EX-99.1 2 c60983exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
Cerner Reports Third Quarter 2010 Results
Strong Bookings, Revenue, Earnings and Cash Flow
KANSAS CITY, Mo. — October 28, 2010 — Cerner Corporation (Nasdaq: CERN) today announced results for the 2010 third quarter that ended October 2, 2010, delivering strong levels of bookings, revenue, earnings and cash flow.
Bookings in the third quarter of 2010 were $495.7 million, up 17 percent from $424.3 million in the third quarter of 2009. Third quarter revenue was $462.7 million, up 13 percent compared to $409.4 million in the year-ago period.
On a Generally Accepted Accounting Principles (GAAP) basis, third quarter 2010 net earnings were $60.9 million, and diluted earnings per share were $0.71. Third quarter 2009 GAAP net earnings were $48.4 million, and diluted earnings per share were $0.57.
Adjusted (non-GAAP) Earnings
Adjusted third quarter 2010 net earnings were $65.0 million, an increase of 27 percent compared to $51.3 million of adjusted net earnings in the third quarter of 2009. Adjusted diluted earnings per share were $0.76 in the third quarter of 2010 compared to $0.61 of adjusted diluted earnings per share in the third quarter of 2009. Analysts’ consensus estimate for third quarter 2010 adjusted diluted earnings per share was $0.74.
Adjusted Net Earnings is not a recognized term under GAAP and should not be substituted for net earnings as a measure of the Company’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 Adjusted Net Earnings and Adjusted Diluted Earnings Per Share to GAAP Net Earnings and Diluted Earnings Per Share.”
Adjusted third quarter 2010 and 2009 net earnings and diluted earnings per share exclude share based compensation expense, which reduced third quarter 2010 net earnings and diluted earnings per share by $4.1 million and $0.05, respectively, and reduced third quarter 2009 net earnings and diluted earnings per share by $3.0 million and $0.04, respectively.
Other Third Quarter Highlights:
    Third quarter cash collections of $471.8 million and operating cash flow of $119.0 million.
    Free cash flow of $79.1 million. Free cash flow is a non-GAAP financial measure defined as operating cash flow less capital expenditures and capitalized software. For more detail, please see the accompanying schedule, titled “Reconciliation of GAAP Operating Cash Flow to non-GAAP Free Cash Flow.”
    Days sales outstanding of 91 days compared to 88 days in the second quarter of 2010 and 105 days in the year-ago quarter.
    Total revenue backlog of $4.66 billion, up 21 percent over the year-ago quarter. This is comprised of $4.02 billion of contract backlog and $642 million of support and maintenance backlog.
“We are pleased with our strong results in the third quarter, including record cash flow and strong bookings, revenue and earnings,” said Neal Patterson, Cerner chairman, CEO, president and co-founder. “Our third quarter and year-to-date results reflect strong performance in what we believe is the beginning of a multi-year period of increased demand as healthcare providers purchase solutions and services to help them qualify for healthcare information technology incentives included in the American Recovery and Reinvestment Act of 2009 (ARRA). Further, we believe additional demand for our solutions and services will be driven by healthcare reform and the increasingly complex and more clinically-focused requirements healthcare providers must meet to get reimbursed for their services,” Patterson said.

 


 

Future Period Guidance
Cerner currently expects:
    Fourth quarter 2010 revenue between $490 million and $510 million.
    Fourth quarter 2010 adjusted diluted earnings per share before share based compensation expense between $0.80 and $0.85.
    Fourth quarter 2010 new business bookings between $490 million and $530 million.
    Share based compensation expense to reduce diluted earnings per share by approximately $0.05 in the fourth quarter of 2010.
Earnings Conference Call
Cerner will host an earnings conference call to provide additional detail on third quarter results at 3:30 p.m. CT on October 28. The dial-in number for the conference call is (617) 597-5395; the passcode is Cerner. The company recommends joining the call 15 minutes early for registration. The re-broadcast of the call will be available from 6:30 p.m. CT, October 28 through 11:59 p.m. CT, October 31. The dial-in number for the re-broadcast is (888) 286-8010; the passcode is 79004643.
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 transforming healthcare by eliminating error, variance and waste for healthcare providers and consumers around the world. Cerner® solutions optimize processes for healthcare organizations ranging in size from single-doctor practices, to health systems, to entire countries, for the pharmaceutical and medical device industries, employer health and wellness services industry and for the healthcare commerce system. These solutions are licensed by more than 8,500 facilities around the world, including approximately 2,300 hospitals; 3,400 physician practices covering more than 30,000 physicians; 600 ambulatory facilities, such as laboratories, ambulatory centers, cardiac facilities, radiology clinics and surgery centers; 700 home-health facilities; and 1,500 retail pharmacies. The trademarks, service marks and logos (collectively, the “Marks”) set forth herein are registered and unregistered trademarks and/or service marks owned by Cerner Corporation and/or its subsidiaries in the United States and certain other countries throughout the world. 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 the Company’s performance, and actual results, financial condition or business could differ materially from those expressed in such forward-looking statements. The words “believe”, “guidance” and “expects” 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 reliance on third party suppliers; risks inherent with business acquisitions; changing political, economic and regulatory influences; government regulation; significant competition and market changes; risks associated with the ongoing adverse financial market environment and uncertainty in global economic conditions; variations in our quarterly operating results; potential inconsistencies in our sales forecasts compared to actual sales; the volatility in the trading price of our common stock; and, our directors’ authority to issue preferred stock and the anti-takeover provisions in our corporate governance documents. Additional discussion of these and other factors affecting the Company’s business is contained in the Company’s periodic filings with the Securities and Exchange Commission. The Company 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: Kelli Christman, (816) 885-4342, kelli.christman@cerner.com
Cerner’s Internet Home Page: www.cerner.com
# # #

