EX-99.1 2 a4746397ex991.txt CERNER CORPORATION EXHIBIT 99.1 Exhibit 99.1 Cerner Delivers Record Third Quarter New Business Bookings; Cash Flow Also at Record Levels KANSAS CITY, Mo.--(BUSINESS WIRE)--Oct. 20, 2004--Cerner Corporation (Nasdaq:CERN) today announced results for the 2004 third quarter ended October 2, 2004, delivering record third quarter bookings and record cash flow. Diluted earnings per share were $0.39 in the third quarter, which includes a prior period adjustment related to accrued vacation pay that reduced earnings per share by $0.06. Earnings per share prior to this adjustment were $0.45, compared to $0.33 in the third quarter of 2003. Analysts' consensus estimates for third quarter earnings per share were $0.44. For the year, diluted earnings per share were $1.15, including a gain on the sale of Zynx Health in the first quarter that increased earnings per share by $0.05 and the accrued vacation pay adjustment that decreased earnings per share by $0.06. Third quarter revenues increased 12 percent to $231.1 million compared to $206.3 million in the year-ago quarter. Net earnings in the quarter were $14.8 million, which includes the adjustment for accrued vacation pay of $2.1 million, net of $1.2 million of tax. Net earnings prior to this adjustment were $16.9 million, compared to $12.0 million in the third quarter of 2003. New business bookings in the third quarter were $215.8 million, a record for the third quarter, and an increase of 6 percent compared to $203.9 million in the third quarter of 2003. The Company generated record operating cash flow of $45.2 million in the third quarter driven by strong cash collections and reflective of continued operational improvements. Other Third Quarter Highlights: -- Strong cash collections of $228.1 million. -- Days Sales Outstanding (DSOs) of 104 days, which is 8 days lower than a year ago. -- Total revenue backlog of $1.46 billion, up 28 percent over the year-ago quarter. This is comprised of $1.13 billion of contract backlog and $335.6 million of support and maintenance backlog. -- 293 Cerner Millennium(R) solutions were implemented during the quarter. Cerner has now turned on over 3,400 Cerner Millennium solutions at more than 670 client facilities worldwide. -- Computerized Physician Order Entry was brought live at more than 30 locations, bringing the total to more than 350. "Our third quarter results reflect continued strong performance in a very good industry environment," said Neal Patterson, Cerner's co-founder, Chairman and Chief Executive Officer. "I am particularly pleased with the strength of our cash flow performance, which is a reflection of our ability to deliver value to our clients." "We feel very good about Cerner's competitive position in the healthcare information technology industry, and Cerner is focused on several initiatives that we believe will strengthen that position," added Patterson. "Our healthcare system is increasingly looking toward information technology as a solution to major systemic issues it faces, and Cerner is the best-positioned company in the world to help healthcare providers leverage information technology to improve patient safety while eliminating the unnecessary waste, variance, error, delay and friction in the current healthcare system." Future Period Guidance Cerner expects earnings per share in the fourth quarter of 2004 to be between $0.54 and $0.55. The Company expects revenue in the fourth quarter to be approximately $242 million to $247 million. Cerner expects bookings revenue in the fourth quarter to be between $225 million and $250 million. The Company also indicated that it expects to generate full-year operating cash flow at the high end or above its original guidance range of $120 million to $140 million. For 2005, the Company expects earnings per share between $2.05 and $2.10. Cerner expects revenue for 2005 to be between $1.01 billion and $1.03 billion. The Company also indicated that it expects to continue showing improvements in operating and free cash flow in 2005. Accrued Vacation Pay Adjustment 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 is a decrease of $2.1 million for this four-year period. The impact on 2004 net earnings