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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
1998 1997 1996
Per Per Per
Earnings Shares Share Earnings Shares Share Earnings Shares Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
Basic earnings per share
Income available to
common stockholders $ 20,589 32,825 $ .63 15,148 32,881 $ .46 8,251 32,729 $ .25
Effect of dilutive securities
Stock options — 842 — 787 — 891
Diluted earnings per share
Income available to
stockholders including
assumed conversions $ 20,589 33,667 $ .61 15,148 33,668 $ .45 8,251 33,620 $ .25
Options to purchase 1,652,000, 1,149,000 and 494,000 shares of common stock at per share prices ranging from $25.00 to
$31.00, $21.50 to $31.00, and $18.50 to $29.63 were outstanding at the end of 1998, 1997 and 1996, respectively, but were
not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average
market price of the common shares.
(j)
(k)
(l)
Foreign Currency – Assets and liabilities in foreign currencies are translated into dollars at rates prevailing at the balance
sheet date. Revenues and expenses are translated at average rates for the year. The net exchange differences resulting
from these translations are reported in accumulated other comprehensive income. Gains and losses resulting from foreign
currency transactions are included in the consolidated statements of earnings. The net loss resulting from foreign currency
transactions was $673,000, $762,000, and $274,000 in 1998, 1997, and 1996, respectively.
Income Taxes – Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
Goodwill – Excess of cost over net assets acquired (goodwill) is being amortized on a straight-line basis over seven to
eight years. Accumulated amortization was $4,037,000 and $2,733,000 at the end of 1998 and 1997, respectively. The
Company assesses the recoverability of goodwill based on forecasted undiscounted future operating cash flows.
(m) Comprehensive Income – The Company adopted statement of Financial Accounting Standards No. 130, “Reporting
Comprehensive Income” at the beginning of 1998. This statement establishes requirements for reporting and display of
comprehensive income and its components. The adoption of this statement had no effect on the previously reported
net earnings or stockholders’ equity.
(n)
(o)
Use of Estimates – The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates.
Reclassifications – Certain 1997 and 1996 amounts have been reclassified to conform with the 1998 presentations.
C ERNER
CORPORATION
ANNUAL R EPORT 7