-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Sq5Ym1yPNlk3F4NFtt74CjKz7/W5bQeLLU3dhXMx/p0+IEp8LFLM4ojrOCV/8KDA rfvpMd6Bje9DntBXx6QvwQ== 0000804753-96-000035.txt : 19961113 0000804753-96-000035.hdr.sgml : 19961113 ACCESSION NUMBER: 0000804753-96-000035 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960928 FILED AS OF DATE: 19961112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CERNER CORP /MO/ CENTRAL INDEX KEY: 0000804753 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 431196944 STATE OF INCORPORATION: DE FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15386 FILM NUMBER: 96659421 BUSINESS ADDRESS: STREET 1: 2800 ROCKCREEK PKWY-STE 601 CITY: KANSAS CITY STATE: MO ZIP: 64117 BUSINESS PHONE: 8162211024 MAIL ADDRESS: STREET 1: 2800 ROCKCREEK PKWY STREET 2: DROP 1624 CITY: KANSAS CITY STATE: MO ZIP: 64117 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 28, 1996 ------------------------- OR ( ) 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 0-15386 --------------------- CERNER CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 43-1196944 ------------------------------- --------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 2800 Rockcreek Parkway Kansas City, Missouri 64117 (816) 221-1024 -------------------------------------------------------------- (Address of Principal Executive Offices, including zip code; registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) with the Commission, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------- There were 32,868,197 shares of Common Stock, $.01 par value, outstanding at September 28, 1996. CERNER CORPORATION AND SUBSIDIARIES ----------------------------------- I N D E X --------- Part I. Financial Information: Item 1. Financial Statements: Consolidated Balance Sheets as of September 28, 1996 and December 30, 1995 (unaudited) Consolidated Statements of Earnings for the three months and nine months ended September 28, 1996 and September 30, 1995 (unaudited) Consolidated Statements of Cash Flows for the nine months ended September 28, 1996 and September 30, 1995 (unaudited) Notes to Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Part II. Other Information: Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K Part I. Financial Information Item 1. Financial Statements CERNER CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 28, December 30, 1996 1995 ------------- ------------ (In thousands) Assets Current Assets: Cash and cash equivalents $ 10,030 $ 8,640 Short-term investments 100,124 103,478 Receivables 93,113 98,154 Inventory 3,170 2,246 Prepaid expenses and other 2,916 4,393 --------- --------- Total current assets 209,353 216,911 Property and equipment, net 60,247 53,693 Software development costs, net 27,907 22,885 Intangible assets, net 4,090 4,414 Noncurrent receivables 4,194 4,097 Other assets 3,126 1,945 --------- -------- $ 308,917 $ 303,945 ========= ========= Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $ 11,847 $ 14,932 Current installments of long-term debt 138 130 Advanced billings 5,156 6,162 Accrued income taxes 14,575 13,946 Accrued payroll and tax withholdings 6,381 5,112 Other accrued expenses 2,022 2,565 --------- --------- Total Current Liabilities 40,119 42,847 --------- --------- Long-term debt, net 30,000 30,104 Deferred income taxes 9,899 9,620 Stockholders' Equity: Common stock, $.01 par value, 150,000,000 shares authorized, 33,381,215 shares issued in 1996 and 33,001,973 issued in 1995 334 330 Additional paid-in capital 144,617 143,876 Retained earnings 89,560 82,874 Treasury stock, at cost (513,018 shares in 1996 and 1995) (5,693) (5,693) Foreign currency translation adjustment 81 (13) --------- --------- Total stockholders' equity 228,899 221,374 --------- --------- $ 308,917 $ 303,945 ========= ========= See notes to consolidated financial statements.
CERNER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Three Months Ended Nine Months Ended September 28, September 30, September 28, September 30, ---------------------------- --------------------------- 1996 1995 1996 1995 ----------- ----------- ----------- ------------- (In thousands, except per share data) Revenues: System sales $ 26,420 $ 27,243 $ 93,427 $ 92,565 Support and maintenance 14,372 12,747 42,093 36,059 Other 2,609 1,734 7,171 5,259 -------- -------- -------- -------- Total revenues 43,401 41,724 142,691 133,883 -------- -------- -------- -------- Cost and expenses: Cost of revenues 13,782 11,724 44,945 38,011 Sales and client service 15,811 12,657 48,464 36,648 Software development 9,235 7,429 26,478 22,482 General and administrative 4,194 4,390 13,905 12,171 -------- -------- -------- -------- Total costs and expenses 43,022 36,200 133,792 109,312 ======== ======== ======== ======== Operating earnings 379 5,524 8,899 24,571 Interest income (expense), net 535 251 1,798 (710) -------- -------- -------- -------- Earnings before income taxes 914 5,775 10,697 23,861 Income Taxes 144 2,284 4,016 9,646 -------- -------- -------- -------- Net earnings $ 770 $ 3,491 $ 6,681 $ 14,215 ======== ======== ======== ======== Earnings per share $ 0.02 $ 0.11 $ 0.20 $ 0.46 ======== ======== ======== ======== Weighted average shares outstanding 33,483 32,226 33,644 30,677 -------- -------- -------- -------- See notes to consolidated financial statements.