is a positive $8 thousand. As the impact to prior year's annual financial 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. The Company has 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 details at 3:30 p.m. CT on October 20, 2004. The dial-in number for the call is 617-614-4078 and the replay number is 617-801-6888 (Pass code: 78693492). The call will also be Web cast and available both live and archived on Cerner's Web site at www.cerner.com in the Investors' section under Presentation and Webcasts. Please access the site fifteen minutes early to register and to download and install any necessary audio software. For those who cannot listen to the live broadcast, replays will be made available shortly after the call and will run for two weeks. A copy of the script used during the call will also be available at www.cerner.com in the Investors' section under Presentation and Webcasts. 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 may contain 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 "reflect", "continued", "ability", "feel", "focused", "would", "believe", "expects", "guidance", or 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, market risk of investments, potential impairment of goodwill, changes in the healthcare industry, significant competition, the Company's proprietary technology may be subjected to infringement claims or may be infringed upon, regulation of the Company's software by the U.S. Food and Drug Administration or other government regulation, 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 operation and the recruitment and retention of key personnel. 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 STATEMENTS OF EARNINGS Note(1) Note(1)(2) Three Months Three Months Ended YTD Ended YTD Oct. 2, Oct. 2, Sept. 27, Sept. 27, (In thousands, except 2004 2004 2003 2003 per share data) ----------- ----------- ---------- --------- Revenue System sales $ 82,882 252,247 80,193 241,529 Support, maintenance and services 140,123 401,141 118,774 347,946 Reimbursed travel 8,062 24,796 7,325 22,703 ----------- ----------- ---------- --------- Total revenue 231,067 678,184 206,292 612,178 Margin System sales 57,156 170,945 54,144 155,721 Support, maintenance and services 128,898 364,989 106,713 309,674 ----------- ----------- ---------- --------- Total margin 186,054 535,934 160,857 465,395 ----------- ----------- ---------- --------- Operating expenses Sales and client service 98,919 285,993 84,794 259,531 Software development 42,837 128,160 39,255 115,170 General and administrative 17,942 47,006 15,083 41,374 ----------- ----------- ---------- --------- Total operating expenses 159,698 461,159 139,132 416,075 ----------- ----------- ---------- --------- Operating earnings 26,356 74,775 21,725 49,320 Interest income 478 1,359 294 894 Interest expense (2,063) (6,851) (1,997) (6,046) Other income 52 2,892 24 167 ----------- ----------- ---------- --------- Non-operating expense, net (1,533) (2,600) (1,679) (4,985) Earnings before income taxes 24,823 72,175 20,046 44,335 Income taxes (10,044) (28,953) (7,999) (17,752) ----------- ----------- ---------- --------- Net earnings $ 14,779 43,222 12,047 26,583 =========== =========== ========== ========= ----------- ----------- ---------- --------- Basic earnings per share $ 0.41 1.20 0.34 0.75 =========== =========== ========== ========= Basic weighted average shares outstanding 36,253 35,950 35,359 35,437 ----------- ----------- ---------- --------- Diluted earnings per share $ 0.39 1.15 0.33 0.73 =========== =========== ========== ========= Diluted weighted average shares outstanding 37,653 37,422 36,365 36,259 Note 1: Includes a charge for vacation accrual of $3.3 million included in General and adminstrative. 