-----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, Bn1Oewi4iqgR5qmSXAFdon1aRxFemIYubylDD7qqAutQQpFJ+JAGYaeKdx1zbHRp td0eR5watLrmDW4oKzrZdQ== /in/edgar/work/0000804753-00-000132/0000804753-00-000132.txt : 20001114 0000804753-00-000132.hdr.sgml : 20001114 ACCESSION NUMBER: 0000804753-00-000132 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CERNER CORP /MO/ CENTRAL INDEX KEY: 0000804753 STANDARD INDUSTRIAL CLASSIFICATION: [7373 ] IRS NUMBER: 431196944 STATE OF INCORPORATION: DE FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15386 FILM NUMBER: 759656 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 0001.txt 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 30, 2000 -------------------- 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) 201-1024 ---------------------------------------------------------------- (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 34,556,532 shares of Common Stock, $.01 par value, outstanding at September 30, 2000. CERNER CORPORATION AND SUBSIDIARIES ----------------------------------- I N D E X --------- Part I. Financial Information: Item 1. Financial Statements: Consolidated Balance Sheets as of September 30, 2000 (unaudited) and January 1, 2000 1 Consolidated Statements of Operations for the three months and nine months ended September 30, 2000 and October 2, 1999 (unaudited) 2 Consolidated Statements of Cash Flows for the nine months ended September 30, 2000 and October 2, 1999 (unaudited) 3 Notes to Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosure about Market Risk 16 Part II. Other Information: Item 6. Exhibits and Reports on Form 8-K 16 Part I. Financial Information Item 1. Financial Statements CERNER CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 30, January 1, (Dollars in thousands) 2000 2000 ------------- ---------- Assets Current Assets: Cash and cash equivalents $ 78,199 $ 75,677 Receivables 161,431 161,174 Inventory 876 1,262 Prepaid expenses and other 5,718 4,316 --------- --------- Total current assets 246,224 242,429 Property and equipment, net 78,629 77,938 Software development costs, net 79,481 71,007 Intangible assets, net 18,285 7,511 Investments, net 291,216 252,123 Other assets 10,316 9,883 --------- --------- $ 724,151 $ 660,891 ========= ========= Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $ 21,815 $ 20,261 Current installments of long-term debt 83 - Deferred revenue 31,279 21,245 Income taxes 13,056 10,987 Accrued payroll and tax withholdings 22,751 17,241 Other accrued expenses 2,842 2,642 --------- --------- Total current liabilities 91,826 72,376 --------- --------- Long-term debt, net 100,022 100,000 Deferred income taxes 101,388 93,578 Deferred revenue 14,063 16,000 Stockholders' Equity: Common stock, $.01 par value, 150,000,000 shares authorized, 35,758,157 shares issued in 2000 and 34,932,703 shares issued in 1999 358 349 Additional paid-in capital 186,544 166,735 Retained earnings 248,766 125,651 Treasury stock, at cost (1,201,625 shares in 2000 and 1,201,518 shares in 1999) (20,799) (20,796) Accumulated other comprehensive income: Foreign currency translation adjustment (840) 23 Unrealized gain on available-for-sale equity securities (net of deferred taxes of $1,588 in 2000 and $59,806 in 1999) 2,823 106,975 --------- --------- Total stockholders' equity 416,852 378,937 --------- --------- $724,151 $660,891 ========= =========
See notes to consolidated financial statements. 1 CERNER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended Nine Months Ended ---------------------------------------------------- September 30, October 2, September 30, October 2, ---------------------------------------------------- 2000 1999 2000 1999 --------- --------- --------- --------- (In thousands, except per share data) Revenues: System sales $ 68,700 $ 52,004 $ 181,610 $ 167,022 Support and maintenance 28,834 23,640 83,624 68,924 Other 6,791 5,285 19,700 14,508 --------- --------- --------- --------- Total revenues 104,325 80,929 284,934 250,454 --------- --------- --------- --------- Costs and expenses: Cost of revenues 23,903 17,900 61,764 63,399 Sales and client service 42,975 35,460 122,049 103,716 Software development 19,064 18,210 56,650 54,256 General and administrative 7,312 7,191 20,898 20,638 Write-off of acquired in- process research and development 3,200 - 3,200 - Write-down of intangible assets - - 6,687 - --------- --------- --------- --------- Total costs and expenses 96,454 78,761 271,248 242,009 --------- --------- --------- --------- Operating earnings 7,871 2,168 13,686 8,445 Interest expense, net (937) (1,022) (2,722) (2,328) Realized gain on exchange of investments 188,654 - 188,654 - --------- --------- --------- --------- Earnings before income taxes and extraordinary item 195,588 1,146 199,618 6,117 Income taxes (72,252) (466) (76,503) (2,359) --------- --------- --------- --------- Earnings before extraordinary item 123,336 680 123,115 3,758 --------- --------- --------- --------- Extraordinary loss on early extinguishment of debt, net of taxes of $865 - - - (1,395) --------- --------- --------- --------- Net earnings $ 123,336 $ 680 $ 123,115 $ 2,363 ========= ========= ========= ========= Basic earnings per share: Basic earnings per share before extraordinary item $ 3.61 $ 0.02 $ 3.63 $ 0.11 ========= ========= ========= ========= Basic earnings per share $ 3.61 $ 0.02 $ 3.63 $ 0.07 ========= ========= ========= ========= Basic weighted average shares outstanding 34,188 33,622 33,932 33,599 --------- --------- --------- --------- Diluted earnings per share: Diluted earnings per share before extraordinary item $ 3.45 $ 0.02 $ 3.52 $ 0.11 ========= ========= ========= ========= Diluted earnings per share $ 3.45 $ 0.02 $ 3.52 $ 0.07 ========= ========= ========= ========= Diluted weighted average shares outstanding 35,757 33,862 35,025 33,930 --------- --------- --------- ---------
See notes to consolidated financial statements. 2 CERNER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended ----------------- September 30, 2000 October 2, 1999 --------------------------------------- (In thousands) Cash flows from operating activities: Net earnings $ 123,115 $ 2,363 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 27,517 23,170 Extraordinary item, net of tax - 1,395 Realized gain on exchange of investments (188,654) - Write-off of acquired in-process research and development 3,200 - Write-down of intangible assets 6,687 - Revenue from non-monetary transactions (6,773) (12,200) Issuance of stock as compensation 31 40 Non-employee stock option compensation expense 173 178 Equity in losses of investee companies 641 1,378 Provision for deferred income taxes 70,525 1,409 Tax benefit from disqualifying dispositions of stock options 712 11 Loss on disposal of capital equipment 33 474 Gain on sale of investments (11) - Changes in assets and liabilities (net of businesses acquired): Receivables, net 4,789 2,935 Inventory 498 137 Prepaid expenses and other (5,027) (1,016) Accounts payable 21 (4,048) Accrued income taxes 4,458 (743) Deferred revenue 