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Cerner Reports First Quarter 2014 Results

(April 24, 2014)

KANSAS CITY, Mo., April 24, 2014 (GLOBE NEWSWIRE) -- Cerner Corporation (Nasdaq: CERN) today announced results for the 2014 first quarter that ended March 29, 2014, delivering strong levels of bookings and revenue performance.



Bookings in the first quarter of 2014 were $910.2 million, an all-time high for a first quarter and an increase of 14 percent compared to first quarter 2013 bookings of $801.6 million.



First quarter revenue was $784.8 million, an increase of 15 percent compared to $680.0 million in the year-ago period.


On a U.S. Generally Accepted Accounting Principles (GAAP) basis, first quarter 2014 net earnings were $119.5 million and diluted earnings per share were $0.34. First quarter 2013 GAAP net earnings were $110.0 million and diluted earnings per share were $0.31.




The number of shares and the per share amounts for all periods presented within reflect the two-for-one stock split effective June 28, 2013.



Adjusted (non-GAAP) Net Earnings



Adjusted net earnings for first quarter 2014 were $129.1 million, an increase of 10 percent compared to $116.9 million of adjusted net earnings in the first quarter of 2013. Adjusted diluted earnings per share were $0.37 in the first quarter of 2014 compared to $0.33 of adjusted diluted earnings per share in the year-ago quarter. Analysts' consensus estimate for first quarter 2014 adjusted diluted earnings per share was $0.37. 



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."



First quarter 2014 adjusted net earnings and diluted earnings per share exclude share-based compensation expense, which reduced first quarter 2014 net earnings and diluted earnings per share by $9.6 million and $0.03, respectively. First quarter 2013 adjusted net earnings and diluted earnings per share exclude share-based compensation expense, which reduced net earnings and diluted earnings per share by $6.9 million and $0.02, respectively. 



Other 2014 First Quarter Highlights:




  • First quarter cash collections of $867.7 million and operating cash flow of $155.8 million.


  • First quarter free cash flow of $41.6 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."


  • First quarter days sales outstanding of 66 days, which is down from 69 days in the year-ago quarter.


  • Total backlog of $9.24 billion, up 22 percent over the year-ago quarter. This was comprised of $8.45 billion of contract backlog and $795.9 million of support and maintenance backlog.



"Our solid first quarter results represent a good start to the year," said Neal Patterson, Cerner chairman, CEO and co-founder. "In addition to good financial results, we made strides in innovation. Cerner is focused on defining the next generation of the electronic medical record, which will go beyond orders and documentation and become an interactive medium that enables providers to practice medicine at a higher standard. This is important work as we prepare our clients for the upcoming era of population health management, when they will have to manage both health and care."



Future Period Guidance



Cerner currently expects:




  • Second quarter 2014 revenue between $790 million and $830 million.


  • Full year 2014 revenue between $3.25 billion and $3.4 billion, which is up from a prior range of $3.2 billion to $3.4 billion.


  • Second quarter 2014 adjusted diluted earnings per share before share based compensation expense between $0.39 and $0.40. 


  • Full year 2014 adjusted diluted earnings per share before share based compensation expense between $1.63 and $1.67, which is up from a prior range of $1.62 to $1.67.


  • Second quarter 2014 new business bookings between $1 billion and $1.06 billion.


  • Share based compensation expense to reduce diluted earnings per share by approximately $0.03 in the second quarter of 2014 and between $0.11 and $0.12 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 April 24. The dial-in number for the conference call is (617)-614-3451; the passcode is Cerner. Cerner recommends joining the call 15 minutes early for registration. The re-broadcast of the call will be available from 7:30 p.m. CT, April 24 through 11:59 p.m. CT, April 28. The dial-in number for the re-broadcast is (617)-801-6888; the passcode is 87514059.



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 14,000 facilities around the world, including more than 3,000 hospitals; 4,900 physician practices; 60,000 physicians; 590 ambulatory facilities, such as laboratories, ambulatory centers, behavioral health centers, cardiac facilities, radiology clinics and surgery centers; 3,500 extended care facilities; 150 employer sites and 1,790 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 "guidance", "expects", "will" 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 and combinations; the potential for losses resulting from asset impairment charges; risks associated with volatility and disruption resulting from global economic conditions; managing growth in the new markets in which we offer solutions, health care devices and services; 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.


















































































































































































































































































CERNER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the three months ended March 29, 2014 and March 30, 2013

 (unaudited)

 

 

 

(In thousands, except per share data)

Three Months Ended

 

2014 (1)

2013 (1)

Revenues

 

 

System sales

 $ 206,687

 $ 198,902

Support, maintenance and services

 557,429

 466,556

Reimbursed travel

 20,645

 14,571

Total revenues

 784,761

 680,029

 

 

 

Margin

 

 

System sales

 141,574

 117,419

Support, maintenance and services

 514,088

 435,381

Total margin

 655,662

 552,800

 

 

 

Operating expenses

 

 

