##### Table of Contents









UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | For the fiscal year ended December 31, 2004                                                 
|  
|or
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
|  
|   |  | For the transition period
    from           to                                             

Commission file number: 0-24975





WebMD Corporation


(Exact name of registrant as specified in its charter)


|                                                                                              |  |                                     
|--------------------------------------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                                                      |  | 94-3236644                          
|(State of incorporation)                                                                      |  | (I.R.S. employer identification no.)
|                                                                                             
|669 River Drive, Center 2
    Elmwood Park, New Jersey(Address of principal executive office) |  | 07407-1361(Zip code)                

(201) 703-3400


None




Common Stock, par value $.0001 per share




þ o


o


þ o




DOCUMENTS INCORPORATED BY REFERENCE












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TABLE OF CONTENTS


|                                                              |  |                                                                                                                      |     |      |    | 
|------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------- | --- | ---- | -- | 
|                                                              |  |                                                                                                                      |     | Page |   
|                                                              |  |                                                                                                                      |     |      |   
|Cautionary Statement Regarding
    Forward-Looking Statements |  |                                                                                                                      | 2   |     
|                                                             
|PART I                                                       
|Item 1.                                                       |  | Business                                                                                                             |     |      | 3  | 
|Item 2.                                                       |  | Properties                                                                                                           |     |      | 42 | 
|Item 3.                                                       |  | Legal Proceedings                                                                                                    |     |      | 42 | 
|Item 4.                                                       |  | Submission of Matters to a Vote of Security
    Holders                                                              |     |      | 47 | 
|                                                             
|PART II                                                      
|Item 5.                                                       |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |     |      | 48 | 
|Item 6.                                                       |  | Selected Financial Data                                                                                              |     |      | 50 | 
|Item 7.                                                       |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |     |      | 52 | 
|Item 7A.                                                      |  | Quantitative and Qualitative Disclosures
    about Market Risk                                                       |     |      | 95 | 
|Item 8.                                                       |  | Financial Statements and Supplementary
    Data                                                                      |     |      | 95 | 
|Item 9.                                                       |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |     |      | 95 | 
|Item 9A.                                                      |  | Controls and Procedures                                                                                              |     |      | 95 | 
|Item 9B.                                                      |  | Other Information                                                                                                    |     |      | 96 | 
|                                                             
|PART III                                                     
|Item 10.                                                      |  | Directors and Executive Officers of the
    Registrant                                                               |     |      | 97 | 
|Item 11.                                                      |  | Executive Compensation                                                                                               |     |      | 97 | 
|Item 12.                                                      |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |     |      | 97 | 
|Item 13.                                                      |  | Certain Relationships and Related
    Transactions                                                                   |     |      | 97 | 
|Item 14.                                                      |  | Principal Accountant Fees and Services                                                                               |     |      | 97 | 
|                                                             
|PART IV                                                      
|Item 15.                                                      |  | Exhibits and Financial Statement
    Schedules                                                                       |     |      | 98 | 
|Signatures                                                    |  |                                                                                                                      | 99  |     
|Financial Statements                                          |  |                                                                                                                      | F-1 |     
|Schedule II. Valuation and Qualifying
    Accounts            |  |                                                                                                                      | S-1 |     
|Index to Exhibits                                             |  |                                                                                                                      | E-1 |     
|EX-12.1 COMPUTATION OF RATIO OF EARNINGS                     
|EX-21.1 SUBSIDIARIES OF THE REGISTRANT                       
|EX-23.1 CONSENT OF ERNST & YOUNG LLP                         
|EX-31.1 SECTION 302 CERTIFICATION OF THE CEO                 
|EX-31.2 SECTION 302 CERTIFICATION OF THE CFO                 
|EX-32.1 SECTION 906 CERTIFICATION OF THE CEO                 
|EX-32.2 SECTION 906 CERTIFICATION OF THE CFO                 
|EX-99.1 AMENDED AND RESTATED AUDIT COMMITTEE CHARTER         
|EX-99.2 AMENDED AND RESTATED COMPENSATION COMMITTEE CHARTER  
|EX-99.3 AMENDED AND RESTATED NOMINATING COMMITTEE CHARTER    



tm DX sm sm tm sm


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##### Table of Contents






CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS






| |   |                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the failure to achieve sufficient levels of customer utilization
    and market acceptance of new or updated products and services,                                              
|
| |  | the inability to successfully deploy new or updated applications,                                                                                                                
|
| |  | difficulties in forming and maintaining relationships with
    customers and strategic partners,                                                                                 
|
| |  | the anticipated benefits from acquisitions not being fully
    realized or not being realized within the expected time frames;                                                   
|
| |  | the inability to attract and retain qualified personnel, and                                                                                                                     
|
| |  | general economic, business or regulatory conditions affecting
    the healthcare, information technology, Internet and plastic
    industries being less favorable than expected.



2



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PART I







|        |         
|------- | --------
|Item 1. | Business

INTRODUCTION


General Information






www.webmd.com


Overview of Our Businesses






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | WebMD Business Services. WebMD Business Services
    provides healthcare reimbursement cycle management services for
    healthcare providers and transaction-related administrative
    services for healthcare payers, together with related technology
    solutions. We transmit transactions electronically between
    healthcare payers and providers and provide healthcare payers
    with transaction processing technology, decision support and
    data warehousing solutions, consulting services and outsourcing
    services. Our services for payers include conversion of paper
    claims to electronic ones and related document management
    services, as well as print-and-mail services for the
    distribution of checks, remittance advice and explanation of
    benefits. We also provide automated patient billing services to
    healthcare providers, including statement printing and mailing
    services. We are focused on continuing to increase the
    percentage of healthcare transactions that are handled
    electronically and on providing electronic solutions that can be
    used by payers and providers to automate the entire
    reimbursement process.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | WebMD Business Services generates revenues by selling our
    transaction services to healthcare payers and providers,
    generally on either a per transaction basis or, in the case of
    some providers, on a monthly fixed fee basis. We also generate
    revenue by selling our patient statement and paid-claims
    communication services, typically on a per statement or per
    communication basis. Finally, we generate revenue by licensing
    software and providing information technology consulting
    services to payers, including governmental payers. We charge
    healthcare payers annual license fees, which are based on the
    number of covered members, for use of our software and provide
    business and information technology consulting services to them
    on a time and materials basis. The consulting services we
    provide to certain governmental agencies are typically billed on
    a cost-plus fee structure. WebMD Business Services revenue was
    $686.6 million in 2004 and $505.7 million in 2003.

3



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| |   |                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | WebMD Practice Services. WebMD Practice Services
    develops and markets information technology systems for
    healthcare providers, primarily under The Medical Manager,
    Intergy and WebMD Network Services brands. Our systems include:



| |   |                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | administrative and financial applications that enable healthcare
    providers and their administrative personnel to manage their
    practices more efficiently, and
|
| |  | electronic medical record and other clinical applications that
    assist them in delivering quality patient care.                                                   



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our systems and services are used by physician offices to
    automate their scheduling, billing and other administrative
    tasks, to transmit transactions electronically, to maintain
    electronic medical records and to automate documentation of
    patient encounters. In addition, through WebMD Network Services,
    we provide integrated access to our WebMD Business Services
    transaction services for our WebMD Practice Services customers.                                                                                                                                                                                                                  
|
| | We generate revenues from: one-time fees for licenses to our
    software modules, for system hardware and for implementation
    services; and recurring fees for the maintenance and support of
    our software and system hardware. Pricing depends on the number
    and type of software modules to be licensed, the number of
    users, the complexity of the installation and other factors. Our
    WebMD Network Services and some of our WebMD Practice Services
    products and services are priced on a monthly fee per provider
    basis or a per transaction basis. WebMD Practice Services
    revenue was $296.1 million in 2004 and $302.6 million
    in 2003.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | WebMD Health. WebMD Health provides health
    information, health and benefit decision-support tools,
    continuing medical education services, and interactive
    communications services through its public online portals for
    consumers and physicians, through syndication and distribution
    relationships, through customized private portals for employers
    and payers, and, to a lesser extent, through offline publishing
    services. Our offerings for consumers help them become more
    informed about healthcare choices and assist them in playing an
    active role in managing their own health. Our offerings for
    healthcare professionals help them improve their clinical
    knowledge, as well as their communication with patients
    regarding treatment options for specific health conditions.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We reach over 20 million unique users per month (based on
    the average during 2004) through www.webmd.com,
    www.medscape.comand our other public portals, as well as
    other Web sites with which we have relationships. We believe
    that Medscape from WebMD, our portal for healthcare
    professionals, reaches more physicians than any other
    physician-targeted Web site. Our private portals provide online
    health and benefit management services for employer and payer
    sponsors. These services assist the sponsors employees and
    members to make informed benefit, provider and treatment choices
    that help reduce healthcare costs while improving quality of
    care. We integrate the sponsors unique health and benefits
    content with our content and technology platform, to create
    private portals specific to the eligibility, coverage and health
    profile of each plan member. We generate revenue by providing
    healthcare and consumer products companies with opportunities to
    reach our public portals audience through a variety of content
    sponsorship formats and advertising products. In addition, we
    create and distribute accredited online continuing medical
    education programs funded by grants from a variety of sponsors.
    We also generate revenues by licensing private portals to
    employers and payers for use by their employees and members.
|
| |  | We publish specialized physician directories, used by
    physicians, pharmacists and other healthcare professionals, and
    professional medical reference textbooks. We generate revenue
    from sales of subscriptions to our medical reference
    publications, from sales of physician directories, and from
    sales of advertisements in those directories.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



| |                                                                                
| | -------------------------------------------------------------------------------
| | WebMD Health revenue was $134.3 million in 2004 and
    $110.7 million in 2003.

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Porex. Porex develops, manufactures and
    distributes proprietary porous plastic products and components
    used in healthcare, industrial and consumer applications. Our
    Porex customers include both end-users of our finished products,
    as well as manufacturers that include our components in their
    products for the medical device, life science, research and
    clinical laboratory, surgical and other markets. Porex is an
    international business with manufacturing operations in North
    America, Europe and Asia and customers in more than 65
    countries. Porex revenue from continuing operations was
    $77.1 million in 2004 and $71.9 million in 2003.







Recent Developments


Evaluation of WebMD Health Transaction Alternatives.


Acquisition of HealthShare Technologies.


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HEALTHCARE INFORMATION SERVICES AND TECHNOLOGY SOLUTIONS







WebMD Business Services


Overview










Customer and Vendor Relationships


Customers.




| |   |                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Healthcare Providers. For providers, WebMD Business
    Services can help them automate every step of the reimbursement
    cycle, including: checking patient coverage eligibility
    information;

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | seeking pre-authorization from a payer for services; submitting
    and tracking claims; and automated payment posting, credit card
    billing and patient statement processing. Our EDI connectivity
    services reduce paperwork and the need for communication by
    mail, telephone and fax, resulting in cost savings for payers
    and providers. These services also expedite the reimbursement
    process, which can result in a lower average number of
    outstanding accounts receivable days for providers. In addition,
    the use of EDI for eligibility and other coverage-related
    transactions can save hospital, physician and dentist office
    staff significant amounts of time compared to phone or other
    individual verification methods and allow them to provide faster
    answers to patient questions regarding coverage.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Healthcare Payers. For a healthcare payer, the
    administrative cost of supporting patient medical encounters
    includes eligibility and benefit information distribution,
    intake of paper and electronic claims, claim adjudication,
    payment and explanation of benefits (or EOB) distribution, as
    well as a wide variety of member and provider service and
    communication activities. WebMD Business Services provides
    services that help automate and reduce the cost and improve the
    accuracy of these processes. Specifically, our electronic
    transaction services automate the data exchange between
    healthcare providers and payers for patient eligibility and
    benefits information, claims transactions, remittance
    information, referrals, claim status information and other
    processes. Payers using us as their managed EDI gateway for
    inbound transactions benefit from improved reliability and
    improved auto-adjudication rates. Our systems can apply
    customized payer-specific business rules to these transaction
    processes to further improve payer auto-adjudication rates
    (which means the percentage of claims that are adjudicated by
    the payers computer systems, without review by payer
    personnel), which provides additional cost savings to our
    clients. These automation tools, in conjunction with our imaging
    and scanning services for inbound transactions and print and
    mail services for remittances and other outbound communications,
    allow payers to better focus on their core activities: provider
    network management, employer marketing and contracting, benefit
    plan design, and member service. In addition, by outsourcing
    inbound and outbound transaction processes to us, payers can
    reduce their capital expenses and operating costs. Our
    acquisitions of Advanced Business Fulfillment in 2003 and Dakota
    Imaging in 2004 support our ability to provider more
    comprehensive business process outsourcing services. For a
    description of other services that WebMD Business Services
    provides to healthcare payers, see  ViPS
    below.

Information System Vendors.


Clearinghouses.


Our Connectivity Services


Administrative Solutions.


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| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| |  | beginning with insurance eligibility verification,                            
|
| |  | continuing through the claim submission process,                              
|
| |  | followed by tracking the reimbursement through claim status
    inquiries, and
|
| |  | concluding with electronic remittance information and payment
    posting.    





Clinical Solutions.




| |   |                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------
| |  | electronic ordering of clinical tests and the reporting of test
    results between healthcare providers and labs, and          
|
| |  | electronic prescribing that references medication histories,
    payer formularies, and drug usage reports at the point of care.



Accessing Our Connectivity.






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Claim Master. Through our Claim Master service, providers
    can securely access our transaction services through the
    Internet. Claim Master can be used as a stand-alone system or as
    a complement to a practice management system or hospital
    information system. Claims are captured from the source
    healthcare information system and incorporated into the Claim
    Master relational database to be tracked through event-driven
    updates. The Claim Master database serves as the repository for
    all claim management functions including viewing, editing (in
    real time), correcting, submitting and managing payer responses.
    During validation, claims are separated into clean

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | claims and those needing additional information. Clean claims
    are passed on to our clearinghouse in a HIPAA-compliant format
    and then submitted to the appropriate payers. Claims needing
    additional information are edited, corrected, and then
    submitted. With Claim Masters wide array of reporting and
    display options, providers can clearly understand the location
    and status of any claim or batch of claims at any given time,
    including the status of all claims in the system, types of claim
    errors and list of claims sorted by dollar amount, work queue
    and payer.          
|
| |  | WebMD Office. Through our WebMD Office Internet-based
    service, providers can securely access our transaction services
    through either a standard dial-up or high speed DSL or cable
    modem. WebMD Office can be used as a stand-alone system or as a
    complement to a practice management system through an import and
    data management function that allows transactions to be
    generated from the practice management system and submitted
    through WebMD Office. In addition, our practice management
    system vendor partners may elect to market a private-label brand
    version of WebMD Office.
|
| |  | WebMD Assistant. WebMD Assistant integrates with hospital
    information systems to automate various registration activities
    such as insurance eligibility verification, credit checking and
    address verification. WebMD Assistant can be configured to
    automatically perform real-time tasks during patient
    registration. This saves the registration staff time by
    eliminating the need to use separate systems for registration
    and for eligibility verification. The eligibility response can
    be automatically stored within the patient record as a permanent
    reference.                  
|
| |  | WebMD Receivable Analysis. WebMD Receivable Analysis is
    an electronic screening service designed to verify Medicaid and
    other forms of insurance eligibility in an electronic batch
    format. The healthcare provider submits a file electronically
    and the file is processed against the WebMD payer databases to
    determine eligibility. WebMD customers use this service to
    identify Medicaid and other forms of eligibility that may apply
    to patients who have been classified as not having coverage. The
    resulting reclassification often results in significant
    reimbursements.        
|
| |  | WebMD Accupost. WebMD Accupost automates the posting of
    payments received from governmental and commercial payers that
    provide an electronic remittance advice into the providers
    financial accounting system. Automated posting is completed in a
    fraction of the time it takes to perform these same tasks
    manually and is more accurate.                                                                                                                                                                                                                                                                

ViPS




Government Solutions.




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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Centralized Medicare Beneficiary Eligibility Transaction
    System. This system will be used by healthcare providers and
    other submitters, network service providers and clearinghouses.
    ViPS is providing overall program management for this system.
    For this project, ViPS is working with other WebMD Business
    Services units and benefiting from their EDI subject matter
    expertise and is also working with Northrop Grumman Mission
    Systems.                                                                                                                                                                                                                                                                      
|
| |  | System to Support the Retiree Drug Subsidy Provisions of the
    MMA. Under the MMA, employers are eligible for a financial
    subsidy from Medicare if they keep retiree beneficiaries on
    their prescription drug plan rather than have them move to the
    new Medicare prescription drug benefit. ViPS is working with
    Group Health, Inc., Arkansas Blue Cross Blue Shield and Northrop
    Grumman Mission Systems on this project, which includes
    responsibility for processing enrollment applications and
    payment requests, issuing payments and remittance advices to
    eligible employers, providing a call center, conducting outreach
    activities, performing fraud analysis and providing related
    training.



Healthpayer Solutions.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | MCSource. MCSource is a medical management decision
    support system that consists of an integrated suite of
    analytical and Web-based applications designed to give health
    plans the ability to address critical issues such as medical
    cost and utilization, provider profiling, disease management,
    quality improvement and medical review. MCSources
    foundation is a high-performance data warehouse that can store
    all types of administrative healthcare information. MCSource is
    designed to support the complexities and usage volumes of large,
    information-driven health plans and has been deployed to more
    than 20 customers, including the BCBS Federal Employee
    Program, where it is used to manage a data warehouse covering
    approximately four million lives and five years of longitudinal
    member data.
|
| |  | STARSentinel. STARSentinel is an early-warning detection
    system that looks at health plan data and evaluates claims
    against providers claims histories, specialty profiles and
    common, documented fraud schemes. By calling early attention to
    questionable patterns, STARSentinel helps prioritize cases and
    helps health plans use their resources with maximum productivity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



Print-and-Mail Services


ABF.




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WebMD ExpressBill.




| |   |                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Patient Mailings. On behalf of healthcare provider
    customers, we print invoices, account statements, collection
    letters, recall notices and other communications and mail them
    to patients.                                                    
|
| |  | Paper Claims. Claims that cannot be sent electronically
    to payers can be sent by healthcare providers electronically to
    WebMD ExpressBill, where we print and mail them on their behalf.                                                           
|
| |  | Payment Processing. We process payments on behalf of
    providers and other customers, receiving and depositing checks,
    posting payments and transmitting funds in accordance with
    customer instructions.                                         
|
| |  | Electronic Presentment and Payment Services. Our
    electronic presentment and payment services offer healthcare
    providers the ability to present statement and invoice images to
    patients electronically and to receive payment via the Internet.

Sales and Marketing






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We promote our EDI and print-and-mail services for providers to
    organizations that have relationships with or access to a large
    number of providers, such as practice management systems
    vendors, hospital information systems vendors, practice
    management companies and other clearinghouses. In certain cases,
    we agree to pay a sales commission to these organizations as an
    inducement to use WebMD Business Services as the clearinghouse
    for the transactions made through their systems or by providers
    with which they have relationships. We also market our EDI and
    print-and-mail services directly to small and large physician
    practices, dentists, hospitals and other healthcare providers.
    We offer our payer customers the opportunity to work with us in
    targeted programs to educate physicians and dentists to increase
    the utilization of electronic services. When a payer agrees to
    participate in such a program, WebMD utilizes information
    supplied by the payer to target providers that may not be
    sending claims electronically.
|
| |  | A team of sales, marketing and account management personnel
    market our EDI services and other pre- and post-adjudication
    transaction services directly to healthcare payers. In addition,
    in the post-adjudication services area, we have established
    relationships with vendors of claims processing software.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | In the pharmacy EDI area, WebMD Business Services has
    established relationships with large retail pharmacy chains and
    pharmacy software vendors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | A team of account management personnel, supported by
    professional services representatives, markets our ViPS
    Government Solutions Group products and services. The Government
    Solutions Group extends its government sales capabilities
    through key relationships with leading government contractors,
    including Computer Sciences Corp., SAIC, BearingPoint and
    Northrop Grumman.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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| |   |                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | ViPS often bids on government projects together with one or more
    of these companies. ViPS is seeking to extend its government
    services reach into additional government agencies.                                                                                                                                                                                   
|
| |  | ViPS Healthpayer Solutions Group markets its products and
    services nationally through a direct sales organization. Because
    of ViPS long-standing industry relationships, particularly
    with BCBS plan organizations and other large commercial payers,
    ViPS is often invited to bid on contracts to be awarded based on
    competitive bidding procedures.

HIPAA







WebMD Practice Services


Overview






| |   |                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------
| |  | automate scheduling, billing, receivables management and other
    administrative and financial management tasks,       
|
| |  | enable providers to maintain electronic medical records and to
    automate the documentation of patient encounters, and
|
| |  | facilitate the use of electronic data interchange for
    administrative and clinical healthcare transactions.          







| |   |                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our WebMD Network Services administrative transactions services,
    generally on a per provider per month subscription basis or a
    per transaction basis; and
|
| |  | our clinical transaction services, on a per provider per month
    subscription basis.                                                                           

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Practice Management Systems


Intergy Practice.








The Medical Manager.


13



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Medware.


Other Practice Management Systems.


Clinical Solutions




Intergy EHR.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | PhysicianFlow technology that enables physicians to access
    information from a variety of sources  including the
    patient chart, imaging systems, practice management systems, and
    laboratory systems  all from one screen.                                                                                                                                                                                                                                                  
|
| |  | clinical encounter forms that guide the creation of
    documentation and capture structured data to facilitate correct
    coding and outcomes reporting. Physicians can review and approve
    coding as they create the encounter note so that billed
    procedures are appropriately documented. Intergy EHR provides a
    forms library for major medical specialties, including primary
    care, pediatrics, obstetrics/gynecology, cardiology, orthopedics
    and others.     
|
| |  | a clinical workflow manager, integrated with the electronic
    chart, that allows the physician to communicate with staff
    members and that automatically generates tasks list items for
    the physician when, for example, a lab report is ready, a
    transcription needs to be signed or a prescription needs
    approval.                                                                                                                                                    
|
| |  | KnowledgeLink technology to enable physicians to access
    information from Medscape and other drug and medical reference
    information. This enables the physician to share education with
    the patient at the time of care, and document the event in the
    encounter notes.                                                                                                                                                                                                   
|
| |  | a selection of various input devices for physicians, including
    desktop, laptop and tablet PCs, and handheld personal digital
    assistant (PDA) devices. Handheld systems can be used for
    offline charge capture, schedule review and dictation, and
    tablet PCs for full mobile functionality. Physicians also can
    assign tasks and access clinical information from Intergy EHR
    systems connected to the practice over the Internet or over a
    wireless network.
|
| |  | a prescription module that automates the process of writing and
    tracking prescriptions, providing improved efficiency with both
    the clinical and administrative aspects of the prescription
    process and can be linked to our optional clinical transaction
    services (see  Transaction Services
    below).                                                                                                                                                            

14



---



##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a Laboratory System module that allows providers to access,
    review and maintain all lab results from within the Intergy EHR
    system. Practices may also arrange to place orders and receive
    accurate and timely lab test results via a direct,
    bi-directional link with the laboratory. Test results are
    received electronically from the laboratory and are stored
    directly in the patients file for viewing, printing and
    analysis.



Intergy EHR Imaging.


Image Director.


Intergy PACS.


Intergy EHR PDA.




| |   |                                                                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | appointment schedules, hospital rounds information and clinical
    tasks needing the providers attention;                                                                                                                                                                                                                                                 
|
| |  | a user-friendly electronic prescription writer, with integrated
    drug utilization review, or DUR, and formulary checking, which
    electronically submits prescriptions to the patients
    chosen pharmacy and, at the same time, adds prescription
    information directly to the patients electronic medical
    record in the Intergy EHR system;
|
| |  | electronic lab ordering and reporting of results that can be
    viewed using the handheld device;                                                                                                                                                                                                                                                          
|
| |  | their patients electronic medical records, including
    demographic data, progress notes, medications, lab results,
    procedure histories and other information and transcribed
    patient documentation; and                                                                                                                                          
|
| |  | a fully customized encounter form for capturing patient charges,
    which displays procedure and diagnosis codes in customized
    checklists and automatically posts charge information to the
    practice management system.                                                                                                                            

15



---



##### Table of Contents







Maintenance and Support Services






| |   |                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | provide customers with access to our telephone help desk,
    typically advising customers in the use and operation of our
    software and services and remotely accessing customers
    systems to provide support; and
|
| |  | in most cases, provide customers with periodic releases updating
    our software.                                                                                                                                        



Transaction Services


WebMD Network Services.




16



---



##### Table of Contents



Clinical Transaction Services.


Additional Features and Modules


Online Access.


Remote Monitoring System.


Analytics Reporting.


Sales and Marketing







WebMD Health


Overview










| |   |                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | enable consumers to check symptoms, assess risks, understand
    diseases and conditions, evaluate treatment options, find
    healthcare providers, communicate with peers about healthcare
    issues, and improve their personal health status;

17



---



##### Table of Contents





| |   |                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | make it easier for physicians to access clinical reference
    sources, stay abreast of the latest clinical information, learn
    about new treatment options, earn continuing medical education
    credits, and communicate with peers; and
|
| |  | enable employees and health plan members to access health
    information and decision support tools that help them make
    informed benefit, provider and treatment choices.                                                                







Online Services




Portals for Consumers


Introduction.


Content. www.webmd.com


18



---



##### Table of Contents





Membership.


Portals for Physicians and
Other Healthcare Professionals


Introduction. Medscape from WebMD www.medscape.com


Content. www.medgenmed.com


Membership. Medscape from WebMD.


19



---



##### Table of Contents



CME.






Private Online
Portals


Introduction.




| |   |                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------
| |  | lowering benefits administration and communication costs for
    employers and payers;                         
|
| |  | increasing effectiveness of communications by delivering
    targeted, personalized messages; and              
|
| |  | efficiently identifying and enrolling candidates in disease
    management or other health management programs.



20



---



##### Table of Contents





Content.






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Health Manager. Health Manager provides a user-friendly
    experience that enables employees to access and manage health
    and benefits information and decision support tools relevant to
    their individual needs, risks and interests in one place. Health
    Manager includes The WebMD Personal Health Record, a secure
    online personal health record that allows employees to store and
    manage health information for themselves and their family
    members. We also enable employers to target employees with
    information, programs or messages specific to the individual
    employees needs. Finally, Health Manager makes available
    online lifestyle modification programs, including programs for
    smoking cessation, nutrition and fitness.
|
| |  | Benefit Manager. Benefit Manager is a set of benefit
    decision-support applications that explain health plan benefit
    choices and facilitate informed selection and use of those
    benefits options. For example, CostCompare allows an employee to
    forecast and model their individual premium and out-of-pocket
    costs for the different types of benefit programs their plan
    sponsor may offer.                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Site Manager. Site Manager is our online service and
    administrative suite of applications that provides specialized
    decision support for our WebMD Health and Benefits Manager
    clients. With Site Manager, employers and health plans are able
    to analyze aggregate health data, address population health
    risks more effectively and proactively implement preventive
    programs. Site Managers messaging capabilities also allow
    employers to streamline their communication with their employees.                                                                                                                                                                                                                                                     
|
| |  | Integration Services: We offer a proprietary suite of
    applications that allows us to integrate third party
    applications and data.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

Membership.


Advertising and
Sponsorship


General.


21



---



##### Table of Contents





The WebMD Health Network.


WebMD Health Network




| |   |                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | WebMD Health, our flagship consumer portal, which is
    located at www.webmd.com;                                                                                                            
|
| |  | MedicineNet, a health information site for consumers
    produced and written by practicing physicians, which is located
    at www.medicinenet.com;                                          
|
| |  | RxList, an online drug directory with information on over
    1,400 pharmaceutical products, which is located at
    www.rxlist.comand which is also used by healthcare
    professionals; and
|
| |  | Medscape from WebMD, our online Web site for physicians
    and healthcare professionals, which is located at
    www.medscape.com.                                                           

WebMD Health
Network




| |   |                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our content and distribution alliance with AOL, pursuant to
    which we are the primary provider of healthcare content, tools
    and services for AOL properties and provide related co-branded
    services for AOL members; and
|
| |  | our relationships with Fox News Online and CBS News Online,
    which distribute health content from WebMD through their online
    health channels.                                                                               





| |   |                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our reach of over 20 million unique users per month (based
    on the monthly average during 2004), which we believe is much
    larger than the number of unique users of any other sponsor
    supported health-oriented Web portal;       
|
| |  | our ability to attract health-involved consumers and clinically
    active physicians who view approximately 165 million of our
    Web pages of content per month (based on the monthly average
    during 2004);                           
|
| |  | our ability to help advertisers and sponsors reach specific
    groups of consumers and physicians by specialty, product,
    disease or wellness topic, which typically produces a more
    efficient and productive marketing campaign; and
|
| |  | our ability to provide advertisers and other sponsors with
    objective measures of the effectiveness of their online
    marketing.                                                                                                        





| |   |                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Media Solutions. These are traditional online advertising
    solutions  such as banners, buttons and
    badges  used to reach health-involved consumers. In
    addition, clients can sponsor a variety of condition-specific or
    specialty-specific email newsletters, keyword searches and
    specific educational programs.

