Cerner Reports Second Quarter 2008 Results

Strong Earnings Growth, Bookings, Cash Flow
KANSAS CITY, Mo.--(Business Wire)--
Cerner Corp. (NASDAQ: CERN) today announced results for the 2008
second quarter that ended June 28, delivering strong levels of
bookings, earnings and cash flow.

Bookings in the second quarter of 2008 were $404 million. Second
quarter 2007 bookings were $487 million. Second quarter 2007 bookings
included $98 million related to Cerner's participation in the National
Health Service (NHS) initiative to automate clinical processes and
digitize medical records in England and approximately $20 million of
higher than expected hardware bookings. Second quarter 2008 bookings
are 10 percent higher than adjusted second quarter 2007 bookings of
$369 million. Second quarter revenue increased 4 percent over the
year-ago period to $402.8 million.

On a Generally Accepted Accounting Principles (GAAP) basis, second
quarter 2008 net earnings were $35.3 million, and diluted earnings per
share were $0.42. Second quarter 2007 GAAP net earnings were $26.8
million, and diluted earnings per share were $0.32.

Adjusted (non-GAAP) Earnings

Adjusted second quarter 2008 net earnings were $42.5 million,
compared to $29.6 million of adjusted net earnings in the second
quarter of 2007. Adjusted diluted earnings per share were $0.51 in the
second quarter of 2008 compared to $0.36 in the second quarter of
2007. Analysts' consensus estimate for second quarter 2008 adjusted
diluted earnings per share was $0.50.

Adjusted Net Earnings is not a recognized term under GAAP and
should not be substituted for net earnings as a measure of the
Company's performance but instead should be utilized as a supplemental
measure of financial performance in evaluating our business. Following
is a description of adjustments made to second quarter net earnings.
For more detail, please see the accompanying schedule, titled
"Reconciliation of Adjusted Net Earnings and Adjusted Diluted Earnings
Per Share to GAAP Net Earnings and Diluted Earnings Per Share."

Adjusted second quarter 2008 and 2007 net earnings and diluted
earnings per share exclude the impact of accounting pursuant to
Statement of Financial Accounting Standards (SFAS) No. 123R,
Share-Based Payment, which requires the expensing of stock options.
The effect of accounting under SFAS 123R reduced second quarter 2008
net earnings and diluted earnings per share by $2.1 million and $0.03,
respectively, and reduced second quarter 2007 net earnings and diluted
earnings per share by $2.7 million and $0.04, respectively.

Adjusted earnings and diluted earnings per share in the second
quarter 2008 also exclude the impact of a third party supplier
settlement that increased sales and client service expense by $8.0
million, decreased net earnings by $5.0 million, and decreased diluted
earnings per share by $0.06. During the second quarter, the Company
finalized a settlement with a third party provider of software related
to the use of the third party's software in the Company's remote
hosting business. The settlement included compensation for use of the
software for periods prior to the second quarter of 2008 as well as
compensation for licenses of the software for future use for existing
clients as well as additional clients through January 2009. Based on a
relative value allocation of the settlement amount, the amount
attributable to the utilization of software for current and prior
periods is $8.0 million, which was recognized in the second quarter,
and the amount attributable to the license for future use is
approximately $15 million, which will be amortized ratably over the
hosting period for the applicable arrangement. The Company determined
that approximately $5 million of the amount expensed in the 2008
second quarter should have been recorded in prior periods. The Company
determined that the effect of this adjustment on prior annual and
interim periods is not material to any previously reported results.

Other Second Quarter Highlights:

-- Cash collections of $426 million and operating cash flow of
$85 million, up from $62 million in the second quarter of
2007.

-- Days sales outstanding of 90 days compared to 92 days in the
first quarter of 2008 and 86 days in the year-ago quarter.

-- Total revenue backlog of $3.3 billion, up 10 percent over the
year-ago quarter. This is comprised of $2.7 billion of
contract backlog and $0.6 billion of support and maintenance
backlog.

