SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 4, 1998
------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _________
Commission File Number 0-15386
------------------------
CERNER CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 43-1196944
- --------------------------- ----------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
2800 Rockcreek Parkway
Kansas City, Missouri 64117
(816) 221-1024
----------------------------------------------------------
(Address of Principal Executive Offices, including zip code;
registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) with the Commission, and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
----- -----
There were 32,756,676 shares of Common Stock, $.01 par
value, outstanding at July 4, 1998.
<PAGE>
CERNER CORPORATION AND SUBSIDIARIES
I N D E X
Part I. Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheets as of July 4, 1998
and January 3, 1998 (unaudited) 1
Consolidated Statements of Earnings for the
three months and six months ended July 4, 1998
and June 28, 1997 (unaudited) 2
Consolidated Statements of Cash Flows
for the six months ended July 4, 1998
and June 28, 1997 (unaudited) 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
Part II. Other Information:
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
<TABLE>
CERNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
July 4, January 3,
1998 1998
-------------------------
(In thousands)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 19,936 $ 7,541
Short-term investments 32,086 70,002
Receivables 149,243 125,516
Inventory 1,868 1,743
Prepaid expenses and other 4,446 3,553
----------- -----------
Total current assets 207,579 208,355
Property and equipment, net 69,209 65,724
Software development costs, net 47,105 40,566
Intangible assets, net 8,568 6,402
Noncurrent receivables 2,046 2,290
Other assets 8,694 8,444
----------- -----------
$ 343,201 $ 331,781
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 10,621 $ 11,330
Current installments of long-term debt 43 35
Advanced billings 7,239 8,290
Accrued income taxes 21,110 18,245
Accrued payroll and tax withholdings 13,624 11,610
Other accrued expenses 2,805 2,037
----------- -----------
Total Current Liabilities 55,442 51,547
----------- -----------
Long-term debt, net 30,010 30,026
Deferred income taxes 17,021 16,461
Stockholders' Equity:
Common stock, $.01 par value, 150,000,000
shares authorized, 33,958,194 shares issued
in 1998 and 33,816,829 issued in 1997 340 338
Additional paid-in capital 149,168 148,074
Retained earnings 112,313 106,273
Treasury stock, at cost (1,201,518 shares) (20,796) (20,796)
Accumulated other comprehensive income (297) (142)
----------- -----------
Total stockholders' equity 240,728 233,747
----------- -----------
$ 343,201 $ 331,781
=========== ===========
</TABLE>
See notes to consolidated financial statements.
1
<PAGE>
<TABLE>
CERNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
-------------------------------------------
July 4, June 28, July 4, June 28,
-------------------------------------------
(In thousands, except per share data)
1998 1997 1998 1997
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
System sales $ 58,219 $ 44,792 $ 111,592 $ 78,867
Support and maintenance 18,709 16,999 36,721 32,724
Other 2,224 1,529 4,513 2,858
--------- -------- -------- --------
Total revenues 79,152 63,320 152,826 114,449
--------- -------- -------- --------
Costs and expenses:
Cost of revenues 21,237 21,879 43,309 37,026
Sales and client service 28,110 20,435 54,060 39,054
Software development 14,520 10,600 28,154 20,217
General and administrative 6,475 5,502 12,509 10,709
Write-off of in process
research and development -- -- 5,038 --
--------- -------- -------- --------
Total costs and expenses 70,342 58,416 143,070 107,006
--------- -------- -------- --------
Operating earnings 8,810 4,904 9,756 7,443
Interest income (expense), net (84) 574 76 1,158
--------- -------- -------- --------
Earnings before income taxes 8,726 5,478 9,832 8,601
Income Taxes 3,357 2,154 3,792 3,341
--------- -------- -------- --------
Net earnings $ 5,369 $ 3,324 $ 6,040 $ 5,260
========= ======== ======== ========
Basic Earnings per share $ .16 $ .10 $ .18 $ .16
========= ======== ======== ========
Basic Weighted average
shares outstanding 32,741 32,908 32,705 32,912
--------- -------- -------- --------
Diluted Earnings per share $ .16 $ .10 $ .18 $ .16
========= ======== ======== ========
Diluted Weighted average
shares outstanding 33,661 33,497 33,497 33,546
--------- -------- -------- --------