22



---



##### Table of Contents





| |   |                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Sponsored Content Solutions. These are customized
    collections of articles, topics, and decision support tools,
    sponsored by clients and distributed within WebMD environments.      
|
| |  | Patient Education Centers. Patient education centers are
    sponsored destinations on Medscape for physicians to access
    patient education materials on a particular topic or condition.





| |                     
| | --------------------
| | Grant-Based Programs





| |   |                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Conference Coverage. Medscape provides coverage of major
    medical conferences.                                                                                                                                                                                  
|
| |  | CME Circle. CME Circle provides online multimedia
    extensions of sponsor-supported CME activities, including
    symposia, monographs and CD-ROMs.                                                                                                              
|
| |  | CME Live. These are original Medscape online events
    featuring live streaming video, audio and synchronized visual
    presentation by experts.                                                                                                                 
|
| |  | CME Cases. These are original CME activities presented by
    healthcare professionals in a patient case format.                                                                                                                                                   
|
| |  | Resource Centers. Resource centers are grant-based
    sponsored disease or condition-specific areas, for conditions
    such as congestive heart failure or breast cancers. These
    centers include news, expert columns, guidelines and reference
    material.

Publishing Services Group: Offline Publications




The Little Blue Book. The Little Blue Book, The Little Blue Book The Little Blue Book The Little Blue Book, The Little Blue Book


Reference Publications.  ACP Medicine ACP Surgery: Principles and Practice.
ACP Medicine ACP Surgery


23



---



##### Table of Contents



Editorial, Privacy, Education and Advertising and Promotion
Policies


General.




| |   |                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | URAC. WebMD has been awarded e-Health accreditation from
    URAC, an independent accrediting body that has reviewed and
    approved the WebMD.com site for compliance with its more than 50
    quality and ethics standards.                                                                                                                
|
| |  | TRUSTe. WebMD is a licensee of the TRUSTe Privacy
    Program. TRUSTe is an independent, non-profit organization whose
    goal is to build users trust and confidence in the
    Internet. In January 2005 a panel of privacy experts, sponsored
    by TRUSTe, ranked WebMD among the ten most trusted companies in
    America for privacy.
|
| |  | Health on the Net Foundation. Our WebMD.com and
    Medicinet.com sites comply with the principles of the HON Code
    of Conduct established by the Health on the Net Foundation.                                                                                                                                                             

Editorial Practices.


Privacy Policies.


Continuing Medical Education Services.


Advertising and Promotion Policies.


Technological Infrastructure




24



---



##### Table of Contents







Sales and Marketing















Competition for Our Healthcare Information Services and
Technology Solutions






| |   |                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | healthcare information system vendors and support providers,
    including physician practice management system and EMR system
    vendors and support providers;                                                               
|
| |  | transaction processing companies, including those providing EDI
    and/or Internet-based services and those providing services
    through other means, such as paper and fax;                                                 
|
| |  | large information technology consulting service providers;                                                                                                                                                                      
|
| |  | online services, portals, search engines or Web sites targeted
    to the healthcare industry, healthcare consumers and/or
    physicians generally, including both commercial sites and
    not-for-profit sites;              
|
| |  | health insurance companies, pharmacy benefit management
    companies and pharmacies that provide or are developing
    electronic transaction services for use by their members and
    customers;                             
|
| |  | publishers and distributors of traditional offline media,
    including those targeted to healthcare professionals, many of
    which have established or may establish their own Web sites or
    partner with other Web sites;

25



---



##### Table of Contents





| |   |                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | general purpose consumer online services and portals and other
    high-traffic Web sites that provide access to healthcare-related
    content and services;
|
| |  | public sector and non-profit Web sites that provide healthcare
    information without advertising or commercial
    sponsorships; and                       
|
| |  | vendors of healthcare information, products and services
    distributed through other means, including direct sales, mail
    and fax messaging.            









26



---



##### Table of Contents








POREX


Overview






Porex Products


Porous Plastics.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Filtering. In filtration applications, the pore structure
    acts as both a surface filter and a depth filter. The structure
    acts as a surface filter by trapping particles larger than its
    average pore size and as a depth filter by trapping much smaller
    particles deep in its complex channels. Unlike the direct
    passages in woven synthetic materials and metal screens, the
    pores in porous plastics join to form many tortuous paths.
    Examples of these applications include: filters for drinking
    water purification, air filters, fuel filters for power tools
    and appliances and other liquid filters for clarification of
    drugs, blood separation and chemicals.
|
| |  | Venting. In venting applications, the pore structure
    allows gases to easily escape while retaining fluids. Examples
    of these applications include: vents for medical devices,
    printers and automotive batteries; and caps and closures.                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Wicking. When used as a wicking device, the pore
    structure creates capillary channels for liquid transfer
    allowing fluid to flow, or wick, from a reservoir. Examples of
    these applications include: nibs or tips for writing
    instruments, such as highlighters and coloring markers; fluid
    delivery components for printers and copiers; fragrance wicks;
    and absorbent media for diagnostic testing.                                                                                                                                                                                                                                                                                    
|
| |  | Diffusing. When used in diffusion applications, porous
    plastic components emit a multitude of small, evenly distributed
    bubbles. Examples of these applications include air diffusers
    for fermentation, metal finishing and plating.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Muffling. In muffling applications, exhaust air is
    channeled through a tortuous path, causing significant sound
    reduction by breaking up and diffusing the sound waves. Examples
    of these applications include industrial mufflers for pneumatic
    equipment.                                                                                                                                                                                                                                                                                                                                                                                                                                       

27



---



##### Table of Contents





Other Porous Media.


Markets for Our Porous Plastic Products.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Healthcare Products. We manufacture a variety of porous
    plastic components for the healthcare industry that are
    incorporated into the products of other manufacturers. These
    components are used to vent or diffuse gases or fluids and are
    used as membrane supports, including catheter vents,
    self-sealing valves in surgical vacuum canisters, fluid
    filtration components and components for diagnostic devices.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We also use proprietary porous plastic technology to produce
    MEDPOR® Biomaterial implantable products for use in
    reconstructive and aesthetic surgery of the head and face. These
    permanent implants, which are composed of biocompatible porous
    high-density plastics, are biomaterial alternatives for
    replacement or augmentation of bone and cartilage. Their unique
    porous structure allows for rapid in growth of the
    patients tissue and capillary blood vessels. Since the
    initial product introduction in 1985, we have continued to
    introduce new shapes and sizes of MEDPOR products to meet
    surgeons needs.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Consumer Products. Our porous plastics are used in a
    variety of office and home products. These products include
    writing instrument tips, or nibs, which we supply to
    manufacturers of highlighting pens and childrens coloring
    markers. The porous nib conducts the ink stored in the pen
    barrel to the writing surface by capillary action. Our porous
    plastic components are also found in products such as air
    fresheners, power tool dust canisters and computer printers. We
    also produce a variety of porous plastic water filters used to
    improve the taste and safety of drinking water.
|
| |  | Industrial Products. We manufacture a variety of custom
    porous plastic components for industrial applications, designed
    to customer specifications as to size, rigidity, porosity and
    other needs, including automobile battery vents and various
    types of filters and filtration components.                                                                                                                                                                                                                                                                                                                           
|
| |  | Operating Room Products. We also produce two product
    lines for the operating room supplies market: surgical markers
    and surgical drainage systems.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

Competition




28



---



##### Table of Contents





Raw Materials




Marketing






EMPLOYEES




DEVELOPMENT AND ENGINEERING






29



---



##### Table of Contents





INTELLECTUAL PROPERTY




tm dx sm tm sm tm










30



---



##### Table of Contents







GOVERNMENT REGULATION


Introduction


General.


Healthcare Regulation.




Other Regulation.


31



---



##### Table of Contents



Health Insurance Portability and Accountability Act of
1996


General.




| |   |                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the Standards for Electronic Transactions, published
    August 17, 2000, which we refer to as the Transaction
    Standards;                              
|
| |  | the Standards for Privacy of Individually Identifiable Health
    Information, published December 28, 2000, which we refer to
    as the Privacy Standards;
|
| |  | the Standard Unique Employer Identifier, published May 31,
    2002;                                                                                       
|
| |  | the Health Insurance Reform: Security Standards, published
    February 20, 2003, which we refer to as the Security
    Standards; and                     
|
| |  | the Standard Unique Health Identifier for Health Care Providers,
    published January 23, 2004, which we refer to as the NPI
    Standard.                



Transaction Standards.




32



---



##### Table of Contents













33



---



##### Table of Contents





Privacy Standards.




Unique Employer Identifier Standard.


Security Standards.




34



---



##### Table of Contents





NPI Standard.


Other Restrictions Regarding Confidentiality and Privacy of
Patient Information




Other Regulation of Transaction Services




International Data Regulation




35



---



##### Table of Contents



Regulation of Healthcare Relationships


Anti-kickback Laws.


False Claims Laws.


Regulation of Medical Devices


Overview.


36



---



##### Table of Contents





Access to U.S. Market.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 510(k) Clearance Process. To obtain
    510(k) clearance, we must submit a premarket notification
    demonstrating that the proposed device is substantially
    equivalent in intended use and in safety and effectiveness to a
    predicate device  either a previously
    510(k) cleared class I or class II device or a
    preamendment class III device for which the FDA has not
    called for PMA applications. The FDAs
    510(k) clearance process usually takes from four to
    12 months, but it can last longer. After a device receives
    510(k) clearance, any modification that could significantly
    affect its safety or effectiveness, or that would constitute a
    major change in its intended use, requires a new
    510(k) clearance or could even require a PMA approval. The
    FDA requires each manufacturer to make this determination in the
    first instance, but the FDA can review any such decision. If the
    FDA disagrees with that decision, the agency may retroactively
    require the manufacturer to seek 510(k) clearance or PMA
    approval. The FDA also can require the manufacturer to cease
    marketing and/or recall the modified device until
    510(k) clearance or PMA approval is obtained.
|
| |  | PMA Approval Process. If a product is not eligible for
    510(k) clearance, the product is placed in class III
    and must follow the PMA approval process, which requires proof
    of the safety and effectiveness of the device to the FDAs
    satisfaction. A PMA approval application must provide extensive
    preclinical and clinical trial data and also information about
    the device and its components regarding, among other things,
    device design, manufacturing and labeling. As part of the PMA
    approval application review, the FDA will inspect the
    manufacturers facilities for compliance with the Quality
    System Regulation, which requires manufacturers to follow
    elaborate design, testing, control, documentation and other
    quality assurance procedures during the manufacturing process.
    The PMA approval pathway is costly, lengthy and uncertain. It
    generally takes from one to three years or longer. After
    approval of a PMA approval application, a new PMA approval
    or PMA supplement approval may be required in the event of a
    modification to the device, its labeling or its manufacturing
    process.                                                                       
|
| |  | Clinical Studies. A clinical study is generally required
    to support a PMA approval application and is sometimes required
    for a 510(k) premarket notification. For significant
    risk devices, such studies generally require submission of
    an application for an Investigational Device Exemption, or IDE.
    The IDE application must be supported by appropriate data, such
    as animal and laboratory testing results, showing that it is
    safe to test the device in humans and that the testing protocol
    is scientifically sound. The IDE must be approved in advance by
    the FDA for a specified number of patients. Clinical studies may
    begin once the IDE application is approved by the FDA and the
    appropriate institutional review boards at the study sites. For
    nonsignificant risk devices, one or more
    institutional review boards must review the study, but
    submission of an IDE application to the FDA for advance approval
    is not required. Both types of studies are subject to record
    keeping, reporting and other IDE regulation requirements.                                                                                                                                         

Post-market Regulation.


37



---



##### Table of Contents





Products. DX DX DX


DX DX DX






Regulation of Drug and Medical Device Advertising and
Promotion




38



---



##### Table of Contents





Drug Advertising.








39



---



##### Table of Contents





Continuing Medical Education.


Medical Professional Regulation




Consumer Protection Regulation


General.


CAN-SPAM Act.


40



---



##### Table of Contents





Regulation of Advertisements Sent by Fax.


COPPA.


Regulation of Contests and Sweepstakes.


Other Consumer Protection Regulation.




41



---



##### Table of Contents










|        |           
|------- | ----------
|Item 2. | Properties



Headquarters




WebMD Business Services, WebMD Health and WebMD Practice
Services






| |   |                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------
| |  | Nashville, Tennessee for WebMD Business Services
    headquarters and primary data and call centers and
    Medifaxs operations;
|
| |  | Towson, Maryland;                                                                                                                 
|
| |  | Columbia, Maryland;                                                                                                               
|
| |  | St. Louis, Missouri;                                                                                                              
|
| |  | Costa Rica;                                                                                                                       
|
| |  | Waterloo, Iowa;                                                                                                                   
|
| |  | Scottsdale, Arizona; and                                                                                                          
|
| |  | Toledo, Ohio.                                                                                                                     







Porex









|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

Investigations by United States Attorney for the District of
South Carolina and the SEC




42



---



##### Table of Contents

















43



---



##### Table of Contents













Litigation Regarding Distribution of Shares in Healtheon
Initial Public Offering




44



---



##### Table of Contents

















Merrill Lynch Fundamental Growth Fund, Inc.
et al. v. McKesson HBOC, Inc., et al.


Merrill Lynch
Fundamental Growth Fund, Inc., et al. v. McKesson
HBOC, Inc., et al.




45



---



##### Table of Contents















Porex Mammary Implant Litigation




46



---



##### Table of Contents











Other Legal Proceedings









|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders



47



---



##### Table of Contents






PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities





|     |                |      |   |       |     |  |   |      | 
|---- | -------------- | ---- | - | ----- | --- |  | - | ---- | 
|     |                | High |   |       | Low | 
|     |                |      |   |       |     | 
|2003 |                |      |   |       |     |  |   |     
|     | First quarter  |      | $ | 10.28 |     |  | $ | 8.25 | 
|     | Second quarter |      |   | 12.00 |     |  |   | 8.28 | 
|     | Third quarter  |      |   | 12.49 |     |  |   | 8.20 | 
|     | Fourth quarter |      |   | 9.32  |     |  |   | 7.59 | 
|2004 |                |      |   |       |     |  |   |     
|     | First quarter  |      | $ | 10.23 |     |  | $ | 8.26 | 
|     | Second quarter |      |   | 9.65  |     |  |   | 8.26 | 
|     | Third quarter  |      |   | 9.28  |     |  |   | 6.68 | 
|     | Fourth quarter |      |   | 8.33  |     |  |   | 6.46 | 







| |   |                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------
| |  | quarter-to-quarter variations in operating results;                                                        
|
| |  | operating results being less than analysts estimates;                                                     
|
| |  | changes in analysts earnings estimates;                                                                   
|
| |  | announcements of new technologies, products and services or
    pricing policies by us or our competitors; 
|
| |  | announcements of acquisitions or strategic partnerships by us or
    our competitors;                      
|
| |  | developments in existing customer or strategic relationships;                                              
|
| |  | actual or perceived changes in our business strategy;                                                      
|
| |  | developments in new or pending litigation and claims;                                                      
|
| |  | sales of large amounts of our common stock;                                                                
|
| |  | changes in market conditions in the healthcare, information
    technology, Internet or plastic industries;
|
| |  | changes in general economic conditions; and                                                                
|
| |  | fluctuations in the securities markets in general.                                                         



48



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Repurchases of Equity Securities During the Fourth Quarter of
2004




Issuer Purchases of Equity Securities


|                  |       |                  |           |           |                |                        |      |                      |                           |  |                     |           |  |   |            |            | 
|----------------- | ----- | ---------------- | --------- | --------- | -------------- | ---------------------- | ---- | -------------------- | ------------------------- |  | ------------------- | --------- |  | - | ---------- | ---------- | 
|                  |       |                  |           |           |                |                        |      | Maximum Number (or   |                          
|                  |       |                  |           |           |                | Total Number of Shares |      |                      | Approximate Dollar Value) | 
|                  |       |                  |           |           |                | Purchased as Part of   |      |                      | of Shares that May Yet Be | 
|                  |       | Total Number of  |           |           | Average Price  |                        |      | Publicly Announced   |                           |  | Purchased Under the |          
|Period            |       | Shares Purchased |           |           | Paid per Share |                        |      | Plans or Programs(1) |                           |  | Plans or Programs   |          
|                  |       |                  |           |           |                |                        |      |                      |                           |  |                     |          
|10/01/04-10/31/04 |       |                  | 1,371,424 | (2)       |                | $                      | 6.70 |                      |                           |  | 1,190,124           |           |  | $ | 63,392,577 |           
|11/01/04-11/30/04 |       |                  | 264,900   |           |                | $                      | 7.02 |                      |                           |  | 264,900             |           |  | $ | 61,531,935 |           
|12/01/04-12/31/04 |       |                  |          |           |                |                        |     |                      |                           |  |                    |           |  | $ | 61,531,935 |           
|                  |       |                  |           |           |                |                        |      |                      |                           |  |                     |          
|                  | Total |                  |           | 1,636,324 |                |                        | $    | 6.75                 |                           |  |                     | 1,455,024 |  |   | $          | 61,531,935 | 
|                  |       |                  |           |           |                |                        |      |                      |                           |  |                     |          






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | These repurchases were made pursuant to the repurchase program
    that we announced on March 29, 2001 where WebMD was
    originally authorized to use up to $50 million to purchase
    shares of its common stock from time to time beginning on
    April 2, 2001. On November 2, 2001, the maximum
    aggregate amount of purchases under the Program was increased to
    $100 million; on November 7, 2002, it was increased to
    $150 million; and on August, 19, 2004, it was increased to
    $200 million.
|   
|(2) | Includes 181,300 previously owned shares tendered to WebMD to
    pay the withholding taxes due upon exercise of employee stock
    options. The value of these shares was determined based on the
    closing fair market value of WebMD common stock on the date of
    exercise.                                                                                                                                                                                                                                     

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|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data



|                                                                                          |                                                                 |                                       |           |         |      |   |         |         |   |   |         |         |   |      |            |            |   |   |            |            |  
|----------------------------------------------------------------------------------------- | --------------------------------------------------------------- | ------------------------------------- | --------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------- | - | ---- | ---------- | ---------- | - | - | ---------- | ---------- | -
|                                                                                          |                                                                 | Years Ended December 31,              |          
|                                                                                          |                                                                 |                                       |          
|                                                                                          |                                                                 | 2004                                  |           |         | 2003 |   |         | 2002    |   |   | 2001    |         |   | 2000 |           
|                                                                                          |                                                                 |                                       |           |         |      |   |         |         |   |   |         |         |   |      |           
|                                                                                          |                                                                 | (In thousands, except per share data) |          
|Consolidated Statements of Operations Data:                                               |                                                                 |                                       |           |         |      |   |         |         |   |   |         |         |   |      |            |            |   |   |            |           
|Revenue                                                                                   |                                                                 | $                                     | 1,160,351 |         |      | $ | 963,980 |         |   | $ | 871,696 |         |   | $    | 842,020    |            |   | $ | 574,524    |           
|Costs and expenses:                                                                       |                                                                 |                                       |           |         |      |   |         |         |   |   |         |         |   |      |            |            |   |   |            |           
|                                                                                          | Cost of operations                                              |                                       |           | 666,431 |      |   |         | 564,939 |   |   |         | 509,744 |   |      |            | 568,321    |   |   |            | 430,296    |  
|                                                                                          | Development and engineering                                     |                                       |           | 54,161  |      |   |         | 42,985  |   |   |         | 43,467  |   |      |            | 43,572     |   |   |            | 59,867     |  
|                                                                                          | Sales, marketing, general and administrative                    |                                       |           | 324,027 |      |   |         | 282,482 |   |   |         | 283,424 |   |      |            | 448,082    |   |   |            | 535,462    |  
|                                                                                          | Depreciation, amortization and other                            |                                       |           | 57,765  |      |   |         | 62,434  |   |   |         | 125,593 |   |      |            | 2,394,857  |   |   |            | 2,188,461  |  
|                                                                                          | Legal expense                                                   |                                       |           | 9,230   |      |   |         | 3,959   |   |   |         |        |   |      |            |           |   |   |            |           |  
|                                                                                          | Impairment of long-lived and other assets                       |                                       |           |        |      |   |         |        |   |   |         |        |   |      |            | 3,816,115  |   |   |            |           |  
|                                                                                          | Restructuring and integration charge (benefit)                  |                                       |           | 4,535   |      |   |         |        |   |   |         | (5,850  | ) |      |            | 266,755    |   |   |            | 452,919    |  
|                                                                                          | Gain (loss) on investments                                      |                                       |           | 457     |      |   |         | 1,659   |   |   |         | 6,547   |   |      |            |           |   |   |            | (40,365    | )
|                                                                                          | Interest income                                                 |                                       |           | 18,717  |      |   |         | 22,901  |   |   |         | 19,590  |   |      |            | 30,409     |   |   |            | 51,467     |  
|                                                                                          | Interest expense                                                |                                       |           | 19,253  |      |   |         | 15,214  |   |   |         | 8,491   |   |      |            | 507        |   |   |            | 735        |  
|                                                                                          | Other income, net                                               |                                       |           | 121     |      |   |         | 4,218   |   |   |         | 3,844   |   |      |            |           |   |   |            |           |  
|                                                                                          |                                                                 |                                       |           |         |      |   |         |         |   |   |         |         |   |      |           
|Income (loss) from continuing operations before income tax
    provision (benefit)        |                                                                 |                                       | 44,244    |         |      |   | 20,745  |         |   |   | (63,192 | )       |   |      | (6,665,780 | )          |   |   | (3,082,114 | )         
|                                                                                          | Income tax provision (benefit)                                  |                                       |           | 4,910   |      |   |         | 4,140   |   |   |         | (10,079 | ) |      |            | 2,588      |   |   |            | 790        |  
|                                                                                          |                                                                 |                                       |           |         |      |   |         |         |   |   |         |         |   |      |           
|                                                                                          | Income (loss) from continuing operations                        |                                       |           | 39,334  |      |   |         | 16,605  |   |   |         | (53,113 | ) |      |            | (6,668,368 | ) |   |            | (3,082,904 | )
|                                                                                          | Income (loss) from discontinued operations, net of income taxes |                                       |           |        |      |   |         | (33,611 | ) |   |         | 3,411   |   |      |            | (3,950     | ) |   |            | 1,296      |  
|                                                                                          |                                                                 |                                       |           |         |      |   |         |         |   |   |         |         |   |      |           
|Net income (loss)                                                                         |                                                                 | $                                     | 39,334    |         |      | $ | (17,006 | )       |   | $ | (49,702 | )       |   | $    | (6,672,318 | )          |   | $ | (3,081,608 | )         
|                                                                                          |                                                                 |                                       |           |         |      |   |         |         |   |   |         |         |   |      |           
|Basic income (loss) per common share:                                                     |                                                                 |                                       |           |         |      |   |         |         |   |   |         |         |   |      |            |            |   |   |            |           
|                                                                                          | Income (loss) from continuing operations                        |                                       | $         | 0.12    |      |   | $       | 0.05    |   |   | $       | (0.17   | ) |      | $          | (19.13     | ) |   | $          | (12.60     | )
|                                                                                          | Income (loss) from discontinued operations                      |                                       |           |        |      |   |         | (0.11   | ) |   |         | 0.01    |   |      |            | (0.01      | ) |   |            | 0.01       |  
|                                                                                          |                                                                 |                                       |           |         |      |   |         |         |   |   |         |         |   |      |           
|Net income (loss)                                                                         |                                                                 | $                                     | 0.12      |         |      | $ | (0.06   | )       |   | $ | (0.16   | )       |   | $    | (19.14     | )          |   | $ | (12.59     | )         
|                                                                                          |                                                                 |                                       |           |         |      |   |         |         |   |   |         |         |   |      |           
|Diluted income (loss) per common share:                                                   |                                                                 |                                       |           |         |      |   |         |         |   |   |         |         |   |      |            |            |   |   |            |           
|                                                                                          | Income (loss) from continuing operations                        |                                       | $         | 0.12    |      |   | $       | 0.05    |   |   | $       | (0.17   | ) |      | $          | (19.13     | ) |   | $          | (12.60     | )
|                                                                                          | Income (loss) from discontinued operations                      |                                       |           |        |      |   |         | (0.10   | ) |   |         | 0.01    |   |      |            | (0.01      | ) |   |            | 0.01       |  
|                                                                                          |                                                                 |                                       |           |         |      |   |         |         |   |   |         |         |   |      |           
|Net income (loss)                                                                         |                                                                 | $                                     | 0.12      |         |      | $ | (0.05   | )       |   | $ | (0.16   | )       |   | $    | (19.14     | )          |   | $ | (12.59     | )         
|                                                                                          |                                                                 |                                       |           |         |      |   |         |         |   |   |         |         |   |      |           
|Weighted-average shares outstanding used in computing income
    (loss) per common share: |                                                                 |                                       |           |         |      |   |         |         |   |   |         |         |   |      |            |            |   |   |            |           
|                                                                                          | Basic                                                           |                                       |           | 320,080 |      |   |         | 304,858 |   |   |         | 304,168 |   |      |            | 348,570    |   |   |            | 244,688    |  
|                                                                                          |                                                                 |                                       |           |         |      |   |         |         |   |   |         |         |   |      |           
|                                                                                          | Diluted                                                         |                                       |           | 333,343 |      |   |         | 325,811 |   |   |         | 304,168 |   |      |            | 348,570    |   |   |            | 244,688    |  
|                                                                                          |                                                                 |                                       |           |         |      |   |         |         |   |   |         |         |   |      |           

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|                                                    |  |                    |           |  |      |   |           |      |  |   |           |  |  |      |           |  |  |   |           | 
|--------------------------------------------------- |  | ------------------ | --------- |  | ---- | - | --------- | ---- |  | - | --------- |  |  | ---- | --------- |  |  | - | --------- | 
|                                                    |  | As of December 31, |          
|                                                    |  |                    |          
|                                                    |  | 2004               |           |  | 2003 |   |           | 2002 |  |   | 2001      |  |  | 2000 |          
|                                                    |  |                    |           |  |      |   |           |      |  |   |           |  |  |      |          
|                                                    |  | (In thousands)     |          
|Consolidated Balance Sheets Data:                   |  |                    |           |  |      |   |           |      |  |   |           |  |  |      |           |  |  |   |           | 
|Cash, cash equivalents and short-term investments   |  | $                  | 107,694   |  |      | $ | 270,681   |      |  | $ | 186,484   |  |  | $    | 378,762   |  |  | $ | 505,793   | 
|Long-term marketable securities                     |  |                    | 515,881   |  |      |   | 456,034   |      |  |   | 456,716   |  |  |      | 18,769    |  |  |   | 222,774   | 
|Working capital                                     |  |                    | 48,295    |  |      |   | 202,573   |      |  |   | 193,031   |  |  |      | 360,429   |  |  |   | 528,136   | 
|Total assets                                        |  |                    | 2,302,224 |  |      |   | 2,135,306 |      |  |   | 1,766,248 |  |  |      | 1,601,454 |  |  |   | 8,487,108 | 
|Convertible subordinated notes                      |  |                    | 649,999   |  |      |   | 649,999   |      |  |   | 300,000   |  |  |      |          |  |  |   |          | 
|Other long-term liabilities                         |  |                    | 1,283     |  |      |   | 1,182     |      |  |   | 498       |  |  |      | 1,226     |  |  |   | 15,279    | 
|Convertible redeemable exchangeable preferred stock |  |                    | 98,299    |  |      |   |          |      |  |   |          |  |  |      |          |  |  |   |          | 
|Convertible redeemable preferred stock              |  |                    |          |  |      |   |          |      |  |   |          |  |  |      | 10,000    |  |  |   | 10,000    | 
|Convertible preferred stock                         |  |                    |          |  |      |   |          |      |  |   |          |  |  |      |          |  |  |   | 710,746   | 
|Stockholders equity                                |  |                    | 1,224,216 |  |      |   | 1,178,597 |      |  |   | 1,153,801 |  |  |      | 1,255,512 |  |  |   | 8,097,435 | 

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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations



Overview






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Introduction. This section provides a general description
    of our business, a brief discussion of our operating segments, a
    description of certain recent developments and a summary of the
    acquisitions we completed during the last two years.                                                                                                                                                                                                                                              
|
| |  | Critical Accounting Policies and Estimates. This section
    discusses those accounting policies that both are considered
    important to our financial condition and results of operations,
    and require us to exercise subjective or complex judgments in
    their application. In addition, all of our significant
    accounting policies, including our critical accounting policies,
    are summarized in Note 1 to the Consolidated Financial
    Statements included in this Annual Report.
|
| |  | Results of Operations and Results of Operations by Operating
    Segment. These sections provide our analysis and outlook for
    the significant line items on our consolidated statements of
    operations, on both a company-wide and a segment-by-segment
    basis.                                                                                                                                                                                                                                
|
| |  | Liquidity and Capital Resources. This section provides an
    analysis of our liquidity and cash flows, as well as a
    discussion of our outstanding debt and commitments that existed
    as of December 31, 2004.                                                                                                                                                                                                                                                                                    
|
| |  | Recent Accounting Pronouncements. This section provides a
    summary of the most recent authoritative accounting standards
    and guidance that have either been recently adopted by the
    Company or may be adopted in the future.                                                                                                                                                                                                                                                                  
|
| |  | Key Trends Affecting Our Businesses and Our Healthcare
    Customers. This section provides background information on
    key trends in the healthcare industry and our strategic
    responses to those trends.                                                                                                                                                                                                                                                                                         
|
| |  | Factors That May Affect Our Future Financial Condition or
    Results of Operations. This section describes circumstances
    or events that could have a negative effect on our financial
    condition or results of operations, or that could change, for
    the worse, existing trends in some or all of our businesses. The
    factors discussed in this section are in addition to factors
    that may be described elsewhere in this Annual Report.                                            



Introduction




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| |                   
| | ------------------
| | Operating Segments





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | WebMD Business Services. We provide healthcare
    reimbursement cycle management services for healthcare providers
    and transaction-related administrative services for healthcare
    payers, together with related technology solutions. We transmit
    transactions electronically between healthcare payers and
    providers and provide healthcare payers with transaction
    processing technology, consulting services and outsourcing
    services, including document management services for transaction
    processing and print-and-mail services for the distribution of
    checks, remittance advice and explanation of benefits. We also
    provide automated patient billing services to healthcare
    providers, including statement printing and mailing services. In
    addition, we provide software products, including decision
    support and data warehousing solutions, and related maintenance
    services to Blue Cross Blue Shield and commercial healthcare
    payers and perform software maintenance and consulting services
    for certain governmental agencies.
|
| |  | WebMD Practice Services. We develop and market
    information technology systems for healthcare providers and
    related services, under The Medical Manager, Intergy and WebMD
    Network Services brands. These systems and services allow
    physician offices to automate their scheduling, billing and
    other administrative tasks, to transmit transactions
    electronically, to maintain electronic medical records and to
    automate documentation of patient encounters.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | WebMD Health. We provide health information, healthcare
    and benefit decision-support tools, continuing medical education
    (CME) services, and interactive communications
    services through our public online portals for consumers and
    physicians, through syndication and distribution relationships,
    through customized private online portals for employers and
    payers and, to a lesser extent, through offline publishing
    services. Our public portal sells advertising and sponsorship
    programs to companies interested in reaching consumers and
    physicians online, including pharmaceutical, biotech, medical
    device and consumer products companies.                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Porex. We develop, manufacture and distribute proprietary
    porous plastic products and components used in healthcare,
    industrial and consumer applications, as well as in finished
    products used in the medical device and surgical markets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         



| |                    
| | -------------------
| | Recent Developments

Evaluation of WebMD Health Transaction Alternatives.


