Kevin Cameron, Chief Executive Officer of HLTH Corporation, said: "I am pleased with our performance during the second quarter. We delivered solid results and we continued to build out the products and services that will allow us to take advantage of the tremendous opportunities we see ahead of us."
Consolidated Financial Highlights
Revenue for the second quarter was $129.3 million. Earnings before interest, taxes, non-cash and other items ("Adjusted EBITDA") for the second quarter was $21.1 million or $0.11 per share. Income from continuing operations for the second quarter was $11.2 million or $0.06 per share.
Net loss for the June 2007 quarter was ($45.5) million or ($0.24) per share, which includes a loss from discontinued operations of $56.6 million which primarily relates to a charge for the estimate of HLTH's indemnification obligation for defense costs for nine former officers and directors of the Company'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.
The Company's consolidated results are not comparable to the respective prior year periods. On November 16, 2006, HLTH Corporation completed the sale of a 52% interest in its Emdeon Business Services segment (excluding the ViPS business) to an affiliate of General Atlantic LLC. The Company's 48% portion of EBS' income is reflected in the line item "Equity in earnings of EBS Master LLC" for the June 2007 quarter. For the prior year period, the results of Emdeon Business Services are included in the Company's consolidated revenues and earnings. As a result, the Company's consolidated results will not be comparable to prior year periods until after the anniversary of the transaction is reached.
As of June 30, 2007, HLTH Corporation had approximately $739 million in cash and short-term investments on a consolidated basis, including $240 million in cash and short-term investments held by WebMD Health Corp., its 84.2% owned subsidiary.
Segment Operating Results
WebMD segment revenue was $78.5 million for the second quarter compared to $56.6 million in the prior year period, an increase of 39%, driven by continued growth in online services. Segment Adjusted EBITDA was $15.2 million compared to $9.6 million in the prior year period, an increase of 58% over the prior year, primarily as a result of the increase in revenues.
ViPS segment revenue was $25.9 million for the second quarter compared to $24.8 million in the prior year period, an increase of 4%, primarily related to increases in both the government and health payer solutions. Segment Adjusted EBITDA was $5.1 million unchanged from the prior year period. Operating margins decreased slightly to 19.7% primarily as a result of a change in the revenue mix.
Porex segment revenue was $25.0 million for the second quarter compared to $22.7 million in the prior year period, an increase of 10.3%. The increase was primarily attributable to strength in sales of consumer and surgical products and the impact of favorable foreign currency exchange rates. Segment Adjusted EBITDA was $7.3 million compared to $7.0 million in the prior year period, an increase of 4%. Operating margins decreased to 29.4% from 31.1% primarily as a result of higher insurance and marketing expenses.
Investment in Emdeon Business Services
Revenue for Emdeon Business Services (which is not a segment and is not included in the Company's consolidated revenue) was a record $201.2 million for the second quarter. Emdeon Business Services continues to generate strong year over year growth. HLTH recorded $7.6 million of Equity in earnings of EBS Master LLC in the June 2007 quarter, reflecting its 48% portion of their income.
Financial Guidance
Including the results for the second quarter announced today, HLTH's full year 2007 guidance is being updated as follows:
-- HLTH narrowed its revenue guidance range to $538.3 to $553.3 million
from $537.4 to $556.4 million.
-- HLTH increased its guidance range for Adjusted EBITDA by $1.1 to $3.0
million to $102.2 to $110.4 million primarily to reflect expected
higher margin on incremental revenue at WebMD, partially offset by
lower than anticipated results at ViPS primarily in the third quarter.
-- HLTH increased its guidance range for income from continuing
operations by $3.4 to $5.5 million to $45.0 to $54.3 million primarily
to reflect the increase in WebMD's Adjusted EBITDA, and its
expectations for higher interest income and lower non cash stock
compensation expense attributable to WebMD, offset in part by higher
income tax expense at WebMD and lower than anticipated results at ViPS
primarily in the third quarter.
A schedule outlining HLTH Corporation's updated financial guidance for 2007 is attached to this press release.
Analyst and Investor Conference Call
As previously announced, HLTH Corporation will host a conference call at 4:45 pm (ET) on July 31, 2007 to discuss its second 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 Corporation
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. In addition, HLTH Corporation owns a 48% minority interest in Emdeon Business Services, which provides solutions that automate key business and administrative functions for healthcare payers and providers.
