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This excerpt taken from the WBMD 10-Q filed Nov 10, 2008. Other
Significant Developments and Trends
Impairment of Auction Rate Securities; Non-Recourse Credit
Facility. We hold investments in auction rate
securities (which we refer to as ARS) backed by student loans,
97% of which are guaranteed under the Federal Family Education
Loan Program (FFELP), and all had credit ratings of AAA or Aaa
when purchased. Historically, the fair value of our ARS
investments approximated par value due to the frequent auction
periods, generally every 7 to 28 days, which provided
liquidity to these investments. However, since February 2008,
virtually all auctions involving these securities have failed.
The result of a failed auction is that these ARS will continue
to pay interest in accordance with their terms at each
respective auction date; however, liquidity of the securities
will be limited until there is a successful auction, the issuer
redeems the securities, the securities mature or until such time
as other markets for these ARS investments develop. We concluded
that the estimated fair value of the ARS no longer approximated
the par value due to the lack of liquidity.
As of March 31, 2008, we concluded the fair value of our
ARS was $141,044, compared to a face value of $168,450. The
impairment in value, or $27,406 was considered to be
other-than-temporary, and accordingly, was recorded as an
impairment charge within the statement of operations during the
three months ended March 31, 2008. During the three and
nine months ended September 30, 2008, we received $2,000
and $3,700, respectively, associated with the partial redemption
of certain of our ARS holdings which represented 100% of their
face value. As a result, as of September 30, 2008, the
total face value of our ARS holdings was $165,500, compared to a
fair value of $132,848. During the three and nine months ended
September 30, 2008, we reduced the carrying value of our
ARS holdings by $4,107 and $5,490, respectively. We assessed
these declines in fair market value to be temporary as they
resulted from fluctuations in interest rate assumptions and,
therefore, recorded these declines as an unrealized loss in our
stockholders’ equity.
In May 2008, we entered into a non-recourse credit facility
(which we refer to as the Credit Facility) with Citigroup that
is secured by its ARS holdings (including, in some
circumstances, interest payable on the ARS holdings), that will
allow WebMD to borrow up to 75% of the face amount of the ARS
holdings pledged as collateral under the Credit Facility. The
Credit Facility is governed by a loan agreement, dated as of
May 6, 2008, containing customary representations and
warranties of the borrower and certain affirmative covenants and
negative covenants relating to the pledged collateral. Under the
loan agreement, the borrower and the lender may, in certain
circumstances, cause the pledged collateral to be sold, with the
proceeds of any such sale required to be applied in full
immediately to repayment of amounts borrowed.
No borrowings have been made under the Credit Facility to date.
Borrowings can be made under this Credit Facility until May
2009. The interest rate applicable to such borrowings will be
one-month LIBOR plus
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250 basis points. Any borrowings outstanding under the
Credit Facility after March 2009 become demand loans, subject to
60 days notice, with recourse only to the pledged
collateral.
HLTH has also entered into a credit facility with Citigroup, on
substantially similar terms and conditions.
We continue to monitor the market for ARS as well as the
individual ARS investments we own. We may be required to record
additional losses in future periods if the fair value of our ARS
holdings deteriorates further.
Use of the Internet by Consumers and
Physicians. The Internet has emerged as a major
communications medium and has already fundamentally changed many
sectors of the economy, including the marketing and sales of
financial services, travel, and entertainment, among others. The
Internet is also changing the healthcare industry and has
transformed how consumers and physicians find and utilize
healthcare information. As consumers are required to assume
greater financial responsibility for rising healthcare costs,
the Internet serves as a valuable resource by providing them
with immediate access to searchable and dynamic interactive
content to check symptoms, assess risks, understand diseases,
find providers and evaluate treatment options. The Internet has
also become a primary source of information for physicians
seeking to improve clinical practice and is growing relative to
traditional information sources, such as conferences, meetings
and offline journals.
