Cerner Delivers Record Earnings and Cash Flow; New Business Bookings n

Cerner Delivers Record Earnings and Cash Flow; New Business Bookings near All-Time High

    Business Editors

    KANSAS CITY, Mo.--(BUSINESS WIRE)--Feb. 3, 2005--Cerner Corporation (Nasdaq:CERN) today announced results for the 2004 fourth quarter ended Jan. 1, 2005, delivering record earnings and cash flow. Diluted earnings per share were $0.56 in the fourth quarter. Analysts' consensus estimates for fourth quarter earnings per share were $0.54. For the year, diluted earnings per share were $1.72, including a gain on the sale of Zynx Health, Incorporated, in the first quarter that increased earnings per share by $0.05 and an accrued vacation pay adjustment in the third quarter that decreased earnings per share by $0.06. Earnings per share were a record for the quarter and year.
    Fourth quarter revenues increased 9 percent to $248.2 million compared to $227.4 million in the year-ago quarter. Full-year 2004 revenues increased 10 percent to $926.4 million compared to $839.6 million in 2003.
    Net earnings in the 2004 fourth quarter were $21.4 million, up 32 percent over the fourth quarter of 2003. Net earnings for 2004 were $64.6 million up 51 percent compared to 2003. Net earnings prior to the gain on the sale of Zynx Health and the accrued vacation pay adjustment were $64.9 million in 2004. Net earnings were a record for the quarter and year.
    New business bookings revenue in the fourth quarter was $244.8 million, which is up 13 percent over the third quarter of 2004 and is the second highest level of new business bookings in the Company's history. The highest level was $255 million in the fourth quarter of 2003, which included an unusually large transaction that was in excess of $50 million.
    The Company generated record operating cash flow of $55.7 million in the fourth quarter driven by strong cash collections and reflective of continued operational improvements. Full-year 2004 operating cash flow was also a record at $168.3 million.

    Other Fourth Quarter and Full-Year 2004 Highlights:

--	Record cash collections of $256.2 million in the fourth quarter and $937.6 million for the year.
--	Days Sales Outstanding (DSOs) of 104 days in the fourth quarter. DSOs for the full-year 2004 were 105 days compared to 110 days in 2003.
--	Operating margin of 14.8 percent for the fourth quarter and 12.0 percent for the full year. The full-year 2004 operating margin without the impact of the vacation accrual adjustment in the third quarter of 2004 was 12.4 percent and reflects an increase of 310 basis points compared to the 9.3 percent operating margin in 2003.
--	Total revenue backlog of $1.54 billion, up 23 percent over the year-ago quarter. This is comprised of $1.19 billion of contract backlog and $347.7 million of support and maintenance backlog.
--	A record of 354 Cerner Millennium(R) solutions were implemented during the quarter. Cerner has now turned on over 3,700 Cerner Millennium solutions at nearly 750 client facilities worldwide.
--	The number of Cerner client locations using Computerized Physician Order Entry increased from approximately 200 at the end of 2003 to nearly 380 at the end of 2004.

    "Our fourth quarter and full-year 2004 results reflect the strongest overall performance in our history," said Neal Patterson, Cerner's co-founder, Chairman and Chief Executive Officer. "We generated strong margin expansion and cash flow and demonstrated our superior ability to deliver value to our clients by implementing a record number of Cerner Millennium solutions."
    "We continue to believe that Cerner remains well positioned in the very active healthcare information technology sector," added Patterson. "We believe Cerner's single architecture approach and depth and breadth of solutions and services uniquely position us to play a major role in providing a network for healthcare information that connects families, physicians, hospitals, clinics, laboratories and pharmacies across major metropolitan and rural areas. This vision and our abilities align with the government's consideration of a national health information network that is needed to reduce costs and improve safety in our healthcare system."

    Future Period Guidance

    Cerner expects earnings per share in the first quarter of 2005 to be between $0.41 and $0.42, which is approximately 25 percent over the first quarter of 2004. The Company expects revenue in the first quarter to be approximately $250 million to $255 million.
    For 2005, the Company expects earnings per share between $2.07 and $2.12, which is up from the prior range of $2.05 to $2.10. Cerner expects revenue for 2005 to be between $1.08 billion and $1.1 billion, which is up from the prior range of $1.01 billion to $1.03 billion.

