Cerner Delivers Strong Revenue, Earnings and Cash Flow; New Business Bookings a Second Quarter Record.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: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 2006 second quarter that ended July July: see month. 1, delivering strong levels of new business bookings, revenue, earnings and cash flow. New business bookings in the second quarter were $311.9 million, which is up 10 percent over the second quarter of 2005 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 high level for bookings in the second quarter. Second quarter 2006 revenues increased 19 percent to $330.6 million compared to $277.8 million in the year-ago quarter. On a GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). basis, second quarter 2006 net earnings were $23.9 million, and 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 $0.29. Second quarter 2005 GAAP net earnings were $19.8 million, and diluted earnings per share were $0.25. Second quarter 2006 net earnings and diluted earnings per share reflect the impact of adopting 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. Adoption of SFAS No. 123R reduced second quarter 2006 net earnings and diluted earnings per share by $3.1 million and $0.04, respectively. Before stock options expense, second quarter 2006 net earnings were $27.0 million, which is 36 percent higher than the $19.8 million of net earnings in the second quarter of 2005. Diluted earnings per share before stock options expense were $0.33 in the second quarter of 2006 compared to $0.25 in the second quarter of 2005. Analysts' consensus estimate for second quarter 2006 diluted earnings per share before stock options expense was $0.32. Other Second Quarter Highlights: --Strong cash collections of $354.7 million. --Operating cash flow of $59.7 million compared to $44.3 million in the second quarter of 2005. --Days sales outstanding of 91 days compared to 98 days in the year-ago quarter. --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 $2.27 billion, up 32 percent over the year-ago quarter. This is comprised of $1.83 billion of contract backlog and $440.4 million of support and maintenance backlog. --382 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 5,500 Cerner Millennium solutions at more than 1,000 client facilities worldwide. "Our second quarter results reflect continued strong sales and operational performance," 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 co-founder, chairman and chief executive officer. "We continued to deliver against our financial imperatives with strong revenue growth, expanding operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: , and strong cash flow. "We remain excited about Cerner's prospects in the healthcare information technology (IT) marketplace, both 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. and across the globe. Using the strength of the largest intellectual property and professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. organizations in the worldwide healthcare IT industry, we expect to continue innovating new solutions and services that will make healthcare safer, more efficient and of higher quality." Future Period Guidance The company expects revenue in the third quarter of 2006 to be approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $330 million to $340 million. Cerner expects diluted earnings per share before stock options expense in the third quarter to be between $0.35 and $0.36, a 1 cent increase from prior expectations. The company expects SFAS No. 123R share-based compensation expense to reduce diluted earnings per share in the third quarter by approximately $0.04, leading to expected diluted earnings per share between $0.31 and $0.32. Cerner expects new business bookings in the third quarter to be between $335 million and $350 million. The mid-point of the bookings guidance reflects 14 percent growth over the record third quarter of 2005 bookings of $301.1 million (adjusted for a unique large $149.4 million contract with Fujitsu (company) Fujitsu - A Japanese elecronics corporation. Fujitsu owns ICL, Amdahl Corporation, and DMR. Home USA, Japan. Services Ltd. in the third quarter of 2005 related to the 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. ). For the year 2006, Cerner expects diluted earnings per share of $1.37 to $1.38 before stock options expense, which reflects growth of approximately 26 percent over 2005 and is 2 cents higher than the company's prior guidance. The company expects SFAS No. 123R share-based compensation expense to reduce diluted