EXHIBIT 99.1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Consolidated Financial Statements of HLTH Corporation (“HLTH”) present financial information giving effect to the sale of our equity method investment in EBS Master LLC. The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2007 presents the consolidated financial position of HLTH, giving effect to the sale as if it had occurred on September 30, 2007. The Unaudited Pro Forma Condensed Consolidated Statements of Operations for the nine months ended September 30, 2007 and for the year ended December 31, 2006 present the consolidated results of operations of HLTH, giving effect to the sale as if it had occurred immediately prior to January 1, 2006.
The historical consolidated financial statements of HLTH have been adjusted to give effect to pro forma events that are (1) directly attributable to the sale, (2) factually supportable, and (3) with respect to the statements of operations, not expected to have a continuing impact on the consolidated results. You should read this information in conjunction with:
| • | the accompanying notes to the unaudited pro forma condensed consolidated financial statements, which describe certain estimates and assumptions made in preparing such financial statements and in making the adjustments reflected therein; | ||
| • | HLTH’s separate historical unaudited financial statements as of and for the nine months ended September 30, 2007 included in HLTH’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007; and | ||
| • | HLTH’s consolidated statement of operations for the year ended December 31, 2006 included in HLTH’s Annual Report on Form 10-K, as amended, filed on May 10, 2007. |
The unaudited pro forma condensed consolidated financial statements have been prepared for informational purposes only. The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of what the financial position or results of operations actually would have been had the sale been completed at the dates indicated. In addition, the unaudited pro forma condensed consolidated financial statements do not purport to project the future financial position or results of operations of HLTH.
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HLTH CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2007
(In thousands)
AS OF SEPTEMBER 30, 2007
(In thousands)
| As | Pro Forma | Pro Forma | ||||||||||
| Reported | Adjustments | Adjusted | ||||||||||
ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 412,330 | $ | 574,000 | (a) | $ | 986,330 | |||||
| Short-term investments | 372,128 | — | 372,128 | |||||||||
| Accounts receivable, net | 104,014 | — | 104,014 | |||||||||
| Inventory | 10,199 | — | 10,199 | |||||||||
| Prepaid expenses and other current assets | 54,899 | — | 54,899 | |||||||||
| Total current assets | 953,570 | 574,000 | 1,527,570 | |||||||||
| Marketable equity securities | 2,634 | — | 2,634 | |||||||||
| Property and equipment, net | 74,644 | — | 74,644 | |||||||||
| Goodwill | 332,689 | — | 332,689 | |||||||||
| Intangible assets, net | 115,083 | — | 115,083 | |||||||||
| Investment in EBS Master LLC | 23,169 | (23,169 | )(b) | — | ||||||||
| Other assets | 36,203 | — | 36,203 | |||||||||
TOTAL ASSETS | $ | 1,537,992 | $ | 550,831 | $ | 2,088,823 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 2,815 | $ | — | $ | 2,815 | ||||||
| Accrued expenses | 56,483 | 34,000 | (c) | 90,483 | ||||||||
| Deferred revenue | 91,837 | — | 91,837 | |||||||||
| Liabilities of discontinued operations | 48,434 | — | 48,434 | |||||||||
| Total current liabilities | 199,569 | 34,000 | 233,569 | |||||||||
| Convertible notes | 650,000 | — | 650,000 | |||||||||
| Other long-term liabilities | 33,881 | — | 33,881 | |||||||||
| Minority interest in WebMD Health Corp. | 119,785 | — | 119,785 | |||||||||
| Stockholders’ equity | 534,757 | 516,831 | (d) | 1,051,588 | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,537,992 | $ | 550,831 | $ | 2,088,823 | ||||||
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HLTH CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007
(In thousands, except per share data)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007
(In thousands, except per share data)
| Pro Forma | Pro Forma | |||||||||||
| As Reported | Adjustments | Adjusted | ||||||||||
| Revenue: | ||||||||||||
| Services | $ | 308,876 | $ | — | $ | 308,876 | ||||||
| Products | 75,751 | — | 75,751 | |||||||||
| Total revenue | 384,627 | — | 384,627 | |||||||||
| Cost of operations: | ||||||||||||
| Services | 132,380 | — | 132,380 | |||||||||
| Products | 30,290 | — | 30,290 | |||||||||
| Total cost of operations | 162,670 | — | 162,670 | |||||||||
| Development and engineering | 13,550 | — | 13,550 | |||||||||
| Sales, marketing, general and administrative | 176,091 | — | 176,091 | |||||||||
| Depreciation and amortization | 34,231 | — | 34,231 | |||||||||
| Gain on sale of EBS | 399 | (399 | )(g) | — | ||||||||
| Interest income | 30,638 | — | 30,638 | |||||||||
| Interest expense | 13,909 | — | 13,909 | |||||||||
| Other income, net | 4,868 | — | 4,868 | |||||||||
| Income from continuing operations before income tax provision | 20,081 | (399 | ) | 19,682 | ||||||||