CERNER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 28, September 30, ------------- ------------- 1996 1995 ------------- ------------ (In thousands) Cash flows from operating activities: Net earnings $ 6,681 $ 14,215 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 11,863 9,474 Issuance of stock as compensation -- 5 Provision for deferred income taxes 908 3,346 Loss on disposal of capital equipment 43 10 Provision for uncollectable accounts 20 -- Changes in assets and liabilities: Receivables 4,923 (13,046) Inventory (923) 170 Prepaid expenses and other (158) (1,636) Accounts payable (3,086) (1,462) Accrued income taxes -- 2,000 Other accrued liabilities (278) 600 --------- --------- Total adjustments 13,312 (539) --------- --------- Net cash provided by operating activities 19,993 13,676 --------- --------- Cash flows from investing activities: Purchase of capital equipment (12,790) (7,847) Purchase of land, building and improvements (378) (5,840) Capitalized software development costs (9,532) (6,899) --------- --------- Net cash used in investing activities (22,700) (20,586) --------- --------- Cash flows from financing activities: Proceeds from issuance of long-term debt 8 6,060 Repayment of long-term debt (104) (6,190) Proceed from public offering, net of expenses -- 108,727 Proceeds from exercise of options 744 1,094 --------- --------- Net cash provided by financing activities 648 109,691 --------- --------- Foreign currency translation adjustment 95 14 --------- --------- Net increase (decrease) in cash, cash equivalents, and short-term investments (1,964) 102,795 Cash, cash equivalents, and short-term investments at beginning of period 112,118 15,305 --------- --------- Cash, cash equivalents, and short-term investments at end of period $ 110,154 $ 118,100 ========= =========
See notes to consolidated financial statements. CERNER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Interim Statement Presentation The consolidated financial statements included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position at September 28, 1996 and December 30, 1995 and the results of operations and cash flows for the periods presented. The results of the three-month and nine-month periods are not necessarily indicative of the operating results for the entire year. (2) Earnings Per Share Net earnings per share for the three months and nine months ended September 28, 1996 and September 30, 1995 is based on the weighted average number of common shares and common share equivalents outstanding during those periods. Common share equivalents consist of shares issuable upon exercise of stock options using the treasury stock method. (3) Stock Dividend On July 17, 1995, the Company's Board of Directors declared a two-for-one stock split in the form of a one hundred percent (100%) stock dividend payable on August 4, 1995, to stockholders of record July 24, 1995. All share and per share data have been restated for all periods presented herein to reflect the stock split. Item 2. Management's Discussion and Analysis of Financial ------------------------------------------------------- Condition and Results of Operations ----------------------------------- Results of Operations - --------------------- Three Months Ended September 28, 1996 Compared to Three Months Ended September 30, 1995 The Company's revenues increased 4% from $41,724,000 for the three-month period ended September 30, 1995 to $43,401,000 for the three-month period ended September 28, 1996. Net earnings decreased 78% from $3,491,000 in the 1995 period to $770,000 for the 1996 period. The earnings decrease resulted primarily from an increase in spending from the 1995 period to the 1996 period. In the 1996 period, revenues increased due to a increase in support of installed systems and other revenues. System sales revenues decreased 3% from $27,243,000 for the three-month period ended September 30, 1995 to $26,420,000 for the corresponding period in 1996. HNA contracts comprised 42% of system revenue in the third quarter of 1996 compared to 36% for the same period in 1995. An HNA contract is an initial contract that includes the Company's CareNet Order Management product and at least two other clinical systems, or a contract that brings an existing client to this level. The revenue from additional hardware and software products to the installed client base decreased 15% in the third quarter of 1996 over the same period in 1995. At September 28, 1996, the Company had $95,214,000 in contract backlog and $102,266,000 in support and maintenance backlog, compared to $67,096,000 in contract backlog and $88,065,000 in support backlog at September 30, 1995. Support and maintenance revenues increased 13% from $12,747,000 during the third quarter of 1995 to $14,372,000 during the same period in 1996. This increase was due primarily to the increase in the Company's installed and converted client base. Other revenues increased 50% from $1,734,000 in the third quarter of 1995 to $2,609,000 in the same period of 1996. This increase was due primarily to an increase in services performed above the contracted requirements for existing clients. The cost of revenues includes the cost of computer hardware and sublicensed software purchased from computer and software manufacturers for delivery to clients. It also includes the cost of hardware maintenance and sublicensed software support subcontracted to manufacturers. The cost of revenue was 32% of total revenues in the third quarter of 1996 and 28% of total revenues in the comparable period in 1995. Such costs, as a percent of revenues, typically have varied as the mix of revenue (software, hardware, maintenance, and support) components carrying different margin rates changes