Form 8-K CERNER CORP /MO/ For: May 07
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________________
FORM 8-K
_______________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 7, 2015
Cerner Corporation
(Exact Name of Registrant as Specified in Its Charter)
Delaware | 0-15386 | 43-1196944 | |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |
2800 Rockcreek Parkway, North Kansas City, Missouri | 64117 | ||
(Address of Principal Executive Offices) | (Zip Code) | ||
(816) 201-1024
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
On May 7, 2015, Cerner Corporation (“Cerner”) issued a press release announcing, among other things, its financial results for the three month period ended April 4, 2015. The press release is furnished as Exhibit 99.1 and is attached hereto.
To supplement Cerner’s consolidated financial statements presented in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), Cerner uses non-GAAP financial measures of adjusted net earnings, adjusted diluted earnings per share and free cash flow (which is defined as GAAP cash flows from operating activities less capital purchases and capitalized software development costs). Both adjusted net earnings and adjusted diluted earnings per share are adjusted from results based on GAAP to exclude certain share-based compensation expenses and acquisition-related adjustments. Cerner also discloses certain non-GAAP measures, such as bookings and backlog. These non-GAAP measures are provided to enhance the user’s overall understanding of our financial performance, and as required, are also reconciled to GAAP. These measurements are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance.
The information contained in this Form 8-K (including Exhibit 99.1) is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise be subject to the liabilities of that section. The information in this Item 2.02 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, except as otherwise expressly stated in such filing.
Item 9.01 Financial Statements and Exhibits.
d) Exhibits
99.1 Press Release of Cerner Corporation dated May 7, 2015.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CERNER CORPORATION | ||||||
Date: May 7, 2015 | By: | /s/ Marc G. Naughton | ||||
Marc G. Naughton, Executive Vice President | ||||||
and Chief Financial Officer | ||||||
EXHIBIT INDEX
Exhibit Number | Description | |
99.1 | Press Release of Cerner Corporation dated May 7, 2015 | |
Exhibit 99.1
Cerner Reports First Quarter 2015 Results
KANSAS CITY, Mo. - May 7, 2015 - Cerner Corporation (Nasdaq: CERN) today announced results for the 2015 first quarter that ended April 4, 2015.
Bookings in the first quarter of 2015 were $1.20 billion, an all-time high and an increase of 32 percent compared to $910.2 million in first quarter 2014.
First quarter revenue was $996.1 million, an increase of 27 percent compared to $784.8 million in the year-ago period. Revenue was below guidance provided by the Company due to a combination of lower than expected revenue from the recently closed acquisition of Siemens Health Services (Health Services) and lower revenue in our existing business. However, the lower revenue did not have a material impact on profitability, and Cerner’s adjusted earnings were in-line with guidance.
On a U.S. Generally Accepted Accounting Principles (GAAP) basis, first quarter 2015 net earnings were $110.9 million and diluted earnings per share were $0.32. First quarter 2014 GAAP net earnings were $119.5 million and diluted earnings per share were $0.34.
Adjusted (non-GAAP) Net Earnings
Adjusted net earnings for first quarter 2015 were $157.1 million, compared to $129.1 million of adjusted net earnings in the first quarter of 2014. Adjusted diluted earnings per share were $0.45 in the first quarter of 2015, an increase of 22 percent compared to $0.37 of adjusted diluted earnings per share in the year-ago quarter. Analysts’ consensus estimate for first quarter 2015 adjusted diluted earnings per share was $0.45.
Adjusted net earnings is not a recognized term under GAAP and should not be substituted for net earnings as a measure of Cerner’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 net earnings. For more detail, please see the accompanying schedule, titled “Reconciliation of GAAP Results to Non-GAAP Results.”
First quarter 2015 adjusted net earnings and diluted earnings per share exclude share-based compensation expense, which reduced first quarter 2015 net earnings and diluted earnings per share by $10.9 million and $0.03, respectively. Adjusted net earnings and diluted earnings per share also reflect adjustments related to Cerner’s acquisition of Health Services, including: amortization of intangibles, which reduced net earnings and diluted earnings per share by $10.0 million and $0.03, respectively; a deferred revenue adjustment, which reduced net earnings and diluted earnings per share by $8.3 million and $0.02, respectively; and other acquisition-related adjustments, which reduced net earnings and diluted earnings per share by $16.9 million and $0.05, respectively.
