EX-99.1 2 a991-pressreleasedatedocto.htm PRESS RELEASE OF CERNER CORPORATION DATED OCTOBER 25, 2012 99.1 - Press Release Dated October 25, 2012


Cerner Reports Third Quarter 2012 Results
Strong Bookings, Revenue, Earnings and Cash Flow

KANSAS CITY, Mo. - October 25, 2012 - Cerner Corporation (Nasdaq: CERN) today announced results for the 2012 third quarter that ended September 29, 2012, delivering strong levels of bookings, revenue, earnings and cash flow.

Bookings in the third quarter of 2012 were $769.9 million, an all-time high for a third quarter and an increase of 18 percent compared to third quarter 2011 bookings of $650.3 million.

Third quarter revenue was a record $676.5 million, an increase of 18 percent compared to $571.6 million in the year-ago period.

On a U.S. Generally Accepted Accounting Principles (GAAP) basis, third quarter 2012 net earnings were $98.9 million and diluted earnings per share were $0.56. Third quarter 2011 GAAP net earnings were $78.8 million and diluted earnings per share were $0.45.
    
Adjusted (non-GAAP) Net Earnings
Adjusted net earnings for third quarter 2012 were $105.2 million, an increase of 26 percent compared to $83.5 million of adjusted net earnings in the third quarter of 2011. Adjusted diluted earnings per share were $0.60 in the third quarter of 2012 compared to $0.48 of adjusted diluted earnings per share in the year-ago quarter. Analysts' consensus estimate for third quarter 2012 adjusted diluted earnings per share was $0.59.

Adjusted net earnings is not a recognized term under GAAP and should not be substituted for net earnings as a measure of Cerner'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 GAAP Results to Non-GAAP Results.”

Adjusted net earnings and diluted earnings per share exclude share-based compensation expense, which reduced third quarter 2012 net earnings and diluted earnings per share by $6.3 million and $0.04, respectively; and reduced third quarter 2011 net earnings and diluted earnings per share by $4.6 million and $0.03, respectively.
 
Other 2012 Third Quarter Highlights:
▪
Third quarter cash collections of $661.7 million and operating cash flow of $182.2 million.
▪
Third quarter free cash flow of $104.8 million. Free cash flow is a non-GAAP financial measure defined as GAAP cash flows from operating activities less capital purchases and capitalized software development costs. For more detail, please see the accompanying schedule, titled “Reconciliation of GAAP Results to Non-GAAP Results.”
▪
Third quarter days sales outstanding of 73 days, which is down from 87 days in the year-ago quarter.
▪
Total backlog of $6.79 billion, up 20 percent over the year-ago quarter. This was comprised of $6.06 billion of contract backlog and $724 million of support and maintenance backlog.

“I am very pleased with our results, which were strong across the board and included Cerner adding several new clients in the U.S. and around the world,” Neal Patterson, Cerner chairman, CEO, president and co-founder said. “We also made great progress at rolling out new cloud-based solutions that significantly enhance the way physicians interact with information technology and allow them to be more productive. In addition, we continued to advance our platform for population health and data analytics solutions that will be critical as health care providers face changes in reimbursement that require them to become accountable for the health of populations.”

Future Period Guidance
Cerner currently expects:
▪
Fourth quarter 2012 revenue between $670 million and $700 million.
▪
Fourth quarter 2012 adjusted diluted earnings per share before share based compensation expense between $0.62 and $0.64.
▪
Fourth quarter 2012 new business bookings between $925 million and $975 million.
▪
Full-year 2012 revenue between $2.63 billion and $2.66 billion, up from a prior range of $2.575 billion to $2.625 billion.




▪
Full-year 2012 adjusted diluted earnings per share before share based compensation expense between $2.34 and $2.36, up from a prior range of $2.32 to $2.36.
▪
Share based compensation expense to reduce diluted earnings per share by approximately $0.04 in the fourth quarter of 2012 and between $0.13 and $0.14 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 October 25. The dial-in number for the conference call is (617) 597-5395; the passcode is Cerner. Cerner recommends joining the call 15 minutes early for registration. The re-broadcast of the call will be available from 6:30 p.m. CT, October 25 through 11:59 p.m. CT, October 28. The dial-in number for the re-broadcast is (617)-801-6888; the passcode is 15860985.

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 contributing to the systemic change of health and care delivery. For more than 30 years Cerner has been executing its vision to make health care safer and more efficient. We started with the foundation of digitizing paper processes and now offer the most comprehensive array of information software, professional services, medical device integration, remote hosting and employer health and wellness services. Cerner systems are used by everyone from individual consumers, to single-doctor practices, hospitals, employers and entire countries. Taking what we've learned over more than three decades, Cerner is building on the knowledge that is in the system to support evidence-based clinical decisions, prevent medical errors and empower patients in their care.

