Cerner Corporation (Nasdaq: CERN) today announced results for the
2020 first quarter that ended March 31, 2020.
Bookings in the first quarter of 2020 were $1.09
billion, at the low end of the Company’s expectations as the
outbreak of the COVID-19 pandemic in mid-March caused the volume of
contracts to be lower than normal in the last two weeks of the
quarter.
First quarter 2020 revenue was $1.41 billion, an
increase of 2 percent compared to $1.39 billion in the first
quarter of 2019 and slightly below the company’s expectations due
to the lower level of bookings in the quarter as well as travel
restrictions implemented by the company in response to the
pandemic.
On a U.S. Generally Accepted Accounting
Principles (GAAP) basis, first quarter 2020 net earnings were $147
million and diluted earnings per share were $0.47. First
quarter 2019 GAAP net earnings were $166 million and diluted
earnings per share were $0.51.
Adjusted Net Earnings for first quarter 2020
were $223 million, compared to $199 million of Adjusted Net
Earnings in the first quarter of 2019. Adjusted Diluted
Earnings Per Share were $0.71 in the first quarter of 2020, in line
with the Company’s expectations and up 16 percent compared to $0.61
of Adjusted Diluted Earnings Per Share in the year-ago
quarter.
Adjusted Net Earnings and Adjusted Diluted
Earnings Per Share are not recognized terms under GAAP. These
non-GAAP financial measures should not be substituted for GAAP net
earnings or GAAP diluted earnings per share, respectively, as
measures of Cerner’s performance, but instead should be utilized as
supplemental measures of financial performance in evaluating our
business. Please see the accompanying schedule, titled
“Reconciliation of GAAP Results to Non-GAAP Results,” where our
non-GAAP financial measures are defined and reconciled to the most
comparable GAAP measures.
Other Highlights:
- First quarter operating cash flow
of $284 million and Free Cash Flow of $160 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. Please see the accompanying schedule,
titled “Reconciliation of GAAP Results to Non-GAAP Results.”
- First quarter days sales
outstanding of 74 days, up from 72 days in the fourth quarter and
down from 76 days in the year-ago quarter.
- Total backlog of $13.47
billion.
“I am pleased with our solid first quarter
results despite the initial impact of the COVID-19 pandemic,” said
Brent Shafer, Chairman and CEO. “More importantly, I am proud
of the efforts of Cerner associates as they quickly adapted to the
challenges presented by the pandemic while maintaining an
unwavering focus on supporting our clients on the frontlines.
While we expect the pandemic to continue affecting our results, we
currently believe that the largest impact will occur in second
quarter 2020 and expect resiliency in our future financial
performance.”
Future Period GuidanceCerner
currently expects:
- Second quarter 2020 revenue between
$1.340 billion and $1.390 billion.
- Full year 2020 revenue between
$5.550 billion and $5.700 billion, down from a prior range of
$5.725 billion to $5.975 billion.
- Second quarter 2020 Adjusted
Diluted Earnings Per Share between $0.60 and $0.64.*
- Full year 2020 Adjusted Diluted
Earnings Per Share between $2.78 and $2.90, down from a prior range
of $3.09 to $3.19.*
- Second quarter 2020 new business
bookings between $1.000 billion and $1.200 billion.
The future period guidance provided above
reflects the Company’s current expectation that the largest impact
from the COVID-19 pandemic will occur in the second quarter and
that project and sales activity will begin to improve in the second
half of the year assuming the impact of the pandemic and related
restrictive measures subside during the second quarter. The
Company currently believes project and sales activity projected
before the pandemic will still occur, but it will occur over a
longer period of time than originally anticipated. There is
still considerable uncertainty regarding the duration and magnitude
of the impact of the COVID-19 pandemic, so the Company’s
forward-looking statements are subject to a higher than normal
amount of risk. In particular, the pandemic and related
restrictive measures have created significant economic uncertainty,
the ultimate impact of which is unknown at this time, which could
adversely affect the Company's future operational and financial
performance.
*Future period non-GAAP guidance includes
adjustments for items not indicative of our core operations, which
may include, without limitation, items included in the accompanying
schedule, titled “Reconciliation of GAAP Results to Non-GAAP
Results.” Such adjustments may be affected by changes in
ongoing assumptions and judgments, as well as nonrecurring, unusual
or unanticipated charges, expenses or gains or other items that may
not directly correlate to the underlying performance of our
business operations. The exact amounts of these adjustments
are not currently determinable but may be significant. It is
therefore not practicable to provide the comparable GAAP measures
or reconcile this non-GAAP guidance to the most comparable GAAP
measures.