from period to period. The decrease in margin is due to equipment being a larger component of system sales in the third quarter of 1996 compared to the third quarter of 1995. Sales and client service expenses include salaries of client service personnel, communications expenses and travel expenses. Also included are sales and marketing salaries, trade show costs and advertising costs. These expenses as a percent of total revenues were 36% and 30% in the third quarter of 1996 and 1995, respectively. The increase in total sales and client service expenses from $12,657,000 in 1995 to $15,811,000 in 1996 was attributable to personnel and operating expenses associated with the larger regional sales and service organization and certain marketing initiatives. Software development expenses include salaries, documentation and other direct expenses incurred in product development, as well as amortization of software development costs previously capitalized. Total expenditures for software development, including both capitalized and noncapitalized portions, for the third quarter of 1996 and 1995 were $10,936,000 and $8,455,000, respectively. These amounts exclude amortization of previously capitalized expenditures. Capitalized software costs were $3,246,000 and $2,279,000 for the third quarter of 1996 and 1995, respectively. The increase in aggregate expenditures for software development in 1996 was due to Health Network Architecture Version 500 (HNA 500) and development of community care products. General and administrative expenses include salaries for corporate, financial, and administrative staffs, utilities, communications expenses, and professional fees. These expenses as a percent of total revenues were 10% and 11% in the third quarter of 1996 and 1995, respectively. Total general and administrative expenses for the third quarter of 1996 and 1995 were $4,194,000 and $4,390,000, respectively. Net interest income increased 113% in the third quarter of 1996 than in the same period in 1995. This increase in interest income was due primarily to interest income from the investment of the proceeds from the sale of 3,716,000 new shares of common stock from the August 1995 public offering. The Company's effective tax rates were 16% and 40% for the third quarter of 1996 and 1995, respectively. This change is a result of a decrease in the Company's tax valuation allowance related to foreign net operating losses. The Company's quarterly revenues and net earnings have historically been variable and cyclical. The variability is attributable primarily to the number and size of project milestone events in any fiscal quarter. The Company expects fluctuations in quarterly results to continue. Nine Months Ended September 28, 1996 Compared to Nine Months Ended September 30, 1995. The Company's revenues increased 7% from $133,883,000 for the nine-month period ended September 30, 1995 to $142,691,000 for the nine-month period ended September 28, 1996. Net earnings decreased 53% from $14,215,000 in the 1995 period to $6,681,000 for the 1996 period. The earnings decrease resulted primarily from an increase in spending from the 1995 period to the 1996 period. In the 1996 period, revenues increased due to an increase in system sales and support of installed systems. System sales revenues increased from $92,565,000 for the nine-month period ended September 30, 1995 to $93,427,000 for the corresponding period in 1996. This increase in system revenues resulted principally from an increase in the sale of additional hardware and software products to the installed client base. Sale of additional hardware and software products to the installed client base increased 13% in the first nine months of 1996 over the same period in 1995. At September 28, 1996, the Company had $95,214,000 in contract backlog and $102,266,000 in support and maintenance backlog, compared to $67,096,000 in contract backlog and $88,065,000 in support backlog at September 30, 1995. Support and maintenance revenues increased 17% from $36,059,000 during the first nine months of 1995 to $42,093,000 during the same period in 1996. This increase was due primarily to the increase in the Company's installed and converted client base. Other revenues increased 36% from $5,259,000 in the first nine months of 1995 to $7,171,000 in the same period of 1996. This increase was due primarily to an increase in services performed above the contracted requirements for existing clients. The cost of revenues includes the cost of computer hardware and sublicensed software purchased from computer and software manufacturers for delivery to clients. It also includes the cost of hardware maintenance and sublicensed software support subcontracted to manufacturers. The cost of revenue was 31% of total revenues in the first nine months of 1996 and 28% of total revenues in the comparable period in 1995. Such costs, as a percent of revenues, typically have varied as the mix of revenue (software, hardware, maintenance, and support) components carrying different margin rates changes from period to period. The decrease in margin is due to equipment being a larger component of system sales in the first nine months of 1996 compared to the first nine months of 1995. Sales and client service expenses include salaries of client service personnel, communications expenses and travel expenses. Also included are sales and marketing salaries, trade show costs and advertising costs. These expenses as a percent of total revenues were 34% and 27% in the first nine months of 1996 and 1995, respectively. The increase in total sales and client service expenses from $36,648,000 in 1995 to $48,464,000 in 1996 was attributable to personnel and operating expenses associated with the