HLTH and WebMD Announce Merger
ELMWOOD PARK, N.J., Feb. 21 /PRNewswire-FirstCall/ -- HLTH Corporation (NASDAQ:HLTH) today announced financial results for the three months ended December 31, 2007.
Martin J. Wygod, Chairman and Acting Chief Executive Officer of HLTH Corporation, said: "Our fourth quarter results were strong as WebMD continued to build its leadership position as the most recognized and trusted brand of health care information." He continued, "I am pleased that HLTH and WebMD have agreed to the merger transaction we outlined today." Consolidated Financial Highlights Revenue for the fourth quarter was $145.8 million. Earnings before interest, taxes, non-cash and other items ("Adjusted EBITDA") for the fourth quarter was $40.3 million or $0.17 per share. Income from continuing operations for the fourth quarter was $41.5 million or $0.19 per share. Net income for the December 2007 quarter was $43.1 million or $0.20 per share. Income from continuing operations and net income for the fourth quarter 2007 include a benefit of $23.7 million, or $0.10 per share, relating to certain reversals of its valuation allowance against deferred tax assets, primarily net operating loss ("NOL") carryforwards.
Revenue for the year ended December 31, 2007 was $527.1 million. Adjusted EBITDA for the year was $107.7 million or $0.51 per share. Income from continuing operations for the year was $74.3 million or $0.38 per share. Net income for the year was $19.9 million or $0.12 per share. Income from continuing operations and net income for the year ended December 31, 2007 include a benefit of $23.7 million, or $0.11 per share, relating to certain reversals of its valuation allowance against deferred tax assets, primarily NOL carryforwards.
HLTH's financial results for the fourth quarter and year ended December 31, 2007 reflect the reclassification of WebMD's offline professional medical reference and textbook publication business as a discontinued operation in the current and prior year periods, as a result of the completion of the sale of the business on December 31, 2007.
HLTH's consolidated results are not comparable to the respective prior year periods. On November 16, 2006, HLTH completed the sale of a 52% interest in its Emdeon Business Services segment (excluding the ViPS business) to an affiliate of General Atlantic LLC. Accordingly, the results of Emdeon Business Services are included in HLTH's consolidated revenue and earnings until November 16, 2006, and HLTH's 48% portion of EBS' income is reflected in the line item "Equity in earnings of EBS Master LLC" for all periods subsequent to November 16, 2006. As previously disclosed, on February 11, 2008, HLTH completed the sale, for $575 million in cash, of its remaining 48% minority interest in Emdeon Business Services to General Atlantic LLC and Hellman & Friedman LLC.
Income from discontinued operations includes $3.6 million reflecting the net gain on the sale of WebMD's offline professional medical reference and textbook publication business. This business generated revenue of approximately $1 million and $4 million for the fourth quarter and full year 2007. Also included in discontinued operations is a $1 million net charge from an increase in the estimate of HLTH's indemnification obligation for defense costs for nine former officers and directors of HLTH's former subsidiary Emdeon Practice Services, Inc. who were indicted in connection with the previously disclosed investigation by the United States Attorney for the District of South Carolina, which was almost fully offset by proceeds from settlements with two of the insurance companies related to this matter.
Segment Operating Results WebMD segment revenue was $96.6 million for the fourth quarter compared to $79.4 million in the prior year period, an increase of 22%, driven by continued growth in online services. Segment Adjusted EBITDA was $33.1 million compared to $22.4 million in the prior year period, an increase of 48% over the prior year, primarily as a result of the increase in revenues. WebMD's segment results reflect the reclassification of the discontinued operation as noted above.
ViPS segment revenue was $26.2 million for the fourth quarter compared to $25.3 million in the prior year period, an increase of 3%, primarily due to an increase in consulting services and license revenue. Segment Adjusted EBITDA was $6.3 million, up from $5.0 million a year ago. Operating margins increased to 23.9% compared to 19.8% a year ago primarily as a result of favorable revenue mix.
Porex segment revenue was $23.0 million for the fourth quarter compared to $21.2 million in the prior year period, an increase of 9%. The increase was primarily attributable to strength in sales of surgical products and the impact of favorable foreign currency exchange rates. Segment Adjusted EBITDA was $6.8 million compared to $6.2 million in the prior year period, an increase of 9%. Operating margins increased to 29.6% from 29.5% in the year ago period.