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
<TABLE>
CERNER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended
--------------------
July 4, June 28,
--------------------
1998 1997
-------- ---------
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 6,040 $ 5,260
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 11,970 8,704
Issuance of stock as compensation -- 16
Write-off of acquired in-process
research and development 5,038 --
Provision for deferred income taxes 3,285 --
Equity in losses of investee companies 488 --
Loss on disposal of capital equipment 147 --
Changes in assets and liabilities:
Receivables (23,396) (8,750)
Inventory (125) (179)
Prepaid expenses and other (2,140) (457)
Accounts payable (851) 6,229
Accrued income taxes -- 3,344
Other accrued liabilities 850 489
--------- ---------
Total adjustments (4,734) 9,396
--------- ---------
Net cash provided by operating activities 1,306 14,656
--------- ---------
Cash flows from investing activities:
Purchase of capital equipment (8,443) (9,195)
Acquisition of business (6,874) --
Investment of investee companies (567) (4,500)
Capitalized software development costs (11,862) (8,746)
--------- ---------
Net cash used in investing activities (27,746) (22,441)
--------- ---------
Cash flows from financing activities:
Repayment of long-term debt (22) (68)
Proceeds from exercise of options 1,096 448
Purchase of treasury stock -- (2,900)
--------- ---------
Net cash provided by(used in)financing activities 1,074 (2,520)
--------- ---------
Foreign currency translation adjustment (155) (109)
--------- ---------
Net decrease in cash, cash equivalents, and
short-term investments (25,521) (10,414)
Cash, cash equivalents, and short-term
investments at beginning of period 77,543 110,902
--------- ---------
Cash, cash equivalents, and short-term
investments at end of period $ 52,022 $ 100,488
========= =========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
CERNER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Interim Statement Presentation
The consolidated financial statements included herein have
been prepared by the Company without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in
annual financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these
consolidated financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included
in the Company's latest annual report on Form 10-K.
In the opinion of management, the accompanying unaudited
consolidated financial statements include all adjustments
(consisting of only normal recurring accruals) necessary to
present fairly the financial position at July 4, 1998 and January
3, 1998 and the results of operations and cash flows for the
periods presented. The results of the three-month and six-month
periods are not necessarily indicative of the operating results
for the entire year.
The Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" as of January
4, 1998. This statement establishes requirements for reporting
and display of comprehensive income and its components. For the
six months ended July 4, 1998 and June 28, 1997, total
Comprehensive Income, which includes foreign currency translation
adjustments, amounted to $5,885,000 and $5,151,000, respectively.
(2) Earnings Per Share
Basic EPS excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities of
other contracts to issue stock were exercised or converted into
common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity.
(3) Acquisition of Business
On March 16, 1998, the Company purchased all of the
outstanding common stock of Multum Information Systems, Inc.,
(Multum) for $6.9 million. Multum is a supplier to the
healthcare industry of drug knowledge databases and intelligent
software components that improve the quality and cost-
effectiveness of medical care. The Company plan to incorporate
Multum's drug information and expert dosing component into its
Health Network Architecture Millennium solutions to enable
Multum's expert knowledge to become executable within the process
of care delivery.
The acquisition has been accounted for using the purchase
method of accounting with the operating results of Multum
included in the Company's consolidated statement of earnings
since the date of acquisition. Five million dollars of the purchase
price was allocated to in-process research and development that
had not reached technological feasibility and was treated as a
one-time charge to earnings reducing after tax income for the six
month period ended July 4, 1998 by $3.1 million or $.09 per share
on a diluted basis.
The allocation of the purchase price to the estimated fair
values of the identified tangible and intangible assets acquired
and liabilities assumed, resulted in goodwill of $1,581,000. The
goodwill is being amortized straight-line over seven years.
4
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
- ---------------------
Three Months Ended July 4, 1998 Compared to Three Months Ended June 28, 1997
The Company's revenues increased 25% to $79,152,000 for the
three-month period ended July 4, 1998 from $63,320,000 for the
three-month period ended June 28, 1997. Net earnings increased
62% to $5,369,000 in the 1998 period from $3,324,000 for the 1997
period.
System sales revenues increased 30% to $58,219,000 for the
three-month period ended July 4, 1998 from $44,792,000 for the
corresponding period in 1997. The increase in system sales was
due primarily to an increase in revenue from Health Network
Architecture (HNA) contracts. HNA contracts were 63% of total
system sales for the quarter ended July 4, 1998 compared to 60%
for the prior year period. The revenue from the sale of
additional hardware and software products to the installed client
base increased 20% in the second quarter of 1998 over the same
period in 1997.
At July 4, 1998, the Company had $266,765,000 in contract
backlog and $144,360,000 in support and maintenance backlog,
compared to $153,532,000 in contract backlog and $122,353,000 in
support and maintenance backlog at June 28, 1997.
Support and maintenance revenues increased 10% to $18,709,000
during the second quarter of 1998 from $16,999,000 during the
same period in 1997. This increase was due primarily to the
increase in the Company's installed and converted client base.
Other revenues increased 45% to $2,224,000 in the second
quarter of 1998 from $1,529,000 in the same period of 1997. This
increase was due primarily to services performed beyond
contracted requirements for existing clients.
The cost of revenues includes the cost of computer hardware
and sublicensed software purchased from computer and software
manufacturers for delivery to clients. It also includes the cost
of hardware maintenance and sublicensed software support
subcontracted to manufacturers. The cost of revenue was 27% of
total revenues in the second quarter of 1998 and 35% of total
revenues in the comparable period in 1997. Such costs, as a
percent of revenues, typically have varied as the mix of revenue
(software, hardware, maintenance, and support) components
carrying different margin rates changes from period to period.
Sales and client service expenses include salaries of client
service personnel, communications expenses and unreimbursed
travel expenses. Also included are sales and marketing salaries,
trade show costs and advertising costs. These expenses as a
percent of total revenues were 36% and 32% in the second quarter
of 1998 and 1997, respectively. The increase in total sales and
client service expenses to $28,110,000 in 1998 from $20,435,000
in 1997 was attributable to the cost of a larger regional sales
and services organization and marketing of new products.
Software development expenses include salaries, documentation
and other direct expenses incurred in product development, as
well as amortization of software development costs. Total
expenditures for software development, including both capitalized
and noncapitalized portions, for the second quarter of 1998 and
1997 were $17,973,000 and $13,326,000, respectively. These
amounts exclude amortization of previously capitalized
expenditures. Capitalized software costs were $6,112,000 and
$4,712,000 for the second quarter of 1998 and 1997, respectively.
The increase in aggregate expenditures for software development
in 1998 was due to development of HNA Millennium products and
development of community care products.
General and administrative expenses include salaries for
corporate, financial, and administrative staffs, utilities,
communications expenses, and professional fees. These expenses
as a percent of total revenues were 8% and 9% in the second
quarter of 1998 and 1997, respectively. Total general and
administrative expenses for the second quarter of 1998 and 1997
were $6,475,000 and $5,502,000, respectively.
5
<PAGE>
Net interest income (expense) was ($84,000) in the second
quarter of 1998 compared to $574,000 for the same period in 1997.
This decrease is primarily due to a decrease in invested cash.
The Company's effective tax rates were 38% and 39% for the
second quarter of 1998 and 1997, respectively.
The Company's quarterly revenues and net earnings have
historically been variable and cyclical. The variability is
attributable primarily to the number and size of project
milestone events in any fiscal quarter. The Company expects
fluctuations in quarterly results to continue.
