KANSAS CITY, Mo. — July 24, 2007— Cerner Corp. (NASDAQ: CERN) today announced results for the 2007 second quarter that ended June 30, delivering strong new business bookings, revenue and earnings growth.
Bookings in the second quarter 2007 were $486.8 million, an increase of 56 percent over the year-ago quarter. Second quarter 2007 bookings included a $97.8 million booking related to Cerner’s participation in the London and Southern regions of the National Health Service (NHS) initiative to automate clinical processes and digitize medical records in England. Excluding this booking, Cerner’s bookings were $389.0 million, which is 25 percent higher than the second quarter of 2006. Second quarter 2007 revenue increased 17 percent to $386.6 million compared to $330.6 million in the year-ago quarter.
On a Generally Accepted Accounting Principles (GAAP) basis, second quarter 2007 net earnings were $31.1 million, and diluted earnings per share were $0.37. Second quarter 2006 GAAP net earnings were $23.9 million and diluted earnings per share were $0.29. Adjusted second quarter 2007 net earnings were $33.8 million, which is 25 percent higher than the $27.0 million of adjusted net earnings in the second quarter of 2006. Adjusted diluted earnings per share were $0.41 in the second quarter of 2007 compared to $0.33 in the second quarter of 2006. Analysts’ consensus estimate for second quarter 2007 adjusted diluted earnings per share was $0.41.
Adjusted second quarter 2007 and 2006 net earnings and diluted earnings per share exclude the impact of adopting Statement of Financial Accounting Standards (SFAS) No. 123R, Share-Based Payment, which requires the expensing of stock options. The adoption of SFAS 123R reduced second quarter 2007 net earnings and diluted earnings per share by $2.7 million and $0.04, respectively, and reduced second quarter 2006 net earnings and diluted earnings per share by $3.1 million and $0.04, respectively.
Included in second quarter earnings is an adjustment to increase a valuation allowance related to new information about the realization of Cerner’s foreign net operating losses, adjustments related to uncertain tax positions under FIN 48 and certain out-of-period tax adjustments related to foreign net operating losses. The net impact of these adjustments increased tax expense by approximately $2 million.
Other Second Quarter Highlights:
• Cash collections of $437.6 million and operating cash flow of $63 million.
• Days sales outstanding of 86 days compared to 91 days in the year-ago quarter.
• Total revenue backlog of $3.00 billion, up 32 percent over the year-ago quarter. This is comprised of $2.49 billion of contract backlog and $513 million of support and maintenance backlog.
• 349 Cerner Millennium® solution implementations were completed. Cerner has now turned on more than 6,700 Cerner Millennium solutions at more than 1,100 client facilities worldwide.
“We are pleased with our strong results in the second quarter,” said Neal Patterson, Cerner co-founder, chairman and chief executive officer. “Our good execution led to record bookings, as well as strong revenue and earnings growth.
“In addition to our strong financial performance, I am pleased with our progress at advancing several strategic initiatives. Consistently delivering strong results while steadily advancing our future growth engines is a hallmark of Cerner, and this quarter was no exception.”
Future Period Guidance
The company expects revenue in the third quarter of 2007 to be approximately $385 million to $395 million. For the year 2007, Cerner expects revenue between $1.55 billion and $1.57 billion, or 14 to 15 percent over 2006.
Cerner expects adjusted diluted earnings per share before stock options expense in the third quarter to be between $0.44 and $0.45. 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 $0.40 and $0.41.
For the full year 2007, Cerner expects adjusted diluted earnings per share before stock options expense to grow in the mid-twenty percent range. This expectation is consistent with earnings per share before options expense in the range of $1.72 to $1.73, with the high end of the range reflecting a $0.01 increase from where consensus was the last time the company provided guidance. The company expects SFAS No. 123R share-based compensation expense to reduce diluted earnings per share for 2007 by approximately $0.14 to $0.15.
Cerner expects new business bookings in the third quarter of 2007 to be between $365 million and $380 million.
Earnings Conference Call
Cerner will host an earnings conference call to provide additional detail on second quarter results at 3:30 p.m. CT on July 24. The dial-in number for the conference call is (617) 213-8058; the passcode is Cerner. The company recommends accessing the call 15 minutes early for registration. The rebroadcast of the call will be available from 5:30 p.m. CT, July 24 through 11:59 p.m. CT, July 27. The dial-in number for the rebroadcast is (617) 801-6888; the passcode is 48918578.
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 used during the call will also be available at the same section of www.cerner.com.
