This excerpt taken from the WBMD 8-K filed Jul 2, 2009.
Explanation of Non-GAAP Financial Measures
The Managements Discussion and Analysis of Financial Condition and Results of Operations (the MD&A) contained in Exhibit 99.2 to the Current Report on Form 8-K to which this Explanation of Non-GAAP Financial Measures is filed as Exhibit 99.5 includes 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). Adjusted EBITDA should be viewed as supplemental to, and not as an alternative for, income (loss) from continuing operations or net income (loss) calculated in accordance with GAAP. The MD&A also includes reconciliations of non-GAAP financial measures to GAAP financial measures.
Adjusted EBITDA is used by WebMDs management as an additional measure of WebMDs 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 WebMDs management identify additional trends in WebMDs financial results that may not be shown solely by period-to-period comparisons of income (loss) from continuing operations or net income (loss). In addition, WebMD uses Adjusted EBITDA in the incentive compensation programs applicable to many of its employees in order to evaluate WebMDs performance. WebMD 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 (loss) from continuing operations or net income (loss), 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 (loss) from continuing operations or to net income (loss) that accompany our press releases and disclosure documents containing non-GAAP financial measures, including the reconciliation contained in the MD&A.
WebMD believes that the presentation of Adjusted EBITDA is useful to investors in their analysis of WebMDs results for reasons similar to the reasons why WebMDs management finds it useful and because it helps facilitate investor understanding of decisions made by WebMDs management in light of the performance metrics used in making those decisions. In addition, as more fully described below, WebMD believes that providing Adjusted EBITDA, together with a reconciliation of Adjusted EBITDA to income (loss) from continuing operations or to net income (loss), helps investors make comparisons between WebMD 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 WebMD with other public companies and is not intended as a substitute for comparisons based on income (loss) from continuing operations or net income (loss) 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 WebMD from Adjusted EBITDA but included in income (loss) from continuing operations: