SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

(Mark One)

OR

Commission File Number 0-15386

CERNER CORPORATION

2800 Rockcreek Parkway
North Kansas City, Missouri 64117
(816) 221-1024
(Address of principal executive offices, including zip code;
Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.01 per share
Preferred Stock Purchase Rights
(Title of Class)

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes (X)          No (  )

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [   ]

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act rule 12b-2).

Yes (X)          No (  )

The aggregate value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant as of June 28, 2003 was $643,591,876.

     At February 27, 2004, there were 35,689,164 shares of Common Stock outstanding, of which 7,563,341 shares were owned by affiliates. The aggregate market value of the outstanding Common Stock of the Registrant held by non-affiliates, based on the closing sale price of such stock on February 27, 2004, was $1,258,911,855.

     Documents incorporated by reference: portions of the Registrant’s Proxy Statement for the 2004 Annual Meeting of Shareholders are incorporated by reference in Part III hereof.

Part I

Item 1. Business

Overview

Cerner Corporation (“Cerner” or the “Company”) is a Delaware business incorporated in 1980. The Company’s corporate headquarters are located at 2800 Rockcreek Parkway, North Kansas City, Missouri 64117. Its telephone number is (816) 221-1024. The Company’s Web site address is www.cerner.com. The Company makes available free of charge, on or through its Web site, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission.

Cerner is taking the paper chart out of healthcare, eliminating error, variance and unnecessary waste in the care process. With more than 1,500 clients worldwide, Cerner is the leading supplier of healthcare information technology. Cerner^® solutions give end users secure access to clinical, administrative and financial data in real time. Consumers retrieve appropriate care information and educational resources via the Internet.

Cerner implements these solutions as stand-alone, combined or enterprise-wide systems. Cerner solutions can be managed by its clients or via an application outsourcing/hosting model. Cerner provides hosted solutions from its data center in Lee’s Summit, Missouri.

Cerner solutions are designed and developed using the Cerner Millennium^® architecture. The Cerner Millennium architecture is a state-of-the-art technology infrastructure that combines clinical, financial and management information solutions. It provides access to an individual’s electronic medical record at the point of care and organizes information for the specific needs of the physician, nurse, laboratory technician, pharmacist or other care provider, as well as for front and back office professionals.

Healthcare organizations utilize data gathered and stored within the Cerner Millennium architecture to improve the safety, efficiency and productivity of the entire enterprise. The Cerner Millennium architecture also delivers medical knowledge and content to the point of care to help clinicians predict outcomes of treatment plans and deliver the most effective care.

The Healthcare Industry

2003 was a landmark year for the healthcare industry, as Health Insurance Portability and Accountability Act of 1996 (HIPAA) rules were implemented, and other legislation came to bear on this dynamic and fragmented market. The healthcare industry is getting a lot of attention, and many leaders, both governmental and industry, are calling for reform. Key issues include the use of electronic medical records to ensure patient safety and to eliminate manual, paper-based medical records systems.

Perhaps the most notable event of last year was the Medicare Prescription Drug and Modernization Act, which was signed in November 2003. The Act will provide prescription drug coverage to 40 million senior Americans, as well as $600 million for technology integration of e-prescribing. Additionally, the Medicare Reform bill includes important provisions related to quality oversight, aligning pay with performance and improving care for the chronically ill.

In 2003, the financial condition of healthcare providers appeared to stabilize, with the primary exception being hospitals with a higher mix of Medicaid revenues. Recent Standard & Poor’s data indicates that higher reimbursement, coupled with sustained demand for services, should improve the credit quality of hospitals. In addition, new debt issuance was up eight percent in 2002, which is likely indicative of continued access to capital. Hospital capital spending is expected to rise 14 percent annually over the next five years, according to a survey of chief financial officers conducted by the Healthcare Financial

2

Management Association. This number reflects significant growth following one percent annual increases from 1997 to 2001. Technology tops the list of anticipated capital projects, with investments expected in computerized physician order entry systems and digital radiology, as well as for purchases of major information technology systems.

As in previous years, the growing shortage of personnel continues to be another threat to the healthcare system. According to United American Nurses, about 67 percent of hospital nurses said that the time available for patient care has decreased, and 80 percent said their hospitals are seriously short of nurses. These shortages impact all areas of the hospital, but are prevalent in nursing, radiology and pharmacy.

Many hospitals are turning to information technology (“IT”) solutions to recruit and retain clinicians, as technology can significantly reduce the amount of paperwork clinicians perform. The American Hospital Association and PricewaterhouseCoopers estimate clinicians spend 30 to 60 minutes completing paperwork for each hour of patient care. This overhead dramatically reduces not only the time a clinician can spend with a given patient, but also the number of patients a clinician can see in a given day. In an era of serious staff shortages, anything that takes away from caregiver/patient interaction is a serious impediment to the quality of care and to the healthcare system’s very mission.

Healthcare Spending Rises; High-Quality Healthcare Not Yet a Universal Reality

According to projections of the Centers for Medicare and Medicaid Services, healthcare spending grew 7.8 percent ($1.7 trillion) in 2003, down from a growth rate of 9.3 percent in 2002. This will be the first slowdown in healthcare spending growth in six years. While the growth is slowing, healthcare spending is expected to make up more than 15 percent of the United States Gross Domestic Product (GDP) in 2003, up from 14.9 percent in 2002 and 13.3 percent in 2001. These figures indicate that healthcare spending continues to outpace growth in the rest of the economy.

Unfortunately, spending does not equate with quality, and despite the progress made in medicine, high-quality healthcare is not yet a universal reality in the United States. This is the finding of a December 2003 report by the Agency for Healthcare Research and Quality. As the first national comprehensive effort to measure healthcare quality in the United States, the study indicates that opportunities for preventive care are frequently missed.

Other studies that verify these findings include one by RAND Health, an independent and leading research organization, which found that about 45 percent of the respondents did not receive recommended care. The National Committee for Quality Assurance (NCQA) also reported in September 2003 that 57,000 insured persons die due to a quality gap, deaths that are the result of factors such as poor use of technology. The NCQA also estimates that nearly 41 million sick days and more than $11 billion in lost productivity could be avoided annually if well known “best practices” were more widely adopted.

To address these and other related issues, several organizations have been developing recommendations on the use of technology in healthcare. In a report issued by the Institute of Medicine (IOM) in July 2003, several core capabilities for an Electronic Health Record System were identified, including the adoption of computer-based health records. The IOM cited the importance of these electronic records to greater safety, quality and efficiency in healthcare delivery. Additionally, Health Level Seven (HL7), one of the world’s leading developers of healthcare standards, is working to develop a common industry standard for electronic medical records that will guide the efforts of software developers.

