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8-K - FORM 8-K - CERNER Corp | c65629e8vk.htm |
Exhibit 99.1
Cerner Reports Second Quarter 2011 Results
Record Revenue and Bookings, Strong Earnings and Cash Flow
Raises Outlook for Year
Record Revenue and Bookings, Strong Earnings and Cash Flow
Raises Outlook for Year
KANSAS CITY, Mo. July 28, 2011 Cerner Corporation (Nasdaq: CERN) today announced results for
the 2011 second quarter that ended July 2, 2011, delivering strong levels of bookings, revenue,
earnings and cash flow.
Bookings
in the second quarter of 2011 were $649.9 million, an increase
of 39 percent compared to second
quarter 2010 bookings of $467.8 million. Bookings were an all-time high for a second quarter and
the second highest result in company history.
Second quarter revenue was $524.2 million, an increase of 15 percent compared to $456.0 million in
the year-ago period.
On a Generally Accepted Accounting Principles (GAAP) basis, second quarter 2011 net earnings were
$72.0 million and diluted earnings per share were $0.42. Second quarter 2010 GAAP net earnings
were $55.5 million and diluted earnings per share were $0.33.
The number of shares and the per share amounts for all periods presented within reflect the
two-for-one stock split effective June 24, 2011.
Adjusted (non-GAAP) Earnings
Adjusted second quarter 2011 net earnings were $76.1 million, an increase of 29 percent compared to
$59.1 million of adjusted net earnings in the second quarter of 2010. Adjusted diluted earnings
per share were $0.44 in the second quarter of 2011 compared to $0.35 of adjusted diluted earnings
per share in the year-ago quarter. Analysts consensus estimate for second quarter 2011 adjusted
diluted earnings per share was $0.43.
Adjusted Net Earnings is not a recognized term under GAAP and should not be substituted for net
earnings as a measure of the Companys 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 Adjusted Net Earnings and Adjusted Diluted Earnings Per Share to GAAP Net
Earnings and Diluted Earnings Per Share.
Adjusted second quarter 2011 and 2010 net earnings and diluted earnings per share exclude
share-based compensation expense, which reduced second quarter 2011 net earnings and diluted
earnings per share by $4.1 million and $0.02, respectively, and reduced second quarter 2010 net
earnings and diluted earnings per share by $3.7 million and $0.02, respectively.
Other Second Quarter Highlights:
| Second quarter cash collections of $509.0 million and operating cash flow of $122.1 million. |
| Second quarter free cash flow of $71.2 million, which is an all-time high level of free cash flow in a second quarter. Free cash flow is a non-GAAP financial measure defined as operating cash flow less capital expenditures and capitalized software. For more detail, please see the accompanying schedule, titled Reconciliation of GAAP Operating Cash Flow to non-GAAP Free Cash Flow. |
| Days sales outstanding of 88 days, which is the same as the year-ago quarter. |
| Total revenue backlog of $5.41 billion, up 21 percent over the year-ago quarter. This is comprised of $4.74 billion of contract backlog and $678.6 million of support and maintenance backlog. |
I am very pleased with our second quarter results, said Neal Patterson, Cerner chairman, CEO,
president and co-founder. Our outstanding bookings, revenue, earnings, and cash flow performance
are evidence of a very strong market and Cerners leadership position. We expect our market
opportunity to remain robust for years to come as we benefit from demand driven by stimulus,
health care reform, and other regulatory requirements, such as ICD-10 codes, that can be addressed
with our solutions and services. We are also making ongoing investments in new solutions and
services that strengthen our alignment with our existing clients and also allow us to address new
large market segments, such as employers. We believe these investments will increase Cerners role
in transforming health care while also fueling another wave of growth beyond stimulus, Patterson
said.