Investment in Emdeon Business Services HLTH recorded $5.9 million of Equity in earnings of EBS Master LLC in the December 2007 quarter, reflecting its 48% portion of the income of that entity. HLTH sold its 48% interest in Emdeon Business Services for $575 million in cash on February 11, 2008. HLTH expects to recognize a taxable gain on the sale and expects to utilize a portion of its federal NOL carryforward to offset a portion of the tax liability that would otherwise result from the sale.
HLTH and WebMD Announce Agreement to Merge In a separate release today, HLTH and WebMD announced that they have entered into a definitive merger agreement pursuant to which HLTH will merge into WebMD. In the merger, each outstanding share of HLTH common stock will be converted into 0.1979 shares of WebMD common stock and $6.89 in cash, subject to certain adjustments, representing a premium of 26% based on WebMD's closing price on February 20, 2008. The cash portion is subject to adjustment as described in a separate release issued today. HLTH stockholders will own approximately 80% of WebMD after completion of the merger, based on the currently outstanding shares of HLTH and WebMD.
Porex and ViPS To Be Divested HLTH announced today that it intends to divest its ViPS and Porex subsidiaries. HLTH has received significant interest from potential strategic buyers for both ViPS and Porex and will be moving rapidly to obtain formal offers for these businesses.
Investment in Auction Rate Securities Backed by Federally Guaranteed Student Loans HLTH currently has a total of approximately $1.45 billion in consolidated cash, cash equivalents and marketable securities, which includes approximately $364 million of investments in certain auction rate securities (ARS). WebMD holds $327 million of HLTH's current amount of cash, cash equivalents and marketable securities, including $169 million of HLTH's consolidated ARS investments. The types of ARS investments that HLTH owns are backed by student loans, 97% of which are guaranteed under the Federal Family Education Loan Program (FFELP), and all had credit ratings of AAA or Aaa when purchased. HLTH and its subsidiaries do not own any other type of ARS investments.
The interest rates on these ARS are reset every 28 days by an auction process. Historically, these types of ARS investments have been highly liquid. Last week, auctions for ARS investments backed by student loans failed, including auctions for the ARS investments held by HLTH. The result of a failed auction is that these ARS continue to pay interest in accordance with their terms until the next successful auction; however, liquidity will be limited until there is a successful auction or until such time as other markets for these ARS investments develop. HLTH believes that the underlying credit quality of the assets backing its ARS investments have not been impacted by the reduced liquidity of these ARS investments. As a result of these recent events, HLTH is in the process of evaluating the extent of any impairment in its ARS investments resulting from the current lack of liquidity; however, HLTH is not yet able to quantify the amount of any impairment. HLTH believes that any lack of liquidity relating to its ARS investments will not have an impact on its ability to fund its operations.
Financial Guidance HLTH is not providing financial guidance for 2008 at this time. WebMD provided financial guidance in a press release and Form 8-K on February 11, 2008. This guidance did not contemplate the merger announced today.
Analyst and Investor Conference Call As previously announced, HLTH Corporation and WebMD Health Corp. will host a conference call at 4:45 pm (ET) today to discuss their respective fourth quarter results. Investors can access the call via webcast at http://www.hlth.com/ (in the Investor Relations section). A replay of the call will be available at the same web address.
About HLTH HLTH Corporation's (NASDAQ:HLTH) businesses are comprised of WebMD Health Corp., (NASDAQ:WBMD), ViPS and Porex. WebMD provides health information services for consumers, physicians, healthcare professionals, employers and health plans through its public and private online portals and health-focused publications. ViPS provides healthcare data management, analytics, decision- support and process automation solutions and related information technology services to governmental, Blue Cross Blue Shield and commercial healthcare payers. ViPS' solutions and services help its clients improve patient outcomes, increase customer satisfaction and reduce costs. Porex is a developer, manufacturer and distributor of proprietary porous plastic products and components used in healthcare, industrial and consumer applications.
