UNITED 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): July 24, 2014
 
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 July 24, 2014, Cerner Corporation (“Cerner”) issued a press release announcing, among other things, its financial results for the three and six month periods ended June 28, 2014. 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 and adjusted diluted earnings per share. Both adjusted net earnings and adjusted diluted earnings per share are adjusted from results based on GAAP to exclude certain share-based compensation expenses. Cerner also discloses certain non-GAAP measures, such as bookings and backlog (which includes contract backlog and support and maintenance backlog), and the non-GAAP financial measure free cash flow (which is defined as GAAP cash flows from operating activities less capital purchases and capitalized software development costs). 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 July 24, 2014.






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: July 24, 2014
 
 
 
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 July 24, 2014



99.1 - Press Release Dated July 24, 2014


Exhibit 99.1
Cerner Reports Second Quarter 2014 Results
Strong Bookings, Revenue, Earnings and Cash Flow

KANSAS CITY, Mo. - July 24, 2014 - Cerner Corporation (Nasdaq: CERN) today announced results for the 2014 second quarter that ended June 28, 2014, delivering strong levels of bookings, revenue, earnings, and cash flow.

Bookings in the second quarter of 2014 were $1.08 billion, an all-time high for a second quarter and an increase of 15 percent compared to second quarter 2013 bookings of $935.0 million.

Second quarter revenue was $851.8 million, an increase of 20 percent compared to $707.6 million in the year-ago period.

On a U.S. Generally Accepted Accounting Principles (GAAP) basis, second quarter 2014 net earnings were $129.0 million and diluted earnings per share were $0.37. Second quarter 2013 GAAP net earnings were $112.9 million and diluted earnings per share were $0.32.
 
Adjusted (non-GAAP) Net Earnings
Adjusted net earnings for second quarter 2014 were $138.9 million, compared to $119.6 million of adjusted net earnings in the second quarter of 2013. Adjusted diluted earnings per share were $0.40 in the second quarter of 2014, an increase of 18 percent compared to $0.34 of adjusted diluted earnings per share in the year-ago quarter. Analysts’ consensus estimate for second quarter 2014 adjusted diluted earnings per share was $0.40.

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.”

Second quarter 2014 adjusted net earnings and diluted earnings per share exclude share-based compensation expense, which reduced second quarter 2014 net earnings and diluted earnings per share by $9.9 million and $0.03, respectively. Second quarter 2013 adjusted net earnings and diluted earnings per share exclude share-based compensation expense, which reduced net earnings and diluted earnings per share by $6.7 million and $0.02, respectively.

Other 2014 Second Quarter Highlights:
▪
Second quarter cash collections of $843.8 million and operating cash flow of $248.3 million.
▪
Second quarter free cash flow of $143.8 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.”
▪
Second quarter days sales outstanding of 66 days, which is down from 68 days in the year-ago quarter.
▪
Total backlog of $9.69 billion, up 21 percent over the year-ago quarter. This was comprised of $8.88 billion of contract backlog and $806.6 million of support and maintenance backlog.

“Our outstanding second quarter results reflect Cerner’s strong position in a growing industry,” said Neal Patterson, Cerner chairman, CEO and co-founder. “Health care providers face a growing list of measures and mandates that are putting pressure on them to lower costs while also improving quality. We believe information technology is the biggest lever to help them address these challenges, and we are continuing to invest heavily in R&D to not only help providers navigate the current environment, but also prepare them for the future.”





Future Period Guidance
Cerner currently expects:
▪
Third quarter 2014 revenue between $840 million and $870 million.
▪
Full year 2014 revenue between $3.3 billion and $3.4 billion, which is up from a prior range of $3.25 billion to $3.4 billion.
▪
Third quarter 2014 adjusted diluted earnings per share before share based compensation expense between $0.41 and $0.42.
▪
Full year 2014 adjusted diluted earnings per share before share based compensation expense between $1.64 and $1.67, which is up from a prior range of $1.63 to $1.67.
▪
Third quarter 2014 new business bookings between $1 billion and $1.1 billion.
▪
Share based compensation expense to reduce diluted earnings per share by approximately $0.03 in the third quarter of 2014 and between $0.11 and $0.12 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 July 24. The dial-in number for the conference call is (617)-614-4909; the passcode is Cerner. Cerner recommends joining the call 15 minutes early for registration. The re-broadcast of the call will be available from 6:30 p.m. CT, July 24 through 11:59 p.m. CT, July 27. The dial-in number for the re-broadcast is (617)-801-6888; the passcode is 98537092.

