9. Acquisitions:

2012 Acquisitions

On December 20, 2012, the Company acquired the net assets of Insurance Risk Management Solutions (“IRMS”). IRMS provided integrated property risk assessment technology underlying one of the Company’s geographic information system (“GIS”) underwriting solutions. At the end of 2012, the long-term contract with IRMS was expiring and precipitated a change in the business relationship. Instead of continuing forward with a new service agreement, the Company acquired IRMS as this will enable the Company to better manage, enhance and continue to use the solutions as part of its Risk Assessment segment. The Company paid a net cash purchase price of $26,422 and funded $1,000 of indemnity escrows. The preliminary purchase price allocation of the acquisition is presented as “Others” in the table below.

On August 31, 2012, the Company acquired Argus Information & Advisory Services, LLC (“Argus”), a provider of information, competitive benchmarking, scoring solutions, analytics, and customized services to financial institutions and regulators in North America, Latin America, and Europe, for a net cash purchase price of approximately $404,995 and funded $20,000 of indemnity escrows. Argus leverages its comprehensive payment data sets and provides proprietary solutions to a client base that includes credit and debit card issuers, retail banks and other consumer financial services providers, payment processors, insurance companies, and other industry stakeholders. Within the Company’s Decision Analytics segment, this acquisition enhances the Company’s position as a provider of data, analytics, and decision-support solutions to financial institutions globally.

On July 2, 2012, the Company acquired the net assets of Aspect Loss Prevention, LLC (“ALP”), a provider of loss prevention and analytic solutions to the retail, entertainment, and food industries, for a net cash purchase price of approximately $6,917 and funded $800 of indemnity escrows. Within the Company’s Decision Analytics segment, ALP further advances the Company’s position as a provider of data, crime analytics, and decision-support solutions. The preliminary purchase price allocation of the acquisition is presented as “Others” in the table below.

On March 30, 2012, the Company acquired 100% of the stock of MediConnect Global, Inc. (“MediConnect”), a service provider of medical record retrieval, digitization, coding, extraction, and analysis, for a net cash purchase price of approximately $331,405 and funded $17,000 of indemnity escrows. Within the Company’s Decision Analytics segment, MediConnect further supports the Company’s objective as the leading provider of data, analytics, and decision-support solutions to the healthcare and property casualty industry.

The preliminary purchase price allocations of the acquisitions resulted in the following:


	MediConnect		Argus		Others		Total
Accounts receivable	$	7,077	$	12,165	$	489	$	19,731
Current assets		17,238		568		68		17,874
Fixed assets		1,075		4,994		76		6,145
Intangible assets		159,506		179,316		9,264		348,086
Goodwill		222,976		277,857		29,875		530,708
Other assets		5,087		20,000		1,801		26,888

Total assets acquired		412,959		494,900		41,573		949,432
Current liabilities		15,007		9,661		4,625		29,293
Deferred income taxes		40,836		40,244		—		81,080
Other liabilities		8,711		20,000		1,809		30,520

Total liabilities assumed		64,554		69,905		6,434		140,893

Net assets acquired	$	348,405	$	424,995	$	35,139	$	808,539

Current assets and current liabilities primarily consisted of MediConnect’s indemnity escrow of $12,000. Other assets and other liabilities primarily consisted of $26,800 of indemnity escrows for MediConnect, ALP, Argus and IRMS.

The amounts assigned to intangible assets by type for the acquisitions are summarized in the table below:


	Weighted Average Useful Life		Total
Technology-based		10 years	$	77,936
Marketing-related		5 years		30,331
Customer-related		13 years		239,819

Total intangible assets		11 years	$	348,086

The allocations of the purchase prices (noted within the tables above) are all subject to revisions as additional information is obtained about the facts and circumstances that existed as of the acquisition dates. The revisions may have an impact on the consolidated financial statements. The allocations of the purchase prices will be finalized once all information is obtained, but not to exceed one year from the acquisition dates.

