WebMD CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data, unaudited)
| Three Months Ended | Six Months Ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
| Revenue | $ | 246,471 | $ | 227,644 | $ | 481,214 | $ | 453,517 | |||||||||
| Costs and expenses: | |||||||||||||||||
| Cost of operations | 143,582 | 135,648 | 277,962 | 274,179 | |||||||||||||
| Development and engineering | 10,490 | 11,113 | 21,502 | 21,981 | |||||||||||||
| Sales, marketing, general and administrative | 71,724 | 76,511 | 141,794 | 155,877 | |||||||||||||
| Depreciation and amortization | 16,016 | 33,033 | 43,992 | 65,792 | |||||||||||||
| Impairment of long-lived assets | 33,113 | 609 | 33,113 | 609 | |||||||||||||
| Restructuring and integration charge (benefit) | — | 1,160 | — | (2,590 | ) | ||||||||||||
| Other income | 1,118 | 5,866 | 1,301 | 5,866 | |||||||||||||
| Interest income | 4,994 | 6,022 | 10,049 | 9,162 | |||||||||||||
| Interest expense | 2,927 | 2,954 | 5,848 | 3,095 | |||||||||||||
| Loss before income tax provision | (25,269 | ) | (21,496 | ) | (31,647 | ) | (50,398 | ) | |||||||||
| Income tax provision | 1,001 | 713 | 1,981 | 1,413 | |||||||||||||
| Net loss | $ | (26,270 | ) | $ | (22,209 | ) | $ | (33,628 | ) | $ | (51,811 | ) | |||||
| Basic and diluted net loss per common share | $ | (0.09 | ) | $ | (0.07 | ) | $ | (0.11 | ) | $ | (0.17 | ) | |||||
| Weighted-average shares outstanding used in computing basic and diluted net loss per common share | 304,001 | 309,462 | 303,447 | 310,565 | |||||||||||||
WebMD CORPORATION
CONSOLIDATED SEGMENT INFORMATION
(In thousands, except per share data, unaudited)
| Three Months Ended | Six Months Ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
| Revenues | |||||||||||||||||
| Transaction services | $ | 118,021 | $ | 117,204 | $ | 233,514 | $ | 235,131 | |||||||||
| Physician services | 76,797 | 66,068 | 148,808 | 132,157 | |||||||||||||
| Portal services | 26,538 | 18,006 | 48,718 | 35,140 | |||||||||||||
| Plastic technologies | 31,649 | 31,509 | 62,187 | 61,050 | |||||||||||||
| Inter-segment eliminations | (6,534 | ) | (5,143 | ) | (12,013 | ) | (9,961 | ) | |||||||||
| $ | 246,471 | $ | 227,644 | $ | 481,214 | $ | 453,517 | ||||||||||
| Income (loss) before taxes, restructuring, non-cash and other items | |||||||||||||||||
| Transaction services | $ | 22,342 | $ | 18,264 | $ | 46,393 | $ | 35,802 | |||||||||
| Physician services | 6,359 | 6,234 | 12,656 | 12,486 | |||||||||||||
| Portal services | 6,192 | (2,219 | ) | 10,210 | (7,056 | ) | |||||||||||
| Plastic technologies | 7,967 | 8,197 | 15,247 | 15,795 | |||||||||||||
| Corporate | (12,381 | ) | (12,641 | ) | (24,843 | ) | (27,248 | ) | |||||||||
| Interest income | 4,994 | 6,022 | 10,049 | 9,162 | |||||||||||||
| Interest expense | (2,927 | ) | (2,954 | ) | (5,848 | ) | (3,095 | ) | |||||||||
| $ | 32,546 | $ | 20,903 | $ | 63,864 | $ | 35,846 | ||||||||||
| Basic and diluted income per common share before taxes, restructuring, non-cash and other items (a) | $ | 0.11 | $ | 0.07 | $ | 0.21 | $ | 0.12 | |||||||||
| Taxes, restructuring, non-cash and other items (b) | |||||||||||||||||
| Depreciation and amortization | $ | (16,016 | ) | $ | (33,033 | ) | $ | (43,992 | ) | $ | (65,792 | ) | |||||
| Amortization of prepaid content and services (included in cost of operations) | (827 | ) | (750 | ) | (827 | ) | (1,724 | ) | |||||||||
| Amortization of prepaid content and services (included in sales, marketing, general and administrative) | (5,176 | ) | (5,399 | ) | (11,322 | ) | (11,685 | ) | |||||||||
| Non-cash stock compensation (included in sales, marketing, general and administrative) | (3,801 | ) | (7,314 | ) | (7,558 | ) | (14,890 | ) | |||||||||
| Impairment of long-lived assets | (33,113 | ) | (609 | ) | (33,113 | ) | (609 | ) | |||||||||
| Restructuring and integration (charge) benefit | — | (1,160 | ) | — | 2,590 | ||||||||||||
| Income tax provision | (1,001 | ) | (713 | ) | (1,981 | ) | (1,413 | ) | |||||||||
| Other income | 1,118 | 5,866 | 1,301 | 5,866 | |||||||||||||
| Net loss | $ | (26,270 | ) | $ | (22,209 | ) | $ | (33,628 | ) | $ | (51,811 | ) | |||||
| Basic and diluted net loss per common share | $ | (0.09 | ) | $ | (0.07 | ) | $ | (0.11 | ) | $ | (0.17 | ) | |||||
| Weighted-average shares outstanding used in computing basic and diluted net loss per common share | 304,001 | 309,462 | 303,447 | 310,565 | |||||||||||||