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 approximately 14,000 facilities worldwide. Recognized for innovation, Cerner solutions assist clinicians in making care decisions and enable organizations to manage the health of populations. The company provides clients with a wide range of in-house services, as well as an integrated clinical and financial system to help organizations manage revenue. Cerner's mission is to contribute to the systemic improvement of health care delivery and the health of communities. Nasdaq: CERN. For more information about Cerner, please visit www.cerner.com, check out our blog at www.cerner.com/blog and 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.

This release contains forward-looking statements that involve a number of 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 “guidance”, “expects”, “will” or the negative of these words, variations thereof or similar expressions are intended to identify such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: the possibility of product-related liabilities; potential claims for system errors and warranties; the possibility of interruption at our data centers or client support facilities; our proprietary technology may be subject to claims for infringement or misappropriation of intellectual property rights of others, or may be infringed or misappropriated by others; risks associated with our 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; 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; 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; and material adverse resolution of legal



proceedings. Additional discussion of these and other risks, uncertainties and factors affecting Cerner's business is contained in Cerner's periodic 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, akells@cerner.com
Media Contact: Kate O'Neill Rauber, (816) 888-2880, c_oneillrauber.kate@cerner.com
Cerner's Internet Home Page: www.cerner.com





CERNER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and six months ended June 28, 2014 and June 29, 2013
(unaudited)
(In thousands, except per share data)
 
 Three Months Ended
 
Six Months Ended
 
 
2014 (1)
2013 (1)
 
2014 (1)
2013 (1)
Revenues
 
 
 
 
 
 
System sales
 
$
234,563

$
200,503

 
$
441,250

$
399,405

Support, maintenance and services
 
588,167

486,647

 
1,145,596

953,203

Reimbursed travel
 
29,032

20,411

 
49,677

34,982

            Total revenues
 
851,762

707,561

 
1,636,523

1,387,590

 
 
 
 
 
 
 
Margin
 
 
 
 
 
 
System sales
 
153,257

128,795

 
294,831

246,214

Support, maintenance and services
 
536,136

452,966

 
1,050,224

888,347

            Total margin
 
689,393

581,761

 
1,345,055

1,134,561

 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
Sales and client service
 
343,234

281,192

 
674,135

548,548

Software development
 
97,326

82,282

 
188,871

163,345

General and administrative
 
57,200

51,831

 
112,413

99,643

            Total operating expenses
 
497,760

415,305

 
975,419

811,536

 
 
 
 
 
 
 
            Operating earnings
 
191,633

166,456

 
369,636

323,025

 
 
 
 
 
 
 
Other income, net
 
2,737

2,733

 
5,727

5,777

 
 
 
 
 
 
 
Earnings before income taxes
 
194,370

169,189

 
375,363

328,802

Income taxes
 
(65,337
)
(56,282
)
 
(126,804
)
(105,855
)
Net earnings
 
$
129,033

$
112,907

 
$
248,559

$
222,947

 
 
 
 
 
 
 
Basic earnings per share
 
$
0.38

$
0.33

 
$
0.73

$
0.65

 
 
 
 
 
 
 
Basic weighted average shares outstanding
 
341,788

343,800

 
342,787

343,976

 
 
 
 
 
 
 
Diluted earnings per share
 
$
0.37

$
0.32

 
$
0.71

$
0.63

 
 
 
 
 
 
 
Diluted weighted average shares outstanding
 
349,794

352,485

 
351,049

352,714


Note 1: Operating expenses for the three and six months ended June 28, 2014 and June 29, 2013 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
 
Six Months Ended
 
 
2014
2013
 
2014
2013
 
 
 
 
 
 
 
Sales and client service
 
$
7,084

$
4,898

 
$
14,302

$
9,916

Software development
 
3,643

2,946

 
6,728

5,271

General and administrative
 
4,477

3,089

 
8,942

6,972

Total share-based compensation
 
15,204

10,933

 
29,972

22,159

Amount of related income tax benefit
 
(5,336
)
(4,242
)
 
