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."
Adjusted net earnings and diluted earnings per share exclude share-based compensation expense, which reduced fourth quarter 2012 net earnings and diluted earnings per share by $6.4 million and $0.04, respectively; and reduced fourth quarter 2011 net earnings and diluted earnings per share by $5.0 million and $0.03, respectively. Share based compensation expense reduced full year 2012 net earnings and diluted earnings per share by $23.5 million and $0.13, respectively, and reduced full year 2011 net earnings and diluted earnings per share by $18.2 million and $0.11, respectively.
Other 2012 Fourth Quarter and Full Year Highlights:
- Fourth quarter cash collections of $689.8 million and operating cash flow of $180.6 million. For the full year, cash collections were $2.71 billion and operating cash flow was $708.3 million.
- Fourth quarter free cash flow of $99.4 million. For the full year, free cash flow was a record $424.7 million, up 18 percent from $358.6 million in 2011. 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."
- Fourth quarter days sales outstanding of 74 days, which is down from 83 days in the year-ago quarter.
- Total backlog of $7.27 billion, up 19 percent over the year-ago quarter. This was comprised of $6.53 billion of contract backlog and $738.2 million of support and maintenance backlog.
"2012 was great year for Cerner. We delivered outstanding bookings, revenue, earnings and cash flow growth, with this growth coming from expanding relationships with existing clients and record levels of bookings from new clients," Neal Patterson, Cerner chairman, CEO, president and co-founder said. "I was also very pleased with our innovation, as we significantly advanced our cloud-based physician solutions and population health capabilities. In 2013, we plan to build on this success and continue to invest heavily in research and development to increase our competitive advantages and position us for strong growth throughout this decade."