Earnings Conference Call
Cerner will host an earnings conference call to
provide additional detail on the Company’s results and outlook at
3:30 p.m. CT on April 28, 2020. On the call, Cerner will
discuss its first quarter 2020 results and answer questions from
the investment community. The call may also include
discussion of Cerner developments, and forward-looking and other
material information about business and financial matters.
The dial-in number for the conference call is (678) 509-7542;
the passcode is Cerner. Cerner recommends joining the call 15
minutes early for registration.
An audio webcast will be available live and
archived on Cerner’s website at www.cerner.com under the About Us
section (click Investor Relations, then Presentations and
Webcasts).
About CernerCerner’s health
technologies connect people and information systems in thousands of
worldwide facilities dedicated to creating smarter and better care
for individuals and communities. Recognized globally for
innovation, Cerner assists clinicians in making care decisions and
assists organizations in managing the health of their populations.
The company also offers an integrated clinical and financial system
to help manage day-to-day revenue functions, as well as a wide
range of services to support clinical, financial and operational
needs, focused on people. For more information, visit Cerner.com,
The Cerner Blog, The Cerner Podcast or connect on Facebook,
Instagram, LinkedIn or Twitter. Nasdaq: CERN. Smarter
Care. Better Outcomes. Healthier You.
Certain trademarks, service marks and logos set
forth herein are property of Cerner Corporation and/or its
subsidiaries.
All statements in this press release that do not
directly and exclusively relate to historical facts constitute
forward-looking statements. These forward-looking statements
are based on the current beliefs, expectations and assumptions of
Cerner's management with respect to future events and are subject
to a number of significant 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 “expects”,
“guidance”, “position”, “believe”, “expectations”, “plan”,
“outlook”, “future”, “approximately”, “target”, “opportunity”,
“projections”, “aim”, “think” or the negative of these words,
variations thereof or similar expressions are intended to identify
such forward-looking statements. For example, our forward-looking
statements include statements regarding future period
guidance. Factors that could cause or contribute to such
differences include, but are not limited to the possibility of
significant costs and reputational harm related to product and
service-related liabilities; potential claims for system errors and
warranties; the possibility of interruption at our data centers or
client support facilities, or those of third parties with whom we
have contracted (such as public cloud providers), that could expose
us to significant costs and reputational harm; the possibility of
increased expenses, exposure to legal claims and regulatory actions
and reputational harm associated with a cyberattack or other breach
in our IT security or the IT security of third parties on which we
rely; material adverse resolution of legal proceedings or other
claims or reputational harm stemming from negative publicity
related to such claims or legal proceedings; risks associated with
our global operations, including without limitation greater
difficulty in collecting accounts receivable; risks associated with
fluctuations in foreign currency exchange rates; changes in tax
laws, regulations or guidance that could adversely affect our tax
position and/or challenges to our tax positions in the U.S. and
non-U.S. countries; risks associated with the unexpected loss or
recruitment and retention of key personnel or the failure to
successfully develop and execute succession planning to assure
transitions of key associates and their knowledge, relationships
and expertise; risks related to our dependence on strategic
relationships and third party suppliers, including any impact to
the business of such suppliers resulting from the COVID-19
pandemic; risks inherent with business acquisitions or strategic
investments and the failure to achieve projected synergies; risks
associated with volatility and disruption resulting from global
economic or market conditions, including any impact thereon
resulting from events such as the COVID-19 pandemic; significant
competition and our ability to anticipate or respond quickly to
market changes, changing technologies and evolving pricing and
deployment methods and to bring competitive new solutions, devices,
features and services to market in a timely fashion; managing
growth in the new markets in which we offer solutions, health care
devices or services; long sales cycles for our solutions and
services; risks inherent in contracting with government clients,
including without limitation, complying with strict compliance and
disclosure obligations, navigating complex procurement rules and
processes, and defending against bid protests; risks associated
with our outstanding and future indebtedness, such as compliance
with restrictive covenants, which may limit our flexibility to
operate our business; the potential for losses resulting from asset
impairment charges; changing political, economic, regulatory and
judicial influences, which could impact the purchasing practices
and operations of our clients and increase costs to deliver
compliant solutions and services; non-compliance with laws,
government regulation or certain industry initiatives or failure to
deliver solutions or services that enable our clients to comply
with laws or regulations applicable to their businesses; variations
in our quarterly operating results; potential variations in our
sales forecasts compared to actual sales; inability to achieve
expected operating efficiencies and sustain or improve operating
expense reductions; risks that Cerner’s revenue growth may be lower
than anticipated and/or that the mix of revenue shifts to low
margin revenue; and risk that our capital allocation strategy will
not be fully implemented or enhance long-term shareholder value;
and the extent to which the COVID-19 pandemic and measures taken in
response thereto could adversely affect our financial condition,
future bookings and results of operations, including risks
associated with the impact of the COVID-19 pandemic on collecting
accounts receivable. Additional discussion of these and other
risks, uncertainties and factors affecting Cerner's business is
contained in Cerner's 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. Except as required by law, Cerner
undertakes no obligation to update or revise forward-looking
statements to reflect changed assumptions, the occurrence of
unanticipated events, or changes in our business, results of
operations or financial condition over time.