"Our second quarter results demonstrate another quarter of solid
execution," said Neal Patterson, Cerner co-founder, chairman and chief
executive officer. "While declines in sales of hardware, a non-core
part of our business, again impacted our overall revenue growth, our
core business is strong, as evidenced by our strong levels of
bookings, earnings growth, operating margin expansion and cash
generation in the second quarter and year to date."

"Cerner's strategic worldwide footprint across healthcare is
unmatched, with clients spanning acute care, ambulatory care, retail
pharmacy, laboratory, pharmaceutical companies, and employers. This
footprint, our unmatched depth and breadth of solutions and services,
and our strategic initiatives that continue to expand Cerner's
boundaries, uniquely position us for strong sustainable growth,"
Patterson said.

Future Period Guidance

The company expects revenue in the third quarter of 2008 to be
approximately $410 million to $425 million. For the year 2008, Cerner
continues to expect revenue growth of approximately 10 percent over
2007.

Cerner expects adjusted diluted earnings per share before stock
options expense in the third quarter to be between $0.55 and $0.56.
For the year, the Company remains comfortable with the current
consensus EPS of $2.17, which is before options expense and the third
party supplier settlement, plus the $0.01 over-attainment this
quarter, leading to an estimate of $2.18.

The company expects SFAS No. 123R share-based compensation expense
to reduce diluted earnings per share in the third quarter and full
year by approximately $0.03 and $0.12, respectively.

Cerner expects new business bookings in the third quarter of 2008
to be between $370 million and $400 million.

Earnings Conference Call

Cerner will host an earnings conference call to provide additional
detail on second quarter results at 3:30 p.m. CT, July 22. The dial-in
number for the conference call is 617-614-3669; the passcode is
Cerner. The company recommends joining the call 15 minutes early for
registration. The re-broadcast of the call will be available from 5:30
p.m. CT, July 22 through 11:59 p.m. CT, July 25. The dial-in number
for the re-broadcast is 888-286-8010; the passcode is 21143886.

An audio webcast will be available live and archived on Cerner's
Web site at www.cerner.com under the About Cerner section (click
Investors, then Presentations and Webcasts).

About Cerner

Cerner is taking the paper chart out of healthcare, eliminating
error, variance and waste in the care process. With more than 6,000
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 "position," "guidance,"
"expects," and "comfortable" 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: the
possibility of product-related liabilities; potential claims for
system errors and warranties; the possibility of interruption at our
data centers or client support facilities; our proprietary technology
may be subject to claims for infringement or misappropriation of
intellectual property rights of others, or may be infringed or
misappropriated by others; risks associated with our global
operations; risks associated with our ability to effectively hedge
exposure to fluctuations in foreign currency exchange rates; risks
associated with our recruitment and retention of key personnel; risks
related to our reliance on third party suppliers; risks inherent with
business acquisitions; changing political, economic and regulatory
influences; government regulation; significant competition and market
changes; variations in our quarterly operating results; potential
inconsistencies in our sales forecasts compared to actual sales; and
the volatility in the trading price of our common stock. 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.

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*T
CERNER CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
(unaudited)

Three Three
Months Months
Ended YTD Ended YTD
(In thousands, except per June 28, June 28, June 30, June 30,
share data) 2008 2008 2007 2007
(1)(2) (1)(2) (1) (1)
--------- --------- --------- ---------

Revenue
System sales $120,633 236,865 130,097 252,967
Support, maintenance and
services 271,470 531,264 246,210 480,099
Reimbursed travel 10,697 19,436 10,281 19,374
--------- --------- --------- ---------

Total revenue 402,800 787,565 386,588 752,440

Margin
System sales 74,789 150,838 74,569 150,439
Support, maintenance and
services 256,225 500,567 231,057 448,576
--------- --------- --------- ---------

Total margin 331,014 651,405 305,626 599,015
--------- --------- --------- ---------

