EX-99.1 2 c19465exv99w1.htm PRESS RELEASE exv99w1
 

Exhibit 99.1
Investors Contact: Allan Kells, (816) 201-2445, akells@cerner.com
Media Contact: Kay Hawes, (816) 201-1326, kay.hawes@cerner.com
Cerner’s Internet Home Page: www.cerner.com
Cerner Reports Third Quarter 2007 Results
Strong Earnings Growth and Margin Expansion
KANSAS CITY, Mo. — Oct. 18, 2007— Cerner Corp. (NASDAQ: CERN) today announced results for the 2007 third quarter that ended Sept. 29, delivering strong margin expansion and earnings growth.
Bookings in the third quarter 2007 were $356.7 million, which is up 1 percent from the third quarter of 2006. Year-to-date 2007 bookings were $1.10 billion, up 19 percent compared to $926.1 million of bookings in the same period of 2006. Year-to-date 2007 bookings exclude a $97.8 million booking in the second quarter of 2007 related to Cerner’s participation in the National Health Service (NHS) initiative to automate clinical processes and digitize medical records in England. Third quarter revenue increased 8 percent over the year-ago period to $372.9 million. Year-to-date 2007 revenue increased 13 percent to $1.13 billion.
On a Generally Accepted Accounting Principles (GAAP) basis, third quarter 2007 net earnings were $35.8 million, and diluted earnings per share were $0.43. Third quarter 2006 GAAP net earnings were $26.7 million, and diluted earnings per share were $0.33.
Adjusted (non-GAAP) Earnings
Adjusted third quarter 2007 net earnings were $38.4 million, which is 30 percent higher than the $29.6 million of adjusted net earnings in the third quarter of 2006. Adjusted diluted earnings per share were $0.46 in the third quarter of 2007 compared to $0.36 in the third quarter of 2006. Analysts’ consensus estimate for third quarter 2007 adjusted diluted earnings per share was $0.45.
Adjusted net earnings and diluted earnings per share exclude the impact of adopting Statement of Financial Accounting Standards (SFAS) No. 123R, Share-Based Payment,

 


 

which requires the expensing of stock options. The Company provides earnings with and without stock options expense because earnings excluding this expense are used by management along with GAAP results to analyze our business, make strategic decisions, and for management compensation purposes. 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. 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.’
Other Third Quarter Highlights:
    Cash collections of $402 million and operating cash flow of $80 million.
 
    Days sales outstanding of 89 days compared to 93 days in the year-ago quarter.
 
    Total revenue backlog of $3.12 billion, up 31 percent over the year-ago quarter. This is comprised of $2.59 billion of contract backlog and $528.9 million of support and maintenance backlog.
 
    458 Cerner MillenniumÒ solution implementations were completed. Cerner has now turned on more than 7,200 Cerner Millennium solutions at more than 1,200 client facilities worldwide.
“We are pleased with our solid results in the third quarter,” said Neal Patterson, Cerner co-founder, chairman and chief executive officer. “Our focus on margin expansion is reflected in the very strong earnings growth we achieved this quarter.
“Our position as a leader in the global healthcare information technology industry was validated by record attendance of more than 6,700 people from 10 countries at Cerner’s Health Conference. Not only is this the largest client gathering in our company’s history, the event also included more than 100 exhibiting companies, making it a major industry conference as well.
“With an unmatched depth and breadth of solutions and services and a strategic footprint across acute care, ambulatory care, retail pharmacy, laboratory, pharmaceutical companies, and employers, Cerner is uniquely positioned to have a meaningful impact on the worldwide health economy,” Patterson said.

