WebMD Health (WBMD)

Contractual Obligations and Commitments

 

The following table summarizes our principal commitments as of December 31, 2008 for future specified contractual obligations that have not been accrued for in our consolidated balance sheet, as well as the estimated timing of the cash payments associated with these obligations which relate to lease commitments for facilities and data center locations. Management has used estimates and assumptions as to the timing of the cash flows associated with these commitments. Management’s estimates of the timing of future cash flows are largely based on historical experience, and accordingly, actual timing of cash flows may vary from these estimates.

 

 

The above table excludes $611 of uncertain tax positions, under FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” as we are unable to reasonably estimate the timing of the settlement of these items. See Note 14, “Income Taxes,” in the Notes to Consolidated Financial Statements in Exhibit 99.3.

 

Potential future cash commitments not included in the specified contractual obligations table above or accrued for in our consolidated balance sheet include our anticipated 2009 capital expenditure requirements which we currently estimate at $20,000 to $25,000. Our anticipated capital expenditures relate to improvements that will be deployed across our public and private portal web sites in order to enable us to service future growth in unique users, page views and private portal customers, the creation of new functionality and sponsorship areas for our customers, as well as leasehold improvements for our facilities.

 

Outlook on Future Liquidity

 

As of December 31, 2008, we had $191,659 in cash and cash equivalents and investments in ARS with a face amount of $164,800 and a fair value of $133,563. The ARS investments are discussed in more detail earlier in this MD&A under “Introduction — Background Information on Certain Trends and Developments — Certain Developments — Impairment of Auction Rate Securities; Non-Recourse Credit Facility.” Based on our plans and expectations as of the date of the filing of our 2008 Form 10-K and taking into consideration issues relating to the liquidity of our ARS investments, we believe that our available cash resources and future cash flow from operations, will provide sufficient cash resources to meet the commitments described above and to fund our currently anticipated working capital and capital expenditure requirements for up to twenty-four months. Our future liquidity and capital requirements will depend upon numerous factors, including retention of customers at current volume and revenue levels, our existing and new application and service offerings, competing technological and market developments, and potential future acquisitions. In addition, our ability to generate cash flow is subject to numerous factors beyond our control, including general economic, regulatory and other matters affecting us and our customers. We plan to continue to enhance the relevance of our online services to our audience and sponsors and expect to continue to invest in acquisitions, strategic relationships, facilities and technological infrastructure and product development. We may need to raise additional funds to support expansion, develop new or enhanced applications and services, respond to competitive pressures, acquire complementary businesses or technologies or take advantage of unanticipated opportunities. If required, we may raise such additional funds through public or private debt or equity financing, strategic relationships or other arrangements. We cannot assure you that such financing will be available on acceptable terms, if at all, or that such financing will not be dilutive to our stockholders. Future indebtedness may impose various restrictions and covenants on us that could limit our ability to respond to market conditions, to provide for unanticipated capital investments or to take advantage of business opportunities.

 

Off-Balance Sheet Arrangements

 

We have no material off-balance sheet arrangements.

non-cash expenses of $42,060, which included loss from discontinued operations, net of tax, depreciation and amortization, non-cash advertising expense, non-cash stock-based compensation expense, deferred income taxes and an impairment of auction rate securities. Additionally, changes in working capital provided cash flow of $14,054, primarily due to a decrease in accounts receivable of $10,449 and an increase in deferred revenue of $11,231, partially offset by a decrease in accrued expenses and other long-term liabilities of $8,791.

 

Cash used in investing activities from our continuing operations during the three months ended March 31, 2009 was $4,440, which primarily related to investments in property and equipment of $5,290 primarily to enhance our technology platform offset by proceeds from the redemption of auction rate securities of $600 and cash received from the sale of the ACS/ACP Business of $250. Cash used in investing activities from our continuing operations during the three months ended March 31, 2008 was $89,191, which primarily related to net purchases of available-for-sale securities of $87,550, investments in property and equipment of $2,626 primarily to enhance our technology platform and cash received from the sale of the ACS/ACP Business of $985.