Cerner is committed to helping these organizations better understand the role of technology in healthcare. The Company is co-sponsoring another study by RAND Health that began in March 2003. This unprecedented study will prove the value of healthcare technology. Neal Patterson, chairman and chief executive officer of Cerner, sits on the RAND Health Board of Advisors, and Nancy-Ann DeParle, former administrator of the federal Healthcare Financing Administration (HCFA) and Cerner board member, is on the steering committee. The results of this study are scheduled to be released in March 2005.

3

Opportunity for Growth Exists in Healthcare Information Technology

While the healthcare market is the second fastest-growing market for IT (government is first), it lags in its adoption of technology. For example, it has historically allocated a smaller percentage of revenue to IT, spending an estimated 2.5 percent of revenue compared to 3.9 percent for all other industries. Fortunately, the healthcare market is becoming increasingly receptive to the use and anticipated benefits of technology. Gartner Group, a leading research company, forecasts the United States healthcare IT market will grow from $35.7 billion in 2002 to $47.9 billion in 2006. Software and services are expected to represent the largest portion of this increase.

Transforming healthcare delivery requires a proactive approach – one that enables physicians to manage health through better use and integration of data. By adopting information technology and evidence-based practices, healthcare organizations can drive out medical errors, eliminate waste and reduce the inconsistency of care that undermines the overall quality of the health system.

2004 will be an important one for healthcare, as government and industry leaders debate patient safety and quality – all of which lead to the exploration of the role of IT. Cerner has proactively addressed the changing and increasing needs of the healthcare industry as discussed above by developing the Cerner Millennium architecture. See “Cerner’s Technology—Cerner Millennium Architecture” for a more in-depth explanation of this unparalleled architecture.

The Cerner Vision

Cerner solutions and the Company’s business approach are organized around a central vision of how healthcare can and should operate. This vision is founded on a community health model which encompasses four steps:

•		Automate the Core Processes of Healthcare
•		Connect the Person
•		Structure the Knowledge
•		Close the Loop

Automate the Core Processes

Cerner is dedicated to the elimination of the paper medical record and to the reduction of costs in the healthcare industry.

As long as medical information is isolated in a paper record, the inadequacies of today’s healthcare delivery system will remain. Nurses and pharmacists will be forced to interpret illegible and incomplete orders. Physicians will not benefit from the real-time, contextual reference information available in automated solutions. And clinicians throughout a healthcare organization will continue to search for the single copy of the paper-based record. When it is not readily available, they will be forced to make critical care decisions without adequate or complete information.

The elimination of the paper record will lead to improved quality and safety of healthcare. It will increase productivity and generate better documentation from which clinical outcomes, financial performance and resource utilization can be benchmarked and analyzed.

With an electronic medical record, clinicians view demographic information, medical history, lab results, vital signs and treatment plans, along with notes from healthcare team members. Guidelines and pathways relevant to the person’s medical condition help the physician make the best possible decisions in diagnosing and treating the patient. This comprehensive view of the person’s health ensures safer and higher-quality care.

Online documentation and physician order entry reduce errors and eliminate duplication of services—and the costs associated with both. Documentation required to write claims and seek reimbursement for services is maintained efficiently, thus reducing claim denials and shortening the time that passes between claims submission and payment.

4

Once all the steps of healthcare are captured electronically, the enhanced documentation will create the foundation for data collection that will be the backbone of structuring the knowledge of healthcare.

In addition to automating workflow, technology is essential in order to eliminate error, variance, waste, delay and friction – all of which contribute to declines in healthcare quality and increases in medical error. Healthcare IT can eliminate these factors, leading to an overall cost reduction in healthcare.

Connect the Person

Cerner is dedicated to helping its clients build a personal health system, a new medium between the person and the physician, which empowers the individual and delivers higher-quality healthcare.

The healthcare system is undergoing fundamental change as the person moves to the center of healthcare delivery. Increasing access to expert knowledge over the Internet and a cultural shift toward self-directed care are moving the center of power and control away from the healthcare provider and toward the healthcare consumer.

With the personal health record, individuals can store and access their medical information securely from anywhere they have Internet access. When combined with personalized health content, consumers gain a better sense of the care they are receiving and the options available to them. They communicate better with providers and more proactively manage their healthcare.

Structure the Knowledge

Cerner is dedicated to building information systems that treat every clinical decision as a learning event. Cerner solutions enable the industry to structure, store and study the application and outcomes of medical practice.

Medicine must have a structure that allows physicians to record treatment and outcomes in such a way that it can be compared and contrasted with other methods. A common nomenclature that can exactly capture the meaning of input from physicians and clinicians is a necessary first step.

Cerner solutions store healthcare data and provide a framework for comparability. This enables physicians to make sense of and glean value from the information that is gathered through automated processes and connected persons. Without a knowledge framework, data collected will provide no real benefit. By building this structure, Cerner opens the door for every encounter with a patient and every piece of new knowledge to be catalogued, measured and analyzed. This knowledge framework will deliver better care and an improved understanding of medicine.

Close the Loop

Cerner is dedicated to building information systems that deliver evidence-based medicine, dramatically reducing the average time from the discovery of an improved method to the change in medical practice.

Advances in technology offer great opportunities in healthcare and must be used to deliver better care faster. The information learned must be applied. Today, patients may wait as long as 10 years before new medical knowledge reaches widespread use. With systems designed to embed evidence-based medicine inside the clinician’s workflow—using pathways, guidelines and alerts—physicians know that every medical decision is based on the best and most recent knowledge available. The results will be better outcomes and reduced variance.

The Cerner Strategy

Key elements of the Company’s business strategy include:

Penetrate the integrated healthcare provider market. Large healthcare systems represent a significant component of the healthcare information technology market. These organizations focus on improving safety and reducing costs through operating efficiencies. Cerner’s enterprise-wide, person-centric clinical and management solutions provide the technology to manage healthcare across an organization, significantly reduce costs, improve the efficiency of delivery and enhance the quality of care.

5

Increase market share in individual domains and further penetrate the existing client base. Cerner expects continued growth in clinical domain systems for specific markets such as nursing, physician office, laboratory, pharmacy, radiology, surgery, emergency medicine and cardiology, as institutions look to restructure and reengineer these high-cost centers.

Cerner is also expanding its presence into the home healthcare market. In August 2003, the Company acquired BeyondNow Technologies, a leader in the home care information technology market. Based in Overland Park, Kansas, BeyondNow has been a leader in the home care industry by developing technologies that reduce administrative paperwork, provide clinicians with remote access to charts, accelerate third-party reimbursement and share information between the home care setting and hospitals. This acquisition establishes Cerner’s presence in a market that is expected to increase dramatically with the advancing age of the baby boomer generation. It also reflects the Company’s goal to connect the person in the Cerner community health model. In December 2003, the HomeWorks^®/Road Notes^® solution received a “Best in KLAS” ranking in the Home Health category.