 


 

CERNER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and nine months ended October 2, 2010 and October 3, 2009
(unaudited)
                                 
(In thousands, except per share data)   Three Months Ended     Nine Months Ended  
    2010 (1)     2009 (1)     2010 (1)     2009 (1)  
                                 
Revenues
                               
System sales
  $ 133,439     $ 118,325     $ 386,292     $ 332,816  
Support, maintenance and services
    321,289       284,189       939,909       849,461  
Reimbursed travel
    7,955       6,901       23,820       23,266  
 
                       
Total revenues
    462,683       409,415       1,350,021       1,205,543  
 
                               
Margin
                               
System sales
    76,043       70,391       231,205       200,689  
Support, maintenance and services
    307,492       269,545       893,373       802,955  
 
                       
Total margin
    383,535       339,936       1,124,578       1,003,644  
 
                       
 
                               
Operating expenses
                               
Sales and client service
    189,320       171,415       566,943       516,401  
Software development
    67,257       66,752       202,024       196,578  
General and administrative
    32,966       31,059       99,611       91,819  
 
                       
Total operating expenses
    289,543       269,226       868,578       804,798  
 
                       
 
                               
Operating earnings
    93,992       70,710       256,000       198,846  
 
                               
Interest income
    1,766       2,371       7,571       6,057  
Interest expense
    (1,679 )     (2,191 )     (5,280 )     (6,344 )
Other income (expense), net
    5       (3 )     (566 )     414  
 
                       
Total other income (expense), net
    92       177       1,725       127  
 
                       
 
                               
Earnings before income taxes
    94,084       70,887       257,725       198,973  
Income taxes
    (33,212 )     (22,493 )     (91,090 )     (66,004 )
 
                       
Net earnings
  $ 60,872     $ 48,394     $ 166,635     $ 132,969  
 
                       
 
                               
Basic earnings per share
  $ 0.74     $ 0.60     $ 2.03     $ 1.65  
 
                       
 
                               
Basic weighted average shares outstanding
    82,547       81,225       82,279       80,750  
 
                               
Diluted earnings per share
  $ 0.71     $ 0.57     $ 1.95     $ 1.59  
 
                       
 
                               
Diluted weighted average shares outstanding
    85,360       84,172       85,273       83,576  
Note 1: Operating expenses for the three and nine months ended October 2, 2010 and October 3, 2009 include share-based compensation expense. The impact of this expense on net earnings is presented below:
                                 
    Three Months Ended     Nine Months Ended  
    2010     2009     2010     2009  
 
                               
Sales and client service
  $ 2,944     $ 2,315     $ 7,723     $ 5,401  
Software development
    1,861       1,132       4,903       3,134  
General and administrative
    1,745       1,258       5,277       3,676  
 
                       
Total share based compensation
    6,550       4,705       17,903       12,211  
Amount of related income tax benefit
    (2,440 )     (1,753 )     (6,669 )     (4,549 )
 
                       
Net impact on net earnings
  $ 4,110     $ 2,952     $ 11,234     $ 7,662  
 
                       
 
                               
Decrease to diluted earnings per share
  $ 0.05     $ 0.04     $ 0.14     $ 0.09  
 
                       

 


 

CERNER CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS 1

For the three and nine months ended October 2, 2010 and October 3, 2009
(unaudited)
RECONCILIATION OF ADJUSTED NET EARNINGS AND ADJUSTED DILUTED
   EARNINGS PER SHARE TO GAAP NET EARNINGS AND DILUTED EARNINGS PER SHARE 1
                                 
