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): April 24, 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 April 24, 2014, Cerner Corporation (“Cerner”) issued a press release announcing, among other things, its financial results for the three month period ended March 29, 2014. 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. 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 April 24, 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: April 24, 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 April 24, 2014

EX-99.1

Exhibit 99.1

Cerner Reports First Quarter 2014 Results

Strong Bookings and Revenue

KANSAS CITY, Mo. - April 24, 2014 - Cerner Corporation (Nasdaq: CERN) today announced results for the 2014 first quarter that ended March 29, 2014, delivering strong levels of bookings and revenue performance.

Bookings in the first quarter of 2014 were $910.2 million, an all-time high for a first quarter and an increase of 14 percent compared to first quarter 2013 bookings of $801.6 million.

First quarter revenue was $784.8 million, an increase of 15 percent compared to $680.0 million in the year-ago period.

On a U.S. Generally Accepted Accounting Principles (GAAP) basis, first quarter 2014 net earnings were $119.5 million and diluted earnings per share were $0.34. First quarter 2013 GAAP net earnings were $110.0 million and diluted earnings per share were $0.31.

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 first quarter 2014 were $129.1 million, an increase of 10 percent compared to $116.9 million of adjusted net earnings in the first quarter of 2013. Adjusted diluted earnings per share were $0.37 in the first quarter of 2014 compared to $0.33 of adjusted diluted earnings per share in the year-ago quarter. Analysts’ consensus estimate for first quarter 2014 adjusted diluted earnings per share was $0.37.

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.”

First quarter 2014 adjusted net earnings and diluted earnings per share exclude share-based compensation expense, which reduced first quarter 2014 net earnings and diluted earnings per share by $9.6 million and $0.03, respectively. First quarter 2013 adjusted net earnings and diluted earnings per share exclude share-based compensation expense, which reduced net earnings and diluted earnings per share by $6.9 million and $0.02, respectively.

Other 2014 First Quarter Highlights:

▪ First quarter cash collections of $867.7 million and operating cash flow of $155.8 million.

▪ First quarter free cash flow of $41.6 million. 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.”

▪ First quarter days sales outstanding of 66 days, which is down from 69 days in the year-ago quarter.

▪ Total backlog of $9.24 billion, up 22 percent over the year-ago quarter. This was comprised of $8.45 billion of contract backlog and $795.9 million of support and maintenance backlog.

“Our solid first quarter results represent a good start to the year,” said Neal Patterson, Cerner chairman, CEO and co-founder. “In addition to good financial results, we made strides in innovation. Cerner is focused on defining the next generation of the electronic medical record, which will go beyond orders and documentation and become an interactive medium that enables providers to practice medicine at a higher standard. This is important work as we prepare our clients for the upcoming era of population health management, when they will have to manage both health and care.”

Future Period Guidance

Cerner currently expects:

▪ Second quarter 2014 revenue between $790 million and $830 million.

▪ Full year 2014 revenue between $3.25 billion and $3.4 billion, which is up from a prior range of $3.2 billion to $3.4 billion.

▪ Second quarter 2014 adjusted diluted earnings per share before share based compensation expense between $0.39 and $0.40.

▪ Full year 2014 adjusted diluted earnings per share before share based compensation expense between $1.63 and $1.67, which is up from a prior range of $1.62 to $1.67.

▪ Second quarter 2014 new business bookings between $1 billion and $1.06 billion.

▪ Share based compensation expense to reduce diluted earnings per share by approximately $0.03 in the second 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 April 24. The dial-in number for the conference call is (617)-614-3451; the passcode is Cerner. Cerner recommends joining the call 15 minutes early for registration. The re-broadcast of the call will be available from 7:30 p.m. CT, April 24 through 11:59 p.m. CT, April 28. The dial-in number for the re-broadcast is (617)-801-6888; the passcode is 87514059.

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, FacebookandYouTube.