Other 2015 First Quarter Highlights:
▪ | First quarter cash collections of $981.2 million and operating cash flow of $214.2 million. |
▪ | First quarter free cash flow of $68.9 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. For more detail, please see the accompanying schedule, titled “Reconciliation of GAAP Results to Non-GAAP Results.” |
▪ | First quarter days sales outstanding of 79 days, which is up from 66 days in the year-ago quarter. |
▪ | Total backlog of $13.0 billion, up 41 percent over the year-ago quarter. |
“Cerner’s first quarter results represent a solid start to the year,” said Neal Patterson, Cerner chairman, CEO and co-founder. “With the exception of lower than expected revenue, all of our results were at or above expected levels, with bookings being particularly strong and representing an all-time high. The record bookings reflect great success at attaining new clients, both domestically and around the world, and position us for a good year.”
Future Period Guidance
Cerner currently expects:
▪ | Second quarter 2015 revenue between $1.175 billion and $1.225 billion. |
▪ | Full year 2015 revenue between $4.65 billion and $4.8 billion, as compared to a prior range of $4.8 billion to $5.0 billion. |
▪ | Second quarter 2015 adjusted diluted earnings per share before share based compensation expense and acquisition related adjustments between $0.51 and $0.52. |
▪ | Full year 2015 adjusted diluted earnings per share before share based compensation expense and acquisition-related adjustments between $2.07 and $2.15, as compared to a prior range of $2.05 to $2.15. |
▪ | Second quarter 2015 new business bookings between $1.2 billion and $1.3 billion. |
▪ | Share based compensation expense to reduce diluted earnings per share by approximately $0.03 to $0.04 in the second quarter of 2015 and between $0.14 and $0.16 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 May 7. The dial-in number for the conference call is (857)-244-7326; the passcode is Cerner. Cerner recommends joining the call 15 minutes early for registration. The re-broadcast of the call will be available from 7:30 p.m. CT, May 7 through 11:59 p.m. CT, May 10. The dial-in number for the re-broadcast is (617)-801-6888; the passcode is 92323471.
An audio webcast will be available live and archived on Cerner’s website at www.cerner.com under the About Cerner section (click Investor Relations, then Presentations and Webcasts).
About Cerner
Cerner's health information technologies connect people, information, and systems, at more than 18,000 facilities worldwide. Recognized for innovation, Cerner solutions assist clinicians in making care decisions and enable organizations to manage the health of populations. The company also offers an integrated clinical and financial system to help health care organizations manage revenue, as well as a wide range of services to support clients’ clinical, financial and operational needs. Cerner’s mission is to contribute to the systemic improvement of health care delivery and the health of communities. On February 2, 2015, Cerner Corporation acquired substantially all of the assets, and assumed certain liabilities, of the Siemens Health Services business from Siemens AG. Nasdaq: CERN. For more information about Cerner, visit www.cerner.com, read our blog at www.cerner.com/blog, connect with us on Twitter at http://www.twitter.com/cerner and on Facebook at www.facebook.com/cerner.
Certain trademarks, service marks and logos set forth herein are property of Cerner Corporation and/or its subsidiaries. All other non-Cerner marks are the property of their respective owners.