5,448 (4,899) Other accrued liabilities 5,039 942 --------- --------- Total adjustments (70,693) 9,163 --------- --------- Net cash provided by operating activities 52,422 11,526 --------- --------- Cash flows from investing activities: Purchase of capital equipment (10,598) (10,815) Acquisition of businesses (12,950) - Investment in investee companies (7,764) (12,801) Advances to investee company 1,000 (750) Proceeds from sale of investment 511 - Executive stock purchase program 186 (3,343) Capitalized software development costs (22,251) (22,437) --------- --------- Net cash used in investing activities (51,866) (50,146) --------- --------- Cash flows from financing activities: Proceeds from issuance of long-term debt - 99,568 Repayment of long-term debt (919) (30,030) Prepayment penalty on early extinguishment of debt - (2,137) Proceeds from exercise of options 3,748 244 --------- --------- Net cash provided by financing activities 2,829 67,645 --------- --------- Foreign currency translation adjustment (863) 286 --------- --------- Net increase in cash and cash equivalents 2,522 29,311 Cash and cash equivalents at beginning of period 75,677 42,658 --------- --------- Cash and cash equivalents at end of period $ 78,199 $ 71,969 ========= =========
See notes to consolidated financial statements. 3 CERNER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Interim Statement Presentation & Accounting Policies 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 30, 2000 and January 1, 2000 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. The Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" at the beginning of 1998. This statement establishes requirements for reporting and display of comprehensive income and its components. For the nine months ended September 30, 2000 and October 2, 1999, total Comprehensive Income, which includes foreign currency translation adjustments and unrealized gain (loss) on available-for-sale equity securities adjustments, amounted to $18,100,000 and $58,091,000 respectively. (2) Earnings Per Share Basic earnings per share (EPS) excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. A reconciliation of the numerators and denominators of the basic and diluted per-share computations is as follows: Three months ended Three months ended September 30, 2000 October 2, 1999 ------------------------------------------------------------------------ Earnings Shares Per-Share Earnings Shares Per-Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ---------------------------------------------------------------------- (In thousands, except per share data) Basic earnings per share: Income available to common stockholders $ 123,336 34,188 $ 3.61 $ 680 33,622 $ 0.02 ========= ========= Effect of dilutive securities (stock options) - 1,569 - 240 Diluted earnings per share: Income available to common stockholders including assumed conversions --------------------------------------------------------------------- $ 123,336 35,757 $ 3.45 $ 680 33,862 $ 0.02 =====================================================================
Options to purchase 189,000 and 3,395,000 shares of common stock at per share prices ranging from $36.31 to $84.07 and $16.75 to $31.00 were outstanding at the three months ended September 30, 2000 4 and October 2, 1999, but were not included in the computation of diluted earnings per share because the options' exercise price was greater than the average market price of the common shares. Nine months ended Nine months ended September 30, 2000 October 2, 1999 ----------------------------------------------------------------------- Earnings Shares Per-Share Earnings Shares Per-Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ----------------------------------------------------------------------- (In thousands, except per share data) Earnings per share before extraordinary item - -------------------------------------------------- Basic earnings per share: Income available to common stockholders $ 123,115 33,932 $ 3.63 $ 3,758 33,599 $ 0.11 ========= ========= Effect of dilutive securities (stock options) - 1,093 - 331 Diluted earnings per share: Income available to common stockholders including assumed conversions ------------------------------------------------------------------------ $ 123,115 35,025 $ 3.52 $ 3,758 33,930 $ 0.11 ========================================================================
Nine months ended Nine months ended September 30, 2000 October 2, 1999 ------------------------------------------------------------------------- Earnings Shares Per-Share Earnings Shares Per-Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ------------------------------------------------------------------------- Net earnings per share - ------------------------------- Basic earnings per share: Income available to common stockholders $ 123,115 33,932 $ 3.63 $ 2,363 33,599 $ 0.07 ========= ========= Effect of dilutive securities (stock options) - 1,093 - 331 Diluted earnings per share: Income available to common stockholders including assumed conversions ------------------------------------------------------------------------ $ 123,115 35,025 $ 3.52 $ 2,363 33,930 $ 0.07 ========================================================================
Options to purchase 715,000 and 3,174,000 shares of common stock at per share prices ranging from $29.63 to $84.07, and $18.06 to $31.00 were outstanding at the nine months ended September 30, 2000 and October 2, 1999, but were not included in the computation of diluted earnings per share because the options' exercise price was greater than the average market price of the common shares. (3) Business Acquisitions On April 2, 2000 the Company purchased the remaining 50% of the outstanding common stock of Health Network Ventures, Inc. (HNV) for $8.3 million. HNV develops software solutions that enable transaction processing between providers, and other health- related entities. Subsequent to the acquisition, the Company determined that it would shut down the portion of the business focused on individual physician practice connectivity and transaction processing given that it is the Company's strategy to use CareInsite to process transactions. As a result of this decision, the Company recorded a non-recurring charge in the second quarter of 2000 in the amount of $6,687,000 or $.20 per share on a diluted basis related to a write-down of intangible assets. The Company also purchased the assets of Mitch Cooper & Associates (MC&A) for $2 million on April 2, 2000. MC&A is a supply chain re-engineering consulting practice. The allocation of the purchase price to 5 the estimated fair values of the identified tangible and intangible assets acquired and liabilities assumed, resulted in goodwill of $1,957,000. The goodwill is being amortized straight-line over five years. On August 22, 2000, the Company purchased CITATION Computer Systems, Inc, a market leader in laboratory systems for small to mid-sized hospitals. The purchase price was financed with approximately $2 million in cash and $14 million in stock. $3.2 