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Cerner Reports First Quarter 2013 Results

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

About Cerner

Cerner is contributing to the systemic change of health and care delivery. For more than 30 years Cerner has been executing its vision to make health care safer and more efficient. We started with the foundation of digitizing paper processes and now offer the most comprehensive array of information software, professional services, medical device integration, remote hosting and employer health and wellness services. Cerner systems are used by everyone from individual consumers, to single-doctor practices, hospitals, employers and entire countries. Taking what we've learned over more than three decades, Cerner is building on the knowledge that is in the system to support evidence-based clinical decisions, prevent medical errors and empower patients in their care.

Cerner ® solutions are licensed by approximately 10,000 facilities around the world, including more than 2,700 hospitals; 4,150 physician practices; 45,000 physicians; 550 ambulatory facilities, such as laboratories, ambulatory centers, behavioral health centers, cardiac facilities, radiology clinics and surgery centers; 800 home health facilities; 45 employer sites and 1,750 retail pharmacies.

Certain trademarks, service marks and logos (collectively, the "Marks") set forth herein are owned by Cerner Corporation and/or its subsidiaries in the United States and certain other countries throughout the world. All other non-Cerner Marks are the property of their respective owners. Nasdaq: CERN. For more information about Cerner, please visit www.cerner.com , Twitter , Facebook and YouTube .

This release contains forward-looking statements that involve a number of risks and uncertainties. It is important to note that Cerner's performance, and actual results, financial condition or business could differ materially from those expressed in such forward-looking statements. The words "expect", "position", "guidance", "believe", "estimate" 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 non-U.S. operations; risks associated with our ability to effectively hedge exposure to fluctuations in foreign currency exchange rates; the potential for tax legislation initiatives that could adversely affect our tax position and/or challenges to our tax positions in the United States and non-U.S. countries; risks associated with our recruitment and retention of key personnel; risks related to our dependence on third party suppliers; risks inherent with business acquisitions; the potential for losses resulting from asset impairment charges; risks associated with uncertainty in global economic conditions; managing growth in the new markets in which we offer solutions, health care devices and services; changing political, economic, regulatory and judicial influences; government regulation; significant competition and market changes; variations in our quarterly operating results; potential inconsistencies in our sales forecasts compared to actual sales; volatility in the trading price of our common stock and the timing and volume of market activity; our directors' authority to issue preferred stock and the anti-takeover provisions in our corporate governance documents; and material adverse resolution of legal proceedings. Additional discussion of these and other risks, uncertainties and factors affecting Cerner's business is contained in Cerner's periodic filings with the Securities and Exchange Commission. The reader should not place undue reliance on forward-looking statements, since the statements speak only as of the date that they are made. Cerner 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 AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 30, 2013 and March 31, 2012
(unaudited)    
     
(In thousands, except per share data) Three Months Ended
  2013 (1) 2012 (1)
Revenues    
System sales  $ 198,902  $ 225,820
Support, maintenance and services  466,556  403,904
Reimbursed travel  14,571  11,488
Total revenues  680,029  641,212
     
Margin    
System sales  117,419  108,865
Support, maintenance and services  435,381  374,339
Total margin  552,800  483,204
     
Operating expenses    
Sales and client service  267,356  245,074
Software development  81,063  71,145
General and administrative  47,812  39,546
Total operating expenses  396,231  355,765
     
Operating earnings  156,569  127,439
     
Other income, net  3,044  2,624
     
Earnings before income taxes  159,613  130,063
Income taxes  (49,573)  (41,355)
Net earnings  $ 110,040  $ 88,708
     
Basic earnings per share  $ 0.64  $ 0.52
     
Basic weighted average shares outstanding  172,032  169,968
     
Diluted earnings per share  $ 0.62  $ 0.51
     
Diluted weighted average shares outstanding  176,413  175,027
     
Note 1: Operating expenses for the three months ended March 30, 2013 and March 31, 2012 include share-based compensation expense. The impact of this expense on net earnings and diluted earnings per share is presented below:
     
(In thousands, except per share data) Three Months Ended
  2013 2012
     
Sales and client service  $ 5,018  $ 3,862
Software development  2,325  1,968
General and administrative  3,883  3,119
Total share-based compensation  11,226  8,949
Amount of related income tax benefit  (4,356)  (3,423)
Net impact on net earnings  $ 6,870  $ 5,526
     