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 “position”, “guidance”, “future”, “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; material adverse resolution of legal proceedings; 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 and combinations and the integration thereof, such as difficulties and operational and financial risks associated with integrating Cerner and the Siemens Health Services business acquired from Siemens AG (the “Acquisition”); the potential for losses resulting from asset impairment charges; risks associated with volatility and disruption resulting from global economic conditions; managing growth in the new markets in which we offer solutions, health care devices and services; incurring significant additional expenses relating to the integration of the Health Services business into Cerner; compliance with restrictive covenants in our debt agreements, which may restrict our flexibility to operate our business; changing political, economic, regulatory and judicial 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 the timing and volume of market activity; our directors’ authority to issue preferred stock and the anti-takeover provisions in our corporate governance documents; risks related to disruption of management time from ongoing business operations due to the integration of the business acquired in the Acquisition; failure to realize the synergies and other benefits expected from the Acquisition; risk that the assets and business acquired may not continue to be commercially successful; the effect of the Acquisition on the ability of Cerner to retain customers and retain and hire key personnel and maintain relationships with key suppliers; unexpected costs, charges or expenses resulting from the Acquisition; and litigation or claims relating to the Acquisition or the acquired assets and business. 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. Cerner 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, [email protected]
Media Contact: Dan Smith, (913) 304-3991, [email protected]
Cerner’s Internet Home Page: www.cerner.com
CERNER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended April 4, 2015 and March 29, 2014
(unaudited)
(In thousands, except per share data) | Three Months Ended | ||||||
2015 (1) | 2014 (1) | ||||||
Revenues | |||||||
System sales | $ | 259,569 | $ | 206,687 | |||
Support, maintenance and services | 718,370 | 557,429 | |||||
Reimbursed travel | 18,150 | 20,645 | |||||
Total revenues | 996,089 | 784,761 | |||||
Margin | |||||||
System sales | 168,070 | 141,574 | |||||
Support, maintenance and services | 659,359 | 514,088 | |||||
Total margin | 827,429 | 655,662 | |||||
Operating expenses | |||||||
Sales and client service | 420,182 | 330,901 | |||||
Software development | 127,271 | 91,545 | |||||
General and administrative | 113,064 | 55,213 | |||||
Total operating expenses | 660,517 | 477,659 | |||||
Operating earnings | 166,912 | 178,003 | |||||
Other income, net | 208 | 2,990 | |||||
Earnings before income taxes | 167,120 | 180,993 | |||||
Income taxes | (56,186 | ) | (61,467 | ) | |||
Net earnings | $ | 110,934 | $ | 119,526 | |||
Basic earnings per share | $ | 0.32 | $ | 0.35 | |||
Basic weighted average shares outstanding | 343,216 | 343,701 | |||||
Diluted earnings per share | $ | 0.32 | $ | 0.34 | |||
Diluted weighted average shares outstanding | 351,659 | 352,230 | |||||
Note 1: Operating expenses for the three months ended April 4, 2015 and March 29, 2014 include share-based compensation expense. The impact of this expense on net earnings and diluted earnings per share is presented below:
(In thousands, except per share data) | Three Months Ended | ||||||
2015 | 2014 | ||||||
Sales and client service | $ | 8,540 | $ | 7,218 | |||
Software development | 2,954 | 3,085 | |||||
General and administrative | 4,963 | 4,465 | |||||
Total share-based compensation | 16,457 | 14,768 | |||||
Amount of related income tax benefit | (5,533 | ) | (5,184 | ) | |||
Net impact on net earnings | $ | 10,924 | $ | 9,584 | |||
Decrease to diluted earnings per share | $ | 0.03 | $ | 0.03 | |||
CERNER CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS1
For the three months ended April 4, 2015 and March 29, 2014
(unaudited)
RECONCILIATION OF ADJUSTED NET EARNINGS TO GAAP NET EARNINGS1
(In thousands) | Three Months Ended | ||||||
2015 | 2014 | ||||||
Net Earnings | |||||||
Net earnings (GAAP) | $ | 110,934 | $ | 119,526 | |||
Share-based compensation expense, net of tax | 10,924 | 9,584 | |||||
Acquisition-related amortization, net of tax2 | 10,035 | — | |||||
Acquisition-related deferred revenue adjustment, net of tax3 | 8,298 | — | |||||
Other acquisition-related adjustments, net of tax4 | 16,879 | — | |||||
Adjusted net earnings (non-GAAP)5 | $ | 157,070 | $ | 129,110 | |||
RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE TO GAAP DILUTED EARNINGS PER SHARE1
Three Months Ended | |||||||
2015 | 2014 | ||||||
Diluted Earnings Per Share | |||||||
Diluted earnings per share (GAAP) | $ | 0.32 | $ | 0.34 | |||
Share-based compensation expense, net of tax | 0.03 | 0.03 | |||||
Acquisition-related amortization, net of tax2 | 0.03 | — | |||||
Acquisition-related deferred revenue adjustment, net of tax3 | 0.02 | — | |||||
Other acquisition-related adjustments, net of tax4 | 0.05 | — | |||||
Adjusted diluted earnings per share (non-GAAP)5 | $ | 0.45 | $ | 0.37 | |||
RECONCILIATION OF NON-GAAP FREE CASH FLOW TO GAAP OPERATING CASH FLOW1
(In thousands) | Three Months Ended | ||||||
2015 | 2014 | ||||||
Cash flows from operating activities (GAAP) | $ | 214,247 | $ | 155,787 | |||
Capital purchases | (82,264 | ) | (69,661 | ) | |||
Capitalized software development costs | (63,067 | ) | (44,544 | ) | |||
Free cash flow (non-GAAP)6 | $ | 68,916 | $ | 41,582 | |||
Note 1: The presentation of Adjusted Diluted Earnings per Share, 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 Cerner's consolidated financial statements prepared in accordance with GAAP. Adjusted Diluted Earnings per Share, 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. We believe that Adjusted Diluted Earnings per Share, Adjusted Net Earnings and Free Cash Flow are important to 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.
