Cerner Delivers Record New Business Bookings; Revenue and Earnings Growth Strong.KANSAS CITY Kansas City, two adjacent cities of the same name, one (1990 pop. 149,767), seat of Wyandotte co., NE Kansas (inc. 1859), the other (1990 pop. 435,146), Clay, Jackson, and Platte counties, NW Mo. (inc. 1850). , Mo. -- Cerner Cerner Corporation (NYSE: CERN) is an international IT corporation in the healthcare industry with more than 7,700 employees. As of June 2006, approximately 1,900 associates in the United States and 300 associates in India were involved full-time in the software development Corp. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : CERN CERN or European Organization for Nuclear Research, nuclear and particle physics research center straddling the French-Swiss border W of Geneva, Switzerland. ) today announced results for the 2005 third quarter ended October October: see month. 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 all-time adj. Exceeding all others up to the present time: an all-time speed skating record. all-time Adjective Informal record. Third quarter bookings include $149.4 million of bookings for the initial phase of Cerner's contract with Fujitsu (company) Fujitsu - A Japanese elecronics corporation. Fujitsu owns ICL, Amdahl Corporation, and DMR. Home USA, Japan. Services Ltd. as part of the National Health Service (NHS NHS abbr. National Health Service NHS (in Britain) National Health Service ) initiative to automate To turn a set of manual steps into an operation that goes by itself. See automation. clinical processes and digitize To convert an image or signal into digital code by scanning, tracing on a graphics tablet or using an analog to digital conversion device. 3D objects can be digitized by a device with a mechanical arm that is moved onto all the corners. medical records in the Southern Cluster cluster, in astronomy: see star cluster; galaxy. (1) Two or more systems working together. See clustering. (2) Also called an "allocation unit" or "file allocation unit," it is some number of disk sectors that are treated as a unit. of England England, the largest and most populous portion of the United Kingdom of Great Britain and Northern Ireland (1991 pop. 46,382,050), 50,334 sq mi (130,365 sq km). It is bounded by Wales and the Irish Sea on the west and Scotland on the north. . 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 VACATION. That period of time between the end of one term and beginning of another. During vacation, rules and orders are made in such cases as are urgent, by a judge at his chambers. accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. 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 diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of 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 Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. 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 Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. 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 Millennium millennium [Lat.,=1,000 years], the period of 1,000 years in which, according to some schools of Christian eschatology, Christ will reign again gloriously on earth. Belief in the millennium, based on Rev. 20, has recurred in Christianity since the earliest times. (R) solution implementations were completed. Cerner has now turned on more than 4,500 Cerner Millennium solutions at nearly 900 client facilities worldwide. "I am very pleased with our record third quarter results," said Neal Patterson Neal L. Patterson is CEO of Cerner Corporation, a Kansas City-based medical software corporation. Cerner was founded in 1979 by Patterson with Paul Gorup and Cliff Illig. Patterson was featured in a USA Today , 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 United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , 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 Patterson, family of American journalists. Robert Wilson Patterson, 1850–1910, b. Chicago, grad. Williams, 1871, became (1871) a reporter on the Chicago Times and after 1873 was attached to the Chicago Tribune. . "A recently released study by the RAND Corporation Rand Corporation, research institution in Santa Monica, Calif.; founded 1948 and supported by federal, state, and local governments, as well as by foundations and corporations. Its principal fields of research are national security and public welfare. indicates the U.S. healthcare U.S. Healthcare is a now-defunct healthcare company. The logo had an apple. The merger with Aetna In 1996, the company merged with Aetna, calling it Aetna U.S. Healthcare. The U.S. Healthcare apple logo was next to the Aetna name, and U.S. Healthcare under it. U.S. 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 spark, in electricity: see arc. (language) SPARK - An annotated subset of Ada supported by tools supplied by Praxis Critical Systems (originally by PVL). http://sparkada.com. 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 Breadth The percentage of assets or stocks advancing relative to those unchanged or declining. Also the number of independent forecasts available per year. A stock picker forecasting returns to 100 stocks every quarter exhibits a breadth of 400, assuming each forecast is of solutions uniquely allow Cerner to connect physician offices, hospitals, clinics, laboratories, pharmacies This article is a list of major pharmacies (also known as chemists and drugstores) by country. Australia Pharmacies in Australia are mostly independently-owned by pharmacists, often operated as franchises of retail brands offered by the three major , and consumers' homes." Future Period Guidance The Company has increased it's it's 1. Contraction of it is. 2. Contraction of it has. See Usage Note at its. it's it is or it has it's be ~have guidance for 2005. The Company expects revenue in the fourth quarter of 2005 to be approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $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 Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge was not material, the Company recorded this tax benefit of $4.8 million in the third quarter of 2005. Third Quarter 2004 Accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. Vacation Pay Adjustment As reported on October 20, 2004, in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. 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 relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc periods prior to 2004 was understated by $3.3 million. While the Company was fully accrued for all vested vested adj. referring to having an absolute right or title, when previously the holder of the right or title only had an expectation. Examples: after 20 years of employment Larry Loyal's pension rights are now vested. (See: vest, vested remainder) vacation that would be subject to payout pay·out n. 1. The act or an instance of paying out. 2. A percentage of corporate earnings that is paid as dividends to shareholders. upon termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. , the Company understated the liability for accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. 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 statements was not material, Cerner recorded additional expense of $3.3 million, $2.1 million after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. ($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 CDT abbr. Central Daylight Time CDT Central Daylight Time CDT n abbr (US) (= Central Daylight Time) → hora de verano del centro; (BRIT 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 (1) A program written in a general-purpose programming language. Such languages are typically interpreted and less comprehensive than full-blown compiled languages. See scripting language and interpreter. 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 The discrepancy between what a party to a lawsuit alleges will be proved in pleadings and what the party actually proves at trial. In Zoning law, an official permit to use property in a manner that departs from the way in which other property in the same locality 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 With regard to computer memory, it means "temporary" and not "highly changeable," which is the usual meaning of the word. See volatile memory. 1. (programming) volatile - volatile variable. 2. (storage) volatile - See non-volatile storage. , changes in the healthcare industry, significant competition, the Company's proprietary technology may be subjected to infringement The encroachment, breach, or violation of a right, law, regulation, or contract. The term is most frequently used in reference to the invasion of rights secured by Copyright, patent, or trademark. 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 Global Operations is a first-person shooter computer game developed by Barking Dog Studios and published by both Crave Entertainment and Electronic Arts. It was released in March of 2002, following its public multiplayer beta version which contained only the Quebec map. , the recruitment recruitment /re·cruit·ment/ (re-krldbomact´ment) 1. the gradual increase to a maximum in a reflex when a stimulus of unaltered intensity is prolonged. 2. and retention of key personnel, risks related to doing business with third party suppliers, and the potential inconsistencies in sales forecasts Sales forecast A key input to a firm's financial planning process. External sales forecasts are based on historical experience, statistical analysis, and consideration of various macroeconomic factors. 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 STATEMENTS OF EARNINGS
Note Note
Note (1) (1)(2) Note (3) (3)(4)
Three Three
Months Months
Ended YTD Ended YTD
(In thousands, except per Oct, 1. Oct. 1, Oct. 2, Oct. 2,
share data) 2005 2005 2004 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 Oct. 1, Oct. 1, Oct. 2, Oct. 2,
share data) 2005 2005 2004 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 Oct. 1, Oct. 1, Oct. 2, Oct. 2,
share data) 2005 2005 2004 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 CORPORATION
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
========== ===========
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