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

Date of Report (Date of earliest event reported): February 4, 2014

Cerner Corporation

(Exact Name of Registrant as Specified in Its Charter)

Delaware	0-15386		43-1196944
(State or Other Jurisdiction of Incorporation)	(Commission File Number)		(IRS Employer Identification No.)
2800 Rockcreek Parkway, North Kansas City, Missouri		64117
(Address of Principal Executive Offices)		(Zip Code)

(816) 201-1024

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former 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):

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

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

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

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

Item 2.02 Results of Operations and Financial Condition.

On February 4, 2014, Cerner Corporation (“Cerner”) issued a press release announcing, among other things, its financial results for the three and twelve month periods ended December 28, 2013. The press release is furnished as Exhibit 99.1 and is attached hereto.

To supplement Cerner’s consolidated financial statements presented in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), Cerner uses non-GAAP financial measures of adjusted net earnings and adjusted diluted earnings per share. Both adjusted net earnings and adjusted diluted earnings per share are adjusted from results based on GAAP to exclude certain share-based compensation expenses and, for 2013, a settlement charge. Cerner also discloses certain non-GAAP measures, such as bookings and backlog (which includes contract backlog and support and maintenance backlog), and the non-GAAP financial measure free cash flow (which is defined as GAAP cash flows from operating activities less capital purchases and capitalized software development costs). These non-GAAP measures are provided to enhance the user’s overall understanding of our financial performance, and as required, are also reconciled to GAAP. These measurements are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance.

The information contained in this Form 8-K (including Exhibit 99.1) is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise be subject to the liabilities of that section. The information in this Item 2.02 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, except as otherwise expressly stated in such filing.

Item 9.01 Financial Statements and Exhibits.

d)     Exhibits

99.1 Press Release of Cerner Corporation dated February 4, 2014.

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 hereunto duly authorized.

		CERNER CORPORATION
Date: February 4, 2014	By:	/s/ Marc G. Naughton
		Marc G. Naughton, Executive Vice President
		and Chief Financial Officer

EXHIBIT INDEX

Exhibit Number	Description
99.1	Press Release of Cerner Corporation dated February 4, 2014

EX-99.1

Exhibit 99.1

Cerner Reports Fourth Quarter and Full Year 2013 Results

Strong Bookings and Revenue

KANSAS CITY, Mo. - February 4, 2014 - Cerner Corporation (Nasdaq: CERN) today announced results for the 2013 fourth quarter and full year that ended December 28, 2013, delivering strong levels of bookings and revenue performance.

Bookings in the fourth quarter of 2013 were $1.11 billion, an all-time high and an increase of 9 percent compared to fourth quarter 2012 bookings of $1.02 billion, which was the previous all-time high. Full-year 2013 bookings were a record $3.77 billion, up 20 percent compared to 2012 bookings of $3.14 billion.

Fourth quarter revenue was $795.3 million, an increase of 12 percent compared to $710.4 million in the year-ago period. Full year 2013 revenue was $2.91 billion, up 9 percent compared to 2012 revenue of $2.67 billion.

On a U.S. Generally Accepted Accounting Principles (GAAP) basis, fourth quarter 2013 net earnings were $60.1 million and diluted earnings per share were $0.17. Fourth quarter 2012 GAAP net earnings were $111.8 million and diluted earnings per share were $0.32. For the full year, 2013 GAAP net earnings were $398.4 million and diluted earnings per share were $1.13. Full year 2012 GAAP net earnings were $397.2 million and diluted earnings per share were $1.13.

The number of shares and the per share amounts for all periods presented within reflect the two-for-one stock split effective June 28, 2013.

Adjusted (non-GAAP) Net Earnings

Adjusted net earnings for fourth quarter 2013 were $136.7 million, an increase of 16 percent compared to $118.2 million of adjusted net earnings in the fourth quarter of 2012. Adjusted diluted earnings per share were $0.39 in the fourth quarter of 2013 compared to $0.34 of adjusted diluted earnings per share in the year-ago quarter. Analysts’ consensus estimate for fourth quarter 2013 adjusted diluted earnings per share was $0.39. For the full year 2013, adjusted net earnings were $496.8 million and adjusted diluted earnings per share were $1.41, compared to full year 2012 adjusted net earnings of $420.8 million and adjusted diluted earnings per share of $1.20.

Adjusted net earnings is not a recognized term under GAAP and should not be substituted for net earnings as a measure of Cerner’s performance but instead should be utilized as a supplemental measure of financial performance in evaluating our business. Following is a description of adjustments made to net earnings. For more detail, please see the accompanying schedule, titled “Reconciliation of GAAP Results to Non-GAAP Results.”