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 “guidance”, “expects”, “will” 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 and combinations;

the potential for losses resulting from asset impairment charges; risks associated with volatility and disruption resulting from 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: Kate O'Neill Rauber, (816) 888-2880, c_oneillrauber.kate@cerner.com

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

CERNER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the three months ended March 29, 2014 and March 30, 2013

(unaudited)

(In thousands, except per share data)	Three Months Ended
	2014 (1)			2013 (1)
Revenues
System sales	$	206,687		$	198,902
Support, maintenance and services	557,429			466,556
Reimbursed travel	20,645			14,571
Total revenues	784,761			680,029
Margin
System sales	141,574			117,419
Support, maintenance and services	514,088			435,381
Total margin	655,662			552,800
Operating expenses
Sales and client service	330,901			267,356
Software development	91,545			81,063
General and administrative	55,213			47,812
Total operating expenses	477,659			396,231
Operating earnings	178,003			156,569
Other income, net	2,990			3,044
Earnings before income taxes	180,993			159,613
Income taxes	(61,467		)	(49,573		)
Net earnings	$	119,526		$	110,040
Basic earnings per share	$	0.35		$	0.32
Basic weighted average shares outstanding	343,701			344,063
Diluted earnings per share	$	0.34		$	0.31
Diluted weighted average shares outstanding	352,230			352,825

Note 1: Operating expenses for the three months ended March 29, 2014 and March 30, 2013 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
	2014			2013
Sales and client service	$	7,218		$	5,018
Software development	3,085			2,325
General and administrative	4,465			3,883
Total share-based compensation	14,768			11,226
Amount of related income tax benefit	(5,184		)	(4,356		)
Net impact on net earnings	$	9,584		$	6,870
Decrease to diluted earnings per share	$	0.03		$	0.02

CERNER CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS¹ 

For the three months ended March 29, 2014 and March 30, 2013

(unaudited)

RECONCILIATION OF ADJUSTED NET EARNINGS TO GAAP NET EARNINGS¹ 

(In thousands)	Three Months Ended
	2014			2013
Net Earnings
Net earnings (GAAP)	$	119,526		$	110,040
Share-based compensation expense	14,768			11,226
Income tax benefit of share-based compensation	(5,184		)	(4,356		)
Adjusted net earnings (non-GAAP)2	$	129,110		$	116,910

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

	Three Months Ended
	2014		2013
Diluted Earnings Per Share
Diluted earnings per share (GAAP)	$	0.34	$	0.31
Share-based compensation expense (net of tax)	0.03		0.02
Adjusted diluted earnings per share (non-GAAP)2	$	0.37	$	0.33

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

(In thousands)	Three Months Ended
	2014			2013
Cash flows from operating activities (GAAP)	$	155,787		$	213,648
Capital purchases	(69,661		)	(49,451		)
Capitalized software development costs	(44,544		)	(34,334		)
Free cash flow (non-GAAP)3	$	41,582		$	129,863

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 greater transparency in the review and understanding of our overall financial, operational and economic performance.

Note 2: Cerner provides earnings with and without share-based compensation expense because earnings excluding this expense is used by management along with GAAP results to analyze its business, make strategic decisions, assess long-term trends on a comparable basis, and for management compensation purposes.

Note 3: 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 March 29, 2014 (unaudited) and December 28, 2013

(In thousands)	2014			2013
Assets
Current assets:
Cash and cash equivalents	$	219,928		$	202,377
Short-term investments	811,327			677,004
Receivables, net	564,086			582,926
Inventory	28,257			32,299
Prepaid expenses and other	198,961			175,488
Deferred income taxes, net	92,622			91,614
Total current assets	1,915,181			1,761,708
Property and equipment, net	845,104			792,781
Software development costs, net	366,676			347,077
Goodwill	307,081			307,422
Intangible assets, net	138,696			144,132
Long-term investments	436,995			554,873
Other assets	181,615			190,371
Total assets	$	4,191,348		$	4,098,364
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	125,741		$	145,019
Current installments of long-term debt and capital lease obligations	55,657			54,107
Deferred revenue	231,512			209,746
Accrued payroll and tax withholdings	123,242			147,986
Other accrued expenses	75,515			83,574
Total current liabilities	611,667			640,432
Long-term debt and capital lease obligations	104,827			111,717
Deferred income taxes and other liabilities	219,857			170,392
Deferred revenue	8,600			8,159
Total liabilities	944,951			930,700
Shareholders’ Equity:
Common stock	3,452			3,443
Additional paid-in capital	843,953			812,853
Retained earnings	2,512,574			2,393,048
Treasury stock	(103,277		)	(28,251		)
Accumulated other comprehensive loss, net	(10,305		)	(13,429		)
Total shareholders’ equity	3,246,397			3,167,664
Total liabilities and shareholders’ equity	$	4,191,348		$	4,098,364