Operating expenses
Sales and client service 182,915 353,997 165,844 323,002
Software development 65,890 135,054 63,715 130,313
(Includes amortization of
software development costs
of $13,408 and $24,425,
for the three and six
months ended June 28,
2008; and $13,357 and
$26,687 for the three and
six months ended June 30,
2007.)
General and administrative 28,988 52,667 27,887 54,342
--------- --------- --------- ---------

Total operating expenses 277,793 541,718 257,446 507,657
--------- --------- --------- ---------

Operating earnings 53,221 109,687 48,180 91,358

Interest income 3,245 7,074 3,361 6,490
Interest expense (2,785) (5,583) (2,937) (5,946)
Other income 42 (171) (415) (737)
--------- --------- --------- ---------

Non-operating income
(expense), net 502 1,320 9 (193)

Earnings before income taxes 53,723 111,007 48,189 91,165
Income taxes (18,436) (38,903) (21,340) (36,605)
--------- --------- --------- ---------

Net earnings $35,287 72,104 26,849 54,560
========= ========= ========= =========

Basic earnings per share $0.44 0.90 0.34 0.69
========= ========= ========= =========

Basic weighted average shares
outstanding 80,618 80,500 79,223 78,967

Diluted earnings per share $0.42 0.86 0.32 0.66
========= ========= ========= =========

Diluted weighted average
shares outstanding 83,581 83,553 83,092 82,879

Note 1: Operating expenses for the three months ended June 28, 2008
and June 30, 2007, and the six months ended June 28, 2008 and June
30, 2007 include share-based compensation expense. The impact of this
expense on net earnings is presented below:

Three Six Three Six
Months Months Months Months
Ended Ended Ended Ended
June 28, June 28, June 30, June 30,
2008 2008 2007 2007
---------------------------------------

Sales and client service $1,732 $3,567 $2,648 $5,006
Software development 621 1,397 751 1,518
General and administrative 1,075 2,027 987 1,674
Amount of related income tax
benefit (1,277) (2,604) (1,678) (3,136)
---------------------------------------
Net impact on net earnings $2,151 4,387 $2,708 $5,062
=======================================

Decrease to diluted earnings
per share $0.03 $0.06 $0.04 $0.06

Note 2: Includes the impact of a third party supplier settlement that
impacted sales and client service expense by $8.0 million and net
earnings by $5.0 million. During the second quarter, the Company
finalized a settlement with a third party provider of software
related to the use of the third party's software in the Company's
remote hosting business. The settlement included compensation for use
of the software for periods prior to the second quarter of 2008 as
well as compensation for licenses of the software for future use for
existing clients as well as additional clients through January 2009.
Based on a relative value allocation of the settlement amount, the
amount attributable to the utilization of software for current and
prior periods is $8.0 million, which was recognized in the second
quarter, and the amount attributable to the license for future use is
approximately $15 million, which will be amortized ratably over the
hosting period for the applicable arrangement. The Company determined
that approximately $5 million of the amount expensed in the 2008
second quarter should have been recorded in prior periods. The
Company determined that the effect of this adjustment on prior annual
and interim periods is not material to any previously reported
results.

Three Six Three Six
Months Months Months Months
Ended Ended Ended Ended
June 28, June 28, June 30, June 30,
2008 2008 2007 2007
---------------------------------------

Sales and client service $8,014 $8,014 $- $-
Amount of related income tax
benefit (2,984) (2,984) $- $-
---------------------------------------
Net impact on net earnings $5,030 5,030 $- $-
=======================================

Decrease to diluted earnings
per share $0.06 $0.06 $- $-
*T

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CERNER CORPORATION
Reconciliation of Adjusted Net Earnings and Adjusted Diluted Earnings
Per Share to GAAP Net Earnings and Diluted Earnings Per Share(1)
(unaudited)

