Cerner Corp. (NASDAQ: CERN) today announced results for the 2007
fourth quarter that ended Dec. 29, delivering strong levels of
bookings, margin expansion, earnings and cash flow. Bookings in the
fourth quarter 2007 were $406.6 million, which is up 5 percent from
the fourth quarter of 2006 of $389.0 (excluding $154.2 million
related to Cerner�s participation in the National Health Service�s
(NHS) National Programme for IT in England). Full-year 2007
bookings were $1.51 billion (excluding $97.8 million related to
National Programme for IT), up 14 percent compared to 2006 bookings
of $1.32 billion (excluding $154.2 million related to National
Programme for IT). Fourth quarter revenue increased 4 percent over
the year-ago period to $394.5 million. Full-year 2007 revenue
increased 10 percent to $1.52 billion. On a Generally Accepted
Accounting Principles (GAAP) basis, fourth quarter 2007 net
earnings were $41.3 million, and diluted earnings per share were
$0.49. Fourth quarter 2006 GAAP net earnings were $39.1 million,
and diluted earnings per share were $0.48. Adjusted (non-GAAP)
Earnings Adjusted fourth quarter 2007 net earnings were $43.3
million, which is 27 percent higher than the $34.0 million of
adjusted net earnings in the fourth quarter of 2006. Adjusted
diluted earnings per share were $0.52 in the fourth quarter of 2007
compared to $0.41 in the fourth quarter of 2006. Analysts�
consensus estimate for fourth quarter 2007 adjusted diluted
earnings per share was $0.51. 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 2007 and 2006 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 2007 net earnings and diluted earnings per share by $2.6
million and $0.03, respectively, and reduced fourth quarter 2006
net earnings and diluted earnings per share by $2.8 million and
$0.03, respectively. Adjusted net earnings and diluted earnings per
share exclude a research and development write-off related to the
RxStation medication dispensing cabinets. 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 Rx Station were incorrectly capitalized and
should have been expensed. 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 year
ended December 29, 2007. Of the $5.4 million net write-off, $2.9
million, or $.03 of diluted earnings per share, is included in GAAP
results for the three months ended December 29, 2007, and excluded
from adjusted results, with $2.1 million of this excluded 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; however, the Company has reflected the
amounts in the quarterly period in which they occurred in the
accompanying schedule, titled "Revised Presentation of 2007
Quarterly GAAP Results." Adjusted net earnings and diluted earnings
per share also exclude a tax benefit related to the over-expensing
of state income taxes. The impact of this error is an increase to
net earnings of $5.4 million and to diluted earnings per share of
$.06 in the year ended December 29, 2007. Of the $5.4 million tax
benefit, $3.8 million, or $.04 of diluted earnings per share, is
included in GAAP results for the three months ended December 29,
2007, and is excluded from adjusted results, with $3.1 million of
this excluded 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; however, the
Company has reflected the amounts in the quarterly period in which
they occurred in the accompanying schedule, titled "Revised
Presentation of 2007 Quarterly GAAP Results." Adjusted net earnings
and diluted earnings per share also exclude a tax expense that
resulted primarily because the Company did not record 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 year
ended December 29, 2007. Of the $4.0 million tax expense, $.4
million, or $.01 of diluted earnings per share, is included in GAAP
results for the three months ended December 29, 2007, and excluded
from adjusted earnings. 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; however, the Company has reflected the amount in the
quarterly period in which it occurred in the accompanying schedule,
titled "Revised Presentation of 2007 Quarterly GAAP Results."
Fourth quarter 2006 adjusted net earnings and diluted earnings per
share exclude a $7.9 million benefit of a lower tax rate related to
the extension of the Federal Research and Development Credit and
the recognition of certain state, federal and foreign tax benefits.