Fourth quarter 2013 adjusted net earnings and diluted earnings per share exclude share-based compensation expense and a settlement charge. These items reduced fourth quarter 2013 net earnings and diluted earnings per share by $76.6 million and $0.22, respectively. Fourth quarter 2012 adjusted net earnings and diluted earnings per share exclude share-based compensation expense, which reduced net earnings and diluted earnings per share by $6.4 million and $0.02, respectively. Share based compensation expense and the settlement charge reduced full-year 2013 net earnings and diluted earnings per share by $98.4 million and $0.28, respectively. Share based compensation expense reduced full year 2012 net earnings and diluted earnings per share by $23.5 million and $0.07, respectively.

Other 2013 Fourth Quarter and Full-Year Highlights:

▪ Fourth quarter cash collections of $781.8 million and operating cash flow of $141.5 million. For the full year, cash collections were $3.05 billion and operating cash flow was $695.9 million.

▪ Fourth quarter free cash flow of negative $41.7 million, reflecting the impact of the settlement charge. For the full year, free cash flow was $168.3 million, compared to $424.7 million in 2012, with the decline due to an increase in capital expenditures and capitalized software related to facilities needs and growth initiatives and the fourth quarter settlement charge. Free cash flow is a non-GAAP financial measure defined as GAAP cash flows from operating activities less capital purchases and capitalized software development costs. For more detail, please see the accompanying schedule, titled “Reconciliation of GAAP Results to Non-GAAP Results.”

▪ Fourth quarter days sales outstanding of 67 days, which is down from 74 days in the year-ago quarter.

▪ Total backlog of $8.91 billion, up 23 percent over the year-ago quarter. This was comprised of $8.13 billion of contract backlog and $786.0 million of support and maintenance backlog.

“Cerner’s fourth quarter results reflect a strong finish to the year,” Neal Patterson, Cerner chairman, CEO and co-founder said. “In addition to delivering strong operating results in 2013, we invested heavily in our cloud solutions and infrastructure, and I believe these investments are positioning Cerner for growth through the decade. IT is growing in importance as health care undergoes an unprecedented amount of change, and we believe Cerner’s solutions and services are well aligned with helping stakeholders improve quality and lower costs while adapting to the evolving landscape.”

Future Period Guidance

Cerner currently expects:

▪ First quarter 2014 revenue between $770 million and $810 million.

▪ Full year 2014 revenue between $3.2 billion and $3.4 billion.

▪ First quarter 2014 adjusted diluted earnings per share before share based compensation expense between $0.36 and $0.37.

▪ Full year 2014 adjusted diluted earnings per share before share based compensation expense between $1.62 and $1.67.

▪ First quarter 2014 new business bookings between $860 million and $930 million.

▪ Share based compensation expense to reduce diluted earnings per share by approximately $0.03 in the first quarter of 2014 and between $0.11 and $0.12 for the year.

Earnings Conference Call

Cerner will host an earnings conference call to provide additional detail on these results at 3:30 p.m. CT on February 4. The dial-in number for the conference call is (857)-244-7551; the passcode is Cerner. Cerner recommends joining the call 15 minutes early for registration. The re-broadcast of the call will be available from 6:30 p.m. CT, February 4 through 11:59 p.m. CT, February 7. The dial-in number for the re-broadcast is (617)-801-6888; the passcode is 61186290.

An audio webcast will be available live and archived on Cerner’s website at www.cerner.com under the About Cerner section (click Investor Relations, then Presentations and Webcasts).

About Cerner

Cerner is contributing to the systemic change of health and care delivery. For more than 30 years Cerner has been executing its vision to make health care safer and more efficient. We started with the foundation of digitizing paper processes and now offer the most comprehensive array of information software, professional services, medical device integration, remote hosting and employer health and wellness services. Cerner systems are used by everyone from individual consumers, to single-doctor practices, hospitals, employers and entire countries. Taking what we’ve learned over more than three decades, Cerner is building on the knowledge that is in the system to support evidence-based clinical decisions, prevent medical errors and empower patients in their care.

Cerner^® solutions are licensed by approximately 14,000 facilities around the world, including more than 3,000 hospitals; 4,900 physician practices; 60,000 physicians; 590 ambulatory facilities, such as laboratories, ambulatory centers, behavioral health centers, cardiac facilities, radiology clinics and surgery centers; 3,500 extended care facilities; 150 employer sites and 1,790 retail pharmacies.

Certain trademarks, service marks and logos (collectively, the “Marks”) set forth herein are owned by Cerner Corporation and/or its subsidiaries in the United States and certain other countries throughout the world. All other non-Cerner Marks are the property of their respective owners. Nasdaq: CERN. For more information about Cerner, please visit www.cerner.com, Twitter, Facebook and YouTube.