Acquisition of HealthShare Technologies.


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Acquisitions






Critical Accounting Policies and Estimates




54



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| |   |                                                                                           
| | - | ------------------------------------------------------------------------------------------
| |  | Revenue  Our revenue recognition
    policies for each reportable segment are as follows:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | WebMD Business Services. Healthcare payers and providers
    pay us fees for transaction services, generally on either a per
    transaction basis or, in the case of some providers, on a
    monthly fixed fee basis. Healthcare payers and providers also
    pay us fees for patient statement and paid-claims communication
    services, typically on a per statement or per communication
    basis. Additionally, payers, including government payers, pay us
    fees to license decision support software and provide related
    support and maintenance for that decision support software, and
    provide information technology consulting services. Healthcare
    payers pay us annual license fees, which are based on the number
    of covered members, for use of our software and for providing
    business and information technology consulting services to them
    on a time and materials basis. The consulting services we
    provide to certain governmental agencies are typically billed on
    a cost-plus fee structure.
|
| | Revenue for transaction services, patient statement and
    paid-claims communication services is recognized as the services
    are provided. Decision support software and the related support
    and maintenance agreements are generally sold as bundled
    time-based license agreements and accordingly, the revenue for
    both the software and related support and maintenance is
    recognized ratably over the term of the license and maintenance
    agreement. Revenue for consulting services is recognized as the
    services are provided.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | WebMD Practice Services. Healthcare providers pay us fees
    to license our Medical Manager and Intergy practice management
    systems and Intergy EHR electronic medical records system. Our
    practice management systems are sold as multiple-element
    arrangements as these software arrangements typically include
    related hardware, support and maintenance agreements and
    implementation and training services. We also charge healthcare
    providers fees for transmitting, through WebMD Network Services,
    transactions to payers and billing statements to patients. We
    recognize revenue from these fees, which are generally paid on a
    per transaction or monthly basis, as we provide the service.                                                                                                                                                                                                                                                                                                               
|
| | Software revenue is recognized in accordance with SOP
    No. 97-2, Software Revenue Recognition, as
    amended by SOP 98-9, Modification of SOP 97-2, Software
    Revenue Recognition, With Respect to Certain Transactions.
    Software license revenue is recognized when a customer enters
    into a non-cancelable license agreement, the software product
    has been delivered, there are no uncertainties surrounding
    product acceptance, there are no significant future                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | performance obligations, the license fees are fixed or
    determinable and collection of the license fee is considered
    probable. Amounts received in advance of meeting these criteria
    are deferred. As required by SOP 98-9, the Company determines
    the value of the software component of its multiple-element
    arrangements using the residual method as vendor specific
    objective evidence (VSOE) of fair value exists for
    the undelivered elements such as the support and maintenance
    agreements and related implementation and training services, but
    not for all the delivered elements such as the software itself.
    The residual method requires revenue to be allocated to the
    undelivered elements based on the fair value of such elements,
    as indicated by VSOE. VSOE is based on the price charged when an
    element is sold separately.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | The vast majority of our practice management and medical records
    systems include support and maintenance agreements of the
    underlying software and hardware. These arrangements provide
    customers with rights to unspecified software product upgrades
    released during the term of the support period, as well as
    Internet and telephone access to technical support personnel.
    Revenue from support and maintenance agreements is recognized
    ratably over the term of the arrangement, typically one year or
    less. Additionally, many of our software arrangements include
    implementation and training services. Revenues from these
    services are accounted for separately from the software revenue,
    as they are not essential to the functionality of any other
    element of the software arrangement, and are generally
    recognized as the services are performed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | WebMD Health. Customers pay us for advertising,
    sponsorship, healthcare management tools, content syndication
    and distribution, and licenses of private online portals. In
    addition, in connection with our Medscape portal, our customers
    provide funding for online education programs for healthcare
    professionals, including online continuing medical education
    (CME). Revenue from advertising is recognized as
    advertisements are delivered. Revenues from sponsorship
    arrangements and healthcare management tools are recognized
    ratably over the term of the applicable agreement. Revenue from
    CME arrangements is recognized over the period we satisfy the
    minimum credit hour requirements of the applicable agreements.
    Revenue from fixed fee content license or carriage fees is
    recognized ratably over the term of the applicable agreement.
    E-commerce revenue is recognized when a subscriber or consumer
    utilizes our Internet-based services or purchases goods or
    services through our Web site or a Web site co-branded with one
    of our strategic partners. Subscription revenue, including
    subscription revenue from sponsorship arrangements, is
    recognized over the subscription period. When contractual
    arrangements contain multiple elements, revenue is allocated to
    the elements based on their relative fair values, determined
    using prices charged when elements are sold separately.
|
| | Porex. We develop, manufacture and distribute porous
    plastic products and components. For standard products, we
    recognize revenue upon shipment of product, net of sales returns
    and allowances. For sales of certain custom products, we
    recognize revenue upon completion and customer acceptance.
    Recognition of amounts received in advance of meeting these
    criteria is deferred until we meet these criteria.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Long-Lived Assets  Our long-lived
    assets consist of property and equipment, goodwill and other
    intangible assets. Goodwill and other intangible assets arise
    from the acquisitions we have made. The amount assigned to
    intangible assets is subjective and based on our estimates of
    the future benefit of the intangible asset using accepted
    valuation techniques, such as discounted cash flow and
    replacement cost models. Our long-lived assets, excluding
    goodwill, are amortized over their estimated useful lives, which
    we determined based on the consideration of several factors
    including the period of time the asset is expected to remain in
    service. We evaluate the carrying value and remaining useful
    lives of long-lived assets, excluding goodwill, whenever
    indicators of impairment are present. We evaluate the carrying
    value of goodwill annually. We use a discounted cash flow
    approach to determine the fair value of goodwill. There was no
    impairment of goodwill noted as a result of our impairment
    testing in 2004, 2003 or 2002.

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Investments  Our investments, at
    December 31, 2004, consisted principally of certificates of
    deposit, municipal bonds, auction rate securities, asset-backed
    securities, Federal Agency Notes, U.S. Treasury Notes and
    marketable equity securities in publicly traded companies. Each
    reporting period we evaluate the carrying value of our
    investments and record a loss on investments when we believe an
    investment has experienced a decline in value that is other than
    temporary. Our investments are classified as available-for-sale
    and are carried at fair value. We do not recognize gains on an
    investment until sold. Unrealized gains and losses are recorded
    as a component of accumulated other comprehensive income. Future
    changes in market or economic conditions or operating results of
    our investments could result in gains or losses or an inability
    to recover the carrying value of the investments that may not be
    reflected in an investments carrying value.
|
| |  | Deferred Tax Assets  Our deferred tax
    assets are comprised primarily of net operating loss
    carryforwards. At December 31, 2004, we had net operating
    loss carryforwards of approximately $2.0 billion. These
    loss carryforwards may be used to offset taxable income in
    future periods, reducing the amount of taxes we might otherwise
    be required to pay. Due to a lack of a history of generating
    taxable income, we record a valuation allowance equal to 100% of
    our net deferred tax assets. In the event that we are able to
    generate taxable earnings in the future and determine it is more
    likely than not that we can realize our deferred tax assets, an
    adjustment to the valuation allowance would be made which may
    increase income in the period that such determination was made.                                                                                                                                                                                                       
|
| |  | Tax Contingencies  Our tax
    contingencies are recorded to address potential exposures
    involving tax positions we have taken that could be challenged
    by tax authorities. These potential exposures result from the
    varying application of statutes, rules, regulations and
    interpretations. Our estimates of tax contingencies reflect
    assumptions and judgments about potential actions by taxing
    jurisdictions. We believe that these assumptions and judgments
    are reasonable; however, our accruals may change in the future
    due to new developments in each matter and the ultimate
    resolution of these matters may be greater or less than the
    amount that we have accrued.                                                                                                                                                                                                                                                                                                                             

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Results of Operations




|                                                                                   |                                                                 |                          |           |         |      |  |       |      |  |  |         |         |   |   |       |      |   |  |         |         |   |  |       |      |  
|---------------------------------------------------------------------------------- | --------------------------------------------------------------- | ------------------------ | --------- | ------- | ---- |  | ----- | ---- |  |  | ------- | ------- | - | - | ----- | ---- | - |  | ------- | ------- | - |  | ----- | ---- | -
|                                                                                   |                                                                 | Years Ended December 31, |          
|                                                                                   |                                                                 |                          |          
|                                                                                   |                                                                 | 2004                     |           |         | 2003 |  |       | 2002 | 
|                                                                                   |                                                                 |                          |           |         |      |  |       |      | 
|                                                                                   |                                                                 | $                        |           |         | %    |  |       | $    |  |  | %       |         |   | $ |       |      | % | 
|                                                                                   |                                                                 |                          |           |         |      |  |       |      |  |  |         |         |   |   |       |      |   | 
|Revenue                                                                            |                                                                 |                          | 1,160,351 |         |      |  | 100.0 |      |  |  | 963,980 |         |   |   | 100.0 |      |   |  | 871,696 |         |   |  | 100.0 |     
|Costs and expenses:                                                                |                                                                 |                          |           |         |      |  |       |      |  |  |         |         |   |   |       |      |   |  |         |         |   |  |       |     
|                                                                                   | Cost of operations                                              |                          |           | 666,431 |      |  |       | 57.4 |  |  |         | 564,939 |   |   |       | 58.6 |   |  |         | 509,744 |   |  |       | 58.5 |  
|                                                                                   | Development and engineering                                     |                          |           | 54,161  |      |  |       | 4.7  |  |  |         | 42,985  |   |   |       | 4.5  |   |  |         | 43,467  |   |  |       | 5.0  |  
|                                                                                   | Sales, marketing, general and administrative                    |                          |           | 324,027 |      |  |       | 27.9 |  |  |         | 282,482 |   |   |       | 29.3 |   |  |         | 283,424 |   |  |       | 32.5 |  
|                                                                                   | Depreciation, amortization and other                            |                          |           | 57,765  |      |  |       | 5.0  |  |  |         | 62,434  |   |   |       | 6.5  |   |  |         | 125,593 |   |  |       | 14.4 |  
|                                                                                   | Legal expense                                                   |                          |           | 9,230   |      |  |       | 0.8  |  |  |         | 3,959   |   |   |       | 0.4  |   |  |         |        |   |  |       |     |  
|                                                                                   | Restructuring and integration charge (benefit)                  |                          |           | 4,535   |      |  |       | 0.4  |  |  |         |        |   |   |       |     |   |  |         | (5,850  | ) |  |       | (0.7 | )
|                                                                                   | Gain on investments                                             |                          |           | 457     |      |  |       | 0.1  |  |  |         | 1,659   |   |   |       | 0.2  |   |  |         | 6,547   |   |  |       | 0.8  |  
|                                                                                   | Interest income                                                 |                          |           | 18,717  |      |  |       | 1.6  |  |  |         | 22,901  |   |   |       | 2.4  |   |  |         | 19,590  |   |  |       | 2.3  |  
|                                                                                   | Interest expense                                                |                          |           | 19,253  |      |  |       | 1.7  |  |  |         | 15,214  |   |   |       | 1.6  |   |  |         | 8,491   |   |  |       | 1.0  |  
|                                                                                   | Other income, net                                               |                          |           | 121     |      |  |       | 0.0  |  |  |         | 4,218   |   |   |       | 0.4  |   |  |         | 3,844   |   |  |       | 0.4  |  
|                                                                                   |                                                                 |                          |           |         |      |  |       |      |  |  |         |         |   |   |       |      |   | 
|Income (loss) from continuing operations before income tax
    provision (benefit) |                                                                 |                          | 44,244    |         |      |  | 3.8   |      |  |  | 20,745  |         |   |   | 2.1   |      |   |  | (63,192 | )       |   |  | (7.2  | )   
|                                                                                   | Income tax provision (benefit)                                  |                          |           | 4,910   |      |  |       | 0.4  |  |  |         | 4,140   |   |   |       | 0.4  |   |  |         | (10,079 | ) |  |       | (1.1 | )
|                                                                                   |                                                                 |                          |           |         |      |  |       |      |  |  |         |         |   |   |       |      |   | 
|                                                                                   | Income (loss) from continuing operations                        |                          |           | 39,334  |      |  |       | 3.4  |  |  |         | 16,605  |   |   |       | 1.7  |   |  |         | (53,113 | ) |  |       | (6.1 | )
|                                                                                   | Income (loss) from discontinued operations, net of income taxes |                          |           |        |      |  |       |     |  |  |         | (33,611 | ) |   |       | (3.5 | ) |  |         | 3,411   |   |  |       | 0.4  |  
|                                                                                   |                                                                 |                          |           |         |      |  |       |      |  |  |         |         |   |   |       |      |   | 
|Net income (loss)                                                                  |                                                                 |                          | 39,334    |         |      |  | 3.4   |      |  |  | (17,006 | )       |   |   | (1.8  | )    |   |  | (49,702 | )       |   |  | (5.7  | )   
|                                                                                   |                                                                 |                          |           |         |      |  |       |      |  |  |         |         |   |   |       |      |   | 



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| |              
| | -------------
| | 2004 and 2003



| |         
| | --------
| | Revenues







| |                   
| | ------------------
| | Costs and Expenses

Cost of Operations.


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Development and Engineering.


Sales, Marketing, General and Administrative.


Depreciation, Amortization and Other.


Legal Expense.


Restructuring and Integration Charge (Benefit).


Gain on Investments.


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Interest Income.


Interest Expense.


Other Income, Net.


Income Tax Provision.


Discontinued Operations.




| |              
| | -------------
| | 2003 and 2002



| |         
| | --------
| | Revenues







| |                   
| | ------------------
| | Costs and Expenses

Cost of Operations.


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Development and Engineering.


Sales, Marketing, General and Administrative.


Depreciation, Amortization and Other.


Legal Expense.


Restructuring and Integration (Benefit) Charge.


Gain on Investments.


Interest Income. 1 4


Interest Expense. 1 4


Other Income, Net.


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Income Tax Provision (Benefit).


Discontinued Operations.


Results of Operations by Operating Segment




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|                                                                        |                   |                          |           |        |      |   |         |         |   |   |          |         |  
|----------------------------------------------------------------------- | ----------------- | ------------------------ | --------- | ------ | ---- | - | ------- | ------- | - | - | -------- | ------- | -
|                                                                        |                   | Years Ended December 31, |          
|                                                                        |                   |                          |          
|                                                                        |                   | 2004                     |           |        | 2003 |   |         | 2002    |  
|                                                                        |                   |                          |           |        |      |   |         |         |  
|                                                                        |                   | (In thousands)           |          
|Revenues                                                                |                   |                          |           |        |      |   |         |         |   |   |          |        
|WebMD Business Services                                                 |                   | $                        | 686,585   |        |      | $ | 505,729 |         |   | $ | 466,810  |        
|WebMD Practice Services                                                 |                   |                          | 296,115   |        |      |   | 302,640 |         |   |   | 275,306  |        
|WebMD Health                                                            |                   |                          | 134,317   |        |      |   | 110,665 |         |   |   | 84,296   |        
|Porex                                                                   |                   |                          | 77,099    |        |      |   | 71,940  |         |   |   | 65,811   |        
|Inter-segment eliminations                                              |                   |                          | (33,765   | )      |      |   | (26,994 | )       |   |   | (20,527  | )      
|                                                                        |                   |                          |           |        |      |   |         |         |  
|                                                                        |                   | $                        | 1,160,351 |        |      | $ | 963,980 |         |   | $ | 871,696  |        
|                                                                        |                   |                          |           |        |      |   |         |         |  
|Income (loss) before restructuring, taxes, non-cash and other
    items |                   |                          |           |        |      |   |         |         |   |   |          |        
|WebMD Business Services                                                 |                   | $                        | 131,834   |        |      | $ | 94,218  |         |   | $ | 85,154   |        
|WebMD Practice Services                                                 |                   |                          | 14,533    |        |      |   | 20,924  |         |   |   | 26,685   |        
|WebMD Health                                                            |                   |                          | 32,898    |        |      |   | 24,898  |         |   |   | 5,574    |        
|Porex                                                                   |                   |                          | 22,650    |        |      |   | 20,532  |         |   |   | 19,891   |        
|Corporate                                                               |                   |                          | (58,382   | )      |      |   | (50,251 | )       |   |   | (51,272  | )      
|Interest income                                                         |                   |                          | 18,717    |        |      |   | 22,901  |         |   |   | 19,590   |        
|Interest expense                                                        |                   |                          | (19,253   | )      |      |   | (15,214 | )       |   |   | (8,491   | )      
|                                                                        |                   |                          |           |        |      |   |         |         |  
|                                                                        |                   |                          | 142,997   |        |      |   | 118,008 |         |   |   | 97,131   |        
|Restructuring, taxes, non-cash and other items                          |                   |                          |           |        |      |   |         |         |   |   |          |        
|Depreciation, amortization and other                                    |                   |                          | (57,765   | )      |      |   | (62,434 | )       |   |   | (125,593 | )      
|Non-cash content and distribution services and stock compensation       |                   |                          | (27,801   | )      |      |   | (36,747 | )       |   |   | (50,971  | )      
|Restructuring and integration (charge) benefit                          |                   |                          | (4,535    | )      |      |   |        |         |   |   | 5,850    |        
|Legal expense                                                           |                   |                          | (9,230    | )      |      |   | (3,959  | )       |   |   |         |        
|Gain on investments                                                     |                   |                          | 457       |        |      |   | 1,659   |         |   |   | 6,547    |        
|Other income, net                                                       |                   |                          | 121       |        |      |   | 4,218   |         |   |   | 3,844    |        
|Income tax (provision) benefit                                          |                   |                          | (4,910    | )      |      |   | (4,140  | )       |   |   | 10,079   |        
|                                                                        |                   |                          |           |        |      |   |         |         |  
|Income (loss) from continuing operations                                |                   |                          | 39,334    |        |      |   | 16,605  |         |   |   | (53,113  | )      
|Income (loss) from discontinued operations                              |                   |                          |          |        |      |   | (33,611 | )       |   |   | 3,411    |        
|                                                                        |                   |                          |           |        |      |   |         |         |  
|                                                                        | Net income (loss) |                          | $         | 39,334 |      |   | $       | (17,006 | ) |   | $        | (49,702 | )
|                                                                        |                   |                          |           |        |      |   |         |         |  



| |              
| | -------------
| | 2004 and 2003



WebMD Business Services.




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WebMD Practice Services.




WebMD Health.




Porex.




Corporate


Inter-Segment Eliminations.




| |              
| | -------------
| | 2003 and 2002



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WebMD Business Services.




WebMD Practice Services.




WebMD Health.




Porex.




Corporate.


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Inter-Segment eliminations.


Liquidity and Capital Resources






1 4






1 4


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| |  |                                                                                                                             
| |  | ----------------------------------------------------------------------------------------------------------------------------
| |  | achieving certain milestones. In addition, we expect capital
    expenditures to be between $70,000 and $80,000
    in 2005.



|                            |       |                |         |           |        |   |        |           |  |   |           |         |  |         |        |        |  |   |         |         | 
|--------------------------- | ----- | -------------- | ------- | --------- | ------ | - | ------ | --------- |  | - | --------- | ------- |  | ------- | ------ | ------ |  | - | ------- | ------- | 
|                            |       |                |         | Less Than |        |   |        |           |  |   | More Than |        
|                            |       | Total          |         |           | 1 Year |   |        | 1-3 Years |  |   | 4-5 Years |         |  | 5 Years |       
|                            |       |                |         |           |        |   |        |           |  |   |           |         |  |         |       
|                            |       | (In thousands) |        
|Long-term debt(a)           |       | $              | 784,994 |           |        | $ | 15,875 |           |  | $ | 324,437   |         |  | $       | 12,251 |        |  | $ | 432,431 |        
|Leases(b)                   |       |                | 119,987 |           |        |   | 24,252 |           |  |   | 42,121    |         |  |         | 27,612 |        |  |   | 26,002  |        
|Purchase obligations(c)     |       |                | 29,772  |           |        |   | 21,033 |           |  |   | 8,739     |         |  |         |       |        |  |   |        |        
|Strategic relationships     |       |                | 1,379   |           |        |   | 754    |           |  |   | 625       |         |  |         |       |        |  |   |        |        
|Other long-term liabilities |       |                | 890     |           |        |   |       |           |  |   | 700       |         |  |         | 190    |        |  |   |        |        
|                            |       |                |         |           |        |   |        |           |  |   |           |         |  |         |       
|                            | Total |                | $       | 937,022   |        |   | $      | 61,914    |  |   | $         | 376,622 |  |         | $      | 40,053 |  |   | $       | 458,433 | 
|                            |       |                |         |           |        |   |        |           |  |   |           |         |  |         |       






|    |  |                                                                                                                                                                                                                      
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Long-term debt includes our $350,000 1.75% Convertible
    Subordinated Notes due 2023 and our $300,000
    31/4%
    Convertible Subordinated Notes due 2007. Amounts include our
    contractual interest payments.
|(b) |  | The lease amounts are net of sublease income.                                                                                                                                                                        
|(c) |  | Purchase obligations include amounts committed under legally
    enforceable contracts or purchase orders for goods and services
    with defined terms as to price, quantity and delivery.                          





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Recent Accounting Pronouncements










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Key Trends Affecting Our Businesses and Our Healthcare
Customers






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | High Rates of Increase in Healthcare Costs.
    According to the Centers for Medicare & Medicaid
    Services, or CMS, healthcare spending in the United States rose
    to $1.7 trillion in 2003, up from $1.6 trillion in
    2002, $1.4 trillion in 2001 and $1.3 trillion in 2000.
    The CMS report indicated a growth rate in healthcare spending of
    7.7% for 2003, compared to 9.3% for 2002, and 8.5% for 2001. The
    7.7% rate of increase in 2003 was three percentage points
    higher than the 2003 increase gross domestic product for the
    United States. The rate of increase in private spending for
    physician services, which accounts for two-thirds of payments
    for physician services, accelerated 1.2 percentage points
    to 9.4%. CMS indicated that healthcares share of gross
    domestic product was 15.3% for 2004. The difficulties involved
    in controlling healthcare costs have resulted in the following
    key trends:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Cost-Shifting by Employers to their Employees and Changes in
    Plan Design. Employers are seeking to shift a greater
    portion of healthcare costs onto their employees and to redefine
    traditional health benefits. People in employer-sponsored health
    plans are paying much more out of their own pockets than they
    did a few years ago and are likely to see their share continue
    to increase significantly in the near future. With the shift in
    financial burdens, consumers are assuming a more active role in
    managing their health and need information to make educated
    benefit, provider and treatment decisions. We are continuing the
    process of transforming WebMD Health, our consumer portal, from
    an online place that consumers go for information to a place
    where they can actively manage their health. In addition,
    through our WebMD Health Services business, we help employers
    and plans provide employees and plan members with answers to
    healthcare and plan benefit questions, decision-support tools
    and personalized information and feedback. WebMD Health intends
    to continue to make significant investments in its
    infrastructure, as well as in new products and services, to
    position ourselves to provide additional interactive online
    services.                                                                                                                                                                                                                                                                           
|
| |  | Increased Use of Information Technology for Clinical
    Purposes. Governmental and commercial payers continue to
    exert considerable pricing pressure on providers. As a result,
    in order to maintain their incomes, providers need to see more
    patients and increase productivity and/or reduce their operating
    costs. Use of information technology can assist providers in
    these efforts. Healthcare providers are also under pressure to
    increase quality and reduce medical errors. While information
    technology systems and electronic transaction services are used
    by many physician offices for administrative and financial
    applications, their use in clinical workflow is much more
    limited, especially in smaller practices. We believe that is
    changing and we are continuing to target the market for clinical
    applications as one of our priorities for the next several
    years. While it will be a long time before most physicians go to
    a paperless office, more physicians are beginning to
    incorporate information technology into their clinical workflow,
    and our products allow them to make this shift in a gradual way.
    In 2004, WebMD Practice Services released a new suite of
    clinical software called Intergy EHR. We believe that, in light
    of the increasing importance of clinical software to healthcare
    providers, WebMD Practice Services success in retaining
    existing practice management system customers and attracting new
    customers may depend, in substantial part, on their response to
    Intergy EHR.



| |   |                                                                    
| | - | -------------------------------------------------------------------
| |  | Improving Quality of Care Through Use of Information
    Technology



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Quality Initiatives. Health plans recognize that
    encouraging the good health of their members not only benefits
    the members but also has financial benefits for the health
    plans. Healthier people need less care and fewer costly
    services. Thus, controlling costs by keeping people healthier
    and better managing chronic conditions has become a significant
    focus for Americas healthcare system. Managed care emerged
    in the 1990s as a new approach to healthcare

