EX-99.1 2 c99209exv99w1.htm PRESS RELEASE exv99w1
 

Exhibit 99.1
INVESTORS: Allan Kells
(816) 201-2445 akells@cerner.com

MEDIA: Tracy Richardson
(816) 201-5042 tracy.richardson@cerner.com

Cerner’s Internet Home Page: http://www.cerner.com
Cerner Delivers Record New Business Bookings
Revenue and Earnings Growth Strong
KANSAS CITY, Mo. October 20, 2005—Cerner Corp. (NASDAQ: CERN) today announced results for the 2005 third quarter ended October 1, 2005, delivering record levels of new business bookings and strong revenue, earnings and cash flow. New business bookings revenue in the third quarter was $450.5 million, which is up 109 percent over the third quarter of 2004 and an all-time record. Third quarter bookings include $149.4 million of bookings for the initial phase of Cerner’s contract with Fujitsu Services Ltd. as part of the National Health Service (NHS) initiative to automate clinical processes and digitize medical records in the Southern Cluster of England. Excluding bookings revenue from this contract, Cerner’s bookings revenue was $301.1 million, which is up 40 percent over the third quarter of 2004 and higher than the record bookings of $284.3 million in the second quarter of 2005.
Third quarter 2005 revenues increased 28 percent to $294.6 million compared to $231.1 million in the year-ago quarter. Third quarter 2005 net earnings were $26.6 million compared to net earnings of $14.8 million in the third quarter of 2004. Third quarter 2005 net earnings includes an adjustment related to a prior period for a tax benefit from the carry back of a capital loss generated by the sale of Zynx Health Incorporated, and third quarter 2004 net earnings included an adjustment related to a charge for vacation accrual that related to prior periods. Excluding these two items, net earnings were $21.8 million in the third quarter of 2005, which is up 29 percent compared to $16.9 million in the third quarter of 2004. Third quarter 2005 diluted earnings per share were $0.67 including the tax benefit and $0.55 excluding it. Analysts’ consensus estimate for third quarter 2005 diluted earnings per share was $0.55.
Other Third Quarter Highlights:
    Record cash collections of $298.9 million and strong operating cash flow of $46.9 million.
 
    Days sales outstanding of 98 days compared to 104 days in the year-ago quarter and 98 days in the second quarter of 2005.
 
    Operating margin of 12.6 percent compared to 12.3 percent in the second quarter of 2005 and 12.9 percent (before charge for vacation accrual) in the third quarter of 2004.
 
    Total revenue backlog of $1.97 billion, up 35 percent over the year-ago quarter. This is comprised of $1.58 billion of contract backlog and $389.6 million of support and maintenance backlog.
 
    233 Cerner MillenniumÒ solution implementations were completed. Cerner has now turned on more than 4,500 Cerner Millennium solutions at nearly 900 client facilities worldwide.

 


 