Increased Online Marketing and Education Spending for
Healthcare Products. Pharmaceutical,
biotechnology and medical device companies spend large amounts
each year marketing their products and educating consumers and
physicians about them; however, only a small portion of this
amount is currently spent on online services. We believe that
these companies, which comprise the majority of our advertisers
and sponsors, are becoming increasingly aware of the
effectiveness of the Internet relative to traditional media in
providing health, clinical and product-related information to
consumers and physicians, and this increasing awareness will
result in increasing demand for our services. However,
notwithstanding our general expectation for increased demand,
our advertising and sponsorship revenue may vary significantly
from quarter to quarter due to a number of factors, many of
which are not in our control, and some of which may be difficult
to forecast accurately, including the following:
Other factors that may affect the timing of contracting for
specific programs with advertisers and sponsors, or receipt of
revenue under such contracts, include: the timing of FDA
approval for new products or for new approved uses for existing
products; the timing of FDA approval of generic products that
compete with existing brand name products; the timing of
withdrawals of products from the market; seasonal factors
relating to the prevalence of specific health conditions and
other seasonal factors that may affect the timing of promotional
campaigns for specific products; and the scheduling of
conferences for physicians and other healthcare professionals.
Changes in Health Plan Design; Health Management
Initiatives. In a healthcare market where a
greater share of the responsibility for healthcare costs and
decision-making has been increasingly shifting to consumers, use
of information technology (including personal health records) to
assist consumers in making informed decisions about healthcare
has also increased. We believe that through our WebMD Health and
Benefits Manager tools, including our personal health record
application, we are well positioned to play a role in this
consumer-directed healthcare environment, and these services
will be a significant driver for the growth of our private
portals during the next several years. However, our growth
strategy depends, in part, on increasing usage of our private
portal services by our employer and health plan clients’
employees and members, respectively. Increasing usage of our
services requires us to continue to deliver and improve the
Table of Contents
underlying technology and develop new and updated applications,
features and services. In addition, we face competition in the
area of healthcare decision-support tools and online health
management applications and health information services. Many of
our competitors have greater financial, technical, product
development, marketing and other resources than we do, and may
be better known than we are. We also expect that, for clients
and potential clients in the industries most seriously affected
by recent adverse changes in general economic conditions
(including those in the financial services industry), we may
experience some reductions in initial contracts, contract
expansions and contract renewals for our private portal services.
The healthcare industry in the United States and relationships
among healthcare payers, providers and consumers are very
complicated. In addition, the Internet and the market for online
services are relatively new and still evolving. Accordingly,
there can be no assurance that the trends identified above will
continue or that the expected benefits to our businesses from
our responses to those trends will be achieved. In addition, the
market for healthcare information services is highly competitive
and not only are our existing competitors seeking to benefit
from these same trends, but the trends may also attract
additional competitors.
This excerpt taken from the WBMD 10-Q filed Aug 11, 2008. Other
Significant Developments and Trends
Impairment of Auction Rate Securities. We hold
investments in ARS backed by student loans, 97% of which are
guaranteed under the Federal Family Education Loan Program
(FFELP), and all had credit ratings of AAA or Aaa when
purchased. Historically, the fair value of our ARS investments
approximated par value due to the frequent auction periods,
generally every 7 to 28 days, which provided liquidity to
these investments. However, since February 2008, virtually all
auctions involving these securities have failed. The result of a
failed auction is that these ARS will continue to pay interest
in accordance with their terms at each respective auction date;
however, liquidity of the securities will be limited until there
is a successful auction, the issuer redeems the securities, the
securities mature or until such time as other markets for these
ARS investments develop. We concluded that the estimated fair
value of the ARS no longer approximated the par value due to the
lack of liquidity.
As of March 31, 2008, we concluded the fair value of our
ARS was $141,044, compared to a face value of $168,450. The
impairment in value, or $27,406 was considered to be
other-than-temporary, and accordingly, was recorded as an
impairment charge within the statement of operations during the
three months ended March 31, 2008. During the three and six
months ended June 30, 2008, we received $950 and $1,700,
respectively, associated with the partial redemption of certain
of our ARS holdings which represented 100% of their face value.
As a result, as of June 30, 2008, the total face value of
our ARS holdings was $167,500. During the three months ended
June 30, 2008, we reduced the carrying value of our ARS
holdings by $1,383. We assessed this decline in fair market
value to be temporary and therefore recorded this decline as an
unrealized loss in our stockholders’ equity.