***************************** This press release does not constitute an offer of any securities for sale. In connection with the proposed merger, HLTH and WebMD expect to file, with the SEC, a proxy statement/prospectus as part of a registration statement regarding the proposed transaction. Investors and security holders are urged to read the proxy statement/prospectus because it will contain important information about HLTH and WebMD and the proposed transaction. Investors and security holders may obtain a free copy of the definitive proxy statement/prospectus and other documents when filed by HLTH and WebMD with the SEC at http://www.sec.gov/ or http://www.hlth.com/ or http://www.wbmd.com/. Investors and security holders are urged to read the proxy statement, prospectus and other relevant material when they become available before making any voting or investment decisions with respect to the merger.
***************************** All statements contained in this press release, other than statements of historical fact, are forward-looking statements, including those regarding: expectations regarding the credit ratings and valuation of and market for HLTH's and WebMD's investments in auction rate securities (ARS); HLTH's and WebMD's future financial results and other measures of WebMD's future performance; market opportunities and WebMD's ability to capitalize on them; the benefits expected from new products or services and from other potential sources of additional revenue; the merger transaction between HLTH and WebMD (the "Merger Transaction"); and the potential sales transactions with respect to ViPS and Porex (the "Potential Sales Transactions"). These statements speak only as of the date of this press release, are based on HLTH's and WebMD's current plans and expectations, and involve risks and uncertainties that could cause actual future events or results to be different than those described in or implied by such forward-looking statements. These risks and uncertainties include those relating to: changes in the markets for ARS; market acceptance of HLTH's and WebMD's products and services; HLTH's and WebMD's relationships with customers and strategic partners; and changes in economic, political or regulatory conditions or other trends affecting the healthcare, Internet and information technology industries. Further information about these matters can be found in our other Securities and Exchange Commission filings. In addition, there can be no assurances regarding: whether HLTH and WebMD will be able to complete the Merger Transaction or as to the timing of such transaction; or whether HLTH will be able to complete the Potential Sales Transactions or as to the timing or terms of such transactions. Except as required by applicable law or regulation, we do not undertake any obligation to update our forward-looking statements to reflect future events or circumstances.
***************************** This press release, and the accompanying tables, include both financial measures in accordance with accounting principles generally accepted in the United States of America, or GAAP, as well as certain non-GAAP financial measures. The tables attached to this press release include reconciliations of these non-GAAP financial measures to GAAP financial measures. In addition, an "Explanation of Non-GAAP Financial Measures" is attached to this press release as Annex A.
***************************** WebMD(R), WebMD Health(R), POREX(R) and ViPS(SM) are trademarks of HLTH Corporation or its subsidiaries.
Emdeon(TM) and Emdeon Business Services(TM) are trademarks of Emdeon Business Services, LLC or its subsidiaries.
HLTH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data, unaudited) Three Months Ended Years Ended
December 31, December 31,
2007 2006 2007 2006 Revenue:
Services $122,135 $205,743 $430,930 $998,016
Products 23,680 23,120 96,185 95,487
Total revenue 145,815 228,863 527,115 1,093,503 Cost of operations:
Services 43,696 107,393 174,552 578,544
Products 9,302 9,163 38,003 40,502