Cerner Delivers Record New Business Bookings
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“I am very pleased with our record third quarter results,” said Neal Patterson, Cerner’s co-founder, chairman and chief executive officer. “Our strong top-line and earnings growth reflect the momentum created by our continued leadership position in the United States, our rapidly growing global presence, and the near universal recognition that information technology can significantly improve health outcomes and reduce costs.”
“We believe the outlook for our industry remains strong,” added Patterson. “A recently released study by the RAND Corporation indicates the U.S. healthcare system could save lives as well as $162 billion annually with widespread use of healthcare information technology (HIT). This study provides evidence that could spark more widespread investment in HIT, and we believe Cerner is well positioned to benefit from this trend. Our unified architecture and the depth and breadth of solutions uniquely allow Cerner to connect physician offices, hospitals, clinics, laboratories, pharmacies, and consumers’ homes.”
Future Period Guidance
The Company has increased it’s guidance for 2005. The Company expects revenue in the fourth quarter of 2005 to be approximately $305 million to $310 million. This equates to $1.14 billion to $1.145 billion for the year 2005, which is up from a prior range of $1.12 billion to $1.14 billion. Cerner expects diluted earnings per share in the fourth quarter to be between $0.67 and $0.68, which is approximately 20 percent higher than the fourth quarter of 2004. This equates to $2.16 to $2.17 per share for the year 2005, which is up from a prior range of $2.13 to $2.16. Cerner expects new business bookings in the fourth quarter to be between $300 and $315 million, which is approximately 25 percent higher than the fourth quarter of 2004.
For the year 2006, Cerner indicated that it is comfortable with the analysts’ consensus estimate for diluted earnings per share of $2.66, which reflects growth of 23 percent over 2005 estimates. Cerner expects 2006 revenue to be between $1.30 billion and $1.34 billion.
Third Quarter 2005 Income Tax Benefit
In connection with filing the Company’s 2004 income tax return, management determined that the sale of Zynx Health Incorporated in the first quarter of 2004 resulted in a tax capital loss. This tax capital loss was carried back against capital gains previously realized resulting in a tax benefit of $4.8 million.
The tax benefit, if properly recorded in 2004, would have increased 2004 net earnings by $4.8 million. As the impact to prior year’s annual consolidated financial statements was not material, the Company recorded this tax benefit of $4.8 million in the third quarter of 2005.
Third Quarter 2004 Accrued Vacation Pay Adjustment
As reported on October 20, 2004, in conjunction with a review of the process for calculating the liability for accrued vacation pay at the end of the third quarter of 2004, the Company determined that the liability on the balance sheet relating to periods prior to 2004 was understated by $3.3 million. While the Company was fully accrued for all vested vacation that would be subject to payout upon termination, the Company understated the liability for accumulated vacation that could be used in subsequent periods by associates in excess of the vested amount payable upon termination.
The expense, if properly recorded in 2000 through 2003, would have increased 2003 net earnings by $0.1 million and would have decreased net earnings by $0.4 million in 2002, $0.6 million in 2001, and $1.2 million in 2000. The cumulative impact on net earnings was a decrease of $2.1 million for this four-year period. The impact on 2004 net earnings was a positive $8 thousand. As the impact to prior year’s annual financial

 


 

Cerner Delivers Record New Business Bookings
3
statements was not material, Cerner recorded additional expense of $3.3 million, $2.1 million after-tax ($0.06 per share), in the 2004 third quarter to appropriately reflect the liability as of October 2, 2004. As previously reported, the Company revised its process for calculating the liability for accumulated vacation to accurately report this information in the future.
Earnings Conference Call
Cerner will host an earnings conference call to provide additional detail on third quarter results at 3:30 p.m. CDT on October 20, 2005. The dial-in number for the call is (617) 614-3669 with a pass code of Cerner. The replay number is (617) 801-6888 (Pass code: 42331029). The rebroadcast of the call will be available from approximately 6:00 p.m. CDT, October 20, through 6:00 p.m. CDT, October 23.
An audio Webcast will be available both live and archived on Cerner’s Web site at www.cerner.com under the About Cerner section (click Investors, then Presentations and Webcasts). A copy of the script used during the call will also be available at the same section of www.cerner.com.
Cerner Corp. is taking the paper chart out of healthcare, eliminating error, variance and waste in the care process. With more than 1,500 clients worldwide, Cerner is the leading supplier of healthcare information technology. The following are trademarks of Cerner: Cerner, Cerner Millennium, and Cerner’s logo. (Nasdaq:CERN), www.cerner.com.
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,” “could,” “well positioned,” “guidance,” “expects,” “comfortable,” “estimate” 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: quarterly operating results may vary, stock price may be volatile, changes in the healthcare industry, significant competition, the Company’s proprietary technology may be subjected to infringement claims or may be infringed upon, government regulations, the possibility of product-related liabilities, possible system errors or failures or defects in the performance of the Company’s software, risks associated with the Company’s global operations, the recruitment and retention of key personnel, risks related to doing business with third party suppliers, and the potential inconsistencies in sales forecasts compared to actual sales. 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.
# # #

 


 

CERNER CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
                                       
    Note (1)       Note (1) (2)       Note (3)       Note (3) (4)  
    Three Months                 Three Months          
    Ended       YTD       Ended       YTD  
(In thousands, except per share data)   October 1, 2005       October 1, 2005       October 2, 2004       October 2, 2004  
Revenue
                                     
System sales
  $ 110,173         315,315         82,882         252,247  
Support, maintenance and services
    175,208         495,460         140,123         401,141  
Reimbursed travel
    9,241         24,196         8,062         24,796  
 