 

Cash provided by financing activities during the three months ended March 31, 2009 and March 31, 2008 related to proceeds from the issuance of common stock of $1,827 and $589, respectively.

 

Potential future cash commitments include our anticipated 2009 capital expenditure requirements for the full year which we currently estimate to be up to $25,000. Our anticipated capital expenditures relate to improvements that will be deployed across our public and private portal web sites in order to enable us to service future growth in unique users, page views and private portal customers, as well as to create new sponsorship areas for our customers.

 

Based on our plans and expectations as of the date of this Quarterly Report and taking into consideration issues relating to the liquidity of our ARS investments, we believe that our available cash resources and future cash flow from operations will provide sufficient cash resources to meet the commitments described above and to fund our currently anticipated working capital and capital expenditure requirements for up to twenty-four months. Our future liquidity and capital requirements will depend upon numerous factors, including retention of customers at current volume and revenue levels, our existing and new application and service offerings, competing technological and market developments, and potential future acquisitions. In addition, our ability to generate cash flow is subject to numerous factors beyond our control, including general economic, regulatory and other matters affecting us and our customers. We plan to continue to enhance the relevance of our online services to our audience and sponsors and will continue to invest in acquisitions, strategic relationships, facilities and technological infrastructure and product development. We intend to grow each of our existing businesses and enter into complementary ones through both internal investments and acquisitions. We may need to raise additional funds to support expansion, develop new or enhanced applications and services, respond to competitive pressures, acquire complementary businesses or technologies or take advantage of unanticipated opportunities. If required, we may raise such additional funds through public or private debt or equity financing, strategic relationships or other arrangements. We cannot assure you that such financing will be available on acceptable terms, if at all, or that such financing will not be dilutive to our stockholders. Future indebtedness may impose various restrictions and covenants on us that could limit our ability to respond to market conditions, to provide for unanticipated capital investments or to take advantage of business opportunities.

 

2007 was $103,984 which related to net purchases of available-for-sale securities of $90,410 and investments in property and equipment of $13,574 primarily to enhance our technology platform.

 

Cash provided by financing activities during the nine months ended September 30, 2008 related to proceeds from the issuance of common stock of $3,453 and a tax benefit related to stock option deductions of $315. Cash provided by financing activities during the nine months ended September 30, 2007 principally related to net cash transfers with HLTH of $155,119, which included $149,862 received from HLTH related to the utilization of the Company’s net operating losses, a tax benefit related to stock option deductions of $655 and proceeds from the issuance of common stock of $8,490.

 

Potential future cash commitments include our anticipated 2008 capital expenditure requirements for the full year, which we currently estimate to be up to $25,000. Our anticipated capital expenditures relate to improvements that will be deployed across our public and private portal web sites in order to enable us to service future growth in unique users, page views and private portal customers, as well as to create new sponsorship areas for our customers. In addition, WebMD entered into a definitive agreement to acquire MTS. See “— Introduction — Recent or Pending Transactions — Pending Acquisition of Marketing Technology Solutions Inc.” above. The pending acquisition will result in $50,000 in cash, payable at closing, and payment of up to an additional $25,000 in cash if certain performance thresholds are achieved relating to calendar year 2009.

 

We believe that our available cash resources and future cash flow from operations will provide sufficient cash resources to meet the commitments described above and to fund our currently anticipated working capital and capital expenditure requirements for up to twenty-four months. Our future liquidity and capital requirements will depend upon numerous factors, including retention of customers at current volume and revenue levels, implementation of new or updated application and service offerings, competing technological and market developments, and potential future acquisitions. In addition, our ability to generate cash flow is subject to numerous factors beyond our control, including general economic, regulatory and other matters affecting us and our customers. We plan to continue to enhance our online services and to continue to invest in acquisitions, strategic relationships, facilities, technological infrastructure and product development. We intend to grow our existing businesses and enter into complementary ones through both internal investments and acquisitions. We may need to raise additional funds to support expansion, develop new or enhanced applications and services, respond to competitive pressures, acquire complementary businesses or technologies or take advantage of unanticipated opportunities. If required, we may raise such additional funds through public or private debt or equity financing, strategic relationships or other arrangements. We cannot assure you that such financing will be available on acceptable terms, if at all, or that such financing will not be dilutive to our stockholders. Future indebtedness may impose various restrictions and covenants on us that could limit our ability to respond to market conditions, to provide for unanticipated capital investments or to take advantage of business opportunities.

 

Cash provided by financing activities during the six months ended June 30, 2008 related to proceeds from the issuance of common stock of $2,392. Cash provided by financing activities during the six months ended June 30, 2007 principally related to net cash transfers with HLTH of $145,257, which included $140,000 received from HLTH related to the utilization of the Company’s net operating losses, and proceeds from the issuance of common stock of $5,723.

 

Potential future cash commitments include our anticipated 2008 capital expenditure requirements for the full year, which we currently estimate to be up to $25,000. Our anticipated capital expenditures relate to improvements that will be deployed across our public and private portal web sites in order to enable us to service future growth in unique users, page views and private portal customers, as well as to create new sponsorship areas for our customers. Our liquidity during 2008 is expected to be significantly impacted as a result of the planned HLTH Merger. See “— Introduction — Pending HLTH Merger” above. The planned merger with HLTH will result in the payment of up to $6.89 in cash for each share of HLTH Common Stock as of the closing date of the merger. We expect the combined company to use available cash on hand, as well as cash proceeds to be received from the divestiture by HLTH of its Porex business to fund the cash portion of the Merger Consideration. Additionally, if Porex has not been sold at the time the HLTH Merger is ready to be consummated, we could issue up to $250,000 in redeemable notes to the HLTH stockholders in lieu of a portion of the cash consideration otherwise payable in the merger, or HLTH or WebMD could drawdown proceeds from the respective non-recourse credit facilities they have entered into with Citigroup.

 

We believe that our available cash resources and future cash flow from operations will provide sufficient cash resources to meet the commitments described above and to fund our currently anticipated working capital and capital expenditure requirements for up to twenty-four months. Our future liquidity and capital requirements will depend upon numerous factors, including retention of customers at current volume and revenue levels, our existing and new application and service offerings, competing technological and market developments, and potential future acquisitions. In addition, our ability to generate cash flow is subject to numerous factors beyond our control, including general economic, regulatory and other matters affecting us and our customers. We plan to continue to enhance our online services and to continue to invest in acquisitions, strategic relationships, facilities, technological infrastructure and product development. We intend to grow our existing businesses and enter into complementary ones through both internal investments and acquisitions. We may need to raise additional funds to support expansion, develop new or enhanced applications and services, respond to competitive pressures, acquire complementary businesses or technologies or take advantage of unanticipated opportunities. If required, we may raise such additional funds through public or private debt or equity financing, strategic relationships or other arrangements. We cannot assure you that such financing will be available on acceptable terms, if at all, or that such financing will not be dilutive to our stockholders. Future indebtedness may impose various restrictions and covenants on us that could limit our ability to respond to market conditions, to provide for unanticipated capital investments or to take advantage of business opportunities.

 

was $25,272 which primarily related to net purchases of available-for-sale securities of $20,510 and investments in property and equipment of $4,762 primarily to enhance our technology platform.

 

Cash provided by financing activities during the three months ended March 31, 2008 related to proceeds from the issuance of common stock of $589. Cash provided by financing activities during the three months ended March 31, 2007 was principally related to net cash transfers with HLTH of $145,257, which included $140,000 received from HLTH related to the utilization of WebMD’s NOLs, and proceeds from the issuance of common stock of $4,458.

 

Potential future cash commitments include our anticipated 2008 capital expenditure requirements for the full year which we currently estimate to be up to $25,000. Our anticipated capital expenditures relate to improvements that will be deployed across our public and private portal web sites in order to enable us to service future growth in unique users, page views and private portal customers, as well as to create new sponsorship areas for our customers. Our liquidity during 2008 is expected to be significantly impacted as a result of the planned HLTH Merger. See “— Introduction — Pending HLTH Merger” above. The planned merger with HLTH will result in the payment of up to $6.89 in cash for each share of HLTH Common Stock as of the closing date of the merger. We expect the combined company to use available cash on hand, as well as cash proceeds to be received from the divestitures by HLTH of its Porex and VIPS businesses to fund the cash portion of the merger consideration. Additionally, if either Porex or ViPS has not been sold at the time the HLTH Merger is ready to be consummated, WHC could issue up to $250,000 in redeemable notes to the HLTH stockholders in lieu of a portion of the cash consideration otherwise payable in the merger, or HLTH or WebMD could drawn proceeds from the respective non-recourse credit facilities they have entered into with Citigroup.

 

We believe that our available cash resources and future cash flow from operations will provide sufficient cash resources to meet the commitments described above and to fund our currently anticipated working capital and capital expenditure requirements for up to twenty-four months. Our future liquidity and capital requirements will depend upon numerous factors, including retention of customers at current volume and revenue levels, our existing and new application and service offerings, competing technological and market developments, and potential future acquisitions. In addition, our ability to generate cash flow is subject to numerous factors beyond our control, including general economic, regulatory and other matters affecting us and our customers. We plan to continue to enhance the relevance of our online services to our audience and sponsors and will continue to invest in acquisitions, strategic relationships, facilities and technological infrastructure and product development. We intend to grow each of our existing businesses and enter into complementary ones through both internal investments and acquisitions. We may need to raise additional funds to support expansion, develop new or enhanced applications and services, respond to competitive pressures, acquire complementary businesses or technologies or take advantage of unanticipated opportunities. If required, we may raise such additional funds through public or private debt or equity financing, strategic relationships or other arrangements. We cannot assure you that such financing will be available on acceptable terms, if at all, or that such financing will not be dilutive to our stockholders. Future indebtedness may impose various restrictions and covenants on us that could limit our ability to respond to market conditions, to provide for unanticipated capital investments or to take advantage of business opportunities.

 

We believe that our available cash resources and future cash flow from operations will provide sufficient cash resources to meet the commitments described above and to fund our currently anticipated working capital and capital expenditure requirements for up to twenty-four months. Our future liquidity and capital requirements will depend upon numerous factors, including retention of customers at current volume and revenue levels, our existing and new application and service offerings, competing technological and market developments, and potential future acquisitions. In addition, our ability to generate cash flow is subject to numerous factors beyond our control, including general economic, regulatory and other matters affecting us and our customers. We plan to continue to enhance the relevance of our online services to our audience and sponsors and to continue to invest in acquisitions, strategic relationships, facilities and technological infrastructure and product development. We may need to raise additional funds to support expansion, develop new or enhanced applications and services, respond to competitive pressures, acquire complementary businesses or technologies or take advantage of unanticipated opportunities. If required, we may raise such additional funds through public or private debt or equity financing, strategic relationships or other arrangements. We cannot assure you that such financing will be available on acceptable terms, if at all, or that such financing will not be dilutive to our stockholders. Future indebtedness may impose various restrictions and covenants on us that could limit our ability to respond to market conditions, to provide for unanticipated capital investments or to take advantage of business opportunities.

 

The above discussion does not consider any impact that the Potential Merger Transaction may have on our liquidity. As discussed earlier in this MD&A, HLTH indicated that it is planning to propose a transaction to a Special Committee of our Board of Directors, which would involve the merger of HLTH into our Company for a combination of cash and WebMD Common Stock. HLTH expects that the cash necessary to consummate the potential transaction would come from cash and cash equivalents on hand at HLTH and WebMD and from the proceeds of the sales by HLTH of its ViPS and Porex subsidiaries and possibly its 48% interest in EBS Master LLC. HLTH has received preliminary, non-binding indications of interest for each of these assets and intends to explore potential sale transactions. There can be no assurance that such exploration will result in any definitive agreement or transaction. Additionally, we cannot yet determine the effect that these transactions will have on our liquidity until the transaction terms have been negotiated.

 

revenue levels, our existing and new application and service offerings, competing technological and market developments, and potential future acquisitions. In addition, our ability to generate cash flow is subject to numerous factors beyond our control, including general economic, regulatory and other matters affecting us and our customers. We plan to continue to enhance our online services and to continue to invest in acquisitions, strategic relationships, facilities, technological infrastructure and product development. We intend to grow our existing businesses and enter into complementary ones through both internal investments and acquisitions. We may need to raise additional funds to support expansion, develop new or enhanced applications and services, respond to competitive pressures, acquire complementary businesses or technologies or take advantage of unanticipated opportunities. If required, we may raise such additional funds through public or private debt or equity financing, strategic relationships or other arrangements. We cannot assure you that such financing will be available on acceptable terms, if at all, or that such financing will not be dilutive to our stockholders. Future indebtedness may impose various restrictions and covenants on us that could limit our ability to respond to market conditions, to provide for unanticipated capital investments or to take advantage of business opportunities.

 

ended June 30, 2005 was $13,362 which was primarily due to earnings before interest, taxes, depreciation, amortization and other non-cash items of $6,878 and sources of cash from changes in working capital of $6,636. Sources of cash from changes in working capital were due to increases in deferred revenue of $4,587 and accrued expenses and other long-term liabilities of $2,032.

 

Cash used in investing activities during the six months ended June 30, 2006 was $99,343, which primarily related to net purchases of available-for-sale securities of $21,000, the acquisition of Summex and eMedicine and investments in property and equipment primarily to enhance our technology platform. Cash flow used in investing activities was $44,819 during the six months ended June 30, 2005, which primarily related to the acquisition of HealthShare and the build-out of our new corporate offices in New York.

 

Cash provided by financing activities during the six months ended June 30, 2005 principally related to net cash amounts received from, or transferred to, Emdeon. Emdeon did not transfer cash to us for financing activities during the six months ended June 30, 2006.

 

Potential future cash commitments include $41,000 related to the pending acquisition of MedSite in the third quarter of 2006, a contingent consideration payment of up to $2,500 for RxList which will be determined based on 2006 measurements, a $10,000 contingent consideration payment for Summex which will be determined based on certain revenue thresholds during future years and our anticipated 2006 capital expenditure requirements for the full year which we currently estimate at approximately $25,000 to $30,000. Our anticipated capital expenditures relate to investments in our websites in order to enable us to service future growth in unique users, page views and private portal customers, to create new sponsorship areas for our customers, as well as the relocation of our private portal business offices to larger facilities in the latter half of 2006.

 

We believe that our available cash resources, future cash flow from operations and cash reimbursements from Emdeon for their utilization of our tax net operating loss carryforwards will provide sufficient cash resources to meet the commitments described above and to fund our currently anticipated working capital and capital expenditure requirements for up to twenty-four months. Our future liquidity and capital requirements will depend upon numerous factors, including retention of customers at current volume and revenue levels, our existing and new application and service offerings, competing technological and market developments, and potential future acquisitions. In addition, our ability to generate cash flow is subject to numerous factors beyond our control, including general economic, regulatory and other matters affecting us and our customers. We plan to continue to enhance the relevance of our online services to our audience and sponsors and will continue to invest in acquisitions, strategic relationships, facilities and technological infrastructure and product development. We intend to grow each of our existing businesses and enter into complementary ones through both internal investments and acquisitions. We may need to raise additional funds to support expansion, develop new or enhanced applications and services, respond to competitive pressures, acquire complementary businesses or technologies or take advantage of unanticipated opportunities. If required, we may raise such additional funds through public or private debt or equity financing, strategic relationships or other arrangements. We cannot assure you that such financing will be available on acceptable terms, if at all, or that such financing will not be dilutive to our stockholders. Future indebtedness may impose various restrictions and covenants on us that could limit our ability to respond to market conditions, to provide for unanticipated capital investments or to take advantage of business opportunities.

 

capital expenditure requirements for up to twenty-four months. Our future liquidity and capital requirements will depend upon numerous factors, including retention of customers at current volume and revenue levels, our existing and new application and service offerings, competing technological and market developments, and potential future acquisitions. In addition, our ability to generate cash flow is subject to numerous factors beyond our control, including general economic, regulatory and other matters affecting us and our customers. We plan to continue to enhance the relevance of our online services to our audience and sponsors and will continue to invest in acquisitions, strategic relationships, facilities and technological infrastructure and product development. We intend to grow each of our existing businesses and enter into complementary ones through both internal investments and acquisitions. We may need to raise additional funds to support expansion, develop new or enhanced applications and services, respond to competitive pressures, acquire complementary businesses or technologies or take advantage of unanticipated opportunities. If required, we may raise such additional funds through public or private debt or equity financing, strategic relationships or other arrangements. We cannot assure you that such financing will be available on acceptable terms, if at all, or that such financing will not be dilutive to our stockholders. Future indebtedness may impose various restrictions and covenants on us that could limit our ability to respond to market conditions, to provide for unanticipated capital investments or to take advantage of business opportunities.

 

advertising expense, non-cash stock-based compensation expense, deferred income taxes and a reversal of an income tax valuation allowance applied to goodwill. Additionally, changes in working capital utilized cash flow of $3,597, primarily due to an increase in accounts receivable of $25,430 and a change in amounts due from Emdeon of $1,568, offset by an increase in deferred revenue of $17,502 and an increase in accrued expenses and other long-term liabilities of $6,698. Cash provided by operating activities in 2005 was $28,605, which related to net income of $6,565 adjusted for non-cash expenses of $23,140. Changes in working capital utilized cash flow of $1,100, primarily due to an increase in accounts receivable of $13,974, partially offset by increases in accrued expenses of $6,323, a deferred credit related to lease incentives of $4,398 and amounts due to Emdeon of $3,672.

 

Cash used in investing activities in 2006 was $83,845, which primarily related to the acquisitions of eMedicine, Summex, Medsite and Subimo and investments in property and equipment primarily to enhance our technology platform, partially offset by net maturities and sales of available-for-sale securities of $74,774. Cash used in investing activities in 2005 was $146,606, which primarily related to net purchases of available-for-sale securities of $77,728, the acquisitions of HealthShare and Conceptis and investments in property and equipment primarily as a result of the build-out of our new corporate offices in New York.

 

Cash provided by financing activities in 2005 principally related to the proceeds received from the IPO and net cash amounts received from, or transferred to, Emdeon.

 

The following table summarizes our principal commitments as of December 31, 2006 for future specified contractual obligations that have not been accrued for in our consolidated balance sheet, as well as the estimated timing of the cash payments associated with these obligations. Management has used estimates and assumptions as to the timing of the cash flows associated with these commitments. Management’s estimates of the timing of future cash flows are largely based on historical experience, and accordingly, actual timing of cash flows may vary from these estimates.

 

 

 

 

Potential future cash commitments not included in the specified contractual obligations table above or accrued for in our consolidated balance sheet include our anticipated 2007 capital expenditure requirements which we currently estimate at $15,000 to $20,000. Our anticipated capital expenditures primarily relate to improvements that will be deployed across our public and private portal web sites in order to enable us to service future growth in unique users, page views and private portal customers, as well as to create new sponsorship areas for our customers. We believe that our available cash resources and future cash flow from operations, will provide sufficient cash resources to meet the commitments described above and to fund our currently anticipated working capital and capital expenditure requirements for up to twenty-four months. Our future liquidity and capital requirements will depend upon numerous factors, including retention of customers at current volume and revenue levels, our existing and new application and service offerings, competing technological and market developments, and potential future acquisitions. In addition, our ability to generate cash flow is subject to numerous factors beyond our control, including general economic, regulatory and other matters affecting us and our customers. We may need to raise additional funds to support expansion, develop new or enhanced applications and services, respond to competitive pressures, acquire complementary businesses or technologies or take advantage of unanticipated opportunities. If required, we may raise such additional funds through public or private debt or equity financing, strategic relationships or other arrangements. We cannot assure you that such financing will be available on acceptable terms, if at all, or that such financing will not be dilutive to our stockholders. Future indebtedness may impose various restrictions

and covenants on us that could limit our ability to respond to market conditions, to provide for unanticipated capital investments or to take advantage of business opportunities.