Decrease to diluted earnings per share  $ 0.04  $ 0.03
 
CERNER CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS 1
For the three months ended March 30, 2013 and March 31, 2012
(unaudited)
     
RECONCILIATION OF ADJUSTED NET EARNINGS TO GAAP NET EARNINGS 1
     
(In thousands) Three Months Ended
  2013 2012
Net Earnings    
Net earnings (GAAP)  $ 110,040  $ 88,708
Share-based compensation expense  11,226  8,949
Income tax benefit of share-based compensation  (4,356)  (3,423)
Adjusted net earnings (non-GAAP) 2  $ 116,910  $ 94,234
     
RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE TO GAAP DILUTED EARNINGS PER SHARE 1
     
  Three Months Ended
  2013 2012
Diluted Earnings Per Share    
Diluted earnings per share (GAAP)  $ 0.62  $ 0.51
Share-based compensation expense (net of tax)  0.04  0.03
Adjusted diluted earnings per share (non-GAAP) 2  $ 0.66  $ 0.54
     
RECONCILIATION OF NON-GAAP FREE CASH FLOW TO GAAP OPERATING CASH FLOW 1
     
(In thousands) Three Months Ended
  2013 2012
Cash flows from operating activities (GAAP)  $ 213,648  $ 162,708
Capital purchases  (49,451)  (26,363)
Capitalized software development costs  (34,334)  (23,080)
Free cash flow (non-GAAP) 3  $ 129,863  $ 113,265
     
Note 1: The presentation of Adjusted Diluted Earnings per Share, Adjusted Net Earnings and Free Cash Flow, non-GAAP financial measures, are not meant to be considered in isolation, nor 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 Cerner's consolidated financial statements prepared in accordance with GAAP. Adjusted Diluted Earnings per Share, Adjusted Net Earnings and Free Cash Flow 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 calculations. We believe that Adjusted Diluted Earnings per Share, Adjusted Net Earnings and Free Cash Flow are important to enable investors to better understand and evaluate our ongoing operating results and allows for more comprehensive review and understanding of our overall financial, operational and economic performance.
     
Note 2: Cerner provides earnings with and without share-based compensation expense because earnings excluding this expense is used by management along with GAAP results to analyze its business, make strategic decisions and for management compensation purposes.
     
Note 3: Cerner provides free cash flow because it takes into account the capital expenditures necessary to operate our business.
 
CERNER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of March 30, 2013 (unaudited) and December 29, 2012
     
(In thousands) 2013 2012
     
Assets    
Current assets:    
Cash and cash equivalents  $ 281,458  $ 317,120
Short-term investments  723,693  719,665
Receivables, net  512,078  577,848
Inventory  22,106  23,681
Prepaid expenses and other  149,406  113,572
Deferred income taxes, net  38,819  38,620
Total current assets  1,727,560  1,790,506
     
Property and equipment, net  606,449  569,708
Software development costs, net  279,516  267,307
Goodwill  306,155  247,616
Intangible assets, net  151,193  132,045
Long-term investments  515,858  509,467
Other assets  178,418  187,819
Total assets  $ 3,765,149  $ 3,704,468
     
Liabilities and Shareholders' Equity    
Current liabilities:    
Accounts payable  $ 148,877  $ 141,212
Current installments of long-term debt and capital lease obligations  46,905  59,582
Deferred revenue  193,969  189,652
Accrued payroll and tax withholdings  106,924  125,253
Other accrued expenses  75,748  64,413
Total current liabilities  572,423  580,112
     
Long-term debt and capital lease obligations  135,470  136,557
Deferred income taxes and other liabilities  148,686  143,212
Deferred revenue  9,330  10,937
Total liabilities  865,909  870,818
     
Shareholders' Equity:    
Common stock  1,726  1,721
Additional paid-in capital  870,308  842,490
Retained earnings  2,104,734  1,994,694
Treasury stock  (63,241)  --
Accumulated other comprehensive loss, net  (14,287)  (5,255)
Total shareholders' equity  2,899,240  2,833,650
Total liabilities and shareholders' equity  $ 3,765,149  $ 3,704,468
CONTACT: Investor Contact: Allan Kells, (816) 201-2445,
         akells@cerner.com
         Media Contact: Megan Moriarty, (816) 888-2470,
         megan.moriarty@cerner.com
         Cerner's Internet Home Page: www.cerner.com

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