This release contains forward-looking statements that involve a number of risks and uncertainties. It is important to note that Cerner's performance, and actual results, financial condition or business could differ materially from those expressed in such forward-looking statements. The words “believe”, “positioning”, “guidance”, “expect” or the negative of these words, variations thereof or similar expressions are intended to identify such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: the possibility of product-related liabilities; potential claims for system errors and warranties; the possibility of interruption at our data centers or client support facilities; our proprietary technology may be subject to claims for infringement or misappropriation of intellectual property rights of others, or may be infringed or misappropriated by others; risks associated with our non-U.S. operations; risks associated with our ability to effectively hedge exposure to fluctuations in foreign currency exchange rates; the potential for tax legislation initiatives that could adversely affect our tax position and/or challenges to our tax positions in the United States and non-U.S. countries; risks associated with our recruitment and retention of key personnel; risks related to our dependence on third party suppliers; risks inherent with business acquisitions; the potential for losses resulting from asset impairment charges; risks associated with uncertainty in global economic conditions; managing growth in the new markets in which we offer solutions, health care devices and services; changing political, economic, regulatory and judicial influences; government regulation; significant competition and market changes; variations in our quarterly operating results; potential inconsistencies in our sales forecasts compared to actual sales; volatility in the trading price of our common stock and the timing and volume of market activity; our directors’ authority to issue preferred stock and the anti-takeover provisions in our corporate governance documents; and material adverse resolution of legal proceedings. Additional discussion of these and other risks, uncertainties and factors affecting Cerner's business is contained in Cerner's periodic filings with the Securities and Exchange Commission. The reader should not place undue reliance on forward-looking statements, since the statements speak only as of the date that they are made. Cerner undertakes no obligation to update forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial condition or business over time.

Investor Contact: Allan Kells, (816) 201-2445, akells@cerner.com

Media Contact: Megan Moriarty, (816) 888-2470, megan.moriarty@cerner.com

Cerner’s Internet Home Page: www.cerner.com

CERNER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the three and twelve months ended December 28, 2013 and December 29, 2012

(unaudited)

(In thousands, except per share data)	Three Months Ended						Years Ended
	2013 (1)			2012 (1)			2013 (1)			2012 (1)
Revenues
System sales	$	245,772		$	251,759		$	847,809		$	902,799
Support, maintenance and services	531,107			445,098			1,992,830			1,707,329
Reimbursed travel	18,449			13,527			70,109			55,308
Total revenues	795,328			710,384			2,910,748			2,665,436
Margin
System sales	160,978			142,496			545,435			475,343
Support, maintenance and services	492,234			414,777			1,850,591			1,581,896
Total margin	653,212			557,273			2,396,026			2,057,239
Operating expenses
Sales and client service	319,838			274,550			1,173,051			1,020,640
Software development	92,443			78,624			338,786			301,370
General and administrative	157,182			43,655			308,177			163,567
Total operating expenses	569,463			396,829			1,820,014			1,485,577
Operating earnings	83,749			160,444			576,012			571,662
Other income, net	2,756			7,257			12,042			16,046
Earnings before income taxes	86,505			167,701			588,054			587,708
Income taxes	(26,442		)	(55,893		)	(189,700		)	(190,476		)
Net earnings	$	60,063		$	111,808		$	398,354		$	397,232
Basic earnings per share	$	0.17		$	0.33		$	1.16		$	1.16
Basic weighted average shares outstanding	343,501			343,487			343,636			341,861
Diluted earnings per share	$	0.17		$	0.32		$	1.13		$	1.13
Diluted weighted average shares outstanding	352,131			352,361			352,281			351,394

Note 1: Operating expenses for the three and twelve months ended December 28, 2013 and December 29, 2012 include share-based compensation expense. The impact of this expense on net earnings and diluted earnings per share is presented below:

(In thousands, except per share data)	Three Months Ended						Years Ended
	2013			2012			2013			2012
Sales and client service	$	6,973		$	5,100		$	24,058		$	17,316
Software development	2,949			2,322			11,096			9,217
General and administrative	3,415			2,922			13,800			11,579
Total share-based compensation	13,337			10,344			48,954			38,112
Amount of related income tax benefit	(4,788		)	(3,957		)	(18,607		)	(14,578		)
Net impact on net earnings	$	8,549		$	6,387		$	30,347		$	23,534
Decrease to diluted earnings per share	$	0.03		$	0.02		$	0.09		$	0.07

CERNER CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS¹ 

For the three and twelve months ended December 28, 2013 and December 29, 2012

(unaudited)