| Income tax provision | 6,956 | 5 | (h) | 6,961 | ||||||||
| Minority interest in WHC | 2,758 | — | 2,758 | |||||||||
| Equity in earnings of EBS Master LLC | 22,679 | (22,679 | )(i) | — | ||||||||
| Income from continuing operations | $ | 33,046 | $ | (23,083 | ) | $ | 9,963 | |||||
| Income from continuing operations per common share: | ||||||||||||
| Basic | $ | 0.19 | $ | 0.06 | ||||||||
| Diluted | $ | 0.17 | $ | 0.05 | ||||||||
| Weighted-average shares outstanding used in computing income from continuing operations per common share: | ||||||||||||
| Basic | 178,681 | 178,681 | ||||||||||
| Diluted | 188,486 | 188,486 | ||||||||||
PF-3
HLTH CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2006
(In thousands, except per share data)
FOR THE YEAR ENDED DECEMBER 31, 2006
(In thousands, except per share data)
| Less | Pro Forma | Pro Forma | ||||||||||||||
| As Reported | EBS (e) | Adjustments | Adjusted | |||||||||||||
| Revenue: | ||||||||||||||||
| Services | $ | 998,252 | $ | (654,103 | ) | $ | — | $ | 344,149 | |||||||
| Products | 100,356 | (6,987 | ) | 420 | (f) | 93,789 | ||||||||||
| Total revenue | 1,098,608 | (661,090 | ) | 420 | 437,938 | |||||||||||
| Cost of operations: | ||||||||||||||||
| Services | 581,108 | (421,238 | ) | — | 159,870 | |||||||||||
| Products | 42,650 | (5,012 | ) | 420 | (f) | 38,058 | ||||||||||
| Total cost of operations | 623,758 | (426,250 | ) | 420 | 197,928 | |||||||||||
| Development and engineering | 33,649 | (18,250 | ) | — | 15,399 | |||||||||||
| Sales, marketing, general and administrative | 288,015 | (68,873 | ) | — | 219,142 | |||||||||||
| Depreciation and amortization | 61,976 | (25,904 | ) | — | 36,072 | |||||||||||
| Gain on sale of EBS | 352,297 | — | (352,297 | )(g) | — | |||||||||||
| Interest income | 32,339 | (67 | ) | — | 32,272 | |||||||||||
| Interest expense | 18,779 | (25 | ) | — | 18,754 | |||||||||||
| Other expense, net | 4,252 | (4,198 | ) | — | 54 | |||||||||||
| Income from continuing operations before income tax provision | 452,815 | (117,657 | ) | (352,297 | ) | (17,139 | ) | |||||||||
| Income tax provision | 52,316 | — | (47,192 | )(h) | 5,124 | |||||||||||
| Minority interest in WHC | 405 | — | — | 405 | ||||||||||||
| Equity in earnings of EBS Master LLC | 763 | — | (763 | )(i) | — | |||||||||||
| Income (loss) from continuing operations | $ | 400,857 | $ | (117,657 | ) | $ | (305,868 | ) | $ | (22,668 | ) | |||||
| Income (loss) from continuing operations per common share: | ||||||||||||||||
| Basic | $ | 1.44 | $ | (0.08) | ||||||||||||
| Diluted | $ | 1.26 | $ | (0.08) | ||||||||||||
| Weighted-average shares outstanding used in computing income (loss) from continuing operations per common share: | ||||||||||||||||
| Basic | 279,234 | 279,234 | ||||||||||||||
| Diluted | 331,642 | 279,234 | ||||||||||||||
PF-4
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The “as reported” financial information as of and for the nine months ended September 30, 2007 has been derived from our historical financial statements included in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007. The “as reported” information for the year ended December 31, 2006 has been derived from our historical financial statements included in our 2006 Annual Report on Form 10-K, as amended.
The pro forma adjustments related to the Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2007 assume the sale took place on September 30, 2007 and are as follows:
(a) Represents estimated net cash proceeds from the sale of $574 million, net of approximately $1 million of costs related to the transaction.
(b) Represents the elimination of the EBS equity investment.
(c) Represents an estimate of the federal, state and other taxes payable in connection with the gain on this transaction.
(d) Represents the estimated gain on the sale of the EBS equity investment of approximately $515 million. Also included in this adjustment is the elimination of the accumulated other comprehensive loss of $2 million related to the EBS equity investment.
The pro forma adjustments to the Unaudited Pro Forma Condensed Consolidated Statements of Operations for the nine months ended September 30, 2007 and for the year ended December 31, 2006 assume the sale took place immediately prior to January 1, 2006 and are as follows:
(e) Represents the reduction of revenue and expenses for the period from January 1, 2006 through November 16, 2006, the date EBS became an equity method investment.
(f) Represents an adjustment to add back inter-company transactions between EBS and other HLTH businesses, which were previously eliminated in consolidation. The inter-company revenue is comprised of printing services that were provided by EBS to our WebMD and Corporate segments.
(g) Represents the elimination of the gain on the sale of EBS recognized in connection with the initial sale of the 52% interest on November 16, 2006.
(h) Represents the net adjustment to the income tax provision as a result of pro forma adjustments e, f, g and i.
(i) Represents the elimination of the equity in earnings of EBS Master LLC, for the period during which EBS was held as an equity method investment.
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