We continue to monitor the market for ARS as well as the
individual ARS investments we own. We may be required to record
additional losses in future periods if the fair value of our ARS
holdings deteriorates further.
Use of the Internet by Consumers and
Physicians. The Internet has emerged as a major
communications medium and has already fundamentally changed many
sectors of the economy, including the marketing and sales of
financial services, travel, and entertainment, among others. The
Internet is also changing the healthcare
Table of Contents
industry and has transformed how consumers and physicians find
and utilize healthcare information. As consumers are required to
assume greater financial responsibility for rising healthcare
costs, the Internet serves as a valuable resource by providing
them with immediate access to searchable and dynamic interactive
content to check symptoms, assess risks, understand diseases,
find providers and evaluate treatment options. The Internet has
also become a primary source of information for physicians
seeking to improve clinical practice and is growing relative to
traditional information sources, such as conferences, meetings
and offline journals.
Increased Online Marketing and Education Spending for
Healthcare Products. Pharmaceutical,
biotechnology and medical device companies spend large amounts
each year marketing their products and educating consumers and
physicians about them; however, only a small portion of this
amount is currently spent on online services. We believe that
these companies, which comprise the majority of our advertisers
and sponsors, are becoming increasingly aware of the
effectiveness of the Internet relative to traditional media in
providing health, clinical and product-related information to
consumers and physicians, and this increasing awareness will
result in increasing demand for our services. However,
notwithstanding our general expectation for increased demand,
our advertising and sponsorship revenue may vary significantly
from quarter to quarter due to a number of factors, many of
which are not in our control, and some of which may be difficult
to forecast accurately, including the following:
Other factors that may affect the timing of contracting for
specific programs with advertisers and sponsors, or receipt of
revenue under such contracts, include: the timing of FDA
approval for new products or for new approved uses for existing
products; the timing of FDA approval of generic products that
compete with existing brand name products; the timing of
withdrawals of products from the market; seasonal factors
relating to the prevalence of specific health conditions and
other seasonal factors that may affect the timing of promotional
campaigns for specific products; and the scheduling of
conferences for physicians and other healthcare professionals.
Changes in Health Plan Design; Health Management
Initiatives. In a healthcare market where a
greater share of the responsibility for healthcare costs and
decision-making has been increasingly shifting to consumers, use
of information technology (including personal health records) to
assist consumers in making informed decisions about healthcare
has also increased. We believe that through our WebMD Health and
Benefits Manager tools, including our personal health record
application, we are well positioned to play a role in this
consumer-directed healthcare environment, and these services
will be a significant driver for the growth of our private
portals during the next several years. However, our growth
strategy depends, in part, on increasing usage of our private
portal services by our employer and health plan clients’
employees and members, respectively. Increasing usage of our
services requires us to continue to deliver and improve the
underlying technology and develop new and updated applications,
features and services. In addition, we face competition in the
area of healthcare decision-support tools and online health
management applications and health information services. Many of
our competitors have greater financial, technical, product
development, marketing and other resources than we do, and may
be better known than we are.
The healthcare industry in the United States and relationships
among healthcare payers, providers and consumers are very
complicated. In addition, the Internet and the market for online
services are relatively new and still evolving. Accordingly,
there can be no assurance that the trends identified above will
continue or that the expected benefits to our businesses from
our responses to those trends will be achieved. In addition, the
market for healthcare information services is highly competitive
and not only are our existing competitors seeking to benefit
from these same trends, but the trends may also attract
additional competitors.
Table of Contents
This excerpt taken from the WBMD 10-Q filed May 12, 2008. Other
Significant Developments and Trends
Impairment of Auction Rate Securities. WebMD
holds investments in auction rate securities (ARS). The types of
ARS investments WebMD owns are backed by student loans, 97% of
which are guaranteed under the Federal Family Education Loan
Program (FFELP), and all had credit ratings of AAA or Aaa when
purchased. Historically, the fair value of our ARS investments
approximated par value due to the frequent auction periods,
generally every 7 to 28 days, which provided liquidity to
these investments. However, since February 2008, virtually all
auctions involving these securities have failed. The result of a
failed auction is that these ARS will continue to pay interest
in accordance with their terms at each respective auction date;
however liquidity of the securities will be limited until there
is a successful auction, the issuer redeems the securities, the
securities mature or until such time as other markets for these
ARS investments develop. We concluded that the estimated fair
value of the ARS no longer approximates the par value due to the
lack of liquidity.
