8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

September 14, 2006

Date of Report (Date of earliest event reported)

EMDEON CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	0-24975	94-3236644
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

669 River Drive, Center 2
Elmwood Park, New Jersey 07407-1361

(Address of principal executive offices, including zip code)

(201) 703-3400

(Registrant’s telephone number, including area code)

(Former name or address, if changed since last report)

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

     o      Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

     o      Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

     o      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

     o      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 2.01.    Completion of Acquisition or Disposition of Assets
	Item 9.01.    Financial Statements and Exhibits
SIGNATURE
EXHIBIT INDEX
EX-99.1 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     All statements contained in this Current Report on Form 8-K, other than statements of historical fact, are forward-looking statements, including those regarding the tax consequences from the disposition transaction referred to below and ongoing relationships between the Registrant and the business that was sold. These statements are based on our current plans and expectations and involve risks and uncertainties that could cause actual future events or results to be different from those described in or implied by such forward-looking statements. These risks and uncertainties include those relating to: relationships with customers or strategic partners; and changes in economic, political or regulatory conditions or other trends affecting the healthcare, Internet, and information technology industries. Further information about these matters can be found in our other Securities and Exchange Commission filings. We expressly disclaim any intent or obligation to update these forward-looking statements.

Item 2.01.    Completion of Acquisition or Disposition of Assets

     As previously announced, Emdeon Corporation entered into a Stock Purchase Agreement, dated as of August 8, 2006 (which we refer to as the Purchase Agreement), with Sage Software, Inc. (which we sometimes refer to as the Purchaser), an indirect wholly-owned subsidiary of The Sage Group plc, pursuant to which the Purchaser agreed to purchase all of the outstanding capital stock of Emdeon Practice Services, Inc., which, collectively with its subsidiaries, comprised the Emdeon Practice Services segment (we refer below to Emdeon Practice Services, Inc. and its subsidiaries, collectively, as Practice Services). That transaction was completed on September 14, 2006. The purchase price was $565 million in cash and will be subject to customary adjustments based on net working capital as of the closing.

     The Board of Directors of Emdeon has not made any determination regarding the use of the proceeds of the sale of Practice Services and, in accordance with Emdeon’s investment policy, the proceeds have been invested in money market accounts.

     The Purchase Agreement contains representations and warranties, covenants, indemnification provisions and closing conditions that are customary for transactions of this type. At the closing of the transaction on September 14, 2006, $35 million of the purchase price was placed into escrow as security for Emdeon’s indemnification obligations under the transaction agreements, with one-third of that amount scheduled to be released 12 months after the closing and the remaining two-thirds scheduled to be released 18 months after the closing, in each case subject to any paid or pending claims.

     As previously disclosed, Emdeon and Sage Software will make an IRC Section 338(h)(10) election and will treat this transaction as a sale of assets for tax purposes. Emdeon expects to recognize a taxable gain on the sale of Practice Services and to utilize a portion of its federal net operating loss (“NOL”) carryforwards to offset the gain on this transaction. Under the existing Tax Sharing Agreement between Emdeon and WebMD Health Corp. (which we refer to as WHC), an 85.8% owned subsidiary of Emdeon, Emdeon has agreed to reimburse WHC for any of its NOL carryforwards utilized by Emdeon in this transaction at the current federal statutory tax rate of 35%. Emdeon currently estimates that the amount of WHC’s NOL carryforwards to be utilized in this transaction will be approximately $240 million to $260 million, resulting in a cash reimbursement to WHC of $84 million to $91 million. Emdeon’s estimates of the amount of WHC’s NOL carryforwards to

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be utilized and of the related reimbursement is based on various assumptions and will not be finalized until the filing of Emdeon’s 2006 consolidated tax return.

     The Purchase Agreement is filed as Exhibit 2.1 to this Current Report and is incorporated herein by reference. This summary of the provisions of the Purchase Agreement is qualified in its entirety by reference to the Purchase Agreement.

     The terms of the Purchase Agreement were determined on the basis of arms-length negotiations. Prior to the execution of the Purchase Agreement, there was no material relationship between the Purchaser and Emdeon, any affiliate of the Registrant, or any director or officer of Emdeon, and, to the knowledge of Emdeon, there was no material relationship between the Purchaser and any associate of any director or officer of Emdeon.

Item 9.01.    Financial Statements and Exhibits

     (b)       Pro Forma Financial Information.

     The unaudited pro forma condensed consolidated financial statements of Emdeon Corporation, as of and for the six months ended June 30, 2006 and for the years ended December 31, 2005, 2004 and 2003 are filed as Exhibit 99.1 to this Current Report and incorporated by reference herein.