Total cost of operations 52,998 116,556 212,555 619,046 Development and engineering 4,505 6,485 18,055 33,649
Sales, marketing, general and
administrative 58,542 71,412 234,633 288,015
Depreciation and amortization 11,796 10,010 46,023 61,968
Interest income 11,397 16,889 42,035 32,339
Interest expense 4,610 4,697 18,519 18,779
Gain on sale of EBS - 352,297 399 352,297
Other (expense) income, net (1,804) 1,446 3,064 (4,252)
Income from continuing
operations before income
tax (benefit) provision 22,957 390,335 42,828 452,430
Income tax (benefit) provision (20,554) 37,193 (13,598) 52,316
Minority interest in WHC 7,909 929 10,667 405
Equity in earnings of EBS
Master LLC 5,887 763 28,566 763
Income from continuing
operations 41,489 352,976 74,325 400,472
Income (loss) from
discontinued operations, net
of tax 1,580 798 (54,446) 371,445
Net income $43,069 $353,774 $19,879 $771,917 Basic income (loss) per common
share:
Income from continuing
operations $0.23 $1.38 $0.42 $1.44
Income (loss) from
discontinued operations 0.01 0.00 (0.31) 1.33
Net income $0.24 $1.38 $0.11 $2.77 Diluted income (loss) per
common share:
Income from continuing
operations $0.19 $1.16 $0.38 $1.26
Income (loss) from
discontinued operations 0.01 0.00 (0.26) 1.12
Net income $0.20 $1.16 $0.12 $2.38 Weighted-average shares outstanding
used in computing income (loss) per
common share:
Basic 181,280 256,688 179,330 279,234
Diluted 231,609 308,295 211,505 331,642 HLTH CORPORATION
CONSOLIDATED SEGMENT INFORMATION
(In thousands, except per share data, unaudited) Three Months Ended Years Ended
December 31, December 31,
2007 2006 2007 2006 Revenue
Emdeon Business Services $ - $103,116 $ - $661,090
WebMD 96,642 79,385 331,954 248,776
ViPS 26,232 25,349 103,083 98,874
Porex 23,002 21,158 92,581 85,702
Inter-segment eliminations (61) (145) (503) (939)
$145,815 $228,863 $527,115 $1,093,503
Earnings before interest,
taxes, non-cash and other
items ("Adjusted EBITDA")
Emdeon Business Services $ - $25,392 $ - $152,911
WebMD 33,072 22,409 84,697 52,686
ViPS 6,269 5,012 21,012 20,529
Porex 6,812 6,242 27,074 24,974
Corporate (5,844) (9,781) (25,111) (43,414)
$40,309 $49,274 $107,672 $207,686 Adjusted EBITDA per diluted
common share (a) $0.17 $0.16 $0.51 $0.63 Interest, taxes, non-cash
and other items (b)
Depreciation and
amortization $(11,796) $(10,010) $(46,023) $(61,968)
Non-cash stock-based
compensation (6,840) (9,720) (34,703) (44,955)
Non-cash advertising (2,775) (2,960) (5,264) (7,414)
Interest income 11,397 16,889 42,035 32,339
Interest expense (4,610) (4,697) (18,519) (18,779)
Income tax benefit
(provision) 20,554 (37,193) 13,598 (52,316)
Minority interest in WHC (7,909) (929) (10,667) (405)
Equity in earnings of EBS
Master LLC 5,887 763 28,566 763
Gain on sale of EBS - 352,297 399 352,297
Other expense, net (2,728) (738) (2,769) (6,776)
Income from continuing
operations 41,489 352,976 74,325 400,472
Income (loss) from
discontinued operations, net
of tax 1,580 798 (54,446) 371,445
Net income $43,069 $353,774 $19,879 $771,917 Basic income (loss) per
common share:
Income from continuing
operations $0.23 $1.38 $0.42 $1.44
Income (loss) from
discontinued operations 0.01 0.00 (0.31) 1.33
Net income $0.24 $1.38 $0.11 $2.77 Diluted income (loss) per
common share:
Income from continuing
operations $0.19 $1.16 $0.38 $1.26
Income (loss) from
discontinued operations 0.01 0.00 (0.26) 1.12
Net income $0.20 $1.16 $0.12 $2.38 Weighted-average shares
outstanding used in
computing income (loss) per
common share:
Basic 181,280 256,688 179,330 279,234
Diluted 231,609 308,295 211,505 331,642 (a) Adjusted EBITDA per diluted common share is based on the weighted-
average shares outstanding used in computing diluted income (loss)
per common share. (b) Reconciliation of Adjusted EBITDA to net income (see Annex A -
Explanation of Non-GAAP Financial Measures). HLTH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited) December 31,
2007 2006 Assets
Cash and cash equivalents $536,879 $614,691
Short-term investments 290,858 34,140
Accounts receivable, net 116,243 121,608
Inventory 11,772 9,922
Due from EBS Master LLC 1,224 30,716