Cerner’s acquisition of BeyondNow Technologies comes at a key time for the home care segment. Information sharing and the use of technology directly impact the quality of care provided by home care agencies - quality now measured by the Department of Health and Human Services and the Centers for Medicare & Medicaid Services. The two organizations recently launched the Home Health Quality Initiative, aimed at providing quality standards and measures to consumers researching home healthcare agencies.

Remain committed to a common architecture. Because Cerner believes that the constituents in health management need to work together to benefit defined populations in a community, the Company has made a commitment to a single, unified architecture as the platform for its health information and management systems. This platform enables the Cerner Millennium architecture to be scaleable on a linear basis, using either Cerner compatible modules for process-oriented applications or competitive systems interfaced using open system protocols.

In 2003, Cerner extended its commitment to a unified architecture with the introduction of its Cerner Millennium Web experience solution. Please see “Cerner Millennium Delivers a New Client Experience” in the “Cerner Technology” section.

Expand solutions and services. Building upon the Cerner Millennium architecture, Cerner intends to continue expanding the range of solutions and services offered to providers. These new solutions and services will complement existing solutions, address clients’ emerging IT needs and employ technological advances.

Cerner believes that major opportunities exist as providers reach into new markets and offer more alternative services to remain competitive. The Company believes these organizations will find value in having personal health records and trusted medical information accessible to the individual in the home. Cerner recognizes the potential value of the aggregate database being developed by its broad client base. This database is a powerful means of enabling comparative or normative procedure evaluations. The substantial project management, process redesign, technology integration and training involved in healthcare systems taking advantage of the opportunities provided by clinical and management information technology represent a significant market for the Company’s consulting services.

Additionally, in 2003 the Company made specific progress in expanding its Cerner Millennium solutions to create one of the broadest range of solution offerings in the industry.

Key new solutions that were introduced in 2003 include the Powerchart Oncology^™ and Workforce Management solutions. Other significant progress is the success in two of Cerner’s relatively new offerings, Patient Accounting and Picture Archiving Communications System (PACS).

Cerner converted 11 PACS clients in 2003 and has another 15 signed clients scheduled for conversion or module roll-out in 2004, bringing its total converted client facilities to more than 40 in North America and

6

120 facilities globally. These clients benefit from the productivity and safety delivered by an integrated solution.

Continue pursuit of excellence in implementations. Since the introduction of the Cerner Millennium architecture – a revolutionary concept and application offering that ventured into uncharted territories – Cerner has dramatically improved the implementation process. With the benefit of more than 2,600 converted solutions at the end of 2003 and more than 1,600 consulting associates, Cerner has steadily decreased implementation timelines while increasing the number of solutions converted within those timelines.

Contributing to this record number of implementations is the client response to Cerner’s Accelerated Solutions Center services (ASC) – a prescribed practices implementation model developed from more than 25 years of success in developing and implementing healthcare IT solutions. Comprised of a dedicated group of information technology consultants that specialize in the implementation of Cerner Millennium solutions, Center takes much of the implementation burden of database design and build activities off its clients’ staff. Through use of the ASC, clients enjoy reduced time, cost and complexity of implementation, predictable, fixed-fee solutions and reduced burden on resources.

Offer solutions on a hosted basis. To assist Cerner’s clients with implementation and maintenance of its solutions, Cerner offers application outsourcing through its Remote Hosted Option (RHO). Representing the fastest growing service within the Company, this option delivers information technology services that include software, computer hardware, implementation, technical support, wide-area network services and automatic software upgrades.

Traditionally, many healthcare organizations were unable to access the most advanced IT systems due to the complexity and cost involved in the management and support of these systems. Cerner’s RHO addresses many of these challenges, providing a solution for healthcare IT that enables any size healthcare organization to benefit from Cerner’s industry-leading information management software.

While this business model started with a focus on community hospitals, it has expanded to meet the needs of clients of all sizes. Cerner now has more than 100 clients relying on its data center for delivery of a variety of technology services, generating a highly visible and increasingly profitable revenue stream.

Build a reputation as a partner characterized by trust and integrity. In an era in which corporate financial scandals seem almost a constant in the headlines, Cerner pledges to promote trust and integrity in every client relationship it establishes. Cerner’s three original founders – still in leadership positions today – along with its long history of solid financial performance are testaments to the Company’s commitment.

Continue to expand global presence. Cerner has an immense opportunity to revolutionize the practice and delivery of healthcare throughout the world through its leadership in clinical systems and patient safety. To that end, Cerner continues to make significant investments in the infrastructure development to support these efforts.

In October 2003, the Company reported that Atos Origin (formerly SchlumbergerSema), with Cerner as its key partner, was awarded the Electronic Booking Service contract, which was the first contract awarded in the very large healthcare information technology procurement conducted by the National Health Service (NHS) in the United Kingdom. This contract is very strategic because the Electronic Booking Service will link healthcare providers with more than 50 million citizens in England.

Cerner also expanded its presence in the United Kingdom when Homerton University Hospital NHS Trust and Newham Healthcare NHS Trust in London joined forces to contract for the Cerner Millennium electronic patient record (EPR) solution. Cerner was chosen for the multi-million dollar procurement after a rigorous selection process. Implementation began in August 2003, and the Trusts are scheduled to have a fully operational EPR system within two years that will improve patient safety, clinician workflow and operational efficiency. In addition, the local Primary Care Trusts (PCTs) will be incorporated into the system, resulting in the connection of all parts of the health community.

7

In Germany, Cerner completed its integration of Image Devices with Cerner Deutschland. The acquisition, which occurred in 2002, substantially increased the Company’s European presence. Founded in 1990, Image Devices has supplied the image archive component for the Cerner ProVision^™ PACS solution since 1999.

The Company also continues to increase its leadership in other key global markets. In August, Cerner was selected by Montreal-based McGill University Health Centre to automate all aspects of its clinical and anatomic laboratories.

Additionally, London Health Sciences Centre in London, Ontario, continues to implement its Cerner Millennium architecture city-wide to support their “one person/one health record” mission. In 2003, the Company also negotiated a new five year agreement with London Health Sciences Centre to complete the rollout of the Cerner Millennium electronic health record platform across all facilities and to position them to expand into the surrounding region.

In addition to its strong European and North American presence, Cerner believes there are meaningful opportunities in other global locations, including the Far East and South America.