million of the purchase price was allocated to in-process research and development that had not reached technological feasibility and is reflected as a one-time charge to earnings in the third quarter of 2000. The allocation of the purchase price to the estimated fair values of the identified tangible and intangible assets acquired and liabilities assumed, resulted in goodwill of $8,310,000. The goodwill is being amortized straight- line over seven years. The acquisitions were accounted for using the purchase method of accounting with the operating results of HNV, MC&A and CITATION included in the Company's consolidated statement of earnings since the date of acquisition. Management has determined that the proforma impact on earnings is not material. On October 23, 2000, the Company entered into an agreement to acquire ADAC Laboratories' Health Care Information Systems (HCIS) business, excluding its Cardiology Systems Group, for approximately $6 million. The companies expect to complete the transaction in November 2000, pending customary closing conditions and regulatory approval. (4) Receivables Receivables consist of accounts receivable and contracts receivable. Accounts receivable represent recorded revenues that have been billed. Contracts receivable represent recorded revenues that are billable by the Company at future dates under the terms of a contract with a client. Billings and other consideration received on contracts in excess of related revenues recognized under the percentage-of -completion method are recorded as deferred revenue. A summary of receivables is as follows: (In thousands) September 30, January 1, 2000 2000 -------------------------------- Accounts receivable $ 73,943 85,814 Contracts receivable 87,488 75,360 ----------------------------------------------------------- Total receivables $ 161,431 161,174 ===================================
(5) Investments In 1998 and 1999 the Company acquired a 17.5% interest (13,149,259 shares of common stock) in CareInsite with a cost basis of $81,804,000. 12,437,500 of these shares were received in 1998 as consideration for the sale of license software, and an additional 711,759 shares were purchased in 1999. The value assigned to the shares acquired in 1998 was $70,000,000 and was based on a methodology which utilized both a comparable company and the expected underlying discounted future cash flows. The Company was also granted, by CareInsite, 1,008,445 common stock warrants with an exercise price of $4.00 per share ("THINC Warrants"). The THINC Warrants were exercisable only in the event that The Health Information Network Connections, LLC ("THINC") exercised warrants granted to them by CareInsite at $4.00 per share. THINC was allowed to exercise their warrants 180 days after the initial public offering of CareInsite. On January 29, 2000 CareInsite completed an acquisition of THINC. As part of that agreement, 806,756 of the Company's 1,008,445 THINC Warrants became immediately exercisable, with the remaining amount forfeited. On February 13, 2000 CareInsite entered into an agreement to merge with Healtheon/WebMD Corporation ("Merger Agreement"). As part of the Merger Agreement, the Company received 1.3 shares of Healtheon/WebMD Corporation (Web MD) in exchange for each common share of CareInsite held by the Company. The warrants were also converted at the same exchange ratio. The merger of CareInsite 6 and WebMD ("Merger") closed on September 12, 2000. Accordingly, the Company recorded a non-recurring investment gain of $120,362,000, net of tax, as a result of the exchange. At September 30, 2000, the Company owned 17,094,037 shares of common stock of WebMD, which have a cost basis of $256,411,000 and a carrying value of $260,684,000, as these shares are accounted for as available-for-sale. The stock of WebMD held by the Company is registered but is subject to certain lock-up provisions. At September 30, 2000 the Company also holds 1,048,783 warrants of WebMD with an exercise price of $3.08 and a cost basis and carrying value of $13,685,000. The warrants are carried at cost, as they do not have a fair value that is currently available on a securities exchange. If the Company realizes certain performance metrics related to specified levels of physician usage, WebMD will issue to the Company 3,254,063 shares of common stock at a price of $0.01 per share ("Performance Shares"). The Performance Shares were adjusted at a rate of 1.3 shares of WebMD for each share of CareInsite. The measurement date is February 15, 2001. No amounts have been recognized in the consolidated financial statements for the Performance Shares due to the uncertainty of the future events. All physician users of systems of WebMD Corporation or its affiliates shall be included for purposes of determining the specified levels of physician usage. 7 Item 2. Management's Discussion and Analysis of Financial ------------------------------------------------------- Condition and Results of Operations ----------------------------------- Results of Operations - --------------------- Three Months Ended September 30, 2000 Compared to Three Months Ended October 2, 1999 The Company's revenues increased 29% to $104,325,000 for the three-month period ended September 30, 2000 from $80,929,000 for the three-month period ended October 2, 1999. Net earnings, before non-recurring items were $6,174,000 for the three-month period ended September 30, 2000, compared to $680,000 for the three-month period ended October 2, 1999. Revenues from non- monetary transactions were $1,645,000 for the three-month period ended September 30, 2000 and $1,000,000 for the three-month period ended October 2, 1999. The increase in net earnings, before non-recurring items, is due to an increase in new contract bookings in the three-month period ended September 30, 2000 compared to the three-month period ended October 2, 1999. The 1999 earnings were adversely affected by what management believes were delays in purchasing decisions related to Year 2000 and the Balanced Budget Act of 1997. After the gain on exchange of investments and the write-off of acquired in-process research and development, the Company's net earnings were $123,336,000 for the three-month period ended September 30, 2000. System sales revenues increased 32% to $68,700,000 for the three- month period ended September 30, 2000 from $52,004,000 for the corresponding period in 1999. This increase in system sales resulted primarily from an increase in new business signed in the three-month period ended September 30, 2000 compared to the three- month period ended October 2, 1999. Support and maintenance revenues increased 22% to $28,834,000 during the third quarter of 2000 from $23,640,000 during the same period in 1999. This increase was due primarily to the increase in the Company's installed and converted client base. At September 30, 2000, the Company had $413,001,000 in contract backlog and $179,078,000 in support and maintenance backlog, compared to $326,581,000 in contract backlog and $159,819,000 in support and maintenance backlog at October 2, 1999. Other revenues increased 28% to $6,791,000 in the third quarter of 2000 from $5,285,000 in the same period of 1999. This increase was due primarily to subscriptions to clients; this increase was $1,001,000. The cost of revenues includes the cost of third party consulting services, 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 23% of total revenues in the third quarter of 2000 compared to 22% in 1999. 