All statements contained in this press release, other than statements of historical fact, are forward-looking statements, including those regarding: guidance on our future financial results and other projections or measures of our future performance; our expectations concerning market opportunities and our ability to capitalize on them; and the amount and timing of the benefits expected from acquisitions, from new products or services and from other potential sources of additional revenue. These statements speak only as of the date of this press release and are based on our current plans and expectations, and they 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: market acceptance of our products and services; difficulties in integrating acquired businesses; relationships with customers and strategic partners; changes in economic, political or regulatory conditions or other trends affecting the healthcare, Internet, information technology and plastics industries; and our ability to attract and retain qualified personnel. Further information about these matters can be found in our Securities and Exchange Commission filings. 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.
-Tables Follow-
HLTH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data, unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
(Restated) (Restated)
Revenue:
Services $102,129 $265,606 $200,072 $518,351
Products 27,165 26,025 51,247 50,474
Total revenue 129,294 291,631 251,319 568,825
Cost of operations:
Services 44,129 157,625 88,643 313,984
Products 10,772 11,416 20,687 22,231
Total cost of operations 54,901 169,041 109,330 336,215
Development and engineering 4,767 9,057 9,341 17,921
Sales, marketing, general and
administrative 58,340 72,033 118,739 142,213
Depreciation and amortization 11,678 17,221 22,405 33,775
Legal expense 471 275 791 817
Interest income 10,100 4,433 19,774 8,851
Interest expense 4,619 4,668 9,336 9,359
Transition services income 1,468 - 3,924 -
Other income (expense) 399 (2,072) 1,145 (2,072)
Income from continuing operations
before income tax provision 6,485 21,697 6,220 35,304
Income tax provision 2,031 6,288 3,021 10,344
Minority interest in WHC income
(loss) 843 (121) 958 (593)
Equity in earnings of EBS Master
LLC 7,575 - 14,674 -
Income from continuing operations 11,186 15,530 16,915 25,553
(Loss) income from discontinued
operations, net of tax (56,649) 6,556 (56,676) 12,123
Net (loss) income $(45,463) $22,086 $(39,761) $37,676
Basic (loss) income per
common share:
Income from continuing
operations $0.06 $0.05 $0.10 $0.09
(Loss) income from discontinued
operations (0.31) 0.03 (0.32) 0.04
Net (loss) income $(0.25) $0.08 $(0.22) $0.13
Diluted (loss) income per common
share:
Income from continuing operations $0.06 $0.05 $0.09 $0.09
(Loss) income from discontinued
operations (0.30) 0.02 (0.30) 0.04
Net (loss) income $(0.24) $0.07 $(0.21) $0.13
Weighted-average shares outstanding
used in computing (loss) income per
common share:
Basic 180,219 285,086 178,115 286,141
Diluted 191,032 296,722 188,693 296,107
HLTH CORPORATION
CONSOLIDATED SEGMENT INFORMATION
(In thousands, except per share data, unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Revenue (Restated) (Restated)
Emdeon Business Services $ - $187,858 $ - $370,709
WebMD 78,479 56,612 151,441 106,663
ViPS 25,885 24,845 52,544 48,681
Porex 25,003 22,659 47,712 43,246
Inter-segment eliminations (73) (343) (378) (474)
$129,294 $291,631 $251,319 $568,825
Earnings before interest, taxes,
non-cash and other items
("Adjusted EBITDA")
Emdeon Business Services $ - $44,765 $ - $82,972
WebMD 15,155 9,599 27,762 16,126
ViPS 5,094 5,057 9,934 10,215
Porex 7,343 7,045 13,817 12,599
Corporate (6,483) (11,495) (13,214) (22,633)
$21,109 $54,971 $38,299 $99,279
Adjusted EBITDA per diluted
common share (a) $0.11 $0.19 $0.20 $0.34
Interest, taxes, non-cash and
other items (b)
Depreciation and amortization $(11,678) $(17,221) $(22,405) $(33,775)
Non-cash stock-based
compensation (8,355) (12,282) (18,146) (24,009)
Non-cash advertising - (1,189) (2,320) (2,794)
Legal expense (471) (275) (791) (817)
Interest income 10,100 4,433 19,774 8,851
Interest expense (4,619) (4,668) (9,336) (9,359)
Income tax provision (2,031) (6,288) (3,021) (10,344)
Minority interest in WHC
(income) loss (843) 121 (958) 593
Equity in earnings of EBS Master
LLC 7,575 - 14,674 -
Other income (expense) 399 (2,072) 1,145 (2,072)
Income from continuing operations 11,186 15,530 16,915 25,553
(Loss) income from discontinued
operations, net of tax (56,649) 6,556 (56,676) 12,123
Net (loss) income $(45,463) $22,086 $(39,761) $37,676
Basic (loss) income per common
share:
Income from continuing
operations $0.06 $0.05 $0.10 $0.09
(Loss) income from discontinued
operations (0.31) 0.03 (0.32) 0.04
Net (loss) income $(0.25) $0.08 $(0.22) $0.13
Diluted (loss) income per common
share:
Income from continuing
operations $0.06 $0.05 $0.09 $0.09
(Loss) income from discontinued
operations (0.30) 0.02 (0.30) 0.04
Net (loss) income $(0.24) $0.07 $(0.21) $0.13
Weighted-average shares
outstanding used in computing
(loss) income per common share:
Basic 180,219 285,086 178,115 286,141
Diluted 191,032 296,722 188,693 296,107
(a) Adjusted EBITDA per diluted common share is based on the weighted-
average shares outstanding used in computing diluted (loss) income per
common share.
