.

The Company is required to make quarterly payments equal to 0.25% of the aggregate principal amount of the loans under the Term Loan Facility, with the balance due and payable on November 2, 2018. Any principal amount outstanding under the Revolving Facility is due and payable on November 2, 2016.

Certain of the Company’s United States wholly-owned restricted subsidiaries, together with the Company, are co-borrowers and jointly and severally liable for all obligations under the Senior Credit Facilities. Such obligations of the co-borrowers are unconditionally guaranteed by Beagle Intermediate Holdings, Inc. (a direct wholly-owned subsidiary of Parent), the Company and each of its existing and future United States wholly-owned restricted subsidiaries (with certain exceptions including immaterial subsidiaries). These obligations are secured by a perfected security interest in substantially all of the assets of the co-borrowers and guarantors now owned or later acquired, including a pledge of all of the capital stock of the Company and its United States wholly-owned restricted subsidiaries and 65% of the capital stock of its foreign restricted subsidiaries, subject in each case to the exclusion of certain assets and additional exceptions.

The Senior Credit Agreement requires the Company to comply with a maximum first lien net leverage ratio financial maintenance covenant, to be tested on the last day of each fiscal quarter. A breach of the first lien net leverage ratio covenant is subject to certain equity cure rights. In addition, the Senior Credit Facilities contain a number of negative covenants that, among other things and subject to certain exceptions, restrict the Company’s ability and the ability of its subsidiaries to:

•

incur additional indebtedness or guarantees;

•

incur liens;

•

make investments, loans and acquisitions;

•

consolidate or merge;

•

sell assets, including capital stock of subsidiaries;

•

pay dividends on capital stock or redeem, repurchase or retire capital stock of the Company or any restricted subsidiary;

•

alter the business of the Company;

•

amend, prepay, redeem or purchase subordinated debt;

•

engage in transactions with affiliates; and

•

enter into agreements limiting dividends and distributions of certain subsidiaries.

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

The Senior Credit Agreement also contains certain customary representations and warranties, affirmative covenants and provisions relating to events of default (including upon change of control).

As of September 30, 2015, the Company believes it was in compliance with all of the applicable debt covenants under the Senior Credit Agreement.

Senior Notes

The 2019 Notes bear interest at an annual rate of 11.00% with interest payable semi-annually on June 30 and December 31 of each year. The 2019 Notes mature on December 31, 2019. The 2020 Notes bear interest at an annual rate of 11.25% with interest payable quarterly on March 31, June 30, September 30 and December 31 of each year. The 2020 Notes mature on December 31, 2020. The 2021 Notes bear interest at an annual rate of 6.00% with interest payable semi-annually on April 15 and October 15 of each year, commencing on April 15, 2016. The 2021 Notes mature on February 15, 2021.

The Company may redeem the 2019 Notes, the 2020 Notes or both, in whole or in part, at any time on or after December 31, 2015 at the applicable redemption price, plus accrued and unpaid interest. At any time prior to December 31, 2015, the Company may redeem the 2019 Notes, the 2020 Notes or both, in whole or in part, at its option and on one or more occasions, at a redemption price equal to 100% of the principal amount, plus a “make-whole premium” and accrued and unpaid interest.

The Company may redeem the 2021 Notes, in whole or in part, at any time on or after August 15, 2017 at the applicable redemption price, plus accrued and unpaid interest. At any time prior to August 15, 2017, the Company may, at its option and on one or more occasions, redeem up to 40% of the aggregate principal amount of the 2021 Notes at a redemption price equal to 100% of the aggregate principal amount, plus a premium and accrued and unpaid interest with the net cash proceeds of certain equity offerings. At any time prior to August 15, 2017, the Company may redeem the 2021 Notes, in whole or in part, at its option and on one or more occasions, at a redemption price equal to 100% of the principal amount, plus a “make-whole premium” and accrued and unpaid interest.

If the Company experiences specific kinds of changes in control, it must offer to purchase the Senior Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest.

The Senior Notes are senior unsecured obligations and rank equally in right of payment with all of the Company’s existing and future indebtedness and senior in right of payment to all of its existing and future subordinated indebtedness. The Company’s obligations under the Senior Notes are guaranteed on a senior basis by all of its existing and subsequently acquired or organized wholly-owned United States restricted subsidiaries that guarantee the Senior Credit Facilities or its other indebtedness or indebtedness of any affiliate guarantor. The Senior Notes and the related guarantees are effectively subordinated to the Company’s existing and future secured obligations and that of its affiliate guarantors to the extent of the value of the collateral securing such obligations, and are structurally subordinated to all existing and future indebtedness and other liabilities of any of the Company’s subsidiaries that do not guarantee the Senior Notes.