larger regional sales and service organization and certain marketing initiatives. Software development expenses include salaries, documentation and other direct expenses incurred in product development, as well as amortization of software development costs previously capitalized. Total expenditures for software development, including both capitalized and noncapitalized portions, for the first nine months of 1996 and 1995 were $31,526,000 and $25,172,000, respectively. These amounts exclude amortization of previously capitalized expenditures. Capitalized software costs were $9,532,000 and $6,899,000 for the first nine months of 1996 and 1995, respectively. The increase in aggregate expenditures for software development in 1996 was due to Health Network Architecture Version 500 (HNA 500) and development of community care products. General and administrative expenses include salaries for corporate, financial, and administrative staffs, utilities, communications expenses, and professional fees. These expenses as a percent of total revenues were 10% and 9% in the first nine months of 1996 and 1995, respectively. Total general and administrative expenses for the first nine months of 1996 and 1995 were $13,905,000 and $12,171,000, respectively. Net interest income was 353% higher in the first nine months of 1996 than in the same period in 1995. This increase was due primarily to interest income from investment of the proceeds from the sale of 3,716,000 new shares of common stock from the August 1995 public offering. The Company's effective tax rates were 37.5% and 40% for the first nine months of 1996 and 1995, respectively. This change is a result of a decrease in the Company's tax valuation allowance related to foreign net operating losses. Capital Resources and Liquidity - ------------------------------- The Company's liquidity position remains strong with total cash and cash equivalents of $10,030,000 and short term investments of $100,124,000 at September 28, 1996 and working capital of $169,234,000. The Company generated net cash from operations of $19,993,000 and $13,676,000 during the nine month periods ended September 28, 1996 and September 30, 1995, respectively. During August 1995, the Company sold 3,716,000 shares of common stock. The proceeds of this sale, net of underwriting discounts and commissions and expenses, were $108,287,000. Prior to the public offering the Company financed it operations, capital expenditures (other that the purchase of the Kansas City headquarters complex and its anticipated capital improvements), and working capital from the internally generated funds and bank borrowings. The Company has $18,000,000 of long- term, revolving credit from banks, all of which was available as of September 28, 1996. Revenues provided under the Company's support and maintenance agreements represent recurring cash flows. The Company's revenue backlog at September 28, 1996 included $102,266,000 representing twelve months of equipment maintenance and software support associated with signed contracts. The Company believes its present cash, cash equivalents and short-term investment position, together with cash generated from operations and available under its current bank borrowing facility, will be sufficient to meet anticipated cash requirements during the next twelve months. Part II. Other Information Item 5. Other Information. ------------------ Item 6. Exhibits and Reports on Form 8-K. --------------------------------- (a) Exhibits Exhibit 11 Computation of Earnings Per Share Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the quarter ended September 28, 1996. SIGNATURES 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. CERNER CORPORATION ------------------ Registrant November 8, 1996 By: /s/ Marc G. Naughton - ---------------- --------------------- Date Marc G. Naughton Chief Financial Officer EX-11 2 EXHIBIT 11 Exhibit 11 CERNER CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE
Three Months Ended Nine Months Ended September 28, September 30, September 28, September 30, 1996 1995 1996 1995 ------------ ---------- ------------ ------------ Net earnings: $ 770,000 $ 3,491,000 $ 6,681,000 $ 14,215,000 Weighted average number of common and common stock equivalent shares: Weighted average number of outstanding common shares 32,845,572 30,555,747 32,679,356 29,007,578 Dilutive effect (excess of number of shares issuable over number of shares assumed to be repurchased with the proceeds of exercised options based on the average market price during the period) 637,159 1,670,004 964,344 1,669,734 ----------- ----------- ------------ ------------ 33,482,731 32,225,751 33,643,700 30,677,312 Earnings per common and common stock equivalent shares: $ .02 $ .11 $ .20 $ .46 ----------- ----------- ------------ ------------ Weighted average number of common and common stock equivalent shares, assuming full dilution: Additional dilutive effect (reduction in number of shares assumed to be repurchased with the proceeds of exercised stock options and converted warrants based on the end of the period market price of the stock, if higher than the average price) 52,615 41,760 -- 109,617 ---------- ----------- ----------- ------------ 33,535,346 32,267,511 33,643,700 30,786,929 Earnings per common and common stock equivalent shares assuming full dilution: $ .02 $ .11 $ .20 $ .46 ----------- ----------- ----------- ------------
EX-27 3
5 9-MOS DEC-28-1996 SEP-28-1996 10,030,000 100,124,000 94,234,000 1,121,000 3,170,000 209,353,000 88,077,000 27,830,000 308,917,000 45,119,000 0 334,000 0 0 0 308,917,000 142,691,000 142,691,000 44,945,000 88,847,000 0 0 (1,798,000) 10,697,000 4,016,000 6,681,000 0 0 0 6,681,000 .20 .20
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