 


 

Future Period Guidance
The company expects revenue in the fourth quarter of 2007 to be approximately $405 million to $415 million. For the year 2007, Cerner expects revenue between $1.53 billion and $1.54 billion, or 11 to 12 percent over 2006.
Cerner expects adjusted diluted earnings per share before stock options expense in the fourth quarter to be between $0.50 and $0.51. This brings expectations for adjusted EPS before stock options expense for the full year 2007, to $1.73 to $1.74. The company expects SFAS No. 123R share-based compensation expense to reduce diluted earnings per share in the fourth quarter and full year by approximately $0.04 and $0.13, respectively, leading to expected diluted GAAP earnings per share between $0.46 and $0.47 for the fourth quarter and between $1.60 to $1.61 for the full year.
Cerner expects new business bookings in the fourth quarter of 2007 to be between $380 million and $400 million.
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 Oct. 18. The dial-in number for the conference call is (617) 597-5396; 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 5:30 p.m. CDT, Oct. 18 through 11:59 p.m. CDT, Oct 21. The dial-in number for the re-broadcast is (617) 801-6888; the passcode is 74182820.
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.

 


 

About Cerner
Cerner Corp. is taking the paper chart out of healthcare, eliminating error, variance and waste in the care process. With more than 6,000 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 “positioned,” “guidance” and “expects” 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: 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 subjected to infringement claims or may be infringed upon; risks associated with our global operations; our potential failure to effectively hedge against foreign currency exchange rate fluctuations; risks associated with the recruitment and retention of key personnel; risks related to third party suppliers; risks inherent with business acquisitions; changing political, economic and regulatory influences; government regulation; significant competition and market changes; variations in our quarterly operating results; and, potential inconsistencies in our 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
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
                                       
    Three Months               Three Months            
    Ended       YTD     Ended       YTD    
(In thousands, except per share data)   September 29, 2007 (1)       September 29, 2007 (1)     September 30, 2006 (2)       September 30, 2006 (2)    
 
                                     
Revenue
                                     
System sales
  $ 115,272         368,238       125,180         356,394    
Support, maintenance and services
    249,086         729,186       210,265         612,068    
Reimbursed travel
    8,578         27,952       10,007         28,787    
 
                             
 
                                     
Total revenue
    372,936         1,125,376       345,452         997,249    
 
                                     
Margin
                                     
System sales
    81,415         231,854       77,967         222,094    
Support, maintenance and services
    233,712         682,289       197,682         573,141    
 
                             
 
                                     
Total margin
    315,127         914,143       275,649         795,235    
 
                             
 
                                     
Operating expenses
                                     
Sales and client service
    164,380         487,382       144,198         425,599    
Software development (Includes amortization of software development costs of $13,375,000, $40,063,000, $10,798,000 and $32,419,000, respectively.)
    65,609         194,305       62,160         182,064    
 
                                     
General and administrative
    28,536         82,878       25,414         71,788    
 
                             
 
                                     
Total operating expenses
    258,525         764,565       231,772         679,451    
 
                             
 
                                     
Operating earnings
    56,602         149,578       43,877         115,784    
 
                                     
Interest income
    2,867         9,357       3,051         8,232    
Interest expense
    (3,057 )       (9,003 )     (3,064 )       (9,416 )  
Other income
    (402 )       (1,140 )     (33 )       2,026    
 
                             
 
                                     
Non-operating income (expense), net
    (592 )       (786 )     (46 )       842    
 
                                     
Earnings before income taxes
    56,010         148,792       43,831         116,626    
Income taxes
    (20,169 )       (54,256 )     (17,103 )       (45,881 )  
 
                             
 
                                     
Net earnings
  $ 35,841         94,536       26,728         70,745    
 
                             
 
                                     
Basic earnings per share
  $ 0.45         1.19       0.34         0.91    
 
                             
 
                                     
Basic weighted average shares outstanding
    79,634         79,190       77,844         77,508    
 
                                     
Diluted earnings per share
  $ 0.43         1.14       0.33         0.87    
 
                             
 
