EX-99.3 4 a993proformafinancials.htm EXHIBIT 99.3 99.3 Pro Forma Financials


Exhibit 99.3


CERNER CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION


We derived the following unaudited pro forma condensed consolidated financial information by applying pro forma adjustments attributable to the Siemens Health Services ("Siemens HS") acquisition to our historical condensed consolidated financial statements and the Siemens HS financial statements included in this Form 8-K/A. The unaudited condensed consolidated pro forma balance sheet gives pro forma effect to the Siemens HS acquisition as if it had occurred on January 3, 2015. The unaudited condensed consolidated pro forma statement of operations data for the fiscal year ended January 3, 2015 gives effect to the Siemens HS acquisition as if it had occurred on December 29, 2013. We describe the assumptions underlying the pro forma adjustments in the accompanying notes to unaudited pro forma condensed consolidated financial information, which should be read in conjunction with the unaudited pro forma condensed consolidated financial information.

The unaudited pro forma condensed consolidated financial information is for illustrative and informational purposes only and should not be considered indicative of the results that would have been achieved had the transactions been consummated on the dates or for the periods indicated and do not purport to represent consolidated balance sheet data or statement of operations data or other financial data as of any future date or any future period.

The unaudited pro forma condensed consolidated financial information should be read in conjunction with the information contained in "Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," our consolidated financial statements and accompanying notes appearing elsewhere in our Annual Report on Form 10-K for the period ended January 3, 2015, and the Siemens HS financial statements included in this Form 8-K/A.




CERNER CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
As of January 3, 2015

 
 
Historical
 
As of January 3, 2015
 
 
As of
 
Purchase Price Pro Forma Adjustments
 
Purchase Price Allocation Pro Forma Adjustments
 
Acquisition Cost Pro Forma Adjustments
 
Cerner Pro Forma Siemens HS Acquisition
 
 
January 3, 2015
 
September 30, 2014
 
 
 
 
(In thousands)
 
Cerner
 
Siemens HS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
635,203

 
$
21

 
$
(502,014
)
 
$
(21
)
 
$
(17,500
)
 
$
115,689

Short-term investments
 
785,663

 

 
(770,000
)
 

 

 
15,663

Receivables, net
 
672,778

 
208,873

 

 
35,338

 

 
916,989

Other current assets
 
255,142

 
245,953

 

 
(194,500
)
 

 
306,595

Total current assets
 
2,348,786

 
454,847

 
(1,272,014
)
 
(159,183
)
 
(17,500
)
 
1,354,936

 
 
 
 
 
 
 
 
 
 
 
 
 
Property and equipment, net
 
924,260

 
121,264

 

 
27,858

 

 
1,073,382

Software development costs, net
 
420,199

 
261,386

 

 
(261,386
)
 

 
420,199

Goodwill
 
320,538

 
275,345

 

 
232,181

 

 
828,064

Intangible assets, net
 
126,636

 
21,429

 

 
551,551

 

 
699,616

Other non-current assets
 
390,146

 
313,289

 
(100,000
)
 
(313,056
)
 

 
290,379

Total assets
 
$
4,530,565

 
$
1,447,560

 
$
(1,372,014
)
 
$
77,965

 
$
(17,500
)
 
$
4,666,576

 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Shareholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
160,285

 
$
74,709

 
$

 
$
(39,670
)
 
$

 
$
195,324

Current installments of long-term debt and capital lease obligations
 
67,460

 

 

 

 

 
67,460

Deferred revenue
 
209,655

 
258,387

 

 
(170,451
)
 

 
297,591

Other current liabilities
 
196,915

 
156,864

 

 
(142,853
)
 
(6,816
)
 
204,110

Total current liabilities
 
634,315

 
489,960

 

 
(352,974
)
 
(6,816
)
 
764,485

 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt and capital lease obligations
 
62,868

 

 

 

 

 
62,868

Deferred income taxes and other liabilities
 
256,601

 
126,099

 

 
(126,099
)
 

 
256,601

Deferred revenue
 
10,813

 
342,959

 