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| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | delivery, combining a greater emphasis on preventive care with
    careful monitoring of resource utilization and provider
    performance. However, while managed care produced some important
    cost reductions, it also met with consumer resistance to what
    was perceived as its excessive restrictions. Then, in 1999 and
    2000, a series of major studies suggested that the nations
    healthcare system should be fundamentally redirected to focus on
    continuous quality improvement and anticipating healthcare
    needs, rather than controlling access to services. To achieve
    this, the healthcare industry required both new thinking and new
    techniques. Today, health plans seek to understand the needs of
    their members, including those whose medical conditions are
    likely to generate the greatest cost of services, and are
    working to offer both providers and members timely information
    to improve their health through appropriate care. Health plans
    and employer sponsors also seek to anticipate member and
    employee needs and to reach out to them with personalized
    communications. Finally, health plans and employers want to be
    able to determine the effectiveness of these efforts. ViPS,
    which we acquired in 2004, provides software and services that
    helps health plans identify and serve members who need the most
    care and to anticipate the future needs of member populations.
    In addition, WebMD Health provides online private portals that
    assist employers and health plans in educating and encouraging
    employees and plan members to lower health risks and to take a
    more active role in their healthcare.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Pay-for-Performance Initiatives. Both governmental and
    commercial payers have begun to reassess current healthcare
    provider compensation arrangements, which generally reimburse
    physicians and other healthcare providers based on the number
    and complexity of the services provided to patients.
    Pay-for-performance initiatives reward healthcare providers for
    better outcomes and adherence to evidence-based guidelines.
    These initiatives typically create incentives for improvements
    in the quality of care and for an increased focus on preventive
    medicine and appropriate management of chronic illnesses. The
    goal is both better outcomes and reductions in hospitalizations
    and expensive procedures. Information technology plays an
    important role in pay-for-performance initiatives, including
    with respect to the delivery of quality care by providers and
    quality measurement by payers. Some pay-for-performance programs
    provide incentives for use of electronic medical record systems,
    such as Intergy EHR, by providers. ViPS provides software and
    services that can be used to support
    pay-for-performance initiatives by payers. In
    addition, WebMD Health is working with Bridges to Excellence
    (BTE), a consortium of employers, providers and plans focused on
    improving outcomes and the quality of care through incentive
    programs. WebMD Health created and maintains the patient
    component of BTEs Diabetes Care Link program, which
    provides tools to help patients make treatment and provider
    decisions in connection with managing their disease, and it is
    integrated into an outcomes-based physician incentive program.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Increasing Automation of the Healthcare Reimbursement
    Cycle. Submission of claims electronically assists
    payers in reducing the cost of processing and servicing claims
    and can expedite the reimbursement process for providers.
    However, this is just a starting point for increasing
    administrative efficiency. We are continuing our efforts to
    transform WebMD Business Services (whose name was changed in
    2004 from WebMD Envoy) from an electronic transactions
    clearinghouse to a provider of more complete reimbursement cycle
    management services for healthcare providers and
    transaction-related administrative services for healthcare
    payers. The new name is intended to reflect this transformation,
    which in turn is intended to allow us to provide the benefits of
    economies of scale to our customers in various stages of the
    healthcare reimbursement cycle. In order to be more efficient,
    many healthcare payers are focusing upon core
    activities  building cost-effective provider
    networks, marketing their services to employers, and
    adjudicating claims payment  and are outsourcing pre-
    and post-adjudication administrative activities, such as
    printing and mailing checks and explanation of benefits and
    other document management activities, including conversion of
    paper claims to electronic form. By outsourcing these services
    to us, payers can reduce operating costs and capital
    expenditures. Our acquisitions of Advanced Business Fulfillment
    and Medifax-EDI in 2003 and Dakota Imaging in April 2004 support
    our ability to

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| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | provide more comprehensive business process outsourcing
    services. Through ViPS, which we acquired in August 2004, we
    provide healthcare payers with information technology solutions
    and related services for claims processing, provider performance
    measurement, quality improvement, fraud detection, disease
    management and predictive modeling. We are working to cross-sell
    our additional services to healthcare payers.







| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Increased Use of the Internet by Physicians and as a
    Source of Health Information for Consumers. A study
    published in 2003 by the Pew Internet and American Life Project
    estimated that approximately half of all American adults in the
    United States have accessed the Internet for health information,
    with nearly three-quarters of those who use the Internet
    reporting use of the Internet for health information. WebMD
    Health is a leading destination on the Internet for these
    consumers. See Healthcare Information Services and
    Technology Solutions  WebMD Health below. The
    Internet allows us to offer consumers the resources they are
    looking for, with immediate access to searchable information and
    dynamic interactive content. Physicians are also increasingly
    turning to the Internet for professional activities. In 2004,
    approximately 927,000 physicians and healthcare professional
    participants earned approximately 827,000 continuing medical
    education credits at Medscape, an increase of approximately 59%
    and 31% over 2003 respectively. As a result, WebMD Health
    enables its sponsors, including pharmaceutical, medical device
    and consumer products companies, to reach targeted consumers
    when they are looking for answers to healthcare questions and to
    reach physicians when they are exploring new treatment options.
    However, pharmaceutical companies and medical device
    manufacturers currently spend only a very small portion of their
    marketing and educational budgets on online media. Our strategy
    is to seek a greater portion of these budgets and to increase
    sponsorship of our portals by consumer products companies whose
    products have health claims.
|
| |  | Governmental Initiatives Relating to Healthcare
    Information Technology. There are currently numerous
    federal, state and private initiatives seeking ways to increase
    the use of information technology in healthcare, including in
    the physicians office. Most significantly, in April 2004,
    Executive Order 13335 directed the appointment of a National
    Coordinator for Health Information Technology to coordinate
    programs and policies regarding health information technology
    across the Federal government.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The National Coordinator is charged with directing the health
    information technology programs within the Department of Health
    and Human Services, or HHS, and coordinating them with those of
    other relevant Executive Branch agencies. In May 2004,
    David J. Brailer M.D., Ph.D., was appointed to serve
    in this new position. Also in accordance with that Executive
    Order, HHS issued a report during 2004 entitled The Decade
    of Health Information Technology: Delivering Consumer-centric
    and Information-rich Health Care. At WebMD, an important
    part of our mission has been fostering adoption of information
    technology and electronic communications in healthcare.
    Accordingly, we welcome governmental and private initiatives
    designed to achieve the same goals. However, these initiatives
    may encourage more companies

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| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | to enter our markets or result in the development of technology
    solutions that compete with ours. The National Coordinator has
    indicated that he intends to encourage widespread adoption of
    health information technology throughout the healthcare system
    and, to do that, intends to facilitate the development and
    transfer of knowledge and technology used by the federal
    government to the private sector.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In November 2004, the National Coordinator published a Request
    for Information seeking public comment regarding considerations
    in implementing a national health information network (NHIN). We
    are committed to promoting the development and adoption of
    interoperable health care information services and technology
    solutions and were one of many healthcare information technology
    companies that responded to the Request for Information. We
    believe that our experience in processing large volumes of
    electronic healthcare transactions, together with our experience
    in providing electronic health records and practice management
    software to medical practices and clinics and providing IT
    services to private and governmental healthcare payers, makes us
    a good candidate to work with HHS on NHIN-related initiatives
    and projects.





Factors That May Affect Our Future Financial Condition or
Results of Operations







Risks Related to Our Relationships with Customers of


WebMD Business Services and WebMD Practice Services




| |                                                                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The financial results of WebMD Business Services could be
    adversely affected if payers conduct electronic data
    interchange, or EDI, transactions without using a clearinghouse
    or if their ability to do so allows them to terminate or modify
    their relationships with us



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| |                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------
| | Some of our customers compete with us and some, instead of
    using a third party provider, perform internally some of the
    services that we offer





| |                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | WebMD Business Services transaction volume and
    financial results could be adversely affected if we do not
    maintain relationships with practice management system vendors
    and large submitters of healthcare EDI transactions



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| |                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Contractual relationships with governmental customers may
    impose special burdens on us and provide special benefits to
    those customers, including the right to change or terminate the
    contract in response to budgetary constraints or policy
    changes





| |   |                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | termination when appropriated funding for the current fiscal
    year is exhausted;                                                                                                                                                                                                                                                                                   
|
| |  | termination for the governmental customers convenience,
    subject to a negotiated settlement for costs incurred and profit
    on work completed, along with the right to place contracts out
    for bid before the full contract term, as well as the right to
    make unilateral changes in contract requirements, subject to
    negotiated price adjustments;
|
| |  | most-favored pricing disclosure requirements that
    are designed to ensure that the government can negotiate and
    receive pricing akin to that offered commercially and
    requirements to submit proprietary cost or pricing data to
    ensure that government contract pricing is fair and reasonable;                                                     
|
| |  | commercial customer price tracking requirements that require
    contractors to monitor pricing offered to a specified class of
    customers and to extend price reductions offered to that class
    of customers to the government;                                                                                                                                
|
| |  | reporting and compliance requirements related to, among other
    things: equal employment opportunity, affirmative action for
    veterans and for workers with disabilities, and accessibility
    for the disabled;                                                                                                                                                
|
| |  | broader audit rights than we would usually grant to
    non-governmental customers; and                                                                                                                                                                                                                                                                               
|
| |  | specialized remedies for breach and default, including setoff
    rights, retroactive price adjustments, and civil or criminal
    fraud penalties, as well as mandatory administrative dispute
    resolution procedures instead of state contract law remedies.                                                                                                     





| |                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Long sales, installation and implementation cycles for
    some WebMD Business Services applications and some
    WebMD Practice Services applications may result in
    unanticipated fluctuations in their revenues

WebMD Practice Services.


ViPS.


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| |                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------
| | WebMD Practice Services faces competition in providing
    support services to owners of The Medical Manager and other
    systems






Risks Related to the Development and Performance of Our


WebMD Business Services and WebMD Practice Services
Solutions




| |                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our ability to generate revenue could suffer if we do not
    continue to update and improve our existing products and
    services and develop new ones





| |                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------
| | Developing and implementing new or updated products and
    services may take longer and cost more than expected



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| |                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------
| | New or updated products and services will not become
    profitable unless they achieve sufficient levels of market
    acceptance





| |   |                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------
| |  | our updated electronic medical records products;                                                                  
|
| |  | the business process outsourcing services for payers we have
    developed internally and through acquisition; and
|
| |  | our updated clinical transaction services.                                                                        







| |                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------
| | Achieving market acceptance of new or updated products and
    services is likely to require significant efforts and
    expenditures





| |                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We could be subject to breach of warranty, product
    liability or other claims if our software products, information
    technology systems or transmission systems contain errors or
    experience failures



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| |                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Performance problems with WebMD Business Services
    systems or system failures could cause us to lose customers or
    cause customers to reduce the number of transactions we process
    for them







| |                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------
| | During times when we are making significant changes to our
    products and services, there are increased risks of performance
    problems





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| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | If our systems or the Internet experience security
    breaches or are otherwise perceived to be insecure, our business
    could suffer





| |                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------
| | Performance problems with WebMD Business Services
    systems could affect our relationships with customers of our
    Practice Services business





| |                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------
| | WebMD Business Services ability to provide
    transaction services depends on services provided by
    telecommunications companies






Risks Related to the Operations of WebMD Healths Public
Web Sites




| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | Our advertising and sponsorship revenues may vary
    significantly from quarter to quarter



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| |   |                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | timing of FDA approval for new products or for new approved uses
    for existing products;                                                                                                
|
| |  | 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
|
| |  | scheduling of conferences for physicians and other healthcare
    professionals.                                                                                                           





| |                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our ability to maintain or increase our advertising and
    sponsorship revenues depends on our ability to retain or
    increase usage of our online offerings by consumers and
    physicians





| |                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our ability to retain or increase usage of our Web sites
    depends on our ability to create or license high quality health
    content, interactive tools and other features





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| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | Changes in government regulation or industry guidelines
    could adversely affect our online continuing medical education
    offerings











| |                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------
| | Loss of a small number of sponsors could have a material
    adverse effect on our advertising and sponsorship
    revenues





| |                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------
| | We may be unsuccessful in our efforts to increase
    advertising and sponsorship revenue from consumer products
    companies



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| |                                                                                               
| | ----------------------------------------------------------------------------------------------
| | Performance problems with the systems of our content
    providers could disrupt our Web sites






Risks Related to Our Private Online Portals






| |                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------
| | Lengthy sales and implementation cycles for our private
    online portals make it difficult to forecast our revenues from
    these applications







| |                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------
| | We must continue to upgrade our technology infrastructure,
    both hardware and software, to effectively meet demand for our
    private online portals



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| |                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If the systems WebMD Health Services uses to provide
    private online portals experience security breaches or are
    otherwise perceived to be insecure, its business could
    suffer





| |                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We could be subject to breach of warranty or other claims
    if our private online portals or the software and systems we use
    to provide them contain errors or experience failures








Risks Applicable to Our Use of the Internet






| |                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------
| | Our Internet-based services are dependent on the
    development and maintenance of the Internet
    infrastructure



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| |                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------
| | Delivery of web-based services requires uninterrupted
    communications and computer service from third-party service
    providers and our own systems





| |   |                                                                             
| | - | ----------------------------------------------------------------------------
| |  | damage from fire, power loss and other natural disasters;                   
|
| |  | communications failures;                                                    
|
| |  | software and hardware errors, failures or crashes;                          
|
| |  | security breaches, computer viruses and similar disruptive
    problems; and
|
| |  | other potential interruptions.                                              





| |                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------
| | Implementation of changes in hardware and software
    platforms used to deliver our Web-based services may result in
    performance problems





| |                                                                              
| | -----------------------------------------------------------------------------
| | Government regulation of the Internet could adversely
    affect our business



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Other Risks Applicable to WebMD Health




| |                                                                                                              
| | -------------------------------------------------------------------------------------------------------------
| | WebMD Healths primary businesses are difficult to
    evaluate because they have a limited operating history







| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | Third parties may bring claims against us as a result of
    content we provide, which may be expensive and time consuming to
    defend







| |                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------
| | We face potential liability related to the privacy and
    security of personal information we collect on our
    Web sites



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| |                                                                            
| | ---------------------------------------------------------------------------
| | Third parties may challenge the enforceability of our
    online agreements






Risks Related to Providing Products and Services to the
Healthcare Industry




| |                                                                                
| | -------------------------------------------------------------------------------
| | Developments in the healthcare industry could adversely
    affect our business





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | government regulation or private initiatives that affect the
    manner in which healthcare providers interact with patients,
    payers or other healthcare industry participants, including
    changes in pricing or means of delivery of healthcare products
    and services (for additional discussion of the potential effects
    of regulatory matters on our business and on participants in the
    healthcare industry, see the other Risks Related to
    Providing Products and Services to the Healthcare Industry
    described below in this section and Business 
    Government Regulation above);
|
| |  | consolidation of healthcare industry participants;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | reductions in governmental funding for healthcare; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | adverse changes in business or economic conditions affecting
    healthcare payers or providers, pharmaceutical companies,
    medical device manufacturers or other healthcare industry
    participants.                                                                                                                                                                                                                                                                                                                                                                                                                





| |   |                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes in the billing patterns of healthcare providers;                                                                                                                                                                                                                                  
|
| |  | changes in the design of health insurance plans;                                                                                                                                                                                                                                          
|
| |  | changes in the contracting methods payers use in their
    relationships with providers; and                                                                                                                                                                                              
|
| |  | decreases in marketing expenditures by pharmaceutical companies
    or medical device manufacturers, including as a result of
    governmental regulation or private initiatives that discourage
    or prohibit promotional activities by pharmaceutical or medical
    device companies.





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| |                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Governmental and private initiatives to support adoption
    of healthcare information technology may encourage additional
    companies to enter our markets or result in the development of
    technology solutions that compete with ours





| |                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------
| | Government regulation of healthcare creates risks and
    challenges with respect to our compliance efforts and our
    business strategies





| |   |                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | because we are in the business of applying information
    technology to healthcare, various aspects of HIPAA have had and
    are expected to continue to have significant consequences for
    WebMD Business Services and WebMD Practice Services and, to a
    lesser extent, WebMD Health;                                                        
|
| |  | because our WebMD Health business involves advertising and
    promotion of prescription and over-the-counter drugs and medical
    devices, any increase in regulation of these areas by the
    Federal Drug Administration or the Federal Trade Commission
    could make it more difficult for us to contract for sponsorships
    and advertising;
|
| |  | because we sell items and services to healthcare providers and
    physicians, our sales and promotional practices must comply with
    federal and state anti-kickback laws;                                                                                                                                                                          
|
| |  | our healthcare connectivity and transaction-related
    administrative services must be provided in compliance with
    federal and state false claims laws; and                                                                                                                                                                                       
|
| |  | in providing health information to consumers, we must comply
    with corporate practice of medicine rules and not offer
    professional medical advice, diagnosis or treatment.                                                                                                                                                                      






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Risks Related to Porexs Business and Industry




| |                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| | Porexs success depends upon demand for its products,
    which in some cases ultimately depends upon end-user demand for
    the products of its customers





| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Porexs success may depend on satisfying rapidly
    changing customer requirements





| |                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------
| | Potential new or enhanced Porex products may not achieve
    sufficient sales to be profitable or justify the cost of their
    development





| |                                                                                                               
| | --------------------------------------------------------------------------------------------------------------
| | Porex may not be able to source the raw materials it needs
    or may have to pay more for those raw materials





| |                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------
| | Disruptions in Porexs manufacturing operations could
    have a material adverse effect on its business and financial
    results



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| |                                                                                       
| | --------------------------------------------------------------------------------------
| | Porex may not be able to keep third parties from using
    technology it has developed





| |                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------
| | The nature of Porexs products exposes it to product
    liability claims that may not be adequately covered by indemnity
    agreements or insurance









| |                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Economic, political and other risks associated with
    Porexs international sales and geographically diverse
    operations could adversely affect Porexs operations and
    financial results



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| |   |                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------
| |  | changes in foreign currency exchange rates;                                                                        
|
| |  | changes in a specific countrys or regions political
    or economic conditions, particularly in emerging markets;
|
| |  | trade protection measures and import or export licensing
    requirements;                                         
|
| |  | potentially negative consequences from changes in tax laws;                                                        
|
| |  | differing protection of intellectual property; and                                                                 
|
| |  | unexpected changes in regulatory requirements.                                                                     



| |                                                                     
| | --------------------------------------------------------------------
| | Environmental regulation could adversely affect
    Porexs business






Risks Applicable to Our Entire Company




| |                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The ongoing investigations by the United States Attorney
    for the District of South Carolina and the SEC could negatively
    impact our company and divert management attention from our
    business operations







| |                                                                  
| | -----------------------------------------------------------------
| | We face significant competition for our products and
    services



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| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | Third parties may bring claims as a result of the
    activities of our strategic partners or resellers of our
    products and services





| |                                                                                                             
| | ------------------------------------------------------------------------------------------------------------
| | The performance of our businesses depends on attracting
    and retaining qualified executives and employees





| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | We may not be successful in protecting our intellectual
    property and proprietary rights







| |                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Third parties may claim that we are infringing their
    intellectual property, and we could suffer significant
    litigation or licensing expenses or be prevented from selling
    products or services





| |                                                  
| | -------------------------------------------------
| | We have incurred and may continue to incur losses



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| |                                
| | -------------------------------
| | We may be subject to litigation





| |                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Acquisitions, business combinations and other transactions
    may be difficult to complete and, if completed, may have
    negative consequences for our business and our
    securityholders





| |   |                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------
| |  | cash and cash equivalents on hand and marketable securities,                                                     
|
| |  | proceeds from the incurrence of indebtedness, and                                                                
|
| |  | proceeds from the issuance of additional common stock, preferred
    stock, convertible debt or other securities.





| |   |                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------
| |  | cause substantial dilution of the percentage ownership of our
    stockholders at the time of the issuance,
|
| |  | cause substantial dilution of our earnings per share, and                                                  
|
| |  | adversely affect the prevailing market price for our outstanding
    securities.                           





| |                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our business will suffer if we fail to successfully
    integrate acquired businesses and technologies or to assess the
    risks in particular transactions





| |   |                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability to maintain relationships with the customers of the
    acquired business;                                                                                                        
|
| |  | our ability to cross-sell products and services to customers
    with which we have established relationships and those with
    which the acquired businesses have established relationships;
|
| |  | our ability to retain or replace key personnel;                                                                                                                                               
|
| |  | potential conflicts in payer, provider, strategic partner,
    sponsor or advertising relationships;                                                                                          
|
| |  | our ability to coordinate organizations that are geographically
    diverse and may have different business cultures; and                                                                     
|
| |  | compliance with regulatory requirements.                                                                                                                                                      

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| |                                                                                                          
| | ---------------------------------------------------------------------------------------------------------
| | We may not be able to raise additional funds when needed
    for our business or to exploit opportunities





| |                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We expect that accounting for employee stock options using
    the fair value method will have a material impact on our
    consolidated results of operations and earnings per share





| |                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The separation of WebMD Health from WebMD Corporation
    currently being considered by our Board of Directors will expose
    you to additional risks and those risks may outweigh the
    potential benefits





| |   |                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------
| |  | a one-step split-off of WebMD Health equity through an exchange
    offer transaction with WebMD Corporations stockholders; or
|
| |  | an initial public offering of a minority interest in WebMD
    Health.                                                         





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|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures about Market
    Risk

Interest Rate Sensitivity












Exchange Rate Sensitivity









|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data

Financial Statements









|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures



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Item 9B.     Other
Information




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PART III









|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant








|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation








|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters








|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services



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PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules

(a)(1)-(2) Financial Statements and Schedules




(a)(3) Exhibits




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SIGNATURES






| |                  
| | -----------------
| | WebMD Corporation



| |     |                     
| | --- | --------------------
| | By: | /s/ Andrew C. Corbin

| |                             
| | ----------------------------
| |                             
| | Andrew C. Corbin            
| | Executive Vice President and
| | Chief Financial Officer     

POWER OF ATTORNEY






|                                           |  |                                                                                                       |  |                |  | 
|------------------------------------------ |  | ----------------------------------------------------------------------------------------------------- |  | -------------- |  | 
|Signature                                  |  | Capacity                                                                                              |  | Date          
|                                           |  |                                                                                                       |  |               
|                                          
|/s/ Kevin M. CameronKevin
    M. Cameron   |  | Director; Chief Executive Officer (principal executive officer)                                       |  | March 16, 2005
|                                          
|/s/ Andrew C. CorbinAndrew
    C. Corbin   |  | Executive Vice President and Chief Financial Officer (principal
    financial and accounting officer) |  | March 16, 2005
|                                          
|/s/ Mark J. AdlerMark
    J. Adler, M.D.   |  | Director                                                                                              |  | March 16, 2005
|                                          
|/s/ Paul A. BrookePaul
    A. Brooke       |  | Director                                                                                              |  | March 16, 2005
|                                          
|/s/ Neil F. DimickNeil
    F. Dimick       |  | Director                                                                                              |  | March 16, 2005
|                                          
|/s/ Roger C. HolsteinRoger
    C. Holstein |  | Director                                                                                              |  | March 16, 2005
|                                          
|/s/ James V. ManningJames
    V. Manning   |  | Director                                                                                              |  | March 16, 2005

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|                                         |  |          |  |                |  | 
|---------------------------------------- |  | -------- |  | -------------- |  | 
|Signature                                |  | Capacity |  | Date          
|                                         |  |          |  |               
|                                        
|/s/ Herman SarkowskyHerman
    Sarkowsky |  | Director |  | March 16, 2005
|                                        
|/s/ Joseph E. SmithJoseph
    E. Smith   |  | Director |  | March 16, 2005
|                                        
|/s/ Martin J. WygodMartin
    J. Wygod   |  | Director |  | March 16, 2005

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##### Table of Contents






WebMD Corporation


Index to Consolidated Financial Statements and Supplemental
Data




|                                 |                                                                                                                                                                   |      |  |      | 
|-------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- |  | ---- | 
|                                 |                                                                                                                                                                   | Page | 
|                                 |                                                                                                                                                                   |      | 
|Historical Financial Statements: |                                                                                                                                                                   |      |  |     
|                                 | Report of Management on Internal Control Over Financial Reporting                                                                                                 |      |  | F-2  | 
|                                 | Report of Independent Registered Public Accounting Firm                                                                                                           |      |  | F-3  | 
|                                 | Report of Independent Registered Public Accounting Firm on
    Internal Control Over Financial Reporting                                                          |      |  | F-4  | 
|                                 | Consolidated Balance Sheets at December 31, 2004 and 2003                                                                                                         |      |  | F-5  | 
|                                 | Consolidated Statements of Operations for the Years Ended
    December 31, 2004, 2003 and 2002                                                                    |      |  | F-6  | 
|                                 | Consolidated Statements of Stockholders Equity for the
    Years Ended December 31, 2004, 2003 and 2002                                                          |      |  | F-7  | 
|                                 | Consolidated Statements of Cash Flows for the Years Ended
    December 31, 2004, 2003 and 2002                                                                    |      |  | F-8  | 
|                                 | Notes to Consolidated Financial Statements                                                                                                                        |      |  | F-10 | 
|Supplemental Financial Data:     |                                                                                                                                                                   |      |  |     
|                                 | The following supplementary financial data of the Registrant and
    its subsidiaries required to be included in Item 15(a)(2)
    of Form 10-K are listed below: |      |  |      | 
|                                 | Schedule II  Valuation and Qualifying Accounts                                                                                                                   |      |  | S-1  | 



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##### Table of Contents



REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING






| |   |                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | pertain to the maintenance of records that, in reasonable
    detail, accurately and fairly reflect the transactions and
    dispositions of the assets of the company;                                                                                                                                                                                        
|
| |  | provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that receipts and expenditures of the company are being made
    only in accordance with authorizations of management and
    directors of the company; and
|
| |  | provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use, or disposition of
    the companys assets that could have a material effect on
    the financial statements.                                                                                                                                      





Internal
Control  Integrated Framework








F-2



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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
















| |                          
| | -------------------------
| | /s/ Ernst & Young
    LLP





F-3



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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON


INTERNAL CONTROL OVER FINANCIAL REPORTING






















| |                          
| | -------------------------
| | /s/ Ernst & Young
    LLP





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##### Table of Contents



WebMD Corporation


Consolidated Balance Sheets


(In thousands, except share and per share data)


|                                                                                                                                                      |                                                                                                                 |                                                                                                                                                                        |                            |             |      |           |           |             |    |           | 
|----------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ----------- | ---- | --------- | --------- | ----------- | -- | --------- | 
|                                                                                                                                                      |                                                                                                                 | December 31,                                                                                                                                                           |                           
|                                                                                                                                                      |                                                                                                                 |                                                                                                                                                                        |                           
|                                                                                                                                                      |                                                                                                                 | 2004                                                                                                                                                                   |                            |             | 2003 |          
|                                                                                                                                                      |                                                                                                                 |                                                                                                                                                                        |                            |             |      |          
|ASSETS                                                                                                                                                |                                                                                                                 |                                                                                                                                                                        |                            |             |      |           |           |            
|Current assets:                                                                                                                                       |                                                                                                                 |                                                                                                                                                                        |                            |             |      |           |           |            
|                                                                                                                                                      | Cash and cash equivalents                                                                                       |                                                                                                                                                                        | $                          | 46,019      |      |           | $         | 39,648      |   
|                                                                                                                                                      | Short-term investments                                                                                          |                                                                                                                                                                        |                            | 61,675      |      |           |           | 231,033     |   
|                                                                                                                                                      | Accounts receivable, net of allowance for doubtful accounts of
    $13,433 in 2004 and $20,500 in 2003          |                                                                                                                                                                        |                            | 214,437     |      |           |           | 181,173     |   
|                                                                                                                                                      | Inventory                                                                                                       |                                                                                                                                                                        |                            | 13,476      |      |           |           | 12,158      |   
|                                                                                                                                                      | Prepaid expenses and other current assets                                                                       |                                                                                                                                                                        |                            | 41,115      |      |           |           | 44,089      |   
|                                                                                                                                                      |                                                                                                                 |                                                                                                                                                                        |                            |             |      |          
|                                                                                                                                                      |                                                                                                                 |                                                                                                                                                                        | Total current assets       |             |      | 376,722   |           |             |    | 508,101   | 
|Marketable debt securities                                                                                                                            |                                                                                                                 |                                                                                                                                                                        | 511,864                    |             |      |           | 451,290   |            
|Marketable equity securities                                                                                                                          |                                                                                                                 |                                                                                                                                                                        | 4,017                      |             |      |           | 4,744     |            
|Property and equipment, net                                                                                                                           |                                                                                                                 |                                                                                                                                                                        | 89,677                     |             |      |           | 77,278    |            
|Goodwill                                                                                                                                              |                                                                                                                 |                                                                                                                                                                        | 1,010,564                  |             |      |           | 844,448   |            
|Intangible assets, net                                                                                                                                |                                                                                                                 |                                                                                                                                                                        | 260,509                    |             |      |           | 184,130   |            
|Other assets                                                                                                                                          |                                                                                                                 |                                                                                                                                                                        | 48,871                     |             |      |           | 65,315    |            
|                                                                                                                                                      |                                                                                                                 |                                                                                                                                                                        |                            |             |      |          
|                                                                                                                                                      |                                                                                                                 | $                                                                                                                                                                      | 2,302,224                  |             |      | $         | 2,135,306 |            
|                                                                                                                                                      |                                                                                                                 |                                                                                                                                                                        |                            |             |      |          
|                                                                                                                                                     
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                  |                                                                                                                 |                                                                                                                                                                        |                            |             |      |           |           |            
|Current liabilities:                                                                                                                                  |                                                                                                                 |                                                                                                                                                                        |                            |             |      |           |           |            
|                                                                                                                                                      | Accounts payable                                                                                                |                                                                                                                                                                        | $                          | 17,366      |      |           | $         | 10,390      |   
|                                                                                                                                                      | Accrued expenses                                                                                                |                                                                                                                                                                        |                            | 201,528     |      |           |           | 208,430     |   
|                                                                                                                                                      | Deferred revenue                                                                                                |                                                                                                                                                                        |                            | 109,533     |      |           |           | 86,708      |   
|                                                                                                                                                      |                                                                                                                 |                                                                                                                                                                        |                            |             |      |          
|                                                                                                                                                      |                                                                                                                 |                                                                                                                                                                        | Total current liabilities  |             |      | 328,427   |           |             |    | 305,528   | 
|31/4% convertible
    subordinated notes due 2007                                                                                                     |                                                                                                                 |                                                                                                                                                                        | 299,999                    |             |      |           | 299,999   |            
|1.75% convertible subordinated notes due 2023                                                                                                         |                                                                                                                 |                                                                                                                                                                        | 350,000                    |             |      |           | 350,000   |            
|Other long-term liabilities                                                                                                                           |                                                                                                                 |                                                                                                                                                                        | 1,283                      |             |      |           | 1,182     |            
|Commitments and contingencies                                                                                                                         |                                                                                                                 |                                                                                                                                                                        |                            |             |      |           |           |            
|Convertible redeemable exchangeable preferred stock,
    $0.0001 par value; 10,000 shares authorized, issued
    and outstanding at December 31, 2004 |                                                                                                                 |                                                                                                                                                                        | 98,299                     |             |      |           |          |            
|Stockholders equity:                                                                                                                                 |                                                                                                                 |                                                                                                                                                                        |                            |             |      |           |           |            
|                                                                                                                                                      | Preferred stock, $0.0001 par value; 4,990,000 shares
    authorized; no shares issued                           |                                                                                                                                                                        |                            |            |      |           |           |            |   
|                                                                                                                                                      |                                                                                                                 | Common stock, $0.0001 par value; 900,000,000 shares
    authorized; 394,041,320 shares issued at December 31,
    2004; 384,751,705 shares issued at December 31, 2003 |                            |             | 39   |           |           |             | 38 |          
|                                                                                                                                                      | Additional paid-in capital                                                                                      |                                                                                                                                                                        |                            | 11,776,911  |      |           |           | 11,726,734  |   
|                                                                                                                                                      | Deferred stock compensation                                                                                     |                                                                                                                                                                        |                            | (7,819      | )    |           |           | (4,683      | ) 
|                                                                                                                                                      | Treasury stock, at cost; 80,849,495 shares at
    December 31, 2004; 76,576,865 shares at
    December 31, 2003 |                                                                                                                                                                        |                            | (379,968    | )    |           |           | (347,858    | ) 
|                                                                                                                                                      | Accumulated deficit                                                                                             |                                                                                                                                                                        |                            | (10,172,904 | )    |           |           | (10,212,054 | ) 
|                                                                                                                                                      | Accumulated other comprehensive income                                                                          |                                                                                                                                                                        |                            | 7,957       |      |           |           | 16,420      |   
|                                                                                                                                                      |                                                                                                                 |                                                                                                                                                                        |                            |             |      |          
|                                                                                                                                                      |                                                                                                                 |                                                                                                                                                                        | Total stockholders equity |             |      | 1,224,216 |           |             |    | 1,178,597 | 
|                                                                                                                                                      |                                                                                                                 |                                                                                                                                                                        |                            |             |      |          
|                                                                                                                                                      |                                                                                                                 | $                                                                                                                                                                      | 2,302,224                  |             |      | $         | 2,135,306 |            
|                                                                                                                                                      |                                                                                                                 |                                                                                                                                                                        |                            |             |      |          