Cerner Technology—Cerner Millennium Architecture

The cornerstone of Cerner’s technology strategy is the Cerner Millennium architecture, the single architecture around which each of Cerner’s solutions is developed. This person-centric, single data model is open and highly scalable. Thus, it allows Cerner to meet the clinical, financial, management and business information requirements of a healthcare delivery system across the continuum of care. The Cerner Millennium architecture, the core of which was developed between 1994 and 1999, is Cerner’s computing platform. The Cerner Millennium architecture uses flexible n-tiered client/server technology to optimize distributed computing performance and scalability across multiple client and server platforms. The Cerner Millennium architecture and solutions were designed and developed to accommodate healthcare specific requirements for mission-critical computing and secure access from all settings along the care delivery continuum. The breadth of focus and functionality of the Cerner Millennium architecture and solutions are well suited for large-scale and enterprise application technologies for healthcare organizations.

The value of the Cerner Millennium architecture to a client organization is the enterprise-wide use of a single system based on a fully unified common architecture and database. With its single data model and comprehensive electronic medical record, the Cerner Millennium architecture provides secure, real-time access to all information across multiple solutions, domains, organizations and physical locations, including physician, hospital, nursing, laboratory, pharmacy and consumers, to all authorized providers requiring such access. Given its unified and open design, the Cerner Millennium architecture can also provide a centralized repository of clinical and financial transactions to help standardize access and messaging of disparate applications across a health system.

The alternative to a single architectural approach is to use disparate systems based on differing architectures and data structures. These disparate systems must be interfaced together and rely on these interfaces to transmit, modify and arrange data exchanged between them, which limits the data’s usefulness across multiple systems and inhibits real-time access. In addition, many of these systems lack functional scalability and cannot operate across multiple provider settings or locations within a healthcare organization, constraining organizations’ potential to realize full benefits.

Several overarching capabilities are embedded into the Cerner Millennium architecture. First is the person-centric transactions and secure messaging, which consider the breadth of requirements not only of a patient, but also of healthy consumers. Second is healthcare community dynamics, which take into account the flexibility required by the constantly changing relationships between healthcare organizations, physicians and consumers, and the need to maintain complex security and end-user preferences based on the context and business attributes of the transaction in a community setting. Third is the ability to proactively deliver patient, provider- and condition-specific knowledge and content in the form of alerts, best practices and pathways—content in context—at the point of decision, empowering physicians with the most complete, most timely information available when making decisions about care delivery.

8

Cerner Millennium Delivers a New Client Experience

In 2003, Cerner introduced its new Cerner Millennium Web experience. This solution combines the technology benefits of a browser-agnostic platform with an optimized human interface that aligns personalization, digitized knowledge and clinician work practices. Unlike competitive offerings, this new solution is an extension of the Company’s already proven architecture, offering seamless coexistence with Windows and all other browser-based technologies. The ability to leverage the Cerner Millennium architecture has put the Company in the unique position to focus its efforts on complex collaboration, as this will represent the next generation of clinician productivity.

The new Web experience is designed with a focus on individuals’ roles and the venues in which they practice. Using the new human interface, individuals can easily personalize their workspaces, creating and saving the unique views that best support their unique responsibilities to ensure the immediate visibility of relevant information. The intuitive interface and associated usability enhancements help health professionals incorporate information technology into their daily work practices and enable them to quickly and easily complete routine tasks. Clinicians also enjoy a proactive knowledge push that occurs before they select an order or medication, ensuring they can take advantage of the best medical science without disruption.

The Electronic Booking Service for the NHS project in England has proven the capacity of the Cerner Millennium Web experience to handle the scheduling for more than 50 million citizens in England. Cerner internally processed more than 2.9 million transactions in one hour against a database with 2.7 billion rows of data, indicating that its Web architecture can deliver consistent performance under extreme workloads.

Solutions

The Cerner Millennium architecture is the only healthcare information system on the market today capable of storing, retrieving and disseminating clinical and financial information across an entire health system. The Cerner Millennium architecture solutions are dedicated to meeting the automation needs of every segment of the care continuum.

Cerner solutions can be acquired individually or as a fully unified health information system. Cerner also markets more than 200 solutions options that complement Cerner’s major information systems. In addition, Cerner offers comprehensive consulting services—including learning services, readiness assessments, planning and change management and process redesign—and also sells third-party computers and related hardware to its software licensees.

Enterprise Repositories

The unique architecture of the Cerner Millennium architecture sets Cerner apart from the competition. A key part of the Cerner Millennium architecture is the data repositories—the underlying foundation for Cerner solutions—which allow healthcare organizations to manage and make use of the data collected along the healthcare continuum.

The Open Clinical Foundation^® repository manages clinical information with an open, standard medical terminology, providing the foundation for the electronic medical record.

The Open Image Foundation^™ repository provides the clinical and document imaging foundation for the electronic medical record.

Cerner’s solution categories include:

•

Enterprise-wide Systems, which automate processes throughout the health system enterprise, including:

•		Access Management.
•		Care Management.

9

•

Financial and Operational Management Systems, which automate business operations.

•		Clinical Systems, which automate critical processes across the healthcare continuum, and Clinical Centers, which provide efficiencies for ancillary departments such as laboratory and radiology.
•		Decision Support and Knowledge, which enhance clinical and business processes with information and actions.
•		Consumer, which supports Internet-based healthcare communities that effectively connect individuals, providers and health systems.
•		Packaged Solutions, which address key processes in healthcare.
•		Segment Solutions, which address issues unique to specific care settings.
•		Technologies for developing solutions or connecting other technologies and systems to the Cerner Millennium architecture.

Enterprise-Wide Solutions

Access Management

The CapStone^® Enterprise Access Management System is the industry’s most comprehensive suite of solutions designed to automate, integrate and streamline patient access information between and among all key points in the delivery system. Key components of this solution create the enterprise master person index (EMPI) and automate the identification, eligibility, registration and scheduling processes across hospitals, clinics, physician practices and other care delivery organizations.

Care Management

PowerChart^® Electronic Medical Record System is the enterprise clinician’s desktop solution for viewing, ordering, documenting and managing care delivery, including the PowerOrders® offering for physician ordering.

Financial and Operational

Cerner is leveraging its experience to bridge the gap between clinical settings and the business office, revolutionizing the revenue cycle within healthcare systems.

The ProFit^® Enterprise Billing and Accounts Receivable System is Cerner’s patient accounting and financial management solution. The ProFit system brings together clinical and financial data to maximize reimbursement, decrease denials and gain dramatic operational efficiencies.

Cerner ProVision^™ Document Image Management System is the only integrated solution that manages document images across the entire healthcare organization, including both clinical and non-clinical departments.