The indentures governing the Senior Notes (the “Indentures”) contain customary covenants that restrict the ability of the Company and its restricted subsidiaries to:

•

pay dividends on capital stock or redeem, repurchase or retire capital stock of the Company, subject to customary exceptions, including compliance with a fixed charge coverage ratio and subject to limitation based on net income generated during the term of the Indentures;

•

incur additional indebtedness or issue certain capital stock;

•

incur certain liens;

•

make investments, loans, advances and acquisitions;

•

consolidate, merge or transfer all or substantially all of their assets and the assets of their subsidiaries;

•

prepay subordinated debt;

•

engage in certain transactions with affiliates; and

•

enter into agreements restricting the subsidiaries’ ability to pay dividends.

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

The Indentures also contain certain customary affirmative covenants and events of default.

As of September 30, 2015, the Company believes it was in compliance with all of the applicable debt covenants under the Senior Notes.

Obligation Under Data Sublicense Agreement

In 2009 and 2010, the Company acquired certain additional rights to specified uses of its data from the former owner of the Company’s business in order to broaden the Company’s ability to pursue business intelligence and data analytics solutions for payers and providers. The Company previously licensed exclusive rights to this data to the former owner of the Company’s business. In connection with these data rights acquisitions, the Company recorded amortizable intangible assets and corresponding obligations at inception based on the present value of the scheduled annual payments through 2018, which totaled $65,000 in the aggregate (approximately $21,400 remained payable at September 30, 2015). In connection with the Merger, the Company was required to adjust this obligation to its fair value.

Other

From time to time, the Company enters into deferred financing arrangements with certain vendors. The obligations under such arrangements are generally recorded at the present value of the scheduled payments. Such future payments totaled approximately $7,100 at September 30, 2015.

7. Interest Rate Swap

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. During the nine months ended September 30, 2015, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt pursuant to the Term Loan Facility. As of September 30, 2015, the Company had three outstanding interest rate derivatives with a combined notional amount of $640,000 that were designated as cash flow hedges of interest rate risk.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next twelve months, the Company estimates that an additional $2,575 will be reclassified as an increase to interest expense.

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

The following table summarizes the fair value of the Company’s derivative instruments at September 30, 2015 and December 31, 2014:


	Fair Values of Derivative Instruments Asset (Liability) Derivatives
	Balance Sheet Location	September 30, 2015			December 31, 2014
Derivatives designated as hedging instruments:
Interest rate swaps	Other assets	$	—		$	222
Interest rate swaps	Accrued expenses		(1,908	)		(2,567	)
Interest rate swaps	Other long-term liabilities		(1,197	)		—

		$	(3,105	)	$	(2,345	)

Tabular Disclosure of the Effect of Derivative Instruments on the Statement of Operations

The effect of the derivative instruments on the accompanying unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2015 and 2014, respectively, is summarized in the following table:


	Three Months Ended September 30,			Three Months Ended September 30,			Nine Months Ended September 30,			Nine Months Ended September 30,
	2015			2014			2015			2014
Derivatives in Cash Flow Hedging Relationships
Gain/ (loss) related to effective portion of derivative recognized in other comprehensive loss	$	(645	)	$	595		$	(2,695	)	$	(2,150	)

Gain/ (loss) related to effective portion of derivative reclassified from accumulated other comprehensive loss to interest expense	$	(652	)	$	(652	)	$	(1,935	)	$	(1,935	)

Credit Risk-related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company also could be declared in default on its derivative obligations.

As of September 30, 2015, the termination value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $3,809. If the Company had breached any of these provisions at September 30, 2015, the Company could have been required to settle its obligations under the agreements at this termination value. The Company does not offset any derivative instruments and the derivative instruments are not subject to collateral posting requirements.

8. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company’s assets and liabilities that are measured at fair value on a recurring basis consist of the Company’s derivative financial instruments and contingent consideration associated with business combinations. The table below summarizes these items as of September 30, 2015, aggregated by the level in the fair value hierarchy within which those measurements fall.

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)


Description	Balance at September 30, 2015			Quoted in Markets Identical (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Interest rate swaps	$	(3,105	)	$	—	$	(3,105	)	$	—
Contingent consideration obligations		(4,650	)		—		—			(4,650	)

Total	$	(7,755	)	$	—	$	(3,105	)	$	(4,650	)

The valuation of the Company’s derivative financial instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The fair value of the interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments) using the overnight index swap rate as the discount rate.

The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements and measures the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs to evaluate the likelihood of default by itself and by its counterparties. As of September 30, 2015, the Company determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The valuation of the Company’s contingent consideration obligations is estimated as the present value of total expected contingent consideration payments which are determined using a Monte Carlo simulation. This analysis reflects the contractual terms of the purchase agreements and utilizes assumptions with regard to future sales, probabilities of achieving such future sales, the likelihood and timing of expected payments and a discount rate. Significant increases with respect to assumptions as to future sales and probabilities of achieving such future sales would result in a higher fair value measurement, while an increase in the discount rate would result in a lower fair value measurement.

