Cerner Delivers Record Third Quarter New Business Bookings; Cash Flow Also at Record Levels.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 Corporation (Nasdaq: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 2004 third quarter ended October October: see month. 2, 2004, delivering record third quarter bookings and record cash flow. 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 $0.39 in the third quarter, which includes a prior period adjustment related to 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 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. 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 Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. of $45.2 million in the third quarter driven by strong cash collections and reflective Refers to light hitting an opaque surface such as a printed page or mirror and bouncing back. See reflective media and reflective LCD. 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 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 $1.46 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 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) 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 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. "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 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. . "Our healthcare system is increasingly looking toward information technology as a solution to major systemic systemic /sys·tem·ic/ (sis-tem´ik) pertaining to or affecting the body as a whole. sys·tem·ic adj. 1. Of or relating to a system. 2. 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 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 , 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 ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $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 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 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 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. 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 To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. 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 (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 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 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 "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 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. , market risk of investments, potential impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of goodwill, 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, 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 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. 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
============== ===============
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