Investor Contact: Allan Kells, (816)
201-2445, akells@cerner.com Media Contact:
Misti Preston, (816) 299-2037,
misti.preston@cerner.com Cerner’s Internet Home
Page: www.cerner.com
|
|
|
|
CERNER CORPORATION AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
For the three months ended March 31, 2020 and March 30,
2019 |
(unaudited) |
|
|
|
|
|
|
|
(In thousands, except per share data) |
|
Three Months Ended |
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
Revenues |
|
$ |
1,411,741 |
|
$ |
1,389,877 |
|
Costs of revenue |
|
|
254,416 |
|
|
253,204 |
|
Margin |
|
|
1,157,325 |
|
|
1,136,673 |
|
|
|
|
|
Operating expenses |
|
|
|
Sales and client service |
|
|
636,649 |
|
|
640,187 |
|
Software development |
|
|
185,320 |
|
|
180,361 |
|
General and administrative |
|
|
139,852 |
|
|
96,196 |
|
Amortization of acquisition-related intangibles |
|
|
17,128 |
|
|
21,985 |
|
Total operating expenses |
|
|
978,949 |
|
|
938,729 |
|
|
|
|
|
Operating earnings |
|
|
178,376 |
|
|
197,944 |
|
|
|
|
|
Other income, net |
|
|
5,595 |
|
|
8,432 |
|
|
|
|
|
Earnings before income taxes |
|
|
183,971 |
|
|
206,376 |
|
Income taxes |
|
|
(36,812 |
) |
|
(40,157 |
) |
Net earnings |
|
$ |
147,159 |
|
$ |
166,219 |
|
|
|
|
|
Basic earnings per share |
|
$ |
0.48 |
|
$ |
0.51 |
|
|
|
|
|
Basic weighted average shares outstanding |
|
|
309,657 |
|
|
324,573 |
|
|
|
|
|
Diluted earnings per share |
|
$ |
0.47 |
|
$ |
0.51 |
|
|
|
|
|
Diluted weighted average shares outstanding |
|
|
312,240 |
|
|
327,003 |
|
|
|
|
|
Note 1: Our revenues by business model for the
three months ended March 31, 2020 and March 30, 2019 were as
follows: |
|
|
|
|
(In thousands) |
|
Three Months Ended |
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
Licensed software |
|
$ |
158,032 |
|
$ |
154,477 |
|
Technology resale |
|
|
51,487 |
|
|
55,540 |
|
Subscriptions |
|
|
94,385 |
|
|
84,291 |
|
Professional services |
|
|
511,346 |
|
|
490,439 |
|
Managed services |
|
|
309,354 |
|
|
304,393 |
|
Support and maintenance |
|
|
273,681 |
|
|
276,963 |
|
Reimbursed travel |
|
|
13,456 |
|
|
23,774 |
|
Total revenues |
|
$ |
1,411,741 |
|
$ |
1,389,877 |
|
|
|
|
|
|
|
|
|
CERNER CORPORATION AND SUBSIDIARIES |
|
|
|
RECONCILIATION OF GAAP RESULTS TO NON-GAAP
RESULTS |
|
|
|
For the three months ended March 31, 2020 and March 30, 2019 |
|
|
|
(unaudited) |
|
|
|
|
|
|
|
ADJUSTED OPERATING EXPENSES |
|
|
|
|
(In thousands) |
|
Three Months Ended |
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
Operating expenses (GAAP) |
|
$ |
978,949 |
|
$ |
938,729 |
|
|
|
|
|
Share-based compensation expense |
|
|
(35,387 |
) |
|
(21,589 |
) |
Acquisition-related amortization |
|
|
(17,128 |
) |
|
(21,097 |
) |
Organizational restructuring and other expense |
|
|
(40,785 |
) |
|
(2,392 |
) |
COVID-19 related expense |
|
|
(1,975 |
) |
|
— |
|
|
|
|
|
Adjusted Operating Expenses (non-GAAP) |
|
$ |
883,674 |
|
$ |
893,651 |
|
|
|
|
|