The goodwill associated with the stock purchase of MediConnect is not deductible for tax purposes; whereas the goodwill associated with the asset purchases of ALP and IRMS is deductible for tax purposes. The goodwill associated with the acquisition of Argus is partially deductible for income tax purposes as approximately 46% of the net cash purchase price represented an asset purchase. For the year ended December 31, 2012, the Company incurred transaction costs related to these acquisitions of $1,874 included within “Selling, general and administrative” expenses in the accompanying consolidated statements of operations.

Supplemental information on an unaudited pro forma basis is presented below as if the acquisitions of MediConnect and Argus occurred at the beginning of the year 2011. The pro forma information for the years ended December 31, 2012 and 2011 presented below is based on estimates and assumptions, which the Company believes are reasonable and not necessarily indicative of the consolidated financial position or results of operations in future periods or the results that actually would have been realized had these acquisitions been completed at the beginning of 2011. The unaudited pro forma information includes intangible asset amortization charges and incremental borrowing costs as a result of the acquisitions, net of related tax, estimated using the Company’s effective tax rate for continuing operations for the years ended December 31:


	2012		2011
	(unaudited)
Pro forma revenues	$	1,589,149	$	1,437,581
Pro forma net income	$	321,140	$	262,765
Pro forma basic income per share	$	1.94	$	1.58
Pro forma diluted income per share	$	1.87	$	1.52

2011 Acquisitions

On June 17, 2011, the Company acquired the net assets of Health Risk Partners, LLC (“HRP”), a provider of solutions to optimize revenue, ensure compliance and improve quality of care for Medicare Advantage and Medicaid health plans, for a net cash purchase price of approximately $46,400 and funded $3,000 of indemnity escrows and $10,000 of contingency escrows. Within the Company’s Decision Analytics segment, this acquisition further advances the Company’s position as a major provider of data, analytics, and decision-support solutions to the healthcare market.

On April 27, 2011, the Company acquired 100% of the stock of Bloodhound Technologies, Inc. (“Bloodhound”), a provider of real-time preadjudication medical claims editing, for a net cash purchase price of approximately $75,321 and funded $6,560 of indemnity escrows. Within the Company’s Decision Analytics segment, Bloodhound addresses the need of healthcare payers to control fraud and waste in a real-time claims-processing environment, and these capabilities align with the Company’s existing fraud identification tools in the healthcare market.

The preliminary purchase price allocations of the acquisitions resulted in the following:


	Bloodhound		HRP		Total
Accounts receivable	$	2,278	$	378	$	2,656
Current assets		6,646		297		6,943
Fixed assets		1,091		1,147		2,238
Intangible assets		33,624		26,871		60,495
Goodwill		45,635		32,152		77,787
Other assets		16		13,000		13,016
Deferred income taxes		1,324		—		1,324

Total assets acquired		90,614		73,845		164,459
Current liabilities		6,869		1,445		8,314
Other liabilities		1,864		13,000		14,864

Total liabilities assumed		8,733		14,445		23,178

Net assets acquired	$	81,881	$	59,400	$	141,281

Current liabilities consist of $6,560 of payment due to the sellers, assuming no pre-acquisition indemnity claims arise subsequent to the acquisition date through April 2, 2012 for Bloodhound, which was funded into escrow at the close. The remaining balance also consist of accounts payable and accrued liabilities. For HRP, other liabilities consist of $13,000 of payments due to the sellers, assuming certain conditions are met through December 31, 2012 and no pre-acquisition indemnity claims arise subsequent to the acquisition date through March 31, 2013, which was funded into escrow at the close.

The amounts assigned to intangible assets by type for the acquisitions are summarized in the table below:


	Weighted Average Useful Life		Total
Technology-based		10 years	$	25,388
Marketing-related		8 years		7,880
Customer-related		10 years		27,227

Total intangible assets		10 years	$	60,495

The goodwill associated with Bloodhound is not deductible for tax purposes; whereas the goodwill associated with HRP is deductible for tax purposes as this was an asset purchase rather than a stock purchase. For the year ended December 31, 2011, the Company incurred transaction costs related to these acquisitions of $979, respectively, included within “Selling, general and administrative” expenses in the accompanying consolidated statements of operations. In accordance with ASC 805, the allocations of the purchase prices for HRP and Bloodhound were revised during the measurement period. Refer to Note 10. Goodwill and Intangible Assets for further discussion.