 
(326,434
)
 

 
27,338

Total liabilities
 
964,597

 
959,018

 

 
(805,507
)
 
(6,816
)
 
1,111,292

 
 
 
 
 
 
 
 
 
 
 
 
 
Shareholders’ Equity
 
3,565,968

 
488,542

 

 
(488,542
)
 
(10,684
)
 
3,555,284

 
 
 
 
 
 
 
 
 
 
 
 
 
Total liabilities and shareholders’ equity
 
$
4,530,565

 
$
1,447,560

 
$

 
$
(1,294,049
)
 
$
(17,500
)
 
$
4,666,576



See Notes to Unaudited Pro Forma Condensed Consolidated Financial Information.

1


CERNER CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
For the year ended January 3, 2015


 
 
Historical
 
For the year ended January 3, 2015
 
 
For the year ended
 
Classification Pro Forma Adjustments
 
Acquisition Pro Forma Adjustments
 
Acquisition Cost Pro Forma Adjustments
 
Cerner Pro Forma Siemens HS Acquisition
 
 
January 3, 2015
 
September 30, 2014
 
 
 
 
(In thousands, except per share data)
 
Cerner
 
Siemens HS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
3,402,703

 
$
1,199,157

 
$

 
$

 
$

 
$
4,601,860

Costs of revenue
 
604,377

 
803,517

 
(537,417
)
 

 

 
870,477

            Total margin
 
2,798,326

 
395,640

 
537,417

 

 

 
3,731,383

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Sales and client service
 
1,395,568

 

 
614,451

 

 

 
2,010,019

Software development
 
392,805

 
224,384

 

 

 

 
617,189

General and administrative
 
246,869

 
185,727

 
(77,034
)
 
83,282

 
(15,786
)
 
423,058

Contract settlement (gain)
 

 
(38,057
)
 

 

 

 
(38,057
)
            Total operating expenses
 
2,035,242

 
372,054

 
537,417

 
83,282

 
(15,786
)
 
3,012,209

 
 
 
 
 
 
 
 
 
 
 
 
 
            Operating earnings
 
763,084

 
23,586

 

 
(83,282
)
 
15,786

 
719,174

 
 
 
 
 
 
 
 
 
 
 
 
 
Other income (expense), net
 
11,090

 
(1,066
)
 

 

 

 
10,024

 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings before income taxes
 
774,174

 
22,520

 

 
(83,282
)
 
15,786

 
729,198

Income taxes
 
(248,741
)
 
(8,607
)
 

 
32,438

 
(5,648
)
 
(230,558
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings
 
$
525,433

 
$
13,913

 
$

 
$
(50,844
)
 
$
10,138

 
$
498,640

 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
1.54

 
 
 
 
 
 
 
 
 
$
1.46

Diluted earnings per share
 
$
1.50

 
 
 
 
 
 
 
 
 
$
1.42

Basic weighted average shares outstanding
 
342,150

 
 
 
 
 
 
 
 
 
342,150

Diluted weighted average shares outstanding
 
350,386

 
 
 
 
 
 
 
 
 
350,386



See Notes to Unaudited Pro Forma Condensed Consolidated Financial Information.


2


CERNER CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)


(1) Purchase Price

Consideration for the acquisition was $1,372,014 of cash. The purchase price is subject to certain post-closing adjustments for working capital and pension obligations, as specified in the Master Sale and Purchase Agreement dated August 5, 2014, as amended.

We used a combination of cash on hand and proceeds from the sale of investments to fund the acquisition. The sources of funds used in connection with the acquisition are reflected in the Unaudited Condensed Consolidated Pro Forma Balance Sheet as follows:

Cash and cash equivalents
 
$
502,014

Short-term investments
 
770,000

Long-term investments
 
100,000

 
 
 
Total net tangible assets
 
$
1,372,014

 

(2) Allocation of Purchase Price

The acquisition of Siemens HS will be treated as a purchase in accordance with Accounting Standards Codification (ASC) 805, Business Combinations, which requires allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed in the transaction. Our allocation of purchase price is based on management's judgment after evaluating several factors, including a preliminary valuation assessment. The allocation of purchase price is preliminary and subject to changes, which could be significant, as appraisals of tangible and intangible assets are finalized, working capital and pension obligation adjustments are finalized, and additional information becomes available. The preliminary allocation of purchase price reflects reclassification adjustments to present assets and liabilities consistent with Cerner's historical presentation.