The ProFile^® Health Information Management System helps meet the operations management needs of the health information management (medical records) department with functionality that simultaneously manages paper, document images and computerized records within a single application.

The Clinically Driven Workforce Management^™ solutions align the appropriate resources based on predicted and actual demand. With this comprehensive suite of offerings, organizations are empowered to optimize existing resources while increasing patient throughput and managing employee satisfaction.

The ProCure^™ Enterprise Supply Chain Management solutions focus on eliminating variation and clinical staff burden. By connecting materials management processes with key clinical processes, the supply chain is established as a byproduct of care delivery.

10

Medical Transcription Management Cerner Millennium integration offers unprecedented levels of accuracy and efficiency of transcribed documents by leveraging clinical data to auto-create report content.

Clinical Systems

Points of Care

The Critical Care INet^® Intensive Care Management System is designed to automate the entire care process in critical care settings. It supports complete nursing documentation with automated capture of bedside monitor and device data. Physician workflow is automated with both documentation and flow sheet embedded Computerized Physician Order Entry (CPOE). Both nursing and physician workflows are enhanced with closed loop meds process and remote patient monitoring capabilities. Embedded knowledge augments patient safety with critical care specific nursing and physician documentation templates and alerts. Outcome analysis (with world-renowned solutions like the APACHE^®) is also embedded in the critical care workflow.

The CareNet^® Acute Care Management System is designed to automate and streamline the work and care delivery processes for the entire acute care team. This solution provides improved communication and the coordination of care for nursing and the entire multi-disciplinary acute care team. The CareNet system promotes patient safety through strong clinical decision support, evidence-based nursing and knowledge based best practices and alerts and reminders, thereby reducing the variance and variability in the care process. The CareNet system enables care sets, plans of care, pathways and protocols, allowing the care team to collect, refine, organize and evaluate detailed clinical and management data, as well as measure outcomes and goals.

The CVNet^® Cardiology Information System automates the processes within the cardiology department, supporting the scheduling, ordering, documentation and data capture required by professionals in the cardiology domain.

The PowerChart Oncology Information System automates the clinical decision-making and complex communication needs of the medical oncology care team. This oncology solution provides the ability to share crucial patient information across both ambulatory and acute care for management of complex, multi-encounter chemotherapy protocols, improving communication and the real-time flow of patient information across the continuum of care.

The SurgiNet^® Surgery and Anesthesia Information System is designed to address the needs of the perioperative service, including automating the functions of professional staff and material resource scheduling, supply chain management, perioperative documentation, patient tracking, anesthesia documentation, physiological monitoring at the bedside or in the operating room suite. It provides easy access to clinical and historical patient data for past surgical events to support planning for anesthesia care and surgical case preparation by clinicians. The SurgiNet system provides financial and operational analysis and reporting tools to support continuous improvement in the utilization of and quality of care delivered by the perioperative service.

The Cerner Women’s Health Information System automates the care processes in women’s centers, ob/gyn offices, labor & delivery units and in newborn care areas in the hospital. This solution is designed to support the clinical workflow, information needs and specific challenges faced in women’s healthcare.

The FirstNet^® Emergency Department Information System provides a comprehensive solution to the challenges emergency departments face to streamline process flows, comply with HIPAA and Emergency Medical Treatment and Active Labor Act regulations, comply with the Centers for Medicare and Medicaid Services requirements and ensure appropriate reimbursement. The FirstNet system is an emergency department clinician and management tool for quick and effective patient tracking, ordering, results and medical record review, online clinical documentation, prescription writing, patient education and evidenced-based coding.

The PowerChart Office^® Management System supports the broad range of clinical and business activities that occur within a physician office, clinic or large physician organization. This system ties the physician

11

office together with other medical entities and automates key care team activities in both primary and specialty care settings.

Clinical Centers

The PathNet^® Laboratory Information System (LIS) addresses the clinical, financial and managerial needs of a comprehensive laboratory setting with unified solutions for: general laboratory, microbiology, blood bank transfusion, blood bank donor, anatomic pathology, human leukocyte antigen (HLA) and outreach services. Innovative laboratory solutions such as patented Synoptic Reporting for AP, Clinical Validation and the PathNet Helix^™ offering for Molecular Diagnostic/Genomics are just several examples of how PathNet continues to set the bar in the LIS market. The PathNet system automates laboratory processes while capturing crucial data for operational success, ensuring the production of accurate and timely reports and the maintenance of accessible laboratory records.

The RadNet^® Radiology Information System addresses the operational and management requirements of radiology departments or services. It allows a department to replace its manual, paper-based system of record keeping with an efficient computer-based system.

Cerner ProVision^™ PACS (picture archival and communications system) is fully unified with Cerner’s radiology information system to manage storage, viewing, reporting and distribution of images. Using Cerner’s end-to-end, fully unified radiology information and image management systems, radiologists can improve operational efficiencies and reduce medical error.

The PharmNet^® Pharmacy Information System is a powerful solution for transforming pharmacy and medication administration processes. The PharmNet system facilitates improved patient safety and operational activities across the continuum of care. The PharmNet system puts patient safety first and foremost in support of clinical pharmacy practice. It is a complete solution offering clinical decision support, formulary management and operational support, facilitating optimal utilization of pharmacy resources.

Decision Support and Knowledge

The Discern Expert^® solution is an event-driven, rules-based decision support software application that allows users to define clinical and management rules that are applied to event data captured or generated by other applications. It supports both synchronous (real-time, interactive) processing and asynchronous (noninteractive) processing of events.

The Discern Explorer^® solution is a decision support software application unified with other Cerner Millennium clinical and management information systems that allows users to execute predetermined or ad hoc queries and reports regarding process-related data that is generated by the other applications.

Executable Knowledge^® solutions help clinicians assess and treat illnesses and improve outcomes based on the most current medical knowledge. Knowledge is customized to the individual and embedded within the Cerner Millennium architecture via order sets, plans of care, alerts and notifications including Adverse Drug Event (ADE) Prevention alerts and clinical documentation. Reports measuring compliance against key clinical standards help organizations benchmark and enhance care quality.

Medisource^™ solutions provide caregivers and consumers alike with access to drug information from Cerner Multum and the ability to perform drug interaction checking to prevent adverse events. Patient safety is enhanced through dose range checking capabilities that determine the appropriate medication dose based on the age, weight and physiology of an individual.

APACHE^® clinical decision support and outcomes management systems manage the clinical and financial outcomes of high-risk patients in critical and acute care.

The PowerInsight^® solution is a comprehensive healthcare intelligence and data warehouse for healthcare. It enables clinical leadership and healthcare executives to collect, measure, analyze and benchmark data, thereby deriving insights to enable positive changes in clinical processes and operational performance.