--------------------------------------
Three Six Three Six
Months Months Months Months
Net Earnings Ended Ended Ended Ended
(In thousands) June 28, June 28, June 30, June 30,
2008 2008 2007 2007
--------------------------------------
Net earnings $35,287 $72,104 $26,849 $54,560
Share-based compensation
expense(2) 3,428 6,991 4,386 8,198
Income tax benefit of share-
based compensation(2) (1,277) (2,604) (1,678) (3,136)
Third party supplier
settlement(2) 8,014 8,014 - -
Income tax benefit of
supplier settlement(2) (2,984) (2,984) - -
--------------------------------------
Adjusted net earnings (non-
GAAP) $42,468 $81,521 $29,557 $59,622
======================================

Diluted Earnings Per Share
Diluted earnings per share(2) $0.42 $0.86 $0.32 $0.66
Share-based compensation
expense (net of tax)(2) 0.03 0.06 0.04 0.06
Third party supplier
settlement (net of tax)(2) 0.06 0.06 - -
--------------------------------------
Adjusted diluted earnings per
share (non-GAAP) $0.51 $0.98 $0.36 $0.72
======================================

Note 1: The presentation of Adjusted Net Earnings, a Non-GAAP
financial measure, is not meant to be considered in isolation, as a
substitute for, or superior to, Generally Accepted Accounting
Principles (GAAP) results and investors should be aware that non-GAAP
measures have inherent limitations and should be read only in
conjunction with the Company's consolidated financial statements
prepared in accordance with GAAP. Adjusted Net Earnings may also be
different from similar non-GAAP financial measures used by other
companies and may not be comparable to similarly titled captions of
other companies due to potential inconsistencies in the method of
calculation. The Company believes that Adjusted Net Earnings is
important to enable investors to better understand and evaluate its
ongoing operating results and allows for greater transparency in the
review of its overall financial, operational and economic
performance.

Note 2: The Company provides earnings with and without stock options
expense and unique items such as the third party supplier settlement
because earnings excluding these items are used by management along
with GAAP results to analyze its business, make strategic decisions
and for management compensation purposes.
*T

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CERNER CORPORATION
CONSOLIDATED BALANCE SHEETS

(In thousands) June 28, December 29,
2008 2007
------------- -------------
Assets (unaudited)

Cash and cash equivalents $291,395 182,914
Short-term investments 0 161,600
Receivables, net 398,371 391,060
Inventory 12,741 10,744
Prepaid expenses and other 65,980 61,878
Deferred income taxes 10,218 10,368
------------- -------------

Total current assets 778,705 818,564

Property and equipment, net 470,701 462,839
Software development costs, net 211,488 200,380
Goodwill, net 148,440 143,924
Intangible assets, net 54,641 46,854
Long-term investments 101,649 -
Other assets 17,152 17,395
------------- -------------

Total assets $1,782,776 1,689,956
============= =============

Liabilities

Accounts payable $75,464 79,812
Current installments of long-term debt 13,847 14,260
Deferred revenue 103,682 98,802
Accrued payroll and tax withholdings 58,532 65,011
Other accrued expenses 39,700 30,238
------------- -------------

Total current liabilities 291,225 288,123
------------- -------------

Long-term debt 170,820 177,606
Deferred income taxes 78,252 68,738
Deferred revenue 17,974 21,775
------------- -------------

Total liabilities 558,271 556,242
------------- -------------

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

Stockholders' Equity

Common stock 808 801
Additional paid-in capital 475,576 451,876
Retained earnings 743,545 671,440
Accumulated other comprehensive income 3,290 8,311
------------- -------------

Total stockholders' equity 1,223,219 1,132,428

Total liabilities and equity $1,782,776 1,689,956
============= =============
*T

Cerner Corp.
Investor Contact:
Allan Kells, 816-201-2445
akells@cerner.com
or
Media Contact:
Kay Hawes, 816-885-3560
kay.hawes@cerner.com
www.cerner.com

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