The table below presents a reconciliation of the fair value of the liabilities that use significant unobservable inputs (Level 3).


	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Balance at beginning of period	$	(9,310	)	$	(13,169	)	$	(17,486	)	$	(5,484	)
Adjustment of provisional amounts		—			—			(50	)		—
Issuance of contingent consideration		—			—			—			(6,015	)
Settlement of contingent consideration		—			—			8,061			—
Total changes included in contingent consideration		4,660			(1,976	)		4,825			(3,646	)

Balance at end of period	$	(4,650	)	$	(15,145	)	$	(4,650	)	$	(15,145	)

During April 2015, the Company exercised its option to terminate all future obligations under the Vieosoft, Inc. (“Vieosoft”) stock purchase agreement in exchange for a cash payment of $4,650 to the former stockholders of Vieosoft. This termination payment was not accepted and the former stockholders of Vieosoft have filed a lawsuit against the Company. The Company has reflected a liability of $4,650 within accrued expenses on the accompanying condensed consolidated balance sheet as of September 30, 2015.

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

As a result of anticipated revenue growth rates during the measurement period, the Company no longer expects that Change will meet the thresholds sufficient to earn additional consideration.

Assets and Liabilities Measured at Fair Value on a Non-recurring Basis

During the nine months ended September 30, 2014, the Company’s technology-enabled services segment received notice that its existing contract with a customer would not be renewed in full upon its expiration. As a result, the Company abandoned a customer related project that was under development and assessed the recoverability of the net assets included in the relevant asset group. The Company recognized an impairment charge, measured as of April 30, 2014, to write off the abandoned project and to adjust the carrying value of the asset group to its fair value. This latter impairment charge was generally allocated to the affected long-lived assets on a pro rata basis. Additionally, the Company abandoned certain network solutions and technology-enabled services segment development projects in connection with execution of certain strategic initiatives during the nine months ended September 30, 2014.

The following table summarizes the affected financial statement captions, the allocation of the impairment charges among those captions and provides certain quantitative information associated with the required fair value measurements for the nine months ended September 30, 2014.


	Range of Inputs	Fair Value		Impairment
Long-lived assets to be held and used (Level 3)
Relevant asset group	N/A	$	13,066	$	73,220
Balance sheet account:
Customer relationships	N/A		N/A	$	72,290
Property and equipment	N/A		N/A	$	930
Unobservable inputs (discounted cash flow method):
Probability of contract extension	80%		N/A		N/A
Probability of new contract execution	20%-90%		N/A		N/A
Expected annual revenue range	$3,080-$3,590		N/A		N/A
Risk free interest rate	1.6%		N/A		N/A
Long-lived assets to be disposed of
Property and Equipment	N/A	$	—	$	3,040

Assets and Liabilities Measured at Fair Value upon Initial Recognition

The carrying amount and the estimated fair value of financial instruments held by the Company as of September 30, 2015 were:


	Carrying Amount		Fair Value
Cash and cash equivalents	$	84,958	$	84,958
Accounts receivable	$	278,826	$	278,826
Senior Credit Facilities (Level 1)	$	1,779,008	$	1,801,342
Senior Notes (Level 2)	$	978,205	$	1,050,861

The carrying amounts of cash equivalents and accounts receivable approximate fair value because of their short-term maturities. The fair value of long-term debt is based upon market quotes and trades by investors in partial interests of these instruments.

9. Legal Proceedings

In the normal course of business, the Company is involved in various claims and legal proceedings. While the ultimate resolution of these matters has yet to be determined, the Company does not believe that their outcomes will have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

10. Income Taxes

In May 2015, the state of Tennessee enacted the Tennessee Revenue Modernization Act, which changed the manner in which the Company’s Tennessee apportionment is determined. This change in the Company’s Tennessee apportionment, along with routine changes in apportionment that arose following the filing of the Company’s annual tax returns, resulted in a change in the Company’s effective state income tax rate.

Additionally, during the nine months ended September 30, 2015, the Company revised its estimates of its contingent consideration obligations related to two of its acquisitions.

After giving effect to the changes in the Company’s Tennessee apportionment, changes in contingent consideration and other items, income taxes for the nine months ended September 30, 2015 amounted to an income tax benefit of $32,264 and an effective tax rate of 51.2%. The income tax benefit for the nine months ended September 30, 2014 was $43,733 and resulted in an effective tax rate of 36.7%.

11. Tax Receivable Agreement Obligation to Related Parties

The Company is a party to tax receivable agreements which obligate it to make payments to certain of its current and former owners, including affiliates of Blackstone, Hellman & Friedman and certain members of management (collectively, the “TRA Members”), equal to 85% of the applicable cash savings that the Company realizes as a result of tax attributes arising from certain previous transactions, including the Merger. The Company will retain the benefit of the remaining 15% of these tax savings. The Company expects cumulative remaining payments under the tax receivable agreements of approximately $353,048. $180,182 of this amount, which reflected the initial fair value of the tax receivable agreement obligations plus recognized accretion, was reflected as an obligation on the accompanying unaudited condensed consolidated balance sheet at September 30, 2015.

