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Exhibit 99.1
Cerner Reports Second Quarter 2011 Results
Record Revenue and Bookings, Strong Earnings and Cash Flow
Raises Outlook for Year
KANSAS CITY, Mo. — July 28, 2011 — Cerner Corporation (Nasdaq: CERN) today announced results for the 2011 second quarter that ended July 2, 2011, delivering strong levels of bookings, revenue, earnings and cash flow.
Bookings in the second quarter of 2011 were $649.9 million, an increase of 39 percent compared to second quarter 2010 bookings of $467.8 million. Bookings were an all-time high for a second quarter and the second highest result in company history.
Second quarter revenue was $524.2 million, an increase of 15 percent compared to $456.0 million in the year-ago period.
On a Generally Accepted Accounting Principles (GAAP) basis, second quarter 2011 net earnings were $72.0 million and diluted earnings per share were $0.42. Second quarter 2010 GAAP net earnings were $55.5 million and diluted earnings per share were $0.33.
The number of shares and the per share amounts for all periods presented within reflect the two-for-one stock split effective June 24, 2011.
Adjusted (non-GAAP) Earnings
Adjusted second quarter 2011 net earnings were $76.1 million, an increase of 29 percent compared to $59.1 million of adjusted net earnings in the second quarter of 2010. Adjusted diluted earnings per share were $0.44 in the second quarter of 2011 compared to $0.35 of adjusted diluted earnings per share in the year-ago quarter. Analysts’ consensus estimate for second quarter 2011 adjusted diluted earnings per share was $0.43.
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 second quarter 2011 and 2010 net earnings and diluted earnings per share exclude share-based compensation expense, which reduced second quarter 2011 net earnings and diluted earnings per share by $4.1 million and $0.02, respectively, and reduced second quarter 2010 net earnings and diluted earnings per share by $3.7 million and $0.02, respectively.
Other Second Quarter Highlights:
    Second quarter cash collections of $509.0 million and operating cash flow of $122.1 million.
    Second quarter free cash flow of $71.2 million, which is an all-time high level of free cash flow in a second quarter. 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 88 days, which is the same as the year-ago quarter.
    Total revenue backlog of $5.41 billion, up 21 percent over the year-ago quarter. This is comprised of $4.74 billion of contract backlog and $678.6 million of support and maintenance backlog.

 


 

“I am very pleased with our second quarter results,” said Neal Patterson, Cerner chairman, CEO, president and co-founder. “Our outstanding bookings, revenue, earnings, and cash flow performance are evidence of a very strong market and Cerner’s leadership position. We expect our market opportunity to remain robust for years to come as we benefit from demand driven by stimulus, health care reform, and other regulatory requirements, such as ICD-10 codes, that can be addressed with our solutions and services. We are also making ongoing investments in new solutions and services that strengthen our alignment with our existing clients and also allow us to address new large market segments, such as employers. We believe these investments will increase Cerner’s role in transforming health care while also fueling another wave of growth beyond stimulus,” Patterson said.
Future Period Guidance
Cerner currently expects:
    Third quarter 2011 revenue between $520 million and $540 million.
    Third quarter 2011 adjusted diluted earnings per share before share based compensation expense between $0.46 and $0.48.
    Third quarter 2011 new business bookings between $560 million and $600 million.
    Full-year 2011 revenue between $2.09 billion and $2.12 billion, up from a previous range of $2.07 billion to $2.12 billion.
    Full-year 2011 adjusted diluted earnings per share before share-based compensation expense between $1.80 and $1.83, up from a prior range of $1.78 to $1.81.
    Share based compensation expense to reduce diluted earnings per share by approximately $0.02 – $0.03 in the third quarter of 2011 and between $0.10 and $0.11 for the year.
Earnings Conference Call
Cerner will host an earnings conference call to provide additional detail on these results at 3:30 p.m. CT on July 28. The dial-in number for the conference call is (617) 213-8066; 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, July 28 through 11:59 p.m. CT, July 31. The dial-in number for the re-broadcast is (617) 801-6888; the passcode is 51684145.
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 health care by eliminating error, variance and waste for health care providers and consumers around the world. Cerner® solutions optimize processes for health care 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 health care commerce system. These solutions are licensed by more than 9,000 facilities around the world, including approximately 2,600 hospitals; 3,500 physician practices covering more than 30,000 physicians; 500 ambulatory facilities, such as laboratories, ambulatory centers, cardiac facilities, radiology clinics and surgery centers; 800 home-health facilities; and 1,600 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 “expect,” “believe,” “guidance” 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 dependence on third party suppliers; risks inherent with business acquisitions; the potential for losses resulting from asset impairment charges; risks associated with the ongoing adverse financial market environment and uncertainty in global economic conditions; changing political, economic and regulatory influences; government regulation; significant competition and market changes; variations in our quarterly operating results; potential inconsistencies in our sales forecasts compared to actual sales; 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 risks, uncertainties and 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 six months ended July 2, 2011 and July 3, 2010
(unaudited)
                                 
