Cerner Delivers Strong Earnings and Cash Flow; New Business Bookings a

Cerner Delivers Strong Earnings and Cash Flow; New Business Bookings a First Quarter Record

    Business Editors/Health/Medical Writers

    KANSAS CITY, Mo.--(BUSINESS WIRE)--April 21, 2005--Cerner Corp. (NASDAQ: CERN) today announced results for the 2005 first quarter ended April 2, 2005, delivering strong new business bookings, earnings and cash flow. New business bookings revenue in the first quarter was $233.8 million, which is up 8 percent over the first quarter of 2004 and is a record level of new business bookings for the first quarter.
    First quarter 2005 revenues increased 20 percent to $262.5 million compared to $218.7 million in the year-ago quarter. First quarter 2005 revenues included $17.3 million from the acquisition of the medical division of VitalWorks Inc., which closed on January 3, 2005.
    On a GAAP basis, first quarter 2005 net earnings were $12.5 million, and diluted earnings per share were $0.33. The first quarter of 2005 included a charge of $6.4 million for the write-off of acquired in-process research and development related to the acquisition of the medical division of VitalWorks Inc. This charge impacted net earnings by $3.9 million and diluted earnings per share by $0.10. Before this charge, net earnings were $16.5 million and diluted earnings per share were $0.43. Analysts' consensus estimates for first quarter 2005 earnings per share were $0.42.
    The Company generated strong operating cash flow of $44.3 million in the first quarter, driven by continued strong operational execution and improved days sales outstanding.

    Other First Quarter Highlights:

--	Record cash collections of $278.9 million.
--	Days sales outstanding of 99 days compared to 104 days in the fourth quarter of 2004 and 108 days in the year-ago quarter.
--	Operating margin of 11.1 percent, which is 80 basis points higher than the first quarter of 2004.
--	Total revenue backlog of $1.61 billion, up 22 percent over the year-ago quarter. This is comprised of $1.24 billion of contract backlog and $364.5 million of support and maintenance backlog.
--	175 Cerner Millennium(R) solution implementations were completed. Cerner has now turned on over 3,900 Cerner Millennium solutions at nearly 800 client facilities worldwide.

    "Our first quarter results again reflect very strong sales and operational execution," said Neal Patterson, Cerner's co-founder, chairman and chief executive officer. "We continued to deliver on our financial imperatives by generating strong revenue growth, expanding operating margins, and delivering strong cash flow.
    "We remain excited about the opportunities that exist in the healthcare information technology industry," added Patterson. "Healthcare remains the largest single component of the United States economy, and the federal government has become increasingly aware that widespread adoption of HIT is necessary to reduce rising healthcare costs and improve safety. Cerner's unified architecture and depth and breadth of solutions and services uniquely position us to play a major role in facilitating this widespread adoption across physician offices, hospitals, clinics, laboratories and pharmacies."

    Future Period Guidance

    The Company expects revenue in the second quarter of 2005 to be approximately $265 million to $270 million. Cerner expects earnings per share in the second quarter to be between $0.48 and $0.49, which is nearly 30 percent higher than the second quarter of 2004. Cerner expects new business bookings in the second quarter to be between $235 and $250 million.
    For the year 2005, the Company expects earnings per share between $2.10 and $2.14, which is up from the prior range of $2.07 to $2.12. 2005 earnings per share guidance does not include the previously mentioned $0.10 charge for the write-off of acquired in-process research and development. Cerner expects 2005 revenue to be between $1.09 billion and $1.11 billion, which is up from the prior range of $1.08 billion and $1.1 billion.

    Earnings Conference Call

    Cerner will host an earnings conference call to provide additional detail at 3:30 p.m. CDT on April 21, 2005. The dial-in number for the call is 617+786-4513 and the replay number is 617-801-6888 (Pass code: 15393413). The rebroadcast of the call will be available from approximately 6:00 p.m. CDT, April 21, through 6:00 p.m. CDT, April 23.
    An audio Webcast will be available both live and archived on Cerner's Web site at www.cerner.com under the About Cerner section (click Investors, then Presentations and Webcasts). A copy of the script used during the call will also be available at the same section of www.cerner.com.

    Cerner Corp. is taking the paper chart out of healthcare, eliminating error, variance and waste in the care process. With more than 1,500 clients worldwide, Cerner is the leading supplier of healthcare information technology. The following are trademarks of Cerner: Cerner, Cerner Millennium, and Cerner's logo. (Nasdaq: CERN), www.cerner.com.

    This release contains forward-looking statements that involve a number of risks and uncertainties. It is important to note that the Company's performance, and actual results, financial condition or business could differ materially from those expressed in such forward-looking statements. The words "opportunities," "positions us," "expects," "guidance" 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: quarterly operating results may vary, stock price may be volatile, changes in the healthcare industry, significant competition, the Company's proprietary technology may be subjected to infringement claims or may be infringed upon, government regulations, the possibility of product-related liabilities, possible system errors or failures or defects in the performance of the Company's software, risks associated with the Company's global operations, the recruitment and retention of key personnel, risks related to doing business with third party suppliers, and the potential inconsistencies in sales forecasts compared to actual sales. Additional discussion of these and other factors affecting the Company's business is contained in the Company's periodic filings with the Securities and Exchange Commission. The Company 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 CONSOLIDATED STATEMENTS OF EARNINGS

Three Months Three Months (In thousands, except per share Ended Ended data) April 2, 2005 (1) April 3, 2004 (2) ------------------ ------------------ Revenue System sales $ 99,942 84,512 Support, maintenance and services 156,001 127,069 Reimbursed travel 6,591 7,146 ------------------ ------------------

Total revenue 262,534 218,727

Margin System sales 63,908 57,779 Support and maintenance 143,218 114,275 ------------------ ------------------