    Cerner Board Member Announcement

    Cerner also announced that former U.S. Senator John C. Danforth has re-joined its Board of Directors, effective today. Senator Danforth brings invaluable experience from his 18 years as a U.S. Senator where he was a long-time member of the Senate Finance Committee. Danforth recently stepped down as U.S. Ambassador to the United Nations, affording him the opportunity to re-join the Cerner Board.

    Earnings Conference Call

    Cerner will host an earnings conference call to provide additional detail at 3:30 p.m. CT on February 3, 2005. The dial-in number for the call is 617-786-2903 and the replay number is 617-801-6888 (Pass code: 90190036). The call will also be Web cast and available both live and archived on Cerner's Web site at www.cerner.com in the Investors' section under Presentation and Webcasts. Please access the site fifteen minutes early to register and to download and install any necessary audio software. For those who cannot listen to the live broadcast, replays will be made available shortly after the call and will run for two weeks. A copy of the script used during the call will also be available at www.cerner.com in the Investors' section under Presentation and Webcasts.

    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 "believe," "expects," "guidance," or 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, market risk of investments, potential impairment of goodwill, changes in the healthcare industry, significant competition, the Company's proprietary technology may be subjected to infringement claims or may be infringed upon, regulation of the Company's software by the U.S. Food and Drug Administration or other government regulation, 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 operation and the recruitment and retention of key personnel. 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

Note (1) (2) Three Three Months Months Ended YTD Ended YTD (In thousands, except per Jan. 1, Jan. 1, Jan. 3, Jan. 3, share data) 2005 2005 2004 2004 ---------- -------- -------- ---------

Revenue System sales $ 99,614 351,861 90,820 332,349 Support, maintenance and services 141,273 542,414 128,849 476,795 Reimbursed travel 7,285 32,081 7,740 30,443 ---------- --------- -------- ---------

Total revenue 248,172 926,356 227,409 839,587

Margin System sales 65,113 236,058 65,372 221,093 Support, maintenance and services 128,961 493,950 114,530 424,204 ---------- --------- -------- ---------

Total margin 194,074 730,008 179,902 645,297 ---------- --------- -------- ---------

Operating expenses Sales and client service 97,635 383,628 93,197 352,728 Software development 43,429 171,589 41,066 156,236 General and administrative 16,321 63,327 16,862 58,236 ---------- --------- -------- ---------

Total operating expenses 157,385 618,544 151,125 567,200 ---------- --------- -------- ---------

Operating earnings 36,689 111,464 28,777 78,097

Interest income 1,663 3,022 325 1,219 Interest expense (2,323) (9,174) (2,190) (8,236) Other income, (expense) (284) 2,608 (25) 142 ---------- --------- -------- ---------

Non-operating expense, net (944) (3,544) (1,890) (6,875)

Earnings before income taxes 35,745 107,920 26,887 71,222 Income taxes (14,319) (43,272) (10,679) (28,431) ---------- --------- -------- ---------

Net earnings $ 21,426 64,648 16,208 42,791 ========== ========= ======== =========

---------- --------- -------- --------- Basic earnings per share $ 0.59 1.79 0.46 1.21 ========== ========= ======== =========

Basic weighted average shares outstanding 36,495 36,087 35,494 35,355

---------- --------- -------- --------- Diluted earnings per share $ 0.56 1.72 0.44 1.18 ========== ========= ======== =========

Diluted weighted average shares outstanding 38,055 37,571 36,935 36,356

Note 1: Includes a charge for vacation accrual of $3.3 million included in general and adminstrative. The impact of this charge is a $2.1 million decrease, net of $1.2 million tax benefit, in net earnings and a decrease to diluted earnings per share of $.06 for 2004.

Note 2: Includes a gain on the sale of Zynx Health Incorporated included in other income, (expense). 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 Three Months Months Ended YTD Ended YTD (In thousands, except per Jan. 1, Jan. 1, Jan. 3, Jan. 3, share data) 2005 2005 2004 2004 ---------- ------- --------- ---------

Revenue System sales $ 99,614 351,861 90,820 332,349 Support, maintenance and services 141,273 542,414 128,849 476,795 Reimbursed travel 7,285 32,081 7,740 30,443 ---------- --------- -------- ----------

Total revenue 248,172 926,356 227,409 839,587

Margin System sales 65,113 236,058 65,372 221,093 Support, maintenance and services 128,961 493,950 114,530 424,204 ---------- --------- -------- ----------

Total margin 194,074 730,008 179,902 645,297 ---------- --------- -------- ----------