earnings per share for 2006 by approximately $0.16, leading to expected diluted earnings per share of approximately $1.21 to $1.22. Cerner expects 2006 revenue to be between $1.32 billion and $1.35 billion. Earnings Conference Call Cerner will host an earnings conference call to provide additional detail on second 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 July 20. The dial-in number for the call is 617-213-8063 with a pass code of Cerner. The replay number is 617-801-6888 (Pass code: 50371949). The rebroadcast of the call will be available from approximately 6:30 p.m. CDT, July 20, through 6:30 p.m. CDT, July 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 "guidance" and "expects" 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 warranties, n.pl the details of a contract; considered less important than the conditions. Whereas the penalty for breach of conditions is the termination of the contract, the penalty for breach of warranties is payment of damages to the innocent party. ; the possibility of interruption INTERRUPTION. The effect of some act or circumstance which stops the course of a prescription or act of limitation's. 2. Interruption of the use of a thing is natural or civil. at our data centers or client support facilities; our 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; risks associated with our 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. ; 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 third party suppliers; risks inherent with business acquisitions; changing political, economic and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. influences; government regulation; significant competition and market changes; variations in our quarterly operating results; and potential inconsistencies in our 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 STATEMENT OF EARNINGS
Three Three
Months Months
Ended YTD Ended YTD
(In thousands, except per share July 1, July 1, July 2, July 2,
data) 2006(1) 2006(1) 2005 2005(2)
-------- -------- -------- --------
Revenue
System sales $114,364 231,214 105,200 205,142
Support, maintenance and
services 206,217 401,803 164,251 320,252
Reimbursed travel 9,991 18,780 8,364 14,955
-------- -------- -------- --------
Total revenue 330,572 651,797 277,815 540,349
Margin
System sales 73,441 144,127 64,138 128,046
Support, maintenance and
services 192,939 375,459 154,076 297,294
-------- -------- -------- --------
Total margin 266,380 519,586 218,214 425,340
-------- -------- -------- --------
Operating expenses
Sales and client service 141,877 281,401 114,291 225,131
Software development 60,888 119,904 48,702 98,031
General and administrative 23,702 46,373 21,013 38,935
Write-off of in process research
and development - - - 6,382
-------- -------- -------- --------
Total operating expenses 226,467 447,678 184,006 368,479
-------- -------- -------- --------
Operating earnings 39,913 71,908 34,208 56,861
Interest income 2,592 5,181 834 1,718
Interest expense (3,070) (6,352) (2,200) (4,826)
Other income (67) 2,058 47 77
-------- -------- -------- --------
Non-operating expense,
net (545) 887 (1,319) (3,031)
Earnings before income taxes 39,368 72,795 32,889 53,830
Income taxes (15,495) (28,778) (13,086) (21,507)
-------- -------- -------- --------
Net earnings $ 23,873 44,017 19,803 32,323
======== ======== ======== ========
Basic earnings per share $ 0.31 0.57 0.27 0.44
======== ======== ======== ========
Basic weighted average shares
outstanding 77,524 77,340 74,314 73,894
Diluted earnings per share $ 0.29 0.54 0.25 0.42
======== ======== ======== ========
Diluted weighted average shares
outstanding 81,413 81,411 77,972 77,342
Note 1: Operating expenses for the three and six months ended July 1,
2006, include share-based compensation expense. The impact of
this expense for the quarter is a $3.1 million decrease, net
of $1.9 million tax benefit, in net earnings and a decrease to
diluted earnings per share of $.04. The allocation of
share-based compensation expense for the quarter is $3 million
to Sales and client service, $1.1 million to Software
development and $.9 million to General and administrative. The
impact of this expense for the six-month period is a $6.1
million decrease, net of $3.7 million tax benefit, in net
earnings and a decrease to diluted earnings per share of $.08.
The allocation of share-based compensation expense for the
six-month period is $6 million to Sales and client service,
$2.2 million to Software development and $1.7 million to
General and administrative.
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 2005.
