Cerner reduces expectations for second quarter and 1996 year.

KANSAS CITY, Mo.--(BUSINESS WIRE)--July 3, 1996--Cerner Corporation (NASDAQ:CERN) today announced that it expects its earnings per share for the second quarter ended June 29, 1996 to be in the range of $0.02 to $0.05 per share.

The Company earned $0.21 per share in last year's second quarter (split adjusted). The Company also indicated that earnings per share expectations for the 1996 fiscal year should be adjusted downward.

Clifford W. Illig, President and Chief Operating Officer, said, "Cerner did not achieve its plan for new business bookings in the quarter. The shortfall in new bookings resulted in a $4.6 million negative impact on gross margin in the income statement. Revenues and gross margin generated from the backlog totaled $7.0 million, about $2.9 million less than expected. While Cerner has a large number of opportunities in its sales pipeline, the Company, over the last several quarters, has not been able to generate consistency in closing the large pieces of new business that have become the drivers of Cerner's growth. In addition, the complexity and size of the deals being negotiated is increasing significantly as health systems continue to focus on the strategic necessity of integrating the clinical record with institutional and community care activities. This has had the effect of stretching out the time lines associated with closing large and complex transactions. Also, competition from the larger traditional HIS companies in our market, is increasing. We are seeing these companies for the first time in competitive situations involving the acquisition of comprehensive, health system-wide clinical applications. We believe this activity underscores the importance of Cerner's position as the leading supplier of clinical information systems that are at the heart of health enterprise strategic plans."

Illig stated, "Balanced against the second quarter's poor earnings per share performance, there remains a number of underlying strengths in Cerner's core business including a strong backlog, a substantial base of recurring revenues and a large, growing installed base that contributes substantial new revenues from incremental purchases of Cerner's application software technology. Also, as we have discussed previously, Cerner continues to move aggressively ahead on its investment spending priorities. Expense spending for the second quarter will approximate $31 million compared with $24.0 million a year ago and the $29.0 million of operating expense recorded in the first quarter of this year. Key spending initiatives include Health Network Architecture (HNA) Version 500, the development of community care products and the data mining business, increased sales capacity, adding to operational capabilities in our regions and the Cerner 2000 business development initiatives. We currently are absorbing the full cost impact of these spending priorities while the realization of the benefits are still in front of us.

"These initiatives are central to Cerner's vision of automating the process of managing health. We believe the emerging health entities will value the solutions of innovative suppliers who are able to close the loop between hospitals, physicians, health plans, purchasers and consumers of health care. Our platform for delivering this vision is our future Version 500 of HNA. Over the last three years, Cerner has invested $15.5 million in the development of this next major generation of Cerner's highly successful HNA. Within a year, Version 500 will be delivering client-server application capabilities that enable health systems to automate and integrate all of their activities while positioning themselves to proactively manage the health status of the populations they serve."

Illig added, "We are pleased to have signed the strategic partnership agreement with Siemens Nixdorf Information Systems to have Siemens market, implement and support Cerner's clinical information solutions in the international marketplace. With the significant changes that have been occurring in the purchasing behavior of government-funded health systems in Europe, Cerner has moved aggressively to a collaborative strategy for maximizing the opportunities that are emerging in Europe and other regions of the world, including Asia Pacific, India, South America and Africa. We have high expectations for this partnership in the years ahead and, in the short term, expect that international will become a positive contributor to Cerner's results."

Illig concluded, "We recognize Cerner's second quarter performance does not meet shareholder expectations. We also believe it is appropriate, based on our performance to date in 1996, to lower investor expectations for the remainder of the 1996 year. We believe the expectation for 1996 should reflect the combination of our commitment to our investment spending programs and our continuing conservative view of our ability to substantially improve new business bookings in the short term. We are working diligently to improve our near-term performance while continuing to focus on what we believe are the strategic imperatives that will create a unique competitive position for the Company and substantially enhance its performance over the longer term."

Cerner Corporation is a leading developer of clinical and management information systems that support evolving relationships between providers, purchasers, payors, and consumers of health services. Health organizations worldwide use Cerner's comprehensive Health Network Architecture (HNA) to make more effective decisions, streamline processes, reduce costs, and deliver higher quality care more efficiently across multiple clinical disciplines and care venues within the community.

CONTACT: Cerner Corp., Kansas City

Wendy Coffey, Investor Relations, 816/221-1024

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Cerner's Internet Home Page: http://www.cerner.com