12. Segment Reporting

Management views the Company’s operating results in three reportable segments: (a) software and analytics, (b) network solutions and (c) technology-enabled services. Listed below are the results of operations for each of the reportable segments. This information is reflected in the manner utilized by management to make operating decisions, assess performance and allocate resources. Such amounts include allocations of corporate shared services functions that are essential to the core operations of the reportable segments such as information technology, operations and product development functions. Segment assets and related depreciation expenses are not presented to management for purposes of operational decision making, and therefore are not included in the accompanying tables. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies in the notes to the Company’s audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2014 as filed with the SEC.

Software and Analytics

The software and analytics segment provides revenue cycle technology, revenue optimization, payment integrity, electronic payment, risk adjustment, quality reporting, data and analytic and consumer engagement solutions.

Network Solutions

The network solutions segment provides financial and administrative information exchange solutions for medical, dental and pharmacy claims management and other standardized healthcare transactions, including clinical information exchange capabilities.

Technology-enabled Services

The technology-enabled services segment provides payment and communication, eligibility and enrollment, healthcare consulting, payment automation and pharmacy benefits administration solutions.

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Corporate and Eliminations

Corporate and eliminations includes pass-through postage costs, management, administrative and certain other shared corporate services functions such as legal, finance, human resources and marketing, as well as eliminations to remove inter-segment revenue and expenses. Inter-segment revenue and expenses primarily represent claims management and payment and communication solutions provided between segments. These administrative costs are excluded from the adjusted EBITDA measure for each respective operating segment.

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

The revenue and adjusted EBITDA for the operating segments are as follows:


	Three Months Ended September 30, 2015
	Software and Analytics			Network Solutions		Technology- enabled Services			Corporate and Eliminations			Consolidated
Revenue from external customers:
Solutions revenue	$	97,458		$	93,415	$	103,784		$	(6,711	)	$	287,946
Postage revenue		—			—		—			89,839			89,839
Inter-segment revenue		308			146		1,047			(1,501	)		—

Net revenue	$	97,766		$	93,561	$	104,831		$	81,627		$	377,785

Income (loss) before income taxes		37,280			49,914		35,224			(165,602	)		(43,184	)
Interest expense		—			—		—			45,541			45,541
Depreciation and amortization		—			—		—			85,817			85,817

EBITDA		37,280			49,914		35,224			(34,244	)		88,174
Equity compensation		426			166		240			1,799			2,631
Acquisition accounting adjustments		227			1		158			—			386
Acquisition-related costs		58			11		108			3,551			3,728
Transaction-related costs and advisory fees		—			—		—			1,960			1,960
Strategic initiatives, duplicative and transition costs		738			318		414			619			2,089
Severance costs		429			178		371			(131	)		847
Accretion		—			—		—			6,458			6,458
Impairment of long-lived assets		—			—		—			219			219
Contingent consideration		(4,660	)		—		—			—			(4,660	)
Other non-routine, net		392			462		(272	)		(633	)		(51	)

EBITDA Adjustments		(2,390	)		1,136		1,019			13,842			13,607

Adjusted EBITDA	$	34,890		$	51,050	$	36,243		$	(20,402	)	$	101,781

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)


	Three Months Ended September 30, 2014
	Software and Analytics		Network Solutions			Technology- enabled Services		Corporate and Eliminations			Consolidated
Revenue from external customers:
Solutions revenue	$	61,884	$	90,236		$	109,094	$	(6,199	)	$	255,015
Postage revenue		—		—			—		86,593			86,593
Inter-segment revenue		312		90			2,178		(2,580	)		—

Net revenue	$	62,196	$	90,326		$	111,272	$	77,814		$	341,608

Income (loss) before income taxes		21,955		44,659			38,789		(113,912	)		(8,509	)
Interest expense		—		—			—		36,635			36,635
Depreciation and amortization		—		—			—		48,448			48,448

EBITDA		21,955		44,659			38,789		(28,829	)		76,574
Equity compensation		165		149			304		1,614			2,232
Acquisition accounting adjustments		20		(7	)		176		—			189
Acquisition-related costs		16		25			11		1,336			1,388
Transaction-related costs and advisory fees		—		—			—		1,683			1,683
Strategic initiatives, duplicative and transition costs		16		15			11		364			406
Severance costs		63		209			870		694			1,836
Accretion		—		—			—		4,452			4,452
Impairment of long-lived assets		—		19			165		2,930			3,114
Contingent consideration		—		647			1,329		—			1,976
Other non-routine, net		150		808			399		(1,157	)		200

EBITDA Adjustments		430		1,865			3,265		11,916			17,476

Adjusted EBITDA	$	22,385	$	46,524		$	42,054	$	(16,913	)	$	94,050

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)