CERNER CORPORATION
NON-GAAP
CONSOLIDATED STATEMENTS OF EARNINGS
Three Three
Months Months
Ended YTD Ended YTD
(In thousands, except per share July 1, July 1, July 2, July 2,
data) 2006 2006 2005 2005
-------- ---------------- --------
Revenue
System sales $114,364 231,214 105,200 205,142
Support, maintenance and
services 206,217 401,803 164,251 320,252
Reimbursed travel 9,991 18,780 8,364 14,955
-------- ---------------- --------
Total revenue 330,572 651,797 277,815 540,349
Margin
System sales 73,441 144,127 64,138 128,046
Support, maintenance and
services 192,939 375,459 154,076 297,294
-------- ---------------- --------
Total margin 266,380 519,586 218,214 425,340
-------- ---------------- --------
Operating expenses
Sales and client service 138,804 275,517 114,291 225,131
Software development 59,792 117,676 48,702 98,031
General and administrative 22,787 44,686 21,013 38,935
-------- ---------------- --------
Total operating expenses 221,383 437,879 184,006 362,097
-------- ---------------- --------
Operating earnings 44,997 81,707 34,208 63,243
Interest income 2,592 5,181 834 1,718
Interest expense (3,070) (6,352) (2,200) (4,826)
Other income (67) 2,058 47 77
-------- ---------------- --------
Non-operating expense,
net (545) 887 (1,319) (3,031)
Earnings before income taxes 44,452 82,594 32,889 60,212
Income taxes (17,440) (32,523)(13,086) (23,948)
-------- ---------------- --------
Net earnings $ 27,012 50,071 19,803 36,264
======== ================ ========
Basic earnings per share $ 0.35 0.65 0.27 0.49
======== ================ ========
Basic weighted average shares
outstanding 77,524 77,340 74,314 73,894
Diluted earnings per share $ 0.33 0.62 0.25 0.47
======== ================ ========
Diluted weighted average shares
outstanding 81,413 81,411 77,972 77,342
RECONCILIATION OF NON-GAAP
TO GAAP CONSOLIDATED STATEMENTS OF EARNINGS
Three Three
Months Months
Ended YTD Ended YTD
(In thousands, except per share July 1, July 1, July 2, July 2,
data) 2006 2006 2005 2005
-------- ---------------- --------
Non-GAAP net income $ 27,012 50,071 19,803 36,264
Share-based compensation expense (5,084) (9,799) - -
Income tax benefit 1,945 3,745 - -
Write off of acquired in process
research and development - - - (6,382)
Income tax benefit - - - 2,441
-------- ---------------- --------
GAAP net income $ 23,873 44,017 19,803 32,323
======== ================ ========
Basic earnings per share $ 0.31 0.57 0.27 0.44
======== ================ ========
Basic weighted average shares
outstanding 77,524 77,340 74,314 73,894
Diluted earnings per share $ 0.29 0.54 0.25 0.42
======== ================ ========
Diluted weighted average shares
outstanding 81,413 81,411 77,972 77,342
CERNER CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands) July 1, Dec. 31,
2006 2005
---------- ----------
Assets
Cash and cash equivalents $ 124,159 113,057
Short-term investments 152,529 161,230
Receivables, net 331,316 316,965
Inventory 18,069 9,585
Prepaid expenses and other 50,115 42,685
Deferred income taxes 7,519 8,109
---------- ----------
Total current assets 683,707 651,631
Property and equipment, net 321,890 292,608
Software development costs, net 182,785 172,548
Goodwill, net 119,036 116,142
Intangible assets, net 54,558 60,448
Other assets 11,299 10,252
---------- ----------
Total assets $1,373,275 1,303,629
========== ==========
Liabilities
Accounts payable $ 55,632 65,377
Current installments of long-term debt 21,407 28,743
Deferred revenue 90,419 79,890
Accrued payroll and tax withholdings 64,280 66,002
Other accrued expenses 32,329 20,078
---------- ----------
Total current liabilities 264,067 260,090
---------- ----------
Long-term debt 180,116 194,265
Deferred income taxes 78,778 72,922
Deferred revenue 15,413 14,533
---------- ----------
Total liabilities 538,374 541,810
---------- ----------
Minority owners' equity interest in subsidiary 1,286 1,286
Stockholders' Equity
Common stock 776 770
Additional paid-in capital 352,059 325,134
Retained earnings 474,279 430,262
Foreign currency translation adjustment 6,501 4,367
---------- ----------
Total stockholders' equity 833,615 760,533
Total liabilities and equity $1,373,275 1,303,629
========== ==========
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