Cerner Delivers Strong New Business Bookings and Cash Flow 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 fourth quarter ended December December: see month. 31, 2005, delivering strong levels of new business bookings, revenue, earnings and cash flow. New business bookings revenue in the fourth quarter was $386.3 million, which is up 58 percent over the fourth quarter of 2004. Fourth quarter bookings include $65.5 million of bookings related to 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 $320.8 million, which is up 31 percent over the fourth quarter of 2004. Full-year 2005 bookings revenue was $1.35 billion, which is 48 percent higher than 2004 bookings of $917.4 million. Fourth quarter 2005 revenues increased 31 percent to $325.8 million compared to $248.2 million in the year-ago quarter and $294.6 million in the third quarter of 2005. Full-year 2005 revenue totaled $1.16 billion, which is 25 percent more than 2004 revenue of $926.4 million. Fourth quarter 2005 net earnings were $27.4 million, compared to net earnings of $21.4 million in the fourth quarter of 2004. Fourth 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 $0.34, which reflects the effect of a two-for-one stock split that was effective January January: see month. 10, 2006. Analysts' consensus estimate for fourth quarter 2005 diluted earnings per share was $0.34. Full-year 2005 diluted earnings per share were $1.10 compared to $0.86 cents in 2004, after the effect of the two-for-one stock split. Cerner 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. for the fourth quarter and full-year 2005 of $93.3 million and $228.9 million, respectively. Other Fourth Quarter Highlights: --Record cash collections of $345.2 million. --Days sales outstanding of 89 days compared to 104 days in the year-ago quarter and 98 days in the third quarter of 2005. --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 $2.14 billion, up 39 percent over the year-ago quarter. This is comprised of $1.72 billion of contract backlog and $415.7 million of support and maintenance backlog. --296 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 4,800 Cerner Millennium solutions at more than 900 client facilities worldwide. "I am extremely pleased with our fourth quarter and full-year 2005 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. "With strong growth of bookings, backlog, revenue, earnings and cash flow, Cerner strengthened its leadership position in the healthcare IT industry. In addition to another strong year 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. , Cerner had a breakout year in its global business during 2005, with revenue from outside the United States increasing more than 75 percent and now representing approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 10 percent of Cerner's total revenue." "Our outlook remains positive for the healthcare IT industry and Cerner," 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. . "In passing $1 billion in revenue, we reached an important level of scale that positions us well for future growth opportunities around the world. We also offer the most unified and scaleable architecture with the broadest suite of solutions, which is important in an environment when entire countries are in the process of considering major IT initiatives." Future Period Guidance The Company expects revenue in the first quarter of 2006 to be approximately $310 million to $320 million. Cerner expects diluted earnings per share excluding stock options expense in the first quarter to be between $0.26 and $0.27, which is approximately 21 to 26 percent higher than the first quarter of 2005. The Company expects adoption of Statement of Financial Accounting Standards (SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System ) No. 123R, Share-Based Payment, which requires the expensing of stock options, to reduce diluted earnings per share in the first quarter by approximately $0.04, leading to expected diluted earnings per share between $0.22 and $0.23. Cerner expects new business bookings in the first quarter to be between $255 million and $270 million, which is approximately 10 to 15 percent higher than the first quarter of 2005. For the year 2006, Cerner expects diluted earnings per share of $1.34 to $1.35 before stock options expense, which reflects growth of approximately 24 percent over 2005 and is 1 to 2 cents higher than the Company's prior guidance. The Company expects adoption of SFAS No. 123R to reduce diluted earnings per share for 2006 by approximately $0.16, leading to expected diluted earnings per share of approximately $1.18 to $1.19. Cerner expects 2006 revenue to be between $1.30 billion and $1.34 billion. Earnings Conference Call Cerner will host an earnings conference call to provide additional detail on fourth quarter results at 3:30 p.m. CST CST abbr. 1. Central Standard Time 2. convulsive shock treatment CST Central Standard Time Noun 1. on February February: see month. 2, 2006. The dial-in number for the call is 617-213-8059 with a pass code of Cerner. The replay number is 617-801-6888 (Pass code: 55020094). The rebroadcast of the call will be available from approximately 6:00 p.m. CST, February 2, through 6:00 p.m. CST, February 5. 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 "outlook," "positions us," "guidance," "expects," "estimates" 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
(1)(2) (3)(4)
Three Three
Months Months
Ended YTD Ended YTD
(In thousands, except Dec. 31, Dec. 31, Jan. 1, Jan. 1,
per share data) 2005 2005 2005 2005
--------------------------------------------
Revenue
System sales $134,419 449,734 99,614 351,861
Support, maintenance
and services 182,204 677,664 141,273 542,414
Reimbursed travel 9,191 33,387 7,285 32,081
--------------------------------------------
Total revenue 325,814 1,160,785 248,172 926,356
Margin
System sales 82,117 278,661 65,113 236,058
Support, maintenance
and services 169,326 627,438 128,961 493,950
--------------------------------------------
Total margin 251,443 906,099 194,074 730,008
--------------------------------------------
Operating expenses
Sales and client
service 124,065 466,206 97,635 383,628
Software development 59,456 211,455 43,429 171,589
General and
administrative 21,543 81,620 16,321 63,327
Write-off of in process
research and
development - 6,382 - -
--------------------------------------------
Total operating
expenses 205,064 765,663 157,385 618,544
--------------------------------------------
Operating earnings 46,379 140,436 36,689 111,464
Interest income 1,565 3,871 1,663 3,022
Interest expense (2,957) (9,729) (2,323) (9,174)
Other income 279 666 (284) 2,608
--------------------------------------------
Non-operating
expense, net (1,113) (5,192) (944) (3,544)
Earnings before income
taxes 45,266 135,244 35,745 107,920
Income taxes (17,894) (48,993) (14,319) (43,272)
--------------------------------------------
Net earnings $27,372 86,251 21,426 64,648
============================================
Basic earnings per share
(Note 5) $0.36 1.16 0.29 0.90
============================================
Basic weighted average
shares outstanding
(Note 5) 76,758 74,144 72,990 72,174
Diluted earnings per
share (Note 5) $0.34 1.10 0.28 0.86
============================================
Diluted weighted average
shares outstanding
(Note 5) 80,810 78,090 76,110 75,142
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 $.06 for the 12 months ended
December 31, 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 $.05 for the 12 months ended
December 31, 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 $.03 for the 12 months ended January 1, 2005.