	Nine Months Ended September 30, 2015
	Software and Analytics			Network Solutions			Technology- enabled Services		Corporate and Eliminations			Consolidated
Revenue from external customers:
Solutions revenue	$	230,374		$	276,314		$	322,953	$	(19,479	)	$	810,162
Postage revenue		—			—			—		268,119			268,119
Inter-segment revenue		819			268			3,071		(4,158	)		—

Net revenue	$	231,193		$	276,582		$	326,024	$	244,482		$	1,078,281

Income (loss) before income taxes		78,289			143,459			112,241		(396,981	)		(62,992	)
Interest expense		—			—			—		121,685			121,685
Depreciation and amortization		—			—			—		183,446			183,446

EBITDA		78,289			143,459			112,241		(91,850	)		242,139
Equity compensation		1,477			466			176		4,695			6,814
Acquisition accounting adjustments		834			4			546		—			1,384
Acquisition-related costs		91			65			934		5,792			6,882
Transaction-related costs and advisory fees		—			—			—		5,138			5,138
Strategic initiatives, duplicative and transition costs		1,580			674			644		2,426			5,324
Severance costs		132			436			3,211		1,185			4,964
Accretion		—			—			—		15,254			15,254
Impairment of long-lived assets		—			—			—		1,180			1,180
Contingent consideration		(4,730	)		(95	)		—		—			(4,825	)
Other non-routine, net		1,034			1,702			404		(162	)		2,978

EBITDA Adjustments		418			3,252			5,915		35,508			45,093

Adjusted EBITDA	$	78,707		$	146,711		$	118,156	$	(56,342	)	$	287,232

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)


	Nine Months Ended September 30, 2014
	Software and Analytics		Network Solutions		Technology- enabled Services		Corporate and Eliminations			Consolidated
Revenue from external customers:
Solutions revenue	$	178,055	$	257,345	$	322,445	$	(17,619	)	$	740,226
Postage revenue		—		—		—		256,747			256,747
Inter-segment revenue		1,072		271		5,990		(7,333	)		—

Net revenue	$	179,127	$	257,616	$	328,435	$	231,795		$	996,973

Income (loss) before income taxes		59,342		123,330		33,361		(335,282	)		(119,249	)
Interest expense		—		—		—		109,741			109,741
Depreciation and amortization		—		—		—		141,541			141,541

EBITDA		59,342		123,330		33,361		(84,000	)		132,033
Equity compensation		481		446		865		4,122			5,914
Acquisition accounting adjustments		96		4		621		4			725
Acquisition-related costs		45		62		1,410		3,376			4,893
Transaction-related costs and advisory fees		—		—		—		4,799			4,799
Strategic initiatives, duplicative and transition costs		102		152		74		9,431			9,759
Severance costs		1,207		567		1,754		2,028			5,556
Accretion		—		—		—		9,220			9,220
Impairment of long-lived assets		218		2,569		76,376		3,526			82,689
Contingent consideration		—		1,305		2,341		—			3,646
Other non-routine, net		833		1,607		2,497		(1,485	)		3,452

EBITDA Adjustments		2,982		6,712		85,938		35,021			130,653

Adjusted EBITDA	$	62,324	$	130,042	$	119,299	$	(48,979	)	$	262,686

13. Accumulated Other Comprehensive Income (Loss)

The following is a summary of the accumulated other comprehensive income (loss) balances, net of taxes, as of and for the nine months ended September 30, 2015.


	Foreign Currency Translation Adjustment			Cash Flow Hedge			Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2015	$	(483	)	$	(1,472	)	$	(1,955	)
Change associated with foreign currency translation		(531	)		—			(531	)
Change associated with current period hedging		—			1,490			1,490
Reclassification into earnings		—			(1,935	)		(1,935	)

Balance at September 30, 2015	$	(1,014	)	$	(1,917	)	$	(2,931	)

14. Supplemental Condensed Consolidating Financial Information

In lieu of providing separate annual and interim financial statements for each guarantor of the Senior Notes, Regulation S-X provides companies, if certain criteria are satisfied, with the option to instead provide condensed consolidating financial information for its issuers, guarantors and non-guarantors. In the case of the Company, the applicable criteria include the following: (i) the Senior Notes are fully and unconditionally guaranteed on a joint and several basis (subject to customary release provisions), (ii) each of the guarantors of the Senior Notes is a direct or indirect 100% owned subsidiary of the Company and (iii) any non-guarantors are considered minor as that term is defined in Regulation S-X. Because each of these criteria has been satisfied by the Company, condensed consolidating balance sheets as of September 30, 2015 and December 31, 2014, condensed consolidating statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2015 and 2014, respectively, and condensed consolidating statements of cash flows for the nine months ended September 30, 2015 and 2014, respectively, for the Company, segregating the issuer, the subsidiary guarantors and consolidating adjustments, are reflected below. Prior period amounts have been reclassified to conform to the current year presentation.