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 quarter and for 2004. Note 2: 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 2004. CERNER CORPORATION NON-GAAP CONSOLIDATED STATEMENTS OF EARNINGS Three Months Three Months Ended YTD Ended YTD Oct. 2, Oct. 2, Sept. 27, Sept. 27, (In thousands, except 2004 2004 2003 2003 per share data) ---------- ---------- ---------- ---------- Revenue System sales $ 82,882 252,247 80,193 241,529 Support, maintenance and services 140,123 401,141 118,774 347,946 Reimbursed travel 8,062 24,796 7,325 22,703 ---------- ---------- ---------- ---------- Total revenue 231,067 678,184 206,292 612,178 Margin System sales 57,156 170,945 54,144 155,721 Support, maintenance and services 128,898 364,989 106,713 309,674 ---------- ---------- ---------- ---------- Total margin 186,054 535,934 160,857 465,395 ---------- ---------- ---------- ---------- Operating expenses Sales and client service 98,919 285,993 84,794 259,531 Software development 42,837 128,160 39,255 115,170 General and administrative 14,596 43,660 15,083 41,374 ---------- ---------- ---------- ---------- Total operating expenses 156,352 457,813 139,132 416,075 ---------- ---------- ---------- ---------- Operating earnings 29,702 78,121 21,725 49,320 Interest income 478 1,359 294 894 Interest expense (2,063) (6,851) (1,997) (6,046) Other income 52 (131) 24 167 ---------- ---------- ---------- ---------- Non-operating expense, net (1,533) (5,623) (1,679) (4,985) Earnings before income taxes 28,169 72,498 20,046 44,335 Income taxes (11,314) (29,026) (7,999) (17,752) ---------- ---------- ---------- ---------- Net earnings $ 16,855 43,472 12,047 26,583 ========== ========== ========== ========== ---------- ---------- ---------- ---------- Basic earnings per share $ 0.46 1.21 0.34 0.75 ========== ========== ========== ========== Basic weighted average shares outstanding 36,253 35,950 35,359 35,437 ---------- ---------- ---------- ---------- Diluted earnings per share $ 0.45 1.16 0.33 0.73 ========== ========== ========== ========== Diluted weighted average shares outstanding 37,653 37,422 36,365 36,259 RECONCILIATION OF NON-GAAP TO GAAP CONSOLIDATED STATEMENTS OF EARNINGS Three Months Three Months Ended YTD Ended YTD Oct. 2, Oct. 2, Sept. 27, Sept. 27, (In thousands, except 2004 2004 2003 2003 per share data) ---------- ---------- ---------- ---------- Non-GAAP net income $ 16,855 43,472 12,047 26,583 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 $ 14,779 43,222 12,047 26,583 ========== ========== ========== ========== Basic earnings per share $ 0.41 1.20 0.34 1.08 ========== ========== ========== ========== Basic weighted average shares outstanding 36,253 35,950 35,359 35,437 Diluted earnings per share $ 0.39 1.15 0.33 1.03 ========== ========== ========== ========== Diluted weighted average shares outstanding 37,653 37,422 36,365 36,259 CERNER CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands) October 2, January 3, 2004 2004 Assets Cash and cash equivalents $ 160,947 121,839 Receivables 262,376 256,574 Inventory 10,521 12,434 Prepaid expenses and other 33,071 38,132 -------------- --------------- Total current assets 466,915 428,979 Property and equipment, net 217,090 204,953 Software development costs, net 153,963 141,090 Goodwill, net 53,682 51,573 Intangible assets, net 22,335 24,036 Investments, net 332 692 Other assets 2,842 8,017 -------------- --------------- Total assets $ 917,159 859,340 ============== =============== Liabilities Accounts payable $ 17,164 20,753 Current installments of long-term debt 24,711 21,162 Deferred revenue 60,202 64,879 Deferred income taxes 15,654 15,586 Accrued payroll and tax withholdings 55,736 45,004 Other accrued expenses 11,233 10,095 -------------- --------------- Total current liabilities 184,700 177,479 -------------- --------------- Long-term debt, net 110,360 124,570 Deferred income taxes 63,871 59,500 Deferred revenue 1,551 1,945 -------------- --------------- Total liabilities 360,482 363,494 -------------- --------------- Minority owners' equity interest in subsidiary 1,166 1,166 Stockholders' Equity Common stock 378 371 Additional paid-in capital 254,407 236,969 Retained earnings 322,585 279,363 Treasury stock, at cost (1,502,999 shares in 2004 and 2003) (26,793) (26,793) Foreign currency translation adjustment 4,934 4,770 -------------- --------------- Total stockholders' equity 555,511 494,680 Total liabilities and equity $ 917,159 859,340 ============== =============== CONTACT: Cerner Corporation Investors: Allan Kells, 816-201-2445 akells@cerner.com or Media: Justin Scott, 816-201-6438 jscott@cerner.com or Cerner's Internet Home Page: http://www.cerner.com