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. Sales and client service expenses include salaries of client service personnel, communications expenses and unreimbursed travel expenses. Also included are sales and marketing salaries, trade show costs and advertising costs. These expenses as a percent of total revenues were 41% and 44% in the third quarter of 2000 and 1999, respectively. The increase in total sales and client service expenses to $42,975,000 in 2000 from $35,460,000 in 1999 was attributable to the cost of a larger field sales and services organization and marketing of new products. Software development expenses include salaries, documentation and other direct expenses incurred in product development, and amortization of software development costs. Total expenditures for software development, including both capitalized and noncapitalized portions, for the third quarter of 2000 and 1999 were $22,001,000 and $22,295,000, respectively. These amounts exclude amortization. Capitalized 8 software development costs were $7,545,000 and $7,470,000 for the third quarter of 2000 and 1999, respectively. The decrease in aggregate expenditures for software development in 2000 is due to a reduction in third party software development expenses. 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 7% and 9% in the third quarter of 2000 and 1999, respectively. Total general and administrative expenses for the third quarter of 2000 and 1999 were $7,312,000 and $7,191,000, respectively. Write-off of in-process research and development is a one-time expense resulting from the acquisition of CITATION. Net interest expense was $937,000 in the third quarter of 2000 compared to $1,022,000 in the third quarter of 1999. This decrease is due to an increase in invested cash, resulting from an increase in cash collections. The realized gain on exchange of investments is a non-recurring investment gain related to the exchange of CareInsite shares for Web MD shares. After adjusting for the non-recurring investment gain and the write-off of in-process research and development, the Company's effective tax rates were 39% and 41% for the third quarter of 2000 and 1999, respectively. The higher tax rate in the third quarter of 1999 was due to the impact of permanent differences on the lower net earnings for the quarter. Nine Months Ended September 30, 2000 Compared to Nine Months Ended October 2, 1999 The Company's revenues increased 14% to $284,934,000 for the nine- month period ended September 30, 2000 from $250,454,000 for the nine-month period ended October 2, 1999. Net earnings before extraordinary and non-recurring items were $12,640,000 for the nine-months ended September 30, 2000, compared to $3,758,000 for the nine-months ended October 2, 1999. The increase in net earnings, before extraordinary and non-recurring items, is due to an increase in new contract bookings in the nine-month period ended September 30, 2000 compared to the nine-month period ended October 2, 1999. The 1999 earnings were adversely affected by what management believes were delays in purchasing decisions related to Year 2000 and the Balanced Budget Act of 1997. Revenues from non-monetary transactions were $6,773,000 for the nine-month period ended September 30, 2000 and $12,200,000 for the nine-month period ended October 2, 1999. After non-recurring and extraordinary items, net earnings were $123,115,000 and $2,363,000 for the first nine-months of 2000 and 1999, respectively. System sales revenues increased 9% to $181,610,000 for the nine- month period ended September 30, 2000 from $167,022,000 for the corresponding period in 1999. Support and maintenance revenues increased 21% to $83,624,000 during the first nine months of 2000 from $68,924,000 during the same period in 1999. This increase was due primarily to the increase in the Company's installed and converted client base. At September 30, 2000, the Company had $413,001,000 in contract backlog and $179,078,000 in support and maintenance backlog, compared to $326,581,000 in contract backlog and $159,819,000 in support and maintenance backlog at October 2, 1999. Other revenues increased 36% to $19,700,000 in the first nine months of 2000 from $14,508,000 in the same period of 1999. This increase is due primarily to additional revenues derived from gains on investments received on previous license software arrangements and subscriptions to clients; these increases were $2,686,000 and $2,044,000, respectively. The cost of revenues includes the cost of third party consulting services, computer hardware and sublicensed software purchased from computer and software manufacturers for delivery to clients. It also 9 includes the cost of hardware maintenance and sublicensed software support subcontracted to manufacturers. The cost of revenue was 22% of total revenues in the first nine months of 2000 compared to 25% in 1999. 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. Sales and client service expenses include salaries of client service personnel, communications expenses and unreimbursed travel expenses. Also included are sales and marketing salaries, trade show costs and advertising costs. These expenses as a percent of total revenues were 43% and 41% in the first nine months of 2000 and 1999, respectively. The increase in total sales and client service expenses to $122,049,000 in 2000 from $103,716,000 in 1999 was attributable to the cost of a larger field sales and services organization and marketing of new products. Software development expenses include salaries, documentation and other direct expenses incurred in product development, and amortization of software development costs. Total expenditures for software development, including both capitalized and noncapitalized portions, for the first nine months of 2000 and 1999 were $65,124,000 and $66,040,000 respectively. These amounts exclude amortization. Capitalized software development costs were $22,251,000 and $22,437,000 for the first nine months of 2000 and 1999, respectively. The decrease in aggregate expenditures for software development in 2000 is due to a reduction in third party software development expenses. 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 7% and 8% in the first nine months of 2000 and 1999, respectively. Total general and administrative expenses for the first nine months of 2000 and 1999 were $20,898,000 and $20,638,000, respectively. Write-off of in-process research and development is a one-time expense resulting from the acquisition of CITATION. Write-down of intangible assets is a one-time expense resulting from the decision to shut down a portion of the HNV business, as more fully described in Note 3 to the Consolidated Financial Statements. Net interest expense was $2,722,000 in the first nine months of 2000 compared to $2,328,000 in the first nine months of 1999. This increase in expense is due to an increase in borrowings. On April 15, 1999, the Company completed a $100,000,000 private placement of debt pursuant to a Note Agreement dated April 1, 1999. The Series A Senior Notes, with a $60,000,000 principal amount at 7.14% are due on April 15, 2006 and the Series B Senior Notes, with a $40,000,000 principal amount at 7.66% are due April 15, 2009. The proceeds were used to retire the Company's existing $30,000,000 of debt, and the remaining funds are being used for proposed capital improvements and to strengthen the Company's cash position. In connection with the early extinguishment of debt, the Company incurred a $1,395,000, net of taxes, extraordinary loss for a prepayment penalty and write-off of deferred loan costs. The realized gain on exchange of investments is a non-recurring investment gain related to the exchange of CareInsite shares for Web MD shares. After adjusting for the non-deductible write-down of intangibles, the non-recurring investment gain and the write-off of in-process research and development, the Company's effective tax rate was 39% for the first nine months of both 2000 and 1999. Capital Resources and Liquidity - ------------------------------- The Company's liquidity position remains strong with total cash and cash equivalents of $78,199,000 at September 30, 2000 and working capital of $154,398,000. The Company generated net cash from operations of $52,422,000 and $11,526,000 during the nine- month periods ended September 30, 2000 and October 2, 1999, respectively. Cash flow from operations increased in the first nine-months of 2000, due to increased earnings and increased collection of receivables and improved payment terms. On April 10 15, 1999, the Company completed a $100,000,000 private placement of debt as previously discussed. The proceeds were used to retire the Company's existing $30,000,000 of debt, and the remaining funds are being used for capital improvements and to strengthen the Company's cash position. The Company has $18,000,000 of long-term, revolving credit from banks, all of which was available as of September 30, 2000. Cash used in investing activities consisted primarily of capitalized software development costs of $22,251,000 and $22,437,000 and purchase of capital equipment of $10,598,000 and $10,815,000 in the first nine months of 2000 and 1999, respectively. Also, included in investing activities in the first nine months of 2000 was $12,950,000 for the acquisition of three businesses, as previously discussed. Revenues provided under the Company's support and maintenance agreements represent recurring cash flows. Support and maintenance revenues increased 22% in the third quarter of 2000 over the third quarter of 1999, and the Company expects these revenues to continue to grow as the base of installed systems grows. The Company's liquidity is influenced by many factors, including the amount and timing of the Company's revenues, its cash collections from its clients as implementation of its products proceed and the amounts the Company invests in software development and capital expenditures. The Company believes that its present cash position, together with cash generated from operations, will be sufficient to meet anticipated cash requirements during 2000. The effects of inflation were minimal on the Company's business during the period discussed herein. Recent Accounting Pronouncements - -------------------------------- During the second quarter of 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities", (Statement 133). Statement 133 will be adopted by the Company in the first quarter of 2001. The Company believes the adoption of Statement 133 will not have a significant effect on its reported earnings per share. In December of 1999, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements, (SAB 101). The Company believes SAB 101 will not have a significant effect on its reported earnings per share. Factors that may Affect Future Results of Operations, Financial - --------------------------------------------------------------- Condition or Business - --------------------- Statements made in this report, other reports and proxy statements filed with the Securities and Exchange Commission, communications to stockholders, press releases and oral statements made by representatives of the Company that are not historical in nature, or that state the Company's or management's intentions, hopes, beliefs, expectations, or predictions of the future, are "forward-looking statements" within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended, and involve risks and uncertainties. The words "should," "will be," "intended," "continue," "believe," "may," "expect," "hope," "anticipate," "goal," "forecast" and similar expressions identify such forward-looking statements. It is important to note that any such performance, and actual results, financial condition or business could differ materially from those expressed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below as well as those discussed elsewhere in reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial condition or business over time. Quarterly Operating Results May Vary - ------------------------------------- - The Company's quarterly operating results have varied in the past and may continue to vary in future periods. Quarterly operating results may vary for a number of reasons including demand for the Company's products and services, the Company's long sales cycle, the long installation and implementation cycle for these larger, more complex and costlier systems and other factors described in this section and elsewhere in this report. As a result of healthcare industry trends and 11 the market for the Company's HNA Millennium products, a large percentage of the Company's revenues are generated by the sale and installation of larger, more complex and costlier systems. The sales process for these systems is lengthy and involves a significant technical evaluation and commitment of capital and other resources by the customer. The sale may be subject to delays due to customers' internal budgets and procedures for approving large capital expenditures and by competing needs for other capital expenditures and deploying new technologies or personnel resources. Delays in the expected sale or installation of these large contracts may have a significant impact on the Company's anticipated quarterly revenues and consequently its earnings, since a significant percentage of the Company's expenses are relatively fixed. These larger, more complex and costlier systems are installed and implemented over time periods ranging from approximately nine months to three years and involve significant efforts both by the Company and the client. In addition, implementation of the Company's Millennium products is a new and evolving process. The Company recognizes revenue upon the completion of standard milestone conditions and the amount of revenue recognized in any quarter depends upon the Company's and the client's ability to meet these project milestones. Delays in meeting these milestone conditions or modification of the contract relating to one or more of these systems could result in a shift of revenue recognition from one quarter to another and could have a material adverse effect on results of operations for a particular quarter. In addition, support payments by clients for the Company's products do not commence until the product is in use. The Company's revenues from system sales historically have been lower in the first quarter of the year and greater in the fourth quarter of the year. Stock Price May Be Volatile - ------------------------------- - The trading price of the Company's common stock may be volatile. The market for the Company's common stock may experience significant price and volume fluctuations in response to a number of factors including actual or anticipated quarterly variations in operating results, changes in expectations of future financial performance or changes in estimates of securities analysts, governmental regulatory action, healthcare reform measures, client relationship developments and other factors, many of which are beyond the Company's control. Furthermore, the stock market in general, and the market for software, healthcare and high technology companies in particular, has experienced extreme volatility that often has been unrelated to the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the trading price of the Company's common stock, regardless of actual operating performance. Market Risk of Investments - ----------------------------- - The Company accounts for its investments in equity securities which have readily determinable fair values as available-for-sale. Available-for-sale securities are reported at fair value with unrealized gains and losses reported, net of tax, as a separate component of accumulated other comprehensive income. Investments in other equity securities are reported at cost. All equity securities are reviewed by the Company for declines in fair value. If such declines are considered to be other than temporary, the cost basis of the individual security is written down to fair value as a new cost basis, and the amount of the write-down is included in earnings. In 1998 and 1999 the Company acquired a 17.5% interest (13,149,259 shares of common stock) in CareInsite with a cost basis of $81,804,000. 12,437,500 of these shares were received in 1998 as consideration for the sale of license software, and an additional 711,759 shares were purchased in 1999. The value assigned to the shares acquired in 1998 was $70,000,000 and was based on a methodology which utilized both a comparable company and the expected underlying discounted future cash flows. The Company was also granted, by CareInsite, 1,008,445 common stock warrants with an exercise price of $4.00 per share ("THINC Warrants"). The THINC Warrants were exercisable only in the event that The Health Information Network Connections, LLC ("THINC") exercised warrants granted to them by CareInsite at $4.00 per share. THINC was allowed to exercise their warrants 180 days after the initial public offering of CareInsite. On January 29, 2000 CareInsite completed an acquisition of THINC. As part of that agreement, 806,756 of the Company's 1,008,445 THINC Warrants became immediately exercisable, with the remaining amount forfeited. 12 On February 13, 2000 CareInsite entered into an agreement to merge with Healtheon/WebMD Corporation ("Merger Agreement"). As part of the Merger Agreement, the Company received 1.3 shares of Healtheon/WebMD Corporation (Web MD) in exchange for each common share of CareInsite held by the Company. The warrants were also converted at the same exchange ratio. The merger of CareInsite and WebMD ("Merger") closed on September 12, 2000. Accordingly, the Company recorded a non-recurring investment gain of $120,362,000, net of tax, as a result of the exchange. At September 30, 2000, the Company owned 17,094,037 shares of common stock of WebMD, which have a cost basis of $256,411,000 and a carrying value of $260,684,000, as these shares are accounted for as available-for-sale. The stock of WebMD held by the Company is registered but is subject to certain lock-up provisions. At September 30, 2000 the Company also holds 1,048,783 warrants of WebMD with an exercise price of $3.08 and a cost basis and carrying value of $13,685,000. The warrants are carried at cost, as they do not have a fair value that is currently available on a securities exchange. If the Company realizes certain performance metrics related to specified levels of physician usage, WebMD will issue to the Company 3,254,063 shares of common stock at a price of $0.01 per share ("Performance Shares"). The Performance Shares were adjusted at a rate of 1.3 shares of WebMD for each share of CareInsite. The measurement date is February 15, 2001. No amounts have been recognized in the consolidated financial statements for the Performance Shares due to the uncertainty of the future events. All physician users of systems of WebMD Corporation or its affiliates shall be included for purposes of determining the specified levels of physician usage. The Company is exposed to market risk from changes in marketable securities (which consist of money market and commercial paper). At September 30, 2000, marketable securities of the Company were recorded at a fair value of approximately $78 million, with an overall average return of approximately 5% and an overall weighted maturity of less than 90 days. The marketable securities held by the Company are not subject to price risk as they are held to maturity. The Company is not exposed to material future earnings or cash flow exposures from changes in interest rates on long-term debt since 100% of its long-term debt is at a fixed rate. To date, the Company has not entered into any derivative financial instruments to manage interest rate risk and is not currently evaluating the future use of any such financial instruments. The Company conducts business in several foreign jurisdictions. However, the business transacted is in the local functional currency and the Company does not currently have any material exposure to foreign currency transaction gains or losses. All other business transactions are in U.S. dollars. To date, the Company has not entered into any derivative financial instrument to manage foreign currency risk and is not currently evaluating the future use of any such financial instruments. Changes in the Healthcare Industry - ---------------------------------- - The healthcare industry is highly regulated and is subject to changing political, economic and regulatory influences. For example, The Balanced Budget Act of 1997 (Public Law 105-32) contains significant changes to Medicare and Medicaid and began to have its initial impact in 1998 due to limitations on