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Condensed Consolidating Balance Sheet


	As of September 30, 2015
	Emdeon Inc.		Guarantor Subsidiaries		Consolidating Adjustments			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	703	$	84,255	$	—		$	84,958
Accounts receivable, net of allowance for doubtful accounts		—		278,826		—			278,826
Deferred income tax assets		—		15,457		—			15,457
Prepaid expenses and other current assets		2,749		31,605		—			34,354

Total current assets		3,452		410,143		—			413,595
Property and equipment, net		4		299,031		—			299,035
Due from affiliates		167,339		—		(167,339	)		—
Investment in consolidated subsidiaries		1,793,496		—		(1,793,496	)		—
Goodwill		—		2,291,375		—			2,291,375
Intangible assets, net		95,875		1,598,963		—			1,694,838
Other assets, net		206,873		7,964		(206,796	)		8,041

Total assets	$	2,267,039	$	4,607,476	$	(2,167,631	)	$	4,706,884


LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	27,265	$	—		$	27,265
Accrued expenses		18,056		191,048		—			209,104
Deferred revenues		—		12,005		—			12,005
Current portion of long-term debt		6,796		24,469		—			31,265

Total current liabilities		24,852		254,787		—			279,639
Due to affiliates		—		167,339		(167,339	)		—
Long-term debt, excluding current portion		1,022,049		1,728,281		—			2,750,330
Deferred income tax liabilities		—		655,725		(206,796	)		448,929
Tax receivable agreement obligations to related parties		179,237		—		—			179,237
Other long-term liabilities		1,196		7,848		—			9,044
Commitments and contingencies
Equity		1,039,705		1,793,496		(1,793,496	)		1,039,705

Total liabilities and equity	$	2,267,039	$	4,607,476	$	(2,167,631	)	$	4,706,884

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Condensed Consolidating Balance Sheet


	As of December 31, 2014
	Emdeon Inc.		Guarantor Subsidiaries		Consolidating Adjustments			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	796	$	81,510	$	—		$	82,306
Accounts receivable, net of allowance for doubtful accounts		—		233,791		—			233,791
Deferred income tax assets		—		18,893		—			18,893
Prepaid expenses and other current assets		2,267		26,979		—			29,246

Total current assets		3,063		361,173		—			364,236
Property and equipment, net		7		244,146		—			244,153
Due from affiliates		—		180,610		(180,610	)		—
Investment in subsidiaries		1,740,062		—		(1,740,062	)		—
Goodwill		—		1,702,569		—			1,702,569
Intangible assets, net		133,500		1,405,894		—			1,539,394
Other assets, net		150,906		7,924		(149,647	)		9,183

Total assets	$	2,027,538	$	3,902,316	$	(2,070,319	)	$	3,859,535


LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	16,399	$	—		$	16,399
Accrued expenses		4,935		170,271		—			175,206
Deferred revenues		—		10,518		—			10,518
Current portion of long-term debt		6,709		20,599		—			27,308

Total current liabilities		11,644		217,787		—			229,431
Due to affiliates		180,610		—		(180,610	)		—
Long-term debt, excluding current portion		769,236		1,366,232		—			2,135,468
Deferred income tax liabilities		—		562,874		(149,647	)		413,227
Tax receivable agreement obligations to related parties		163,983		—		—			163,983
Other long-term liabilities		—		15,361		—			15,361
Commitments and contingencies
Total equity		902,065		1,740,062		(1,740,062	)		902,065

Total liabilities and equity	$	2,027,538	$	3,902,316	$	(2,070,319	)	$	3,859,535

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Condensed Consolidating Statement of Operations


	Three Months Ended September 30, 2015
	Emdeon Inc.			Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenue:
Solutions revenue	$	—		$	287,946		$	—		$	287,946
Postage revenue		—			89,839			—			89,839

Total revenue		—			377,785			—			377,785
Costs and expenses:
Cost of operations (exclusive of depreciation and amortization below)		15			129,370			—			129,385
Development and engineering		—			11,651			—			11,651
Sales, marketing, general and administrative		1,974			54,745			—			56,719
Customer postage		15			89,824			—			89,839
Depreciation and amortization		33,133			52,684			—			85,817
Accretion		6,458			—			—			6,458
Impairment of long-lived assets		—			219			—			219

Operating income (loss)		(41,595	)		39,292			—			(2,303	)
Equity in earnings of consolidated subsidiaries		(7,141	)		—			7,141			—
Interest expense, net		28,108			17,433			—			45,541
Contingent consideration		—			(4,660	)		—			(4,660	)

Income (loss) before income tax provision (benefit)		(62,562	)		26,519			(7,141	)		(43,184	)
Income tax provision (benefit)		(29,656	)		19,378			—			(10,278	)

Net income (loss)	$	(32,906	)	$	7,141		$	(7,141	)	$	(32,906	)