     (d)       Exhibits.

     The following exhibits are filed herewith:

2.1	Stock Purchase Agreement, dated as of August 8, 2006, between the Registrant and Sage Software, Inc. (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on August 11, 2006)*
99.1	Unaudited pro forma condensed consolidated financial statements of Emdeon Corporation, as of and for the six months ended June 30, 2006 and for the years ended December 31, 2005, 2004 and 2003

* The exhibits and schedules to the Stock Purchase Agreement have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. The Registrant will furnish copies of any of the exhibits and schedules to the Securities and Exchange Commission upon request.

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SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	EMDEON CORPORATION
Dated: September 20, 2006	By:	/s/ Lewis H. Leicher
		Lewis H. Leicher
		Senior Vice President

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EXHIBIT INDEX

Exhibit
Number	Description
2.1	Stock Purchase Agreement, dated as of August 8, 2006, between the Registrant and Sage Software, Inc. (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on August 11, 2006)
99.1	Unaudited pro forma condensed consolidated financial statements of Emdeon Corporation, as of and for the six months ended June 30, 2006 and for the years ended December 31, 2005, 2004 and 2003

EX-99.1

EXHIBIT 99.1

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following Unaudited Pro Forma Condensed Consolidated Financial Statements of Emdeon Corporation (“Emdeon”) present financial information giving effect to the sale of Emdeon Practice Services, Inc, accounted for in accordance with Statement of Financial Accounting Standards No. 144 (As Amended), “Accounting for the Impairment or Disposal of Long-Lived Assets.” The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2006 presents the consolidated financial position of Emdeon, giving effect to the disposition as if it had occurred on June 30, 2006. The Unaudited Pro Forma Condensed Consolidated Statements of Operations for the six months ended June 30, 2006 and for the years ended December 31, 2005, 2004 and 2003 present the consolidated results of operations of Emdeon, giving effect to the disposition as if had occurred on January 1, 2003.

The historical consolidated financial statements of Emdeon have been adjusted to give effect to pro forma events that are (1) directly attributable to the sale, (2) factually supportable, and (3) with respect to the statements of operations, not expected to have a continuing impact on the consolidated results. You should read this information in conjunction with:

•  the accompanying notes to the unaudited pro forma condensed consolidated financial statements, which describe certain estimates and assumptions made in preparing such financial statements and in making the adjustments reflected therein;

•  Emdeon’s separate historical unaudited financial statements as of and for the six months ended June 30, 2006 included in Emdeon’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006; and

•  Emdeon’s separate historical financial statements for the three years ended December 31, 2005, 2004 and 2003 included in Emdeon’s Annual Report on Form 10-K for the year ended December 31, 2005.

The unaudited pro forma condensed consolidated financial statements have been prepared for informational purposes only. The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of what the financial position or results of operations actually would have been had the sale been completed at the dates indicated. In addition, the unaudited pro forma condensed consolidated financial statements do not purport to project the future financial position or results of operations of Emdeon.

PF-1

EMDEON CORPORATION

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF JUNE 30, 2006

(In thousands)

	As		Discontinued			Pro Forma			Pro Forma
	Reported		Operations (b)			Adjustments			Adjusted
ASSETS
Cash and cash equivalents	$	92,210	$	(2,710	)	$	524,000	(a)	$	613,500
Short-term investments		296,750		—			—			296,750
Accounts receivable, net		239,024		(35,594	)		—			203,430
Inventory		14,486		(3,500	)		—			10,986
Prepaid expenses and other current assets		36,079		(4,060	)		—			32,019
Assets related to discontinued operations		—		247,801			(247,801	)(b)		—
Total current assets		678,549		201,937			276,199			1,156,685
Marketable equity securities		2,944		(54	)		—			2,890
Property and equipment, net		126,376		(17,748	)		—			108,628
Goodwill		1,110,521		(179,460	)		(18,077	)(c)		912,984
Intangible assets, net		238,213		(4,477	)		—			233,736
Other assets		47,837		(198	)		35,000	(a)		82,639
TOTAL ASSETS	$	2,204,440	$	—		$	293,122		$	2,497,562
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	15,135	$	(3,371	)	$	—		$	11,764
Accrued expenses		158,249		(13,055	)		13,073	(d)		158,267
Deferred revenue		125,811		(45,584	)		—			80,227
Liabilities related to discontinued operations		—		62,718			(62,718	)(b)		—
Total current liabilities		299,195		708			(49,645	)		250,258
Convertible notes		650,000		—			—			650,000
Other long-term liabilities		15,946		(708	)		—			15,238
Minority interest in WebMD Health Corp.		53,811		—			—			53,811
Convertible redeemable exchangeable preferred stock		98,650		—			—			98,650
Stockholders’ equity		1,086,838		—			342,767			1,429,605
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,204,440	$	—		$	293,122		$	2,497,562