(In thousands, except per share data)   Three Months Ended     Nine Months Ended  
Net Earnings   2010     2009     2010     2009  
                                 
 
                               
Net earnings
  $ 60,872     $ 48,394     $ 166,635     $ 132,969  
Share-based compensation expense2
    6,550       4,705       17,903       12,211  
Income tax benefit of share-based compensation2
    (2,440 )     (1,753 )     (6,669 )     (4,549 )
 
                       
Adjusted net earnings (non-GAAP)
  $ 64,982     $ 51,346     $ 177,869     $ 140,631  
 
                       
                                 
    Three Months Ended     Nine Months Ended  
    2010     2009     2010     2009  
Diluted Earnings Per Share
                               
Diluted earnings per share2
  $ 0.71     $ 0.57     $ 1.95     $ 1.59  
Share-based compensation expense (net of tax)2
    0.05       0.04       0.14       0.09  
 
                       
Adjusted diluted earnings per share (non-GAAP)
  $ 0.76     $ 0.61     $ 2.09     $ 1.68  
 
                       
RECONCILIATION OF GAAP OPERATING CASH FLOW TO NON-GAAP FREE CASH FLOW 1
                                 
(In thousands)   Three Months Ended     Nine Months Ended  
    2010     2009     2010     2009  
                                 
Cash flows from operating activities
  $ 118,956     $ 73,402     $ 334,697     $ 239,158  
Capital purchases 3
    (19,330 )     (24,140 )     (75,341 )     (89,863 )
Capitalized software development costs 3
    (20,535 )     (20,110 )     (61,783 )     (58,698 )
 
                       
Free cash flow (non-GAAP)
  $ 79,091     $ 29,152     $ 197,573     $ 90,597  
 
                       
Note 1: The presentation of Adjusted Net Earnings and Free Cash Flow, non-GAAP financial measures, are not meant to be considered in isolation, 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 the Company’s consolidated financial statements prepared in accordance with GAAP. 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. The Company believes that Adjusted Net Earnings and Free Cash Flow are important to enable investors to better understand and evaluate its ongoing operating results and allows for greater transparency in the review of its overall financial, operational and economic performance.
Note 2: The Company provides earnings with and without stock options expense because earnings excluding this expense is used by management along with GAAP results to analyze its business, make strategic decisions and for management compensation purposes.
Note 3: The Company provides cash flow with and without capital purchases and software development cost because operating cash flows excluding these expenditures is used by management along with GAAP results to analyze its earnings quality and overall cash generation of the business.

 


 

CERNER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

As of October 2, 2010 (unaudited) and January 2, 2010
(In thousands)
                 
    2010     2009  
Assets
               
 
               
Cash and cash equivalents
  $ 211,747     $ 241,723  
Short-term investments
    353,516       317,113  
Receivables, net
    463,368       461,411  
Inventory
    8,058       11,242  
Prepaid expenses and other
    98,741       106,791  
Deferred income taxes
    2,285       8,055  
 
           
 
               
Total current assets
    1,137,715       1,146,335  
 
               
Property and equipment, net
    500,667       509,178  
Software development costs, net
    244,852       233,265  
Goodwill
    161,974       151,479  
Intangible assets, net
    38,340       33,719  
Long-term investments
    205,323        
Other assets
    69,512       74,591  
 
           
 
               
Total assets
  $ 2,358,383     $ 2,148,567  
 
           
 
               
Liabilities and Stockholders’ Equity
               
 
               
Accounts payable
  $ 56,671     $ 36,893  
Current installments of long-term debt
    25,751       25,014  
Deferred revenue
    117,847       137,095  
Accrued payroll and tax withholdings
    78,072       80,093  
Other accrued expenses
    46,593       79,008  
 
           
 
               
Total current liabilities
    324,934       358,103  
 
               
Long-term debt
    93,282       95,506  
Deferred income taxes and other liabilities
    112,228       98,372  
Deferred revenue
    18,578       15,788  
 
           
 
               
Total liabilities
    549,022       567,769  
 
           
 
               
Stockholders’ Equity
               
 
               
Common stock
    836       826  
Additional paid-in capital
    618,318       557,545  
Retained earnings
    1,220,198       1,053,563  
Treasury stock
    (28,002 )     (28,002 )
Accumulated other comprehensive loss, net
    (2,109 )     (3,254 )
 
           
Total Cerner Corporation stockholders’ equity
    1,809,241       1,580,678  
Noncontrolling interest
    120       120  
 
           
 
               
Total stockholders’ equity
    1,809,361       1,580,798  
 
           
 
               
Total liabilities and stockholders’ equity
  $ 2,358,383     $ 2,148,567