12

The Health Facts^™ repository is Cerner’s comparative data warehouse for benchmarking information and services for subscribers to support their own improvement processes.

The HealthSentry^™ bio-surveillance network collects critical biological information about potential disease outbreaks and analyzes data for specific patterns or trends.

Consumer

Cerner’s IQHealth^™ systems enable healthcare organizations to create an Internet-based healthcare community that connects individuals to their healthcare providers. IQHealth^™ systems empower consumers and patients to record, track and store health information to better manage their own health and that of their loved ones. With IQHealth^™ systems, sponsoring organizations can create and brand a “health exchange” to improve their presence in the community, better support individuals in their self-care actions and enhance existing centers of excellence.

IQHealth systems include Web Portal Services, Health Content, Survey and Assessment Tools, Personal Health Record, Physician and Consumer Messaging and Disease-Specific Modules.

Packaged Solutions

Computerized Physician Order Entry (CPOE)

Cerner offers a total CPOE solution ranging from basic automation to complete medication integration.

CPOE enables standardized electronic physician ordering of tests, medications and other patient services. Orders are checked using decision support tools to determine if they are in line with standards and appropriate for the person’s individual situation. Physicians are alerted to potential problems and actions are documented in the patient’s electronic medical record.

Cerner’s CPOE solution includes a physician-centric ordering application (PowerOrders), an important decision-support engine with rules and alerts (Discern Expert and MediSource), and clinical documentation (Care Documentation, eMAR, PowerPOC^™ and more), all integrated within a robust clinical data repository (PowerChart).

When combined with the PharmNet and CareNet systems, Cerner’s CPOE unifies physicians, nurses and pharmacists to close the medication management loop, connecting each member of the care team to the same updated information, thereby reducing errors.

The solution also provides extra tools—evidence-based medical content and an enhanced human interface—to support clinicians and improve care delivery.

PowerPOC

PowerPOC is a solution set of supporting, multisystem offerings that automate the documentation of medication administration and documentation of tasks related to specific physician/nursing orders at the point of care (POC). This solution set provides notification to the clinician when inconsistencies occur that could represent potential medication administration errors.

This graduated solution set facilitates patient safety through barcode verification of the “Five Rights” data review and collection, as well as medical devices integration at the patient bedside. Solutions within this family include: PowerPOC CareAdmin^™; PowerPOC CareMobile^™; and PowerPOC CareGuard^™ solutions.

13

HomeWorks

BeyondNow Technologies provides innovative information technology solutions to the home care industry. The HomeWorks solution is a complete front and back office home care information management system targeting business needs in a quickly changing, fast paced environment. The HomeWorks solution manages data from the point of the first referral call to the point of the last service payment. The RoadNotes solution enables users to extend complete patient information from point-of-care to the back office system. Caregivers have access to complete patient charts, profiles and histories – for the information needed to make informed decisions.

Segment Solutions

Cerner also offers solutions designed for specific segments in the healthcare industry.

Cerner solutions for the Integrated Delivery Network allow organizations to serve multiple facilities, with differing needs, across various geographic locations.

Community Hospital Solutions automate clinical and business processes in the community hospital. Community Hospital Solutions suites include administrative, clinical, patient care, hospital integration and community.

Cerner solutions for the Children’s Hospital setting specifically address those issues unique to the pediatric hospital setting. Cerner solutions include content and functionality specific to meeting the unique needs of children’s hospitals, including dose range checking, weight-based dose calculation, growth charts and immunization schedules.

Cerner solutions for Academic Medical Centers allow medical centers to focus on delivering high-quality care and carry out high-level teaching and research functions. Cerner’s unified architecture also enhances research efforts by allowing access to information via a centralized database.

The Cerner Academic Education Solution is the only clinical information system adapted to support automated curricula and classroom instruction in nursing, medical and allied health schools, preparing future healthcare professionals for success in an IT driven environment.

Cerner offers solutions to meet the needs of federal healthcare organizations, including the Department of Veterans Affairs and the Department of Defense. These organizations have specific requirements for IT solutions.

Technologies

The MillenniumObjects^® toolkit is a collection of reusable programming elements from the revolutionary Cerner Millennium architecture. These segments of code, or objects, allow third-party developers to create front-end applications that draw upon the data model and proven functionality of the Cerner Millennium architecture.

The Open Engine Application Gateway^™ System facilitates the exchange of data and assists in the management of interfaces between foreign systems in a network environment. It serves as a solution kit to help write interface code.

The Open Port Interface^™ System represents Cerner’s standardized technology for providing reliable foreign system, medical device and other standard interfaces in a timely manner. Message translation and data mapping are done with point-and-click solutions and a scripting environment. Communications protocols are configured via table-driven parameters. These sophisticated methodologies result in decreased implementation times and greater client satisfaction.

14

Software Development

Cerner commits significant resources to developing new health information system solutions. As of January 3, 2004, approximately 1,837 associates were engaged full-time in software solutions development activities. Total expenditures for the development and enhancement of the Company’s software solutions were approximately $179,999,000, $149,985,000 and $113,872,000 during the 2003, 2002 and 2001 fiscal years, respectively. These figures include both capitalized and non-capitalized portions and exclude amounts amortized for financial reporting purposes.

The Company expects to continue investment and development efforts for its current and future solution offerings. As new clinical and management information needs emerge, Cerner intends to enhance its current software solutions lines with new versions released to clients on a periodic basis. In addition, Cerner plans to: expand its current software solutions lines by developing additional information systems for clinical, financial, operational and/or consumer use; continue to support simultaneous use of Cerner’s solutions across multiple facilities; and, continue to expand in the global marketplace.

The Company is committed to maintaining open attributes in its system architecture through operability in a diverse set of technical and application environments. The Company strives to design its systems to co-exist with disparate applications developed and supported by other suppliers. This effort is exemplified by Cerner’s Open Engine, Open Port and MillenniumObjects software solutions lines.

See “Cerner Technology—Cerner Millennium Architecture” for a discussion of the development of Cerner’s latest generation of software solutions.

Sales and Marketing

The markets for Cerner’s information system solutions include integrated delivery networks, physician groups and networks and their management service organizations, managed care organizations, hospitals, medical centers, free-standing reference laboratories, home health agencies, blood banks, imaging centers, pharmacies, pharmaceutical manufacturers, employer coalitions and public health organizations. To date, a substantial portion of system sales has been in clinical solutions in hospital-based provider organizations. Cerner’s Millennium architecture is highly scalable, with solutions being used in hospitals ranging from under 50 beds to over 2,000 beds and managed care settings with over 2,000,000 members. All Cerner Millennium solutions are designed to operate on either computers manufactured by HP Computer Corporation or IBM’s RISC System/6000 AIX (UNIX) platform, thereby allowing Cerner to be price competitive across the full range of size and organizational structure of healthcare providers. The sale of a health information system usually takes approximately nine to eighteen months, from the time of initial contact to the signing of a contract.