ADJUSTED OPERATING EARNINGS AND ADJUSTED OPERATING
MARGIN |
|
|
|
|
(In thousands) |
|
Three Months Ended |
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
Operating earnings (GAAP) |
|
$ |
178,376 |
|
$ |
197,944 |
|
|
|
|
|
Share-based compensation expense |
|
|
35,387 |
|
|
21,589 |
|
Acquisition-related amortization |
|
|
17,128 |
|
|
21,097 |
|
Organizational restructuring and other expense |
|
|
40,785 |
|
|
2,392 |
|
COVID-19 related expense |
|
|
1,975 |
|
|
— |
|
|
|
|
|
Adjusted Operating Earnings (non-GAAP) |
|
$ |
273,651 |
|
$ |
243,022 |
|
|
|
|
|
Operating Margin (GAAP) |
|
|
12.64 |
% |
|
14.24 |
% |
|
|
|
|
Adjusted Operating Margin (non-GAAP) |
|
|
19.38 |
% |
|
17.49 |
% |
|
|
|
|
ADJUSTED NET EARNINGS AND ADJUSTED DILUTED EARNINGS PER
SHARE |
|
|
|
|
(In thousands, except per share data) |
|
Three Months Ended |
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
Net earnings (GAAP) |
|
$ |
147,159 |
|
$ |
166,219 |
|
|
|
|
|
Pre-tax adjustments for Adjusted Net Earnings: |
|
|
|
Share-based compensation expense |
|
|
35,387 |
|
|
21,589 |
|
Acquisition-related amortization |
|
|
17,128 |
|
|
21,097 |
|
Organizational restructuring and other expense |
|
|
40,785 |
|
|
2,392 |
|
COVID-19 related expense |
|
|
1,975 |
|
|
— |
|
Investment gains |
|
|
(477 |
) |
|
— |
|
|
|
|
|
After-tax adjustments for Adjusted Net Earnings: |
|
|
|
Income tax effect of pre-tax adjustments |
|
|
(17,259 |
) |
|
(8,771 |
) |
Share-based compensation permanent tax items |
|
|
(5,311 |
) |
|
(3,997 |
) |
Valuation allowance on net operating loss carryforwards |
|
|
3,318 |
|
|
— |
|
|
|
|
|
Adjusted Net Earnings (non-GAAP) |
|
$ |
222,705 |
|
$ |
198,529 |
|
|
|
|
|
Diluted weighted average shares outstanding |
|
|
312,240 |
|
|
327,003 |
|
|
|
|
|
Adjusted Diluted Earnings Per Share (non-GAAP) |
|
$ |
0.71 |
|
$ |
0.61 |
|
|
|
|
|
FREE CASH FLOW |
|
|
|
|
(In thousands) |
|
Three Months Ended |
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
Cash flows from operating activities (GAAP) |
|
$ |
283,506 |
|
$ |
317,266 |
|
Capital purchases |
|
|
(49,248 |
) |
|
(119,261 |
) |
Capitalized software development costs |
|
|
(73,855 |
) |
|
(74,551 |
) |
Free Cash Flow (non-GAAP) |
|
$ |
160,403 |
|
$ |
123,454 |
|
|
|
|
|
Cash flows from investing activities (GAAP) |
|
$ |
(136,611 |
) |
$ |
(183,655 |
) |
|
|
|
|
Cash flows from financing activities (GAAP) |
|
$ |
(295,961 |
) |
$ |
(6,991 |
) |
|
|
|
|
Explanation of Non-GAAP Financial Measures |
|
|
|
|
|
|
|
We report our financial results in accordance with accounting
principles generally accepted in the United States of America
("GAAP"). However, we supplement our GAAP results with certain
non-GAAP financial measures, which we believe 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. These
non-GAAP financial measures are not meant to be considered in
isolation, as a substitute for, or superior to 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.