We concluded the fair value of our ARS was $141,044, compared to
a par value of $168,450 as of March 31, 2008. The
impairment in value, or $27,406 was considered to be
other-than-temporary, and accordingly, was recorded as an
impairment charge within the statement of operations during the
three months ended March 31, 2008. We continue to monitor
the market for auction rate securities as well as the individual
ARS investments we own. We may be required to record additional
losses in future periods if the fair value of our ARS
deteriorate further.
Use of the Internet by Consumer and
Physicians. The Internet has emerged as a major
communications medium and has already fundamentally changed many
sectors of the economy, including the marketing and sales of
financial services, travel, and entertainment, among others. The
Internet is also changing the healthcare industry and has
transformed how consumers and physicians find and utilize
healthcare information. As consumers are required to assume
greater financial responsibility for rising healthcare costs,
the Internet serves as a valuable resource by providing them
with immediate access to searchable and dynamic interactive
content to check symptoms, assess risks, understand diseases,
find providers and evaluate treatment options. The Internet has
also become a primary source of information for physicians
seeking to improve clinical practice and is growing relative to
traditional information sources, such as conferences, meetings
and offline journals.
Table of Contents
Increased Online Marketing and Education Spending for
Healthcare Products. Pharmaceutical,
biotechnology and medical device companies spend large amounts
each year marketing their products and educating consumers and
physicians about them, however, only a small portion of this
amount is currently spent on online services. We believe that
these companies, which comprise the majority of our advertisers
and sponsors, are becoming increasingly aware of the
effectiveness of the Internet relative to traditional media in
providing health, clinical and product-related information to
consumers and physicians, and that this increasing awareness
will result in increasing demand for our services. However,
notwithstanding our general expectation for increased demand,
our advertising and sponsorship revenue may vary significantly
from quarter to quarter due to a number of factors, many of
which are not in our control, and some of which may be difficult
to forecast accurately, including the following:
Other factors that may affect the timing of contracting for
specific programs with advertisers and sponsors, or receipt of
revenue under such contracts, include: the timing of FDA
approval for new products or for new approved uses for existing
products; the timing of FDA approval of generic products that
compete with existing brand name products; the timing of
withdrawals of products from the market; seasonal factors
relating to the prevalence of specific health conditions and
other seasonal factors that may affect the timing of promotional
campaigns for specific products; and the scheduling of
conferences for physicians and other healthcare professionals.
Changes in Health Plan Design; Health Management
Initiatives. In a healthcare market where a
greater share of the responsibility for healthcare costs and
decision-making has been increasingly shifting to consumers, use
of information technology (including personal health records) to
assist consumers in making informed decisions about healthcare
has also increased. We believe that through our WebMD Health and
Benefits Manager tools, including our personal health record
application, we are well positioned to play a role in this
consumer-directed healthcare environment, and these services
will be a significant driver for the growth of our private
portals during the next several years. However, our growth
strategy depends, in part, on increasing usage of our private
portal services by our employer and health plan clients’
employees and members, respectively. Increasing usage of our
services requires us to continue to deliver and improve the
underlying technology and develop new and updated applications,
features and services. In addition, we face competition in the
area of healthcare decision-support tools and online health
management applications and health information services. Many of
our competitors have greater financial, technical, product
development, marketing and other resources than we do, and may
be better known than we are.
The healthcare industry in the United States and relationships
among healthcare payers, providers and consumers are very
complicated. In addition, the Internet and the market for online
services are relatively new and still evolving. Accordingly,
there can be no assurance that the trends identified above will
continue or that the expected benefits to our businesses from
our responses to those trends will be achieved. In addition, the
market for healthcare information services is highly competitive
and not only are our existing competitors seeking to benefit
from these same trends, but the trends may also attract
additional competitors.
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