Six Months Ended July 4, 1998 Compared to Six Months Ended June 28, 1997
The Company's revenues increased 34% to $152,826,000 for the
six-month period ended July 4, 1998 from $114,449,000 for the six-
month period ended June 28, 1997. Net earnings increased 15% to
$6,040,000 in the 1998 period from $5,260,000 for the 1997
period. Excluding a one-time write-off of in-process research
and development, net earnings would have increased 74% to
$9,138,000, relative to the 1997 period.
System sales revenues increased 41% to $111,592,000 for the
six-month period ended July 4, 1998 from $78,867,000 for the
corresponding period in 1997. The increase in system sales was
due primarily to an increase in revenue from Health Network
Architecture (HNA) contracts. HNA contracts were 45% of total
system sales for the six-month period ended July 4, 1998 compared
to 36% for the prior year period. The revenue from the sale of
additional hardware and software products to the installed client
base increased 25% in the first six-months of 1998 over the same
period in 1997.
At July 4, 1998, the Company had $266,765,000 in contract
backlog and $144,360,000 in support and maintenance backlog,
compared to $153,532,000 in contract backlog and $122,353,000 in
support and maintenance backlog at June 28, 1997.
Support and maintenance revenues increased 12% to $36,721,000
during the first six months of 1998 from $32,724,000 during the
same period in 1997. This increase was due primarily to the
increase in the Company's installed and converted client base.
Other revenues increased 58% to $4,513,000 in the first six
months of 1998 from $2,858,000 in the same period of 1997. This
increase was due primarily to services performed beyond
contracted requirements for existing clients.
The cost of revenues includes the cost of computer hardware
and sublicensed software purchased from computer and software
manufacturers for delivery to clients. It also includes the cost
of hardware maintenance and sublicensed software support
subcontracted to manufacturers. The cost of revenue was 28% of
total revenues in the first six months of 1998 and 32% of total
revenues in the comparable period in 1997. Such costs, as a
percent of revenues, typically have varied as the mix of revenue
(software, hardware, maintenance, and support) components
carrying different margin rates changes from period to period.
Sales and client service expenses include salaries of client
service personnel, communications expenses and unreimbursed
travel expenses. Also included are sales and marketing salaries,
trade show costs and advertising costs. These expenses as a
percent of total revenues were 35% and 34% in the first six
months of 1998 and 1997, respectively. The increase in total
sales and client service expenses to $54,060,000 in 1998 from
$39,054,000 in 1997 was attributable to the cost of a larger
regional sales and services organization and marketing of new
products.
Software development expenses include salaries, documentation
and other direct expenses incurred in product development, as
well as amortization of software development costs. Total
expenditures for software development, including both capitalized
and noncapitalized portions, for the second quarter of 1998 and
1997 were $34,693,000 and $25,035,000, respectively. These
amounts exclude amortization of previously capitalized
expenditures. Capitalized software costs were $11,862,000 and
$8,746,000 for the first six months of 1998 and 1997,
respectively. The increase in aggregate
6
<PAGE>
expenditures for software development in 1998 was due to develop-
ment of HNA Millennium products and development of community care
products.
General and administrative expenses include salaries for
corporate, financial, and administrative staffs, utilities,
communications expenses, and professional fees. These expenses
as a percent of total revenues were 8% and 9% in the first six
months of 1998 and 1997, respectively. Total general and
administrative expenses for the first six months of 1998 and 1997
were $12,509,000 and $10,709,000, respectively.
Write-off of in process research and development is a one-
time expense resulting from the acquisition of Multum.
Net interest income decreased 93% in the first six months of
1998 compared to the same period in 1997. This decrease is
primarily due to a decrease in invested cash and cash
equivalents.
The Company's effective tax rate was 39% for the first six
months of 1998 and 1997.
