KANSAS CITY, Mo., Feb. 10, 2009 (GLOBE NEWSWIRE) -- Cerner Corp. (Nasdaq:CERN) today announced results for the 2008 fourth quarter that ended January 3, 2009, delivering strong levels of revenue, earnings and cash flow.
Bookings in the fourth quarter of 2008 were $404.9 million and were near the record level of $406.6 million in the fourth quarter 2007 bookings. Fourth quarter revenue increased 18 percent over the year-ago period to $465.7 million.
On a Generally Accepted Accounting Principles (GAAP) basis, fourth quarter 2008 net earnings were $71.5 million, and diluted earnings per share were $0.86. Fourth quarter 2007 GAAP net earnings were $41.3 million, and diluted earnings per share were $0.49.
Adjusted (non-GAAP) Earnings
Adjusted fourth quarter 2008 net earnings were $53.6 million, compared to $43.3 million of adjusted net earnings in the fourth quarter of 2007. Adjusted diluted earnings per share were $0.65 in the fourth quarter of 2008 compared to $0.52 in the fourth quarter of 2007. Analysts' consensus estimate for fourth quarter 2008 adjusted diluted earnings per share was $0.61.
Adjusted Net Earnings is not a recognized term under GAAP and should not be substituted for net earnings as a measure of the Company'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 fourth quarter 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 fourth quarter 2008 and 2007 net earnings and diluted earnings per share exclude the impact of accounting pursuant to Statement of Financial Accounting Standards (SFAS) No. 123R, Share-Based Payment, which requires the expensing of stock options. The effect of accounting under SFAS 123R reduced fourth quarter 2008 net earnings and diluted earnings per share by $2.7 million and $0.03, respectively, and reduced fourth quarter 2007 net earnings and diluted earnings per share by $2.6 million and $0.03, respectively.
Adjusted net earnings also excludes margin of $28.6 million related to the Company's contract in London as part of the National Health Services (NHS) initiative to automate clinical processes and digitize medical records in England. This represents a one-time catch up resulting from a change in accounting estimate and the ability to separate the support services element of the contract. The after tax effect of this item increased fourth quarter 2008 net earnings and diluted earnings per share by $20.6 million and $0.24, respectively.
Other Fourth Quarter Highlights:
* Cash collections of $441 million and record operating cash flow of $98 million. * Days sales outstanding of 92 days compared to 93 days in the third quarter of 2008 and 90 days in the year-ago quarter. * Total revenue backlog of $3.5 billion, up 7 percent over the year-ago quarter. This is comprised of $2.9 billion of contract backlog and $0.6 billion of support and maintenance backlog.
"We are pleased with our fourth quarter and full-year 2008 results, which reflect good execution in a challenging economic environment," said Neal Patterson, Cerner co-founder, chairman and chief executive officer. "We delivered solid bookings, revenue and earnings, and record levels of cash flow."
"The large size and geographic diversity of our client base and the deep strategic relationships with those clients contributed to our ability to deliver solid results in a difficult environment. Cerner also benefits from a depth and breadth of solutions and services that help healthcare providers address the increasing complexity of delivering safe, efficient, and high-quality care. As a result, while the financial crisis may continue to have some impact on healthcare, we are cautiously optimistic that we will continue to generate solid results. In addition, with the Obama administration focused on healthcare reform and recognizing healthcare IT as a necessary component of reform, Cerner is well positioned to play a role in the transformation of healthcare envisioned in those initiatives," Patterson said.
Future Period Guidance
Cerner currently expects:
* First quarter 2009 revenue between $410 million and $430 million.
* First quarter 2009 adjusted diluted earnings per share before
stock options expense between $0.48 and $0.54.
* First quarter 2009 new business bookings between $330 million and
$370 million.
* Full-year 2009 revenue between $1.75 billion and $1.80 billion.
* Full-year 2009 adjusted diluted earnings per share before stock
options expense between $2.40-$2.50.
* SFAS No. 123R share-based compensation expense to reduce diluted
earnings per share by approximately $0.03 in the first quarter of
2009 and 13-14 cents for the full-year 2009.
Earnings Conference Call
Cerner will host an earnings conference call to provide additional detail on fourth quarter results at 3:30 p.m. CT Feb. 10. The dial-in number for the conference call is (617) 614-3472; 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 approximately 5:30 p.m. CT, Feb. 10 through 11:59 p.m. CT, Feb. 13. The dial-in number for the re-broadcast is (617) 801-6888; the passcode is 32724776.
An audio webcast will be available live and archived on Cerner's Web site at www.cerner.com under the About Cerner section (click Investors, then Presentations and Webcasts).
About Cerner
Cerner is taking the paper chart out of healthcare, eliminating error, variance and waste in the care process. With more than 6,000 clients worldwide, Cerner is the leading supplier of healthcare information technology. The following are trademarks of Cerner: Cerner and Cerner's logo. (Nasdaq:CERN). For more information about Cerner, please visit our Web site at www.cerner.com.
