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Cerner Reports Fourth Quarter 2012 Results

Cerner ® solutions are licensed by approximately 10,000 facilities around the world, including more than 2,700 hospitals; 4,150 physician practices; 45,000 physicians; 550 ambulatory facilities, such as laboratories, ambulatory centers, behavioral health centers, cardiac facilities, radiology clinics and surgery centers; 800 home health facilities; 45 employer sites and 1,750 retail pharmacies.

Certain trademarks, service marks and logos (collectively, the "Marks") set forth herein are owned by Cerner Corporation and/or its subsidiaries in the United States and certain other countries throughout the world. All other non-Cerner Marks are the property of their respective owners. Nasdaq:CERN. For more information about Cerner, please visit www.cerner.com , Twitter , Facebook and YouTube .

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 "plan", guidance", "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; 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; the potential for losses resulting from asset impairment charges; risks associated with uncertainty in global economic conditions; 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.

         
CERNER CORPORATION AND SUBSIDIARIES        
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS        
For the three and twelve months ended December 29, 2012 and December 31, 2011      
(unaudited)        
         
(In thousands, except per share data) Three Months Ended Years Ended
  2012 (1) 2011 (1) 2012 (1) 2011 (1)
Revenues        
System sales  $ 251,759  $ 220,492  $ 902,799  $ 706,714
Support, maintenance and services  445,098  383,956  1,707,329  1,451,747
Reimbursed travel  13,527  11,178  55,308  44,692
Total revenues  710,384  615,626  2,665,436  2,203,153
         
Margin        
System sales  142,496  128,185  475,343  410,153
Support, maintenance and services  414,777  355,395  1,581,896  1,351,328
Total margin  557,273  483,580  2,057,239  1,761,481
         
Operating expenses        
Sales and client service  274,550  238,224  1,020,640  869,962
Software development  78,624  73,323  301,370  286,801
General and administrative  43,655  34,299  163,567  144,920
Total operating expenses  396,829  345,846  1,485,577  1,301,683
         
Operating earnings  160,444  137,734  571,662  459,798
         
Other income, net  7,257  2,230  16,046  9,896
         
Earnings before income taxes  167,701  139,964  587,708  469,694
Income taxes  (55,893)  (48,772)  (190,476)  (163,067)
Net earnings  $ 111,808  $ 91,192  $ 397,232  $ 306,627
         
Basic earnings per share  $ 0.65  $ 0.54  $ 2.32  $ 1.82
         
Basic weighted average shares outstanding  171,744  169,472  170,931  168,634
         
Diluted earnings per share  $ 0.63  $ 0.52  $ 2.26  $ 1.76
         
Diluted weighted average shares outstanding  176,180  174,488  175,697  173,867
         
Note 1: Operating expenses for the three and twelve months ended December 29, 2012 and December 31, 2011 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 Years Ended
  2012 2011 2012 2011
         
Sales and client service  $ 5,100  $ 3,923  $ 17,316  $ 13,313
Software development  2,322  1,950  9,217  8,372
General and administrative  2,922  2,162  11,579  7,794
Total share-based compensation  10,344  8,035  38,112  29,479
Amount of related income tax benefit  (3,957)  (3,074)  (14,578)  (11,256)
Net impact on net earnings  $ 6,387  $ 4,961  $ 23,534  $ 18,223
         
Decrease to diluted earnings per share  $ 0.04  $ 0.03  $ 0.13  $ 0.11
         
         
CERNER CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS 1
For the three and twelve months ended December 29, 2012 and December 31, 2011
(unaudited)
         
RECONCILIATION OF ADJUSTED NET EARNINGS TO GAAP NET EARNINGS 1
         
(In thousands) Three Months Ended Years Ended
  2012 2011 2012 2011
Net Earnings        
Net earnings (GAAP)  $ 111,808  $ 91,192  $ 397,232  $ 306,627
Share-based compensation expense  10,344  8,035  38,112  29,479
Income tax benefit of share-based compensation  (3,957)  (3,074)  (14,578)  (11,256)
Adjusted net earnings (non-GAAP) 2  $ 118,195  $ 96,153  $ 420,766  $ 324,850
         
RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE TO GAAP DILUTED EARNINGS PER SHARE 1
         
  Three Months Ended Years Ended
  2012 2011 2012 2011
Diluted Earnings Per Share        
Diluted earnings per share (GAAP)  $ 0.63  $ 0.52  $ 2.26  $ 1.76
Share-based compensation expense (net of tax)  0.04  0.03  0.13  0.11
Adjusted diluted earnings per share (non-GAAP) 2  $ 0.67  $ 0.55  $ 2.39  $ 1.87
         
RECONCILIATION OF NON-GAAP FREE CASH FLOW TO GAAP OPERATING CASH FLOW 1
         
(In thousands) Three Months Ended Years Ended
  2012 2011 2012 2011
Cash flows from operating activities (GAAP)  $ 180,554  $ 168,489  $ 708,314  $ 546,294
Capital purchases  (53,463)  (29,193)  (183,429)  (104,795)
Capitalized software development costs  (27,683)  (21,115)  (100,189)  (82,942)
Free cash flow (non-GAAP) 3  $ 99,408  $ 118,181  $ 424,696  $ 358,557
         
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 more comprehensive 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 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 December 29, 2012 (unaudited) and December 31, 2011
   
(In thousands) 2012 2011
     
Assets    
Current assets:    
Cash and cash equivalents  $ 317,120  $ 243,146
Short-term investments  719,665  531,635
Receivables, net  577,848  563,209
Inventory  23,681  23,296
Prepaid expenses and other  113,572  94,232
Deferred income taxes, net  38,620  46,795
Total current assets  1,790,506  1,502,313
     
Property and equipment, net  569,708  488,996
Software development costs, net  267,307  248,750
Goodwill  247,616  211,826
Intangible assets, net  132,045  75,366
Long-term investments  509,467  359,324
Other assets  187,819  113,783
Total assets  $ 3,704,468  $ 3,000,358
     
Liabilities and Shareholders' Equity    
Current liabilities:    
Accounts payable  $ 141,212  $ 85,545
Current installments of long-term debt and capital lease obligations  59,582  39,722
Deferred revenue  189,652  153,139
Accrued payroll and tax withholdings  125,253  109,227
Other accrued expenses  64,413  51,087
Total current liabilities  580,112  438,720
     
Long-term debt and capital lease obligations  136,557  86,821
Deferred income taxes and other liabilities  143,212  150,229
Deferred revenue  10,937  13,787
Total liabilities  870,818  689,557
     
Shareholders' Equity:    
Common stock  1,721  1,696
Additional paid-in capital  842,490  723,490
Retained earnings  1,994,694  1,597,462
Accumulated other comprehensive loss, net  (5,255)  (11,967)
Total Cerner Corporation shareholders' equity  2,833,650  2,310,681
Noncontrolling interest  --   120
Total shareholders' equity  2,833,650  2,310,801
Total liabilities and shareholders' equity  $ 3,704,468  $ 3,000,358
     
CONTACT: Investor Contact:
         Allan Kells
         (816) 201-2445
         akells@cerner.com
         Media Contact: Megan Moriarty
         (816) 888-2470
         megan.moriarty@cerner.com

         Cerner's Internet Home Page: www.cerner.com

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