Capital Resources and Liquidity
- -------------------------------
The Company's liquidity position remains strong with total
cash and cash equivalents of $19,936,000 and short term
investments of $32,086,000 at July 4, 1998 and working capital of
$152,137,000. The Company generated net cash from operations of
$1,306,000 and $14,656,000 during the six month periods ended
July 4, 1998 and June 28, 1997, respectively. The decrease in
net cash from operations is due to the increase in receivables
from record revenues. The Company acquired Multum on March 16,
1998 for $6.9 million. The Company has $18,000,000 of long-term,
revolving credit from banks, all of which was available as of
July 4, 1998.
Revenues provided under the Company's support and maintenance
agreements represent recurring cash flows. The Company's revenue
backlog at July 4, 1998 included $144,360,000 representing twelve
months of equipment maintenance and software support associated
with signed contracts.
The Company believes its present cash, cash equivalents and
short-term investment position, together with cash generated from
operations and available under its current bank borrowing
facility, will be sufficient to meet anticipated cash
requirements during the next twelve months.
7
<PAGE>
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
At the Company's annual shareholders meeting held on May 22,
1998, Dr. Gerald E. Bisbee, Jr. and Michael E. Herman were
reelected as Class III Directors, for a three year term expiring
at the 2001 annual meeting of shareholders. Neal L. Patterson,
Clifford W. Illig, John C. Danforth,Thomas C. Tinstman, M.D. and
Thomas A. McDonnell continued as directors after the meeting.
<TABLE>
Abstention and Broker
For Withheld Non-Votes
---------- -------- ---------------------
<S> <C> <C> <C>
Dr. Gerald E. Bisbee, Jr. 31,915,185 0 786,812
Michael E. Herman 32,114,675 0 587,322
</TABLE>
The shareholders approved the amendment to increase the common
shares available in Stock Option Plan D of the Company from
2,600,000 to 4,600,000. Shares voted in favor were 16,131,353,
shares against 9,399,432 and 7,171,211 shares abstained or were
broker non-votes.
The shareholders also ratified the selection by the Board of
Directors of KPMG Peat Marwick LLP as the Company's independent
certified public accountants for the fiscal year ending January
2, 1999. Shares voted in favor were 32,418,524, shares against
252,660 and 30,813 shares abstained or were broker non-votes 30,813.
Item 5. Other Information.
-----------------
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
Exhibit 10 Amended Stock Option Plan D
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company
during the quarter ended July 4, 1998.
8
<PAGE>
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 thereunto duly authorized.
CERNER CORPORATION
------------------
Registrant
August 7, 1998 By: /s/ Marc G. Naughton
- -------------- ---------------------
Date Marc G. Naughton
Chief Financial Officer
9
<PAGE>
CERNER CORPORATION
NONQUALIFIED STOCK OPTION PLAN D
APPROVED BY SHAREHOLDERS ON MAY 22, 1998
1. Purpose of Plan. The purpose of the Plan is to encourage
the employees and directors of Cerner Corporation (the "Company")
and its subsidiaries and consultants and advisors to the Company
and its subsidiaries to participate in the ownership of the
Company, and to provide additional incentive for such persons to
promote the success of its business through sharing in the future
growth of such business.
2. Effectiveness of Plan. The provisions of this Plan shall
become effective on the date the Plan is adopted by the Board of
Directors of the Company (the "Board of Directors"), and shall
govern all options granted hereunder. Nothing in this Plan shall
be construed as a modification of any provision of the Cerner
Corporation Incentive Stock Option Plan A, the Cerner Corporation
Incentive Stock Option Plan B or the Cerner Corporation Incentive
Stock Option Plan C.
3. Administration. This Plan shall be administered by a
committee of the Board of Directors consisting of not less than
two nor more than five members of the Board of Directors (the
"Committee") appointed by the members of the Board of Directors.