                                     
Diluted weighted average shares outstanding
    83,382         83,043       81,796         81,536    
Note 1: Operating expenses for the three and nine months ended September 29, 2007 include share-based compensation expense. The impact of this expense for the quarter is a $2.5 million decrease, net of $1.6 million tax benefit, in net earnings and a decrease to diluted earnings per share of $.03. The allocation of share based compensation expense for the quarter is $2.3 million to Sales and client service, $.7 million to Software development and $1.1 million to General and administrative. The impact of this expense for the nine month period is a $7.6 million decrease, net of $4.7 million tax benefit, in net earnings and a decrease to diluted earnings per share of $.09. The allocation of share-based compensation expense for the nine month period is $7.3 million to Sales and client service, $2.3 million to Software development and $2.7 million to General and administrative.
Note 2: Operating expenses for the three and nine months ended September 30, 2006 include share based compensation expense. The impact of this expense for the quarter is a $2.9 million decrease, net of $1.8 million tax benefit, in net earnings and a decrease to diluted earnings per share of $.03. The allocation of share based compensation expense for the quarter is $2.8 million to Sales and client service, $1.1 million to Software development and $.8 million to General and administrative. The impact of this expense for the nine month period is a $8.9 million decrease, net of $5.5 million tax benefit, in net earnings and a decrease to diluted earnings per share of $.11. The allocation of share-based compensation expense for the nine month period is $8.6 million to Sales and client service, $3.3 million to Software development and $2.5 million to General and administrative.

 


 

CERNER CORPORATION
Reconciliation of Adjusted Net Earnings and Adjusted Diluted Earnings Per Share to
GAAP Net Earnings and Diluted Earnings Per Share1
                 
     
    Three Months Ended   Three Months Ended
Net Earnings   September 29, 2007   September 30, 2006
     
(In thousands)
               
Net earnings
  $ 35,841     $ 26,728  
Share-based compensation expense
    4,094       4,688  
Income tax benefit of share-based compensation
    (1,566 )     (1,793 )
     
Adjusted net earnings (non-GAAP)
  $ 38,369     $ 29,623  
     
 
               
Diluted Earnings Per Share
               
Diluted earnings per share
  $ 0.43     $ 0.33  
Share-based compensation expense
    0.03       0.03  
     
Adjusted diluted earnings per share (non-GAAP)
  $ 0.46     $ 0.36  
     
Note 1: The presentation of Adjusted Net Earnings, a Non-GAAP financial measure, is 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 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 calculation. Adjusted Net Earnings includes adjustments to Net Earnings that the Company considers unique, infrequent or excluded by management in its analysis of the performance of the Company and management. The Company provides earnings with and without stock options expense because earnings excluding this expense are used by management along with GAAP results to analyze our business, make strategic decisions, and for management compensation purposes. The Company believes that Adjusted Net Earnings is 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.

 


 

CERNER CORPORATION
CONSOLIDATED BALANCE SHEETS
                 
    September 29,     December 30,  
(In thousands)   2007     2006  
Assets
               
 
               
Cash and cash equivalents
  $ 194,216       162,545  
Short-term investments
    114,211       146,239  
Receivables, net
    365,709       361,424  
Inventory
    12,861       18,084  
Prepaid expenses and other
    54,770       55,272  
Deferred income taxes
    2,183       2,423  
 
           
 
               
Total current assets
    743,950       745,987  
 
               
Property and equipment, net
    478,227       357,942  
Software development costs, net
    197,516       187,788  
Goodwill, net
    144,074       128,819  
Intangible assets, net
    50,437       54,428  
Other assets
    17,596       16,426  
 
           
 
               
Total assets
  $ 1,631,800       1,491,390  
 
           
 
               
Liabilities
               
 
               
Accounts payable
  $ 63,809       79,735  
Current installments of long-term debt
    14,032       20,242  
Deferred revenue
    92,785       93,699  
Accrued payroll and tax withholdings
    78,092       77,914  
Other accrued expenses
    17,380       29,741  
 
           
 
               
Total current liabilities
    266,098       301,331  
 
           
 
               
Long-term debt
    190,970       187,391  
Deferred income taxes
    76,245       68,693  
Deferred revenue
    16,233       14,557  
 
           
 
               
Total liabilities
    549,546       571,972  
 
           
 
               
Minority owners’ equity interest in subsidiary
    1,286       1,286  
 
               
Stockholders’ Equity
               
 
               
Common stock
    798       784  
Additional paid-in capital
    438,355       376,595  
Retained earnings
    634,689       540,153  
Foreign currency translation adjustment
    7,126       600  
 
           
 
               
Total stockholders’ equity
    1,080,968       918,132  
 
               
Total liabilities and equity
  $ 1,631,800       1,491,390