Sales and client service

 330,901

 267,356

Software development

 91,545

 81,063

General and administrative

 55,213

 47,812

Total operating expenses

 477,659

 396,231

 

 

 

Operating earnings

 178,003

 156,569

 

 

 

Other income, net

 2,990

 3,044

 

 

 

Earnings before income taxes

 180,993

 159,613

Income taxes

 (61,467)

 (49,573)

Net earnings

 $ 119,526

 $ 110,040

 

 

 

Basic earnings per share

 $ 0.35

 $ 0.32

 

 

 

Basic weighted average shares outstanding

 343,701

 344,063

 

 

 

Diluted earnings per share

 $ 0.34

 $ 0.31

 

 

 

Diluted weighted average shares outstanding

 352,230

 352,825

 

 

 

Note 1: Operating expenses for the three months ended March 29, 2014 and March 30, 2013 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

 

2014

2013

 

 

 

Sales and client service

 $ 7,218

 $ 5,018

Software development

 3,085

 2,325

General and administrative

 4,465

 3,883

Total share-based compensation

 14,768

 11,226

Amount of related income tax benefit

 (5,184)

 (4,356)

Net impact on net earnings

 $ 9,584

 $ 6,870

 

 

 

Decrease to diluted earnings per share

 $ 0.03

 $ 0.02

 

 

 

 

 

 

























































































































































CERNER CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS1

For the three months ended March 29, 2014 and March 30, 2013

(unaudited)

 

 

 

RECONCILIATION OF ADJUSTED NET EARNINGS TO GAAP NET EARNINGS1

 

 

 

(In thousands)

Three Months Ended

 

2014

2013

Net Earnings

 

 

Net earnings (GAAP)

 $ 119,526

 $ 110,040

Share-based compensation expense

 14,768

 11,226

Income tax benefit of share-based compensation

 (5,184)

 (4,356)

Adjusted net earnings (non-GAAP)2

 $ 129,110

 $ 116,910

 

 

 

RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE TO GAAP DILUTED EARNINGS PER SHARE1

 

 

 

 

Three Months Ended

 

2014

2013

Diluted Earnings Per Share

 

 

Diluted earnings per share (GAAP)

 $ 0.34

 $ 0.31

Share-based compensation expense (net of tax)

 0.03

 0.02

Adjusted diluted earnings per share (non-GAAP)2

 $ 0.37

 $ 0.33

 

 

 

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

 

 

 

(In thousands)

Three Months Ended

 

2014

2013

Cash flows from operating activities (GAAP)

 $ 155,787

 $ 213,648

Capital purchases

 (69,661)

 (49,451)

Capitalized software development costs

 (44,544)

 (34,334)

Free cash flow (non-GAAP)3

 $ 41,582

 $ 129,863

 

 

 


























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 greater transparency in the 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, assess long-term trends on a comparable basis, 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 March 29, 2014 (unaudited) and December 28, 2013

 

 

(In thousands)

2014

2013

 

 

 

Assets

 

 

Current assets:

 

 

Cash and cash equivalents

 $ 219,928

 $ 202,377

Short-term investments

 811,327

 677,004

Receivables, net

 564,086

 582,926

Inventory

 28,257

 32,299

Prepaid expenses and other

 198,961

 175,488

Deferred income taxes, net

 92,622

 91,614

Total current assets

 1,915,181

 1,761,708

 

 

 

Property and equipment, net

 845,104

 792,781

Software development costs, net

 366,676

 347,077

Goodwill

 307,081

 307,422

Intangible assets, net

 138,696

 144,132

Long-term investments

 436,995

 554,873

Other assets

 181,615

 190,371

Total assets

 $ 4,191,348

 $ 4,098,364

 

 

 

Liabilities and Shareholders' Equity

 

 

Current liabilities:

 

 

Accounts payable

 $ 125,741

 $ 145,019

Current installments of long-term debt and capital lease obligations

 55,657

 54,107

Deferred revenue

 231,512

 209,746

Accrued payroll and tax withholdings

 123,242

 147,986

Other accrued expenses

 75,515

 83,574

Total current liabilities

 611,667

 640,432

 

 

 

Long-term debt and capital lease obligations

 104,827

 111,717

Deferred income taxes and other liabilities

 219,857

 170,392

Deferred revenue

 8,600

 8,159

Total liabilities

 944,951

 930,700

 

 

 

Shareholders' Equity:

 

 

Common stock

 3,452

 3,443

Additional paid-in capital

 843,953

 812,853

Retained earnings

 2,512,574

 2,393,048

Treasury stock

 (103,277)

 (28,251)

Accumulated other comprehensive loss, net

 (10,305)

 (13,429)

Total shareholders' equity

 3,246,397

 3,167,664

Total liabilities and shareholders' equity

 $ 4,191,348

 $ 4,098,364

 

 

 

CONTACT: Investor Contact: Allan Kells,
(816) 201-2445, akells@cerner.com

Media Contact: Kate O'Neill Rauber,
(816) 888-2880, c_oneillrauber.kate@cerner.com

Cerner's Internet Home Page: www.cerner.com

Page: 1


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