Note 2: The Health Services acquisition-related amortization is presented net of income tax benefits of $5.1 million for the three months ended April 4, 2015.
Note 3: The Health Services acquisition-related deferred revenue adjustment is presented net of income tax benefits of $4.2 million for the three months ended April 4, 2015.
Note 4: Other acquisition-related adjustments (includes acquisition and employee separation costs) are presented net of income tax benefits of $8.5 million for the three months ended April 4, 2015.
Note 5: Cerner provides earnings with and without share-based compensation expense and acquisition-related adjustments because earnings excluding these amounts are used by management along with GAAP results to analyze its business, make strategic decisions, assess long-term trends on a comparable basis, and for management compensation purposes.
Note 6: Cerner provides free cash flow because it takes into account the capital expenditures necessary to operate our business.
CERNER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of April 4, 2015 (unaudited) and January 3, 2015
(In thousands) | 2015 | 2014 | |||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 390,335 | $ | 635,203 | |||
Short-term investments | 293,827 | 785,663 | |||||
Receivables, net | 940,571 | 672,778 | |||||
Inventory | 22,553 | 23,789 | |||||
Prepaid expenses and other | 242,462 | 209,278 | |||||
Deferred income taxes, net | 21,533 | 22,075 | |||||
Total current assets | 1,911,281 | 2,348,786 | |||||
Property and equipment, net | 1,103,400 | 924,260 | |||||
Software development costs, net | 456,473 | 420,199 | |||||
Goodwill | 767,222 | 320,538 | |||||
Intangible assets, net | 741,162 | 126,636 | |||||
Long-term investments | 204,520 | 231,147 | |||||
Other assets | 168,547 | 158,999 | |||||
Total assets | $ | 5,352,605 | $ | 4,530,565 | |||
Liabilities and Shareholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 195,711 | $ | 160,285 | |||
Current installments of long-term debt and capital lease obligations | 61,828 | 67,460 | |||||
Deferred revenue | 301,907 | 209,655 | |||||
Accrued payroll and tax withholdings | 182,222 | 140,230 | |||||
Other accrued expenses | 50,631 | 56,685 | |||||
Total current liabilities | 792,299 | 634,315 | |||||
Long-term debt and capital lease obligations | 564,339 | 62,868 | |||||
Deferred income taxes and other liabilities | 258,746 | 256,601 | |||||
Deferred revenue | 26,800 | 10,813 | |||||
Total liabilities | 1,642,184 | 964,597 | |||||
Shareholders’ Equity: | |||||||
Common stock | 3,486 | 3,470 | |||||
Additional paid-in capital | 985,073 | 933,446 | |||||
Retained earnings | 3,029,415 | 2,918,481 | |||||
Treasury stock | (245,333 | ) | (245,333 | ) | |||
Accumulated other comprehensive loss, net | (62,220 | ) | (44,096 | ) | |||
Total shareholders’ equity | 3,710,421 | 3,565,968 | |||||
Total liabilities and shareholders’ equity | $ | 5,352,605 | $ | 4,530,565 | |||
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