About Cerner
Cerner Corp. 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, Cerner Millennium and Cerner's logo. (NASDAQ: CERN), 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 “guidance” and “expects” or 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 subjected to infringement claims or may be infringed upon; risks associated with our global operations; our potential failure to effectively hedge against foreign currency exchange rate fluctuations; risks associated with the recruitment and retention of key personnel; risks related to third party suppliers; risks inherent with business acquisitions; changing political, economic and regulatory influences; government regulation; significant competition and market changes; variations in the quarterly operating results; and, potential inconsistencies in our sales forecasts 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 June 30, June 30, July 1, July 1,
share data) 2007 (1) 2007 (1) 2006 (2) 2006 (2)
--------- --------- --------- ---------
Revenue
System sales $ 130,097 252,966 114,364 231,214
Support, maintenance and
services 246,210 480,100 206,217 401,803
Reimbursed travel 10,281 19,374 9,991 18,780
--------- --------- --------- ---------
Total revenue 386,588 752,440 330,572 651,797
Margin
System sales 74,569 150,438 73,441 144,127
Support, maintenance and
services 231,057 448,577 192,939 375,459
--------- --------- --------- ---------
Total margin 305,626 599,015 266,380 519,586
--------- --------- --------- ---------
Operating expenses
Sales and client service 165,844 323,002 141,877 281,401
Software development 62,873 128,696 60,888 119,904
General and administrative 27,887 54,342 23,702 46,373
--------- --------- --------- ---------
Total operating expenses 256,604 506,040 226,467 447,678
--------- --------- --------- ---------
Operating earnings 49,022 92,975 39,913 71,908
Interest income 3,361 6,490 2,592 5,181
Interest expense (2,937) (5,945) (3,070) (6,352)
Other income (415) (738) (67) 2,058
--------- --------- --------- ---------
Non-operating expense,
net 9 (193) (545) 887
Earnings before income taxes 49,031 92,782 39,368 72,795
Income taxes (17,916) (34,087) (15,495) (28,778)
--------- --------- --------- ---------
Net earnings $ 31,115 58,695 23,873 44,017
========= ========= ========= =========
Basic earnings per share $ 0.39 0.74 0.31 0.57
========= ========= ========= =========
Basic weighted average shares
outstanding 79,223 78,967 77,524 77,340
Diluted earnings per share $ 0.37 0.71 0.29 0.54
========= ========= ========= =========
Diluted weighted average shares
outstanding 83,092 82,879 81,413 81,411
Note 1: Operating expenses for the three and six months ended June 30,
2007 include share-based compensation expense. The impact of this
expense for the quarter is a $2.7 million decrease, net of $1.7
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 $2.6 million to Sales and
client service, $.8 million to Software development and $1.0 million
to General and administrative. The impact of this expense for the six
month period is a $5.1 million decrease, net of $3.1 million tax
benefit, in net earnings and a decrease to diluted earnings per share
of $.06. The allocation of share-based compensation expense for the
six month period is $5.0 million to Sales and client service, $1.5
million to Software development and $1.7 million to General and
administrative.
Note 2: 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.
CERNER CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands) June 30, December 30,
2007 2006
------------- -------------
Assets
Cash and cash equivalents $ 158,278 162,545
Short-term investments 123,574 146,239
Receivables, net 364,656 361,424
Inventory 12,443 18,084
Prepaid expenses and other 57,202 55,272
Deferred income taxes 2,282 2,423
------------- -------------
Total current assets 718,435 745,987
Property and equipment, net 443,265 357,942
Software development costs, net 193,558 187,788
Goodwill, net 143,055 128,819
Intangible assets, net 55,152 54,428
Other assets 17,397 16,426
------------- -------------
Total assets $ 1,570,862 1,491,390
============= =============
Liabilities
Accounts payable $ 78,757 79,735
Current installments of long-term debt 14,422 20,242
Deferred revenue 98,555 93,699
Accrued payroll and tax withholdings 72,470 77,914
Other accrued expenses 4,227 29,741
------------- -------------
Total current liabilities 268,431 301,331
------------- -------------
Long-term debt 183,974 187,391
Deferred income taxes 75,255 68,693
Deferred revenue 16,878 14,557
------------- -------------
Total liabilities 544,538 571,972
------------- -------------
Minority owners' equity interest in
subsidiary 1,286 1,286
Stockholders' Equity
Common stock 794 784
Additional paid-in capital 422,127 376,595
Retained earnings 598,848 540,153
Foreign currency translation adjustment 3,269 600
------------- -------------
Total stockholders' equity 1,025,038 918,132
Total liabilities and equity $ 1,570,862 1,491,390
============= =============
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