F-5



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##### Table of Contents



WebMD Corporation


Consolidated Statements of Operations


(In thousands, except per share data)


|                                                                                          |                                                                 |                          |           |         |      |   |         |         |   |   |         |         |  
|----------------------------------------------------------------------------------------- | --------------------------------------------------------------- | ------------------------ | --------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                                          |                                                                 | Years Ended December 31, |          
|                                                                                          |                                                                 |                          |          
|                                                                                          |                                                                 | 2004                     |           |         | 2003 |   |         | 2002    |  
|                                                                                          |                                                                 |                          |           |         |      |   |         |         |  
|Revenue                                                                                   |                                                                 | $                        | 1,160,351 |         |      | $ | 963,980 |         |   | $ | 871,696 |        
|Costs and expenses:                                                                       |                                                                 |                          |           |         |      |   |         |         |   |   |         |        
|                                                                                          | Cost of operations                                              |                          |           | 666,431 |      |   |         | 564,939 |   |   |         | 509,744 |  
|                                                                                          | Development and engineering                                     |                          |           | 54,161  |      |   |         | 42,985  |   |   |         | 43,467  |  
|                                                                                          | Sales, marketing, general and administrative                    |                          |           | 324,027 |      |   |         | 282,482 |   |   |         | 283,424 |  
|                                                                                          | Depreciation, amortization and other                            |                          |           | 57,765  |      |   |         | 62,434  |   |   |         | 125,593 |  
|                                                                                          | Legal expense                                                   |                          |           | 9,230   |      |   |         | 3,959   |   |   |         |        |  
|                                                                                          | Restructuring and integration charge (benefit)                  |                          |           | 4,535   |      |   |         |        |   |   |         | (5,850  | )
|                                                                                          | Gain on investments                                             |                          |           | 457     |      |   |         | 1,659   |   |   |         | 6,547   |  
|                                                                                          | Interest income                                                 |                          |           | 18,717  |      |   |         | 22,901  |   |   |         | 19,590  |  
|                                                                                          | Interest expense                                                |                          |           | 19,253  |      |   |         | 15,214  |   |   |         | 8,491   |  
|                                                                                          | Other income, net                                               |                          |           | 121     |      |   |         | 4,218   |   |   |         | 3,844   |  
|                                                                                          |                                                                 |                          |           |         |      |   |         |         |  
|Income (loss) from continuing operations before income tax
    provision (benefit)        |                                                                 |                          | 44,244    |         |      |   | 20,745  |         |   |   | (63,192 | )      
|                                                                                          | Income tax provision (benefit)                                  |                          |           | 4,910   |      |   |         | 4,140   |   |   |         | (10,079 | )
|                                                                                          |                                                                 |                          |           |         |      |   |         |         |  
|                                                                                          | Income (loss) from continuing operations                        |                          |           | 39,334  |      |   |         | 16,605  |   |   |         | (53,113 | )
|                                                                                          | Income (loss) from discontinued operations, net of income taxes |                          |           |        |      |   |         | (33,611 | ) |   |         | 3,411   |  
|                                                                                          |                                                                 |                          |           |         |      |   |         |         |  
|Net income (loss)                                                                         |                                                                 | $                        | 39,334    |         |      | $ | (17,006 | )       |   | $ | (49,702 | )      
|                                                                                          |                                                                 |                          |           |         |      |   |         |         |  
|Basic income (loss) per common share:                                                     |                                                                 |                          |           |         |      |   |         |         |   |   |         |        
|                                                                                          | Income (loss) from continuing operations                        |                          | $         | 0.12    |      |   | $       | 0.05    |   |   | $       | (0.17   | )
|                                                                                          | Income (loss) from discontinued operations                      |                          |           |        |      |   |         | (0.11   | ) |   |         | 0.01    |  
|                                                                                          |                                                                 |                          |           |         |      |   |         |         |  
|Net income (loss)                                                                         |                                                                 | $                        | 0.12      |         |      | $ | (0.06   | )       |   | $ | (0.16   | )      
|                                                                                          |                                                                 |                          |           |         |      |   |         |         |  
|Diluted income (loss) per common share:                                                   |                                                                 |                          |           |         |      |   |         |         |   |   |         |        
|                                                                                          | Income (loss) from continuing operations                        |                          | $         | 0.12    |      |   | $       | 0.05    |   |   | $       | (0.17   | )
|                                                                                          | Income (loss) from discontinued operations                      |                          |           |        |      |   |         | (0.10   | ) |   |         | 0.01    |  
|                                                                                          |                                                                 |                          |           |         |      |   |         |         |  
|Net income (loss)                                                                         |                                                                 | $                        | 0.12      |         |      | $ | (0.05   | )       |   | $ | (0.16   | )      
|                                                                                          |                                                                 |                          |           |         |      |   |         |         |  
|Weighted-average shares outstanding used in computing income
    (loss) per common share: |                                                                 |                          |           |         |      |   |         |         |   |   |         |        
|                                                                                          | Basic                                                           |                          |           | 320,080 |      |   |         | 304,858 |   |   |         | 304,168 |  
|                                                                                          |                                                                 |                          |           |         |      |   |         |         |  
|                                                                                          | Diluted                                                         |                          |           | 333,343 |      |   |         | 325,811 |   |   |         | 304,168 |  
|                                                                                          |                                                                 |                          |           |         |      |   |         |         |  



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##### Table of Contents



WebMD Corporation


Consolidated Statements of Stockholders Equity


(In thousands, except share data)


|                                                                                                 |  |                      |             |  |            |   |    |          |  |             |                |   |  |             |         |       |               |  |            |               |  |   |          |   |  |        |             |   |  |   |         |   |  |   |           |  
|------------------------------------------------------------------------------------------------ |  | -------------------- | ----------- |  | ---------- | - | -- | -------- |  | ----------- | -------------- | - |  | ----------- | ------- | ----- | ------------- |  | ---------- | ------------- |  | - | -------- | - |  | ------ | ----------- | - |  | - | ------- | - |  | - | --------- | -
|                                                                                                 |  | Stockholders Equity |            
|                                                                                                 |  |                      |            
|                                                                                                 |  |                      |             |  |            |   |    |          |  | Accumulated |                |   | 
|                                                                                                 |  | Common Stock         |             |  | Additional |   |    | Deferred |  |             | Treasury Stock |   |  |             |         | Other |               |  | Total      |              
|                                                                                                 |  |                      |             |  | Paid-In    |   |    | Stock    |  |             |                |   |  | Accumulated |         |       | Comprehensive |  |            | Stockholders | 
|                                                                                                 |  | Shares               |             |  | Amount     |   |    | Capital  |  |             | Compensation   |   |  | Shares      |         |       | Amount        |  |            | Deficit       |  |   | Income   |   |  | Equity |            
|                                                                                                 |  |                      |             |  |            |   |    |          |  |             |                |   |  |             |         |       |               |  |            |               |  |   |          |   |  |        |            
|Balances at December 31, 2001                                                                    |  |                      | 366,956,160 |  |            | $ | 37 |          |  | $           | 11,652,743     |   |  | $           | (42,173 | )     |               |  | 56,091,935 |               |  | $ | (222,582 | ) |  | $      | (10,145,346 | ) |  | $ | 12,833  |   |  | $ | 1,255,512 |  
|Net loss                                                                                         |  |                      |            |  |            |   |   |          |  |             |               |   |  |             |        |       |               |  |           |               |  |   |         |   |  |        | (49,702     | ) |  |   |        |   |  |   | (49,702   | )
|Net decrease in unrealized gains on securities                                                   |  |                      |            |  |            |   |   |          |  |             |               |   |  |             |        |       |               |  |           |               |  |   |         |   |  |        |            |   |  |   | (3,640  | ) |  |   | (3,640    | )
|Foreign currency translation adjustment                                                          |  |                      |            |  |            |   |   |          |  |             |               |   |  |             |        |       |               |  |           |               |  |   |         |   |  |        |            |   |  |   | 2,523   |   |  |   | 2,523     |  
|                                                                                                 |  |                      |             |  |            |   |    |          |  |             |                |   |  |             |         |       |               |  |            |               |  |   |          |   |  |        |            
|Comprehensive loss                                                                               |  |                      |            |  |            |   |   |          |  |             |               |   |  |             |        |       |               |  |           |               |  |   |         |   |  |        |            |   |  |   |        |   |  |   | (50,819   | )
|Issuance of common stock for option exercises, ESPP, 401(k) and
    other issuances              |  |                      | 7,704,904   |  |            |   |   |          |  |             | 28,774         |   |  |             |        |       |               |  |           |               |  |   |         |   |  |        |            |   |  |   |        |   |  |   | 28,774    |  
|Issuance, net of repurchase, of warrants in connection with
    strategic alliances and services |  |                      |            |  |            |   |   |          |  |             | 29             |   |  |             |        |       |               |  |           |               |  |   |         |   |  |        |            |   |  |   |        |   |  |   | 29        |  
|Deferred stock compensation                                                                      |  |                      |            |  |            |   |   |          |  |             | 2,500          |   |  |             | (2,500  | )     |               |  |           |               |  |   |         |   |  |        |            |   |  |   |        |   |  |   |          |  
|Stock compensation expense                                                                       |  |                      |            |  |            |   |   |          |  |             | 392            |   |  |             | 24,873  |       |               |  |           |               |  |   |         |   |  |        |            |   |  |   |        |   |  |   | 25,265    |  
|Purchase of treasury stock                                                                       |  |                      |            |  |            |   |   |          |  |             |               |   |  |             |        |       |               |  | 18,162,734 |               |  |   | (104,960 | ) |  |        |            |   |  |   |        |   |  |   | (104,960  | )
|Adjustment to deferred stock compensation for terminations                                       |  |                      |            |  |            |   |   |          |  |             | (1,995         | ) |  |             | 1,995   |       |               |  |           |               |  |   |         |   |  |        |            |   |  |   |        |   |  |   |          |  
|                                                                                                 |  |                     
|Balances at December 31, 2002                                                                    |  |                      | 374,661,064 |  |            |   | 37 |          |  |             | 11,682,443     |   |  |             | (17,805 | )     |               |  | 74,254,669 |               |  |   | (327,542 | ) |  |        | (10,195,048 | ) |  |   | 11,716  |   |  |   | 1,153,801 |  
|Net loss                                                                                         |  |                      |            |  |            |   |   |          |  |             |               |   |  |             |        |       |               |  |           |               |  |   |         |   |  |        | (17,006     | ) |  |   |        |   |  |   | (17,006   | )
|Net increase in unrealized gains on securities                                                   |  |                      |            |  |            |   |   |          |  |             |               |   |  |             |        |       |               |  |           |               |  |   |         |   |  |        |            |   |  |   | 1,419   |   |  |   | 1,419     |  
|Foreign currency translation adjustment                                                          |  |                      |            |  |            |   |   |          |  |             |               |   |  |             |        |       |               |  |           |               |  |   |         |   |  |        |            |   |  |   | 3,285   |   |  |   | 3,285     |  
|                                                                                                 |  |                      |             |  |            |   |    |          |  |             |                |   |  |             |         |       |               |  |            |               |  |   |          |   |  |        |            
|Comprehensive loss                                                                               |  |                      |            |  |            |   |   |          |  |             |               |   |  |             |        |       |               |  |           |               |  |   |         |   |  |        |            |   |  |   |        |   |  |   | (12,302   | )
|Issuance of common stock for option exercises, ESPP, 401(k) and
    other issuances              |  |                      | 10,090,641  |  |            |   | 1  |          |  |             | 44,718         |   |  |             |        |       |               |  |           |               |  |   |         |   |  |        |            |   |  |   |        |   |  |   | 44,719    |  
|Issuance of warrants in connection with strategic alliances and
    services                     |  |                      |            |  |            |   |   |          |  |             | 67             |   |  |             |        |       |               |  |           |               |  |   |         |   |  |        |            |   |  |   |        |   |  |   | 67        |  
|Deferred stock compensation                                                                      |  |                      |            |  |            |   |   |          |  |             | 25             |   |  |             | (25     | )     |               |  |           |               |  |   |         |   |  |        |            |   |  |   |        |   |  |   |          |  
|Stock compensation expense                                                                       |  |                      |            |  |            |   |   |          |  |             | 335            |   |  |             | 12,293  |       |               |  |           |               |  |   |         |   |  |        |            |   |  |   |        |   |  |   | 12,628    |  
|Purchase of treasury stock                                                                       |  |                      |            |  |            |   |   |          |  |             |               |   |  |             |        |       |               |  | 2,322,196  |               |  |   | (20,316  | ) |  |        |            |   |  |   |        |   |  |   | (20,316   | )
|Adjustment to deferred stock compensation for terminations                                       |  |                      |            |  |            |   |   |          |  |             | (854           | ) |  |             | 854     |       |               |  |           |               |  |   |         |   |  |        |            |   |  |   |        |   |  |   |          |  
|                                                                                                 |  |                     
|Balances at December 31, 2003                                                                    |  |                      | 384,751,705 |  |            |   | 38 |          |  |             | 11,726,734     |   |  |             | (4,683  | )     |               |  | 76,576,865 |               |  |   | (347,858 | ) |  |        | (10,212,054 | ) |  |   | 16,420  |   |  |   | 1,178,597 |  
|Net income                                                                                       |  |                      |            |  |            |   |   |          |  |             |               |   |  |             |        |       |               |  |           |               |  |   |         |   |  |        | 39,334      |   |  |   |         |   |  |   | 39,334    |  
|Net decrease in unrealized gains on securities                                                   |  |                      |            |  |            |   |   |          |  |             |               |   |  |             |        |       |               |  |           |               |  |   |         |   |  |        |            |   |  |   | (10,581 | ) |  |   | (10,581   | )
|Foreign currency translation adjustment                                                          |  |                      |            |  |            |   |   |          |  |             |               |   |  |             |        |       |               |  |           |               |  |   |         |   |  |        |            |   |  |   | 2,118   |   |  |   | 2,118     |  
|                                                                                                 |  |                      |             |  |            |   |    |          |  |             |                |   |  |             |         |       |               |  |            |               |  |   |          |   |  |        |            
|Comprehensive income                                                                             |  |                      |            |  |            |   |   |          |  |             |               |   |  |             |        |       |               |  |           |               |  |   |         |   |  |        |            |   |  |   |        |   |  |   | 30,871    |  
|Issuance of common stock for option exercises, ESPP, 401(k) and
    other issuances              |  |                      | 9,289,615   |  |            |   | 1  |          |  |             | 38,051         |   |  |             |        |       |               |  |           |               |  |   |         |   |  |        |            |   |  |   |        |   |  |   | 38,052    |  
|Issuance of warrants in connection with strategic alliances and
    services                     |  |                      |            |  |            |   |   |          |  |             | 15             |   |  |             |        |       |               |  |           |               |  |   |         |   |  |        |            |   |  |   |        |   |  |   | 15        |  
|Accretion of convertible redeemable exchangeable preferred stock                                 |  |                      |            |  |            |   |   |          |  |             |               |   |  |             |        |       |               |  |           |               |  |   |         |   |  |        | (184        | ) |  |   |        |   |  |   | (184      | )
|Deferred stock compensation                                                                      |  |                      |            |  |            |   |   |          |  |             | 13,001         |   |  |             | (13,001 | )     |               |  |           |               |  |   |         |   |  |        |            |   |  |   |        |   |  |   |          |  
|Stock compensation expense                                                                       |  |                      |            |  |            |   |   |          |  |             | 70             |   |  |             | 8,905   |       |               |  |           |               |  |   |         |   |  |        |            |   |  |   |        |   |  |   | 8,975     |  
|Purchase of treasury stock                                                                       |  |                      |            |  |            |   |   |          |  |             |               |   |  |             |        |       |               |  | 4,272,630  |               |  |   | (32,110  | ) |  |        |            |   |  |   |        |   |  |   | (32,110   | )
|Adjustment to deferred stock compensation for terminations                                       |  |                      |            |  |            |   |   |          |  |             | (960           | ) |  |             | 960     |       |               |  |           |               |  |   |         |   |  |        |            |   |  |   |        |   |  |   |          |  
|                                                                                                 |  |                     
|Balances at December 31, 2004                                                                    |  |                      | 394,041,320 |  |            | $ | 39 |          |  | $           | 11,776,911     |   |  | $           | (7,819  | )     |               |  | 80,849,495 |               |  | $ | (379,968 | ) |  | $      | (10,172,904 | ) |  | $ | 7,957   |   |  | $ | 1,224,216 |  
|                                                                                                 |  |                      |             |  |            |   |    |          |  |             |                |   |  |             |         |       |               |  |            |               |  |   |          |   |  |        |            



F-7



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##### Table of Contents



WebMD Corporation


Consolidated Statements of Cash Flows


(In thousands)


|                                                                                             |                                              |                                 |                                              |        |         |          |           |        |         |          |            |         |         |          |  
|-------------------------------------------------------------------------------------------- | -------------------------------------------- | ------------------------------- | -------------------------------------------- | ------ | ------- | -------- | --------- | ------ | ------- | -------- | ---------- | ------- | ------- | -------- | -
|                                                                                             |                                              | Years Ended December 31,        |                                             
|                                                                                             |                                              |                                 |                                             
|                                                                                             |                                              | 2004                            |                                              |        | 2003    |          |           | 2002   |        
|                                                                                             |                                              |                                 |                                              |        |         |          |           |        |        
|Cash flows from operating activities:                                                        |                                              |                                 |                                              |        |         |          |           |        |         |          |            |        
|Net income (loss)                                                                            |                                              | $                               | 39,334                                       |        |         | $        | (17,006   | )      |         | $        | (49,702    | )      
|Adjustments to reconcile net income (loss) to net cash provided
    by operating activities: |                                              |                                 |                                              |        |         |          |           |        |         |          |            |        
|                                                                                             | Loss (income) from discontinued operations   |                                 |                                              |       |         |          |           | 33,611 |         |          |            | (3,411  | )      
|                                                                                             | Depreciation, amortization and other         |                                 |                                              | 57,765 |         |          |           | 62,434 |         |          |            | 125,593 |        
|                                                                                             | Amortization of debt issuance costs          |                                 |                                              | 2,975  |         |          |           | 2,246  |         |          |            | 1,109   |        
|                                                                                             | Non-cash content and distribution services   |                                 |                                              | 18,826 |         |          |           | 24,298 |         |          |            | 25,706  |        
|                                                                                             | Non-cash stock-based compensation            |                                 |                                              | 8,975  |         |          |           | 12,449 |         |          |            | 25,265  |        
|                                                                                             | Bad debt expense                             |                                 |                                              | 3,606  |         |          |           | 6,328  |         |          |            | 11,305  |        
|                                                                                             | Gain on investments                          |                                 |                                              | (457   | )       |          |           | (1,659 | )       |          |            | (6,547  | )      
|                                                                                             | Gain on sale of property and equipment       |                                 |                                              | (121   | )       |          |           | (3,100 | )       |          |            |        |        
|                                                                                             | Changes in operating assets and liabilities: |                                 |                                              |        |         |          |           |        |         |          |            |         |        
|                                                                                             |                                              | Accounts receivable             |                                              |        | (20,477 | )        |           |        | (813    | )        |            |         | (13,936 | )       
|                                                                                             |                                              | Inventory                       |                                              |        | (1,041  | )        |           |        | (2,176  | )        |            |         | (872    | )       
|                                                                                             |                                              | Prepaid expenses and other, net |                                              |        | 3,478   |          |           |        | 3,792   |          |            |         | (3,663  | )       
|                                                                                             |                                              | Accounts payable                |                                              |        | 5,577   |          |           |        | (651    | )        |            |         | (7,541  | )       
|                                                                                             |                                              | Accrued expenses                |                                              |        | (43,703 | )        |           |        | (42,419 | )        |            |         | (32,651 | )       
|                                                                                             |                                              | Deferred revenue                |                                              |        | 15,307  |          |           |        | (225    | )        |            |         | 12,530  |         
|                                                                                             |                                              |                                 |                                              |        |         |          |           |        |        
|                                                                                             |                                              |                                 | Net cash provided by continuing operations   |        |         | 90,044   |           |        |         | 77,109   |            |         |         | 83,185   |  
|                                                                                             |                                              |                                 | Net cash provided by discontinued operations |        |         |         |           |        |         | 5,130    |            |         |         | 9,912    |  
|                                                                                             |                                              |                                 |                                              |        |         |          |           |        |        
|                                                                                             |                                              |                                 | Net cash provided by operating activities    |        |         | 90,044   |           |        |         | 82,239   |            |         |         | 93,097   |  
|Cash flows from investing activities:                                                        |                                              |                                 |                                              |        |         |          |           |        |         |          |            |        
|Proceeds from maturities and sales of available-for-sale
    securities                      |                                              |                                 | 1,253,491                                    |        |         |          | 1,079,897 |        |         |          | 949,920    |        
|Proceeds from maturities and redemptions of held-to-maturity
    securities                  |                                              |                                 |                                             |        |         |          | 157,919   |        |         |          | 59,095     |        
|Purchases of available-for-sale securities                                                   |                                              |                                 | (1,153,703                                   | )      |         |          | (760,607  | )      |         |          | (1,067,362 | )      
|Purchases of held-to-maturity securities                                                     |                                              |                                 |                                             |        |         |          | (590,113  | )      |         |          | (300,970   | )      
|Purchases of property and equipment                                                          |                                              |                                 | (38,800                                      | )      |         |          | (18,385   | )      |         |          | (26,267    | )      
|Proceeds received from sale of discontinued operations                                       |                                              |                                 |                                             |        |         |          | 46,500    |        |         |          |           |        
|Proceeds received from sale of property and equipment                                        |                                              |                                 | 417                                          |        |         |          | 9,779     |        |         |          |           |        
|Other changes in equity of discontinued operations                                           |                                              |                                 |                                             |        |         |          | 1,754     |        |         |          | 10,369     |        
|Cash paid in business combinations, net of cash acquired                                     |                                              |                                 | (249,557                                     | )      |         |          | (400,491  | )      |         |          | (33,471    | )      
|                                                                                             |                                              |                                 |                                              |        |         |          |           |        |        
|                                                                                             |                                              |                                 | Net cash used in continuing operations       |        |         | (188,152 | )         |        |         | (473,747 | )          |         |         | (408,686 | )
|                                                                                             |                                              |                                 | Net cash used in discontinued operations     |        |         |         |           |        |         | (2,529   | )          |         |         | (12,577  | )
|                                                                                             |                                              |                                 |                                              |        |         |          |           |        |        
|                                                                                             |                                              |                                 | Net cash used in investing activities        |        |         | (188,152 | )         |        |         | (476,276 | )          |         |         | (421,263 | )

F-8



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##### Table of Contents



|                                                                                      |                                            |                          |         |         |      |   |         |         |   |   |          |         |  
|------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------ | ------- | ------- | ---- | - | ------- | ------- | - | - | -------- | ------- | -
|                                                                                      |                                            | Years Ended December 31, |        
|                                                                                      |                                            |                          |        
|                                                                                      |                                            | 2004                     |         |         | 2003 |   |         | 2002    |  
|                                                                                      |                                            |                          |         |         |      |   |         |         |  
|Cash flows from financing activities:                                                 |                                            |                          |         |         |      |   |         |         |   |   |          |        
|Proceeds from issuance of common stock                                                |                                            |                          | 38,052  |         |      |   | 44,719  |         |   |   | 28,765   |        
|Purchase of treasury stock                                                            |                                            |                          | (32,110 | )       |      |   | (20,316 | )       |   |   | (104,960 | )      
|Payment of notes payable and other                                                    |                                            |                          | (602    | )       |      |   | (361    | )       |   |   | (2,904   | )      
|Net proceeds from issuance of convertible debt                                        |                                            |                          |        |         |      |   | 339,125 |         |   |   | 292,000  |        
|Net proceeds from issuance of convertible redeemable
    exchangeable preferred stock |                                            |                          | 98,115  |         |      |   |        |         |   |   |         |        
|Redemption of Series B Preferred Stock                                                |                                            |                          |        |         |      |   |        |         |   |   | (10,000  | )      
|                                                                                      |                                            |                          |         |         |      |   |         |         |  
|                                                                                      | Net cash provided by continuing operations |                          |         | 103,455 |      |   |         | 363,167 |   |   |          | 202,901 |  
|                                                                                      | Net cash used in discontinued operations   |                          |         |        |      |   |         | (6,546  | ) |   |          | (1,150  | )
|                                                                                      |                                            |                          |         |         |      |   |         |         |  
|                                                                                      | Net cash provided by financing activities  |                          |         | 103,455 |      |   |         | 356,621 |   |   |          | 201,751 |  
|Effect of exchange rates on cash                                                      |                                            |                          | 1,024   |         |      |   | 1,423   |         |   |   | 1,083    |        
|                                                                                      |                                            |                          |         |         |      |   |         |         |  
|Net increase (decrease) in cash and cash equivalents                                  |                                            |                          | 6,371   |         |      |   | (35,993 | )       |   |   | (125,332 | )      
|Changes in cash attributable to discontinued operations                               |                                            |                          |        |         |      |   | 3,945   |         |   |   | 3,815    |        
|Cash and cash equivalents at beginning of year                                        |                                            |                          | 39,648  |         |      |   | 71,696  |         |   |   | 193,213  |        
|                                                                                      |                                            |                          |         |         |      |   |         |         |  
|Cash and cash equivalents at end of year                                              |                                            | $                        | 46,019  |         |      | $ | 39,648  |         |   | $ | 71,696   |        
|                                                                                      |                                            |                          |         |         |      |   |         |         |  



F-9



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##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial Statements


December 31, 2004


(In thousands, except share and per share data)




|   |                                           
|-- | ------------------------------------------
|1. | Summary of Significant Accounting Policies