| (a) | Basic and diluted income per common share before taxes, restructuring, non-cash and other items is based on the weighted average shares outstanding used in computing basic and diluted net loss per common share. | |
| (b) | Reconciliation of income before taxes, restructuring, non-cash and other items to net loss. |
WebMD CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
| June 30, | December 31, | |||||||||
| 2003 | 2002 | |||||||||
| (Unaudited) | ||||||||||
Assets | ||||||||||
| Cash and cash equivalents | $ | 461,530 | $ | 179,541 | ||||||
| Short-term investments | 216,060 | 10,888 | ||||||||
| Accounts receivable, net | 178,357 | 170,467 | ||||||||
| Inventory | 19,724 | 18,804 | ||||||||
| Current portion of prepaid content and distribution services | 24,944 | 25,406 | ||||||||
| Other current assets | 21,180 | 26,197 | ||||||||
| Total current assets | 921,795 | 431,303 | ||||||||
| Marketable debt securities | 268,222 | 449,289 | ||||||||
| Marketable equity securities | 7,504 | 7,427 | ||||||||
| Property and equipment, net | 89,160 | 94,737 | ||||||||
| Prepaid content and distribution services | 37,290 | 48,532 | ||||||||
| Goodwill | 615,488 | 629,055 | ||||||||
| Intangible assets, net | 50,051 | 79,536 | ||||||||
| Other assets | 35,801 | 26,369 | ||||||||
| $ | 2,025,311 | $ | 1,766,248 | |||||||
Liabilities and Stockholders’ Equity | ||||||||||
| Accounts payable | $ | 13,880 | $ | 11,494 | ||||||
| Accrued expenses | 186,280 | 212,600 | ||||||||
| Deferred revenue | 86,588 | 81,179 | ||||||||
| Current portion of long-term debt | — | 6,546 | ||||||||
| Total current liabilities | 286,748 | 311,819 | ||||||||
| Convertible subordinated notes | 599,999 | 300,000 | ||||||||
| Other long-term liabilities | 631 | 628 | ||||||||
| Stockholders’ equity | 1,137,933 | 1,153,801 | ||||||||
| $ | 2,025,311 | $ | 1,766,248 | |||||||
WebMD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
| Six Months Ended | |||||||||||
| June 30, | |||||||||||
| 2003 | 2002 | ||||||||||
Cash flows from operating activities: | |||||||||||
| Net loss | $ | (33,628 | ) | $ | (51,811 | ) | |||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 43,992 | 65,792 | |||||||||
| Impairment of long-lived assets | 33,113 | 609 | |||||||||
| Amortization of debt issuance costs | 774 | 374 | |||||||||
| Non-cash content and distribution services | 12,149 | 13,409 | |||||||||
| Non-cash stock-based compensation | 7,558 | 14,890 | |||||||||
| Non-cash portion of restructuring and integration charge | — | 617 | |||||||||
| Gain on investments | (183 | ) | (5,866 | ) | |||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | (5,262 | ) | 2,097 | ||||||||
| Inventory | (920 | ) | 1,481 | ||||||||
| Prepaid content and distribution services | (445 | ) | (938 | ) | |||||||
| Accounts payable | 1,827 | (5,108 | ) | ||||||||
| Accrued expenses | (26,885 | ) | 1,210 | ||||||||
| Deferred revenue | 478 | 10,871 | |||||||||
| Other, net | 4,751 | (1,116 | ) | ||||||||
| Net cash provided by operating activities | 37,319 | 46,511 | |||||||||
Cash flows from investing activities: | |||||||||||
| Proceeds from maturities and sales of available-for-sale securities | 2,631 | 101,826 | |||||||||
| Proceeds from maturities and redemptions of held-to-maturity securities | 102,919 | 1,055 | |||||||||
| Purchases of available-for-sale securities | (6,730 | ) | (201,565 | ) | |||||||
| Purchases of held-to-maturity securities | (124,931 | ) | (246,072 | ) | |||||||
| Purchases of property and equipment | (9,571 | ) | (14,370 | ) | |||||||
| Cash paid in business combinations, net of cash acquired | (14,701 | ) | (2,924 | ) | |||||||
| Net cash used in investing activities | (50,383 | ) | (362,050 | ) | |||||||
Cash flows from financing activities: | |||||||||||
| Proceeds from issuance of common stock | 28,578 | 13,369 | |||||||||
| Payments of notes payable and other | (6,563 | ) | (4,021 | ) | |||||||
| Redemption of Series B Preferred Stock | — | (10,000 | ) | ||||||||
| Purchases of treasury stock | (18,125 | ) | (88,747 | ) | |||||||
| Net proceeds from issuance of convertible debt | 290,500 | 292,000 | |||||||||
| Net cash provided by financing activities | 294,390 | 202,601 | |||||||||
| Effect of exchange rates on cash | 663 | 899 | |||||||||
| Net increase (decrease) in cash and cash equivalents | 281,989 | (112,039 | ) | ||||||||
| Cash and cash equivalents at beginning of period | 179,541 | 286,273 | |||||||||
| Cash and cash equivalents at end of period | $ | 461,530 | $ | 174,234 | |||||||