These non-GAAP measures 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 provide
the measures of Adjusted Operating Expenses, Adjusted Operating
Earnings, Adjusted Operating Margin, Adjusted Net Earnings and
Adjusted Diluted Earnings Per Share as such measures are used by
management, along with GAAP results, to analyze Cerner's business,
make strategic decisions, assess long-term trends on a comparable
basis, and for management compensation purposes. We provide the
measure of Free Cash Flow as such measure takes into account
certain capital expenditures necessary to operate our business.
Free Cash Flow is used by management, along with GAAP results, to
analyze our earnings quality and overall cash generation of the
business, and for management compensation purposes. |
|
|
|
|
We calculate each of our non-GAAP financial measures as
follows: |
|
|
|
|
Adjusted Operating Expenses - Consists of GAAP
operating expenses adjusted for: (i) share-based compensation
expense, (ii) acquisition-related amortization, (iii)
organizational restructuring and other expense, and (iv) COVID-19
related expense. |
|
|
|
|
Adjusted Operating Earnings - Consists of GAAP
operating earnings adjusted for: (i) share-based compensation
expense, (ii) acquisition-related amortization, (iii)
organizational restructuring and other expense, and (iv) COVID-19
related expense. |
|
|
|
|
Adjusted Operating Margin - Consists of Adjusted
Operating Earnings, as defined above, divided by revenues, in the
applicable period; the result presented as a percentage. |
|
|
|
|
Adjusted Net Earnings - Consists of GAAP net
earnings adjusted for: (i) share-based compensation expense, (ii)
acquisition-related amortization, (iii) organizational
restructuring and other expense, (iv) COVID-19 related expense, (v)
investment gains, (vi) the income tax effect of the aforementioned
items, (vii) share-based compensation permanent tax items, and
(viii) a valuation allowance on net operating loss
carryforwards. |
|
|
|
|
Adjusted Diluted Earnings Per Share - Consists of
Adjusted Net Earnings, as defined above, divided by diluted
weighted average shares outstanding, in the applicable period. |
|
|
|
|
Free Cash Flow - Consists of GAAP cash flows from
operating activities, less capital purchases and capitalized
software development costs. |
|
|
|
|
Adjustments included in the calculations above are described
below: |
|
|
|
|
Share-based compensation expense - Non-cash expense arising from
our equity compensation and stock purchase plans available to our
associates and directors. We exclude share-based compensation
expense as we believe the amount of such non-cash expenses in any
specific period may not directly correlate to the underlying
performance of our business operations. Share-based compensation
expense is included in our Condensed Consolidated Statements of
Operations as follows: |
|
|
|
|
(In thousands) |
|
Three Months Ended |
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
Sales and client service |
|
$ |
14,902 |
|
$ |
10,671 |
|
Software development |
|
|
4,269 |
|
|
5,156 |
|
General and administrative |
|
|
16,216 |
|
|
5,762 |
|
Total share-based compensation expense |
|
$ |
35,387 |
|
$ |
21,589 |
|
|
|
|
|
Acquisition-related amortization - Non-cash expense consisting of
the amortization of customer relationships, acquired technology,
and trade name intangible assets recorded in connection with our
acquisitions of the Health Services business in February 2015 and
AbleVets in October 2019. We exclude acquisition-related
amortization as we believe the amount of such non-cash expenses in
any specific period may not directly correlate to the underlying
performance of our business operations. Such amount is included in
our Condensed Consolidated Statements of Operations in the caption
"Amortization of acquisition-related intangibles." |
|
|
|
|
Organizational restructuring and other expense - Consists of
certain charges incurred in connection with our operational
improvement initiatives. Expenses in connection with these efforts
may include, but are not limited to, consultant and other
professional services fees, employee separation costs, contract
termination costs, and other such related expenses. We exclude
organizational restructuring and other expense as we believe the
amount of such expense in any specific period may not directly
correlate to the underlying performance of our business operations.