The Company’s executive marketing management is located in its North Kansas City, Missouri, headquarters, while its client representatives are deployed across the United States and globally. In addition to the United States, the Company, through subsidiaries and joint ventures, has sales staff and/or offices in Australia, Belgium, Canada, Germany, Singapore, Malaysia, Saudi Arabia and the United Kingdom. Cerner’s consolidated revenues include foreign sales of $54,191,000, $36,634,000 and $22,794,000 for the 2003, 2002 and 2001 fiscal years, respectively. The Company supports its sales force with technical personnel who perform demonstrations of Cerner’s solutions and assist clients in determining the proper hardware and software configurations. The Company’s primary direct marketing strategy is to generate sales contacts from its existing client base and through presentations at industry seminars and tradeshows. Cerner attends a number of major tradeshows each year and sponsors executive conferences, which feature industry experts who address the information system needs of large healthcare organizations.

Client Services

All of Cerner’s clients enter into software maintenance agreements with Cerner for support of their Cerner systems. In addition to immediate software support in the event of problems, these agreements allow clients the use of new releases of the Cerner solutions covered by maintenance agreements. Each client

15

has 24-hour access to the client support staff located at Cerner’s world headquarters in North Kansas City, Missouri and the Company’s global support organization in Brussels, Belgium. Most of Cerner’s clients also enter into hardware maintenance agreements with Cerner. These arrangements normally provide for a fixed monthly fee for specified services. In the majority of cases, Cerner subcontracts hardware maintenance to the hardware manufacturer. To assist Cerner’s clients with implementation and maintenance of its solutions, Cerner offers application outsourcing through its Remote Hosted Option. This option delivers information technology services that include software, computer hardware, implementation, technical support, wide-area network services and automatic software upgrades.

Backlog

At January 3, 2004, Cerner had a contract backlog of approximately $938,221,000 as compared to approximately $732,719,000 December 28, 2002. Such backlog represents system sales from signed contracts, which had not yet been recognized as revenue. The Company recognizes revenue on a percent of completion basis, based on certain milestone conditions, for its software solutions. At January 3, 2004, the Company had approximately $94,340,000 of contracts receivable, which represents revenues recognized under the percentage of completion method but not yet billable under the terms of the contract. At January 3, 2004, Cerner had a software support and maintenance backlog of approximately $312,887,000 as compared to approximately $269,153,000 at December 28, 2002. Such backlog represents contracted software support and hardware maintenance services for a period of twelve months. The Company estimates that approximately 45% percent of the aggregate backlog at January 3, 2004 of $1,251,108,000 will be recognized as revenue during 2004.

Other Factors Affecting The Company’s Business

Information under the caption “Factors That May Affect Future Results of Operations, Financial Condition of Business” included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 is incorporated herein by reference. Such information includes a discussion of various factors that could, among other things, affect the Company’s business in the future, including; (a) variations in the Company’s quarterly operating results; (b) volatility of the Company’s stock price; (c) market risk of investments; (d) potential impairment of goodwill; (e) changes in the healthcare industry; (f) significant competition; (g) the Company’s proprietary technology may be subjected to infringement claims or may be infringed upon; (h) possible regulation of the Company’s software by the U.S. Food and Drug Administration or other government regulation; (i) the possibility of product-related liabilities; (j) possible failures or defects in the performance of the Company’s software; (k) risks associated with the Company’s global operations; and (l) recruitment and retention of key personnel.

Number of Employees (“Associates”)

As of January 3, 2004, the Company employed 5,077 associates.

Item 2. Properties

The Company’s world headquarters offices are located in a Company-owned office park in North Kansas City, Missouri, containing approximately 739,000 square feet of useable space (the “Campus”). As of January 3, 2004, the Company was using approximately 736,000 square feet and substantially all of the remainder was leased to tenants. In the first quarter of 2002, the Company began construction of a new facility situated between the buildings located at 2800 and 2900 Rockcreek Parkway on the Campus. This facility was completed on August 1, 2003 and is approximately 123,000 square feet in size. This new facility, referred to as Cerner’s World Headquarters Building, houses offices, a cafeteria and meeting space for the Company. In 2002, the Company also began construction of a new office building located on the Campus. This facility was completed in December of 2003 and houses office and meeting space for the Company.

In the spring of 2001, the Company acquired property formally owned by Harrah’s Operating Company, Inc., located along the north riverbank of the Missouri River, approximately 2 miles from the Company’s Campus. This property consists of an 80,000 square foot building and a 1,300-car parking garage. The building has been renovated for use as a corporate training, meeting and event center for the Company

16

and third parties. The Company has also made use of the parking garage to meet overflow-parking demands on the Company’s Campus.

The Company also leases office space in: San Jose, California; Beverly Hills, California; Denver, Colorado; Lake Mary, Florida; Waltham, Massachusetts; North Kansas City, Missouri; Detroit, Michigan; Chesterfield, Missouri; Overland Park, Kansas; Houston, Texas; Falls Church, Virginia; Chesapeake, Virginia; and, Vienna, Virginia. The Company operates its primary solutions center (or data center) in leased space in Lee’s Summit, Missouri. Globally, the Company also leases office space in: Sydney, Australia; Brussels, Belgium; London, England; and, Aachen and Idstein, Germany. Cerner Arabia, a joint venture in which the Company maintains a 40% equity interest, leases space in Riyadh, Saudi Arabia.

Item 3. Legal Proceedings

As disclosed in our Form 10-Q for the quarterly period ending March 29, 2003, the Company received notice in April 2003 that three shareholder class action lawsuits were filed against it and five of its officers in the United States District Court for the Western District of Missouri. Subsequently, as disclosed in our Form 10-Q for the quarterly period ending June 28, 2003, five additional shareholder class action lawsuits were filed against the Company. All of these lawsuits were filed after a decline in the Company’s stock price following the Company’s announcement on April 3, 2003 that the Company would not meet revenue and earnings estimates for the first quarter of 2003.

On August 20, 2003, the Court ordered that all of the lawsuits (as specifically identified in our Form 10-Q for the quarterly periods ending March 29, 2003 and June 28, 2003) be consolidated under Case No. 03-CV-00296-DW and appointed Phil Crabtree as Lead Plaintiff. On December 1, 2003, the Lead Plaintiff filed a Consolidated Class Action Complaint. In general, the consolidated complaint alleges that, during a class period commencing as of July 17, 2002 and ending April 2, 2003, the Company and individual named defendants misrepresented or failed to disclose certain factors, which they allege impacted the Company’s business and anticipated revenue and earnings, all allegedly in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Company believes that all the claims asserted in the Consolidated Amended Complaint are without merit and intends to vigorously defend those claims.