                             
 
                                     
Total revenue
    294,622         834,971         231,067         678,184  
 
                                     
Margin
                                     
System sales
    68,497         196,543         57,156         170,945  
Support, maintenance and services
    160,820         458,114         128,898         364,989  
 
                             
 
                                     
Total margin
    229,317         654,657         186,054         535,934  
 
                             
 
                                     
Operating expenses
                                     
Sales and client service
    117,010         342,141         98,919         285,993  
Software development
    53,968         151,999         42,837         128,160  
General and administrative
    21,142         66,459         17,942         47,006  
 
                             
 
                                     
Total operating expenses
    192,120         560,599         159,698         461,159  
 
                             
 
                                     
Operating earnings
    37,197         94,058         26,356         74,775  
 
                                     
Interest income
    588         2,306         478         1,359  
Interest expense
    (1,946 )       (6,772 )       (2,063 )       (6,851 )
Other income
    310         387         52         2,892  
 
                             
 
                                     
Non-operating expense, net
    (1,048 )       (4,079 )       (1,533 )       (2,600 )
 
                                     
Earnings before income taxes
    36,149         89,979         24,823         72,175  
Income taxes
    (9,593 )       (31,100 )       (10,044 )       (28,953 )
 
                             
 
                                     
Net earnings
  $ 26,556         58,879         14,779         43,222  
 
                             
 
                                     
Basic earnings per share
  $ 0.70         1.59         0.41         1.20  
 
                             
 
                                     
Basic weighted average shares outstanding
    37,889         37,054         36,253         35,950  
 
                                     
Diluted earnings per share
  $ 0.67         1.51         0.39         1.15  
 
                             
 
                                     
Diluted weighted average shares outstanding
    39,897         38,940         37,653         37,422  
    Note 1: Includes a tax benefit of $4.8 million relating to the carryback of a capital loss generated by the sale of Zynx in the first quarter of 2004. The impact of this refund claim is a $4.8 million increase in net earnings and an increase in diluted earnings per share of $.12 for the three and nine months ended October 1, 2005.
 
    Note 2: Includes a charge for the write off of acquired in process research and development related to the acquisition of the medical business division of Vitalworks, Inc. The impact of this charge is a $3.9 million decrease, net of $2.4 million tax benefit, in net earnings and a decrease to diluted earnings per share of $.10 for the nine months ended October 1, 2005.
 
    Note 3: Includes a charge for vacation accrual of $3.3 million included in General and administrative. The impact of this charge is a $2.1 million decrease, net of $1.2 million tax benefit, in net earnings and a decrease to diluted earnings per share of $.06 for the three and nine months ended October 2, 2004.
 
    Note 4: Includes a gain on the sale of Zynx Health Incorporated. The impact of this gain is a $1.8 million increase, net of $1.2 million tax expense, in net earnings and an increase to diluted earnings per share of $.05 for the nine months ended October 2, 2004.

 


 

CERNER CORPORATION
NON-GAAP
CONSOLIDATED STATEMENTS OF EARNINGS
                                       
    Three Months                 Three Months          
    Ended       YTD       Ended       YTD  
(In thousands, except per share data)   October 1, 2005       October 1, 2005       October 2, 2004       October 2, 2004  
Revenue
                                     
System sales
  $ 110,173         315,315         82,882         252,247  
Support, maintenance and services
    175,208         495,460         140,123         401,141  
Reimbursed travel
    9,241         24,196         8,062         24,796  
 
                             
 
                                     
Total revenue
    294,622         834,971         231,067         678,184  
 
                                     
Margin
                                     
System sales
    68,497         196,543         57,156         170,945  
Support, maintenance and services
    160,820         458,114         128,898         364,989  
 
                             
 
                                     
Total margin
    229,317         654,657         186,054         535,934  
 
                             
 
                                     
Operating expenses
                                     
 
                                     
Sales and client service
    117,010         342,141         98,919         285,993  
Software development
    53,968         151,999         42,837         128,160  
General and administrative
    21,142         60,077         14,596         43,660  
 
                             
 
                                     
Total operating expenses
    192,120         554,217         156,352         457,813  
 
                             
 