Basis of Presentation




Business






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | WebMD Business Services. Through WebMD Business Services,
    the Company provides healthcare reimbursement cycle management
    services for healthcare providers and transaction-related
    administrative services for healthcare payers, together with
    related technology solutions. The Company transmits transactions
    electronically between healthcare payers and providers and
    provides healthcare payers with transaction processing
    technology, decision support and data warehousing solutions,
    consulting services and outsourcing services, including document
    management services for transaction processing and
    print-and-mail services for the distribution of checks,
    remittance advice and explanation of benefits. The Company also
    provides automated patient billing services to healthcare
    providers, including statement printing and mailing services.
|
| |  | WebMD Practice Services. Through WebMD Practice Services,
    the Company develops and markets information technology systems
    for healthcare providers and related services, primarily under
    The Medical Manager, Intergy and WebMD Network Services brands.
    These systems and services allow physician offices to automate
    their scheduling, billing and other administrative tasks, to
    transmit transactions electronically, to maintain electronic
    medical records and to automate documentation of patient
    encounters.                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | WebMD Health. Through WebMD Health, the Company provides
    health information, health and benefit decision-support tools,
    continuing medical education (CME) services, and
    interactive communications services through its public online
    portals for consumers and physicians, through syndication and
    distribution relationships, through customized private online
    portals for employers and payers and, to a lesser extent,
    through offline publishing services. WebMD Healths public
    portals sell advertising and sponsorship programs to companies
    interested in reaching consumers and physicians online,
    including pharmaceutical, biotech, medical device and consumer
    products companies.                                                                                                                                                                        
|
| |  | Porex. The Company develops, manufactures and distributes
    proprietary porous plastic products and components used in
    healthcare, industrial and consumer applications, as well as in
    finished products used in the medical device and surgical
    markets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

F-10



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##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)


Principles of Consolidation




Accounting Estimates




Cash and Cash Equivalents




Marketable Securities




F-11



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##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)


Allowance for Doubtful Accounts




Inventory




|                           |  |              |        |  |      |   |        | 
|-------------------------- |  | ------------ | ------ |  | ---- | - | ------ | 
|                           |  | December 31, |       
|                           |  |              |       
|                           |  | 2004         |        |  | 2003 |  
|                           |  |              |        |  |      |  
|Raw materials and supplies |  | $            | 3,925  |  |      | $ | 3,142  | 
|Work-in-process            |  |              | 1,335  |  |      |   | 1,394  | 
|Finished goods and other   |  |              | 8,216  |  |      |   | 7,622  | 
|                           |  |              |        |  |      |  
|                           |  | $            | 13,476 |  |      | $ | 12,158 | 
|                           |  |              |        |  |      |  

Long-Lived Assets


Property and
Equipment




|                                         |  |  |                                      | 
|---------------------------------------- |  |  | ------------------------------------ | 
|Computer equipment                       |  |  | 3 to 5 years                         | 
|Buildings                                |  |  | Up to 40 years                       | 
|Office equipment, furniture and fixtures |  |  | 3 to 7 years                         | 
|Software                                 |  |  | 3 years                              | 
|Leasehold improvements                   |  |  | Shorter of useful life or lease term | 





| |                               
| | ------------------------------
| | Goodwill and Intangible Assets



|                                 |  |  |                | 
|-------------------------------- |  |  | -------------- | 
|Customer lists                   |  |  | 3 to 15  years | 
|Trade names                      |  |  | 1 to 10  years | 
|Technology and patents           |  |  | 3 to 40  years | 
|Non-compete agreements and other |  |  | 3 to 5 years   | 



| |               
| | --------------
| | Recoverability



F-12



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##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)






Software Development Costs




| |                                                  
| | -------------------------------------------------
| | Software to be Sold, Leased or Otherwise Marketed





| |                      
| | ---------------------
| | Internal Use Software



Restricted Cash




Deferred Charges


1 4


Revenue Recognition




F-13



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##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)












F-14



---



##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)








Advertising Costs




Foreign Currency




F-15



---



##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)




Concentration of Credit Risk








Income Taxes and Tax Contingencies




Accounting for Stock-Based Compensation




F-16



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##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)




|                                                                                                                                                                                       |                               |                          |         |       |      |   |         |       |   |   |          |       |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------- | ------------------------ | ------- | ----- | ---- | - | ------- | ----- | - | - | -------- | ----- | -
|                                                                                                                                                                                       |                               | Years Ended December 31, |        
|                                                                                                                                                                                       |                               |                          |        
|                                                                                                                                                                                       |                               | 2004                     |         |       | 2003 |   |         | 2002  |  
|                                                                                                                                                                                       |                               |                          |         |       |      |   |         |       |  
|Net income (loss) as reported                                                                                                                                                          |                               | $                        | 39,334  |       |      | $ | (17,006 | )     |   | $ | (49,702  | )    
|Add: Stock-based employee compensation expense included in
    reported net income (loss) (including stock-based employee
    compensation expense related to discontinued operations) |                               |                          | 8,975   |       |      |   | 12,628  |       |   |   | 25,265   |      
|Deduct: Total stock-based employee compensation expense
    determined under fair value based method for all awards                                                                    |                               |                          | (67,569 | )     |      |   | (76,483 | )     |   |   | (119,670 | )    
|                                                                                                                                                                                       |                               |                          |         |       |      |   |         |       |  
|Pro forma net loss                                                                                                                                                                     |                               | $                        | (19,260 | )     |      | $ | (80,861 | )     |   | $ | (144,107 | )    
|                                                                                                                                                                                       |                               |                          |         |       |      |   |         |       |  
|Net income (loss) per common share:                                                                                                                                                    |                               |                          |         |       |      |   |         |       |   |   |          |      
|                                                                                                                                                                                       | Basic  as reported           |                          | $       | 0.12  |      |   | $       | (0.06 | ) |   | $        | (0.16 | )
|                                                                                                                                                                                       |                               |                          |         |       |      |   |         |       |  
|                                                                                                                                                                                       | Diluted  as reported         |                          | $       | 0.12  |      |   | $       | (0.05 | ) |   | $        | (0.16 | )
|                                                                                                                                                                                       |                               |                          |         |       |      |   |         |       |  
|                                                                                                                                                                                       | Basic and Diluted  pro forma |                          | $       | (0.06 | )    |   | $       | (0.27 | ) |   | $        | (0.47 | )
|                                                                                                                                                                                       |                               |                          |         |       |      |   |         |       |  



Net Income (Loss) Per Common Share




F-17



---



##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)




|                                                                             |                                            |                                                       |         |      |         |   |         |       |         |   |         |       |         |  
|---------------------------------------------------------------------------- | ------------------------------------------ | ----------------------------------------------------- | ------- | ---- | ------- | - | ------- | ----- | ------- | - | ------- | ----- | ------- | -
|                                                                             |                                            | Years Ended December 31,                              |        
|                                                                             |                                            |                                                       |        
|                                                                             |                                            | 2004                                                  |         |      | 2003    |   |         | 2002  |        
|                                                                             |                                            |                                                       |         |      |         |   |         |       |        
|Numerator:                                                                   |                                            |                                                       |         |      |         |   |         |       |         |   |         |      
|                                                                             |                                            | Income (loss) from continuing operations              |         | $    | 39,334  |   |         | $     | 16,605  |   |         | $     | (53,113 | )
|                                                                             |                                            | Income (loss) from discontinued operations            |         |      |        |   |         |       | (33,611 | ) |         |       | 3,411   |  
|                                                                             |                                            |                                                       |         |      |         |   |         |       |        
|Net income (loss)                                                            |                                            | $                                                     | 39,334  |      |         | $ | (17,006 | )     |         | $ | (49,702 | )    
|                                                                             |                                            |                                                       |         |      |         |   |         |       |        
|Denominator:                                                                 |                                            |                                                       |         |      |         |   |         |       |         |   |         |      
|                                                                             |                                            | Common stock                                          |         |      | 311,721 |   |         |       | 304,858 |   |         |       | 304,168 |  
|                                                                             |                                            | Convertible redeemable exchangeable preferred stock   |         |      | 8,359   |   |         |       |        |   |         |       |        |  
|                                                                             |                                            |                                                       |         |      |         |   |         |       |        
|Weighted-average shares  Basic                                              |                                            |                                                       | 320,080 |      |         |   | 304,858 |       |         |   | 304,168 |      
|                                                                             |                                            | Employee stock options, restricted stock and warrants |         |      | 13,263  |   |         |       | 20,953  |   |         |       |        |  
|                                                                             |                                            |                                                       |         |      |         |   |         |       |        
|Adjusted weighted-average shares after assumed
    conversions 
    Diluted |                                            |                                                       | 333,343 |      |         |   | 325,811 |       |         |   | 304,168 |      
|                                                                             |                                            |                                                       |         |      |         |   |         |       |        
|Basic income (loss) per common share:                                        |                                            |                                                       |         |      |         |   |         |       |         |   |         |      
|                                                                             | Income (loss) from continuing operations   |                                                       | $       | 0.12 |         |   | $       | 0.05  |         |   | $       | (0.17 | )      
|                                                                             | Income (loss) from discontinued operations |                                                       |         |     |         |   |         | (0.11 | )       |   |         | 0.01  |        
|                                                                             |                                            |                                                       |         |      |         |   |         |       |        
|Net income (loss)                                                            |                                            | $                                                     | 0.12    |      |         | $ | (0.06   | )     |         | $ | (0.16   | )    
|                                                                             |                                            |                                                       |         |      |         |   |         |       |        
|Diluted income (loss) per common share:                                      |                                            |                                                       |         |      |         |   |         |       |         |   |         |      
|                                                                             | Income (loss) from continuing operations   |                                                       | $       | 0.12 |         |   | $       | 0.05  |         |   | $       | (0.17 | )      
|                                                                             | Income (loss) from discontinued operations |                                                       |         |     |         |   |         | (0.10 | )       |   |         | 0.01  |        
|                                                                             |                                            |                                                       |         |      |         |   |         |       |        
|Net income (loss)                                                            |                                            | $                                                     | 0.12    |      |         | $ | (0.05   | )     |         | $ | (0.16   | )    
|                                                                             |                                            |                                                       |         |      |         |   |         |       |        



|                     |  |                          |         |  |      |  |         |      |  |  |         | 
|-------------------- |  | ------------------------ | ------- |  | ---- |  | ------- | ---- |  |  | ------- | 
|                     |  | Years Ended December 31, |        
|                     |  |                          |        
|                     |  | 2004                     |         |  | 2003 |  |         | 2002 | 
|                     |  |                          |         |  |      |  |         |      | 
|Options and warrants |  |                          | 83,986  |  |      |  | 82,267  |      |  |  | 136,147 | 
|Convertible notes    |  |                          | 55,129  |  |      |  | 55,129  |      |  |  | 32,387  | 
|                     |  |                          |         |  |      |  |         |      | 
|                     |  |                          | 139,115 |  |      |  | 137,396 |      |  |  | 168,534 | 
|                     |  |                          |         |  |      |  |         |      | 

Recent Accounting Pronouncements




F-18



---



##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)










Reclassifications




F-19



---



##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)






|   |                      
|-- | ---------------------
|2. | Business Combinations

2004 Acquisitions










F-20



---



##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)










F-21



---



##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)


2003 Acquisitions








F-22



---



##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)










F-23



---



##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)




2002 Acquisitions






F-24



---



##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)


Unaudited Pro Forma Information




|                                        |                                   |                          |           |      |      |   |           |       |  
|--------------------------------------- | --------------------------------- | ------------------------ | --------- | ---- | ---- | - | --------- | ----- | -
|                                        |                                   | Years Ended December 31, |          
|                                        |                                   |                          |          
|                                        |                                   | 2004                     |           |      | 2003 |  
|                                        |                                   |                          |           |      |      |  
|Revenue                                 |                                   | $                        | 1,199,689 |      |      | $ | 1,125,138 |      
|Income from continuing operations       |                                   | $                        | 40,964    |      |      | $ | 30,457    |      
|Net income (loss)                       |                                   | $                        | 40,964    |      |      | $ | (3,154    | )    
|Basic income (loss) per common share:   |                                   |                          |           |      |      |   |           |      
|                                        | Income from continuing operations |                          | $         | 0.13 |      |   | $         | 0.10  |  
|                                        | Net income (loss)                 |                          | $         | 0.13 |      |   | $         | (0.01 | )
|Diluted income (loss) per common share: |                                   |                          |           |      |      |   |           |      
|                                        | Income from continuing operations |                          | $         | 0.12 |      |   | $         | 0.09  |  
|                                        | Net income (loss)                 |                          | $         | 0.12 |      |   | $         | (0.01 | )



|   |                         
|-- | ------------------------
|3. | Significant Transactions

America Online, Inc.






News Corporation




F-25



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##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)




Microsoft






|   |                                      
|-- | -------------------------------------
|4. | Restructuring and Integration Charges









|   |                        
|-- | -----------------------
|5. | Discontinued Operations



F-26



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##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)




|                                                                |  |                 |         |   |                   |   |        | 
|--------------------------------------------------------------- |  | --------------- | ------- | - | ----------------- | - | ------ | 
|                                                                |  | For the Period  |         |   |                  
|                                                                |  | January 1, 2003 |         |   | For the Year      |  
|                                                                |  | through         |         |   | Ended             |  
|                                                                |  | August 1, 2003  |         |   | December 31, 2002 |  
|                                                                |  |                 |         |   |                   |  
|Revenue                                                         |  | $               | 31,004  |   |                   | $ | 54,181 | 
|                                                                |  |                 |         |   |                   |  
|Income (loss) from operations                                   |  | $               | (30,120 | ) |                   | $ | 3,411  | 
|Loss on disposal                                                |  |                 | (3,491  | ) |                   |   |       | 
|                                                                |  |                 |         |   |                   |  
|Income (loss) from discontinued operations, net of income taxes |  | $               | (33,611 | ) |                   | $ | 3,411  | 
|                                                                |  |                 |         |   |                   |  



|   |                                                    
|-- | ---------------------------------------------------
|6. | Convertible Redeemable Exchangeable Preferred Stock











F-27



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##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)








|   |                               
|-- | ------------------------------
|7. | Convertible Subordinated Notes



| |                                                           
| | ----------------------------------------------------------
| | $350,000 1.75% Convertible Subordinated Notes due
    2023







| |                                                               
| | --------------------------------------------------------------
| | $300,000
    31/4% Convertible
    Subordinated Notes due 2007

1 4 1 4 1 4 1 4 1 4 1 4 1 4 1 4 1 4 1 4


F-28



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##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)






|   |                    
|-- | -------------------
|8. | Segment Information



F-29



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##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)




|                                                                        |                   |                          |           |        |      |   |         |         |   |   |          |         |  
|----------------------------------------------------------------------- | ----------------- | ------------------------ | --------- | ------ | ---- | - | ------- | ------- | - | - | -------- | ------- | -
|                                                                        |                   | Years Ended December 31, |          
|                                                                        |                   |                          |          
|                                                                        |                   | 2004                     |           |        | 2003 |   |         | 2002    |  
|                                                                        |                   |                          |           |        |      |   |         |         |  
|Revenues                                                                |                   |                          |           |        |      |   |         |         |   |   |          |        
|WebMD Business Services                                                 |                   | $                        | 686,585   |        |      | $ | 505,729 |         |   | $ | 466,810  |        
|WebMD Practice Services                                                 |                   |                          | 296,115   |        |      |   | 302,640 |         |   |   | 275,306  |        
|WebMD Health                                                            |                   |                          | 134,317   |        |      |   | 110,665 |         |   |   | 84,296   |        
|Porex                                                                   |                   |                          | 77,099    |        |      |   | 71,940  |         |   |   | 65,811   |        
|Inter-segment eliminations                                              |                   |                          | (33,765   | )      |      |   | (26,994 | )       |   |   | (20,527  | )      
|                                                                        |                   |                          |           |        |      |   |         |         |  
|                                                                        |                   | $                        | 1,160,351 |        |      | $ | 963,980 |         |   | $ | 871,696  |        
|                                                                        |                   |                          |           |        |      |   |         |         |  
|Income (loss) before restructuring, taxes, non-cash and other
    items |                   |                          |           |        |      |   |         |         |   |   |          |        
|WebMD Business Services                                                 |                   | $                        | 131,834   |        |      | $ | 94,218  |         |   | $ | 85,154   |        
|WebMD Practice Services                                                 |                   |                          | 14,533    |        |      |   | 20,924  |         |   |   | 26,685   |        
|WebMD Health                                                            |                   |                          | 32,898    |        |      |   | 24,898  |         |   |   | 5,574    |        
|Porex                                                                   |                   |                          | 22,650    |        |      |   | 20,532  |         |   |   | 19,891   |        
|Corporate                                                               |                   |                          | (58,382   | )      |      |   | (50,251 | )       |   |   | (51,272  | )      
|Interest income                                                         |                   |                          | 18,717    |        |      |   | 22,901  |         |   |   | 19,590   |        
|Interest expense                                                        |                   |                          | (19,253   | )      |      |   | (15,214 | )       |   |   | (8,491   | )      
|                                                                        |                   |                          |           |        |      |   |         |         |  
|                                                                        |                   |                          | 142,997   |        |      |   | 118,008 |         |   |   | 97,131   |        
|Restructuring, taxes, non-cash and other items                          |                   |                          |           |        |      |   |         |         |   |   |          |        
|Depreciation, amortization and other                                    |                   |                          | (57,765   | )      |      |   | (62,434 | )       |   |   | (125,593 | )      
|Non-cash content and distribution services and stock compensation       |                   |                          | (27,801   | )      |      |   | (36,747 | )       |   |   | (50,971  | )      
|Restructuring and integration (charge) benefit                          |                   |                          | (4,535    | )      |      |   |        |         |   |   | 5,850    |        
|Legal expense                                                           |                   |                          | (9,230    | )      |      |   | (3,959  | )       |   |   |         |        
|Gain on investments                                                     |                   |                          | 457       |        |      |   | 1,659   |         |   |   | 6,547    |        
|Other income, net                                                       |                   |                          | 121       |        |      |   | 4,218   |         |   |   | 3,844    |        
|Income tax (provision) benefit                                          |                   |                          | (4,910    | )      |      |   | (4,140  | )       |   |   | 10,079   |        
|                                                                        |                   |                          |           |        |      |   |         |         |  
|Income (loss) from continuing operations                                |                   |                          | 39,334    |        |      |   | 16,605  |         |   |   | (53,113  | )      
|Income (loss) from discontinued operations                              |                   |                          |          |        |      |   | (33,611 | )       |   |   | 3,411    |        
|                                                                        |                   |                          |           |        |      |   |         |         |  
|                                                                        | Net income (loss) |                          | $         | 39,334 |      |   | $       | (17,006 | ) |   | $        | (49,702 | )
|                                                                        |                   |                          |           |        |      |   |         |         |  





F-30



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##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)




|   |                  
|-- | -----------------
|9. | Long-Lived Assets



| |                       
| | ----------------------
| | Property and Equipment



|                                         |                             |              |         |        |      |   |         |        | 
|---------------------------------------- | --------------------------- | ------------ | ------- | ------ | ---- | - | ------- | ------ | 
|                                         |                             | December 31, |        
|                                         |                             |              |        
|                                         |                             | 2004         |         |        | 2003 |  
|                                         |                             |              |         |        |      |  
|Computer equipment                       |                             | $            | 62,106  |        |      | $ | 52,968  |       
|Land and buildings                       |                             |              | 17,847  |        |      |   | 17,136  |       
|Office equipment, furniture and fixtures |                             |              | 45,695  |        |      |   | 38,612  |       
|Software                                 |                             |              | 35,195  |        |      |   | 27,219  |       
|Leasehold improvements                   |                             |              | 9,727   |        |      |   | 9,050   |       
|Construction in process                  |                             |              | 11,848  |        |      |   | 3,819   |       
|                                         |                             |              |         |        |      |  
|                                         |                             |              | 182,418 |        |      |   | 148,804 |       
|Less: accumulated depreciation           |                             |              | (92,741 | )      |      |   | (71,526 | )     
|                                         |                             |              |         |        |      |  
|                                         | Property and equipment, net |              | $       | 89,677 |      |   | $       | 77,278 | 
|                                         |                             |              |         |        |      |  





| |                               
| | ------------------------------
| | Goodwill and Intangible Assets



F-31



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##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)




|                                |                                                                 |          |         |         |          |   |         |        |   |   |        |        |   |       |        |       |  |   |           |         |  
|------------------------------- | --------------------------------------------------------------- | -------- | ------- | ------- | -------- | - | ------- | ------ | - | - | ------ | ------ | - | ----- | ------ | ----- |  | - | --------- | ------- | -
|                                |                                                                 | WebMD    |         |         | WebMD    |   |         |        |   |   |        |       
|                                |                                                                 | Business |         |         | Practice |   |         | WebMD  |   |   |        |        |  
|                                |                                                                 | Services |         |         | Services |   |         | Health |   |   | Porex  |        |   | Total |       
|                                |                                                                 |          |         |         |          |   |         |        |   |   |        |        |   |       |       
|Balance as of January 1, 2003   |                                                                 | $        | 341,967 |         |          | $ | 182,085 |        |   | $ | 23,705 |        |   | $     | 38,286 |       |  | $ | 586,043   |        
|                                | Goodwill recorded during the period                             |          |         | 244,021 |          |   |         | 1,469  |   |   |        | 12,731 |   |       |        |      |  |   |           | 258,221 |  
|                                | Adjustments to finalize purchase price allocations              |          |         |        |          |   |         | (745   | ) |   |        | 407    |   |       |        |      |  |   |           | (338    | )
|                                | Effects of exchange rates                                       |          |         |        |          |   |         |       |   |   |        |       |   |       |        | 522   |  |   |           | 522     |  
|                                |                                                                 |          |         |         |          |   |         |        |   |   |        |        |   |       |       
|Balance as of January 1, 2004   |                                                                 |          | 585,988 |         |          |   | 182,809 |        |   |   | 36,843 |        |   |       | 38,808 |       |  |   | 844,448   |        
|                                | Acquisitions during the period                                  |          |         | 99,829  |          |   |         |       |   |   |        | 14,942 |   |       |        | 4,122 |  |   |           | 118,893 |  
|                                | Contingent consideration payments for prior period acquisitions |          |         | 60,955  |          |   |         | 155    |   |   |        | 1,500  |   |       |        |      |  |   |           | 62,610  |  
|                                | Tax reversals(a)                                                |          |         | (7,141  | )        |   |         | (7,321 | ) |   |        |       |   |       |        |      |  |   |           | (14,462 | )
|                                | Adjustments to finalize purchase price allocations              |          |         | (1,263  | )        |   |         |       |   |   |        | (116   | ) |       |        |      |  |   |           | (1,379  | )
|                                | Effects of exchange rates                                       |          |         |        |          |   |         |       |   |   |        |       |   |       |        | 454   |  |   |           | 454     |  
|                                |                                                                 |          |         |         |          |   |         |        |   |   |        |        |   |       |       
|Balance as of December 31, 2004 |                                                                 | $        | 738,368 |         |          | $ | 175,643 |        |   | $ | 53,169 |        |   | $     | 43,384 |       |  | $ | 1,010,564 |        
|                                |                                                                 |          |         |         |          |   |         |        |   |   |        |        |   |       |       






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | During the fourth quarter of 2004, in accordance with
    EITF 93-7, Uncertainties Related to Income Taxes in a
    Purchase Business Combination, the Company reduced
    goodwill and accrued liabilities by $7,141 and $7,321 for the
    WebMD Business Services and WebMD Practice Services segments,
    respectively. The reduction related to the favorable resolution
    of estimated tax liabilities established in connection with the
    2000 acquisitions of Envoy and Medical Manager.



|                                 |       |                   |         |         |                   |   |          |          |   |          |         |         |             |              |         |         |     |   |          |          |   |   |         |         | 
|-------------------------------- | ----- | ----------------- | ------- | ------- | ----------------- | - | -------- | -------- | - | -------- | ------- | ------- | ----------- | ------------ | ------- | ------- | --- | - | -------- | -------- | - | - | ------- | ------- | 
|                                 |       | December 31, 2004 |         |         | December 31, 2003 |  
|                                 |       |                   |         |         |                   |  
|                                 |       | Gross             |         |         |                   |   | Gross    |          |   |         
|                                 |       | Carrying          |         |         | Accumulated       |   |          |          |   | Carrying |         |         | Accumulated |              |         |        
|                                 |       | Amount            |         |         | Amortization      |   |          | Net      |   |          | Amount  |         |             | Amortization |         |         | Net |  
|                                 |       |                   |         |         |                   |   |          |          |   |          |         |         |             |              |         |         |     |  
|Customer lists                   |       | $                 | 369,704 |         |                   | $ | (217,874 | )        |   | $        | 151,830 |         |             | $            | 325,160 |         |     | $ | (206,163 | )        |   | $ | 118,997 |        
|Technology and patents           |       |                   | 234,722 |         |                   |   | (155,687 | )        |   |          | 79,035  |         |             |              | 191,318 |         |     |   | (146,905 | )        |   |   | 44,413  |        
|Trade names                      |       |                   | 40,716  |         |                   |   | (26,923  | )        |   |          | 13,793  |         |             |              | 30,316  |         |     |   | (19,756  | )        |   |   | 10,560  |        
|Non-compete agreements and other |       |                   | 17,920  |         |                   |   | (2,069   | )        |   |          | 15,851  |         |             |              | 11,019  |         |     |   | (859     | )        |   |   | 10,160  |        
|                                 |       |                   |         |         |                   |   |          |          |   |          |         |         |             |              |         |         |     |  
|                                 | Total |                   | $       | 663,062 |                   |   | $        | (402,553 | ) |          | $       | 260,509 |             |              | $       | 557,813 |     |   | $        | (373,683 | ) |   | $       | 184,130 | 
|                                 |       |                   |         |         |                   |   |          |          |   |          |         |         |             |              |         |         |     |  



|                         |  |   |         | 
|------------------------ |  | - | ------- | 
|Year Ending December 31, |  |  
|2005                     |  | $ | 33,617  | 
|2006                     |  |   | 30,668  | 
|2007                     |  |   | 29,856  | 
|2008                     |  |   | 27,489  | 
|2009                     |  |   | 20,769  | 
|Thereafter               |  |   | 118,110 | 

F-32



---



##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)




|    |                 
|--- | ----------------
|10. | Accrued Expenses



|                                             |                        |              |        |         |      |   |        |         | 
|-------------------------------------------- | ---------------------- | ------------ | ------ | ------- | ---- | - | ------ | ------- | 
|                                             |                        | December 31, |       
|                                             |                        |              |       
|                                             |                        | 2004         |        |         | 2003 |  
|                                             |                        |              |        |         |      |  
|Accrued outside services                     |                        | $            | 13,142 |         |      | $ | 17,855 |        
|Accrued restructuring costs                  |                        |              | 1,423  |         |      |   | 25,915 |        
|Accrued acquisition contingent consideration |                        |              | 43,500 |         |      |   |       |        
|Accrued compensation                         |                        |              | 40,001 |         |      |   | 37,344 |        
|Accrued customer deposits                    |                        |              | 19,804 |         |      |   | 16,539 |        
|Accrued income, sales and other taxes        |                        |              | 27,770 |         |      |   | 51,781 |        
|Other accrued liabilities                    |                        |              | 55,888 |         |      |   | 58,996 |        
|                                             |                        |              |        |         |      |  
|                                             | Total accrued expenses |              | $      | 201,528 |      |   | $      | 208,430 | 
|                                             |                        |              |        |         |      |  



|    |                              
|--- | -----------------------------
|11. | Commitments and Contingencies

Legal Proceedings




| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | Investigations by United States Attorney for the District
    of South Carolina and the SEC









F-33



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##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)












F-34



---



##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)












| |                                                                                     
| | ------------------------------------------------------------------------------------
| | Litigation Regarding Distribution of Shares in Healtheon
    Initial Public Offering











F-35



---



##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)










| |                                                                                      
| | -------------------------------------------------------------------------------------
| | Merrill Lynch Fundamental Growth Fund, Inc.
    et al. v. McKesson HBOC, Inc., et al.

Merrill Lynch Fundamental Growth Fund, Inc.,
et al. v. McKesson HBOC, Inc., et al.