PF-2

EMDEON CORPORATION

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2006

(In thousands, except per share data)

				Less
				Discontinued			Pro Forma		Pro Forma
	As Reported			Operations (e)			Adjustments (f)		Adjusted
Revenue:
Services	$	615,346		$	(124,798	)	$	27,803	$	518,351
Products		78,654			(28,180	)		—		50,474
Total revenue		694,000			(152,978	)		27,803		568,825
Costs of operations:
Services		354,202			(67,958	)		27,740		313,984
Products		38,211			(15,980	)		—		22,231
Total cost of operations		392,413			(83,938	)		27,740		336,215
Development and engineering		30,197			(12,276	)		—		17,921
Sales, marketing, general and administrative		178,840			(36,690	)		63		142,213
Depreciation and amortization		38,309			(4,534	)		—		33,775
Legal expense		817			—			—		817
Advisory expenses		4,104			(2,032	)		—		2,072
Interest income		8,854			(3	)		—		8,851
Interest expense		9,359			—			—		9,359
Income from continuing operations before income tax provision and minority interest		48,815			(13,511	)		—		35,304
Income tax provision		9,996			(1,388	)		—		8,608
Minority interest in WebMD Health Corp., net of tax		(793	)		—			—		(793	)
Income from continuing operations	$	39,612		$	(12,123	)	$	—	$	27,489
Income from continuing operations per common share:
Basic	$	0.14							$	0.10
Diluted	$	0.13							$	0.09
Weighted-average shares outstanding used in computing income from continuing operations per common share:
Basic		286,141								286,141
Diluted		296,107								296,107

PF-3

EMDEON CORPORATION

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2005

(In thousands, except per share data)

				Less
				Discontinued			Pro Forma		Pro Forma
	As Reported			Operations (e)			Adjustments (f)		Adjusted
Revenue:
Services	$	1,123,646		$	(245,144	)	$	53,771	$	932,273
Products		153,233			(59,031	)		—		94,202
Total revenue		1,276,879			(304,175	)		53,771		1,026,475
Costs of operations:
Services		641,754			(140,254	)		53,708		555,208
Products		75,293			(34,847	)		—		40,446
Total cost of operations		717,047			(175,101	)		53,708		595,654
Development and engineering		58,494			(22,841	)		—		35,653
Sales, marketing, general and administrative		333,288			(78,464	)		63		254,887
Depreciation and amortization		71,767			(10,862	)		—		60,905
Legal expense		17,835			—			—		17,835
Loss on investments		6,365			—			—		6,365
Interest income		21,531			(4	)		—		21,527
Interest expense		16,324			(2	)		—		16,322
Other expense, net		3,765			—			—		3,765
Income from continuing operations before income tax provision and minority interest		73,525			(16,909	)		—		56,616
Income tax benefit		(357	)		(644	)		—		(1,001	)
Minority interest in WebMD Health Corp., net of tax		908			—			—		908
Income from continuing operations	$	72,974		$	(16,265	)	$	—	$	56,709
Income from continuing operations per common share:
Basic	$	0.21							$	0.17
Diluted	$	0.21							$	0.16
Weighted-average shares outstanding used in computing income from continuing operations per common share:
Basic		341,747								341,747
Diluted		352,852								352,852

PF-4

EMDEON CORPORATION

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004

(In thousands, except per share data)