(b) Reconciliation of Adjusted EBITDA to net (loss) income (see Annex A -
Explanation of Non-GAAP Financial Measures).
HLTH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
June 30, 2007 December 31, 2006
Assets
Cash and cash equivalents $509,969 $614,691
Short-term investments 228,922 34,140
Accounts receivable, net 117,045 121,608
Inventory 9,709 9,922
Due from EBS Master LLC 286 30,716
Prepaid expenses and other current assets 62,232 31,871
Total current assets 928,163 842,948
Marketable equity securities 3,166 2,633
Property and equipment, net 74,376 72,040
Goodwill 333,412 337,669
Intangible assets, net 121,260 129,473
Investment in EBS Master LLC 20,820 1,521
Other assets 39,607 65,659
Total Assets $1,520,804 $1,451,943
Liabilities and Stockholders' Equity
Accounts payable $3,960 $3,996
Accrued expenses 58,043 113,175
Deferred revenue 100,154 87,438
Liabilities of discontinued operations 55,893 -
Total current liabilities 218,050 204,609
Convertible notes 650,000 650,000
Other long-term liabilities 32,357 24,179
Minority interest in WebMD Health
Corp. (WHC) 111,876 101,860
Convertible redeemable exchangeable
preferred stock - 98,768
Stockholders' equity 508,521 372,527
Total Liabilities and Stockholders' Equity $1,520,804 $1,451,943
HLTH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
Six Months Ended
June 30,
2007 2006
Cash flows from operating activities: (Restated)
Net (loss) income $(39,761) $37,676
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Loss (income) from discontinued
operations, net of tax 56,676 (12,123)
Depreciation and amortization 22,405 33,775
Minority interest in WHC income (loss) 958 (593)
Equity in earnings of EBS Master LLC (14,674) -
Amortization of debt issuance costs 1,447 1,461
Non-cash advertising 2,320 2,794
Non-cash stock-based compensation 18,146 24,009
Deferred income taxes 1,052 1,736
EBS working capital adjustment (399) -
Reversal of income tax valuation
allowance applied to goodwill 760 4,043
Changes in operating assets and
liabilities:
Accounts receivable 4,922 (5,233)
Inventory 272 (138)
Prepaid expenses and other, net (514) (3,700)
Accounts payable (36) 3,980
Accrued expenses and other
long-term liabilities (45,430) 3,572
Deferred revenue 12,716 8,137
Net cash provided by
continuing operations 20,860 99,396
Net cash (used in) provided by
discontinued operations (1,880) 15,825
Net cash provided by operating
activities 18,980 115,221
Cash flows from investing activities:
Proceeds from maturities and sales
of available-for-sale securities 194,096 398,870
Purchases of available-for-sale
securities (388,942) (426,470)
Purchases of property and
equipment (12,558) (27,429)
Cash paid in business combinations,
net of cash acquired - (84,846)
Proceeds from the sale of EBS 2,898 -
Proceeds from advances to EBS
Master LLC 19,730 -
Other changes in equity of
discontinued operations - 15,467
Net cash used in continuing
operations (184,776) (124,408)
Net cash used in discontinued
operations - (17,009)
Net cash used in investing
activities (184,776) (141,417)
Cash flows from financing activities:
Proceeds from issuance of HLTH and
WHC common stock 103,263 30,433
Tax benefit on stock-based awards 457 -
Purchases of treasury stock under
repurchase program (42,906) (71,843)
Payments of notes payable and other (101) (173)
Net cash provided by (used in)
financing activities 60,713 (41,583)
Effect of exchange rates on cash 361 479
Net decrease in cash and cash
equivalents (104,722) (67,300)
Change in cash of discontinued
operations - 1,184
Cash and cash equivalents at
beginning of period 614,691 155,616
Cash and cash equivalents at end of
period $509,969 $89,500
2007 Consolidated Financial Guidance Summary