Total margin 207,126 172,054 ------------------ ------------------

Operating expenses Sales and client service 110,840 92,842 Software development 49,329 42,554 General and administrative 17,922 14,145 Write-off of in process research and development 6,382 - ------------------ ------------------

Total operating expenses 184,473 149,541 ------------------ ------------------

Operating earnings 22,653 22,513

Interest income 884 442 Interest expense (2,626) (2,557) Other income 30 3,014 ------------------ ------------------

Non-operating income (expense), net (1,712) 899

Earnings before income taxes 20,941 23,412 Income taxes (8,421) (9,283) ------------------ ------------------

Net earnings $ 12,520 14,129 ================== ==================

Basic earnings per share $ 0.34 0.40 ================== ==================

Basic weighted average shares outstanding 36,740 35,661

Diluted earnings per share $ 0.33 0.38 ================== ==================

Diluted weighted average shares outstanding 38,294 37,222

Note 1: Includes a charge for the write-off of acquired in process research and development related to the acquisition of the medical business division of VitalWorks Inc. The impact of this charge is a $3.9 million decrease, net of $2.4 million tax benefit, in net earnings and a decrease to diluted earnings per share of $.10 for 2005.

Note 2: Includes a gain on the sale of Zynx Health Incorporated. The impact of this gain is a $1.8 million increase, net of $1.2 million tax expense, in net earnings and an increase to diluted earnings per share of $.05 for 2004.

CERNER CORPORATION NON-GAAP CONSOLIDATED STATEMENTS OF EARNINGS

Three Months Three Months Ended Ended (In thousands, except per share data) April 2, 2005 April 3, 2004 --------------- -------------- Revenue System sales $ 99,942 84,512 Support, maintenance and services 156,001 127,069 Reimbursed travel 6,591 7,146 --------------- --------------

Total revenue 262,534 218,727

Margin System sales 63,908 57,779 Support and maintenance 143,218 114,275 --------------- --------------

Total margin 207,126 172,054 --------------- --------------

Operating expenses Sales and client service 110,840 92,842 Software development 49,329 42,554 General and administrative 17,922 14,145 --------------- --------------

Total operating expenses 178,091 149,541 --------------- --------------

Operating earnings 29,035 22,513

Interest income 884 442 Interest expense (2,626) (2,557) Other income 30 (9) --------------- --------------

Non-operating expense, net (1,712) (2,124)

Earnings before income taxes 27,323 20,389 Income taxes (10,862) (8,086) --------------- --------------

Net earnings $ 16,461 12,303 =============== ==============

Basic earnings per share $ 0.45 0.34 =============== ==============

Basic weighted average shares outstanding 36,740 35,661

Diluted earnings per share $ 0.43 0.33 =============== ==============

Diluted weighted average shares outstanding 38,294 37,222

RECONCILIATION OF NON-GAAP TO GAAP CONSOLIDATED STATEMENTS OF EARNINGS

Three Months Three Months Ended Ended (In thousands, except per share data) April 2, 2005 April 3, 2004 --------------- ---------------

Non-GAAP net income $ 16,461 12,303 Write off of acquired in process research and development (6,382) - Income tax effect 2,441 - Gain on sale of Zynx - 3,023 Income tax effect - (1,197) --------------- ---------------

GAAP net income $ 12,520 14,129 =============== ===============

Basic earnings per share $ 0.34 0.40 =============== ===============

Basic weighted average shares outstanding 36,740 35,661

Diluted earnings per share $ 0.33 0.38 =============== ===============

Diluted weighted average shares outstanding 38,294 37,222

CERNER CORPORATION CONSOLIDATED BALANCE SHEETS

(In thousands) April 2, January 1, 2005 2005 ----------- ---------- Assets

Cash and cash equivalents $ 126,680 189,784 Receivables, net 284,107 282,199 Inventory 8,290 7,373 Prepaid expenses and other 36,718 30,117 ----------- ----------

Total current assets 455,795 509,473

Property and equipment, net 234,541 230,440 Software development costs, net 162,148 157,765 Goodwill, net 109,836 54,600 Intangible assets, net 61,878 22,690 Other assets 8,162 7,297 ----------- ----------

Total assets $ 1,032,360 982,265 =========== ==========

Liabilities

Accounts payable $ 36,429 37,008 Current installments of long-term debt 22,018 21,908 Deferred revenue 82,494 77,445 Deferred income taxes - 430 Accrued payroll and tax withholdings 56,896 55,819 Other accrued expenses 12,209 6,634 ----------- ----------

Total current liabilities 210,046 199,244 ----------- ----------

Long-term debt 130,614 108,804 Deferred income taxes 70,747 69,863 Deferred revenue 5,610 5,703 ----------- ----------

Total liabilities 417,017 383,614 ----------- ----------

Minority owners' equity interest in subsidiary 1,286 1,166

Stockholders' Equity

Common stock 410 381 Additional paid-in capital 276,601 271,116 Retained earnings 356,531 344,011 Treasury stock, at cost (1,502,999 shares in 2005 and 2004) (26,793) (26,793) Foreign currency translation adjustment 7,308 8,770 ----------- ----------

Total stockholders' equity 614,057 597,485

Total liabilities and equity $ 1,032,360 982,265 =========== ==========

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CONTACT: Cerner Corp. Investors: Allan Kells, 816-201-2445 akells@cerner.com or Media: Tracy Richardson, 816-201-5042 tracy.richardson@cerner.com http://www.cerner.com

KEYWORD: MISSOURI INDUSTRY KEYWORD: HARDWARE SOFTWARE INSURANCE MEDICAL EARNINGS CONFERENCE CALLS SOURCE: Cerner Corp.

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