Organizational restructuring and other expense is included in our
Condensed Consolidated Statements of Operations as follows: |
|
|
|
|
(In thousands) |
|
Three Months Ended |
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
Sales and client service |
|
$ |
933 |
|
$ |
— |
|
General and administrative |
|
|
39,852 |
|
|
2,392 |
|
Total organizational restructuring and other expense |
|
$ |
40,785 |
|
$ |
2,392 |
|
|
|
|
|
COVID-19 related expense - Consists of certain charges incurred
that we can clearly and objectively attribute to the impact of the
ongoing Coronavirus disease pandemic ("COVID-19"). These charges
include expenses incurred related to trade shows for which we
withdrew our participation and expenses associated with incremental
cleaning and sanitation efforts for facility space that may have
been exposed to the virus. We exclude COVID-19 related expense as
we believe the amount of such expense in any specific period may
not directly correlate to the underlying performance of our
business operations. COVID-19 related expense is included in our
Condensed Consolidated Statements of Operations as follows: |
|
|
|
|
(In thousands) |
|
Three Months Ended |
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
Sales and client service |
|
$ |
1,955 |
|
$ |
— |
|
General and administrative |
|
|
20 |
|
|
— |
|
Total COVID-19 related expense |
|
$ |
1,975 |
|
$ |
— |
|
|
|
|
|
Investment gains - Consists of an unrealized gain of $477 thousand
recognized in the first quarter of 2020 on one of our equity
investments, which was accounted for in accordance with Accounting
Standards Codification Topic 321, Investments-Equity Securities. We
have excluded this gain as we believe the amount of such gain does
not directly correlate to the underlying performance of our
business operations in the period recorded. Such gain is included
in our Condensed Consolidated Statements of Operations in the
caption "Other income, net." |
|
|
|
|
Income tax effect of pre-tax adjustments - The GAAP effective
income tax rate for the applicable quarterly period, adjusted for
the impact of a valuation allowance on net operating loss
carryforwards of $3,318 thousand recorded in the first quarter of
2020 as described below, is applied to pre-tax adjustments for
Adjusted Net Earnings. |
|
|
|
|
Share-based compensation permanent tax items - Consists of
permanent items impacting the Company's income tax provision
related to our share-based compensation arrangements, including net
excess tax benefits recognized upon the exercise of stock options.
We exclude such items as we believe the amount of such items in any
specific period may not directly correlate to the underlying
performance of our business operations. Such amount is included in
our Condensed Consolidated Statements of Operations in the caption
"Income taxes." |
|
|
|
|
Valuation allowance on net operating loss carryforwards - Consists
of a valuation allowance recorded against certain deferred tax
assets related to net operating loss carryforwards in a non-U.S.
tax jurisdiction where certain strategic decisions associated with
our operational improvement initiatives have made it more likely
than not that such deferred tax assets will not be realized. We
have excluded this charge as we believe the amount of such expense
does not directly correlate to the underlying performance of our
business operations in the period recorded. Such amount is included
in our Condensed Consolidated Statements of Operations in the
caption "Income taxes." |
|
|
|
|
CERNER CORPORATION AND SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE SHEETS |
As of March 31, 2020 and December 28, 2019 |
(unaudited) |
|
|
|
|
|
(In thousands) |
|
2020 |
|
|
2019 |
|
|
|
|
Assets |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ |
285,412 |
|
$ |
441,843 |
|
Short-term investments |
|
113,363 |
|
|
99,931 |
|
Receivables, net |
|
1,151,028 |
|
|
1,139,595 |
|
Inventory |
|
23,457 |
|
|
23,182 |
|
Prepaid expenses and other |
|
390,346 |
|
|
392,073 |