Future Period Guidance
Cerner currently expects:
| Third quarter 2011 revenue between $520 million and $540 million. |
| Third quarter 2011 adjusted diluted earnings per share before share based compensation expense between $0.46 and $0.48. |
| Third quarter 2011 new business bookings between $560 million and $600 million. |
| Full-year 2011 revenue between $2.09 billion and $2.12 billion, up from a previous range of $2.07 billion to $2.12 billion. |
| Full-year 2011 adjusted diluted earnings per share before share-based compensation expense between $1.80 and $1.83, up from a prior range of $1.78 to $1.81. |
| Share based compensation expense to reduce diluted earnings per share by approximately $0.02 $0.03 in the third quarter of 2011 and between $0.10 and $0.11 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 July 28. The dial-in number for the conference call is (617) 213-8066; the passcode is
Cerner. The company recommends joining the call 15 minutes early for registration. The re-broadcast
of the call will be available from 6:30 p.m. CT, July 28 through 11:59 p.m. CT, July 31. The
dial-in number for the re-broadcast is (617) 801-6888; the passcode is 51684145.
An audio webcast will be available live and archived on Cerners website at www.cerner.com under
the About Cerner section (click Investor Relations, then Presentations and Webcasts).
About Cerner
Cerner is transforming health care by eliminating error, variance and
waste for health care providers
and consumers around the world.
Cerner®
solutions optimize processes for health care
organizations ranging in size from single-doctor practices, to health systems, to entire countries,
for the pharmaceutical and medical device industries, employer health and wellness services
industry and for the health care commerce system. These solutions are licensed by more than 9,000
facilities around the world, including approximately 2,600 hospitals; 3,500 physician practices
covering more than 30,000 physicians; 500 ambulatory facilities, such as laboratories, ambulatory
centers, cardiac facilities, radiology clinics and surgery centers; 800 home-health facilities; and
1,600 retail pharmacies. The trademarks, service marks and logos (collectively, the Marks) set
forth herein are registered and unregistered trademarks and/or service marks owned by Cerner
Corporation and/or its subsidiaries in the United States and certain other countries throughout the
world. 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 the Companys performance, and actual results, financial condition or
business could differ materially from those expressed in such forward-looking statements. The words
expect, believe, guidance 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 the ongoing adverse
financial market environment and uncertainty in global economic conditions; changing political,
economic and regulatory 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, our
directors authority to issue preferred stock and the anti-takeover provisions in our corporate
governance documents. Additional discussion of these and other risks, uncertainties and factors
affecting the Companys business is contained in the Companys 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.
Investor Contact: Allan Kells, (816) 201-2445, akells@cerner.com
Media Contact: Kelli Christman, (816) 885-4342, kelli.christman@cerner.com
Cerners Internet Home Page: www.cerner.com
Media Contact: Kelli Christman, (816) 885-4342, kelli.christman@cerner.com
Cerners Internet Home Page: www.cerner.com
# # #
CERNER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and six months ended July 2, 2011 and July 3, 2010
(unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and six months ended July 2, 2011 and July 3, 2010
(unaudited)