			Less
			Discontinued			Pro Forma		Pro Forma
	As Reported		Operations (e)			Adjustments (f)		Adjusted
Revenue:
Services	$	1,006,192	$	(234,648	)	$	53,861	$	825,405
Products		154,159		(61,467	)		—		92,692
Total revenue		1,160,351		(296,115	)		53,861		918,097
Costs of operations:
Services		593,467		(149,684	)		53,861		497,644
Products		72,964		(34,319	)		—		38,645
Total cost of operations		666,431		(184,003	)		53,861		536,289
Development and engineering		54,161		(21,020	)		—		33,141
Sales, marketing, general and administrative		324,027		(79,511	)		—		244,516
Depreciation and amortization		57,765		(9,058	)		—		48,707
Legal expense		9,230		—			—		9,230
Restructuring and integration charge		4,535		—			—		4,535
Gain on investments		457		—			—		457
Interest income		18,717		(1	)		—		18,716
Interest expense		19,253		(2	)		—		19,251
Other income, net		121		(121	)		—		—
Income from continuing operations before income tax provision		44,244		(2,643	)		—		41,601
Income tax provision		4,910		(687	)		—		4,223
Income from continuing operations	$	39,334	$	(1,956	)	$	—	$	37,378
Income from continuing operations per common share:
Basic	$	0.12						$	0.12
Diluted	$	0.12						$	0.11
Weighted-average shares outstanding used in computing income from continuing operations per common share:
Basic		320,080							320,080
Diluted		333,343							333,343

PF-5

EMDEON CORPORATION

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003

(In thousands, except per share data)

			Less
			Discontinued			Pro Forma		Pro Forma
	As Reported		Operations (e)			Adjustments (f)		Adjusted
Revenue:
Services	$	799,268	$	(222,542	)	$	45,336	$	622,062
Products		164,712		(80,098	)		—		84,614
Total revenue		963,980		(302,640	)		45,336		706,676
Costs of operations:
Services		492,555		(155,380	)		45,336		382,511
Products		72,384		(37,085	)		—		35,299
Total cost of operations		564,939		(192,465	)		45,336		417,810
Development and engineering		42,985		(18,169	)		—		24,816
Sales, marketing, general and administrative		282,482		(74,297	)		—		208,185
Depreciation and amortization		62,434		(10,959	)		—		51,475
Legal expense		3,959		—			—		3,959
Gain on investments		1,659		—			—		1,659
Interest income		22,901		(46	)		—		22,855
Interest expense		15,214		(13	)		—		15,201
Other income, net		4,218		—			—		4,218
Income from continuing operations before income tax provision		20,745		(6,783	)		—		13,962
Income tax provision		4,140		(451	)		—		3,689
Income from continuing operations	$	16,605	$	(6,332	)	$	—	$	10,273
Income from continuing operations per common share:
Basic and diluted	$	0.05						$	0.03
Weighted-average shares outstanding used in computing income from continuing operations per common share:
Basic		304,858							304,858
Diluted		325,811							325,811

PF-6

NOTES TO THE UNAUDITED PRO FORMA CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

The pro forma adjustments related to the Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2006 assume the disposition took place on June 30, 2006 and are as follows:

(a) Represents estimated total cash proceeds from the sale of $565 million, net of approximately $35 million for the security escrow included in other assets and approximately $6 million of costs related to the transaction which excludes $2 million of transaction costs already reported in Emdeon’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006. These amounts do not reflect any adjustments based on net working capital as of the closing.

(b) Represents the elimination of the assets and liabilities of Emdeon Practice Services.

(c) Reflects an estimate of the reversal of the portion of the income tax valuation allowances that were originally established in connection with the purchase accounting of prior acquisitions. These income tax valuation allowances were reversed as a result of the utilization of Emdeon’s net operating loss carryforwards in connection with the gain on this transaction.

(d) Represents an estimate of the federal, state and other taxes payable in connection with the gain on this transaction.

The pro forma adjustments to the Unaudited Pro Forma Condensed Consolidated Statements of Operations for the six months ended June 30, 2006 and for the years ended December 31, 2005, 2004 and 2003 assume the disposition took place on January 1, 2003 and are as follows:

(e) Represents the reduction of revenue and expenses as a result of the disposition of Emdeon Practice Services. These amounts do not consider any allocation of corporate overhead to the companies that were divested.

(f) Represents an adjustment to add back inter-company transactions between Emdeon Practice Services and other Emdeon businesses, which were previously eliminated in consolidation. The inter-company revenue is primarily comprised of (i) print-and-mail services and electronic data interchange (“EDI”) services provided by Emdeon Business Services to the Emdeon Practice Services customer base which was $23.5 million for the six months ended June 30, 2006 and $44.6 million, $43.2 million and $36.8 million for the years ended December 31, 2005, 2004 and 2003, respectively, and (ii) rebate activity, related to the submission of EDI transactions, which was reflected as revenue of Emdeon Practice Services and expense of Emdeon Business Services in the amount of $4.3 million for the six months ended June 30, 2006 and $9.1 million, $10.7 million and $8.5 million for the years ended December 31, 2005, 2004 and 2003, respectively. Rebate revenue is included in the Discontinued Operations column as it will not be included in revenue of the continuing operations.

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