This resulted in an increase of $.10 to diluted earnings per share
for the fourth quarter of 2006. Other Fourth Quarter Highlights:
Cash collections of $413 million and operating cash flow of $92
million. Days sales outstanding of 90 days compared to 87 days in
the year-ago quarter. Total revenue backlog of $3.25 billion, up 22
percent over the year-ago quarter. This is comprised of $2.71
billion of contract backlog and $541.1 million of support and
maintenance backlog. 339 Cerner Millennium� solution
implementations were completed. Cerner has now turned on more than
7,500 Cerner Millennium solutions at more than 1,200 client
facilities worldwide. �We are pleased with our results in the
fourth quarter,� said Neal Patterson, Cerner co-founder, chairman
and chief executive officer. �Our focus on margin expansion and
cash flow generation is reflected in the very strong earnings
growth and cash flow we delivered this quarter. �With a solid 2007
behind us, we have a good outlook going into 2008. Solid execution
of our 2008 financial and operational plans should result in strong
revenue and earnings growth and accelerating free cash flow. We
will also continue to innovate and execute on our strategic
initiatives, which will allow us to redefine our boundaries as we
approach the next decade,� Patterson said. Future Period Guidance
The company expects revenue in the first quarter of 2008 to be
approximately $390 million to $400 million. For the year 2008,
Cerner continues to expect revenue growth of 10 percent to 12
percent over 2007. Cerner expects adjusted diluted earnings per
share before stock options expense in the first quarter to be
between $0.43 and $0.44. For the full year 2008, Cerner continues
to expect adjusted diluted earnings per share before stock options
expense to grow more than 20 percent and is therefore comfortable
with the current consensus of $2.14 per share, which reflects 22
percent growth. The company expects SFAS No. 123R share-based
compensation expense to reduce diluted earnings per share in the
first quarter and full year by approximately $0.03 and $0.14,
respectively. Cerner expects new business bookings in the first
quarter of 2008 to be between $330 million and $350 million, with
the high end of the range equaling the record first quarter level
last year, which included $50 million of over-attainment related to
Cerner�s Managed Services business. This bookings guidance
represents growth of 10% - 17% compared to first quarter 2006
bookings adjusted for the Managed Services over-attainment.
Earnings Conference Call Cerner will host an earnings conference
call to provide additional detail on fourth quarter results at 3:30
p.m. CT on Jan. 31. The dial-in number for the conference call is
(617) 847-8712; 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 5:30 p.m. CST, Jan.
31 through 11:59 p.m. CST, Feb. 3. The dial-in number for the
re-broadcast is (617) 801-6888; the passcode is 25870487. 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 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 �outlook,�
�should,� �allow,� �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 our 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
(unaudited) � � � (In thousands, except per share data) Three
MonthsEndedDecember 29, 2007 (1)(2) (3)(4) YTDDecember 29, 2007
(1)(2) (3)(4)(5) Three MonthsEndedDecember 30, 2006 (1)(6)
YTDDecember 30, 2006 (1)(6) � Revenue System sales $ 132,080
500,319 149,349 505,743 Support, maintenance and services 253,595
982,780 221,176 833,244 Reimbursed travel 8,826 � 36,778 � 10,264 �
39,051 � � Total revenue 394,501 1,519,877 380,789 1,378,038 �
Margin System sales 86,721 318,575 89,004 311,097 Support,
maintenance and services 238,903 � 921,192 � 202,830 � 775,971 � �
Total margin 325,624 � 1,239,767 � 291,834 � 1,087,068 � �
Operating expenses Sales and client service 170,574 657,956 152,451
578,050 Software development (Includes amortization of software
development costs of $13,412, $53,475, $13,331 and $45,750,
respectively.) 72,221 270,577 64,906 246,970 General and
administrative 24,273 � 107,151 � 24,093 � 95,881 � � Total
operating expenses 267,068 � 1,035,684 � 241,450 � 920,901 � �
Operating earnings 58,556 204,083 50,384 166,167 � Interest income
3,849 13,206 3,646 11,877 Interest expense (2,934 ) (11,937 )
(3,158 ) (12,574 ) Other income (245 ) (1,385 ) 47 � 2,074 � �
Non-operating income (expense), net 670 (116 ) 535 1,377 � Earnings
before income taxes 59,226 203,967 50,919 167,544 Income taxes
(17,895 ) (76,842 ) (11,773 ) (57,653 ) � Net earnings $ 41,331 �
127,125 � 39,146 � 109,891 � � Basic earnings per share $ 0.52 �
1.60 � 0.50 � 1.41 � � Basic weighted average shares outstanding