(In thousands, except per share data) | Three Months Ended | Six Months Ended | ||||||||||||||
2011 (1) | 2010 (1) | 2011 (1) | 2010 (1) | |||||||||||||
Revenues |
||||||||||||||||
System sales |
$ | 157,145 | $ | 135,902 | $ | 297,524 | $ | 252,853 | ||||||||
Support, maintenance and services |
355,330 | 311,575 | 696,324 | 618,620 | ||||||||||||
Reimbursed travel |
11,748 | 8,524 | 22,039 | 15,865 | ||||||||||||
Total revenues |
524,223 | 456,001 | 1,015,887 | 887,338 | ||||||||||||
Margin |
||||||||||||||||
System sales |
95,258 | 83,039 | 177,538 | 155,162 | ||||||||||||
Support, maintenance and services |
330,483 | 294,751 | 649,187 | 585,881 | ||||||||||||
Total margin |
425,741 | 377,790 | 826,725 | 741,043 | ||||||||||||
Operating expenses |
||||||||||||||||
Sales and client service |
210,213 | 190,030 | 411,561 | 377,623 | ||||||||||||
Software development |
69,790 | 67,988 | 140,934 | 134,767 | ||||||||||||
General and administrative |
37,765 | 33,420 | 72,558 | 66,645 | ||||||||||||
Total operating expenses |
317,768 | 291,438 | 625,053 | 579,035 | ||||||||||||
Operating earnings |
107,973 | 86,352 | 201,672 | 162,008 | ||||||||||||
Interest income |
3,949 | 2,147 | 7,427 | 5,804 | ||||||||||||
Interest expense |
(1,074 | ) | (1,726 | ) | (2,576 | ) | (3,600 | ) | ||||||||
Other income (expense), net |
5 | (495 | ) | 40 | (571 | ) | ||||||||||
Total other income (expense), net |
2,880 | (74 | ) | 4,891 | 1,633 | |||||||||||
Earnings before income taxes |
110,853 | 86,278 | 206,563 | 163,641 | ||||||||||||
Income taxes |
(38,809 | ) | (30,801 | ) | (69,963 | ) | (57,878 | ) | ||||||||
Net earnings |
$ | 72,044 | $ | 55,477 | $ | 136,600 | $ | 105,763 | ||||||||
Basic earnings per share |
$ | 0.43 | $ | 0.34 | $ | 0.81 | $ | 0.64 | ||||||||
Basic weighted average shares outstanding |
168,299 | 164,669 | 167,706 | 164,291 | ||||||||||||
Diluted earnings per share |
$ | 0.42 | $ | 0.33 | $ | 0.79 | $ | 0.62 | ||||||||
Diluted weighted average shares outstanding |
173,591 | 170,673 | 173,128 | 170,447 | ||||||||||||
Note 1: Operating expenses for the three and six months ended July 2, 2011 and July 3, 2010 include
share-based compensation expense. The impact of this expense on net earnings is presented below:
| ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Sales and client service |
$ | 2,550 | $ | 2,411 | $ | 5,836 | $ | 4,779 | ||||||||
Software development |
2,415 | 1,636 | 4,261 | 3,042 | ||||||||||||
General and administrative |
1,603 | 1,799 | 3,832 | 3,532 | ||||||||||||
Total share-based compensation |
6,568 | 5,846 | 13,929 | 11,353 | ||||||||||||
Amount of related income tax benefit |
(2,502 | ) | (2,178 | ) | (5,307 | ) | (4,229 | ) | ||||||||
Net impact on net earnings |
$ | 4,066 | $ | 3,668 | $ | 8,622 | $ | 7,124 | ||||||||
Decrease to diluted earnings per share |
$ | 0.02 | $ | 0.02 | $ | 0.05 | $ | 0.04 | ||||||||
CERNER CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS1
For the three and six months ended July 2, 2011 and July 3, 2010
(unaudited)
RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS1
For the three and six months ended July 2, 2011 and July 3, 2010
(unaudited)
RECONCILIATION OF ADJUSTED NET EARNINGS AND ADJUSTED DILUTED
EARNINGS PER SHARE TO GAAP NET EARNINGS AND DILUTED EARNINGS PER SHARE 1
Three Months Ended | Six Months Ended | |||||||||||||||
(In thousands, except per share data) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Net Earnings |
||||||||||||||||
Net earnings |
$ | 72,044 | $ | 55,477 | $ | 136,600 | $ | 105,763 | ||||||||
Share-based compensation expense2 |
6,568 | 5,846 | 13,929 | 11,353 | ||||||||||||
Income tax benefit of share-based compensation2 |
(2,502 | ) | (2,178 | ) | (5,307 | ) | (4,229 | ) | ||||||||
Adjusted net earnings (non-GAAP) |
$ | 76,110 | $ | 59,145 | $ | 145,222 | $ | 112,887 | ||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Diluted Earnings Per Share |