                                     
Operating earnings
    37,197         100,440         29,702         78,121  
 
                                     
Interest income
    588         2,306         478         1,359  
Interest expense
    (1,946 )       (6,772 )       (2,063 )       (6,851 )
Other income
    310         387         52         (131 )
 
                             
 
                                     
Non-operating expense, net
    (1,048 )       (4,079 )       (1,533 )       (5,623 )
 
                                     
Earnings before income taxes
    36,149         96,361         28,169         72,498  
Income taxes
    (14,387 )       (38,335 )       (11,314 )       (29,026 )
 
                             
 
                                     
Net earnings
  $ 21,762         58,026         16,855         43,472  
 
                             
 
                                     
Basic earnings per share
  $ 0.57         1.57         0.46         1.21  
 
                             
 
                                     
Basic weighted average shares outstanding
    37,889         37,054         36,253         35,950  
 
                                     
Diluted earnings per share
  $ 0.55         1.49         0.45         1.16  
 
                             
 
                                     
Diluted weighted average shares outstanding
    39,897         38,940         37,653         37,422  
RECONCILIATION OF NON-GAAP
TO GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
                                       
    Three Months                 Three Months          
    Ended       YTD       Ended       YTD  
(In thousands, except per share data)   October 1, 2005       October 1, 2005       October 2, 2004       October 2, 2004  
 
                                     
Non-GAAP net income
  $ 21,762         58,026         16,855         43,472  
Tax benefit on sale of Zynx
    4,794         4,794                  
IP R&D write-off
            (6,382 )                
Income tax effect
            2,441                  
Vacation accrual
                    (3,346 )       (3,346 )
Income tax effect
                    1,270         1,270  
Gain on sale of Zynx
                            3,023  
Income tax effect
                            (1,197 )
 
                             
 
                                     
GAAP net income
  $ 26,556         58,879         14,779         43,222  
 
                             
 
                                     
Basic earnings per share
  $ 0.70         1.59         0.41         1.20  
 
                             
 
                                     
Basic weighted average shares outstanding
    37,889         37,054         36,253         35,950  
 
                                     
Diluted earnings per share
  $ 0.67         1.51         0.39         1.15  
 
                             
 
                                     
Diluted weighted average shares outstanding
    39,897         38,940         37,653         37,422  

 


 

CERNER CORPORTATION
CONSOLIDATED BALANCE SHEETS
                 
(In thousands)   October 1,     January 1,  
    2005     2005  
Assets
               
 
               
Cash and cash equivalents
  $ 134,186       189,784  
Receivables, net
    316,718       282,199  
Inventory
    8,604       7,373  
Prepaid expenses and other
    54,439       30,117  
 
           
 
               
Total current assets
    513,947       509,473  
 
               
Property and equipment, net
    268,012       230,440  
Software development costs, net
    169,025       157,765  
Goodwill, net
    116,455       54,600  
Intangible assets, net
    64,663       22,690  
Other assets
    10,405       7,297  
 
           
 
               
Total assets
  $ 1,142,507       982,265  
 
           
 
               
Liabilities
               
 
               
Accounts payable
  $ 54,423       37,008  
Current installments of long-term debt
    21,924       21,908  
Note payable to bank
    20,000        
Deferred revenue
    88,244       77,445  
Deferred income taxes
    16,307       430  
Accrued payroll and tax withholdings
    63,381       55,819  
Other accrued expenses
    13,912       6,634  
 
           
 
               
Total current liabilities
    278,191       199,244  
 
           
 
               
Long-term debt
    90,044       108,804  
Deferred income taxes
    71,855       69,863  
Deferred revenue
    5,374       5,703  
 
           
 
               
Total liabilities
    445,464       383,614  
 
           
 
               
Minority owners’ equity interest in subsidiary
    1,286       1,166  
 
               
Stockholders’ Equity
               
Common stock
    397       381  
Additional paid-in capital
    313,873       271,116  
Retained earnings
    402,890       344,011  
Treasury stock, at cost (1,502,999 shares in 2005 and 2004)
    (26,793 )     (26,793 )
Foreign currency translation adjustment
    5,390       8,770  
 
           
 
               
Total stockholders’ equity
    695,757       597,485  
 
               
Total liabilities and equity
  $ 1,142,507       982,265