80,011 79,395 78,242 77,691 � Diluted earnings per share $ 0.49 �
1.53 � 0.48 � 1.34 � � Diluted weighted average shares outstanding
83,641 83,218 82,255 81,723 � � Note 1:��Operating expenses for the
three and twelve months ended December 29, 2007 and December 30,
2006 include share-based compensation expense.��The impact of this
expense on net earnings is presented below: � Three
MonthsEndedDecember 29, 2007 YTDDecember 29, 2007 Three
MonthsEndedDecember 30, 2006 YTDDecember 30, 2006 � Sales and
client service $ 2.2 $ 9.5 $ 2.7 $ 11.3 Software development 0.8
3.0 1.0 4.3 General and administrative 0.9 3.6 0.8 3.4 Amount of
related income tax benefit (1.3 ) � (6.0 ) � (1.7 ) � (7.3 ) Net
impact on net earnings $ 2.6 � � $ 10.1 � � $ 2.8 � � $ 11.7 � �
Decrease to diluted earnings per share $ 0.03 $ 0.12 $ 0.03 $ 0.14
� Note 2:��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 year ended December 29, 2007.�� Of the $5.4
million net write-off, $2.9 million, or $.03 of diluted earnings
per share, is included in the three months ended December 29, 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;
however, the Company has reflected the amounts in the quarterly
period in which they occurred in the accompanying schedule, titled
"Revised Presentation of 2007 Quarterly GAAP Results." � Note
3:��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 year ended December
29, 2007. Of the $5.4 million tax benefit, $3.8 million, or $.04 of
diluted earnings per share, is included in the three months ended
December 29, 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; however, the Company has reflected the amounts in the
quarterly period in which they occurred in the accompanying
schedule, titled "Revised Presentation of 2007 Quarterly GAAP
Results." � Note 4:��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.�� This impact of this error is a decrease to net earnings of
$4.0 million and to diluted earnings per share of $.05 in the year
ended December 29, 2007.��Of the $4.0 million expense, $.4 million,
or $.01 of diluted earnings per share, is included in the three
months ended December 29, 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; however, the Company has reflected the amount in the
quarterly periods in which it occurred in the accompanying
schedule, titled "Revised Presentation of 2007 Quarterly GAAP
Results." � Note 5:�� 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 year ended December 29, 2007, by $4.2 million.��The impact of
this of this error is not material to previously reported periods
and is also presented in the accompanying schedule, titled "Revised
Presentation of 2007 Quarterly GAAP Results." � Note 6:�� Includes
a tax benefit of $7.9 million related to the extension of the
federal research and development credit, the recognition of certain
state tax benefits and the tax benefit of certain federal and
foreign items unrelated to the fourth quarter of 2006.��This
resulted in an increase to diluted earnings per share of $.10. � �
� � � � CERNER CORPORATION Revised Presentation Of 2007 Quarterly
GAAP Results (unaudited) � During the 4th quarter of 2007, the
Company identified certain immaterial errors relating to amounts
previously reported for the first nine months of 2007.�During the
first nine months of 2007, approximately $2.5 million (net of $1.5
million in taxes) of research & development activities for the
RxStation were incorrectly capitalized and should have been
expensed.�During this same period, the Company over-expensed its
state income taxes by approximately $1.6 million as a result of
using an incorrect state tax rate in the Company�s estimated annual
effective tax rate.�Also, the Company did not record tax expense to
reduce deferred tax assets of approximately $3.6 million in the
third quarter of 2007 to reflect a change in a foreign tax rate
resulting from a law that was enacted in that period. � In the
Consolidated Statement of Operations for the year-ended December
29, 2007, these immaterial items are correctly reflected in each of
the first three quarters of 2007 to which they relate.�In
connection with the correction of these immaterial items, the
Company is also reflecting amounts previously reported for the
second quarter of 2007 for a previously disclosed out-of-period tax
item relating to foreign net operating losses in the period to
which it relates.�The effect of this correction is an increase in
tax expense of approximately $4.2 million in the second quarter of
2007 and an increase in beginning retained earnings as of January
1, 2005 of the same amount.�The impact of correcting all of these
immaterial items to the 2007 quarterly results is as follows: � 1Q
2Q 3Q 4Q YTD Pre-Tax Income, as reported 43,751 49,031 56,010