Cerner® solutions are licensed by approximately 9,300 facilities around the world, including more than 2,650 hospitals; 3,750 physician practices; 40,000 physicians; 500 ambulatory facilities, such as laboratories, ambulatory centers, cardiac facilities, radiology clinics and surgery centers; 800 home health facilities; 40 employer sites and 1,600 retail pharmacies.

Certain trademarks, service marks and logos (collectively, the “Marks”) set forth herein are owned by Cerner Corporation and/or its subsidiaries in the United States and certain other countries throughout the world. All other non-Cerner Marks are the property of their respective owners. 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 Cerner's performance, and actual results, financial condition or business could differ materially from those expressed in such forward-looking statements. The words “will be”, “guidance”, “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; 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 uncertainty in global economic conditions; changing political, economic, regulatory and judicial 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 the timing and volume of market activity; our directors' authority to issue preferred stock and the anti-takeover provisions in our corporate governance documents; and material adverse resolution of legal proceedings. Additional discussion of these and other risks, uncertainties and factors affecting Cerner's business is contained in Cerner's periodic filings with the Securities and Exchange Commission. The reader should not place undue reliance on forward-looking statements, since the statements speak only as of the date that they are made. Cerner 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: Megan Moriarty, (913) 515-7530, megan.moriarty@cerner.com
Cerner's Internet Home Page: www.cerner.com






CERNER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and nine months ended September 29, 2012 and October 1, 2011
(unaudited)
(In thousands, except per share data)
 
 Three Months Ended
 
 Nine Months Ended
 
 
2012 (1)
2011 (1)
 
2012 (1)
2011 (1)
Revenues
 
 
 
 
 
 
System sales
 
$
229,925

$
188,698

 
$
651,040

$
486,222

Support, maintenance and services
 
432,281

371,467

 
1,262,231

1,067,791

Reimbursed travel
 
14,276

11,475

 
41,781

33,514

            Total revenues
 
676,482

571,640

 
1,955,052

1,587,527

 
 
 
 
 
 
 
Margin
 
 
 
 
 
 
System sales
 
129,257

104,430

 
332,847

281,968

Support, maintenance and services
 
397,647

346,746

 
1,167,119

995,933

            Total margin
 
526,904

451,176

 
1,499,966

1,277,901

 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
Sales and client service
 
259,141

220,177

 
746,090

631,738

Software development
 
78,094

72,544

 
222,746

213,478

General and administrative
 
41,973

38,063

 
119,912

110,621

            Total operating expenses
 
379,208

330,784

 
1,088,748

955,837

 
 
 
 
 
 
 
            Operating earnings
 
147,696

120,392

 
411,218

322,064

 
 
 
 
 
 
 
Other income, net
 
3,351

2,775

 
8,789

7,666

 
 
 
 
 
 
 
Earnings before income taxes
 
151,047

123,167

 
420,007

329,730

Income taxes
 
(52,160
)
(44,332
)
 
(134,583
)
(114,295
)
Net earnings
 
$
98,887

$
78,835

 
$
285,424

$
215,435

 
 
 
 
 
 
 
Basic earnings per share
 
$
0.58

$
0.47

 
$
1.67

$
1.28

 
 
 
 
 
 
 
Basic weighted average shares outstanding
 
171,251

169,140

 
170,643

168,343

 
 
 
 
 
 
 
Diluted earnings per share
 
$
0.56

$
0.45

 
$
1.63

$
1.24

 
 
 
 
 
 
 
Diluted weighted average shares outstanding
 
175,870

174,283

 
175,517

173,656


Note 1: Operating expenses for the three and nine months ended September 29, 2012 and October 1, 2011 include share-based compensation expense. The impact of this expense on net earnings and diluted earnings per share is presented below:
(In thousands, except per share data)
 
 Three Months Ended
 
Nine Months Ended
 
 
2012
2011
 
2012
2011
 
 
 
 
 
 
 
Sales and client service
 
$
5,007

$
3,554

 
$
12,216

$
9,390

Software development
 
2,436

2,161

 
6,895

6,422

General and administrative
 
2,779

1,800

 
8,657

5,632

Total share-based compensation
 
10,222

7,515

 
27,768

21,444

Amount of related income tax benefit
 
(3,910
)
(2,875
)
 
(10,621
)
(8,182
)
Net impact on net earnings
 
$
6,312

$
4,640

 
$
17,147

$
13,262

Decrease to diluted earnings per share
 
$
0.04

$
0.03

 
$
0.09

$
0.08





CERNER CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS1 
For the three and nine months ended September 29, 2012 and October 1, 2011
(unaudited)