(10,520
)
(8,598
)
Net impact on net earnings
 
$
9,868

$
6,691

 
$
19,452

$
13,561

Decrease to diluted earnings per share
 
$
0.03

$
0.02

 
$
0.05

$
0.04




CERNER CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS1 
For the three and six months ended June 28, 2014 and June 29, 2013
(unaudited)

RECONCILIATION OF ADJUSTED NET EARNINGS TO GAAP NET EARNINGS1 
(In thousands)
 
 Three Months Ended
 
Six Months Ended
 
 
2014
2013
 
2014
2013
Net Earnings
 
 
 
 
 
 
Net earnings (GAAP)
 
$
129,033

$
112,907

 
$
248,559

$
222,947

Share-based compensation expense
 
15,204

10,933

 
29,972

22,159

Income tax benefit of share-based compensation
 
(5,336
)
(4,242
)
 
(10,520
)
(8,598
)
Adjusted net earnings (non-GAAP)2
 
$
138,901

$
119,598

 
$
268,011

$
236,508


RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE TO GAAP DILUTED EARNINGS PER SHARE1 
 
 
 Three Months Ended
 
Six Months Ended
 
 
2014
2013
 
2014
2013
Diluted Earnings Per Share
 
 
 
 
 
 
Diluted earnings per share (GAAP)
 
$
0.37

$
0.32

 
$
0.71

$
0.63

Share-based compensation expense (net of tax)
 
0.03

0.02

 
0.05

0.04

Adjusted diluted earnings per share (non-GAAP)2
 
$
0.40

$
0.34

 
$
0.76

$
0.67


RECONCILIATION OF NON-GAAP FREE CASH FLOW TO GAAP OPERATING CASH FLOW1 

(In thousands)
 
 Three Months Ended
 
Six Months Ended
 
 
2014
2013
 
2014
2013
Cash flows from operating activities (GAAP)
 
$
248,271

$
176,507

 
$
404,058

$
390,155

Capital purchases
 
(62,336
)
(85,536
)
 
(131,997
)
(134,987
)
Capitalized software development costs
 
(42,122
)
(43,573
)
 
(86,666
)
(77,907
)
Free cash flow (non-GAAP)3
 
$
143,813

$
47,398

 
$
185,395

$
177,261


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: Cerner provides earnings with and without share-based compensation expense because earnings excluding this expense is 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 3: 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 June 28, 2014 (unaudited) and December 28, 2013
(In thousands)
 
2014
 
2013
 
 
 
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
315,260

 
$
202,377

Short-term investments
 
673,532

 
677,004

Receivables, net
 
614,930

 
582,926

Inventory
 
31,710

 
32,299

Prepaid expenses and other
 
175,074

 
175,488

Deferred income taxes, net
 
92,763

 
91,614

Total current assets
 
1,903,269

 
1,761,708

 
 
 
 
 
Property and equipment, net
 
863,684

 
792,781

Software development costs, net
 
384,813

 
347,077

Goodwill
 
324,108

 
307,422

Intangible assets, net
 
137,069

 
144,132

Long-term investments
 
478,963

 
554,873

Other assets
 
173,369

 
190,371

Total assets
 
$
4,265,275

 
$
4,098,364

 
 
 
 
 
Liabilities and Shareholders’ Equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
148,854

 
$
145,019

Current installments of long-term debt and capital lease obligations
 
59,287

 
54,107

Deferred revenue
 
228,166

 
209,746

Accrued payroll and tax withholdings
 
141,160

 
147,986

Other accrued expenses
 
95,055

 
83,574

Total current liabilities
 
672,522

 
640,432

 
 
 
 
 
Long-term debt and capital lease obligations
 
96,084

 
111,717

Deferred income taxes and other liabilities
 
229,083

 
170,392

Deferred revenue
 
7,817

 
8,159

Total liabilities
 
1,005,506

 
930,700

 
 
 
 
 
Shareholders’ Equity:
 
 
 
 
Common stock
 
3,457

 
3,443

Additional paid-in capital
 
865,386

 
812,853

Retained earnings
 
2,641,607

 
2,393,048

Treasury stock
 
(245,333
)
 
(28,251
)
Accumulated other comprehensive loss, net
 
(5,348
)
 
(13,429
)
Total shareholders’ equity

3,259,769

 
3,167,664

Total liabilities and shareholders’ equity
 
$
4,265,275

 
$
4,098,364