|
Total current assets |
|
1,963,606 |
|
|
2,096,624 |
|
|
|
|
Property and equipment, net |
|
1,835,138 |
|
|
1,858,772 |
|
Right-of-use assets |
|
128,095 |
|
|
123,155 |
|
Software development costs, net |
|
954,201 |
|
|
939,859 |
|
Goodwill |
|
881,092 |
|
|
883,158 |
|
Intangible assets, net |
|
350,187 |
|
|
364,439 |
|
Long-term investments |
|
411,793 |
|
|
419,419 |
|
Other assets |
|
212,318 |
|
|
209,196 |
|
Total assets |
$ |
6,736,430 |
|
$ |
6,894,622 |
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
Current liabilities: |
|
|
Accounts payable |
$ |
295,950 |
|
$ |
273,440 |
|
Deferred revenue |
|
316,611 |
|
|
360,025 |
|
Accrued payroll and tax withholdings |
|
248,853 |
|
|
245,843 |
|
Other current liabilities |
|
157,072 |
|
|
148,140 |
|
Total current liabilities |
|
1,018,486 |
|
|
1,027,448 |
|
|
|
|
Long-term debt |
|
1,338,417 |
|
|
1,038,382 |
|
Deferred income taxes |
|
378,530 |
|
|
377,657 |
|
Other liabilities |
|
137,918 |
|
|
133,807 |
|
Total liabilities |
|
2,873,351 |
|
|
2,577,294 |
|
|
|
|
Shareholders’ Equity: |
|
|
Common stock |
|
3,702 |
|
|
3,676 |
|
Additional paid-in capital |
|
2,054,252 |
|
|
1,905,171 |
|
Retained earnings |
|
6,022,256 |
|
|
5,934,909 |
|
Treasury stock |
|
(4,057,768 |
) |
|
(3,407,768 |
) |
Accumulated other comprehensive loss, net |
|
(159,363 |
) |
|
(118,660 |
) |
Total shareholders’ equity |
|
3,863,079 |
|
|
4,317,328 |
|
Total liabilities and shareholders’ equity |
$ |
6,736,430 |
|
$ |
6,894,622 |
|
|
|
|
|
|
|
|
CERNER CORPORATION AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
For the three months ended March 31, 2020 and March 30,
2019 |
(unaudited) |
|
|
|
|
|
|
|
|
|
Three Months Ended |
(In thousands) |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
Net earnings |
|
$ |
147,159 |
|
$ |
166,219 |
|
Adjustments to reconcile net earnings to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
|
|
172,646 |
|
|
166,671 |
|
Share-based compensation expense |
|
|
35,031 |
|
|
19,860 |
|
Provision for deferred income taxes |
|
|
10,449 |
|
|
3,998 |
|
Investment gains |
|
|
(477 |
) |
|
— |
|
Changes in assets and liabilities: |
|
|
|
Receivables, net |
|
|
(22,774 |
) |
|
13,789 |
|
Inventory |
|
|
(296 |
) |
|
928 |
|
Prepaid expenses and other |
|
|
(13,681 |
) |
|
(13,318 |
) |
Accounts payable |
|
|
8,539 |
|
|
(10,891 |
) |
Accrued income taxes |
|
|
1,105 |
|
|
4,256 |
|
Deferred revenue |
|
|
(42,310 |
) |
|
(61,547 |
) |
Other accrued liabilities |
|
|
(11,885 |
) |
|
27,301 |
|
|
|
|
|
Net cash provided by operating activities |
|
|
283,506 |
|
|
317,266 |
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
Capital purchases |
|
|
(49,248 |
) |
|
(119,261 |
) |
Capitalized software development costs |
|
|
(73,855 |
) |
|
(74,551 |
) |
Purchases of investments |
|
|
(39,194 |
) |
|
(90,953 |
) |
Sales and maturities of investments |
|
|
36,112 |
|
|
110,104 |
|
Purchase of other intangibles |
|
|
(9,682 |
) |
|
(8,994 |
) |
Acquisition of business, net of cash acquired |
|
|
(744 |
) |
|
— |
|
|
|
|
|
Net cash used in investing activities |
|
|
(136,611 |
) |
|
(183,655 |
) |
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
Long-term debt issuance |
|
|
300,000 |
|
|
— |
|
Proceeds from exercise of stock options |
|
|
118,203 |
|
|
15,281 |
|
Payments to taxing authorities in connection with shares directly
withheld from associates |
|
|
(4,517 |
) |
|
(1,730 |
) |
Treasury stock purchases |
|
|
(650,000 |
) |
|
(20,542 |
) |
Dividends paid |
|
|
(56,047 |
) |
|
— |
|
Other |
|
|
(3,600 |
) |
|
— |
|
|
|
|
|
Net cash used in financing activities |
|
|
(295,961 |
) |
|
(6,991 |
) |
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
(7,365 |
) |
|
2,415 |
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
(156,431 |
) |
|
129,035 |
|
Cash and cash equivalents at beginning of period |
|
|
441,843 |
|
|
374,126 |
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
285,412 |
|
$ |
503,161 |
|
|
|
|
|
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