The preliminary allocation of purchase price is reflected in the Unaudited Condensed Consolidated Pro Forma Balance Sheet as follows:

 
 
Allocation Amount
 
Estimated Weighted Average Useful Life
Receivables, net
 
$
244,211

 
 
Other current assets
 
51,453

 
 
Property and equipment
 
149,122

 
 
Goodwill
 
507,526

 
 
Intangible assets:
 
 
 
 
Customer relationships
 
331,000

 
9 years
Existing technologies
 
201,990

 
5 years
Trade names
 
39,990

 
8 years
Total intangible assets
 
572,980

 
 
Other non-current assets
 
233

 
 
Accounts payable
 
(35,039
)
 
 
Deferred revenue (current)
 
(87,936
)
 
 
Other current liabilities
 
(14,011
)
 
 
Deferred revenue (non-current)
 
(16,525
)
 
 
 
 
 
 
 
Total purchase price
 
$
1,372,014

 
 
 
Intangible assets are expected to be amortized on a straight-line basis over the estimated useful lives above.

3


(3) Acquisition Costs

For the year ended January 3, 2015, we incurred $15,786 of pre-tax costs in connection with our acquisition of Siemens HS. An adjustment is reflected in the Unaudited Condensed Consolidated Pro Forma Statement of Operations to remove such costs, along with the related income tax benefit of $5,648.

Direct and incremental transaction costs expected to be incurred in connection with the closing of the transaction in 2015 are estimated at $17,500. Our estimate of such costs is based on management's judgment after evaluating several factors, including 2014 actual costs and amounts contractually due to external advisers and service providers. An adjustment is reflected in the Unaudited Condensed Consolidated Pro Forma Balance Sheet for such costs, along with the related income tax benefit of $6,816. The income tax benefit was derived using a statutory income tax rate of 38.95%.


(4) Other Adjustments to Unaudited Condensed Consolidated Pro Forma Statement of Operations

Reclassification adjustments are reflected in the Unaudited Condensed Consolidated Pro Forma Statement of Operations in order to estimate the presentation of Siemens HS costs and expenses consistent with Cerner's historical presentation.

An adjustment of $83,282 is reflected in the Unaudited Condensed Consolidated Pro Forma Statement of Operations to estimate the incremental depreciation and amortization resulting from the preliminary allocation of purchase price. The related income tax benefit is also presented, derived using a statutory tax rate of 38.95%.

(5) Subsequent Events

In January 2015, we issued $500,000 aggregate principal amount of unsecured Senior Notes ("Notes"), pursuant to a Master Note Purchase Agreement dated December 4, 2014. The issuance consisted of $225,000 of 3.18% Series 2015-A Notes due February 15, 2022, $200,000 of 3.58% Series 2015-B Notes due February 14, 2025, and $75,000 in floating rate Series 2015-C Notes due February 15, 2022. Interest is payable semiannually on February 15th and August 15th in each year, commencing on August 15, 2015 for the Series 2015-A Notes and Series 2015-B Notes. The Series 2015-C Notes will accrue interest at a floating rate equal to the Adjusted LIBOR Rate (as defined in the Master Note Purchase Agreement), payable quarterly on February 15th, May 15th, August 15th and November 15th in each year, commencing on May 15, 2015. The Master Note Purchase Agreement contains certain leverage and interest coverage ratio covenants and provides certain restrictions on our ability to borrow, incur liens, sell assets, and other customary terms. Proceeds from the Notes are available for general corporate purposes. This transaction has not been reflected in the Unaudited Pro Forma Condensed Financial Information, as the debt issuance was not directly attributable to the acquisition transaction.


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