Subject to the terms, provisions and conditions of the Plan, the
Committee shall have exclusive authority (i) to select the
persons to whom options shall be granted, (ii) to determine the
number of shares subject to each option, (iii) to determine the
time or times when options will be granted, (iv) to determine the
option price of the shares subject to each option, (v) to
determine the time when each option may be exercised, (vi) to fix
such other provisions of each option agreement as the Committee
may deem necessary or desirable, consistent with the terms of
this Plan, and (vii) to determine all other questions relating to
the administration of this Plan; provided however, that any grant
of an option to one individual in excess of 100,000 shares shall
required approval of the Board of Directors.
4. Eligibility. Options to purchase shares of common stock of
the Company ("Cerner Common Stock") shall be granted under this
Plan only to directors and employees of the Company or of any of
its subsidiaries and to advisors and consultants to the Company
and any of its subsidiaries.
5. Shares Subject to the Plan. Options granted under this Plan
shall be granted solely with respect to shares of Cerner Common
Stock. Subject to any adjustments made pursuant to the
provisions of paragraph 10, the aggregate number of shares of
Cerner Common Stock which may be issued upon exercise of all the
options which may be granted under this Plan shall not exceed
4,600,000. If any option granted under this Plan shall expire or
terminate for any reason without having been exercised in full,
the unpurchased shares subject to such option shall be added to
the number of shares otherwise available for options which may be
granted in accordance with the terms of this Plan. The shares to
be delivered upon exercise of the options granted under this Plan
shall be made available, at the discretion of the Committee, from
either the authorized but unissued shares of Cerner Common Stock
or any treasury shares of Cerner Common Stock held by the
Company.
6. Option Agreement. Each option granted under this Plan shall
be evidenced by a nonqualified stock option agreement, which
shall be signed by an officer of the Company and by the employee
to whom the option is granted (the "optionee"). The terms of
said nonqualified stock option agreement shall be in accordance
with the provisions of this Plan, but it may include such other
provisions as may be approved by the Committee. The granting of
an option under this Plan shall be deemed to occur on the date on
which the nonqualified stock option agreement evidencing such
option is executed by the Company and the optionee. Each
nonqualified stock option agreement shall constitute a binding
contract between the Company and the optionee, and every
optionee, upon the execution of a nonqualified stock option
agreement, shall be bound by the terms and restrictions of this
Plan and such nonqualified stock option agreement.
7. Option Price. The price at which shares of Cerner Common
Stock may be purchased under an option granted pursuant to this
Plan shall be determined by the Committee.
8. Period and Exercise of Option.
(a) Period--The period during which each option granted
under this Plan may be exercised shall be fixed by the Committee
at the time such option is granted.
(b) Exercise--Any option granted under this Plan may be
exercised by the optionee (or such other person as the Committee
may determine), subject to designation by the Committee in the
stock option agreement, only by (i) delivering to the Company
written notice of the number of shares with respect to which he
is exercising his option right, (ii) paying in full the option
price of the purchased shares in cash or (iii) by delivery to the
Company of that number of shares of Cerner Common Stock having a
fair market value on the date of exercise equal to the sum of the
exercise price of the options to be exercised or (iv)
surrendering on the date of exercise that number of options
which, when multiplied by the excess of the fair market value of
the stock which is subject to the surrendered options on the date
of exercise over the exercise price for said options, results in
a product that is equal to the sum of the exercise price of the
remaining options being exercised. Subject to the limitations of
this Plan and the terms and conditions of the respective stock
option agreement, each option granted under this Plan shall be
exercisable in whole or in part at such time or times as the
Committee may specify in such stock option agreement.
(c) Delivery of certificates--As soon as practicable after
receipt by the Company of the notice described in subsection (b),
and of payment in full of the option price for all of the shares
being purchased pursuant to an option granted under this Plan, a
certificate or certificates representing such shares of stock
shall be registered in the name of the optionee and shall be
delivered to the optionee. However, no certificate for
fractional shares of stock shall be issued by the Company
notwithstanding any request therefor. Neither any optionee, nor
the legal representative, legatee or distributee of any optionee,
shall be deemed to be a holder of any shares of stock subject to
an option granted under this Plan unless and until the
certificate or certificates for such shares have been issued.