Prepaid expenses and other current assets 74,794 31,871
Total current assets 1,031,770 842,948 Marketable equity securities 2,383 2,633
Property and equipment, net 74,750 72,040
Goodwill 331,859 337,669
Intangible assets, net 109,001 129,473
Investment in EBS Master LLC 25,261 1,521
Other assets 35,541 65,659
Total Assets $1,610,565 $1,451,943 Liabilities and Stockholders' Equity
Accounts payable $3,280 $3,996
Accrued expenses 61,427 113,175
Deferred revenue 87,384 85,793
Liabilities of discontinued operations 55,563 1,645
Total current liabilities 207,654 204,609 Convertible notes 650,000 650,000
Other long-term liabilities 21,781 24,179 Minority interest in WHC 131,353 101,860 Convertible redeemable exchangeable
preferred stock -- - - 98,768 Stockholders' equity 599,777 372,527 Total Liabilities and Stockholders'
Equity $1,610,565 $1,451,943 HLTH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited) Years Ended December 31,
2007 2006 Cash flows from operating activities:
Net income $19,879 $771,917
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss (income) from discontinued operations, net
of tax 54,446 (371,445)
Depreciation and amortization 46,023 61,968
Minority interest in WHC 10,667 405
Equity in earnings of EBS Master LLC (28,566) (763)
Amortization of debt issuance costs 2,916 2,906
Non-cash advertising 5,264 7,414
Non-cash stock-based compensation 34,703 44,955
Deferred income taxes (18,228) 26,893
Gain on sale of EBS (399) (352,297)
Changes in operating assets and liabilities:
Accounts receivable 5,928 (43,807)
Inventory (1,611) 190
Prepaid expenses and other, net 4,559 (12,302)
Accounts payable (716) 162
Accrued expenses and other long-term liabilities (42,888) 20,621
Deferred revenue 1,590 15,913
Net cash provided by continuing operations 93,567 172,730
Net cash (used in) provided by discontinued
operations (18,174) 26,290
Net cash provided by operating activities 75,393 199,020 Cash flows from investing activities:
Proceeds from maturities and sales of
available-for-sale securities 670,326 928,284
Purchases of available-for-sale securities (927,038) (686,815)
Purchases of property and equipment (23,694) (54,885)
Cash paid in business combinations, net of cash
acquired (100) (152,772)
Proceeds from the sale of EBS, net 2,898 1,199,872
Proceeds from advances to EBS Master LLC 18,792 (20,016)
Proceeds from the sale of discontinued
operations 11,667 522,604
Other changes in equity of discontinued
operations - 28,279
Net cash (used in) provided by continuing
operations (247,149) 1,764,551
Net cash used in discontinued operations - (26,010)
Net cash (used in) provided by investing
activities (247,149) 1,738,541 Cash flows from financing activities:
Proceeds from issuance of HLTH and WHC common
stock 133,033 156,078
Tax benefit on stock-based awards 6,601 -
Purchases of treasury stock under repurchase
program (47,102) (83,167)
Purchases of treasury stock in tender offer - (1,552,120)
Payments of notes payable and other (195) (437)
Net cash provided by (used in) financing
activities 92,337 (1,479,646) Effect of exchange rates on cash 1,607 1,135 Net (decrease) increase in cash and cash
equivalents (77,812) 459,050
Change in cash of discontinued operations - 25
Cash and cash equivalents at beginning of period 614,691 155,616
Cash and cash equivalents at end of period $536,879 $614,691 ANNEX A Explanation of Non-GAAP Financial Measures The accompanying HLTH Corporation press release and financial tables include both financial measures in accordance with U.S. generally accepted accounting principles, or GAAP, as well as non-GAAP financial measures. The non-GAAP financial measures represent earnings before interest, taxes, non- cash and other items (which we refer to as "Adjusted EBITDA") and related per share amounts. Adjusted EBITDA should be viewed as supplemental to, and not as an alternative for, "income from continuing operations" calculated in accordance with GAAP. The tables attached to the accompanying press release include reconciliations of non-GAAP financial measures to GAAP financial measures.