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 $.02 for the 12 months ended
January 1, 2005.
Note 5: Reflects the effect of a 2 for 1 stock split distributed on
January 9, 2006.
CERNER CORPORATION
NON-GAAP
CONSOLIDATED STATEMENTS OF EARNINGS
Three Three
Months Months
Ended YTD Ended YTD
(In thousands, except Dec. 31, Dec. 31, Jan. 1, Jan. 1,
per share data) 2005 2005 2005 2005
--------------------------------------------
Revenue
System sales $134,419 449,734 99,614 351,861
Support, maintenance
and services 182,204 677,664 141,273 542,414
Reimbursed travel 9,191 33,387 7,285 32,081
--------------------------------------------
Total revenue 325,814 1,160,785 248,172 926,356
Margin
System sales 82,117 278,661 65,113 236,058
Support, maintenance
and services 169,326 627,438 128,961 493,950
--------------------------------------------
Total margin 251,443 906,099 194,074 730,008
--------------------------------------------
Operating expenses
Sales and client
service 124,065 466,206 97,635 383,628
Software development 59,456 211,455 43,429 171,589
General and
administrative 21,543 81,620 16,321 59,981
--------------------------------------------
Total operating
expenses 205,064 759,281 157,385 615,198
--------------------------------------------
Operating earnings 46,379 146,818 36,689 114,810
Interest income 1,565 3,871 1,663 3,022
Interest expense (2,957) (9,729) (2,323) (9,174)
Other income 279 666 (284) (415)
--------------------------------------------
Non-operating
expense, net (1,113) (5,192) (944) (6,567)
Earnings before income
taxes 45,266 141,626 35,745 108,243
Income taxes (17,894) (56,228) (14,319) (43,345)
--------------------------------------------
Net earnings $27,372 85,398 21,426 64,898
============================================
Basic earnings per share
(Note 1) $0.36 1.15 0.29 0.90
============================================
Basic weighted average
shares outstanding
(Note 1) 76,758 74,144 72,990 72,174
Diluted earnings per
share (Note 1) $0.34 1.09 0.28 0.86
============================================
Diluted weighted average
shares outstanding
(Note 1) 80,810 78,090 76,110 75,142
RECONCILIATION OF NON-GAAP
TO GAAP CONSOLIDATED STATEMENTS OF EARNINGS
Three Three
Months Months
Ended YTD Ended YTD
(In thousands, except Dec. 31, Dec. 31, Jan. 1, Jan. 1,
per share data) 2005 2005 2005 2005
--------------------------------------------
Non-GAAP net income $27,372 85,398 21,426 64,898
Tax benefit on sale
of Zynx - 4,794 - -
IP R&D write-off - (6,382) - -
Income tax effect - 2,441 - -
Vacation accrual - - - (3,346)
Income tax effect - - - 1,270
Gain on sale of Zynx - - - 3,023
Income tax effect - - - (1,197)
--------------------------------------------
GAAP net income $27,372 86,251 21,426 64,648
============================================
Basic earnings per share
(Note 1) $0.36 1.16 0.29 0.90
============================================
Basic weighted average
shares outstanding
(Note 1) 76,758 74,144 72,990 72,174
Diluted earnings per
share (Note 1) $0.34 1.10 0.28 0.86
============================================
Diluted weighted average
shares outstanding
(Note 1) 80,810 78,090 76,110 75,142
Note 1: Reflects the effect of a 2 for 1 stock split distributed on
January 9, 2006.
CERNER CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands) Dec. 31, Jan. 1,
2005 2005
----------------------------
Assets
Cash and cash equivalents $113,057 187,371
Short-term investments 161,230 2,413
Receivables, net 316,965 282,199
Inventory 9,585 7,373
Prepaid expenses and other 47,728 30,117
----------------------------
Total current assets 648,565 509,473
Property and equipment, net 292,608 230,440
Software development costs, net 172,548 157,765
Goodwill, net 116,142 54,600
Intangible assets, net 60,448 22,690
Other assets 10,252 7,297
----------------------------
Total assets $1,300,563 982,265
============================
Liabilities
Accounts payable $65,377 37,008
Current installments of long-term debt 28,743 21,908
Deferred revenue 79,890 77,445
Deferred income taxes 3,456 430
Accrued payroll and tax withholdings 66,002 55,819
Other accrued expenses 13,556 6,634
----------------------------
Total current liabilities 257,024 199,244
----------------------------
Long-term debt 194,265 108,804
Deferred income taxes 72,922 69,863
Deferred revenue 14,533 5,703
----------------------------
Total liabilities 538,744 383,614
----------------------------
Minority owners' equity interest
in subsidiary 1,286 1,166
Stockholders' Equity
Common stock 785 747
Additional paid-in capital 351,912 270,750
Retained earnings 430,262 344,011
Treasury stock, at cost (1,502,999
shares in 2005 and 2004) (26,793) (26,793)
Foreign currency translation adjustment 4,367 8,770
----------------------------
Total stockholders' equity 760,533 597,485
Total liabilities and equity $1,300,563 982,265
============================
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