This excerpt taken from the WBMD 10-K filed Mar 16, 2006.
Prior to our IPO, we had not been operated as an entity separate from Emdeon, and, as a result, our historical and pro forma financial information may not be indicative of our historical financial results on a stand-alone basis or future financial performance
Our consolidated financial information included in this Annual Report assumes that, for the periods presented, we had existed as a separate legal entity, and has been derived from the consolidated financial statements of Emdeon. Some costs have been reflected in the consolidated financial statements that are not
necessarily indicative of the costs that we would have incurred had we operated as an independent, stand-alone entity for all periods presented. These costs include allocated portions of Emdeons corporate services and employee healthcare expenses, interest expense and income taxes. Our consolidated financial information included in this Annual Report may not be indicative of our future financial performance, because these statements do not necessarily reflect our historical financial condition, results of operations and cash flows as they would have been had we been operated during the periods presented as a separate, stand-alone entity.
In addition, since the IPO, we have continued to rely on Emdeon to provide us with certain services pursuant to the services agreement we have entered into with Emdeon. We reimburse Emdeon under agreed upon formulas that allocate to us a portion of Emdeons aggregate costs related to those services. With respect to most of the services provided under the services agreement, we believe that it is likely that it would cost us more to provide or contract for them on our own because we benefit from Emdeons economies of scale as a larger corporation. See also Risks Related to our Relationship with Emdeon We continue to be dependent on Emdeon to provide us with services for our business.
We will be required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, and any adverse results from such evaluation or from the evaluation that will be conducted by our auditors could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, beginning with our Annual Report on Form 10-K for the fiscal year ending December 31, 2006, we will be required to include a report by our management on our internal control over financial reporting. Such report will contain, among other matters, an assessment of the effectiveness of our internal control over financial reporting as of the end of our fiscal year, including a statement as to whether or not our internal control over financial reporting is effective. This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by management. Such report must also contain a statement that our auditors have issued an attestation report on managements assessment of such internal controls.
We are currently in the process of preparing to comply with Section 404. We have some experience with documenting, testing and evaluating internal control over financial reporting because our business is a segment of Emdeon, which has already been required to evaluate its internal control over financial reporting under Section 404. However, we have not been through this process for WebMD itself and, because WebMD is a smaller company, certain of the materiality thresholds applicable in WebMDs internal control over financial reporting will be lower than those applicable to Emdeon. In addition, we are currently preparing to perform financial reporting processes that are separate from those of Emdeon, using different financial reporting software than Emdeon uses. We will need to document, test and evaluate our internal control over financial reporting in connection with such implementation.
If our management identifies one or more material weaknesses in our internal control over financial reporting as of December 31, 2006, we will be unable to assert such internal control is effective in our initial management report on such internal control. If we are unable to make that assertion (or if our auditors are unable to attest that our managements report is fairly stated or they are unable to express an opinion on the effectiveness of our internal controls), investors could lose confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our stock price.