reimbursement, resulting cost containment initiatives, and effects on pricing and demand for capital intensive systems. These factors affect the purchasing practices and operation of healthcare organizations. Federal and state legislatures have periodically considered programs to reform or amend the U.S. healthcare system at both the federal and state level and to change healthcare financing and reimbursement systems. These programs may contain proposals to increase governmental involvement in healthcare, lower reimbursement rates or otherwise change the environment in which healthcare industry participants operate. Healthcare industry participants may respond by reducing their investments or postponing investment decisions, including investments in the Company's products and services. Many healthcare providers are consolidating to create integrated healthcare delivery systems with greater market power. These providers may try to use their market power to negotiate price reductions for the Company's products and services. As the healthcare industry consolidates, the Company's customer 13 base could be eroded, competition for customers could become more intense and the importance of acquiring each customer becomes greater. Significant Competition - ----------------------- - The market for healthcare information systems is intensely competitive, rapidly evolving and subject to rapid technological change. The Company believes that the principal competitive factors in this market include the breadth and quality of system and product offerings, the stability of the information systems provider, the features and capabilities of the information systems, the ongoing support for the system, and the potential for enhancements and future compatible products. Certain of the Company's competitors have greater financial, technical, product development, marketing and other resources than the Company and some of its competitors offer products that it does not offer. The Company's principle existing competitors include Shared Medical Systems Corporation, IDX Systems Corporation, McKesson HBOC, Inc. and Eclipsys Corporation, each of which offers a suite of products that compete with many of the Company's products. There are other competitors that offer a more limited number of competing products. In addition, the Company expects that major software information systems companies, large information technology consulting service providers and system integrators, Internet-based start-up companies and others specializing in the healthcare industry may offer competitive products or services. The pace of change in the healthcare information systems market is rapid and there are frequent new product introductions, product enhancements and evolving industry standards and requirements. As a result, the Company's success will depend upon its ability to keep pace with technological change and to introduce, on a timely and cost- effective basis, new and enhanced products that satisfy changing customer requirements and achieve market acceptance. Proprietary Technology May Be Subjected to Infringement Claims or - ----------------------------------------------------------------- May Be Infringed Upon - --------------------- - The Company relies upon a combination of trade secret, copyright and trademark laws, license agreements, confidentiality procedures, employee nondisclosure agreements and technical measures to maintain the trade secrecy of its proprietary information. The Company has not historically filed patent applications or copyrights covering its software technology. As a result, the Company may not be able to protect against misappropriation of its intellectual property. In addition, the Company could be subject to intellectual property infringement claims as the number of competitors grows and the functionality of its products overlaps with competitive offerings. These claims, even if not meritorious, could be expensive to defend. If the Company becomes liable to third parties for infringing their intellectual property rights, it could be required to pay a substantial damage award and to develop noninfringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. Government Regulation - ---------------------- - The United States Food and Drug Administration (the "FDA") has declared that software products that are intended for the maintenance of data used in making decisions regarding the suitability of blood donors and the release of blood or blood components for transfusion are medical devices under the Federal Food, Drug and Cosmetic Act (the "Act") and amendments to the Act. As a consequence, the Company is subject to extensive regulation by the FDA with regard to its blood bank software. If other of the Company's products are deemed to be medical devices by the FDA, the Company could be subject to extensive requirements including premarket notification clearance prior to marketing. Complying with these FDA regulations would be time consuming, burdensome and expensive. It is possible that the FDA may become more active in regulating computer software that is used in healthcare. Following an inspection by the FDA in March of 1998, the Company received a two-item Form 483 (Notice of Inspectional Observations) containing observations of non-compliance with the Federal Food, Drug and Cosmetic Act (the "Act") with respect to the Company's PathNet HNA Blood Bank Transfusion and Donor products (the "Blood Bank Products"). The Company subsequently received a Warning Letter, dated April 29, 1998, as a result of the same inspection. The Company responded promptly to the FDA and undertook a number of actions in response to the Form 483 and Warning Letter, including an audit by a third party of the Company's Blood Bank Products and improvements to Cerner's Quality System. A copy 14 of the third party audit was submitted to the FDA in October of 1998 and, at the request of the FDA, additional information and clarification was submitted to the FDA in January of 1999. There can be no assurance, however, that the Company's actions taken in response to the Form 483 and Warning Letter will be deemed adequate by the FDA or that additional actions on behalf of the Company will not be required. In addition, the Company remains subject to periodic inspections and there can be no assurances that the Company will not be required to undertake additional actions to comply with the Act and any other applicable regulatory requirements. Any failure by the Company to comply with the Act and any other applicable regulatory requirements could have a material adverse effect on the Company's ability to continue to manufacture and distribute its products, and in more serious cases, could result in seizure, recall, injunction and/or civil fines. Any of the foregoing would have a material adverse effect on the Company's business, results of operations or financial condition. Product Related Liabilities - ----------------------------- - Many of the Company's products provide data for use by healthcare providers in providing care to