This release contains forward-looking statements 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 "benefits," "continue," "positioned," "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; 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 global operations; risks associated with our ability to effectively hedge exposure to fluctuations in foreign currency exchange rates; risks associated with our recruitment and retention of key personnel; risks related to our reliance on third party suppliers; risks inherent with business acquisitions; 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; and the volatility in the trading price of our common stock. 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
(unaudited)
(In thousands, except
per share data)
Q4 2008 YTD 2008 Q42007 (1) YTD 2007(1)
(1)(3) (1)(2)(3) (4)(5)(6) (4)(5)(6)(7)
-------- ---------- --------- ---------
Revenue
System sales $147,986 522,373 132,080 500,319
Support, maintenance and
services 308,930 1,115,896 253,595 982,780
Reimbursed travel 8,818 37,759 8,826 36,778
-------- ---------- --------- ---------
Total revenue 465,734 1,676,028 394,501 1,519,877
Margin
System sales 85,159 325,223 86,721 318,575
Support, maintenance
and services 292,990 1,054,742 238,903 921,192
-------- ---------- --------- ---------
Total margin 378,149 1,379,965 325,624 1,239,767
-------- ---------- --------- ---------
Operating expenses
Sales and client service 182,765 715,512 170,574 657,956
Software development
(Includes amortization of
software development costs
of $13,510 and $51,132
for the fourth quarter
and year ended 2008, and
$13,412 and $53,475 for
the fourth quarter and
year ended 2007.) 69,374 272,519 72,221 270,576
General and
administrative 24,565 113,049 24,273 107,152
-------- ---------- --------- ---------
Total operating
expenses 276,704 1,101,080 267,068 1,035,684
-------- ---------- --------- ---------
Operating earnings 101,445 278,885 58,556 204,083
Interest income 3,526 13,604 3,849 13,206
Interest expense (2,388) (10,548) (2,934) (11,937)
Other income (119) (510) (245) (1,385)
-------- ---------- --------- ---------
Non-operating income
(expense), net 1,019 2,546 670 (116)
Earnings before income
taxes 102,464 281,431 59,226 203,967
Income taxes (30,924) (92,773) (17,895) (76,842)
-------- ---------- --------- ---------
Net earnings $ 71,540 $ 188,658 41,331 127,125
======== ========== ========= =========
Basic earnings per share $ 0.89 $ 2.34 0.52 1.60
======== ========== ========= =========
Basic weighted average
shares outstanding 80,423 80,549 80,011 79,395
Diluted earnings per
share $ 0.86 $ 2.26 0.49 1.53
======== ========== ========= =========
Diluted weighted average
shares outstanding 82,944 83,435 83,641 83,218
Note 1: Operating expenses for the fourth quarter and year ended 2008,
and the fourth quarter and year ended 2007 include share-based
compensation expense. The impact of this expense on net earnings is
presented below:
Q4 2008 YTD 2008 Q4 2007 YTD 2007
-----------------------------------------
Sales and client service $ 2,150 $ 7,750 $ 2,183 $ 9,518
Software development 1,005 3,232 799 3,032
General and administrative 1,119 4,162 916 3,639
Amount of related income
tax benefit (1,592) (5,641) (1,328) (6,030)
-----------------------------------------
Net impact on net earnings $ 2,682 $ 9,503 $ 2,570 $10,159
=========================================
Decrease to diluted
earnings per share $ 0.03 $ 0.11 $ 0.03 $ 0.12
Note 2: Includes the impact of the third party supplier settlement
reported in the second quarter of 2008.
Q4 2008 YTD 2008 Q4 2007 YTD 2007
----------------------------------------
Sales and client service $ -- $8,014 $ -- $ --
Amount of related income tax
benefit -- (2,984) $ -- $ --
----------------------------------------
Net impact on net earnings $ -- 5,030 $ -- $ --
========================================
Decrease to diluted earnings
per share $ -- $0.06 $ -- $ --
Note 3: Includes margin of $28.6 million related to the Company's
contract in London as part of the National Health Services (NHS)
initiative to automate clinical processes and digitize medical records
in England. This represents a one-time catch-up resulting from a
change in accounting estimate and the ability to separate the support
services element of the contract. The after tax effect of this item
increased fourth quarter 2008 net earnings and diluted earnings per
share by $20.6 million and $0.24, respectively.
Note 4: Includes a research and development write-off related to the
RxStation. In connection with production and delivery of the
RxStation, the Company reviewed the accounting treatment for the
RxStation line of devices and determined that $8.6 million of research
& development activities for the RxStation that should have been
expensed were incorrectly capitalized. The impact of this charge is a
$5.4 million decrease, net of $3.2 million tax benefit, in net
earnings and a decrease to diluted earnings per share of $.06 in the
full year ended 2007. Of the $5.4 million net write-off, $2.9 million,
or $.03 of diluted earnings per share, is included in the fourth
quarter of 2007, with $2.1 million of this amount related to periods
prior to 2007. The remaining $2.5 million of net write-off relates to
the first nine months of 2007 and was not previously included in the
results of operations for those periods. The impact of these errors is
not material to the previously reported 2007 periods.