59,226 208,018 Pre-Tax Corrections (775) (842) (2,434) - (4,051)
Pre-Tax Income, as corrected 42,976 48,189 53,576 59,226 203,967 �
Tax expense, as reported (16,171) (17,916) (20,169) (17,895)
(72,151) Tax Corrections 906 (3,424) (2,173) - (4,691) Tax expense,
as corrected (15,265) (21,340) (22,342) (17,895) (76,842) � Net
income, as reported 27,580 31,115 35,841 41,331 135,867 Net
corrections 131 (4,266) (4,607) - (8,742) Net Income, as corrected
27,711 26,849 31,234 41,331 127,125 � � � CERNER CORPORATION
Reconciliation of Adjusted Net Earnings and Adjusted Diluted
Earnings Per Share to GAAP Net Earnings and Diluted Earnings Per
Share1 (unaudited) � � � Three Months Ended Three Months Ended Net
Earnings December 29, 2007 � December 30, 2006 (In thousands) Net
earnings $ 41,331 $ 39,146 Tax benefits related to the research and
development credit extension, recognition of state tax benefits and
certain items unrelated to the presented period3 � - (7,935 )
Share-based compensation expense2 3,898 4,534 Income tax benefit of
share-based compensation2 (1,328 ) (1,734 ) Income tax benefit of
change in effective state income tax rate3 (3,793 ) - Research and
development write-off3 4,569 - Income tax benefit of research and
development write-off3 (1,702 ) - Income tax expense related to a
reduction of foreign deferred tax assets3 357 � � - � Adjusted net
earnings (non-GAAP) $ 43,332 � � $ 34,011 � � Diluted Earnings Per
Share Diluted earnings per share $ 0.49 $ 0.48 Tax benefits related
to the research and development credit extension, recognition of
state tax benefits and certain items unrelated to the presented
period. � - (0.10 ) Share-based compensation expense 0.03 0.03
Change in effective state income tax rate (0.04 ) - Research and
development write-off 0.03 - Reduction of foreign deferred tax
assets 0.01 � � - � Adjusted diluted earnings per share (non-GAAP)
$ 0.52 � � $ 0.41 � � 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 because earnings excluding this expense are used by
management along with GAAP results to analyze our business, make
strategic decisions and for management compensation purposes. �
Note 3: The Company provides earnings with and without certain
significant items because such items are not representative of the
Company�s ongoing business.��Significant items represent
substantive, unusual items that are evaluated on an individual
basis.��Such evaluation considers both the quantitative and the
qualitative aspect of their unusual nature.��Unusual, in this
context, may represent items that either as a result of their
nature or size the Company would not expect to occur as part of our
normal business on a regular basis.��Results excluding significant
unusual tax benefits and the research and development write-off are
used by management along with GAAP results to analyze our business,
make strategic decisions and for management compensation purposes.
CERNER CORPORATION CONSOLIDATED BALANCE SHEETS � (In thousands)
December 29, December 30, 2007 2006 1 Assets (unaudited) � Cash and
cash equivalents $ 182,914 162,545 Short-term investments 161,600
146,239 Receivables, net 391,060 361,424 Inventory 10,744 18,084
Prepaid expenses and other 61,878 55,272 Deferred income taxes
10,368 2,423 Total current assets 818,564 745,987 � Property and
equipment, net 462,839 357,942 Software development costs, net
200,380 187,788 Goodwill, net 143,924 128,819 Intangible assets,
net 46,854 54,428 Other assets 17,395 16,426 Total assets $
1,689,956 1,491,390 Liabilities � Accounts payable $ 79,812 79,735
Current installments of long-term debt 14,260 20,242 Deferred
revenue 98,802 93,699 Accrued payroll and tax withholdings 65,011
77,914 Other accrued expenses 13,909 29,741 � Total current
liabilities 271,794 301,331 � Long-term debt 177,606 187,391
Deferred income taxes 85,067 64,531 Deferred revenue 21,775 14,557
Total liabilities 556,242 567,810 Minority owners' equity interest
in subsidiary 1,286 1,286 � Stockholders' Equity � Common stock 801
784 Additional paid-in capital 451,876 376,595 Retained earnings
671,440 544,315 Foreign currency translation adjustment 8,311 600
Total stockholders' equity 1,132,428 922,294 � Total liabilities
and equity $ 1,689,956 1,491,390 � Note 1:��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 operation losses.��The effect of this adjustment
increases tax expense for the year ended December 29, 2007, by $4.2
million and increases January 1, 2005 Retained Earnings for the
same amount.��The impact of this error is not material to the
periods to which they related and is also presented in the
accompanying schedule, titled "Revised Presentation of 2007
Quarterly GAAP Results."
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