||||||||||||||||
Diluted earnings per share2 |
$ | 0.42 | $ | 0.33 | $ | 0.79 | $ | 0.62 | ||||||||
Share-based compensation expense (net of tax)2 |
0.02 | 0.02 | 0.05 | 0.04 | ||||||||||||
Adjusted diluted earnings per share (non-GAAP) |
$ | 0.44 | $ | 0.35 | $ | 0.84 | $ | 0.66 | ||||||||
RECONCILIATION OF GAAP OPERATING CASH FLOW TO NON-GAAP FREE
CASH FLOW 1
(In thousands) | Three Months Ended | Six Months Ended | ||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Cash flows from operating activities |
$ | 122,127 | $ | 110,238 | $ | 248,628 | $ | 215,741 | ||||||||
Capital purchases 3 |
(30,305 | ) | (23,903 | ) | (51,677 | ) | (56,011 | ) | ||||||||
Capitalized software development costs 3 |
(20,589 | ) | (20,732 | ) | (41,055 | ) | (41,248 | ) | ||||||||
Free cash flow (non-GAAP) |
$ | 71,233 | $ | 65,603 | $ | 155,896 | $ | 118,482 | ||||||||
Note 1: The presentation of 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 the Companys consolidated
financial statements prepared in accordance with GAAP. 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. The Company believes that Adjusted Net Earnings and Free Cash Flow
are important to enable investors to better understand and evaluate its ongoing operating results
and allows for greater transparency in the review of its overall financial, operational and
economic performance.
Note 2: The Company 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: The Company provides cash flow with and without capital purchases and software development
cost because operating cash flows excluding these expenditures is used by management along with
GAAP results to analyze its earnings quality and overall cash generation of the business.
CERNER
CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of July 2, 2011 (unaudited) and January 1, 2011
CONDENSED CONSOLIDATED BALANCE SHEETS
As of July 2, 2011 (unaudited) and January 1, 2011
(In thousands)
2011 | 2010 | |||||||
Assets |
||||||||
Cash and cash equivalents |
$ | 214,056 | $ | 214,511 | ||||
Short-term investments |
467,966 | 356,501 | ||||||
Receivables, net |
504,290 | 476,905 | ||||||
Inventory |
13,076 | 11,036 | ||||||
Prepaid expenses and other |
105,197 | 83,272 | ||||||
Deferred income taxes |
8,737 | 3,836 | ||||||
Total current assets |
1,313,322 | 1,146,061 | ||||||
Property and equipment, net |
497,770 | 498,829 | ||||||
Software development costs, net |
247,709 | 244,848 | ||||||
Goodwill |
189,194 | 161,374 | ||||||
Intangible assets, net |
56,146 | 38,468 | ||||||
Long-term investments |
329,990 | 264,467 | ||||||
Other assets |
86,676 | 68,743 | ||||||
Total assets |
$ | 2,720,807 | $ | 2,422,790 | ||||
Liabilities and Shareholders Equity |
||||||||
Accounts payable |
$ | 72,571 | $ | 65,035 | ||||
Current installments of long-term debt |
29,820 | 24,837 | ||||||
Deferred revenue |
132,721 | 109,351 | ||||||
Accrued payroll and tax withholdings |
90,908 | 86,921 | ||||||
Other accrued expenses |
24,931 | 19,788 | ||||||
Total current liabilities |
350,951 | 305,932 | ||||||
Long-term debt |
84,871 | 67,923 | ||||||
Deferred income taxes and other liabilities |
140,903 | 126,215 | ||||||
Deferred revenue |
13,946 | 17,303 | ||||||
Total liabilities |
590,671 | 517,373 | ||||||
Shareholders Equity |
||||||||
Common stock |
1,689 | 1,681 | ||||||
Additional paid-in capital |
689,190 | 616,972 | ||||||
Retained earnings |
1,427,435 | 1,290,835 | ||||||
Accumulated other comprehensive income (loss), net |
11,702 | (4,191 | ) | |||||
Total Cerner Corporation shareholders equity |
2,130,016 | 1,905,297 | ||||||
Noncontrolling interest |
120 | 120 | ||||||
Total shareholders equity |
2,130,136 | 1,905,417 | ||||||
Total liabilities and shareholders equity |
$ | 2,720,807 | $ | 2,422,790 | ||||