Operating expenses Sales and client service 97,635 383,628 93,197 352,728 Software development 43,429 171,589 41,066 156,236 General and administrative 16,321 59,981 16,862 58,236 ---------- --------- -------- ----------

Total operating expenses 157,385 615,198 151,125 567,200 ---------- --------- -------- ----------

Operating earnings 36,689 114,810 28,777 78,097

Interest income 1,663 3,022 325 1,219 Interest expense (2,323) (9,174) (2,190) (8,236) Other income, (expense) (284) (415) (25) 142 ---------- --------- -------- ----------

Non-operating expense, net (944) (6,567) (1,890) (6,875)

Earnings before income taxes 35,745 108,243 26,887 71,222 Income taxes (14,319) (43,345) (10,679) (28,431) ---------- --------- -------- ----------

Net earnings $ 21,426 64,898 16,208 42,791 ========== ========= ======== ==========

---------- --------- -------- ---------- Basic earnings per share $ 0.59 1.80 0.46 1.21 ========== ========= ======== ==========

Basic weighted average shares outstanding 36,495 36,087 35,494 35,355

---------- --------- -------- ---------- Diluted earnings per share $ 0.56 1.73 0.44 1.18 ========== ========= ======== ==========

Diluted weighted average shares outstanding 38,055 37,571 36,935 36,356

RECONCILIATION OF NON-GAAP TO GAAP CONSOLIDATED STATEMENTS OF OPERATIONS

Three Three Months Months Ended YTD Ended YTD (In thousands, except per Jan. 1, Jan. 1, Jan. 3, Jan. 3, share data) 2005 2005 2004 2004 ---------- -------- -------- ----------

Non-GAAP net income $ 21,426 64,898 16,208 42,791 Vacation accrual - (3,346) - - Income tax effect - 1,270 - - Gain on sale of Zynx - 3,023 - - Income tax effect - (1,197) - - ---------- --------- -------- ----------

GAAP net income $ 21,426 64,648 16,208 42,791 ========== ========= ======== ==========

---------- --------- -------- ---------- Basic earnings per share $ 0.59 1.79 0.46 1.21 ========== ========= ======== ==========

Basic weighted average shares outstanding 36,495 36,087 35,494 35,355

---------- --------- -------- ---------- Diluted earnings per share $ 0.56 1.72 0.44 1.18 ========== ========= ======== ==========

Diluted weighted average shares outstanding 38,055 37,571 36,935 36,356

CERNER CORPORATION CONSOLIDATED BALANCE SHEETS

(In thousands) Jan. 1, Jan. 3, 2005 2004 -------- -------- Assets

Cash and cash equivalents $189,784 121,839 Receivables, net 282,199 256,574 Inventory 7,373 12,434 Prepaid expenses and other 30,117 33,057 -------- --------

Total current assets 509,473 423,904

Property and equipment, net 230,440 204,953 Software development costs, net 157,765 141,090 Goodwill, net 54,600 51,573 Intangible assets, net 22,690 24,036 Other assets 7,288 8,017 Investments 9 692 -------- --------

Total assets $982,265 854,265 ======== ========

Liabilities

Accounts payable $ 37,008 20,753 Current installments of long-term debt 21,908 21,162 Deferred revenue 77,445 64,879 Deferred income taxes 1,301 15,586 Accrued payroll and tax withholdings 55,819 45,004 Other accrued expenses 5,763 10,095 -------- --------

Total current liabilities 199,244 177,479 -------- --------

Long-term debt 108,804 124,570 Deferred income taxes 69,863 54,425 Deferred revenue 5,703 1,945 -------- --------

Total liabilities 383,614 358,419 -------- --------

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

Stockholders' Equity

Common stock 381 371 Additional paid-in capital 271,116 236,969 Retained earnings 344,011 279,363 Treasury stock, at cost (1,502,999 shares in 2004 and 2003) (26,793) (26,793) Foreign currency translation adjustment 8,770 4,770 -------- --------

Total stockholders' equity 597,485 494,680

Total liabilities and equity $982,265 854,265 ========= ========

--30--PT/dx*

CONTACT: Cerner Corporation Investors: Allan Kells, 816-201-2445 akells@cerner.com or Media: Justin Scott, 816-201-6438 jscott@cerner.com or http://www.cerner.com

KEYWORD: MISSOURI INDUSTRY KEYWORD: HARDWARE MEDICAL SOFTWARE NETWORKING EARNINGS CONFERENCE CALLS SOURCE: Cerner Corporation

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