F-36



---



##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)
















| |                                 
| | --------------------------------
| | Porex Mammary Implant Litigation



F-37



---



##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)












| |                        
| | -----------------------
| | Other Legal Proceedings



Leases




F-38



---



##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)




|                         |                              |   |        |         | 
|------------------------ | ---------------------------- | - | ------ | ------- | 
|Year Ending December 31, |                              |  
|2005                     |                              | $ | 24,252 |        
|2006                     |                              |   | 22,205 |        
|2007                     |                              |   | 19,916 |        
|2008                     |                              |   | 18,092 |        
|2009                     |                              |   | 9,520  |        
|Thereafter               |                              |   | 26,002 |        
|                         |                              |   |       
|                         | Total minimum lease payments |   | $      | 119,987 | 
|                         |                              |   |       



|    |                 
|--- | ----------------
|12. | Retirement Plans





|    |                     
|--- | --------------------
|13. | Stockholders Equity

Common Stock






Preferred Stock






F-39



---



##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)




Warrants








|    |                         
|--- | ------------------------
|14. | Stock Compensation Plans





Stock Options






F-40



---



##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)








|                                         |           |                          |             |            |                |   |       |           |          |  |                |            |   |           |       |       |                |  |             |             |   |   |       |       | 
|---------------------------------------- | --------- | ------------------------ | ----------- | ---------- | -------------- | - | ----- | --------- | -------- |  | -------------- | ---------- | - | --------- | ----- | ----- | -------------- |  | ----------- | ----------- | - | - | ----- | ----- | 
|                                         |           | Years Ended December 31, |            
|                                         |           |                          |            
|                                         |           | 2004                     |             |            | 2003           |   |       | 2002      |         
|                                         |           |                          |             |            |                |   |       |           |         
|                                         |           |                          |             | Weighted   |                |   |       |           | Weighted |  |                |            |   | Weighted  |      
|                                         |           |                          |             | Average    |                |   |       |           | Average  |  |                |            |   | Average   |      
|                                         |           | Number of                |             |            | Exercise Price |   |       | Number of |          |  | Exercise Price |            |   | Number of |       |       | Exercise Price | 
|                                         |           | Shares                   |             |            | Per Share      |   |       | Shares    |          |  | Per Share      |            |   | Shares    |       |       | Per Share      | 
|                                         |           |                          |             |            |                |   |       |           |          |  |                |            |   |           |       |       |                | 
|Outstanding at the beginning of the year |           |                          | 104,760,726 |            |                | $ | 12.86 |           |          |  | 108,232,050    |            |   | $         | 12.73 |       |                |  | 121,184,501 |             |   | $ | 12.99 |      
|                                         | Granted   |                          |             | 19,230,750 |                |   |       | 8.31      |          |  |                | 12,326,350 |   |           |       | 9.88  |                |  |             | 4,946,459   |   |   |       | 6.58  | 
|                                         | Exercised |                          |             | (7,796,440 | )              |   |       | 4.42      |          |  |                | (8,773,510 | ) |           |       | 4.73  |                |  |             | (5,316,668  | ) |   |       | 3.26  | 
|                                         | Cancelled |                          |             | (9,937,784 | )              |   |       | 15.18     |          |  |                | (7,024,164 | ) |           |       | 15.82 |                |  |             | (12,582,242 | ) |   |       | 16.49 | 
|                                         |           |                          |             |            |                |   |       |           |          |  |                |            |   |           |       |       |                | 
|Outstanding at the end of the year       |           |                          | 106,257,252 |            |                |   | 12.44 |           |          |  | 104,760,726    |            |   |           | 12.86 |       |                |  | 108,232,050 |             |   |   | 12.73 |      
|                                         |           |                          |             |            |                |   |       |           |          |  |                |            |   |           |       |       |                | 
|Exercisable at the end of the year       |           |                          | 77,325,908  |            |                | $ | 13.72 |           |          |  | 73,927,473     |            |   | $         | 14.03 |       |                |  | 70,764,983  |             |   | $ | 13.86 |      
|                                         |           |                          |             |            |                |   |       |           |          |  |                |            |   |           |       |       |                | 



|                |  |             |             |          |             |   |             |                 |  |  |        |          |  |       |            |  |  |   |       | 
|--------------- |  | ----------- | ----------- | -------- | ----------- | - | ----------- | --------------- |  |  | ------ | -------- |  | ----- | ---------- |  |  | - | ----- | 
|                |  | Outstanding |             |          | Exercisable |  
|                |  |             |             |          |             |  
|                |  |             |             | Weighted |             |   |            
|                |  |             |             | Weighted |             |   | Average     |                 |  |  |        | Weighted | 
|                |  |             |             | Average  |             |   | Remaining   |                 |  |  |        | Average  | 
|                |  |             |             | Exercise |             |   | Contractual |                 |  |  |        | Exercise | 
|Exercise Prices |  | Shares      |             |          | Price       |   |             | Life (In Years) |  |  | Shares |          |  | Price |           
|                |  |             |             |          |             |   |             |                 |  |  |        |          |  |       |           
|$0.25-$5.34     |  |             | 11,912,774  |          |             | $ | 3.57        |                 |  |  | 6.24   |          |  |       | 11,203,642 |  |  | $ | 3.53  | 
|$5.40-$7.27     |  |             | 13,244,058  |          |             |   | 6.37        |                 |  |  | 6.61   |          |  |       | 7,908,445  |  |  |   | 6.05  | 
|$7.28-$8.59     |  |             | 12,819,819  |          |             |   | 8.44        |                 |  |  | 8.95   |          |  |       | 1,306,234  |  |  |   | 8.11  | 
|$8.60-$11.44    |  |             | 11,091,681  |          |             |   | 9.24        |                 |  |  | 8.34   |          |  |       | 3,203,901  |  |  |   | 9.63  | 
|$11.55-$11.69   |  |             | 11,879,927  |          |             |   | 11.55       |                 |  |  | 5.42   |          |  |       | 11,877,677 |  |  |   | 11.55 | 
|$11.73-$13.38   |  |             | 11,373,783  |          |             |   | 12.45       |                 |  |  | 6.16   |          |  |       | 8,713,346  |  |  |   | 12.65 | 
|$13.50-$15.88   |  |             | 10,281,637  |          |             |   | 14.10       |                 |  |  | 5.08   |          |  |       | 10,169,637 |  |  |   | 14.09 | 
|$16.06-$21.69   |  |             | 13,287,044  |          |             |   | 17.80       |                 |  |  | 5.50   |          |  |       | 12,936,044 |  |  |   | 17.75 | 
|$22.12-$105.00  |  |             | 10,366,529  |          |             |   | 31.28       |                 |  |  | 4.78   |          |  |       | 10,006,982 |  |  |   | 31.18 | 
|                |  |             |             |          |             |   |             |                 |  |  |        |          |  |       |           
|                |  |             | 106,257,252 |          |             | $ | 12.44       |                 |  |  | 6.39   |          |  |       | 77,325,908 |  |  | $ | 13.72 | 
|                |  |             |             |          |             |   |             |                 |  |  |        |          |  |       |           



F-41



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##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)




|                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|------------------------------------------------------ |  | ---- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                       |  | 2004 |          |   | 2003 |   |          | 2002 | 
|                                                       |  |      |          |   |      |   |          |      | 
|Expected dividend yield                                |  |      | 0        | % |      |   | 0        | %    |  |   | 0        | %
|Expected volatility                                    |  |      | 0.58     |   |      |   | 0.85     |      |  |   | 0.9      |  
|Risk free interest rate                                |  |      | 1.70     | % |      |   | 1.33     | %    |  |   | 1.85     | %
|Expected post-vesting option lives (years)             |  |      | 0.75-3.0 |   |      |   | 0.75-3.0 |      |  |   | 0.75-3.0 |  
|Weighted fair value of options granted during the year |  | $    | 3.68     |   |      | $ | 5.64     |      |  | $ | 4.06     |  

Restricted Stock Awards










Employee Stock Purchase Plan




F-42



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##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)




|    |             
|--- | ------------
|15. | Income Taxes



|                                        |                                      |              |          |         |      |   |          |         |  
|--------------------------------------- | ------------------------------------ | ------------ | -------- | ------- | ---- | - | -------- | ------- | -
|                                        |                                      | December 31, |         
|                                        |                                      |              |         
|                                        |                                      | 2004         |          |         | 2003 |  
|                                        |                                      |              |          |         |      |  
|Deferred tax assets:                    |                                      |              |          |         |      |   |          |        
|                                        | Net operating loss carryforwards     |              | $        | 770,471 |      |   | $        | 729,963 |  
|                                        | Capital loss carryforwards           |              |          | 4,623   |      |   |          | 1,967   |  
|                                        | Restructuring costs                  |              |          | 541     |      |   |          | 9,943   |  
|                                        | Research and development tax credits |              |          | 17,591  |      |   |          | 15,274  |  
|                                        | Other accrued expenses               |              |          | 53,478  |      |   |          | 33,589  |  
|                                        | Allowance for doubtful accounts      |              |          | 5,067   |      |   |          | 7,692   |  
|                                        | Depreciation                         |              |          | 4,674   |      |   |          | 4,846   |  
|                                        | Intangible assets                    |              |          | 64,608  |      |   |          | 131,979 |  
|                                        | Prepaid assets                       |              |          | 7,043   |      |   |          |        |  
|                                        | Other                                |              |          | 4,465   |      |   |          | 515     |  
|                                        |                                      |              |          |         |      |  
|Total deferred tax assets               |                                      |              | 932,561  |         |      |   | 935,768  |        
|Valuation allowance                     |                                      |              | (915,452 | )       |      |   | (926,767 | )      
|                                        |                                      |              |          |         |      |  
|Net deferred tax assets                 |                                      |              | 17,109   |         |      |   | 9,001    |        
|                                        |                                      |              |          |         |      |  
|Deferred tax liabilities:               |                                      |              |          |         |      |   |          |        
|                                        | Tax basis                            |              |          | (2,541  | )    |   |          | (2,582  | )
|                                        | Convertible subordinated notes       |              |          | (12,212 | )    |   |          |        |  
|                                        | Other                                |              |          | (2,356  | )    |   |          | (6,419  | )
|                                        |                                      |              |          |         |      |  
|Total deferred tax liabilities          |                                      |              | (17,109  | )       |      |   | (9,001   | )      
|                                        |                                      |              |          |         |      |  
|Net deferred tax assets and liabilities |                                      | $            |         |         |      | $ |         |        
|                                        |                                      |              |          |         |      |  



|                                            |  |      |       |   |      |  |       |      |  |  |       |   
|------------------------------------------- |  | ---- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | --
|                                            |  | 2004 |       |   | 2003 |  |       | 2002 | 
|                                            |  |      |       |   |      |  |       |      | 
|United States federal statutory rate        |  |      | 34.0  | % |      |  | 34.0  | %    |  |  | (34.0 | )%
|State income taxes (net of federal benefit) |  |      | 4.0   |   |      |  | 3.3   |      |  |  | (3.6  | ) 
|Restructuring costs                         |  |      | 0.0   |   |      |  | 0.0   |      |  |  | (3.1  | ) 
|Goodwill amortization                       |  |      | (9.1  | ) |      |  | (12.3 | )    |  |  | 5.6   |   
|Valuation allowance                         |  |      | (15.4 | ) |      |  | (2.0  | )    |  |  | 21.0  |   
|Other                                       |  |      | (2.4  | ) |      |  | (3.0  | )    |  |  | (1.9  | ) 
|                                            |  |      |       |   |      |  |       |      | 
|Effective income tax rate                   |  |      | 11.1  | % |      |  | 20.0  | %    |  |  | (16.0 | )%
|                                            |  |      |       |   |      |  |       |      | 



F-43



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##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)














|    |                                    
|--- | -----------------------------------
|16. | Fair Value of Financial Instruments



|             |                                                     |                   |   |         |                   |  |   |            |  |  |            |         |  |  |   |         | 
|------------ | --------------------------------------------------- | ----------------- | - | ------- | ----------------- |  | - | ---------- |  |  | ---------- | ------- |  |  | - | ------- | 
|             |                                                     | December 31, 2004 |   |         | December 31, 2003 | 
|             |                                                     |                   |   |         |                   | 
|             |                                                     | Cost Basis        |   |         | Fair Value        |  |   | Cost Basis |  |  | Fair Value |        
|             |                                                     |                   |   |         |                   |  |   |            |  |  |            |        
|Assets:      |                                                     |                   |   |         |                   |  |   |            |  |  |            |         |  |  |   |        
|             | Cash and cash equivalents                           |                   | $ | 46,019  |                   |  | $ | 46,019     |  |  | $          | 39,648  |  |  | $ | 39,648  | 
|             | Short-term investments                              |                   |   | 62,077  |                   |  |   | 61,675     |  |  |            | 229,612 |  |  |   | 231,033 | 
|             | Marketable securities  long term                   |                   |   | 516,188 |                   |  |   | 515,881    |  |  |            | 447,583 |  |  |   | 456,034 | 
|Liabilities: |                                                     |                   |   |         |                   |  |   |            |  |  |            |         |  |  |   |        
|             | Convertible subordinated notes                      |                   | $ | 649,999 |                   |  | $ | 615,124    |  |  | $          | 649,999 |  |  | $ | 657,812 | 
|             | Convertible exchangeable redeemable preferred stock |                   |   | 98,299  |                   |  |   | 94,750     |  |  |            |        |  |  |   |        | 

F-44



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##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)






|           |                                                            |                   |   |         |                   |  |   |            |       |  |       |       |         |           |   |         |            |  |       |            |         |  |       |       |       |  |   |     |     |  |   |         |         | 
|---------- | ---------------------------------------------------------- | ----------------- | - | ------- | ----------------- |  | - | ---------- | ----- |  | ----- | ----- | ------- | --------- | - | ------- | ---------- |  | ----- | ---------- | ------- |  | ----- | ----- | ----- |  | - | --- | --- |  | - | ------- | ------- | 
|           |                                                            | December 31, 2004 |   |         | December 31, 2003 | 
|           |                                                            |                   |   |         |                   | 
|           |                                                            | Cost or           |   |         | Gross             |  |   | Gross      |       |  |       |       | Cost or |           |   | Gross   |            |  | Gross |            |         | 
|           |                                                            | Amortized         |   |         | Unrealized        |  |   | Unrealized |       |  | Fair  |       |         | Amortized |   |         | Unrealized |  |       | Unrealized |         |  | Fair  |      
|           |                                                            | Cost              |   |         | Gains             |  |   | Losses     |       |  | Value |       |         | Cost      |   |         | Gains      |  |       | Losses     |         |  | Value |      
|           |                                                            |                   |   |         |                   |  |   |            |       |  |       |       |         |           |   |         |            |  |       |            |         |  |       |      
|Short-Term |                                                            |                   |   |         |                   |  |   |            |       |  |       |       |         |           |   |         |            |  |       |            |         |  |       |       |       |  |   |     |     |  |   |        
|           | Certificate of deposits and marketable debt
    securities |                   | $ | 62,077  |                   |  | $ |           |       |  | $     | 402   |         |           | $ | 61,675  |            |  | $     | 229,612    |         |  | $     | 1,421 |       |  | $ |    |     |  | $ | 231,033 |        
|           |                                                            |                   |   |         |                   |  |   |            |       |  |       |       |         |           |   |         |            |  |       |            |         |  |       |      
|Long-Term  |                                                            |                   |   |         |                   |  |   |            |       |  |       |       |         |           |   |         |            |  |       |            |         |  |       |       |       |  |   |     |     |  |   |        
|           | Marketable debt
    securities                             |                   | $ | 514,696 |                   |  | $ | 1,633      |       |  | $     | 4,465 |         |           | $ | 511,864 |            |  | $     | 445,810    |         |  | $     | 6,043 |       |  | $ | 563 |     |  | $ | 451,290 |        
|           | Equity securities                                          |                   |   | 1,492   |                   |  |   | 2,527      |       |  |       | 2     |         |           |   | 4,017   |            |  |       | 1,773      |         |  |       | 2,971 |       |  |   |    |     |  |   | 4,744   |        
|           |                                                            |                   |   |         |                   |  |   |            |       |  |       |       |         |           |   |         |            |  |       |            |         |  |       |      
|           |                                                            | Total             |   | $       | 516,188           |  |   | $          | 4,160 |  |       | $     | 4,467   |           |   | $       | 515,881    |  |       | $          | 447,583 |  |       | $     | 9,014 |  |   | $   | 563 |  |   | $       | 456,034 | 
|           |                                                            |                   |   |         |                   |  |   |            |       |  |       |       |         |           |   |         |            |  |       |            |         |  |       |      



|           |                                                        |                  |   |         |                  |  |   |       |       |  |            |         |         |       |   |       |            |  |   |         |         |  |   |       |       | 
|---------- | ------------------------------------------------------ | ---------------- | - | ------- | ---------------- |  | - | ----- | ----- |  | ---------- | ------- | ------- | ----- | - | ----- | ---------- |  | - | ------- | ------- |  | - | ----- | ----- | 
|           |                                                        | In Loss Position |   |         | In Loss Position |  |   |       |       | 
|           |                                                        | Less Than        |   |         | More Than        |  |   |      
|           |                                                        | 12 Months        |   |         | 12 Months        |  |   | Total |      
|           |                                                        |                  |   |         |                  |  |   |       |      
|           |                                                        |                  |   | Gross   |                  |  |   |       | Gross |  |            |         |         | Gross |  
|           |                                                        | Fair             |   |         | Unrealized       |  |   | Fair  |       |  | Unrealized |         |         | Fair  |   |       | Unrealized | 
|           |                                                        | Value            |   |         | Losses           |  |   | Value |       |  | Losses     |         |         | Value |   |       | Losses     | 
|           |                                                        |                  |   |         |                  |  |   |       |       |  |            |         |         |       |   |       |            | 
|Short-Term |                                                        |                  |   |         |                  |  |   |       |       |  |            |         |         |       |   |       |            |  |   |         |         |  |   |      
|           | Certificate of deposits and marketable debt securities |                  | $ | 54,598  |                  |  | $ | 402   |       |  | $          |        |         |       | $ |      |            |  | $ | 54,598  |         |  | $ | 402   |      
|           |                                                        |                  |   |         |                  |  |   |       |       |  |            |         |         |       |   |       |            | 
|Long-Term  |                                                        |                  |   |         |                  |  |   |       |       |  |            |         |         |       |   |       |            |  |   |         |         |  |   |      
|           | Marketable debt securities                             |                  | $ | 297,050 |                  |  | $ | 2,505 |       |  | $          | 126,040 |         |       | $ | 1,960 |            |  | $ | 423,090 |         |  | $ | 4,465 |      
|           | Equity securities                                      |                  |   | 6       |                  |  |   | 2     |       |  |            |        |         |       |   |      |            |  |   | 6       |         |  |   | 2     |      
|           |                                                        |                  |   |         |                  |  |   |       |       |  |            |         |         |       |   |       |            | 
|           |                                                        | Total            |   | $       | 297,056          |  |   | $     | 2,507 |  |            | $       | 126,040 |       |   | $     | 1,960      |  |   | $       | 423,096 |  |   | $     | 4,467 | 
|           |                                                        |                  |   |         |                  |  |   |       |       |  |            |         |         |       |   |       |            | 



F-45



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##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)






|                    |                                       |                |   |         |            |  |   |         |         | 
|------------------- | ------------------------------------- | -------------- | - | ------- | ---------- |  | - | ------- | ------- | 
|                    |                                       | Cost or        |   |         |           
|                    |                                       | Amortized Cost |   |         | Fair Value | 
|                    |                                       |                |   |         |            | 
|Available-for-sale: |                                       |                |   |         |            |  |   |        
|                    | Due in one year or less               |                | $ | 62,077  |            |  | $ | 61,675  |        
|                    | Due after one year through five years |                |   | 514,696 |            |  |   | 511,864 |        
|                    |                                       |                |   |         |            | 
|                    |                                       | Total          |   | $       | 576,773    |  |   | $       | 573,539 | 
|                    |                                       |                |   |         |            | 







F-46



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##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)






|    |                           
|--- | --------------------------
|17. | Related Party Transactions







|    |                            
|--- | ---------------------------
|18. | Comprehensive Income (Loss)



|                                            |                                                                                   |      |         |         |      |   |         |        |   |   |         |        |  
|------------------------------------------- | --------------------------------------------------------------------------------- | ---- | ------- | ------- | ---- | - | ------- | ------ | - | - | ------- | ------ | -
|                                            |                                                                                   | 2004 |         |         | 2003 |   |         | 2002   |  
|                                            |                                                                                   |      |         |         |      |   |         |        |  
|Foreign currency translation gains          |                                                                                   | $    | 2,118   |         |      | $ | 3,285   |        |   | $ | 2,523   |       
|Unrealized gains (losses) on securities:    |                                                                                   |      |         |         |      |   |         |        |   |   |         |       
|                                            | Unrealized holding gains (losses)                                                 |      |         | (10,124 | )    |   |         | 3,078  |   |   |         | 2,907  |  
|                                            | Less: reclassification adjustment for net gains realized in net
    income (loss) |      |         | (457    | )    |   |         | (1,659 | ) |   |         | (6,547 | )
|                                            |                                                                                   |      |         |         |      |   |         |        |  
|Net unrealized (losses) gains on securities |                                                                                   |      | (10,581 | )       |      |   | 1,419   |        |   |   | (3,640  | )     
|                                            |                                                                                   |      |         |         |      |   |         |        |  
|Other comprehensive (loss) income           |                                                                                   |      | (8,463  | )       |      |   | 4,704   |        |   |   | (1,117  | )     
|                                            |                                                                                   |      |         |         |      |   |         |        |  
|Net income (loss)                           |                                                                                   |      | 39,334  |         |      |   | (17,006 | )      |   |   | (49,702 | )     
|                                            |                                                                                   |      |         |         |      |   |         |        |  
|Comprehensive income (loss)                 |                                                                                   | $    | 30,871  |         |      | $ | (12,302 | )      |   | $ | (50,819 | )     
|                                            |                                                                                   |      |         |         |      |   |         |        |  





|                                             |  |                          |       |   |      |   |        |      |  |   |        | 
|-------------------------------------------- |  | ------------------------ | ----- | - | ---- | - | ------ | ---- |  | - | ------ | 
|                                             |  | Years Ended December 31, |      
|                                             |  |                          |      
|                                             |  | 2004                     |       |   | 2003 |   |        | 2002 | 
|                                             |  |                          |       |   |      |   |        |      | 
|Unrealized (losses) gains on securities      |  | $                        | (709  | ) |      | $ | 9,872  |      |  | $ | 8,453  | 
|Foreign currency translation gains           |  |                          | 8,666 |   |      |   | 6,548  |      |  |   | 3,263  | 
|                                             |  |                          |       |   |      |   |        |      | 
|Total accumulated other comprehensive income |  | $                        | 7,957 |   |      | $ | 16,420 |      |  | $ | 11,716 | 
|                                             |  |                          |       |   |      |   |        |      | 

F-47



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##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)




|    |                                                  
|--- | -------------------------------------------------
|19. | Supplemental Disclosures of Cash Flow Information



|                                                                                      |  |                          |        |  |      |   |        |      |  |   |       | 
|------------------------------------------------------------------------------------- |  | ------------------------ | ------ |  | ---- | - | ------ | ---- |  | - | ----- | 
|                                                                                      |  | Years Ended December 31, |       
|                                                                                      |  |                          |       
|                                                                                      |  | 2004                     |        |  | 2003 |   |        | 2002 | 
|                                                                                      |  |                          |        |  |      |   |        |      | 
|Supplemental Disclosure of Cash Flow Information:                                     |  |                          |        |  |      |   |        |      |  |   |       | 
|Interest paid                                                                         |  | $                        | 16,190 |  |      | $ | 12,714 |      |  | $ | 5,021 | 
|                                                                                      |  |                          |        |  |      |   |        |      | 
|Taxes paid                                                                            |  | $                        | 5,635  |  |      | $ | 7,215  |      |  | $ | 1,090 | 
|                                                                                      |  |                          |        |  |      |   |        |      | 
|Supplemental Schedule of Non-Cash Investing and Financing
    Activities:             |  |                          |        |  |      |   |        |      |  |   |       | 
|Accretion of convertible redeemable exchangeable preferred stock                      |  | $                        | 184    |  |      | $ |       |      |  | $ |      | 
|                                                                                      |  |                          |        |  |      |   |        |      | 
|Issuance of equity securities in connection with strategic
    alliances and services |  | $                        | 15     |  |      | $ | 67     |      |  | $ | 39    | 
|                                                                                      |  |                          |        |  |      |   |        |      | 
|Deferred stock compensation related to restricted stock awards                        |  | $                        | 13,001 |  |      | $ | 25     |      |  | $ | 2,500 | 
|                                                                                      |  |                          |        |  |      |   |        |      | 



|    |                                     
|--- | ------------------------------------
|20. | Quarterly Financial Data (Unaudited)



|                                                              |                                               |         |         |         |         |   |         |         |   |   |         |         |   |   |         |         |  
|------------------------------------------------------------- | --------------------------------------------- | ------- | ------- | ------- | ------- | - | ------- | ------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                              |                                               | 2004    |        
|                                                              |                                               |         |        
|                                                              |                                               | First   |         |         | Second  |   |         | Third   |   |   | Fourth  |        
|                                                              |                                               | Quarter |         |         | Quarter |   |         | Quarter |   |   | Quarter |        
|                                                              |                                               |         |         |         |         |   |         |         |   |   |         |        
|Revenue                                                       |                                               | $       | 271,214 |         |         | $ | 281,881 |         |   | $ | 299,615 |         |   | $ | 307,641 |        
|                                                              | Cost of operations                            |         |         | 162,642 |         |   |         | 163,961 |   |   |         | 168,571 |   |   |         | 171,257 |  
|                                                              | Development and engineering                   |         |         | 11,096  |         |   |         | 12,991  |   |   |         | 14,392  |   |   |         | 15,682  |  
|                                                              | Sales, marketing, general and administrative  |         |         | 76,994  |         |   |         | 83,298  |   |   |         | 84,762  |   |   |         | 78,973  |  
|                                                              | Depreciation, amortization and other          |         |         | 12,585  |         |   |         | 13,148  |   |   |         | 15,189  |   |   |         | 16,843  |  
|                                                              | Legal expense                                 |         |         | 2,037   |         |   |         | 2,215   |   |   |         | 2,325   |   |   |         | 2,653   |  
|                                                              | Interest income (expense), net                |         |         | 735     |         |   |         | (327    | ) |   |         | (331    | ) |   |         | (613    | )
|                                                              | Restructuring and other income (expense), net |         |         | 37      |         |   |         | 447     |   |   |         | (4,441  | ) |   |         |        |  
|                                                              |                                               |         |         |         |         |   |         |         |   |   |         |        
|Income from continuing operations before income tax provision |                                               |         | 6,632   |         |         |   | 6,388   |         |   |   | 9,604   |         |   |   | 21,620  |        
|                                                              | Income tax provision                          |         |         | 931     |         |   |         | 613     |   |   |         | 1,435   |   |   |         | 1,931   |  
|                                                              |                                               |         |         |         |         |   |         |         |   |   |         |        
|Net income                                                    |                                               | $       | 5,701   |         |         | $ | 5,775   |         |   | $ | 8,169   |         |   | $ | 19,689  |        
|                                                              |                                               |         |         |         |         |   |         |         |   |   |         |        
|Basic income per common share                                 |                                               | $       | 0.02    |         |         | $ | 0.02    |         |   | $ | 0.03    |         |   | $ | 0.06    |        
|                                                              |                                               |         |         |         |         |   |         |         |   |   |         |        
|Diluted income per common share                               |                                               | $       | 0.02    |         |         | $ | 0.02    |         |   | $ | 0.02    |         |   | $ | 0.06    |        
|                                                              |                                               |         |         |         |         |   |         |         |   |   |         |        

F-48



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##### Table of Contents



WebMD Corporation


Notes to Consolidated Financial
Statements  (Continued)


|                                                                         |                                                                 |                                                                 |         |        |         |   |         |         |         |   |         |        |         |   |         |        |         | 
|------------------------------------------------------------------------ | --------------------------------------------------------------- | --------------------------------------------------------------- | ------- | ------ | ------- | - | ------- | ------- | ------- | - | ------- | ------ | ------- | - | ------- | ------ | ------- | 
|                                                                         |                                                                 | 2003                                                            |        
|                                                                         |                                                                 |                                                                 |        
|                                                                         |                                                                 | First                                                           |         |        | Second  |   |         | Third   |         |   | Fourth  |       
|                                                                         |                                                                 | Quarter                                                         |         |        | Quarter |   |         | Quarter |         |   | Quarter |       
|                                                                         |                                                                 |                                                                 |         |        |         |   |         |         |         |   |         |       
|Revenue                                                                  |                                                                 | $                                                               | 221,531 |        |         | $ | 233,418 |         |         | $ | 250,635 |        |         | $ | 258,396 |       
|                                                                         |                                                                 | Cost of operations                                              |         |        | 125,845 |   |         |         | 135,441 |   |         |        | 149,270 |   |         |        | 154,383 | 
|                                                                         |                                                                 | Development and engineering                                     |         |        | 10,917  |   |         |         | 10,403  |   |         |        | 11,334  |   |         |        | 10,331  | 
|                                                                         |                                                                 | Sales, marketing, general and administrative                    |         |        | 68,108  |   |         |         | 69,359  |   |         |        | 72,450  |   |         |        | 72,565  | 
|                                                                         |                                                                 | Depreciation, amortization and other                            |         |        | 26,920  |   |         |         | 14,944  |   |         |        | 11,097  |   |         |        | 9,473   | 
|                                                                         |                                                                 | Legal expense                                                   |         |        |        |   |         |         |        |   |         |        | 493     |   |         |        | 3,466   | 
|                                                                         |                                                                 | Interest income, net                                            |         |        | 2,233   |   |         |         | 2,059   |   |         |        | 1,698   |   |         |        | 1,697   | 
|                                                                         |                                                                 | Other income, net                                               |         |        | 183     |   |         |         | 1,118   |   |         |        | 3,039   |   |         |        | 1,537   | 
|                                                                         |                                                                 |                                                                 |         |        |         |   |         |         |         |   |         |       
|Income (loss) from continuing operations before income tax
    provision |                                                                 |                                                                 | (7,843  | )      |         |   | 6,448   |         |         |   | 10,728  |        |         |   | 11,412  |       
|                                                                         | Income tax provision                                            |                                                                 |         | 987    |         |   |         | 1,001   |         |   |         | 1,273  |         |   |         | 879    |        
|                                                                         |                                                                 |                                                                 |         |        |         |   |         |         |         |   |         |       
|                                                                         | Income (loss) from continuing operations                        |                                                                 |         | (8,830 | )       |   |         | 5,447   |         |   |         | 9,455  |         |   |         | 10,533 |        
|                                                                         | Income (loss) from discontinued operations, net of income taxes |                                                                 |         | 1,472  |         |   |         | (31,717 | )       |   |         | (3,366 | )       |   |         |       |        
|                                                                         |                                                                 |                                                                 |         |        |         |   |         |         |         |   |         |       
|Net income (loss)                                                        |                                                                 | $                                                               | (7,358  | )      |         | $ | (26,270 | )       |         | $ | 6,089   |        |         | $ | 10,533  |       
|                                                                         |                                                                 |                                                                 |         |        |         |   |         |         |         |   |         |       
|Basic income (loss) per common share:                                    |                                                                 |                                                                 |         |        |         |   |         |         |         |   |         |        |         |   |         |       
|                                                                         |                                                                 | Income (loss) from continuing operations                        |         | $      | (0.03   | ) |         | $       | 0.02    |   |         | $      | 0.03    |   |         | $      | 0.03    | 
|                                                                         |                                                                 | Income (loss) from discontinued operations, net of income taxes |         |        | 0.01    |   |         |         | (0.11   | ) |         |        | (0.01   | ) |         |        |        | 
|                                                                         |                                                                 |                                                                 |         |        |         |   |         |         |         |   |         |       
|Net income (loss)                                                        |                                                                 | $                                                               | (0.02   | )      |         | $ | (0.09   | )       |         | $ | 0.02    |        |         | $ | 0.03    |       
|                                                                         |                                                                 |                                                                 |         |        |         |   |         |         |         |   |         |       
|Diluted income (loss) per common share:                                  |                                                                 |                                                                 |         |        |         |   |         |         |         |   |         |        |         |   |         |       
|                                                                         |                                                                 | Income (loss) from continuing operations                        |         | $      | (0.03   | ) |         | $       | 0.02    |   |         | $      | 0.03    |   |         | $      | 0.03    | 
|                                                                         |                                                                 | Income (loss) from discontinued operations, net of income taxes |         |        | 0.01    |   |         |         | (0.10   | ) |         |        | (0.01   | ) |         |        |        | 
|                                                                         |                                                                 |                                                                 |         |        |         |   |         |         |         |   |         |       
|Net income (loss)                                                        |                                                                 | $                                                               | (0.02   | )      |         | $ | (0.08   | )       |         | $ | 0.02    |        |         | $ | 0.03    |       
|                                                                         |                                                                 |                                                                 |         |        |         |   |         |         |         |   |         |       



|    |                 
|--- | ----------------
|21. | Subsequent Event

Acquisition of HealthShare Technologies.