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Condensed Consolidating Statement of Operations


	Three Months Ended September 30, 2014
	Emdeon Inc.			Guarantor Subsidiaries		Consolidating Adjustments			Consolidated
Revenue:
Solutions revenue	$	—		$	255,015	$	—		$	255,015
Postage revenue		—			86,593		—			86,593

Total revenue		—			341,608		—			341,608
Costs and expenses:
Cost of operations (exclusive of depreciation and amortization below)		—			116,909		—			116,909
Development and engineering		—			8,117		—			8,117
Sales, marketing, general and administrative		1,290			42,583		—			43,873
Customer postage		—			86,593					86,593
Depreciation and amortization		2,251			46,197		—			48,448
Accretion		4,452			—		—			4,452
Impairment of long-lived assets		—			3,114		—			3,114

Operating income (loss)		(7,993	)		38,095		—			30,102
Equity in earnings of consolidated subsidiaries		(10,110	)		—		10,110			—
Interest expense, net		23,418			13,217		—			36,635
Contingent consideration		—			1,976		—			1,976

Income (loss) before income tax provision (benefit)		(21,301	)		22,902		(10,110	)		(8,509	)
Income tax provision (benefit)		(8,299	)		12,792		—			4,493

Net income (loss)	$	(13,002	)	$	10,110	$	(10,110	)	$	(13,002	)

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Condensed Consolidating Statement of Operations


	Nine Months Ended September 30, 2015
	Emdeon Inc.			Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenue:
Solutions revenue	$	—		$	810,162		$	—		$	810,162
Postage revenue		—			268,119			—			268,119

Total revenue		—			1,078,281			—			1,078,281
Costs and expenses:
Cost of operations (exclusive of depreciation and amortization below)		15			371,844			—			371,859
Development and engineering		—			32,600			—			32,600
Sales, marketing, general and administrative		7,828			144,127			—			151,955
Customer postage		—			268,119			—			268,119
Depreciation and amortization		37,633			145,813			—			183,446
Accretion		15,254			—			—			15,254
Impairment of long-lived assets		—			1,180			—			1,180

Operating income (loss)		(60,730	)		114,598			—			53,868
Equity in earnings of consolidated subsidiaries		(47,865	)		—			47,865			—
Interest expense, net		74,697			46,988			—			121,685
Contingent consideration		—			(4,825	)		—			(4,825	)

Income (loss) before income tax provision (benefit)		(87,562	)		72,435			(47,865	)		(62,992	)
Income tax provision (benefit)		(56,834	)		24,570			—			(32,264	)

Net income (loss)	$	(30,728	)	$	47,865		$	(47,865	)	$	(30,728	)

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Condensed Consolidating Statement of Operations


	Nine Months Ended September 30, 2014
	Emdeon Inc.			Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenue
Solutions revenue	$	—		$	740,226		$	—		$	740,226
Postage revenue		—			256,747			—			256,747

Total revenue		—			996,973			—			996,973
Costs and expenses:
Cost of operations (exclusive of depreciation and amortization below)		—			344,741			—			344,741
Development and engineering		—			24,084			—			24,084
Sales, marketing, general and administrative		13,775			134,006			—			147,781
Customer postage		—			256,747			—			256,747
Depreciation and amortization		6,753			134,788			—			141,541
Accretion		9,220			—			—			9,220
Impairment of long-lived assets		—			82,689			—			82,689

Operating income (loss)		(29,748	)		19,918			—			(9,830	)
Equity in earnings of consolidated subsidiaries		51,018			—			(51,018	)		—
Interest expense, net		70,224			39,517			—			109,741
Contingent consideration		—			3,646			—			3,646
Other		(111	)		(3,857	)		—			(3,968	)

Income (loss) before income tax provision (benefit)		(150,879	)		(19,388	)		51,018			(119,249	)
Income tax provision (benefit)		(75,363	)		31,630			—			(43,733	)

Net income (loss)	$	(75,516	)	$	(51,018	)	$	51,018		$	(75,516	)

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Condensed Consolidating Statement of Comprehensive Income (Loss)


	Three Months Ended September 30, 2015
	Emdeon Inc.			Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net income (loss)	$	(32,906	)	$	7,141		$	(7,141	)	$	(32,906	)
Other comprehensive income (loss):
Changes in fair value of interest rate swap, net of taxes		6			—			—			6
Foreign currency translation adjustment		—			(347	)		—			(347	)
Equity in other comprehensive earnings		(347	)		—			347			—

Other comprehensive income (loss)		(341	)		(347	)		347			(341	)

Total comprehensive income (loss)	$	(33,247	)	$	6,794		$	(6,794	)	$	(33,247	)

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Condensed Consolidating Statement of Comprehensive Income (Loss)