(In thousands, except per share data)   Three Months Ended     Six Months Ended  
    2011 (1)     2010 (1)     2011 (1)     2010 (1)  
Revenues
                               
System sales
  $        157,145     $        135,902     $        297,524           $        252,853  
Support, maintenance and services
    355,330       311,575       696,324       618,620  
Reimbursed travel
    11,748       8,524       22,039       15,865  
 
                       
Total revenues
    524,223       456,001       1,015,887       887,338  
 
                               
Margin
                               
System sales
    95,258       83,039       177,538       155,162  
Support, maintenance and services
    330,483       294,751       649,187       585,881  
 
                       
Total margin
    425,741       377,790       826,725       741,043  
 
                       
 
                               
Operating expenses
                               
Sales and client service
    210,213       190,030       411,561       377,623  
Software development
    69,790       67,988       140,934       134,767  
General and administrative
    37,765       33,420       72,558       66,645  
 
                       
Total operating expenses
    317,768       291,438       625,053       579,035  
 
                       
 
                               
Operating earnings
    107,973       86,352       201,672       162,008  
 
                               
Interest income
    3,949       2,147       7,427       5,804  
Interest expense
    (1,074 )     (1,726 )     (2,576 )     (3,600 )
Other income (expense), net
    5       (495 )     40       (571 )
 
                       
Total other income (expense), net
    2,880       (74 )     4,891       1,633  
 
                       
 
                               
Earnings before income taxes
    110,853       86,278       206,563       163,641  
Income taxes
    (38,809 )     (30,801 )     (69,963 )     (57,878 )
 
                       
Net earnings
  $ 72,044     $ 55,477     $ 136,600     $ 105,763  
 
                       
 
                               
Basic earnings per share
  $ 0.43     $ 0.34     $ 0.81     $ 0.64  
 
                       
 
Basic weighted average shares outstanding
    168,299       164,669       167,706       164,291  
 
                               
Diluted earnings per share
  $ 0.42     $ 0.33     $ 0.79     $ 0.62  
 
                       
 
                               
Diluted weighted average shares outstanding
    173,591       170,673       173,128       170,447  
Note 1: Operating expenses for the three and six months ended July 2, 2011 and July 3, 2010 include share-based compensation expense. The impact of this expense on net earnings is presented below:
                                 
    Three Months Ended     Six Months Ended  
    2011     2010     2011     2010  
Sales and client service
  $ 2,550     $ 2,411     $ 5,836     $ 4,779  
Software development
    2,415       1,636       4,261       3,042  
General and administrative
    1,603       1,799       3,832       3,532  
 
                       
Total share-based compensation
    6,568       5,846       13,929       11,353  
Amount of related income tax benefit
    (2,502 )     (2,178 )     (5,307 )     (4,229 )
 
                       
Net impact on net earnings
  $ 4,066     $ 3,668     $ 8,622     $ 7,124  
 
                       
Decrease to diluted earnings per share
  $ 0.02     $ 0.02     $ 0.05     $ 0.04  
 
                       


 

