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December 12, 2013

Cerner to take charge against earnings after arbitration ruling

The North Kansas City-based health care information company said it “strongly disagrees” with the ruling, but it expects a charge of 18 to 19 cents for the quarter that ends Dec. 28.

Cerner Corp. said Thursday it expected to take a significant charge against its fourth-quarter earnings after an arbitrator ruled against it in a dispute with a medical-center client in North Dakota.

The North Kansas City-based health care information company said in a regulatory filing that it “strongly disagrees” with the ruling, but it expects a charge of 18 to 19 cents per share for the quarter that ends Dec. 28.

Before the news of the arbitration ruling, Cerner was expected to earn about 35 cents per share in the fourth quarter, according to analyst estimates compiled by Bloomberg News.

Shares in Cerner closed Thursday at $54.03, down 57 cents or about 1 percent.

The dispute was with Trinity Medical Center in Minot, N.D. It alleged in 2012 that the patient accounting software package it bought from Cerner in 2008 was “defective and did not deliver the promised benefits,” according to an earlier regulatory filing by Cerner in October with the Securities and Exchange Commission.

Trinity alleged damages of about $240 million. Cerner disputed the allegations and said damages shouldn’t exceed $4 million, assuming it was found liable.

The two sides agreed to arbitration to settle the problem, and a hearing began in October.

The amount of the arbitration award was not disclosed by Cerner, although the company said it was awarded “part of its counterclaim to collect accounts receivable.”

Cerner said that it “takes pride in working closely with clients to achieve successful outcomes” and that Trinity’s claim was “based on unique circumstances.”

The company also said the award represents “the only material judgment against Cerner in its 34-year history.”

A spokesman for Trinity couldn’t be reached for comment Thursday.

In a note to investors, the research firm International and Strategy Investment Group said it did not think Cerner’s one-time charge to earnings “will have a material impact on the company’s growth opportunities. Overall, Cerner’s broad product platform, newer products and large customer penetration should help it to continue to drive market share gains.”

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