Adjusted EBITDA is used by HLTH's management as an additional measure of HLTH's overall performance and its reporting segments' performance for purposes of business decision-making, including developing budgets, managing expenditures, and evaluating potential acquisitions or divestitures. Period- to-period comparisons of Adjusted EBITDA help HLTH's management identify additional trends in HLTH's and its reporting segments' financial results that may not be shown solely by period-to-period comparisons of income from continuing operations. In addition, HLTH uses Adjusted EBITDA in the incentive compensation programs applicable to many of its employees in order to evaluate HLTH's performance. HLTH management recognizes that Adjusted EBITDA has inherent limitations because of the excluded items, particularly those items that are recurring in nature. In order to compensate for those limitations, management also reviews the specific items that are excluded from Adjusted EBITDA, but included in income from continuing operations, as well as trends in those items. The amounts of those items are set forth, for the applicable periods, in the reconciliations of Adjusted EBITDA to net income that accompany our press releases containing non-GAAP financial measures, including the reconciliations contained in the tables attached to the accompanying press release.
HLTH believes that the presentation of Adjusted EBITDA is useful to investors in their analysis of HLTH's results for reasons similar to the reasons why HLTH's management finds it useful and because it helps facilitate investor understanding of decisions made by HLTH's management in light of the performance metrics used in making those decisions. In addition, as more fully described below, HLTH believes that providing Adjusted EBITDA, together with a reconciliation of Adjusted EBITDA to income from continuing operations, helps investors make comparisons between HLTH and other companies that may have different capital structures, different effective income tax rates and tax attributes, different capitalized asset values and/or different forms of employee compensation. However, Adjusted EBITDA is intended to provide a supplemental way of comparing HLTH with other public companies and is not intended as a substitute for comparisons based on "income from continuing operations" or "net income" calculated in accordance with GAAP. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measures and the corresponding GAAP measures provided by each company under applicable SEC rules.
The following is an explanation of the items excluded by HLTH from Adjusted EBITDA but included in income from continuing operations: -- Depreciation and Amortization. Depreciation and amortization expense
is a non-cash expense relating to capital expenditures and intangible
assets arising from acquisitions that are expensed on a straight-line
basis over the estimated useful life of the related assets. HLTH
excludes depreciation and amortization expense from Adjusted EBITDA
because it believes (i) the amount of such expenses in any specific
period may not directly correlate to the underlying performance of
HLTH's business operations and (ii) such expenses can vary
significantly between periods as a result of new acquisitions and full
amortization of previously acquired tangible and intangible assets. Accordingly, HLTH believes this exclusion assists management and
investors in making period-to-period comparisons of operating
performance. Investors should note that the use of tangible and
intangible assets contributed to revenue in the periods presented and
will contribute to future revenue generation and should also note that
such expense will recur in future periods.
-- Stock-Based Compensation Expense. Stock-based compensation expense is
a non-cash expense arising from the grant of stock-based awards to
employees. HLTH believes that excluding the effect of stock-based
compensation from Adjusted EBITDA assists management and investors in
making period-to-period comparisons in its operating performance
because it believes (i) the amount of such expenses in any specific
period may not directly correlate to the underlying performance of
HLTH's business operations and (ii) such expenses can vary
significantly between periods as a result of the timing of grants of
new stock-based awards, including grants in connection with
acquisitions. Additionally, HLTH believes that excluding stock-based
compensation from Adjusted EBITDA assists management and investors in
making meaningful comparisons between HLTH's operating performance and
the operating performance of other companies that may use different
forms of employee compensation or different valuation methodologies for
their stock-based compensation. Investors should note that stock-based
compensation is a key incentive offered to employees whose efforts
contributed to the operating results in the periods presented and are
expected to contribute to operating results in future periods. Investors should also note that such expenses will recur in the future.
-- Non-Cash Advertising Expense. This expense relates to the usage of
non-cash advertising obtained from News Corporation ("Newscorp") in
exchange for equity securities issued by HLTH in 2000. The advertising
is available only on various Newscorp properties, primarily its
television network and cable channels without any cash cost to HLTH. The amount of advertising that can be used in any year is subject to
annual contractual limitation and expires in 2010. HLTH does not incur
any other cash expenses related to airing of television advertising. HLTH excludes this expense from Adjusted EBITDA (i) because it is a
non-cash expense, (ii) because it is incremental to other non
television cash advertising expense that HLTH otherwise incurs, (iii)
because HLTH has not and believes it will not incur cash expenses
relating to television advertising in the future and (iv) to assist
management and investors in comparing its operating results over
multiple periods. Investors should note that it is likely that HLTH
derives some benefit from such advertising and that such expenses will
recur in the future.