On February 9, 2004, the Company and the individual defendants filed a Motion to Dismiss the consolidated Complaint. The deadline for the Lead Plaintiff to respond to the Motion is March 24, 2004. The Company does not know when the District Court will decide the Motion or what the ruling may be. However, no discovery in the litigation will commence until the District Court rules on the Motion to Dismiss and, if the Motion is denied, the Company and the individual defendants have filed their Answers to the Consolidated Amended Complaint.

17

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of the stockholders of the Company during the fourth quarter of the fiscal year ended January 3, 2004.

Item 4A. Executive Officers of the Company

The following table sets forth the names, ages, positions and certain other information regarding the Company’s executive officers as of March 3, 2004. Officers are elected annually and serve at the discretion of the Board of Directors.

Neal L. Patterson has been Chairman of the Board of Directors and Chief Executive Officer of the Company for more than five years. Mr. Patterson also served as President of the Company from March of 1999 until August of 1999.

Clifford W. Illig has been a Director of the Company for more than five years. He also served as Chief Operating Officer of the Company for more than five years until October 1998 and as President of the Company for more than five years until March of 1999. Mr. Illig was appointed Vice Chairman of the Board of Directors in March of 1999.

18

Earl H. Devanny, III joined the Company in August of 1999 as President. Mr. Devanny also served as interim President of Cerner Southeast from January 2003 through July 2003. Prior to joining the Company, Mr. Devanny served as president of ADAC Healthcare Information Systems, Inc. Prior to joining ADAC, Mr. Devanny served as a Vice President of the Company from 1994 to 1997. Prior to that he spent seventeen years with IBM Corporation.

Paul M. Black joined the Company in March of 1994 as a Regional Vice President. He was promoted in June 1998 to Senior Vice President and Chief Sales Officer and to Executive Vice President in September of 2000. In January of 2003 Mr. Black was named Executive Vice President of the U.S. Client Organization. Prior to joining the Company, he spent twelve years with IBM Corporation.

Jack A. Newman, Jr. joined the Company in January of 1996 as Executive Vice President. Prior to joining the Company, he was with KPMG LLP for twenty-two years. Immediately prior to joining Cerner he was National Partner-in-Charge of KPMG’s Healthcare Strategy Practice.

Glenn P. Tobin, Ph.D. joined the Company in April of 1998 as General Manager and Senior Vice President. In October 1998, Dr. Tobin was appointed Executive Vice President and Chief Operating Officer. Dr. Tobin also served as interim President of Cerner Great Lakes from January 2003 through August 2003. In October of 2003, Dr. Tobin gave up his position as Chief Operating Officer and accepted a position as Chief Executive Officer of Cerner Limited in which position he served through February of 2004. Prior to joining the Company, Dr. Tobin served as a senior consultant with McKinsey and Co., Inc. for more than five years.

Marc G. Naughton joined the Company in November 1992 as Manager of Taxes. In November 1995 he was named Chief Financial Officer and in February 1996 he was promoted to Vice President. He was promoted to Senior Vice President in March 2002.

Jeffrey A. Townsend joined the Company in June 1985. Since that time he has held several positions in the Intellectual Property Organization and was promoted to Vice President in February 1997. He was appointed Chief Engineering Officer in March 1998. He was promoted to Senior Vice President in March 2001.

Randy D. Sims joined the Company in March 1997 as Vice President and Chief Legal Officer. Prior to joining the Company, Mr. Sims worked at Farmland Industries, Inc. for three years where he served most recently as Associate General Counsel. Prior to Farmland, Mr. Sims was in-house legal counsel at The Marley Company for seven years, holding the position of Assistant General Counsel when he left to join Farmland.

Julie Wilson joined the Company in November 1995. Since that time, she has held several positions in the Functional Group organization. She was promoted to Vice President and to the position of Chief People Officer in August of 2003.

Richard J. Flanigan, Jr. joined the Company in November 1994 as a Regional Vice President. In 1997, his responsibilities were extended and he was named as General Manager. He was promoted to Senior Vice President in April 2000 and to President of Cerner North Atlantic in January 2003. Prior to joining Cerner, Mr. Flanigan spent more than thirteen years in sales and management positions at IBM Corporation.

Douglas M. Krebs joined the Company in June 1994 as a Regional Vice President. He was promoted to Senior Vice President and Area Manager in April 1999. In February 2000, Mr. Krebs was appointed as President of Cerner Global. Prior to joining Cerner, he spent fifteen years with IBM Corporation.

John Peterzalek joined the Company in July 2003 as Senior Vice President and President of Cerner South East. Prior to joining the Company, Mr. Peterzalek was with Perot Systems for more than ten years.

Stanley M. Sword joined the Company in August 1998 as Vice President and Chief People Officer. He was promoted to Senior Vice President in March 2002. In August of 2003, he was appointed President of

19

Cerner Great Lakes. Prior to joining Cerner, Mr. Sword spent five years at AT&T (three years as the Vice President of Organization Development of NCR Corporation and two years as a client partner in the outsourcing practice of AT&T Solutions). Prior to joining AT&T, Mr. Sword spent ten years with Accenture Consulting in a variety of roles within the systems integration practice.

Zane M. Burke joined the Company in September 1996 as U.S. Corporate Controller. Since that time he has held several positions in the finance organization and was promoted to Vice President in 2000 and to President of Cerner West in January 2003. Prior to joining the Company, Mr. Burke was with KPMG LLP for six years.

Mike Valentine joined the Company in December 1998 as Director of Technology. He was promoted to Vice President in 2000 and to President of Cerner Mid America in January of 2003. Prior to joining the Company, Mr. Valentine was with Accenture Consulting.

20

PART II

Item 5. Market for the Registrant’s Common Stock and Related Security Holder Matters

The Company’s common stock trades on The NASDAQ Stock Market^® under the symbol CERN. The following table sets forth the high, low and last sales prices for the fiscal quarters of 2003 and 2002 as reported by The NASDAQ National Market System. These quotations represent prices between dealers and do not include retail mark-up, mark-down or commissions, and do not necessarily represent actual transactions.

At January 31, 2004, there were approximately 1,600 owners of record. To date, the Company has paid no dividends and it does not intend to pay dividends in the foreseeable future. Management believes it is in the shareholders’ best interest to reinvest funds in the operation of the business.

Item 6. Selected Financial Data