patients. Although no such claims have been brought against the Company to date regarding injuries related to the use of its products, such claims may be made in the future. Although the Company maintains product liability insurance coverage in an amount that it believes is sufficient for its business, there can be no assurance that such coverage will prove to be adequate or that such coverage will continue to remain available on acceptable terms, if at all. A successful claim brought against the Company which is uninsured or under-insured could materially harm its business, results of operations or financial condition. System Errors and Warranties - --------------------------------- - The Company's systems, particularly the HNA Millennium versions, are very complex. As with complex systems offered by others, the Company's systems may contain errors, especially when first introduced. Although the Company conducts extensive testing, it has discovered software errors in its products after their introduction. The Company's systems are intended for use in collecting and displaying clinical information used in the diagnosis and treatment of patients. Therefore, users of the Company products have a greater sensitivity to system errors than the market for software products generally. The Company's agreements with its clients typically provide warranties against material errors and other matters. Failure of a client's system to meet these criteria could constitute a material breach under such contracts allowing the client to cancel the contract, or could require the Company to incur additional expense in order to make the system meet these criteria. The Company's contract with its clients generally limit the Company's liability arising from such claims but such limits may not be enforceable in certain jurisdictions. Anti-Takeover Defenses - ------------------------ - The Company's charter, bylaws, shareholders' rights plan and certain provisions of Delaware law contain certain provisions that may have the effect of delaying or preventing an acquisition of the Company. Such provisions are intended to encourage any person interested in acquiring the Company to negotiate with and obtain the approval of the Board of Directors in connection with any such transaction. These provisions include (i) a Board of Directors that is staggered into three classes to serve staggered three-year terms, (ii) blank check preferred stock, (iii) supermajority voting provisions, (iv) inability of stockholders to act by written consent or call a special meeting, (v) limitations on the ability of stockholders to nominate directors or make proposals at stockholder meetings, and (vi) triggering the exercisability of stock purchase rights on a discriminatory basis, which may invoke extensive economic and voting dilution of a potential acquirer if its beneficial ownership of the Company's common stock exceeds a specified threshold. Certain of these provisions may discourage a future acquisition of the Company not approved by the Board of Directors in which shareholders might receive a premium value for their shares. 15 Item 3. Quantitative and Qualitative Disclosures about Market Risk Information contained under the caption "Factors the may Affect Future Results of Operations, Financial Condition or Business - Market Risk of Investments" set forth under Management's Discussion and Analysis of Financial Conditions and Results of Operations" in Item 2 is incorporated herein by reference. Part II. 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 30, 2000. 16 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 13, 2000 By:\s\Marc G. Naughton - ----------------- ------------------- Date Marc G. Naughton Chief Financial Officer 17 EX-11 2 0002.txt Exhibit 11 CERNER CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE Three Months Ended Nine Months Ended September 30, October 2, September 30, October 2, ---------------------------- ---------------------------- 2000 1999 2000 1999 ----------------------------- ---------------------------- Earnings before extraordinary item: $123,336,000 $ 680,000 $123,115,000 $ 3,758,000 - ---------------------------------- ============ =========== ============ ============ Weighted average number of common and common stock equivalent shares: Basic weighted average number of outstanding common shares 34,188,000 33,622,000 33,932,000 33,599,000 ------------ ----------- ------------ ------------ Basic earnings per common shares: $ 3.61 $ 0.02 $ 3.63 $ 0.11 ------------ ----------- ------------ ------------ Dilutive effect (excess of number of shares issuable over number of shares assumed to be repurchased with the proceeds of exercised options and converted warrants based on the average market price during the period) 1,569 240,000 1,093,000 331,000 ------------ ----------- ------------ ------------ 35,757,000 33,862,000 35,025,000 33,930,000 ------------ ----------- ------------ ------------ ----------------------------------------------------------- Diluted earnings per common and common stock equivalent shares: $ 3.45 $ 0.02 $ 3.52 $ 0.11 ============ =========== ============ ============ Net earnings: $123,336,000 $ 680,000 $123,115,000 $ 2,363,000 - ------------ ============ =========== ============ ============ Weighted average number of common and common stock equivalent shares: Basic weighted average number of outstanding common shares 34,188,000 33,622,000 33,932,000 33,599,000 ------------ ---------- ----------- ----------- Basic earnings per common shares: $ 3.61 $ 0.02 $ 3.63 $ 0.07 ------------ ---------- ----------- ------------ Dilutive effect (excess of number of shares issuable over number of shares assumed to be repurchased with the proceeds of exercised options and converted warrants based on the average market price during the period) 1,569 240,000 1,093,000 331,000 ------------ ---------- ----------- ------------ 35,757,000 33,862,000 35,025,000 33,930,000 ------------ ---------- ----------- ------------ ----------------------------------------------------------- Diluted earnings per common and common stock equivalent shares: $ 3.45 $ 0.02 $ 3.52 $ 0.07 ===========================================================
EX-12 3 0003.txt [ARTICLE] 5 [PERIOD-TYPE] 9-MOS [FISCAL-YEAR-END] DEC-30-2000 [PERIOD-END] SEP-30-2000 [CASH] 78,199,000 [SECURITIES] 0 [RECEIVABLES] 166,202,000 [ALLOWANCES] 4,771,000 [INVENTORY] 876,000 [CURRENT-ASSETS] 246,224,000 [PP&E] 150,458,000 [DEPRECIATION] 71,829,000 [TOTAL-ASSETS] 724,151,000 [CURRENT-LIABILITIES] 91,826,000 [BONDS] 0 [PREFERRED-MANDATORY] 0 [PREFERRED] 0 [COMMON] 358,000 [OTHER-SE] 0 [TOTAL-LIABILITY-AND-EQUITY] 724,151,000 [SALES] 284,934,000 [TOTAL-REVENUES] 284,934,000 [CGS] 61,764,000 [TOTAL-COSTS] 209,484,000 [OTHER-EXPENSES] (188,654,000) [LOSS-PROVISION] 0 [INTEREST-EXPENSE] 2,722,000 [INCOME-PRETAX] 199,618,000 [INCOME-TAX] 76,503,000 [INCOME-CONTINUING] 123,115,000 [DISCONTINUED] 0 [EXTRAORDINARY] 0 [CHANGES] 0 [NET-INCOME] 123,115,000 [EPS-BASIC] 3.63 [EPS-DILUTED] 3.52
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