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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4 PROPERTY AND EQUIPMENT
A summary of property, equipment, and leasehold improvements stated at cost, less accumulated depreciation and
amortization, is as follows:
(In thousands)
1998 1997
Furniture and fixtures $ 19,153 17,496
Computer and communications equipment 59,280 41,898
Marketing equipment 1,913 1,222
Leasehold improvements 13,543 10,803
Capital lease equipment 713 673
Land, buildings, and improvements 32,437 29,669
127,039 101,761
Less accumulated depreciation and amortization 49,747 36,037
Total property and equipment, net $ 77,292 65,724
5 INVESTMENTS
Investments consist of the following:
(In thousands)
1998 1997
Investments in available-for-sale equity securities $ 503 503
Less unrealized holding loss 431 —
Investment in available-for-sale equity securities, at fair value 72 503
Investments in other equity securities, at cost 71,647 2,031
Total investments, net $ 71,719 2,534
Included in investments in other equity securities in 1998 is common stock received as consideration for the sale of license
software. There is no current market for the common stock. As a result, it was valued at $70,000,000 based on a methodology
which utilized both a comparable company and the expected underlying discounted future cash flows. The common stock is
subject to certain lock-up provisions.
6 INDEBTEDNESS
The Company has a loan agreement with two banks that provides for a long-term revolving line of credit for working capital
purposes. The long-term revolving line of credit is unsecured and requires monthly payments of interest only. Interest is payable
at the Company’s option at a rate based on prime (7.75% at January 2, 1999) or LIBOR (5.094% at January 2, 1999) plus
1.75%. The interest rate may be reduced by up to .5% if certain net worth ratios are maintained. At January 2, 1999, the
Company had no outstanding borrowings under this agreement and had $18,000,000 available for working capital purposes.
The agreement contains certain net worth, current ratio, and fixed charge coverage covenants and provides certain restrictions
on the Company’s ability to borrow, incur liens, sell assets, and pay dividends. A commitment fee of 3/16% is payable quarterly
on the unused portion of the revolving line of credit.
The Company has $30,000,000 of Senior Notes. The Senior Notes are payable in six equal annual installments beginning in
August 1999. Interest is payable on February 1 and August 1 at a rate of 8.3%. The note agreement contains certain net
worth, current ratio, and fixed charge coverage covenants and provides certain restrictions on the Company’s ability to borrow,
incur liens, sell assets, and pay dividends.
The Company also has an obligation under a capital lease agreement, which is secured by the related equipment, for $30,000
($61,000 at January 3, 1998) with interest at 8.5%, payable in monthly installments through September 1999.
The fair value of the Company’s Senior Notes is estimated to be $31,848,000 based on current rates offered to the Company
for debt of the same remaining maturities.
C ERNER
CORPORATION
ANNUAL R EPORT 9