RECONCILIATION OF ADJUSTED NET EARNINGS TO GAAP NET EARNINGS1 

(In thousands)
 
 Three Months Ended
 
Nine Months Ended
 
 
2012
2011
 
2012
2011
Net Earnings
 
 
 
 
 
 
Net earnings (GAAP)
 
$
98,887

$
78,835

 
$
285,424

$
215,435

Share-based compensation expense
 
10,222

7,515

 
27,768

21,444

Income tax benefit of share-based compensation
 
(3,910
)
(2,875
)
 
(10,621
)
(8,182
)
Adjusted net earnings (non-GAAP)2
 
$
105,199

$
83,475

 
$
302,571

$
228,697


RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE TO GAAP DILUTED EARNINGS PER SHARE1 
 
 
 Three Months Ended
 
Nine Months Ended
 
 
2012
2011
 
2012
2011
Diluted Earnings Per Share
 
 
 
 
 
 
Diluted earnings per share (GAAP)
 
$
0.56

$
0.45

 
$
1.63

$
1.24

Share-based compensation expense (net of tax)
 
0.04

0.03

 
0.09

0.08

Adjusted diluted earnings per share (non-GAAP)2
 
$
0.60

$
0.48

 
$
1.72

$
1.32


RECONCILIATION OF NON-GAAP FREE CASH FLOW TO GAAP OPERATING CASH FLOW1 

(In thousands)
 
 Three Months Ended
 
Nine Months Ended
 
 
2012
2011
 
2012
2011
Cash flows from operating activities (GAAP)
 
$
182,213

$
129,177

 
$
527,760

$
377,805

Capital purchases
 
(51,802
)
(23,925
)
 
(129,966
)
(75,602
)
Capitalized software development costs
 
(25,659
)
(20,772
)
 
(72,506
)
(61,827
)
Free cash flow (non-GAAP)3
 
$
104,752

$
84,480

 
$
325,288

$
240,376


Note 1: The presentation of Adjusted Diluted Earnings per Share, 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 Cerner's consolidated financial statements prepared in accordance with GAAP. Adjusted Diluted Earnings per Share, 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. We believe that Adjusted Diluted Earnings per Share, Adjusted Net Earnings and Free Cash Flow are important to enable investors to better understand and evaluate our ongoing operating results and allows for more comprehensive review and understanding of our overall financial, operational and economic performance.

Note 2: Cerner 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: Cerner provides free cash flow because it takes into account the capital expenditures necessary to operate our business.






CERNER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of September 29, 2012 (unaudited) and December 31, 2011

(In thousands)
 
2012
 
2011
 
 
 
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
288,101

 
$
243,146

Short-term investments
 
750,895

 
531,635

Receivables, net
 
542,415

 
563,209

Inventory
 
24,308

 
23,296

Prepaid expenses and other
 
128,541

 
94,232

Deferred income taxes, net
 
11,520

 
46,795

Total current assets
 
1,745,780

 
1,502,313

 
 
 
 
 
Property and equipment, net
 
551,663

 
488,996

Software development costs, net
 
260,876

 
248,750

Goodwill
 
211,793

 
211,826

Intangible assets, net
 
66,477

 
75,366

Long-term investments
 
462,999

 
359,324

Other assets
 
170,868

 
113,783

Total assets
 
$
3,470,456

 
$
3,000,358

 
 
 
 
 
Liabilities and Shareholders’ Equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
134,775

 
$
85,545

Current installments of long-term debt
 
54,979

 
39,722

Deferred revenue
 
179,783

 
153,139

Accrued payroll and tax withholdings
 
108,842

 
109,227

Other accrued expenses
 
17,628

 
51,087

Total current liabilities
 
496,007

 
438,720

 
 
 
 
 
Long-term debt and other obligations
 
141,678

 
86,821

Deferred income taxes and other liabilities
 
122,153

 
150,229

Deferred revenue
 
13,941

 
13,787

Total liabilities
 
773,779

 
689,557

 
 
 
 
 
Shareholders’ Equity:
 
 
 
 
Common stock
 
1,715

 
1,696

Additional paid-in capital
 
818,130

 
723,490

Retained earnings
 
1,882,886

 
1,597,462

Accumulated other comprehensive loss, net
 
(6,174
)
 
(11,967
)
Total Cerner Corporation shareholders’ equity
 
2,696,557

 
2,310,681

Noncontrolling interest
 
120

 
120

Total shareholders’ equity
 
2,696,677

 
2,310,801

Total liabilities and shareholders’ equity
 
$
3,470,456

 
$
3,000,358