RECONCILIATION OF ADJUSTED NET EARNINGS TO GAAP NET EARNINGS¹ 

(In thousands)	Three Months Ended				Years Ended
	2013		2012		2013		2012
Net Earnings
Net earnings (GAAP)	$	60,063	$	111,808	$	398,354	$	397,232
Share-based compensation expense, net of tax	8,549		6,387		30,347		23,534
Settlement charge, net of tax2	68,078		—		68,078		—
Adjusted net earnings (non-GAAP)3	$	136,690	$	118,195	$	496,779	$	420,766

RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE TO GAAP DILUTED EARNINGS PER SHARE¹ 

	Three Months Ended				Years Ended
	2013		2012		2013		2012
Diluted Earnings Per Share
Diluted earnings per share (GAAP)	$	0.17	$	0.32	$	1.13	$	1.13
Share-based compensation expense, net of tax	0.03		0.02		0.09		0.07
Settlement charge, net of tax2	0.19		—		0.19		—
Adjusted diluted earnings per share (non-GAAP)3	$	0.39	$	0.34	$	1.41	$	1.20

RECONCILIATION OF NON-GAAP FREE CASH FLOW TO GAAP OPERATING CASH FLOW¹ 

(In thousands)	Three Months Ended						Years Ended
	2013			2012			2013			2012
Cash flows from operating activities (GAAP)	$	141,480		$	180,554		$	695,865		$	708,314
Capital purchases	(134,471		)	(53,463		)	(352,877		)	(183,429		)
Capitalized software development costs	(48,698		)	(27,683		)	(174,649		)	(100,189		)
Free cash flow (non-GAAP)4	$	(41,689	)	$	99,408		$	168,339		$	424,696

Note 1: The presentation of Adjusted Diluted Earnings per Share, Adjusted Net Earnings and Free Cash Flow, non-GAAP financial measures, are not meant to be considered in isolation, nor as a substitute for, or superior to, Generally Accepted Accounting Principles (GAAP) results and investors should be aware that non-GAAP measures have inherent limitations and should be read only in conjunction with Cerner's consolidated financial statements prepared in accordance with GAAP. Adjusted Diluted Earnings per Share, Adjusted Net Earnings and Free Cash Flow may also be different from similar non-GAAP financial measures used by other companies and may not be comparable to similarly titled captions of other companies due to potential inconsistencies in the method of calculations. We believe that Adjusted Diluted Earnings per Share, Adjusted Net Earnings and Free Cash Flow are important to enable investors to better understand and evaluate our ongoing operating results and allows for more comprehensive review and understanding of our overall financial, operational and economic performance.

Note 2: The settlement charge is presented net of an income tax benefit of $38.1 million.

Note 3: Cerner provides earnings with and without share-based compensation expense and settlement charge because earnings excluding these expenses is used by management along with GAAP results to analyze its business, make strategic decisions and for management compensation purposes.

Note 4: Cerner provides free cash flow because it takes into account the capital expenditures necessary to operate our business.

CERNER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

As of December 28, 2013 (unaudited) and December 29, 2012

(In thousands)	2013			2012
Assets
Current assets:
Cash and cash equivalents	$	202,377		$	317,120
Short-term investments	677,004			719,665
Receivables, net	582,926			577,848
Inventory	32,299			23,681
Prepaid expenses and other	175,488			113,572
Deferred income taxes, net	91,614			38,620
Total current assets	1,761,708			1,790,506
Property and equipment, net	792,781			569,708
Software development costs, net	347,077			267,307
Goodwill	307,422			247,616
Intangible assets, net	144,132			132,045
Long-term investments	554,873			509,467
Other assets	190,371			187,819
Total assets	$	4,098,364		$	3,704,468
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	145,019		$	141,212
Current installments of long-term debt and capital lease obligations	54,107			59,582
Deferred revenue	209,746			189,652
Accrued payroll and tax withholdings	147,986			125,253
Other accrued expenses	83,574			64,413
Total current liabilities	640,432			580,112
Long-term debt and capital lease obligations	111,717			136,557
Deferred income taxes and other liabilities	170,392			143,212
Deferred revenue	8,159			10,937
Total liabilities	930,700			870,818
Shareholders’ Equity:
Common stock	3,443			3,442
Additional paid-in capital	812,853			840,769
Retained earnings	2,393,048			1,994,694
Treasury stock	(28,251		)	—
Accumulated other comprehensive loss, net	(13,429		)	(5,255		)
Total shareholders’ equity	3,167,664			2,833,650
Total liabilities and shareholders’ equity	$	4,098,364		$	3,704,468