(in millions, except per share data)
Year Ended
December 31, Quarterly Revenue Range
2007 Q1 Q2 Q3 Q4
Range Actual Actual Range Range
WebMD $342.4 $354.4
ViPS 104.8 106.3
Porex 91.5 93.0
Inter-segment
eliminations (0.4) (0.4)
Total
revenue $538.3 $553.3 $122.0 $129.3 $136.0 $143.0 $151.0 $159.0
Earnings
before
interest,
taxes,
non-cash
and other
items
("Adjusted
EBITDA")(a) $102.2 $110.4
Quarterly Mix
Q1 Q2 Q3 Q4
Reconciliation
of Adjusted
EBITDA to
income from
continuing
operations:
Interest
income, net 21.5 21.0 23% 26% 25% 26%
Depreciation
and
amortization (47.6) (46.5) 23% 25% 26% 26%
Non-cash
advertising (5.7) (5.3) 42% 0% 7% 51%
Non-cash
stock-based
compensation (37.0) (36.5) 27% 23% 27% 23%
Income tax
provision (15.5) (16.0) 6% 13% 31% 50%
Equity in
earnings
of EBS
Master LLC 31.0 32.0 22% 24% 23% 31%
Minority
interest in
WHC income (4.2) (5.1) 2% 17% 29% 52%
Legal
expense (b) (0.8) (0.8) 40% 60% NA NA
Other
income (b) 1.1 1.1 65% 35% NA NA
Income from
continuing
operations $45.0 $54.3
Adjusted
EBITDA
per share $0.54 $0.58
Income from
continuing
operations
per share $0.24 $0.29
Weighted
average
shares -
Diluted 190.0 190.0
(a) See Annex A - Explanation of Non-GAAP Financial Measures
(b) This table reflects actual expense through June 30, 2007 for "legal
expense" (for the ongoing Department of Justice investigation) and
"other income", but does not reflect guidance for these items in any
future quarter. We do not make projections for these items, although
they may recur in future periods.
Operating Segments
Revenue
* WebMD -- Refer to WebMD Health Corp. Financial Guidance Summary included
in its July 31, 2007 press release.
* ViPS -- Approximately 24% of annual segment revenue in Q3 increasing to
26% in Q4.
* Porex -- Approximately 24% of annual segment revenue in Q3 and in Q4.
Adjusted EBITDA
* WebMD -- Refer to WebMD Health Corp. Financial Guidance Summary included
in its July 31, 2007 press release.
* ViPS -- Approximately 18% of segment revenue in Q3 and 21% in Q4.
* Porex -- Approximately 29% of segment revenue in Q3 and 28% in Q4.
* Corporate -- Approximately 5% of consolidated revenue in Q3 decreasing
to approximately 4% by Q4.
ANNEX A
Explanation of Non-GAAP Financial Measures
The accompanying HLTH Corporation press release, financial tables and financial guidance summary 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 and the financial guidance summary 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 income from continuing operations included in the tables and the financial guidance summary 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 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 $1.2 billion as of the year ended December 31, 2006.
Due to a limited history of generating taxable income, HLTH maintains a
full valuation allowance on these NOL carryforwards. As HLTH uses
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 is not 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 income (loss). This represents the minority
stockholders' proportionate share of net income or net loss of HLTH's
majority-owned WebMD subsidiary. The size of this Minority Interest is
related to HLTH's percentage ownership of WebMD. Changes in that
percentage ownership may result from changes in WebMD's capital
structure, including as a result of sales of WebMD equity securities by
WebMD or HLTH or as a result of exercise of WebMD 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 income (loss) 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) 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 2006, by HLTH's Board
of Directors of strategic alternatives for Emdeon Business Services.
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.