Note 5: Includes a $5.4 million tax benefit related to the
over-expensing of state income taxes, which resulted in an increase to
diluted earnings per share of $.06 in the full year ended 2007. Of the
$5.4 million tax benefit, $3.8 million, or $.04 of diluted earnings
per share, is included in the fourth quarter of 2007, with $3.1
million of this amount related to periods prior to 2007. The remaining
$1.6 million tax benefit relates to the first nine months of 2007 and
was not previously included in the results of operations for those
periods. The impact of these errors is not material to the previously
reported 2007 periods.
Note 6: Includes a $4.0 million tax expense primarily related to the
Company not recording a tax expense to reduce deferred tax assets to
reflect a change in a foreign tax rate resulting from a law that was
enacted in the third quarter of 2007. The impact of this error is a
decrease to net earnings of $4.0 million and to diluted earnings per
share of $.05 in the full year ended 2007. Of the $4.0 million
expense, $.4 million, or $.01 of diluted earnings per share, is
included in the fourth quarter of 2007. The remaining $3.6 million tax
expense relates to the third quarter of 2007 and was not previously
included in the results of operations for that period. The impact of
the error is not material to the previously reported 2007 period.
Note 7: Includes an adjustment to correct the amounts previously
reported for the second quarter of 2007 for a previously disclosed
out-of-period tax item relating to foreign net operating losses. The
effect of this adjustment increases tax expense for the full year
ended 2007, by $4.2 million. The impact of this error is not material
to previously reported periods.
CERNER CORPORATION
Reconciliation of Adjusted Net Earnings and
Adjusted Diluted Earnings Per Share to
GAAP Net Earnings and Diluted Earnings Per Share(1)
(unaudited)
--------------------
Net Earnings Q4 2008 Q4 2007
(In thousands) --------------------
Net earnings $ 71,540 $ 41,331
Share-based compensation expense(2) 4,274 3,898
Income tax benefit of share-based
compensation(2) (1,592) (1,328)
Margin catch up related to London contract(2) (28,640) --
Tax impact of catch up(2) 8,019 --
Income tax benefit of change in effective
state income tax rate(2) -- (3,793)
Research and development write-off(2) -- 4,569
Income tax benefit of research and development
write-off(2) -- (1,702)
Income tax expense related to a reduction of
foreign deferred tax assets(2) -- 357
--------------------
Adjusted net earnings (non-GAAP) $ 53,601 $ 43,332
====================
Diluted Earnings Per Share
Diluted earnings per share $ 0.86 $ 0.49
Share-based compensation expense
(net of tax)(2) 0.03 0.03
BT Margin (net of tax)(2) (0.24) --
Change in effective state income tax rate(2) -- (0.04)
Research and development write off(2) -- 0.03
Reduction of foreign deferred tax assets(2) -- 0.01
--------------------
Adjusted diluted earnings per share (non-GAAP) $ 0.65 $ 0.52
====================
Note 1: The presentation of Adjusted Net Earnings, a Non-GAAP
financial measure, is not meant to be considered in isolation, 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 Company's consolidated financial statements
prepared in accordance with GAAP. Adjusted Net Earnings 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
calculation. The Company believes that Adjusted Net Earnings is
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 stock options
expense and unique items such as the one-time margin catch-up,
significant unusual tax benefits and the research and development
write-off because earnings excluding these items are used by
management along with GAAP results to analyze its business, make
strategic decisions and for management compensation purposes.
CERNER CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands) January 3, December 29,
2009 2007
----------- -----------
Assets (unaudited)
Cash and cash equivalents $ 270,494 182,914
Short-term investments 38,400 161,600
Receivables, net 468,928 391,060
Inventory 10,096 10,744
Prepaid expenses and other 69,553 61,878
Deferred income taxes 1,402 10,368
----------- -----------
Total current assets 858,873 818,564
Property and equipment, net 483,399 462,839
Software development costs, net 218,811 200,380
Goodwill, net 146,666 143,924
Intangible assets, net 51,925 46,854
Long-term investments 105,300 --
Other assets 16,014 17,395
----------- -----------
Total assets $ 1,880,988 1,689,956
=========== ===========
Liabilities
Accounts payable $ 93,667 79,812
Current installments of long-term debt 30,116 14,260
Deferred revenue 107,554 98,802
Accrued payroll and tax withholdings 67,266 65,011
Other accrued expenses 42,620 30,238
----------- -----------
Total current liabilities 341,223 288,123
----------- -----------
Long-term debt 111,370 177,606
Deferred income taxes and other liabilities 100,546 68,738
Deferred revenue 15,554 21,775
----------- -----------
Total liabilities 568,693 556,242
----------- -----------
Minority owners' equity interest in
subsidiary 1,286 1,286
Stockholders' Equity
Common stock 810 801
Additional paid-in capital 491,080 451,876
Retained earnings 860,098 671,440
Treasury Stock (28,002) --
Accumulated other comprehensive income (12,977) 8,311
----------- -----------
Total stockholders' equity 1,311,009 1,132,428
Total liabilities and equity $ 1,880,988 1,689,956
=========== ===========