F-49



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##### Table of Contents








| |                                               
| | ----------------------------------------------
| | Schedule II. Valuation and Qualifying Accounts

|                  |                                             |                                              |   |         |            |  |   |          |   |            |            |         |   |          |   |         |             |  |   |        |  |  |   |         | 
|----------------- | ------------------------------------------- | -------------------------------------------- | - | ------- | ---------- |  | - | -------- | - | ---------- | ---------- | ------- | - | -------- | - | ------- | ----------- |  | - | ------ |  |  | - | ------- | 
|                  |                                             | Years Ended December 31, 2004, 2003 and 2002 |  
|                  |                                             |                                              |  
|                  |                                             | Balance at                                   |   |         | Charged to |  |   |         
|                  |                                             | Beginning                                    |   |         | Costs and  |  |   |          |   | Balance at |           
|                  |                                             | of Year                                      |   |         | Expenses   |  |   | Acquired |   |            | Write-offs |         |   | Other(a) |   |         | End of Year | 
|                  |                                             |                                              |   |         |            |  |   |          |   |            |            |         |   |          |   |         |             | 
|                  |                                             | (In thousands)                               |  
|December 31, 2004 |                                             |                                              |   |         |            |  |   |          |   |            |            |         |   |          |   |         |             |  |   |        |  |  |   |        
|                  | Allowance for Doubtful Accounts             |                                              | $ | 20,500  |            |  | $ | 3,606    |   |            | $          | 157     |   |          | $ | (10,830 | )           |  | $ |       |  |  | $ | 13,433  | 
|                  | Valuation Allowance for Deferred Tax Assets |                                              |   | 926,767 |            |  |   | (7,991   | ) |            |            | (18,145 | ) |          |   |        |             |  |   | 14,821 |  |  |   | 915,452 | 
|December 31, 2003 |                                             |                                              |   |         |            |  |   |          |   |            |            |         |   |          |   |         |             |  |   |        |  |  |   |        
|                  | Allowance for Doubtful Accounts             |                                              |   | 22,417  |            |  |   | 6,328    |   |            |            | 768     |   |          |   | (9,013  | )           |  |   |       |  |  |   | 20,500  | 
|                  | Valuation Allowance for Deferred Tax Assets |                                              |   | 941,507 |            |  |   | (1,423   | ) |            |            | (33,277 | ) |          |   |        |             |  |   | 19,960 |  |  |   | 926,767 | 
|December 31, 2002 |                                             |                                              |   |         |            |  |   |          |   |            |            |         |   |          |   |         |             |  |   |        |  |  |   |        
|                  | Allowance for Doubtful Accounts             |                                              |   | 26,972  |            |  |   | 11,305   |   |            |            | 34      |   |          |   | (15,894 | )           |  |   |       |  |  |   | 22,417  | 
|                  | Valuation Allowance for Deferred Tax Assets |                                              |   | 939,764 |            |  |   | 10,471   |   |            |            | (17,355 | ) |          |   |        |             |  |   | 8,627  |  |  |   | 941,507 | 






|    |  |                                                                                                             
|--- |  | ------------------------------------------------------------------------------------------------------------
|(a) |  | Represents valuation allowance created through equity as a
    result of stock option and warrant exercises.

S-1



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##### Table of Contents



INDEX TO EXHIBITS


|            |   |    |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|----------- | - | -- | ----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |   |    | Description
|            |   |    |            
|            | 2 | .1 |             | Stock Purchase Agreement dated as of June 15, 2003 between WebMD
    Corporation and Joseph Q. DiMartini, individually and as Trustee
    U/A dated February 6, 1998 f/b/o Joseph Q. DiMartini, and as
    Trustee of the Joseph Q. DiMartini 2002 Irrevocable Trust dated
    October 14, 2002, Eric J. Schaefer, an individual, Daniel A.
    Schmitt, individually and as Trustee of the Daniel A. Schmitt
    Revocable Trust dated March 26, 1999, and as Trustee of the
    Daniel Schmitt 2002 Irrevocable Trust dated September 24, 2002,
    and Dru A. Schmitt, individually and as Trustee U/A dated
    October 20, 1997 f/b/o Dru A. Schmitt (incorporated by reference
    to Exhibit 2.1 to Registrants Quarterly Report on Form
    10-Q for the quarter ended June 30, 2003)
|            | 2 | .2 |             | Stock Purchase Agreement dated as of October 21, 2003 between
    TPG Holding Company Limited and Envoy Corporation (incorporated
    by reference to Exhibit 2.1 to Registrants Quarterly
    Report on Form 10-Q for the quarter ended September 30, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|            | 2 | .3 |             | Amendment No. 1, dated as of November 28, 2003, to the Stock
    Purchase Agreement dated as of October 21, 2003 between TPG
    Holding Company Limited and Envoy Corporation (incorporated by
    reference to Exhibit 2.1 to Registrants Current Report on
    Form 8-K filed December 1, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|            | 2 | .4 |             | Amendment No. 2, dated as of December 22, 2003, to the Stock
    Purchase Agreement dated as of October 21, 2003 between TPG
    Holding Company Limited and Envoy Corporation (incorporated by
    reference to Exhibit 2.1 to Registrants Current Report on
    Form 8-K filed December 24, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|            | 2 | .5 |             | Agreement and Plan of Merger, dated as of July 9, 2004, by and
    among VIPS, Inc., WebMD Corporation, Envoy Corporation and
    Valor, Inc. (incorporated by reference to Exhibit 2.1 to
    Registrants Quarterly Report on Form 10-Q for the quarter
    ended June 30, 2004)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|            | 3 | .1 |             | Eleventh Amended and Restated Certificate of Incorporation of
    Registrant, as amended (incorporated by reference to Exhibit 3.1
    to Registrants Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2004)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|            | 3 | .2 |             | Certificate of Designations for Convertible Redeemable
    Exchangeable Preferred Stock, as amended (incorporated by
    reference to Exhibit 3.2 to Registrants Quarterly Report
    on Form 10-Q for the quarter ended September 30, 2004)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|            | 3 | .3 |             | Amended and Restated Bylaws of Registrant, as currently in
    effect (incorporated by reference to Exhibit 3.2 to
    Registrants Quarterly Report on Form 10-Q for the quarter
    ended June 30, 2004)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|            | 4 | .1 |             | Specimen Common Stock certificate (incorporated by reference to
    Exhibit 4.1 to Registrants Annual Report on Form 10-K for
    the year ended December 31, 2000)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|            | 4 | .2 |             | Indenture between WebMD Corporation and The Bank of New York,
    dated as of April 1, 2002 (incorporated by reference to Exhibit
    4.1 to the Registrants Quarterly Report on Form 10-Q for
    the quarter ended March 31, 2002)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|            | 4 | .3 |             | Registration Rights Agreement dated as of April 1, 2002 between
    WebMD Corporation and UBS Warburg LLC (incorporated by reference
    to Exhibit 4.2 to the Registrants Quarterly Report on Form
    10-Q for the quarter ended March 31, 2002)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|            | 4 | .4 |             | Form of
    31/4%
    Convertible Subordinated Note Due 2007 (included in Exhibit 4.2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|            | 4 | .5 |             | Indenture, dated as of June 25, 2003, between WebMD Corporation
    and The Bank of New York (incorporated by reference to Exhibit
    4.1 to Registrants Quarterly Report on Form 10-Q for the
    quarter ended June 30, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|            | 4 | .6 |             | Form of 1.75% Convertible Subordinated Note Due 2023 (included
    in Exhibit 4.5)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|            | 4 | .7 |             | Registration Rights Agreement dated as of June 25, 2003 between
    WebMD Corporation and Banc of America Securities LLC
    (incorporated by reference to Exhibit 4.2 to Registrants
    Quarterly Report on Form 10-Q for the quarter ended June 30,
    2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

E-1



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##### Table of Contents



|            |    |     |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|----------- | -- | --- | ----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    |     | Description
|            |    |     |            
|            | 4  | .8  |             | Registration Rights Agreement dated as of July 17, 2003 between
    WebMD Corporation and Joseph Q. DiMartini, individually and as
    Trustee U/A dated February 6, 1998 f/b/o Joseph Q. DiMartini,
    and as Trustee of the Joseph Q. DiMartini 2002 Irrevocable Trust
    dated October 14, 2002, Eric J. Schaefer, an individual, Daniel
    A. Schmitt, individually and as Trustee of the Daniel A. Schmitt
    Revocable Trust dated March 26, 1999, and as Trustee of the
    Daniel Schmitt 2002 Irrevocable Trust dated September 24, 2002,
    and Dru A. Schmitt, individually and as Trustee U/A dated
    October 20, 1997 f/b/o Dru A. Schmitt (incorporated by reference
    to Exhibit 4.3 to Registrants Quarterly Report on Form
    10-Q for the quarter ended June 30, 2003)
|            | 4  | .9  |             | Convertible Redeemable Exchangeable Preferred Stock Purchase
    Agreement, dated as of March 4, 2004, between CalPERs/PCG
    Corporate Partners, LLC and WebMD Corporation (incorporated by
    reference to Exhibit 4.9 to Registrants Annual Report on
    Form 10-K for the year ended December 31, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|            | 4  | .10 |             | Form of Stock Certificate for Convertible Redeemable
    Exchangeable Preferred Stock (included in Exhibit 3.2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|            | 4  | .11 |             | Form of Indenture for 10% Subordinated Notes due 2010 (included
    in Exhibit 3.2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|            | 4  | .12 |             | Form of 10% Subordinated Note due 2010 (included in Exhibit 3.2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|            | 10 | .1  |             | Form of Indemnification Agreement to be entered into by
    Registrant with each of its directors and officers (incorporated
    by reference to Exhibit 10.1 to Registrants Quarterly
    Report on Form 10-Q for the quarter ended June 30, 2002)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|            | 10 | .2  |             | Healtheon/WebMD Corporation Registration Rights Agreement dated
    January 26, 2000 among Registrant, Eastrise Profits Limited,
    AHN/FIT Cable, LLC, AHN/FIT Internet, LLC, News America
    Incorporated and Fox Broadcasting Company (incorporated by
    reference to Exhibit 10.4 to Registrants Quarterly Report
    on Form 10-Q for the quarter ended March 31, 2000), as amended
    by Amendment dated February 15, 2001 (incorporated by reference
    to Exhibit 10.1 to Registrants Quarterly Report on Form
    10-Q for the quarter ended March 31, 2001)                                                                                                                                                                                                                      
|            | 10 | .3  |             | Healtheon/WebMD Media Services Agreement dated January 26, 2000
    among Registrant, Eastrise Profits Limited and Fox Entertainment
    Group, Inc. (incorporated by reference to Exhibit 10.5 to
    Registrants Quarterly Report on Form 10-Q for the quarter
    ended March 31, 2000) , as amended by Amendment dated February
    15, 2001 (incorporated by reference to Exhibit 10.2 to
    Registrants Quarterly Report on Form 10-Q for the quarter
    ended March 31, 2001)                                                                                                                                                                                                                                                                                                           
|            | 10 | .4  |             | Warrant to Purchase Shares of Common Stock of WebMD, Inc. dated
    May 12, 1999 issued to Microsoft Corporation (incorporated by
    reference to Exhibit 10.9 to Registrants Annual Report on
    Form 10-K for the year ended December 31, 2000)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|            | 10 | .5* |             | Employment Agreement dated as of February 1, 1998 between
    Registrant and K. Robert Draughon (incorporated by reference to
    Exhibit 10.51 to Registrants Form 10-K to Annual Report on
    Form 10-K for the year ended December 31, 2000, as amended by
    Amendment No. 1 on Form 10-K/A)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|            | 10 | .6* |             | Letter Agreement dated as of September 12, 2000 between
    Registrant and K. Robert Draughon (incorporated by reference to
    Exhibit 10.52 to Registrants Form 10-K to Annual Report on
    Form 10-K for the year ended December 31, 2000, as amended by
    Amendment No. 1 on Form 10-K/A)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|            | 10 | .7* |             | Agreement dated as of October 8, 2001 between Registrant and
    Martin J. Wygod (incorporated by reference to Exhibit 10.55 to
    Registrants Form 10-K to Annual Report on Form 10-K for
    the year ended December 31, 2001)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|            | 10 | .8* |             | Amended and Restated Stock Option Agreement dated August 21,
    2000 between the Registrant (as successor to Medical Manager
    Corporation) and Martin J. Wygod (incorporated by reference to
    Exhibit 10.21 to Registrants Annual Report on Form 10-K
    for the year ended December 31, 2000, as amended by Amendment
    No. 1 on Form 10-K/A)                                                                                                                                                                                                                                                                                                                                                                                                                                          

E-2



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##### Table of Contents



|            |    |      |             |                                                                                                                                                                                                                                                                                                                                                                                         
|----------- | -- | ---- | ----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    |      | Description
|            |    |      |            
|            | 10 | .9*  |             | Employment Agreement dated as of October 23, 2002 between the
    Registrant and Roger C. Holstein (incorporated by reference to
    Exhibit 10.14 to Registrants Annual Report on Form 10-K
    for the year ended December 31, 2002)                                                                                                                                                 
|            | 10 | .10* |             | Employment Agreement dated as of May 16, 1999 between the
    Registrant (as successor to Synetic, Inc.) and Michael A. Singer
    (incorporated by reference to Exhibit 10.26 to Medical Manager
    Corporations Annual Report on Form 10-K for the fiscal
    year ended June 30, 1999)                                                                                             
|            | 10 | .11* |             | Letter Agreement dated as of September 5, 2000 between
    Registrant (as successor to Medical Manager Corporation) and
    Michael A. Singer (incorporated by reference to Exhibit 10.50 to
    Registrants Annual Report on Form 10-K for the year ended
    December 31, 2001, as amended by Amendment No. 1 on Form 10-K/A)                                                        
|            | 10 | .12* |             | Employment Agreement dated as of July 1, 2000 between Registrant
    (as successor to Medical Manager Corporation) and Charles A.
    Mele, as amended (incorporated by reference to Exhibit 10.51 to
    Registrants Annual Report on Form 10-K for the year ended
    December 31, 2001, as amended by Amendment No. 1 on
    Form 10-K/A)                                           
|            | 10 | .13* |             | Employment Agreement dated as of July 1, 2000 between Registrant
    (as successor to Medical Manager Corporation) and Anthony Vuolo,
    as amended (incorporated by reference to Exhibit 10.52 to
    Registrants Annual Report on Form 10-K for the year ended
    December 31, 2001, as amended by Amendment No. 1 on Form 10-K/A)                                                 
|            | 10 | .14* |             | Form of Amended and Restated Stock Option Agreement dated August
    21, 2000, between Registrant (as successor to Medical Manager
    Corporation) and each of Charles A. Mele and Anthony Vuolo
    (incorporated by reference to Exhibit 10.54 to Registrants
    Annual Report on Form 10-K for the year ended December 31, 2001,
    as amended by Amendment No. 1 on Form 10-K/A)
|            | 10 | .15* |             | WebMD Corporation 2001 Employee Non-Qualified Stock Option Plan,
    as amended (incorporated by reference to Exhibit 10.46 to
    Registrants Form 10-K for the year ended December 31,
    2001, as amended by Amendment No. 1 on Form 10-K/A)                                                                                                                                       
|            | 10 | .16* |             | WebMD Corporation 2002 Restricted Stock Plan and Form of Award
    Agreement (incorporated by reference to Exhibit 10.21 to
    Registrants Annual Report on Form 10-K for the year ended
    December 31, 2002)                                                                                                                                                                       
|            | 10 | .17* |             | Healtheon Corporation 1996 Stock Plan and Form of Stock Option
    Agreement (incorporated by reference to Exhibit 10.2 to
    Amendment No. 2 to Registrants Registration Statement on
    Form S-1 (No. 333-70553) filed February 10, 1999)                                                                                                                                          
|            | 10 | .18* |             | WebMD Corporation Amended and Restated 1998 Employee Stock
    Purchase Plan (incorporated by reference to Exhibit 99.27 to
    Registrants Registration Statement on Form S-8
    (No. 333-47250) filed October 4, 2000)                                                                                                                                                              
|            | 10 | .19* |             | WebMD Corporation 2000 Long-Term Incentive Plan (incorporated by
    reference to Annex G to the Proxy Statement/Prospectus, filed on
    August 7, 2000, and included in Registrants Registration
    Statement on Form S-4 (No. 333-39592)                                                                                                                                           
|            | 10 | .20* |             | WebMD, Inc. Amended and Restated 1997 Stock Incentive Plan, as
    amended (incorporated by reference to Exhibit 10.2 to
    Registrants Registration Statement on Form S-8
    (No. 33-90795) filed November 12, 1999)                                                                                                                                                                
|            | 10 | .21* |             | Envoy Stock Plan (incorporated by reference to Exhibit 99.1 to
    Registrants Registration Statement on Form S-8
    (No. 333-42616) filed July 31, 2000)                                                                                                                                                                                                                             
|            | 10 | .22* |             | Amended and Restated 1989 Class A Non-Qualified Stock Option
    Plan of Synetic, Inc. (incorporated by reference to Exhibit 10.1
    to Synetic, Inc.s Registration Statement on Form S-1
    (No. 333-28654) filed May 18, 1989)                                                                                                                                                     
|            | 10 | .23* |             | Amended and Restated 1989 Class B Non-Qualified Stock Option
    Plan of Synetic, Inc. (incorporated by reference to Exhibit 10.2
    to Synetic, Inc.s Registration Statement on Form S-1
    (No. 333-28654) filed May 18, 1989)                                                                                                                                                     
|            | 10 | .24* |             | 1991 Director Stock Option Plan of Synetic, Inc. (incorporated
    by reference to Exhibit 4.2 to Synetic, Inc.s Registration
    Statement on Form S-8 (No. 333-46640) filed March 24, 1992)                                                                                                                                                                                          

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##### Table of Contents



|            |    |      |             |                                                                                                                                                                                                                                                                                             
|----------- | -- | ---- | ----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    |      | Description
|            |    |      |            
|            | 10 | .25* |             | Amended and Restated 1991 Special Non-Qualified Stock Option
    Plan of Synetic, Inc. (incorporated by reference to Exhibit 4.3
    to Synetic, Inc.s Registration Statement on Form S-8
    (No. 333-36041) filed September 19, 1997)                                                    
|            | 10 | .26* |             | Medical Manager Corporations 1996 Amended and Restated
    Long-Term Incentive Plan (incorporated by reference to Exhibit
    10.1 to Medical Manager Corporations (Commission File No.
    0-29090) Quarterly Report on Form 10-Q for the quarter ended
    September 30, 1998)          
|            | 10 | .27* |             | Medical Manager Corporations 1996 Amended and Restated
    Non-Employee Directors Stock Plan (incorporated by
    reference to Exhibit 10.2 to Medical Manager Corporations
    (Commission File No. 0-29090) Annual Report on Form 10-K for the
    fiscal year ended December 31, 1997)
|            | 10 | .28* |             | 1996 Class C Stock Option Plan of Synetic, Inc. (incorporated by
    reference to Exhibit 4.1 to Synetic, Inc.s Registration
    Statement on Form S-8 (No. 333-36041) filed September
    19, 1997)                                                                                       
|            | 10 | .29* |             | 1997 Class D Stock Option Plan of Synetic, Inc. (incorporated by
    reference to Exhibit 4.2 to Synetic, Inc.s Registration
    Statement on Form S-8 (No. 333-36041) filed September
    19, 1997)                                                                                       
|            | 10 | .30* |             | 1998 Class E Stock Option Plan of Synetic, Inc. (incorporated by
    reference to Exhibit 4.1 to Synetic, Inc.s Registration
    Statement on Form S-8 (No. 333-72517) filed February
    17, 1999)                                                                                        
|            | 10 | .31* |             | The 1999 Medical Manager Corporation Stock Option Plan for
    Employees of Medical Manager Systems, Inc. (incorporated by
    reference to Exhibit 10.28 to Medical Manager Corporations
    Annual Report on Form 10-K for the year ended June 30, 1999)                                 
|            | 10 | .32* |             | Form of Stock Option Agreement between the Corporation and each
    of John H. Kang and Michael A. Singer (incorporated by reference
    to Exhibit 99.5 to Amendment No. 1 to Medical Manager
    Corporations Registration Statement on Form S-4
    (No. 333-81123) filed June 24, 1999)
|            | 10 | .33* |             | 1998 Porex Technologies Corp. Stock Option Plan of Synetic, Inc.
    (incorporated by reference to Exhibit 4.2 to Synetic,
    Inc.s Registration Statement on Form S-8
    (No. 333-72517) filed February 17, 1999)                                                                       
|            | 10 | .34* |             | CareInsite, Inc. 1999 Officer Stock Option Plan (incorporated by
    reference to Exhibit 10.18 to Amendment No. 6 to CareInsite,
    Inc.s Registration Statement on Form S-1
    (No. 333-75071) filed June 11, 1999)                                                                    
|            | 10 | .35* |             | CareInsite, Inc. 1999 Employee Stock Option Plan (incorporated
    by reference to Exhibit 10.17 to Amendment No. 6 to CareInsite,
    Inc.s Registration Statement on Form S-1
    (No. 333-75071) filed June 11, 1999)                                                                   
|            | 10 | .36* |             | CareInsite, Inc. 1999 Director Stock Option Plan (incorporated
    by reference to Annex H to the Proxy Statement/Prospectus, filed
    on August 7, 2000, and included in Registrants
    Registration Statement on Form S-4 (No. 333-39592)                                              
|            | 10 | .37* |             | Amendment to the Company Stock Option Plans of Medical Manager
    Corporation and CareInsite, Inc. (incorporated by reference to
    Exhibit 99.28 to Registrants Registration Statement on
    Form S-8 (No. 333-47250) filed October 4, 2000)                                           
|            | 10 | .38* |             | Employment Agreement, dated as of September 11, 2000, between
    the Registrant and Kirk Layman (incorporated by reference to
    Exhibit 10.44 to Registrants Annual Report on
    Form 10-K for the year ended December 31, 2003)                                                       
|            | 10 | .39* |             | 2003 Non-Qualified Stock Option Plan for Employees of Advanced
    Business Fulfillment, Inc. (incorporated by reference to Exhibit
    10.2 to Registrants Quarterly Report on Form 10-Q for
    the quarter ended September 30, 2003)                                                    
|            | 10 | .40* |             | 2004 Non-Qualified Stock Option Plan for Employees of Dakota
    Imaging, Inc. (incorporated by reference to Exhibit 10.1 to the
    Registrants Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2004)                                                               
|            | 10 | .41* |             | 2004 Non-Qualified Stock Option Plan for Employees of VIPS, Inc.
    (incorporated by reference to Exhibit 10.2 of the
    Registrants Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2004)                                                                         

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##### Table of Contents



|            |    |      |             |                                                                                                                                                                                                                                              
|----------- | -- | ---- | ----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    |      | Description
|            |    |      |            
|            | 10 | .42* |             | Employment Agreement, dated as of August 20, 2001, between the
    Registrant and Wayne Gattinella (incorporated by reference to
    Exhibit 10.46 to Registrants Annual Report on
    Form 10-K for the year ended December 31, 2003)      
|            | 10 | .43* |             | Stock Option Agreement between the Registrant and Wayne
    Gattinella dated August 20, 2001 (incorporated by reference to
    Exhibit 4.8 to Registrants Registration Statement on
    Form S-8 (No. 333-888420) filed May 16, 2002)       
|            | 10 | .44* |             | Employment Agreement, dated as of September 23, 2003, between
    the Registrant and Andrew Corbin (incorporated by reference to
    Exhibit 10.1 to Registrants Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2003)
|            | 10 | .45* |             | Employment Agreement, dated as of December 4, 2003, between
    Envoy Corporation and Tony Holcombe (incorporated by reference
    to Exhibit 10.49 to Registrants Annual Report on Form 10-K
    for the year ended December 31, 2003)     
|            | 10 | .46* |             | Letter Amendment, dated September 23, 2004, between the
    Registrant and Tony Holcombe (incorporated by reference to
    Exhibit 10.1 to Registrants Current Report on
    Form 8-K filed September 28, 2004)                             
|            | 10 | .47* |             | Employment Agreement, dated September 23, 2004, between the
    Registrant and Kevin Cameron (incorporated by reference to
    Exhibit 10.1 to Registrants Current Report on
    Form 8-K filed September 28, 2004)                         
|            | 10 | .48* |             | Letter Agreement, dated February 9, 2005, between Michael A.
    Singer and WebMD Corporation (incorporated by reference to
    Exhibit 99.1 to Registrants Current Report on
    Form 8-K filed February 9, 2005)                          
|            | 12 | .1   |             | Computation of Ratio of Earnings to Fixed Charges                                                                                                                                                                                            
|            | 14 | .1   |             | Code of Business Conduct (incorporated by reference to Exhibit
    14.1 to Registrants Annual Report on Form 10-K for the
    year ended December 31, 2003, as amended by Amendment No. 1
    on Form 10-K/A)                               
|            | 21 | .1   |             | Subsidiaries of Registrant                                                                                                                                                                                                                   
|            | 23 | .1   |             | Consent of Ernst & Young LLP, Independent Registered Public
    Accounting Firm                                                                                                                                                              
|            | 24 | .1   |             | Power of Attorney (see page 99)                                                                                                                                                                                                              
|            | 31 | .1   |             | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive
    Officer of Registrant                                                                                                                                                          
|            | 31 | .2   |             | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial
    Officer of Registrant                                                                                                                                                          
|            | 32 | .1   |             | Section 1350 Certification of Chief Executive Officer of
    Registrant                                                                                                                                                                      
|            | 32 | .2   |             | Section 1350 Certification of Chief Financial Officer of
    Registrant                                                                                                                                                                      
|            | 99 | .1   |             | Amended and Restated Audit Committee Charter                                                                                                                                                                                                 
|            | 99 | .2   |             | Amended and Restated Compensation Committee Charter                                                                                                                                                                                          
|            | 99 | .3   |             | Amended and Restated Nominating Committee Charter                                                                                                                                                                                            
|            | 99 | .4   |             | Governance & Compliance Committee Charter (incorporated by
    reference to Exhibit 99.4 to Registrants Current Report on
    Form 8-K filed November 4, 2004)                                                                              






|  |                                             
|- | --------------------------------------------
|* | Agreement relates to executive compensation.

E-5