Business Acquisition

Cost & Compliance Associates

In February 2017, the Company completed the acquisition of substantially all of the assets of Cost & Compliance Associates, LLC and Cost & Compliance Associates Limited (collectively “C&CA”). C&CA was a commercial recovery audit and contract compliance firm with operations in the U.S. and the U.K. This acquisition was a strategic fit with the Company's then existing operations. The Company acquired substantially all of the assets of C&CA for approximately $10.0 million in cash plus potential earnout consideration of up to $8.0 million.

The actual payment of the earnout consideration is based on achieving certain financial targets over a two-year period that commenced on March 1, 2017 and will conclude on February 28, 2019. Management estimated that the fair value of the earnout consideration was approximately $5.9 million at the date of acquisition. During the three and nine months ended September 30, 2018, the Company recognized accretion of $0.1 million and $0.7 million, respectively, on the fair value of the earnout consideration which was included in Interest expense in the Consolidated Statements of Operations and increased the related contingent consideration liability. As of September 30, 2018, the contingent consideration liability related to the C&CA acquisition was $3.5 million, which is included in current Business acquisition obligations in the Company's Consolidated Balance Sheets.

The Company allocated the aggregate purchase price for C&CA to the net tangible and intangible assets acquired based on their fair values as of February 23, 2017. The Company based the allocation of the purchase price on a valuation for intangible assets and the carrying value for the remaining assets and liabilities, as the carrying value approximates their fair value. The Company recorded the excess of the purchase price over the net tangible and intangible assets as goodwill, which has been allocated and recognized as goodwill within the Company's Recovery Audit Services-Americas and Recovery Audit Services-Europe/Asia-Pacific business segments. The purchase price allocation for C&CA was completed in the first quarter of 2018. During the nine months ended September 30, 2018, the Company recorded an immaterial working capital adjustment to the purchase price allocation.

The purchase price allocation was as follows (in thousands):



Accounts receivable, net	$	1,641
Commissions receivable	48
Prepaid expenses	109
Other current assets, net	6
Intangible assets	10,923
Goodwill	3,534
Fixed assets, net	323
Accounts payable	(125		)
Accrued commissions	(537		)
Total consideration paid	$	15,922
Contingent consideration	(5,954		)
Total cash paid	$	9,968

The intangible assets acquired were as follows (in thousands):



	Fair Value		Remaining useful life
Customer relationships	$	9,556	14 years
Non-compete	1,232		4 years
Trademarks	135		4 years
	$	10,923

The revenue and net income associated with the assets acquired from C&CA for the nine months ended September 30, 2018 and 2017 are presented below (in thousands) and included in the Company's Consolidated Statements of Operations. These amounts are not necessarily indicative of the results of operations that C&CA would have realized if it had continued to operate as a stand-alone company during the period presented, primarily due to costs that are now reflected in the Company's unallocated corporate costs and not allocated to C&CA.



	Nine Months Ended
	September 30, 2018		September 30, 2017
Revenue, net of refund liabilities	$	10,587	$	7,833
Net income from continuing operations	$	1,752	$	1,397

As required by ASC 805, the following unaudited pro forma Statements of Operations for the nine months ended September 30, 2017 give effect to the C&CA acquisition as if it had been completed on January 1, 2016. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of what the operating results would have been during the periods presented had the C&CA acquisition been completed on January 1, 2016. In addition, the unaudited pro forma financial information does not purport to project future operating results. The pro forma revenue and net loss do not reflect: (1) any anticipated synergies (or costs to achieve synergies) or (2) the impact of non-recurring items directly related to the C&CA acquisition. The information presented below is in thousands:



	September 30, 2017
Revenue, net of refund liabilities (pro forma)	$	115,385
Net loss from continuing operations (pro forma)	$	(1,766	)