(d) Limitations on exercise--The Committee may impose such
limitations on the exercise of any specific nonqualified stock
option agreement as it deems appropriate.
9. Nontransferability of Options. No option granted under this
Plan shall be transferable or assignable by the optionee, other
than by will or by the laws of descent and distribution.
10. Adjustments Upon Changes in Capitalization. In the event of
any change in the capital structure of the Company, including but
not limited to a change resulting from a stock dividend, stock
split, reorganization, merger, consolidation, liquidation or any
combination or exchange of shares, the number of shares of Cerner
Common Stock subject to this Plan and the number of such shares
subject to each option granted hereunder shall be correspondingly
adjusted by the Committee. The option price for which shares of
Cerner Common Stock may be purchased pursuant to an option
granted under this Plan shall also be adjusted so that there will
be no change in the aggregate purchase price payable upon the
exercise of any option.
11. Amendment and Termination of Plan. No option shall be
granted pursuant to this Plan after January 1, 2005, on which
date this Plan will expire except as to options then outstanding,
which options shall remain in effect until they have been
exercised or have expired. The Committee may at any time before
such date amend, modify or terminate the Plan; provided, however,
that the Committee may not, without approval of the Shareholders
of the Company (i) increase the maximum number of shares of
Cerner Common Stock as to which options may be granted pursuant
to the Plan, (ii) alter the eligibility requirements for
optionees under the Plan or (iii) extend the duration of the
Nonqualified Plan. No amendment, modification or termination of
this Plan may adversely affect the rights of any optionee under
any then outstanding option granted hereunder without the consent
of such optionee.
12. Governing Law. This Plan and the rights of all persons
claiming hereunder shall be construed and determined in
accordance with the laws of the State of Missouri.
Exhibit 11
<TABLE>
CERNER CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
<CAPTION>
Three Months Ended Six Months Ended
July 4, June 28, July 4, June 28,
------------------------- -------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net earnings: $ 5,369,000 $ 3,324,000 $ 6,040,000 $ 5,260,000
========== ========== ========== ==========
Weighted average number of
common and common stock
equivalent shares:
Basic weighted average
number of outstanding
common shares: 32,741,369 32,907,692 32,704,941 32,911,709
---------- ---------- ---------- ----------
Basic earnings per common shares: $ 0.16 $ 0.10 $ 0.18 $ 0.16
---------- ---------- ---------- ----------
Dilutive effect (excess
of number of shares issuable
over number of shares assumed
to be repurchased with the
proceeds of exercised options
and converted warrants based
on the average market price
during the period) 919,288 589,231 792,418 634,336
---------- ---------- ---------- ----------
33,660,657 33,496,923 33,497,359 33,546,045
---------- ---------- ---------- ----------
Diluted earnings per common and
common stock equivalent shares: $ 0.16 $ 0.10 $ 0.18 $ 0.16
---------- ---------- --------- ----------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> JUL-04-1998
<CASH> 19,936,000
<SECURITIES> 32,086,000
<RECEIVABLES> 152,694,000
<ALLOWANCES> 1,405,000
<INVENTORY> 1,868,000
<CURRENT-ASSETS> 207,579,000
<PP&E> 112,556,000
<DEPRECIATION> 43,347,000
<TOTAL-ASSETS> 343,201,000
<CURRENT-LIABILITIES> 55,442,000
<BONDS> 0
0
0
<COMMON> 340,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 343,201,000
<SALES> 152,826,000
<TOTAL-REVENUES> 152,826,000
<CGS> 43,309,000
<TOTAL-COSTS> 99,761,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (76,000)
<INCOME-PRETAX> 9,832,000
<INCOME-TAX> 3,792,000
<INCOME-CONTINUING> 6,040,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,040,000
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