2010 Acquisitions

On December 16, 2010, the Company acquired 100% of the stock of 3E Company (“3E”), a global source for a comprehensive suite of environmental health and safety compliance solutions for a net cash purchase price of approximately $99,603 and funded $7,730 of indemnity escrows. Within the Company’s Decision Analytics segment, 3E overlaps the customer sets served by the other supply chain risk management solutions and helps the Company’s customers across a variety of vertical markets address their environmental health and safety issues.

On December 14, 2010, the Company acquired 100% of the stock of Crowe Paradis Services Corporation (“CP”), a provider of claims analysis and compliance solutions to the P&C insurance industry for a net cash purchase price of approximately $83,589 and funded $6,750 of indemnity escrows. Within the Company’s Decision Analytics segment, CP offers solutions for complying with the Medicare Secondary Payer Act, provides services to P&C insurance companies, third-party administrators and self-insured companies, which the Company believes further enhances the solution it currently offers.

On February 26, 2010, the Company acquired 100% of the stock of Strategic Analytics, Inc. (“SA”), a provider of credit risk and capital management solutions to consumer and mortgage lenders, for a net cash purchase price of approximately $6,386 and the Company funded $1,500 of indemnity escrows. Within the Decision Analytics segment, the Company believes SA’ solutions and application set will allow customers to take advantage of state-of-the-art loss forecasting, stress testing, and economic capital requirement tools to better understand and forecast the risk associated within their credit portfolios.

The goodwill associated with these acquisitions is not deductible for tax purposes. For the year ended December 31, 2010, the Company incurred transaction costs related to these acquisitions of $1,070 included within “Selling, general and administrative” expenses in the accompanying consolidated statements of operations. In accordance with ASC 805, the allocations of the purchase prices for 3E, CP and SA were revised during the measurement period. Refer to Note 10. Goodwill and Intangible Assets for further discussion.

Acquisition Escrows

Pursuant to the related acquisition agreements, the Company has funded various escrow accounts to satisfy pre-acquisition indemnity and tax claims arising subsequent to the acquisition dates, as well as a portion of the contingent payments. At December 31, 2012 and 2011, the current portion of the escrows amounted to $29,277 and $36,967, and the noncurrent portion of the escrow amounted to $26,803 and $4,508, respectively. The current and noncurrent portions of the escrows have been included in “Other current assets” and “Other assets” in the accompanying consolidated balance sheets, respectively.

During the year ended December 31, 2012, the Company released $5,934 of indemnity escrows related to the Xactware, Inc. (“Xactware”) acquisition. Xactware was acquired in 2006 and therefore, accounted for under the transition provisions of FAS No. 141(R). As such, the release of the indemnity escrows was recorded as an increase in goodwill.

During the year ended December 31, 2011, the Company released $135 of indemnity escrows to sellers related to the Enabl-u Technology Corporation (“Enabl-u”) acquisition. In accordance with ASC 805, the escrows related to the Enabl-u acquisition was recorded within goodwill at the time of acquisition, as that escrow was expected to be released to the sellers. The release of $135 related to Enabl-u was recorded as a reduction of other current assets and a corresponding reduction in accounts payable and accrued liabilities.

Acquisition Related Liabilities

Based on the results of operations for the year ended December 31, 2011 for Atmospheric and Environmental Research, Inc. (“AER”), the Company recorded acquisition related liabilities and goodwill of $250, which was paid in 2012. As of December 31, 2010, the Company recorded acquisition related liabilities and goodwill of $3,500, which was paid in April 2011. AER was acquired in 2008 and therefore, accounted for under the transition provisions of FAS No.141(R).

During the second quarter of 2011, the Company reevaluated the probability of D2Hawkeye, Inc. (“D2”) and SA achieving the specific predetermined EBITDA and revenue earnout targets for exceptional performance in fiscal year 2011 and reversed its contingent consideration related to these acquisitions. These reversals resulted in a reduction of $3,364 to contingent consideration and a decrease of $3,364 to “Acquisition related liabilities adjustment” in the accompanying consolidated statements of operations for the year ended December 31, 2011. The sellers of D2 and SA will not receive any acquisition contingent payments.