CERNER CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS
1
For the three and six months ended July 2, 2011 and July 3, 2010
(unaudited)
RECONCILIATION OF ADJUSTED NET EARNINGS AND ADJUSTED DILUTED EARNINGS PER SHARE TO GAAP NET EARNINGS AND DILUTED EARNINGS PER SHARE 1
                                 
 
  Three Months Ended     Six Months Ended  
(In thousands, except per share data)   2011     2010     2011     2010  
Net Earnings
                               
Net earnings
  $ 72,044     $ 55,477     $ 136,600     $ 105,763  
Share-based compensation expense2
    6,568       5,846       13,929       11,353  
Income tax benefit of share-based compensation2
    (2,502 )     (2,178 )     (5,307 )     (4,229 )
 
                       
Adjusted net earnings (non-GAAP)
  $ 76,110     $ 59,145     $ 145,222     $ 112,887  
 
                       
                                 
    Three Months Ended     Six Months Ended  
    2011     2010     2011     2010  
Diluted Earnings Per Share
                               
Diluted earnings per share2
  $ 0.42     $ 0.33     $ 0.79     $ 0.62  
Share-based compensation expense (net of tax)2
    0.02       0.02       0.05       0.04  
 
                       
Adjusted diluted earnings per share (non-GAAP)
  $ 0.44     $ 0.35     $ 0.84     $ 0.66  
 
                       
RECONCILIATION OF GAAP OPERATING CASH FLOW TO NON-GAAP FREE CASH FLOW 1
                                 
(In thousands)   Three Months Ended     Six Months Ended  
    2011     2010     2011     2010  
Cash flows from operating activities
  $ 122,127     $ 110,238     $ 248,628     $ 215,741  
Capital purchases 3
    (30,305 )     (23,903 )     (51,677 )     (56,011 )
Capitalized software development costs 3
    (20,589 )     (20,732 )     (41,055 )     (41,248 )
 
                       
Free cash flow (non-GAAP)
  $ 71,233     $ 65,603     $ 155,896     $ 118,482  
 
                       
Note 1: The presentation of Adjusted Net Earnings and Free Cash Flow, non-GAAP financial measures, are not meant to be considered in isolation, nor 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 share-based compensation 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 July 2, 2011 (unaudited) and January 1, 2011
(In thousands)
                 
             
    2011     2010  
Assets
               
 
               
Cash and cash equivalents
  $ 214,056     $ 214,511  
Short-term investments
    467,966       356,501  
Receivables, net
    504,290       476,905  
Inventory
    13,076       11,036  
Prepaid expenses and other
    105,197       83,272  
Deferred income taxes
    8,737       3,836  
             
 
Total current assets
    1,313,322       1,146,061  
 
Property and equipment, net
    497,770       498,829  
Software development costs, net
    247,709       244,848  
Goodwill
    189,194       161,374  
Intangible assets, net
    56,146       38,468  
Long-term investments
    329,990       264,467  
Other assets
    86,676       68,743  
 
           
 
Total assets
  $ 2,720,807     $ 2,422,790  
 
           
 
Liabilities and Shareholders’ Equity
               
Accounts payable
  $ 72,571     $ 65,035  
Current installments of long-term debt
    29,820       24,837  
Deferred revenue
    132,721       109,351  
Accrued payroll and tax withholdings
    90,908       86,921  
Other accrued expenses
    24,931       19,788  
 
           
 
Total current liabilities
    350,951       305,932  
 
Long-term debt
    84,871       67,923  
Deferred income taxes and other liabilities
    140,903       126,215  
Deferred revenue
    13,946       17,303  
 
           
 
Total liabilities
    590,671       517,373  
 
           
 
Shareholders’ Equity
               
Common stock
    1,689       1,681  
Additional paid-in capital
    689,190       616,972  
Retained earnings
    1,427,435       1,290,835  
Accumulated other comprehensive income (loss), net
    11,702       (4,191 )
 
           
Total Cerner Corporation shareholders’ equity
    2,130,016       1,905,297  
Noncontrolling interest
    120       120  
 
           
 
Total shareholders’ equity
    2,130,136       1,905,417  
 
           
 
Total liabilities and shareholders’ equity
  $ 2,720,807     $ 2,422,790