	Three Months Ended September 30, 2014
	Emdeon Inc.			Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net income (loss)	$	(13,002	)	$	10,110		$	(10,110	)	$	(13,002	)
Other comprehensive income (loss):
Changes in fair value of interest rate swap, net of taxes		732			—			—			732
Foreign currency translation adjustment		—			(127	)		—			(127	)
Equity in other comprehensive earnings		(127	)		—			127			—

Other comprehensive income (loss)		605			(127	)		127			605

Total comprehensive income (loss)	$	(12,397	)	$	9,983		$	(9,983	)	$	(12,397	)

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Condensed Consolidating Statement of Comprehensive Income (Loss)


	Nine Months Ended September 30, 2015
	Emdeon Inc.			Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net income (loss)	$	(30,728	)	$	47,865		$	(47,865	)	$	(30,728	)
Other comprehensive income (loss):
Changes in fair value of interest rate swap, net of taxes		(445	)		—			—			(445	)
Foreign currency translation adjustment		—			(531	)		—			(531	)
Equity in other comprehensive earnings		(531	)		—			531			—

Other comprehensive income (loss)		(976	)		(531	)		531			(976	)

Total comprehensive income (loss)	$	(31,704	)	$	47,334		$	(47,334	)	$	(31,704	)

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Condensed Consolidating Statement of Comprehensive Income (Loss)


	Nine Months Ended September 30, 2014
	Emdeon Inc.			Guarantor Subsidiaries			Consolidating Adjustments		Consolidated
Net income (loss)	$	(75,516	)	$	(51,018	)	$	51,018	$	(75,516	)
Other comprehensive income (loss):
Changes in fair value of interest rate swap, net of taxes		(127	)		—			—		(127	)
Foreign currency translation adjustment		—			(100	)		—		(100	)
Equity in other comprehensive earnings		(100	)		—			100		—

Other comprehensive income (loss)		(227	)		(100	)		100		(227	)

Total comprehensive income (loss)	$	(75,743	)	$	(51,118	)	$	51,118	$	(75,743	)

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Condensed Consolidating Statement of Cash Flows


	Nine Months Ended September 30, 2015
	Emdeon Inc.			Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Operating activities
Net income (loss)	$	(30,728	)	$	47,865		$	(47,865	)	$	(30,728	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		37,633			145,813			—			183,446
Accretion		15,254			—			—			15,254
Equity compensation		229			6,585			—			6,814
Deferred income tax expense (benefit)		(26,160	)		(2,677	)		—			(28,837	)
Amortization of debt discount and issuance costs		2,353			5,088			—			7,441
Contingent consideration		—			(4,825	)		—			(4,825	)
Impairment of long lived assets		—			1,180			—			1,180
Equity in earnings of consolidated subsidiaries		(47,865	)		—			47,865			—
Other		(1,488	)		14			—			(1,474	)
Changes in operating assets and liabilities:
Accounts receivable		—			6,147			—			6,147
Prepaid expenses and other		(30,546	)		18,872			—			(11,674	)
Accounts payable		—			10,517			—			10,517
Accrued expenses, deferred revenue, and other liabilities		16,627			(17,545	)		—			(918	)
Due to/from affiliates		(347,949	)		347,949			—			—

Net cash provided (used in) by operating activities		(412,640	)		564,983			—			152,343

Investing activities
Purchases of property and equipment		—			(39,175	)		—			(39,175	)
Payments for acquisitions, net of cash acquired		—			(717,669	)		—			(717,669	)
Other		—			(3,676	)		—			(3,676	)
Investment in subsidiary		1,019			—			(1,019	)		—

Net cash provided by (used in) investing activities		1,019			(760,520	)		(1,019	)		(760,520	)

Financing activities
Distributions from (to) Emdeon Inc. net		—			(1,019	)		1,019			—
Proceeds from Term Loan Facility		8,274			377,137			—			385,411
Proceeds from Senior Notes		243,453			—			—			243,453
Proceeds from Revolving Facility		—			60,000			—			60,000
Payments on Revolving Facility		—			(60,000	)		—			(60,000	)
Payments on Term Loan Facility		(229	)		(11,641	)		—			(11,870	)
Payment of debt assumed from acquisition		—			(154,469	)		—			(154,469	)
Deferred financing obligation payments		—			(6,173	)		—			(6,173	)
Repurchase of Parent common stock		(4,351	)		—			—			(4,351	)
Capital contribution from Parent		166,881			—			—			166,881
Payment of contingent consideration		—			(5,553	)		—			(5,553	)
Other		(2,500	)		—			—			(2,500	)

Net cash provided by (used in) financing activities		411,528			198,282			1,019			610,829

Net decrease in cash and cash equivalents		(93	)		2,745			—			2,652
Cash and cash equivalents at beginning of period		796			81,510			—			82,306

Cash and cash equivalents at end of period	$	703		$	84,255		$	—		$	84,958

Emdeon Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited and amounts in thousands, except share and per share amounts)

Condensed Consolidating Statement of Cash Flows

Nine Months Ended September 30, 2014