-- Interest Income and Expense. Interest income is associated with the
level of marketable debt securities and other interest bearing accounts
in which HLTH invests, as well as with interest expenses arising from
the capital structure of HLTH. Interest income and expense varies over
time due to a variety of financing transactions and due to acquisitions
and divestitures that HLTH has entered into or may enter into in the
future. HLTH has, in the past several years, issued convertible
debentures and preferred stock, repurchased shares in cash tender
offers and through other repurchase transactions, conducted an initial
public offering of equity in its WebMD subsidiary and completed the
sale of Emdeon Practice Services and the sale of a 52% interest in
Emdeon Business Services. HLTH excludes interest income and interest
expense from Adjusted EBITDA (i) because these items are not directly
attributable to the performance of HLTH's business operations and,
accordingly, their exclusion assists management and investors in making
period-to-period comparisons of operating performance and (ii) to
assist management and investors in making comparisons to companies with
different capital structures. Investors should note that interest
income and expense will recur in future periods.
-- Income Tax Provision. HLTH had a net operating loss (NOL) carryforward
of approximately $1.3 billion as of the year ended December 31, 2007. HLTH has maintained a full valuation allowance on these NOL
carryforwards until the fourth quarter of 2007 at which time a portion
of the valuation allowance was reversed due to an increased history of
generating income. As HLTH reduces these NOL carryforwards, the
related valuation allowances are either reversed through the income
statement or reversed to goodwill, to the extent those tax benefits
were acquired through business combinations. The timing of such
reversals has not been consistent and as a result, HLTH's income tax
expense can fluctuate significantly from period to period in a manner
not directly related to HLTH's operating performance. HLTH excludes
the income tax provision from Adjusted EBITDA (i) because it believes
that the income tax provision is not directly attributable to the
underlying performance of HLTH's business operations and, accordingly,
its exclusion assists management and investors in making period-to
period comparisons of operating performance and (ii) to assist
management and investors in making comparisons to companies with
different tax attributes. Investors should note that income tax
provision will recur in future periods.
-- Minority Interest in WHC. This represents the minority stockholders'
proportionate share of net income of HLTH's majority-owned WebMD Health
Corp. subsidiary (which we refer to as WHC). The size of this Minority
Interest is related to HLTH's percentage ownership of WHC. Changes in
that percentage ownership may result from changes in WHC's capital
structure, including as a result of sales of WHC equity securities by
WHC or HLTH or as a result of exercise of WHC employee stock options. HLTH excludes Minority Interest from Adjusted EBITDA (i) because it
believes that the size of the Minority Interest can vary for reasons
not attributable to the underlying performance of HLTH's business
operations and, accordingly, its exclusion assists management and
investors in making period-to-period comparisons of operating
performance and (ii) to assist management and investors in making
comparisons to companies with different capital structures. Investors
should note that Minority Interest in WHC will recur in future periods.
-- Other Items. HLTH engages in other activities and transactions that
can impact HLTH's overall income from continuing operations. These
other items included, but were not limited to, (i) "Legal Expense,"
which relates to the on-going Department of Justice investigation, (ii)
equity in earnings of EBS Master LLC, which represents 48% of EBS's
income, (iii) gain on sale and subsequent working capital adjustment
from the sale of 52% of the Emdeon Business Services segment on
November 16, 2006, (iv) a reduction of certain sales and use tax
contingencies resulting from the expiration of certain applicable
statutes of limitations and (v) advisory expenses relating to the
evaluation, in 2007 and 2006, by HLTH's Board of Directors of strategic
alternatives for HLTH. HLTH excludes these other items from Adjusted
EBITDA because it believes these activities or transactions are not
directly attributable to the performance of HLTH's business operations
and, accordingly, their exclusion assists management and investors in
making period-to-period comparisons of operating performance. Investors should note that these other items may recur in future
periods. DATASOURCE: HLTH Corporation CONTACT: Investors, Risa Fisher, +1-201-414-2002, , Media, Jennifer Newman, +1-212-624-3912, , both of HLTH Corporation Web site: http://www.hlth.com/ http://www.wbmd.com/
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